Tenn. Comp. R. & Regs. 0780 — Commerce and Insurance

0780-01 Insurance Division

Chapter 0780-01-01 Repealed

Tenn. Comp. R. & Regs. 0780-01-01 Repealed

RULES

OF THE

TENNESSEE DEPARTMENT OF INSURANCE

INSURANCE DIVISION

INSURANCE AGENTS

REPEALED

Authority: T.C.A. § 56-806. Administrative History. Original Rule certified June 10, 1974. Repealed by Chapter 68, Public Acts of 1975, filed March 8, 1979, effective April 23, 1979.

Chapter 0780-01-02 Repealed

Tenn. Comp. R. & Regs. 0780-01-02 Repealed

RULES

OF THE

TENNESSEE DEPARTMENT OF INSURANCE

INSURANCE DIVISION

HEALTH AND ACCIDENT

REPEALED

Authority: T.C.A. § 56-907. Administrative History. Original Rule certified June 10, 1974. Repealed by Chapter 68, Public Acts of 1975, filed March 8, 1979, effective April 23, 1979.

Chapter 0780-01-03 Repealed

Tenn. Comp. R. & Regs. 0780-01-03 Repealed

RULES

OF THE

TENNESSEE DEPARTMENT OF INSURANCE

INSURANCE DIVISION

REPEALED

Authority: T.C.A. § 59-907. Administrative History. Original Rule certified June 10, 1974. Repealed by Chapter 68, Public Acts of 1975, filed March 8, 1979, effective April 23, 1979.

Chapter 0780-01-04 Credit Life Insurance and Credit Accident and Health Insurance

Tenn. Comp. R. & Regs. 0780-01-04-.01 DEFINITIONS

(1) For the purpose of this Chapter:

(a) “Credit insurance” means credit life insurance and/or credit accident and health insurance;

(b) “Credit life insurance” means insurance on the life of a debtor in connection with a specific loan or other credit transaction of five years’ duration or less to provide payment to a creditor in the event of the death of a debtor;

(c) “Credit accident and health insurance” means insurance on a debtor in connection with a specific loan or other credit transaction of five years’ duration or less to provide indemnity to the creditor for installment payments on the indebtedness becoming due while the debtor is disabled as defined in the policy, or to provide for extinguishment of the indebtedness upon the debtor’s becoming disabled as provided in the policy;

(d) “Creditor” means the lender of money or vendor or lessor of goods, services, or property, rights, or privileges, for which payment is arranged through a credit transaction, or any successor to the right, title, or interest of any such lender, vendor, or lessor, or an affiliate, associates or subsidiary of any of them, or any director, officer or employee of any of them, or any other person in any way associated with them;

(e) “Debtor” means a borrower of money or a purchaser or lessee of goods, services, property, rights or privileges for which payment is arranged through a credit transaction;

(f) “Indebtedness” means the total amount payable by a debtor to a creditor in connection with a loan or other credit transaction;

(g) “Commissioner” means the Commissioner of Insurance and Banking;

(h) “Insurer” means an insurance company licensed to write credit insurance;

(i) “Identifiable charge” means the amount a creditor charges a debtor or collects from him for credit insurance in addition to any other stated charges, including interest or discount, permitted by law. A differential in interest rates between insured and uninsured loans is an identifiable charge.

(j) “Joint life coverage” means credit life insurance covering two or more lives the entire sum insured being payable upon the death of the first insured debtor to die while the insurance is in force.

(k) “Joint accident and health coverage” means credit accident and health insurance covering two or more debtors’ lives, the benefits being payable while any covered debtor is disabled as defined in the policy or upon any debtor becoming disabled as defined in the policy.

(2) The following technical terms have the indicated meanings:

(a) “Claims” means benefits payable on death or disability, excluding loss adjustment expense, claims settlement costs, or other additions of any kind;

(b) “Claims incurred” means claims actually paid during the reporting year plus the estimated reserves at the end of the year for reported claims in the process of settlement and for unreported claims, less the corresponding estimated reserves at the end of the preceding year. All reserves are to be determined in a consistent manner from year to year;

(c) “Premiums earned” means the total gross premiums which become due the insurer, without reduction of any kind, except the premiums refunded or adjusted on account of termination of coverage, appropriately adjusted for changes in gross unearned premiums in force upon a pro rata basis or a “Sum of the Digits” basis, where applicable. Where premiums are payable monthly on the basis of outstanding insured balances, “premiums using the reporting year plus premiums due the insurer but unpaid at the end of that year, less premiums due the insurer but unpaid at the end of the previous year. As defined under either system, premiums are without reduction of any kind except for those refunded or adjusted because of termination of coverage.

This definition does not relate to the preparation of financial statements, but shall be used when this regulation or the experience reporting forms specifically refer to “premium earned”;

(d) “Credibility period” means as of any point of time the period of at least one (1), but not more than three (3) years, immediately prior thereto.

History

• Authority: T.C.A. §§ 56-2-301, 56-7-901, and 56-7-908.
• Administrative History: Original rule certified June 10, 1974. Amendment filed March 31, 1995; effective June 6, 1995.

Tenn. Comp. R. & Regs. 0780-01-04-.02 EXISTING INSURANCE-CHOICE OF INSURER

(1) When life insurance or accident and health insurance is requested by a creditor, the debtor shall have the option, upon notice to the creditor, if furnishing existing policies of insurance, or procuring and furnishing new policies of insurance, owned or controlled by him and issued by any insurer authorized to transact an insurance business in this state for an amount not less than the indebtedness, and for the term and type of insurance coverage requested by the creditor. Any such policy furnished by the debtor shall not be subject to this chapter, unless procured through or administered by the creditor or an agent or broker designated by or associated with the creditor.

(2) Insurers writing credit insurance shall be responsible for establishment of procedures by which creditors are furnished a sufficient number of printed notices informing their debtors of said option. Creditors shall prominently display such notices.

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-04-.03 FORMS OF CREDIT INSURANCE

(1) Credit life insurance and credit accident and health insurance policies which provide benefits differing in kind or character from those set forth in this section, shall be deemed not to conform with T.C.A. § 56-1159.

(a) Individual policies of credit life insurance issued to debtors on the term plan.

(b) Group policies of credit life insurance issued to creditors providing insurance upon the lives of debtors on the term plan.

(c) Individual policies of credit accident and health insurance issued to debtors and group policies of credit accident and health insurance issued to creditors, or disability benefit provisions in credit life insurance policies to provide such coverage in any case on a term plan providing:

1. Benefits payable on any one of the following plans:

(i) After the seventh day of disability due to sickness or accident and retroactive to the first day of such disability, or (ii) After the fourteenth day of disability due to sickness or accident and retroactive to the first day of such disability, or (iii) After the fourteenth day of disability due to sickness or accident, or (iv) After the thirtieth day of disability due to sickness or accident and retroactive to the first day of such disability, or (v) After the thirtieth day of disability due to sickness or accident, or 2. Under any other plan approved by the Commissioner, benefit payable after such other waiting periods or upon such conditions as he shall approve as provided in

Rule 0780-1-1-.06.

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-04-.04 PROVISIONS OF POLICIES AND CERTIFICATES OF INSURANCE: DISCLOSURE

TO DEBTORS.

(1) When credit insurance is effected on a debtor it shall be evidenced by an individual policy or, in the case of group insurance, which policy or certificate shall be delivered to the debtor at the time the indebtedness is incurred or within thirty days after the debtor becomes insured with respect to his indebtedness.

(2) Each such individual policy, or certificate of group insurance shall, in addition to other requirements of law, set forth:

(a) The name and home office address of the insurer, and (b) The identity of the debtor by name or otherwise and his age at issue or his date of birth, if the age is material to claim payment, premium calculation or reserve calculation; and (c) The amount and term of the coverage, if possible, otherwise a clear description of the means of determining the amount and time of expiry, and (d) The amount of premium or identifiable charge, if any, separately in connection with credit life insurance and credit accident and health insurance unless in the case of group insurance such premium or identifiable charge has been disclosed to the debtor as hereinafter provided in paragraph (3). A copy of the document bearing this information shall be forwarded to the insurer or retained by the creditor in a matter which will facilitate the good faith examination required in rule 0780-01-04-.07, and (e) The circumstances and formula under which refunds of premiums or identifiable charges are payable pursuant to the provisions of Rule 0780-01-04-.07 and (f) A description of the insurance coverage including any exceptions, limitations or restrictions, and in addition, shall state that the benefits shall be paid to the creditor to reduce or extinguish any unpaid indebtedness to the creditor. Where the amount of insurance exceeds any unpaid indebtedness that any such excess shall be payable to the debtor or to his designated beneficiary, other than the creditor, or, if he has designated none, to the estate of the debtor or under the provision of a facility of payment clause.

(3) If said individual policy, or certificate of group insurance is not delivered to the debtor at the time the indebtedness is incurred, a copy of the application for such policy or a notice of proposed group insurance, signed by the debtor and the creditor/agent shall be delivered to the debtor at the time such indebtedness is incurred. Such application or notice shall set forth the following:

(a) The name and home office address of the insurer, and (b) The identity of the debtor, by name or otherwise, and (c) The amounts or rates of premium or identifiable charge to the debtor, if any, separately in connection with credit life insurance and credit accident and health insurance, and (d) The amount and term of the coverage provided, or description as provided in (2)(c) above, and (e) A brief description of the coverage provided.

However, where no identifiable charge is made to the debtor, the notice of proposed group insurance need not be signed by the debtor nor set forth his name. Such application for an individual policy or notice of proposed group insurance shall include a statement that, if the insurance is declined by the insurer or otherwise does not become effective, any premium or identifiable charge will be refunded or credited to the debtor pursuant to the provisions of Rule 0780-01-04-.07. The copy of the application for an individual policy and the notice of proposed group insurance shall refer exclusively to insurance coverage, and shall be separate and apart from the loan, sale or other credit statement of account, instrument or agreement unless set forth therein in a separate provision with an appropriate and prominent caption on the face or reverse thereof in type at least equal in size to the type used for the other provisions thereof.

The insurer shall be responsible for establishment of procedures for delivery of the individual policy or certificate of group insurance to the debtor as provided in paragraph (1). Said application or notice of proposed group insurance shall provide that, upon acceptance by the insurer, the insurance coverage provided shall become effective as specified in paragraph (3) of Rule 0780-01-04-.05.

(4) No policy of credit accident and health insurance may contain a provision excluding or denying a claim resulting from a contingency caused by or contributed to by pre-existing conditions which provision is more restrictive than the following:

“No insurance is provided hereunder if disability results from a disease, injury or condition of health for which the insured was hospitalized or received medical or surgical treatment or advise within the lesser of six months at the original term of the coverage immediately preceding the effective date of the coverage, if said death or disability occurs within the lesser of six months or the original term of the coverage immediately following such date, unless this policy (certificate) is issued in connection with a refinanced indebtedness, in which case, the effective date of the coverage shall be deemed to be the first date on which the insured became insured with respect to the indebtedness which was refinanced.”

No such provision shall apply to credit life insurance.

This provision shall not be interpreted to preclude defense of a claim because of misrepresentation of facts in any evidence of insurability.

(5) Except as set forth in paragraph (4), no policy of credit accident and health insurance shall contain any provision which excludes or restricts liability in the event of disability by reason of conditions other than pregnancy, intentionally self-inflicted injuries, foreign travel or residence, travel in non-scheduled aircraft, war, or special hazards to which a person in military service is exposed in the line of duty and such other exclusions which have been shown to the satisfaction of the Commissioner not to be contrary to the standards prescribed in §§ 56-26-108 through 56-26-114.

Excepting in the case of insurance sold in connection with a refinanced indebtedness, credit accident and health insurance shall not be issued to a debtor who is not gainfully employed on the effective date of the policy or certificate.

(6) A credit insurance policy may exclude from those persons eligible for insurance, classes debtors determined by age and provide for the cessation of insurance or reduction in the amount of insurance upon attainment of specified ages. In the event of misstatement of age, where age is material to the acceptance or rejection of the risk, the insurer may provide for rescission of the policy and a refund of all premiums paid by the debtor.

(7) A group credit insurance policy under which premiums are paid to the insurer monthly on outstanding balances shall contain a provision that, in the event of termination of such policy by the insurer or creditor, thirty-one days’ notice of such termination shall be given to each debtor insured under the policy by the creditor, unless there is immediate replacement of the coverage by the same or another insurer.

(8) A group credit insurance policy shall contain in substance the following provisions:

(a) A provision that the policyholder is entitled to a grace period of thirty-one days for the payment of any premium except the first, during which grace period the coverage shall continue in force, unless the policyholder shall have given the insurer written notice of termination in advance of the date of termination 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.

(b) A provision that the validity of the policy shall not be contested, except for non-payment of premiums, after it has been in force for two years from its date of issue; and that no statement made by or on behalf of any person insured under the policy relating to his age or 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, unless it is contained in a written instrument and such written instrument is signed by him. Such instrument shall not be in such form as to encourage misrepresentation or discourage disclosure of relevant facts.

(c) A provision that a copy of the application 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.

(d) 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 to a part or all of his coverage.

(e) A provision specifying an equitable adjustment of premiums or of benefits or of both in the event the age of a person insured has been misstated, and such misstatement would have affected the premium or amount of benefit, such provision to contain a clear statement of the method of adjustment to be used.

(9) If credit accident and health insurance is included as a separate policy, the policy shall in addition, include such of the provisions required by T.C.A. § 56-26-108, as are not inconsistent with the coverage provided. Disability, provisions in credit life insurance policies shall be so worded as to the payment of benefits that they are at least as favorable to the debtor as policies containing such provisions.

(10) Individual policies of credit life insurance shall include, in addition to the provisions set forth herein, such of the provisions of T.C.A. § 56-7-301, as are not inconsistent with the coverage.

(11) No policy or certificate of credit insurance shall be delivered or issued for delivery to any person in this state, unless the style, arrangement and overall appearance of the policy give no undue prominence to any portion of the text, and unless every printed portion of the text of the policy and of any endorsements or attached papers is plainly printed in light-face type of a style in general use, the size of which shall be uniform and not less than ten point with a lower case unspaced alphabet length not less than one hundred and twenty point (the, “text” shall include all printed matter except the name and address of the insurer, name or title of the policy, a brief description if any, captions and subcaptions, and any overprint or statement of Limitation of risk required by this or any other state to be more prominently displayed).

(12) Dividends on participating individual policies of credit insurance shall be payable to the individual insureds. Payment of such dividends may be deferred until such time as the policy is terminated. Dividends (or retrospective rate credits in the case of non-participating group policies) on group policies may be paid or credited to the creditor policyholder, subject to the restrictions hereinafter contained. Such policies may provide that dividends or retrospective rate credits which are in excess of the contribution of the creditor may be paid or credited to the individual debtors or applied in some manner for the sole benefit of debtors generally.

Attention is called to T.C.A. §§ 56-8-104(7), 56-8-201, and 56-8-202, with respect to calculation of dividends and rate credits. Insurers shall be prepared to demonstrate to the Commissioner that such dividends or retrospective rate credits are in fact equitably determined.

Dividends or retrospective rate credits shall be based on earned gross premiums and incurred claims as defined herein. Payment of dividends or retrospective rate credits based on any other assumption shall not be allowed.

Non-participating individual policies of credit insurance shall not be the subject of experience rating and no agent or creditor shall receive retrospective commissions or other compensation, direct or indirect, based on the experience of policies sold through him or on the lives of his debtors excepting as provided in this section.

For the purposes of T.C.A. § 56-4-204, retrospective rate credits shall be treated in the same manner as dividends in the computation of tax on gross premiums.

History

• Authority: T.C.A. §§ 45-5-405, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-04-.05 AMOUNT AND TERM OF CREDIT INSURANCE

(1) The initial amount of credit life insurance issued in connection with a specific loan or other credit transaction shall not exceed the total amount repayable under the contract of indebtedness, which amount repayable under an agriculture or educational loan may include the amount of the loan commitment.

(2) The amount of credit life insurance issued as joint life coverage shall at no time exceed the scheduled or actual amount of unpaid indebtedness, whichever is greater.

(3) The initial amount of indemnity payable by credit accident and health insurance in the event of disability, as defined in the policy, shall not exceed the aggregate of the periodic scheduled unpaid installments of the indebtedness, and the amount of each periodic indemnity payment shall not exceed the original indebtedness divided by the number of periodic installments.

The term of any credit insurance shall, subject to acceptance by the insurer, if required, and unless otherwise permitted pursuant to paragraph (3) of Rule 0780-01-04-.04, commence on the date when the debtor becomes obligated to the creditor. Where a group policy provides coverage with respect to existing obligations, the insurance on a debtor with respect to such indebtedness, unless otherwise expressly authorized by the Commissioner, shall commence on the effective date of the policy. The term of an individual policy of credit insurance shall not extend more than fifteen (15) days beyond the scheduled maturity date of the indebtedness unless extended at no cost to the debtor. If insurance on the life of a debtor is provided under a group policy, the term of such insurance shall not be continued for a period greater than the duration of the indebtedness. Where evidence of insurability is required and such evidence is furnished more than thirty (30) days after the date when the debtor becomes obligated to the creditor, the term of the insurance may commence on the date on which the insurance company determines the evidence to be satisfactory, and in such event shall be an appropriate refund or adjustment of any charge to the debtor for insurance.

(4) If the indebtedness is discharged due to prepayment, the insurance in force shall be terminated. If the indebtedness is discharged due to renewal or refinancing prior to the scheduled maturity date, the insurance in force shall be terminated before any new insurance may be issued in connection with the renewed or refinanced indebtedness. In all cases of termination prior to scheduled maturity, a refund shall be paid or credited as provided in Rule

Tenn. Comp. R. & Regs. 0780-01-04-.06 PREMIUMS AND IDENTIFIABLE CHARGES

(1) The Commissioner shall disapprove rates or forms if the benefits are not reasonable in relation to the premium charged. The basic prospective test of the reasonableness of this relationship is that an anticipated loss ratio of not less than 50% will be developed on all but joint life coverages, for which a loss ratio of not less than 66 2/3% will be considered reasonable. Rates will be tested retrospectively using the reporting forms which are required to be filed annually.

(2) A creditor may remit and an insurer may collect premiums on either a single premium basis or on a monthly outstanding balance basis. If the creditor adds identifiable insurance charges for credit insurance to the total amount of indebtedness, the creditor has loaned the premium or insurance charge to the debtor and the premium on the insurance charge is deemed collected for the insurer as soon as it is added to the indebtedness. In that event the creditor must remit and the insurer must collect on a single premium basis only. A creditor may remit and an insurer may collect on the monthly basis if the insurance charge or premium is not added to the amount of the loan and does not constitute part of the outstanding indebtedness, or if no direct or indirect finance, carrying, credit or service charge is made to the debtor in connection with the insurance charge or premium.

(3) It shall be presumed that the benefits are not reasonable in relation to the premium charged if the premium rates as filed with the Commissioner exceed the following:

(a) Credit Life Insurance 1. The credit life insurance rates filed with the Commissioner shall be considered reasonable by the Commissioner if the single premium rate for single life decreasing term credit life insurance does not exceed seventy-five cents (75 cents) per annum per one hundred dollars ($100) of initial insured indebtedness, and the single premium rate for single life level term credit life insurance does not exceed a single premium rate of one dollar and thirty-eight cents ($1.38) per annum per one hundred dollars ($100) of insured indebtedness.

2. From and after May 1, 1973 a single premium rate of 97.5 cent per annum ($.0813 per month) per $100 of initial insured indebtedness for joint life (2 lives) decreasing term credit life insurance or a premium payable monthly at the rate of $1.50 per $1,000 of outstanding indebtedness insured on joint (2 lives) basis.

3. A minimum premium of fifty cents (50 cents) shall be considered reasonable on any policy of credit life insurance. In the event any premium is unearned and to be returned to the insured, no returned premium calculated at less than one dollar ($1.00) need to be refunded.

4. On and after January 1, 1970, such premium rates as may be promulgated from time to time by the Commissioner.

(b) Credit Accident and Health Insurance.

1. From April 15, 1969, through December 31, 1969, the rates shown in Table III, appended hereto.

2. On and after January 1, 1970, such premium rates as may be promulgated from time to time by the Commissioner.

3. The premium rates for joint credit accident and health insurance shall be no greater than 1.9 times the rates for single coverage.

If premiums or identifiable charges are paid monthly on outstanding balances, the monthly premiums shall be related to single premiums or identifiable charges by using the following formula:

20SP

MP = -------n+1 Where MP – Monthly premium of $1,000 of outstanding indebtedness SP – Single premium per $100 of initial insured indebtedness n – Term in months of the original loan (c) In the promulgation of rates for 1970 and subsequent years, the Commissioner shall be guided by the claim costs and loss ratios demonstrated on Tennessee business and reported on the forms prescribed, but may also use the results of any national mortality or morbidity investigation. The premium rates specified are considered reasonable for pollices which:

1. May condition coverage on the debtor’s being in active employment at the time the indebtedness is incurred.

2. Extend coverage to all debtors regardless of age or to all debtors not older than a specified limit, which shall be not less than age 65 at the time the insurance becomes effective.

3. May except from coverage suicide committed, while sane or insane, within two years from the most recent date of issue of the policy or certificate.

(4) An insurer may receive approval of a different premium rate or schedule of premium rates to be used in connection with a particular policy form, or a class or classes of the debtors of a creditor, if the insurer demonstrates to the satisfaction of the Commissioner that the mortality or morbidity experience which may reasonably be anticipated will develop a loss ratio in excess of 50% if the applicable rate standards hereinabove prescribed are used. This may be accomplished by use of either of two methods:

(a) Development of a life insurance rate based on the actual ages and amounts of insurance of those insured, and based on the mortality and interest assumptions used for valuation, with evidence that the age distribution is representative of the composition of the group and can reasonably be expected to remain at the level so determined. If this method is used, the life insurance rate must be redetermined and refiled annually, or at any time the policy provisions are changed in such a manner as to affect the rate.

(b) When experience is available, the following method may be used:

Let P = Premiums earned (one to three years)

C = Claims expected (one to three years) = kP D = Claims incurred (one to three years) r = premium rate to be determined s = standard premium for coverage z = constant from Table I appended hereto k = expected claim ratio from Table II appended hereto Then r = s [zD + (1-z)C]

C If this method is used, approval will not be given for a period longer than the credibility period utilized in the filing.

(5) If when based on the experience of the most recent three years as reported on the forms prescribed by the Commissioner, a company’s claim experience is such that 1 [zD + (1-z)C]≤.75, C the company shall not use prima facie rates provided above but shall file rates based upon one of the methods in paragraph (4).

(6) If a company proposes to write any type of coverage other than those described herein, it may request a public hearing to determine if a public needs exists for such coverage, and to determine, through credible statistics the initial rate to be employed, except that no hearing will be required to establish the need for lump-sum disability benefits or 7-day non-retroactive accident and health coverages.

(7) If, after study and hearing, the Commissioner determines that prescribed rates as provided in paragraph (2) do not accomplish the purposes of this section, he may prescribe that all rates be calculated in conformity with the methods described in paragraph (3) or in any other appropriate manner.

(8) The ultimate objective of these regulations is that premiums shall be such as to produce single life loss ratios of at least 50%. Since premiums must include margins for taxes and expenses of insurance companies, compensation agreements with creditors which approach or exceed 50% of earned premiums cannot contemplate such loss ratio. Compensation as used herein means commissions, dividends, retrospective rate credits, service fees, expense allowances or reimbursement, gifts or any other form of compensation.

No insurer shall pay or propose to pay, directly or indirectly, to any creditor as compensation for that creditor, total compensation as defined above in excess of 40% of premiums earned excepting that if provision is made for refund of unearned commissions in the event of termination of coverage, commissions may be paid in one sum at the time the single premium policy or certificate is written.

(9) Where an identifiable charge for group credit insurance is made to insured borrowers or purchasers such charge shall not exceed the premium provided for in the group policy issued to the creditor at the date of issue of the certificate.

TABLE I

If C is z l-z less than $10,000 .1414 .8586 $10,000 but less than $20,000 .2458 .7542 $20,000 but less than $30,000 .3162 .6838 $30,000 but less than $40,000 .3741 .6259 $40,000 but less than $50,000 .4243 .5757 $50,000 but less than $60,000 .4690 .5310 $60,000 but less than $70,000 .5100 .4900 $70,000 but less than $80,000 .5477 .4523 $80,000 but less than $90,000 .5831 .4169 $90,000 but less than $100,000 .6165 .3835 $100,000 but less than $150,000 .7071 .2929 $150,000 but less than $200,000 .8367 .1633 $200,000 but less than $250,000 .9487 .0513 $250,000 and over 1.0000 .0000 TABLE II Coverage Life: Premium k S.P. Reducing .75 .405 S.P. Level 1.38 .414 Outstanding Balance 1.17 .407 Accident and Health: 7 day retroactive .430 all others .500 TABLE III No. of Months Nonretroactive Benefits Retroactive Benefits in which 14 day 30 day 7 day 14 day 30 day Indebtness Nonretroactive Nonretroactive is repayable Retroactive Retroactive Retroactive 1 $ .13 $ ----- $ .58 $ .40 $----- 2 .42 .13 1.01 .81 .56 3 .68 .35 1.34 1.12 .91 4 .90 .53 1.60 1.36 1.17 5 1.08 .70 1.82 1.55 1.38 6 1.24 .85 2.01 1.71 1.54 7 1.37 .98 2.18 1.86 1.69 8 1.50 1.09 2.32 1.98 1.82 9 1.61 1.20 2.46 2.10 1.94 10 1.71 1.30 2.58 2.20 2.04 11 1.81 1.39 2.69 2.30 2.14 12 1.89 1.48 2.79 2.39 2.23 13 1.97 1.56 2.89 2.47 2.32 14 2.05 1.63 2.98 2.55 2.40 15 1.70 3.06 2.62 2.47 2.32 16 2.19 1.77 3.14 2.69 2.55 17 2.26 1.83 3.25 2.76 2.61 18 2.32 1.89 3.29 2.82 2.68 19 2.38 1.95 3.36 2.88 2.74 20 2.44 2.01 3.43 2.94 2.80 21 2.49 2.07 3.50 3.00 2.85 22 2.55 2.12 3.56 3.05 3.91 23 2.60 2.17 3.62 3.11 2.96 24 2.65 2.22 3.68 3.16 3.02 25 2.70 2.27 3.74 3.21 3.06 26 5.75 2.32 3.79 3.26 3.12 27 2.80 2.37 3.85 3.31 3.16 28 2.84 2.41 3.90 3.35 3.21 29 2.89 2.46 3.95 3.40 3.56 30 2.93 2.50 4.01 3.44 3.30 31 2.97 2.54 4.06 3.49 3.35 32 3.02 2.59 4.11 3.53 3.39 33 3.06 2.63 4.16 3.57 3.43 34 3.10 2.67 4.21 3.16 3.47 35 3.14 2.71 4.25 3.65 3.51 36 3.18 2.75 4.30 3.69 3.55 37 3.22 2.79 4.35 3.73 3.59 38 3.26 2.83 4.39 3.77 3.63 39 3.30 2.86 4.44 3.81 3.67 40 3.34 2.90 4.48 3.85 3.71 41 3.37 2.94 4.52 3.89 3.75 42 3.41 2.98 4.57 3.92 3.78 43 3.45 3.01 4.61 3.96 3.82 44 3.48 3.05 4.65 3.99 3.85 45 3.52 3.08 4.69 4.03 3.89 46 3.55 3.12 4.73 4.06 3.93 47 3.59 3.15 4.77 4.10 3.96 48 3.62 3.18 4.81 4.13 4.00 49 3.65 3.22 4.85 4.17 4.03 50 3.69 3.25 4.89 4.20 4.06 51 3.72 3.28 4.93 4.23 4.10 52 3.75 3.32 4.97 4.27 4.13 53 3.79 3.35 5.00 4.30 4.16 54 3.82 3.38 5.04 4.33 4.19 55 3.85 3.32 5.08 4.36 4.22 56 3.88 3.44 5.11 4.39 4.25 57 3.91 3.47 5.15 4.42 4.29 58 3.94 3.50 5.18 4.45 4.32 59 3.97 3.54 5.22 4.49 4.35 60 4.00 3.57 5.26 4.52 4.38

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901 and 56-8-110.
• Administrative History: Original rule certified June 10, 1974. (3)(a) – Amendment filed January 9, 1975; effective February 8, 1975. Amendment filed March 31, 1995; effective June 16, 1995.

Tenn. Comp. R. & Regs. 0780-01-04-.07 PREMIUM REFUNDS

(1) Each individual policy of credit insurance on which the premium is paid by the debtor and each group certificate for which an identifiable charge is made to the debtor shall provide that, in the event of termination of the insurance prior to the scheduled maturity date of the indebtedness, any refund of Premium or identifiable charge due shall be paid or credited promptly to the debtor. If a debtor has paid a premium or an identifiable charge for credit insurance to the creditor and such insurance is declined by the insurer or otherwise does not become effective, the insurer or creditor shall immediately give written notice to such debtor and shall promptly arrange for refund or credit to the debtor of any premium or identifiable charge paid by him for such insurance plus interest and fees charged thereon.

(2) (a) The refund of premiums or identifiable charges in the case of level-term credit life insurance and of reducing term credit life insurance on which premiums are payable other than by a single premium shall be equal to the pro-rata unearned gross premium, and in the case of reducing term credit life insurance paid by a single premium shall be equal to the amount computed by the “sum of digits” formula commonly known as the “Rule of 78”, however, refunds calculated at less than one dollar ($1.00) need not be made. If 15 days or less of a loan month has been earned, no charge may be made, but if over 15 days, a full month may be charged.

(b) Refunds or credits on credit accident and health insurance on which a premium or identifiable charge has been made on the single premium basis shall be at least equal to the amount computed by the “sum of digits” formula known as “Rule of 78”, however, refunds calculated at less than one dollar ($1.00) need not be made.

(c) The formulas to be used in computing the amount of the return premium shall be filed with and approved by the Commissioner.

(3) (a) An insurer shall promptly refund to an individual policyholder and refund or credit to a group policyholder any refund of premium due on termination of insurance prior to the scheduled maturity date of the indebtedness, and a group policyholder or creditor shall promptly refund or credit to the debtor any refund due pursuant to this Rule. Insurers shall be responsible for establishment of procedures by which such refunds or credits are made.

(b) “Termination of insurance” as used herein includes termination of credit accident and health coverage by the payment of the proceeds of credit life coverage and the extinguishment of the indebtedness.

(4) In the event of termination of insurance by the payment of the proceeds of credit life coverage and the extinguishment of the indebtedness, the insurer shall not be obligated to make any refund developed under the provisions of this section if such refund is less than $3.00.

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-04-.08 CLAIMS AND REVIEW PROCEDURE

(1) The insurance company shall be responsible for the settlement, adjustment and payment of all claims and shall establish and maintain adequate claim files, which may be reviewed and examined by the Commissioner. All claims shall be promptly reported to the insurer, or its designated claim representative, and all claims shall be settled as soon as possible and in accordance with the terms of the insurance contract. “Promptly reported” shall mean that adequate proofs of loss are in the possession of the insurer at the time its funds are disbursed in payment of claims. All claims shall be paid either by draft drawn upon the insurer or by check of the insurer to the order of the claimant to whom payment of the claim is due pursuant to the policy provisions, or upon direction of such claimant to the one specified.

(2) No plan or arrangement shall be used whereby any person, firm or corporation other than the insurer or its designated claim representative shall be authorized to settle or adjust claims.

The creditor shall not be designated as claim representative for the insurer in settling or adjusting claims; provided, that a group policyholder which employs one or more persons for claims and insurance administration who are not directly involved in making loans may, by arrangement with the group insurer, draw drafts or checks in payments of claims due to the group policyholder subject to audit and review by the insurer. However, nothing herein shall be construed to relieve the insurer of the responsibility for the proper settlement, adjustment and payment of all claims in accordance with the terms of the insurance contract and this

regulation.

(3) It shall be the responsibility of the insurer to make a good faith examination of each lender’s account at least annually verifying the accuracy of premiums or other identifiable insurance charges, premium refunds, and claims payments which have been reported to the insurer.

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-04-.09 STATISTICAL REQUIREMENTS

Insurers doing credit life and/or credit accident and health insurance business in this State shall annually file with the Insurance Department a report of its credit life insurance experience and credit accident and health insurance experience on forms prescribed by the Commissioner.

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-04-.10 FINANCIAL STATEMENT RESERVES

(1) In order to assume that sufficient funds will be made available to make the refunds as required and to guarantee promised benefits to policyholders, aggregate reserves shall be at least equal to the sum of the following:

(a) For Single Premium Credit Life Insurance:

1. If ages are available, the net single premiums for the remaining benefits, calculated by a seriatim method using the 1960 Commissioner’s Standard Group Table and interest of not more than 3½%. It is recommended that companies using this standard accumulate an additional reserve to assure adequacy of funds for refunds and excess claims on terminated group policies or agency agreements. Approximate methods of calculating this reserve liability may be approved by the Commissioner provided:

(i) The actuarial derivation establishes clearly that the method produces at least the minimum reserve; and (ii) The assumptions on which the approximation is based are checked for accuracy and validity against the current business of the insurer at least annually.

Approval of such methods shall be obtained prior to their use and the annual verification of assumptions shall be filed with the Commissioner; or 2. If ages are not available, the gross unearned premium, on the “Rule of 78” or pro-rata basis as specified for refunds, calculated exactly.

(b) For Credit Life Insurance on the outstanding balance plan:

Reserves shall be equal to the gross unearned premium calculated upon a pro-rata

basis.

(c) For Credit Accident and Health Insurance:

Reserves shall be not less than the sum of all gross unearned premiums, calculated as prescribed for premium refunds when the insurance is on the single premium basis, or on a pro-rata basis if on the outstanding balance plan.

(2) If, on December 31, 1969, the reserves maintained on such business by any company are on a lower basis than described above, the Commissioner, upon written request of such company may approve a plan for the systematic accumulation of such reserves. Such plan shall be accomplished within such time as the Commissioner may deem proper.

(3) REPEALED

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule filed January 9, 1975; effective February 8, 1975. Repeal filed June 4, 1975; effective July 4, 1975.

Tenn. Comp. R. & Regs. 0780-01-04-.11 REINSURANCE

REPEALED.

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974. (3) added by amendment filed January 9, 1975; effective February 8, 1975. Amendment filed June 4, 1975; effective July 4, 1975.

Tenn. Comp. R. & Regs. 0780-01-04-.12 LICENSED AGENT

(1) All individual policies of credit insurance and all certificates of group credit insurance for which an identifiable charge is made shall be issued through agents who have qualified as agents under Title 56, Chapter 8, Tennessee Code Annotated. Attention is called specifically to the exemption from examination requirements in Section 56-806, which pertains only to persons acting as agents for group credit insurance. At least one person so licensed shall be available in each location where credit insurance is offered.

(2) All premiums or identifiable charges collected shall be paid the insurer within the terms of an agency contract or group policy. All agency contracts shall be in accordance with these Rules. Each company shall file with the Commissioner a specimen of each of its agency contract forms, accompanied by a certification that no contract or modification of a contract, oral or written, has or will be used other than that on file with the Commissioner.

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-04-.13 UNFAIR SALES PRACTICES DEFINED

(1) Section 56-1204, Tennessee Code Annotated, reads in part as follows: “Unfair methods of competition – Unfair or deceptive acts or practices – Definitions. – The following are defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance: (4) BOYCOTT, COERCION AND INTIMIDATION. (a) Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion or intimidation resulting in or tending to result in unreasonable restraint of the business of insurance, or (b) by any act of boycott, coercion or intimidation monopolizing or attempting to monopolize any

part of the business of insurance...”

In order to prevent a monopoly from developing in the credit insurance field, this Department declares the use of compensating balances or special deposits when associated with the insurance of credit insurance policies (either directly or indirectly) as an “Unfair Sales Practice” and such practices shall neither be permitted in Tennessee nor involve the policies and/or certificates issued covering financial transactions entered into in Tennessee.

(2) The extension to the creditor of credit for the remittance of premiums beyond the grace period of a group policy or for more than forty-five days from the effective date of an individual policy is likewise declared to be an “Unfair Sales Practice”.

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-04-.14 FILING OF FORMS AND RATES

(1) EACH FILING OF FORMS OR RATES SHALL BE SUBMITTED THROUGH THE MAILS.

Questions relative to interpretation of these rules shall first be submitted by letter.

(2) Filings shall be made in the following manner:

(a) Letters should be addressed to the “Credit Insurance Division.”

(b) Each form shall be listed in a covering letter or in an attached list, and all covering letters and lists should be in duplicate.

(c) All policies, certificates, riders, applications, statements of proposed insurance and agent’s agreements shall be completed in “John Doe” fashion, to cover a hypothetical situation. Forms not so completed will be returned to the insurer.

(d) Rate filings shall indicate the expected loss ratio and the basis of its derivation.

(e) Each request for a higher rate than those promulgated by the Commissioner herein or by separate action as provided herein, shall contain a certification by a Fellow or Associate of the Society of Actuaries or Member of the American Academy of Actuaries, or other qualified Actuary stating that:

1. The statements contained in the request are based on investigation by the insurer and are true to the best of its knowledge, and 2. In the Actuary’s opinion, the facts stated clearly justify the rate applied for.

(3) It is the intention of the Commissioner that each filing will be acknowledged within the time prescribed by law, such acknowledgement to indicate either his approval or disapproval and, where approval is given, the date on which the forms or rate may be used. If acknowledgment has not been received within sixty days, the insurer should make inquiry as to whether the filing has been received.

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-04-.15 MISCELLANEOUS

(1) Any company or agent now or hereafter writing credit life or credit accident and health insurance in this State shall subscribe and agree to these Rules and shall be required by law to comply therewith.

(2) All credit life and credit accident and health insurance rates and forms, delivered or issued for delivery on and after April 15, 1969, except as hereinafter provided, shall conform to the provisions of this Chapter as of that date. With regard to existing group credit insurance policies, the rates and forms shall be amended to conform to the requirements of this

Chapter, or be terminated, not later than the anniversary of the date of issue of the contract next following the effective date of this Chapter. Existing group credit insurance contracts that are renewed, reissued or replaced other than on their normal anniversary date of issue and all group credit insurance contracts newly issued to replace or supplement a creditor’s existing insurance program on or after July 1, 1968, shall conform to the requirements of this

Chapter on and after April 15, 1969 No replacement or amendment of group policies to postpone the effect of this Chapter will be recognized for the purpose of this Chapter.

History

• Authority: T.C.A. §§ 45-5-403, 56-7-901, and 56-8-110.
• Administrative History: Original rule certified June 10, 1974.

Chapter 0780-01-05 Unfair Claims Settlement Practices

Tenn. Comp. R. & Regs. 0780-01-05-.01 PURPOSE

The purpose of this Chapter is to set forth minimum standards for the investigation and disposition of claims arising under contracts or certificates of insurance issued to residents of the state. It is not intended to cover claims involving workers’ compensation or health care. The various provisions of this

Chapter are intended to define procedures and practices which constitute unfair claims practices as determined by the commissioner. Nothing herein shall be construed either to create or to imply a private cause of action for violation of this Chapter.

History

• Authority: T.C.A. §§ 56-2-301, 56-8-101 through 56-8-120, 56-8-101(c), 56-8-105, 56-8-108, and 56-8- 110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.02 SCOPE

This Chapter applies to all insurers or persons subject to title 56, chapter 8, part 1, that are authorized to sell, transact, or are otherwise engaged in the business of insurance in this state. Specifically, rules 0780- 01-05-.06 through .10 only apply to property and casualty insurers doing business in this state. Rule

Tenn. Comp. R. & Regs. 0780-01-05-.03 AUTHORITY

This Chapter is issued pursuant to the authority vested in the commissioner pursuant to T.C.A. §§ 56-8- 108 and 56-8-110, the Tennessee Unfair Trade Practices and Unfair Claims Settlement Act of 2009, T.C.A. title 56, chapter 8, part 1, and other authority conferred by the insurance laws of Tennessee to regulate lines of insurance.

History

• Authority: T.C.A. §§ 56-2-301, 56-8-101 through 56-8-120, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017. October, 2017 2

Tenn. Comp. R. & Regs. 0780-01-05-.04 DEFINITIONS

All definitions contained in the Tennessee Unfair Trade Practices and Unfair Claims Settlement Act of 2009, T.C.A. title 56, chapter 8, part 1, are hereby incorporated by reference. As otherwise used in this

Chapter, the following definitions apply unless otherwise specifically defined herein:

(1) “Beneficiary” means the party entitled to receive the proceeds or benefits occurring under the policy of the insured;

(2) "Claim" means:

(a) 1. An oral, written, or electronic submission for payment that is filed by an insured, on behalf of an insured, or by a third party where the insurer accepts such claims, in accordance with the insurer's reasonable submission standards; and 2. Is sufficient to reasonably establish contractual liability for payment on the part of the insurer;

(b) For the purposes of T.C.A. § 56-8-105, a “claim” does not mean an inquiry by an insured as to the existence of coverage or how a potential claim may affect future premiums or renewability of coverage;

(3) “Claim file” means any retrievable electronic file, paper file, or combination of both, relative to a specific claim made by or on behalf of a claimant with an insurer;

(4) “Commissioner” means the commissioner of the department of commerce and insurance;

(5) “Days” means calendar days unless otherwise noted;

(6) “Department” means the department of commerce and insurance;

(7) “Documentation” or “to be documented” includes, but is not limited to, all pertinent communications, transactions, notes, work papers, claim forms, bills and explanation of benefits forms relative to the claim;

(8) “First party claimant” means an individual, corporation, association, partnership or other legal entity asserting a right to payment directly against an insurer under an insurance policy or insurance contract arising out of the occurrence of the contingency or loss covered by the policy or contract;

(9) “Inquiry” means any communication to an insurance company by an insured or by an insurance producer on behalf of an insured, regarding general terms and conditions of the insured’s personal residential property policy, including a communication concerning whether an insured’s personal residential property policy provides coverage for a type of event or the process for filing a claim;

(10) “Insurance producer” or “producer” means a person required to be licensed under the laws of this state to sell, solicit or negotiate insurance under title 56, chapter 6, part 1;

(11) “Investigation” means all activities of an insurer directly or indirectly related to the determination of liabilities under coverages afforded by an insurance policy or insurance contract;

(12) “Notification of claim” or “notice of claim” means any notification, in writing or other means acceptable under the terms of an insurance policy, to an insurer or its producer by a claimant, which reasonably apprises the insurer of the facts pertinent to a claim;

October, 2017 3 (13) “Personal residential property policy” means a homeowners insurance policy or a policy otherwise described in T.C.A. §§ 56-5-102(7)(A) and (B);

(14) “Proof of loss” means written proofs, such as claim forms, or other reasonable evidence of the claim that is required of insureds or beneficiaries submitting the claims;

(15) “Reasonable explanation” means information sufficient to enable the insured or beneficiary to compare the allowable benefits with policy provisions and determine whether proper payment has been made;

(16) “Third party claimant” means any person asserting a claim against any person under a policy or certificate of an insurer; and (17) “Written communication” includes all correspondence, regardless of source or type, that is materially related to the handling of the claim. Written communication also includes electronic mail (email) when requested by the claimant and when accepted by the insurer. Written communication does not include any privileged communication that is prepared by an attorney employed or retained by an insurer, including, but not limited to, work product or legal opinions.

History

• Authority: T.C.A. §§ 56-2-301, 56-5-302(7)(A) and (B), 56-6-102, 56-7-3403, 56-8-101 through 56-8-120, 56-8-102, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.05 FILE AND RECORD DOCUMENTATION

Each insurer’s claim files for policies or certificates are subject to examination by the commissioner or his or her duly appointed designees. To aid in such examination:

(1) The insurer shall maintain claim data that is accessible and retrievable for examination. An insurer shall be able to provide the claim number, line of coverage, date of loss, date of payment of the claim, date of denial or date closed without payment. This data must be available for all open and closed claim files for the current year and the five (5) preceding years.

(2) Documentation shall be contained in each claim file in order to permit reconstruction of the insurer’s activities relative to each claim.

(3) Each relevant document within the claim file shall be noted as to date received, date processed, or date mailed.

(4) For those insurers that do not maintain hard copy files, claim files must be accessible from cathode ray tube (CRT), micrographics, magnetic tape, electronic databases, or other electronic storage formats, and be capable of duplication to hard copy.

History

• Authority: T.C.A. §§ 56-1-103, 56-1-106, 56-1-408, 56-1-409, 56-1-410, 56-2-301, 56-8-101 through 56- 8-120, 56-8-104(10), 56-8-107, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.06 MISREPRESENTATION OF POLICY PROVISIONS

(1) No insurer shall fail to fully disclose, upon request, to first party claimants all pertinent benefits, coverages or other provisions of a policy or contract under which a claim is presented.

October, 2017 4 (2) No producer shall misrepresent to named insureds benefits, coverages or other provisions of any insurance policy or insurance contract when such benefits, coverages or other provisions are pertinent to a claim.

(3) A claim shall not be denied on the basis of failure to provide access to property unless provided for under the terms of the policy and documented in the claim file.

(4) No insurer shall deny a claim based upon the failure of a first party claimant to give written notice of loss within a specified time limit unless the written notice is a written policy condition.

(5) No insurer shall indicate to a first party claimant on a payment draft, check, or in any accompanying letter that said payment is “final” or “a release” of any claim unless the policy limit has been paid or there has been a compromise settlement agreed to by the first party claimant and the insurer as to coverage and amount payable under the contract.

(6) No insurer shall issue checks or drafts in partial settlement of a loss or claim under a specific coverage that contains language purporting to release the insurer or its insured from total liability.

History

• Authority: T.C.A. §§ 56-2-301, 56-8-101 through 56-8-120, 56-8-104, 56-8-105, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.07 FAILURE TO ACKNOWLEDGE PERTINENT COMMUNICATIONS

(1) Every insurer, upon receiving notification of a claim, shall, within thirty (30) days, acknowledge the receipt of such notice unless payment is made within that period of time. If an acknowledgement is made by means other than writing, an appropriate notation of the acknowledgement shall be made in the claim file of the insurer and dated.

(2) Pursuant to T.C.A. § 56-1-106, if the department makes a request for information from an insurer concerning a complaint filed against the insurer, the insurer must respond to the request within thirty (30) days from the date the request is received by the insurer.

(3) An appropriate reply shall be made within thirty (30) days on all other pertinent communications from a first party claimant which reasonably suggest that a response is expected.

(4) Every insurer, upon receiving notification of claim, shall promptly provide necessary claim forms, instructions and reasonable assistance so that first party claimants can comply with the policy conditions and the insurer’s reasonable requirements. Compliance with this paragraph within thirty (30) days of notification of a claim shall constitute compliance with paragraph 0780-01-05-.07(1).

History

• Authority: T.C.A. §§ 56-1-106, 56-2-301, 56-8-101 through 56-8-120, 56-8-105, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.08 STANDARDS FOR PROMPT, FAIR AND EQUITABLE SETTLEMENTS APPLICABLE

TO PROPERTY AND CASUALTY INSURERS.

(1) Within sixty (60) days after receipt by the insurer of properly completed and executed proofs of loss and such information or documents required under the policy, the first party claimant shall be advised of the acceptance or denial of liability for the claim by the insurer. No insurer shall deny a claim without providing a basis for the denial. Upon request, any denial must be given to the first party claimant in writing and the claim file of the insurer shall contain documentation of the denial as required by rule 0780-01-05-.05.

October, 2017 5 (a) Where there is a reasonable basis supported by specific information available for review by the department that the first party claimant has fraudulently caused, contributed to, or misrepresented the loss, the insurer is relieved from the requirements of paragraph 0780-01-05-.08(1); provided, however, that the first party claimant shall be advised of the acceptance or denial of liability for the claim within a reasonable time for full investigation after receipt by the insurer of a properly completed and executed proof of loss.

(2) If the insurer needs more time to determine whether liability for a first party claim should be accepted or denied, it shall so notify the first party claimant within sixty (60) days after receipt of the proofs of loss and such information or documents required under the policy, giving the reasons more time is needed. If the investigation remains incomplete, the insurer shall, sixty (60) days from the initial notification and every sixty (60) days thereafter, send to the first party claimant a letter setting forth the reasons additional time is needed for investigation.

(a) Where there is a reasonable basis supported by specific information available for review by the department for suspecting that the first party claimant has fraudulently caused, contributed to, or misrepresented the loss, the insurer is relieved from the requirements of paragraph 0780-01-05-.08(2); provided, however, that the claimant shall be advised of the acceptance or denial of liability for the claim by the insurer within a reasonable time for full investigation after receipt by the insurer of a properly completed and executed proof of loss.

(3) The insurer shall, within thirty (30) days after concluding a coverage investigation, notify the first party claimant of the findings of the investigation. Paragraphs 0780-01-05-.08(1) and (2) shall apply at the time the notice of investigation closure is sent.

(4) Insurers shall not fail to settle first party claims on the basis that responsibility for payment should be assumed by others except as may otherwise be provided by policy provisions.

(5) Insurers shall give notice of an applicable statute of limitations to first party claimants at least thirty (30) days before the date on which such statute of limitations may expire.

(6) The insurer shall tender payment within thirty (30) days of affirmation of liability, if the amount of the claim is determined and not in dispute, unless the policyholder does not want payment within thirty (30) days.

(7) No insurer shall request or require any insured to submit to a polygraph examination unless authorized under the applicable insurance contracts and state law.

(8) If, after an insurer denies a claim in its entirety, the first party claimant objects in writing to such denial, the insurer shall notify the first party claimant in writing that he or she may file a complaint with the department, Consumer Insurance Services, 500 James Robertson Parkway, Nashville, Tennessee 37243, 1-800-342-4029, or may submit the complaint request for review electronically to that section’s complaint link for insurance complaints, currently found at: https://tn.gov/commerce/topic/commerce-file-a-complaint.

(9) An insurer shall notify a policyholder of his or her right to choose a vendor to complete repairs of damages covered under the policy, unless use of a specified vendor is provided pursuant to the terms of the policy. If a notice is made by means other than writing, an appropriate notation of the notice shall be made in the claim file of the insurer and dated.

(10) No insurer shall cancel a personal residential property policy in effect for sixty (60) days or more, if the sole reason for the cancellation of the policy is that a claim is pending with the insurer.

October, 2017 6 (11) Pursuant to T.C.A. § 56-7-113, no insurance company shall increase a premium or cancel a personal residential property policy solely on the basis of an inquiry or inquiries by an insured regarding the insured's personal residential property policy or a loss under the policy.

History

• Authority: T.C.A. §§ 56-2-201, 56-2-202, 56-2-301, 56-7-113, 56-8-101 through 56-8-120, 56-8-105, 56- 8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.09 STANDARDS FOR PROMPT, FAIR AND EQUITABLE SETTLEMENTS APPLICABLE

TO AUTOMOBILE INSURANCE.

(1) When the insurance policy provides for the adjustment and settlement of first party automobile total losses on the basis of actual cash value or replacement with another of like kind and quality, one of the following methods shall apply at the discretion of the insurer:

(a) The insurer may elect to offer a replacement automobile that is at least comparable in that it will be by the same manufacturer, same or newer year, similar body style, similar options and mileage as the insured vehicle and in as good or better overall condition and available for inspection at a licensed dealer within a reasonable distance of the insured’s residence. The insurer shall pay all applicable taxes, license fees and other fees incident to transfer of evidence of ownership of the automobile, paid at no cost other than any deductible provided in the policy. The offer and any rejection thereof must be documented in the claim file.

(b) The insurer may elect a cash settlement based upon the actual cost, less any deductible provided in the policy, to purchase a comparable automobile including all applicable taxes, license fees and other fees incident to transfer of evidence of ownership of a comparable automobile. Such cost may be derived from:

1. The cost of two or more comparable automobiles in the local market area when comparable automobiles are available or were available within the last ninety (90) days to consumers in the local market area; or 2. The cost of two (2) or more comparable automobiles in areas proximate to the local market area, including the closest major metropolitan areas within or without the state, that are available or were available within the last ninety (90) days to consumers when comparable automobiles are not available in the local market area pursuant to part 0780-01-05-.09(1)(b)1. above; or 3. One (1) of two (2) or more quotations obtained by the insurer from two (2) or more licensed dealers located within the local market area when the cost of comparable automobiles are not available pursuant to parts 0780-01-05- .09(1)(b)1. and (1)(b)2. above; or 4. Any source for determining statistically valid fair market values that meet all of the following criteria:

(i) The source shall give primary consideration to the values of vehicles in the local market area and may consider data on vehicles outside the area;

(ii) The source’s database shall produce values for at least eighty-five percent (85%) of all makes and models for the last fifteen (15) model years, taking into account the values of all major options for such vehicles; and October, 2017 7 (iii) The source shall produce fair market values based on current data available from the area surrounding the location where the insured vehicle was principally garaged or a necessary expansion of parameters (such as time and area) to assure statistical validity.

(c) When a first party claimant’s automobile total loss is settled on a basis which deviates from the methods described in subparagraphs 0780-01-05-.09(1)(a) and (1)(b), the deviation must be supported by documentation giving particulars of the automobile condition. Any deductions from the cost, including deduction for salvage, must be as specific as reasonably possible, and specific and appropriate as to dollar amount, and shall be documented in the claim file as required by rule 0780-01-05-.05. The basis for the settlement shall be fully explained to the first party claimant.

(2) Insurers shall not require a first party claimant to travel an unreasonable distance either to inspect a replacement automobile, to obtain a repair estimate or to have the automobile repaired at a specific repair shop.

(3) Insurers shall, upon the first party claimant’s request, include the first party claimant’s deductible, if any, in subrogation demands. Subrogation recoveries shall be shared on a proportionate basis with the first party claimant, unless the deductible amount has been otherwise recovered. No deduction for expenses can be made from the deductible recovery unless an outside attorney is retained to collect such recovery. The deduction may then be for only a pro rata share of the allocated loss adjustment expense.

(4) Vehicle Repairs. If partial losses are settled on the basis of a written estimate prepared by or for the insurer, the insurer shall supply the insured a copy of the estimate upon which the settlement is based. The estimate prepared by or for the insurer shall be reasonable, in accordance with applicable policy provisions, and of an amount which will allow for repairs to be made in a workmanlike manner. If the insured subsequently claims, based upon a written estimate which he or she obtains, that necessary repairs will exceed the written estimate prepared by or for the insurer, and differences remain unresolved during the course of the repair or negotiation process, the insurer shall:

(a) Pay the difference between the written estimate and a higher estimate obtained by the insured; or (b) Promptly provide the insured with the name of at least one (1) repair shop in areas proximate to the local market area, including the closest major metropolitan areas within or without the state, that will make the repairs for the amount of the written estimate, not considering the cost of supplemental or additional repairs which may be uncovered as part of the repair process. The insurer shall assure that such repairs provided by such repairers designated by the insurer are performed in a workmanlike manner. The insurer shall maintain documentation of all such communications. If such communication is made by means other than writing, an appropriate notation of the communication shall be made in the claim file of the insurer and dated.

(5) When the amount claimed is reduced because of betterment or depreciation, all information for such reduction shall be contained in the claim file. The deductions shall be itemized and specified as to dollar amount and shall be appropriate for the amount of deductions.

(6) When the insurer elects to repair and designates a specific repair shop for automobile repairs, the insurer shall cause the damaged automobile to be restored to its condition prior to the loss at no additional cost to the claimant other than as stated in the policy and within a reasonable period of time.

October, 2017 8 (7) Towing. Unless the insurer has provided an insured with the name of a specific towing company or provides a roadside assistance program, prior to the insured’s use of another towing company, the insurer shall pay any and all reasonable towing charges irrespective of the towing company used by the insured, subject to any applicable policy provisions.

(8) Storage. The insurer shall provide reasonable notice to an insured prior to termination of payment for reasonable automobile storage charges and documentation of the denial as required by rule 0780-01-05-.05. Such insurer shall provide reasonable time for the insured to remove the vehicle from storage prior to the termination of payment, subject to any applicable policy provisions.

(9) Betterment deductions are allowable only if the deductions:

(a) Reflect a measurable decrease in market value attributable to the poorer condition of, or prior damage to, the vehicle;

(b) Any deductions set forth in subparagraph 0780-01-05-.09(9)(a) above must be measurable, itemized, specified as to dollar amount, and documented in the claim file; and (c) No insurer shall require the insured or first party claimant to supply parts for replacement.

History

• Authority: T.C.A. §§ 56-2-301, 56-8-101 through 56-8-120, 56-8-105, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.10 STANDARDS FOR PROMPT, FAIR AND EQUITABLE SETTLEMENTS APPLICABLE

TO FIRE AND EXTENDED COVERAGE TYPE POLICIES WITH REPLACEMENT COST COVERAGE.

(1) When the policy provides for the adjustment and settlement of first party losses based on replacement cost, the following shall apply:

(a) When a loss requires repair or replacement of an item or part, any consequential physical damage incurred in making such repair or replacement not otherwise excluded by the policy, shall be included in the loss. The insured shall not have to pay for any cost except for betterment and any applicable deductible under the policy.

(b) When a loss requires replacement of items and the replaced items do not match in quality, color or size, the insurer shall replace items so as to conform to a reasonably uniform appearance according to the applicable policy provisions. This applies to interior and exterior losses. The insured shall not bear any cost over the applicable deductible, if any.

(2) Actual Cash Value:

(a) When the insurance policy provides for the adjustment and settlement of losses on an actual cash value basis on residential fire and extended coverage, the insurer shall determine actual cash value as follows: replacement cost of property at time of loss less depreciation, if any. Upon the insured’s request, the insurer shall provide a copy of the claim file worksheets detailing any and all deductions for depreciation.

(b) In cases in which the insured’s interest is limited because the property has nominal or no economic value, or a value disproportionate to replacement cost less depreciation, the determination of actual cash value as set forth above is not required. In such cases, the insurer shall provide, upon the insured’s request, a written explanation of the basis for limiting the amount of recovery along with the amount payable under the policy.

October, 2017 9

History

• Authority: T.C.A. §§ 56-2-301, 56-8-101 through 56-8-120, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.11 STANDARDS FOR PROMPT, FAIR AND EQUITABLE SETTLEMENTS APPLICABLE

TO ALL LIFE INSURERS.

(1) Every insurer, upon receiving due notification of a claim filed, shall, within thirty (30) days of the notification, provide necessary claim forms, instructions and reasonable assistance so the first party claimant can properly comply with company requirements for filing a claim.

(2) Upon receipt of proof of loss from a first party claimant, the insurer shall begin any necessary investigation of the claim within thirty (30) days.

(3) The insurer’s standards for claims processing shall be such that notice of claim or proof of loss submitted against one policy issued by that insurer shall fulfill the insured’s obligation under any and all similar policies issued by that insurer and specifically identified by the insured to the insurer to the same degree that the same form would be required under any similar policy. If additional information is required to fulfill the insured’s obligation under similar policies, the insurer may request the additional information. When it is apparent to the insurer that additional benefits would be payable under an insured’s policy upon additional proofs of loss, the insurer shall communicate to and cooperate with the insured in determining the extent of the insurer’s additional liability. Life insurers shall also operate in accordance with T.C.A. §§ 56-7-3401 through 56-7-3406 by searching for persons as defined in T.C.A. § 56-7-3403(8) against the social security death master file (DMF) and notifying beneficiaries about potential claims such persons may have against the company.

(4) The insurer shall affirm or deny liability on claims within a reasonable time and shall offer payment within thirty (30) days of affirmation of liability if the amount of the claim is determined and not in dispute. If portions of the claim are in dispute, the insurer shall tender payment for those portions that are not disputed within thirty (30) days.

(5) If a claim remains unresolved for sixty (60) days from the date proof of loss is received, the insurer shall provide the insured or, when applicable, the insured’s beneficiary, or the insurance producer or other designated representative responsible for communicating with the beneficiary, with a reasonable explanation for the delay. If the investigation remains incomplete, the insurer shall, sixty (60) days from the date of initial notification and every sixty (60) days thereafter, send to the claimant a letter setting forth the reasons additional time is needed for investigation.

(6) The insurer shall acknowledge and respond within thirty (30) days to any written communications relating to a pending claim.

(7) When a claim is denied, written notice of denial shall be sent to the first party claimant within thirty (30) days of the determination. The insurer shall reference the policy provision, condition or exclusion upon which the denial is based.

(8) No insurer shall deny a claim upon information obtained in a telephone conversation or personal interview with any source unless the telephone conversation or personal interview is documented in the claim file.

(9) No insurer shall indicate to a first party claimant on a payment draft, check or in any accompanying letter that said payment is “final” or “a release” of any claim unless the policy limit has been paid or there has been a compromise settlement agreed to by the first party claimant and the insurer as to coverage and amount payable under the policy.

October, 2017 10 (10) Pursuant to T.C.A. § 56-1-106, if the department makes a request for information from an insurer concerning a complaint filed against the insurer, the insurer must respond to the request within (30) days from the date the request is received by the insurer.

(11) If, after an insurer denies a claim in its entirety, the first party claimant objects in writing to such denial, the insurer shall notify the first party claimant or their legally authorized representative in writing that he or she may file a complaint with the department, Consumer Insurance Services, 500 James Robertson Parkway, Nashville, Tennessee 37243, 1-800- 342-4029, or may submit the request for review electronically to that section’s website, currently found at: https://tn.gov/commerce/topic/commerce-file-a-complaint.

History

• Authority: T.C.A. §§ 56-1-106, 56-2-301, 56-7-3401 through 56-7-3406, 56-8-101 through 56-8-120, 56- 8-105, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.12 STANDARDS FOR PROMPT, FAIR AND EQUITABLE SETTLEMENTS APPLICABLE

TO CLAIMS MADE BY THIRD PARTY CLAIMANTS.

Upon receipt of notice or notification of a claim or potential claim from a third party claimant, the insurer shall notify the third party claimant in writing that he or she may obtain information regarding any actions available to a third party claimant by contacting the department, Consumer Insurance Services, 500 James Robertson Parkway, Nashville, Tennessee 37243, 1-800-342-4029, or electronically to that

section’s website, currently found at: https://tn.gov/commerce/topic/commerce-file-a-complaint.

History

• Authority: T.C.A. §§ 56-2-301, 56-8-101 through 56-8-120, 56-8-105, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.13 PENALTIES

Violations of this Chapter shall be enforced against any person subject to the Tennessee Unfair Trade Practices and Unfair Claims Settlement Act of 2009, T.C.A. title 56, chapter 8, part 1, as provided therein, and any other applicable enforcement authority conferred by the insurance laws of Tennessee related to or incorporating violations of that Act, rules promulgated by the commissioner, or the subject matter addressed by this Chapter, including, but not limited to, T.C.A. §§ 56-2-305, 56-6-112, 56-6-410, 56-6- 910, 56-7-3405, 56-8-103, 56-8-109, 56-8-111.

History

• Authority: T.C.A. §§ 56-2-301, 56-2-305, 56-6-112, 56-6-410, 56-6-910, 56-7-3405, 56-8-101 through 56-8-120, 56-8-103, 56-8-108, 56-8-109, 56-8-110, and 56-8-111.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.14 SEVERABILITY

If any provision of this Chapter or the application thereof to any person or circumstance is for any reason held to be invalid by a court, the remainder of the Chapter and the application of such provisions to other persons or circumstances shall not be affected thereby.

History

• Authority: T.C.A. §§ 56-2-301, 56-8-101 through 56-8-120, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.15 WAIVER

(1) Unless otherwise required by law, in the event of a catastrophic occurrence, as determined by the commissioner, in the State of Tennessee, the commissioner may waive the rules arising from, or otherwise affected by, the catastrophic occurrence as he or she deems necessary.

October, 2017 11 (2) The commissioner may waive these rules at his or her discretion in the event an insurer cannot comply or lacks the means to comply with these rules, unless statute mandates that no exception may be granted.

History

• Authority: T.C.A. §§ 56-2-301, 56-8-101 through 56-8-120, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-05-.16 EFFECTIVE DATE

Insurers shall meet the requirements of this Chapter within six (6) months after the effective date of this

Chapter. Policies, forms, and rates on file with the department must comply with this Chapter within six (6) months after the effective date of this Chapter. In the event a policy in existence six (6) months after the effective date of this Chapter does not comply, the policy may run through the end of its term, but it may not be renewed without first making the policy comply with this Chapter.

History

• Authority: T.C.A. §§ 56-2-301, 56-2-305, 56-5-305, 56-7-2311, 56-8-101 through 56-8-120, 56-8-108, and 56-8-110.
• Administrative History: Original rules filed July 11, 2017; effective October 9, 2017.

Chapter 0780-01-06 Repealed

Tenn. Comp. R. & Regs. 0780-01-06 Repealed

RULES

OF THE

TENNESSEE DEPARTMENT OF INSURANCE

INSURANCE DIVISION

REPEALED

Chapter 0780-01-07 Credit Transaction Covering Motor Vehicles and Mortgaged Property

Tenn. Comp. R. & Regs. 0780-01-07-.01 DEFINITIONS

(1) Lender, as used in these rules, shall mean mortgagee and/or servicing agent of the mortgagee, provided the servicing agent is bound by the requirements approved by the mortgagee.

(2) Borrower, as used in these rules shall mean mortgagor.

(3) Commissioner, as used in these rules, shall mean the Commissioner of Insurance and Banking.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.02 NOTICE TO BORROWER

(1) Prior to any formal application for the loan or payment of any fees or costs required with the filing or an application, the lender must inform the borrower of his legal rights regarding the placing of insurance.

(2) Notice must be given to said borrower in a clear and concise statement, in writing, with a copy of said statement to be signed by the borrower and retainer by the lender. Nothing in these rules shall be construed to mean that this statement must be a part of the mortgage contract.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.03 LENDER’S RIGHTS

The lender has the right to select the type of insurance company (mutual, stock, reciprocal) whose policies will be acceptable. The lender also may prescribe reasonable requirements regarding the financial structure and stability of the company, including reinsurance agreements. In prescribing these requirements, the adequacy of the insurance coverage provided by an insurance company may be taken into consideration.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.04 BORROWER’S AGENTS LIST

The borrower shall have the right to submit to the lender a list containing a reasonable choice of agents and/or insures selected by the borrower, who will write the insurance in connection with the loan. The number of agencies comprising a “reasonable choice” shall be construed to be a minimum of three (3) agents and/or insurers. The lender has the right to refuse insurance policies written by agents not located within the trade area normally served by the lender.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.05 CLOSING DAY – BORROWER’S DUTY

If the insurance submitted by the borrower is acceptable to the lender, the borrower must have available on the day of the closing of the loan and at the time specified by the lender, the policy (or acceptable binder) and coverage agreed upon.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.06 CANCELLATION – BORROWER’S DUTY

If the policy is cancelled by the insurer, the borrower must have a new policy, acceptable to the lender, in the hands of the lender not less than thirty-six (36) hours before the expiration date stated in the notice of cancellation to the insured.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.07 MORTGAGE TRANSFER – EFFECT ON INSURANCE

In the event the mortgage is transferred by the original mortgagee to another institution or party during the term of the insurance contract, the insurance coverage shall not be cancelled except by mutual agreement of the borrower and the lender, upon full notice to the borrower, of his rights and powers, and of any expense or penalty charge which he may experience as a result of any such transfer of insurance coverage during such term.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.08 COERCION COMPLAINTS

Complaints of coercion filed with the Insurance Commissioner must be in the form of a written statement signed by the borrower. Complaints from insurance agents must be accompanied by a written statement signed by the borrower.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.09 FILING OF LENDER’S REQUIREMENTS

Any requirements adopted by the lender pursuant to these rules shall be filed with the Insurance Commissioner and such requirements shall be made available to the borrower, insurance companies and agents. The Insurance Commissioner shall treat such requirements, when filed, as public records, making such available to interested parties upon request.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.10 RENEWALS

(1) The agent shall deliver a renewal policy or a renewal certificate to the lender at least ten (10) days prior to the expiration date of the policy in force, if required by the lender.

(2) In cases where the borrower desires to change insurance agents or insurers, the agent writing the renewal business must file with the lender a letter of authorization signed by the borrower, which shall be accepted by the lender in good faith.

(3) Where a change of agent is involved in the renewal of a policy, the lender shall notify the agent renewing the insurance and the borrower, in writing, within five (5) business days after tender of the renewal policy if said policy is not acceptable to the lender.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.11 UNFAIR PRACTICES

Your attention is invited to Section 56-8-104, of Tennessee Code Annotated, in which the following are defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance:

Misrepresentations and False Advertising of Policy Contracts.............................................

Boycott, Coercion and Intimidation ...........................................................................

Unfair Discrimination ...........................................................................................

Rebates.............................................................................................................

Requiring as a condition precedent to lending money upon the security of a mortgage or lien upon real or personal property, that the borrower for whom such financing is arranged, or the owner of the property, negotiate any policy of insurance covering such real or personal property through a particular insurance agent or broker, or insurance company; provided, however, that this provision shall not prevent the exercise by any lender or lien holder or mortgagee of its right to approve or disapprove, for reasons affecting solvency or other proper reasons, of the insurance company selected by the owner or borrower to underwrite the insurance............................................

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.12 STATUTORY PROVISION

It is highly recommended that Section 56-8-101 to

Section 56-8-212, of Tennessee Code Annotated, be read and all persons engaged in the business of insurance in the State of Tennessee become familiar with these provisions.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.13 PROCEDURES

The following procedures are published herewith as requirements which are deemed to be necessary for full compliance with the law as cited above:

(a) Purchasers or borrowers, in all credit transactions where insurance coverage is required, must not be misled concerning their right to purchase insurance from any insurance company licensed by this Department and which company provides the necessary coverage. The finance factor or creditor must act affirmatively in such cases in advising the borrower of his rights to a choice of companies or agents. Where insurance is required in transactions involving the purchase of motor vehicles, the finance factor or creditor need not accept as evidence of insurance a policy which does not contain a LOSS PAYABLE CLAUSE.

(b) When the purchaser or borrower chooses to purchase insurance from the insurer represented by the finance factor or creditor, the seller must furnish the purchaser with evidence of the insurance at the time the sales contract or purchase order is executed.

Such insurance evidence must be in the form of an insurance binder. The policy shall be delivered to the purchaser or borrower within twenty-five days following the execution of the initial evidence of insurance.

(c) Where single interest is written in connection with a finance or loan transaction, a clear and concise statement shall be furnished to the purchaser or borrower, advising him that the insurance effected is solely for the interest of the dealer, finance factor or lender, and that no protection thereunder exists for the benefit of the purchaser or borrower. Such policies shall be clearly stamped or printed in not less than fourteen-point type on the title page “SINGLE INTEREST ONLY.”

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.14 FURNISHING COPY OF RECORD REQUIRED

The purchaser of motor vehicles financed under an installment sales contract must be furnished at the time the contract is consummated with a properly executed copy of a record of the transaction in which must be incorporated the following minimum requirements:

(a) CASH SELLING PRICE (Including Sales Tax andExtra Equipment)................................................................... $____________ Indicate Extra Equipment ...................................................... and Amount Sales Tax..........................................................

DOWN PAYMENT: CASH................................ $____________

TRADE-IN: Year.......................................... Make Model................................................

Motor No............................................ $____________ (b) TOTAL DOWN PAYMENT..................................................... $____________ (c) UNPAID BALANCE OF CASH PRICE (Subtract Item b from a)........................................................... $____________ (d) TOTAL FINANCE CHARGE AND INSURANCE PREMIUM FOR WHICH CREDIT IS EXTENDED........................................ $____________ Check Insurance Coverage:

Comprehensive or Fire-Theft and Combined Additional Coverage $______________ Deductible Collision Term................................................................................. Months Other (Describe):.......................................................................................

Class 1 – Over Age 25YesNo Class 2 – Under Age 25YesNo Class 3 – Business OnlyYesNo Health and Accident and Credit Life Insurance Creditor Life Insurance Only No Creditor Life nor Health & Accident Insurance PURCHASER MUST BE FURNISHED POLICIES ON EACH COVERAGE CHECKED ABOVE WITHIN TWENTY-FIVE (25) DAYS AFTER THIS DATE.

(e) DEFERRED (time) BALANCE................................................ $____________ Payable in ___________ Monthly Installments of $____________ each and One Final Installment of $_____________ The First Installment Becomes Due _____________, _______.

(f) The purchaser must indicate whether or not he(she) has fire, theft or collision insurance on trade-in car.

YesNo (g) If so, indicate whether you want this insurance transferred without penalty, to the car being purchased.

YesNo (h) If there is no trade-in involved, the borrower or purchaser must indicate his(her) desire that the seller arrange the insurance described above.

YesNo (i) If the answer is “No” immediately above, give name of agent through whom the insurance will be procured. ____________________ I (OR WE) CERTIFY THAT I (OR WE) HAVE EXAMINED THE ABOVE STATEMENT, THAT I (OR WE) UNDERSTAND EACH INCLUDED ITEM, AND THAT A COPY OF THIS STATEMENT WAS FURNISHED ME (OR US) UPON SALE OF THE ABOVE VEHICLE.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.15 NOTIFICATION

If the automobile physical damage policy does not afford automobile bodily injury and property damage insurance, the policy shall state the following notification:

“THIS POLICY DOES NOT PROVIDE AUTOMOBILE BODILY INJURY OR PROPERTY

DAMAGE INSURANCE AND IS NOT IN COMPLIANCE WITH THE MOTOR VEHICLE

FINANCIAL RESPONSIBILITY LAW OF ANY STATE.”

(a) This notification must be not less than FOURTEEN point type and it shall be displayed in RED across the face and on the filing back of the policy and may be displayed as an overprint or by a rubber stamp impression. This notification shall also be displayed on sales instruments which afford only material damage insurance. USE OF STICKERS FOR THIS PRUPOSE IS PROHIBITED.

(b) The purchaser or borrower shall be promptly notified in writing of the cancellation of or change in the policy in accordance with the standard ten-day advance cancellation notice as contained in the policy. If through payment in advance by the purchaser or borrower of the remaining undue installments or if the indebtedness is discharged in any manner prior to its maturity date, thereby terminating the insurance coverage, the unearned portion of the insurance premium and interest charged thereon, if any, shall be refunded promptly and without any delay whatsoever.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.16 POWERS OF THE COMMISSIONER

Under the provisions of Section 56-8-105, of Tennessee Code Annotated, the Commissioner is empowered to examine and investigate into the affairs of every person engaged in the business of insurance in this State in order to determine whether such person has been or is engaged in any unfair method of competition or any unfair or deceptive act or practice prohibited by the Fair Trade Practices Act, and after a hearing the offender may be severely penalized up to Five Thousand ($5,000.00) Dollars for each such violation. In view of the seriousness of complaints, and in view of the financial losses which residents of this State have sustained, it shall be the policy of this Department to exercise, wherever deemed necessary, the authority contained in said Act.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-07-.17 SCOPE OF CHAPTER

Any company or agent now or hereafter writing such insurance mentioned above in this State shall subscribe and agree to these rules and regulations and shall be required to act in full compliance therewith.

History

• Authority: T.C.A. §56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Chapter 0780-01-08 Advertisements of Accident and Sickness Insurance

Tenn. Comp. R. & Regs. 0780-01-08-.01 PURPOSE

The purpose of these rules is to assure truthful and adequate disclosure of all material and relevant information in the advertising of accident and sickness insurance. This purpose is intended to be accomplished by the establishment of, and adherence to, certain minimum standards and guidelines of conduct in the advertising of accident and sickness insurance in a manner which prevents unfair competition among insurers and is conducive to the accurate presentation and description to the insurance buying public of a policy of such insurance offered through various advertising media.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.02 APPLICABILITY

(1) These rules shall apply to any accident and sickness insurance “advertisement”, as that term is hereinafter defined, intended for presentation, distribution or dissemination in this State when such presentation, distribution or dissemination is made either directly or indirectly by or on behalf of an insurer, agent, broker or solicitor as those terms are defined in the Insurance Code of this State and these rules.

(2) Every insurer shall establish and at all times maintain a system of control over the content, form and method of dissemination of all advertisements of its policies. All such advertisements, regardless of by whom written, created, designed or presented, shall be the responsibility of the insurer whose policies are so advertised.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.03 DEFINITIONS

(1) Commissioner shall mean The Commissioner of Insurance, State of Tennessee.

(2) An advertisement for the purpose of these rules shall include:

(a) printed and published material, audio visual material, and descriptive literature of an insurer used in direct mail, newspapers, magazines, radio scripts, TV scripts, billboards and similar displays; and (b) descriptive literature and sales aids of all kinds issued by an insurer, agent or broker for presentation to members of the insurance buying public, including but not limited to circulars, leaflets, booklets, depictions, illustrations, and form letters; and (c) prepared sales talks, presentations and material for use by agents, brokers and solicitors.

(3) “Policy” for the purpose of these rules shall include any policy, plan, certificate, contract, agreement, statement of coverage, rider or endorsement which provides accident or sickness benefits, or medical, surgical or hospital expense benefits, whether on an indemnity, reimbursement, service or prepaid basis, except when issued in connection with another kind of insurance other than life, and except disability, waiver of premium and double indemnity benefits included in life insurance and annuity contracts.

(4) “Insurer” for the purpose of these rules shall include any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds, fraternal benefit society, health maintenance organization, and any other legal entity which is defined as an “insurer” in the Insurance Code of this State and is engaged in the advertisement of a policy as “policy” is herein defined.

(5) “Exception” for the purpose of these rules shall mean any provision in a policy whereby coverage for a specified hazard is entirely eliminated; it is a statement of a risk not assumed under the policy.

(6) “Reduction” for the purpose of these rules shall mean any provision which reduces the amount of the benefit; a risk of loss is assumed but payment upon the occurrence of such loss is limited to some amount or period less than would be otherwise payable had such reduction not been used.

(7) “Limitation” for the purpose of these rules shall mean any provision which restricts coverage under the policy other than an exception or a reduction.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.04 METHOD OR DISCLOSURE OF REQUIRED INFORMATION

All information required to be disclosed by these rules shall be set out conspicuously and in close conjunction with the statements to which such information relates or under appropriate captions of such prominence that it shall not be minimized, rendered obscure or presented in an ambiguous fashion or intermingled with the context of the advertisement so as to be confusing or misleading.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.05 FORM AND CONTENT OF ADVERTISEMENTS

(1) The format and content of an advertisement of an accident or sickness insurance policy shall be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive. Whether an advertisement has a capacity or tendency to mislead or deceive shall be determined by the Commissioner of Insurance from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence, within the segment of the public to which it is directed.

(2) Advertisements shall be truthful and not misleading in fact or in implication. Words or phrases, the meaning of which is clear only by implication or by familiarity with insurance terminology, shall not be used.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.06 ADVERTISEMENTS OF BENEFITS PAYABLE, LOSSES COVERED OR

PREMIUMS PAYABLE.

(1) Deceptive Words, Phrases or Illustrations Prohibited.

(a) No advertisement shall omit information or use words, phrases, statements, references or illustrations if the ommission of such information or use of such words, phrases, statements, references or illustrations has the capacity, tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered or premium payable. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale or an offer is made to refund the premium if the purchaser is not satisfied, does not remedy misleading statements.

(b) No advertisement shall contain or use words or phrases such as, “all”; “full”;

“complete”; “comprehensive”; “unlimited”; “up to”; “as high as”; “this policy will help pay your hospital and surgical bills”; “this policy will help fill some of the gaps that Medicare and your present insurance leave out”; “this policy will help to replace your income” (when used to express loss of time benefits); or similar words and phrases, in a manner which exaggerates any benefits beyond the terms of the policy.

(c) An advertisement shall not contain descriptions of a policy limitation, exception, or reduction, worded in a positive manner to imply that it is a benefit, such as, describing a waiting period as a “benefit builder”, or stating “even pre-existing conditions are covered after two years.” Words and phrases used in an advertisement to describe such policy limitations, exceptions and reductions shall fairly and accurately describe the negative features of such limitations, exceptions and reductions of the policy offered.

(d) No advertisement of a benefit for which payment is conditional upon confinement in a hospital or similar facility shall use words or phrases such as “tax free”; “extra cash”; “extra income”; “extra pay”; or substantially similar words or phrases because such words and phrases have the capacity, tendency or effect of misleading the public into believing that the policy advertised will, in some way, enable them to make a profit from being hospitalized.

(e) No advertisement of a hospital or other similar facility confinement benefit shall advertise that the amount of the benefit is payable on a monthly or weekly basis when, in fact, the amount of the benefit payable is based upon a daily pro rata

basis relating to the number of days of confinement. When the policy contains a limit on the number of days of coverage provided, such limit must appear in the advertisement.

(f) No advertisement of a policy covering only one disease or a list of specified diseases shall imply coverage beyond the terms of the policy. Synonymous terms shall not be used to refer to any disease so as to imply broader coverage than is the fact.

(g) An advertisement for a policy providing benefits for specified illnesses only, such as cancer, or for specified accidents only, such as automobile accidents, shall clearly and conspicuously in prominent type state the limited nature of the policy. The statement shall be worded in language identical to, or substantially similar to the following: “THIS IS A LIMITED POLICY”; “THIS IS A CANCER ONLY POLICY”; “THIS IS AN AUTOMOBILE ACCIDENT ONLY POLICY”.

(h) An advertisement of a direct response insurance product shall not imply that because “no insurance agent will call and no commissions will be paid to agent” that it is a “a low cost plan,” or use other similar words or phrases because the cost of advertising and servicing such policies is a substantial cost in the marketing of a direct response insurance product.

(2) Exceptions, Reductions and Limitations.

(a) When an advertisement refers to either a dollar amount, or a period of time for which any benefit is payable, or the cost of the policy, or specific policy benefit, or the loss for which such benefit is payable, it shall also disclose those exceptions, reductions and limitations affecting the basic provisions of the policy without which the advertisement would have the capacity or tendency to mislead or deceive.

(b) When a policy contains a waiting, elimination, probationary or similar time period between the effective date of the policy and the effective date of coverage under the policy or a time period between the date a loss occurs and the date benefits begin to accrue for such loss, an advertisement which is subject to the requirements of the preceding paragraph shall disclose the existence of such periods.

(c) An advertisement shall not use the words “only”; “merely”; “minimum”; or similar words or phrases to describe the applicability of any exceptions and reductions, such as: “This policy is subject to the following minimum exceptions and reductions”.

(3) Pre-Existing Conditions.

(a) An advertisement which is subject to the requirements of Section 6-B shall, in negative terms, disclose the extent to which any loss is not covered if the cause of such loss is traceable to a condition existing prior to the effective date of the policy. The use of the term “pre-existing condition” without an appropriate definition or description shall not be used.

(b) When a policy does not cover losses resulting from pre-existing conditions, no advertisement of the policy shall state or imply that the applicant’s physical condition or medical history will not affect the issuance of the policy or payment of a claim thereunder.

This rule prohibits the use of the phrase “no medical examination required” and phrases of similar import, but does not prohibit explaining “automatic issue.” If an insurer requires a medical examination for a specified policy, the advertisement shall disclose that a medical examination if required.

(c) When an advertisement contains an application form to be completed by the applicant and returned by mail for a direct response insurance product, such application form shall contain a question or statement which reflects the preexisting condition provisions of the policy immediately preceding the blank space for the applicant’s signature. For example, such an application form shall contain a question or statement substantially as follows:

“Do you understand that this policy will not pay benefits during the first __________ year(s) after the issue date for a disease or physical condition which you now have or have had in the past?” YES Or substantially the following statement:

“I understand that the policy applied for will not pay benefits for any loss incurred during the first __________ year(s) after the issue date on account of disease or physical condition which I now have or have had in the past.”

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.07 NECESSITY FOR DISCLOSING POLICY PROVISIONS RELATING TO

RENEWABILITY, CANCELABILITY AND TERMINATION. When an advertisement refers to either a dollar amount or a period of time for which any benefit is payable, or the cost of the policy, or specific policy benefit, or the loss for which such benefit is payable, it shall disclose the provisions relating to renewability, cancellability and termination and any modification of benefits, losses covered or premiums because of age or for other reasons, in a manner which shall not minimize or render obscure the qualifying conditions.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.08 TESTIMONIALS OR ENDORSEMENTS BY THIRD PARTIES

(1) Testimonials used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised and be accurately reproduced. The insurer, in using a testimonial, makes as its own all of the statements contained therein, and the advertisement, including such statement, is subject to all the provisions of these rules.

(2) If the person making a testimonial, an endorsement or an appraisal has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee, or otherwise, such fact shall be disclosed in the advertisement. If a person is compensated for making a testimonial, endorsement or appraisal, such fact shall be disclosed in the advertisement by language substantially as follows: “Paid Endorsement.” This rule does not require disclosure of union “scale” wages required by union rules if the payment is actually for such “scale” for TV or radio performances. The payment of substantial amounts, directly or indirectly, for “travel and entertainment” for filming or recording TV or radio advertisements remove the filming or recording from the category of an unsolicited testimonial and require disclosure of such compensation.

(3) An advertisement shall not state or imply that an insurer or a policy has been approved or endorsed by an individual, group of individuals, society, association or other organizations, unless such is the fact, and unless any proprietary relationship between an organization and the insurer is disclosed. If the entity making the endorsement or the testimonial has been formed by the insurer or is owned or controlled by the insurer or the person or persons who own or control the insurer, such fact shall be disclosed in the advertisement.

(4) When a testimonial refers to benefits received under a policy, the specific claim data, including claim number, date of loss, and other pertinent information shall be retained by the insurer for inspection for a period of four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.09 USE OF STATISTICS

(1) An advertisement relating to the dollar amounts of claims paid, the number of persons insured, or similar statistical information relating to any insurer or policy shall not use irrelevant facts, and shall not be used unless it accurately reflects all of the relevant facts.

Such an advertisement shall not imply that such statistics are derived from the policy advertised unless such is the fact, and when applicable to other policies or plans shall specifically so state.

(2) An advertisement shall not represent or imply that claim settlements by the insurer are “liberal” or “generous,” or use words of similar import, or that claim settlements are or will be beyond the actual terms of the contract. An unusual amount paid for a unique claim for the policy advertised is misleading and shall not be used.

(3) The source of any statistics used in an advertisement shall be identified in such advertisement.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.20 EFFECTIVE DATE

This Chapter shall become effective January 1, 1973 with the following exception: provided that existing supplies of advertisements which do not comply with the requirement as to “form number or numbers” as set forth in Rule 0780-1-8-.13, Identity of Insurer, Paragraph (1) may be utilized until exhausted, but in any event, Paragraph (1) of such rule shall be complied within its entirety not later than March 1, 1973.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.10 IDENTIFICATION OF PLAN OR NUMBER OF POLICIES

(1) When a choice of the amount of benefits is referred to, an advertisement shall disclose that the amount of benefits provided depends upon the plan selected and that the premium will vary with the amount of the benefits selected.

(2) When an advertisement refers to various benefits which may be contained in two or more policies, other than group master policies, the advertisement shall disclose that such benefits are provided only through a combination of such policies.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.11 DISPARAGING COMPARISONS AND STATEMENTS

An advertisement shall not directly or indirectly make unfair or incomplete comparisons of policies or benefits or comparisons of noncomparable policies of other insurers, and shall not disparage competitors, their policies, services or business methods, and shall not disparage or unfairly minimize competing methods of marketing insurance.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.12 JURISDICTIONAL LICENSING AND STATUS OF INSURER

(1) An advertisement which is intended to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed shall not imply licensing beyond those limits.

(2) An advertisement shall not create the impression directly or indirectly that the insurer, its financial condition or status, or the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds or plans of insurance are approved, endorsed, or accredited by any division or agency of this State or the United States Government.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.13 IDENTITY OF INSURER

(1) The name of the actual insurer and the form number or numbers advertised shall be identified and made clear in all of its advertisements. An advertisement shall not use a trade name, any insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer, service mark, slogan, symbol or other device which without disclosing the name of the actual insurer would have the capacity and tendency to mislead or deceive as to the true identity of the insurer.

(2)No advertisement shall use any combination of word, symbols, or physical materials which by their content, phraseology, shape, color or other characteristics are so similar to combination of words, symbols, or physical materials used by agencies of the federal government or of this State, or otherwise appear to be of such a nature that it tends to confuse or mislead prospective insureds into believing that the solicitation is in some manner connected with an agency of the municipal, state, or federal government.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.14 GROUP OR QUASI-GROUP IMPLICATIONS

An advertisement of a particular policy shall not state or imply that prospective insureds become group or quasi-group members covered under a group policy and as such enjoy special rates or underwriting privileges, unless such is the fact.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.15 INTRODUCTORY, INITIAL OR SPECIAL OFFERS

(1) An advertisement of an individual policy shall not directly or by implication represent that a contract or combination of contracts is an introductory, initial or special offer, or that applicants will receive substantial advantages not available at a later date, or that the offer is available only to a specified group of individuals, unless such is the fact. An advertisement shall not contain phrases describing an enrollment period as “special,”

“limited,” or similar words or phrases when the insurer uses such enrollment periods as the usual method of advertising accident and sickness insurance.

(2) An enrollment period during which a particular insurance product may be purchased on an individual basis shall not be offered within this State unless there has been a lapse of not less than 30 days between the close of the immediately preceding enrollment period for the same product and the opening of the new enrollment period. The advertisement shall indicate the date by which the applicant must mail the application which shall be not less than ten days and not more than forty days from the date that such enrollment period is advertised for the first time. This rule applies to all advertising media, i.e., mail, newspapers, radio, television, magazines and periodicals, by any one insurer. It is inapplicable to solicitations of employees or members of a particular group or association which otherwise would be eligible under specific provisions of the Insurance Code for group, blanket or franchise insurance. The phrase “any one insurer” includes all affiliated companies of a group of insurance companies under common management or control.

(3) This rule prohibits any statement or implication to the effect that only a specific number of policies will be sold, or that a time is fixed for the discontinuance of the sale of the particular policy advertised because of special advantages available in the policy, unless such is the fact.

(4) The phrase “a particular insurance product” in Paragraph (2) of this Rule means an insurance policy which provides substantially different benefits than those contained in any other policy. Different terms of renewability; an increase or decrease in the dollar amounts of benefits; an increase or decrease in any elimination period or waiting period from those available during an enrollment period for another policy shall not be sufficient to constitute the product being offered as a different product eligible for concurrent or overlapping enrollment periods.

(5) An advertisement shall not offer a policy which utilizes a reduced initial premium rate in a manner which overemphasizes the availability and the amount of the initial reduced premium. When an insurer charges an initial premium that differs in amount from the amount of the renewal premium payable on the same mode, the advertisement shall not display the amount of the reduced initial premium either more frequently or more prominently than the renewal premium, and both the initial reduced premium and the renewal premium must be stated in juxtaposition in each portion of the advertisement where the initial reduced premium appears.

(6) Special awards, such as a “safe drivers’ award” shall not be used in connection with advertisements of accident or accident and sickness insurance.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.16 STATEMENTS ABOUT AN INSURER

An advertisement shall not contain statements which are untrue in fact, or by implication misleading, with respect to the assets, corporate structure, financial standing, age or relative position of the insurer in the insurance business. An advertisement shall not contain a recommendation by any commercial rating system unless it clearly indicates the purpose of the recommendation and the limitations of the scope and extent of the recommendation.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.17 ENFORCEMENT PROCEDURES

(1) Advertising File.

Each insurer shall maintain at its home or principal office a complete file containing every printed, published or prepared advertisement of its individual policies and typical printed, published or prepared advertisements of its blanket, franchise and group policies hereafter disseminated in this or any other state whether or not licensed in such other state, with a notation attached to each such advertisement which shall indicate the manner and extent of distribution and the form number of any policy advertised. Such file shall be subject to regular and periodical inspection by this Department. All such advertisements shall be maintained in said file for a period of either four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.

(2) Certificate of Compliance.

Each insurer required to file an Annual Statement which is now or which hereafter becomes subject to the provisions of these rules must file with this Department with its Annual Statement a Certificate of Compliance executed by an authorized officer of the insurer wherein it is stated that to the best of his knowledge, information and belief the advertisements which were disseminated by the insurer during the preceding statement year complied or were made to comply in all respects with the provisions of these rules and the Insurance Laws of this State as implemented and interpreted by these rules.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.18 SEVERABILITY PROVISION

If any Rule or portion of a Rule of this Chapter, or the applicability thereof to any person or circumstance is held invalid by a court, the remainder of the rules, or the applicability of such provision to other persons or circumstances, shall not be affected thereby.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-08-.19 PENALTY

(1) Any insurer failing to comply with the requirements of this regulation shall be subject to the following penalty:

Upon the Commissioner’s order, shall file for approval, prior to its use, any advertisement used in connection with the solicitation of a contract of insurance in the State of Tennessee. For the

purpose of this Section, “prior to its use” shall mean the filing of such advertising material at least thirty days prior to its use. Unless disapproved by the Commissioner prior to the expiration of the 30 day period the advertisement shall be deemed to be approved. The Commissioner may, in his discretion, upon proof satisfactory to him that the failure to comply has been corrected, rescind such order.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule certified June 10, 1974.

Chapter 0780-01-09 Repealed

Tenn. Comp. R. & Regs. 0780-01-09 Repealed

RULES

OF THE

TENNESSEE DEPARTMENT OF INSURANCE

INSURANCE DIVISION

REPEALED

Authority: T.C.A. § 48-1604 to implement T.C.A. § 48-1625. Administrative History. Original Rule certified June 10, 1974. Repealed: Filed December 3, 1976; Effective January 3, 1977

Chapter 0780-01-10 Repealed

Tenn. Comp. R. & Regs. 0780-01-10 Repealed

RULES

OF THE

TENNESSEE DEPARTMENT OF INSURANCE

INSURANCE DIVISION

REPEALED

Authority: T.C.A. § 48-1604 to implement T.C.A. § 48-1625. Administrative History. Original Rule certified June 10, 1974. Repealed: Filed December 3, 1976; Effective January 3, 1977

Chapter 0780-01-11 Repealed

Tenn. Comp. R. & Regs. 0780-01-11 Repealed

RULES

OF THE

TENNESSEE DEPARTMENT OF INSURANCE

INSURANCE DIVISION

REPEALED

Authority: T.C.A. § 48-1604 to implement T.C.A. § 48-1625. Administrative History. Original Rule certified June 10, 1974. Repealed: Filed December 3, 1976; Effective January 3, 1977

Chapter 0780-01-12 Title Insurance Companies and Their Agents

Tenn. Comp. R. & Regs. 0780-01-12-.01 DEFINITIONS

(1) All words and phrases used herein which are defined in T.C.A. §56-35-102 shall have the meaning set forth therein.

(2) “All inclusive rate” means the aggregate consideration paid, or to be paid to a title insurance company, a title insurance agency, a title insurance agent, an approved attorney for a title insurance company, or any combination thereof in conjunction with the issuance of such company’s commitment, binder or policy of title insurance for those functions embraced by the definition of “risk rate” in T.C.A., §56-35-102(a)(8), and for those matters such as abstracting, record search and the examination or determination of insurability in conjunction with the issuance of such commitment, binder or policy in accordance with T.C.A., §56-35-129 and other matters related to assumption of a title insurance risk.

(3) “Abstract of title” means a history of title to real property or an interest therein for a given period of time consisting of a listing, summary, copy or some combination thereof of documents or matters affecting said title and imparting constructive notice under the laws.

(4) “Title plant” means a set of records in which an entry has been made of documents or matters imparting constructive notice under the law of matters affecting title to real property or any interest therein or encumbrance thereon, which has been filed or recorded in the jurisdiction for which such title plant is maintained, and may also include maps and back title files.

(5) “Approved attorney” means an attorney at law admitted to practice in this state who is not an agent or employee of the title insurance company and whose certification as to status of title such title insurance company is willing to accept as the basis for issuance of its title insurance policy.

History

• Authority: T.C.A. §§56-35-102, 56-35-122 and 56-35-129.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed January 20, 1984; effective February 19, 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.02 FILING OF RATES

(1) On April 1, 1995, every rating organization licensed pursuant to T.C.A., § 56-35-132 shall file with the Commissioner for its members and subscribers in this state, and every title insurance company doing business in this state which is neither a member of nor a subscriber to such a rating organization shall file with the Commissioner, the schedule of rates to be charged by such members, subscribers and/or company in this state; as follows:

(a) An all inclusive rate for use by the company, its title insurance agencies, its title insurance agents and its approved attorneys in insuring title to real property located in those counties with a population of more than 275,000 but not more than 700,000, as reported in the 1980 Census or any subsequent census, in which the company proposes to do business. Such rate need not be the same in all such counties.

(b) An all inclusive rate, except for charges for abstracts of title, for use by the company, its title insurance agencies, its title insurance agents and its approved attorneys in insuring title to real property located in those counties with a population of more than 700,000, as reported in the 1980 Census or any subsequent census, in which the company proposes to do business.

(c) That portion of the rates specified in subsection (1)(a) and (1)(b) of this section, which shall be the risk rate for the purposes of the tax payable under the provisions of T.C.A. §56-35-107, and establishment of the reserves required under T.C.A §§56-35-115 and 56-35-116.

(d) The risk rate to be applied in those counties with a population of less than 275,000, as reported in the 1980 Census or any subsequent census, in which the company proposes to do business as the aggregate consideration for the functions embraced by the definition of “risk rate” in T.C.A. §56-35-102(a)(8), and for the calculation of said taxes and reserves.

(2) On April 1, 1995, every title insurance company which proposes to do business in any county in this state having a population of more than 700,000, as reported in the 1980 Census or any subsequent census, shall file with the Commissioner a schedule of rates for abstracts of title, however denominated, to be made in contemplation of the issuance of each and every commitment, binder or policy of title insurance to be issued by the company, its title insurance agencies or its title insurance agents in insuring title to real property located in such county, whether such abstracts of title be made from a title plant or from the public records.

History

• Authority: T.C.A. §§56-35-107, 56-35-111, 56-35-115, 56-35-116, 56-35-122, 56-35-129 and 56-35-132.
• Administrative History: Original rule Certified June 10, 1974. Repeal and new rule filed January 20, 1984; effective February 19, 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.03 ADHERENCE TO SCHEDULE OF RATES

Every title insurance company, its title insurance agencies, its title insurance agents and its approved attorneys shall adhere to schedules of rates in effect prior to the effective date of this rule until such time as the schedule of rates filed by such company pursuant hereto shall have been approved by the Commissioner, or until the expiration of sixty (60) days from the date of receipt by the Commissioner of such filing without the Commissioner’s having issued notice of his written disapproval thereof, as set forth in T.C.A. §56-35-111, whichever shall first occur. Thereafter, no title insurance company, its title insurance agencies, its title insurance agents or its approved attorneys shall make any rate charge except in accordance with the schedule of rate which is in effect for said title insurance company as provided in T.C.A. §56-35-111, and herein.

History

• Authority: T.C.A. §§56-35-111 and 56-35-122.
• Administrative History: Original rule filed June 10, 1974. Repeal and new rule filed January 19, 1984; effective February 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.04 RISK RATE

(1) The risk rate filed pursuant to subparagraphs (c) and (d) of Rule 0780-1-12-.02 which is to serve as the basis for the calculation of the taxes and the establishment of the reserves therein recited shall encompass the entire consideration for the functions embraced by the definition of “risk rate” in T.C.A. §56-35-102(a)(8), without diminution for commissions paid to or retained by a title insurance agency or a title insurance agent.

(2) No portion of any risk rate filed pursuant to subparagraphs (c) and (d) of Rule 0780-1-12- .02 shall be paid to any person to defray the cost of abstracting, record searching, certificates as to the record title to real estate, escrow, and closing services, examination of title or any other service or function not embraced by the definition of “risk rate” in T.C.A., § 56-35-102(a)(8).

History

• Authority: T.C.A. §§56-35-102 and 56-35-122.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed January 20, 1984; effective February 19, 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.05 ALL INCLUSIVE RATES – EXAMINATION FEES

(1) Any title insurance company which, under its plan of operation, either directly or through its title insurance agency or title insurance agent, will pay any portion of its schedule of all inclusive rates to an approved attorney for examination of title shall file with the Commissioner a statement of that portion of such rate which will be paid therefor. Such portion need not be the same in all counties.

(2) No title insurance company, title insurance agency or title insurance agent shall pay to an approved attorney any portion of an all inclusive rate unless such approved attorney does, in fact, examine and certify to the title insurance company the title insured.

(3) Any additional fees charged by an attorney to a client shall not be paid by the title insurance company, its title insurance agencies or its title insurance agent.

History

• Authority: T.C.A. §§56-35-111, 56-35-122 and 56-35-129.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed January 20, 1984; effective February 19, 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.06 RATE STANDARDS

(1) Rates shall not be inadequate, excessive, or unfairly discriminatory.

(2) Rates are excessive if in the aggregate they are likely to produce a long run profit that is unreasonably high in relation to the riskiness of the class of business, or if expenses are unreasonably high in relation to the services rendered.

(3) Rates are inadequate if they are clearly insufficient, together with investment income attributable to them, to sustain projected losses and expenses, or if the continued use of such fees will have the effect of substantially lessening competition or the effect of tending to create a monopoly.

(4) Rates are unfairly discriminatory if the premium charged for any classification is not reasonably related to the services performed or the risks assumed by the insurer.

Provided, however, within rate classifications premiums may, to a reasonable degree, be less in the case of small insurances and the excess may be charged against larger insurances, without rendering the rate unfairly discriminatory.

(5) In making or reviewing rates, due consideration shall be given to past and prospective loss experience, to exposure to loss, to underwriting practice and judgment, to past and prospective expenses including amounts paid to or retained by title agents, to investment income, to a reasonable margin for profit and contingencies, and to all other relevant factors both within and outside of this state.

(6) The Commissioner will consider unfair, unjust or unfairly discriminatory schedules of rate which, among other things:

(a) do not state a definite charge for every bracket of coverage;

(b) set forth more than one schedule of rates applicable to a given county;

(c) provide for the negotiation or bidding of price.

History

• Authority: T.C.A. §§56-35-111 and 56-35-122.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed January 20, 1984; effective February 19, 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.07 FINANCIAL AND STATISTICAL REPORTING

In addition to the schedule of rates required under Rule 0780-1-12-.02, all title insurance companies and/or title rating organizations doing business in Tennessee shall by June 1, 1995 file financial, statistical and loss data on specimen forms approved by the Commissioner. These specimen forms will be supplied by the Commissioner with a letter of instruction for their completion. After the original filing of such forms, the forms shall be filed each year on June 1 st . The Commissioner, if he deems it necessary, may appoint an agency to collect such data. Agents are required to supply to the company the statistics required by these forms. Once a schedule of rates with financial, statistical and loss data has been filed with the Department, any amendment to such rates or forms filed either at the request of the Commissioner or company and/or rating organization shall be considered to be a new filing within the requirements of T.C.A. §56-35-111.

History

• Authority: T.C.A. §§56-35-111 and 56-35-122.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed January 20, 1984; effective February 19, 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.08 CLOSING STATEMENT

The closing statement prepared by any title insurance company or its authorized agent shall show the names of all persons, firms, partnerships or corporations receiving compensation and the amount thereof out of the charges for title insurance binders, commitments, policies or escrow closing charges involved in the transaction.

History

• Authority: T.C.A. §§56-35-122 and 56-35-130.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed January 20, 1984; effective February 19, 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.09 ANNUAL STATEMENT

The Annual Statements filed by all title insurance companies with the Commissioner of Commerce and Insurance shall give in detail all pertinent information required by him.

History

• Authority: T.C.A. §§56-35-108 and 56-35-122.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed January 20, 1984; effective February 19, 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.10 MORTGAGEE’S TITLE POLICY

All title insurance companies issuing mortgagee’s title insurance upon a loan made simultaneously with the purchase of all or part of the real estate securing such loans, where no owner’s title insurance policy has been ordered, shall, prior to the disbursement of the loan funds or the issuance of the mortgagee’s title policy, cause the mortgagor to be advised in writing of the fact that a mortgagee’s title insurance policy is to be issued, of the fact that such policy does not afford title insurance protection to the mortgagor, and of the mortgagor’s right to obtain title insurance in his own favor; and if the mortgagor elects not to purchase owner’s title insurance the company shall obtain from him a statement in writing that he has received such notice and that he waives his right to purchase owner’s title insurance. The form of the written notice and waiver shall be as follows:

NOTICE OF WAIVER

Department of Commerce and Insurance State of Tennessee .................................................................................................................................

RE:

(address or brief property description)

Pursuant to the Regulations of the Department of Commerce and Insurance of the State of Tennessee, notice is hereby given that a mortgagee’s title insurance policy is to be issued to your mortgage lender, that such policy does not afford title insurance protection to you in the event of a defect or claim of defect in title to the real estate which you are acquiring (such as unpaid bills for labor and material, forgery, missing heirs or tax liens), and that an owner’s title insurance policy in your favor for the amount of your purchase price (or for the amount of your purchase price plus the cost of any improvements which you anticipate making) may be purchased.

Departmental Regulations require that you sign the statement below if you do not wish to purchase this protection. ____________________________________ Name of Company Issuing Policy This is to certify that we have received the foregoing notice and waive our right to purchase an owner’s title insurance policy for our protection. We acknowledge that (insert name of company) shall have no responsibility to us for the status of the title to the real estate we are acquiring. ____________________________________ Signature of Mortgagors

History

• Authority: T.C.A. §§56-35-111 and 56-35-122.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed January 20, 1984; effective February 19, 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.11 REVOCATION OF LICENSE

The Commissioner may, upon good cause shown, revoke or suspend the license of any title insurance company, agency or agents doing business in this State for a violation of, or neglect to comply with, any provision of these regulations.

History

• Authority: T.C.A. §56-35-122.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed January 20, 1984; effective February 19, 1984. Repeal and new rule filed November 10, 1994; effective January 24, 1995.

Tenn. Comp. R. & Regs. 0780-01-12-.12 ATTORNEY AND CLIENT

Nothing in these regulations shall be construed to affect in any manner the relationship of attorney and client, or the fees paid for services performed by a licensed attorney-at-law.

History

• Authority: T.C.A. §56-35-122.
• Administrative History: Original rule filed November 10, 1994; effective January 24, 1995.

Chapter 0780-01-13 Proxies, Consents, and Authorizations of Domestic Stock Insurers

Tenn. Comp. R. & Regs. 0780-01-13-.01 APPLICATION OF CHAPTER

This chapter is applicable to each domestic stock insurer which has any class of equity security held of record by one hundred or more persons; provided, however, that this chapter shall not apply to any insurer if ninety-five percent or more of its equity securities are owned or controlled by a parent or an affiliated insurer and the remaining securities are held of record by less than five hundred persons. A domestic stock insurer which files with the Securities and Exchange Commission forms of proxies, consents and authorizations complying with the requirements of the Securities Exchange Act of 1934, as amended, and the applicable regulations promulgated thereunder, shall be exempt from the provisions of this regulation with respect to any class of securities subject to SEC jurisdiction.

History

• Authority: T.C.A. §56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-13-.02 PROXIES, CONSENTS AND AUTHORIZATIONS

No domestic stock insurer, or any director, officer or employee of such insurer subject to Rule 0780-1-13-.01 or any other person, shall solicit, or permit the use of his name to solicit, by mail or otherwise, any proxy, consent or authorization in respect of any class of equity security of such insurer held of record by one hundred or more persons in contravention of this chapter and Schedules A and B hereto annexed and hereby made a part of this

regulation.

History

• Authority: T.C.A. §56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-13-.03 DISCLOSURE OF EQUIVALENT INFORMATION

Unless proxies, consents or authorizations in respect of any class of equity security of a domestic insurer subject to Rule 0780-1-13-.01 are solicited by or on behalf of the management of such insurer from the holders of record of such security prior to any annual or other meeting of such security holders, such insurer shall, in accordance with this

chapter and such further regulations as the Commissioner may adopt, file with the Commissioner and transmit to all security holders of record information substantially equivalent to the information which would be required to be transmitted if a solicitation were made. Such insurer shall transmit a written information statement containing the information specified in paragraph (4) of Rule 0780-1-13-.05 every security holder who is entitled to vote in regard to any matter to be acted upon at the meeting and from whom a proxy is not solicited on behalf of the management of the insurer provided, that in the case of a class of securities in unregistered or bearer form such statement need be transmitted only to those security holders whose names and addresses are known to the insurer.

History

• Authority: T.C.A. §56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-13-.04 DEFINITIONS

(1) The definitions and instructions set out in Schedule SIS, as promulgated by the National Association of Insurance Commissioners, shall be applicable for purposes of this

regulation.

(2) The terms “solicit” and “solicitation” for purposes of this chapter shall include:

(a) any request for a proxy, whether or not accompanied by or included in a form of proxy; or (b) any request to execute or not to execute, or to revoke, a proxy; or (c) the furnishing of a proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.

(3) The terms “solicit” and “solicitation” shall not include:

(a) any solicitation by a person in respect of securities of which he is the beneficial owner;

(b) action by a broker or other person in respect to securities carried in his name or in the name of his nominee in forwarding to the beneficial owner of such securities soliciting material received from the company, or impartially instructing such beneficial owner to forward a proxy to the person, if any, to whom the beneficial owner desires to give a proxy, or impartially requesting instructions from the beneficial owner with respect to the authority to be conferred by the proxy and stating that a proxy will be given if the instructions are received by a certain date.

(c) the furnishing of a form of proxy to a security holder upon the unsolicited request of such security holder, or the performance of any person of ministerial acts on behalf of a person soliciting a proxy.

History

• Authority: T.C.A. §56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-13-.05 shall be filed with the Commissioner in preliminary form at least five business days prior to the date definitive copies of such material are first sent or given to such persons, or shorter period as the Commissioner may authorize upon a showing of good cause therefor.

(6) Application of This Section to Report.

Notwithstanding the provisions of paragraph (2) and (3) of Rule 0780-1-13-.05, two copies of any portion of the report referred to in paragraph (2) of Rule 0780-1-13-.05 which comments upon or refers to any solicitation subject to this Rule or to any participant in any such solicitation, other than the solicitation by the management, shall be filed with the Commissioner as proxy material subject to this Chapter. Such portion of the report shall be filed with the Commissioner in preliminary form at least five business days prior to the date copies of the report are first sent or given to security holder.

History

• Authority: T.C.A. §56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-13-.06 REQUIREMENTS AS TO PROXY AND INFORMATION STATEMENT

(1) The form of proxy (a) shall indicate in bold-face type whether or not the proxy is solicited on behalf of the management, (b) shall provide a specifically designated blank space for dating the proxy and (c) shall identify clearly and impartially each matter or group of related matters intended to be acted upon, whether proposed by the management, or security holders. No reference need be made to proposals as to which discretionary authority is conferred pursuant to paragraph (3) hereof.

(2)

(a)Means shall be provided in the proxy for the person solicited to specify by ballot a choice between approval or disapproval of each matter or group of related matters referred to therein, other than elections to office. A proxy may confer discretionary authority with respect to matters as to which a choice is not so specified if the form of proxy states in bold-face type how it is intended to vote the shares or authorization represented by the proxy in each such case.

(b) A form of proxy which provides both for elections to office and for action on other specified matters shall be prepared so as to clearly provide, by a box or otherwise, means by which the security holder may withhold authority to vote for elections to office. Any such form of proxy which is executed by the security holder in such manner as not to withhold authority to vote for elections to office shall be deemed to grant such authority, provided the form of proxy so states in bold-face type.

(3)A proxy may confer discretionary authority with respect to other matters which may come before the meeting, provided the persons on whose behalf the solicitation is made are not aware a reasonable time prior to the time the solicitation is made that any other matters are to be presented for action at the meeting and provided, further, that a specific statement to that effect is made in the proxy statement or in the form of proxy.

(4)No proxy shall confer authority (a) to vote for the election of any person to any office for which a bona fide nominee is not named in the proxy statement, or (b) to vote at any annual meeting other than the next annual meeting (or any adjournment thereof) to be held after the date on which the proxy statement and form of proxy are first sent or given to security holders.

(5) the proxy statement or form of proxy shall provide, subject to reasonable specified conditions, that the proxy will be voted and that where the person solicited specifies by (6) means of ballot provided pursuant to paragraph (2) hereof a choice with respect to any matter to be acted upon, the vote will be in accordance with the specification so made.

(7) The information included in the proxy statement or information statement shall be clearly presented and the statements made shall be divided into groups according to subject matter, with appropriate headings. All printed proxy statements or information statements shall be clearly and legibly presented.

History

• Authority: T.C.A. §56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-13-.07 MATERIAL REQUIRED TO BE FILED

(1) Two preliminary copies of the proxy statement and form of proxy and any other soliciting material to be furnished to security holders concurrently therewith shall be filed with the Commissioner at least ten days prior to the date definitive copies of such material are first sent or given to security holders, or such shorter period prior to that date as the Commissioner may authorize upon a showing of good cause therefor.

(2) Two preliminary copies of any additional soliciting material relating to the same meeting or subject matter to be furnished to security holders subsequent to the proxy statement shall be filed with the Commissioner at least two day (exclusive of Saturdays, Sundays or holidays) prior to the date copies of this material are first sent or given to security holders or a shorter period prior to such dates as the Commissioner may authorize upon a showing of good cause therefor.

(3) Two definitive copies of the proxy statement, form of proxy and all other soliciting material, in the form in which this material is furnished to security holders, shall be filed with, or mailed for filing to, the Commissioner not later than the date such material is first sent or given to the security holders.

(4) Where any proxy statement, form of proxy or other material filed pursuant to these rules is amended or revised, two of the copies shall be marked to clearly show such changes.

(5) Copies of replies to inquiries from security holders requesting further information and copies of communications which do no more than request that forms of proxy theretofore solicited be signed and returned need not be filed pursuant to this section.

(6) Notwithstanding the provisions of paragraphs (1) and (2) hereof and of paragraph (5) of

Rule 0780-1-13-.10 copies of soliciting material in the form of speeches, press releases and radio or television scripts may, but need not, be filed with the Commissioner prior to use or publication. Definitive copies, however, shall be filed with or mailed for filing to the Commissioner as required by subsection 3 hereof not later than the date such material is used or published. The provisions of paragraphs (1) and (2) hereof and paragraph (5) of Rule 0780-1-13-.10 shall apply, however, to any reprints or reproductions of all or any

part of such material.

History

• Authority: T.C.A. §56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-13-.08 FALSE OR MISLEADING STATEMENTS

No proxy statement, form of proxy, notice of meeting, information statement, or other communication, written or oral, subject to this chapter shall contain any statement which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statements in any earlier communication with respect to the same meeting or subject matter which has become false or misleading.

History

• Authority: T.C.A. §56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-13-.09 PROHIBITION OF CERTAIN SOLICITATIONS

No person making a solicitation which is subject to this chapter shall solicit any undated or postdated proxy or any proxy which provides that it shall be deemed to be dated as of any date subsequent to the date on which it is signed by the security holder.

History

• Authority: T.C.A. §56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-13-.10 SPECIAL PROVISIONS APPLICABLE TO ELECTION CONTESTS

(1) Applicability. This Rule shall apply to any solicitation subject to this chapter by any person or group for the purpose of opposing a solicitation subject to this chapter by any other person or group with respect to the election or removal of directors at any annual or special meeting of security holders.

(2) Participant or Participant in a Solicitation.

(a) For purposes of this Rule, the terms “participant” and “participant in a solicitation” include: 1. the insurer; 2. any director of the insurer, and any nominee for whose election as a director proxies are solicited; 3. any other person, acting alone or with one or more other persons, committees or groups, in organizing, directing or financing the solicitation.

(b) For purposes of this Rule, the terms “participant” and “participant in a solicitation” do not include: 1. a bank, broker or dealer who, in the ordinary course of business, lends money or executes orders for the purchase or sale of securities and who is not otherwise a participant; 2. any person or organization retained or employed by a participant to solicit security holders or any person who merely transmits proxy soliciting material or performs ministerial or clerical duties; 3. any person employed in the capacity of attorney, accountant, or advertising, public relations or financial adviser, and whose activities are limited to the performance of his duties in the course of such employment; 4. any person regularly employed as an officer or employee of the insurer or any of its subsidiaries or affiliates who is not otherwise a participant; or 5. any officer or director of, or any person regularly employed by any other participant, if such officer, director, or employee is not otherwise a participant.

(3) Filing of Information Required by Schedule B.

(a) No solicitation subject to this Rule shall be made by any person other than the management of an insurer unless at least five business days prior thereto, or such shorter period as the Commissioner may authorize upon a showing of good cause therefor, there has been filed, with the Commissioner by or on behalf of each participant is such solicitation, a statement in duplicate containing the information specified by Schedule B and a copy of any material proposed to be distributed to security holders in furtherance of such solicitation. Where preliminary copies of any materials are filed, distribution to security holders should be deferred until the Commissioner’s comments have been received and complied with.

(b) Within five business days after a solicitation subject to this Rule is made by the management of an insurer, or such longer period as the Commissioner may authorize upon a showing of good cause therefor, there shall be filed with the Commissioner by or on behalf of each participant in such solicitation, other than the insurer, and by or on behalf of each management nominee for director, a statement in duplicate containing the information specified by Schedule B.

(c) If any solicitation on behalf of management or any other person has been made, or if proxy material is ready for distribution, prior to a solicitation subject to this

section in opposition thereto, a statement in duplicate containing the information specified in Schedule B shall be filed with the Commissioner by or on behalf of each participant in such prior solicitation, other than the insurer, as soon as reasonably practicable after the commencement of the solicitation in opposition thereto.

(d) If, subsequent to the filing of the statement required by subparagraphs (a), (b) and (c) of this paragraph, additional persons become participants in a solicitation subject to this chapter, there shall be filed with the Commissioner by or on behalf of each such person, a statement in duplicate containing the information specified by Schedule B, within three business days after such person becomes a participant, or such longer period as the Commissioner may authorize upon a showing of good cause therefor.

(e) If any material change occurs in the facts reported in any statement filed by or on behalf of any participant, an appropriate amendment to such statement shall be filed promptly with the Commissioner.

(f) Each statement and amendment thereto filed pursuant to this paragraph shall be

part of the public files of the Commissioner.

(4) Solicitations Prior to Furnishing Required Written Proxy Statement. Notwithstanding the provisions of paragraph (1) of Rule 0780-1-13-.05 a solicitation subject to this section may be made prior to furnishing security holders a written proxy statement containing the information specified in Schedule A with respect to such solicitation, provided that:

(a) The statements required by paragraph (3) hereof are filed by or on behalf of each participant in such solicitation.

(b) No form of proxy is furnished to security holders prior to the time the written proxy statement required by paragraph (1) of Rule 0780-1-13.05 is furnished to such persons; provided, however, that this paragraph (b) shall not apply where a proxy statement then meeting the requirements of Schedule A has been furnished to security holders.

(c) At least the information specified in subparagraphs (b) and (c) of the statements required by paragraph (3) hereof to be filed by each participant, or an appropriate summary thereof, are included in each communication sent or given to security holders in connection with the solicitation.

(d) A written proxy statement containing the information specified in Schedule A with respect to a solicitation is sent or given security holders at the earliest practicable ate.

(5) Solicitations Prior to Furnishing Required Written Proxy Statement – Filing Requirements.

Two copies of any soliciting material proposed to be sent or given to security holders prior to the furnishing of the written proxy statement required by paragraph (1) of Rule

Tenn. Comp. R. & Regs. 0780-01-13-.11 INFORMATION REQUIRED IN PROXY STATEMENT – SCHEDULE A

(1) Item 1. Revocability of Proxy. State whether or not the person giving the proxy has the power to revoke it. If the right of revocation before the proxy is exercised is limited or is subject to compliance with any formal procedure, briefly describe such limitation or procedure.

(2) Item 2. Dissenters’ Rights of Appraisal. Outline briefly the rights of appraisal or similar rights of dissenting security holders with respect to any matter to be acted upon and indicate any statutory procedure required to be followed by such security holders in order to perfect their rights. Where such rights may be exercised only within a limited time after the date of the adoption of a proposal, the filing of a charter amendment, or other similar acts, state whether the person solicited will be notified of such date.

(3) Item 3. Persons Making Solicitations Not Subject to Section 10.

(a) If the solicitation is made by the management of the insurer, so state. Given the name of any director of the insurer who has informed the management in writing that he intends to oppose any action intended to be taken by the management and indicate the action which he intends to oppose.

(b) If the solicitation is made otherwise than by the management of the insurer, state the names and addresses of the person by whom and on whose behalf it is made and the names and addresses of the persons by whom the cost of solicitation has been or will be borne, directly or indirectly.

(c) If the solicitation is to be made by specially engaged employees or paid solicitors, state (i) the material features of any contract or arrangement for such solicitation and identify the parties, and (ii) the cost or anticipated cost thereof.

(4) Item 4. Interest of Certain Persons in Matters to be Acted Upon. Describe briefly any substantial interest, direct or indirect, by stockholdings or otherwise, of any director, nominee for election for director, officer and, if the solicitation is made otherwise than on behalf of management, each person on whose behalf the solicitation is made, in any matter to be acted upon other than election to office.

(5) Item 5. Securities and Principal Security Holders.

(a) State, as to each class of voting stock of the insurer entitled to be voted at the meeting, the number of shares outstanding and the number of votes to which each class is entitled.

(b) Give the date as of which the record list of security holders entitled to vote at the meeting will be determined. If the right to vote is not limited to security holders of record on that date, indicate the conditions under which other security holders may be entitled to vote.

(c) If action is to be taken with respect to the election of directors and if the persons solicited have cumulative voting rights, make a statement that they have such rights and state briefly the conditions precedent to the exercise thereof.

(6) Item 6. Nominees and Directors. If action is to be taken with respect to the election of directors, furnish the following information, in tabular form to the entent practicable, with respect to each person nominated for election as a director and each other person whose term of office as a director will continue after the meeting:

(a) Name each such person, state when his term of office or the term of office for which he is a nominee will expire, and all other positions and offices with the insurer presently held by him, and indicate which persons are nominees for election as directors at the meeting.

(b) State his present principal occupation or employment and give the name and principal business of any corporation or other organization in which such employment is carried on. Furnish similar information as to all of his principal occupations or employments during the last five years, unless he is now a director and was elected to his present term of office by a vote of security holders at a meeting for which proxies were solicited under this regulation.

(c) If he is or has previously been a director of the insurer, state the period or periods during which he has served as such.

(d) State, as of the most recent practicable date, the approximate amount of each class of securities of the insurer or any of its parents, subsidiaries or affiliates other than directors’ qualifying shares, beneficially owned directly or indirectly by him. If he is not the beneficial owner of any such secruities, make a statement to that effect.

(7) Item 7. Remuneration and Other Transactions With Management and Others. Furnish the information reported or required in Item One of Schedule SIS under the heading “Information Regarding Management and Directors” if action is to be taken with respect to (a) the election of directors, (b) any remuneration plan, contract or arrangement in which any director, nominee for election as a director, or officer of the insurer will participate, (c) any pension or retirement plan in which any such person will participate, or (d) the granting or extension to any such person of any options, warrants or rights to purchase any securities, other than warrants or rights issued to security holders, as such, on a pro rata basis. If the solicitation is made on behalf of persons other than the management, information shall be furnished only as to Item One-A of the aforesaid hearing of Schedule SIS.

(8) Item 8. Bonus, Profit Sharing and Other Remuneration Plans. If action is to be taken with respect to any bonus, profit sharing, or other remuneration plans, of the insurer, furnish the following information:

(a) A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation.

(b) The amounts which would have been distributable under the plan during the last calendar year to 1. each person named in Item 7 of this schedule, 2. directors (c) and officers as a group, and 3. to all other employees as a group, if the plan had been in effect.

(d) If the plan to acted upon may be amended (other than by a vote of security holders) in a manner which would materially increase the cost thereof to the insurer or to materially alter the allocation of the benefits as between the groups specified in subparagraph (b) of this item, the nature of such amendments should be specified.

(9) Item 9. Pension and Retirement Plan. If action is to be taken with respect to any pension or retirement plan of the insurer, furnish the following information:

(a) A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation.

(b) State: 1. the approximate total amount necessary to fund the plan with respect to past services, the period over which such amount is to be paid, and the estimated annual payments necessary to pay the total amount over such period;

2. the estimated annual payment to be made with respect to current services; and 3. the amount of such annual payments to be made for the benefit (i) each person named in Item 7 of this schedule, (ii) directors and officers as a group, and (iii) employees as a group.

(c) If the plan to be acted upon may be amended (other than by a vote of security holders) in a manner which would materially increase the cost thereof to the insurer or to materially alter the allocation of the benefits as between the groups specified in part (3) of subparagraph (b) of this item, the nature of such amendments should be specified.

(10) Item 10. Options, Warrants, or Rights. If action is to be taken with respect to the granting or extension of any options, warrants, or rights (all referred to herein as “warrants”) to purchase securities of the insurer or any subsidiary or affiliate, other than warrants issued to all security holders on a pro rata basis, furnish the following information:

(a) The title and amount of securities called for or to be called for, the prices, expiration date and other material conditions upon which the warrants may be exercised, the consideration received or to be received by the insurer, subsidiary or affiliate for the granting or entension of the warrants and the market value of the securities called for or to be called for by the warrants, as of the latest practicable date.

(b) If known, state separately the amount of securities called for or to be called for by warrants received or to be received by the following persons, naming each such person: 1. each person named in Item 7 of this schedule, and 2. each other person who will be entitled to acquire five per cent of the securities called for or to be called for by such warrants.

(c) If known, state also the total amount of securities called for or to be called for by such warrants, received or to be received by all directors and officers of the company as a group and all employees, without naming them.

(11) Item 11. Authorization or Issuance of Securities.

(a) If action is to be taken with respect to the authorization or issuance of any securities of the insurer, furnish the title, amount and description of the securities to be authorized or issued.

(b) If the shares of securities are other than additional shares of common stock of a class outstanding, furnish a brief summary of the following, if applicable: dividend, voting, liquidation, preemptive, and conversion rights, redemption and sinking fund provisions, interest rate and date of maturity.

(c) If the shares of securities to be authorized or issued are other than additional shares of common stock of a class outstanding, the Commissioner may require financial statements comparable to those contained in the annual report.

(12) Item 12. Mergers, Consolidations, Acquisitions and Similar Matters.

(a) If action is to be taken with respect to a merger, consolidation, acquisition, or similar matter, furnish in brief outline the following information:

1. The rights of appraisal or similar rights of dissenters with respect to any matters to be acted upon. Indicate any procedure required to be followed by dissenting security holders in order to perfect such rights.

2. The material features of the plan or agreement.

3. The business done by the company to be acquired of whose assets are being acquired.

4. If available, the high and low sales prices for each quarterly period within two years.

5. The percentage of outstanding shares which must approve the transaction before it is consummated.

(b) For each company involved in a merger, consolidation or acquisition, the following financial statements should be furnished:

1. A comparative balance sheet as of the close of the last two fiscal years.

2. A comparative statement of operating income and expenses for each of the last two fiscal years and, as a continuation of each statement, a statement of earnings per share after related taxes and case dividends paid per share.

3. A pro forma combined balance sheet and income and expense statements for the last fiscal year giving effect to the necessary adjustments with respect to the resulting company.

(13) Item 13. Restatement of Accounts. If action is to be taken with respect to the restatement of any asset, capital, or surplus of the insurer, furnish the following information:

(a) State the nature of the restatement and the date as of which it is to be effective.

(b) Outline briefly the reasons for the restatement and for the selection of the particular effective date.

(c) State the name and amount of each account affected by the restatement and the effect of the restatement thereon.

(14) Item 14. Matters Not Required to Be Submitted. If action is to be taken with respect to any matter which is not required to be submitted to a vote of security holders, state the nature of such matter, the reason for submitting it to a vote of security holders and what action is intended to be taken by the management in the event of a negative vote on the matter by the security holders.

(15) Item 15. Amendment of Charter, Bylaws, or Other Documents. If action is to be taken with respect to any amendment of the insurer’s charter, bylaws or other documents as to which information is not required above, state briefly the reasons for and general effect of such amendment and the vote needed for its approval.

History

• Authority: T.C.A. 56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-13-.12 INFORMATION TO BE INCLUDED IN STATEMENTS FILED BY OR ON

BEHALF OF A PARTICIPANT (OTHER THAN THE INSURER) IN A PROXY SOLICITATION

IN AN ELECTION CONTEST. – SCHEDULE B.

(1) Item 1. Insurer. State the name and address of the insurer.

(2) Item 2. Identity and Background.

(a) State the following:

1. Your name and business address.

2. Your present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on.

(b) State the following:

1. Your residence address.

2. Information as to all material occupations, positions, offices or employments during the last ten years, giving starting and ending dates of each and the name, principal business and address of any business corporations or other business organization in which each such occupation, position, office or employment was carried on.

(c) State whether or not you are or have been a participant in any other proxy contest involving this company or other companies within the past ten years. If so, identify the principals, the subject matter and your relationship to the parties and the outcome.

(d) State whether or not, during the past ten years, you have been convicted in a criminal proceeding (excluding traffic violations, or similar misdemeanors) and, if so, give dates, nature of conviction, name and location of court, and penalty imposed or other disposition of the case. A negative answer to this subitem need not be included in the proxy statement or other proxy soliciting material.

(3) Item 3. Interest in Securities of the Insurer.

(a) State the amount of each class of the securities of the insurer which you own beneficially, directly or indirectly.

(b) State the amount of each class of securities of the insurer which you own of record but not beneficially.

(c) State with respect to all securities of the insurer purchased or sold within the past two years, the date on which they were purchased or sold and the amount purchased or sold on each such date.

(d) If any part of the purchase price or market value of any of the securities specified in subparagraph (c) is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such securities, so state and indicate the amount of the indebtedness as of the latest practicable date. If such funds were borrowed or obtained otherwise than pursuant to a margin account or bank loan in the regular course of business of a bank, broker or dealer, briefly describe the transaction, and state the names of the parties.

(e) State whether or not you are a party to any contracts, arrangements or understandings with any person with respect to any securities of the insurer, including but not limited to joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. If so, name the persons with whom such contracts, arrangements, or understandings exist and give the details thereof.

(f) State the amount of securities of the insurer owned beneficially, directly, or indirectly, by each of your associates and the name and address of each such associate.

(g) State the amount of each class of securities of any parent, subsidiary or affiliate of the insurer which you own beneficially, directly or indirectly.

(4) Item 4. Further Matters.

(a) Describe the time and circumstances under which you became a participant in the solicitation and state the nature and extent of your activities or proposed activities as a participant.

(b) Describe briefly, and where practicable state the approximate amount of, any material interest, direct or indirect, of yourself and of each of your associates in any material transactions since the beginning of the company’s last fiscal year, or in any material proposed transactions, to which the company or any of its subsidiaries or affiliates was or is to be a party.

(c) State whether or not you or any of your associates have any arrangement or understanding with any person – 1. with respect to any future employment by the insurer or its subsidiaries or affiliates; or 2. with respect to any future transactions to which the insurer or any of its subsidiaries or affiliates will or may be a party.

If so, describe such arrangement or understanding and state the names of the parties thereto.

(5) Item 5. Signature. The statement shall be dated and signed in the following manner:

I certify that the statements made in this statement are true, complete, and correct, to the best of my knowledge and belief. ___________________________(Date) (Signature of participant or authorized representative)

History

• Authority: T.C.A. §56-3-708.
• Administrative History: Original rule certified June 10, 1974.

Chapter 0780-01-14 Rules and Regulations Concerning the Insider Trading of Equity Securities of a Domestic Stock Insurance Company

Tenn. Comp. R. & Regs. 0780-01-14-.01 DEFINITION OF CERTAIN TERMS

(1) “Insurer” means any domestic stock insurance company with an equity security subject to the provisions of Chapter 95 of the Public Acts of 1965. T.C.A. §§ 56-3-702 through 56- 3-708.

(2) “Act” means T.C.A. §§ 56-3-702 through 56-3-708.

(3) “Officer” means a president, vice president, treasurer, actuary, secretary, controller and any other person who performs for the insurer functions corresponding to those performed by the foregoing officers.

(4) “Equity security” means any stock or similar security; or any voting trust certificate or certificate of deposit for such a 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.

(5) Securities “held of record”.

(a) For the purpose of determining whether the equity securities of an insurer are held of record by one hundred or more persons, securities shall be deemed to be “held of record” by each person who is identified as the owner of such securities on records of security holders maintained by or on behalf of the insurer, subject to the following:

1. In any case where the records of security holders have not been maintained in accordance with accepted practice, any additional person who would be identified as such an owner on such records if they had been maintained in accordance with accepted practice shall be included as a holder of record.

2. Securities identified as held of record by a corporation, a partnership, a trust whether or not the trustees are named, or other organization shall be included as so held by one person.

3. Securities identified as held of record by one or more persons as trustees, executors, guardians, custodians or in other fiduciary capacities with respect to a single trust, estate or account shall be included as held of record by one person.

4. Securities held by two or more persons as co-owners shall be included as held by one person.

5. Each outstanding unregistered or bearer certificate shall be included as held of record by a separate person, except to be the extent that the insurer can establish that, if such securities were registered, they would be held of record, under the provisions of this rule, by a lesser number of persons.

6. Securities registered in substantially similar names where the insurer has reason to believe because of the address or other indications that such names represent the same person, may be included as held of record by one person.

(b) Notwithstanding subparagraph (a) of this paragraph:

1. Securities held, to the knowledge of the insurer, subject to a voting trust, deposit agreement or similar arrangement shall be included as held of record by the record holders of the voting trust certificates, certificates of deposit, receipts or similar evidences of interest in such securities; provided however, that the insurer may rely in good faith on such information as is received in response to its request from a nonaffiliated insurer of the certificates or evidences of interest.

2. If the insurer knows or has reason to know that the form of holding securities of record is used primarily to circumvent the provisions of the Act, the beneficial owners of such securities shall be deemed to be the record owners thereof.

(6) “Class” means all securities of an insurer which are of substantially similar character and the holders of which enjoy substantially similar rights and privileges.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.02 TRANSACTIONS EXEMPTED FROM THE OPERATION OF T.C.A

§ 56-3-703.

Any acquisition or disposition of any equity security by a director or officer of an insurer within six months prior to the date on which the Act shall first become applicable with respect to the equity securities of such insurer shall not be subject to the operation of T.C.A. § 56-3-703.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.03 FILING OF STATEMENTS

Initial statements of beneficial ownership of equity securities required by T.C.A. § 56-3-702 shall be filed on Form 1 attached hereto. Statements of changes in such beneficial ownership required by T.C.A. § 56-3-702 shall be filed on Form 2 attached hereto. All such statements shall be prepared and filed in accordance with the requirements of the applicable form.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.04 OWNERSHIP OF MORE THAN 10 PERCENT OF AN EQUITY SECURITY

In determining, for the purpose of T.C.A. § 56-3-702 whether a person is the beneficial owner, directly or indirectly, of more than 10 percent of any class of any equity security, such class shall be deemed to consist of the total amount of such class outstanding equity securities of the class which may be deposited under the voting trust agreement or deposit agreement in question, whether or not all of such outstanding securities have been so deposited. For the purpose of this se of deposit for equity securities, the class of voting trust certificates or certificates of deposit shall be deemed to consist of the amount of voting trust certificates or certificates of deposit issuable with respect to the total amount of outstanding equity securities of the class which may be deposited under the voting trust agreement or deposit agreement in question, whether or not all of such outstanding securities have been so deposited. For the purpose of this

section a person acting in good faith may rely on the information contained in the latest Convention Form Statement filed with the Commissioner with respect to the amount of securities of a class outstanding or in the case of voting trust certificates or certificates of deposit the amount thereof issuable.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.06 EXEMPTIONS FROM T.C.A

§ 56-3-702 AND § 56-3-703.

(1) During the period of 12 months following their appointment and qualification, securities held by the following persons shall be exempt from T.C.A. § 56-3-702 and § 56-3-703.

(a) Executors or administrators of the estate of a decedent;

(b) Guardians or committees for an incompetent; and (c) Receivers, trustees in bankruptcy, assignees for the benefit of creditors, conservators, liquidating agents, and other similar persons duly authorized by law to administer the estate or assets of other persons.

(2) After the 12-month period following their appointment of qualification the foregoing persons shall be required to file reports with respect to the securities held by the estates which they administer under T.C.A. § 56-3-702 and shall be liable for profits realized from trading in such securities pursuant to T.C.A. § 56-3-703 only when the estate being administered is a beneficial owner of more than 10 percent of any class of equity security of an insurer subject to the Act.

(3) Securities reacquired by or for the account of an insurer and held by it for its account shall be exempt from T.C.A. § 56-3-702 and § 56-3-703 during the time they are held by the insurer.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.07 EXEMPTION FROM THE ACT OF SECURITIES PURCHASED OR SOLD BY

ODD-LOT DEALERS. Securities purchased or sold by an odd-lot dealer (a) in odd lots so far as reasonably necessary to carry on odd-lot transactions or (b) in round lots to offset odd-lot transactions previously or simultaneously executed or reasonably anticipated in the usual course of business, shall be exempt from the provisions of the Act with respect to participation by such odd-lot dealer in such transactions.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.08 CERTAIN TRANSACTIONS SUBJECT TO T.C.A

§ 56-3-702. The acquisition or disposition of any transferable option, put, call, spread or straddle shall be deemed such a change in the beneficial ownership of the security to which such privilege relates as to require the filing of a statement reflecting the acquisition or disposition of such privilege. Nothing in this section, however, shall exempt any person from filing the statements required upon the exercise of such option, put, call, spread or straddle.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.09 OWNERSHIP OF SECURITIES HELD IN TRUST

(1) Beneficial ownership of a security for the purpose of T.C.A. § 56-3-702 shall include:

(a) the ownership of securities as a trustee where either the trustee or members of his immediate family have a vested interest in the income or curpus of the trust, (b) the ownership of a vested beneficial interest in a trust, and (c) the ownership of securities as a settlor of a trust in which the settlor has the power to revoke the trust without obtaining the consent of all beneficiaries.

(2) Except as provided in paragraph (3) hereof, beneficial ownership of securities solely as a settlor or beneficiary of a trust shall be exempt from the provisions of T.C.A. § 56-3-702 where less than twenty percent in market value of the securities having a readily ascertainable market value held by such trust, determined as of the end of the preceding fiscal year of the trust, consists of equity securities from T.C.A. § 56-3-702 with respect to any obligation which would otherwise be imposed solely by reason of ownership as settlor or beneficiary of securities held in trust, where the ownership, acquisition, or disposition of such securities by the trust is made without prior approval by the settlor or beneficiary. No exemption pursuant to this subsection shall, however, be acquired or lost solely as a result of changes in the value of the trust assets during any fiscal year or during any time when there is no transaction by the trust in the securities otherwise subject to the reporting requirements of T.C.A. § 56-3-702.

(3) In the event that 10 percent of any class of any equity security of an insurer is held in a trust, that trust and the trustees thereof as such shall be deemed a person required to file the reports specified in T.C.A. § 56-3-702.

(4) Not more than one report need be filed to report any holdings or with respect to any transaction in securities held by a trust, regardless of the number of officers, directors or ten percent stockholders who are either trustees, settlors, or beneficiaries of a trust, provided that the report filed shall disclose the names of all trustees, settlors and beneficiaries who are officers, directors or ten percent stockholders. A person having an interest only as a beneficiary of a trust shall not be required to file any such report so long as he relies in good faith upon an understanding that the trustee of such trust will file whatever reports might otherwise be required by such beneficiary.

(5) As used in this section the “immediate family” of a trustee means:

(a) a son or daughter of the trustee, or a descendant of either, (b) a stepson or stepdaughter of the trustee, (c) the father or mother of the trustee, or an ancestor of either, (d) a stepfather or stepmother of the trustee, (e) a spouse of the trustee.

For the purpose of determining whether any of the foregoing relations exist, a legally adopted child of a person shall be considered a child of such person by blood.

(6) In determining, for the purposes of T.C.A. § 56-3-702 whether a person is the beneficial owner, directly or indirectly, of more than 10 percent of any class of any equity security, the interest of such person in the remainder of a trust shall be excluded from the computation.

(7) No report shall be required by any person, whether or not otherwise subject to the requirement of filing reports under T.C.A. § 56-3-702, with respect to his indirect interest in portfolio securities held by:

(a) a pension or retirement plan holding securities of an insurer whose employees generally are the beneficiaries of the plan, (b) a business trust with over 25 beneficiaries.

(8) Nothing in this section shall be deemed to impose any duties or liabilities with respect to reporting any transaction or holding prior to its effective date.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.10 EXEMPTION FOR SMALL TRANSACTIONS

(1) Any acquisition of securities shall be exempt from Section 1 where (a) The person effecting the acquisition does not within six months thereafter effect any disposition, otherwise than by way of gift, of securities of the same class, and (b) The person effecting such acquisition does not participate in acquisitions or in dispositions of securities of the same class having a total market value in excess of $3,000 for any six months’ period during which the acquisition occurs.

(2) Any acquisition or disposition of securities by way of gift, where the total amount of such gifts does not exceed $3,000 in market value for any six months’ period, shall be exempt from T.C.A. § 56-3-702 and may be excluded from the computations prescribed in subparagraph (b) of paragraph (1).

(3) Any person exempted by paragraph (1) or (2) or this section shall include in the first report filed by him after a transaction within the exemption a statement showing his acquisitions and dispositions for each six months’ period or portion thereof which has elapsed since his last filing.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.11 EXEMPTION FROM T.C.A

§ 56-3-703 OF TRANSACTIONS WHICH NEED

NOT BE REPORTED UNDER T.C.A. § 56-3-702. Any transaction which has been or shall be exempted from the requirements of T.C.A. § 56-3-702 shall, insofar as it is otherwise subject to the provisions of T.C.A. § 56-3-703, be likewise exempted from T.C.A. § 56-3-703.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.12 EXEMPTION FROM T.C.A

§ 56-3-703 OF CERTAIN TRANSACTIONS

EFFECTED IN CONNECTION WITH A DISTRIBUTION.

(1) Any transaction of purchase and sale, or sale and purchase, of a security which is effected in connection with the distribution of a substantial block of securities shall be exempt from the provisions of T.C.A. § 56-3-703 to the extent specified in this section as not comprehended within the purpose of said section of the Act, upon the following conditions:

(a) The person effecting the transaction is engaged in the business of distributing securities and is participating in good faith, in the ordinary course of such business, in the distribution of such block of securities;

(b) The security involved in the transaction is:

1. a part of such block of securities and is acquired by the person effecting the transaction, with a view to the distribution thereof, from the insurer or other person on whose behalf such securities are being distributed or from a person who is participating in good faith in the distribution of such block of securities or 2. a security purchased in good faith by or for the account of the person effecting the transaction for the purpose of stabilizing the market price of securities of the class being distributed or to cover an over-allotment or other short position created in connection with such distribution; and (c) Other persons not within the purview of T.C.A. § 56-3-703 are participating in the distribution of such block of securities on terms at least as favorable as those on which such person is participating and to an extent at least equal to the aggregate participation of all persons exempted from the provisions of T.C.A. § 56-3-703 by this section. However, the performance of the functions of manager of a distributing group and the receipt of a bona fide payment for performing such functions shall not preclude an exemption which would otherwise be available under this section.

(2) The exemption of a transaction pursuant to this section with respect to the participation therein of one party thereto shall not render such transaction exempt with respect to participation of any other party therein unless such other party also meets the conditions of this section.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.13 EXEMPTION FROM T.C.A

§ 56-3-703 OF ACQUISITIONS OF SHARES OF

STOCK AND STOCK OPTIONS UNDER CERTAIN STOCK BONUS, STOCK OPTION OR

SIMILAR PLANS.

(1) Any acquisition of shares of stock (other than stock acquired upon the exercise of an option, warrant or right) pursuant to a stock bonus, profit sharing, retirement, incentive, thrift, savings or similar plan, or any acquisition of a qualified or a restricted stock option pursuant to a qualified or a restricted stock option plan, or a stock option pursuant to an employee stock purchase plan, by a director or officer of an insurer issuing such stock or stock option shall be exempt from the operation of T.C.A. § 56-3-703 if the plan meets the following conditions:

(a) The plan has been approved, directly or indirectly:

1. by the affirmative votes of the holders of a majority of the securities of such insurer present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Tennessee, or 2. by the written consent of the holders of a majority of the securities of such insurer entitled to vote; provided, however, that if such vote or written consent was not solicited substantially in accordance with the proxy rules and regulations prescribed by the National Association of Insurance Commissioners, if any, in effect at the time of such vote or written consent, the insurer shall furnish in writing to the holders of record of the securities entitled to vote for the plan substantially the same information concerning the plan which would be required by any such rules and regulations so prescribed and in effect at the time such information is furnished, if proxies to be voted with respect to the approval or disapproval of the plan were then being solicited, on or prior to the date of the first annual meeting of security holders held subsequent to the later of (i) the date the Act first applies to such insurer, or (ii) the acquisition of an equity security for which exemption is claimed. Such written information may be furnished by mail to the last address of the security holders of record within 30 days prior to the date of mailing. Four copies of such written information shall be filed with, or mailed for filing to, the Commissioner not later than the date on which it is first sent or given to security holders of the insurer. For the purposes of this paragraph, the term “insurer” includes a predecessor corporation if the plan or obligations to participate thereunder were assumed by the insurer in connection with the succession.

(b) If the selection of any director or officer of the insurer to whom stock may be allocated or to whom qualified, restricted or employees stock purchase plan stock options may be granted pursuant to the plan, or the determination of the number or maximum number of shares of stock which may be allocated to any such director or officer of which may be covered by qualified, restricted or employee stock purchase plan stock options granted to any such director or officer, is subject to the discretion of any person, then such discretion shall be exercised only as follows:

1. With respect to the participation of directors – (i) by the board of directors of the insurer, a majority of which board and a majority of the directors acting in the matter are disinterested persons;

(ii) by, or only in accordance with the recommendations of, a committee of three or more persons having full authority to act in the matter, all of the members of which committee are disinterested persons; or (iii) otherwise in accordance with the plan, if the plan a. specifies the number or maximum number of shares of stock which directors may acquire or which may be subject to qualified, restricted or employee stock purchase plan stock options granted to directors and the terms upon which, and the times at which, or the periods within which, such stock may be acquired or such options may be acquired and exercised; or b. sets forth, by formula or otherwise, effective and determinable limitations with respect to the foregoing based upon earnings of the insurer, dividends paid, compensation received by participants, option prices, market value of shares, outstanding shares or percentages thereof outstanding from time to time, or similar factors.

2. With respect to the participation of officers who are not directors – (i) by the board of directors of the insurer or a committee of three or more directors; or (ii) by, or only in accordance with the recommendations of, a committee of three or more persons having full authority to act in the matter, all of the members of which committee are disinterested persons.

For the purpose of this paragraph, a director or committee member shall be deemed to be a disinterested person only if such person is not at the time such discretion is exercised eligible and has not at any time within one year prior thereto been eligible for selection as a person to whom stock may be allocated or to whom qualified, restricted or employee stock purchase plan stock options may be granted pursuant to the plan or any other plan of the insurer or any of its affiliates entitling the participants therein to acquire stock or qualified, restricted or employee stock purchase plan stock options of the insurer or any of its affiliates.

3. The provisions of this paragraph shall not apply with respect to any option granted, or other equity security acquired, prior to the date that T.C.A. §§ 56-3-702, 56-3-703 and 56-3-704 first become applicable with respect to any class of equity securities of any insurer.

(c) As to each participant or as to all participants the plan effectively limits the aggregate dollar amount or the aggregate number of shares of stock which may be allocated, or which may be subject to qualified, restricted, or employee stock purchase plan stock options granted, pursuant to the plan. The limitations may be established on an annual basis, or for the duration of the plan, whether or not the plan has a fixed termination date; and may be determined either by fixed or maximum dollar amounts or fixed or maximum numbers of shares or by formulas based upon earnings of the insurer, dividends paid, compensation received by participants, option prices, market value of shares, outstanding shares or percentages thereof outstanding from time to time, or similar factors which will result in an effective and determinable limitation. Such limitations may be subject to any provisions for adjustment of the plan or of stock allocable or options outstanding thereunder to prevent dilution or enlargement of rights.

(d) Unless the context otherwise requires, all terms used in this section shall have the same meaning as in the Act and in Rule 0780-1-14-.01. In addition, the following definitions apply:

1. The term “plan” includes any plan, whether or not set forth in any formal written document or documents and whether or not approved in its entirety at one time.

2. The definition of the terms “qualified stock option” and “employee stock purchase plan” that are set forth in Sections 422 and 423 of the Internal Revenue Code of 1954, as amended, shall be applied to that term as used in this section, provided, however, that for the purposes of this section an option which meets all of the conditions of that section, other than the date of issuance shall be deemed to be a “restricted stock option.”

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.05 DISCLAIMER OF BENEFICIAL OWNERSHIP

Any person filing a statement may expressly declare therein that the filing of such statement shall not be construed as an admission that such person is, for the purpose of the Act, the beneficial owner of any equity securities covered by the statement.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.14 EXEMPTION FROM T.C.A

§ 56-3-703 CERTAIN TRANSACTIONS IN WHICH

SECURITIES ARE RECEIVED BY REDEEMING OTHER SECURITIES.

(1) Any acquisition of an equity security (other than a convertible security or right to purchase a security) by a director or officer of the insurer issuing such security shall be exempt from the operation of T.C.A. § 56-3-703 upon condition that:

(a) the equity security is acquired by way of redemption of another security of an insurer substantially all of whose assets other than cash (or Government bonds) consist of securities of the issurer issuing the equity security so acquired, and which 1. represented substantially and in practical effect a stated or readily ascertainable amount of such equity security, 2. had a value which was substantially determined by the value of such equity security, and 3. conferred upon the holder the right to receive such equity security without the payment of any consideration other than the security redeemed;

(b) no security of the same class as the security redeemed was acquired by the director of officer within six months prior to such redemption or is acquired within six months after such redemption;

(c) the insurer issuing the equity security acquired has recognized the applicability of subparagraph (a) by appropriate corporate action.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.15 EXEMPTION OF LONG-TERM PROFITS INCIDENT TO SALES WITHIN SIX

MONTHS OF THE EXERCISE OF AN OPTION.

(1) To the extent specified in paragraph (2) of this rule the Commissioner hereby exempts as not comprehended within the purposes of T.C.A. § 56-3-703 any transaction or transactions involving the purchase and sale, or sale and purchase, of any equity security where such purchase is pursuant to the exercise of an option or similar right either (a) acquired more than six months before its exercise, or (b) acquired pursuant to the terms of an employment contract entered into more than six months before its exercise.

(2) In respect of transactions specified in paragraph (1) the profits inuring to the insurer shall not exceed the difference between the proceeds of sale and the lowest market price of any security of the same class within six months before or after the date of sale. Nothing in this section shall be deemed to enlarge the amount of profit which would inure to such insurer in the absence of this section.

(3) The Commissioner also hereby exempts, as not comprehended within the purpose of T.C.A. § 56-3-703, the disposition of a security, purchased in a transaction specified in paragraph (a) of this section, pursuant to a plan or agreement for merger or consolidation, or reclassification of the insurer’s securities, or for the exchange of its securities for the securities of another person which has acquired its assets, or which is in control, as defined in Section 368 (c) of the Internal Revenue Code of 1954, of a person which has acquired its assets, where the terms of such plan or agreement are binding upon all stockholders of the insurer except to the extent that dissenting stockholders may be entitled, under statutory provisions or provisions contained in the certificate of incorporation, to receive the appraised or fair value of their holdings.

(4) The exemptions approved by this section shall not apply to any transaction made unlawful by T.C.A. § 56-3-704 or by any rules and regulations thereunder.

(5) The burden of establishing market price of a security for the purpose of this section shall rest upon the person claiming the exemption.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.16 EXEMPTION FROM T.C.A

§ 56-3-703 OF CERTAIN ACQUISITIONS AND

DISPOSITIONS OF SECURITIES PURSUANT TO MERGER OR CONSOLIDATIONS.

(1) The following transactions shall be exempt from the provisions of T.C.A. § 56-3-703 as not comprehended within the purpose of said section:

(a) The acquisition of a security of an insurer, pursuant to a merger or consolidation, in exchange for a security of a company which, prior to said merger or consolidation, owned 85 percent or more of the equity securities of all other companies involved in the merger or consolidation except, in the case of consolidation, the resulting company;

(b) The disposition of a security, pursuant to a merger or consolidation of an insurer which, prior to said merger or consolidation, owned 85 percent or more of the equity securities of all other companies involved in the merger or consolidation except, in the case of consolidation, the resulting company;

(c) The acquisition of a security of an insurer, pursuant to a merger or consolidation, in exchange for a security of a company which, prior to said merger or consolidation, held over 85 percent of the combined assets of all the companies undergoing merger or consolidation, computed according to their book values prior to the merger or consolidation as determined by reference to their most recent available financial statements for a 12-month period prior to the merger or consolidation;

(d) The disposition of a security, pursuant to a merger or consolidation, of an insurer which, prior to said merger or consolidation, held over 85 percent of the combined assets of all the companies undergoing merger or consolidation, computed according to their book values prior to merger or consolidation, as determined by reference to their most recent available financial statements for a 12-month period prior to the merger or consolidation.

(2) A merger within the meaning of this section shall include the sale or purchase of substantially all the assets of one insurer by another in exchange for stock which is then distributed to the security holders of the insurer which sold its assets.

(3) Notwithstanding the foregoing, if an officer, director or stockholder shall make any purchase (other than a purchase exempted by this section) of a security in any company involved in the merger or consolidation and any sale (other than a sale exempted by this

section) of a security in any other company involved in the merger or consolidation within any period of less than six months during which the merger or consolidation took place, the exemption provided by this section shall be unavailable to such officer, director, or stockholder.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.17 EXEMPTION FROM T.C.A

§ 56-3-703 OF CERTAIN SECURITIES RECEIVED

UPON SURRENDER OF SIMILAR EQUITY SECURITIES.

(1) Any receipt by a person from an insurer of shares of stock of a class having general voting power, upon the surrender by such person of an equal number of shares of stock of the insurer of a class which does not have general voting power, pursuant to provisions of the insurer’s certificate of incorporation, for the purpose of and accompanied simultaneously or followed immediately by the sale of the shares so received, shall be exempt from the operation of T.C.A. § 56-3-703 as a transaction not comprehended within the purpose of said section, if the following conditions exist:

(a) The person so receiving such shares is not an officer or director, or the beneficial owner, directly or indirectly, immediately prior to such receipt, of more than 10 percent of an equity security of the insurer;

(b) The shares surrendered and the shares issued upon such surrender shall be of classes which are freely transferable and entitle the holders thereof to participate equally per share in all distributions of earnings and assets;

(c) The surrender and issuance are made pursuant to provisions of a certificate of incorporation which require that the shares issued upon such surrender shall be registered upon issuance in the name of a person or persons other than the holder of the shares surrendered and may be required to be issued as of right only in connection with the public offering, sale and distribution of such shares and the immediate sale by such holder of such shares for that purpose, or in connection with a gift of such shares;

(d) Neither the shares so surrendered nor any shares of the same class, nor other shares of the same class as those issued upon such surrender, have been or are purchased (otherwise that in a transaction exempted by this section), by the person surrendering such shares, within six months before or after such surrender or issuance.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.18 EXEMPTION FROM T.C.A

§ 56-3-703 OF CERTAIN TRANSACTIONS

INVOLVING AN EXCHANGE OF SIMILAR SECURITIES.

(1) Any acquisition or disposition of securities made in an exchange of shares of a class (or series thereof) of stock of an insurer for an equivalent number of shares of another class (or series thereof) of stock of the same insurer, pursuant to a right of conversion under the terms of insurer’s charter or other governing instruments shall be exempt from the operation of T.C.A. § 56—3—703 if- (a) The shares surrendered and those acquired in exchange therefor evidence substantially the same rights and privileges except that, pursuant to the provisions of the insurer’s charter or other governing instruments, the board of directors may declare and pay a lesser dividend per share on shares of the class surrendered than on shares of the class acquired in exchange therefor, or may declare and pay no dividend on shares of the class surrendered; and (b) The transaction was effected in contemplation of a public sale of the shares acquired in the exchange; provided, that this section shall not be construed to exempt from the operation of T.C.A. § 56-3-703 any purchase or sale of shares of the class surrendered and any sale or purchase of shares of the class acquired in the exchange (otherwise than in the transaction of exchange exempted by this

section) within a period of less than six months.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.19 EXEMPTION OF CERTAIN SECURITIES FROM T.C.A

§ 56-3-704. Any security shall be exempt from the operation of T.C.A. § 56-3-704 to the extent necessary to render lawful under such section the execution by a broker of an order for an account in which he has no direct or indirect interest.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.20 EXEMPTION FROM T.C.A

§ 56-3-704 OF CERTAIN TRANSACTIONS

EFFECTED IN CONNECTION WITH A DISTRIBUTION.

(1) Any security shall be exempt from the operation of T.C.A. § 56-3-704 to the extent necessary to render lawful under such section any sale made by or on behalf of a dealer in connection with a distribution of a substantial block of securities, upon the following conditions:

(a) The sale is represented by an over-allotment in which the dealer is participating as a member of an underwriting group, or the dealer or a person acting on his behalf intends in good faith to offset such sale with a security to be acquired by or on behalf of the dealer as a participant in an underwriting, selling or soliciting-dealer group of which the dealer is a member at the time of the sale, whether or not the security to be so acquired is subject to a prior offering to existing security holders or some other class of persons; and (b) Other persons not within the purview of T.C.A. § 56-3-704 are participating in the distribution of such block of securities on terms at least as favorable as those on which such dealer is participating and to an extent at least equal to the aggregate participation of all persons exempted from the provisions of T.C.A. § 56-3-704 by this section. However, the performance of the functions of manager of a distributing group and the receipt of a bona fide payment for performing such functions shall not preclude an exemption which would otherwise be available under this section.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.21 EXEMPTION FROM T.C.A

§ 56-3-702 OF SALES OF SECURITIES TO BE

ACQUIRED.

(1) Whenever any person is entitled, as an incident to his ownership of an issued security and without the payment of consideration, to receive another security “when issued” or “when distributed,” the security to be acquired shall be exempted from the operation of T.C.A. § 56-3-702 provided that:

(a) the sale is made subject to the same conditions as those attaching to the right of acquisition, and (b) such person exercises reasonable diligence to deliver such security to the purchaser promptly after this right of acquisition matures, and (c) such person reports the sale on the appropriate form for reporting transactions by persons subject to T.C.A. § 56-3-702.

(2) This section shall not be construed as exempting transactions involving both a sale of security “when issued” or “when distributed” and a sale of the security by virtue of which the seller expects to receive the “when issued” or “when distributed” security, if the two transactions combined result in a sale of more units than the aggregate of those owned by the seller plus those to be received by him pursuant to his right of acquisition.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-14-.22 ARBITRAGE TRANSACTIONS UNDER T.C.A

§ 56-3-706. It shall be unlawful for any director or officer of an insurer to effect any foreign or domestic arbitrage transaction in any equity security of such insurer, unless he shall include such transaction in the statements required by T.C.A. § 56- 3-702 and shall account to such insurer for the profits arising from such transaction, as provided in T.C.A. § 56-3-703. The provisions of T.C.A. § 56-3-704 shall not apply to such arbitrage transactions. The provisions of the Act shall not apply to any bona fide foreign or domestic arbitrage transaction insofar as it is effected by any person other than such director or officer of the insurer.

History

• Authority: T.C.A. §56-3-708 to implement T.C.A. §56-3-702.
• Administrative History: Original rule certified June 10, 1974.

Chapter 0780-01-15 Repealed

Tenn. Comp. R. & Regs. 0780-01-15 Repealed

RULES

OF THE

TENNESSEE DEPARTMENT OF INSURANCE

INSURANCE DIVISION

PROMOTION OF LIFE INSURANCE ISSUED PURSUANT TO THE AUTHORITY VESTED IN THE

COMMISSIONER OF INSURANCE BY § 56-308, T.C.A.

This Chapter has been repealed by Rule 0780-1-33-.11, filed April 19, 1976, effective March 19, 1976. The material dealt with in this chapter is now included in chapter 0780-1-33.

Chapter 0780-01-16 Repealed

Tenn. Comp. R. & Regs. 0780-01-16 Repealed

RULES

OF TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE

INSURANCE DIVISION

Authority: T.C.A. §§56-6-127, 56-6-124, and Public Acts of 2002, Chapter 798, §25. Administrative History:

Original rule certified June 10, 1974. Repeal filed April 14, 2004; effective June 28, 2004.

Chapter 0780-01-17 Rules and Regulations Covering the Sale, Issuance and Delivery of Both Individual and Group Variable Annuity Contracts and Variable Life Contracts

Tenn. Comp. R. & Regs. 0780-01-17-.01 PURPOSE

The purpose of this Rule is to regulate the sale, issuance and delivery of Variable Contracts and to provide for the licensing of applicants to engage in business as Variable Contract agents.

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974. Amendment filed February 6, 1978; effective March 8, 1978.

Tenn. Comp. R. & Regs. 0780-01-17-.03 QUALIFICATION OF INSURANCE COMPANIES TO ISSUE

VARIABLE CONTRACTS

(1)No company shall deliver or issue for delivery variable contracts within the State unless (a)it is licensed or organized to do a life insurance or annuity business in this State and (b)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 company;

VARIABLE LIFE CONTRACTS 2.The character, responsibility and fitness of the officers and directors of the company; and The law and regulation under which the company is authorized in the state of domicile to issue variable contracts. The state of entry of an alien company shall be deemed its place of domicile for this purpose.

(2)If the company is a subsidiary of an admitted life insurance company, or affiliated with such company by common management or ownership, it may be deemed by the Commissioner to have satisfied the provisions of clause (b) of Paragraph (1) hereof if either it or such admitted life company satisfied the aforementioned provisions; provided, further, that companies licensed and having a satisfactory record of doing business in this State for a period of at least 3 years may be deemed to have satisfied the Commissioner with respect to clause (b) of Paragraph (1) above.

(3)Before any company shall deliver or issue for delivery variable contracts within this State, it shall submit to the Commissioner (a) a general description of the kinds of variable contracts it intends to issue, (b) if requested by the Commissioner, a copy of the statutes and regulations of its state of domicile under which it is authorized to issue variable contracts, and (c) if requested by the Commissioner, biographical data with respect to officers and directors of the company on the NAIC uniform biographical data forms.

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-17-.04 SEPARATE ACCOUNT OR SEPARATE ACCOUNTS

(1)A domestic company issuing variable contracts shall establish one or more separate accounts pursuant to T.C.A. § 56-3-501, subject to the following provisions of this Article:

(a)Except as may be provided with respect to reserves for guaranteed benefits and funds referred to in subparagraph (b) hereof, 1. 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 insurance companies and 2. 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 company.

(b)Reserves for 1. benefits guaranteed as to dollar amount and duration and 2. funds guaranteed as to principal amount or stated rate of interest may be maintained in a separate account if a portion of the assets of such separate account at least equal to such reserve liability is invested in accordance with the laws and regulations of this State governing the investments of life insurance companies. Such portion of the assets also shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the company.

If a variable contract includes incidental minimum guarantees as referred to in Subparagraph (c) of paragraph (4) of Rule 0780-1-17-.06, this paragraph shall apply only to the reserve for any excess of such minimum guarantees over the reserves for the benefits that would be payable under the contract if there were no such minimum guarantees.

(c)With respect to 75% of the market value of the total assets in a separate account, no company 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% 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.

(d)Unless otherwise permitted by law or approved by the Commissioner, no company shall purchase or otherwise acquire for its separate accounts the voting securities of any issuer if as VARIABLE LIFE CONTRACTS a result of such acquisition the insurance company and its separate accounts, in the aggregate, will own more than 10% of the total issued and outstanding voting securities of such issuer; provided, 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.

(e)The same separate account may not be used for both variable annuities and variable life insurance.

(f)The limitations provided in Subparagraphs (c), (d), and (e) above 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 Subparagraphs (c) and (d) hereof.(2) 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, that unless otherwise approved by the Commissioner, the portion, if any, of the assets of such separate account equal to the company’s reserve liability with regard to the benefits and funds referred to in clauses 1.and 2. of Subparagraph (b) of paragraph (1) shall be valued in accordance with the rules otherwise applicable to the company’s assets.

(3)If and to the extent so provided under the applicable contracts, 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 company may conduct.

(4)Notwithstanding any other provisions of law a company may (a)with respect to any separate account registered with the Securities and Exchange Commission as a unit investment trust exercise voting rights in connection with any securities of a regulated investment company registered under the Investment Company Act of 1940 and held in such separate accounts in accordance with instructions from persons having interests in such accounts ratably as determined by the company, or (b)with respect to any separate account registered with the Securities and Exchange Commission as a management investment company, establish for such account a committee, board, or other body, the members of which may or may not be otherwise affiliated with such company and may be elected to such membership by the vote of persons having interests in such account ratably as determined by the company. Such committee, board or other body may have the power, exercisable alone or in conjunction with others to manage such separate account and the investment of its assets.

A company, committee, board or other body may make such other provisions in respect to any such separate account as may be deemed appropriate to facilitate compliance with requirements of any federal or state law now or hereafter in effect; provided that the Commissioner approves such provisions as not hazardous to the public or the company’s policyholders in this State.

(5)No sale, exchange or other transfer of assets may be made by a company 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 (a) by a transfer of cash, or (b) by a transfer to securities having a valuation which could be readily determined in the market place, provided that such transfer of securities is approved by the Commissioner. The Commissioner may authorize other transfers among such accounts if, in his opinion, such transfers would not be inequitable.

VARIABLE LIFE CONTRACTS

(6)The company shall maintain in each such separate account assets with a value at least equal to the reserve and other contract liabilities with respect to such account, except as may otherwise be approved by the Commissioner.

(7)Rules under any provision of the Insurance Laws of this State or any regulation applicable to the officers and directors of insurance companies with respect to conflicts of interest shall also apply to members of any separate account’s committee, board or other similar body. No officer or director of such company nor any member of the committee, board or body of a separate account shall receive directly or indirectly any commission or any other compensation with respect to the purchase or sale of assets of such separate account.

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-17-.05 FILING OF CONTRACTS

The filing requirements applicable to variable contracts shall be those filing requirements otherwise applicable under existing statutes and regulations of this State with respect to individual and group life insurance and annuity contract form filings, to the extent appropriate.

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-17-.02 DEFINITIONS

(1)The term “variable contract”, when used in this Chapter, shall mean any policy or contract which provides for life insurance or annuity benefits which vary according to the investment experience of any separate account or accounts maintained by the insurer as to such policyor contract, as provided for in T.C.A. §§ 56-3-501.

(2)“Agent”, when used in this Chapter, shall mean any person who under the laws of this State is licensed as a life insurance agent.

(3)“Variable contract agent”, when used in this Chapter, shall mean an agent who shall sell or offer to sell any variable contract.

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974. Amendment filed February 6, 1978; effective March 8, 1978.

Tenn. Comp. R. & Regs. 0780-01-17-.06 CONTRACTS PROVIDING FOR VARIABLE BENEFITS

(1) 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 insurance company 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 clear statement to the effect that the benefits thereunder are on a variable basis.

(2) Illustrations of benefits payable under immediate variable contracts shall not include projections of past investment experience into the future or attempted predictions of future investment experience; provided that nothing contained herein is intended to prohibit the use of hypothetical assumed investment results to illustrate possible levels of benefits. If an illustration is used, it shall contain three standard rates: 0, 4 and 8%. These are gross rates before asset charges against the separate account (and also before asset charges against the fund in the case of a unit investment trust) but after taxes, and the illustration should state this clearly. As long as the illustration showed results at these three standard rates, results at other rates not in excess of 8% may be included to assist the buyer in his understanding.

(3) No individual variable annuity contract calling for the payment of periodic stipulated payments shall be delivered or issued for delivery in this State unless it contains in substance the following provisions or provisions which in the opinion of the Commissioner are more favorable to the holders of such contracts:

(a) A provision that there shall be a period of grace of 30 days or of one month, within which any periodic stipulated payment to the insurer falling due after the first may be made, during which period of grace the contract shall continue in force. The contract may include a statement of the basis for determining the date as of which any such payment received during the period of grace shall be applied to produce the values under the contract arising therefrom;

(b) A provision that, at any time within three (3) years from the date of default, in making periodic stipulated payments to the insurer during the life of the annuitant and unless the cash VARIABLE LIFE CONTRACTS surrender value has been paid, the contract may be reinstated upon payment to the insurer of such overdue payments as required by the contract, and of all indebtedness to the insurer on the contract, including interest. The contract may include a statement of the basis for determining the date as of which the amount to cover such overdue payments and indebtedness shall be applied to produce the values under the contract arising therefrom;

(c) A provisions specifying the options available in the event of default in a periodic stipulated payment. Such options may include an option to surrender the contract for a cash value as determined by the contract, and shall include an option to receive a paid-up annuity if the contract is not surrendered for cash, the amount of such a paid-up annuity being determined by applying the value of the contract at the annuity commencement date in accordance with the terms of the contract.

(4) No individual variable life insurance policy shall be delivered or issued for delivery in this state unless it contains in substance the following provisions or provisions which in the opinion of the Commissioner are more favorable to the holders of such policies:

(a) A provision that there shall be a period of grace of 30 days or of one month, within which payment of any premium after the first may be made, during which period of grace the policy shall continue in force, but if a claim arises under the policy during such period of grace before the overdue premiums or the deferred premiums of the current policy year, if any, are paid, the amount of such premiums, together with interest, may be deducted from any amount payable under the policy in settlement. The policy may contain a statement of the basis for determining any variation in benefits that may occur as a result of the payment of premium during the period of grace.

(b) A provision that the policy will be reinstated at any time within three (3) years from the date of default, unless the cash surrender value has been paid or unless the period of extended insurance has expired, upon the application of the insured and the production of evidence of insurability, including good health, satisfactory to the insurer and the payment of an amount not exceeding the greater of 1. all overdue premiums and the payment of any other indebtedness to the insurer upon said policy with interest, or 2. 110% of the increase in cash surrender value resulting from reinstatement.

(c) A provision for cash surrender values and paid-up insurance benefits available as nonforfeiture options under the policy in the event of default in a premium payment after premiums have been paid for a specified period. If the policy does not include a table of figures for the options so available, the policy shall provide that the company will furnish at least once in each policy year a statement showing the cash value as of a date no earlier than the prior policy anniversary. The method of computation of cash values and other nonforfeiture benefits, as described either in the policy or in a statement filed with the Commissioner of the jurisdiction in which the policy is delivered, shall be in accordance with actuarial procedures that recognize the variable nature of the policy. The method of computation must be such that, if the net investment return credited to the contract at all times from the date of issue should be equal to the assumed investment increment factor ifthe contract provides for such a factor, or 3½% if not, with premiums and benefits determined accordingly under the terms of the policy, the resulting cash values and other nonforfeiture benefits would be at least equal to the minimum values required by T.C.A. § 56-7-401, (Standard Non-Forfeiture Law), for a fixed dollar policy with such premiums and benefits.

The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include, for example, but are not to be limited to, a guarantee under a policy which provides for an assumed investment increment factor that the amount payable at death or maturity shall be at least equal to the amount that otherwise would have been payable if the net investment return credited to the contract at all times from the date of issue had been equal to such factor.

VARIABLE LIFE CONTRACTS

(5) Any variable annuity contract delivered or issued for delivery in this State shall stipulate the investment increment factors to be used in computing the dollar amount of variable benefits or other variable contractual payments or values thereunder, and may guarantee that expense and/or mortality results shall not adversely affect such dollar amounts. In the case of an individual variable annuity contract under which the expense and mortality results may adversely affect the dollar amount of benefits, the expense and mortality factors shall be stipulated in the contract. In computing the dollar amount of variable benefits or other contractual payments or values under an individual variable annuity contract:

(a) The annual net investment increment assumption shall not exceed 5%, except with the approval of the Commissioner;

(b) To the extent that the level of benefits may be affected by future mortality results, the mortality factor shall be determined from the Annuity Mortality Table for 1949, Ultimate, or any modifications of that table not having a lower life expectancy at any age, or, if approved by the Commissioner, from another table.

“Expense”, as used in this Paragraph, may exclude some or all taxes, as stipulated in the contract.

(6) Any individual variable life insurance policy delivered or issued for delivery in this State shall stipulate the investment increment factor to be used in computing the dollar amount of variable benefits or other variable contractual payments or values thereunder and shall guarantee that expense and mortality results shall not adversely affect such dollar amounts.

(7) The reserve liability for variable contracts shall be established pursuant to the requirements of T.C.A. § 56-1-402, in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

(8) A company issuing variable life insurance contracts with a stated amount of guaranteed minimum death benefit shall hold in a separate account assets at least equal to the entire reserve for the death benefit (such reserve being determined in accordance with paragraph (7) above), except that additional assets supporting the reserve described in (a) below shall be maintained in the company’s general account.

(a) The portion of the reserve in the general account is to provide for the contingency of death occurring when the guaranteed minimum death benefit exceeds the death benefit that would have been paid in the absence of such guarantee. Such additional reserve shall be accumulated from amounts regularly allocated by the company for this purpose and shall be charged with any excess of the actual death benefits paid by the company on such variable life insurance contracts over the death benefits that would have been payable in the absence of the guaranteed minimum death benefit.

(b) In no event, however, may the portion of the reserve maintained in the general ac-count be less than either of the two minimum reserves described in (c) and (d) below.

(c) The first minimum reserve equals the aggregate total of the term costs, if any, covering a period of one full year from the valuation date, of the guarantee on each such variable life insurance contract, assuming an immediate one-third depreciation in the current value of the assets of the separate account followed by a net investment return equal to the assumed investment increment factor.

(d) The second minimum reserve equals the aggregate total of the “attained age level” reserves on each such variable life insurance contract. The “attained age level” reserve on each such variable life insurance contract shall not be less than zero and shall equal the “residue”, as described in (e) below, of the prior year’s “attained age level” reserve on the contract, with any such “residue” increased or decreased by a payment computed on an attained age basis as described in (f) below.

VARIABLE LIFE CONTRACTS

(e) The “residue” of the prior year’s “attained age level” reserve on each such variable life insurance contract shall not be less than zero and shall be determined by adding interest at the valuation interest rate to such prior year’s reserve, deducting the tabular claims based on the “excess”, if any, of the guaranteed minimum death benefit, over the death benefit that would be payable in the absence of such guarantee, and dividing the net result by a tabular probability of survival. The “excess” referred to in the preceding sentence shall be based on the actual level of death benefits that would have been in effect during the preceding year in the absence of the guarantee, taking appropriate account of the reserve assumptions regarding the distribution of death claim payments over the year.

(f) The payment referred to in (d) above shall be computed so that the present value of a level payment of that amount each year over the future premium paying period of the contract is equal to (i) minus (ii) minus (iii), where (i) is the present value of the future guaranteed minimum death benefits, (ii) is the present value of the future death benefits that would be payable in the absence of such guarantee and (iii) is any “residue”, as described in (e) above, of the prior year’s “attained age level” reserve on such variable life insurance contract. If the contract is paid-up, the payment shall equal (i) minus (ii) minus (iii). The amounts of future death benefits referred to in (ii) shall be computed assuming a net investment return of the separate account which may differ from the assumed investment increment factor and/or the valuation interest rate but in no event may exceed the maximum interest rate permitted for the valuation of life insurance contracts.

(g) The valuation interest rate and mortality table used in computing the two minimum reserves described in (c) and (d) above shall conform to permissible standards for the valuation of life insurance contracts. In determining such minimum reserves, the company may employ suitable approximations and estimates, including but not limited to groupings and averages.

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-17-.07 REQUIRED REPORTS

(1) Any company issuing individual variable contracts shall mail to the contractholder at least once in each contract year after the first at his last address known to the company, a statement or statements reporting the investments held in the separate account. The company shall submit annually to the Insurance Commissioner a statement of the business of its separate account or accounts in such form as may be prescribed by the National Association of Insurance Commissioners.

(2) Any company issuing individual variable contracts shall mail to the contractholder at least once in each contract year after the first at his last address known to the company, a statement reporting as of a date not more than four months previous to the date of mailing: (a) in the case of an annuity contract under which payments have not yet commenced, 1. the number of accumulation units credited to such contract and the dollar value of a unit, or 2. the value of the contractholder’s account; and (b) in the case of a life insurance policy, the dollar amount of the death benefit.

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-17-.08 FOREIGN COMPANIES

If the law or regulation in the place of domicile of a foreign company provides a degree of protection to the policyholders and the public which is substantially equal to that provided by these regulations, the Commissioner, to the extent deemed appropriate by him in his discretion, may consider compliance with such law or regulation as compliance with the regulations.

VARIABLE LIFE CONTRACTS

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-17-.09 LICENSE REQUIRED OF AGENTS

(1)(a)No agent shall be eligible to sell or offer for a variable contract unless prior to making any solicitation or sale of such contract, he also be licensed as a variable contract agent. However, any agent who is licensed as a variable contract agent on the effective date of this rule shall continue to be licensed as a variable contract agent.

(b)Any agent who participates only in the sale or offering for sale of variable contracts that are not registered under the Federal Securities Act of 1933 need not be licensed as a variable contract agent.

(2) Any agent applying for a license as a variable contract agent shall do so by filing with this Department his application. All such applications shall be in writing on uniform forms prescribed by the Commissioner and shall be accompanied by a filing fee of twenty dollars ($20.00). Such filing fee shall not be refundable. The applicant shall, upon oath, answer such interrogatories as the Commissioner may require in such application, and the application shall be certified by an authorized representative of an insurance company lawfully authorized in the state to write variable contracts.

(3) There shall not be a written examination for a variable contract agent; however, as a prerequisite to be so licensed as a variable contract agent, the following requirements shall be met:

(a) The applicant shall be a duly licensed life insurance agent at the time he files his application for a variable contract license.

(b) He shall be duly qualified by examination under one or more of the following: 1.Any State Securities Sales Examination accepted by the Securities and Ex-change Commission; 2.The National Association of Securities Dealers, Inc. Examination for Prin-cipals, or Examination for Qualification as a Registered Representative; 3.The various securities examinations required by the New York Stock Exchange, the American Stock Exchange, Pacific Stock Exchange, or any other registered national securities exchange; 4.The Securities and Exchange Commission test given pursuant to Section 15(b) (8) of the Securities Exchange Act of 1934.

(1)Except as modified by this Rule, state statutes and Rules of this Department governing the licensing of life insurance agents shall apply hereto.

(2)Each variable contract agent shall be required to hold a Certificate of Authority with any insurer for which he is to place a contract of insurance. All new, renewal or duplicate certificates shall be issued in accordance with T.C.A. § 56-6-120. The termination of such a certificate shall be in accordance with § 56-6-121.

(3)Any person licensed in this State as a variable contract agent shall immediately report to the Commissioner (a) any suspension or revocation of his variable contract agent’s license or life insurance agent’s license in any other State or Territory of the United States, (b) the imposition of any disciplinary sanction (including suspension or expulsion from membership, suspension or revocation of or denial of registration) imposed upon him by any national securities exchange, or national securities association, or any federal, or state or territorial agency with jurisdiction over securities or contracts on a variable basis, (c) any judgment or injunction entered against him on the basis of VARIABLE LIFE CONTRACTS conduct deemed to have involved fraud, deceit, misrepresentation or violation of any insurance or securities law or regulation.

(1)The Commissioner may reject any application or suspend or revoke or refuse to renew any variable contract agent’s license upon any ground that would bar such applicant or such agent from being licensed to sell Life insurance contracts in this State. The rules governing any proceeding relating to the suspension or revocation of a life insurance agent’s license shall also govern any proceeding for suspension or revocation of a variable contract agent’s license.

(2)A non-resident applicant may qualify for a variable contract license only if he holds a like license in his state of domicile and that such other state and this state has a reciprocal agreement for the purpose of licensing variable contract agents.

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974. Amendment filed February 6, 1978; effective March 8, 1978.

Tenn. Comp. R. & Regs. 0780-01-17-.10 DISCLOSURE

(1)The following information shall be furnished to an applicant for a contract of variable life insurance prior to execution of the application:

(a) A summary description of the insurance company and its principal activities.

(b) A summary explanation in non-technical terms of the principal variable features of the contract and of the manner in which any variable benefits reflect the investment experience of a separate account.

(c) A brief description of the investment policy for the separate account with respect to such contract.

(d) A list of investments in the separate account as of a date not earlier than the end of the last year for which an annual statement has been filed with the Commissioner of the state of domicile.

(e) Summary financial statements of the insurance company and such separate account based upon the last annual statement filed with such Commissioner, except that for a period of four months after the filing of any annual statement the summary required hereby may be based upon the annual statement, immediately preceding such last annual statement, filed with such Commissioner.

(f) The insurance company may include such additional information as it deems appropriate.

(2) Any disclosure document or prospectus required by and filed with the Securities and Exchange Commission under any applicable Federal act shall be deemed to comply with Paragraph (1) above to the extent such information is contained in the disclosure document or prospectus; provided that a copy of the disclosure document or prospectus must be delivered to an applicant for a contract of variable life insurance before execution of the application form.

(3) A copy of the statement containing the foregoing information shall be filed with such Commissioner prior to any use thereof and shall be subject to disapproval if found to be inaccurate or misleading.

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-17-.11 EFFECTIVE DATE

This chapter shall become effective on May 24, 1973.

History

• Authority: T.C.A. §56-3-508.
• Administrative History: Original rule certified June 10, 1974.

Chapter 0780-01-18 Insurance Required or Accepted by an Industrial Loan and Thrift Company

Tenn. Comp. R. & Regs. 0780-01-18-.01 PROPERTY INSURANCE ON COLLATERAL ON LOANS IN

GENERAL.

(1) Prior to any formal application for the loan or payment of any fees or costs required with the filing of an application, the lender must inform the borrower of his legal rights regarding the placing of insurance.

(2) Notice must be given to said borrower in a clear and concise statement, in writing, with a copy of said statement to be signed by the borrower and retained by the lender. Nothing in these rules shall be construed to mean that this statement must be a part of the mortgage contract, note or disclosure statement.

(3) The borrower shall have the right to submit to the lender a list containing a reasonable choice of agents and/or insurers selected by the borrower, who will write the insurance in connection with the loan. The number of agencies comprising a “reasonable choice” shall be construed to be a minimum of three (3) agents and/or insurers. The lender has the right to refuse insurance policies written by agents not located within the trade area normally served by the lender.

(4) The lender may prescribe reasonable requirements regarding the financial structure and stability of the company. In prescribing these requirements, the adequacy of the insurance coverage provided by an insurance company may be taken into consideration.

(5) If the insurance submitted by the borrower is acceptable to the lender, the borrower must have available on the day of the closing of the loan and at the time specified by the lender, the policy (or acceptable binder) and coverage agreed upon.

(6) If the policy is cancelled by the insurer, the borrower must have a new policy, acceptable to the lender, in the hands of the lender not less than thirty-six (36) hours before the expiration date stated in the notice of cancellation to the insured.

(7) In the event the mortgage is transferred by the original mortgagee to another institution or party during the term of the insurance contract, the insurance coverage shall not be cancelled except by mutual agreement of the borrower and the lender, upon full notice to the borrower, of his rights and powers, and of any expense or penalty charge which he may experience as a result of any such transfer of insurance coverage during such term.

(8) Complaints of coercion filed with the Insurance Commissioner must be in the form of a written statement signed by the borrower. Complaints from insurance agents must be accompanied by a written statement signed by the borrower.

(9) Any requirements adopted by the lender pursuant to these rules shall be filed with the Insurance Commissioner and such requirements shall be made available to the borrower, insurance companies and agents. The Insurance Commissioner shall treat such requirements, when filed, as public records, making such available to interested parties upon request.

(10) Renewals:

(a) The agent shall deliver a renewal policy or a renewal certificate to the lender at least ten (10) days prior to the expiration date of the policy in force, if required by the lender.

(b) In cases where the borrower desires to change insurance agents or insurers, the agent writing the renewal business must file with the lender a letter of authorization signed by the borrower, which shall be accepted by the lender in good faith.

(c) Where a change of agent is involved in the renewal of a policy, the lender shall notify the agent renewing the insurance and the borrower, in writing, within five (5) business days after tender of the renewal policy if said policy is not acceptable to the lender.

(d) Notice of Intention Not to Renew: In the event the company does not intend to renew the contract, it shall mail or deliver to the named insured at the address shown in the policy not less than twenty (20) days’ notice of its intention not to renew.

(11) Cancellations and Refunds:

(a) The purchaser or borrower shall be promptly notified in writing of the cancellation of, or change in, the policy, in accordance with the standard ten (10) day advance cancellation notice as contained in the policy. If through payment in advance by the purchaser or borrower of the remaining undue installments or if the indebtedness is discharged in any manner prior to its maturity date, thereby terminating the insurance coverage, the unearned portion of the insurance premium and interest charged thereon, if any, shall be refunded as soon as practicable after the cancellation becomes effective, however, refunds calculated at less than one dollar ($1.00) need not be made.

History

• Authority: T.C.A. §45-2011.
• Administrative History: Original rule certified June 10, 1974. Amended: Filed August 5, 1974; Effective September 4, 1974.

Tenn. Comp. R. & Regs. 0780-01-18-.02 REQUIREMENTS WHICH ARE DEEMED TO BE NECESSARY FOR FULL

COMPLIANCE WITH THE LAW. The following procedures are published herewith as requirements which are deemed to be necessary for full compliance with the law:

(a) Purchasers or borrowers, in all credit transactions where insurance coverage is required, must not be misled concerning their right to purchase insurance from any insurance company licensed by this Department and which company provides the necessary coverage. The finance factor or creditor must act affirmatively in such cases in advising the borrower of his rights to a choice of companies or agents. Where insurance is required, the creditor need not accept as evidence of insurance a policy which does not contain a LOSS PAYABLE CLAUSE.

(b) When the purchaser or borrower chooses to purchase insurance from the insurer represented by the finance factor or creditor, the seller must furnish the purchaser with evidence of the insurance at the time the sales contract or purchase order is executed. Such insurance evidence must be in the form of an insurance binder. The policy shall be delivered to the purchaser or borrower within twenty-five (25) days following the execution of the initial evidence of insurance.

(c) Where single interest is written in connection with a finance or loan transaction, a clear and concise statement shall be furnished to the purchaser or borrower, advising him that the insurance effected is solely for the interest of the dealer, finance factor or lender, and that no protection thereunder exists for the benefit of the purchaser or borrower. Such policies shall be clearly stamped or printed in not less than fourteen point type of the title page, “LENDER’S INTEREST ONLY.”

(d) If an automobile physical damage policy does not afford automobile bodily injury and property damage insurance, the policy shall state the following notification:

“THIS POLICY DOES NOT PROVIDE AUTOMOBILE BODILY INJURY OR PROPERTY DAMAGE

INSURANCE AND IS NOT IN COMPLIANCE WITH THE MOTOR VEHICLE FINANCIAL

RESPONSIBILITY LAW OF ANY STATE.”

This notification must be not less than FOURTEEN point type and it shall be displayed in RED across the face on the filing back of the policy and may be displayed as an overprint or by a rubber stamp impression. This notification shall also be displayed on sales instruments which afford only material damage insurance. USE OF STICKERS FOR THIS PURPOSE IS PROHIBITED.

(e) Property insurance shall not be written in an amount greater than the lessor of 1. the actual cash value of the collateral less any amount which would be payable under existing insurance, or 2. the amount of the loan.

(f) If the borrower has the same collateral insured under more than one policy or certificate, each policy or certificate shall be deemed to be primary coverage for the purpose of paying claims.

(g) Each policy or certificate shall be written for a dollar amount and specific term, each of which shall be stated therein.

History

• Authority: T.C.A. §45-2011.
• Administrative History: Original rule certified June 10, 1974. Amended: Filed August 5, 1974; Effective September 4, 1974.

Tenn. Comp. R. & Regs. 0780-01-18-.03 PROPERTY INSURANCE ON DUAL COLLATERAL

(1)When an automobile and household goods are both used as collateral on loans, insurance may be written only on the actual cash value of the automobile according to its current market value, and then either single or dual interest insurance on the household goods on the difference between the value of the automobile and the amount of the loan.

(2) Single interest auto insurance shall insure only the interest of the creditor loss payee or assignee against loss caused by fire, theft, and collision.

(3) A licensee shall not divide the amount of insurance written on collateral in such a manner as to penalize a borrower in the amount of insurance premium he is required to pay.

(4) No insurance may be written which is not in compliance with all requirements of Section 45-2007(k), Tennessee Code Annotated, especially as regards the relationship of the insurance and the property to the existing hazards and risk of loss.

(5) Cancellation of policies on Dual coverage shall be pro-rata, and on Single interest by

Rule of 78’s.

History

• Authority: T.C.A. §45-2011.
• Administrative History: Original rule certified June 10, 1974. Amended: Filed August 5, 1974; Effective September 4, 1974.

Tenn. Comp. R. & Regs. 0780-01-18-.04 DUAL INTEREST INSURANCE ON HOUSEHOLD GOODS AS SOLE

COLLATERAL ON LOAN.

(1) In case of a total loss, the insurance company shall issue a check payable to the loan company and the borrower for the full amount of the policy, as of the date of loss.

(2) The loan company shall pay the borrower by check the difference between the amount of the settlement check and the net unpaid balance of the loan. The loan company shall then give the borrower his promissory note stamped “PAID.”

History

• Authority: T.C.A. §45-2011.
• Administrative History: Original rule certified June 10, 1974. Amended: Filed August 5, 1974; Effective September 4, 1974.

Tenn. Comp. R. & Regs. 0780-01-18-.05 SINGLE INTEREST INSURANCE ON HOUSEHOLD GOODS AND

SINGLE INTEREST AUTO AS COLLATERAL. In the case of a total loss, the insurance company shall issue a check payable to the loan company for the amount of insurance in effect as of the date of loss. The loan company, after applying the amount of insurance then in effect, shall pay all refunds to the borrower by check, and then give the borrower his promissory note stamped “PAID.”

History

• Authority: T.C.A. §45-2011.
• Administrative History: Original rule certified June 10, 1974. Amended: Filed August 5, 1974; Effective September 4, 1974.

Chapter 0780-01-19 Rules and Regulations Governing the Correlated Sales of Life Insurance Policies and Mutual Funds or Other Securities Issued Pursuant to the Authority Vested in the Commissioner of Insurance by T.C.A. § 56-3-406

Tenn. Comp. R. & Regs. 0780-01-19-.01 APPLICABILITY

(1)This Rule shall apply:

(a) to acts and practices in the advertising, promotion, solicitation, negotiation of or effecting the sale of 1. life insurance policies (which term shall include annuity contracts for

purpose of this Rule) in correlation with the sale of shares of a mutual fund or other security, except a variable annuity contract within the meaning of Chapter 0780-1-17.

2. contracts which contemplate the purchase of a life insurance policy in correlation with the sale of shares of a mutual fund or other security, except a variable annuity contract within the meaning of Chapter 0780- 1-17.

(b) to any acts and practices, whether they involve the use of language disseminated by means of sales kits, policy jackets or covers, letters, personal presentations, visual aids and other sales media in connection with the solicitation, sale, servicing or collection of premiums for life insurance policies in correlation with a mutual fund or other security engaged in by any insurance company, agent, or other person engaged in such correlated sales.

(2) As used in this Rule, in referring to sales of insurance policies and mutual fund shares, or other securities, the terms “correlated sales” or “sales in correlation with” shall include, but not be limited to, the following:

(a) sales of life insurance policies and mutual fund shares or other securities as part of an integrated plan;

(b) sales in which both life insurance policies and mutual fund shares or other securities are offered as part of the same investment program;

ISSUED PURSUANT TO THE AUTHORITY VESTED IN THE COMMISSIONER OF

INSURANCE BY §56-3-206, TENNESSEE CODE ANNOTATED

(c) sales programs in which both life insurance policies and mutual fund shares or other securities are discussed and their purchase solicited during the same interview.

(3) As used in this Rule, “security” shall have the same meaning as set forth in Section 48- 1602(G), Tennessee Code Annotated, and shall mean, in addition, participation in common trust funds of any financial institution.

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-19-.02 STATEMENT OF POLICY

There shall be full disclosure of relevant facts in the sale of life insurance policies in correlation with the sale of shares of a mutual fund or other security.

Accordingly, this Rule sets forth certain procedures and requirements establishing minimum standards for disclosure of information in sales of life insurance policies and mutual fund shares or other securities. Prior to making any cash sales on a correlated basis, there shall be submitted to the Commissioner a complete, detailed, comprehensive, accurate, certified Plan of Operation.

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-19-.03 RESPONSIBILITY OF COMPANY AND AGENT

No insurance company, agent, or person to whom this Rule applies shall make, in connection with correlated sales of life insurance policies and mutual fund shares or other securities, a proposal or billing other than in accordance with the requirements of this Rule. Every such company must inform its agents of the requirements of this Rule

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-19-.04 TIE-IN-SALES

The agent, at the commencement of and throughout the sales presentation, must fully disclose to the purchaser that he has the right to purchase a life insurance policy or policies only, mutual fund shares or other securities only, or both life insurance policies and mutual fund shares or other securities.

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-19-.05 WRITTEN PROPOSAL

In any solicitation of an offer to buy, or in any sale of life insurance policies in correlation with the sale of shares of a mutual fund or other security, the prospect or policyholder must be furnished a copy of a clear and unambiguous written proposal not later than at the time of solicitation or proposal is made. A copy of such written proposal shall be kept on file by the agent, or by the company if no agent is involved.

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-19-.06 CONTENTS OF PROPOSAL

Any proposal referred to in this Rule must (a) be dated and signed by the insurance agent;

(b) state the name of the company in which the life insurance policy is to be written;

(c) state that the purchaser has the right to purchase the life insurance policy only, mutual fund shares or other securities only, or both the life insurance policy and mutual fund shares or other securities;

ISSUED PURSUANT TO THE AUTHORITY VESTED IN THE COMMISSIONER OF

INSURANCE BY §56-3-206, TENNESSEE CODE ANNOTATED

(d) contain no misrepresentation or false, deceptive or misleading words, figures or state-ments. It must be accurate and complete and state all facts without which the proposal would have the capacity of tendency to mislead or deceive;

(e) show the premium charge for the life insurance policy separately from any other charge;

(f) if values which may accrue prior to the death of the insured are involved in the presentation, show the value of the life insurance policy separately from any other values;

(g) show, if it is involved in the presentation, the amount of the death benefit for the life insurance policy separately from any other benefit which may accrue upon the death of the insured;

(h) set forth all matters pertaining to the life insurance policy separately from any matter not pertaining to life insurance;

(i) set forth policy numbers, name of company, and face values of all existing policies of the purchaser, and, if it is proposed that any existing life insurance policy (or policies) is to be surrendered, the policy (or policies) to be surrendered should be indicated and the cash value (or values) thereof set forth; provided, however, that this subparagraph (i) shall not be applicable if the new life insurance is provided under 1. a group life insurance policy; 2. a policy whose cost is borne in whole or in part by the insured’s employer or by an association of which the insured is a member; 3. policies covering employees of an employer, or members of an association, which are distributed on a mass merchandising basis and administered by group-type methods; or 4. life insurance policies issued in connection with a pension, profit-sharing or other benefit plan qualifying for tax-deductibility of premiums.

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-19-.07 STATEMENT TO BE SEPARATE

Any bill, statement, draft, or representation sent or delivered to any prospect or policyholder must show the premium charge for the life insurance and any other information mentioned concerning life insurance separate from any other charges or values shown in the same billing, but nothing in this section shall prevent the total of the premium charge for life insurance with any other charges or values shown in the same billing to arrive at the total billing charge.

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-19-.08 ADVERTISING AND PROMOTIONAL MATERIALS

(1) No advertising used in connection with correlated sales of life insurance or mutual funds may be used if it is or could be misleading, deceptive, or inadequate in any way.

(2) The Commissioner may require that certain specified advertising or sales promotional materials be filed. In such event, the receipt of the specified materials shall be acknowledged by the Commissioner and shall not be used if disapproved in writing by him.

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974. ISSUED PURSUANT TO THE AUTHORITY VESTED IN THE COMMISSIONER OF INSURANCE BY §56-3-206, TENNESSEE CODE ANNOTATED

Tenn. Comp. R. & Regs. 0780-01-19-.09 DUAL LICENSE REQUIRED

No person shall solicit an offer to buy or a sale of a life insurance policy in correlation with the sale of shares of a mutual fund or other security unless he is licensed as a life insurance agent in accordance with the provisions of

Chapter 6, Title 56 of T.C.A., and is also licensed to sell securities by the Division of Securities of the Department of Insurance and Banking, State of Tennessee, in accordance with Chapter 48-1625, Tennessee Code Annotated.

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-19-.10 USE OF POLICY PROCEEDS

No sales material or plan will be approved when such sales material or plan contemplates the use of policy proceeds, except disability benefits, to purchase securities, whether directly or indirectly.

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-19-.11 VIOLATION

Companies or persons in violation of this Rule shall be subject to revocation or suspension of license to do business, or denial of renewal of license to do business.

History

• Authority: T.C.A. §56-3-306.
• Administrative History: Original rule certified June 10, 1974.

Chapter 0780-01-20 Repealed

Tenn. Comp. R. & Regs. 0780-01-20-.01 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-26-114, 56-26-102, and 56-26-103.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 23, 1975; effective November 24, 1975. Repeal and new rule filed October 27, 1980; effective December 11, 1980. Emergency rule filed August 29, 2011; effective through February 25, 2012. Repeal filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-20-.02 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-26-114, 56-26-102, and 56-26-103.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 23, 1975; effective November 24, 1975. Repeal and new rule filed October 27, 1980; effective December 11, 1980. Emergency rule filed August 29, 2011; effective through February 25, 2012. Repeal filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-20-.03 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-26-114, 56-26-102, and 56-26-103.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 23, 1975; effective November 24, 1975. Repeal and new rule filed October 27, 1980; effective December 11, 1980. Emergency rule filed August 29, 2011; effective through February 25, 2012. Repeal filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-20-.04 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-26-114, 56-26-102, and 56-26-103.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 23, 1975; effective November 24, 1975. Repeal and new rule filed October 27, 1980; effective December 11, 1980. Emergency rule filed August 29, 2011; effective through February 25, 2012. Repeal filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-20-.05 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-26-114, 56-26-102, and 56-26-103.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 23, 1975; effective November 24, 1975. Repeal and new rule filed October 27, 1980; effective December 11, 1980. Emergency rule filed August 29, 2011; effective through February 25, 2012. Repeal filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-20-.06 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-26-114, 56-26-102, and 56-26-103.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 23, 1975; effective November 24, 1975. Repeal and new rule filed October 27, 1980; effective December 11, 1980. Emergency rule filed August 29, 2011; effective through February 25, 2011. Repeal filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-20-.07 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-26-114, 56-26-102, and 56-26-103.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 23, 1975; effective November 24, 1975. Repeal and new rule filed October 27, 1980; effective December 11, 1980. Emergency rule filed August 29, 2011; effective through February 25, 2012. Repeal filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-20-.08 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-26-114, 56-26-102, and 56-26-103.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 23, 1975; effective November 24, 1975. Repeal and new rule filed October 27, 1980; effective December 11, 1980. Emergency rule filed August 29, 2011; effective through February 25, 2012. Repeal filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-20-.09 REPEALED

History

• Authority: T.C.A. § 56-7-1008.
• Administrative History: Original rule filed February 8, 1984; effective March 1984. Amendment filed June 3, 1994; effective August 15, 1994. Emergency rule filed August 29, 2011; effective through February 25, 2012. Repeal filed November 22, 2011; effective February 20, 2012.

Chapter 0780-01-21 Including Investment Income in Rate Filings

Tenn. Comp. R. & Regs. 0780-01-21-.01 REQUIREMENT FOR FILING RATE SCHEDULES AND REVISIONS

No rating organization, insurer or group of insurers that transact an insurance business in this State shall file with this Department any rate schedule, or rate revision, which does not reflect, to the extent prescribed herein below, the investment income of each insurer whose experience is incorporated in the filing.

History

• Authority: T.C.A. §§56-5-305 and 56-5-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-21-.02 RATE OF INVESTMENT INCOME

For the purposes of this Chapter the rate of investment income shall mean the quotient of (1) the net investment gain or loss as shown on line 9A of the Underwriting and Investment exhibit on page 4, of the appropriate Annual Statement, divided by (2) the cash and invested assets shown as the sum of items one (1) to seven (7) inclusive, on page 2 of the appropriate Annual Statement or Annual Statements filed with the Department covering the period of time reflected by the statistical data in such rate filing.

History

• Authority: T.C.A. §§56-5-305 and 56-5-306.
• Administrative History: Original rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-21-.03 DETERMINATION OF INVESTMENT INCOME ALLOCATED TO A RATE FILING

The amount of investment income allocated to a rate filing shall be determined by multiplying the rate of investment income as determined herein above by the sum of (1) the loss and loss adjustment reserves involved in the filing, and (2) the unearned premiums reduced by the allowances for acquisition costs, general expense, and taxes in the formula for the premiums which generated the reserve.

History

• Authority: T.C.A. §§56-5-305 and 56-5-306.
• Administrative History: Original rule certified June 10, 1974.

Chapter 0780-01-22 Repealed

Tenn. Comp. R. & Regs. 0780-01-22 Repealed

RULES

OF TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE

INSURANCE DIVISION

Authority: T.C.A. §56-2-301. Administrative History: Original rule certified June 10, 1974. Repeal filed August 9, 2004; effective October 23, 2004.

Chapter 0780-01-23 Installment Maintenance Fee

Tenn. Comp. R. & Regs. 0780-01-23-.01 FEE ON A MONTHLY BASIS

The installment maintenance fee may be charged, earned and collected on a monthly basis.

(1)The installment maintenance fee may be charged on any fractional part of a month in which the account is prepaid.

(2)The installment maintenance fee may be collected monthly in addition to the installment payment.

(3)The installment maintenance fee may be added to the amount of the loan if it is precomputed and taken into income monthly. This is to facilitate meaningful disclosure for compliance with Truth in Lending.

(4)The certificate of investment or indebtedness or other written agreement shall provide for the installment maintenance fee when applicable.

History

• Authority: T.C.A. §45-2011(c) relative to 45-2007(p).
• Administrative History: Original Rule certified June 10, 1974. 07 80-1-23-.02 NO CHARGE. No charge can be imposed on the installment maintenance fee. This means no charge for interest, 4% fee, service fee, flat fee, late charge, insurance charge, or a charge of any kind. Authority: T.C.A. §45-2011(c) relative to 45-2007(p).

Tenn. Comp. R. & Regs. 0780-01-23-.03 MULTIPLE LOANS

Multiple loans are loans existing at the same time to any one borrower by the same industrial loan and thrift company or an affiliated lender. A lender who makes such loans to both husband and wife is presumed to be making multiple loans to the same borrower.

History

• Authority: T.C.A. §45-2011(c) relative to 45-2007(p).
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-23-.04 APPLICATION

If any provisions of this Regulation or the application thereof to any person or circumstances is held invalid, the remainder of the rules and regulations, and the applicability of such provisions to other persons or circumstances shall not be affected thereby.

History

• Authority: T.C.A. §45-2011(c) relative to 45-2007(p).
• Administrative History: Original Rule certified June 10, 1974.

Chapter 0780-01-24 Replacement of Life Insurance Policies

Tenn. Comp. R. & Regs. 0780-01-24-.01 PURPOSE

The purpose of this rule is:

(1)To regulate the activities of insurers and agents with respect to the replacement of existing life insurance.

(2)To protect the interests of life insurance purchasers by establishing minimum standards of conduct to be observed in replacement transactions by:

(a)Assuring that purchasers receive information with which a decision can be made in his or her own best interest;

(b)Reducing the opportunity for misrepresentation and incomplete disclosures; and (c)Establishing penalties for failure to comply with requirements of this rule.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.02 DEFINITION OF REPLACEMENT

‘‘Replacement Transaction’’ means any transaction in which new life insurance is to be purchased, and it is known or should be known to the prosposing agent or to the proposing insurer if there is no agent, that by reason of such transaction, existing life insurance has been or is to be:

(1)Lapsed, forfeited, surrendered, or otherwise terminated;

(2)Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;

(3)Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;

(4)Reissued with any reduction in cash value; or (5)Pledged as collateral or subjected to borrowing, whether in a single loan or under a schedule of borrowing over a period of time for amounts in the aggregate exceeding twenty-five percent (25%) of the loan value set forth in the policy.

(6)The replacement transaction also includes conservation by the existing insurer or its agent.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.03 OTHER DEFINITIONS

(1)‘‘Conservation’’ means any attempt by the existing insurer or its agent to dissuade a policyowner from the replacement of existing life insurance. Conservation does not include routine administrative procedures such as late payment reminders, late payment offers or reinstatement offers.

(2)‘‘Direct-Response Sales’’ means any sale of life insurance where the insurer does not utilize an agent in the sale or delivery of the policy.

(3)‘‘Existing Insurer’’ means the insurance company whose policy is or will be changed or terminated in such a manner as described within the definition of ‘‘replacement’’.

(4)‘‘Existing Life Insurance’’ means any life insurance in force, including life insurance under a binding or conditional receipt or a life insurance policy that is within an unconditional refund period.

(5)‘‘Replacing Insurer’’ means the insurance company that issues or proposes to issue a new policy or contract which is a replacement or existing life insurance.

(6)‘‘Registered Contract’’ means variable life insurance under which the death benefits and cash values vary in accordance with unit values of investments held in a separate account, or any other contracts issued by life insurance companies which are registered with the Federal Securities and Exchange Commission.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.04 EXEMPTIONS

Unless otherwise specifically included, this rule shall not apply to transactions involving:

(1)Credit life insurance;

(2)Group life insurance;

(3)An application to the existing insurer that issued the existing life insurance and a contractual change or a conversion privilege is being exercised;

(4)Proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the same company;

(5)Transactions where the replacing insurer and the existing insurer are the same, or are subsidiaries or affiliates under common ownership or control; provided, however, agents proposing replacement shall comply with the requirements of §0780—1—24—.05(1); and (6)Registered Contracts shall be exempt from the requirements of §§0780—1—24—.07(2)(b) and 0780—1—24—.07(2)(c) requiring provision of Policy Summary or ledger statement information; however, premium or contract contribution amounts and identification of the appropriate prospectus or offering circular shall be required in lieu thereof.

Unless exempted by (1) through (6), above, this rule shall apply in any replacement transaction involving annuities, except for those provisions which require the completion of a Policy Summary or ledger statement as set forth in the Life Insurance Solicitation Rule.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.05 DUTIES OF AGENTS

(1)Each agent who initiates the application shall submit to the insurer to which an application for life insurance is presented, with or as part of each application:

(a)A statement signed by the applicant as to whether or not replacement of existing life insurance is involved in the transaction; and (b)A signed statement as to whether or not the agent knows replacement is or may be involved in the transaction.

(2)Where a replacement is involved, the agent shall:

(a)Present to the applicant, not later than at the time of taking the application, a ‘‘Notice Regarding Replacement’’ in the form as described in Exhibit A, or other substantially similar form approved by the Commissioner. The Notice shall be signed by both applicant and the agent and left with the applicant. Obtain with or as part of each application a list of all existing life insurance to be replaced and properly identified by name of insurer, the insured and contract number. If a contract number has not been assigned by the existing insurer, alternative identification, such as an application or receipt number, shall be listed.

(b)Leave with the applicant the original or a copy of written or printed communications used for presentation to the applicant.

(c)Submit to the replacing insurer with the application a copy of the Replacement Notice provided pursuant to §0780—1—24—.05(2)(a).

(3)Each agent who uses written or printed communications in a conservation shall leave with the applicant the original or a copy of such materials used.

(4)In the case of an agent who has been licensed by the Tennessee Department of Commerce and Insurance for less than one hundred twenty (120) days, an application for an insurance policy which will replace an existing policy shall not be taken until ten (10) days after such agent has mailed to the replacing insurer by certified or registered mail, notice of the intention to replace existing insurance, the name(s) of existing insurer(s) and the policy numbers of the policies to be replaced.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.06 DUTIES OF ALL INSURERS

Each insurer shall:

(1)Inform its field representatives or other personnel responsible for compliance with this rule of the requirements of this

rule.

(2)Require with or as a part of each completed application for life insurance a statement signed by the applicant as to whether or not such proposed insurance will replace existing life insurance.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.07 DUTIES OF INSURERS THAT USE AGENTS

Each insurer that uses an agent in a life insurance sale shall:

(1)Require with or as part of each completed application for life insurance, a statement signed by the agent as to whether or not he or she knows replacement is or may be involved in the transaction.

(2)Where a replacement is involved:

(a)Require from the agent with the application for life insurance (i) a list of all of the applicant’s existing life insurance to be replaced and (ii) a copy of the Replacement Notice provided the applicant pursuant to §0780— 1—24—.05 (2) (a). Such existing life insurance shall be identified by name of insurer, insured and contract number. If a number has not been assigned by the existing insurer, alternative identification, such as an application or receipt number, shall be listed.

(b)Send by certified or registered mail to each existing insurer a written communication advising of the replacement or proposed replacement and the identification information obtained pursuant to §0780—1—24—.07 (2)(a) and a Policy Summary or ledger statement containing Policy Data on the proposed life insurance as required by the Life Insurance Solicitation Rule. Cost indices and equivalent level annual dividend figures need not be included in the Policy Summary or ledger statement. This written communication shall be made within five (5) working days of the date the application is received in the replacing insurer’s home or regional office, or the date the proposed policy or contract is issued, whichever is sooner.

(c)Each existing insurer or such insurer’s agent that undertakes a conservation shall, within twenty days from the date the written communication plus the materials required in §0780—1—24—.07 (2)(a) and §0780—1—24— .07 (2)(b) is received by the existing insurer, furnish the policy-owner with a Policy Summary for the existing life insurance or ledger statement containing Policy Data on the existing policy. Such Policy Summary or ledger statement shall be completed in accordance with the provisions of Life Insurance Solicitation Rule, except that information relating to premiums, cash values, death benefits and dividends, if any, shall be computed from the current policy year of the existing life insurance. The Policy Summary or ledger statement shall include the amount of any outstanding indebtedness, the sum of any dividend accumulations or additions, and may include any other information that is not in violation of the rule or statute. Cost indices and equivalent level annual dividend figures need not be included. The replacing insurer may request the existing insurer to furnish it with a copy of the Summaries or ledger statement, which shall be within five working days of the receipt of the request.

(d)In the case of an agent who has been licensed by the Tennessee Department of Commerce and Insurance for less than one hundred twenty (120) days, immediately forward to the existing insurer by certified or registered mail a copy of the notification required by §0780—1—24—.05(4).

(3)The replacing insurer shall maintain evidence of the ‘‘Notice Regarding Replacement’’, the Policy Summary and any ledger statements used, and a replacement register, cross indexed, by replacing agent and existing insurer to be replaced. The existing insurer shall maintain evidence of Policy Summaries or ledger statements used in any conservation. Evidence that all requirements were met shall be maintained for at least five years or until the conclusion of the next succeeding regular examination by the Insurance Department of its state of domicile, whichever is earlier.

(4)The replacing insurer shall provide in its policy or in a separate written notice which is delivered with the policy that the applicant has a right to an unconditional refund of all premiums paid, which right may be exercised within a period of twenty days commencing from the date of delivery of the policy.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.08 DUTIES OF INSURERS WITH RESPECT OF DIRECT RESPONSE SALES

(1)If in the solicitation of a direct response sale, the insurer did not propose the replacement, and a replacement is involved, the insurer shall send to the applicant with the policy a Replacement Notice as described in Exhibit A or other substantially similar form approved by the Commissioner. In such instances the insurer may delete the last sentence and the references to signatures from Exhibit A without having to obtain approval of the form from the Commissioner.

(2)If the insurer proposed the replacement it shall:

(a)Provide to applicants or prospective applicants with or as a part of the application a Replacement Notice as described in Exhibit A or other substantially similar form approved by the Commissioner.

(b)Request from the applicant with or as part of the application, a list of all existing life insurance to be replaced and properly identified by name of insurer and insured.

(c)Comply with the requirements of §0780—1—24—.07 (2)(b), if the applicant furnishes the names of the existing insurers, and the requirements of §0780—1—24—.07(3), except that it need not maintain a replacement register.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.09 PENALTIES

(1)A violation of this rule shall occur if an agent or insurer, during a replacement transaction, uses a substantially inaccurate presentation or comparison of a contract’s premiums and benefits or dividends and values, if any. Any insurer, agent, representative, officer or employee of such insurer failing to comply with the requirements of this rule shall be subject to such penalties as may be appropriate under the Insurance Laws.

(2)Patterns of action by policyowners who purchase replacing policies from the same agent, after indicating on applications that replacement is not involved, shall be deemed prima facie evidence of the agent’s knowledge that replacement was intended in connection with the sale of those policies, and such patterns of action shall be deemed prima facie evidence of the agent’s intent to violate this rule.

(3)This rule does not prohibit the use of additional material other than that which is required that is not in violation of this rule or any other statute or rule.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.10 SEVERABILITY

If any section or portion of a section of this rule, or the applicability thereof to any person or circumstance, if held invalid by a court, the remainder of this rule or the applicability of such provision to other persons, shall not be affected thereby.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.11 EFFECTIVE DATE

This rule shall become effective on September 1, 1985.

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-24-.12 EXHIBIT A

(NAME, ADDRESS AND TELEPHONE NUMBER OF THE INSURANCE COMPANY)

NOTICE REGARDING REPLACEMENT

REPLACING YOUR LIFE INSURANCE POLICY

Are you thinking about buying a new life insurance policy and discontinuing or changing an existing one? If you are, your decision could be a good one—or a mistake. You will not know for sure unless you make a careful comparison of your existing benefits and the proposed benefits.

Make sure you understand the facts. You should ask the company or agent that sold you your existing policy to give you information about it. You are urged not to take action to terminate, assign or alter your existing life insurance coverage until you have been issued the new policy, examined it and have found it acceptable.

Hear both sides before you decide. This way you can be sure you are making a decision that is in your best interest.

IF YOU SHOULD FAIL TO QUALIFY FOR THE LIFE INSURANCE FOR WHICH YOU HAVE APPLIED, YOU MAY FIND

YOURSELF UNABLE TO PURCHASE OTHER LIFE INSURANCE OR ABLE TO PURCHASE IT ONLY AT SUBSTANTIALLY

HIGHER RATES.

We are required by law to notify your existing company that you may be replacing their policy.

Applicant’s Signature Date Agent’s Signature

History

• Authority: T.C.A. §§56—1—701, 56—2—301, 56—6—127 and 56—8—104.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 30, 1982; effective October 1, 1982. Repeal and new rule filed May 17, 1985; effective September 1, 1985.

Chapter 0780-01-25 Repealed

Tenn. Comp. R. & Regs. 0780-01-25-.01 REPEALED

History

• Authority: T.C.A. §§ 56-6-124 and 56-6-127.
• Administrative History: Original rule certified June 10, 1974. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-25-.06 REPEALED

History

• Authority: T.C.A. §§ 56-6-124 and 56-6-127.
• Administrative History: Original rule certified June 10, 1974. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-25-.02 REPEALED

History

• Authority: T.C.A. §§ 56-6-124 and 56-6-127.
• Administrative History: Original rule certified June 10, 1974. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-25-.03 REPEALED

History

• Authority: T.C.A. §§ 56-6-124 and 56-6-127.
• Administrative History: Original rule certified June 10, 1974. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-25-.04 REPEALED

History

• Authority: T.C.A. §§ 56-6-124 and 56-6-127.
• Administrative History: Original rule certified June 10, 1974. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-25-.05 REPEALED

History

• Authority: T.C.A. §§ 56-6-124 and 56-6-127.
• Administrative History: Original rule certified June 10, 1974. Repeal filed September 23, 2024; effective December 22, 2024.

Chapter 0780-01-26 Agents Writing Travel Accident or Travel Personal Property Insurance Required to Pass Written Examination

Tenn. Comp. R. & Regs. 0780-01-26 Agents Writing Travel Accident or Travel Personal Property Insurance Required to Pass Written Examination

RULES

OF DEPARTMENT OF COMMERCE AND INSURANCE

DIVISION OF INSURANCE

REQUIRED TO PASS WRITTEN EXAMINATION

REPEALED

Authority: T.CA. § 56-6-106 (1974), 1988 Tenn. Pub. Acts ch. 1019 § 32(a) and T.C.A. § 56-6-160. Administrative

History: Original rule certified June 10, 1974. Repealed by 1988 Tenn. Pub. Acts ch. 1019, §32(a); filed August 31, 2004; effective November 14, 2004.

Chapter 0780-01-27 Operation of State Chartered Building and Loan Associations

Tenn. Comp. R. & Regs. 0780-01-27-.01 CAPITAL

(1)Each company in order to protect the stockholders and retain its solvency to a degree necessary to inspire confidence of the public and its stockholders, members, investors, and depositors shall have not less than $100,000.00 Capital, $50,000.00 Paid in Surplus, plus 10% of Paid in Surplus for an Undivided Profit Account before commencing business or obtaining a charter.

(2)EACH ASSOCIATION AFTER THE DEPOSIT OF ALL CAPITAL FUNDS, SHALL OBTAIN

WRITTEN APPROVAL FROM THE COMMISSIONER -ON ITS SURETY BOND, INSURANCE

OF ACCOUNTS, AND QUARTERS TO INSURE THE SAFETY OF ITS FUNDS PRIOR TO

COMMENCING BUSINESS.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.02 BRANCHING

Each association shall obtain prior approval in writing from the Commissioner before opening any branch or moving an association. A branch office is any office of an association which is open to the public for the acceptance of share payments or where loan payments are made.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.03 PUBLISHING FINANCIAL STATEMENTS

On August 1st and February 1st each year every association doing business in this State shall publish in a newspaper located in the County where such association has its principal office, a detailed statement of the assets and liabilities of such association for the period ending June 30 and December 31 immediately preceding such report, and shall file a copy of same with the Commissioner.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.04 INSURANCE OF STOCKHOLDER ACCOUNTS

All deposits of funds of withdrawable stockholders shall be insured at the time placed with the association and shall remain insured. Insurance shall be placed on all withdrawable accounts to the maximum amount possible. No association may accept any funds other than capital funds necessary to incorporate without first obtaining insurance. Failure to maintain or carry insurance on withdrawable stockholder accounts will be sufficient ground for the forfeiture of the charter. Each present and future association is hereby required to immediately purchase insurance to insure all withdrawable deposits and is authorized to make disbursements, necessary to do so. This includes the purchase of bonds or debentures, and stock from the insurance company when required to maintain coverage, however, the aggregate purchase should not exceed 2-1/2% of the building and loan association's savings and time deposits. An association can buy stock and debentures from an insurance company necessary to insure their deposits.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.26 ACCOUNTING PRACTICES

Each association shall maintain adequate and accurate books of accounts, including a General Ledger and such registers and subsidiary records as may be essential. No system or method of accounting is prescribed other than the double entry system. The General Ledger shall be posted with pen and ink or by other permanent methods which shall show the necessary dates, explanatory details and posting references. All Journal Entries, Cash and Check Disbursements shall be substantiated by properly approved vouchers and the records posted in such manner as to distinguish between cash and non-cash items. The accounting procedures used shall truly, accurately and honestly reflect the affairs of the association.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.27 MACHINE ACCOUNTING

An association may use machine posting of its books and records, but it shall support all settlement or summary sheets with appropriate accounting machine tapes and all other necessary information.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.05 FIDELITY BONDS - BONDS FOR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS

PERSONS COVERED BY FORM OF, AND AMOUNT OF BONDS.

(1)Each association shall provide and maintain a Fidelity Bond in form acceptable to the Commissioner covering each director, officer, agent or employee who has control over or access to cash or securities of the association. Such bond coverage may be in the form of individual bonds, a schedule Fidelity Bond, or a Blanket Bond, covering all such persons and protecting the institution exclusively. Each such bond shall be executed by a responsible surety company or other surety acceptable to the Commissioner in minimum amounts computed upon a base consisting of the assets of the association plus the unpaid balance of mortgages which it has contracted to service for others as follows:

(a)Not over $300,000$20,000 plus $10,000 for each $100,000 or fraction thereof over $100,000.

(b)$300,001 to $10,000,000$50,000 plus $15,000 for each $100,000 or fraction thereof over $400,000.

(c)$1,000,001 to $10,000,000$155,000 plus $20,000 for each $1,000,000 or fraction thereof over $2,000,000.

(d)$10,000,001 to $30,000,000$335,000 plus $50,000 for each $5,000,000 or fraction thereof over $15,000,000.

(e)$30,000,001 to $60,000,000$535,000 plus $75,000 for each $10,000,000 or fraction thereof over $40,000,000.

(f)$60,000,001 to $100,000,000$735,000 plus $75,000 for each $15,000,000 or fraction thereof over $70,000,000.

(g)$100,000,001 and over$985,000 plus $75,000 for each $25,000,000 or fraction thereof over $125,000,000.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.06 AMOUNT OF DEDUCTIBLE

Such fidelity bond coverage may contain a provision for a deductible amount from any loss which, except for such deductible provision, would be recoverable from the surety, but no such deductible amount shall be in excess of $500 for all losses involving the same person in any case where the base for the fidelity bond coverage is $10,000,000 or less, or in excess of $1,000 where the base for the fidelity bond coverage is in excess of $10,000,000.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.07 GENERAL CANCELLATION CLAUSE RIDER

Each such bond shall contain a provision that the bonding or surety company will, at least 30 days prior to cancellation of the bond, give notice in writing to the Director of the Division of Building and Loan of its intent to cancel said bond.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.08 APPROVAL OF BOND AND PAYMENT OF PREMIUM

Each such bond shall be formally approved by the Board of Directors of the Association, and the premium of the bond shall be paid by such association. The Savings and Loan Blanket Form No. 22 is acceptable.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.09 REPORTING OF MISAPPROPRIATIONS, DEFALCATIONS, EMBEZZLEMENTS,

THEFTS OR OTHER MISAPPLICATIONS. If any officer, director or employee of an association shall learn or believe that a misappropriation, defalcation, embezzlement, theft or other misapplication of the funds, or other assets, of the association has occurred, or is occurring, such officer, director or employee shall immediately report such information in writing or in person to the Commissioner.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.10 INVESTMENTS- LOANS SECURED BY REAL AND LEASE HOLD PROPERTY

The following provisions shall apply to any loan granted by any association on the security of real or leasehold property:

(a)Application. An association shall, in every such loan, obtain a written application, signed by or on behalf of the person for whose benefit the loan is to be made, which application shall contain such necessary and pertinent information with respect to the borrower and the security as the circumstances may require. All applications shall contain at least the following:

The name, address and occupation of the applicant for the loan. The name and address of the employer of the applicant, if the applicant is employed. The location of the property, character of the improvements thereon, and, if leasehold, the amount of the ground rent thereon.. If the applicant does not have title at the time of the application, the actual consideration to be paid therefor.

If the applicant has purchased the property within one year prior to the application, the actual consideration paid therefor.

The purpose for which the loan is sought.

(b)Before an association %hall make a loan to be secured by mortgage on real or leasehold property, it shall first obtain a written appraisal of such property from at least two qualified persons, which written appraisal shall state the market value of such property in dollars, and be signed by all appraisers. The qualified persons making such appraisal may be members of the association's Board of Directors: provided, however, that such written appraisal may be made by one person if such person be the holder of a certificate evidencing the prior attainment of the minimum qualifications of a real estate appraiser according to the predetermined standards of the American Institute of Real Estate Counselors, the Senior Member Society of Real Estate Appraisers, the American Society of Appraisers, or be a member in good standing of an appraisal committee of a Real Estate Board situated in the State of Tennessee.

(c)Title Certification. Before an association, its agent or attorney, shall pay out any money upon a mortgage loan, it shall secure proper assurance that, upon closing, it will receive a title certification from its attorney, or a title insurance policy from a qualified title company, to the effect that: 1.Title is good and merchantable in the mortgagor; and 2.The association has a first lien, or that it has a second lien if the association already holds the first lien.

In the event that there are liens or encumbrances on the property prior to settlement, the association shall satisfy itself (i) that the encumbrances do not affect the marketability of its security or the amount of its appraisal, and (ii) that all prior liens will be discharged, or appropriate provisions made therefor. Promptly after settlement the association shall secure the written title certification, or the final title insurance policy, as set forth above, together with a statement of the steps taken to protect the association against any prior liens not then released of record.

(d)Affidavit of Seller and Borrower. At settlement, the seller, if any, and the borrower shall state in writing, under oath, whether any money or other thing of value has been or is to be paid to any corporation or persons, other than the association, as a fee, commission, or gift for procuring or for endeavoring to procure such loan from the association, or for any services in connection with such loans, aside from those set forth on the Memorandum of Settlement, and, if so, the amount or value of such fee, commission, or gift and to whom it has been, or is to be paid.

(e)Insurance. 1.An association shall require the mortgagor to maintain at the mortgagor's expense, so long as his loan may be outstanding, fire and extended coverage insurance upon the improvements on the real or leasehold property securing such loan, in an amount at least sufficient to protect the interest of the association, in a company qualified to do business in the State of Tennessee, and approved by the association. Such insurance shall be appropriately endorsed to reflect the interest of the association in any proceeds payable under such policy; and further provided that an association shall be exempt from the earlier provisions hereof as to any loan or loans where the appraised value of unimproved land upon which its lien is secured equals or exceeds the unpaid principal balance on said loan. 2.Loans Secured by Non-withdrawable Permanent Stock - No loans shall be made upon the security of non-withdrawable permanent stock pledged to the association.

(f)Insured or Guaranteed Loan. Any such loan which is, or will be insured or guaranteed by the United States or any instrumentality thereof, or the State of Tennessee, or any instrumentality thereof, may be made for an amount in excess of the restrictions imposed by Statute, but only to the extent that such loan is insured or guaranteed or for a longer term than is permitted by Statute.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.11 INVESTMENTS WITH BANKS- DEFINITION

An investment with a bank shall mean, and be limited to, a deposit of the funds of an association with a bank. It shall include demand deposits and certificates of deposit. It shall not include a loan or other advance to a bank or an investment in bank stock. As used in these regulations, certificate of deposit shall include a time deposit and any other deposit, by whatever name it may be called, on which the association shall directly or indirectly receive any compensation whatsoever therefor in excess of the deposit itself, by way of interest, dividend or otherwise. Demand deposits shall include all other deposits, except certificates of deposit as defined above.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.12 DEPOSITS GENERALLY

An association shall make its deposits in a bank insured by the Federal Deposit Insurance Corporation and may purchase certificates of deposit issued by said bank as authorized under these regulations. An association depositing its funds or purchasing a certificate of deposit in any bank not maintaining its principal office in the State of Tennessee may do so only if said bank shall have been actively engaged in the banking business for a period of at least five (5) years and have a net worth of at least five million dollars ($5,000,000).

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.13 CERTIFICATES OF DEPOSIT

(1)No association shall invest in any certificate of deposit unless:

(a)The certificate of deposit, as issued, is registered in the name of the investing association.

(b)1.The total investment in certificates of deposit of the association in any one bank does not exceed 10% of the total capital of the bank (capital stock, surplus, undivided profits and capital notes) or $100,000, whichever is greater. 2.No association may give or receive consideration of any kind to or from a third party in connection with investment in a certificate of deposit. No association may encumber any such certificate as collateral or otherwise with the issuing bank or any other corporation or person, except to secure a loan to the association itself. The association shall retain in its portfolio, with respect to each investment in a certificate of deposit, evidence that the certificate is registered. If there is an encumbrance thereon permitted, the portfolio shall disclose all relevant facts with respect thereto.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.14 CURRENT INCOME FROM INITIAL LOAN CHARGES

If an association collects Initial Loan Charges on any loan, it may take into income in the year in which collected an amount from Initial Loan Charges not exceeding 3% of the face value of the loan on which such charges have been collected.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.15 COMMITMENT FEE

A fee collected by an association for its commitment to make a loan, by whatever name such charge may be known, shall be retained as a deferred credit by the association until the loan shall be made, when it shall be included in Initial Loan Charges as above provided. If the loan shall not be made for any reason, the association shall thereupon take into current income such amount of the fee as shall remain after such reimbursement as the commitment agreement may require.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.16 EXCLUSIONS FROM INITIAL LOAN CHARGES

Any charge collected by an association in connection with the making of a loan, in which the association merely collects the charge and pays the amount so collected to another, shall not be included in the computation of Initial Loan Charges as above required. Such charges may include such officers' fees as are provided by the By-Laws of the association, and fees for title examination, appraisal and inspection fees, recording costs, documentary stamps and other charges of a similar nature.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.17 DISCOUNTS

When an association makes a discount loan, or purchases a loan at a discount, it may take into income in the year in which the loan is discounted, an amount not exceeding 3% of the face value of the loan and the remainder, if any, shall be taken into income ratably over the term of the loan or over the first 7 years of the loan, whichever is the less.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.18 SALE OR PAYMENT OF LOAN

When any loan shall be sold, or paid in advance of maturity, any profit on the sale, and any deferred credit not then taken into income, shall be thereupon taken into current income.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.19 WASH SALE OR REFINANCING

If any loan shall be sold, and shall be repurchased within one year, any profit on the sale, and discount on the repurchase, shall be taken into income ratably over the remaining term of the loan. If an existing loan shall be refinanced, whether during or at the end of the term of the existing loan, all remaining Initial Loan Charges shall be taken into income ratably over the term of the loan. If an existing loan shall be extended, any charge by the association for the extension shall be taken into income ratably over the new term of the loan.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.20 TERM OF LOAN- DEFINITION

Where the phrase "term of the loan" is used in the above §s, it means the period of time from making of the loan, or extension, until the loan is to be paid in full under the terms of the documents evidencing the loan, or the extension.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.21 DIRECTORS OF ASSOCIATIONS

Each director of an association shall, promptly after his election as such director and prior to commencement of his duties as a director, accept in writing such election.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.22 FORM OF ACCEPTANCE

The acceptance shall be in the following form:

We, the undersigned, having been duly elected as directors of _____________________________ Association, do hereby accept the office of director, for a term as indicated opposite our signatures.

Name of DirectorAddressTermSignature (Please Type)

1. _______________________________________________ 2. _______________________________________________ 3. _______________________________________________ 4. _______________________________________________ 5. _______________________________________________

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.23 FILING OF ACCEPTANCES

The signed acceptances shall be filed with the Division promptly after execution.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.24 FAILURE TO ACCEPT

If a Director shall fail to accept election, in writing, as required by this

Chapter 0780-1-27 within thirty (30) days after his election, it shall be presumptively assumed that such director has refused to accept such election and that a vacancy exists in the board of directors by reason of such refusal.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.25 ACCOUNTING RECORDS AND PRACTICES RECORDS

(1)The association shall own and maintain the following basic records:

(a)Cash Receipts Journal (b)Cash Disbursements Journal (c)General Ledger (d)Share Accounts Ledger or Card System (e)Mortgage Loan Accounts Ledger or Card System for Loans other than Mortgage Loans (f)Loan Ledger or Card System (g)Income Account Ledger or Card System (h)Expense Account Ledger or Card System (i)Check Book and Cancelled Checks or carbon copies of checks, deposit receipts, bank statements and bank reconciliations (j)Minute Book

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.28 POSTING AND BALANCING OF BOOKS

The books and records of an association shall be posted promptly and be balanced by the appropriate officer or officers of the association no less frequently than monthly. Trial Balances by adding machine or other listing methods shall be taken of all loan and free share accounts at least quarterly. Copies of the Trial Balances shall be retained for at least five years.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.29 JOURNAL VOUCHERS

An association may use a system of journal vouchers, but in such case all such vouchers shall be serially numbered and retained as part of the permanent records of the association.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.30 RETENTION OF RECORDS

An association shall retain all its account records, tapes and supporting information for at least five years. Such books, tapes, supporting information and other records shall be available for examination by representatives of the Division at all times.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.31 CURRENT AND DEFERRED INCOME

These regulations shall not be construed as enlarging, changing, modifying or amending the usury laws of the State of Tennessee, but rather as establishing accounting principles. In accounting, for the purpose of calculating income, items of deferred income and direct and indirect loan charges shall be treated as set out in the following rules.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.32 INITIAL LOAN CHARGES

Any charges by whatsoever name or description collected by the association in connection with the making of a loan are called Initial Loan Charges in these regulations. Initial Loan Charges shall include commitment fees, placement fees, entrance fees, commissions, premiums, bonuses, points, service charges, and every other charge collected by the association by whatever name, now or hereafter devised, without the above enumeration being intended to be all inclusive. Except as hereafter specifically permitted, Initial Loan Charges shall be treated as deferred income and taken into income by the charging association ratably over the term of the loan or over the first seven (7) years of the loan, whichever is the less.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.33 ADVERTISING AND PROMOTIONAL ACTIVITIES ASSOCIATIONS ADVERTISING

FILE. Each association shall maintain and make available to the Commissioner for inspection at its home office, a chronological file of all forms of advertisement used by it during the preceding eighteen months.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.34 IDENTIFICATION OF THE ASSOCIATION

The Corporate name of the association shall be set forth at least once in each advertisement in such manner to identify clearly the association, and its identity as an association.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.35 MISLEADING IMPRESSION

Any advertisement or any advertising sign as a whole shall not be inaccurate or create a misleading impression even though statements therein, separately considered, are literally truthful.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.36 DIVIDEND PAYMENT

No association shall advertise in a manner which implies that the rate advertised will be paid for a longer period than one year. All advertisements of "rate" shall make clear that it is the current annual rate.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.37 WITHDRAWAL OF FUNDS

No association shall advertise concerning the availability of funds for withdrawal in such a manner as to lead a reasonable person to believe that funds will necessarily be available on demand.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.38 USE AFTER NOTICE

Advertising shall not be used after the Commissioner has given written notice that the advertisement is unauthorized, false, misleading or likely to deceive the public.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.39 FILING OF ADVERTISING PRIOR TO PUBLICATION

The Commissioner may require an association to file a true copy of the text of any advertisements with the office of the Division at least five days prior to issuance, circulation or publication of such advertisements.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.40 STOCKS AND DIVIDENDS

(1)Guaranty Stock is non-withdrawable permanent stock by whatever name. Free Share is any other type share, stock or deposit.

(2)Any association authorized by law to issue or maintain shares of Guaranty Stock must, prior to the payment of any dividend on such Guaranty Stock, in any dividend period, declare and pay dividends on all free share accounts.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.41 CERTIFICATE -STATED RESTRICTIONS

(1)Each certificate heretofore or hereafter issued as evidence of ownership of Guaranty Stock shall clearly show on its face in a typed size no less then 50 points that such stock is "Guaranty Stock." In addition, each stock certificate shall state the restrictions upon such stock, including the following:

(a)That Guaranty Stock constitutes a secondary reserve for losses, (b)That Guaranty Stock is non-withdrawable.

(c)That Guaranty Stock is assessable in the hands of the owner thereof to the par value thereof.

(d)That Guaranty Stock is entitled to the payment of dividends only after dividends have been declared and paid on all free share accounts.

(e)Such other restrictions with respect to the stock as may be required to appear on the certificate.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.42 FILING OF CERTIFICATES

Each association authorized to issue Guaranty Stock shall promptly file with the Division specimen certificates and specimen stickers and any substitutions therefor.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.43 AFFIDAVIT OF COMPLIANCE

Each association authorized to issue Guaranty Stock shall file with the Commissioner and affidavit that it has complied with these provisions within 90 days after the effective date of these regulations.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.44 HEARING

A hearing may be held by the Commissioner to determine the violation of any Rule, Bulletin, Regulation or Statute, or to determine if unsafe or unsound conditions or practices exist within the association. A hearing shall be held on fifteen (15) days' written notice setting forth the time and place and a concise statement of the facts, alleged to sustain a suspension or revocation. The results of such hearing shall be set forth in a written order accompanied by a finding of fact and a copy shall forthwith be delivered to the association and its Directors. Such order, findings and evidence considered by the Commissioner shall be filed with the public records of the Department of Insurance.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Tenn. Comp. R. & Regs. 0780-01-27-.45 SEPARABILITY PROVISION

If any provision of these rules and regulations or the application thereof to any person or circumstance is held invalid., the remainder of the rules and regulations and the applicability of such provision to other persons or circumstances shall not be affected thereby.

History

• Authority: T.C.A. §45-1303.
• Administrative History: Original Rule certified June 10, 1974.

Chapter 0780-01-28 Health Maintenance Organizations

Tenn. Comp. R. & Regs. 0780-01-28-.01 STATEMENTS AND REPORTS - FORM AND CONTENTS

Any and all reports required to be filed by an HMO under T.C.A. § 56-32-208. Reports. shall be prepared in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual in effect for the period covered by the report.

History

• Authority: T.C.A. §§56-32-208 and 56-32-218(a).
• Administrative History: Original rule filed June 18, 1974; effective July 18, 1974. Repeal and new rule filed August 26, 2002; effective November 9, 2002.

Tenn. Comp. R. & Regs. 0780-01-28-.02 THROUGH 0780-1-28-.09 REPEALED

History

• Authority: T.C.A. §§56-32-208 and 56-32-218(a).
• Administrative History: Original rule filed June 18, 1974; effective July 18, 1974. Repeal filed August 26, 2002; effective November 9, 2002.

Chapter 0780-01-29 Accident and Health Policies Providing Return of Premium or Withdrawal Benefits

Tenn. Comp. R. & Regs. 0780-01-29-.01 TYPES OF BENEFITS

This rule applies to individual accident and health policies providing a deferred benefit payable at the expiration date of the policy or after a specified date(s) based upon an amount equal to all or a stated portion, not less than 80%, of the total premiums paid on the policy, reduced by all or a specified portion, not less than 20%, of the total claims paid under the policy.

History

• Authority: T.C.A. §§56—1—701 and 56—26—114.
• Administrative History: Original rule filed May 27, 1976; effective June 28, 1976.

Tenn. Comp. R. & Regs. 0780-01-29-.02 POLICIES TO WHICH SUCH BENEFITS MAY BE ATTACHED

Such benefits may only be included in policies which are non-cancellable or guaranteed renewable, and which provide for level premiums.

History

• Authority: T.C.A. §§56—1—701 and 56—26—114.
• Administrative History: Original rule filed May 27, 1976; effective June 28, 1976.

Tenn. Comp. R. & Regs. 0780-01-29-.03 PREMIUMS FOR BENEFITS MUST BE SEPARATELY STATED

The additional premium for the benefit defined in 0780—1—29—.01 must be separately stated either in the policy or rider attached thereto.

History

• Authority: T.C.A. §§56—1—701 and 56—26—114.
• Administrative History: Original rule filed May 27, 1976; effective June 28, 1976. Amendment filed June 30, 1989; effective August 14, 1989.

Tenn. Comp. R. & Regs. 0780-01-29-.04 WITHDRAWAL AND DEATH BENEFITS

After completion of not more than five policy years a benefit must be payable upon termination of the policy or rider or both upon cessation of premium or upon death. The amount of benefit must be at least equal to the minimum reserve for the return of premium benefit, computed for this purpose on a five year preliminary term basis with five percent interest using a mortality table acceptable for a reserve purposes, with no discount for lapses and no claim offset. The actual withdrawal benefit paid may be reduced by all or a specified portion, not less than 20 %, of the claims paid to date of withdrawal. If, after payment of the withdrawal benefit, any income benefits shall become payable on account of disability which commenced before the withdrawal benefit was paid, the policy may provide that commencement of such income payments shall be deferred until the payments accrued shall exceed the amount of the withdrawal benefit.

History

• Authority: T.C.A. §§56—1—701 and 56—26—114.
• Administrative History: Original rule filed May 27, 1976; effective June 28, 1976.

Tenn. Comp. R. & Regs. 0780-01-29-.05 PEMIUMS WAIVED AND POLICY DIVIDENDS

Policies must provide that a waived premium is both a paid premium and a claim payment and that dividends constitute a reduction of paid premiums.

History

• Authority: T.C.A. §§56—1—701 and 56—26—114.
• Administrative History: Original rule filed May 27, 1976; effective June 28, 1976.

Tenn. Comp. R. & Regs. 0780-01-29-.06 ADDITIONAL PREMIUMS FOR RETURN OF PREMIUM BENEFITS

A statement describing and explaining the actuarial assumptions made in determining the additional premiums charged must be filed with the policy or rider providing the benefits.

History

• Authority: T.C.A. §§56—1—701 and 56—26—114.
• Administrative History: Original rule filed May 27, 1976; effective June 28, 1976.

Tenn. Comp. R. & Regs. 0780-01-29-.07 RESERVES FOR RETURN OF PREMIUM BENEFIT

A statement describing the method of determining reserves including all of the actuarial assumptions involved must be filed with the policy or rider. Minimum reserves are those according to the one year preliminary term method and the mortality tables and rate of interest prescribed for reserves under regular accident and health benefits. No assumed lapse rate may be used in computing minimum reserves.

History

• Authority: T.C.A. §§56—1—701 and 56—26—114.
• Administrative History: Original rule filed May 27, 1976; effective June 28, 1976.

Chapter 0780-01-30 Repealed

Tenn. Comp. R. & Regs. 0780-01-30-.01 REPEALED

History

• Authority: T.C.A. §§ 56-1-501 and 56-1-701.
• Administrative History: Original rule filed November 10, 1975; effective December 10, 1975. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-30-.04 REPEALED

History

• Authority: T.C.A. §§ 56-1-501 and 56-1-701.
• Administrative History: Original rule filed November 10, 1975; effective December 10, 1975. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-30-.02 REPEALED

History

• Authority: T.C.A. §§ 56-1-501 and 56-1-701.
• Administrative History: Original rule filed November 10, 1975; effective December 10, 1975. Amendment filed April 17, 1978; effective May 17, 1978. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-30-.03 REPEALED

History

• Authority: T.C.A. §§ 56-1-501 and 56-1-701.
• Administrative History: Original rule filed November 10, 1975; effective December 10, 1975. Repeal filed September 23, 2024; effective December 22, 2024.

Chapter 0780-01-31 Repealed

Tenn. Comp. R. & Regs. 0780-01-31 Repealed

RULES

OF THE DEPARTMENT OF COMMERCE AND INSURANCE

DIVISION OF INSURANCE

Authority: T.C.A. Title 56, Chapter 33, and §56-2-301; and Public Acts of 1992, Chapter 638, §3, and Chapter 639, §3. Administrative History: Original rule filed May 12, 1976; effective June 11, 1976. Repeal filed March 16, 2005; effective May 30, 2005.

Chapter 0780-01-32 Repealed

Tenn. Comp. R. & Regs. 0780-01-32-.01 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-2-301, 56-3-302, 56-3-303, 56-3-304, 56-19-114, 56-21-104, 56-23- 110, and 56-23-111.
• Administrative History: Original rule filed January 21, 1976; effective February 20, 1976. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-32-.08 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-2-301, 56-3-302, 56-3-303, 56-3-304, 56-19-114, 56-21-104, 56-23- 110, and 56-23-111.
• Administrative History: Original rule filed January 21, 1976; effective February 20, 1976. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-32-.02 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-2-301, 56-3-302, 56-3-303, 56-3-304, 56-19-114, 56-21-104, 56-23- 110, and 56-23-111.
• Administrative History: Original rule filed January 21, 1976; effective February 20, 1976. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-32-.03 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-2-301, 56-3-302, 56-3-303, 56-3-304, 56-19-114, 56-21-104, 56-23- 110, and 56-23-111.
• Administrative History: Original rule filed January 21, 1976; effective February 20, 1976. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-32-.04 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-2-301, 56-3-302, 56-3-303, 56-3-304, 56-19-114, 56-21-104, 56-23- 110, and 56-23-111.
• Administrative History: Original rule filed January 21, 1976; effective February 20, 1976. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-32-.05 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-2-301, 56-3-302, 56-3-303, 56-3-304, 56-19-114, 56-21-104, 56-23- 110, and 56-23-111.
• Administrative History: Original rule filed January 21, 1976; effective February 20, 1976. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-32-.06 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-2-301, 56-3-302, 56-3-303, 56-3-304, 56-19-114, 56-21-104, 56-23- 110, and 56-23-111.
• Administrative History: Original rule filed January 21, 1976; effective February 20, 1976. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-32-.07 REPEALED

History

• Authority: T.C.A. §§ 56-1-701, 56-2-301, 56-3-302, 56-3-303, 56-3-304, 56-19-114, 56-21-104, 56-23- 110, and 56-23-111.
• Administrative History: Original rule filed January 21, 1976; effective February 20, 1976. Repeal filed September 23, 2024; effective December 22, 2024.

Chapter 0780-01-33 Life Insurance Advertising

Tenn. Comp. R. & Regs. 0780-01-33-.01 PURPOSE

The purpose of these rules is to set forth minimum standards and guidelines to assure a full and truthful disclosure to the public of all material and relevant information in the advertising of life insurance policies and annuity contracts.

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.02 DEFINITIONS

(1)For the purpose of these rules:

(a)“Policy” shall include any policy, plan, certificate, contract, agreement, statement of coverage, rider, or endorsement which provides for life insurance or annuity benefits.

(b)“Insurer” shall include any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyd’s, fraternal benefit society, and any other legal entity which is defined as an “insurer” in the Insurance Code of this state or issues life insurance or annuity in this state and is engaged in the advertisement of a policy.

(c)An “advertisement” shall be material designed to create public interest in life insurance or annuities or in an insurer, or to induce the public to purchase, increase, modify, reinstate, or retain a policy including: 1.printed and published material, audiovisual material, and descriptive literature of an insurer used in direct mail, newspapers, magazines, radio and television scripts, billboards, and similar displays; 2.descriptive literature and sales aids of all kinds issued by an insurer or agent, including but not limited to circulars, leaflets, booklets, depictions, illustrations, and form letters; 3.material used for the recruitment, training, and education of an insurer’s sales personnel, agents, solicitors, and brokers which is designated to be used or is used to induce the public to purchase, increase, modify, reinstate, or retain a policy; 4.prepared sales talks, presentations, and material for use by sales personnel, agents, solicitors, and brokers.

(d)“Advertisement” for the purpose of these rules shall not include: 1.communications or materials used within an insurer’s own organization and not intended for dissemination to the public; 2.communications with policyholders other than material urging policyholders to purchase, increase, modify, reinstate, or retain a policy; 3.a general announcement from a group or blanket policyholder to eligible individuals on an employment or membership list that a policy or program has been written or arranged; provided the announcement clearly indicates that it is preliminary to the issuance of a booklet explaining the proposed coverage.

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.03 APPLICABILITY

(1)These rules shall apply to any life insurance or annuity advertisement intended for dissemination in this state.

(2)Every insurer shall establish and at all times maintain a system of control over the content, form, and method of dissemination of all advertisements of its policies. All such advertisements, regardless of by whom written, created, designed, or presented, shall be the responsibility of the insurer.

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.04 FORM AND CONTENT OF ADVERTISEMENTS

(1)Advertisements shall be truthful and not misleading in fact or by implication. The form and content of an advertisement of a policy shall be sufficiently complete and clear so as to avoid deception. It shall not have the capacity or tendency to mislead or deceive.

Whether an advertisement has the capacity or tendency to mislead or deceive shall be determined by the Commissioner from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.

(2)No advertisement shall use the terms “investment”, “investment plan”, “founder’s plan”, “charter plan”, “expansion plan”, “profit”, 11 profits” “profit sharing”, “interest plan”, “savings”, “savings plan”, or other similar terms in connection with a policy in a context or under such circumstances or conditions as to have the capacity or tendency to mislead a purchaser or prospective purchaser of such policy to believe that he will receive, or that it is possible that he will receive, something other than a policy or some benefit not available to other persons of the same class and equal expectation of life.

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.05 DISCLOSURE REQUIREMENTS

(1)The information required to be disclosed by these rules shall not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the advertisement so as to be confusing or misleading.

(Rule 0780-1-33-.05, conti nu ed)

(2)No advertisement shall omit material information or use words, phrases, statements, references, or illustrations if such omission or such use has the capacity, tendency, or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered, premium payable, or state or federal tax consequences. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale, or an offer is made to refund the premium if the purchaser is not satisfied, does not remedy misleading statements.

(3)In the event an advertisement uses “Non-Medical”, “No Medical Examination Required”, or similar terms where issue is not guaranteed, such terms shall be accompanied by a further disclosure of equal prominence and in juxtaposition thereto to the effect that issuance of the policy may depend upon the answers to the health questions.

(4)An advertisement shall not use as the name or title of a life insurance policy or an annuity any phrase which does not include the words “life insurance” or “annuity” unless accompanied by other language clearly indicating it is life insurance or an annuity.

(5)An advertisement shall prominently describe the type of policy advertised.

(6)An advertisement of an insurance policy marketed by direct response techniques shall not state or imply that because there is no agent or commission there will be a cost saving to prospective purchasers unless such is the fact. No such cost savings may be stated or implied without justification satisfactory to the Commissioner prior to use.

(7)An advertisement for a policy containing graded or modified benefits shall prominently display any limitation of benefits. If the premium is level and coverage decreases or increases with age or duration, such fact shall be prominently disclosed.

(8)An advertisement for a policy with non-level premiums shall prominently describe the premium changes.

(9)Dividends (a)An advertisement shall not utilize or describe dividends in a manner which is misleading or has the capacity or a tendency to mislead.

(b)An advertisement shall not state or imply that the payment or amount of dividends is guaranteed.

If dividends are illustrated, they must be based on the insurer’s current dividend scale and the illustration must contain a statement to the effect that they are not to be construed as guarantees or estimates of dividends to be paid in the future.

(c)An advertisement shall not state or imply that illustrated dividends under a participating policy and/or pure endowments will be or can be sufficient at any future time to assure, without the further payment of premiums, the receipt of benefits, such as a paid-up policy, unless the advertisement clearly and precisely explains (1) what benefits or coverage would be provided at such time and (2) under what conditions this would occur.

(10) An advertisement shall not state that a purchaser of a policy will share in or receive a stated percentage or portion of the earnings on the general account assets of the company.

(11) Testimonials or Endorsements by Third Parties.

(a)Testimonials used in advertisements must be genuine; represent the current opinion of the author; be applicable to the policy advertised, if any; and be accurately reproduced. In using a (Rule 0780-1-33-.05, conti nu ed) testimonial, the insurer makes as its own all of the statements contained therein, and such statements are subject to all the provisions of these rules.

(b)If the individual making a testimonial or an endorsement has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee, or otherwise, or receives any benefit directly or indirectly other than required union scale wages, such fact shall be disclosed in the advertisement.

(c)An advertisement shall not state or imply that an insurer or a policy has been approved or endorsed by a group of individuals, society, association, or other organization unless such is the fact and unless any proprietary relationship between an organization and the insurer is disclosed.

If the entity making the endorsement or testimonial is owned, controlled, or managed by the insurer, or receives any payment or other consideration from the insurer for making such endorsement or testimonial, such fact shall be disclosed in the advertisement.

(12) An advertisement shall not contain statistical information relating to any insurer or policy unless it accurately reflects recent and relevant facts. The source of any such statistics used in an advertisement shall be identified therein.

(13) Introductory, Initial or Special Offers and Enrollment Periods.

(a)An advertisement of an individual policy or combination of such policies shall not state or imply that such policy or combination of such policies is an introductory, initial, or special offer, or that applicants will receive substantial advantages not available at a later date, or that the offer is available only to a specified group of individuals, unless such is the fact. An advertisement shall not describe an enrollment period as “special” or “limited” or use similar words or phrases in describing it when the insurer uses successive enrollment periods as its usual method of marketing its policies.

(b)An advertisement shall not state or imply that only a specific number of policies will be sold, or that a time is fixed for the discontinuance of the sale of the particular policy advertised because of special advantages available in the policy.

(c)An advertisement shall not offer a policy which utilizes a reduced initial premium rate in a manner which overemphasizes the availability and the amount of the reduced initial premium.

When an insurer charges an initial premium that differs in amount from the amount of the renewal premium payable on the same mode, all references to the reduced initial premium shall be followed by an asterisk or other appropriate symbol which refers the reader to that specific portion of the advertisement which contains the full rate schedule for the policy being advertised.

(d)An enrollment period during which a particular insurance policy may be purchased on an individual basis shall not be offered within this state unless there has been a lapse of not less than three months between the close of the immediately preceding enrollment period for the same policy and the opening of the new enrollment period. The advertisement shall indicate the date by which the applicant must mail the application, which shall be not less than ten days and not more than forty days from the date that such enrollment period is advertised for the first time. This rule applies to all advertising media-i.e., mail, newspapers, radio, television, magazines, and periodicals-by any one insurer. The phrase “any one insurer” includes all the affiliated companies of a group of insurance companies under common management or control.

This rule does not apply to the use of termination or cutoff date beyond which an individual application for a guaranteed issue policy will not be accepted by an insurer in those instances where the application has been sent to the applicant in response to his request. It is also inapplicable to solicitations of employees or members of a particular group or association which (Rule 0780-1-33-.05, conti nu ed) otherwise would be eligible underspecific provisions of the Insurance Code for group, blanket, or franchise insurance. In cases where an insurance product is marketed on a direct mail basis to prospective insured by reason of some common relationship with a sponsoring organization, this

rule shall be applied separately to each such sponsoring organization.

(14) An advertisement of a particular policy shall not state or imply that prospective insurers shall be or become members of a special class, group, or quasi-group and as such enjoy special rates, dividends, or underwriting privileges, unless such is the fact.

(15) An advertisement shall not make unfair or incomplete comparisons of policies, benefits, dividends, or rates of other insurers. An advertisement shall not falsely or unfairly describe other insurers, their policies, services, or methods of marketing.

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.06 UNFAIR METHODS OF COMPETITION

(1)Making any statement relating to the growth of the life insurance industry or to the tax status of life insurance companies in a context which would reasonably be understood to interest a prospect in the purchase of shares of stock in an insurance company rather than in the purchase of a life insurance policy.

(2)Making any statement which reasonably gives rise to the inference that the insured will enjoy a status common to a stockholder or will acquire a stock ownership interest in the insurance company by virtue of purchasing the policy.

(3)Providing a policyholder with any premium receipt book, policy jacket, return envelope, or other printed material containing references to the company’s “Investment Department,” “Insured Investment Department,” or similar terminology, in such a manner as to imply that the policy was sold or issued or is serviced by the investment department of the insurance company.

(4)Stating that each stockholder is given the right to purchase or allocate a specific number of policies.

(5)Stating that policyholders who act as “centers of influence” for an insurance company in that capacity will share in the company’s surplus earnings in some manner not available to other policyholders of the same class.

(6)Stating or implying that the principal amounts payable under coupons represent interest, earnings, return on investment, or anything other than policy benefits, the cost of which is included in the total premium.

(7)Describing premium payments in language which states the payment is a “deposit”, unless:

(a)the payment establishes a debtor-creditor relationship between the insurance company and policyholder; or (b)the term is used in conjunction with the word “premium” in such manner as to clearly indicate the true character of the payment.

(8)Including in sales kits and prepared sales presentations proposed answers to a prospect’s question as to whether life insurance is being sold, which are designed to avoid a clear and unequivocal statement that life insurance is the subject matter of the solicitation.

(Rule 0780-1-33-.06, conti nu ed)

(9)Stating that an insured is guaranteed certain benefits if the policy is allowed to lapse, without making an adequate explanation of the non-forfeiture benefits.

(10) Using a dollar amount in printed material to be shown to a prospective policyholder unless accompanied by language in such material indicating the nature of the figure. This is intended to prohibit the use of dollar figures not in relation to guaranteed values and properly projected dividend figures. It is intended to prohibit the use of figures showing growth of stock values, or other values not a part of the life insurance contract.

(11) Stating that a policy provides certain features which are not found in any other insurance policies, unless that in fact be true.

(12) The making of any statement or implication in regard to an insurance policy that cannot be verified by reference to the policy contract itself, or a specimen copy of the policy being described, or to the company’s officially published rate book and dividend illustrations.

(13) Stating that life insurance is “loss proof” or “depression proof,” but this shall not prohibit statements that life insurance benefits (other than dividends) are guaranteed by the company regardless of economic conditions.

(14) Making any statement that a company makes a profit as a result of policy lapses or surrenders.

(15) Making comparisons to the past experience of other life insurance companies as a means of projecting possible experience of your company. This paragraph is intended to protect policyholders from being misled as to the probabilities of the policy being sold having the same results through presentations of experience of companies which successfully sold similar policies without a. fair disclosure of the fact that many companies have had unfavorable experience

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.07 IDENTITY OF INSURER

(1)The name of the insurer shall be clearly identified, and if any specific individual policy is advertised it shall be identified either by form number or other appropriate description. An advertisement shall not use a trade name, any insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer, service mark, slogan, symbol, or other device or reference without disclosing the name of the insurer, if the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the insurer or create the impression that any company other than the insurer would have any responsibility for the financial obligation under a policy.

(2)No advertisement shall use any combination of words, symbols, or physical materials which by their content, phraseology, shape, color, or other characteristics are so similar to a combination of words, symbols, or physical materials used by governmental programs of agencies or otherwise appear to be of such a nature that it tends to mislead prospective insurers into believing that the solicitation is in some manner connected with any such governmental program or agency.

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.08 JURISDICTIONAL LICENSING AND STATUS OF INSURER

(1)An advertisement which is intended to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed shall not imply licensing beyond such limits.

(Rule 0780-1-33-.08, conti nu ed)

(2)An advertisement may state that an insurer is licensed in the state where the advertisement appears, provided it does not exaggerate such fact or suggest that competing insurers may not be so licensed.

(3)An advertisement shall not create the impression that the insurer, its financial condition or status, the payment of its claims, or the merits, desirability, or advisability of its policy forms or kinds of plans of insurance are recommended or endorsed by any governmental entity. However, where a governmental entity has recommended or endorsed a policy form or plan, such fact may be stated if the entity authorized its recommendation or endorsement to be used in an advertisement.

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.09 STATEMENTS ABOUT AN INSURER

An advertisement shall not contain statements, pictures, or illustrations which are false or misleading, in fact or by implication, with respect to the assets, liabilities, insurance in force, corporate structure, financial condition, age, or relative position of the insurer in the insurance business. An advertisement shall not contain a recommendation by any commercial rating system unless it clearly defines the scope and extent of the recommendation.

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.10 ENFORCEMENT PROCEDURES

(1)Each insurer shall maintain at its home or principal office a complete file containing a specimen copy of every printed, published, or prepared advertisement of its individual policies and specimen copies of typical printed, published, or prepared advertisements of its blanket, franchise, and group policies, hereafter disseminated in this state, with a notation indicating the manner and extent of distribution and the form number of any policy advertised. Such file shall be subject to inspection by this department.

All such advertisements shall be maintained in said file for a period of either four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.

(2)Each insurer subject to the provisions of these rules shall file with this department with its Annual Statement a certificate of compliance executed by an authorized officer of the insurer wherein it is stated that to the best of his knowledge, information, and belief the advertisements which were disseminated by the insurer in this state during the preceding statement year, or during the portion of such year when these rules were in effect, complied or were made to comply in all respects with the provisions of these rules and the Insurance Laws of this state as implemented and interpreted by these rules.

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.11 REGULATION 33 RESCINDED

Regulation 33, dated 29 June 1965, is hereby rescinded.

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.12 CONFLICT WITH OTHER REGULATIONS

It is not intended that these regulations conflict with or supersede any regulations currently in force or subsequently adopted in this state governing specific aspects of the sale or replacement of life insurance including, but not limited to, rules dealing with deceptive practices in the sale of life insurance and replacement of life insurance policies. Consequently, no disclosure required under any such regulations shall be deemed to be an advertisement within the meaning of these regulations.

(Rule 0780-1-33-.12, conti nu ed)

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-33-.13 PENALTY

Any insurer failing to comply with the requirements of this regulation shall be subject to the following penalty:

(a)Upon the Commissioner’s order, shall file for approval, prior to its use, any advertisement used in connection with the solicitation of a contract of insurance in the State of Tennessee. For the

purpose of this section, “prior to its use” shall mean the filing of such advertising material at least thirty days prior to its use. Unless disapproved by the Commissioner prior to the expiration of the thirty day period the advertisement shall be deemed to be approved. The Commissioner may, in his discretion, upon proof satisfactory to him that the failure to comply has been corrected, rescind such order

History

• Authority: T.C.A. §§.56-2-301.
• Administrative History: Original rule filed April 19, 1976; effective May 19, 1976.

Chapter 0780-01-34 Eliminating Unfair Discrimination

Tenn. Comp. R. & Regs. 0780-01-34-.01 PURPOSE

The purpose of this regulation is to eliminate the act of denying benefits or coverage unfairly in the terms and conditions of insurance contracts and in the underwriting criteria of insurance carriers. It is not intended to prohibit reasonable and justifiable differences in premium rates based upon sound actuarial principles or actual or reasonably anticipated experience.

History

• Authority: T.C.A. §§56—8—104 and 56—8—113.
• Administrative History: Rule filed April 19, 1976; effective May 19, 1976. Amendment filed March 29, 1985; effective May 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-34-.02 DEFINTIONS

(1)Contract — any insurance policy, plan, or binder, including any rider or endorsement thereto offered by an insurer.

(2)Insurer — any insurance company, association, reciprocal or inter-insurance exchange, hospital or medical service corporation or plan, health maintenance organization, fraternal benefit society or beneficial association.

History

• Authority: T.C.A., Title 56, Chapter 8.
• Administrative History: Rule filed April 19, 1976; effective May 19, 1976.

Tenn. Comp. R. & Regs. 0780-01-34-.03 APPLICABILITY AND SCOPE

(1)This regulation shall apply to all contracts delivered or issued for delivery in this state by an insurer on or after January 1, 1977, to all existing group, franchise or blanket contracts which are amended or renewed on or after June 1, 1976 and to all policy forms submitted for approval on or after June 1, 1976, provided however that in the case of contracts issued pursuant to all collective bargaining agreement this regulation shall apply on the first date after June 1, 1976 upon which any new bargaining agreement first becomes effective.

(2)This regulation does not apply to or affect the right of fraternal benefit societies to determine eligibility requirements for membership. If a fraternal benefit society does, however, admit members of both sexes, this regulation is applicable to the insurance benefits available to members thereof.

(3)The portions of this regulation dealing with discrimination on the basis of blindness or partial blindness shall apply to all contracts delivered or issued for delivery in this state by an insurer on or after June 8, 1985 and to all existing group, franchise or blanket contracts which are amended or renewed on or after June 8, 1985; provided, however, that in the case of contracts issued pursuant to all collective bargaining agreements this regulation shall apply on the first date after June 8, 1985 upon which any new bargaining agreement first becomes effective.

History

• Authority: T.C.A. §§56—8—104 and 56—8—113.
• Administrative History: Rule filed April 19, 1976; effective May 19, 1976. Amendment filed March 29, 1985; effective May 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-34-.04 AVAILABILITY REQUIREMENTS

(1)Availability of any insurance contract shall not be denied to an insured or prospective insured solely on the basis of sex or marital status of the insured or prospective insured. The amount of benefits payable, or any term, conditions or type of coverage shall not be restricted, modified, excluded, or reduced solely on the basis of the sex or marital status of the insured or prospective insured except to the extent the amount of benefits, term, conditions or type of coverage vary as a result of the application of rate differentials permitted under the Tennessee Insurance Code.

However, nothing in this regulation shall prohibit an insurer from taking marital status into account for the purpose of defining persons eligible for dependents benefits. Specific examples of practices prohibited by this regulationinclude but are not limited to the following:

(a)Denying coverage to females gainfully employed at home, employed part-time or employed by relatives when coverage is offered to males similarly employed.

(b)Denying policy riders to females when the riders are available to males.

(c)Denying maternity benefits to unmarried females covered under a contract if maternity coverage is available to married females under such contract, provided that this shall not be construed to require that benefits must be payable for normal pregnancies under either group or individual insurance contracts.

(d)Denying, under group contracts, dependent coverage to husbands of female employees, when dependent coverage is available to wives of male employees.

(e)Denying disability income contracts to employed women when coverage is offered to men similarly employed.

(f)Treating complications of pregnancy differently from any other illness or sickness under the contract. Complications of pregnancy means: 1.conditions, requiring hospital confinement (when the pregnancy is not terminated), whose diagnoses are distinct from pregnancy but are adversely affected by pregnancy or are caused by pregnancy, such as acute nephritis, nephrosis, cardiac decompensation, missed abortion and similar medical and surgical conditions of comparable severity, but shall not include false labor, occasional spotting, physicianprescribed rest during the period of pregnancy, morning sickness, hyperemesis gravidarum, and similar conditions associated with the management of a difficult pregnancy not constituting a nosologically distinct complication of pregnancy; and 2.non-elective cesarean section, ectopic pregnancy which is terminated and spontaneous termination of pregnancy, which occurs during a period of gestation in which a viable birth is not possible.

(g)Restricting, reducing, modifying, or excluding benefits payable for disorders of the genital organs of only one sex.

(h)Offering lower maximum monthly benefits to women than to men who are in the same classification under a disability income contract.

(i)Offering more restrictive benefit periods and more restrictive definitions of disability to women than to men in the same classifications under a disability income contract.

(j)Establishing different conditions by sex under which the policyholder may renew a contract or exercise benefit options contained in the contract.

(k)Limiting the amount of coverage an insured or prospective insured may purchase based upon the insured’s or prospective insured’s martial status unless such limitation is for the purpose of defining persons eligible for dependents benefits.

(2)An insurer shall not refuse to insure, or refuse to continue to insure, or limit the amount, extent or kind of coverage available to an individual, or charge an individual a different rate for the same coverage solely because of blindness or partial blindness; provided, however, with respect to all other conditions, including the underlying cause of the blindness or partial blindness, persons who are blind or partially blind shall be subject to the same standards of sound actuarial principles or actual or reasonably anticipated experience as are sighted persons.

(a)Refusal to insure includes denial by an insurer of disability insurance coverage on the grounds that the policy defines ‘‘disability’’ as being presumed in the event that the insured loses his/her eyesight. However, an insurer may exclude from coverage disabilities, consisting solely of blindness or partial blindness when such condition existed at the time the policy was issued.

History

• Authority: T.C.A. §§56—8—104 and 56—8—113.
• Administrative History: Rule filed April 19, 1976; effective May 19, 1976. Amendment filed April 10, 1981; effective May 26, 1981. Amendment filed March 29, 1985; effective May 1, 1985.

Chapter 0780-01-35 Corporate Governance Annual Disclosure

Tenn. Comp. R. & Regs. 0780-01-35-.01 AUTHORITY

This chapter is promulgated pursuant to the authority granted by T.C.A. § 56-2-301 and 2018 Tenn. Pub.

Acts Ch. 873, § 8.

History

• Authority: T.C.A. § 56-2-301 and 2018 Tenn. Pub. Acts Ch. 873, § 8.
• Administrative History: Original rules filed August 20, 2018; effective November 18, 2018.

Tenn. Comp. R. & Regs. 0780-01-35-.02 PURPOSE

The purpose of this chapter is to set forth the procedures for filing and the required contents of the Corporate Governance Annual Disclosure (CGAD), deemed necessary by the Commissioner to carry out the provisions of the Corporate Governance Annual Disclosure Act, 2018 Tenn. Pub. Acts Ch. 873, § 8

History

• Authority: T.C.A. § 56-2-301 and 2018 Tenn. Pub. Acts Ch. 873, § 8.
• Administrative History: Original rules filed August 20, 2018; effective November 18, 2018.

Tenn. Comp. R. & Regs. 0780-01-35-.03 DEFINITIONS

(1) “Commissioner” means the Commissioner of the Tennessee Department of Commerce & Insurance.

(2) “Insurance group” means those insurers and affiliates included within an insurance holding company system as defined in T.C.A. Title 56, chapter 11, part 1.

(3) “Insurer” shall have the same meaning as “insurance company” as set forth in § 56-1-102, 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.

(4) “Senior Management” shall mean any corporate officer responsible for reporting information to the board of directors at regular intervals or providing this information to shareholders or regulators and shall include, for example and without limitation, the Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), Chief Operations Officer (“COO”), Chief Procurement Officer (“CPO”), Chief Legal Officer (“CLO”), Chief Information Officer (“CIO”), Chief Technology Officer (“CTO”), Chief Revenue Officer (“CRO”), Chief Visionary Officer (“CVO”), or any other “C” level executive.

History

• Authority: T.C.A. § 56-2-301 and 2018 Tenn. Pub. Acts Ch. 873, § 8.
• Administrative History: Original rules filed August 20, 2018; effective November 18, 2018. November, 2018 2

Tenn. Comp. R. & Regs. 0780-01-35-.04 FILING PROCEDURES

(1) An insurer, or the insurance group of which the insurer is a member, required to file a CGAD by the Corporate Governance Annual Disclosure Act, 2018 Tenn. Pub. Acts Ch. 873, § 8, shall submit to the Commissioner a CGAD in accordance with the following:

(a) All insurers or insurance groups, except those that fall within the scope of subparagraph (b), shall file a CGAD that contains the information described in Rule

Tenn. Comp. R. & Regs. 0780-01-35-.05 CONTENTS OF CORPORATE GOVERNANCE ANNUAL DISCLOSURE

(1) The insurer or insurance group shall be as descriptive as possible in completing the CGAD, with inclusion of attachments or example documents that are used in the governance process, since these may provide a means to demonstrate the strengths of their governance framework and practices.

(2) The CGAD shall describe the insurer’s or insurance group’s corporate governance framework and structure including consideration of the following:

(a) The Board and various committees thereof ultimately responsible for overseeing the insurer or insurance group and the level(s) at which that oversight occurs (e.g., the ultimate control level, intermediate holding company, legal entity, etc.). The insurer or insurance group shall describe and discuss the rationale for the current Board size and structure; and (b) The duties of the Board and each of its significant committees and how they are governed (e.g. bylaws, charters, informal mandates, etc.), as well as how the Board’s leadership is structured, including a discussion of the roles of CEO and Chairman of the Board within the organization.

(3) The insurer or insurance group shall describe the policies and practices of the most senior governing entity and significant committees thereof, including a discussion of the following factors:

(a) How the qualifications, expertise and experience of each Board member meet the needs of the insurer or insurance group.

(b) How an appropriate amount of independence is maintained on the Board and its significant committees.

(c) The number of meetings held by the Board and its significant committees over the past year as well as information on director attendance.

(d) How the insurer or insurance group identifies, nominates and elects members to the Board and its committees. The discussion should include, for example:

1. Whether a nomination committee is in place to identify and select individuals for consideration;

November, 2018 4 2. Whether term limits are placed on directors;

3. How the election and re-election processes function; and 4. Whether a Board diversity policy is in place and, if so, how it functions.

(e) The processes in place for the Board to evaluate its performance and the performance of its committees, as well as any recent measures taken to improve performance (including any Board or committee training programs that have been put in place).

(4) The insurer or insurance group shall describe the policies and practices for directing Senior Management, including a description of the following factors:

(a) Any processes or practices (i.e., suitability standards) to determine whether officers and key persons in control functions have the appropriate background, experience and integrity to fulfill their prospective roles, including:

1. Identification of the specific positions for which suitability standards have been developed and a description of the standards employed; and 2. Any changes in an officer’s or key person’s suitability as outlined by the insurer’s or insurance group’s standards and procedures to monitor and evaluate such changes.

(b) The insurer’s or insurance group’s code of business conduct and ethics, the discussion of which considers, for example:

1. Compliance with laws, rules, and regulations; and 2. Proactive reporting of any illegal or unethical behavior.

(c) The insurer’s or insurance group’s processes for performance evaluation, compensation and corrective action to ensure effective Senior Management throughout the organization, including a description of the general objectives of significant compensation programs and what the programs are designed to reward. The description shall include sufficient detail to allow the Commissioner to understand how the organization ensures that compensation programs do not encourage and/or reward excessive risk taking. Elements to be discussed may include, for example:

1. The Board’s role in overseeing management compensation programs and practices;

2. The various elements of compensation awarded in the insurer’s or insurance group’s compensation programs and how the insurer or insurance group determines and calculates the amount of each element of compensation paid;

3. How compensation programs are related to both company and individual performance over time;

4. Whether compensation programs include risk adjustments and how those adjustments are incorporated into the programs for employees at different levels;

5. Any clawback provisions built into the programs to recover awards or payments if the performance measures upon which they are based are restated or otherwise adjusted; and November, 2018 5 6. Any other factors relevant in understanding how the insurer or insurance group monitors its compensation policies to determine whether its risk management objectives are met by incentivizing its employees.

(d) The insurer’s or insurance group’s plans for CEO and Senior Management succession.

(5) The insurer or insurance group shall describe the processes by which the Board, its committees and Senior Management ensure an appropriate amount of oversight to the critical risk areas impacting the insurer’s business activities, including a discussion of:

(a) How oversight and management responsibilities are delegated between the Board, its committees and Senior Management;

(b) How the Board is kept informed of the insurer’s strategic plans, the associated risks, and steps that Senior Management is taking to monitor and manage those risks; and (c) How reporting responsibilities are organized for each critical risk area. The description should allow the Commissioner to understand the frequency at which information on each critical risk area is reported to and reviewed by Senior Management and the Board. This description may include, for example, the following critical risk areas of the insurer:

1. Risk management processes (An ORSA Summary Report filer may refer to its ORSA Summary Report filed pursuant to T.C.A. Title 56, Chapter 11, Part 2);

2. Actuarial function;

3. Investment decision-making processes;

4. Reinsurance decision-making processes;

5. Business strategy/finance decision-making processes;

6. Compliance function;

7. Financial reporting/internal auditing; and 8. Market conduct decision-making processes.

History

• Authority: T.C.A. § 56-2-301 and 2018 Tenn. Pub. Acts Ch. 873, § 8.
• Administrative History: Original rules filed August 20, 2018; effective November 18, 2018.

Tenn. Comp. R. & Regs. 0780-01-35-.06 CONTENTS OF CORPORATE GOVERNANCE ANNUAL DISCLOSURE FOR

CERTAIN NONPROFIT AND QUALIFIED INSURERS.

(1) The CGAD should describe the insurer or insurance group’s corporate governance framework and structure and include an overview and description of the Board and various committees thereof ultimately responsible for overseeing the insurer or insurance group and the level(s) at which that oversight occur and the role of the chairman of the Board within the organization. The CGAD description of the Board should include biographical information for each Board member.

(2) The CGAD should include a narrative and description of the policies and practices of the Board, including discussion of the duties of any advisors utilized by the Board, and a November, 2018 6 description of the processes in place for the Board to evaluate its performance and the performance of its committees.

(3) The CGAD should include a description of the interaction between the Board and senior management, which include:

(a) A description of the role of the CEO and other senior management that makes periodic reports to the Board;

(b) A description of how the Board reviews significant financial management decisions by senior management; and (c) A description of how the Board provides periodic feedback and instruction to senior management.

(4) The CGAD should include a description of the processes by which the Board ensures an appropriate amount of oversight to critical risk areas impacting the insurer’s business activities, including a discussion of:

(a) Risk management processes;

(b) Actuarial information;

(c) Investment decision-making processes;

(d) Reinsurance decision-making processes;

(e) Business strategy;

(f) Compliance function;

(g) Financial reporting/internal auditing; and (h) Market conduct decision-making processes.

History

• Authority: T.C.A. § 56-2-301 and 2018 Tenn. Pub. Acts Ch. 873, § 8.
• Administrative History: Original rules filed August 20, 2018; effective November 18, 2018.

Tenn. Comp. R. & Regs. 0780-01-35-.07 SEVERABILITY

If any provision of this chapter, or the application thereof to any person or circumstance, is held invalid, such determination shall not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to that end the provisions of this chapter are severable.

History

• Authority: T.C.A. § 56-2-301 and 2018 Tenn. Pub. Acts Ch. 873, § 8.
• Administrative History: Original rules filed August 20, 2018; effective November 18, 2018.

Chapter 0780-01-36 Reserved

Tenn. Comp. R. & Regs. 0780-01-36 Reserved

RULES

OF THE

TENNESSEE DEPARTMENT OF INSURANCE

INSURANCE DIVISION

Chapter 0780-01-37 Annual Statement Filing Requirements

Tenn. Comp. R. & Regs. 0780-01-37-.01 PURPOSE

The purpose of this Chapter is to set forth the manner in which insurers, companies and health maintenance organizations licensed in the State of Tennessee file annual and quarterly financial statements and annual and quarterly financial reports with the commissioner.

History

• Authority: T.C.A. §§ 56-1-501, 56-2-301, 56-32-108, 56-32-118 and 56-44-102.
• Administrative History: Original rule filed September 17, 1976; effective October 18, 1976. Repeal and new rule filed March 16, 2005; effective May 30, 2005. Amendment filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.02 SCOPE

Every insurer and/or company authorized to do business under the provisions of Title 56, that is required to file annual statements pursuant to T.C.A. § 56-1-501, 56-44-102, or otherwise by law, must file such annual and quarterly statements in the manner provided by this

Chapter. Every health maintenance organization, authorized to do business under the provisions of Title 56, Chapter 32, that is required to file an annual report pursuant to T.C.A. § 56-32-108, must file annual and quarterly reports in the manner provided by this Chapter.

History

• Authority: T.C.A. §§ 56-1-501, 56-2-301, 56-32-108, 56-32-118 and 56-44-102.
• Administrative History: Original rule filed September 17, 1976; effective October 18, 1976. Repeal and new rule filed March 16, 2005; effective May 30, 2005. Amendment filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.03 AUTHORITY

This Chapter is promulgated by the commissioner pursuant to T.C.A. §§ 56-1-501, 56-2- 301, 56-32-108, 56-32-118 and 56-44-102.

History

• Authority: T.C.A. §§ 56-1-501, 56-2-301, 56-32-108, 56-32-118 and 56-44-102.
• Administrative History: Original rule filed September 17, 1976; effective October 18, 1976. Repeal and new rule filed March 16, 2005; effective May 30, 2005. Amendment filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.04 DEFINITIONS

As used in this Chapter, unless noted otherwise, the following definitions shall apply:

(1) “Annual statement” means and includes annual statements, the Statement of Actuarial Opinion, Management's Discussion and Analysis and any other documents specified in T.C.A. § 56-1-501.

(2) “Commissioner” means the commissioner of the Tennessee Department of Commerce and Insurance.

(3) “Department” means the Tennessee Department of Commerce and Insurance.

(4) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

(5) “Health maintenance organization” means any person that undertakes to provide or arrange for basic health care services to enrollees on a prepaid basis pursuant to Title 56,

Chapter 32 of the Tennessee Code Annotated.

(6) “NAIC” means the National Association of Insurance Commissioners.

History

• Authority: T.C.A. §§ 56-1-501, 56-2-301, 56-32-108, 56-32-118, and 56-44-102(a)(1).
• Administrative History: Original rule filed September 17, 1976; effective October 18, 1976. Repeal and new rule filed March 16, 2005; effective May 30, 2005. Amendment filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.05 FORM OF ANNUAL STATEMENTS

(1) In meeting the annual financial reporting requirements of T.C.A. § 56-1-501, all insurers and/or companies enumerated in T.C.A. § 56-1-501(b), 56-44-102, or otherwise required to file annual statements by law must use the following annual statement forms adopted by the NAIC, as amended from time to time, as is appropriate for each line or types of insurance business in which the company is engaged, unless such forms are in contradiction with a law or statute:

(a) Life and Accident and Health Annual Statement Blank;

(b) Property and Casualty Annual Statement Blank;

(c) Title Annual Statement Blank;

(d) Fraternal Annual Statement Blank; and (e) Health Annual Statement Blank.

(2) Insurers and/or companies are required to use any annual statement forms adopted by the NAIC for any other lines or types of insurance business that may be applicable to insurers licensed and operating in this State.

(3) Health maintenance organizations required to file annual reports pursuant to T.C.A. § 56-32-108 must use the blank prescribed by the NAIC for health maintenance organizations.

History

• Authority: T.C.A. §§ 56-1-501, 56-2-301, 56-32-108, 56-32-118 and 56-44-102.
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Amendment filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.06 INSTRUCTIONS FOR COMPLETION OF ANNUAL STATEMENTS FORMS

(1) For completion of the annual statement forms required under Rule 0780-01-37-.05, and except when such instructions conflict with a statute, the applicable instructions adopted by the NAIC, as amended from time to time, and as follows, as well as all other applicable rules promulgated by the commissioner, must be followed in completing and filing the annual statement forms:

(a) Instructions for Completing Life and Accident and Health Annual Statement Blank;

(b) Instructions for Completing Property and Casualty Annual Statement Blank;

(c) Instructions for Completing Title Annual Statement Blank;

(d) Instructions for Completing Fraternal Annual Statement Blank; and (e) Instructions for Completing Health Annual Statement Blank.

(2) Insurers and/or companies are required to use any instructions adopted by the NAIC which are applicable to any annual statement form referenced in Rule 0780-01-37- .05.

(3) Health maintenance organizations are required to use any instructions adopted by the NAIC which are applicable to any annual report form referenced in Rule 0780-01- 37-.05.

History

• Authority: T.C.A. §§ 56-1-501, 56-2-301, 56-32-108, 56-32-118 and 56-44-102.
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Amendment filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.07 INSTRUCTIONS FOR COMPLETION OF QUARTERLY FINANCIAL

STATEMENTS.

(1) In addition to annual statements required by T.C.A. § 56-1-501, all insurers and/or companies enumerated in T.CA. § 56-1-501(b), 56-44-102, or otherwise required by law to file annual statements are also required to file financial statements on a quarterly basis. Such quarterly statements must be filed on May 15, August 15, and November 15 of each year. Foreign insurers and/or companies shall, unless requested by the commissioner, file their quarterly statements with the NAIC in lieu of filing such statements with the commissioner.

(2) All insurers and/or companies enumerated in T.C.A. § 56-1-501(b), 56-44-102 or otherwise required by law to file such annual statements must use the following Quarterly Financial Statement forms adopted by the NAIC, as amended from time to time:

(a) Life and Accident and Health Quarterly Statement Blank;

(b) Property and Casualty Quarterly Statement Blank;

(c) Title Quarterly Statement Blank;

(d) Fraternal Quarterly Statement Blank; and (e) Health Quarterly Statement Blank.

(3) Insurers and/or companies are required to use any quarterly statement form adopted by the NAIC for any other lines or types of insurance business that may be applicable to companies licensed and operating in this State.

(4) Health maintenance organizations required to file annual reports pursuant to T.C.A. § 56-32-108 shall also file a quarterly financial statement on the quarterly statement form adopted by the NAIC for health maintenance organizations.

Such quarterly statements must be filed on May 15, August 15, and November 15 of each year.

History

• Authority: T.C.A. §§ 56-1-501, 56-2-301, 56-32-108, 56-32-118, and 56-44-102(a)(1).
• Administrative History: Original rule filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.08 FILING OF ANNUAL AND QUARTERLY STATEMENTS

(1) For insurers and companies not domiciled in Tennessee, the annual statements required by this Chapter shall be filed electronically with the NAIC. Such entities shall file with the commissioner a hard copy jurat page only, in the manner provided by the commissioner, subscribed and sworn to by the entity’s president and secretary, or in their absence, by two (2) of its principal officers .

(2) For all insurers and companies domiciled in Tennessee, the annual statements required by this Chapter shall be filed electronically with the commissioner.

Domestic insurers and companies shall also file the annual statement electronically with the NAIC. All insurers and companies domiciled in Tennessee shall also file with the commissioner one (1) non-electronic signed original and one (1) nonelectronic copy of the annual statement. The original and hard copy annual statements should be subscribed and sworn to by the insurer’s or company’s president and secretary, or in their absence, by two (2) of its principal officers as required by applicable Tennessee law.

(3) (a) For insurers and/or companies not domiciled in Tennessee, each quarterly statement may be filed electronically with the NAIC, unless the commissioner requests otherwise.

(b) For insurers and/or companies domiciled in Tennessee and all health maintenance organizations, each quarterly statement shall be filed electronically with the commissioner, and one (1) signed original and one (1) hard copy of each quarterly statement shall also be filed with the commissioner. Domestic insurers and/or companies and health maintenance organizations shall also file the quarterly statement electronically with the NAIC.

(4) For purposes of this Rule, health maintenance organizations shall file in the same manner as domestic insurers pursuant to Paragraph (2) of this Rule.

History

• Authority: T.C.A. §§ 56-1-501, 56-2-301, 56-32-108, 56-32-118, 56-44-102 and 56-44-103.
• Administrative History: Original rule filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.09 DUE DATES FOR FILING OF ANNUAL AND QUARTERLY STATEMENTS

(1) Original and hard copy annual statement and annual report filings and hard copy jurat pages, if required by this Chapter, shall be mailed on or before March 1 of each year.

(2) Original and hard copy quarterly filings, if required by this Chapter, shall be mailed on or before May 15, August 15 and November 15 of each year.

History

• Authority: T.C.A. §§ 56-1-501, 56-2-301, 56-32-108, 56-32-118, 56-44-102 and 56-44-103.
• Administrative History: Original rule filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.10 EFFECT OF FILING IN VIOLATION OF THIS CHAPTER

Financial statements or information not prepared in a manner consistent with all applicable laws and the National Association of Insurance Commissioners’ Accounting Practices and Procedures Manual in effect for the applicable reporting period shall be deemed not to meet the filing requirements of T.C.A. §§ 56-1-501 and 56-32-108 or Rule 0780-01-37-.06 and Rule 0780-01-37-.07.

History

• Authority: T.C.A. §56-1-501, 56-2-301, 56-32-108, 56-32-118, and 56-44-102(a)(1).
• Administrative History: Original rule filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.11 VIOLATION AND PENALTIES

(1) Any insurer or company that fails to make and file its annual statement in the form and time provided by this Chapter shall be subject to the applicable penalties provided for by T.C.A. § 56-1-502 and 56-44-104, as well as such other sanctions provided for by law.

(2) Any health maintenance organization that fails to file its annual report in the form and time provided by T.C.A. § 56-32-108 and this Chapter shall be subject to the applicable penalties provided for by T.C.A. § 56-1-801 and 56-44-104, as well as such other sanctions provided for by law.

History

• Authority: T.C.A. §56-1-501, 56-2-305, 56-1-801, 56-2-301, 56-1-502, 56-32-108, 56-32-118, 56- 44-102(a)(1) and 56-44-104.
• Administrative History: Original rule filed April 15, 2009; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-37-.12 SEVERABILITY

If any provision of this Chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the Chapter and the application of such provision to other persons or circumstance shall not be affected thereby. To this end, the provisions of this chapter are declared severable.

History

• Authority: T.C.A. §§ 56-1-501, 56-2-301, 56-32-108, 56-32-118 and 56-44-102.
• Administrative History: Original rule filed April 15, 2009; effective June 29, 2009.

Chapter 0780-01-38 Relating to the Classification, Salaries, and Expenses of Insurance Company Examiners

Tenn. Comp. R. & Regs. 0780-01-38-.01 CLASSIFICATION, SALARIES, AND EXPENSES

For compliance with requirements of Section 54-1-413, Tennessee Code Annotated, the Department adopts, as a guide line, the minimum qualifications as adopted by the National Association of Insurance Commissioners for examiners to be assigned to represent the State of Tennessee and Zone 3, National Association of Insurance Commissioners on Convention Examinations. The National Association of Insurance Commissioners’ recommendations for classifications of examiners, compensation and per diem expense allowance will be implemented, as required to maintain a professional staff of examiners and remain competitive with other state insurance departments.

History

• Authority: T.C.A. §56-1-413.
• Administrative History: Original rule filed October 21, 1976; effective November 22, 1976.

Tenn. Comp. R. & Regs. 0780-01-38-.02 FULL COST TO BE CHARGED TO INSURANCE COMPANIES EXAMINED

The full cost of such examinations to be charged the Companies examined shall be set at the daily rate paid the examiner plus an overhead expense factor to cover the cost of employee benefits and to include the per diem expense allowance and transportation costs paid to the examiner.

History

• Authority: T.C.A. §56-1-413.
• Administrative History: Original rule filed October 21, 1976; effective November 22, 1976.

Chapter 0780-01-39 Relating to Accounting for Salvage and Subrogation When Making Financial Statements to the Department of Commerce and Insurance

Tenn. Comp. R. & Regs. 0780-01-39-.01 ACCOUNTING FOR SALVAGE AND SUBROGATION WHEN MAKING

FINANCIAL REPORTING STATEMENTS TO THE DEPARTMENT OF INSURANCE.

All domestic stock casualty, mutual casualty and reciprocal companies will report losses net of salvage and subrogation recoverable on paid and unpaid losses. Salvage and subrogation on paid and unpaid losses will not be included as admitted assets on any quarterly or annual financial statements until such salvage and subrogation has been reduced to cash or its equivalent.

History

• Authority: T.C.A. §56-1-501.
• Administrative History: Rule filed January 4, 1977; effective February 3, 1977.

Tenn. Comp. R. & Regs. 0780-01-39-.02 EFFECTIVE DATES

All domestic stock casualty, mutual casualty and reciprocal companies will comply with this Rule effective with all quarterly statements and annual statements due on or before March 1, 1977 for the quarter ending December 31, 1976 and the year ending December 31, 1976.

History

• Authority: T.C.A. §56-1-501.
• Administrative History: Rule filed January 4, 1977; effective February 3, 1977.

Chapter 0780-01-40 Relating to Life Insurance Solicitations

Tenn. Comp. R. & Regs. 0780-01-40-.01 PURPOSE

(1) The purpose of this rule is to require insurers to deliver to purchasers of life insurance, information which will improve the buyer’s ability to select the most appropriate plan of life insurance for his needs, improve the buyer’s understanding of the basic features of the policy which has been purchased or which is under consideration, and improve the ability of the buyer to evaluate the relative costs of similar plans of life insurance.

(2) This rule does not prohibit the use of additional material which is not in violation of this

rule or any other Tennessee statute or regulation.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule filed July 13, 1978; effective January 1, 1979.

Tenn. Comp. R. & Regs. 0780-01-40-.02 SCOPE

(1) Except as hereafter exempted, this rule shall apply to any solicitation, negotiation, or procurement of life insurance occurring within this state. This rule shall apply to any issuer of life insurance contracts, including fraternal benefit societies.

(2) Unless otherwise specifically included, this rule shall not apply to:

(a) Annuities.

(b) Credit life insurance.

(c) Group life insurance.

(d) Life insurance policies issued in connection with pension and welfare plans as defined by and which are subject to the Federal Employee Retirement Income Security Act of 1974 (ERISA).

(e) Variable life insurance under which the death benefits and cash values vary in accordance with unit values of investments held in a separate account.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule filed July 13, 1978; effective January 1, 1979. Amendment filed March 27, 1979; effective September 1, 1979.

Tenn. Comp. R. & Regs. 0780-01-40-.03 DEFINITIONS

(1) For the purposes of this rule, the following definitions shall apply:

(a) Buyer’s Guide. A Buyer’s Guide is a document which contains and is limited to, the language contained in the Appendix to this rule, or language approved by the commissioner of insurance.

(b) Cash Dividend. A Cash Dividend is the current illustrated dividend which can be applied toward payment of the gross premium.

(c) Equivalent Level Annual Dividend. The Equivalent Level Annual Dividend is calculated by applying the following steps:

1. Accumulate the annual cash dividends at five percent interest compounded annually to the end of the tenth and twentieth policy years.

2. Divide each accumulation of Step 1. by an interest factor that converts it into one equivalent level annual amount that, if paid at the beginning of each year, would accrue to the values in Step 1. over the respective periods stipulated in Step 1. If the period is ten years, the factor is 13.207, and if the period is twenty years, the factor is 34.719.

3. Divide the results of Step 2. by the number of thousands of the Equivalent Level Death Benefit to arrive at the Equivalent Level Annual Dividend.

(d) Equivalent Level Death Benefit. The Equivalent Level Death Benefit of a policy or term life insurance rider is an amount calculated as follows:

1. Accumulate the guaranteed amount payable upon death, regardless of the cause of death, at the beginning of each policy year for ten and twenty years at five percent interest compounded annually to the end of the tenth and twentieth policy years respectively.

2. Divide each accumulation of Step 1. by an interest factor that converts it into one equivalent level annual amount that, if paid at the beginning of each year, would accrue to the value in Step 1. over the respective periods stipulated in Step 1. If the period is ten years, the factor is 13.207, and if the period is twenty years, the factor is 34.719.

(e) Generic Name. Generic name means a short title which is descriptive of the premium and benefit patterns of a policy or a rider.

(f) Life Insurance Cost Indexes.

1. Life Insurance Surrender Cost Index. The Life Insurance Surrender Cost Index is calculated by applying the following steps:

(i) Determine the guaranteed cash surrender value, if any, available at the end of the tenth and twentieth policy years.

(ii) For participating policies, add the terminal dividend payable upon surrender, if any, to the accumulation of the annual Cash Dividends at five percent interest compounded annually to the end of the period selected and add this sum to the amount determined in Step (i).

(iii) Divide the result of Step (ii) (Step (i) for guaranteed-cost policies) by an interest factor that converts it into an equivalent level annual amount that, if paid at the beginning of each year, would accrue to the value in Step (ii) (Step (i) for guaranteed-cost policies) over the respective periods stipulated in Step (i). If the period is ten years, the factor is 13.207, and if the period is twenty years, the factor is 34.719.

(iv) Determine the equivalent level premium by accumulating each annual premium payable for the basic policy or rider at five percent interest compounded annually to the end of the period stipulated in Step (i) and dividing the result by the respective factors stated in Step (iii). (This amount is the annual premium payable for a level premium plan).

(v) Subtract the result of Step (iii) from Step (iv).

(vi) Divide the result of Step (v) by the number of thousands of the Equivalent Level Death Benefit to arrive at the Life Insurance Surrender Cost Index.

2. Life Insurance Net Payment Cost Index. The Life Insurance Net Payment Cost Index is calculated in the same manner as the comparable Life Insurance Surrender Cost Index except that the cash surrender value and any terminal dividend are set at zero.

(g) Policy Summary. For the purposes of this rule, Policy Summary means a written statement describing the elements of the policy including, but not limited to:

1. A prominently placed title as follows: STATEMENT OF POLICY COST AND BENEFIT INFORMATION.

2. The name and address of the insurance agent, or, if no agent is involved, a statement of the procedure to be followed in order to receive responses to inquiries regarding the Policy Summary.

3. The full name and home office or administrative office address of the company in which the life insurance policy is to be or has been written.

4. The Generic Name of the basic policy and each rider. 5.The following amounts, where applicable, for the first five policy years and representative policy years thereafter sufficient to clearly illustrate the premium and benefit patterns, including, but not necessarily limited to, the years for which Life Insurance Cost Indexes are displayed and at least one age from sixty through sixty-five, or maturity, whichever is earlier:

(i)The annual premium for the basic policy.

(ii) The annual premium for each optional rider.

(iii) Guaranteed amount payable upon death, at the beginning of the policy year, regardless of the cause of death other than suicide, or other specifically enumerated exclusions, which is provided by the basic policy and each optional rider, with benefits provided under the basic policy and each rider shown separately.

(iv) Total guaranteed cash surrender values at the end of the year with values shown separately for the basic policy and each rider.

(v) Cash Dividends payable at the end of the year with values shown separately for the basic policy and each rider.

(Dividends need not be displayed beyond the twentieth policy year.)

(vi) Guaranteed endowment amounts payable under the policy which are not included under guaranteed cash surrender values above. 6.The effective policy loan annual percentage interest rate, if the policy contains this provision, specifying whether this rate is applied in advance or in arrears. If the policy loan interest rate is variable, the Policy Summary includes the maximum annual percentage rate. 7.Life Insurance Cost Indexes for ten and twenty years, but in no case beyond the premium paying period. Separate indexes are displayed for the basic policy and for each optional term life insurance rider. Such indexes need not be included for optional riders which are limited to benefits such as accidental death benefits, disability waiver of premium, preliminary term life insurance coverage of less than twelve months and guaranteed insurability benefits, nor for basic policies or optional riders covering more than one life.

8. The Equivalent Level Annual Dividend, in the case of participating policies and participating optional term life insurance riders, under the same circumstances and for the same durations at which Life Insurance Cost Indexes are displayed.

9. A Policy Summary which includes dividends shall also include a statement that dividends are based on the company’s current dividend scale and are not guaranteed in addition to a statement in close proximity to the Equivalent Level Annual Dividend as follows: An explanation of the intended use of the Equivalent Level Annual Dividend is included in the Life Insurance Buyer’s Guide.

10. A statement in close proximity to the Life Insurance Cost Indexes as follows: An explanation of the intended use of these indexes is provided in the Life Insurance Buyer’s Guide.

11. The date on which the Policy Summary is prepared.

The Policy Summary must consist of a separate document. All information required to be disclosed must be set out in such a manner as to not minimize or render any portion thereof obscure. Any amounts which remain level for two (2) or more years of the policy may be represented by a single number if it is clearly indicated what amounts are applicable for each policy year. Amounts in item 5 of this subsection shall be listed in total, not on a per thousand, not per unit basis. If more than one insured is covered under one policy or rider, guaranteed death benefits shall be displayed separately for each insured or for each class of insureds if death benefits do not differ within the class. Zero amounts shall be displayed as zero and shall not be displayed as a blank space.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule filed July 13, 1978; effective January 1, 1979.

Tenn. Comp. R. & Regs. 0780-01-40-.04 DISCLOSURE REQUIREMENTS

(1) The insurer shall provide, to all prospective purchasers, a Buyer’s Guide and a Policy Summary prior to accepting the applicant’s initial premium or premium deposit, unless the policy for which application is made contains an unconditional refund provision of at least ten days, or unless the Policy Summary contains such an unconditional refund offer in which event the Buyer’s Guide and Policy Summary must be delivered with the policy or prior to delivery of the policy.

(2) The insurer shall provide a Buyer’s Guide and a Policy Summary to any prospective purchaser upon request.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule filed July 13, 1978; effective January 1, 1979.

Tenn. Comp. R. & Regs. 0780-01-40-.05 GENERAL RULES

(1) Each insurer shall maintain at its home office or principal office, a complete file containing one copy of each document authorized by the insurer for use pursuant to this

rule. Such file shall contain one copy of each authorized form for a period of three years following the date of its last authorized use.

(2) An agent shall inform the prospective purchaser, prior to commencing a life insurance sales presentation, that he is acting as life insurance agent and inform the prospective purchaser of the full name of the insurance company which he is representing to the buyer. In sales situations in which an agent is not involved, the insurer shall identify its full name.

(3) Terms such as financial planner, investment advisor, financial consultant, or financial counselling shall not be used in such a way as to imply that the insurance agent is generally engaged in an advisory business in which compensation is unrelated to sales, unless such is actually the case.

(4) Any reference to policy dividends must include a statement that dividends are not guaranteed.

(5) A system or presentation which does not recognize the time value of money through the use of appropriate interest adjustments shall not be used for comparing the cost of two or more life insurance policies. Such a system may be used for the purpose of demonstrating the cash-flow pattern of a policy if such presentation is accompanied by a statement disclosing that the presentation does not recognize that, because of interest, a dollar in the future has less value that a dollar today.

(6) A presentation of benefits shall not display guaranteed and non-guaranteed benefits as a single sum unless they are shown separately in close proximity thereto.

(7) A statement regarding the use of the Life Insurance Cost Indexes shall include an explanation to the effect that the indexes are useful only for the comparison of the relative costs of two (2) or more similar policies.

(8) A Life Insurance Cost Index which reflects dividends or an Equivalent Level Annual Dividend shall be accompanied by a statement that it is based on the company’s current dividend scale and is not guaranteed.

(9) For the purposes of this rule, the annual premium for a basic policy or rider, for which the company reserves the right to change the premium, shall be the maximum annual premium.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule filed July 13, 1978; effective January 1, 1979.

Tenn. Comp. R. & Regs. 0780-01-40-.06 FAILURE TO COMPLY

Failure of an insurer to provide or deliver a Buyer’s Guide, or a Policy Summary as provided in

Section .04, shall constitute an omission which misrepresents the benefits, advantages, conditions, or terms of an insurance policy.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule filed July 13, 1978; effective January 1, 1979.

Tenn. Comp. R. & Regs. 0780-01-40-.07 EFFECTIVE DATE

This rule shall apply to all solicitations of life insurance which commence on or after January 1, 1979.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule filed July 13, 1978; effective January 1, 1979.

Tenn. Comp. R. & Regs. 0780-01-40-.08 APPENDIX – LIFE INSURANCE BUYER’S GUIDE

APPENDIX

Life Insurance Buyer’s Guide The face page of the Buyer’s Guide shall read as follows:

Life Insurance Buyer’s Guide This guide can show you how to save money when you shop for life insurance. It helps you to: -Decide how much life insurance you should buy, -Decide what kind of life insurance policy you need, and -Compare the cost of similar life insurance policies.

Prepared by the National Association of Insurance Commissioners Reprinted by (Company Name)

(Month and year of printing)

The Buyer’s Guide shall contain the following language at the bottom of page 2:

The National Association of Insurance Commissioners is an association of state insurance regulatory officials. This association helps the various Insurance Departments to coordinate insurance laws for the benefit of all consumers. You are urged to use this Guide in making a life insurance purchase.

This Guide Does Not Endorse Any Company or Policy.

The remaining text of the Buyer’s Guide shall begin on page 3 as follows:

Buying Life Insurance When you buy life insurance, you want a policy which fits your needs without costing too much. Your first step is to decide how much you need, how much you can afford to pay, and the kind of policy you want.

Then, find out what various companies charge for that kind of policy. You can find important differences in the cost of life insurance by using the life insurance cost indexes which are described in this guide. A good life insurance agent or company will be able and willing to help you with each of these shopping steps.

If you are going to make a good choice when you buy life insurance, you need to understand which kinds are available. If one kind does not seem to fit you needs, ask about the other kinds which are described in this Guide. If you feel that you need more information than is given here, you may want to check with a life insurance agent or company or books on life insurance in your public library.

Choosing the Amount One way to decide how much life insurance you need is to figure how much cash and income your dependents would need if you were to die. You should think of life insurance as a source of cash needed for expenses of final illnesses, paying taxes, mortgages, or other debts. It can also provide income for your family’s living expenses, educational costs, and other future expenses. Your new policy should come as close as you can afford to making up the difference between (1) what your dependents would have if you were to die now, and (2) what they would actually need.

Choosing the Right Kind All life insurance policies agree to pay an amount of money if you die. But all policies are not the same.

There are three basic kinds of life insurance:

1. Term insurance 2. Whole life insurance 3. Endowment insurance.

Remember, no matter how fancy the policy title or sales presentation might appear, all life insurance policies contain one or more of the three basic kinds. If you are confused about a policy that sounds complicated, ask the agent or company if it combines more than one kind of life insurance. The following is a brief description of the three basic kinds:

Term Insurance Term Insurance is death protection for a “term” of one or more years. Death benefits will be paid only if you die within that term of years. Term insurance generally provides the largest immediate death protection for your premium dollar.

Some term insurance policies are “renewable” for one or more additional terms even if your health has changed. Each time you renew the policy for a new term, premiums will be higher. You should check the premiums at older ages and the length of time the policy can be continued.

Some term insurance policies are also “convertible”. This means that before the end of the conversion period, you may trade the term policy for a whole life or endowment insurance policy, even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.

Whole Life Insurance Whole Life Insurance gives death protection for as long as you live. The most common type is called “straight life” or “ordinary life” insurance, for which you pay the same premiums for as long as you live.

These premiums can be several times higher than you would pay initially for the same amount of term insurance. But they are smaller than the premiums you would eventually pay if you were to keep renewing a term insurance policy until your later years.

Some whole life policies let you pay premiums for a shorter period such as twenty years or until age 65.

Premiums for these policies are higher than for ordinary life insurance, since the premium payments are squeezed into a shorter period.

Although you pay higher premiums to begin with for whole life insurance than for term insurance, whole life insurance policies develop “cash values” which you may have if you stop paying premiums. You can generally either take the cash, or use it to buy some continuing insurance protection. Technically speaking, these values are called “nonforfeiture benefits”. This refers to benefits you do not lose (or “forfeit”) when you stop paying premiums. The amount of these benefits depends on the kind of policy you have, its size, and how long you have owned it.

A policy with cash values may also be used as collateral for a loan. If you borrow form the life insurance company, the rate of interest is shown in your policy. Any money which you owe on a policy loan would be deducted from the benefits if you were to die, or from the cash value if you were to stop paying the premiums.

Endowment Insurance An endowment insurance policy pays a sum or income to you – the policyholder – if you live to a certain age. If you were to die before then, the death benefit would be paid to your beneficiary. Premiums and cash values for endowment insurance are higher than for the same amount of whole life insurance. Thus, endowment insurance gives you the least amount of death protection for your premium dollar.

Finding a Low Cost Policy After you have decided which kind of life insurance fits your needs, look for a good buy. Your chances of finding a good buy are better if you use two (2) types of index numbers that have been developed to aid in shopping for life insurance. One is called the “Surrender Cost Index” and the other is the “Net Payment Cost Index”. If will be worth your time to try to understand how these indexes are used, but in any event, use them only for comparing the relative costs of similar policies. LOOK FOR POLICIES WITH LOW COST INDEX NUMBERS.

What is Cost?

“Cost” is the difference between what you pay and what you get back. If you pay a premium for life insurance and get nothing back, your cost for the death protection is the premium. If you pay a premium and get something back later on, such as a cash value, your cost is smaller than the premium.

The cost of some policies can also be reduced by dividends; these are called “participating” policies.

Companies may tell you what their current dividends are, but the size of future dividends is unknown today and cannot be guaranteed. Dividends actually paid are set each year by the company.

Some policies do not pay dividends. These are called “guaranteed cost” or “non-participating” policies.

Every feature of a guaranteed cost policy is fixed so that you know in advance what your future cost will be.

The premiums and cash values of a participating policy are guaranteed, but the dividends are not.

Premiums for participating policies are typically higher than for guaranteed cost policies, but the cost to you may be higher or lower, depending on the dividends actually paid.

What Are Cost Indexes?

In order to compare the cost of policies, you need to look at:

1. Premiums 2. Cash Values 3. Dividends Cost indexes use one or more of these factors to give you a convenient way to compare relative costs of similar policies. When you compare costs, an adjustment must be made to take into account that money is paid and received at difference times. It is not enough to just add up the premiums you will pay and to subtract the cash values and dividends you expect to get back. These indexes take care of the arithmetic for you. Instead of having to add, subtract, multiply, and divide many numbers yourself, you just compare the index numbers which you can get from life insurance agents and companies.

2. Life Insurance Surrender Cost Index. This index is useful if you consider the level of the cash values to be of primary importance to you. It helps you compare costs if at some future point in time, such as 10 or 20 years, you were to surrender the policy and take its cash value.

3. Life Insurance Net Payment Cost Index. This index is useful if you main concern is the benefits that are to be paid at your death and if the level of cash values is of secondary importance to you.

It helps you compare costs at some future point in time, such as 10 or 20 years, if you continue paying premiums on your policy and do not take its cash value. *** There is another number called the Equivalent Level Annual Dividend. It shows the part dividends play in determining the cost index of a participating policy. Adding a policy’s Equivalent Level Annual Dividend to its cost index allows you to compare total costs of similar policies before deducting dividends. However, if you make any cost comparisons of participating policy with a non-participating policy, remember that the total cost of the participating policy will be reduced by the dividends, but the cost of the non-participating policy will not change.

How Do I Use Cost Indexes?

The most important thing to remember when using cost indexes is that a policy with a small index number is generally a better buy than a comparable policy with a larger index number. The following rules are also important:

(1) Cost comparisons should only be made between similar plans of life insurance. Similar plans are those which provide essentially the same basic benefits and require premium payments for approximately the same period of time. The closer policies are to being identical, the more reliable the cost comparison will be.

(2) Compare index numbers only for the kind of policy, for your age, and for the amount you intend to buy. Since no one company offers the lowest cost for all types of insurance at all ages and for all amounts of insurance, it is important that you get the indexes for the actual policy, age, and amount which you intend to buy. Just because a “Shopper’s Guide” tells you that one company’s policy is a good buy for a particular age and amount, you should not assume that all of that company’s policies are equally good buys.

(3) Small differences in index numbers could be offset by other policy features, or differences in the quality of service you may expect from the company or its agent. Therefore, when you find small differences in cost indexes, your choice should be based on something other than cost.

(4) In any event, you will need other information on which to base your purchase decision. Be sure you can afford the premiums, and that you understand its cash values, dividends and death benefits. You should also make a judgment on how well the life insurance company or agent will provide service in the future, to you as a policyholder.

(5) These life insurance cost indexes apply to new policies and should not be used to determine whether you should drop a policy you have already owned for a while, in favor of a new one. If such a replacement is suggested, you should ask for information from the company which issued the old policy before you take action.

Important Things To Remember – A Summary The first decision you must make when buying a life insurance policy is choosing a policy whose benefits and premiums most closely meet your needs and ability to pay. Next, find a policy which is also a relatively good buy. If you compare Surrender Cost Indexes and Net Payment Cost Indexes of similar competing policies, your chances of finding a relatively good buy will be better than if you do not shop.

REMEMBER, LOOK FOR POLICIES WITH LOWER COST INDEX NUMBERS. A good life insurance agent can help you to choose the amount of life insurance and kind of policy you want, and will give you cost indexes so that you can make cost comparisons of similar policies.

Do not buy life insurance unless you intend to stick with it. A policy which is a good buy when held for twenty years can be very costly if you quit during the early years of the policy. If you surrender such a policy during the first few years, you may get little or nothing back and much of your premium may have been used for company expenses.

Read your new policy carefully, and ask the agent or company for an explanation of anything you do not understand. Whatever you decide now, it is important to review your life insurance program every few years to keep up with changes in your income and your responsibilities.

History

• Authority: T.C.A. §§56-1-701 and 56-2-301.
• Administrative History: Original rule filed July 13, 1978; effective January 1, 1979.

Chapter 0780-01-41 Tennessee Captive Insurance Companies

Tenn. Comp. R. & Regs. 0780-01-41-.01 PURPOSE AND AUTHORITY

The purpose of this Chapter is to set forth the financial and reporting requirements that the commissioner deems necessary for the regulation of captive insurance companies, as authorized by the Revised Tennessee Captive Insurance Act, Title 56, Chapter 13 of the Tennessee Code Annotated, (the "Act").

Reference in this Chapter to “company” shall mean captive insurance company or companies, unless otherwise specified. Terms of this Chapter employ definitions found in the Act as the context may require.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-108, 56-13- 115, and 56-13-121.
• Administrative History: Original rule filed May 10, 1978; effective June 9, 1978. Repeal and new rule filed March 16, 2005; effective May 30, 2005. Repeal and new rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.02 ANNUAL REPORTING AND PREMIUM TAX PAYMENT REQUIREMENTS

(1) The report of financial condition required by T.C.A. §§ 56-13-108, 56-13-204(12), 56-13-305 and 56-13-416(d) and shall be made by completing and submitting each of the forms and schedules prescribed by the Tennessee Captive Insurer Annual Report found at Appendix A of this rule, which is incorporated herein by reference.

(2) The OPTins system is hereby designated as the approved method of receiving premium tax, penalty, and interest forms and payments owed by a captive insurance company.

(a) Premium tax forms and payments shall be filed and paid in electronic form through the OPTins system no later than the date such payment is required.

(b) Filings and payments made through OPTins on or before the due date shall be deemed received by the department on the date received by OPTins.

(c) Every filing and payment made through OPTins shall be subject to a convenience fee of up to ten dollars ($10.00) per filing to cover the department’s actual costs incurred by accepting electronic payments through OPTins. Such convenience fee shall be assessed in addition to any applicable premium tax, penalty, or interest.

(d) If a tax payment due date falls on a Saturday, Sunday or banking holiday, the electronic payment must be made so that the funds are immediately available on the first business day after the due date.

(e) The commissioner may waive the requirement for electronic payment through OPTins and allow filing and payment by mail on a case by case basis for good cause shown.

(3) For a company that has received approval from the commissioner to utilize an alternative reporting date of its annual report pursuant to T.C.A. § 56-13-108(c), the full estimated premium tax due should be paid to the Department by March 15 of each year along with an estimated premium tax return.

(4) If, in accordance with paragraph (3) above, the paid premium tax is less than eighty percent (80%) of the premium tax due as calculated from the annual report filed at the end of the fiscal year, the commissioner may impose monetary penalties on said company in an amount up to one thousand dollars ($1,000).

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-108, 56-13- 114, 56-13-115, 56-13-120, 56-13-121, 56-13-204, 56-13-305, and 56-13-416.
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal and new rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.03 AUDITS

(1) (a) Each captive insurance company shall be thoroughly examined at least once every three (3) years by the commissioner. The three year period may be extended up to a five (5) year period provided that the company is subject to comprehensive annual financial audits as provided for in T.C.A. § 56-13-109(a). To qualify for this extension, the comprehensive audits shall be conducted by an independent certified public accountant authorized by the commissioner. The authorized accountant shall prepare and sign an audited annual financial report in a format specified by the commissioner.

This report is hereinafter referred to in this rule as the “audited annual financial report.”

To qualify for the extension provided for in T.C.A. § 56-13-109(a), the audited annual financial report shall be filed on or before June 30th of each year or 180 days after the end of the fiscal year. The audited annual financial report shall be considered part of the company's annual report of financial condition except with respect to the date by which it must be filed with the commissioner.

(b) To be eligible for an extension up to a five (5) year period between thorough examinations, the captive insurance company must have filed timely audited annual financial reports covering all periods of operation from the later of the date of formation or the end date of the previous examination. For good cause shown in exceptional circumstances, the commissioner may allow the late filing of the audited annual financial report to preserve a captive insurance company’s eligibility for a thorough examination extension.

(c) A newly formed captive insurance company or a newly formed protected cell or incorporated protected cell of a captive insurance company that is in operation for less than ninety (90) days before the end of its fiscal year may elect to defer conducting a comprehensive annual audit under this Chapter so long as the first filed audited annual financial report includes audit data from the date of formation to the end of the first complete fiscal year that the captive insurance company or protected cell was in operation.

(d) A protected cell or incorporated protected cell captive insurance company may elect to omit from its audited annual financial report one or more individual cells that collected no premium and wrote no policies during the calendar or fiscal year and was under no liability or potential liability for any policies issued in prior years. This action is hereinafter referred to in this rule as an “omission election.” The omission election shall be made on a form prescribed by the commissioner and signed under oath by the captive manager and at least one officer of the company and filed with the audited annual financial report. No omission election may be made in the calendar or fiscal year in which occurs the fifth anniversary of the company’s formation or fifth anniversary of the final date covered by the company’s last T.C.A. § 56-13-109 thorough examination. In the next year subsequent to the taking of an omission election where no omission election is made or following after a year in which no omission election may be made, the filed audited annual financial report shall include a cumulative report on the protected cell’s activity during all preceding years for which an omission election was made. No omission election may be made on a protected cell or incorporated protected cell’s core or general account. The commissioner, in his or her sole discretion, may disallow a protected cell or incorporated protected cell captive insurance company from taking any future omission elections on one or more cells upon notice.

(e) A captive insurance company that has been issued a letter of dormancy may elect to defer conducting a comprehensive annual audit under this Chapter and maintain eligibility for a five (5) year period between thorough examinations. To maintain this eligibility, the captive insurance company must file a cumulative audited financial report that includes audit data from the preceding years since the last filed audited annual financial report. Such filing shall be due with the first audited annual financial report filed subsequent to the rescission or expiration of the letter of dormancy.

(2) Designation of Independent Certified Public Accountant.

Companies, after becoming subject to this rule, shall within ninety days report to the commissioner in writing, the name and address of the independent certified public accountant retained to conduct the annual audit set forth in this rule. The certified public accountant that is retained to conduct the annual audit may only be appointed from the list of approved certified public accounting firms or individual certified public accountants maintained by the commissioner. The independent certified public accountant retained to conduct the annual audit shall apply, on a form adopted by the commissioner, for approval by the commissioner.

(3) Notification of Adverse Financial Condition.

A company shall require the certified public accountant to immediately notify in writing an officer and all members of the Board of Directors of the company of any determination by the independent certified public accountant that the company has materially misstated its financial condition in its report to the commissioner as required in T.C.A. § 56-13-108. The company shall furnish such notification to the commissioner within five (5) working days of receipt thereof.

(4) Availability and Maintenance of Working Papers of the Independent Certified Public Accountant.

(a) Each company shall require the independent certified public accountant to make available for review by the commissioner or the commissioner's appointed agent the work papers prepared in the conduct of the audit of the company. The company shall require that the accountant retain the audit work papers for a period of not less than five (5) years after the period reported upon.

(b) The aforementioned review by the commissioner shall be considered examinations and all working papers obtained during the course of such examinations shall be confidential. The company shall require that the independent certified public accountant provide photocopies or equivalent copy of any of the working papers which the Department considers relevant. Such working papers may be retained by the Department.

(c) “Work Papers" or "Working Papers” as referred to in this rule include, but are not necessarily limited to, schedules, analyses, reconciliations, abstracts, memoranda, narratives, flow charts, copies of company records or other documents prepared or obtained by the accountant and the accountant’s employees in the conduct of their examination of the company.

(d) The lead (or coordinating) audit partner (having primary responsibility for the audit) may not act in that capacity for more than five (5) consecutive years. The person shall be disqualified from acting in that or similar capacity for the same company or its insurance subsidiaries or affiliates for a period of five (5) consecutive years. An insurer may make application to the commissioner for relief from the above rotation requirement on the basis of unusual circumstances. This application should be made at least thirty (30) days before the end of the calendar year. The commissioner may consider the following factors in determining if the relief should be granted:

1. Number of partners, expertise of the partners or the number of insurance clients in the currently registered firm;

2. Premium volume of the insurer; or 3. Number of jurisdictions in which the insurer transacts business.

(5) The audited annual financial report shall consist of the following:

(a) Opinion of Independent Certified Public Accountant.

Financial statements furnished pursuant to this rule shall be examined by independent certified public accountants in accordance with generally accepted auditing standards as determined by the American Institute of Certified Public Accountants or statutory accounting principles in accordance with the National Association of Insurance Commissioners' Accounting Practices and Procedures Manual in effect for the period covered by the report. The opinion of the independent certified public accountant shall cover all years presented. The opinion shall be addressed to the company on stationery of the accountant showing the address of issuance, shall bear original manual signatures, and shall be dated.

(b) Report of Evaluation of Internal Controls.

Every company that has annual direct written and assumed premiums of five hundred million dollars ($500,000,000) or more shall include an evaluation of the internal controls of the company relating to the methods and procedures used in the securing of assets and the reliability of the financial records, including but not limited to such controls as the system of authorization and approval and the separation of duties. The review shall be conducted in accordance with generally accepted auditing standards or statutory accounting principles and the report shall be filed with the commissioner. An exemption from this evaluation may be granted on a case by case basis upon written request to the Commissioner.

(c) Accountant's Letter.

The accountant shall furnish the company, for inclusion in the filing of the audited annual financial report, a letter stating:

1. That the accountant is independent with respect to the company and conforms to the standards of the accountant's profession as contained in the Code of Professional Ethics and pronouncements of the American Institute of Certified Public Accountants and pronouncements of the Financial Accounting Standards Board.

2. The general background and experience of the staff engaged in audit including the experience in auditing captives or other insurance companies.

3. That the accountant understands that the audited annual report and the accountant's opinions thereon will be filed in compliance with this Chapter with the Tennessee Department of Commerce and Insurance.

4. That the accountant consents to the requirements of Rule 0780-01-41-.03(4) of this Chapter and that the accountant consents and agrees to make available for review by the commissioner, the commissioner's designee or the commissioner's appointed agent, the work papers as defined therein.

5. That the accountant is properly licensed by an appropriate state licensing

authority and that the accountant is a member in good standing in the American Institute of Certified Public Accountants.

(d) Financial Statements as required under Rule 0780-01-41-.02, Annual Reporting Requirements.

(e) Certification of Loss Reserves and Loss Expense Reserves.

The audited annual financial report shall include an opinion as to the reasonableness of the company's loss reserves and loss expense reserves. The individual who certifies as to the reasonableness of reserves shall apply, on a form adopted by the commissioner, for approval by the commissioner, and shall be a Fellow of the Casualty Actuarial Society, a member in good standing of the American Academy of Actuaries, or an individual who has demonstrated his or her competence in loss reserve evaluation to the commissioner. Certification shall be in such form as the commissioner deems appropriate. For protected cell captive insurance companies, this opinion shall also include a statement identifying any one or more protected cells for which the carried reserves are either inadequate (i.e. – below the minimum amount the actuary believes is reasonable) or redundant (i.e. – greater than the maximum amount the actuary believes is reasonable). For exceptional cause shown, the commissioner may waive the requirement of filing an opinion as to reasonableness of loss reserves and loss expense reserves by a company.

History

• Authority: T.C.A. §§ 56-13-101 through 56-13-418, 56-13-108, 56-13-109, 56-13-115, and 56-13-121; 2011 Public Acts, Chapter 468; and 2017 Public Acts, Chapter 354, § 3.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.04 DEPOSIT REQUIREMENT

(1) Whenever the commissioner deems that the financial condition of the company warrants additional security, the commissioner may require a company to deposit cash or securities approved by the commissioner in addition to statutory prescribed amounts. The deposit shall be in the form of cash or cash equivalent or an irrevocable letter of credit issued by a bank acceptable to the commissioner.

(2) The company may receive interest or dividends from said deposit; however the company may not exchange the deposits for others of equal value without the approval of the commissioner.

(3) If such company discontinues business, the commissioner shall release any claim to such deposit only after being satisfied that all obligations of the company have been discharged.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-105, 56-13- 108, 56-13-115, and 56-13-121.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.05 ORGANIZATIONAL EXAMINATION

In addition to the processing of the application, an organizational examination shall be performed before an applicant is licensed. Such examination shall consist of a general survey of the company's corporate records, including charter, bylaws and minute books; verification of capital and surplus; verification of principal place of business; determination of assets and liabilities; and a review of such other factors as the commissioner deems necessary.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-1-401, 56-13-101 through 56-13-418, 56-13-103, 56-13-108, 56-13-115, and 56-13-121.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.06 LIMITED SCOPE EXAMINATION AND INFORMAL VISITATION

(1) Pursuant to T.C.A. § 56-13-109(a) the commissioner may direct a limited scope examination be conducted upon a captive insurance company. Such an exam may be ordered when questions arise about a captive insurance company’s solvency, governance, operating practices, or other specific areas that the commissioner may determine.

(2) The limited scope examination order shall identify the specific limited areas that the examination will cover. If, in the course of the examination, the examiner believes that the scope of the examination should be broadened, the examiner shall file a recommendation with the commissioner and with the captive insurance company under examination, which company shall have ten (10) days to file any response to the recommendation. The commissioner shall thereafter determine if the scope of the examination should be broadened and the additional areas that the examination should cover.

(3) A limited scope examination under this rule does not waive or extend the period of time between thorough examinations conducted pursuant to T.C.A. § 56-13-109. A copy of any limited scope examination reports should be reviewed and included in the thorough examination of any captive insurance company. However, within ten (10) days of issuance of the limited scope examination order, the captive insurance company may file an election with the commissioner to convert the examination to a thorough examination conducted pursuant to T.C.A. § 56-13-109(a).

(4) At the request of a captive insurance company, the commissioner may, in person or by designee, conduct an informal visitation of such captive insurance company. Such informal visitation may include, but is not limited to, a review of the books and records of the captive insurance company, review of governance, internal practices, controls, policies and procedures. A visitation may include a site visit to the captive insurance company’s principal place of business, the offices of its captive manager, accountant, and/or principal or beneficial owner, or other service provider. At the conclusion of such a visitation, the commissioner or commissioner’s designee shall send a report to the captive insurance company that shall include any suggestions or recommendations. This report shall be reviewed and included in the next subsequent thorough examination of the captive insurance company.

(5) The expenses and charges of any limited scope examination and informal visitation shall be paid by the captive insurance company.

History

• Authority: T.C.A. §§ 56-1-409, 56-1-413, 56-13-101 through 56-13-418, 56-13-103, 56-13-108, 56-13- 109, 56-13-115, and 56-13-121.
• Administrative History: Original rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.07 INSURANCE MANAGERS AND INTERMEDIARIES

No person shall, in or from within this state, act as a managing general agent, producer, or reinsurance intermediary for captive business without the authorization of the commissioner. Application for such authorization must be on a form prescribed by the commissioner.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-108, 56-13- 115, and 56-13-121.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.08 BIOGRAPHICAL AFFIDAVITS AND COMPENSATION

(1) Every company shall report to the commissioner within thirty (30) days after any change in its executive officers, managers, or directors, including in its report a biographical affidavit on any individual serving as an executive officer, manager, or director. If a manager is a corporation, trustee, partnership or limited liability company, the report shall include a biographical affidavit from such person or persons who exercise ultimate control over the manager as determined by the commissioner. For good cause shown, the commissioner may waive the requirement for a biographical affidavit under this rule.

(2) No director, officer, manager, or employee of a company shall, except on behalf of the company, accept, or be the beneficiary of, any fee, brokerage, gift, or other compensation because of any investment, loan, deposit, purchase, sale, payment or exchange made by or for the company but such person may receive reasonable compensation for necessary services rendered to the company in his or her usual private, professional or business capacity

History

• Authority: T.C.A. §§ 56-13-101 through 56-13-418, 56-13-108, 56-13-115, and 56-13-121.
• Administrative History: Original rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.09 CONFLICT OF INTEREST

(1) Each company chartered in this state is required to adopt a conflict of interest statement for officers, directors, managers, and key employees. Such statement shall disclose that the individual has no outside commitments, personal or otherwise, that would divert the individual from their duty to further the interests of the company they represent but this shall not preclude such person from being a director or officer in more than one insurance company.

(2) Each officer, director, manager, and key employee shall file such disclosure with the Board of Directors yearly.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-108, 56-13- 115, and 56-13-121.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.10 REVOCATION OR SUSPENSION OF CAPTIVE LICENSE

The commissioner may, subject to the provisions of this rule, by order suspend or revoke the license of the company for any of the following:

(1) At the request of the company; or (2) For any reason provided in T.C.A. § 56-13-110.

Before the commissioner rescinds the license of a company under (1) or (2), the commissioner shall give the company notice in writing of the grounds on which the commissioner proposes to cancel the license, and shall afford the company an opportunity to make objection in writing within the period of thirty (30) days after receipt of notice. The commissioner shall take into consideration any objection received by the commissioner within that period and, if the commissioner decides to cancel the license, cause the order of cancellation to be served on the company.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-108, 56-13- 110, 56-13-115, and 56-13-121.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.11 ACQUISITION OF CONTROL OF OR MERGER WITH DOMESTIC COMPANY

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 or otherwise, any voting security of a domestic company 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 company; and no person shall enter into an agreement to merge with or otherwise to acquire control of a domestic company without the prior written approval of the commissioner. In considering any application for acquisition of control or merger with a domestic company, the commissioner shall consider all of the facts and circumstances surrounding the application as well as the criteria for establishment of a company set out in this chapter.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-107, 56-13- 108, 56-13-115, and 56-13-121.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.12 CHANGE OF BUSINESS PLAN

A change in any information filed with the application that does not constitute a material change as identified in T.C.A. §§ 56-13-103(c)(2)(B) or 56-13-416 or a change requiring commissioner approval in T.C.A. § 56-13-204(14) must be filed with the commissioner within sixty (60) days but does not require prior approval.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-103, 56-13- 108, 56-13-115, 56-13-121, 56-13-204, and 56-13-416.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.13 DESIGNATION OF A CAPTIVE MANAGER

Companies, before becoming licensed, shall report to the commissioner in writing, the name and address of the designated captive manager retained to manage the company. The captive manager shall apply, on a form adopted by the commissioner, for approval by the commissioner. Any change of designated captive manager for a captive insurance company must be approved, in advance, by the commissioner.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-108, 56-13- 115, and 56-13-121.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.14 REGULATION FOR CAPTIVE INSURANCE COMPANIES ISSUING ANNUITIES

(1) This Rule 0780-01-41-.14 establishes reserve requirements, separate accounts and the form of the annual statement required of any captive insurance company that issues annuity contracts (which may have life or other benefits that constitute a subsidiary or incidental part of the entire contract).

(2) This Rule shall apply to any captive insurance company formed or licensed under the provisions of Title 56, Chapter 13 of the Tennessee Code Annotated issuing annuity contracts (which may have life or other benefits that constitute a subsidiary or incidental part of the entire contract).

(3) Any captive insurance company that issues contracts that provide variable benefits shall establish separate accounts. Such accounts shall be subject to the requirements of T.C.A. § 56-3-501.

(4) A captive insurance company that issues annuity contracts shall maintain reserves that are actuarially sufficient to support the liabilities provided by the contracts.

(5) A captive insurance company that issues annuity contracts shall submit its annual report in the form of the annual statement approved by the National Association of Insurance Commissioners for life insurers, as modified or supplemented by the commissioner.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-3-501, 56-13-101 through 56-13-418, 56-13-108, 56-13-115, and 56-13-121.
• Administrative History: Original rule filed November 30, 2012; effective May 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-41-.15 REGULATION FOR CAPTIVE INSURANCE COMPANIES REINSURING LIFE

INSURANCE POLICIES.

(1) This Rule 0780-01-41-.15 establishes reserve requirements and the form of the annual report required of a captive insurance company that reinsures life insurance policies, including term, universal and variable life policies, and related guarantees and riders (collectively, “Life Insurance Policies”).

(2) This Rule shall apply to any captive insurance company formed or licensed under the provisions of Title 56, Chapter 13 of the Tennessee Code Annotated that reinsures Life Insurance Policies, with respect to fiscal years ending on and after December 31, 2013.

(3) A captive insurance company described in rule 0780-01-41-.15(2) shall maintain reserves that are actuarially sufficient to support the liabilities incurred by the captive insurance company in reinsuring Life Insurance Policies.

(4) For purposes of the annual report required by Tenn. Code Ann. § 56-13-108(b):

(a) A captive insurance company described in rule 0780-01-41-.15(2) that uses statutory accounting principles (i.e., the National Association of Insurance Commissioners'

Accounting Practices and Procedures Manual, including any appropriate or necessary modifications or adaptations thereto approved by the Commissioner of Commerce and Insurance) shall submit the annual report in the form of the annual statement approved by the National Association of Insurance Commissioners for life insurers, as modified or supplemented by the commissioner, unless the commissioner requires or approves a different form of annual report; and (b) A captive insurance company described in rule 0780-01-41-.15(2) that uses generally accepted accounting principles, including any appropriate or necessary modifications or adaptations thereto approved by the commissioner, shall submit the annual report in the form approved by the commissioner.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-108, 56-13- 115, and 56-13-121.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017.

Tenn. Comp. R. & Regs. 0780-01-94-.16 SEVERABILITY PROVISION

If any Rule or portion of a Rule of this Chapter or its applicability to any person or circumstance is held invalid by a court, the remainder of the Chapter or the applicability of the provision to other persons or circumstances shall not be affected. To this end, the provisions of this Chapter are declared severable.

History

• Authority: 2011 Public Acts, Chapter 468, T.C.A. §§ 56-13-101 through 56-13-418, 56-13-108, 56-13- 115, and 56-13-121.
• Administrative History: Original rule filed November 30, 2012; effective February 28, 2013. Repeal and new rule filed September 22, 2017; effective December 21, 2017. APPENDIX A TENNESSEE CAPTIVE INSURER ANNUAL REPORT As of (date) of the Condition and Affairs of (Name of Captive Insurance Company) Date of License: ______________________________________________________________________ Company Street Address: _______________________________________________________________ Company City, State, Zip Code: __________________________________________________________ Books and Records Street Address: _______________________________________________________ Captive Manager Name: ________________________________________________________________ Captive Manager Street Address: _________________________________________________________ Annual Report Contact Name: ___________________________________________________________ Annual Report Contact Number: __________________________________________________________ Annual Report Contact Email: ____________________________________________________________ Officers: Directors / Managers: President: _______________________ ________________________________________ Secretary: _______________________ ________________________________________ Treasurer: _______________________ ________________________________________ : _______________________ ________________________________________ : _______________________ ________________________________________ : _______________________ ________________________________________ 1. List the name(s) and address(es) of the beneficial owners of the captive and corresponding percentages of ownership: Name Address % Ownership 2. Type of Captive: ❑Pure ❑ Association ❑ Risk Retention Group ❑ Protected Cell ❑ Industrial Insured ❑ Special Purpose 3. Organizational form:______________________________________ If organized as a stock company, please include a description of all authorized stock classes, whether the class is preferred or common stock, and for each class, the number of shares authorized, shares outstanding, and the par value. 4. Provide the name and address of the Captive Manager. ____________________________________________________________________________________ ____________________________________________________________________________________ Has the Captive Manager changed from the last annual filing? ❑ Yes ❑ No 5. Provide the individual name, firm name and firm address of the Actuary. ____________________________________________________________________________________ ____________________________________________________________________________________ Has the Actuary changed from the last annual filing? ❑ Yes ❑ No (Appendix A, continued) 6. Provide the individual name, firm name and firm address of the Certified Public Accountant. ____________________________________________________________________________________ ____________________________________________________________________________________ Has the Certified Public Accountant changed from the last annual filing? ❑ Yes ❑ No 7. Attach a complete copy of the company’s unaudited financial statements as of prior year end that include the Balance Sheet and Income Statement. 8. Were any changes made to the charter, bylaws or articles since the last annual filing? ❑ Yes ❑ No 9. Did the company provide notification to and receive approval from the Captive Insurance Section for all material transactions? ❑ Yes ❑ No If no, provide a brief description including the dollar amount on a separate attachment. 10. Since the last annual filing, were there any related party transactions? ❑ Yes ❑ No If yes, provide a brief description including the dollar amount on a separate attachment. 11. Have all assets been valued in accordance with GAAP? ❑ Yes ❑ No If other than GAAP was used, please explain: 12. Do the company’s assets include any loans to its parent, affiliates, or unaffiliated companies? ❑ Yes ❑ No If yes, please answer the following: (a) Were any of these loans entered into this year? ❑ Yes ❑ No If yes, what is the date of Captive Insurance Section approval? __________________ (b) Amount of the loan as of the end of the year: _____________________________ (c) Describe the terms of the loan on a separate attachment. (d) Have all interest payments due for the year been collected? ❑ Yes ❑ No If no, when are the interest payments expected? _____________________________ (e) Attach copies of current financial statements of the company or companies to whom loans have been made. 13. Were any of the company’s assets or stock pledged as collateral at any time during the year or did the captive provide any outside guarantees? ❑ Yes ❑ No If yes, please provide the date of Captive Insurance Section approval and a brief description on a separate attachment. 14. Has each officer, director and key employee for the current reporting year filed a disclosure with the captive’s board of directors disclosing any potential conflicts of interest as outlined in the captive’s conflict of interest policy? ❑ Yes ❑ No 15. Have loss and loss adjustment expense (LAE) reserves been discounted? ❑ Yes ❑ No If yes, what interest rate was used? _____________________ 16. Were any dividends paid during the year? ❑ Yes ❑ No If yes, provide the date of approval by the Captive Insurance Section, the date(s) paid and amounts paid. 17. Did the company hold a board of directors meeting in Tennessee during the reporting period as required by Tenn. Code Ann. § 56-13-103(b)? ❑ Yes ❑ No 18. Does the company participate in a reinsurance pooling arrangement? ❑ Yes ❑ No If yes, identify the name of the pool and either the pool’s domicile or the domiciles of the other pool participants. (Appendix A, continued) 19. Did the company write any new lines of business this year? ❑ Yes ❑ No If yes, provide the date of Captive Insurance Section approval and a listing of new lines on a separate attachment. 20. Did the company write premiums this year? ❑ Yes ❑ No If not, does the company plan to write insurance in the next year? ❑ Yes ❑ No If not, does the company plan on going dormant or dissolving in the next year? ❑ Yes, Dormancy ❑ Yes, Dissolving ❑No 21. In the past year were there any material changes in the management's understanding of the company's financial condition or any trends, events or uncertainties that have had or will likely cause the company to substantially deviate from its filed business plan. If yes, please attach an explanatory statement. ❑ Yes ❑ No 22. Please complete the following: EXHIBIT OF PREMIUMS AND LOSSES Premium Schedule 1 2 3 4 5 Lines of Coverage Direct Business Reinsurance Assumed Reinsurance Ceded Net Premiums Written 1. 2. 3. 4. 5. 6. 7. 8. 9. Totals Paid Loss Schedule 1 2 3 4 5 Lines of Coverage Direct Business Assumed Reinsurance Ceded Reinsurance Net Losses Paid 1. 2. 3. 4. 5. 6. 7. 8. 9. Totals (Appendix A, continued) Loss Reserve Schedule 1 2 3 4 5 Lines of Coverage Direct Business Assumed Reinsurance Ceded Reinsurance Net Loss Reserves 1. 2. 3. 4. 5. 6. 7. 8. 9. Totals SCHEDULE OF REINSURANCE Assumed Reinsurance as of Current Year End 1 2 3 4 5 6 Federal ID Number Name of Reinsured (include pool participants) State or Country of Domicile Assumed Premiums Assumed Paid Losses Assumed Loss Reserves 1. 2. 3. 4. 5. 6. 7. 8. 9. Totals Total for Column 4 must agree to Premium Schedule Total for Column 5 must agree to Paid Loss Schedule Total for Column 6 must agree to Loss Reserve Schedule Ceded Reinsurance as of Current Year End 1 2 3 4 5 6 Federal ID Number Name of Reinsured (include pool participants) State or Country of Domicile Ceded Premiums Ceded Paid Losses Ceded Loss Reserves 1. 2. 3. 4. 5. 6. 7. 8. 9. Totals Total for Column 4 must agree to Premium Schedule Total for Column 5 must agree to Paid Loss Schedule Total for Column 6 must agree to Loss Reserve Schedule (Appendix A, continued) INVESTMENTS OWNED AT CURRENT YEAR END 1 2 3 4 Description Investment Type Cost Statement Value 1. 2. 3. 4. 5. 6. 7. 8. Totals Enter the corresponding numbers for the investment type as noted below: 1. Bonds 2. Stocks 3. Cash and Short-Term Investments 4. Loans and Notes Receivable 5. Cash Surrender Value of Life Insurance 6. Letters of Credit 7. Other CERTIFICATION The officers of this company, being duly sworn, each depose and say that they are the described officers of said insurer and attest to the following: (1) that as of the date of this Annual Report (as noted above), the company has maintained the minimum capital and surplus requirements pursuant to Tenn. Code Ann. § 56-13-105. (2) the attached schedules, exhibits, and explanations therein contained, annexed or referred to are a full and true statement, in all material respect of the company’s financial condition and results of operations, according to the best of their information, knowledge, and belief respectively. (3) that pursuant to Tenn. Code Ann. § 56-13-109 and Tenn. Comp. R. & Regs. 0780-01-41-.03, the company ❑will ❑will not (check one) file an independently audited financial report, including an actuarial opinion, with the Tennessee Department of Commerce and Insurance on or before June 30 for the period covered by this Annual Report, or alternative filing date of ________________ as approved by the Department. NOTE: A company that does not annually file independently audited financial reports must be examined at least every three years. Tenn. Code Ann. § 56-13-109. Companies who file independently audited financial reports must be examined at least every five years. Original, sworn, and notarized signatures of two officers are required. Tenn. Code Ann. § 56-13-108. ________________________________________ __________________________________________ Printed Name: ____________________________ Printed Name: ______________________________ Title: ___________________________________ Title: _____________________________________ Subscribed to and sworn before me this ______ day of __________________, ________. __________________________________ (seal) Notary Public Is this an original filing? ❑yes ❑no If no, (Appendix A, continued) 1. State the amendment #: ___________ 2. Date filed: ___________ 3. Number of pages attached: _____________ OVERSIGHT DOCUMENT CHECKLIST Please certify that the following documents are current as filed with the Captive Insurance Section, are new (and attached), or are not applicable at this time for: (Name of Captive Insurance Company) 1. Executed agreement between the captive and the captive manager. ❑ Current as filed ❑ New ❑ N/A 2. Executed agreement with audit firm. ❑ Current as filed ❑ New ❑ N/A 3. Executed agreement with actuarial firm. ❑ Current as filed ❑ New ❑ N/A 4. Sample policy form(s) used by captive. ❑ Current as filed ❑ New ❑ N/A 5. Minutes and resolutions of all board meetings. ❑ Current as filed ❑ New ❑ N/A 6. Executed reinsurance and/or pooling agreements. ❑ Current as filed ❑ New ❑ N/A 7. Statement of Investment Policy. ❑ Current as filed ❑ New ❑ N/A 8. Code of ethics and certificate of acknowledgement by owners. ❑ Current as filed ❑ New ❑ N/A 9. Conflict of interest policy statement and owner’s certificate of acknowledgement. ❑ Current as filed ❑ New ❑ N/A To the best of my knowledge, the above documents have either been filed with the Captive Insurance Section (and no changes have been made), are attached hereto, or are not applicable. ____________________________________ _______________________________ Captive Manager Date

Chapter 0780-01-42 Repealed

Tenn. Comp. R. & Regs. 0780-01-42 Repealed

RULES

OF TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE

INSURANCE DIVISION

Authority: T.C.A. §§56-6-105, 56-6-107, 56-6-124, Public Acts of 2002, Chapter 798, §25. Administrative

History: Original rule filed March 27, 1979; effective October 1, 1979. Repeal filed April 14, 2004; effective June 28, 2004.

Chapter 0780-01-43 Relating to the "Small Insurance Policy Law of 1979"

Tenn. Comp. R. & Regs. 0780-01-43-.01 PURPOSE

The purpose of this rule is to implement the provisions of Chapter 398 of the Public Act of 1979, known as the “Small Insurance Policy Law of 1979”.

History

• Authority: T.C.A. §56-7-702(d)(3).
• Administrative History: Original rule filed September 28, 1979; effective November 30, 1979.

Tenn. Comp. R. & Regs. 0780-01-43-.02 SCOPE

This rule shall apply to all industrial life insurance policies issued or delivered in this State after April 1, 1980. Industrial life insurance is defined in T.C.A. §56-7-701, as follows:

“...that form of life insurance, the policies for which include the words ‘industrial policy’ as part of the descriptive matter; and (a) under which the premiums are payable weekly, or (b) which the premiums are payable monthly or oftener, but less often than weekly, if the fact amount of the insurance provided in such policy is one thousand dollars ($1,000) or less.”

History

• Authority: T.C.A. §56-7-702(d)(3).
• Administrative History: Original rule filed September 28, 1979; effective November 30, 1979.

Tenn. Comp. R. & Regs. 0780-01-43-.03 APPROVAL OF FORMS

All approvals heretofore given to industrial life insurance policy forms, including endorsements, rider and applications, used in Tennessee shall cease to be effective as of April 1, 1980. No industrial life insurance form, including endorsements, riders and applications, shall be issued or delivered in this State after April 1, 1980 unless such form prior to its use shall have been filed and approved by the Commissioner of Insurance and until the applicable premium rates have been filed. No such form shall be approved unless it complies with each and every applicable provision of the “Small Insurance Policy Law of 1979” and all other applicable sections of Title 56, Tennessee Code Annotated. No such form will be approved if the Commissioner of Insurance determines that it is misleading, deceptive or encourages misrepresentation of coverage.

History

• Authority: T.C.A. §56-7-702(d)(3).
• Administrative History: Original rule filed September 28, 1979; effective November 30, 1979.

Tenn. Comp. R. & Regs. 0780-01-43-.04 CONTENT OF POLICIES

(1)(a)Except as noted herein, all industrial life insurance policies issued or delivered in this State issued on or after April 1, 1980, must contain the provisions set forth in T.C.A. §§56-7-702(a), 56-7-303(b), and 56-7-401(1)(b) and (d), or provisions which in the opinion of the Commissioner are as favorable to the policyholder. The loan provision required by T.C.A. §56-7-702(a), shall be contained in all industrial policies issued or delivered in this State after July 1, 1980; however, upon request by an insurer, the Commissioner of Insurance shall hold a hearing to determine if good cause exists to extend the time for compliance with the policy loan requirement, such extension not be exceed twelve (12) months.

(b) In connection with the provisions required by T.C.A. §56-7-702(a), for discount or refund in the event of premiums paid in advance at least 26 weeks and at least 52 weeks, the policy must provide either the discount or the refund at the end of the stipulated period. In the alternative, the policy may provide for both the discount or refund, with the insured given the opportunity to elect either option.

(c) No industrial life insurance policy shall be issued or delivered in this State after April 1, 1980, if such policy contains any of the provisions prohibited by T.C.A. §56-7-302. In addition, no such policy shall be issued if it contains a provision reducing or excluding liability for the face amount or natural death benefit, because the insured’s death occurred as the result of the act of another.

(d) No industrial life insurance policy shall be issued or delivered in this State after April 1, 1980, unless such policy is designed so that the premiums for optional benefits, if any, are displayed in the policy in a clear, conspicuous, understandable manner, thereby enabling the policyholder to determine the actual cost of optional benefits. The term “optional benefits” as used herein means policy benefits which can be purchased or not purchased or which can be added to or deleted from such policy at the election of the applicant or policyowner.

(e) In addition to the provisions required and prohibited as described above, an industrial life insurance policy issued or delivered in this State after April 1, 1980, may, at the option of the insurer, contain a provision for refund of a portion of the premium if payments are made directly to the insurer’s home office or other designated office for a period of one year.

(f) This subsection shall not preclude the reissue of policies which were approved for issue and originally issued prior to April 1, 1980, nor shall it preclude the issue of policies pursuant to contractual provisions of policies which were approved for issue and originally issued prior to April 1, 1980.

History

• Authority: T.C.A. §56-7-702(d)(3).
• Administrative History: Original rule filed September 28, 1979; effective November 30, 1979.

Tenn. Comp. R. & Regs. 0780-01-43-.05 CONTENT OF APPLICATIONS

(1)No application form for an industrial life insurance policy shall be used in this State after April 1, 1980 unless such form contains the provisions required by T.C.A. §56-7-702 (d)

(6) which are:

(a) a question as to whether the applicant has reviewed his or her life insurance program;

(b)A question as to whether the applicant is aware of the relationship of the cost of his or her life insurance program to the applicant’s total income;

(c)A question which requires the applicant to disclose the total number of policies and total amount of insurance presently in force on the life of the applicant and the proposed insured, if the proposed insured is a person other than the applicant.

The question must be stated in language which can be understood by the average consumer, and shall be stated so as to require a “yes” or “no” answer.

All of the questions required by this rule shall be displayed in the policy application in a manner no less prominent than other questions.

History

• Authority: T.C.A. §56-7-702(d)(3).
• Administrative History: Original rule filed September 28, 1979; effective November 30, 1979.

Tenn. Comp. R. & Regs. 0780-01-43-.06 RECEIPTS

The requirements with respect to receipts for premiums paid under industrial life insurance policies, as set forth in T.C.A. §56-7-702(a), may be satisfied by either (i) delivery of a separate receipt for each premium remittance, which receipt shall bear the signature (actual or facsimile) of a company officer, or (ii) delivery of a premium receipt book to the policyholder, which premium receipt book shall bear the signature (actual or facsimile) of a company officer and which shall be countersigned by a company representative upon receipt of each premium remittance.

History

• Authority: T.C.A. §56-7-702(d)(3).
• Administrative History: Original rule filed September 28, 1979; effective November 30, 1979.

Tenn. Comp. R. & Regs. 0780-01-43-.07 PENALTY

Any insurer violating the “Small Insurance Policy Law of 1979” shall be subject to a penalty not to exceed five hundred dollars ($500.00) for each violation as provided by T.C.A. §56-7-702(d)(2).

History

• Authority: T.C.A. §56-7-702(d)(3).
• Administrative History: Original rule filed September 28, 1979; effective November 30, 1979.

Tenn. Comp. R. & Regs. 0780-01-43-.08 EFFECTIVE DATE

The effective date of this rule is November 30, 1979.

History

• Authority: T.C.A. §56-7-702(d)(3).
• Administrative History: Original rule filed September 28, 1979; effective November 30, 1979.

Chapter 0780-01-44 Relating to Reporting Hospital Charges for Patients

Tenn. Comp. R. & Regs. 0780-01-44-.01 PURPOSE

The purpose of this rule is to require certain persons to report hospital charges for patients in order to provide information as to patient charges by hospitals.

History

• Authority: Chapter 876, Public Acts of 1980.
• Administrative History: Original rule filed August 5, 1980; effective January 1, 1981.

Tenn. Comp. R. & Regs. 0780-01-44-.02 DEFINITIONS

As used in this rule, unless the context otherwise requires, the term:

(1) “Administrator” means any person, company, corporation, partnership, association or legal entity who collects charges or premiums from, or who adjusts or settles claims on, residents of this state in connection with health insurance coverage.

(2) “Charge Data” means information and figures concerning the dollar amount billed by hospitals to patients on account of care, services, goods, accommodations, facilities and equipment furnished by or in a hospital; provided, however, that charge data shall only include categorical information and figures and shall not include information and figures concerning individual patients.

(3) “Commissioner” means the Commissioner of the Department of Insurance.

(4) “Hospital” means any institution, place, building or agency as defined by Tennessee Code Annotated, Section 53-1301, and subject to the provisions of Tennessee Code Annotated, Chapter 13, Title 53.

(5) “Insurer” means any person authorized to transact the business of insurance under the provisions of Tennessee Code Annotated, Title 56.

(6) “Major Purchasers” means persons who have health insurance coverage and who consists of one hundred employees or more under a group plan of insurance; or any experience rated group regardless of size.

History

• Authority: Chapter 876, Public Acts of 1980.
• Administrative History: Original rule filed August 5, 1980; effective January 1, 1981.

Tenn. Comp. R. & Regs. 0780-01-44-.03 SCOPE

Require insurers and administrators to provide charge data by hospital and diagnostic category when reasonably available as determined by the Commissioner to their major purchasers.

History

• Authority: Chapter 876, Public Acts of 1980.
• Administrative History: Original rule filed August 5, 1980; effective January 1, 1981.

Tenn. Comp. R. & Regs. 0780-01-44-.04 APPLICABILITY

(A) Insurers and administrators shall print and make available charge data information annually. The report shall contain the previous calendar year’s data and nothing is to preclude an insurer or administrator from printing this information more frequently. The report should be printed and made available by March 1, of each year.

(B) The report shall include all in-patient and non-governmental hospital claims, utilizing the first three digits of the International Classification of Diseases coding system (ICD), which represent the twenty-five most frequent diagnoses as determined by the Commissioner. The report will be run by diagnosis with a frequency of ten or more within each hospital. The format will show the name and address of the hospital, nomenclature for the twenty-five most frequent diagnosis, the number of cases for each diagnosis, and the reported hospital average charge for each diagnosis.

(C) An insurer or administrator may charge a fee for the report. Such fee shall not exceed the cost of producing the report.

History

• Authority: Chapter 876, Public Acts of 1980.
• Administrative History: Original rule filed August 5, 1980; effective January 1, 1981.

Tenn. Comp. R. & Regs. 0780-01-44-.05 EFFECTIVE DATE

The effective date of this rule shall be January 1, 1981.

History

• Authority: Chapter 876, Public Acts of 1980.
• Administrative History: Original rule filed August 5, 1980; effective January 1, 1981.

Chapter 0780-01-45 Relating to Medicare Supplement Insurance

Tenn. Comp. R. & Regs. 0780-01-45 Relating to Medicare Supplement Insurance

RULES

OF DEPARTMENT OF COMMERCE AND INSURANCE

DIVISION OF INSURANCE

REPEALED

Authority: 1992 Tenn.. Pub. Acts ch. 735 and T.CA. § 56-2-301. Administrative History: Original rule filed September 4, 1981; effective January 1, 1982. Repealed by 1992 Tenn. Pub. Acts ch. 735; filed August 31, 2004; effective November 14, 2004.

Chapter 0780-01-46 Regulations on Custodial Agreements and the Use of Clearing Corporations

Tenn. Comp. R. & Regs. 0780-01-46-.01 DEFINITIONS

When used in this Chapter, the term:

(1) “Agent” means a national bank, state bank, federal home loan bank, trust company or broker/dealer that maintains an account in its name in a clearing corporation or that is a member of the Federal Reserve System and through which a custodian participates in a clearing corporation, including the Treasury/Reserve Automated Debt Entry Securities System (TRADES) or Treasury Direct systems, except that with respect to securities issued by institutions organized or existing under the laws of a foreign country or securities used to meet the deposit requirements pursuant to the laws of a foreign country as a condition of doing business therein, “agent” may include a corporation that is organized or existing under the laws of a foreign country and that is legally qualified under those laws to accept custody of securities.

(2) “Clearing corporation” means a clearing corporation as defined in Section 8-102(a)(5) of the Uniform Commercial Code, as adopted by the National Conference of Commissioners on Uniform State Laws and the American Law Institute, as amended from time to time, that is organized for the purpose of effecting transactions in securities by computerized book-entry, except that with respect to securities issued by institutions organized or existing under the laws of a foreign country or securities used to meet the deposit requirements pursuant to the laws of a foreign country as a condition of doing business therein, “clearing corporation” may include a corporation that is organized or existing under the laws of a foreign country and which is legally qualified under those laws to effect transactions in securities by computerized book-entry. Clearing corporation also includes “Treasury/Reserve Automated Debt Entry Securities System” and “Treasury Direct” book-entry securities systems established pursuant to 31 U.S.C. § 3100 et seq., 12 U.S.C. pt. 391 and 5 U.S.C. pt. 301.

(3) “Custodian” means:

(a) A national bank, state bank, federal home loan bank or trust company that shall at all times during which it acts as a custodian pursuant to this Chapter be no less than adequately capitalized as determined by the standards adopted by the regulator charged with establishing standards for, and assessing, the institution’s solvency and that is regulated by either federal or state banking laws or the Federal Home Loan Bank Act, as amended, or is a member of the Federal Reserve System and that is legally qualified to accept custody of securities in accordance with the standards set forth below, except that with respect to securities issued by institutions organized or existing under the laws of a foreign country, or securities used to meet the deposit requirements pursuant to the laws of a foreign country as a condition of doing business therein, “custodian” may include a bank or trust company incorporated or organized under the laws of a country other than the United States that is regulated as such by that country’s government or an agency thereof that shall at all times during which it acts as a custodian pursuant to this Chapter be no less than adequately capitalized as determined by the standards adopted by international banking authorities and that is legally qualified to accept custody of securities; or (b) A broker/dealer that shall be registered with and subject to jurisdiction of the Securities and Exchange Commission, maintains membership in the Securities Investor Protection Corporation, and has a tangible net worth equal to or greater than two hundred fifty million dollars ($250,000,000).

(4) “Custodied securities” means securities held by the custodian or its agent or in a clearing corporation, including the Treasury/Reserve Automated Debt Equity Securities System (TRADES) or Treasury Direct systems.

(5) “Tangible net worth” means shareholders equity, less intangible assets, as reported in the broker/dealer’s most recent Annual or Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (SEC Form 10-K) filed with the Securities and Exchange Commission, or as determined by the most recent audited financial statement that broker/dealers file with the Securities and Exchange Commission pursuant to Exchange Act

Rule 17a-5.

(6) “Treasury/Reserve Automated Debt Entry Securities System” (“TRADES”) and “Treasury Direct” mean the book entry securities systems established pursuant to 31 U.S.C. § 3100 et seq., 12 U.S.C. pt. 391 and 5 U.S.C. pt. 301. The operation of TRADES and Treasury Direct are subject to 31 C.F.R. pt. 357 et seq.

(7) “Security” has the same meaning as that defined in Section 8-102(a)(15), as adopted by the National Conference of Commissioners on Uniform State Laws and the American Law Institute, of the Uniform Commercial Code, as amended from time to time.

(8) “Securities’ certificate” has the same meaning as that defined in Section 8-102(a)(16), as adopted by the National Conference of Commissioners on Uniform State Laws and the American Law Institute, of the Uniform Commercial Code, as amended from time to time.

History

• Authority: Acts 2012, ch. 680 and T.C.A. § 56-3-901, et seq., T.C.A. § 56-2-301 and T.C.A. § 56-2-104.
• Administrative History: Original rule filed October 27, 1980; effective December 11, 1980. Repeal and new rule filed April 28, 2005; effective July 12, 2005. Emergency rule filed June 29, 2012; effective through December 26, 2012. Emergency rule filed November 27, 2012; effective through May 26, 2013. Repeal and new rule filed February 25, 2013; effective May 26, 2013.

Tenn. Comp. R. & Regs. 0780-01-46-.02 CUSTODY AGREEMENT; REQUIREMENTS

(1) An insurance company may, by written agreement with a custodian, provide for the custody of its securities with that custodian. The securities that are the subject of the agreement may be held by the custodian or its agent or in a clearing corporation.

(2) The agreement shall be in writing and shall be authorized by a resolution of the board of directors of the insurance company or of an authorized committee of the board. The terms of the agreement shall comply with the following:

(a) Securities’ certificates held by the custodian shall be held separate from the securities’ certificates of the custodian and of all of its other customers.

(b) Securities held indirectly by the custodian and securities in a clearing corporation shall be separately identified on the custodian’s official records as being owned by the insurance company. The records shall identify which securities are held by the custodian or by its agent and which securities are in a clearing corporation. If the securities are in a clearing corporation, the records shall also identify where the securities are and, if in a clearing corporation, the name of the clearing corporation and if through an agent, the name of the agent.

(c) All custodied securities that are registered shall be registered in the name of the company or in the name of a nominee of the company or in the name of the custodian or its nominee or, if in a clearing corporation, in the name of the clearing corporation or its nominee.

(d) Custodied securities shall be held subject to the instructions of the insurance company and shall be withdrawable upon the demand of the insurance company except that custodied securities used to meet the deposit requirements set forth in TCA §§ 56-2- 104, 56-3-904 and 56-3-905 of this Insurance Law shall, to the extent required by those sections, be under the control of the Department of Commerce and Insurance and shall not be withdrawn by the insurance company without the approval of the Department of Commerce and Insurance.

(e) The custodian shall be required to send or cause to be sent to the insurance company a confirmation of all transfers of custodied securities to or from the account of the insurance company. In addition, the custodian shall be required to furnish no less than monthly the insurance company with reports of holdings of custodied securities at times and containing information reasonably requested by the insurance company. The custodian’s trust committee’s annual reports of its review of the insurer’s trust accounts shall also be provided to the insurer. Reports and verifications may be transmitted in electronic or paper form.

(f) During the course of the custodian’s regular business hours, an officer or employee of the insurance company, an independent accountant selected by the insurance company and a representative of an appropriate regulatory body shall be entitled to examine, on the premises of the custodian, the custodian’s records relating to custodied securities, but only upon furnishing the custodian with written instructions to that effect from an appropriate officer of the insurance company.

(g) The custodian and its agents shall be required to send to the insurance company:

1. All reports which they receive from a clearing corporation on their respective systems of internal accounting control, and 2. Reports prepared by outside auditors on the custodian’s or its agent’s internal accounting control of the custodied securities that the insurance company may reasonably request.

(h) The custodian shall maintain records sufficient to determine and verify information relating to custodied securities that may be reported in the insurance company’s annual statement and supporting schedules and information required in an audit of the financial statements of the insurance company.

(i) The custodian shall provide, upon written request from an appropriate officer of the insurance company, the appropriate affidavits, substantially in the form of Forms A, B or C as found in Appendices A, B, and C of this regulation, with respect to custodied securities.

(j) A national bank, state bank, federal home loan bank or trust company shall secure and maintain insurance protection in an adequate amount covering the bank’s or trust company’s duties and activities as custodian for the insurer’s assets, and shall state in the custody agreement that protection is in compliance with the requirements of the custodian’s banking regulator. A broker/dealer shall secure and maintain insurance protection for each insurance company’s custodied securities in excess of that provided by the Securities Investor Protection Corporation in an amount equal to or greater than the market value of each respective insurance company’s custodied securities. The commissioner may determine whether the type of insurance is appropriate and the amount of coverage is adequate.

(k) The custodian shall be obligated to indemnify the insurance company for any loss of custodied securities occasioned by the negligence or dishonesty of the custodian’s officers or employees, or burglary, robbery, holdup, theft, or mysterious disappearance, including loss by damage or destruction.

(l) In the event that there is a loss of custodied securities for which the custodian shall be obligated to indemnify the insurance company as provided in subparagraph (k) above, the custodian shall promptly replace the securities or the value thereof and the value of any loss of rights or privileges resulting from the loss of securities.

(m) The agreement may provide that the custodian will not be liable for a failure to take an action required under the agreement in the event and to the extent that the taking of the action is prevented or delayed by war (whether declared or not and including existing wars), revolution, insurrection, riot, civil commotion, act of God, accident, fire, explosion, stoppage of labor, strikes or other differences with employees, laws, regulations, orders or other acts of any governmental authority, or any other cause whatever beyond its reasonable control.

(n) In the event that the custodian gains entry in a clearing corporation through an agent, there shall be an agreement between the custodian and the agent under which the agent shall be subject to the same liability for loss of custodied securities as the custodian. However, if the agent shall be subject to regulation under the laws of a jurisdiction that is different from the jurisdiction the laws of which regulate the custodian, the Commissioner of Insurance of the state of domicile of the insurance company may accept a standard of liability applicable to the agent that is different from the standard of liability applicable to the custodian.

(o) The custodian shall provide written notification to the insurer’s domiciliary commissioner if the custodial agreement with the insurer has been terminated or if 100% of the account assets in any one custody account have been withdrawn. This notification shall be remitted to the insurance commissioner within three (3) business days of the receipt by the custodian of the insurer’s written notice of termination or within three (3) business days of the withdrawal of 100% of the account assets.

History

• Authority: Acts 2012, ch. 680 and T.C.A. § 56-3-901, et seq., T.C.A. § 56-2-301 and T.C.A. § 56-2-104.
• Administrative History: Original rule filed October 27, 1980; effective December 11, 1980. Repeal and new rule filed April 28, 2005; effective July 12, 2005. Emergency rule filed June 29, 2012; effective through December 26, 2012. Emergency rule filed November 27, 2012; effective through May 26, 2013. Repeal and new rule filed February 25, 2013; effective May 26, 2013.

Tenn. Comp. R. & Regs. 0780-01-46-.03 DEPOSIT WITH AFFILIATES; REQUIREMENTS

(1) Nothing in this Chapter shall prevent an insurance company from depositing securities with another insurance company with which the depositing insurance company is affiliated, provided that the securities are deposited pursuant to a written agreement authorized by the board of directors of the depositing insurance company or an authorized committee thereof and that the receiving insurance company is organized under the laws of one of the states of the United States of America or of the District of Columbia. If the respective states of domicile of the depositing and receiving insurance companies are not the same, the depositing insurance company shall have given notice of the deposit to the insurance commissioner in the state of its domicile and the insurance commissioner shall not have objected to it within thirty (30) days of the receipt of the notice.

(2) The terms of the agreement shall comply with the following:

(a) The insurance company receiving the deposit shall maintain records adequate to identify and verify the securities belonging to the depositing insurance company.

(b) The receiving insurance company shall allow representatives of an appropriate regulatory body to examine records relating to securities held subject to the agreement.

(c) The depositing insurance company may authorize the receiving insurance company:

1. To hold the securities of the depositing insurance company in bulk, in certificates issued in the name of the receiving insurance company or its nominee, and to commingle them with securities owned by other affiliates of the receiving insurance company, and 2. To provide for the securities to be held by a custodian, including the custodian of securities of the receiving insurance company or in a clearing corporation.

History

• Authority: Acts 2012, ch. 680 and T.C.A. § 56-3-901, et seq., T.C.A. § 56-2-301 and T.C.A. § 56-2-104.
• Administrative History: Original rule filed October 27, 1980; effective December 11, 1980. Repeal and new rule filed April 28, 2005; effective July 12, 2005. Emergency rule filed June 29, 2012; effective through December 26, 2012. Emergency rule filed November 27, 2012; effective through May 26, 2013. Repeal and new rule filed February 25, 2013; effective May 26, 2013.

Tenn. Comp. R. & Regs. 0780-01-46-.04 REPEALED

History

• Authority: T.C.A. §§ 56-2-117 and 56-3-112.
• Administrative History: Original rule filed October 27, 1980; effective December 11, 1980. Repeal and new rule filed April 28, 2005; effective July 12, 2005. Emergency rule filed June 29, 2012; effective through December 29, 2012. Emergency rule filed November 27, 2012; effective through May 26, 2013. Repeal filed February 25. 2013 effective May 26, 2013. (Rule 0780-01-46, Appendix A) APPENDIX A FORM A CUSTODIAN AFFIDAVIT [For use by a custodian where securities entrusted to its care have not been redeposited elsewhere.] STATE OF __________________________ ) ) ss. COUNTY OF ________________________ ) __________________________________________, being duly sworn deposes and says that he or she is ____________________ of __________________________________________, a corporation organized under and pursuant to the laws of the _______________________ with the principal place of business at __________________________ (hereinafter called the “corporation”): That his or her duties involve supervision of activities as custodian and records relating thereto; That the corporation is custodian for certain securities of ___________________________________________ having a place of business at ________________________________________________________ (hereinafter called the “insurance company”) pursuant to an agreement between the corporation and the insurance company; That the schedule attached hereto is a true and complete statement of securities (other than those caused to be deposited with The Depository Trust Company or like entity or a Federal Reserve Bank under the TRADES or Treasury Direct systems) which were in the custody of the corporation for the account of the insurance company as of the close of business on ________________________; that, unless otherwise indicated on the schedule, the next maturing and all subsequent coupons were then either attached to coupon bonds or in the process of collection; and that, unless otherwise shown on the schedule, all such securities were in bearer form or in registered form in the name of the insurance company or its nominee or of the corporation or its nominee, or were in the process of being registered in such form; That the corporation as custodian has the responsibility for the safekeeping of such securities as that responsibility is specifically set forth in the agreement between the corporation as custodian and the insurance company; and That, to the best of his or her knowledge and belief, unless otherwise shown on the schedule, the securities were the property of the insurance company and were free of all liens, claims or encumbrances whatsoever. Subscribed and sworn to before me this _____ day of __________, 20 _______________________________ (L.S.) Vice President [or other authorized officer] (Rule 0780-01-46, Appendix B) APPENDIX B FORM B CUSTODIAN AFFIDAVIT (For use in instances where a custodian corporation maintains securities on deposit with The Depository Trust Company or like entity.) STATE OF __________________________ ) ) ss. COUNTY OF ________________________ ) __________________________________________, being duly sworn deposes and says that he or she is ____________________ of __________________________________________, a corporation organized under and pursuant to the laws of the _______________________ with the principal place of business at __________________________ (hereinafter called the “corporation”): That his or her duties involve supervision of activities of the corporation as custodian and records relating thereto; That the corporation is custodian for certain securities of ________________________________ having a place of business at _____________________________________________________ (hereinafter called the “insurance company”) pursuant to an agreement between the corporation and the insurance company; That the corporation has caused certain of such securities to be deposited with ___________________________ _________________________________________ and that the schedule attached hereto is a true and complete statement of the securities of the insurance company of which the corporation was custodian as of the close of business on _______________________________________, and which were so deposited on such date; That the corporation as custodian has the responsibility for the safekeeping of the securities both in the possession of the corporation or deposited with _________________________________ as is specifically set forth in the agreement between the corporation as custodian and the insurance company; and That, to the best of his or her knowledge and belief, unless otherwise shown on the schedule, the securities were the property of the insurance company and were free of all liens, claims or encumbrances whatsoever. Subscribed and sworn to before me this _____ day of __________, 20 __________________________ (L.S.) Vice President [or other authorized officer] (Rule 0780-01-46, Appendix C) APPENDIX C FORM C CUSTODIAN AFFIDAVIT (For use where ownership is evidenced by book entry at a Federal Reserve Bank.) STATE OF __________________________ ) ) ss. COUNTY OF ________________________ ) __________________________________________, being duly sworn deposes and says that he or she is ____________________ of __________________________________________, a corporation organized under and pursuant to the laws of the _______________________ with the principal place of business at __________________________ (hereinafter called the “corporation”): That his or her duties involve supervision of activities of the corporation as custodian and records relating thereto; That the corporation is custodian for certain securities of ___________________________________________ having a place of business at ________________________________________________________ (hereinafter called the “insurance company”) pursuant to an agreement between the corporation and the insurance company; That it has caused certain securities to be credited to its book entry account with the Federal Reserve Bank of ________________________________________ under the TRADES or Treasury Direct systems; and that the schedule attached hereto is a true and complete statement of the securities of the insurance company of which the corporation was custodian as of the close of business on ________________, which were in a “general” book entry account maintained in the name of the corporation on the books and records of the Federal Reserve Bank of _______________________ at such date; That the corporation has the responsibility for the safekeeping of such securities both in the possession of the corporation or in the “general” book entry account as is specifically set forth in the agreement between the corporation as custodian and the insurance company; and That, to the best of his or her knowledge and belief, unless otherwise shown on the schedule, the securities were the property of the insurance company and were free of all liens, claims or encumbrances whatsoever. Subscribed and sworn to before me this _____ day of __________, 20 _______________________________ (L.S.) Vice President [or other authorized officer] Authority: T.C.A. § 56-3-112.

Chapter 0780-01-47 Individual Conversion Privileges in Group Hospitalization Contracts

Tenn. Comp. R. & Regs. 0780-01-47-.01 PURPOSE

The purpose of this rule is to set the maximum dollar amount for the hospital room and board daily expense benefit contained in Plan A as provided in T.C.A. §67—7—1507. This amount shall be one hundred forty dollars ($140.00).

History

• Authority: T.C.A. §§56—2—301 and 56—7—1507; Chapter 537, Public Acts of 1980.
• Administrative History: Original rule filed October 27, 1980; effective December 11, 1980. Amendment filed March 29, 1985; effective May 1, 1985.

Tenn. Comp. R. & Regs. 0780-01-47-.02 EFFECTIVE DATE

This rule shall be effective May 1, 1985.

History

• Authority: T.C.A. §§56—2—301 and 56—7—1507; Chapter 537, Public Acts of 1980.
• Administrative History: Original rule filed October 27, 1980; effective December 11, 1980. Amendment filed March 29, 1985; effective May 1, 1985.

Chapter 0780-01-48 Transferred to 0780-05-10

Tenn. Comp. R. & Regs. 0780-01-48 Transferred to 0780-05-10

RULES

OF THE TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE

DIVISION OF INSURANCE

Chapter 0780-01-49 Relating to Government Tort Liability

Tenn. Comp. R. & Regs. 0780-01-49-.01 PURPOSE

The purpose of this rule is to require all government entities, creating and maintaining funds for the purposes set forth in T.C.A. §29—20—401, to maintain adequate reserves to pay all claims arising against such funds.

History

• Authority: T.C.A. §§29—20—401 and 12—9—101.
• Administrative History: Original rule filed March 9, 1981; effective April 23, 1981.

Tenn. Comp. R. & Regs. 0780-01-49-.02 DEFINITIONS

As used in this rule, unless the context otherwise requires:

(1)‘‘Fund’’ means any accumulation of assets, by pooling arrangements, for the purpose of making payment of claims pursuant to T.C.A. §29—20—401.

(2)‘‘Reserves’’ means all amounts necessary to discharge the claims obligations of any fund created pursuant to T.C.A. §29—20—401, including losses reported, losses incurred but not reported and all loss adjustment expenses.

(3)‘‘Commissioner’’ means the Commissioner of Insurance.

(4)‘‘State’’ means the State of Tennessee.

(5)‘‘Annual Report’’ means an annual financial statement which includes a balance sheet, summary of operations, schedule necessary to identify and enumerate the cash, stocks, bonds, real estate or other assets held by the fund, and a summary of all outstanding loss reserves and loss expense reserves by opinion of an independent casualty actuary.

History

• Authority: T.C.A. §§29—20—401 and 12—9—101.
• Administrative History: Original rule filed March 9, 1981; effective April 23, 1981. Amendment filed February 8, 1984; effective March 9, 1984.

Tenn. Comp. R. & Regs. 0780-01-49-.03 SCOPE

This rule shall apply to any and all governmental entities jointly creating such a fund, if such fund is created pursuant to T.C.A. §§29—20—401 and 12—9—101 et seq.

History

• Authority: T.C.A. §§29—20—401 and 12—9—101.
• Administrative History: Original rule filed March 9, 1981; effective April 23, 1981.

Tenn. Comp. R. & Regs. 0780-01-49-.04 POOLING AGREEMENT

All pools formed pursuant to T.C.A. §29—20—401 shall have formal pooling agreements which contain all provisions specified by T.C.A. §12—9—104. Such agreements shall also be approved by the Attorney General of the State of Tennessee as provided for by T.C.A. §12—9—104. All pooling agreements made and entered into pursuant to T.C.A. §29—20—401 or all plans, agreements or contracts between the pool and the governmental entities participating therein shall contain provisions which require all governmental entities participating in or benefiting from said pooling agreement to remain liable for their proportionate share of all losses incurred by the pool during their membership or participation in the pool, regardless of their withdrawal from, or the complete termination of, the pooling agreement.

History

• Authority: T.C.A. §§29—20—401 and 12—9—101.
• Administrative History: Original rule filed March 9, 1981; effective April 23, 1981.

Tenn. Comp. R. & Regs. 0780-01-49-.05 ANNUAL REPORT

(1)The manager, administrator or director of all such funds shall file on or before sixty (60) days following the close of each fiscal year a report, under oath, to the Commissioner for such fiscal year showing the financial condition of the fund and shall, at any and all times, furnish such additional information and reports as may be required. Such Annual Report shall contain a summary of all outstanding reserves maintained by the fund, segregated by member, and by lines of business including but not limited to general and professional liabilities under the unemployment compensation law, and motor vehicle insurance. The summary of all outstanding loss and loss expense reserves shall be accompanied by opinion of an independent casualty actuary and such opinion shall be responsive to but not limited to the following:

(a)Are the loss and loss expense reserves computed in accordance with accepted loss reserving standards and are they fairly stated in accordance with sound loss reserving principles?

(b)Are the loss and loss expense reserves based on factors relevant to the policy provisions issued by the pool?

(c)Are the loss and loss expense reserves calculated to make good and sufficient provision for unpaid losses and loss expense obligations of the pool under the terms of its policies and agreements?

History

• Authority: T.C.A. §§29—20—401 and 12—9—101.
• Administrative History: Original rule filed March 9, 1981; effective April 23, 1981. Amendment filed February 8, 1984; effective March 9, 1984.

Tenn. Comp. R. & Regs. 0780-01-49-.06 ADEQUACY OF RESERVES

There shall at all times be maintained a sum in cash, or in other assets (approved by the Commissioner) an amount sufficient to discharge all liabilities on all outstanding losses arising under all risks assumed by the pool, the same to be calculated in accordance with the Statutes and Rules of the State relating to similar reserves for companies insuring similar risks, with due consideration given to other Statutes as they relate to Governmental Tort Liability.

History

• Authority: T.C.A. §§29—20—401 and 12—9—101.
• Administrative History: Original rule filed March 9, 1981; effective April 23, 1981.

Tenn. Comp. R. & Regs. 0780-01-49-.07 REINSURANCE FOR RESERVES

No amount shall be deducted from the fund’s reserves for reinsurance, unless such reinsurer is licensed in the state.

History

• Authority: T.C.A. §§29—20—401 and 12—9—101.
• Administrative History: Original rule filed March 9, 1981; effective April 23, 1981.

Tenn. Comp. R. & Regs. 0780-01-49-.08 EXAMINATIONS OF THE RESERVE FUND

Representatives of the Commissioner shall cause an examination of the reserve fund of any pool to be made as often as is necessary to verify the adequacy of the fund. Any pool examined under the provisions of this rule shall pay the proper charges incurred in such examination as prescribed under T.C.A. §56—1— 413.

History

• Authority: T.C.A. §§29—20—401 and 12—9—101.
• Administrative History: Original rule filed March 9, 1981; effective April 23, 1981.

Chapter 0780-01-50 Relating to the Timely Filing of Premium Tax Returns

Tenn. Comp. R. & Regs. 0780-01-50-.01 DEFINITIONS

(1) “Commissioner,” as used herein, means the commissioner of commerce and insurance.

(2) “Department” means the department of commerce and insurance.

(3) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

(4) “Gross premiums,” as used in this chapter, means maximum gross premiums as provided in the policy contracts, new and renewal, including policy or membership fees, whether paid in

part or in whole by cash, automatic premium loans, dividends applied in any manner whatsoever, and without deduction or exclusion of dividends in any manner; but excluding premiums returned on cancelled policies, or on account of reduction in rates, or reductions in the amount insured or experience rating refunds on life insurance policies and disability insurance policies.

(5) “Immediately available funds,” as used in this chapter, shall mean funds which are available to OPTins pursuant to rule 0780-01-50-.05.

(6) “NAIC” means the National Association of Insurance Commissioners.

(7) “OPTins” means the NAIC’s Online Premium Tax for Insurance tax filing and payment program.

(8) “Signature of attestation” means the taxpayer’s certification that the tax return, and any accompanying forms or payments, have been examined and are, to the best of the taxpayer’s knowledge, information, and belief, a true, correct, and complete tax return made in good faith, as evidenced by the taxpayer’s mark either through an electronic verification on the OPTins tax form, or through submission of an electronic copy of a hand-signed form.

History

• Authority: T.C.A. §§ 56-1-501, 56-1-701, 56-2-301, 56-4-205, 56-4-216, and 2015 Public Acts, Chapter Number 155.
• Administrative History: Original rule filed April 8, 1982; effective May 24, 1982. Emergency rule filed January 12, 2016 effective through July 10, 2016. Repeal and new rule filed April 8, 2016; effective July 7, 2016.

Tenn. Comp. R. & Regs. 0780-01-50-.02 PURPOSE

The purpose of this chapter is to establish the method required by the department for the filing of premium tax returns and the payment of premium taxes and other fees by electronic means.

History

• Authority: T.C.A. §§ 56-1-501, 56-1-701, 56-2-301, 56-4-205, 56-4-216, and 2015 Public Acts, Chapter Number 155.
• Administrative History: Original rule filed April 8, 1982; effective May 24, 1982. Emergency rule filed January 12, 2016 effective through July 10, 2016. Repeal and new rule filed April 8, 2016; effective July 7, 2016.

Tenn. Comp. R. & Regs. 0780-01-50-.03 SCOPE

Every entity required to file returns, reports or other documents and make payments pursuant to the taxes listed in rule 0780-01-50-.04 shall file such returns, reports or other documents and make such payments of premium taxes, fees or other obligations identified herein in the electronic format as specified by this

chapter, no later than the date such payment or remittance of funds is required, in funds which are immediately available to OPTins pursuant to rule 0780-01-50-.05 on the due date of payment no later than the close of business.

History

• Authority: T.C.A. §§ 56-1-501, 56-1-701, 56-2-301, 56-4-205, 56-4-216, and 2015 Public Acts, Chapter Number 155.
• Administrative History: Original rule filed April 8, 1982; effective May 24, 1982. Emergency rule filed January 12, 2016 effective through July 10, 2016. Repeal and new rule filed April 8, 2016; effective July 7, 2016.

Tenn. Comp. R. & Regs. 0780-01-50-.04 IDENTIFICATION OF TAXES, FEES AND OTHER OBLIGATIONS COVERED

Payments for the following taxes, fees or other obligations will be subject to payment pursuant to this

chapter:

(1) Gross premium tax as found in T.C.A. § 56-4-205;

(2) Workers’ Compensation gross premium tax as found in T.C.A. § 56-4-206;

(3) Additional payment for fire insurance as found in T.C.A. § 56-4-208;

(4) Retaliatory tax as found in T.C.A. § 56-4-218;

(5) Taxation on Health Maintenance Organizations as found in T.C.A. § 56-32-124;

(6) Tax on title insurance risk rate charges as found in T.C.A. § 56-35-107;

(7) Any other tax or fee, including the fee under rule 0780-01-50-.05(6) as may be associated with the payment of the above listed taxes.

History

• Authority: T.C.A. §§ 56-1-501, 56-1-701, 56-2-301, 56-4-205, 56-4-206, 56-4-208, 56-4-216, 56-4-218, 56-32-124, 56-35-107 and 2015 Public Acts, Chapter Number 155.
• Administrative History: Emergency rule filed January 12, 2016 effective through July 10, 2016. Repeal and new rule filed April 8, 2016; effective July 7, 2016.

Tenn. Comp. R. & Regs. 0780-01-50-.05 FILING RETURNS AND PAYMENT OF TAXES

(1) Every entity required to file a return, report or other document with the department, in conjunction with the taxes listed in rule 0780-01-50-.04, shall file any such return, report or other document with the department electronically, no later than the date such return, report or other document is required by law to be filed with the department. Such return, report or document filed electronically with the department shall be filed through OPTins and signed by the taxpayer by means of an acceptable signature of attestation.

(a) Filings made to OPTins on or before the day the tax payment is due shall be deemed received by the department on the date received by OPTins.

(2) Every entity required to file a return shall also pay any taxes owed through OPTins by any means accepted by OPTins.

(a) Payments remitted through Automated Clearing House Debit (ACH-debit) payable to OPTins on or before the day the tax payment is due shall be deemed received by the department and paid to the department on the date the ACH-debit is initiated.

(b) Payments made through Automated Clearing House Credit (ACH-credit) payable to OPTins shall be deemed received by the department and paid to the department, so long as the ACH-credit is received by OPTins on or before the day the tax payment is due.

(c) The commissioner may waive rule 0780-01-50-.05(2)(a) and (b) in the event OPTins has been subject to some kind of catastrophic event.

(3) Failure to timely make such payment in immediately available funds shall subject the taxpayer to penalty and interest as provided by law for delinquent or deficient tax payments pursuant to T.C.A. § 56-4-216. If payment is timely made in other than immediately available funds, such that payment is not received by the state on the date payments are due, penalty and interest shall be added to the amount of tax due from the due date of the tax payment to the date that funds from the tax payment become available to the state.

(4) If a tax payment due date falls on a Saturday, Sunday or banking holiday, the electronic payment must be made so that the funds are immediately available on the first business day after the due date.

(5) The requirement to make electronic payments does not change the requirement to file returns, reports and documents associated with said payments in the manner prescribed by

rule 0780-01-50-.05(1).

(6) Every entity required to file a return shall be responsible for paying a convenience fee of up to Ten Dollars ($10.00) per filing to cover the department’s actual costs incurred by accepting electronic filings through OPTins. Such convenience fee shall be assessed in addition to any applicable penalty and interest. Such convenience fee shall be in addition to the premium tax.

(7) In the event an entity believes the correct calculation of its taxes contemplated in rule 0780- 01-50-.04 is different from the taxes calculated by OPTins, that entity retains the right to dispute the tax calculation after payment of the tax as assessed.

History

• Authority: T.C.A. §§ 56-1-501, 56-1-701, 56-2-301, 56-4-205, 56-4-216, and 2015 Public Acts, Chapter Number 155.
• Administrative History: Emergency rule filed January 12, 2016 effective through July 10, 2016. Repeal and new rule filed April 8, 2016; effective July 7, 2016.

Tenn. Comp. R. & Regs. 0780-01-50-.06 SEVERABILITY PROVISION

If any provision of this chapter or the application thereof to any person or circumstances is for any reason held to be invalid, the remainder of the chapter and the application of such provision to other persons or circumstances shall not be affected thereby

History

• Authority: T.C.A. §§ 56-1-501, 56-1-701, 56-2-301, 56-4-205, 56-4-216, and 2015 Public Acts, Chapter Number 155.
• Administrative History: Emergency rule filed January 12, 2016 effective through July 10, 2016. Repeal and new rule filed April 8, 2016; effective July 7, 2016.

Chapter 0780-01-51 Guidelines to be by Insurance Companies, Insurance Agencies, Insurance Agents and Financial Sharing a Retail Area

Tenn. Comp. R. & Regs. 0780-01-51-.01 PURPOSE

The purpose of these rules is to identify prohibited activities, which, taken in conjunction with another specific existing relationship, such as a lease, between a financial institution and/or insurance companies, agents, or agencies, would violate statutory provisions contained in T.C.A. §§56—6—126, 56—6—201 through 56—6—207, 56—8—101 through 56—8—104 and 56—8—106. The provisions of this chapter apply only when financial institutions share a retail area with insurance agents or agencies. This chapter does not apply to existing operations of financial institutions related to the sale of certain types of insurance, when such operations are specifically permitted by state and/or federal statutes.

History

• Authority: T.C.A. §§56—6—127 and 56—8—113.
• Administrative History: Original chapter filed January 16, 1985; effective February 15, 1985.

Tenn. Comp. R. & Regs. 0780-01-51-.02 DEFINITIONS

For the purposes of this Chapter, unless the context otherwise requires:

(1)‘‘Agent’’ means an ‘‘insurance agent’’ as defined in T.C.A. §56—6—102 (1) and an ‘‘agency’’ as defined in T.C.A. §56—6—102 (3).

(2)‘‘Financial Institution’’ means a bank, a bank holding company, savings and loan association, industrial loan and thrift company and credit union.

(3)‘‘Insurance’’ means all kinds of insurance set forth in T.C.A. §56—2—201 except credit life and credit accident and health.

(4)‘‘Retail Area’’ means all open space within the financial institution lobby containing, but not limited to, loan and discount transaction stations, savings stations, cash debit and credit stations and installment and finance payment stations.

History

• Authority: T.C.A. §§56—6—127 and 56—8—113.
• Administrative History: Original chapter filed January 16, 1985; effective February 15, 1985.

Tenn. Comp. R. & Regs. 0780-01-51-.03 RELATIONSHIPS

(1)No agent or insurer shall enter into any contract, lease or other arrangement with a financial institution which results in:

(a)any activity reasonably leading a person to believe that his credit-worthiness, or that extension of credit or renewal thereof, is conditioned upon the purchase of insurance through a particular agent or insurer; or INSTITUTIONS SHARING A RETAIL AREA (b)the financial institution soliciting insurance business acting on behalf of an agent or insurer in the sale or negotiation of insurance or directing potential insureds to an agent or insurer.

History

• Authority: T.C.A. §§56—6—127 and 56—8—113.
• Administrative History: Original chapter filed January 16, 1985; effective February 15, 1985.

Tenn. Comp. R. & Regs. 0780-01-51-.04 PHYSICAL FACILITIES

Any arrangement between an agent or insurer and a financial institution pursuant to which the agent or insurer shares space in the retail area of the financial institution is subject to the following conditions:

(1)All signs displayed in connection with the operation of the insurer, agent, or agency shall have no indication of any relationship with the financial institution. Further, there shall be no signs displayed in connection with the operation of the insurer, agent, or agency in the retail area of the financial institution, other than in the direct vicinity of the insurance sales area.

(2)The space occupied by the agent or insurer must be situated and sufficiently segregated in the retail area of the financial institution to insulate customers of the financial institution who have applied for or obtained credit from express or implied intimidation or interference with the customers’ free choice regarding the purchase of insurance.

Accordingly, employees of the financial institution may not be positioned, in relation to the space occupied by the agent or insurer, so as to allow regular observance by financial institution customers transacting business within the space occupied by the agent or insurer. The layouts of bank lobbies will differ depending on the size of the institution.

Therefore, different means may be necessary to effect sufficient separation in each lobby.

History

• Authority: T.C.A. §§56—6—127 and 56—8—113.
• Administrative History: Original chapter filed January 16, 1985; effective February 15, 1985.

Tenn. Comp. R. & Regs. 0780-01-51-.05 ADVERTISING

(1)No agent shall enter into any contract, lease or other arrangement under which a financial institution is authorized to advertise, promote or announce to its customers or the public in any fashion:

(a)The availability of insurance products through means of the financial institution’s contract, lease or arrangement with the agent; or (b)Information regarding such insurance products, including, without limitation, the names of insurance companies represented by the agent and premium rates.

(2)Every contract, lease, or other arrangement under which an agent obtains space in the retail area of a financial institution shall contain a prohibition against the financial institution advertising, promoting, or announcing publicly in any fashion the availability of insurance products or any information regarding such insurance products, including, without limitations, the names of insurance companies represented by the agent and premium rates.

(3)No advertising, promotional material or public announcement by an agent or insurance company shall contain:

(a)Any language or implication to the effect that the agent can provide or make available insurance products through a financial institution.

INSTITUTIONS SHARING A RETAIL AREA

(b)Any use of the name of the financial institution other than strictly as an address referencing the location of the insurance agent or agency involved. Further, the use of the address should not be made in such a manner as to draw prominent attention to, or indicate any other relationship with the financial institution to the insurance product being advertised.

History

• Authority: T.C.A. §§56—6—127 and 56—8—113.
• Administrative History: Original chapter filed January 16, 1985; effective February 15, 1985.

Tenn. Comp. R. & Regs. 0780-01-51-.06 SOLICITATION ACTIVITIES

The selling or renting of customer lists or envelope space by a financial institution to an insurance agency tenant of such institution is prohibited unless it offers the same products and services upon the same terms to other insurance agents or agencies.

History

• Authority: T.C.A. §§56—6—127 and 56—8—113, Attorney General’s Opinions to Rep. Dale Kelley on December 8, 1984 and Commissioner John C. Neff on August 13, 1984.
• Administrative History: Original chapter filed January 16, 1985; effective February 15, 1985.

Chapter 0780-01-52 Mortality Tables

Tenn. Comp. R. & Regs. 0780-01-52-.01 ANNUITY MORTALITY TABLES

(1) Purpose - The purpose of this rule is to recognize the following mortality tables for use in determining the minimum standard of valuation for annuity and pure endowment contracts: the 1983 Table “a”, the 1983 Group Annuity Mortality (1983 GAM) Table, the Annuity 2000 Mortality Table, and the 1994 Group Annuity Reserving (1994 GAR) Table.

(2) Definitions.

(a) As used in this rule “1983 Table ‘a’ ” means that mortality table developed by the Society of Actuaries Committee to Recommend a New Mortality Basis for Individual Annuity Valuation and adopted as a recognized mortality table for annuities in June 1982 by the National Association of Insurance Commissioners.

(b) As used in this rule “1983 GAM Table” means that mortality table developed by the Society of Actuaries Committee on Annuities and adopted as a recognized mortality table for annuities in December 1983 by the National Association of Insurance Commissioners.

(c) As used in this rule “1994 GAR Table” means that mortality table developed by the Society of Actuaries Group Annuity Valuation Table Task force and shown on pages 866-867 of Volume XLVII of the Transactions of the Society of Actuaries (1995), and adopted as a recognized mortality table for annuities in January 1998 by the National Association of Insurance Commissioners.

(d) As used in this rule “Annuity 2000 Mortality Table” means that mortality table developed by the Society of Actuaries Committee on Life Insurance Research and shown on page 240 of Volume XLVII of the Transactions of the Society of Actuaries (1995), and adopted as a recognized mortality table for annuities in January 1998 by the National Association of Insurance Commissioners.

(3) Individual Annuity or Pure Endowment Contracts.

(a) Except as provided in subsections (b) and (c) of this section, the 1983 Table “a” is recognized and approved as an individual annuity mortality table for valuation and, at the option of the company, may be used for purposes of determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after March 13, 1978.

(b) Except as provided in subsection (c) of this section, either the 1983 Table “a” or the Annuity 2000 Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after July 1, 1985.

(c) Except as provided in subsection (d) of this section, the Annuity 2000 Mortality Table shall be used for determining the minimum standard of valuation for any individual annuity or pure endowment contract issued on or after January 1, 2004.

(d) The 1983 Table “a” without projection is to be used for determining the minimum standards of valuation for an individual annuity or pure endowment contract issued on or after January 1, 2004, solely when the contract is based on life contingencies and issued to fund periodic benefits arising from:

1. Settlements of various forms of claims pertaining to court settlements or out of court settlements from tort actions;

2. Settlements involving similar actions such as worker’s compensation claims; or 3. Settlements of long term disability claims where a temporary or life annuity has been used in lieu of continuing disability payments.

(4) Group Annuity or Pure Endowment Contracts.

(a) Except as provided in subsections (b) and (c) of this section, the 1983 GAM Table, the 1983 Table “a” and the 1994 GAR Table are recognized and approved as group annuity mortality tables for valuation and, at the option of the company, any one of these tables may be used for purposes of valuation for an annuity or pure endowment purchased on or after March 13, 1978, under a group annuity or pure endowment contract.

(b) Except as provided in subsection (c) of this section, either the 1983 GAM Table or the 1994 GAR Table shall be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after July 1, 1985, under a group annuity or pure endowment contract.

(c) The 1994 GAR Table shall be used for determining the minimum standard of valuation for any annuity or pure endowment purchased on or after January 1, 2004, under a group annuity or pure endowment contract.

(5) Application of the 1994 GAR Table In using the 1994 GAR Table, the mortality rate for a person age x in year (1994 + n) is calculated as follows: q x 1994 + n =q x (1-AA x ) n where the q x and AA x s are as specified in the 1994 GAR Table.

History

• Authority: T.C.A. §§56-1-403, 56-1-403(b)(2)(C) and (E), and 56-2-301.
• Administrative History: Original rule filed March 29, 1985; effective July 1, 1985. Amendment filed October 17, 2003; effective December 31, 2003.

Tenn. Comp. R. & Regs. 0780-01-52-.02 SMOKER/NON-SMOKER MORTALITY TABLES

(1) Purpose - The purpose of rule 0780-01-52-.02 is to permit the use of mortality tables that reflect differences in mortality between smokers and non-smokers in determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits for plans of insurance with separate premium rates for smokers and non-smokers.

(2) Definitions.

(a) As used in rule 0780-01-52-.02, “1980 CSO Table, with or without Ten-Year Select Mortality Factor” means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the Society of Actuaries Committee to Recommend New Mortality Tables for Valuation of Standard Individual Ordinary Life Insurance, incorporated in the 1980 NAIC Amendments to the Model Standard Valuation Law and Standard Non-forfeiture Law for Life Insurance, and referred to in those models as the Commissioners 1980 Standard Mortality Table, with or without Ten-Year Select Mortality Factors. The same select factors will be used for both smokers and non-smokers tables.

(b) As used in rule 0780-01-52-.02, “1980 CET Table” means that mortality table consisting of separate rates of mortality for male and female lives, developed by the Society of Actuaries Committee to Recommend New Mortality Tables for Valuation of Standard Individuals Ordinary Life Insurance, incorporated in the 1980 NAIC Amendments to the Model Standard Non-forfeiture Law for Life Insurance, and referred to in those models as the Commissioners 1980 Extended Term Insurance Table.

(c) As used in rule 0780-01-52-.02, “1958 CSO Table” means that mortality table developed by the Society of Actuaries Special Committee on New Mortality Tables, incorporated in the NAIC Model Standard Non-forfeiture Law for Life Insurance, and referred to in that model as the Commissioners 1958 Standard Ordinary Mortality Table.

(d) As used in rule 0780-01-52-.02, “1958 CET Table” means that mortality table developed by the Society of Actuaries Special Committee on New Mortality Tables, incorporated in the NAIC Model Standard Non-forfeiture Law for Life Insurance, and referred to in that model as the Commissioners 1958 Extended Term Insurance Table.

(e) As used in rule 0780-01-52-.02, the phrase “smoker and non-smoker mortality tables” refers to the mortality tables with separate rates of mortality for smokers and nonsmokers derived from the tables defined in (a) through (d) of this section.

(f) As used in rule 0780-01-52-.02, the phrase “composite mortality tables” refers to the mortality tables defined in (a) through (d) of this section as they were originally published with rates of mortality that do not distinguish between smokers and nonsmokers.

(3) Alternate Tables.

(a) For any policy of insurance delivered or issued for delivery in this state after the operative date of T.C.A. §56-7-401(h)(11), for that policy form and before January 1, 1989, at the option of the company and subject to the conditions stated in section 4 of

rule 0780-01-52-.02, 1. the 1958 CSO Smoker and Non-smoker Mortality Tables may be substituted for the 1980 CSO Table, with or without Ten-Year Select Mortality Factors, and 2. the 1958 CET Smoker and Non-smoker Mortality Tables may be substituted for the 1980 CET Table, for use in determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits;

Provided that for any category of insurance issued on female lives with minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits determined using the 1958 CSO or 1958 CET Smoker and Non-smoker Mortality Tables, such minimum values may be calculated according to an age not more than six years younger than the actual age of the insured; Provided further that the substitution of the 1958 CSO or 1958 CET Smoker and Non-smoker Mortality Tables is available only if made for each policy of insurance on a policy form delivered or issued for delivery on or after the operative date for that policy form and before a date not later than January 1, 1989.

(b) For any policy of insurance delivered or issued for delivery in this state after the operative date of T.C.A. §56-7-401(h)(11), for that policy form, at the option of the company and subject to the conditions stated in section 4 of rule 0780-01-52-.02, 1. the 1980 CSO Smoker and Non-smoker Mortality Tables, with or without Ten- Year Select Mortality Factors, may be substituted for the 1980 CSO Table, with or without Ten-Year Select Mortality Factors, and 2. the 1980 CET Smoker and Non-smoker Mortality Tables may be substituted for the 1980 CET Table for use in determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits.

(4) Conditions - For each plan of insurance with separate rates for smokers and non-smokers an insurer may:

(a) use composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits, (b) use smoker and non-smoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by T.C.A. §56-1-403(d)(5), and use composite mortality tables to determine the basic minimum reserves, minimum cash surrender values and amounts of paid-up non-forfeiture benefits, or (c) use smoker and non-smoker mortality to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits.

History

• Authority: T.C.A. §§56-1-403, 56-2-301, and 56-7-401.
• Administrative History: Original rule filed March 29, 1985; effective July 1, 1985. Amendment filed October 17, 2003; effective December 31, 2003.

Tenn. Comp. R. & Regs. 0780-01-52-.03 MIXED GENDER MORTALITY TABLES

(1) Purpose - The purpose of rule 0780-01-52-.03 is to permit individual life insurance policies to provide the same cash surrender values and paid-up non-forfeiture benefits to both men and women. No change in minimum valuation standards is implied by this rule.

(2) Definitions.

(a) As used in rule 0780-01-52-.03, “1980 CSO Table, with or without Ten-Year Select Mortality Factors” means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the Society of Actuaries Committee to Recommend New Mortality Tables for Valuation of Standard Individual Ordinary Life Insurance, incorporated in the 1980 NAIC Amendments to the Model Standard Valuation Law and Standard Non-forfeiture Law for Life Insurance, and referred to in those models as the Commissioners 1980 Standard Ordinary Mortality Table, with or without Ten-Year Select Mortality Factors.

(b) As used in rule 0780-01-52-.03, “1980 CSO Table (M), with or without Ten-Year Select Mortality Factors” means that mortality table consisting of the rates of mortality for male lives from the 1980 CSO Table, with or without Ten-Year Select Mortality Factors.

(c) As used in rule 0780-01-52-.03, “1980 CSO Table (F), with or without Ten-Year Select Mortality Factors” means that mortality table consisting of the rates of mortality for female lives from the 1980 CSO Table, with or without Ten-Year Select Mortality Factors.

(d) As used in rule 0780-01-52-.03, “1980 CET Table” means that mortality table consisting of separate rates of mortality for male and female lives, developed by the Society of Actuaries Committee to Recommend New Mortality Tables for Valuation of Standard Individual Ordinary Life Insurance, incorporated in the 1980 NAIC Amendments to the Model Standard Valuation Law and Standard Non-forfeiture Law for Life Insurance, and referred to in those models as the Commissioners 1980 Extended Term Insurance Table.

(e) As used in rule 0780-01-52-.03, “1980 CET Table (M)” means that mortality table consisting of the rates of mortality for male lives from the 1980 CET Table.

(f) As used in rule 0780-01-52-.03, “1980 CET Table (F)” means that mortality table consisting of the rates of mortality for female lives from the 1980 CET Table.

(g) As used in this rule, “1980 CSO and 1980 CET Smoker and Non-smoker Mortality Tables” means the mortality tables with separate rates of mortality for smokers and non-smokers derived from the 1980 CSO and 1980 CET Mortality tables by the Society of Actuaries Task Force on Smoker/Non-smoker Mortality and adopted by the NAIC in December 1983.

(3) Rule - For any policy of insurance on the life of either a male or female insured delivered or issued for delivery in this state after the operative date of T.C.A. §56-7-401(h)(11), for that policy form, (a) a mortality table which is a blend of the 1980 CSO Table (M) and the 1980 CSO Table (F) with or without Ten-Year Select Mortality Factors may at the option of the company be substituted for the 1980 CSO Table, with or without Ten-Year Select Mortality Factors, and (b) a mortality table which is of the same blend as used in (a) but applied to form a blend of the 1980 CET Table (M) and the 1980 CET Table (F) may at the option of the company be substituted for the 1980 CET Table, for use in determining minimum cash surrender values and amounts of paid-up non-forfeiture benefits.

The following tables will be considered as the basis for acceptable tables:

1. 100% Male 0% Female for tables to be designated as the “1980 CSO-A” and “1980 CET-A” tables.

2. 80% Male 20% Female for tables to be designated as the “1980 CSO-B” and “1980 CET-B” tables.

3. 60% Male 40% Female for tables to be designated as the “1980 CSO-C” and “1980 CET-C” tables.

4. 50% Male 50% Female for tables to be designated as the “1980 CSO-D” and “1980 CET-D” tables.

5. 40% Male 60% Female for tables to be designated as the “1980 CSO-E” and “1980 CET-E” tables.

6. 20% Male 80% Female for tables to be designated as the “1980 CSO-F” and “1980 CET-F” tables.

7. 0% Male 100% Female for tables to be designated as the “1980 CSO-G” and “1980 CET-G” tables.

Tables 1. and 7. are not to be used with respect to policies issued on or after July 1, 1985, except where the proportion of persons insured is anticipated to be 90 % or more of one sex or other except for certain policies converted from group insurance. Such conversions issued on or after January 1, 1986, must use Mortality Tables based on the blend of lives by sex expected for such policies if such group conversions are considered as extensions of the Norris decision. This consideration has not been clearly defined by court or legislative action in all jurisdictions. Table 1 is the same as 1980 CSO Table (M) and 1980 CET Table (M) and Table 7. is the same as 1980 CSO Table (F) and 1980 CET Table (F).

(4) Alternate Rule In determining minimum cash surrender values and amounts of paid-up non-forfeiture benefits for any policy of insurance on the life of either a male or female insured on a form of insurance with separate rates for smokers and non-smokers delivered or issued for delivery in this state after the operative date of T.C.A. §56-7-401(h)(11), for that policy form, in addition to the mortality tables that may be used according to Section 3 of rule 0780-01-52- .03, (a) a mortality table which is a blend of the male and female rates of mortality according to the 1980 CSO Smoker Mortality Table, in the case of lives classified as smokers, or the 1980 CSO Non-smoker Mortality Table, in the case of lives classified as non-smokers, with or without Ten-Year Select Mortality Factors, may at the option of the company be substituted for the 1980 CSO Table, with or without Ten-Year Select Mortality Factors, and (b) A mortality table which is of the same blend as used in (a) but applied to form a blend of the male and female rates of mortality according to the corresponding 1980 CET Smoker Mortality Table or 1980 CET Non-smoker Mortality Table may at the option of the company be substituted for the 1980 CET Table.

The following blended mortality tables will be considered acceptable:

SA: 100% Male 0% Female smoker tables designated as “1980 CSO-SA” and “1980 CET-SA” Tables.

SB: 80% Male 20% Female smoker tables designated as “1980 CSO-SB” and “1980 CET-SB” Tables.

SC: 60% Male 40% Female smoker tables designated as “1980 CSO-SC” and “1980 CET-SC” Tables.

SD: 50% Male 50% Female smoker tables designated as “1980 CSO-SD” and “1980 CET-SD” Tables.

SE: 40% Male 60% Female smoker tables designated as “1980 CSO-SE” and “1980 CET-SE” Tables.

SF: 20% Male 80% Female smoker tables designated as “1980 CSO-SF” and “1980 CET-SF” Tables.

SG: 0% Male 100% Female smoker tables designated as “1980 CSO-SG” and “1980 CET-SG” Tables.

NA: 100% Male 0% Female non-smoker tables designated as “1980 CSO-NA” and “1980 CET-NA” Tables.

NB: 80% Male 20% Female non-smoker tables designated as “1980 CSO-NB” and “1980 CET-NB” Tables.

NC: 60% Male 40% Female non-smoker tables designated as “1980 CSO-NC” and “1980 CET-NC” Tables.

ND: 50% Male 50% Female non-smoker tables designated as “1980 CSO-ND” and “1980 CET-ND” Tables.

NE: 40% Male 60% Female non-smoker tables designated as “1980 CSO-NE” and “1980 CET-NE” Tables.

NF: 20% Male 80% Female non-smoker tables designated as “1980 CSO-NF” and “1980 CET-NF” Tables.

NG: 0% Male 100% Female non-smoker tables designated as “1980 CSO-NG” and “1980 CET-NG” Tables.

Tables SA, SG, NA, and NG are not acceptable as blended tables unless the proportion of persons insured is anticipated to be 90% or more of one sex or the other.

(5) Unfair Discrimination - It shall not be a violation of T.C.A Title 56, Chapter 8, for an insurer to issue the same kind of policy of life insurance on both sex distinct and sex neutral basis.

History

• Authority: T.C.A. §§56-2-301 and 56-7-401.
• Administrative History: Original rule filed March 29, 1985; effective July 1, 1985. Amendment filed August 28, 1989; effective October 12, 1989. Amendment filed October 17, 2003; effective December 31, 2003.

Tenn. Comp. R. & Regs. 0780-01-52-.04 2001 CSO MORTALITY TABLE

(1) Purpose - The purpose of this subchapter is to recognize, permit and prescribe the use of the 2001 Commissioners Standard Ordinary (CSO) Mortality Table for use in determining the minimum standard of valuation and non-forfeiture benefits for life insurance policies.

(2) Definitions. The following words and terms, when used in this regulation, shall have the following meanings, unless the context clearly indicates otherwise.

(a) As used in rule 0780-01-52-.04 “2001 CSO Mortality Table” means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted by the National Association of Insurance Commissioners in December 2002. Unless the context indicates otherwise, the 2001 CSO Mortality Table includes both the ultimate form of that table and the select and ultimate form of that table and includes both the smoker and non-smoker mortality tables and the composite mortality tables. It also includes both the age-nearestbirthday and age-last-birthday bases of the mortality tables.

(b) As used in rule 0780-01-52-.04 “2001 CSO Mortality Table (F)” means that mortality table consisting of the rates of mortality for female lives from the 2001 CSO Mortality Table.

(c) As used in rule 0780-01-52-.04 “2001 CSO Mortality Table (M)” means that mortality table consisting of the rates of mortality for male lives from the 2001 CSO Mortality Table.

(d) As used in rule 0780-01-52-.04 “Composite mortality tables” means mortality tables with rates of mortality that do not distinguish between smokers and non-smokers.

(e) As used in rule 0780-01-52-.04 “Smoker and non-smoker” mortality tables means those mortality tables with separate rates of mortality for smokers and non-smokers.

(3) Application.

(a) At the election of the company for any one or more specified plans of insurance and subject to the conditions stated in this subchapter, the 2001 CSO Mortality Table may be used as the minimum standard for policies issued on or after January 1, 2004, and before the date specified in subsection (b) of this section to which Tennessee Code Annotated Section 56-1-403 is applicable. If the company elects to use the 2001 CSO Mortality Table, it shall do so for both valuation and non-forfeiture purposes.

(b) Subject to the conditions stated in this regulation, the 2001 CSO Mortality Table shall be used in determining minimum standards for policies issued on and after January 1, 2009, to which Tennessee Code Annotated Section 56-1-403 is applicable.

(c) The minimum basis for computation of values related to extended term benefits will be the 2001 CSO Mortality Table pursuant to the requirements of this subchapter.

(d) The Commissioner of Commerce and Insurance adopts by reference the 2001 CSO Mortality Table. The table is available from the Actuarial Section, Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Nashville, Tennessee 37243, or on the internet by accessing the department’s website at www.state.tn.us/commerce/.

(4) Conditions.

(a) For each plan of insurance with separate rates for smokers and non-smokers an insurer may use:

1. Composite mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits;

2. Smoker and non-smoker mortality tables to determine the valuation net premiums and additional minimum reserves, if any, required by T.C.A. §56-1- 403(d)(5) and use composite mortality tables to determine the basic minimum reserves, minimum cash surrender values and amounts of paid-up non-forfeiture benefits; or 3. Smoker and non-smoker mortality tables to determine minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits.

(b) For plans of insurance without separate rates for smokers and non-smokers the composite mortality tables shall be used.

(c) For the purpose of determining minimum reserve liabilities and minimum cash surrender values and amounts of paid-up non-forfeiture benefits, the 2001 CSO Mortality Table may, at the option of the company for each plan of insurance, be used in its ultimate or select and ultimate form.

(d) When the 2001 CSO Mortality Table is the minimum reserve standard for any plan of a company, the actuarial opinion in the annual statement filed with the commissioner shall be based on an asset adequacy analysis as specified in the Actuarial Opinion and Memorandum Regulation of the Tennessee Insurance Regulations, rule 0780-01-64.

A company shall be exempt from this requirement if it only does business in this state and in no other state to the extent such company has not elected to use the 2001 CSO Mortality Table.

(5) Applicability of the 2001 CSO Mortality Table to the Valuation of Life Insurance Policies

Appendix A-830 of the National Association of Insurance Commissioners Accounting Practices and Procedures Manual (the “Appendix”).

(a) Subject to the transition dates set forth in this rule, for any report due after effectiveness hereof and in which the National Association of Insurance Commissioners Accounting Practices and Procedures Manual shall not have been amended to conform the Appendix to the 2001 CSO Mortality Table, the following principles shall apply to use of such Appendix:

1. Paragraph 3(a)(ii)(b) of the Appendix . The net level reserve premium shall be based on the ultimate mortality rates in the 2001 CSO Mortality Table.

2. Paragraph 5 of the Appendix . All calculations shall be made using the 2001 CSO Mortality Rate, and, if elected, the optimal minimum mortality standard for deficiency reserves stipulated in subsection (5)(a).4 of this regulation. The value of “qx+k+t-1” shall be the valuation mortality rate for deficiency reserves in policy year k+t, but using the unmodified select mortality rates if modified select mortality rates are used in the computation of deficiency reserves.

3. Paragraph 16 of the Appendix . The 2001 CSO Mortality Table shall be the minimum standard for basic reserves.

4. Paragraph 17 of the Appendix . The 2001 CSO Mortality Table shall be the minimum standard for deficiency reserves. If select mortality rates are used, they shall be multiplied by X percent for durations in the first segment, subject to the conditions specified in Paragraph 17(c)(i) through (viii) of the Appendix. In demonstrating compliance with those conditions, the demonstrations may not combine the results of tests that utilize the 1980 CSO Mortality Table with those tests that utilize the 2001 CSO Mortality Table, unless the combination is explicitly required by regulation or necessary to be in compliance with relevant Actuarial Standards of Practice.

5. Paragraph 25(a) of the Appendix . The valuation mortality table used in determining the tabular cost of insurance shall be the ultimate mortality rates in the 2001 CSO Mortality Table.

6. Paragraph 25(d) of the Appendix . The calculations specified in Paragraph 25 of the Appendix shall use the ultimate mortality rates in the 2001 CSO Mortality Table.

7. Paragraph 26(d) of the Appendix . The calculations specified in Paragraph 26 of the Appendix shall use the ultimate mortality rates in the 2001 CSO Mortality Table.

8. Paragraph 27(b) of the Appendix . The calculations specified in Paragraph 27 of the Appendix shall use the ultimate mortality rates in the 2001 CSO Mortality Table.

9. Paragraph 29(a)(ii) of the Appendix . The one-year valuation premium shall be calculated using the ultimate mortality rates in the 2001 CSO Mortality Table.

(b) Nothing in this section shall be construed to expand the applicability of the Valuation of Life Insurance Policies Model Regulation to include life insurance policies exempted under Paragraph 3(a) of the Appendix.

(6) Gender-Blended Tables.

(a) For any ordinary life insurance policy delivered or issued for delivery in this state on and after January 1, 2004, that utilizes the same premium rates and charges for male and female lives or is issued in circumstances where applicable law does not permit distinctions on the basis of gender, a mortality table that is a blend of the 2001 CSO Mortality Table (M) and the 2001 CSO Mortality Table (f) may, at the option of the company for each plan of insurance, be substituted for the 2001 CSO Mortality Table for use in determining minimum cash surrender values and amounts of paid-up nonforfeiture benefits. No change in minimum valuation standards is implied by this subsection.

(b) The company may choose from among the blended tables developed by the American Academy of Actuaries CSO Task Force and adopted by the National Association of Insurance Commissioners in December 2002. These blended tables are available from the Actuarial Section, Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Nashville, Tennessee 37243, or the internet by accessing the department’s website at www.state.tn.us/commerce/.

(c) It shall not, in and of itself, be a violation of Tennessee Code Annotated Section 56-8- 104 for an insurer to issue the same kind of policy of life insurance on both a sexdistinct and sex-neutral basis.

History

• Authority: T.C.A. §§56-1-403, 56-1-403(b)(1)(A)(iii), 56-7-401, 56-7-401(h)(8)(B)(vi), and 56-2-301.
• Administrative History: Original rule filed March 29, 1985; effective July 1, 1985. Amendment filed October 17, 2003; effective December 31, 2003. RULE 0780-01-52-.05 PRENEED MORTALITY TABLES. (1) Purpose. The purpose of this Rule is to establish for preneed insurance products minimum mortality standards for reserves and nonforfeiture values, and to require the use of the 1980 Commissioners Standard Ordinary (CSO) Life Valuation Mortality Table for use in determining the minimum standard of valuation of reserves and the minimum standard nonforfeiture values for preneed insurance products. (2) Definitions. (a) “2001 CSO Mortality Table” means that mortality table, consisting of separate rates of mortality for male and female lives, developed by the American Academy of Actuaries CSO Task Force from the Valuation Basic Mortality Table developed by the Society of Actuaries Individual Life Insurance Valuation Mortality Task Force, and adopted by the NAIC in December 2002. The 2001 CSO Mortality Table is included in the Proceedings of the NAIC (2nd Quarter 2002). Unless the context indicates otherwise, the “2001 CSO Mortality Table” includes both the ultimate form of that table and the select and ultimate form of that table and includes both the smoker and nonsmoker mortality tables and the composite mortality tables. It also includes both the agenearest-birthday and age-last-birthday bases of the mortality tables. (b) “Ultimate 1980 CSO” means the Commissioners’ 1980 Standard Ordinary Life Valuation Mortality Tables (1980 CSO) without ten-year (10-year) selection factors, incorporated into the 1980 amendments to the NAIC Standard Valuation Law approved in December 1983. (c) “Preneed Insurance” shall mean any policy that falls within the definition of a “prearrangement insurance policy”, defined in T.C.A. §62-5-403(7) as “a life insurance policy, annuity contract, or other insurance contract, or any series of contracts or agreements in any form or manner, issued by an insurance company, that, whether by assignment or otherwise, funds a pre-need funeral contract, the insured, or annuitant being the person for whose funeral service the funds were paid”. (3) Minimum Valuation Mortality Standards. For preneed insurance contracts, as defined in Rule 0780-01-52-.05(2)(c), the minimum mortality standard for determining reserve liabilities and non-forfeiture values for both male and female insureds shall be the Ultimate 1980 CSO. (4) Minimum Valuation Interest Rate Standards. (a) The interest rates used in determining the minimum standard for valuation of preneed insurance shall be the calendar year statutory valuation interest rates as defined in T.C.A. §56-1-403. (b) The interest rates used in determining the minimum standard for nonforfeiture values for preneed insurance shall be the calendar year statutory nonforfeiture interest rates as defined in T.C.A. §56-7-401. (5) Minimum Valuation Method Standards. (a) The method used in determining the standard for the minimum valuation of reserves of preneed insurance shall be the method defined in T.C.A. §56-1-403. (b) The method used in determining the standard for the minimum nonforfeiture values for preneed insurance shall be the method defined in T.C.A. §56-7-401. (6) Transitional Rules. (a) For preneed insurance policies issued on or after the effective date of this Rule and before January 1, 2012, the 2001 CSO may be used as the minimum standard for reserves and minimum standard for non-forfeiture benefits for both male and female insurances. (b) If an insurer elects to use the 2001 CSO as a minimum standard any policy issued on or after the effective date of this Rule and before January 1, 2012, the insurer shall provide, as part of the actuarial opinion memorandum submitted in support of the company’s asset adequacy testing, an annual written notification to the domiciliary commissioner. The notification shall include: 1. A complete list of all preneed policy forms that use the 2001 CSO as a minimum standard; 2. A certification signed by the appointed actuary stating that the reserve methodology employed by the company in determining reserves for the preneed policies issued after the effective date and using the 2001 CSO as a minimum standard, develops adequate reserves (For the purposes of this certification, the preneed insurance policies using the 2001 CSO as a minimum standard cannot be aggregated with any other policies.); and 3. Supporting information regarding the adequacy of reserves for preneed insurance policies issued after the effective date of this regulation and using the 2001 CSO as a minimum standard for reserves. (c) Preneed insurance policies issued on or after January 1, 2012, must use the Ultimate 1980 CSO in the calculation of minimum nonforfeiture values and minimum reserves. Authority: T.C.A. §§56-1-403, 56-2-301, 56-7-401, 62-5-403(7) and 62-5-413(b).

Tenn. Comp. R. & Regs. 0780-01-52-.06 SEPARABILITY

If any provision of chapter 0780-01-52 or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the rule and the application of such provision to other persons or circumstances shall not be affected thereby.

History

• Authority: T.C.A. §§56-1-403, 56-2-301 and 56-7-401, 62-5-403(7) and 62-5-413(b).
• Administrative History: Original rule filed March 29, 1985; effective July 1, 1985. Amendment filed October 17, 2003; effective December 31, 2003. Amendment filed April 15, 2009 and rule renumbered; effective June 29, 2009.

Tenn. Comp. R. & Regs. 0780-01-52-.07 EFFECTIVE DATE

The effective date of chapter 0780-01-52 is July 1, 1985; provided, that amendments in sections .01 and .04 shall become effective on January 1, 2004 and provided that preneed insurance policies issued on or after January 1, 2012, must use the Ultimate 1980 CSO in the calculation of minimum nonforfeiture values and minimum reserves.

History

• Authority: T.C.A. §§56-2-301, 56-7-401 and 62-5-413(b).
• Administrative History: Original rule filed October 17, 2003; effective December 31, 2003. Amendment filed April 15, 2009 and rule renumbered; effective June 29, 2009.

Chapter 0780-01-53 Coordination of Benefits

Tenn. Comp. R. & Regs. 0780-01-53-.01 PURPOSE AND SCOPE

(1)The purpose of this regulation is to adopt the Model Group Coordination of Benefits Regulation, as promulgated by the National Association of Insurance Commissioners. This regulation is intended to establish uniformity in the permissive use of overinsurance provisions and to avoid claim delays and misunderstandings that could otherwise result from the use of inconsistent or incompatible provisions among Plans. Except as specifically provided in subsection 4 below, it is contrary to the public policy of this state for a Plan to declare its coverage to the ‘‘excess’’ to all others, or ‘‘ always secondary’’, or to reduce its benefits because of the existence of duplicate coverage in a manner other than as permitted by this regulation; or to reduce its benefits because a person covered by the Plan is eligible for any other coverage. It is requested that courts give effect to this public policy when they consider the interrelation of Plans with order of benefit determination rules which comply with this regulation and Plans with order of benefit determination rules which differ from those set forth in this regulation.

(2)A Coordination of Benefits (COB) provision is one that is intended to avoid claims payment delays, to aid with the enforcement of T.C.A. §68—11—219 concerning prompt payment, and avoid duplication of benefits when a person is covered by two or more Plans providing benefits or services for medical, dental or other care or treatment. It avoids claims payment delays by establishing an order in which Plans pay their claims and providing the authority for the orderly transfer of information needed to pay claims promptly. It avoids duplication of benefits by permitting a reduction of the benefits of a Plan when, by the rules established by this regulation, it does not have to pay its benefits first.

(3)This regulation permits, but does not require, Plans to include COB provisions.

(4)If a group contract includes a COB provision, it must be consistent with this regulation. A Plan that does not include such a provision may not take the benefits of another Plan as defined in rule 0780—1—53—.02 DEFINITIONS into account when it determines its benefits. There is one exception: a contract holder’s coverage that is designed to supplement a part of a basic package of benefits may provide that the supplementary coverage shall be excess to any other parts of the plan provided by the contract holder.

History

• Authority: T.C.A. §§56—1—701 and 56—2—301.
• Administrative History: Original chapter filed June 4, 1986; effective July 4, 1986.

Tenn. Comp. R. & Regs. 0780-01-53-.02 DEFINITIONS

(1)Plan.

(a)A ‘‘Plan’’ is a form of coverage with which coordination is allowed. The definition of Plan in the group contract must state the types of coverage which will be considered in applying the COB provision of that contract. The right to include a type of coverage is limited by the rest of this subsection.

(b)This regulation uses the term ‘‘Plan’’. However, a group contract may instead, use ‘‘Program’’ or some other term.

(c)‘‘Plan’’ shall not include individual or family: 1.insurance contracts; 2.subscriber contracts; 3.coverage through Health Maintenance Organizations (HMOs); or 4.coverage under other prepayment, group practice and individual practice plans; except as provided in (d) below:

(d)‘‘Plan’’ may include: 1.group insurance and group subscriber contracts; 2.uninsured arrangements of group or group-type coverage; 3.group or group-type coverage through HMOs and other prepayment, group practice and individual practice plans; and 4.group-type contracts.

Group-type contracts are contracts which are not available to the general public and can be obtained and maintained only because of membership in or connection with a particular organization or group. Grouptype contracts answering this description may be included in the definition of Plan, at the option of the insurer or the service provider and its contract-client, whether or not uninsured arrangements or individual contract forms are used and regardless of how the group-type coverage is designated (for example, ‘‘franchise’’ or ‘‘blanket’’). The use of payroll deductions by the employee, subscriber or member to pay for the coverage in not sufficient, of itself, to make an individual contract part of a group-type plan.

(e)‘‘Plan’’ may include the medical benefits coverage in group-type, and individual automobile ‘‘no-fault’’ and traditional automobile ‘‘fault’’ type contracts.

(f)‘‘Plan’’ may include Medicare or other governmental benefits. That part of the definition of ‘‘Plan’’ may be limited to the hospital, medical and surgical benefits of the governmental program. However, ‘‘Plan’’ shall not include a state plan under Medicaid, and shall not include a law or plan when, by law, its benefits are excess to those of any private insurance plan or other non-governmental plan.

(g)‘‘Plan’’ shall not be construed to include group or group-type hospital indemnity benefits of $100 per day or less; but may be construed to include the amount by which group or group-type hospital indemnity benefits exceed $100 per day. ‘‘Hospital indemnity benefits’’ are those not related to expenses incurred. The term does not include reimbursement-type benefits even if they are designed or administered to give the insured the right to elect indemnitytype benefits at the time of claim.

(h)‘‘Plan’’ shall not include school accident-type coverages. These cover grammar, high school, and college students only, including athletic injuries, either on a 24-hour basis or on a ‘‘to and from school’’ basis.

(2)This Plan. In a COB provision, this term refers to the part of the group contract providing the health care benefits to which the COB provisions applies and which may be reduced on account of the benefits of other Plans. Any other

part of the group contract providing health care benefits is separate from this Plan.

A group contract may apply one COB provision to certain of its benefits (such as dental benefits, coordinating only with like benefits), and may apply other separate COB provisions to coordinate other benefits.

(3)A Primary Plan is one whose benefits for a person’s health care coverage must be determined without taking the existence of any other Plan into consideration. A Plan is a Primary Plan if either (a) or (b) below is true. There may be more than one Primary Plan (for example, two Plans which have no order of benefit determination rules).

(a)The Plan either has no order of benefit determination rules, or it has rules which differ from those permitted by this regulation.

(b)All plans which cover the person use the order of benefit determination rules required by this regulation and under those rules the Plan determines its benefits first.

(4)A Secondary Plan is one which is not a Primary Plan. If a person is covered by more than one Secondary Plan, the order of benefit determination rules of this regulation decide the order in which their benefits are determined in relation to each other. The benefits of each Secondary Plan may take into consideration the benefits of the Primary Plan or Plans and the benefits of any other Plan which, under the rules of this regulation, has its benefits determined before those of that Secondary Plan.

(5)Allowable Expense.

(a)Allowable expense is the necessary, reasonable, and customary item of expense for health care, when the item of expense is covered at least in part under any of the Plans involved, except where a statute requires a different definition. However, items of expense under coverages such as dental care, vision care, prescription drug or hearing aid programs may be excluded from the definition of Allowable Expense. A Plan which provides benefits only for any such item of expense may limit its definition of Allowable Expenses to like items of expense.

(b)When a Plan provides benefits in the form of services, the reasonable cash value of each service will be considered as both an Allowable Expense and a benefit paid.

(c)The difference between the cost of a private hospital room and cost of a semi-private hospital room is not considered an Allowable Expense under the above definition unless the patient’s stay in a private hospital room is medically necessary in terms of generally accepted medical practice.

(d)When COB is restricted in its use to a specific coverage in a contract (for example, major medical or dental), the definition of ‘‘Allowable Expense’’ must include the corresponding expenses or services to which COB applies.

(6)A claim is a request that benefits of a Plan be provided or paid. The benefits claimed may be in the form of:

(a)services (including supplies);

(b)payment for all or a portion of the expenses incurred;

(c)a combination of (a) and (b) above; or (d)an indemnification.

(7)Claim Determination Period.

(a)This is the period of time, which must not be less than twelve (12) consecutive months, over which Allowable Expenses are compared with total benefits payable in the absense of COB, to determine: 1.whether overinsurance exists; and 2.how much each Plan will pay or provide.

(b)It usually is a calendar year, but a Plan may use some other period of time that fits the coverage of the group contract. A person may be covered by a plan during a portion of a Claim Determination Period if that person’s coverage starts or ends during that Claim Determination Period.

(c)As each claim is submitted, each Plan is to determine its liability and pay or provide benefits based upon Allowable Expenses incurred to that point in the Claim Determination Period. But that determination is subject to adjustment as later Allowable Expenses are incurred in the same Claim Determination Period.

History

• Authority: T.C.A. §§56—1—701 and 56—2—301.
• Administrative History: Original chapter filed June 4, 1986; effective July 4, 1986.

Tenn. Comp. R. & Regs. 0780-01-53-.03 MODEL COB CONTRACT PROVISION

(1)General. Rule 0780—1—53—.03 contains a Model COB Provision for use in group contracts. That use is subject to the provisions of subsections (2) and (3) of rule 0780—1—53—.02 Definitions and to the provisions of rule 0780— 1—53—.04 Rules for Coordination of Benefits.

(2)Flexibility. A group contract’s COB provision does not have to use the words and format shown in this regulation.

Changes may be made to fit the language and style of the rest of the group contract or to reflect the differences among Plans:

(a)which provide services;

(b)which pay benefits for expenses incurred; and (c)which indemnify.

Substantive changes are allowed only as set forth in this regulation.

(3)Prohibited Coordination and Benefit Design. A group contract may not reduce benefits on the basis that:

(a)another Plan exists;

(b)except with respect to Part B of Medicare, that a person is or could have been covered under another Plan; or (c)a person has elected an option under another Plan providing a lower level of benefits than another option which could have been elected. No contract may contain a provision that its benefits are ‘‘excess’’ or ‘‘always secondary’’ to any Plan defined in rule 0780—1—53—.02, except in accord with the rules permitted by this

regulation.

(4)Text of the Model COB Provision.

Coordination of Group Contract’s Benefits With Other Benefits (a)Applicability. 1.This Coordination of Benefits (‘‘COB’’) provision applies to This Plan when an employee or the employee’s covered dependent has health care coverage under more than one Plan. ‘‘Plan’’ and ‘‘This Plan’’ are defined below. 2.If this COB provision applies, the order of benefit determination rules should be looked at first. Those rules determine whether the benefits of This Plan are determined before or after those of another Plan.

The benefits of This Plan:

(i)shall not be reduced when, under the order of benefit determination rules, This Plan determines its benefits before another Plan; but (ii)may be reduced when, under the order of benefit determination rules, another Plan determines its benefits first. The above reduction is described in rule 0780—1—53—.03, subsection (4) (d), Effect on the Benefits of This Plan.

(b)Definitions. 1.A ‘‘Plan’’ is any of these which provides benefits or services for, or because of, medical or dental care or treatment:

(i)Group insurance or group-type coverage, whether insured or uninsured. This includes prepayment, group practices of individual practice coverage. It also includes coverage other than school accident-type coverage.

(ii)Coverage under a governmental plan or required or provided by law. This does not include a state plan under Medicaid (Title XIX, Grants to States for Medical Assistance Programs, of the United States Social Security Act as amended from time to time). It also does not include any plan when, by law, its benefits are excess to those of any private insurance program or other non-governmental program.

(iii)Each contract or other arrangement for coverage under (i) or (ii) is a separate Plan. Also, if an arrangement has two parts and COB rules apply only to one of the two, each of the parts is a separate Plan. 2.‘‘This Plan’’ is the part of the group contract that provides benefits for health care expenses. 3.‘‘Primary Plan’’/‘‘Secondary Plan’’.

(i)The order of benefit determination rules state whether This Plan is a Primary Plan or Secondary Plan as to another Plan covering the person.

(ii)When This Plan is a Primary Plan, its benefits are determined before those of the other Plan and without considering the other Plan’s benefits.

(iii)When This Plan is a Secondary Plan, its benefits are determined after those of the other Plan and may be reduced because of the other Plan’s benefits.

(iv)When there are more than two Plans covering the person, This Plan may be a Primary Plan as to one or more other Plans, and may be a Secondary Plan as to a different Plan or Plans. 4.‘‘Allowable Expense’’ means a necessary, reasonable, and customary item of expense for health care, when the item of expense is covered at least in part by one or more Plans covering the person for whom the claim is made.

(i)The difference between the cost of a private hospital room and the cost of a semi-private hospital room is not considered an Allowable Expense under the above definition unless the patient’s stay in a private hospital room is medically necessary either in terms of generally accepted medical practice, or as specifically defined in the Plan.

(ii)When a Plan provides benefits in the form of services, the reasonable cash value of each service rendered will be considered both an Allowable Expense and a benefit paid. 5.‘‘Claim Determination Period’’ means a calendar year. However it does not include any part of a year during which a person has no coverage under This Plan, or any part of a year before the date this COB provision or a similar provision takes effect.

(c)Order of Benefit Determination Rules. 1.General. When there is a basis for a claim under This Plan and another Plan, This Plan is a Secondary Plan which has its benefits determined after those of the other Plan, unless:

(i)the other plan has rules coordinating its benefits with those of This Plan; and (ii)both those rules and This Plan’s rules, in subparagraph (2) below, require that This Plan’s benefits be determined before those of the other Plan. 2.Rules. This Plan determines its order of benefits using the first of the following rules which applies:

(i)Non-dependent/Dependent. The benefits of the Plan which covers the person as an employee, member or subscriber (that is, other than as a dependent) are determined before those of the plan which covers the person as a dependent.

(ii)Dependent Child/Parents Not Separated or Divorced. Except as stated in subparagraph (III) below, when This Plan and another Plan cover the same child as a dependent of different persons, called ‘‘parents’’:

(I)the benefits of the Plan of the parent whose birthday falls earlier in a year are determined before those of the Plan of the parent whose birthday falls later in that year; but (II)if both parents have the same birthday, the benefits of the Plan which covered the parent longer are determined before those of the Plan which covered the other parent for a shorter period of time.

(III)However, if the other Plan does not have the rules described in (I) immediately above, but instead has a rule based upon the gender of the parent, and if, as a result, the Plans do not agree on the order of benefits, the rule in the other Plan will determine the order of benefits.

(See rule 0780—1—53—.04, (1) (b) 1.)

(iii)Dependent Child/Separated or Divorced Parents. If two or more Plans cover a person as a dependent child of divorced or separated parents, benefits for the child are determined in this order:

(I)first, the Plan of the parent with custody of the child; and (II)then, the Plan of the spouse of the parent with custody of the child; and (III)finally, the Plan of the parent not having custody of the child.

However, if the specific terms of a court decree state that one of the parents is responsible for the health care expenses of the child, and the entity obligated to pay or provide the benefits of the Plan of that parent has actual knowledge of those terms, the benefits of that Plan are determined first. This paragraph does not apply with respect to any Claim Determination Period or plan year during which any benefits are actually paid or provided before the entity has actual knowledge.

(iv)Active/Inactive Employee. The benefits of a Plan which covers a person as an employee who is neither laid off nor retired (or as that employee’s dependent ) are determined before those of a Plan which covers that person as a laid off or retired employee (or as that employee’s dependent). If the other Plan does not have this rule, and if, as a result, the Plans do not agree on the order of benefits, this section (iv) is ignored.

(v)Longer/Shorter Length of Coverage. If none of the above rules determines the order of benefits, the benefits of the Plan which covered an employee, member or subscriber longer are determined before those of the Plan which covered that person for the shorter time. (See rule 0780—1—53— .04, subsection (1) (c))

(d)Effect on the Benefits of This Plan. 1.This section applies when, in accordance with paragraph (c) 1. and 2., Order of Benefit Determination Rules, this Plan is a Secondary Plan as to one or more other Plans. In that event the benefits of This Plan or Plans are referred to as ‘‘the other Plans’’ in 2. immediately below. 2.The benefits of This Plan will be reduced when the sum of:

(i)the benefits that would be payable for the Allowable Expenses under This Plan in the absence of this COB provision; and (ii)the benefits that would be payable for the Allowable Expenses under the other Plans, in the absence of provisions with a purpose like that of this COB provision, whether or not claim is made; exceeds those Allowable Expenses in a Claim Determination Period. In that case, the benefits of This Plan will be reduced so that they and the benefits payable under the other Plans do not total more than those Allowable Expenses.

When the benefits of This Plan are reduced as described above, each benefit is reduced in proportion. It is then charged against any applicable benefit limit of This Plan. (See rule 0780—1—53— .04, subsection (2))

(e)Right to Receive and Release Needed Information. Certain facts are needed to apply these COB rules. (The XYZ Company) has the right to decide which facts it needs. It may get needed facts from or give them to any other organization or person. (The XYZ Company) need not tell, or get the consent of any person to do this. Each person claiming benefits under This Plan must give (The XYZ Company) any facts it needs to pay the claim. (See rule 0780—1—53—.04, subsections (2) and (6))

(f)Facility of Payment. A payment under another Plan may include an amount which should have been paid under This Plan. If it does, (The XYZ Company) may pay that amount to the organization which made that payment.

That amount will then be treated as though it were a benefit paid under This Plan. (The XYZ Company) will not have to pay that amount again. The term ‘‘payment made’’ includes providing benefits in the form of services, in which case ‘‘payment made’’ means reasonable cash value of the benefits provided in the form of services.

(See rule 0780—1—53—.04, subsections (2) and (6))

(g)Right of Recovery. If the amount of the payments made by (the XYZ Company) is more than it should have paid under this COB provision, it may recover the excess from one or more of: 1.the persons it has paid or for whom it has paid; 2.insurance companies; or 3.other organizations.

The ‘‘amount of the payments made’’ includes the reasonable cash value of any benefits provided in the form of services. (See rule 0780—1—53—.04, subsections (2) and (6))

History

• Authority: T.C.A. §§56—1—701 and 56—2—301.
• Administrative History: Original chapter filed June 4, 1986; effective July 4, 1986.

Tenn. Comp. R. & Regs. 0780-01-53-.04 RULES FOR COORDINATION OF BENEFITS

(1)Order of Benefits.

(a)General. 1.The Primary Plan must pay or provide its benefits as if the Secondary Plan or Plans did not exist. 2.A Secondary Plan may take the benefits of another Plan into account only when, under these rules, it is Secondary to that other Plan. (See rule 0780—1—53—.03, subsections (3) and (4) (b) (3)

(b)Dependent Child/Parents Not Separated or Divorced. 1.The word ‘‘birthday’’ in the wording shown in rule 0780—1—53—.03, subsection (4) (c) (2) (ii) of this

regulation refers only to month and day in a calendar year, not the year in which the person was born. 2.A group contract which includes COB and which is issued or renewed, or which has an anniversary date on or after sixty (60) days after the effective date of this regulation shall include the substance of the provision in rule 0780—1—53—.03 (4) (c) (2) (ii) of this regulation. That provision shall become effective one (1) year and sixty (60) days after the effective date of this regulation. Until that provision becomes effective, the group contract shall, instead, use wording like this: ‘‘Except as stated in rule 0780—1—53—.03 (4) (c) 2. (ii), the benefits of a Plan which covers a person as a dependent of a male are determined before those of a Plan which covers the person as a dependent of a female.’’ (c)Longer/Shorter Length of Coverage. 1.To determine the length of time a person has been covered under a Plan, two Plans shall be treated as one if the claimant was eligible under the second within 24 hours after the first ended. Thus, the start of a new Plan does not include:

(i)a change in the amount of a scope of a Plan’s benefits;

(ii)a change in the entity which pays, provides or administers the Plan’s benefits; or (iii)a change from one type of Plan to another (such as, from a single employer plan to that of a multiple employer plan). 2.The claimant’s length of time covered under a Plan is measured from the claimant’s first date of coverage under that Plan. If that date is not readily available, the date the claimant first became a member of the group shall be used as the date from which to determine the length of time the claimant’s coverage under the present Plan has been in force. (See rule 0780—1—53—.03, (4) (c) 2. (v))

(2)Reduction in a Plan’s Benefits When it is Secondary.

(a)General. A Secondary Plan may reduce its benefits by using Alternatives 1, 2, or 3 below, or any version thereof which is more favorable to a covered person. This is subject to the conditions and limits described in this subsection (2).

(b)Alternative 1. Total Allowable Expenses. 1.When this Alternative is used, a Secondary Plan may reduce its benefits so that the total benefits paid or provided by all Plans during a Claim Determination Period are not more than total Allowable Expenses.

The amount by which the Secondary Plan’s benefits have been reduced shall be used by the Secondary Plan to pay Allowable Expenses, not otherwise paid, which were incurred during the Claim Determination Period by the person for whom the claim is made. As each claim is submitted, the Secondary Plan determines its obligation to pay for Allowable Expenses based on all claims which were submitted up to that point in time during the Claim Determination Period. 2.When this alternative is used, the suggested contract provision is as shown in rule 0780—1—53—.03, (4) (d) (2). 3.The last paragraph quoted in rule 0780—1—53—.03, (4) (d) (2) may be omitted if the Plan provides only one benefit, or may be altered to suit the coverage provided.

(c)Alternative 2. Total Allowable Expenses with Coinsurance. 1.When this Alternative is used, a Secondary Plan may reduce its benefits so that the total benefits paid or provided by all Plans during a Claim Determination Period are not more than a stated percentage, but not less than eighty percent (80%), of total Allowable Expenses. The amount by which the Secondary Plan’s benefits have been reduced shall be used by the Secondary Plan to pay the stated percentage of Allowable Expenses, not otherwise paid, which were incurred during the Claim Determination Period by the person for whom the claim is made. As each claim is submitted, the Secondary Plan determines its obligation to pay for the stated percentage of Allowable Expenses based on all claims which were submitted up to that point in time during the Claim Determination Period. 2.When this alternative is used, the suggested contract provision for use in rule 0780—1—53—.03, (4) (d)

2. is shown below.

(i)Reduction in This Plan’s Benefits. The benefits of This Plan will be reduced when the sum of:

(I)the benefits that would be payable for the Allowable Expenses under This Plan in the absence of this COB provision; and (II)the benefits that would be payable for the Allowable Expenses under the other Plans in the absence of provisions with a purpose like that of this COB provision, whether or not claim is made; exceeds the greater of (i) eighty percent (80%) of those Allowable Expenses or (ii) the amount of the benefits in (I) above. In that case, the benefits in this section do not total more than the greater of (i) and (ii) above.

(III)When the benefits of This Plan are reduced as described above, each benefit is reduced in proportion. It is then charged against any applicable benefit limit of This Plan.

(IV)The last paragraph of (2), quoted immediately above, may be omitted if the Plan provides only one benefit, or may be altered to suit the coverage provided.

(d)Alternative 3. Maintenance of Benefits. 1.When this Alternative is used, a Secondary Plan may reduce its benefits by the amount of the benefits payable under the other Plans for the same expenses. 2.When this Alternative is used, the suggested contract provision for use in rule 0780—1—53—.03, subsection 4 (d) 2. is shown below.

(i)The benefits that would be payable under This Plan in the absence of this COB provision will be reduced by the benefits payable under the other Plans for the expenses covered in whole or in part under This Plan. This applies whether or not claim is made under a Plan.

(ii)When a Plan provides benefits in the form of services, the reasonable cash value of each service rendered will be considered both an expense incurred and a benefit payable.

(iii)When the benefits of This Plan are reduced as described above, each benefit is reduced in proportion. It is then charged against any applicable benefit limit of This Plan. 3.The last paragraph of 2., quoted immediately above, may be omitted if the Plan provides only one benefit, or may be altered to suit the coverage provided. 4.This Alternative 3 may be used in a Plan only when, in the absence of COB, the benefits of the Plan (excluding benefits for dental care, vision care, prescription drug or hearing aid programs) will, after any deductible be:

(i)not less than fifty percent (50%) of covered expenses:

(I)for the treatment of mental or nervous disorders or alcoholism or drug abuse; or (II)under cost containment provisions with alternative benefits, such as those applicable to second surgical opinions, precertification of hospital stays, etc., and (ii)not less than seventy-five percent (75%) of other covered expenses. 5.A Plan using this Alternative 3 may exclude definitions of and references to Allowable Expenses, Claim Determination Period, or both.

(e)Conditions for use of Alternatives 2 and 3. 1.General. Alternatives 2 and 3 permit a Secondary Plan to reduce its benefits so that total benefits may be less than one hundred percent (100%) of Allowable Expenses. 2.Conditions. A Plan using Alternative 2 or 3 must comply with the following conditions:

(i)Notice. The Plan must provide prior notice to employees or members that when it is Secondary (that is, it determines benefits after another Plan):

(I)its benefits plus those of the Primary Plan will be less that one hundred percent (100%) of Allowable Expenses; unless (II)the Primary Plan, by itself, provides benefits at one hundred percent (100%) of Allowable Expenses.

(ii)Copayment and Deductible Limit. When the Plan is Secondary, it must provide a limit on the amount the employee, member or subscriber is required to pay toward the expenses or services covered under the Plan and for which the Plan is Secondary. Such limit shall not exceed $2,000 for any covered person, or $3,000 for any family in any Claim Determination Period.

(iii)Unrestricted Enrollment. The Plan must permit a person to be enrolled for its health care coverage when that person’s eligibility for health care coverage under another Plan ends for any reason if:

(I)such person is eligible for coverage under The Plan; and (II)such enrollment is made before the end of the 31-day period immediately following either:

I.the date when health care coverage under the other Plan ends; or II.the end of any continuation period elected by or for that person.

This unrestricted enrollment is not required if a person remains eligible for coverage un der that other Plan, or a Plan which replaces it, without interruption of that person’s coverage.

(iv)Enrollment Requirements. If the person is enrolled before the end of the period, described in subparagraph (II) above, there shall be no interruption of coverage. Thus, the requirements concerning active work of employees, members of subscribers, or non-confinement of dependents on the effective date of coverage, shall not be applied. However, coverage for the person under the Plan may be subject to the same requirements including underwriting requirements, benefit restrictions, waiting periods, and pre-existing condition limitations that would have applied had the person been enrolled under the Plan on the later of:

(I)the date the person first became eligible for the Plan’s coverage; or (II)the date the employee, member or subscriber last became covered under the Plan.

Credit shall be given under any pre-existing condition limitations or waiting period from the later of the dates described in (I) or (II) above to the date the person actually enrolled pursuant to paragraph (iii) above.

(3)Reasonable Cash Value of Services. A Secondary Plan which provides benefits in the form of services may recover the reasonable cash value of providing the services from the Primary Plan, to the extent that benefits for the services are covered by the Primary Plan and have not already been paid or provided by the Primary Plan. Nothing in this provision shall be interpreted to require a Plan to reimburse a covered person in cash for the value of services provided by a Plan which provides benefits in the form of services.

(4)Excess or Other Nonconforming Provisions.

(a)Some Plans have order of benefit determination rules not consistent with this regulation which declare that the Plan’s coverage is ‘‘excess’’ to all others, or ‘‘always secondary.’’ This occurs because: 1.certain Plans may not be subject to insurance regulation; or 2.some group contracts have not yet been conformed with this regulation pursuant to rule 0780—1—53— .05, Effective Date; Existing Contracts.

(b)A Plan with order of benefit determination rules which comply with this regulation (herein called a Complying Plan) may coordinate its benefits with a Plan which is ‘‘excess’’ or ‘‘always secondary’’ or which uses order of benefit determination rules which are inconsistent with those contained in this regulation (herein called a Noncomplying Plan) on the following basis: 1.If the Complying Plan is the Primary Plan, it shall pay or provide its benefits on a primary basis. 2.If the Complying Plan is the Secondary Plan, it shall, nevertheless, pay or provide its benefits first, but the amount of the benefits payable shall be determined as if the Complying Plan were the Secondary Plan. In such a situation, such payment shall be the limit of the Complying Plan’s liability. 3.If the Noncomplying Plan does not provide the information needed by the Complying Plan to determine its benefits within a reasonable time after it is requested to do so, the Complying Plan shall assume that the benefits of the Noncomplying Plan are identical to its own, and shall pay its benefits accordingly.

However, the Complying Plan must adjust any payments it makes based on such assumption whenever information becomes available as to the actual benefits of the Noncomplying Plan. 4.If:

(i)the Noncomplying Plan reduces its benefits so that the employee, subscriber, or member receives less in benefits than he or she would have received had the Complying Plan paid or provided its benefits as the Secondary Plan and the Noncomplying Plan paid or provided its benefits as the Primary Plan; and (ii)governing state law allows the right of subrogation set forth below;

Then the Complying Plan shall advance to or on behalf of the employee, subscriber, or member an amount equal to such difference. However, in no event shall the Complying Plan advance more than the Complying Plan would have paid had it been the Primary Plan less any amount it previously paid. In consideration of such advance, the Complying Plan shall be subrogated to all rights of the employee, subscriber, or member against the Noncomplying Plan. Such advance by the Complying Plan shall also be without prejudice to any claim it may have against the Noncomplying Plan in the absence of such subrogation.

(5)Allowable Expense. A term such as ‘‘usual and customary,’’ ‘‘usual and prevailing,’’ or ‘‘reasonable and customary,’’ may be substituted for the term ‘‘necessary, reasonable and customary.’’ Terms such as ‘‘medical care’’ or ‘‘dental care’’ may be substituted for ‘‘health care’’ to describe the coverages to the which the COB provision applies.

(6)Subrogation. The COB concept clearly differs from that of subrogation. Provisions for one may be included in health care benefits contracts without compelling the inclusion or exclusion of the other.

History

• Authority: T.C.A. §§56—1—701 and 56—2—301.
• Administrative History: Original chapter filed June 4, 1986; effective July 4, 1986.

Tenn. Comp. R. & Regs. 0780-01-53-.05 EFFECTIVE DATE: EXISTING CONTRACTS

(1)This regulation takes effect on January 1, 1987. It applies to every group contract which provides health care benefits and is issued on or after that date.

(2)A group contract which provides health care benefits and was issued before that date shall be brought into compliance with this regulation by the later of:

(a)the next anniversary date or renewal date of the group contract; or (b)the expiration of any applicable collectively bargained contract pursuant to which it was written.

History

• Authority: T.C.A. §§56—1—701 and 56—2—301.
• Administrative History: Original chapter filed June 4, 1986; effective July 4, 1986.

Chapter 0780-01-54 Self-Insured Worker's Compensation Pools

Tenn. Comp. R. & Regs. 0780-01-54-.01 PURPOSE AND SCOPE

The purpose of this Chapter is to regulate employers that choose to pool their workers’ compensation liabilities pursuant to T.C.A. § 50-6-405(c). This Chapter shall not apply to governmental tort liability pools established pursuant to Tennessee Code Annotated Title 20,

Chapter 2.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.02 DEFINITIONS

(1) “Administrator” means any person engaged by a pool to carry out the policies established by the pool’s board of trustees and to provide daily management of the pool.

(2) “Certificate of Authority” means a license issued by the Commissioner to a pool granting it the

authority to insure the workers’ compensation liabilities of its members for such members’ employees in this State.

(3) “Commissioner” means the Commissioner of the Tennessee Department of Commerce and Insurance.

(4) “Declaration” or “declared” for purposes of Rule 0780-01-54-.15 means an action by a Board that has the effect of making the surplus monies for a fund year payable to its members, regardless of whether the amount of surplus is known at the time of the declaration or whether it is intended to be paid at that time.

(5) “Department” means the Tennessee Department of Commerce and Insurance.

(6) “Designated Rate Service Organization” means the rate service organization designated by the Commissioner pursuant to T.C.A. § 56-5-320.

(7) “Fund year” means the fiscal year during which workers’ compensation insurance liabilities and expenses associated therewith are incurred by a pool. Each fund year shall be considered separately for purposes of allocated losses and expenses and for reserving for and paying such losses and expenses.

(8) “IBNR” or “Incurred But Not Reported” means those claims which have been incurred by an insured of the pool but which have not been submitted to the pool for payment of workers’ compensation benefits.

(9) “Insolvent” or “insolvency” means a pool whose liabilities exceed the value of its assets and/or that has stopped paying debts in the ordinary course of business or is unable to pay them as its debts fall due, as may be shown by an excess of the pool’s required liability reserves and other liabilities over its assets.

(10) “Known Claims” means claims that have been incurred by an insured of the pool and identified to, or submitted to, the pool for payment of workers’ compensation benefits.

(11) “Loss reserves” means funds of the pool immediately available to pay:

(a) known or open claims and expenses associated therewith;

(b) IBNR and expenses associated therewith; and (c) expenses associated with run-off or termination of a pool.

(12) “Manual Rate” means the product of the advisory prospective loss cost and a pool’s loss cost multiplier for each individual self-insured pool.

(13) “NAIC” means the National Association of Insurance Commissioners.

(14) “Net premium” means premium derived from standard premium adjusted by any advance premium discounts.

(15) “Person” means any natural or artificial person including, but not limited to, an individual, partnership, association, trust, or corporation.

(16) “Qualified Actuary” means an individual who:

(a) Is a member in good standing of the American Academy of Actuaries and an associate or fellow of the Casualty Actuarial Society;

(b) Is qualified to sign statements of actuarial opinion for workers’ compensation insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements;

(c) Is familiar with the reserve requirements applicable to workers’ compensation insurance companies; and (d) Has not been found by the Commissioner (or if so found has subsequently been reinstated as a qualified actuary), following appropriate notice and hearing to have:

1. Violated any provision of, or any obligation imposed by, the Tennessee Insurance Law or other law in the course of his or her dealings as a qualified actuary;

2. Been found guilty of fraudulent or dishonest practices;

3. Demonstrated his or her incompetence, lack of cooperation with the Commissioner, or untrustworthiness to act as a qualified actuary;

4. Submitted to the Commissioner during the past five (5) years an actuarial opinion or memorandum that the Commissioner rejected because it did not meet the provision of this Chapter including standards set by the Actuarial Standards Board; or 5. Resigned or been removed as an actuary within the past five (5) years as a result of failure to adhere to generally acceptable actuarial standards.

(17) “Pool” means any group of employers who, for the purpose of qualifying as self-insurers, pool their liabilities related to workers’ compensation insurance, as provided in Tennessee Code Annotated Title 50, Chapter 6.

(18) “Sponsoring association” means a trade or professional association that has been in active existence in Tennessee for at least five (5) years that (1) has a constitution or bylaws; (2) has members that support the association by regular payment of dues on an annual, semiannual, quarterly or monthly basis; and (3) has been created in good faith for purposes other than that of creating a workers’ compensation self insurer pool. The sponsoring association must give a group of ten (10) or more employer members of the association permission to pool their liabilities under Tennessee Code Annotated Title 50, Chapter 6 for the purposes of qualifying as self-insurers.

(19) “Standard premium” means the premium derived from the manual rates adjusted by experience modification factors but before advance premium discounts.

(20) “Tennessee Insurance Law” means any law administered by the Commissioner affecting the business of insurance in this state, including, but not limited to T.C.A. § 50-6-405 and T.C.A. §§ 56-1-101, et seq. as well as any rules promulgated thereunder.

(21) “Third party administrator” means a person which contracts with a pool to provide services relating to any of the following:

(a) Claim adjusting;

(b) Safety engineering;

(c) Compilation of statistics and the preparation of reports relating to premium, loss and taxes;

(d) Preparation of other required self-insurance reports;

(e) Development of members’ premiums, assessments, and other fees; or (f) Administration of a claim fund.

(22) “Unearned premium” means the portion of the written premium applicable to the unexpired or unused part of the policy period for which the premium has been paid.

(23) “Workers’ compensation” means both workers’ compensation and employer’s liability, as prescribed under Tennessee Code Annotated Title 50, Chapter 6.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005. Amendment filed December 31, 2008; effective March 16, 2009.

Tenn. Comp. R. & Regs. 0780-01-54-.03 CERTIFICATE OF AUTHORITY REQUIRED

No person shall act as a pool without a certificate of authority issued to it by the Commissioner.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.04 APPLICATION FOR CERTIFICATE OF AUTHORITY

(1) To apply for a certificate of authority, a pool shall file with the Commissioner an application on a form adopted by the Commissioner, accompanied by a non-refundable filing fee as set under T.C.A. § 56-4-101(a)(1). A person in this state applying for a certificate of authority to act as a pool shall, under penalty of refusal, suspension or revocation of the certificate of

authority, declare therein that the statements made in the application are true, correct and complete to the best of the person’s knowledge and belief under penalty of perjury.

(2) An application for a certificate of authority shall include the following documentation, together with such other information or documentation as the Commissioner may require:

(a) Organizational documents and information.

1. The articles of incorporation, trust agreement, or any other similar document from which the pool is formed;

2. The by-laws of the pool;

3. The mailing addresses and physical location of all of the pool’s offices in Tennessee, including the address where the books and records of the pool will be located;

4. The name, address, and telephone number of each member; and 5. Documentation evidencing designation of the board of trustees, administrator, and, if applicable, third party administrator.

(b) Written contracts.

1. All contracts between the pool and the pool’s expected administrator;

2. All contracts between the pool and the pool’s expected third party administrator;

3. Any and all royalty agreements or contracts;

4. Any and all service fee agreements or contracts; and 5. The errors and omissions insurance policies for the board of trustees issued to protect the pool from damages, if any.

(c) Operational documents.

1. Any operational and/or claims manual to be used by the pool;

2. Documentation establishing the rate at which insurance producers will be commissioned to solicit members to join the pool; and 3. Underwriting guidelines established by the board of trustees.

(d) Financial documents.

1. Documentation in a form acceptable to the Commissioner evidencing the financial ability of the pool to pay the obligations of the pool and to pay the workers’ compensation obligations of its members, as provided in this Chapter; and 2. Documentation evidencing proof of payment to the pool by each member of the initial premium due for such member in an amount of at least twenty-five percent (25%) of the member’s first year premium.

(e) Member documents.

1. Each member’s application for membership into the pool;

2. Indemnity agreements between the pool and each member establishing each member’s joint and several liability to the pool for all expenses, liabilities, and claims asserted against the pool by any person or entity;

3. Documentation evidencing the current experience modifier of each member, if the member’s premium size makes it available;

4. Documentation evidencing loss run data for each member for the past four (4) years or loss run data for all prior years the member has been in business, whichever is less; and 5. A financial statement for the most recent fiscal year ended over ninety (90) days prior to the application and for each quarter ended more than thirty (30) days prior, if such quarterly statement is available. The pool may file the following types of financial statements in order to comply with this Rule:

(i) Audited financial statement prepared by a certified public accountant;

(ii) Compilation report prepared by a certified public accountant;

(iii) Tennessee Franchise and Excise Tax Return including Form 1120; or (iv) Such other financial statements as the Commissioner may accept.

(f) Sponsoring association documents.

1. The articles of incorporation or other similar document from which the sponsoring association is formed;

2. The by-laws, constitution, and procedures of the sponsoring association;

3. Documentation evidencing the fact that the sponsoring association has members that support the association by regular payment of dues on an annual, semiannual, quarterly or monthly basis;

4. A certification signed by the president of the sponsoring association that the association was created in good faith for purposes other than that of creating a self-insurance pool; and 5. Documentation evidencing that the sponsoring association has reviewed the pool’s application for a certificate of authority and believes and represents to the Commissioner that the statements made in the application and the documents accompanying the application comply with the sponsoring association’s constitution, by-laws and procedures and applicable state statutes and regulations.

(3) To obtain and maintain its certificate of authority, a pool shall comply with the following requirements as well as any other requirements established by law or regulation:

(a) Each pool shall provide proof to the Commissioner that it is comprised of ten (10) or more employers of the same trade or professional association, and that the member employers are engaged in the same trade or profession as the other members.

1. The Commissioner may refuse to issue a certificate of authority to a pool upon finding that the different class codes which the pool would be self-insuring are of such diversity or type of risk that it would not be in the interest of the members, the members’ employees, or the public to allow a pool to self-insure such diverse class codes.

2. The Commissioner may, after notice and hearing, revoke the certificate of

authority upon finding that the pool is self-insuring class codes of such diversity and risk that it is not in the interest of the members, the members’ employees, or the public to allow a pool to self-insure such diverse class codes. In lieu of revoking a pool’s certificate of authority, the Commissioner may order a pool to refuse an application for membership, cancel, or non-renew a member upon making such findings.

3. Pools that possess a certificate of authority as of January 1, 2005, do not have to comply with Subparagraph (a) except to the extent they accept new members after such date.

(b) Upon request by the Commissioner, a pool shall provide proof of an ability to pay all claims, liabilities and legal obligations of the pool, including all open workers’ compensation claims submitted by employees of the members of the pool. Such proof shall be established by the following documents:

1. The pool’s annual audited financial reports. Such annual audited financial reports shall adhere to the requirements for financial reports provided in Chapter 0780-1-65;

2. A certification from a qualified actuary that the pool has adequately reserved for its losses, including those losses that have been incurred but not reported;

3. Each member’s financial condition in the form of an annual audited financial statement, compilation report prepared by a certified public accountant, a Tennessee Franchise and Excise Tax Return including Form 1120, or such other financial statements as the Commissioner may accept; and 4. Such other documents the Commissioner finds relevant to determining whether the pool can pay all of its claims, liabilities and legal obligations of the pool.

(c) Each pool shall obtain both a specific and aggregate excess insurance policy in a form and amount acceptable to the Commissioner.

1. Each pool shall file with the Commissioner a certification from a qualified actuary that the amount of specific and aggregate excess insurance procured by the pool is actuarially sound. A pool may forego the purchase of aggregate excess coverage if it is not obtainable or if it provides no additional protection to the pool so long as this decision is certified by a qualified actuary.

2. The Commissioner may disallow the use of a specific and/or aggregate excess insurance policy upon determining it is not sufficient to meet the pool’s responsibilities. In making this determination, the Commissioner may consider the pool’s size, types of employments, years in existence and other relevant factors.

(d) Each pool shall enter into indemnity agreements with its members jointly and severally binding the pool and each member thereof to meet the financial obligations of the pool.

1. The indemnity agreement shall be on a form prescribed by the Commissioner and shall include minimum uniform substantive provisions prescribed by the Commissioner.

2. Subject to the Commissioner’s prior written approval, a pool may add other provisions needed because of its particular circumstances.

3. The agreement shall be irrevocable for the period during and for which the member receives workers’ compensation coverage through the pool, shall bind any successor in interest, and shall remain in effect as long as there is in this State any obligation or liability of the pool.

(e) The pool has deposited with the Commissioner, in a form approved by the Commissioner, one of the following types of security in the amount of one hundred thousand dollars ($100,000) to be used for the payment of claims in the event the pool becomes insolvent:

1. Negotiable securities;

2. Certificates of deposit;

3. Letters of credit; or 4. Surety bonds.

(f) Each pool shall have an estimated annual standard premium of at least one million dollars ($1,000,000) in order to obtain and maintain a certificate of authority.

(g) The Commissioner may require a pool to submit any documents necessary to verify the information contained in or documents submitted with the application.

(4) Before approving an application for a certificate of authority filed under this Rule, the Commissioner shall find that the person applying:

(a) Has not committed any act that is a ground for denial, suspension or revocation set forth in Rule 0780-01-54-.22;

(b) Has the financial ability to pay the obligations of the pool and to pay the workers’ compensation obligations of its members;

(c) Has complied with all requirements for obtaining and maintaining a certificate of

authority issued to a pool by the Commissioner; and (d) Has paid the fees set forth in this Rule.

(5) In the event the Commissioner determines that an applicant does not qualify for a certificate of authority, the Commissioner shall notify the applicant in writing of the denial and the basis thereof.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005. Amendment filed December 31, 2008; effective March 16, 2009.

Tenn. Comp. R. & Regs. 0780-01-54-.05 CONTINUED REPORTING REQUIREMENTS

Any amendments to the organizational documents or written contracts required to be provided to the Commissioner by Rule 0780-01-54-.04 shall be filed with the Commissioner with a nonrefundable filing fee of ninety dollars ($90.00) no later than thirty (30) days prior to the proposed effective date of the amendments.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h) and 56-4-101(a)(5).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.06 BOARD OF TRUSTEES

(1) Each pool shall be operated by a board of trustees which shall consist of not less than five (5) persons whom the members of a pool elect for stated terms of office. No less than two-thirds (2/3) of the members of the board shall be comprised of members of the pool. The pool’s administrator and any owner, officer, employee of, or any other person affiliated or contracting with the administrator shall not serve on the board of trustees unless the administrator is a wholly-owned subsidiary of the sponsoring association, whose directors are simultaneously trustees of the pool and members of the pool and all serve without compensation and expense reimbursement. All members of the board of trustees shall be residents of this State or officers of corporations authorized to do business in this State. The board of trustees of each pool shall ensure that all claims are paid promptly and take all necessary precautions to safeguard the assets of the pool.

(2) The board of trustees shall:

(a) Maintain responsibility for all monies collected or disbursed from the pool.

(b) Conduct regular meetings, maintain minutes of such meetings and make such minutes available to the Commissioner. The board of trustees shall meet no less than once every quarter.

(c) Have the sole and undelegable authority to approve an application for membership into the pool and the initial premium of a new member.

1. The board of trustees may choose to delegate the decision to admit new members into the pool to one (1) or more board members as long as those board members are also members of the pool.

2. The decision whether to accept new members into the pool must be based on the pool’s approved underwriting guidelines.

3. The entire board of trustees remains liable for the decision to appoint new members even if that decision is delegated to one (1) or more board members.

(d) Establish an investment policy for the pool. Such policy shall address credit, quality of investments, maximum maturity of investments and such other matters as the board deems appropriate.

(e) Designate an administrator to carry out the policies established by the board of trustees and to provide daily management of the pool. The areas of authority delegated to the administrator must be delineated in the written minutes of its meetings or in the written contract between the pool and the administrator.

(f) Appoint a third party administrator, should the board in its discretion desire to do so, for certain daily operations of the pool to be delegated.

(g) Retain an independent certified public accountant to prepare the statement of financial condition required by Rule 0780-01-54-.09.

(3) The board of trustees shall not:

(a) Extend credit to individual members for payment of premium, except pursuant to payment plans approved in writing by the Commissioner prior to the extension of credit; or (b) Allow anyone to borrow monies from the pool.

(4) Each pool shall include in its bylaws or articles of incorporation the method by which a trustee can be replaced or terminated.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.07 ADMINISTRATORS

(1) No person shall act as an administrator for a pool without a license issued by the Commissioner. Persons acting as an administrator for an existing pool as of January 1, 2005, shall have twelve (12) months from the effective date of these rules as amended herein in which to obtain such license from the Commissioner.

(2) To apply for a license, an applicant shall file with the Commissioner an application on a form adopted by the Commissioner. A person applying for a license to act as an administrator shall, under penalty of refusal, suspension or revocation of the certificate of authority, declare therein that the statements made in the application are true, correct and complete to the best of the person’s knowledge and belief and upon penalty of perjury.

(3) An application for a license shall include the following documentation, together with such other information or documentation as the Commissioner may require:

(a) If the applicant is not a natural person, the most recent financial condition of the applicant in the form of an audited financial, a compilation report prepared by a certified public accountant, a Tennessee Franchise and Excise Tax Return, or such other financial statements that the Commissioner may accept;

(b) Evidence that the applicant has obtained a fidelity bond in the amount of two hundred thousand dollars ($200,000) written by a company licensed to transact business in this state, which may be obtained by either the administrator or the pool on the administrator’s behalf;

(c) Evidence that the applicant has obtained an errors and omissions insurance policy for the protection of the pool in the amount of two hundred thousand dollars ($200,000) written by a company licensed to transact insurance in this state, unless waived by the Commissioner upon a showing of proof that the applicant is unable to obtain such coverage; and (d) NAIC Biographical Data forms completed by the officers and directors of the applicant.

(4) The Commissioner may deny an application for a license issued under this Rule upon finding that the applicant does not have sufficient experience or qualification to provide services as an administrator to a pool, or for such other grounds enumerated in Rule 0780-01-54-.22. In reviewing an application, the Commissioner may consider the specific services which would be performed by the applicant for the pool.

(5) Each pool shall enter into a written contract with the administrator setting forth with specificity the functions of the administrator in their entirety, and the method for calculating the entire amount of compensation to be paid to the administrator for the services rendered to the pool.

(6) No administrator or its employees or the pool’s board of trustees shall accept, or be the beneficiary of, either directly or remotely, any fee, brokerage, commission, gift, or other consideration for or on account of any loan, deposit, sale, payment, exchange, or reinsurance transaction made by or on behalf of such pool, or be pecuniarily interest in any such purchase, sale, loan, either as borrower, principle, coprinciple, agent, or beneficiary, except that if a member, such person shall be entitled to all of the benefits accruing under the terms of the membership.

(7) No administrator or its employee(s) or the pool’s board of trustees shall take or receive for their own use any fee, brokerage, commission, gift or other consideration of the pool except for reasonable compensation for services performed or sales or purchases made to or for the pool in accordance with the terms of the administrator contract approved by the Commissioner. No administrator or its employee(s) or the pool’s board of trustees shall collect a commission for the procurement of excess insurance for the pool.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.08 MEMBERS OF THE POOL

(1) The board of trustees shall establish underwriting guidelines with respect to the addition of members to the pool as well as the renewal of its members. At a minimum, such underwriting guidelines shall set forth requirements for the members to be able to provide the pool evidence that the member is solvent. Each pool shall file such guidelines and any amendments thereto with the Commissioner no later than thirty (30) days prior to their proposed effective date.

(2) A person joining a pool as a member shall:

(a) Submit an application for membership to the board of trustees or its administrator; and (b) Enter into an indemnity agreement binding such person jointly and severally to the financial obligations of the pool incurred during a fund year in which the person was a member of the pool, as required by Rule 0780-01-54-.04(3)(d).

(3) No applicant shall become a member of a pool until the board of trustees for the pool determines that the applicant meets the current and approved underwriting guidelines and approves the membership of the applicant.

(a) If the Commissioner determines that a member does not qualify under a pool’s current and approved underwriting guidelines, the Commissioner may order the pool to cancel the membership of the non-qualifying member after the member receives thirty (30) days notice of the cancellation. Notwithstanding a member’s disqualification, a pool may charge this member a pro-rata amount of the quoted yearly premium as well as any amount due upon audit of the member.

(b) Any person aggrieved by an order of the Commissioner issued under Subparagraph (a) may request a hearing to appeal such an order. Such request shall be filed in writing with the Commissioner within fifteen (15) days of the entry of the order.

(4) Membership and coverage of a pool member may take effect no earlier than each member's date of approval by the board of trustees. A board of trustees may allow the pool's administrator to bind coverage on a member that qualifies under the pool's current and approved underwriting guidelines so long as that member's approval is subsequently voted on by the board of trustees at its next meeting. The pool shall notify the Commissioner within ten (10) days of granting membership to a new member, and shall file a copy of the new member's indemnity agreement.

(5) Each member’s application for membership and its document evidencing approval to belong to the pool shall be maintained as permanent records of the pool.

(6) No approval for membership in a pool may be granted to, nor shall any claims be paid on behalf of, any person who has not completed, signed and notarized the indemnity agreement required by Rule 0780-01-54-.04(3)(d).

(7) Individual members of a pool shall be subject to cancellation by the pool pursuant to the pool’s by-laws or when the Commissioner determines that a member does not qualify for membership under a pool’s current and approved underwriting guidelines in accordance with Subparagraph (3)(a) of this Rule. In addition, individual members may elect to terminate their participation in the pool at any time. The pool shall notify the Commissioner and the Commissioner of Labor and Workforce Development of the termination or cancellation of a member within ten (10) days of such cancellation or termination and shall maintain coverage of each cancelled or terminated member for a period of thirty (30) days after such notice unless the pool is notified sooner by the Commissioner of Labor and Workforce Development that the cancelled or terminated member has procured workers’ compensation insurance through an insurer, has become a licensed self-insurer, or has become a member of another pool. A cancelled or terminated member that receives the thirty (30) days of extended coverage shall remain liable to the pool for premiums during that period in the pro-rata amount of the quoted yearly premium as well as any amount due upon audit of the member.

(8) The pool shall pay all workers’ compensation benefits for which each member incurs liability during the member’s period of membership in the pool. Notwithstanding the foregoing, a pool may only pay workers’ compensation benefits for claims incurred by employees that meet the requirements of T.C.A. § 50-6-115. Each member shall attest to the pool annually that the employees covered under the employer’s membership in the pool meet the extraterritorial requirements of T.C.A. § 50-6-115.

(9) A pool shall cancel a member that cannot promptly pay its premiums when they become due or in accordance with the pool’s cancellation policy. A pool shall cancel a member that is more than one hundred twenty (120) days late in making a premium payment. A pool shall cancel a member that does not pay its assessments when due.

(10) A member who elects to terminate its membership or is cancelled by a pool remains jointly and severally liable for the financial obligations of the pool and its members incurred during any fund year in which the person was a member of the pool.

(11) The insolvency, bankruptcy, or a member’s refusal to pay does not relieve the pool or any other members of liability for the payment of any financial obligations, liabilities or workers’ compensation benefits incurred by the pool for such insolvent, bankrupt or refusing member during that member’s period of membership.

(12) The pool shall file with the Commissioner on or before the day it is required to file its audited financial statement a copy of the financial condition of each member of the pool for the most recently ended fiscal year. The statement of financial condition can be an annual audited financial statement, a compilation report prepared by a certified public accountant, a Tennessee Franchise and Excise Tax Return including a Form 1120, or such other financial statements that the Commissioner may accept.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h) and 50-6-115.
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005. Amendments filed December 31, 2008; effective March 16, 2009.

Tenn. Comp. R. & Regs. 0780-01-54-.09 FINANCIAL STATEMENTS AND OTHER REPORTS

(1) Each pool shall submit to the Commissioner an unaudited statement of financial condition on or before April 1 of each year for the pool’s prior fiscal year. Such statement shall be signed by the administrator of the pool and the chairman of the board of trustees.

(2) Each pool shall submit to the Commissioner a statement of financial condition audited by an independent certified public accountant on or before the last day of the sixth (6th) month following the end of the pool’s fiscal year. Such statement shall also be accompanied by a non-refundable filing fee of five hundred fifteen dollars ($515).

(a) The pool must submit an unaudited management report indicating the current financial condition of each fund year.

(b) A pool shall be given thirty (30) additional days in which to file its audited financial statement if the pool notifies the Commissioner in writing at least thirty (30) days prior to the date the audited financial statement is to be filed. The Commissioner may grant such additional extensions as deemed appropriate.

(3) In determining the financial condition of the pool, the Commissioner may, in the Commissioner’s sole discretion, non-admit the following assets of the pool for any regulatory

purpose:

(a) Account receivables over ninety (90) days;

(b) Pre-paid expenses;

(c) Office furniture, computer systems with a value less than fifty thousand dollars ($50,000), and vehicles;

(d) Intangible assets;

(e) Loans on personal security and cash advances;

(f) Discounting reserves; and (g) Unearned premiums.

(4) The commissioner may hold a hearing in accordance with the procedures set out in T.C.A.

Title 4, Chapter 5, Part 3, to determine whether a certified accountant is qualified and, considering the evidence presented, may rule that the accountant is not qualified for purposes of expressing his or her opinion on the financial statements in the annual audited financial statement made pursuant to this Chapter and require the insurer to replace the accountant with another that the commissioner deems appropriate.

(5) The financial statements required by this Rule may be prepared in accordance with Generally Accepted Accounting Principles in effect for the period covered by the statement or such other accounting method(s) approved by the Commissioner.

(6) The Commissioner may prescribe the format and frequency of other reports which may include, but shall not be limited to, payroll audit reports, summary loss reports, and quarterly financial statements. Quarterly loss ratios shall be reported on an accident year basis within thirty (30) days from the end of the quarter.

(7) Failure to file any of the financial statements required by this Rule on a timely basis authorizes the Commissioner to suspend or revoke the certificate of authority of a pool under

Rule 0780-01-54-.22. In lieu of suspending or revoking the pool's certificate of authority, the Commissioner may assess a civil penalty in the amount of one hundred dollars ($100) per day for each day of delinquency, or in such other amount as allowed by statute.

History

• Authority: T.C.A. §§ 4-5-101 et seq., 50-6-405(c) and (h) and 56-4-101.
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005. Amendments filed December 31, 2008; effective March 16, 2009.

Tenn. Comp. R. & Regs. 0780-01-54-.10 RATES AND RATE REPORTING

(1) Every pool shall adhere to the uniform classification system, uniform experience rating plan, and manual rules of the designated rate service organization. A pool may request permission from the Commissioner to vary from such manual rules. No permission granted by the Commissioner may be relied upon by a pool unless the variance is in writing.

(2) Every pool shall use the advisory prospective loss cost approved by the Commissioner pursuant to T.C.A. §§ 50-6-402 and 56-5-306.

(3) Premium contributions to the pool shall be determined by applying the manual rates and rules of the designated rate service organization.

(4) Each pool shall file with the Commissioner its loss cost multiplier and supporting information not later than fifteen (15) days after the effective date and at least annually thereafter at least fifteen (15) days prior to the pool’s renewal date. Multipliers shall apply to the most recently approved, currently effective advisory prospective loss cost. All multipliers filed pursuant to this Paragraph shall be actuarially justified and shall be certified by a qualified actuary.

(5) Each pool may be audited by an auditor acceptable to the Commissioner to verify proper classifications, experience rating, payroll and rates in conformance with the standards and rules of the designated rate service organization. A report of the audit shall be filed with the Commissioner in a form acceptable to the Commissioner within sixty (60) days of such audit.

All such audits shall be prepared at the expense of the pool.

(6) Each pool shall provide to its members a method by which a member may appeal the application of the pool’s rating system to the member. If the pool fails to grant or reject such request within thirty (30) days of receiving the written appeal, the member may proceed in the same manner as if the application had been rejected. Any party affected by the pool’s final decision may, within thirty (30) days of the decision, appeal the decision to the Commissioner.

(7) If the Commissioner determines that, as a result of an improper application of the pool’s rating system or violation of this Chapter, the pool has improperly calculated the premium rates of a member, the Commissioner may order the pool to assess the member or refund premiums collected in order to correct the rate charged the member.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h) and 50-6-414.
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.11 PREMIUMS AND RESERVES

(1) A pool shall establish and maintain an aggregate surplus equal to:

(a) thirty percent (30%) of the unpaid claims liability of the pool. The pool may accumulate the surplus at a rate of ten percent (10%) per fund year over the next three (3) years.

However, each pool shall have an aggregate surplus of thirty percent (30%) of the unpaid claims liability three (3) years from the effective date of this Chapter.

(2) Each pool shall establish through a qualified actuary a premium payment plan for its members and shall submit such to the Commissioner for his/her approval at least thirty (30) days prior to the beginning of the next fund year. The premium payment plan shall not include installment fees. The Commissioner may, in his/her discretion, disapprove a premium payment plan and require the pool to resubmit a premium payment plan for its members that is acceptable to the Commissioner.

(3) The commissioner may hold a hearing in accordance with the procedures set out in Tenn.

Code. Ann. Title 4, Chapter 5, Part 3, to determine whether an actuary is qualified and, considering the evidence presented, may rule that the actuary is not qualified for purposes of expressing his or her opinion on the financial statements in the annual audited financial statement made pursuant to this Chapter and require the insurer to replace the actuary with another that the commissioner deems appropriate.

(4) Each pool shall establish and maintain adequate reserves for:

(a) Known claims and expenses associated therewith;

(b) Claims incurred but not reported and expenses associated therewith; and (c) Bad or uncollectible debt reserves based on the historical experience of the pool or other pools, if no historical experience is available for the pool.

(5) In addition to the minimum requirements for reserves as set out in this Chapter, the Commissioner may require, after notice and opportunity for hearing, additional reserves so that a pool’s reserves shall be reasonable in relation to the pool’s outstanding liabilities and premiums and adequate to its financial needs. For purposes of this Rule, in determining whether a pool’s reserves are reasonable in relation to the pool’s outstanding liabilities and premiums and adequate to its financial needs, the following factors, among others, shall be considered:

(a) The size of the pool as measured by its assets, liabilities, reserves, premiums, and other appropriate criteria;

(b) The number and size of members in the pool;

(c) The nature and extent of the pool’s excess coverage;

(d) The quality, diversification and liquidity of the pool’s investment portfolio; and (e) The recent past and projected future trend in the size of the pool’s investment portfolio.

History

• Authority: T.C.A. §§ 4-5-101 et seq., and 50-6-405(c) and (h).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005. Amendment filed December 31, 2008; effective March 16, 2009.

Tenn. Comp. R. & Regs. 0780-01-54-.12 TAXES AND DELINQUENCIES

(1) Each pool shall be subject to pay a tax on monies collected from members in the amount required of insurance companies pursuant to T.C.A. § 56-4-206. Such tax shall also include the surcharge imposed on insurance companies pursuant to T.C.A. § 56-4-206 to be earmarked for the administration of the Tennessee Occupational Safety and Health Act, T.C.A. § 50-3-101, et seq. Assessments made by the pool or ordered by the Commissioner shall be taxed as premium pursuant to this Rule.

(2) Any pool failing and neglecting to make such returns and payments promptly and correctly on or before the last day of the sixth (6th) month following the end of the pool’s fiscal year shall forfeit and pay to the Commissioner, in addition to the amount of these taxes, an amount equal to five percent (5%) for the first month or fractional part thereof of delinquency; provided, that should the period of delinquency exceed one (1) month, the rate of penalty will be an additional five percent (5%) for the second month or fractional part thereof and penalty thereafter at the rate of one half of one percent (.5%) per month of the amount of tax due, the maximum penalty not to exceed ten thousand dollars ($10,000) for any pool not more than three (3) days delinquent. All delinquencies shall bear interest at the rate of ten percent (10%) per annum from the date the amount was due until paid. The penalty and interest herein provided for shall apply to any part of the tax unpaid by the due date and no such penalty or interest may be waived.

(3) The Commissioner has the discretion, for good cause shown, upon application made at least thirty (30) days in advance of delinquency date, to grant an extension of time determined by the Commissioner but not to exceed sixty (60) days to a pool to file the premium tax returns and pay the tax imposed by T.C.A. § 56-4-206, without penalty attached, but such tax shall bear interest as herein provided from the date the amount was due.

(4) Any pool failing to pay the tax due plus penalty and interest for sixty (60) days beyond the due date shall thereafter be barred from transacting any business of insurance in the state until these taxes and penalties are fully paid, and the Commissioner shall revoke the certificate of authority granted to the pool and its administrator to transact business in the state.

(5) No grace period for the filing of returns and payments shall be allowed except for the thirty (30) day extension provided for in Paragraph (3) of this Rule. A premium tax return and payment made to the Commissioner shall not be considered as paid on or before the due date unless:

(a) The premium tax return and payment are received by the Commissioner on or before the due date;

(b) The premium tax return and payment bears a post office cancellation mark stamped by the United States post office on or before the due date, or are mailed by certified or registered mail, or have a certificate of mailing on or before the due date. A premium tax return and payment received by the Commissioner bearing a metered mail stamp and no post office cancellation mark stamped by the United States post office shall be deemed filed and received on the date such premium tax return arrives at the Commissioner; or (c) In the event a premium tax return and payment are mailed but not received by the Commissioner, or received and the cancellation mark is illegible or omitted, such return and payment shall be deemed filed and received on the date they were mailed, if the sender establishes that the premium tax return and payment were deposited in the United States mail. In order to establish proof of mailing under these circumstances, a record authenticated by the United States post office that the original mailing was sent registered mail, certified mail, or by certificate of mailing, shall be the only proof accepted by the Commissioner.

(6) A pool may receive a tax credit in accordance with T.C.A. § 56-4-210.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h), 56-4-206, 56-4-210, 56-4-216 and 2005 Public Acts, Chapter 390.
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.13 INVESTMENTS

(1) Each pool shall maintain an amount equal to at least eighty-five percent (85%) of its net assets in the following:

(a) Cash and cash equivalents;

(b) A certificate of deposit issued by a bank or other financial institution whose deposits qualify for Federal Deposit Insurance Corporation protection, provided, that if the Commissioner determines that the amount of the certificate of deposit purchased by an insurer in any one bank is not a sound investment, the Commissioner may require the insurer to liquidate that portion found to be an unsound investment;

(c) A share of savings account of a savings and loan or building and loan association, to the extent that an account is insured by the Federal Deposit Insurance Corporation; or (d) A rated credit instrument that is issued, assumed, guaranteed, or insured by the United States or Canada or by a government-sponsored enterprise of the United States or Canada if the instrument is assumed, guaranteed, or insured by the United States or Canada or is otherwise backed or supported by the full faith and credit of the United States or Canada.

(2) Notwithstanding any other provision in this Chapter, funds not needed for current obligations may be invested by the board of trustees in “Tennessee securities” as defined in T.C.A. § 56- 4-210(b).

(3) Investment in real estate by a pool may only be undertaken with the prior approval of the Commissioner.

(4) Each pool shall maintain its investments and deposits pursuant to Chapter 0780-1-46.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h) and 56-4-210.
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.14 INFORMATION TO MEMBERS

The articles of incorporation, trust agreement or bylaws of each pool shall state what each member’s rights are with respect to receiving financial information related to the pool.

Notwithstanding anything contained in the organizational documents of the pool, each pool shall, within thirty (30) days of receiving a written request and upon payment of a reasonable charge, furnish to any member or former member affected by a rate used by the pool, all pertinent information as to such rate, including but not limited to loss run data concerning the member. Each pool shall annually send to each of its members a copy of all information relative to the member’s experience modification factor.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.15 REFUNDS AND DIVIDENDS

(1) Any monies for a fund year in excess of the amount necessary to fund all obligations for that fund year may be declared to be refundable by the board of trustees not less than eighteen (18) months after the end of the fund year and only with the written approval of the Commissioner.

(a) Any request for approval under this Paragraph shall be accompanied by an unaudited management report indicating the financial condition of each fund year.

(b) In addition to the information sought in Subparagraph (a) of this Paragraph, the Commissioner may request such additional information from the pool to help in determining whether the declaration of the dividend would be hazardous to the financial condition of the pool.

(2) If a refund is declared by a pool and such refund is approved to be disbursed by the Commissioner, ten percent (10%) of the refundable amount must be retained by the fund or pool for an additional year to cover any liabilities that may develop as a result of incurred but not reported losses for that period.

(3) Each member shall be given a written description of the refund policy of the pool at the time of application for membership. Payment of a refund based on a previous fund year shall not be contingent on continued membership in the pool after that fund year. Each such refund policy shall be filed and approved by the Commissioner prior to the policy’s effective date.

(4) Before any dividend or refund may be paid, the pool must receive the written approval of the Commissioner.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005. Amendment filed December 31, 2008; effective March 16, 2009.

Tenn. Comp. R. & Regs. 0780-01-54-.16 REPEALED

History

• Authority: T.C.A. §§ 50-6-405(c) and (h), and 2008 Public Acts, Chapter 841.
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005. Repeal filed December 31, 2008; effective March 16, 2009.

Tenn. Comp. R. & Regs. 0780-01-54-.17 INSURANCE PRODUCER LICENSE REQUIRED

Any person soliciting membership in a pool must be appropriately licensed as an insurance producer authorized to sell property and casualty lines of insurance. Any person selling, soliciting or negotiating membership in a pool shall be subject to all the statutory provisions, prohibitions and requirements contained in Tennessee Code Annotated Title 56, Chapter 6, Part 1. Notwithstanding this provision, the sponsoring association or administrator may promote member participation in the pool and answer general questions regarding the qualifications for the pool without being deemed to be selling, soliciting or negotiating membership. However, anyone receiving commissions for the addition of new members will be deemed to be selling, soliciting, or negotiating membership and will be required to obtain an insurance producer license.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h) and 56-6-101 through 56-1-126.
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.18 MISREPRESENTATION PROHIBITED

No person shall make a material misrepresentation, omit to state a material fact, including the joint and several nature of the pool, or make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in connection with the offering of workers’ compensation coverage by a pool to members of a trade or professional association. Notwithstanding the forgoing, a misrepresentation shall not provide a member grounds for avoiding its liabilities and obligations to the pool if that member’s workers’ compensation liabilities have been paid or incurred by the pool.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h), 56-8-104 and 56-8-113.
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.19 SERVICE OF PROCESS

Each pool and member thereof that has operated or is operating in this State shall be deemed through acceptance of its certificate of authority to have appointed the Commissioner as its attorney-in-fact to receive service of legal process issued against it in this State with respect to any matters arising out of the actions of or related to the pool. The appointment shall be irrevocable, shall bind any successor in interest, and shall remain in effect as long as there is in this State any obligation or liability of the pool.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h).
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.20 EXAMINATIONS AND INVESTIGATIONS

(1) The Commissioner has the authority to examine the affairs of any pool that has applied for or received a certificate of authority under this Chapter in order to determine the financial condition of the pool or to determine whether the pool is in compliance with all insurance laws and regulations applicable to it. Such examinations shall be conducted when deemed necessary but no less than once every five (5) years, and all expenses of such examinations shall be assessed against the pool, including the costs of contract examiners or specialists.

T.C.A. § 56-1-411 provides the standard for examination reports and procedure. The following procedure will be applied to pools:

(a) No later than sixty (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 pool examined, together with a notice which shall afford the pool examined a reasonable opportunity of not more than sixty (60) days to make a written submission or rebuttal with respect to any matters contained in the examination report.

(b) Within thirty (30) days of the end of the period allowed for the receipt of written submission 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 work papers and enter an order:

1. Adopting the examination report as filed or with modifications or corrections. If the examination report reveals that a pool is operating in violation of any law,

regulation, or prior order of the Commissioner, the Commissioner may order the pool to take any action the Commissioner considers necessary and appropriate to cure such violations;

2. Rejecting the examination report with directions to the examiners to reopen the examination for purposes of obtaining additional data, documentation or information, and re-filing; or 3. Calling for an investigatory hearing with no less than twenty (20) days notice to the pool for purposes of obtaining additional documentation, data, information or testimony.

(c) If the examination reveals that the pool is operating in violation of any law, regulation or prior order, the Commissioner in such written order may require the pool to take any action the Commissioner considers necessary or appropriate in accordance with the report of examination or the hearing, if any, on such. That order shall be subject to judicial review in accordance with the provisions of Title 27, Chapter 9.

(d) All working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the Commissioner or his/her designee in the course of an examination made under this Rule must be given confidential treatment and may not be made public by the Commissioner or his/her designee, except as to those uses provided in T.C.A. §§ 56-1-411 and 50-6-405(c).

(2) The Commissioner has the authority to investigate the affairs of any person acting as a pool or any person associated or affiliated with a pool that offers or proposes to offer workers’ compensation insurance in this State in order to determine whether such person is in violation of the Tennessee Insurance Law or this Chapter.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h), 56-1-204, 56-1-408, 56-1-409(b)(5), 56-1-411 and 56-1-413.
• Administrative History: Original rule filed April 8, 1986; effective May 8, 1986. Repeal and new rule filed August 31, 2005; effective November 14, 2005. Amendment filed December 31, 2008; effective March 16, 2009.

Tenn. Comp. R. & Regs. 0780-01-54-.21 CEASE AND DESIST ORDERS

(1) Except as otherwise provided in Paragraph (2) of this Rule, after notice and opportunity for a hearing and in accordance with any statute specific to a given practice, the Commissioner may issue an order requiring a pool to cease and desist from engaging in any act or practice found to be in violation of any applicable statute or provision under the Tennessee Insurance Law, this Chapter, or any order of the Commissioner.

(2) Whenever the Commissioner determines that a pool has been established or maintained in this State in violation of Rule 0780-01-54-.03, the Commissioner may issue a cease and desist order ex parte and without prior notice being given to the pool in accordance with T.C.A. § 56-2-304; provided, however, that the Commissioner shall provide the pool notice and the opportunity for hearing to challenge the issuance of the cease and desist order.

(3) Any order issued pursuant to this Rule will be accompanied by a notice to the pool as to the right to have a hearing. All hearings conducted pursuant to this Chapter will be done in accordance with the Uniform Administrative Procedures Act, T.C.A. §§ 4-5-301, et seq.

(4) Without limitation on other remedies provided by law, upon finding that any person or pool has violated any final cease and desist order issued by the Commissioner, the Commissioner may seek enforcement of such order.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h), 56-2-105 and 56-2-302 through 56-2-304.
• Administrative History: Original rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.22 SUSPENSION OR REVOCATION OF CERTIFICATE OF AUTHORITY

(1) After notice and an opportunity for a hearing, the Commissioner may revoke or suspend the certificate of authority or a license issued under this Chapter upon a finding that any of the following exists:

(a) The pool is in a hazardous financial condition. The Commissioner, in evaluating the financial or operational condition of a pool, may utilize the criteria for evaluating the financial or operation condition of a pool contained in Chapter 0780-1-66. The Commissioner may consider such other factors in evaluating the financial condition of a pool as he/she may deem appropriate;

(b) The pool has failed to pay any premium tax, regulatory penalty or assessment imposed upon the pool at the time when such obligations are owed;

(c) The pool has failed to cooperate in any examination or investigation initiated by the Commissioner pursuant to Rule 0780-01-54-.20;

(d) The pool, the pool’s administrator, or an officer or director thereof, or any member of the pool’s board of trustees has failed to comply with any of the provisions of this

Chapter or with any lawful order of the Commissioner, including those issued pursuant to Rules 0780-01-54-.21 and 0780-01-54-.24, within the time prescribed;

(e) The pool, the pool’s administrator, or an officer or director thereof, or any member of the pool’s board of trustees has provided incorrect, misleading, or incomplete and materially untrue information to the Commissioner;

(f) The pool’s administrator, or an officer or director thereof, or any member of the pool’s board of trustees has been convicted of a felony deemed by the Commissioner to be related to the person’s overall fitness to serve in that capacity and the pool has failed to remove the administrator or board member;

(g) The pool has committed an insurance unfair trade practice or fraud, as defined in T.C.A. § 56-8-104;

(h) The administrator is not sufficiently qualified or has not employed persons sufficiently qualified to administer a pool;

(i) The pool fraudulently obtained its certificate of authority;

(j) The pool made a misrepresentation in the application for the certificate of authority;

(k) The pool, the pool’s administrator or any member of the pool’s board of trustees has misappropriated, converted, illegally withheld, or refused to pay over upon proper demand any monies that belong to a member, an employee of a member, or a person otherwise in its fiduciary capacities; or (l) The pool uses a third party administrator that is lacking any licensed required by the Commissioner.

(2) As provided by T.C.A. § 56-2-305, with respect to any pool licensed or required to be licensed under this Chapter, and in addition to or in lieu of any action taken in Rule 0780-01- 54-.21 or Paragraph (1) of this Rule, the Commissioner may assess a civil penalty against such pool in an amount of not more than one thousand dollars ($1,000) for each violation, but not to exceed an aggregate penalty of one hundred thousand dollars ($100,000), unless the pool knowingly violates a statute, rule or order, in which case the penalty shall not be more than twenty-five thousand dollars ($25,000) for each violation, not to exceed an aggregate penalty of two hundred fifty thousand dollars ($250,000). Each day of continued violation constitutes a separate violation for purposes of computing such penalty. This paragraph does not apply where a statute specifically provides for other civil penalties for the violation.

(3) The Commissioner may serve a notice or order in any action arising under this part by registered or certified mail to the pool’s administrator and/or board of trustees at the address of record in the files of the Commissioner. Service in the manner set forth herein shall be deemed by the Commissioner to constitute service and reasonable notice to such pool or applicant.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h), and 56-2-305.
• Administrative History: Original rule filed August 31, 2005; effective November 14, 2005. Amendment filed December 31, 2008; effective March 16, 2009.

Tenn. Comp. R. & Regs. 0780-01-54-.23 TERMINATION OF CERTIFICATE OF AUTHORITY

(1) A pool wishing to terminate its certificate of authority and cease operations shall file a notice of intent to terminate with the Commissioner and its members no later than ninety (90) days prior to the proposed termination date. A pool shall accompany this notice with a detailed description of its plan as to how it will meet all of its outstanding workers’ compensation obligations and liabilities.

(2) The Commissioner shall not grant the request of any pool to terminate its certificate of

authority until such time as it has demonstrated to the Commissioner that it has made satisfactory plans to meet all outstanding workers’ compensation obligations and liabilities.

Such obligations shall include both known claims and expenses associated therewith and claims incurred but not reported and expenses associated therewith.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h).
• Administrative History: Original rule filed August 31, 2005; effective November 14, 2005.

Tenn. Comp. R. & Regs. 0780-01-54-.24 ASSESSMENTS

(1) (a) If the aggregate assets of the pool are at any time insufficient to enable the pool to discharge its legal liabilities and other obligations and to maintain the reserves required of it under this Chapter, the pool shall, within thirty (30) days of receiving notice of such deficiency, levy an assessment upon its members for the amount needed to eliminate the deficiency.

(b) Any deficiency expected for any fund year shall be reported, accompanied by supporting financial documentation, to the Commissioner within three (3) days of the pool receiving notice of the deficiency. The pool shall subsequently submit a plan to the Commissioner for the correcting of the fund year deficiency within thirty (30) days.

The plan shall propose for the deficiency to be corrected in one of the following ways:

1. Surplus funds obtained by the pool from a fund year prior to the deficient year with the prior written approval of the Commissioner;

2. Surplus funds obtained by the pool from a fund year subsequent to the deficient year with the prior written approval of the commissioner. However, a pool should satisfy the deficiency under Subparagraph (b)1. of this Paragraph where practical before using the funds of a subsequent fund year;

3. Administrative funds;

4. Assessment of the membership, if ordered by the pool; or 5. Such alternative method as the Commissioner may approve or direct.

(2) If the pool fails to assess its members or to otherwise make up such deficiency within thirty (30) days of notice of such deficiency, or such other time as may be allowed by the Commissioner, the Commissioner shall issue an order to the pool and the pool’s members specifying the time period in which the pool must assess its members, the procedures for implementing the assessment, and the time in which the members have to pay the assessment.

(3) Any pool or member affected by an order of assessment issued by the Commissioner may request, in writing, a hearing before the Commissioner as to the necessity or grounds for such order. Any request for such a hearing must be filed no later than thirty (30) days after the entry of the Commissioner’s order.

(4) A pool that has a deficiency in a fund year may be considered to be in a hazardous financial condition for purposes of this Chapter, the Insurers Rehabilitation and Liquidation Act, T.C.A. §§ 56-9-101, et seq., or any other regulatory purpose or any of the remedies provided by this

Chapter.

(5) A pool that fails to comply with an order of the Commissioner issued under this Rule shall be considered to be insolvent for purposes of this Chapter, the Insurers Rehabilitation and Liquidation Act, T.C.A. §§ 56-9-101, et seq., or any other regulatory purpose.

(6) In the event of a supervision, liquidation, or rehabilitation of a pool, the Commissioner shall levy an assessment upon such members of the pool for such an amount as the Commissioner determines to be necessary to discharge all liabilities of the pool, including the reasonable costs of the supervision, liquidation, or rehabilitation.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h) and 56-9-101, et seq.
• Administrative History: Original rule filed August 31, 2005; effective November 14, 2005. Amendment filed December 31, 2008; effective March 16, 2009.

Tenn. Comp. R. & Regs. 0780-01-54-.25 APPLICABILITY OF THE INSURERS REHABILITATION AND LIQUIDATION ACT

The proceedings authorized by Tennessee Code Annotated Title 56, Chapter 9 are applicable to pools. A pool established or maintained in this State is considered by its nature included in the definition of the term “insurer” found in T.C.A. § 56-9-103(12) for all such purposes.

History

• Authority: T.C.A. §§ 50-6-405(c) and (h) and 56-9-101, et seq.
• Administrative History: Original rule filed August 31, 2005; effective November 14, 2005.

Chapter 0780-01-55 Navigator and Certified Application Counselor Registration Requirements

Tenn. Comp. R. & Regs. 0780-01-55-.01 PURPOSE AND SCOPE

The federal Patient Protection and Affordable Care Act creates health insurance exchanges that operate in Tennessee under federal law and employ navigators or certified application counselors whose federally designated and certified role will be to facilitate individuals’ and companies’ enrollment in qualified health plans offered through such exchanges. The federal government has a system for designating and certifying such individuals and companies. Tennessee Public Acts 2013, ch. 377 reflects the intent of the legislature that licensing and regulation of such navigators and certified application counselors is necessary and in the best interest of the people of Tennessee, to ensure that they are trained and knowledgeable in the subject matter of individual and group health insurance plans and insurance coverage, and to avoid substantial risk to the health, safety, and welfare of the residents of this state. Therefore the Department is hereby creating a registration program to identify and regulate the activity of navigators and certified application counselors in order to appropriately regulate their activity in this State. Individuals or companies who are not actually certified by the United States Department of Health and Human Services as navigators, navigator entities, certified application counselor organizations or certified application counselors or are not required by federal law and regulations to be certified as navigators, navigator entities, certified application counselor organizations or certified application counselors are not required to be registered by this Chapter.

History

• Authority: Tenn. Public Acts 2013, ch. 377, T.C.A. §§ 56-2-301 and 56-6-1301 through 56-6-1305, Patient Protection and Affordable Care Act, Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Original rule filed July 21, 1989; effective September 4, 1989. Repeal filed April 14, 2004; effective June 28, 2004. Emergency rule filed September 18, 2013; effective through March 17, 2014. Emergency rule filed September 18, 2013 expired effective March 17, 2014; on March 18, 2014, the rule reverted to its previous status. New rule filed February 20, 2015; effective May 21, 2015.

Tenn. Comp. R. & Regs. 0780-01-55-.02 DEFINITIONS

When used in this Chapter, unless the context clearly requires otherwise, the term:

(1) “Commissioner” means the commissioner of the Tennessee Department of Commerce andInsurance;

(2) “Department” means the Tennessee Department of Commerce and Insurance;

(3) “Certified application counselor” means any employee or volunteer of a certified application counselor organization that enters into an agreement with the exchange to have its employees or volunteers:

(a) Provide information to individuals and employees about the full range of qualified health plan options and insurance affordability programs for which they are eligible;

(b) Assist individuals and employees to apply for coverage in a qualified health plan through the exchange and for insurance affordability programs; and (c) Help to facilitate enrollment of eligible individuals in qualified health plans and insurance affordability programs.

(4) “Certified application counselor organization” means any organization, including an organization designated as a Medicaid certified application counselor organization by a state Medicaid or CHIP agency, designated by the exchange to certify its staff members or volunteers to act as certified application counselors, and includes those organizations described in 45 CFR § 155.225.

(5) “Exchange” means any health benefit exchange established or operating in this state, including any exchange established or operated by the United States Department of Health and Human Services.

(6) “Navigator” means all persons who are certified or are required to be certified by the federal government under the designation of “navigator” under the federal Patient Protection and Affordable Care Act, including any individual or entity, other than an insurance producer licensed pursuant to Title 56, who receives any funding, directly or indirectly, from an exchange, the state, or the federal government to perform any activities and duties identified in 42 U.S.C. 18031(i). Such persons required to be certified as navigators federally include an employee of a navigator grant awardee or sub-grantee of navigator grant awardee who performs the activities and duties identified in 42 U.S.C. 18031(i).

(7) “Person” means any natural or artificial person including, but not limited to, an individual, partnership, association trust or corporation;

(8) “Qualified health plan” has the meaning given such term in 42 U.S.C.A. § 18021(a).

(9) “Registrant” means any person registered under this chapter or any one required to be licensed under this chapter.

History

• Authority: Tenn. Public Acts 2013, ch. 377, T.C.A. §§ 56-2-301, 56-6-1301 through 56-6-1305, Public Law 111-148 as amended by Public Law 111-152 (2010), 42 U.S.C. § 18021(a), 42 U.S.C. § 18031(i), and 45 CFR Part 155.
• Administrative History: Original rule filed July 21, 1989; effective September 4, 1989. Repeal filed April 14, 2004; effective June 28, 200.4 Emergency rule filed September 18, 2013; effective through March 17, 2014. Emergency rule filed September 18, 2013 expired effective March 17, 2014; on March 18, 2014, the rule reverted to its previous status. New rule filed February 20, 2015; effective May 21, 2015.

Tenn. Comp. R. & Regs. 0780-01-55-.03 REGISTRATION REQUIRED

(1) No person shall act as, offer to act as, or advertise any service as a navigator, a certified application counselor or a certified application counselor organization in this state unless the individual or entity is registered with the commissioner pursuant to this rule.

(2) A person that is a navigator, a certified application counselor or a certified application counselor organization is subject to regulation by the commissioner.

History

• Authority: Tenn. Public Acts 2013, ch. 377, T.C.A. §§ 56-2-301 and 56-6-1301 through 56-6-1305.
• Administrative History: Original rule filed July 21, 1989; effective September 4, 1989. Repeal filed April 14, 2004; effective June 28, 2004. Emergency rule filed September 18, 2013; effective through March 17, 2013. Emergency rule filed September 18, 2013 expired effective March 17, 2014; on March 18, 2014, the rule reverted to its previous status. New rule filed February 20, 2015; effective May 21, 2015.

Tenn. Comp. R. & Regs. 0780-01-55-.04 APPLICATION FOR REGISTRATION

(1) An individual applying for a navigator or certified application counselor registration shall make application to the commissioner on a form developed by the commissioner and declare under penalty of refusal, suspension, or revocation of the registration 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:

(a) Is at least eighteen years of age;

(b) Is not disqualified for having committed any act that would be a ground for denial, suspension, or revocation of a registration under rule 0780-01-55-.07;

(c) Has not had an insurance producer license, a navigator license, a certified application counselor license, or an equivalent license or certification denied, suspended, or revoked in any state, province, district, or territory or by the United States Department of Health and Human Services;

(d) Has successfully passed the applicable federal training program for navigators or certified application counselors;

(e) Has submitted a full set of fingerprints to the commissioner and successfully completed a criminal background check in a manner prescribed by the commissioner. The commissioner may accept an equivalent criminal background check performed by the navigator entity or the certified application counselor organization;

(f) When applicable, has the written consent of the commissioner pursuant to 18 U.S.C. 1033 and T.C.A. § 56-53-106(b), or any successor statute regulating crimes by or affecting persons engaged in the business of insurance whose activities affect interstate commerce;

(g) Possesses the requisite character and integrity; and (h) Has identified the entity with which the individual is affiliated and supervised.

(2) An entity that acts as a navigator, supervises or is responsible for the activities of individual navigators, or receives funding to perform such activities shall obtain a navigator entity registration. An entity applying for navigator entity registration shall:

(a) Make application on a form and containing the information prescribed by the commissioner;

(b) Designate an individual registered as a navigator to be responsible for the entity’s compliance with this chapter.

(3) An entity that acts as a certified application counselor organization, supervises or is responsible for the activities of individual certified application counselors, or receives funding to perform such activities shall obtain a certified application counselor registration. An entity applying for a certified application counselor registration shall:

(a) Make application on a form and containing the information prescribed by the commissioner;

(b) Designate an individual registered as a certified application counselor to be responsible for the entity’s compliance with this chapter.

(4) The commissioner may require any documents deemed necessary to verify the information contained in an application submitted in accordance with rule 0780-01-55-.04(1), (2) and (3).

(5) Entities registered as navigator shall, in a manner prescribed by the commissioner, provide the commissioner with a list of all individual navigators that are no longer affiliated with the navigator entity within thirty (30) days of the termination of affiliation.

(6) Entities registered as certified application counselor organizations shall, in a manner prescribed by the commissioner, provide the commissioner with a list of all individual certified application counselors that are no longer affiliated with the certified application counselor organization within thirty (30) days of the termination of affiliation.

History

• Authority: Tenn. Public Acts 2013, ch. 377, T.C.A. §§ 56-1-107, 56-2-301 and 56-6-1301 through 56-6- 1305, 56-53-106 and 18 U.S.C. § 1033.
• Administrative History: Original rule filed July 21, 1989; effective September 4, 1989. Repeal filed April 14, 2004; effective June 28, 2004. Emergency rule filed September 18, 2013; effective through March 17, 2014. Emergency rule filed September 18, 2013 expired effective March 17, 2014; on March 18, 2014, the rule reverted to its previous status. New rule filed February 20, 2015; effective May 21, 2015.

Tenn. Comp. R. & Regs. 0780-01-55-.05 at the time of the September 30, 2018, renewal and for purposes of meeting continuing education requirements, proof of completion of twelve (12) continuing education hours at the time of the September 30, 2018, renewal will be satisfactory.

(2) A navigator, business entity navigator, certified application counselor, or certified application counselor organization may file an application for renewal from September 1 to September 30 of each year. All applications for renewal must use the application prescribed by the commissioner. A navigator, business entity navigator, certified application counselor, or certified application counselor whose registration lapses for more than twelve (12) months from the renewal date shall be required to submit a new application and meet all new application requirements provided by Rule 0780-01-55-.04.

(3) Prior to the filing date for application for renewal of a license, an individual navigator or certified application counselor shall complete twelve (12) hours of continuing education requirements with one (1) credit hour equaling fifty (50) minutes in length. An entity registered as a navigator or a certified application counselor organization shall provide or shall arrange for continuing education to be provided to the individual navigators and certified application counselors. Any failure to fulfill the ongoing continuing education requirements shall result in the expiration of the individual navigator’s or certified application counselor’s registration.

Individual navigators and certified application counselors whose registration has expired for failing to complete the continuing education requirements may not apply for a registration until they have provided satisfactory proof to the commissioner that they have completed the required continuing education requirements and have filed for an application for registration in accordance with rule 0780-01-55-.04.

(4) For continuing education provided to navigators and certified application counselors:

(a) It is recommended that one (1) hour should have course concentration in ethics during each continuing education year.

(b) The federal training required for navigators and certified application counselors may only count toward a maximum of five (5) continuing education requirement hours under this rule.

(c) It is recommended an educational program should be a formal program of learning which contributes directly to the professional competence of the registrant. It is recommended that such formal programs:

1. File the education program with the commissioner on a form approved by the commissioner;

2. Prepare and maintain a detailed outline for four (4) years after the presentation;

3. Concentrate on subject areas such as:

(i) Insurance laws and regulations;

(ii) Health insurance overview;

(iii) Providing assistance in the marketplace;

(iv) Eligibility and enrollment;

(v) Privacy and security;

(vi) Tenncare and other Tennessee assistance programs;

(vii) Financial literacy;

(viii) Special marketplace circumstances;

(ix) Ethics;

4. Avoid subject areas such as:

(i) Committee service in any professional organization;

(ii) Computer science courses; and (iii) Motivational, psychology, or sales training courses.

(d) Reporting of Continuing Education. Entities registered as navigators and certified application counselor organizations shall, in a manner prescribed by the commissioner, provide the commissioner with a list of all individual navigators or certified application counselors that it employs, supervises or is affiliated with on an annual basis upon renewal. This list shall certify that continuing education has been provided for individual navigator and certified application counselor registrants.

(e) The commissioner may, upon written request, extend the time in which a registrant must comply with or grant exception to the continuing education requirements of this

Rule for reasons of poor health, military service, or other reasonable and just causes, including situations in which an individual navigator or certified application counselor becomes affiliated with, employed by or supervised by an entity registered as a navigator or certified application organization, and such individual has not completed the continuing education requirements before the individual’s renewal because the continuing education has not yet been provided by the entity or organization.

History

• Authority: Tenn. Public Acts 2013, ch. 377, T.C.A. §§ 56-2-301 and 56-6-1301 through 56-6-1305.
• Administrative History: Original rule filed July 21, 1989; effective September 4, 1989. Repeal filed April 14, 2004; effective June 28, 2004. Emergency rule filed September 18, 2013; effective through March 17, 2014. Emergency rule filed September 18, 2013 expired effective March 17, 2014; on March 18, 2014, the rule reverted to its previous status. New rule filed February 20, 2015; effective May 21, 2015. Amendments filed June 28, 2017; effective September 26, 2017.

Tenn. Comp. R. & Regs. 0780-01-55-.06 NAVIGATOR AND CERTIFIED APPLICATION COUNSELOR CONDUCT

(1) A navigator or certified application counselor may not:

(a) Engage in any activities that would require an insurance producer license;

(b) Provide any information or services related to health benefit plans or other products not offered in the exchange except as may be required or contemplated by the duties of such person under federal law or regulation on behalf of the exchange;

(c) Accept any compensation or consideration that is dependent, in whole or in part, on whether a person enrolls in or purchases a health plan;

(d) Engage in any unfair method of competition or any fraudulent, deceptive, or dishonest act or practice; or (e) Violate any applicable insurance law or regulation of this state or any subpoena or order of the commissioner.

(2) Only a person licensed as an insurance producer in this state may:

(a) Sell, solicit, or negotiate health insurance.

History

• Authority: Tenn. Public Acts 2013, ch. 377, T.C.A. §§ 56-2-301, 56-6-103 and 56-6-1301 through 56-6- 1305.
• Administrative History: Original rule filed July 21, 1989; effective September 4, 1989. Repeal filed April 14, 2004; effective June 28, 2004. Emergency rule filed September 18, 2013; effective through March 17, 2014. Emergency rule filed September 18, 2013 expired effective March 17, 2014; on March 18, 2014, the rule reverted to its previous status. New rule filed February 20, 2015; effective May 21, 2015.

Tenn. Comp. R. & Regs. 0780-01-55-.07 GROUNDS FOR PLACING ON PROBATION, REFUSAL TO ISSUE OR RENEW,

REVOCATION OR SUSPENSION OF REGISTRATION.

(1) The commissioner may refuse to issue a registration or, if after providing notice consistent with the process established by T.C.A. § 4-5-320(c) and providing the opportunity for a contested case hearing in accordance with the Uniform Administrative Procedures Act, compiled in Title 4, Chapter 5, to be conducted pursuant to the Rules of Procedure for Contested Cases of the Rules of the Secretary of State as compiled at Chapter 1360-04-01, the commissioner may place on probation, suspend, revoke, or refuse to renew or reinstate, a registration issued pursuant to this chapter, or may levy a fine not to exceed One Thousand dollars ($1000) for each violation, or any combination of actions, for any one or more of the following causes:

(a) Providing incorrect, misleading, incomplete or materially untrue information in the registration application or any other report or filing submitted to the commissioner or Department;

(b) Violating any law, rule, including this Chapter, regulation, subpoena or order of the commissioner or of another state's commissioner;

(c) Obtaining or attempting to obtain a license or registration through misrepresentation or fraud;

(d) Improperly withholding, misappropriating or converting any moneys or properties received in the course of doing insurance business;

(e) Intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance;

(f) Having been convicted of a felony;

(g) Having admitted or been found to have committed any insurance unfair trade practice or fraud;

(h) Using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness or financial irresponsibility in the conduct of business in this state or elsewhere;

(i) Having an insurance producer license, navigator license or certified application counselor license, or its equivalent, denied, suspended or revoked in any other state, province, district or territory;

(j) Forging another's name to an application for insurance or to any document related to an insurance transaction;

(k) Violating the unfair trade practices as enumerated in § 56-6-125 as if the individual were the insurance producer referenced in that statute.

(l) Failing to maintain the certification or approval to be a navigator or certified application counselor, or having such approval terminated, by the Department of Health and Human Services, or the exchange.

(2) The commissioner may examine and investigate the business affairs and records of any registrant, or any person required to be registered, to determine whether the individual or entity has engaged or is engaging in any violation of this chapter or applicable insurance law.

(3) The registration of a business entity may be suspended, revoked or subject to a monetary penalty if the commissioner finds, after a hearing, that an individual registrant's violation was known or should have been known by one (1) or more of the partners, officers or managers acting on behalf of the entity and the violation was neither reported to the commissioner nor corrective action taken.

History

• Authority: Tenn. Public Acts 2013, ch. 377, T.C.A. §§ 56-1-204, 56-2-301, 56-2-305, 56-6-112, and 56-6- 1301 through 56-6-1305.
• Administrative History: Original rule filed July 21, 1989; effective September 4, 1989. Repeal filed April 14, 2004; effective June 28, 2004. Emergency rule filed September 18, 2013; effective through September 18, 2013; effective through March 17, 2014. Emergency rule filed September 18, 2013 expired effective March 17, 2014; on March 18, 2014, the rule reverted to its previous status. New rule filed February 20, 2015; effective May 21, 2015.

Tenn. Comp. R. & Regs. 0780-01-55-.08 REPORTING TO THE COMMISSIONER

(1) Each registrant shall report to the commissioner any administrative action taken by a governmental agency against him in this state or in any other jurisdiction within thirty calendar 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.

(2) A registrant shall immediately report to the commissioner any criminal prosecution of the navigator or certified application counselor 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. Failure to report within thirty days following the hearing date shall be considered a violation of this rule subject to rule 0780-01-55-.07.

(3) An entity registered under this chapter that terminates the employment, engagement, affiliation, or other relationship with an individual navigator or certified application counselor shall notify the commissioner within thirty days following the effective date of the termination, using a format prescribed by the commissioner, if the reason for termination is one of the reasons set forth in rules 0780-01-55-.06 or 0780-01-55-.07, or the entity has knowledge the navigator or certified application counselor was found by a court or government body to have engaged in any of the activities in rules 0780-01-55-.06 or 0780-01-55-.07. Upon the written request of the commissioner, the entity shall provide additional information, documents, records, or other data pertaining to the termination or activity of the individual.

History

• Authority: Tenn. Public Acts 2013, ch. 377, T.C.A. §§ 56-1-204, 56-2-301 and 56-6-1301 through 56-6- 1305.
• Administrative History: Original rule filed July 21, 1989; effective September 4, 1989. Repeal filed April 14, 2004; effective June 28, 2004. Emergency rule filed September 18, 2013; effective through March 17, 2014. Emergency rule filed September 18, 2013 expired effective March 17, 2014; on March 18, 2014, the rule reverted to its previous status. New rule filed February 20, 2015; effective May 21, 2015.

Tenn. Comp. R. & Regs. 0780-01-55-.09 OTHER LAWS; SEVERABILITY

(1) The requirements of Title 56, Chapter 8, Part 1, and any related rules, shall apply to individuals and entities registered under this chapter. The activities and duties of navigators and certified application counselors shall be deemed to constitute transacting the business of insurance.

(2) The requirements of this chapter shall not apply to any individual or entity licensed as an insurance producer in this state or any entity or individual exempted from having to have an insurance producer license under T.C.A. § 56-6-104(b)(1).

(3) The requirements of this chapter shall not apply to hospitals licensed in this state under Title 68 or Title 33 of the Tennessee Code Annotated.

(4) The requirements of this chapter shall not apply to state and local government agencies, employees acting in their official capacities as employees of state and local government agencies, or any contractors to the extent of their official duties for state and local government agencies.

(5) If any provision of this chapter or its application to any person or circumstance is held invalid by a court, the invalidity does not affect other provisions or applications of this chapter that can be given effect without the invalid provision or application, and to this end the provisions of the chapter are severable and the valid provisions or applications shall remain in full force and effect.

History

• Authority: Tenn. Public Acts 2013, ch. 377, T.C.A. §§ 56-2-301, 56-6-104, 56-8-101 through 56-8-113 and 56-6-1301 through 56-6-1305.
• Administrative History: Original rule filed July 21, 1989; effective September 4, 1989. Repeal filed April 14, 2004; effective June 28, 2004. Emergency rule filed September 18, 20913; effective through March 17, 2014. Emergency rule filed September 18, 2013 expired effective March 17, 2014; on March 18, 2014, the rule reverted to its previous status. New rules filed February 20, 2015; effective May 21, 2015. Amendments filed June 28, 2017; effective September 26, 2017.

Chapter 0780-01-56 Licensing Requirements for Insurance Producers

Tenn. Comp. R. & Regs. 0780-01-56-.01 PURPOSE

The purpose of this Chapter is to:

(1) Prescribe the pre-licensing, examination, continuing education, and renewal requirements for insurance/HMO producers licensed pursuant to T.C.A. §§ 56-6-106, 56-6-107 and 56-32-214;

(2) Establish standards by which continuing education will be evaluated for awarding of credit hours;

(3) Ensure compliance with applicable statutes and the provisions delineated in this Chapter by requiring periodic reporting of educational achievements; and (4) Enable the commissioner to obtain the information necessary to determine whether to issue a license to applicants.

History

• Authority: T.C.A. §§ 56-1-107, 56-6-102, 56-6-105, 56-6-106, 56-6-107, 56-6-121, 56-6-124, 56-32-114, 56-35-122, and 56-35-201.
• Administrative History: Original rule filed February 12, 1991; effective March 29, 1991. Amendment filed August 5, 1998; effective October 19, 1998. Amendment filed April 14, 2004; effective June 28, 2004. Amendment filed April 16, 2004; effective June 30, 2004. Repeal and new rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed January 5, 2011; effective April 5, 2011.

Tenn. Comp. R. & Regs. 0780-01-56-.02 SCOPE

This Chapter shall apply to all insurance/HMO producers licensed pursuant to T.C.A. §§ 56-6-106, 56-6- 107 and 56-32-114.

History

• Authority: T.C.A. §§ 56-6-102, 56-6-105, 56-6-106, 56-6-107, 56-6-121, 56-6-124, 56-32-114, 6-35-122, and 56-35-201.
• Administrative History: Original rule filed February 12, 1991; effective March 29, 1991. Amendment filed April 14, 2004; effective June 28, 2004. Amendment filed April 16, 2004; effective June 30, 2004.Amendment filed December 5; effective February 18, 2007. Repeal and new rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed January 5, 2011; effective April 5, 2011.

Tenn. Comp. R. & Regs. 0780-01-56-.03 AUTHORITY

This Chapter is issued under the authority of T.C.A. §§ 56-6-102, 56-6-105, 56-6-106, 56-6-107, 56-6- 121, 56-6-124, 56-32-214, 56-35-122, and 56-35-201.

History

• Authority: T.C.A. §§ 56-6-102, 56-6-105, 56-6-106, 56-6-107, 56-6-121, 56-6-124, 56-32-114, 56-35- 122, and 56-35-201.
• Administrative History: Original rule filed February 12, 1991; effective March 29, 1991. Amendment filed August 5, 1998; effective October 19, 1998. Amendment filed April 16, 2004; effective June 30, 2004. Repeal and new rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed January 5, 2011; effective April 5, 2011.

Tenn. Comp. R. & Regs. 0780-01-56-.04 DEFINITIONS

(1) “Commissioner” means the commissioner of the Tennessee Department of Commerce and Insurance;

(2) “Department” means the Tennessee Department of Commerce and Insurance;

(3) “Insurance producer” means an individual who is required to be licensed under the laws of this state to sell, solicit or negotiate insurance, whether or not such licensee has an agency contract, agreement or an appointment with an insurer; and/or an individual who is appointed or employed by a health maintenance organization “HMO” and who engages in solicitation for membership in such organization.

(4) “Insurer” means any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyd’s, fraternal benefit society, and any other legal entity which is defined as an “insurer” in the insurance code of this state or issues life insurance or annuities in this state and is engaged in the advertisement of a policy.

(5) “NAIC” means the National Association of Insurance Commissioners;

(6) “Person” means any natural or artificial person including, but not limited to, an individual, partnership, association trust or corporation;

(7) “Resident Insurance Producer” means an individual who resides in this state and who is required to be licensed under the laws of this state to sell, solicit or negotiate insurance, whether or not such licensee has an agency contract, agreement or an appointment with an insurer; and/or an individual who is appointed or employed by a health maintenance organization “HMO” and who engages in solicitation for membership in such organization.

History

• Authority: T.C.A. §§ 56-2-305, 56-6-107, 56-6-112, 56-6-118(b), 56-6-124, 56-32-114, 56-35-122, 56-35- 201, and 42 U.S.C § 4011 (2004).
• Administrative History: Original rule filed February 12, 1991; effective March 29, 1991. Amendment filed August 5, 1998; effective October 19, 1998. Amendment filed April 16, 2004; effective June 30, 2004. Amendment filed December 5, 2006; effective February 18, 2007. Repeal and new rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendments filed January 5, 2011; effective April 5, 2011.

Tenn. Comp. R. & Regs. 0780-01-56-.05 PROCEDURES FOR INITIAL LICENSURE

(1) An insurance producer shall apply for and receive from the commissioner an insurance producer license to act as an insurance producer in this State. All applications for licensure shall contain the following:

(a) A completed application form adopted by the commissioner and/or the NAIC signed by the applicant or an officer or director of the business entity;

(b) Unless otherwise exempt by law, proof of the completion and passing of an examination required by Rule 0780-01-56-.07; and (c) A non-refundable filing fee of fifty dollars ($50.00).

(2) Unless directed otherwise by the Department, an applicant shall file the information required under this Rule with the commissioner, and in a manner approved by the commissioner, by electronic submission, personal delivery, or mail addressed to: Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Davy Crockett Tower, Nashville, Tennessee 37243, Attention: Agent Licensing Section.

(3) Applicants should allow thirty (30) days for the Department’s review and granting of the application upon receipt of all required information.

History

• Authority: T.C.A. §§ 56-6-102, 56-6-105, 56-6-106, 56-6-107, 56-6-121, 56-6-124, 56-32-114, 56-35- 122, and 56-35-201.
• Administrative History: Original rule filed February 12, 1991; effective March 29, 1991. Amendment filed April 16, 2004; effective June 30, 2004. Repeal and new rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed January 5, 2011; effective April 5, 2011.

Tenn. Comp. R. & Regs. 0780-01-56-.06 PRE-LICENSING EDUCATION REQUIREMENTS

(1) All applicants for an insurance producer license, unless exempt pursuant to Paragraph (5) of this Rule or otherwise exempted by law, are required to complete an online or classroom prelicensing course of study prior to taking the examination required.

(2) The pre-licensing course taken by the applicant must be approved by the commissioner in order for an applicant to receive credit under this Rule.

(3) The amounts of total hours which an insurance producer is required to take are listed as follows:

Lines of Insurance Number of Hours Title 20 Life 20 Accident and Health 20 Property 20 Casualty 20 Personal Lines 20 (4) The applicant shall certify to the commissioner in or with the application for insurance producer license that such applicant has completed a pre-licensing course of study approved by the commissioner for each line of insurance for which an insurance producer license is requested.

(5) The following persons are exempt from the pre-licensing education requirements prescribed by this Rule for the specified lines of authority that are deemed by the commissioner to be equivalent to pre-licensing education:

(a) Persons holding a Chartered Life Underwriter (CLU) designation for a life line of

authority;

(b) Persons holding a Chartered Property and Casualty Underwriters (CPCU) designation for property, personal lines, and casualty lines of authority;

(c) Persons holding a Certified Insurance Counselors (CIC) designation for life, health, property, personal lines, and casualty lines of authority;

(d) Persons holding a Certified Employee Benefit Specialist (CEBS), Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), Fellow of Life Management Institute (FLMI), or Life Underwriter Training Council Fellow (LUTCF) designation for a life line of authority;

(e) Persons holding a Registered Health Underwriter (RHU), Certified Employee Benefit Specialist (CEBS), Registered Employee Benefit Consultant (REBC), or Health Insurance Advisor (HIA) designation for a health line of authority; and (f) Persons holding an Accredited Advisor in Insurance (AAI) or Associate in Risk Management (ARM) designation for property, personal lines, and casualty lines of

authority.

(g) Persons holding an insurance degree from an accredited college or university for all lines of authority.

History

• Authority: T.C.A. §§ 56-6-105, 56-6-106, 56-6-107, 56-6-109, 56-6-124, 56-32-114, 56-35-122, and 56- 35-201.
• Administrative History: Original rule filed February 12, 1991; effective March 29, 1991. Amendment filed August 5, 1998; effective October 19, 1998. Amendment filed April 16, 2004; effective June 30, 2004. Repeal and new rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed January 5, 2011; effective April 5, 2011. Amendments filed June 12, 2020; effective September 10, 2020.

Tenn. Comp. R. & Regs. 0780-01-56-.07 EXAMINATION REQUIREMENTS

(1) All applicants for an insurance producer license, unless otherwise exempted by law, are required to pass a written examination in order to test the applicant’s knowledge as to the line of insurance for which a license is applied, the duties and responsibilities of an insurance producer, and the insurance laws and rules of this state. There shall be a separate examination for each line of insurance in which an insurance producer may be licensed.

Applicants wishing to be licensed as an insurance producer in more than one line of insurance shall take each applicable examination.

(2) Each examination for a license shall be approved for use by the commissioner.

Examinations for licensing shall be at such reasonable times and places accessible to the applicants as are designated by the commissioner.

(3) An individual taking an examination pursuant to this Rule shall pay a non-refundable fee in order to take such examination. An individual who takes an examination more than once shall pay the examination fee for each subsequent taking of the examination, regardless of the reason for the subsequent examinations.

(4) The minimum score that will be considered as a passing score for any examination given hereunder is seventy percent (70%). Any score on an exam below seventy percent (70%) shall be considered a failing score.

(a) An individual who has failed to pass an examination for a license applied for may take another examination following the expiration of thirty (30) days from the date of the applicant’s last unsuccessful examination upon submission of the examination fee.

(b) An individual who has not successfully passed the examination within six (6) months of the first attempt shall be required to re-take pre-licensing education courses as set forth in Rule 0780-01-56-.06.

(5) The commissioner may enter into a contract with a testing organization for the examination of applicants for license as an insurance producer. Notwithstanding any other provisions of this

chapter, such contract may provide that the testing organization shall:

(a) Assume responsibility for administration and grading of the examination; and (b) Charge and collect reasonable non-refundable examination fees, subject to the approval of the commissioner.

(6) No individual taking an examination for an insurance producer license shall possess or examine the examination questions and/or answers prior to the time of examination, nor shall any such individual use improper notes or other reference materials during the examination.

Furthermore, no person shall have such questions or answers reproduced and/or disseminated for the purposes of assisting an insurance producer in passing an examination.

(7) To determine that the applicant has not committed any act that would disqualify the applicant from receiving an insurance producer license, all individuals desiring to take a test under this

Rule, shall submit to the commissioner:

(a) Two (2) full sets of fingerprints;

(b) A certified check made payable to the Tennessee Bureau of Investigation representing the cost of having criminal history record checks performed; and (c) A reasonable administrative fee representing the cost of the collection and transmission of fingerprint data made payable to the contractor; or (d) Alternate methods of fingerprint submission if approved by the commissioner.

Applicants that have had a criminal background check performed by the Tennessee Bureau of Investigation within six (6) months prior to taking an examination may have the results of that examination submitted directly from the criminal background check provider to the Agent Licensing section.

Applicants that are required to take an examination after the lapse of a license will be required to submit fingerprint background checks prior to taking a new examination.

History

• Authority: T.C.A. §§ 56-1-107, 56-6-102, 56-6-105, 56-6-106, 56-6-112, 56-6-124, 56-32-114, 56-35- 122, and 56-35-201.
• Administrative History: Original rule filed February 12, 1991; effective March 29, 1991. Amendment filed April 16, 2004; effective June 30, 2004. Repeal and new rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed January 5, 2011; effective April 5, 2011.

Tenn. Comp. R. & Regs. 0780-01-56-.08 CONTINUING EDUCATION

(1) Basic Requirement. Every individual seeking biennial renewal of a license pursuant to T.C.A. § 56-6-107(c), unless otherwise exempt, must satisfactorily complete twenty-four (24) credit hours of study in approved courses, programs of instruction or seminars every two (2) years following the last day of the producer’s birth month.

(a) Three (3) hours shall have course concentration in ethics during each continuing education biennium.

(b) Certificates of completion for courses previously submitted and approved for credit may only be repeated and submitted for credit after two (2) years.

(c) Any resident insurance producer who is authorized to sell "property insurance" as defined by T.C.A. § 56-2-201(5) or who is authorized to sell both property and "casualty insurance" as defined by T.C.A. § 56-2-201(2), shall take a one-time three (3) hour course consisting of the minimum training requirements of section 207 of the Flood Insurance Federal Reform Act of 2004, 42 U.S.C. § 4011, and basic flood education as outlined at 70 Fed. Reg. 52117, or such later requirements as are published by the Federal Emergency Management Agency. This course will count towards the individual's required twenty-four (24) hours of continuing education for one biennium and must be completed before the first license renewal following January 1, 2012.

Those individuals who can show proof of having completed such a course after January 1, 2008 may be exempt from this requirement.

(2) Qualifying Programs.

(a) In order to qualify for credit towards satisfaction of the requirements of this Rule, an educational program must be a formal program of learning which contributes directly to the professional competence of the insurance producer and such program must meet the standards outlined for continuing educational programs.

(b) Formal programs requiring attendance may be considered for credit if:

1. A detailed outline is prepared and presented to the commissioner for approval;

2. The program is at least one (1) credit hour [fifty (50) minutes] in length; and 3. The program is conducted by a qualified instructor, discussion leader or lecturer.

(c) An instructor of a certified continuing education program shall receive continuing education credit. Credit for presenting a certified continuing education program will be awarded only for the first presentation, unless a program has been substantially revised since credit was last awarded. The amount of credit awarded shall be two (2) times the number of approved class hours for the program.

(d) The list of subjects that will be acceptable for continuing education credits includes, but is not limited to the following:

1. Insurance, annuities, and risk management;

2. Insurance laws and regulations;

3. Mathematics, statistics, and probability;

4. Economics;

5. Business law;

6. Finance;

7. Taxes;

8. Business environment, management or organization; and 9. Subjects other than those listed above may be acceptable if the insurance producer can demonstrate that they contribute to professional competence and otherwise meet the standards set forth in this Rule. The responsibility for substantiating that a particular program meets the requirements of this Rule rests solely upon the insurance producer.

(e) A member of an insurance trade association shall receive two (2) general continuing education credit hours annually based on membership in an insurance trade association. A maximum of two (2) general continuing education credit hours, based on association membership, are allowed per year. The two (2) general continuing education credit hours are allowable if the insurance trade association:

1. Is approved as a continuing education provider as required by this rule;

2. Has been in existence for at least five (5) years;

3. Was formed for purposes other than providing continuing education;

4. Provides the commissioner with the association’s Articles of Incorporation on file with the Tennessee Secretary of State;

5. Provides to the commissioner a certification that:

(i) Those members are active in the insurance trade association; and (ii) Those members attended a national, statewide, or intrastate regional meeting in the previous year; and 6. Pays a course reporting fee of one dollar ($1.00) for each continuing education credit hour reported in accordance with the Department’s or its designee’s internet credit recording procedure.

(f) Subjects that will not be acceptable for continuing education credits include, but are not limited to the following:

1. Any course used to prepare for taking an insurance licensing examination;

2. Committee service in any professional organization;

3. Computer science courses;

4. Motivational, psychology, or sales training courses; and 5. Securities courses, other than variable annuities.

(g) Continuing education programs which shall be deemed to meet the commissioner’s standards, if properly submitted to the commissioner and approved, are:

1. Any part of the Life Underwriter Training Counsel Life Course Curriculum or Health Course;

2. Any part of the American College Life Underwriter Training Counsel Fellow (LUTFC) and Financial Services Specialist (FSS) designation curriculum;

3. Any part of the American College Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), Chartered Advisor for Senior Living (CASL), or Master of Science in Financial Services (MSFS) diploma curriculum;

4. Any part of the Insurance Institute of America’s programs;

5. Any part of the American Institute for Property and Liability Underwriters Chartered Property Casualty Underwriter (CPCU) professional designation program;

6. Any part of the National Alliance for Insurance Education programs;

7. Any part of the American Land Title Association’s, the Land Title Institute’s, or the Tennessee Land Title Association’s programs;

8. Any program relating to the field of real property law or title insurance law approved by the Committee on Continuing Legal Education of the Supreme Court of Tennessee;

9. Successful completion of any insurance related course approved by the Commissioner and taught by an accredited college or university per credit hour granted;

10. Any part of the Tennessee Association of Health Underwriters’ or the National Association of Health Underwriters’ programs;

11. Any part of the Independent Insurance Agents of Tennessee’s programs;

12. Any part of the National Association of Insurance and Financial Advisors (NAIFA) of Tennessee programs; and 13. Any part of the Professional Insurance Agents of Tennessee (PIA) programs.

(h) A producer may carry over a maximum of twelve (12) continuing education credit hours to the next renewal cycle for additional hours obtained during the biennium. However, carry over shall not apply to ethics continuing education credit requirements.

(i) Any correspondence or self-study program approved by the commissioner shall qualify for the equivalent number of classroom hours, provided that:

1. All correspondence or self-study programs shall include a final examination; and 2. Any provider of correspondence or self-study programs shall be the originally published provider or have the written authorization of the originally published provider to present such program.

(j) All programs for continuing education must be submitted for approval on a form prescribed by the commissioner and submitted at least thirty (30) days prior to the program’s presentation. In the event the provider does not know the specific content of the curriculum prior to program presentation due to the nature of the program, the provider may submit the course thirty (30) days after program presentation. However, the provider shall notify attendees and place prominently in all marketing materials that the continuing education course may or may not be approved for credit and that the approval may not occur until sixty (60) days after the course is taught. Any hours credited to a producer from a course approved after the course is given shall only be credited as of the day of the approval and not the day of the course’s presentation.

(k) The commissioner specifically reserves the right to approve and disapprove credit for continuing education claimed under this Rule.

(l) The commissioner may require any original publisher or provider to submit all material to be used in the program to the commissioner for review.

(m) Any applicant who seeks approval as a provider of certified continuing education programs shall submit an application on a form prescribed by the commissioner with a non-refundable filing fee in the amount of five hundred ($500) dollars. All providers shall be required to annually renew their authority to provide certified continuing education programs on a form prescribed by the commissioner with a non-refundable filing fee in the amount of two hundred and fifty ($250) dollars. Any material change in or to a certified continuing education program shall require prior approval before an insurance producer may receive credit for such altered program. Program certification shall expire at such time as the commissioner may determine. State educational institutions are exempt from these filing fees, but must comply with all other requirements in order to obtain/maintain provider authority.

(n) All providers must maintain, for not less than four (4) years from the date the program was presented, a record of persons attending each program and upon completion of the program requirements, provide a certificate of completion with credit hours earned to each successful student. The certificate shall bear the provider’s identification number as assigned by the commissioner upon the granting of authority to provide continuing education programs.

(o) Any insurance company, trade association, individual corporation, partnership, firm or agency that has been approved and been given authority by the commissioner to be a continuing education provider under this Rule shall meet the following continuing minimum operational standards:

1. A minimum of one (1) business office open to the public, with a minimum of one (1) telephone to be answered by an employee or voice message service, during normal business hours, equipped with the usual office equipment such as a desk, filing cabinets, typewriter/word processor/computer, supplies, and other similar items; and 2. Classroom(s) (not applicable to self-study programs) in compliance with the Americans with Disabilities Act (ADA), comprised of a room large enough to accommodate a minimum of ten (10) students with comfortable chairs and appropriate writing surfaces for each student and a chalk board or flip chart.

(p) Any individual or provider who violates the provisions of this Chapter shall be subject to disciplinary action and/or civil penalties pursuant to T. C. A. §§ 56-6-112 and 56-2-305.

(3) Reporting of Continuing Education Compliance.

(a) Prior to the expiration of the biennium period, each insurance producer shall submit on a form prescribed by the commissioner, a signed statement setting forth the continuing education program(s) in which the insurance producer has participated during the reporting period. Such insurance producer shall retain documentation supporting such statement for the most recent two (2) year period subsequent to the date of submission.

(b) If any continuing education credit hours claimed in a statement submitted by an insurance producer pursuant to subparagraph (a) of this Paragraph are disapproved, the commissioner shall notify such insurance producer of the reason for the disapproval. The commissioner may allow a specified period of time for correction of the deficiencies noted.

(c) The original certificate of completion received for each continuing education program shall be retained by the insurance producer as evidence of completion of the program for the most recent two (2) year period. The statement submitted by the insurance producer will be reviewed and verified by the commissioner.

(d) The responsibility for establishing whether a particular program for which credit is claimed is acceptable and meets the continuing educational requirements as set forth in this Chapter rests solely with the insurance producer claiming the credit.

(e) Providers shall electronically transmit a record of those students who have successfully completed a continuing education program to the Department or its designee within thirty (30) days of the program presentation. Providers shall be responsible for paying a course reporting fee of one dollar ($1.00) for each continuing education credit hour reported in accordance with the Department’s or its designee’s internet credit recording procedure.

(4) Extensions of Time.

(a) The commissioner may, upon written request, extend the time in which an insurance producer must comply with or grant exception to the continuing education requirements of this Rule for reasons of poor health, military service, or other reasonable and just causes.

(b) Any insurance producer who requests or is granted an extension of time under this

Rule shall remain subject to Paragraph (3) of this Rule, and shall note such extension on any report required thereunder.

(5) A non-resident insurance producer’s satisfaction of the insurance producer’s home state’s continuing education requirements for licensed insurance producers shall constitute satisfaction of this state’s continuing education requirements if the non-resident insurance producer’s home state recognizes the satisfaction of its continuing education requirements imposed upon insurance producers from this state on the same basis. The commissioner may, within his/her sole discretion, enter into reciprocity agreements with other state’s insurance regulators to grant recognition to the continuing education credits received from other jurisdictions for non-resident insurance producers.

History

• Authority: T.C.A. §§ 56-2-305, 56-6-107, 56-6-112, 56-6-118(b), 56-6-124, 56-32-114, 56-35-122, 56-35- 201, and 42 U.S.C. § 4011 (2004).
• Administrative History: Original rule filed February 12, 1991; effective March 29, 1991. Amendment filed August 5, 1998; effective October 19, 1998. Amendment filed April 16, 2004; effective June 30, 2004. Repeal and new rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed March 10, 2010; effective June 8, 2010. Amendments filed January 5, 2011; effective April 5, 2011. Amendments filed June 12, 2020; effective September 10, 2020.

Tenn. Comp. R. & Regs. 0780-01-56-.09 PROCEDURES FOR LICENSE RENEWAL

(1) An insurance producer shall renew his/her/its license every other year on or before the end of the producer’s birth month. All applications for renewal shall contain the following:

(a) A completed renewal form adopted by the commissioner signed by the applicant or an officer or director of the business entity in a manner acceptable to the commissioner;

(b) If applicable, proof of compliance with Rule 0780-01-56-.08; and (c) A non-refundable renewal fee of sixty dollars ($60.00).

(2) Unless directed otherwise by the Department, an applicant shall file the information required under this Rule with the commissioner, and in a manner approved by the commissioner, by electronic submission, personal delivery, or mail addressed to: Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Davy Crockett Tower, Nashville, Tennessee 37243, Attention: Agent Licensing Section.

(3) In order to ensure the prompt review and granting of a renewal application, applicants should file all information required under Paragraph (1) of this Rule thirty (30) days prior to the end of the producer’s birth month.

History

• Authority: T.C.A. §§ 56-6-102, 56-6-107, 56-6-115, 56-6-121, 56-6-124, 56-32-114, 56-35-122, and 56- 35-201.
• Administrative History: Original rule filed April 16, 2004; effective June 30, 2004. Repeal and new rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed January 5, 2011; effective April 5, 2011.

Tenn. Comp. R. & Regs. 0780-01-56-.10 AGENTS FOR HEALTH MAINTENANCE ORGANIZATIONS

All agents of health maintenance organizations, as that term is defined in T.C.A. § 56-32-214(a), must obtain an insurance producer license in the line of accident and health insurance prior to acting as an agent. Such persons are required to meet all requirements for licensure, to include, but not necessarily be limited to, the requirements under T.C.A. Title 56, Chapter 6, as well as any other rules or regulations promulgated by the commissioner, such as any pre-licensing and continuing education requirements, and examination requirements.

History

• Authority: T.C.A. §§ 56-32-114 and 56-6-124.
• Administrative History: Original rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed January 5, 2011; effective April 5, 2011.

Tenn. Comp. R. & Regs. 0780-01-56-.11 SEVERABILITY

If any Rule, term or provision of this Chapter shall be judged invalid for any reason, that judgment shall not affect, impair or invalidate any other Rule, term or provision of this Chapter, and the remaining Rules, terms and provisions shall be and remain in full force and effect.

History

• Authority: T.C.A. §§ 56-6-102, 56-6-107(c), 56-6-121, 56-6-124, 56-32-114, 56-35-122, and 56-35-201.
• Administrative History: Original rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed January 5, 2011; effective April 5, 2011.

Tenn. Comp. R. & Regs. 0780-01-56-.12 EFFECTIVE DATE

This Chapter shall take effect for all licenses applied for or renewed on or after January 1, 2009.

History

• Authority: T.C.A. §§ 56-6-102, 56-6-107(c), 56-6-121, 56-32-114, 56-35-122, and 56-35-201.
• Administrative History: Original rule filed October 18, 2007; effective January 1, 2008. Repeal and new rule filed October 17, 2008; effective December 31, 2008. Amendment filed January 5, 2011; effective April 5, 2011.

Chapter 0780-01-57 Policyholders Service Office Disclosure Requirements

Tenn. Comp. R. & Regs. 0780-01-57-.01 PURPOSE

The purpose of this rule is to establish requirements and standards for the notice provided for in T.C.A. §56-2-118, to policyholders regarding the policyholders service office, as is required by any company not maintaining such an office in this state that issues policies of life insurance, accident and health insurance, property insurance or casualty insurance. This rule does not apply to surplus lines, credit or surety insurance, or captive companies.

History

• Authority: T.C.A. §56-2-118(b).
• Administrative History: Original rule filed July 12, 1989; effective August 26, 1989.

Tenn. Comp. R. & Regs. 0780-01-57-.02 DEFINITIONS

(1)For the purpose of this Chapter “Policyholder Service Office” means an office that provides support and information regarding policy terms, premium payments, claims processing and payment. A managing general agency does not constitute a policyholder service office unless it can provide all information required by this rule and is authorized by the insurer to pay claims.

History

• Authority: T.C.A. §56-2-118(b).
• Administrative History: Original rule filed July 12, 1989; effective August 26, 1989.

Tenn. Comp. R. & Regs. 0780-01-57-.03 NOTICE REQUIREMENTS

(1)Every Life, Accident and Health, or Property or Casualty insurance policy issued after January 1, 1989, and covering risks in this state must include the address and telephone number of the insurer’s policyholders service office, if the insurer maintains no policyholders service office in this state.

(2)The notice required under this Chapter shall be provided no later than at the time of delivery of the insurance policy or certificate.

(3)Any insurance company which ceases to maintain a policyholder service office in this state must provide notice as required by this Chapter at least thirty (30) days prior to the closing of the policyholders service office in the state.

(4)When there is a change in the address and/or telephone number which is included in the notice which is required by this Chapter or in any policyholders service office maintained by a company, the company must provide notice of the change prior to the change.

History

• Authority: T.C.A. §56-2-118(b).
• Administrative History: Original rule filed July 12, 1989; effective August 26,

Tenn. Comp. R. & Regs. 0780-01-57-.04 PERMISSIBLE FORMS OF NOTICE

All notices required to be provided to policyholders by this Chapter shall meet the following standards.

(1)The notice must contain the complete address and telephone number (toll free number if available) of the policyholders service office of the company issuing the policy.

(2)The notice shall be printed in a legible type style with adequate contrast between ink and paper.

(3)The notice may be on any page of the policy or on a separate page provided it meets all requirements of this Chapter. A prominent stamp or sticker meeting the requirements of this Chapter shall constitute proper notice.

(4)The notice may be a part of a document other than the policy; however, the notice provision must be prominently displayed on the face page of any document into which it is incorporated. All notices whether a part of the policy or certificate, another document, or separate notification, must be set apart and in bold face type and in no smaller print than ten point type.

History

• Authority: T.C.A. §56-2-118(b).
• Administrative History: Original rule filed July 12, 1989; effective August 26, 1989.

Tenn. Comp. R. & Regs. 0780-01-57-.05 PENALTY

(1)Any company required to give notice under this Chapter who has violated or attempted to violate any provision of the Chapter, shall be subject to the penalties established by Title 56, Chapter 8, Part 1, Tennessee Code Annotated.

History

• Authority: T.C.A. §§56-2-118(b), 56-8-109, 56-8-112, and 56-8-114.
• Administrative History: Original rule filed July 12, 1989; effective August 26, 1989.

Chapter 0780-01-58 Medicare Supplement Insurance Minimum Standards

Tenn. Comp. R. & Regs. 0780-01-58-.01 PURPOSE

The purpose of this Chapter is to provide for the reasonable standardization of coverage and simplification of terms and benefits of Medicare supplement policies; to facilitate public understanding and comparison of such policies; to eliminate provisions contained in such policies which may be misleading or confusing in connection with the purchase of such policies or with the settlement of claims; and to provide for full disclosures in the sale of accident and sickness insurance coverages to persons eligible for Medicare.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.02 AUTHORITY

This Chapter is issued pursuant to the authority vested in the commissioner under T.C.A. §§ 56-7-1401 et seq., specifically, T.C.A. § 56-7-1454.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005, expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.03 APPLICABILITY AND SCOPE

(1) Except as otherwise specifically provided in Rules 0780-01-.58-.07, 0780-01-58-.16, 0780- 01-58-.17, 0780-01-58-.20, and 0780-01-58-.25, this Chapter shall apply to:

(a) All Medicare supplement policies delivered or issued for delivery in this state on or after the effective date of this Chapter; and (b) All certificates issued under group Medicare supplement policies, which certificates have been delivered or issued for delivery in this state.

(2) This Chapter shall not apply to a policy or contract of one (1) or more employers or labor organizations, or of the trustees of a fund established by one (1) or more employers 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.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.04 DEFINITIONS

(1) “Applicant” means:

(a) In the case of an individual Medicare supplement policy, the person who seeks to contract for insurance benefits; and (b) In the case of a group Medicare supplement policy, the proposed certificate holder.

(2) “Bankruptcy” means when a Medicare Advantage organization that is not an issuer has filed, or has had filed against it, a petition for declaration of bankruptcy and has ceased doing business in the state.

(3) “Certificate” means any certificate delivered or issued for delivery in this state under a group Medicare supplement policy.

(4) “Certificate form” means the form on which the certificate is delivered or issued for delivery by the issuer.

(5) “Commissioner” means the commissioner of commerce and insurance.

(6) “Continuous period of creditable coverage” means the period during which an individual was covered by creditable coverage, if during the period of the coverage the individual had no breaks in coverage greater than sixty-three (63) days.

(7) (a) “Creditable coverage” means, with respect to an individual, coverage of the individual provided under any of the following:

1. A group health plan;

2. Health insurance coverage;

3. Part A or Part B of Title XVIII of the Social Security Act (Medicare);

4. Title XIX of the Social Security Act (Medicaid), other than coverage consisting solely of benefits under Section 1928;

5. Chapter 55 of Title 10 United States Code (CHAMPUS);

6. A medical care program of the Indian Health Service or of a tribal organization;

7. A state health benefits risk pool;

8. A health plan offered under Chapter 89 of Title 5 United States Code (Federal Employees Health Benefits Program);

9. A public health plan as defined in federal regulation; and 10. A health benefit plan under Section 5(e) of the Peace Corps Act (22 U.S.C. § 2504(e)).

(b) “Creditable coverage” shall not include one or more, or any combination of, the following:

1. Coverage only for accident or disability income insurance, or any combination thereof;

2. Coverage issued as a supplement to liability insurance;

3. Liability insurance, including general liability insurance and automobile liability insurance;

4. Workers’ compensation or similar insurance;

5. Automobile medical payment insurance;

6. Credit-only insurance;

7. Coverage for on-site medical clinics; and 8. Other similar insurance coverage, specified in federal regulations, under which benefits for medical care are secondary or incidental to other insurance benefits.

(c) “Creditable coverage” shall not include the following benefits if they are provided under a separate policy, certificate or contract of insurance or are otherwise not an integral

part of the plan:

1. Limited scope dental or vision benefits;

2. Benefits for long-term care, nursing home care, home health care, communitybased care, or any combination thereof; and 3. Such other similar, limited benefits as are specified in federal regulations.

(d) “Creditable coverage” shall not include the following benefits if offered as independent, non-coordinated benefits:

1. Coverage only for a specified disease or illness; and 2. Hospital indemnity or other fixed indemnity insurance.

(e) “Creditable coverage” shall not include the following if it is offered as a separate policy, certificate or contract of insurance:

1. Medicare supplemental health insurance as defined under Section 1882(g)(1) of the Social Security Act;

2. Coverage supplemental to the coverage provided under Chapter 55 of Title 10, United States Code; and 3. Similar supplemental coverage provided to coverage under a group health plan.

(8) “Employee welfare benefit plan” means a plan, fund or program of employee benefits as defined in 29 U.S.C. § 1002 (Employee Retirement Income Security Act).

(9) “Insolvency” means when an issuer, licensed to transact the business of insurance in this state, has had a final order of liquidation entered against it with a finding of insolvency by a court of competent jurisdiction in the issuer’s state of domicile.

(10) “Issuer” includes 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.

(11) “Medicare” means the “Health Insurance for the Aged Act,” Title XVIII of the Social Security Amendments of 1965, as then constituted or later amended.

(12) “Medicare Advantage plan” means a plan of coverage for health benefits under Medicare Part C as defined in 42 U.S.C. § 1395w-28(b)(1), and includes:

(a) Coordinated care plans that provide health care services, including but not limited to health maintenance organization plans with or without a point-of-service option, plans offered by provider-sponsored organizations, and preferred provider organization plans;

(b) Medical savings account plans coupled with a contribution into a Medicare Advantage plan medical savings account; and (c) Medicare Advantage private fee-for-service plans.

(13) “Medicare supplement policy” means a group or individual policy of accident and sickness insurance or a subscriber contract of hospital and medical service associations or health maintenance organizations, other than a policy issued pursuant to a contract under Section 1876 of the federal Social Security Act (42 U.S.C. §§ 1395 et. seq.) or an issued policy under a demonstration project specified in 42 U.S.C. § 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. “Medicare supplement policy” does not include Medicare Advantage plans established under Medicare Part C, Outpatient Prescription Drug plans established under Medicare Part D, or any Health Care Prepayment Plan (HCPP) that provides benefits pursuant to an agreement under § 1833(a)(1)(A) of the Social Security Act.

(14) “Pre-Standardized Medicare supplement benefit plan,” “Pre-Standardized benefit plan” or “Pre-Standardized plan” means a group or individual policy of Medicare supplement insurance issued prior to July 1, 1992.

(15) “1990 Standardized Medicare supplement benefit plan,” “1990 Standardized benefit plan” or “1990 plan” means a group or individual policy of Medicare supplement insurance issued on or after July 1, 1992, and with an effective date for coverage prior to June 1, 2010, and includes Medicare supplement insurance policies and certificates renewed on or after that date which are not replaced by the issuer at the request of the insured.

(16) “2010 Standardized Medicare supplement benefit plan,” “2010 Standardized benefit plan” or “2010 plan” means a group or individual policy of Medicare supplement insurance issued with an effective date of coverage on or after June 1, 2010.

(17) “Policy form” means the form on which the policy is delivered or issued for delivery by the issuer.

(18) “Secretary” means the Secretary of the United States Department of Health and Human Services.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 28, 1996. Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.05 POLICY DEFINITIONS AND TERMS

No policy or certificate may be advertised, solicited or issued for delivery in this state as a Medicare supplement policy or certificate unless the policy or certificate contains definitions or terms that conform to the requirements of this Rule.

(1) “Accident,” “accidental injury,” or “accidental means” shall be defined to employ “result” language and shall not include words that establish an accidental means test or use words such as “external, violent, visible wounds” or similar words of description or characterization.

(a) The definition shall not be more restrictive than the following: “Injury or injuries for which benefits are provided means accidental bodily injury sustained by the insured person which is the direct result of an accident, independent of disease or bodily infirmity or any other cause, and occurs while insurance coverage is in force.”

(b) The definition may provide that injuries shall not include injuries for which benefits are provided or available under any workers’ compensation, employer’s liability or similar law, or motor vehicle no-fault plan, unless prohibited by law.

(2) “Benefit period” or “Medicare benefit period” shall not be defined more restrictively than as defined in the Medicare program.

(3) “Convalescent nursing home,” “extended care facility,” or “skilled nursing facility” shall not be defined more restrictively than as defined in the Medicare program.

(4) “Health care expenses” means, for purposes of Rule 0780-01-58-.17, expenses of health maintenance organizations associated with the delivery of health care services, which expenses are analogous to incurred losses of insurers.

(5) “Hospital” may be defined in relation to its status, facilities and available services or to reflect its accreditation by the Joint Commission on Accreditation of Hospitals, but not more restrictively than as defined in the Medicare program.

(6) “Medicare” shall be defined in the policy and certificate. Medicare may be substantially defined as “The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then Constituted or Later Amended,” or “Title I, Part I of Public Law 89-97, as Enacted by the Eighty-Ninth Congress of the United States of America and popularly known as the Health Insurance for the Aged Act, as then constituted and any later amendments or substitutes thereof,” or words of similar import.

(7) “Medicare eligible expenses” shall mean expenses of the kinds covered by Medicare Parts A and B, to the extent recognized as reasonable and medically necessary by Medicare.

(8) “Physician” shall not be defined more restrictively than as defined in the Medicare program.

(9) “Sickness” shall not be defined to be more restrictive than the following: “Sickness means illness or disease of an insured person which first manifests itself after the effective date of insurance and while the insurance is in force.” The definition may be further modified to exclude sicknesses or diseases for which benefits are provided under any workers’ compensation, occupational disease, employer’s liability or similar law.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.06 POLICY PROVISIONS

(1) Except for permitted preexisting condition clauses as described in Rules 0780-01-58- .07(1)(a), 0780-01-58-.08(1)(a), and 0780-01-58-.09(1)(a) of this Chapter, no policy or certificate may be advertised, solicited or issued for delivery in this state as a Medicare supplement policy if the policy or certificate contains limitations or exclusions on coverage that are more restrictive than those of Medicare.

(2) No Medicare supplement policy or certificate may use waivers to exclude, limit or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions.

(3) No Medicare supplement policy or certificate in force in the state shall contain benefits that duplicate benefits provided by Medicare.

(4) (a) Subject to Rules 0780-01-58-.07(1)(d), (e), and (g), and Rule 0780-01-58-.08(1)(d) and (e) of this Chapter, a Medicare supplement policy with benefits for outpatient prescription drugs in existence prior to January 1, 2006, shall be renewed for current policyholders who do not enroll in Part D at the option of the policyholder.

(b) A Medicare supplement policy with benefits for outpatient prescription drugs shall not be issued after December 31, 2005.

(c) After December 31, 2005, a Medicare supplement policy with benefits for outpatient prescription drugs may not be renewed after the policyholder enrolls in Medicare Part D unless:

1. The policy is modified to eliminate outpatient prescription coverage for expenses of outpatient prescription drugs incurred after the effective date of the individual’s coverage under a Part D plan; and 2. Premiums are adjusted to reflect the elimination of outpatient prescription drug coverage at the time of Medicare Part D enrollment, accounting for any claims paid, if applicable.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repeal and new rule filed November 26, 1990; effective January 10, 1991. Repeal and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.07 MINIMUM BENEFIT STANDARDS FOR MEDICARE SUPPLEMENT BENEFIT PLAN

POLICIES OR CERTIFICATES ISSUED FOR DELIVERY PRIOR TO JULY 1, 1992.

No policy or certificate may be advertised, solicited or issued for delivery in this state as a Medicare supplement policy or certificate unless it meets or exceeds the following minimum standards. These are minimum standards and do not preclude the inclusion of other provisions or benefits which are not inconsistent with these standards.

(1) General Standards. The following standards apply to Medicare supplement policies and certificates and are in addition to all other requirements of this Chapter.

(a) A Medicare supplement policy or certificate shall not exclude or limit benefits for losses incurred more than six (6) months from the effective date of coverage because it involved a preexisting condition. The policy or certificate shall 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 (6) months before the effective date of coverage.

(b) A Medicare supplement policy or certificate shall not indemnify against losses resulting from sickness on a different basis than losses resulting from accidents.

(c) A Medicare supplement policy or certificate shall provide that benefits designed to cover cost sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible, co-payment, or coinsurance amounts. Premiums may be modified to correspond with such changes.

(d) A “non-cancellable,” “guaranteed renewable,” or “non-cancellable and guaranteed renewable” Medicare supplement policy shall not:

1. Provide for termination of coverage of a spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than the nonpayment of premium; or 2. Be cancelled or non-renewed by the issuer solely on the grounds of deterioration of health.

(e) 1. Except as authorized by the commissioner of this state, an issuer shall neither cancel nor non-renew a Medicare supplement policy or certificate for any reason other than nonpayment of premium or material misrepresentation.

2. If a group Medicare supplement insurance policy is terminated by the group policyholder and not replaced as provided in part 4., the issuer shall offer certificate holders an individual Medicare supplement policy. The issuer shall offer the certificate holder at least the following choices:

(i) An individual Medicare supplement policy currently offered by the issuer having comparable benefits to those contained in the terminated group Medicare supplement policy; and (ii) An individual Medicare supplement policy which provides only such benefits as are required to meet the minimum standards as defined in Rule 0780-01-58-.09(2) of this Chapter.

3. If membership in a group is terminated, the issuer shall:

(i) Offer the certificate holder the conversion opportunities described in part 2.; or (ii) At the option of the group policyholder, offer the certificate holder continuation of coverage under the group policy.

4. If a group Medicare supplement policy is replaced by another group Medicare supplement policy purchased by the same policyholder, the issuer of the replacement policy shall offer coverage to all persons covered under the old group policy on its date of termination. Coverage under the new group policy shall not result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced.

(f) Termination of a Medicare supplement policy or certificate shall be without prejudice to any continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be predicated upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or to payment of the maximum benefits. Receipt of Medicare Part D benefits will not be considered in determining a continuous loss.

(g) If a Medicare supplement policy eliminates an outpatient prescription drug benefit as a result of requirements imposed by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the modified policy shall be deemed to satisfy the guaranteed renewal requirements of this paragraph.

(2) Minimum Benefit Standards.

(a) Coverage of Part A Medicare eligible expenses for hospitalization to the extent not covered by Medicare from the sixty-first (61st) day through the ninetieth (90th) day in any Medicare benefit period;

(b) Coverage for either all or none of the Medicare Part A inpatient hospital deductible amount;

(c) Coverage of Part A Medicare eligible expenses incurred as daily hospital charges during use of Medicare’s lifetime hospital inpatient reserve days;

(d) Upon exhaustion of all Medicare hospital inpatient coverage including the lifetime reserve days, coverage of ninety percent (90%) of all Medicare Part A eligible expenses for hospitalization not covered by Medicare subject to a lifetime maximum benefit of an additional three hundred sixty-five (365) days;

(e) Coverage under Medicare Part A for the reasonable cost of the first three (3) pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations) unless replaced in accordance with federal regulations or already paid for under Medicare Part B;

(f) Coverage for the coinsurance amount, or in the case of hospital outpatient department services paid under a prospective payment system, the co-payment amount, of Medicare eligible expenses under Medicare Part B regardless of hospital confinement, subject to a maximum calendar year out-of-pocket amount equal to the Medicare Part B deductible [$147];

(g) Effective January 1, 1990, coverage under Medicare Part B for the reasonable cost of the first three (3) pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations), unless replaced in accordance with federal regulations or already paid for under Medicare Part A, subject to the Medicare deductible amount.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.08 BENEFIT STANDARDS FOR 1990 STANDARDIZED MEDICARE SUPPLEMENT

BENEFIT PLAN POLICIES OR CERTIFICATES ISSUED OR DELIVERED ON OR AFTER JULY 1,

1992, AND WITH AN EFFECTIVE DATE OF COVERAGE PRIOR TO JUNE 1, 2010.

The following standards are applicable to all Medicare supplement policies or certificates delivered or issued for delivery in this state on or after July 1, 1992, and with an effective date of coverage prior to June 1, 2010. No policy or certificate may be advertised, solicited, delivered or issued for delivery in this state as a Medicare supplement policy or certificate unless it complies with these benefit standards.

(1) General Standards. The following standards apply to Medicare supplement policies and certificates and are in addition to all other requirements of this Chapter.

(a) A Medicare supplement policy or certificate shall not exclude or limit benefits for losses incurred more than six (6) months from the effective date of coverage because it involved a preexisting condition. The policy or certificate 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 (6) months before the effective date of coverage.

(b) A Medicare supplement policy or certificate shall not indemnify against losses resulting from sickness on a different basis than losses resulting from accidents.

(c) A Medicare supplement policy or certificate shall provide that benefits designed to cover cost sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible, co-payment, or coinsurance amounts. Premiums may be modified to correspond with such changes.

(d) No Medicare supplement policy or certificate shall provide for termination of coverage of a spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than the nonpayment of premium.

(e) Each Medicare supplement policy shall be guaranteed renewable.

1. The issuer shall not cancel or non-renew the policy solely on the ground of health status of the individual.

2. The issuer shall not cancel or non-renew the policy for any reason other than nonpayment of premium or material misrepresentation.

3. If the Medicare supplement policy is terminated by the group policyholder and is not replaced as provided under part 5., the issuer shall offer certificate holders an individual Medicare supplement policy which, at the option of the certificate holder:

(i) Provides for continuation of the benefits contained in the group policy, or (ii) Provides for benefits that otherwise meet the requirements of this Paragraph.

4. If an individual is a certificate holder in a group Medicare supplement policy and the individual terminates membership in the group, the issuer shall (i) Offer the certificate holder the conversion opportunity described in part 3., or (ii) At the option of the group policyholder, offer the certificate holder continuation of coverage under the group policy.

5. If a group Medicare supplement policy is replaced by another group Medicare supplement policy purchased by the same policyholder, the issuer of the replacement policy shall offer coverage to all persons covered under the old group policy on its date of termination. Coverage under the new policy shall not result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced.

6. If a Medicare supplement policy eliminates an outpatient prescription drug benefit as a result of requirements imposed by the Medicare Prescription Drug, Improvement and Modernization Act of 2003, the modified policy shall be deemed to satisfy the guaranteed renewal requirements of this subparagraph.

(f) Termination of a Medicare supplement policy or certificate shall be without prejudice to any continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be conditioned upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or payment of the maximum benefits. Receipt of Medicare Part D benefits will not be considered in determining a continuous loss.

(g) 1. A Medicare supplement policy or certificate shall provide that benefits and premiums under the policy or certificate shall be suspended at the request of the policyholder or certificate holder for the period, not to exceed twenty-four (24) months, in which the policyholder or certificate holder has applied for and is determined to be entitled to medical assistance under Title XIX of the Social Security Act, but only if the policyholder or certificate holder notifies the issuer of the policy or certificate within ninety (90) days after the date the individual becomes entitled to assistance.

2. If suspension occurs and if the policyholder or certificate holder loses entitlement to medical assistance, the policy or certificate shall be automatically reinstituted effective as of the date of termination of entitlement as of the termination of entitlement if the policyholder or certificate holder provides notice of loss of entitlement within ninety (90) days after the date of loss and pays the premium attributable to the period, effective as of the date of termination of entitlement.

3. Each Medicare supplement policy shall provide that benefits and premiums under the policy shall be suspended (for any period that may be provided by federal regulation) at the request of the policyholder if the policyholder is entitled to benefits under Section 226(b) of the Social Security Act and is covered under a group health plan as defined in Section 1862(b)(1)(A)(v) of the Social Security Act. If suspension occurs and if the policyholder or certificate holder loses coverage under the group health plan, the policy shall be automatically reinstituted effective as of the date of loss of coverage if the policyholder provides notice of loss of coverage within ninety (90) days after the date of the loss and pays the premium attributable to the period, effective as of the date of termination of enrollment in the group health plan.

4. Reinstitution of coverages as described in parts 2. and 3.:

(i) Shall not provide for any waiting period with respect to treatment of preexisting conditions;

(ii) Shall provide for resumption of coverage that is substantially equivalent to coverage in effect before the date of suspension. If the suspended Medicare supplement policy provided coverage for outpatient prescription drugs, reinstitution of the policy for Medicare Part D enrollees shall be without coverage for outpatient prescription drugs and shall otherwise provide substantially equivalent coverage to the coverage in effect before the date of suspension; and (iii) Shall provide for classification of premiums on terms at least as favorable to the policyholder or certificate holder as the premium classification terms that would have applied to the policyholder or certificate holder had the coverage not been suspended.

(h) If an issuer makes a written offer to the Medicare Supplement policyholders or certificate holders of one or more of its plans, to exchange during a specified period from his or her 1990 Standardized plan as described in Rule 0780-01-58-.10 of this

Chapter to a 2010 Standardized plan as described in Rule 0780-01-58-.11 of this

Chapter, the offer and subsequent exchange shall comply with the following requirements:

1. An issuer need not provide justification to the commissioner if the insured replaces a 1990 Standardized policy or certificate with an issue age rated 2010 Standardized policy or certificate at the insured’s original issue age and duration.

If an insured’s policy or certificate to be replaced is priced on an issue age rate schedule at the time of such offer, the rate charged to the insured for the new exchanged policy shall recognize the policy reserve buildup, due to the prefunding inherent in the use of an issue age rate basis, for the benefit of the insured. The method proposed to be used by an issuer must be filed with the commissioner according to the state’s rate filing procedure.

2. The rating class of the new policy or certificate shall be the class closest to the insured’s class of the replaced coverage.

3. An issuer may not apply new preexisting condition limitations or a new incontestability period to the new policy for those benefits contained in the exchanged 1990 Standardized policy or certificate of the insured, but may apply preexisting condition limitations of no more than six (6) months to any added benefits contained in the new 2010 Standardized policy or certificate not contained in the exchanged policy.

4. The new policy or certificate shall be offered to all policyholders or certificate holders within a given plan, except where the offer or issue would be in violation of state or federal law.

(2) Standards for Basic (Core) Benefits Common to Benefit Plans A to J. Every issuer shall make available a policy or certificate including only the following basic “core” package of benefits to each prospective insured. An issuer may make available to prospective insureds any of the other Medicare Supplement Insurance Benefit Plans in addition to the basic core package, but not in lieu of it.

(a) Coverage of Part A Medicare eligible expenses for hospitalization to the extent not covered by Medicare from the sixty-first (61st) day through the ninetieth (90th) day in any Medicare benefit period;

(b) Coverage of Part A Medicare eligible expenses incurred for hospitalization to the extent not covered by Medicare for each Medicare lifetime inpatient reserve day used;

(c) Upon exhaustion of the Medicare hospital inpatient coverage, including the lifetime reserve days, coverage of one hundred percent (100%) of the Medicare Part A eligible expenses for hospitalization paid at the applicable prospective payment system (PPS) rate, or other appropriate Medicare standard of payment, subject to a lifetime maximum benefit of an additional three hundred sixty-five (365) days. The provider shall accept the issuer’s payment as payment in full and may not bill the insured for any balance;

(d) Coverage under Medicare Parts A and B for the reasonable cost of the first three (3) pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations) unless replaced in accordance with federal regulations;

(e) Coverage for the coinsurance amount, or in the case of hospital outpatient department services paid under a prospective payment system, the co-payment amount, of Medicare eligible expenses under Medicare Part B regardless of hospital confinement, subject to the Medicare Part B deductible;

(3) Standards for Additional Benefits. The following additional benefits shall be included in Medicare Supplement Benefit Plans B through J only as provided by Rule 0780-01-58-.10 of this Chapter.

(a) Medicare Part A Deductible: Coverage for all of the Medicare Part A inpatient hospital deductible amount per benefit period.

(b) Skilled Nursing Facility Care: Coverage for the actual billed charges up to the coinsurance amount from the twenty-first (21st) day through the one hundredth (100th) day in a Medicare benefit period for post-hospital skilled nursing facility care eligible under Medicare Part A.

(c) Medicare Part B Deductible: Coverage for all of the Medicare Part B deductible amount per calendar year regardless of hospital confinement.

(d) Eighty Percent (80%) of the Medicare Part B Excess Charges: Coverage for eighty percent (80%) of the difference between the actual Medicare Part B charge as billed, not to exceed any charge limitation established by the Medicare program or state law, and the Medicare-approved Part B charge.

(e) One Hundred Percent (100%) of the Medicare Part B Excess Charges: Coverage for all of the difference between the actual Medicare Part B charge as billed, not to exceed any charge limitation established by the Medicare program or state law, and the Medicare-approved Part B charge.

(f) Basic Outpatient Prescription Drug Benefit: Coverage for fifty percent (50%) of outpatient prescription drug charges, after a two hundred fifty dollar ($250) calendar year deductible, to a maximum of one thousand two hundred fifty dollar ($1,250) in benefits received by the insured per calendar year, to the extent not covered by Medicare. The outpatient prescription drug benefit may be included for sale or issuance in a Medicare supplement policy until January 1, 2006.

(g) Extended Outpatient Prescription Drug Benefit: Coverage for fifty percent (50%) of outpatient prescription drug charges, after a two hundred fifty dollar ($250) calendar year deductible to a maximum of three thousand dollars ($3,000) in benefits received by the insured per calendar year, to the extent not covered by Medicare. The outpatient prescription drug benefit may be included for sale or issuance in a Medicare supplement policy until January 1, 2006.

(h) Medically Necessary Emergency Care in a Foreign Country: Coverage to the extent not covered by Medicare for eighty percent (80%) of the billed charges for Medicareeligible expenses for medically necessary emergency hospital, physician and medical care received in a foreign country, which care would have been covered by Medicare if provided in the United States and which care began during the first sixty (60) consecutive days of each trip outside the United States, subject to a calendar year deductible of two hundred fifty dollars ($250), and a lifetime maximum benefit of fifty thousand dollars ($50,000). For purposes of this benefit, “emergency care” shall mean care needed immediately because of an injury or an illness of sudden and unexpected onset.

(i) 1. Preventive Medical Care Benefit: Coverage for the following preventive health services not covered by Medicare:

(i) An annual clinical preventive medical history and physical examination that may include tests and services from part 2. and patient education to address preventive health care measures;

(ii) Preventive screening tests or preventive services, the selection and frequency of which is determined to be medically appropriate by the attending physician.

2. Reimbursement shall be for the actual charges up to one hundred percent (100%) of the Medicare-approved amount for each service, as if Medicare were to cover the service as identified in American Medical Association Current Procedural Terminology (AMA CPT) codes, to a maximum of one hundred twenty dollars ($120) annually under this benefit. This benefit shall not include payment for any procedure covered by Medicare.

(j) At-Home Recovery Benefit: Coverage for services to provide short term, at-home assistance with activities of daily living for those recovering from an illness, injury or surgery.

1. For purposes of this benefit, the following definitions shall apply:

(i) “Activities of daily living” include, but are not limited to bathing, dressing, personal hygiene, transferring, eating, ambulating, assistance with drugs that are normally self-administered, and changing bandages or other dressings.

(ii ) “Care provider” means a duly qualified or licensed home health aide or homemaker, personal care aide or nurse provided through a licensed home health care agency or referred by a licensed referral agency or licensed nurses registry.

(iii) “Home” shall mean any place used by the insured as a place of residence, provided that the place would qualify as a residence for home health care services covered by Medicare. A hospital or skilled nursing facility shall not be considered the insured’s place of residence.

(iv) “At-home recovery visit” means the period of a visit required to provide at home recovery care, without limit on the duration of the visit, except each consecutive four (4) hours in a twenty-four (24) hour period of services provided by a care provider is one visit.

2. Coverage Requirements and Limitations.

(i) At-home recovery services provided must be primarily services which assist in activities of daily living.

(ii) The insured’s attending physician must certify that the specific type and frequency of at-home recovery services are necessary because of a condition for which a home care plan of treatment was approved by Medicare.

(iii) Coverage is limited to:

(I) No more than the number and type of at-home recovery visits certified as necessary by the insured’s attending physician. The total number of at-home recovery visits shall not exceed the number of Medicare approved home health care visits under a Medicare approved home care plan of treatment;

(II) The actual charges for each visit up to a maximum reimbursement of forty dollars ($40) per visit;

(III) One thousand six hundred dollars ($1,600) per calendar year;

(IV) Seven (7) visits in any one week;

(V) Care furnished on a visiting basis in the insured’s home;

(VI) Services provided by a care provider as defined in this Rule;

(VII) At-home recovery visits while the insured is covered under the policy or certificate and not otherwise excluded;

(VIII) At-home recovery visits received during the period the insured is receiving Medicare approved home care services or no more than eight (8) weeks after the service date of the last Medicare approved home health care visit.

3. Coverage is excluded for:

(i) Home care visits paid for by Medicare or other government programs; and (ii ) Care provided by family members, unpaid volunteers or providers who are not care providers.

(4) Standards for Plans K and L.

(a) Standardized Medicare supplement benefit plan K shall consist of the following:

1. Coverage of one hundred percent (100%) of the Part A hospital coinsurance amount for each day used from the sixty-first (61st) through the ninetieth (90th) day in any Medicare benefit period;

2. Coverage of one hundred percent (100%) of the Part A hospital coinsurance amount for each Medicare lifetime inpatient reserve day used from the ninety-first (91st) through the one hundred fiftieth (150th) day in any Medicare benefit period;

3. Upon exhaustion of the Medicare hospital inpatient coverage, including the lifetime reserve days, coverage of one hundred percent (100%) of the Medicare

Part A eligible expenses for hospitalization paid at the applicable prospective payment system (PPS) rate, or other appropriate Medicare standard of payment, subject to a lifetime maximum benefit of an additional three hundred sixty-five (365) days. The provider shall accept the issuer’s payment as payment in full and may not bill the insured for any balance;

4. Medicare Part A Deductible: Coverage for fifty percent (50%) of the Medicare

Part A inpatient hospital deductible amount per benefit period until the out-ofpocket limitation is met as described in part 10.;

5. Skilled Nursing Facility Care: Coverage for fifty percent (50%) of the coinsurance amount for each day used from the twenty-first (21st) day through the one hundredth (100th) day in a Medicare benefit period for post-hospital skilled nursing facility care eligible under Medicare Part A until the out-of-pocket limitation is met as described in part 10.;

6. Hospice Care: Coverage for fifty percent (50%) of cost sharing for all Part A Medicare eligible expenses and respite care until the out-of-pocket limitation is met as described in part 10.;

7. Coverage for fifty percent (50%), under Medicare Part A or B, of the reasonable cost of the first three (3) pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations) unless replaced in accordance with federal regulations until the out-of-pocket limitation is met as described in

part 10.;

8. Except for coverage provided in part 10., coverage for fifty percent (50%) of the cost sharing otherwise applicable under Medicare Part B after the policyholder pays the Part B deductible until the out-of-pocket limitation is met as described

part 10.;

9. Coverage of one hundred percent (100%) of the cost sharing for Medicare Part B preventive services after the policyholder pays the Part B deductible; and 10. Coverage of one hundred percent (100%) of all cost sharing under Medicare Parts A and B for the balance of the calendar year after the individual has reached the out-of-pocket limitation on annual expenditures under Medicare Parts A and B of four thousand dollars ($4000) in 2006, indexed each year by the appropriate inflation adjustment specified by the Secretary of the U.S.

Department of Health and Human Services.

(b) Standardized Medicare supplement benefit plan L shall consist of the following:

1. The benefits described in subparagraph (a), parts 1., 2., 3. and 9.

2. The benefit described in subparagraph (a), parts 4., 5., 6., 7. and 8., but substituting seventy-five percent (75%) for fifty percent (50%); and 3. The benefit described in subparagraph (a), part 10., but substituting two thousand dollars ($2000) for four thousand dollars ($4000).

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2006; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.09 BENEFIT STANDARDS FOR 2010 STANDARDIZED MEDICARE SUPPLEMENT

BENEFIT PLAN POLICIES OR CERTIFICATES ISSUED FOR DELIVERY WITH AN EFFECTIVE DATE

OF COVERAGE ON OR AFTER JUNE 1, 2010.

The following standards are applicable to all Medicare supplement policies or certificates delivered or issued for delivery in this state with an effective date of coverage on or after June 1, 2010. No policy or certificate may be advertised, solicited, delivered, or issued for delivery in this state as a Medicare supplement policy or certificate unless it complies with these benefit standards. No issuer may offer any 1990 Standardized Medicare supplement benefit plan for sale on or after June 1, 2010. Benefit standards applicable to Medicare supplement policies and certificates issued with an effective date of coverage before June 1, 2010, remain subject to the requirements of T.C.A. Title 56, Chapter 7, Part 14 and all applicable benefit standards in Rules 0780-01-58-.07 and 0780-01-58-.08 of this Chapter.

(1) General Standards. The following standards apply to Medicare supplement policies and certificates and are in addition to all other requirements of this Chapter.

(a) A Medicare supplement policy or certificate shall not exclude or limit benefits for losses incurred more than six (6) months from the effective date of coverage because it involved a preexisting condition. The policy or certificate 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 (6) months before the effective date of coverage.

(b) A Medicare supplement policy or certificate shall not indemnify against losses resulting from sickness on a different basis than losses resulting from accidents.

(c) A Medicare supplement policy or certificate shall provide that benefits designed to cover cost sharing amounts under Medicare will be changed automatically to coincide with any changes in the applicable Medicare deductible, co-payment, or coinsurance amounts. Premiums may be modified to correspond with such changes.

(d) No Medicare supplement policy or certificate shall provide for termination of coverage of a spouse solely because of the occurrence of an event specified for termination of coverage of the insured, other than the nonpayment of premium.

(e) Each Medicare supplement policy shall be guaranteed renewable.

1. The issuer shall not cancel or non-renew the policy solely on the ground of health status of the individual.

2. The issuer shall not cancel or non-renew the policy for any reason other than nonpayment of premium or material misrepresentation.

3. If the Medicare supplement policy is terminated by the group policyholder and is not replaced as provided under part 5., the issuer shall offer certificate holders an individual Medicare supplement policy which, at the option of the certificate holder:

(i) Provides for continuation of the benefits contained in the group policy; or (ii) Provides for benefits that otherwise meet the requirements of this Rule.

4. If an individual is a certificate holder in a group Medicare supplement policy and the individual terminates membership in the group, the issuer shall:

(i) Offer the certificate holder the conversion opportunity described in part 3.; or (ii) At the option of the group policyholder, offer the certificate holder continuation of coverage under the group policy.

5. If a group Medicare supplement policy is replaced by another group Medicare supplement policy purchased by the same policyholder, the issuer of the replacement policy shall offer coverage to all persons covered under the old group policy on its date of termination. Coverage under the new policy shall not result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced.

(f) Termination of a Medicare supplement policy or certificate shall be without prejudice to any continuous loss which commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be conditioned upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or payment of the maximum benefits. Receipt of Medicare Part D benefits will not be considered in determining a continuous loss.

(g) 1. A Medicare supplement policy or certificate shall provide that benefits and premiums under the policy or certificate shall be suspended at the request of the policyholder or certificate holder for the period, not to exceed twenty-four (24) months, in which the policyholder or certificate holder has applied for and is determined to be entitled to medical assistance under Title XIX of the Social Security Act, but only if the policyholder or certificate holder notifies the issuer of the policy or certificate within ninety (90) days after the date the individual becomes entitled to assistance.

2. If suspension occurs and if the policyholder or certificate holder loses entitlement to medical assistance, the policy or certificate shall be automatically reinstituted (effective as of the date of termination of entitlement) as of the termination of entitlement if the policyholder or certificate holder provides notice of loss of entitlement within ninety (90) days after the date of loss and pays the premium attributable to the period, effective as of the date of termination of entitlement.

3. Each Medicare supplement policy shall provide that benefits and premiums under the policy shall be suspended for any period that may be provided by federal regulation at the request of the policyholder if the policyholder is entitled to benefits under Section 226(b) of the Social Security Act and is covered under a group health plan as defined in Section 1862(b)(1)(A)(v) of the Social Security Act. If suspension occurs and if the policyholder or certificate holder loses coverage under the group health plan, the policy shall be automatically reinstituted, effective as of the date of loss of coverage, if the policyholder provides notice of loss of coverage within ninety (90) days after the date of the loss and pays the premium attributable to the period, effective as of the date of termination of enrollment in the group health plan.

4. Reinstitution of coverages as described in parts 2. and 3.:

(i) Shall not provide for any waiting period with respect to treatment of preexisting conditions;

(ii) Shall provide for resumption of coverage that is substantially equivalent to coverage in effect before the date of suspension; and (iii) Shall provide for classification of premiums on terms at least as favorable to the policyholder or certificate holder as the premium classification terms that would have applied to the policyholder or certificate holder had the coverage not been suspended.

(2) Standards for Basic (Core) Benefits Common to Medicare Supplement Insurance Benefit Plans A, B, C, D, F, F with High Deductible, G, M and N. Every issuer of Medicare supplement insurance benefit plans shall make available a policy or certificate including only the following basic “core” package of benefits to each prospective insured. An issuer may make available to prospective insureds any of the other Medicare Supplement Insurance Benefit Plans in addition to the basic core package, but not in lieu of it.

(a) Coverage of Part A Medicare eligible expenses for hospitalization to the extent not covered by Medicare from the sixty-first (61st) day through the ninetieth (90th) day in any Medicare benefit period;

(b) Coverage of Part A Medicare eligible expenses incurred for hospitalization to the extent not covered by Medicare for each Medicare lifetime inpatient reserve day used;

(c) Upon exhaustion of the Medicare hospital inpatient coverage, including the lifetime reserve days, coverage of one hundred percent (100%) of the Medicare Part A eligible expenses for hospitalization paid at the applicable prospective payment system (PPS) rate, or other appropriate Medicare standard of payment, subject to a lifetime maximum benefit of an additional three hundred sixty-five (365) days. The provider shall accept the issuer’s payment as payment in full and may not bill the insured for any balance;

(d) Coverage under Medicare Parts A and B for the reasonable cost of the first three (3) pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations) unless replaced in accordance with federal regulations;

(e) Coverage for the coinsurance amount, or in the case of hospital outpatient department services paid under a prospective payment system, the co-payment amount, of Medicare eligible expenses under Part B regardless of hospital confinement, subject to the Medicare Part B deductible;

(f) Hospice Care: Coverage of cost sharing for all Part A Medicare eligible hospice care and respite care expenses.

(3) Standards for Additional Benefits. The following additional benefits shall be included in Medicare supplement benefit Plans B, C, D, F, F with High Deductible, G, M, and N as provided by Rule 0780-01-58-.11 of this Chapter.

(a) Medicare Part A Deductible: Coverage for one hundred percent (100%) of the Medicare Part A inpatient hospital deductible amount per benefit period.

(b) Medicare Part A Deductible: Coverage for fifty percent (50%) of the Medicare Part A inpatient hospital deductible amount per benefit period.

(c) Skilled Nursing Facility Care: Coverage for the actual billed charges up to the coinsurance amount from the twenty-first (21st) day through the one hundredth (100th) day in a Medicare benefit period for post-hospital skilled nursing facility care eligible under Medicare Part A.

(d) Medicare Part B Deductible: Coverage for one hundred percent (100%) of the Medicare Part B deductible amount per calendar year regardless of hospital confinement.

(e) One Hundred Percent (100%) of the Medicare Part B Excess Charges: Coverage for all of the difference between the actual Medicare Part B charges as billed, not to exceed any charge limitation established by the Medicare program or state law, and the Medicare-approved Part B charge.

(f) Medically Necessary Emergency Care in a Foreign Country: Coverage to the extent not covered by Medicare for eighty percent (80%) of the billed charges for Medicareeligible expenses for medically necessary emergency hospital, physician and medical care received in a foreign country, which care would have been covered by Medicare if provided in the United States and which care began during the first sixty (60) consecutive days of each trip outside the United States, subject to a calendar year deductible of two hundred fifty dollars ($250), and a lifetime maximum benefit of fifty thousand dollars ($50,000). For purposes of this benefit, “emergency care” shall mean care needed immediately because of an injury or an illness of sudden and unexpected onset.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2006; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.10 STANDARD MEDICARE SUPPLEMENT BENEFIT PLANS FOR 1990

STANDARDIZED MEDICARE SUPPLEMENT BENEFIT PLAN POLICIES OR CERTIFICATES ISSUED

FOR DELIVERY ON OR AFTER JULY 1, 1992, AND WITH AN EFFECTIVE DATE OF COVERAGE

PRIOR TO JUNE 1, 2010.

(1) An issuer shall make available to each prospective policyholder and certificate holder a policy form or certificate form containing only the basic core benefits, as defined in Rule 0780-01- 58-.08(2) of this Chapter.

(2) No groups, packages or combinations of Medicare supplement benefits other than those listed in this Rule shall be offered for sale in this state, except as may be permitted in Rule 0780-01-58-.10(7) and in Rule 0780-01-58-.13 of this Chapter.

(3) Benefit plans shall be uniform in structure, language, designation and format to the standard benefit plans A through L listed in this Rule and conform to the definitions in Rule 0780-01- 58-.04 of this Chapter. Each benefit shall be structured in accordance with the format provided in Rule 0780-01-58-.08(2) and Rule 0780-01-58-.08(3), or Rule 0780-01-58-.08(4) and list the benefits in the order shown in this Rule. For purposes of this Rule, “structure, language, and format” means style, arrangement and overall content of a benefit.

(4) An issuer may use, in addition to the benefit plan designations required in Paragraph (3), other designations to the extent permitted by law.

(5) Make-up of benefit plans:

(a) Standardized Medicare supplement benefit plan A shall be limited to the basic (core) benefits common to all benefit plans, as defined in Rule 0780-01-58-.08(2) of this

Chapter.

(b) Standardized Medicare supplement benefit plan B shall include only the following: The core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare

Part A deductible as defined in Rule 0780-01-58-.08(3)(a) of this Chapter.

(c) Standardized Medicare supplement benefit plan C shall include only the following: The core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare

Part A deductible, skilled nursing facility care, Medicare Part B deductible and medically necessary emergency care in a foreign country as defined in Rules 0780-01- 58-.08(3)(a), (b), (c), and (h) of this Chapter, respectively.

(d) Standardized Medicare supplement benefit plan D shall include only the following: The core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare

Part A deductible, skilled nursing facility care, medically necessary emergency care in an foreign country and the at-home recovery benefit as defined in Rules 0780-01-58- .08(3)(a), (b), (h), and (j) of this Chapter, respectively.

(e) Standardized Medicare supplement benefit plan E shall include only the following: The core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare

Part A deductible, skilled nursing facility care, medically necessary emergency care in a foreign country and preventive medical care as defined in Rules 0780-01-58- .08(3)(a), (b), (h), and (i) of this Chapter, respectively.

(f) Standardized Medicare supplement benefit plan F shall include only the following: The core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare

Part A deductible, the skilled nursing facility care, the Part B deductible, one hundred percent (100%) of the Medicare Part B excess charges, and medically necessary emergency care in a foreign country as defined in Rules 0780-01-58-.08(3)(a), (b), (c), (e), and (h) of this Chapter, respectively.

(g) Standardized Medicare supplement benefit high deductible plan F shall include only the following: one hundred percent (100%) of covered expenses following the payment of the annual high deductible plan F deductible. The covered expenses include the core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare Part A deductible, skilled nursing facility care, the Medicare Part B deductible, one hundred percent (100%) of the Medicare Part B excess charges, and medically necessary emergency care in a foreign country as defined in Rules 0780-01-58-.08(3)(a), (b), (c), (e), and (h) of this Chapter, respectively. The annual high deductible plan F deductible shall consist of out-of-pocket expenses, other than premiums, for services covered by the Medicare supplement plan F policy, and shall be in addition to any other specific benefit deductibles. The annual high deductible Plan F deductible shall be one thousand five hundred dollars ($1,500) for 1998 and 1999, and shall be based on the calendar year. It shall be adjusted annually thereafter by the Secretary to reflect the change in the Consumer Price Index for all urban consumers for the twelve (12) month period ending with August of the preceding year, and rounded to the nearest multiple of ten dollars ($10).

(h) Standardized Medicare supplement benefit plan G shall include only the following: The core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare

Part A deductible, skilled nursing facility care, eighty percent (80%) of the Medicare

Part B excess charges, medically necessary emergency care in a foreign country, and the at-home recovery benefit as defined in Rules 0780-01-58-.08(3)(a), (b), (d), (h), and (j) of this Chapter, respectively.

(i) Standardized Medicare supplement benefit plan H shall consist of only the following:

The core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare Part A deductible, skilled nursing facility care, basic prescription drug benefit and medically necessary emergency care in a foreign country as defined in Rules 0780-01-58-.08(3)(a), (b), (f), and (h) of this Chapter, respectively. The outpatient prescription drug benefit shall not be included in a Medicare supplement policy sold after December 31, 2005.

(j) Standardized Medicare supplement benefit plan I shall consist of only the following:

The core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare Part A deductible, skilled nursing facility care, one hundred percent (100%) of the Medicare Part B excess charges, basic prescription drug benefit, medically necessary emergency care in a foreign country and at-home recovery benefit as defined in Rules 0780-01-58-.08(3)(a), (b), (e), (f), (h), and (j) of this Chapter, respectively. The outpatient prescription drug benefit shall not be included in a Medicare supplement policy sold after December 31, 2005.

(k) Standardized Medicare supplement benefit plan J shall consist of only the following:

The core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, one hundred percent (100%) of the Medicare Part B excess charges, extended prescription drug benefit, medically necessary emergency care in a foreign country, preventive medical care and at-home recovery benefit as defined in Rules 0780-01-58- .08(3)(a), (b), (c), (e), (g), (h), (i), and (j) of this Chapter, respectively. The outpatient prescription drug benefit shall not be included in a Medicare supplement policy sold after December 31, 2005.

(l) Standardized Medicare supplement benefit high deductible plan J shall consist of only the following: one hundred percent (100%) of covered expenses following the payment of the annual high deductible plan J deductible. The covered expenses include the core benefit as defined in Rule 0780-01-58-.08(2) of this Chapter, plus the Medicare Part A deductible, skilled nursing facility care, Medicare Part B deductible, one hundred percent (100%) of the Medicare Part B excess charges, extended outpatient prescription drug benefit, medically necessary emergency care in a foreign country, preventive medical care benefit and at-home recovery benefit as defined in Rules 0780-01-58-.08(3)(a), (b), (c), (e), (g), (h), (i), and (j) of this Chapter, respectively. The annual high deductible plan J deductible shall consist of out-of-pocket expenses, other than premiums, for services covered by the Medicare supplement plan J policy, and shall be in addition to any other specific benefit deductibles. The annual deductible shall be one thousand five hundred dollars ($1,500) for 1998 and 1999, and shall be based on a calendar year. It shall be adjusted annually thereafter by the Secretary to reflect the change in the Consumer Price Index for all urban consumers for the twelve (12) month period ending with August of the preceding year, and rounded to the nearest multiple of ten dollars ($10). The outpatient prescription drug benefit shall not be included in a Medicare supplement policy sold after December 31, 2005.

(6) Make-up of two Medicare supplement plans mandated by The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA);

(a) Standardized Medicare supplement benefit plan K shall consist of only those benefits described in Rule 0780-01-58-.08(4)(a) of this Chapter.

(b) Standardized Medicare supplement benefit plan L shall consist of only those benefits described in Rule 0780-01-58-.08(4)(b) of this Chapter.

(7) New or Innovative Benefits: An issuer may, with the prior approval of the commissioner, offer policies or certificates with new or innovative benefits in addition to the benefits provided in a policy or certificate that otherwise complies with the applicable standards. The new or innovative benefits may include benefits that are appropriate to Medicare supplement insurance, new or innovative, not otherwise available, cost-effective, and offered in a manner that is consistent with the goal of simplification of Medicare supplement policies. After December 31, 2005, the innovative benefit shall not include an outpatient prescription drug benefit.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 15, 1996; effective October 29, 1996. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.11 STANDARD MEDICARE SUPPLEMENT BENEFIT PLANS FOR 2010

STANDARDIZED MEDICARE SUPPLEMENT BENEFIT PLAN POLICIES OR CERTIFICATES ISSUED

FOR DELIVERY WITH AN EFFECTIVE DATE OF COVERAGE ON OR AFTER JUNE 1, 2010.

The following standards are applicable to all Medicare supplement policies or certificates delivered or issued for delivery in this state with an effective date of coverage on or after June 1, 2010. No policy or certificate may be advertised, solicited, delivered or issued for delivery in this state as a Medicare supplement policy or certificate unless it complies with these benefit plan standards. Benefit plan standards applicable to Medicare supplement policies and certificates issued with an effective date of coverage before June 1, 2010, remain subject to the requirements of T.C.A. Title 56, Chapter 7, Part 14 and all applicable benefit standards in Rules 0780-01-58-.07 and 0780-01-58-.08 of this Chapter.

(1) (a) An issuer shall make available to each prospective policyholder and certificate holder a policy form or certificate form containing only the basic (core) benefits, as defined in

Rule 0780-01-58-.09(2) of this Chapter.

(b) If an issuer makes available any of the additional benefits described in Rule 0780-01- 58-.09(3), or offers standardized benefit Plans K or L as described in subparagraphs (5)(h) and (i) of this Rule, then the issuer shall make available to each prospective policyholder and certificate holder, in addition to a policy form or certificate form with only the basic (core) benefits as described in subparagraph (1)(a), a policy form or certificate form containing either standardized benefit Plan C as described in subparagraph (5)(c), or standardized benefit Plan F as described in subparagraph (5)(e).

(2) No groups, packages or combinations of Medicare supplement benefits other than those listed in this Rule shall be offered for sale in this state, except as may be permitted in Paragraph (6) and in Rule 0780-01-58-.13 of this Chapter.

(3) Benefit plans shall be uniform in structure, language, designation and format to the standard benefit plans listed in this Rule and conform to the definitions in Rule 0780-01-58-.04 of this

Chapter. Each benefit shall be structured in accordance with the format provided in Rules 0780-01-58-.09(2) and (3) of this Chapter; or, in the case of plans K or L, in subparagraphs (5)(h) or (i) and list the benefits in the order shown. For purposes of this Rule, “structure, language, and format” means style, arrangement and overall content of a benefit.

(4) In addition to the benefit plan designations required in Paragraph (3), an issuer may use other designations to the extent permitted by law.

(5) Make-up of 2010 Standardized Benefit Plans:

(a) Standardized Medicare supplement benefit Plan A shall include only the following: The basic (core) benefits as defined in Rule 0780-01-58-.09(2) of this Chapter.

(b) Standardized Medicare supplement benefit Plan B shall include only the following: The basic (core) benefit as defined in Rule 0780-01-58-.09(2) of this Chapter, plus one hundred percent (100%) of the Medicare Part A deductible as defined in Rule 0780-01- 58-.09(3)(a) of this Chapter.

(c) Standardized Medicare supplement benefit Plan C shall include only the following: The basic (core) benefit as defined in Rule 0780-01-58-.09(2) of this Chapter, plus one hundred percent (100%) of the Medicare Part A deductible, skilled nursing facility care, one hundred percent (100%) of the Medicare Part B deductible, and medically necessary emergency care in a foreign country as defined in Rules 0780-01-58- .09(3)(a), (c), (d), and (f) of this Chapter, respectively.

(d) Standardized Medicare supplement benefit Plan D shall include only the following: The basic (core) benefit as defined in Rule 0780-01-58-.09(2) of this Chapter, plus one hundred percent (100%) of the Medicare Part A deductible, skilled nursing facility care, and medically necessary emergency care in an foreign country as defined in Rules 0780-01-58-.09(3)(a), (c), and (f) of this Chapter, respectively.

(e) Standardized Medicare supplement [regular] Plan F shall include only the following:

The basic (core) benefit as defined in Rule 0780-01-58-.09(2) of this Chapter, plus one hundred percent (100%) of the Medicare Part A deductible, the skilled nursing facility care, one hundred percent (100%) of the Medicare Part B deductible, one hundred percent (100%) of the Medicare Part B excess charges, and medically necessary emergency care in a foreign country as defined in Rules 0780-01-58-.09(3)(a), (c), (d), (e), and (f), respectively.

(f) Standardized Medicare supplement Plan F with High Deductible shall include only the following: one hundred percent (100%) of covered expenses following the payment of the annual deductible set forth in part 2. below.

1. The basic (core) benefit as defined in Rule 0780-01-58-.09(2) of this Chapter, plus one hundred percent (100%) of the Medicare Part A deductible, skilled nursing facility care, one hundred percent (100%) of the Medicare Part B deductible, one hundred percent (100%) of the Medicare Part B excess charges, and medically necessary emergency care in a foreign country as defined in Rules 0780-01-58-.09(3)(a), (c), (d), (e), and (f) of this Chapter, respectively.

2. The annual deductible in Plan F with High Deductible shall consist of out-ofpocket expenses, other than premiums, for services covered by regular Plan F, and shall be in addition to any other specific benefit deductibles. The basis for the deductible shall be one thousand five hundred dollars ($1,500) and shall be adjusted annually from 1999 by the Secretary of the U.S. Department of Health and Human Services to reflect the change in the Consumer Price Index for all urban consumers for the twelve (12) month period ending with August of the preceding year, and rounded to the nearest multiple of ten dollars ($10).

(g) Standardized Medicare supplement benefit Plan G shall include only the following: The basic (core) benefit as defined in Rule 0780-01-58-.09(2) of this Chapter, plus one hundred percent (100%) of the Medicare Part A deductible, skilled nursing facility care, one hundred percent (100%) of the Medicare Part B excess charges, and medically necessary emergency care in a foreign country as defined in Rules 0780-01-58- .09(3)(a), (c), (e), and (f) of this Chapter, respectively. Effective January 1, 2020, the standardized benefit plans described in Rule 0780-01-58-.12(1)(d) of this Chapter (Redesignated Plan G High Deductible) may be offered to any individual who was eligible for Medicare prior to January 1, 2020.

(h) Standardized Medicare supplement Plan K is mandated by The Medicare Prescription Drug, Improvement and Modernization Act of 2003, and shall include only the following:

1. Part A Hospital Coinsurance, sixty-first (61st) through ninetieth (90th) days:

Coverage of one hundred percent (100%) of the Part A hospital coinsurance amount for each day used from the sixty-first (61st) through the ninetieth (90th) day in any Medicare benefit period;

2. Part A Hospital Coinsurance, ninety-first (91st) through one hundred fiftieth (150th) days: Coverage of one hundred percent (100%) of the Part A hospital coinsurance amount for each Medicare lifetime inpatient reserve day used from the ninety-first (91st) through the one hundred fiftieth (150th) day in any Medicare benefit period;

3. Part A Hospitalization After one hundred fifty (150) days: Upon exhaustion of the Medicare hospital inpatient coverage, including the lifetime reserve days, coverage of one hundred percent (100%) of the Medicare Part A eligible expenses for hospitalization paid at the applicable prospective payment system (PPS) rate, or other appropriate Medicare standard of payment, subject to a lifetime maximum benefit of an additional three hundred sixty-five (365) days.

The provider shall accept the issuer’s payment as payment in full and may not bill the insured for any balance;

4. Medicare Part A Deductible: Coverage for fifty percent (50%) of the Medicare

Part A inpatient hospital deductible amount per benefit period until the out-ofpocket limitation is met as described in part 10.;

5. Skilled Nursing Facility Care: Coverage for fifty percent (50%) of the coinsurance amount for each day used from the twenty-first (21st) day through the one hundredth (100th) day in a Medicare benefit period for post-hospital skilled nursing facility care eligible under Medicare Part A until the out-of-pocket limitation is met as described in part 10.;

6. Hospice Care: Coverage for fifty percent (50%) of cost sharing for all Part A Medicare eligible expenses and respite care until the out-of-pocket limitation is met as described in part 10.;

7. Blood: Coverage for fifty percent (50%), under Medicare Part A or B, of the reasonable cost of the first three (3) pints of blood (or equivalent quantities of packed red blood cells, as defined under federal regulations) unless replaced in accordance with federal regulations until the out-of-pocket limitation is met as described in part 10.;

8. Part B Cost Sharing: Except for coverage provided in part 9., coverage for fifty percent (50%) of the cost sharing otherwise applicable under Medicare Part B after the policyholder pays the Part B deductible until the out-of-pocket limitation is met as described in part 10.;

9. Part B Preventive Services: Coverage of one hundred percent (100%) of the cost sharing for Medicare Part B preventive services after the policyholder pays the

Part B deductible; and 10. Cost Sharing After Out-of-Pocket Limits: Coverage of one hundred percent (100%) of all cost sharing under Medicare Parts A and B for the balance of the calendar year after the individual has reached the out-of-pocket limitation on annual expenditures under Medicare Parts A and B of four thousand dollars ($4000) in 2006, indexed each year by the appropriate inflation adjustment specified by the Secretary of the U.S. Department of Health and Human Services.

(i) Standardized Medicare supplement Plan L is mandated by The Medicare Prescription Drug, Improvement and Modernization Act of 2003, and shall include only the following:

1. The benefits described in subparagraph (h), parts 1., 2., 3., and 9.;

2. The benefit described in subparagraph (h), parts 4., 5., 6., 7., and 8., but substituting seventy-five percent (75%) for fifty percent (50%); and 3. The benefit described in subparagraph (h), part 10., but substituting two thousand dollars ($2,000) for four thousand dollars ($4,000).

(j) Standardized Medicare supplement Plan M shall include only the following: The basic (core) benefit as defined in Rule 0780-01-58-.09(2) of this Chapter, plus fifty percent (50%) of the Medicare Part A deductible, skilled nursing facility care, and medically necessary emergency care in a foreign country as defined in Rules 0780-01-58- .09(3)(b), (c), and (f) of this Chapter, respectively.

(k) Standardized Medicare supplement Plan N shall include only the following: The basic (core) benefit as defined in Rule 0780-01-58-.09(2) of this Chapter, plus one hundred percent (100%) of the Medicare Part A deductible, skilled nursing facility care, and medically necessary emergency care in a foreign country as defined in Rules 0780-01- 58-.09(3)(a), (c), and (f) of this Chapter, respectively, with co-payments in the following amounts:

1. the lesser of twenty dollars ($20) or the Medicare Part B coinsurance or copayment for each covered health care provider office visit, including visits to medical specialists; and 2. the lesser of fifty dollars ($50) or the Medicare Part B coinsurance or co-payment for each covered emergency room visit, however, this co-payment shall be waived if the insured is admitted to any hospital and the emergency visit is subsequently covered as a Medicare Part A expense.

(6) New or Innovative Benefits: An issuer may, with the prior approval of the commissioner, offer policies or certificates with new or innovative benefits, in addition to the standardized benefits provided in a policy or certificate that otherwise complies with the applicable standards. The new or innovative benefits shall include only benefits that are appropriate to Medicare supplement insurance, are new or innovative, are not otherwise available, and are costeffective. Approval of new or innovative benefits must not adversely impact the goal of Medicare supplement simplification. New or innovative benefits shall not include an outpatient prescription drug benefit. New or innovative benefits shall not be used to change or reduce benefits, including a change of any cost-sharing provision, in any standardized plan.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.12 STANDARD MEDICARE SUPPLEMENT BENEFIT PLANS FOR 2020

STANDARDIZED MEDICARE SUPPLEMENT BENEFIT PLAN POLICIES OR CERTIFICATES ISSUED

FOR DELIVERY ON OR AFTER JANUARY 1, 2020.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) requires the following standards which are applicable to all Medicare supplement policies or certificates delivered or issued for delivery in this state to individuals newly eligible for Medicare on or after January 1, 2020. No policy or certificate that provides coverage of the Medicare Part B deductible may be advertised, solicited, delivered, or issued for delivery in this state as a Medicare supplement policy or certificate to individuals newly eligible for Medicare on or after January 1, 2020. All policies must comply with the following benefit standards.

Benefit plan standards applicable to Medicare supplement policies and certificates issued to individuals eligible for Medicare before January 1, 2020, remain subject to the requirements of T.C.A. Title 56,

Chapter 7, Part 14 and all applicable benefit standards in Rules 0780-01-58-.07 and 0780-01-58-.08 of this Chapter.

(1) Benefit Requirements. The standards and requirements of Rule 0780-01-58-.11 shall apply to all Medicare supplement policies or certificates delivered or issued for delivery to individuals newly eligible for Medicare on or after January 1, 2020, with the following exceptions:

(a) Standardized Medicare supplement benefit Plan C is redesignated as Plan D and shall provide the benefits contained in Rule 0780-01-58-.11(5)(c) of this Chapter but shall not provide coverage for one hundred percent (100%) or any portion of the Medicare

Part B deductible.

(b) Standardized Medicare supplement benefit Plan F is redesignated as Plan G and shall provide the benefits contained in Rule 0780-01-58-.11(5)(e) of this Chapter but shall not provide coverage for one hundred percent (100%) or any portion of the Medicare

Part B deductible.

(c) Standardized Medicare supplement benefit plans C, F, and F with High Deductible may not be offered to individuals newly eligible for Medicare on or after January 1, 2020.

(d) Standardized Medicare supplement benefit Plan F with High Deductible is redesignated as Plan G with High Deductible and shall provide the benefits contained in Rule 0780- 01-58-.11(5)(f) of this Chapter but shall not provide coverage for one hundred percent (100%) or any portion of the Medicare Part B deductible; provided further that, the Medicare Part B deductible paid by the beneficiary shall be considered an out-ofpocket expense in meeting the annual high deductible.

(e) The reference to Plans C or F contained in Rule 0780-01-58-.11(1)(b) is deemed a reference to Plans D or G for purposes of this Rule.

(2) Applicability to Certain Individuals. This Rule applies only to individuals that are newly eligible for Medicare on or after January 1, 2020:

(a) By reason of attaining the age of 65 on or after January 1, 2020; or (b) By reason of entitlement to benefits under Part A pursuant to Section 226(b) or 226A of the Social Security Act, or who are deemed to be eligible for benefits under Section 226(a) of the Social Security Act on or after January 1, 2020.

(3) Guaranteed Issue for Eligible Persons. For purposes of Rule 0780-01-58-.15(5), in the case of any individual newly eligible for Medicare on or after January 1, 2020, any reference to a Medicare supplement policy C or F (including F with High Deductible) shall be deemed to be a reference to Medicare supplement policy D or G (including G with High Deductible), respectively, that meet the requirements of Rule 0780-01-58-.12.

(4) Offer of Redesignated Plans to Individuals Other Than Newly Eligible. On or after January 1, 2020, the standardized benefit plans described in subparagraph (1)(d) above may be offered to any individual who was eligible for Medicare prior to January 1, 2020, in addition to the standardized plans described in Rule 0780-01-58-.11(5) of this Rule.

History

• Authority: T.C.A. §§ 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56-32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114-10 (2015).
• Administrative History: New rule filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.13 MEDICARE SELECT POLICIES AND CERTIFICATES

(1) (a) This Rule shall apply to Medicare Select policies and certificates, as defined in this

Rule.

(b) No policy or certificate may be advertised as a Medicare Select policy or certificate unless it meets the requirements of this Rule.

(2) For the purposes of this Rule:

(a) “Complaint” means any dissatisfaction expressed by an individual concerning a Medicare Select issuer or its network providers.

(b) “Grievance” means dissatisfaction expressed in writing by an individual insured under a Medicare Select policy or certificate with the administration, claims practices, or provision of services concerning a Medicare Select issuer or its network providers.

(c) “Medicare Select issuer” means an issuer offering, or seeking to offer, a Medicare Select policy or certificate.

(d) “Medicare Select policy” or “Medicare Select certificate” mean respectively a Medicare supplement policy or certificate that contains restricted network provisions.

(e) “Network provider” means a provider of health care, or a group of providers of health care, which has entered into a written agreement with the issuer to provide benefits insured under a Medicare Select policy.

(f) “Restricted network provision” means any provision which conditions the payment of benefits, in whole or in part, on the use of network providers.

(g) “Service area” means the geographic area approved by the commissioner within which an issuer is authorized to offer a Medicare Select policy.

(3) The commissioner may authorize an issuer to offer a Medicare Select policy or certificate, pursuant to this Rule and Section 4358 of the Omnibus Budget Reconciliation Act (OBRA) of 1990, if the commissioner finds that the issuer has satisfied all of the requirements of this

Chapter.

(4) A Medicare Select issuer shall not issue a Medicare Select policy or certificate in this state until its plan of operation has been approved by the commissioner.

(5) A Medicare Select issuer shall file a proposed plan of operation with the commissioner in a format prescribed by the commissioner. The plan of operation shall contain at least the following information:

(a) Evidence that all covered services that are subject to restricted network provisions are available and accessible through network providers, including a demonstration that:

1. Services can be provided by network providers with reasonable promptness with respect to geographic location, hours of operation and after-hour care. The hours of operation and availability of after-hour care shall reflect usual practice in the local area. Geographic availability shall reflect the usual travel times within the community.

2. The number of network providers in the service area is sufficient, with respect to current and expected policyholders, either:

(i) To deliver adequately all services that are subject to a restricted network provision; or (ii) To make appropriate referrals.

3. There are written agreements with network providers describing specific responsibilities.

4. Emergency care is available twenty-four (24) hours per day and seven (7) days per week.

5. In the case of covered services that are subject to a restricted network provision and are provided on a prepaid basis, there are written agreements with network providers prohibiting the providers from billing or otherwise seeking reimbursement from or recourse against any individual insured under a Medicare Select policy or certificate. This part shall not apply to supplemental charges or coinsurance amounts as stated in the Medicare Select policy or certificate.

(b) A statement or map providing a clear description of the service area.

(c) A description of the grievance procedure to be utilized.

(d) A description of the quality assurance program, including:

1. The formal organizational structure;

2. The written criteria for selection, retention and removal of network providers; and 3. The procedures for evaluating quality of care provided by network providers, and the process to initiate corrective action when warranted.

(e) A list and description, by specialty, of the network providers.

(f) Copies of the written information proposed to be used by the issuer to comply with Paragraph (9).

(g) Any other information requested by the commissioner.

(6) (a) A Medicare Select issuer shall file any proposed changes to the plan of operation, except for changes to the list of network providers, with the commissioner prior to implementing the changes. Changes shall be considered approved by the commissioner after thirty (30) days unless specifically disapproved.

(b) An updated list of network providers shall be filed with the commissioner at least quarterly.

(7) A Medicare Select policy or certificate shall not restrict payment for covered services provided by non-network providers if:

(a) The services are for symptoms requiring emergency care or are immediately required for an unforeseen illness, injury or a condition; and (b) It is not reasonable to obtain services through a network provider.

(8) A Medicare Select policy or certificate shall provide payment for full coverage under the policy for covered services that are not available through network providers.

(9) A Medicare Select issuer shall make full and fair disclosure in writing of the provisions, restrictions and limitations of the Medicare Select policy or certificate to each applicant. This disclosure shall include at least the following:

(a) An outline of coverage sufficient to permit the applicant to compare the coverage and premiums of the Medicare Select policy or certificate with:

1. Other Medicare supplement policies or certificates offered by the issuer; and 2. Other Medicare Select policies or certificates.

(b) A description (including address, phone number and hours of operation) of the network providers, including primary care physicians, specialty physicians, hospitals and other providers.

(c) A description of the restricted network provisions, including payments for coinsurance and deductibles when providers other than network providers are utilized. Except to the extent specified in the policy or certificate, expenses incurred when using out-ofnetwork providers do not count toward the out-of-pocket annual limit contained in plans K and L.

(d) A description of coverage for emergency and urgently needed care and other out-ofservice area coverage.

(e) A description of limitations on referrals to restricted network providers and to other providers.

(f) A description of the policyholder’s rights to purchase any other Medicare supplement policy or certificate otherwise offered by the issuer.

(g) A description of the Medicare Select issuer’s quality assurance program and grievance procedure.

(10) Prior to the sale of a Medicare Select policy or certificate, a Medicare Select issuer shall obtain from the applicant a signed and dated form stating that the applicant has received the information provided pursuant to Paragraph (9) and that the applicant understands the restrictions of the Medicare Select policy or certificate.

(11) A Medicare Select issuer shall have and use procedures for hearing complaints and resolving written grievances from the subscribers. The procedures shall be aimed at mutual agreement for settlement and may include arbitration procedures.

(a) The grievance procedure shall be described in the policy and certificates and in the outline of coverage.

(b) At the time the policy or certificate is issued, the issuer shall provide detailed information to the policyholder describing how a grievance may be registered with the issuer.

(c) Grievances shall be considered in a timely manner and shall be transmitted to appropriate decision-makers who have authority to fully investigate the issue and take corrective action.

(d) If a grievance is found to be valid, corrective action shall be taken promptly.

(e) All concerned parties shall be notified about the results of a grievance.

(f) The issuer shall report no later than each March 31st to the commissioner regarding its grievance procedure. The report shall be in a format prescribed by the commissioner and shall contain the number of grievances filed in the past year and a summary of the subject, nature and resolution of such grievances.

(12) At the time of initial purchase, a Medicare Select issuer shall make available to each applicant for a Medicare Select policy or certificate the opportunity to purchase any Medicare supplement policy or certificate otherwise offered by the issuer.

(13) (a) At the request of an individual insured under a Medicare Select policy or certificate, a Medicare Select issuer shall make available to the individual insured the opportunity to purchase a Medicare supplement policy or certificate offered by the issuer which has comparable or lesser benefits and which does not contain a restricted network provision. The issuer shall make the policies or certificates available without requiring evidence of insurability after the Medicare Select policy or certificate has been in force for six (6) months.

(b) For the purposes of this Paragraph, a Medicare supplement policy or certificate will be considered to have comparable or lesser benefits unless it contains one or more significant benefits not included in the Medicare Select policy or certificate being replaced. For the purposes of this subparagraph, a significant benefit means coverage for the Medicare Part A deductible, coverage for at-home recovery services or coverage for Part B excess charges.

(14) Medicare Select policies and certificates shall provide for continuation of coverage in the event the Secretary of Health and Human Services determines that Medicare Select policies and certificates issued pursuant to this Rule should be discontinued due to either the failure of the Medicare Select Program to be reauthorized under law or its substantial amendment.

(a) Each Medicare Select issuer shall make available to each individual insured under a Medicare Select policy or certificate the opportunity to purchase any Medicare supplement policy or certificate offered by the issuer which has comparable or lesser benefits and which does not contain a restricted network provision. The issuer shall make the policies and certificates available without requiring evidence of insurability.

(b) For the purposes of this Paragraph, a Medicare supplement policy or certificate will be considered to have comparable or lesser benefits unless it contains one or more significant benefits not included in the Medicare Select policy or certificate being replaced. For the purposes of this subparagraph, a significant benefit means coverage for the Medicare Part A deductible, coverage for at-home recovery services or coverage for Part B excess charges.

(15) A Medicare Select issuer shall comply with reasonable requests for data made by state or federal agencies, including the United States Department of Health and Human Services, for the purpose of evaluating the Medicare Select Program.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.12 but was renumbered 0780- 01-58-.13 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.14 OPEN ENROLLMENT

(1) An issuer shall not deny or condition the issuance or effectiveness of any Medicare supplement policy or certificate available for sale in this state, nor discriminate in the pricing of a policy or certificate because of the health status, claims experience, receipt of health care, or medical condition of an applicant in the case of an application for a policy or certificate that is submitted prior to or during the six (6) month period beginning with the first day of the first month in which an individual is both sixty-five (65) years of age or older and is enrolled for benefits under Medicare Part B. Each Medicare supplement policy and certificate currently available from an insurer shall be made available to all applicants who qualify under this Paragraph without regard to age.

(2) (a) If an applicant qualifies under Paragraph (1) and submits an application during the time period referenced in Paragraph (1) and, as of the date of application, has had a continuous period of creditable coverage of at least six (6) months, the issuer shall not exclude benefits based on a preexisting condition.

(b) If the applicant qualifies under Paragraph (1) and submits an application during the time period referenced in Paragraph (1) and, as of the date of application, has had a continuous period of creditable coverage that is less than six (6) months, the issuer shall reduce the period of any preexisting condition exclusion by the aggregate of the period of creditable coverage applicable to the applicant as of the enrollment date. The Secretary shall specify the manner of the reduction under this Paragraph.

(3) Except as provided in Paragraph (2) and Rules 0780-01-58-.15 and .26, Paragraph (1) of this

Rule shall not be construed as preventing the exclusion of benefits under a policy, during the first six (6) months, based on a preexisting condition for which the policyholder or certificate holder received treatment or was otherwise diagnosed during the six (6) months before the coverage became effective.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. (Formerly 0780-01-58-.12) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed September 11, 2009; effective through March 10, 2010. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.13 but was renumbered 0780-01-58-.14 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.15 GUARANTEED ISSUE FOR ELIGIBLE PERSONS

(1) Guaranteed Issue.

(a) Eligible persons are those individuals described in Paragraph (2) who seek to enroll under the policy during the period specified in Paragraph (3), and who submit evidence of the date of termination, disenrollment, or Medicare Part D enrollment with the application for a Medicare supplement policy.

(b) With respect to eligible persons, an issuer shall not deny or condition the issuance or effectiveness of a Medicare supplement policy described in Paragraph (5) that is offered and is available for issuance to new enrollees by the issuer, shall not discriminate in the pricing of such a Medicare supplement policy because of health status, claims experience, receipt of health care, or medical condition, and shall not impose an exclusion of benefits based on a preexisting condition under such a Medicare supplement policy.

(2) Eligible Persons. An eligible person is an individual described in any of the following subparagraphs:

(a) The individual is enrolled under an employee welfare benefit plan that provides health benefits that supplement the benefits under Medicare; and the plan terminates, or the plan ceases to provide all such supplemental health benefits to the individual;

(b) The individual is enrolled with a Medicare Advantage organization under a Medicare Advantage plan under Part C of Medicare, and any of the following circumstances apply, or the individual is sixty-five (65) years of age or older and is enrolled with a Program of All-Inclusive Care for the Elderly (PACE) provider under Section 1894 of the Social Security Act, and there are circumstances similar to those described below that would permit discontinuance of the individual’s enrollment with such provider if such individual were enrolled in a Medicare Advantage plan:

1. The certification of the organization or plan has been terminated;

2. The organization has terminated or otherwise discontinued providing the plan in the area in which the individual resides;

3. The individual is no longer eligible to elect the plan because of a change in the individual’s place of residence or other change in circumstances specified by the Secretary, but not including termination of the individual’s enrollment on the basis described in Section 1851(g)(3)(B) of the federal Social Security Act where the individual has not paid premiums on a timely basis or has engaged in disruptive behavior as specified in standards under Section 1856, or the plan is terminated for all individuals within a residence area;

4. The individual demonstrates, in accordance with guidelines established by the Secretary, that:

(i) The organization offering the plan substantially violated a material provision of the organization’s contract under this part in relation to the individual, including the failure to provide an enrollee on a timely basis medically necessary care for which benefits are available under the plan or the failure to provide such covered care in accordance with applicable quality standards; or (ii) The organization, or agent or other entity acting on the organization’s behalf, materially misrepresented the plan’s provisions in marketing the plan to the individual; or 5. The individual meets such other exceptional conditions as the Secretary may provide.

(c) 1. The individual is enrolled with:

(i) An eligible organization under a contract under Section 1876 of the Social Security Act (Medicare cost);

(ii) A similar organization operating under demonstration project authority, effective for periods before April 1, 1999;

(iii) An organization under an agreement under Section 1833(a)(1)(A) of the Social Security Act (health care prepayment plan); or (iv) An organization under a Medicare Select policy; and 2. The enrollment ceases under the same circumstances that would permit discontinuance of an individual’s election of coverage under subparagraph (2)(b).

(d) The individual is enrolled under a Medicare supplement policy and the enrollment ceases because:

1. (i) Of the insolvency of the issuer or bankruptcy of the non-issuer organization; or (ii) Of other involuntary termination of coverage or enrollment under the policy;

2. The issuer of the policy substantially violated a material provision of the policy; or 3. The issuer, or an agent or other entity acting on the issuer's behalf, materially misrepresented the policy’s provisions in marketing the policy to the individual.

(e) 1. The individual was enrolled under a Medicare supplement policy and terminates enrollment and subsequently enrolls, for the first time, with any Medicare Advantage organization under a Medicare Advantage plan under part C of Medicare, any eligible organization under a contract under Section 1876 of the Social Security Act (Medicare cost), any similar organization operating under demonstration project authority, any PACE provider under Section 1894 of the Social Security Act or a Medicare Select policy; and 2. The subsequent enrollment under part 1. is terminated by the enrollee during any period within the first twelve (12) months of such subsequent enrollment (during which the enrollee is permitted to terminate such subsequent enrollment under

Section 1851(e) of the federal Social Security Act).

(f) The individual, upon first becoming eligible for benefits under part A of Medicare at age sixty-five (65), enrolls in a Medicare Advantage plan under part C of Medicare, or with a PACE provider under Section 1894 of the Social Security Act, and disenrolls from the plan or program by not later than twelve (12) months after the effective date of enrollment.

(g) The individual enrolls in a Medicare Part D plan during the initial enrollment period and, at the time of enrollment in Part D, was enrolled under a Medicare supplement policy that covers outpatient prescription drugs and the individual terminates enrollment in the Medicare supplement policy and submits evidence of enrollment in Medicare Part D along with the application for a policy described in subparagraph (5)(d).

(h) The individual is enrolled under Title XIX of the Social Security Act (Medicaid) and the enrollment involuntarily ceases after the individual is sixty-five (65) years of age or older and eligible for and enrolled in Medicare Part B.

(3) Guaranteed Issue Time Periods.

(a) In the case of an individual described in subparagraph (2)(a), the guaranteed issue period begins on the later of: (i) the date the individual receives a notice of termination or cessation of all supplemental health benefits (or, if a notice is not received, notice that a claim has been denied because of a termination or cessation); or (ii) the date that the applicable coverage terminates or ceases; and ends sixty-three (63) days thereafter;

(b) In the case of an individual described in subparagraphs (2)(b), (2)(c), (2)(e) or (2)(f) whose enrollment is terminated involuntarily, the guaranteed issue period begins on the date that the individual receives a notice of termination and ends sixty-three (63) days after the date the applicable coverage is terminated;

(c) In the case of an individual described in subparagraph (2)(d), part 1., the guaranteed issue period begins on the earlier of: (i) the date that the individual receives a notice of termination, a notice of the issuer’s bankruptcy or insolvency, or other such similar notice if any, and (ii) the date that the applicable coverage is terminated, and ends on the date that is sixty-three (63) days after the date the coverage is terminated;

(d) In the case of an individual described in subparagraph (2)(b), subparagraph (2)(d), part 2., subparagraph (2)(d), part 3., and subparagraphs (2)(e) or (2)(f) who disenrolls voluntarily, the guaranteed issue period begins on the date that is sixty (60) days before the effective date of the disenrollment and ends on the date that is sixty-three (63) days after the effective date;

(e) In the case of an individual described in subparagraph (2)(g), the guaranteed issue period begins on the date the individual receives notice pursuant to Section 1882(v)(2)(B) of the Social Security Act from the Medicare supplement issuer during the sixty (60) day period immediately preceding the initial Part D enrollment period and ends on the date that is sixty-three (63) days after the effective date of the individual’s coverage under Medicare Part D;

(f) In the case of an individual described in subparagraph (2)(h), the guaranteed issue period begins on the date that the individual receives notice of the involuntary disenrollment and ends on the date that is sixty-three (63) days after the date the coverage is terminated. The appropriate state disenrolling agency shall notify the individual no later than eight (8) calendar days after the effective date of involuntary disenrollment of his or her rights under this Rule and of the obligations of issuers of Medicare supplement policies under this Rule;

(g) Those individuals who were involuntarily disenrolled from Medicaid in the period of June 1, 2009, through September 18, 2009, will have an open enrollment period of six (6) months after September 18, 2009, in which to purchase coverage; further, the issuer shall not consider the period of time between the date of involuntary disenrollment and September 18, 2009, to be a break in the period of continuous creditable coverage, and shall calculate the period of creditable coverage as though the individual were submitting an application on the actual date of disenrollment for purposes of excluding benefits on the basis of a preexisting condition. Those individuals who are involuntarily disenrolled after September 18, 2009, but before March 3, 2010, will have an open enrollment period of six (6) months after the effective date the applicable coverage terminated; and (h) In the case of an individual described in Paragraph (2) but not described in the preceding provisions of this Paragraph the guaranteed issue period begins on the effective date of disenrollment and ends on the date that is sixty-three (63) days after the effective date.

(4) Extended Medigap Access for Interrupted Trial Periods.

(a) In the case of an individual described in subparagraph (2)(e) or deemed to be so described, pursuant to this subparagraph, whose enrollment with an organization or provider described in subparagraph (2)(e), part 1. is involuntarily terminated within the first twelve (12) months of enrollment, and who, without an intervening enrollment, enrolls with another such organization or provider, the subsequent enrollment shall be deemed to be an initial enrollment described in subparagraph (2)(e);

(b) In the case of an individual described in subparagraph (2)(f) or deemed to be so described, pursuant to this subparagraph whose enrollment with a plan or in a program described in subparagraph (2)(f) is involuntarily terminated within the first twelve (12) months of enrollment, and who, without an intervening enrollment, enrolls in another such plan or program, the subsequent enrollment shall be deemed to be an initial enrollment described in subparagraph (2)(f); and (c) For purposes of subparagraphs (2)(e) and (2)(f), no enrollment of an individual with an organization or provider described in subparagraph (2)(e), part 1., or with a plan or in a program described in subparagraph (2)(f), may be deemed to be an initial enrollment under this subparagraph after the two (2) year period beginning on the date on which the individual first enrolled with such an organization, provider, plan or program.

(5) Products to Which Eligible Persons are Entitled. The Medicare supplement policy to which eligible persons are entitled under:

(a) Subparagraphs (2)(a), (b), (c), (d), and (h) are Medicare supplement policies which have a benefit package classified as Plan A, B, C, F (including F with a high deductible), K, or L offered by any issuer, after January 1, 2020, Plan A, B, D, G (including G with a high deductible), K, or L offered by any issuer;

(b) 1. Subject to subparagraph (2)(e), part 2. is the same Medicare supplement policy in which the individual was most recently previously enrolled, if available from the same issuer, or, if not so available, a policy described in subparagraph (a);

2. After December 31, 2005, if the individual was most recently enrolled in a Medicare supplement policy with an outpatient prescription drug benefit, a Medicare supplement policy described in this subparagraph is:

(i) The policy available from the same issuer but modified to remove outpatient prescription drug coverage; or (ii) At the election of the policyholder, an A, B, C, F (including F with a high deductible), K, or L policy that is offered by any issuer;

(c) Subparagraph (2)(f) shall include any Medicare supplement policy offered by any issuer;

(d) Subparagraph (2)(g) is a Medicare supplement policy that has a benefit package classified as Plan A, B, C, F (including F with a high deductible), K, or L, after January 1, 2020, Plan A, B, D, G (including G with a high deductible), K, or L and that is offered and is available for issuance to new enrollees by the same issuer that issued the individual’s Medicare supplement policy with outpatient prescription drug coverage.

(6) Notification provisions.

(a) At the time of an event described in Paragraph (2) because of which an individual loses coverage or benefits due to the termination of a contract or agreement, policy, or plan, the organization that terminates the contract or agreement, the issuer terminating the policy, or the administrator of the plan being terminated, respectively, shall notify the individual of his or her rights under this section, and of the obligations of issuers of Medicare supplement policies under Paragraph (1). Such notice shall be communicated contemporaneously with the notification of termination.

(b) At the time of an event described in Paragraph (2) because of which an individual ceases enrollment under a contract or agreement, policy, or plan, the organization that offers the contract or agreement, regardless of the basis for the cessation of enrollment, the issuer offering the policy, or the administrator of the plan, respectively, shall notify the individual of his or her rights under this section, and of the obligations of issuers of Medicare supplement policies under Paragraph (1). Such notice shall be communicated within ten (10) working days of the issuer receiving notification of disenrollment.

(c) At the time of an event described in subparagraph (2)(h), no later than eight (8) calendar days after the effective date of involuntary disenrollment, the appropriate state disenrolling agency shall notify the individual of his or her rights under this Rule and of the obligations of issuers of Medicare supplement policies under this Rule.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. (Formerly 0780-01-58-.13) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.14 but was renumbered 0780-01-58-.15 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.16 STANDARDS FOR CLAIMS PAYMENT

(1) An issuer shall comply with Section 1882(c)(3) of the Social Security Act (as enacted by

Section 4081(b)(2)(C) of the Omnibus Budget Reconciliation Act of 1987 (OBRA) 1987, Pub.

L. No. 100-203) by:

(a) Accepting a notice from a Medicare carrier on dually assigned claims submitted by participating physicians and suppliers as a claim for benefits in place of any other claim form otherwise required and making a payment determination on the basis of the information contained in that notice;

(b) Notifying the participating physician or supplier and the beneficiary of the payment determination;

(c) Paying the participating physician or supplier directly;

(d) Furnishing, at the time of enrollment, each enrollee with a card listing the policy name, number and a central mailing address to which notices from a Medicare carrier may be sent;

(e) Paying user fees for claim notices that are transmitted electronically or otherwise; and (f) Providing to the Secretary of Health and Human Services, at least annually, a central mailing address to which all claims may be sent by Medicare carriers.

(2) Compliance with the requirements set forth in Paragraph (1) shall be certified on the Medicare supplement insurance experience reporting form.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. (Formerly 0780-01-58-.14) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.15 but was renumbered 0780-01-58-.16 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.17 LOSS RATIO STANDARDS AND REFUND OR CREDIT OF PREMIUM

(1) Loss Ratio Standards.

(a) 1. A Medicare Supplement policy form or certificate form shall not be delivered or issued for delivery unless the policy form or certificate form can be expected, as estimated for the entire period for which rates are computed to provide coverage, to return to policyholders and certificate holders in the form of aggregate benefits, not including anticipated refunds or credits, provided under the policy form or certificate form:

(i) At least seventy-five percent (75%) of the aggregate amount of premiums earned in the case of group policies; or (ii) At least sixty-five percent (65%) of the aggregate amount of premiums earned in the case of individual policies;

2. Calculated 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 for the period and in accordance with accepted actuarial principles and practices. Incurred health care expenses where coverage is provided by a health maintenance organization shall not include:

(i) Home office and overhead costs;

(ii) Advertising costs;

(iii) Commissions and other acquisition costs;

(iv) Taxes;

(v) Capital costs;

(vi) Administrative costs; and (vii) Claims processing costs.

(b) All filings of rates and rating schedules shall demonstrate that expected claims in relation to premiums comply with the requirements of this section when combined with actual experience to date. Filings of rate revisions shall also demonstrate that the anticipated loss ratio over the entire future period for which the revised rates are computed to provide coverage can be expected to meet the appropriate loss ratio standards.

(c) For purposes of applying subparagraph (1)(a) and Rule 0780-01-58-.18(3)(c) only, policies issued as a result of solicitations of individuals through the mails or by mass media advertising including both print and broadcast advertising shall be deemed to be individual policies.

(d) For policies issued prior to July 1, 2009, expected claims in relation to premiums shall meet:

1. The originally filed anticipated loss ratio when combined with the actual experience since inception;

2. The appropriate loss ratio requirement from subparagraph (1)(a), part 1., subparts (i) and (ii) when combined with actual experience beginning with July 1, 2009 to date; and 3. The appropriate loss ratio requirement from subparagraph (1)(a), part 1., subparts (i) and (ii) over the entire future period for which the rates are computed to provide coverage.

(2) Refund or Credit Calculation.

(a) An issuer shall collect and file with the commissioner by May 31 of each year the data contained in the applicable reporting form contained in Appendix A for each type in a standard Medicare supplement benefit plan.

(b) If on the basis of the experience as reported the benchmark ratio since inception (ratio 1) exceeds the adjusted experience ratio since inception (ratio 3), then a refund or credit calculation is required. The refund calculation shall be done on a statewide basis for each type in a standard Medicare supplement benefit plan. For purposes of the refund or credit calculation, experience on policies issued within the reporting year shall be excluded.

(c) For the purposes of this section, policies or certificates issued prior to July 1, 2009, the issuer shall make the refund or credit calculation separately for all individual policies (including all group policies subject to an individual loss ratio standard when issued) combined and all other group policies combined for experience after the July 1, 2009, date. The first report shall be due by May 31, 2011.

(d) A refund or credit shall be made only when the benchmark loss ratio exceeds the adjusted experience loss ratio and the amount to be refunded or credited exceeds a de minimis level. The refund shall include interest from the end of the calendar year to the date of the refund or credit at a rate specified by the Secretary of Health and Human Services, but in no event shall it be less than the average rate of interest for thirteenweek Treasury notes. A refund or credit against premiums due shall be made by September 30 following the experience year upon which the refund or credit is based.

(3) Annual filing of Premium Rates. An issuer of Medicare supplement policies and certificates issued before or after the effective date of this Chapter in this state shall file annually its rates, rating schedule and supporting documentation including ratios of incurred losses to earned premiums by policy duration for approval by the commissioner in accordance with the filing requirements and procedures prescribed by the commissioner. The supporting documentation shall also demonstrate in accordance with actuarial standards of practice using reasonable assumptions that the appropriate loss ratio standards can be expected to be met over the entire period for which rates are computed. The demonstration shall exclude active life reserves. An expected third-year loss ratio which is greater than or equal to the applicable percentage shall be demonstrated for policies or certificates in force less than three (3) years. As soon as practicable, but prior to the effective date of enhancements in Medicare benefits, every issuer of Medicare supplement policies or certificates in this state shall file with the commissioner, in accordance with the applicable filing procedures of this state:

(a) 1. Appropriate premium adjustments necessary to produce loss ratios as anticipated for the current premium for the applicable policies or certificates. The supporting documents necessary to justify the adjustment shall accompany the filing.

2. An issuer shall make premium adjustments necessary to produce an expected loss ratio under the policy or certificate to conform to minimum loss ratio standards for Medicare supplement policies and which are expected to result in a loss ratio at least as great as that originally anticipated in the rates used to produce current premiums by the issuer for the Medicare supplement policies or certificates. No premium adjustment which would modify the loss ratio experience under the policy other than the adjustments described herein shall be made with respect to a policy at any time other than upon its renewal date or anniversary date.

3. If an issuer fails to make premium adjustments acceptable to the commissioner, the commissioner may order premium adjustments, refunds or premium credits deemed necessary to achieve the loss ratio required by this section.

(b) Any appropriate riders, endorsements or policy forms needed to accomplish the Medicare supplement policy or certificate modifications necessary to eliminate benefit duplications with Medicare. The riders, endorsements or policy forms shall provide a clear description of the Medicare supplement benefits provided by the policy or certificate.

(4) Public Hearings. The commissioner may conduct a public hearing to gather information concerning a request by an issuer for an increase in a rate for a policy form or certificate form issued before or after the effective date of this Chapter if the experience of the form for the previous reporting period is not in compliance with the applicable loss ratio standard. The determination of compliance is made without consideration of any refund or credit for the reporting period. Public notice of the hearing shall be furnished in a manner deemed appropriate by the commissioner.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. (Formerly 0780-01-58-.15) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December, 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.16 but was renumbered 0780-01-58-.17 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.18 FILING AND APPROVAL OF POLICIES AND CERTIFICATES AND PREMIUM

RATES.

(1) An issuer shall not deliver or issue for delivery a policy or certificate to a resident of this state unless the policy form or certificate form has been filed with and approved by the commissioner in accordance with filing requirements and procedures prescribed by the commissioner.

(2) An issuer shall file any riders or amendments to policy or certificate forms to delete outpatient prescription drug benefits as required by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 only with the commissioner in the state in which the policy or certificate was issued.

(3) An issuer shall not use or change premium rates for a Medicare supplement policy or certificate unless the rates, rating schedule and supporting documentation have been filed with and approved by the commissioner in accordance with the filing requirements and procedures prescribed by the commissioner.

(4) (a) Except as provided in subparagraph (b), an issuer shall not file for approval more than one (1) form of a policy or certificate of each type for each standard Medicare supplement benefit plan.

(b) An issuer may offer, with the approval of the commissioner, up to four (4) additional policy forms or certificate forms of the same type for the same standard Medicare supplement benefit plan, one (1) for each of the following cases:

1. The inclusion of new or innovative benefits;

2. The addition of either direct response or agent marketing methods;

3. The addition of either guaranteed issue or underwritten coverage; or 4. The offering of coverage to individuals eligible for Medicare by reason of disability.

(c) For the purposes of this Rule, a “type” means an individual policy, a group policy, an individual Medicare Select policy, or a group Medicare Select policy.

(5) (a) Except as provided in Rule 0780-01-58-.18(5)(a)1., an issuer shall continue to make available for purchase any policy form or certificate form issued after the effective date of this Chapter that has been approved by the commissioner. A policy form or certificate form shall not be considered to be available for purchase unless the issuer has actively offered it for sale in the previous twelve (12) months.

1. An issuer may discontinue the availability of a policy form or certificate form if the issuer provides to the commissioner in writing its decision at least thirty (30) days prior to discontinuing the availability of the form of the policy or certificate. After receipt of the notice by the commissioner, the issuer shall no longer offer for sale the policy form or certificate form in this state.

2. An issuer that discontinues the availability of a policy form or certificate form pursuant to Rule 0780-01-58-.18(5)(a)1. shall not file for approval a new policy form or certificate form of the same type for the same standard Medicare supplement benefit plan as the discontinued form for a period of five (5) years after the issuer provides notice to the commissioner of the discontinuance. The period of discontinuance may be reduced if the commissioner determines that a shorter period is appropriate.

(b) The sale or other transfer of Medicare supplement business to another issuer shall be considered a discontinuance for the purposes of this Rule.

(c) A change in the rating structure or methodology shall be considered a discontinuance under subparagraph (a) unless the issuer complies with the following requirements:

1. The issuer provides an actuarial memorandum, in a form and manner prescribed by the commissioner, describing the manner in which the revised rating methodology and resultant rates differ from the existing rating methodology and existing rates.

2. The issuer does not subsequently put into effect a change of rates or rating factors that would cause the percentage differential between the discontinued and subsequent rates as described in the actuarial memorandum to change. The commissioner may approve a change to the differential that is in the public interest.

(6) (a) Except as provided in subparagraph (b), the experience of all policy forms or certificate forms of the same type in a standard Medicare supplement benefit plan shall be combined for purposes of the refund or credit calculation prescribed in Rule 0780-01- 58-.17.

(b) Forms assumed under an assumption reinsurance agreement shall not be combined with the experience of other forms for purposes of the refund or credit calculation.

(7) The commissioner may approve “attained age” rate structures for Medicare supplement policies or certificates based upon a determination that the benefits provided in the policy are reasonable in relation to the premium charged.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. Repealed and new rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. (Formerly 0780-01-58-.16) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Amendment filed March 16, 2017; effective June 14, 2017. Rule was previously numbered 0780-01-58-.17 but was renumbered 0780-01-58-.18 with the addition of a new rule 0780-01- 58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.19 PERMITTED COMPENSATION ARRANGEMENTS

(1) An issuer or other entity may provide commission or other compensation to an agent or other representative for the sale of a Medicare supplement policy or certificate only if the first year commission or other first year compensation is no more than two hundred percent (200%) of the commission or other compensation paid for selling or servicing the policy or certificate in the second year or period.

(2) The commission or other compensation provided in subsequent (renewal) years must be the same as that provided in the second year or period and must be provided for no fewer than five (5) renewal years.

(3) No issuer or other entity shall provide compensation to its agents or other producers and no agent or producer shall receive compensation greater than the renewal compensation payable by the replacing issuer on renewal policies or certificates if an existing policy or certificate is replaced.

(4) For purposes of this Rule, “compensation” includes pecuniary or non-pecuniary remuneration of any kind relating to the sale or renewal of the policy or certificate including but not limited to bonuses, gifts, prizes, awards and finders fees.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989. New rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. (Formerly 0780-01-58-.17) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.18 but was renumbered 0780-01-58-.19 with the addition of a new rule 0780-01- 58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.20 REQUIRED DISCLOSURE PROVISIONS

(1) General Rules.

(a) Medicare supplement policies and certificates shall include a renewal or continuation provision. The language or specifications of the provision shall be consistent with the type of contract issued. The provision shall be appropriately captioned and shall appear on the first page of the policy, and shall include any reservation by the issuer of the right to change premiums and any automatic renewal premium increases based on the policyholder’s age.

(b) Except for riders or endorsements by which the issuer effectuates a request made in writing by the insured, exercises a specifically reserved right under a Medicare supplement policy, or is required to reduce or eliminate benefits to avoid duplication of Medicare benefits, all riders or endorsements added to a Medicare supplement policy after the date of issue or at reinstatement or renewal which reduce or eliminate benefits or coverage in the policy shall require a signed acceptance by the insured. After the date of policy or certificate issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term shall be agreed to in writing signed by the insured, unless the benefits are required by the minimum standards for Medicare supplement policies, or if the increased benefits or coverage is required by law. Where a separate additional premium is charged for benefits provided in connection with riders or endorsements, the premium charge shall be set forth in the policy.

(c) Medicare supplement policies or certificates shall not provide for the payment of benefits based on standards described as “usual and customary,” “reasonable and customary” or words of similar import.

(d) If a Medicare supplement policy or certificate contains any limitations with respect to preexisting conditions, such limitations shall appear as a separate paragraph of the policy and be labeled as “Preexisting Condition Limitations.”

(e) Medicare supplement policies and certificates shall have a notice prominently printed on the first page of the policy or certificate or attached thereto stating in substance that the policyholder or certificate holder shall have the right to return the policy or certificate within thirty (30) days of its delivery and to have the premium refunded if, after examination of the policy or certificate, the insured person is not satisfied for any reason.

(f) 1. Issuers of accident and sickness policies or certificates which provide hospital or medical expense coverage on an expense incurred or indemnity basis to persons eligible for Medicare shall provide to those applicants a Guide to Health Insurance for People with Medicare in the form developed jointly by the National Association of Insurance Commissioners and CMS and in a type size no smaller than twelve (12) point type. Delivery of the Guide shall be made whether or not the policies or certificates are advertised, solicited or issued as Medicare supplement policies or certificates as defined in this Chapter. Except in the case of direct response issuers, delivery of the Guide shall be made to the applicant at the time of application and acknowledgement of receipt of the Guide shall be obtained by the issuer. Direct response issuers shall deliver the Guide to the applicant upon request but not later than at the time the policy is delivered.

2. For the purposes of this Rule, “form” means the language, format, type size, type proportional spacing, bold character, and line spacing.

(2) Notice Requirements.

(a) As soon as practicable, but no later than thirty (30) days prior to the annual effective date of any Medicare benefit changes, an issuer shall notify its policyholders and certificate holders of modifications it has made to Medicare supplement insurance policies or certificates in a format acceptable to the commissioner. The notice shall:

1. Include a description of revisions to the Medicare program and a description of each modification made to the coverage provided under the Medicare supplement policy or certificate, and 2. Inform each policyholder or certificate holder as to when any premium adjustment is to be made due to changes in Medicare.

(b) The notice of benefit modifications and any premium adjustments shall be in outline form and in clear and simple terms so as to facilitate comprehension.

(c) The notices shall not contain or be accompanied by any solicitation.

(3) MMA Notice Requirements. Issuers shall comply with any notice requirements of the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

(4) Outline of Coverage Requirements for Medicare Supplement Policies.

(a) Issuers shall provide an outline of coverage to all applicants at the time application is presented to the prospective applicant and, except for direct response policies, shall obtain an acknowledgement of receipt of the outline from the applicant; and (b) If an outline of coverage is provided at the time of application and the Medicare supplement policy or certificate is issued on a basis which would require revision of the outline, a substitute outline of coverage properly describing the policy or certificate shall accompany the policy or certificate when it is delivered and contain the following statement, in no less than twelve (12) point type, immediately above the company name:

NOTICE: Read this outline of coverage carefully. It is not identical to the outline of coverage provided upon application and the coverage originally applied for has not been issued.;

(c) The outline of coverage provided to applicants pursuant to this Paragraph consists of four (4) parts: a cover page, premium information, disclosure pages, and charts displaying the features of each benefit plan offered by the issuer. The outline of coverage shall be in the language and format prescribed below in no less than twelve (12) point type. All plans shall be shown on the cover page, and the plans that are offered by the issuer shall be prominently identified. Premium information for plans that are offered shall be shown on the cover page or immediately following the cover page and shall be prominently displayed. The premium and mode shall be stated for all plans that are offered to the prospective applicant. All possible premiums for the prospective applicant shall be illustrated.

(d) The following items shall be included in the outline of coverage in the order prescribed below:

Benefit Chart of Medicare Supplement Plans Sold with an effective date of coverage on or After June 1, 2010 This chart shows the benefits included in each of the standard Medicare supplement plans. Every company must make Plan A available. Some plans may not be available in your state.

Basic Benefits:

Hospitalization – Part A coinsurance plus coverage for three hundred sixtyfive (365) additional days after Medicare benefits end.

Medical Expenses – Part B coinsurance (generally twenty percent (20%) of Medicare-approved expenses) or co-payments for hospital outpatient services. Plans K, L and N require insureds to pay a portion of Part B coinsurance or co-payments.

Blood – First three (3) pints of blood each year.

Hospice – Part A coinsurance A B C D F/F* G K L M N Basic, Including 100% Part B coinsurance Basic, including 100% Part B coinsurance Basic, including 100% Part B coinsurance Basic, including 100% Part B coinsurance Basic, including 100% Part B coinsurance Basic, including 100% Part B coinsurance* Hospitalization and preventive care paid at 100%; other basic benefits paid at 50% Hospitalization and preventive care paid at 100%; other basic benefits paid at 75% Basic, including 100% Part B coinsurance Basic including 100% Part B coinsurance except up to $20 copayment for offic e visit and up to $50 copayment for ER Skilled Nursing Facility Coinsurance Skilled Nursing Facility Coinsurance Skilled Nursing Facility Coinsurance Skilled Nursing Facility Coinsurance 50% Skilled Nursing Facility Coinsurance 75% Skilled Nursing Facility Coinsurance Skilled Nursing Facility Coinsurance Skilled Nursing Facility Coinsurance

Part A Deductible

Part A Deductible

Part A Deductible

Part A Deductible

Part A Deductible 50% Part A Deductible 75% Part A Deductible 50% Part A Deductible

Part A Deductible

Part B Deductible

Part B Deductible

Part B Excess (100%)

Part B Excess (100%)

Foreign Travel Emergency Foreign Travel Emergency Foreign Travel Emergency Foreign Travel Emergency Foreign Travel Emergency Foreign Travel Emergency Out-of-pocket limit [$5,120]; paid at 100% after limit reac hed Out-of-pocket limit [$2,560]; paid at 100% after limit reac hed *Plan F also has an option called a high deductible plan F. This high deductible plan pays the same benefits as Plan F after one has paid a calendar year [$2,200] deductible. Benefits from high deductible plan F will not begin until out-of-pocket expenses exceed [$2,200]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy. These expenses include the Medicare deductibles for Part A and Part B, but do not include the plan’s separate foreign travel emergency deductible.

PREMIUM INFORMATION [Boldface Type]

We [insert issuer’s name] can only raise your premium if we raise the premium for all policies like yours in this State. [If the premium is based on the increasing age of the insured, include information specifying when premiums will change.]

DISCLOSURES [Boldface Type]

Use this outline to compare benefits and premiums among policies.

READ YOUR POLICY VERY CAREFULLY [Boldface Type]

This is only an outline describing your policy’s most important features. The policy is your insurance contract.

You must read the policy itself to understand all of the rights and duties of both you and your insurance company.

RIGHT TO RETURN POLICY [Boldface Type]

If you find that you are not satisfied with your policy, you may return it to [insert issuer’s address]. If you send the policy back to us within thirty (30) days after you receive it, we will treat the policy as if it had never been issued and return all of your payments.

POLICY REPLACEMENT [Boldface Type]

If you are replacing another health insurance policy, do NOT cancel it until you have actually received your new policy and are sure you want to keep it.

NOTICE [Boldface Type]

This policy may not fully cover all of your medical costs. [for agents:]

Neither [insert company’s name] nor its agents are connected with Medicare. [for direct response:] [insert company’s name] is not connected with Medicare.

This outline of coverage does not give all the details of Medicare coverage. Contact your local Social Security Office or consult Medicare and You for more details.

COMPLETE ANSWERS ARE VERY IMPORTANT [Boldface Type]

When you fill out the application for the new policy, be sure to answer truthfully and completely all questions about your medical and health history. The company may cancel your policy and refuse to pay any claims if you leave out or falsify important medical information. [If the policy or certificate is guaranteed issue, this paragraph need not appear.]

Review the application carefully before you sign it. Be certain that all information has been properly recorded. [Include for each plan prominently identified in the cover page, a chart showing the services, Medicare payments, plan payments and insured payments for each plan, using the same language, in the same order, using uniform layout and format as shown in the charts below. No more than four (4) plans may be shown on one chart. For purposes of illustration, charts for each plan are included in this Chapter. An issuer may use additional benefit plan designations on these charts pursuant to Rule 0780-0 1-58-.11(4) of this Chapter.]

Benefits Plans Available to All Applicants A B D G K L M N Medicare Part A coinsurance and hospital coverage (up to an additional 365 days after Medicare benefits are used up) ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Medicare Part B Coinsurance or Copayment ✔ ✔ ✔ ✔ 50% 75% ✔ ✔ copays apply Blood (first three pints) ✔ ✔ ✔ ✔ 50% 75% ✔ ✔

Part A hospice care coinsurance or copayment ✔ ✔ ✔ ✔ 50% 75% ✔ ✔ Skilled nursing facility coinsurance ✔ ✔ 50% 75% ✔ ✔ Medicare Part A deductible ✔ ✔ ✔ 50% 75% 50 % ✔ Medicare Part B deductible Medicare Part B excess charges ✔ Foreign travel emergency (up to plan limits) ✔ ✔ ✔ ✔ Out-of-pocket limit in [2017] [$5,120] [$2,560]

Medicare first eligible before only C F ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ [Include an explanation of any innovative benefits on the cover page and in the chart, in a manner approved by the commissioner.]

Benefit Chart of Medicare Supplement Plans Sold on or after January 1, 2020 This chart shows the benefits included in each of the standard Medicare supplement plans. Some plans may not be available. Only applicants first (1st) eligible for Medicare before 2020 may purchase Plans C, F, and high deductible F.

Note: A ✔means 100% of the benefit is paid.

Plans F and G also have a high deductible option which require first paying a plan deductible of [$2,200] before the plan begins to pay. Once the plan deductible is met, the plan pays one hundred percent (100%) of covered services for the rest of the calendar year. High deductible plan G does not cover the Medicare Part B deductible. However, high deductible plans F and G count your payment of the Medicare Part B deductible toward meeting the plan deductible.

Plans K and L pay one hundred percent (100%) of covered services for the rest of the calendar year once you meet the out-of-pocket yearly limit.

Plan N pays one hundred percent (100%) of the Part B coinsurance, except for a co-payment of up to twenty dollars ($20) for some office visits and up to a fifty dollar ($50) co-payment for emergency room visits that do not result in an inpatient admission.

PLAN A

MEDICARE (PART A)—HOSPITAL SERVICES—PER BENEFIT PERIOD * A benefit period begins on the first (1st) day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for sixty (60) days in a row.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

HOSPITALIZATION*

Semiprivate room and board, general nursing and miscellaneous services and Supplies First 60 days All but [$1,316] $0 [$1,316](Part A deductible) 61st thru 90th day All but [$329] a day [$329] a day $0 91st day and after: —While using 60 lifetime reserve days All but [$658] a day [$658] a day $0 —Once lifetime reserve days are used: $0 100% of Medicare $0** —Additional 365 days eligible expenses —Beyond the additional 365 $0 $0 All costs Days SKILLED NURSING FACILITY CARE* You must meet Medicare’s requirements, including having been in a hospital for at least 3 days and entered a Medicareapproved facility Within 30 days after leaving the hospital First 20 days All approved amounts $0 $0 21st thru 100th day All but [$164.50] a $0 Up to [$164.50] a day Day 101st day and after $0 $0 All costs BLOOD First 3 pints $0 3 pints $0 Additional amounts 100% $0 $0 SERVICES MEDICARE PAYS PLAN PAYS YOU PAY HOSPICE CARE You must meet Medicare's All but very limited Medicare $0 requirements, including a co-payment/ co-payment/ doctor's certification of coinsurance for out- coinsurance terminal illness. patient drugs and inpatient respite care ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional three hundred sixty-five (365) days as provided in the policy’s “Core Benefits.” During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have paid.

PLAN A

MEDICARE (PART B)—MEDICAL SERVICES—PER CALENDAR YEAR * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

MEDICAL EXPENSES—

IN OR OUT OF THE

HOSPITAL AND

OUTPATIENT HOSPITAL

TREATMENT, such as physician’s services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment, First [$183] of Medicare Approved Amounts* $0 $0 [$183] (Part B Remainder of Medicare deductible)

Approved Amounts Generally 80% Generally 20% $0

Part B Excess Charges (Above Medicare Approved $0 $0 All costs Amounts)

BLOOD

First 3 pints $0 All costs $0 Next [$183] of Medicare $0 $0 [$183] (Part B Approved Amounts* deductible)

Remainder of Medicare 80% 20% $0 Approved Amounts SERVICES MEDICARE PAYS PLAN PAYS YOU PAY CLINICAL LABORATORY SERVICES—TESTS FOR 100% $0 $0 DIAGNOSTIC SERVICES PARTS A & B SERVICES MEDICARE PAYS PLAN PAYS YOU PAY HOME HEALTH CARE MEDICARE APPROVED SERVICES Medically necessary skilled 100% $0 $0 care services and medical supplies —Durable medical equipment First [$183] of Medicare $0 $0 [$183] (Part B Approved Amounts* deductible)

Remainder of Medicare Approved Amounts 80% 20% $0 PLAN B MEDICARE (PART A)—HOSPITAL SERVICES—PER BENEFIT PERIOD * A benefit period begins on the first (1st) day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for sixty (60) days in a row.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

HOSPITALIZATION*

Semiprivate room and board, general nursing and miscellaneous services and supplies First 60 days All but [$1,316] [$1,316](Part A $0 deductible) st thru 90th day All but [$329] a day [$329] a day $0 st day and after: —While using 60 lifetime reserve days All but [$658] a day [$658] a day $0 —Once lifetime reserve days are used: $0 100% of Medicare $0** —Additional 365 days eligible expenses —Beyond the additional 365 $0 $0 All costs days SKILLED NURSING FACILITY CARE* You must meet Medicare’s requirements, including having been in a hospital for at least 3 days and entered a Medicareapproved facility within 30 days after leaving the hospital All approved amounts $0 $0 First 20 days All but [$164.50] a $0 Up to [$164.50] a 21st thru 100th day day day $0 $0 All costs 101st day and after BLOOD First 3 pints $0 3 pints $0 Additional amounts 100% $0 $0 SERVICES MEDICARE PAYS PLAN PAYS YOU PAY HOSPICE CARE All but very limited Medicare co-payment/ $0 You must meet Medicare's co-payment/ coinsurance requirements, including a coinsurance for outdoctor's certification of terminal patient drugs and illness inpatient respite care ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional three hundred sixty-five (365) days as provided in the policy’s “Core Benefits.” During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have paid.

PLAN B

MEDICARE (PART B)—MEDICAL SERVICES—PER CALENDAR YEAR * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

MEDICAL EXPENSES—

IN OR OUT OF THE

HOSPITAL AND

OUTPATIENT HOSPITAL

TREATMENT, such as physician’s services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment, F First [$183] of Medicare Approved Amounts* $0 $0 [$183] (Part B Remainder of Medicare deductible)

Approved Amounts Generally 80% Generally 20% $0

Part B Excess Charges (Above Medicare Approved $0 $0 All costs Amounts)

BLOOD

First 3 pints $0 All costs $0 Next [$183] of Medicare Approved Amounts* $0 $0 [$183] (Part B Remainder of Medicare deductible)

Approved Amounts 80% 20% $0 CLINICAL LABORATORY SERVICES—TESTS FOR 100% $0 $0 DIAGNOSTIC SERVICES PARTS A & B SERVICES MEDICARE PAYS PLAN PAYS YOU PAY HOME HEALTH CARE MEDICARE APPROVED SERVICES Medically necessary skilled 100% $0 $0 care services and medical supplies —Durable medical equipment First [$183] of Medicare $0 $0 [$183] (Part B Approved Amounts* deductible)

Remainder of Medicare Approved Amounts 80% 20% $0 PLAN C MEDICARE (PART A)—HOSPITAL SERVICES—PER BENEFIT PERIOD * A benefit period begins on the first (1st) day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for sixty (60) days in a row.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

HOSPITALIZATION*

Semiprivate room and board, general nursing and miscellaneous services and supplies All but [$1,316] [$1,316](Part A $0 First 60 days deductible) 61st thru 90th day All but [$329] a day [$329] a day $0 91st day and after: —While using 60 lifetime All but [$658] a day [$658] a day $0 reserve days —Once lifetime reserve days are used: $0 100% of Medicare $0** Additional 365 days eligible expenses —Beyond the additional 365 $0 $0 All costs days SKILLED NURSING FACILITY CARE* You must meet Medicare’s requirements, including having been in a hospital for at least 3 days and entered a Medicareapproved facility within 30 days after leaving the hospital First 20 days All approved amounts $0 $0 21st thru 100th day All but [$164.50] a Up to [$164.50] a day $0 day 101st day and after $0 $0 All costs BLOOD First 3 pints $0 3 pints $0 Additional amounts 100% $0 $0 HOSPICE CARE You must meet Medicare's All but very limited Medicare copayment/coinsurance $0 requirements, including a co-payment/ doctor's certification of terminal coinsurance for outillness. patient drugs and inpatient respite care ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional three hundred sixty-five (365) days as provided in the policy’s “Core Benefits.” During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have paid.

PLAN C

MEDICARE (PART B)—MEDICAL SERVICES—PER CALENDAR YEAR * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

MEDICAL EXPENSES—

IN OR OUT OF THE

HOSPITAL AND

OUTPATIENT HOSPITAL

TREATMENT, such as physician’s services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment, First [$183] of Medicare $0 [$183] (Part B $0 Approved Amounts* deductible)

Remainder of Medicare Approved Amounts Generally 80% Generally 20% $0

Part B Excess Charges (Above Medicare Approved $0 $0 All costs Amounts)

BLOOD

First 3 pints $0 All costs $0 Next [$183] of Medicare Approved Amounts* $0 [$183] (Part B $0 Remainder of Medicare deductible)

Approved Amounts 80% 20% $0 CLINICAL LABORATORY SERVICES—TESTS FOR 100% $0 $0 DIAGNOSTIC SERVICES PARTS A & B SERVICES MEDICARE PAYS PLAN PAYS YOU PAY HOME HEALTH CARE MEDICARE APPROVED 100% $0 $0 SERVICES Medically necessary skilled care services and medical supplies —Durable medical equipment First [$183] of Medicare Approved Amounts* $0 [$183](Part B deductible) $0 Remainder of Medicare Approved Amounts 80% 20% $0 OTHER BENEFITS—NOT COVERED BY MEDICARE SERVICES MEDICARE PAYS PLAN PAYS YOU PAY FOREIGN TRAVEL— NOT COVERED BY MEDICARE Medically necessary emergency care services beginning during the first 60 days of each trip outside the USA First $250 each calendar year $0 $0 $250 Remainder of Charges $0 80% to a lifetime maximum benefit of 20% and amounts over the $50,000 lifetime $50,000 maximum PLAN D MEDICARE (PART A)—HOSPITAL SERVICES—PER BENEFIT PERIOD * A benefit period begins on the first (1st) day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for sixty (60) days in a row.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

HOSPITALIZATION*

Semiprivate room and board, general nursing and miscellaneous services and supplies First 60 days All but [$1,316] [$1,316] (Part A $0 deductible) 61st thru 90th day All but [$329] a day [$329] a day $0 91st day and after: —While using 60 lifetime reserve days All but [$658] a day [$658] a day $0 $0 —Once lifetime reserve days are used: $0 100% of Medicare $0** Additional 365 days eligible expenses —Beyond the additional 365 days $0 $0 All costs SKILLED NURSING FACILITY CARE* You must meet Medicare’s requirements, including having been in a hospital for at least 3 days and entered a Medicareapproved facility within 30 days after leaving the hospital First 20 days All approved amounts $0 $0 21st thru 100th day All but [$164.50] a Up to [$164.50] a day $0 day 101st day and after $0 $0 All costs BLOOD First 3 pints $0 3 pints $0 Additional amounts 100% $0 $0 HOSPICE CARE Medicare co-payment/ $0 You must meet Medicare's All but very limited copayment/ coinsurance requirements, including a coinsurance for outdoctor's certification of terminal patient drugs and illness inpatient respite care ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional three hundred sixty-five (365) days as provided in the policy’s “Core Benefits.” During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have paid.

PLAN D

MEDICARE (PART B)—MEDICAL SERVICES—PER CALENDAR YEAR * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

MEDICAL EXPENSES—

IN OR OUT OF THE

HOSPITAL AND

OUTPATIENT HOSPITAL

TREATMENT, such as physician’s services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment, First [$183] of Medicare Approved Amounts* $0 $0 [$183] (Part B Remainder of Medicare deductible)

Approved Amounts Generally 80% Generally 20% $0

Part B Excess Charges (Above Medicare Approved $0 $0 All costs Amounts)

BLOOD

First 3 pints $0 All costs $0 Next [$183] of Medicare $0 $0 [$183] (Part B Approved Amounts* deductible)

Remainder of Medicare 80% 20% $0 Approved Amounts CLINICAL LABORATORY SERVICES—TESTS FOR DIAGNOSTIC SERVICES 100% $0 $0 PLAN D PARTS A & B SERVICES MEDICARE PAYS PLAN PAYS YOU PAY HOME HEALTH CARE MEDICARE APPROVED SERVICES Medically necessary skilled 100% $0 $0 care services and medical supplies —Durable medical equipment First [$183] of Medicare $0 $0 [$183] (Part B Approved Amounts* deductible)

Remainder of Medicare 80% 20% $0 Approved Amounts OTHER BENEFITS—NOT COVERED BY MEDICARE SERVICES MEDICARE PAYS PLAN PAYS YOU PAY FOREIGN TRAVEL—NOT COVERED BY MEDICARE Medically necessary emergency care services beginning during the first 60 days of each trip outside the USA First $250 each calendar year $0 $0 $250 Remainder of charges $0 80% to a lifetime 20% and amounts maximum benefit of over the $50,000 $50,000 lifetime maximum PLAN F or HIGH DEDUCTIBLE PLAN F MEDICARE (PART A)—HOSPITAL SERVICES—PER BENEFIT PERIOD • A benefit period begins on the first (1st) day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for sixty (60) days in a row. [**This high deductible plan pays the same benefits as Plan F after you have paid a calendar year [$2,200] deductible. Benefits from the high deductible plan F will not begin until out-of-pocket expenses are [$2,200]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy. This includes the Medicare deductibles for Part A and Part B, but does not include the plan’s separate foreign travel emergency deductible.]

SERVICES MEDICARE PAYS [

AFTER YOU PAY [$2,200]

DEDUCTIBLE,**]

PLAN PAYS

[IN ADDITION TO [$2,200]

DEDUCTIBLE,**]

YOU PAY

HOSPITALIZATION*

Semiprivate room and board, general nursing and miscellaneous services and supplies All but [$1,316] [$1,316](Part A $0 First 60 days deductible) 61st thru 90th day All but [$329] a day [$329] a day $0 91st day and after: —While using 60 Lifetime All but [$658] a day [$658] a day $0 reserve days —Once lifetime reserve days are used: —Additional 365 days $0 100% of Medicare $0** Eligible expenses —Beyond the additional 365 $0 $0 All costs days *** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional three hundred sixty-five (365) days as provided in the policy’s “Core Benefits.” During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have paid.

PLAN F or HIGH DEDUCTIBLE PLAN F MEDICARE (PART B)—MEDICAL SERVICES—PER CALENDAR YEAR *Once you have been billed [$1,835] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year. [**This high deductible plan pays the same benefits as Plan F after you have paid a calendar year [$2,200] deductible. Benefits from the high deductible plan F will not begin until out-of-pocket expenses are [$2,200]. Out-of-pocket expenses for this deductible are expenses that would ordinarily be paid by the policy. This includes the Medicare deductibles for Part A and Part B, but does not include the plan’s separate foreign travel emergency deductible.]

SKILLED NURSING

FACILITY CARE*

You must meet Medicare’s requirements, including having been in a hospital for at least 3 days and entered a Medicareapproved facility within 30 days after leaving the hospital First 20 days All approved amounts $0 $0 21st thru 100th day All but [$164.50] a Up to [$164.50] a day $0 day 101st day and after $0 $0 All costs BLOOD First 3 pints $0 3 pints $0 Additional amounts 100% $0 $0 HOSPICE CARE Medicare co-payment/ $0 You must meet Medicare's All but very limited copayment/ coinsurance requirements, including a coinsurance for outdoctor's certification of terminal patient drugs and illness inpatient respite care [AFTER YOU PAY [IN ADDITION TO [$2,200] [$2,200]

SERVICES MEDICARE PAYS DEDUCTIBLE,] DEDUCTIBLE,]

PLAN PAYS YOU PAY

MEDICAL EXPENSES—

IN OR OUT OF THE

HOSPITAL AND

OUTPATIENT

HOSPITAL TREATMENT,

Such as physician’s services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment, First [$183] of medicare approved amounts* $0 [$183] (Part B $0 Remainder of Medicare deductible)

Approved amounts Generally 80% Generally 20% $0

Part B excess charges $0 100% $0 (Above Medicare Approved Amounts)

BLOOD

First 3 pints $0 All costs $0 Next [$183] of Medicare Approved amounts* $0 [$183] (Part B $0 Remainder of Medicare deductible)

Approved amounts 80% 20% $0 CLINICAL LABORATORY SERVICES—TESTS FOR DIAGNOSTIC 100% $0 $0 SERVICES PLAN F or HIGH DEDUCTIBLE PLAN F PARTS A & B [AFTER YOU PAY [IN ADDITION TO [$2,200] [$2,200]

DEDUCTIBLE,] DEDUCTIBLE,]

SERVICES

MEDICARE PAYS

PLAN PAYS

YOU PAY

HOME HEALTH CARE

MEDICARE APPROVED

SERVICES

Medically necessary skilled care 100% $0 $0 services and medical supplies —Durable medical equipment First [$183] of Medicare Approved Amounts* $0 [$183] (Part B $0 Remainder of Medicare — deductible)

Approved Amounts 80% 20% $0 OTHER BENEFITS—NOT COVERED BY MEDICARE [AFTER YOU PAY [IN ADDITION TO [$2,200] [$2,200]

DEDUCTIBLE,] DEDUCTIBLE,]

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

FOREIGN TRAVEL—

NOT COVERED BY MEDICARE

Medically necessary Emergency care services Beginning during the first 60 days of each trip outside the USA First $250 each calendar year $0 $0 $250 Remainder of charges $0 80% to a lifetime maximum benefit 20% and amounts over the $50,000 of $50,000 lifetime maximum PLAN G or HIGH DEDUCTIBLE PLAN G MEDICARE (PART A)—HOSPITAL SERVICES—PER BENEFIT PERIOD * A benefit period begins on the first (1st) day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for sixty (60) days in a row. [**This high deductible plan pays the same benefits as Plan G after you have paid a calendar year [$2,200] deductible. Benefits from the high deductible Plan G will not begin until out-of-pocket expenses are [$2,200]. Out-of-pocket expenses for this deductible include expenses for the Medicare Part B deductible, and expenses that would ordinarily be paid by the policy. This does not include the plan’s separate foreign travel emergency deductible.]

SERVICES MEDICARE PAYS

[AFTER YOU PAY [$2,200]

DEDUCTIBLE,**]

PLAN PAYS

[IN ADDITION TO [$2,200]

DEDUCTIBLE,**]

YOU PAY

HOSPITALIZATION*

Semiprivate room and board, general nursing and miscellaneous services and supplies First 60 days All but [$1,316] [$1,316] (Part A $0 deductible) 61st thru 90th day All but [$329] a day [$329] a day $0 91st day and after: —While using 60 lifetime reserve days All but [$658] a day [$658] a day $0 —Once lifetime reserve days are used: $0 100% of Medicare $0** —Additional 365 days eligible expenses —Beyond the additional 365 $0 $0 All costs days SKILLED NURSING FACILITY CARE* You must meet Medicare’s requirements, including having been in a hospital for at least 3 days and entered a Medicareapproved facility within 30 days after leaving the hospital All approved amounts $0 $0 First 20 days 21st thru 100th day All but [$164.50] a Up to [$164.50] a day $0 day 101st day and after $0 $0 All costs BLOOD First 3 pints $0 3 pints $0 Additional amounts 100% $0 $0 HOSPICE CARE All but very limited Medicare co-payment/ coinsurance $0 You must meet Medicare's requirements, including a co-payment/ doctor's certification of terminal coinsurance for outillness patient drugs and inpatient respite care *** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional three hundred sixty-five (365) days as provided in the policy’s “Core Benefits.” During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have paid.

PLAN G or HIGH DEDUCTIBLE PLAN G MEDICARE (PART B)—MEDICAL SERVICES—PER CALENDAR YEAR * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year. [**This high deductible plan pays the same benefits as Plan G after you have paid a calendar year [$2,200] deductible. Benefits from the high deductible Plan G will not begin until out-of-pocket expenses are [$2,200]. Out-of-pocket expenses for this deductible include expenses for the Medicare Part B deductible, and expenses that would ordinarily be paid by the policy. This does not include the plan’s separate foreign travel emergency deductible.]

SERVICES MEDICARE PAYS

[AFTER YOU PAY [$2,200]

DEDUCTIBLE,**]

PLAN PAYS

[IN ADDITION TO [$2,200]

DEDUCTIBLE,**]

YOU PAY

MEDICAL EXPENSES—

IN OR OUT OF THE

HOSPITAL AND

OUTPATIENT HOSPITAL

TREATMENT, such as physician’s services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment, First [$183] of Medicare $0 $0 [$183] (Unless Part B deductible has been met)

Approved Amounts* Remainder of Medicare Generally 80% Generally 20% $0 Approved Amounts

Part B Excess Charges (Above Medicare Approved $0 100% All costs Amounts)

BLOOD

First 3 pints $0 All costs $0 Next [$183] of Medicare Approved Amounts* $0 $0 [$183] (Unless Part B deductible has been met)

Remainder of Medicare 80% 20% $0 Approved Amounts CLINICAL LABORATORY SERVICES—TESTS FOR 100% $0 $0 DIAGNOSTIC SERVICES PLAN G or HIGH DEDUCTIBLE PLAN G PARTS A & B SERVICES MEDICARE PAYS [AFTER YOU PAY [$2,200]

DEDUCTIBLE,**]

PLAN PAYS

[IN ADDITION TO [$2,200]

DEDUCTIBLE,**]

YOU PAY

HOME HEALTH CARE

MEDICARE APPROVED 100% $0 $0

SERVICES

Medically necessary skilled care services and medical supplies —Durable medical equipment First [$183] of Medicare Approved Amounts* $0 $0 [$183] (Unless Part B deductible has been met)

Remainder of Medicare Approved Amounts 80% 20% $0 OTHER BENEFITS—NOT COVERED BY MEDICARE SERVICES MEDICARE PAYS [AFTER YOU PAY [$2,200]

DEDUCTIBLE,**]

PLAN PAYS

[IN ADDITION TO [$2,200]

DEDUCTIBLE,**]

YOU PAY

FOREIGN TRAVEL—

NOT COVERED BY

MEDICARE

Medically necessary emergency care services beginning during the first 60 days of each trip outside the USA First $250 each calendar $0 $0 $250 year Remainder of Charges $0 80% to a lifetime maxi- 20% and amounts mum benefit of over the $50,000 $50,000 lifetime maximum PLAN K * You will pay half the cost-sharing of some covered services until you reach the annual out-of-pocket limit of [$5,120] each calendar year. The amounts that count toward your annual limit are noted with diamonds (♦) in the chart below. Once you reach the annual limit, the plan pays one hundred percent (100%) of your Medicare co-payment and coinsurance for the rest of the calendar year. However, this limit does NOT include charges from your provider that exceed Medicare-approved amounts (these are called “Excess Charges”) and you will be responsible for paying this difference in the amount charged by your provider and the amount paid by Medicare for the item or service.

MEDICARE (PART A)—HOSPITAL SERVICES—PER BENEFIT PERIOD ** A benefit period begins on the first (1st) day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for sixty (60) days in a row.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY*

HOSPITALIZATION*

Semiprivate room and board, general nursing and miscellaneous services and supplies First 60 days All but [$1,316] [$658](50% of Part A [$658](50% of Part A deductible) deductible)♦ 61st thru 90th day All but [$329] a day [$329] a day $0 91st day and after: —While using 60 lifetime reserve days All but [$658] a day [$658] a day $0 —Once lifetime reserve days are used: $0 100% of Medicare $0** —Additional 365 days eligible expenses —Beyond the additional 365 $0 $0 All costs days SKILLED NURSING FACILITY CARE* You must meet Medicare’s requirements, including having been in a hospital for at least 3 days and entered a Medicareapproved facility within 30 days after leaving the hospital First 20 days All approved amounts $0 $0 21st thru 100th day All but [$164.50] a day Up to [$82.25] a day Up to [$82.25] a day ♦ 101st day and after $0 $0 All costs BLOOD First 3 pints $0 50% 50%♦ Additional amounts 100% $0 $0 HOSPICE CARE You must meet Medicare's requirements, including a doctor's certification of terminal illness All but very limited co-payment/ coinsurance for outpatient drugs and inpatient respite care 50% of Co-payment/ coinsurance 50% of Medicare Copayment/coinsurance♦ *** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional three hundred sixty-five (365) days as provided in the policy’s “Core Benefits.” During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have paid.

PLAN K

MEDICARE (PART B)—MEDICAL SERVICES—PER CALENDAR YEAR **** Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY*

MEDICAL EXPENSES—

IN OR OUT OF THE

HOSPITAL AND

OUTPATIENT HOSPITAL

TREATMENT, such as physician’s services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment, First [$183] of Medicare Approved Amounts**** $0 $0 [$183] (Part B Preventive Benefits for deductible)**** ♦ Medicare covered services Generally 75% or Remainder of All costs above more of Medicare Medicare approved Medicare approved Remainder of Medicare approved amounts amounts amounts Approved Amounts Generally 80% Generally 10% Generally 10% ♦

Part B Excess Charges (Above Medicare $0 $0 All costs (and they do Approved Amounts) not count toward annual out-of-pocket limit of [$5,120])* BLOOD First 3 pints $0 50% 50%♦ Next [$183] of Medicare $0 $0 [$183] (Part B Approved Amounts**** deductible)**** ♦ Remainder of Medicare Generally 80% Generally 10% Generally 10% ♦ Approved Amounts CLINICAL LABORATORY SERVICES—TESTS FOR DIAGNOSTIC SERVICES 100% $0 $0 (continued) * This plan limits your annual out-of-pocket payments for Medicare-approved amounts to [$5,120] per year.

However, this limit does NOT include charges from your provider that exceed Medicare-approved amounts (these are called “Excess Charges”) and you will be responsible for paying this difference in the amount charged by your provider and the amount paid by Medicare for the item or service.

PLAN K

PARTS A & B

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY*

HOME HEALTH CARE

MEDICARE APPROVED

SERVICES

Medically necessary skilled 100% $0 $0 care services and medical supplies —Durable medical equipment First [$183] of Medicare $0 $0 [$183] (Part B Approved Amounts***** deductible) ♦ Remainder of Medicare Approved Amounts 80% 10% 10%♦ *****Medicare benefits are subject to change. Please consult the latest Guide to Health Insurance for People with Medicare.

PLAN L * You will pay one-fourth of the cost-sharing of some covered services until you reach the annual out-ofpocket limit of [$2,560] each calendar year. The amounts that count toward your annual limit are noted with diamonds (♦) in the chart below. Once you reach the annual limit, the plan pays one hundred percent (100%) of your Medicare copayment and coinsurance for the rest of the calendar year. However, this limit does NOT include charges from your provider that exceed Medicare-approved amounts (these are called “Excess Charges”) and you will be responsible for paying this difference in the amount charged by your provider and the amount paid by Medicare for the item or service.

MEDICARE (PART A)—HOSPITAL SERVICES—PER BENEFIT PERIOD ** A benefit period begins on the first (1st) day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for sixty (60) days in a row.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY*

HOSPITALIZATION**

Semiprivate room and board, general nursing and miscellaneous services and supplies First 60 days All but [$1,316] [$987] (75% of Part [$329] (25% of Part A A deductible) deductible)♦ 61st thru 90th day All but [$329] a day [$329] a day $0 91st day and after: —While using 60 lifetime reserve days All but [$658] a day [$658] a day $0 —Once lifetime reserve days are used: —Additional 365 days $0 100% of Medicare $0*** —Beyond the additional 365 eligible expenses days $0 $0 All costs SKILLED NURSING FACILITY CARE** You must meet Medicare’s requirements, including having been in a hospital for at least 3 days and entered a Medicareapproved facility Within 30 days after leaving the hospital First 20 days All approved amounts $0 $0 21st thru 100th day All but [$164.50] a day Up to [$123.38] a day (75% of Part A Coinsurance)

Up to [$41.13] a day (25% of Part A Coninsurance)♦ 101st day and after $0 $0 All costs SERVICES MEDICARE PAYS PLAN PAYS YOU PAY* BLOOD First 3 pints $0 75% 25%♦ Additional amounts 100% $0 $0 HOSPICE CARE You must meet Medicare's All but very limited co- 75% of co-payment/ 25% of co-payment/ requirements, including a payment/ coinsurance coinsurance ♦ doctor's certification of terminal coinsurance for illness. outpatient drugs and inpatient respite care *** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional three hundred sixty-five (365) days as provided in the policy’s “Core Benefits.” During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have paid.

PLAN L

MEDICARE (PART B)—MEDICAL SERVICES—PER CALENDAR YEAR **** Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY*

MEDICAL EXPENSES—

IN OR OUT OF THE

HOSPITAL AND

OUTPATIENT HOSPITAL

TREATMENT, such as Physician’s services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment, First [$183] of Medicare $0 $0 [$183] (Part B Approved Amounts**** deductible)**** ♦ Preventive Benefits for Generally 80% or Remainder of All costs above Medicare covered services more of Medicare Medicare approved Medicare approved approved amounts amounts amounts Remainder of Medicare Generally 80% Generally 15% Generally 5% ♦ Approved Amounts

Part B Excess Charges (Above Medicare Approved $0 $0 All costs (and they Amounts) do not count toward annual out-of-pocket limit of [$2,560])* SERVICES MEDICARE PAYS PLAN PAYS YOU PAY* BLOOD First 3 pints $0 75% 25%♦ Next [$183] of Medicare $0 $0 [$183] (Part B Approved Amounts**** deductible) ♦ Remainder of Medicare Generally 80% Generally 15% Generally 5%♦ Approved Amounts CLINICAL LABORATORY SERVICES—TESTS FOR DIAGNOSTIC SERVICES 100% $0 $0 * This plan limits your annual out-of-pocket payments for Medicare-approved amounts to [$2,560] per year.

However, this limit does NOT include charges from your provider that exceed Medicare-approved amounts (these are called “Excess Charges”) and you will be responsible for paying this difference in the amount charged by your provider and the amount paid by Medicare for the item or service.

PLAN L

PARTS A & B

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY*

HOME HEALTH CARE

MEDICARE APPROVED

SERVICES

Medically necessary skilled 100% $0 $0 care services and medical supplies —Durable medical equipment First [$183] of Medicare $0 $0 [$183] (Part B Approved Amounts***** deductible) ♦ Remainder of Medicare Approved Amounts 80% 15% 5% ♦ *****Medicare benefits are subject to change. Please consult the latest Guide to Health Insurance for People with Medicare.

PLAN M

MEDICARE (PART A)—HOSPITAL SERVICES—PER BENEFIT PERIOD * A benefit period begins on the first (1st) day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for sixty (60) days in a row.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

HOSPITALIZATION*

Semiprivate room and board, general nursing and miscellaneous services and supplies All but [$1,316] [$658](50% of Part A [$658](50% of Part First 60 days deductible) A deductible) 61st thru 90th day All but [$329] a day [$329] a day $0 91st day and after: —While using 60 lifetime All but [$658] a day [$658] a day $0 reserve days —Once lifetime reserve days are used: $0 100% of Medicare $0** —Additional 365 days eligible expenses —Beyond the additional 365 days $0 $0 All costs SKILLED NURSING FACILITY CARE* You must meet Medicare’s requirements, including having been in a hospital for at least 3 days and entered a Medicareapproved facility within 30 days after leaving the hospital First 20 days All approved amounts $0 $0 21st thru 100th day All but [$164.50] a Up to [$164.50] a day $0 101st day and after day $0 $0 All costs BLOOD $0 First 3 pints 3 pints $0 Additional amounts 100% $0 $0 SERVICES MEDICARE PAYS PLAN PAYS YOU PAY HOSPICE CARE All but very limited Medicare co-payment/ $0 You must meet Medicare’s co-payment/ coinsurance requirements, including a coinsurance for doctor’s certification of terminal outpatient drugs and illness inpatient respite care ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional three hundred sixty-five (365) days as provided in the policy’s “Core Benefits.” During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have paid.

PLAN M

MEDICARE (PART B)—MEDICAL SERVICES—PER CALENDAR YEAR * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

MEDICAL EXPENSES—

IN OR OUT OF THE

HOSPITAL AND

OUTPATIENT HOSPITAL

TREATMENT, such as physician’s services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment —First [$183] of $0 $0 [$183] (Part B deductible)

Medicare Approved Amounts* Remainder of Medicare Approved Amounts Generally 80% Generally 20% $0

Part B Excess Charges (Above Medicare $0 $0 All costs Approved Amounts)

BLOOD

First 3 pints $0 All costs $0 Next [$183] of Medicare Approved Amounts* $0 $0 [$183] (Part B Remainder of Medicare deductible)

Approved Amounts 80% 20% $0 CLINICAL LABORATORY SERVICES—TESTS FOR DIAGNOSTIC SERVICES 100% $0 $0 PARTS A & B SERVICES MEDICARE PAYS PLAN PAYS YOU PAY HOME HEALTH CARE MEDICARE APPROVED SERVICES Medically necessary skilled care services and medical supplies 100% $0 $0 —Durable medical equipment First [$183] of Medicare Approved Amounts* $0 $0 [$183](Part B deductible)

Remainder of Medicare Approved Amounts 80% 20% $0 OTHER BENEFITS—NOT COVERED BY MEDICARE SERVICES MEDICARE PAYS PLAN PAYS YOU PAY FOREIGN TRAVEL— NOT COVERED BY MEDICARE Medically necessary emergency care services beginning during the first 60 days of each trip outside the USA First $250 each calendar year $0 $0 $250 Remainder of Charges $0 80% to a lifetime maxi- 20% and amounts over mum benefit of the $50,000 lifetime $50,000 maximum PLAN N MEDICARE (PART A)—HOSPITAL SERVICES—PER BENEFIT PERIOD * A benefit period begins on the (1st) first day you receive service as an inpatient in a hospital and ends after you have been out of the hospital and have not received skilled care in any other facility for sixty (60) days in a row.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

HOSPITALIZATION*

Semiprivate room and board, general nursing and miscellaneous services and supplies All but [$1,316] [$1,316](Part A $0 First 60 days deductible) 61st thru 90th day All but [$329] a day [$329] a day $0 91st day and after: —While using 60 lifetime All but [$658] a day [$658] a day $0 reserve days —Once lifetime reserve days are used: $0 100% of Medicare eligible expenses $0** —Additional 365 days —Beyond the additional 365 $0 $0 All costs days SKILLED NURSING FACILITY CARE* You must meet Medicare’s requirements, including having been in a hospital for at least 3 days and entered a Medicareapproved facility within 30 days after leaving the hospital All approved amounts First 20 days $0 $0 21st thru 100th day All but [$164.50] a Up to [$164.50] a day $0 day $0 $0 All costs 101st day and after BLOOD $0 First 3 pints 3 pints $0 Additional amounts 100% $0 $0 ** NOTICE: When your Medicare Part A hospital benefits are exhausted, the insurer stands in the place of Medicare and will pay whatever amount Medicare would have paid for up to an additional three hundred sixty-five (365) days as provided in the policy’s “Core Benefits.” During this time the hospital is prohibited from billing you for the balance based on any difference between its billed charges and the amount Medicare would have paid.

SERVICES

MEDICARE PAYS PLAN PAYS YOU PAY

HOSPICE CARE

All but very limited Medicare co-payment/ $0 You must meet Medicare’s co-payment/ coinsurance requirements, including a coinsurance for doctor’s certification of terminal outpatient drugs and illness inpatient respite care PLAN N MEDICARE (PART B)—MEDICAL SERVICES—PER CALENDAR YEAR * Once you have been billed [$183] of Medicare-approved amounts for covered services (which are noted with an asterisk), your Part B deductible will have been met for the calendar year.

SERVICES MEDICARE PAYS PLAN PAYS YOU PAY

MEDICAL EXPENSES—

IN OR OUT OF THE

HOSPITAL AND

OUTPATIENT HOSPITAL

TREATMENT, such as physician’s services, inpatient and outpatient medical and surgical services and supplies, physical and speech therapy, diagnostic tests, durable medical equipment First [$183] of Medicare Approved Amounts* $0 $0 [$183] (Part B deductible)

Remainder of Medicare Approved Amounts Generally 80% Balance, other than Up to [$20] per office visit up to [$20] per office and up to [$50] per visit and up to [$50] emergency room visit. per emergency room The co-payment of up to visit. The co- [$50] is waived if the payment of up to insured is admitted to any [$50] is waived if the hospital and the insured is admitted to emergency visit is any hospital and the covered as a Medicare emergency visit is Part A expense. covered as a Medicare Part A expense.

Part B Excess Charges (Above Medicare Approved $0 $0 All costs Amounts)

BLOOD

First 3 pints $0 All costs $0 Next [$183] of Medicare Approved Amounts* $0 $0 [$183] (Part B deductible)

Remainder of Medicare Approved Amounts 80% 20% $0 CLINICAL LABORATORY SERVICES—TESTS FOR DIAGNOSTIC SERVICES 100% $0 $0 PARTS A & B SERVICES MEDICARE PAYS PLAN PAYS YOU PAY HOME HEALTH CARE MEDICARE APPROVED SERVICES Medically necessary skilled care services and medical supplies 100% $0 $0 —Durable medical equipment First [$183] of Medicare Approved Amounts* $0 $0 [$183] (Part B deductible)

Remainder of Medicare 80% 20% $0 Approved Amounts OTHER BENEFITS—NOT COVERED BY MEDICARE SERVICES MEDICARE PAYS PLAN PAYS YOU PAY FOREIGN TRAVEL— NOT COVERED BY MEDICARE Medically necessary emergency care services beginning during the first 60 days of each trip outside the USA First $250 each calendar year $0 $0 $250 Remainder of Charges 80% to a lifetime 20% and amounts over the $50,000 lifetime $0 maximum benefit of (5) Notice Regarding Policies or Certificates Which Are Not Medicare Supplement Policies.

(a) Any accident and sickness insurance policy or certificate, other than a Medicare supplement policy, a policy issued pursuant to a contract under Section 1876 of the Federal Social Security Act (42 U.S.C. §§ 1395 et seq.), disability income policy, or other policy identified in Rule 0780-01-58-.03(2), issued for delivery in this state to persons eligible for Medicare shall notify insureds under the policy that the policy is not a Medicare supplement policy or certificate. The notice shall either be printed or attached to the first page of the outline of coverage delivered to insureds under the policy, or if no outline of coverage is delivered, to the first page of the policy, or certificate delivered to insureds. The notice shall be in no less than twelve (12) point type and shall contain the following language:

“THIS [POLICY OR CERTIFICATE] IS NOT A MEDICARE SUPPLEMENT [POLICY

OR CONTRACT]. If you are eligible for Medicare, review the Guide to Health Insurance for People with Medicare available from the company.”

(b) Applications provided to persons eligible for Medicare for the health insurance policies or certificates described in subparagraph (4)(a) shall disclose, using the applicable statement in Appendix C, the extent to which the policy duplicates Medicare. The disclosure statement shall be provided as a part of, or together with, the application for the policy or certificate.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. New rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. (Formerly 0780-01-58-.18) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.19 but was renumbered 0780-01-58-.20 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.21 REQUIREMENTS FOR APPLICATION FORMS AND REPLACEMENT COVERAGE

(1) Application forms shall include the following questions designed to elicit information as to whether, as of the date of the application, the applicant currently has Medicare supplement, Medicare Advantage, Medicaid coverage, or another health insurance policy or certificate in force or whether a Medicare supplement policy or certificate is intended to replace any other accident and sickness policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and agent containing such questions and statements may be used. [Statements]

(1) You do not need more than one (1) Medicare supplement policy.

(2) If you purchase this policy, you may want to evaluate your existing health coverage and decide if you need multiple coverages.

(3) You may be eligible for benefits under Medicaid and may not need a Medicare supplement policy.

(4) If, after purchasing this policy, you become eligible for Medicaid, the benefits and premiums under your Medicare supplement policy can be suspended, if requested, during your entitlement to benefits under Medicaid for twenty-four (24) months. You must request this suspension within ninety (90) days of becoming eligible for Medicaid.

If you are no longer entitled to Medicaid, your suspended Medicare supplement policy (or, if that is no longer available, a substantially equivalent policy) will be reinstituted if requested within ninety (90) days of losing Medicaid eligibility. If the Medicare supplement policy provided coverage for outpatient prescription drugs and you enrolled in Medicare Part D while your policy was suspended, the reinstituted policy will not have outpatient prescription drug coverage, but will otherwise be substantially equivalent to your coverage before the date of the suspension.

(5) If you are eligible for, and have enrolled in a Medicare supplement policy by reason of disability and you later become covered by an employer or union-based group health plan, the benefits and premiums under your Medicare supplement policy can be suspended, if requested, while you are covered under the employer or union-based group health plan. If you suspend your Medicare supplement policy under these circumstances, and later lose your employer or union-based group health plan, your suspended Medicare supplement policy (or, if that is no longer available, a substantially equivalent policy) will be reinstituted if requested within ninety (90) days of losing your employer or union-based group health plan. If the Medicare supplement policy provided coverage for outpatient prescription drugs and you enrolled in Medicare Part D while your policy was suspended, the reinstituted policy will not have outpatient prescription drug coverage, but will otherwise be substantially equivalent to your coverage before the date of the suspension.

(6) Counseling services may be available in your state to provide advice concerning your purchase of Medicare supplement insurance and concerning medical assistance through the state Medicaid program, including benefits as a Qualified Medicare Beneficiary (QMB) and a Specified Low-Income Medicare Beneficiary (SLMB). [Questions]

If you lost or are losing other health insurance coverage and received a notice from your prior insurer saying you were eligible for guaranteed issue of a Medicare supplement insurance policy, or that you had certain rights to buy such a policy, you may be guaranteed acceptance in one (1) or more of our Medicare supplement plans. Please include a copy of the notice from your prior insurer with your application.

PLEASE ANSWER ALL QUESTIONS. [Please mark Yes or No below with an “X”]

To the best of your knowledge, (1) (a) Did you turn age sixty-five (65) in the last six (6) months? Yes____ No____ (b) Did you enroll in Medicare Part B in the last six (6) months? Yes____ No____ (c) If yes, what is the effective date? _______________ (2) Are you covered for medical assistance through the state Medicaid program? [NOTE TO APPLICANT: If you are participating in a “Spend-Down Program” and have not met your “Share of Cost,” please answer NO to this question.]

Yes____ No____ If yes, (a) Will Medicaid pay your premiums for this Medicare supplement policy?

Yes____ No____ (b) Do you receive any benefits from Medicaid OTHER THAN payments toward your Medicare Part B premium?

Yes____ No____ (3) (a) If you had coverage from any Medicare plan other than original Medicare within the past sixty-three (63) days (for example, a Medicare Advantage plan, or a Medicare HMO or PPO), fill in your start and end dates below. If you are still covered under this plan, leave “END” blank.

START //__ END //__

(b) If you are still covered under the Medicare plan, do you intend to replace your current coverage with this new Medicare supplement policy?

Yes____ No____ (c) Was this your first time in this type of Medicare plan?

Yes____ No____ (d) Did you drop a Medicare supplement policy to enroll in the Medicare plan?

Yes____ No____ (4) (a) Do you have another Medicare supplement policy in force?

Yes____ No____ (b) If so, with what company, and what plan do you have [optional for Direct Mailers]? __________________________________________________ (c) If so, do you intend to replace your current Medicare supplement policy with this policy?

Yes____ No____ (5) Have you had coverage under any other health insurance within the past sixty-three (63) days? (For example, an employer, union, or individual plan)

Yes____ No____ (a) If so, with what company and what kind of policy? ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ (b) What are your dates of coverage under the other policy?

START //__ END //__

(If you are still covered under the other policy, leave “END” blank.)” [end of questions in form]

(2) Agents shall list any other health insurance policies they have sold to the applicant.

(a) List policies sold which are still in force.

(b) List policies sold in the past five (5) years that are no longer in force.

(3) In the case of a direct response issuer, a copy of the application or supplemental form, signed by the applicant, and acknowledged by the insurer, shall be returned to the applicant by the insurer upon delivery of the policy.

(4) Upon determining that a sale will involve replacement of Medicare supplement coverage, any issuer, other than a direct response issuer, or its agent, shall furnish the applicant, prior to issuance or delivery of the Medicare supplement policy or certificate, a notice regarding replacement of Medicare supplement coverage. One (1) copy of the notice signed by the applicant and the agent, except where the coverage is sold without an agent, shall be provided to the applicant and an additional signed copy shall be retained by the issuer. A direct response issuer shall deliver to the applicant at the time of the issuance of the policy the notice regarding replacement of Medicare supplement coverage.

(5) The notice required by Paragraph (4) for an issuer shall be provided in substantially the following form in no less than twelve (12) point type:

NOTICE TO APPLICANT REGARDING REPLACEMENT

OF MEDICARE SUPPLEMENT INSURANCE

OR MEDICARE ADVANTAGE [Insurance company’s name and address]

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE.

According to [your application] [information you have furnished], you intend to terminate existing Medicare supplement or Medicare Advantage insurance and replace it with a policy to be issued by [Company Name] insurance company. Your new policy will provide thirty (30) days within which you may decide without cost whether you desire to keep the policy.

You should review this new coverage carefully. Compare it with all accident and sickness coverage you now have. If, after due consideration, you find that purchase of this Medicare supplement coverage is a wise decision, you should terminate your present Medicare supplement or Medicare Advantage coverage. You should evaluate the need for other accident and sickness coverage you have that may duplicate this policy.

STATEMENT TO APPLICANT BY ISSUER, AGENT [BROKER OR OTHER

REPRESENTATIVE]:

I have reviewed your current medical or health insurance coverage. To the best of my knowledge, this Medicare supplement policy will not duplicate your existing Medicare supplement or, if applicable, Medicare Advantage coverage because you intend to terminate your existing Medicare supplement coverage or leave your Medicare Advantage plan. The replacement policy is being purchased for the following reason (check one (1)): ____ Additional benefits. ____ No change in benefits, but lower premiums. ____ Fewer benefits and lower premiums. ____ My plan has outpatient prescription drug coverage and I am enrolling in Part D. ____ Disenrollment from a Medicare Advantage plan. Please explain reason for disenrollment. [optional only for Direct Mailers. ] ____ Other. (please specify) ________________________________________ 1. Note: If the issuer of the Medicare supplement policy being applied for does not, or is otherwise prohibited from imposing preexisting condition limitations, please skip to statement 2. below. Health conditions that you may presently have (preexisting conditions) may not be immediately or fully covered under the new policy. This could result in denial or delay of a claim for benefits under the new policy, whereas a similar claim might have been payable under your present policy.

2. State law provides that your replacement policy or certificate may not contain new preexisting conditions, waiting periods, elimination periods or probationary periods. The insurer will waive any time periods applicable to preexisting conditions, waiting periods, elimination periods, or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy.

3. If, you still wish to terminate your present policy and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical and health history. Failure to include all material medical information on an application may provide a basis for the company to deny any future claims and to refund your premium as though your policy had never been in force. After the application has been completed and before you sign it, review it carefully to be certain that all information has been properly recorded. [If the policy or certificate is guaranteed issue, this paragraph need not appear.]

Do not cancel your present policy until you have received your new policy and are sure that you want to keep it. ______________________________________________________ (Signature of Agent, Broker or Other Representative)* [Typed Name and Address of Issuer, Agent or Broker] ______________________________________________________ (Applicant’s Signature) _______________________ (Date) *Signature not required for direct response sales.

(6) Paragraphs 1 and 2 of the replacement notice (applicable to preexisting conditions) may be deleted by an issuer if the replacement does not involve application of a new preexisting condition limitation.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. New rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. (Formerly 0780-01-58-.19) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.20 but was renumbered 0780-01-58-.21 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.22 FILING REQUIREMENTS FOR ADVERTISING

An issuer 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 for review or approval to the extent it may be required under state law.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed August 14, 1989; effective September 28, 1989. New rule filed November 26, 1990; effective January 10, 1991. Repealed and new rule filed September 16, 1992; effective November 1, 1992. Amendment filed August 15, 1996; effective October 29, 1996. (Formerly 0780-01-58-.19) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.21 but was renumbered 0780-01-58-.22 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.23 STANDARDS FOR MARKETING

(1) An issuer, directly or through its producers, shall:

(a) Establish marketing procedures to assure that any comparison of policies by its agents or other producers will be fair and accurate.

(b) Establish marketing procedures to assure excessive insurance is not sold or issued.

(c) Display prominently by type, stamp or other appropriate means, on the first page of the policy the following:

“Notice to buyer: This policy may not cover all of your medical expenses.”

(d) Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for Medicare supplement insurance already has accident and sickness insurance and the types and amounts of any such insurance.

(e) Establish auditable procedures for verifying compliance with this Paragraph.

(2) In addition to the practices prohibited in T.C.A. §§ 56-8-101 et seq., the following acts and practices are prohibited:

(a) Twisting. Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert an insurance policy or to take out a policy of insurance with another insurer.

(b) High pressure tactics. Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.

(c) Cold lead advertising. Making use directly or indirectly of any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company.

(3) The terms “Medicare Supplement,” “Medigap,” “Medicare Wrap-Around” and words of similar import shall not be used unless the policy is issued in compliance with this Chapter.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed September 16, 1992; effective November 1, 1992. (Formerly 0780-01-58-.21) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27. 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through March 7, 2010. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.22 but was renumbered 0780-01-58-.23 with the addition of a new rule 0780-01- 58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.24 APPROPRIATENESS OF RECOMMENDED PURCHASE AND EXCESSIVE

INSURANCE.

(1) In recommending the purchase or replacement of any Medicare supplement policy or certificate an agent shall make reasonable efforts to determine the appropriateness of a recommended purchase or replacement.

(2) Any sale of a Medicare supplement policy or certificate that will provide an individual more than one Medicare supplement policy or certificate is prohibited.

(3) An issuer shall not issue a Medicare supplement policy or certificate to an individual enrolled in Medicare Part C unless the effective date of the coverage is after the termination date of the individual’s Part C coverage.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed September 16, 1992; effective November 1, 1992. (Formerly 0780-01-58-.22) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.23 but was renumbered 0780-01-58-.24 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.25 REPORTING OF MULTIPLE POLICIES

(1) On or before March 1 of each year, an issuer shall report the following information for every individual resident of this state for which the issuer has in force more than one Medicare supplement policy or certificate:

(a) Policy and certificate number; and (b) Date of issuance.

(2) The items set forth above must be grouped by individual policyholder.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed September 16, 1992; effective November 1, 1992. (Formerly 0780-01-58-.23) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed (0780-01-58-.25, continued) September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.24 but was renumbered 0780-01-58-.25 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.26 PROHIBITION AGAINST PREEXISTING CONDITIONS, WAITING PERIODS,

ELIMINATION PERIODS, AND PROBATIONARY PERIODS IN REPLACEMENT POLICIES OR

CERTIFICATES.

(1) If a Medicare supplement policy or certificate replaces another Medicare supplement policy or certificate, the replacing issuer shall waive any time periods applicable to preexisting conditions, waiting periods, elimination periods and probationary periods in the new Medicare supplement policy or certificate for similar benefits to the extent such time was spent under the original policy.

(2) If a Medicare supplement policy or certificate replaces another Medicare supplement policy or certificate which has been in effect for at least six (6) months, the replacing policy shall not provide any time period applicable to preexisting conditions, waiting periods, elimination periods and probationary periods for benefits similar to those contained in the original policy or certificate.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Original rule filed September 16, 1992; effective November 1, 1992. (Formerly 0780-01-58-.24) Amendment filed October 25, 1999; effective January 3, 2000. Public necessity rule filed September 1, 2005; effective through February 13, 2006. Public necessity rule filed September 1, 2005; expired on February 13, 2006. On February 14, 2006, reverted to rule in effect on August 31, 2005. Repeal and new rule filed October 13, 2006; effective December 27, 2006. Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.25 but was renumbered 0780-01-58-.26 with the addition of a new rule 0780-01-58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.27 PROHIBITION AGAINST USE OF GENETIC INFORMATION AND REQUESTS FOR

GENETIC TESTING.

This Rule applies to all policies with policy years beginning on or after May 21, 2009.

(1) An issuer of a Medicare supplement policy or certificate:

(a) Shall not deny or condition the issuance or effectiveness of the policy or certificate (including the imposition of any exclusion of benefits under the policy based on a preexisting condition) on the basis of the genetic information with respect to such individual; and (b) Shall not discriminate in the pricing of the policy or certificate, including the adjustment of premium rates, of an individual on the basis of the genetic information with respect to such individual.

(2) Nothing in Paragraph (1) shall be construed to limit the ability of an issuer, to the extent otherwise permitted by law, from:

(a) Denying or conditioning the issuance or effectiveness of the policy or certificate or increasing the premium for a group based on the manifestation of a disease or disorder of an insured or applicant; or (b) Increasing the premium for any policy issued to an individual based on the manifestation of a disease or disorder of an individual who is covered under the policy (in such case, the manifestation of a disease or disorder in one individual cannot also be used as genetic information about other group members and to further increase the premium for the group).

(3) An issuer of a Medicare supplement policy or certificate shall not request or require an individual or a family member of such individual to undergo a genetic test.

(4) Paragraph (3) shall not be construed to preclude an issuer of a Medicare supplement policy or certificate from obtaining and using the results of a genetic test in making a determination regarding payment (as defined for the purposes of applying the regulations promulgated under part C of title XI and Section 264 of the Health Insurance Portability and Accountability Act of 1996, as may be revised from time to time) and consistent with Paragraph (1).

(5) For purposes of carrying out Paragraph (4), an issuer of a Medicare supplement policy or certificate may request only the minimum amount of information necessary to accomplish the intended purpose.

(6) Notwithstanding Paragraph (3), an issuer of a Medicare supplement policy may request, but not require, that an individual or a family member of such individual undergo a genetic test if each of the following conditions is met:

(a) The request is made pursuant to research that complies with part 46 of title 45, Code of Federal Regulations, or equivalent Federal regulations, and any applicable State or local law or regulations for the protection of human subjects in research.

(b) The issuer clearly indicates to each individual, or in the case of a minor child, to the legal guardian of such child, to whom the request is made that:

1. Compliance with the request is voluntary; and 2. Non-compliance will have no effect on enrollment status or premium or contribution amounts.

(c) No genetic information collected or acquired under this Paragraph shall be used for underwriting, determination of eligibility to enroll or maintain enrollment status, premium rates, or the issuance, renewal, or replacement of a policy or certificate.

(d) The issuer notifies the Secretary in writing that the issuer is conducting activities pursuant to the exception provided for under this Paragraph, including a description of the activities conducted.

(e) The issuer complies with such other conditions as the Secretary may by regulation require for activities conducted under this Paragraph.

(7) An issuer of a Medicare supplement policy or certificate shall not request, require, or purchase genetic information for underwriting purposes.

(8) An issuer of a Medicare supplement policy or certificate shall not request, require, or purchase genetic information with respect to any individual prior to such individual’s enrollment under the policy in connection with such enrollment.

(9) If an issuer of a Medicare supplement policy or certificate obtains genetic information incidental to the requesting, requiring, or purchasing of other information concerning any individual, such request, requirement, or purchase shall not be considered a violation of Paragraph (8) if such request, requirement, or purchase is not in violation of Paragraph (7).

(10) For the purposes of this Rule only:

(a) “Issuer of a Medicare supplement policy or certificate” includes a third-party administrator, or other person acting for or on behalf of such issuer.

(b) “Family member” means, with respect to an individual, any other individual who is a first-degree, second-degree, third-degree, or fourth-degree relative of such individual.

(c) “Genetic information” means, with respect to any individual, information about such individual’s genetic tests, the genetic tests of family members of such individual, and the manifestation of a disease or disorder in family members of such individual. Such term includes, with respect to any individual, any request for, or receipt of, genetic services, or participation in clinical research which includes genetic services, by such individual or any family member of such individual. Any reference to genetic information concerning an individual or family member of an individual who is a pregnant woman, includes genetic information of any fetus carried by such pregnant woman, or with respect to an individual or family member utilizing reproductive technology, includes genetic information of any embryo legally held by an individual or family member. The term “genetic information” does not include information about the sex or age of any individual.

(d) “Genetic services” means a genetic test, genetic counseling (including obtaining, interpreting, or assessing genetic information), or genetic education.

(e) “Genetic test” means an analysis of human DNA, RNA, chromosomes, proteins, or metabolites, that detect genotypes, mutations, or chromosomal changes. The term “genetic test” does not mean an analysis of proteins or metabolites that does not detect genotypes, mutations, or chromosomal changes; or an analysis of proteins or metabolites that is directly related to a manifested disease, disorder, or pathological condition that could reasonably be detected by a health care professional with appropriate training and expertise in the field of medicine involved.

(f) “Underwriting purposes” means, 1. Rules for, or determination of, eligibility (including enrollment and continued eligibility) for benefits under the policy;

2. The computation of premium or contribution amounts under the policy;

3. The application of any preexisting condition exclusion under the policy; and 4. Other activities related to the creation, renewal, or replacement of a contract of health insurance or health benefits.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.26 but was renumbered 0780-01-58-.27 with the addition of a new rule 0780-01- 58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.28 SEVERABILITY

If any provision of this Chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the Chapter and the application of such provision to other persons or circumstances shall not be affected thereby.

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.27 but was renumbered 0780-01-58-.28 with the addition of a new rule 0780-01- 58-.12 filed November 20, 2018; effective February 18, 2019. Amendments filed November 20, 2018; effective February 18, 2019.

Tenn. Comp. R. & Regs. 0780-01-58-.29 REPEALED

History

• Authority: T.C.A. §§ 56-1-701; 56-2-301; 56-6-112; 56-6-124(a); 56-7-1401, et seq.; 56-7-1453; 56-7- 1454; 56-7-1455; 56-7-1457; 56-7-1501, et seq.; 56-7-1503; 56-7-1504; 56-7-1505; 56-7-1507; and 56- 32-118(a); Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, (1990); Genetic Information Non Discrimination Act, Pub. L. No. 110-233 (2008); Medicare Improvements for Patients and Providers Act, Pub. L. No. 110-275 (2008); and Medicare Access and CHIP Reauthorization Act, Pub. L. No. 114- 10 (2015).
• Administrative History: Public necessity rule filed June 30, 2009; effective through December 12, 2009. Emergency rule filed December 9, 2009; effective through June 7, 2010. Amendment filed December 3, 2009; effective March 3, 2010. Administrative changes made to the authority of this chapter due to revisions in the 2016 Tennessee Code Annotated. Rule was previously numbered 0780-01-58-.28 but was renumbered 0780-01-58-.29 with the addition of a new rule 0780-01- 58-.12 filed November 20, 2018; effective February 18, 2019. Repeal filed November 20, 2018; effective February 18, 2019. APPENDIX A MEDICARE SUPPLEMENT REFUND CALCULATION FORM FOR CALENDAR YEAR_________________ TYPE _________________________________________ SMSBP _______________________________________ For the State of __________________________________ Company Name _________________________________ NAIC Group Code________________________________ NAIC Company Code_____________________________ Address________________________________________ Person Completing Exhibit _________________________ Title ___________________________________________ Telephone Number ______________________________ Line (a) Earned Premium (b) Incurred Claims 1. Current Year’s Experience a. Total (all policy years) b. Current year’s issues c. Net (for reporting purposes = 1a–1b) 2. Past Years’ Experience (all policy years) 3. Total Experience (Net Current Year + Past Year) 4. Refunds Last Year (Excluding Interest) 5. Previous Since Inception (Excluding Interest) 6. Refunds Since Inception (Excluding Interest) 7. Benchmark Ratio Since Inception (see worksheet for Ratio 1) 8. Experienced Ratio Since Inception (Ratio 2) Total Actual Incurred Claims (line 3, col. b) Total Earned Prem. (line 3, col. a)–Refunds Since Inception (line 6) 9. Life Years Exposed Since Inception If the Experienced Ratio is less than the Benchmark Ratio, and there are more than 500 life years exposure, then proceed to calculation of refund. 10. Tolerance Permitted (obtained from credibility table) Medicare Supplement Credibility Table Life Years Exposed Since Inception Tolerance 10,000 + 0.0% 5,000-9,999 5.0% 2,500-4,999 7.5% 1,000-2,499 10.0% 500-999 15.0% If less than 500, no credibility. _______________________________________________________ 1 Individual, Group, Individual Medicare Select, or Group Medicare Select Only. 2 “SMSBP” = Standardized Medicare Supplement Benefit Plan - Use “P” for pre-standardized plans. 3 Includes Modal Loadings and Fees Charged 4 Excludes Active Life Reserves 5 This is to be used as “Issue Year Earned Premium” for Year 1 of next year’s “Worksheet for Calculation of Benchmark Ratios” MEDICARE SUPPLEMENT REFUND CALCULATION FORM FOR CALENDAR YEAR_________________ TYPE ___________________________________ SMSBP _________________________________ (Rule 0780-01-58 Appendix A, continued) For the State of ____________________________ Company Name ___________________________ NAIC Group Code __________________________ NAIC Company Code _______________________ Address __________________________________ Person Completing Exhibit ___________________ Title _____________________________________ Telephone Number _________________________ 11. Adjustment to Incurred Claims for Credibility Ratio 3 = Ratio 2 + Tolerance If Ratio 3 is more than Benchmark Ratio (Ratio 1), a refund or credit to premium is not required. If Ratio 3 is less than the Benchmark Ratio, then proceed. 12. Adjusted Incurred Claims [Total Earned Premiums (line 3, col. a)–Refunds Since Inception (line 6)] x Ratio 3 (line 11) 13. Refund = Total Earned Premiums (line 3, col. a)–Refunds Since Inception (line 6) –[Adjusted Incurred Claims (line 12)/Benchmark Ratio (Ratio 1)] If the amount on line 13 is less than .005 times the annualized premium in force as of December 31 of the reporting year, then no refund is made. Otherwise, the amount on line 13 is to be refunded or credited, and a description of the refund or credit against premiums to be used must be attached to this form. I certify that the above information and calculations are true and accurate to the best of my knowledge and belief. _______________________________________ Signature _______________________________________ Name - Please Type _______________________________________ Title - Please Type _______________________________________ Date (Rule 0780-01-58 Appendix A, continued) REPORTING FORM FOR THE CALCULATION OF BENCHMARK RATIO SINCE INCEPTION FOR GROUP POLICIES FOR CALENDAR YEAR____________________ TYPE¹ _______________________________________________ SMSBP² _____________________________________________ For the State of ________________________________________ Company Name ______________________________________ NAIC Group Code _____________________________________ NAIC Company Code __________________________________ Address _____________________________________________ Person Completing Exhibit ______________________________ Title _________________________________________________ Telephone Number ____________________________________ (a)³ (b) (c) (d) (e) (f) (g) (h) (i) (j) (o) Earned Cumulative Cumulativ e Policy Year Year Premium Factor (b)x(c) Loss Ratio (d)x(e) Factor (b)x(g) Loss Ratio (h)x(i) Loss Ratio 1 2.770 0.507 0.000 0.000 0.46 2 4.175 0.567 0.000 0.000 0.63 3 4.175 0.567 1.194 0.759 0.75 4 4.175 0.567 2.245 0.771 0.77 5 4.175 0.567 3.170 0.782 0.80 6 4.175 0.567 3.998 0.792 0.82 7 4.175 0.567 4.754 0.802 0.84 8 4.175 0.567 5.445 0.811 0.87 9 4.175 0.567 6.075 0.818 0.88 10 4.175 0.567 6.650 0.824 0.88 11 4.175 0.567 7.176 0.828 0.88 12 4.175 0.567 7.655 0.831 0.88 13 4.175 0.567 8.093 0.834 0.89 14 4.175 0.567 8.493 0.837 0.89 15+ 4.175 0.567 8.684 0.838 0.89 Total: (k): (l): (m): (n): Benchmark Ratio Since Inception: (l + n)/(k + m): __________ Individual, Group, Individual Medicare Select, or Group Medicare Select Only. “SMSBP” = Standardized Medicare Supplement Benefit Plan - Use “P” for pre-standardized plans Year 1 is the current calendar year - 1. Year 2 is the current calendar year - 2 (etc.) (Example: If the current year is 1991, then: Year 1 is 1990; Year 2 is 1989, etc.) For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year. These loss ratios are not explicitly used in computing the benchmark loss ratios. They are the loss ratios, on a policy year basis, which result in the cumulative loss ratios displayed on this worksheet. They are shown here for informational purposes only. To include the earned premium for all years prior to as well as the 15 th year prior to the current year. (Rule 0780-01-58 Appendix A, continued) REPORTING FORM FOR THE CALCULATION OF BENCHMARK RATIO SINCE INCEPTION FOR INDIVIDUAL POLICIES FOR CALENDAR YEAR____________________ TYPE¹ _______________________________________________ SMSBP² _____________________________________________ For the State of ________________________________________ Company Name ______________________________________ NAIC Group Code _____________________________________ NAIC Company Code __________________________________ Address _____________________________________________ Person Completing Exhibit ______________________________ Title _________________________________________________ Telephone Number ____________________________________ (a)³ (b) (c) (d) (e) (f) (g) (h) (i) (j) (o) Earned Cumulative Cumulative Policy Year Year Premiu m Factor (b)x(c) Loss Ratio (d)x(e) Factor (b)x(g) Loss Ratio (h)x(i) Loss Ratio 1 2.770 0.442 0.000 0.000 0.40 2 4.175 0.493 0.000 0.000 0.55 3 4.175 0.493 1.194 0.659 0.65 4 4.175 0.493 2.245 0.669 0.67 5 4.175 0.493 3.170 0.678 0.69 6 4.175 0.493 3.998 0.686 0.71 7 4.175 0.493 4.754 0.695 0.73 8 4.175 0.493 5.445 0.702 0.75 9 4.175 0.493 6.075 0.708 0.76 10 4.175 0.493 6.650 0.713 0.76 11 4.175 0.493 7.176 0.717 0.76 12 4.175 0.493 7.655 0.720 0.77 13 4.175 0.493 8.093 0.723 0.77 14 4.175 0.493 8.493 0.725 0.77 15+ 4.175 0.493 8.684 0.725 0.77 Total: (k): (l): (m): (n): Benchmark Ratio Since Inception: (l + n)/(k + m): __________ Individual, Group, Individual Medicare Select, or Group Medicare Select Only. “SMSBP” = Standardized Medicare Supplement Benefit Plan - Use “P” for pre-standardized plans Year 1 is the current calendar year - 1. Year 2 is the current calendar year - 2 (etc.) (Example: If the current year is 1991, then: Year 1 is 1990; Year 2 is 1989, etc.) For the calendar year on the appropriate line in column (a), the premium earned during that year for policies issued in that year. These loss ratios are not explicitly used in computing the benchmark loss ratios. They are the loss ratios, on a policy year basis, which result in the cumulative loss ratios displayed on this worksheet. They are shown here for informational purposes only. To include the earned premium for all years prior to as well as the 15 th year prior to the current year. APPENDIX B FORM FOR REPORTING MEDICARE SUPPLEMENT POLICIES Company Name: ______________________________ Address: ______________________________ ______________________________ Phone Number: ______________________________ Due March 1, annually The purpose of this form is to report the following information on each resident of this state who has in force more than one Medicare supplement policy or certificate. The information is to be grouped by individual policyholder. Policy and Date of Certificate # Issuance ___________________________________ Signature ___________________________________ Name and Title (please type) ___________________________________ Date APPENDIX C DISCLOSURE STATEMENTS Instructions for Use of the Disclosure Statements for Health Insurance Policies Sold to Medicare Beneficiaries that Duplicate Medicare 1. Section 1882(d) of the federal Social Security Act [42 U.S.C. § 1395ss] prohibits the sale of a health insurance policy (the term policy includes certificate) to Medicare beneficiaries that duplicates Medicare benefits unless it will pay benefits without regard to a beneficiary’s other health coverage and it includes the prescribed disclosure statement on or together with the application for the policy. 2. All types of health insurance policies that duplicate Medicare shall include one of the attached disclosure statements, according to the particular policy type involved, on the application or together with the application. The disclosure statement may not vary from the attached statements in terms of language or format (type size, type proportional spacing, bold character, line spacing, and usage of boxes around text). 3. State and federal law prohibits insurers from selling a Medicare supplement policy to a person that already has a Medicare supplement policy except as a replacement policy. 4. Property/casualty and life insurance policies are not considered health insurance. 5. Disability income policies are not considered to provide benefits that duplicate Medicare. 6. Long-term care insurance policies that coordinate with Medicare and other health insurance are not considered to provide benefits that duplicate Medicare. 7. The federal law does not preempt state laws that are more stringent than the federal requirements. 8. The federal law does not preempt existing state form filing requirements. 9. Section 1882 of the federal Social Security Act was amended in Subsection(d)(3)(A) to allow for alternative disclosure statements. The disclosure statements already in Appendix C remain. Carriers may use either disclosure statement with the requisite insurance product. However, carriers should use either the original disclosure statements or the alternative disclosure statements and not use both simultaneously. (Rule 0780-01-58 Appendix C, continued) [Original disclosure statement for policies that provide benefits for expenses incurred for an accidental injury only.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS This is not Medicare Supplement Insurance This insurance provides limited benefits, if you meet the policy conditions, for hospital or medical expenses that result from accidental injury. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. This insurance duplicates Medicare benefits when it pays: • hospital or medical expenses up to the maximum stated in the policy Medicare generally pays for most or all of these expenses. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. Before You Buy This Insurance (Rule 0780-01-58 Appendix C, continued) [Original disclosure statement for policies that provide benefits for specified limited services.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS This is not Medicare Supplement Insurance This insurance provides limited benefits, if you meet the policy conditions, for expenses relating to the specific services listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. This insurance duplicates Medicare benefits when: • any of the services covered by the policy are also covered by Medicare Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services Before You Buy This Insurance √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. (Rule 0780-01-58 Appendix C, continued) [Original disclosure statement for policies that reimburse expenses incurred for specified diseases or other specified impairments. This includes expense-incurred cancer, specified disease and other types of health insurance policies that limit reimbursement to named medical conditions.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS This is not Medicare Supplement Insurance This insurance provides limited benefits, if you meet the policy conditions, for hospital or medical expenses only when you are treated for one of the specific diseases or health conditions listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. This insurance duplicates Medicare benefits when it pays: • hospital or medical expenses up to the maximum stated in the policy Medicare generally pays for most or all of these expenses. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. Before You Buy This Insurance (Rule 0780-01-58 Appendix C, continued) [Original disclosure statement for policies that pay fixed dollar amounts for specified diseases or other specified impairments. This includes cancer, specified disease, and other health insurance policies that pay a scheduled benefit or specific payment based on diagnosis of the conditions named in the policy.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS This is not Medicare Supplement Insurance This insurance pays a fixed amount, regardless of your expenses, if you meet the policy conditions, for one of the specific diseases or health conditions named in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. This insurance duplicates Medicare benefits because Medicare generally pays for most of the expenses for the diagnosis and treatment of the specific conditions or diagnoses named in the policy. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. Before You Buy This Insurance (Rule 0780-01-58 Appendix C, continued) [Original disclosure statement for indemnity policies and other policies that pay a fixed dollar amount per day, excluding long-term care policies.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS This is not Medicare Supplement Insurance This insurance pays a fixed dollar amount, regardless of your expenses, for each day you meet the policy conditions. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. This insurance duplicates Medicare benefits when: • any expenses or services covered by the policy are also covered by Medicare Medicare generally pays for most or all of these expenses. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • [outpatient prescription drugs if you are enrolled in Medicare Part D] • hospice • other approved items and services √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. Before You Buy This Insurance (Rule 0780-01-58 Appendix C, continued) [Original disclosure statement for policies that provide benefits upon both an expense-incurred and fixed indemnity basis.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS This is not Medicare Supplement Insurance This insurance pays limited reimbursement for expenses if you meet the conditions listed in the policy. It also pays a fixed amount, regardless of your expenses, if you meet other policy conditions. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. This insurance duplicates Medicare benefits when: • any expenses or services covered by the policy are also covered by Medicare; or • it pays the fixed dollar amount stated in the policy and Medicare covers the same event Medicare generally pays for most or all of these expenses. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • hospice care • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items & services √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. Before You Buy This Insurance (Rule 0780-01-58 Appendix C, continued) [Original disclosure statement for other health insurance policies not specifically identified in the preceding statements.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS INSURANCE DUPLICATES SOME MEDICARE BENEFITS This is not Medicare Supplement Insurance This insurance provides limited benefits if you meet the conditions listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. This insurance duplicates Medicare benefits when it pays: • the benefits stated in the policy and coverage for the same event is provided by Medicare Medicare generally pays for most or all of these expenses. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. Before You Buy This Insurance (Rule 0780-01-58 Appendix C, continued) [Alternative disclosure statement for policies that provide benefits for expenses incurred for an accidental injury only.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS IS NOT MEDICARE SUPPLEMENT INSURANCE Some health care services paid for by Medicare may also trigger the payment of benefits from this policy. This insurance provides limited benefits, if you meet the policy conditions, for hospital or medical expenses that result from accidental injury. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. Medicare generally pays for most or all of these expenses. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or other insurance. Before You Buy This Insurance √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005 (Rule 0780-01-58 Appendix C, continued) [Alternative disclosure statement for policies that provide benefits for specified limited services.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS IS NOT MEDICARE SUPPLEMENT INSURANCE Some health care services paid for by Medicare may also trigger the payment of benefits under this policy. This insurance provides limited benefits, if you meet the policy conditions, for expenses relating to the specific services listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or other insurance. Before You Buy This Insurance √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. (Rule 0780-01-58 Appendix C, continued) [Alternative disclosure statement for policies that reimburse expenses incurred for specified diseases or other specified impairments. This includes expense-incurred cancer, specified disease and other types of health insurance policies that limit reimbursement to named medical conditions.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS IS NOT MEDICARE SUPPLEMENT INSURANCE Some health care services paid for by Medicare may also trigger the payment of benefits from this policy. Medicare generally pays for most or all of these expenses. This insurance provides limited benefits, if you meet the policy conditions, for hospital or medical expenses only when you are treated for one of the specific diseases or health conditions listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. Medicare generally pays for most or all of these expenses. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or other insurance. Before You Buy This Insurance √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. (Rule 0780-01-58 Appendix C, continued) [Alternative disclosure statement for policies that pay fixed dollar amounts for specified diseases or other specified impairments. This includes cancer, specified disease, and other health insurance policies that pay a scheduled benefit or specific payment based on diagnosis of the conditions named in the policy.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS IS NOT MEDICARE SUPPLEMENT INSURANCE Some health care services paid for by Medicare may also trigger the payment of benefits from this policy. This insurance pays a fixed amount, regardless of your expenses, if you meet the policy conditions, for one of the specific diseases or health conditions named in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or other insurance. √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. Before You Buy This Insurance (Rule 0780-01-58 Appendix C, continued) [Alternative disclosure statement for indemnity policies and other policies that pay a fixed dollar amount per day, excluding long-term care policies.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS IS NOT MEDICARE SUPPLEMENT INSURANCE Some health care services paid for by Medicare may also trigger the payment of benefits from this policy. This insurance pays a fixed dollar amount, regardless of your expenses, for each day you meet the policy conditions. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. Medicare generally pays for most or all of these expenses. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or other insurance. √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. Before You Buy This Insurance (Rule 0780-01-58 Appendix C, continued) [Alternative disclosure statement for policies that provide benefits upon both an expense-incurred and fixed indemnity basis.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS IS NOT MEDICARE SUPPLEMENT INSURANCE Some health care services paid for by Medicare may also trigger the payment of benefits from this policy. This insurance pays limited reimbursement for expenses if you meet the conditions listed in the policy. It also pays a fixed amount, regardless of your expenses, if you meet other policy conditions. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. Medicare generally pays for most or all of these expenses. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • hospice care • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items & services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or other insurance. √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. Before You Buy This Insurance (Rule 0780-01-58 Appendix C, continued) [Alternative disclosure statement for other health insurance policies not specifically identified in the preceding statements.] IMPORTANT NOTICE TO PERSONS ON MEDICARE THIS IS NOT MEDICARE SUPPLEMENT INSURANCE Some health care services paid for by Medicare may also trigger the payment of benefits from this policy. This insurance provides limited benefits if you meet the conditions listed in the policy. It does not pay your Medicare deductibles or coinsurance and is not a substitute for Medicare Supplement insurance. Medicare generally pays for most or all of these expenses. Medicare pays extensive benefits for medically necessary services regardless of the reason you need them. These include: • hospitalization • physician services • hospice • [outpatient prescription drugs if you are enrolled in Medicare Part D] • other approved items and services This policy must pay benefits without regard to other health benefit coverage to which you may be entitled under Medicare or other insurance. √ Check the coverage in all health insurance policies you already have. √ For more information about Medicare and Medicare Supplement insurance, review the Guide to Health Insurance for People with Medicare, available from the insurance company. √ For help in understanding your health insurance, contact your state insurance department or your state [health] insurance [assistance] program [SHIP]. Drafting Note: Insurers insert reference to: outpatient prescription drugs and state health insurance assistance program (SHIP) above when new notices need to be printed after December 31, 2005. Before You Buy This Insurance

Chapter 0780-01-59 Aftermarket Crash Parts Regulation

Tenn. Comp. R. & Regs. 0780-01-59-.01 PURPOSE

The purpose of this Chapter is to regulate the use of aftermarket crash parts by requiring disclosure when any use is proposed of an aftermarket, non-original equipment manufacturer’s crash part, and by requiring that the manufacturers of such aftermarket crash parts be identified.

History

• Authority: T.C.A. §§56-2-301, 56-8-104(8) and 56-8-113.
• Administrative History: Original rule filed August 4, 1989; effective September 18, 1989. Repeal and new rule filed April 28, 2005; effective July 12, 2005.

Tenn. Comp. R. & Regs. 0780-01-59-.02 DEFINITIONS

The following words and terms, when used in this Chapter, shall have, unless the context clearly indicates otherwise, the following meanings:

(1) “Aftermarket crash part” means a replacement for any of the non-mechanical sheet metal or plastic parts which generally constitute the exterior of a motor vehicle, including inner and outer panels not made for or by the manufacturer of the motor vehicle.

(2) “Insurer” includes an insurance company and any person authorized to represent the insurer with respect to a claim.

(3) “Non-OEM” means aftermarket crash parts not made for or by the manufacturer of the motor vehicle.

History

• Authority: T.C.A. §§56-2-301, 56-8-104(8) and 56-8-113.
• Administrative History: Original rule filed August 4, 1989; effective September 18, 1989. Repeal and new rule filed April 28, 2005; effective July 12, 2005.

Tenn. Comp. R. & Regs. 0780-01-59-.03 IDENTIFICATION

Any aftermarket crash part specified by an insurer for use in the repair of an insured’s or a third party claimant’s motor vehicle, supplied by a non-original equipment manufacturer for use in this State after the effective date of this

regulation shall have affixed thereto or inscribed thereon the logo or name of its manufacturer. Such manufacturer’s logo or name shall be visible after installation whenever practicable.

History

• Authority: T.C.A. §§56-2-301, 56-8-104(8) and 56-8-113.
• Administrative History: Original rule filed August 4, 1989; effective September 18, 1989. Repeal and new rule filed April 28, 2005; effective July 12, 2005.

Tenn. Comp. R. & Regs. 0780-01-59-.04 DISCLOSURE

(1) No insurer shall specify directly or indirectly the use of non-OEM aftermarket crash parts in the repair of an insured’s or third party claimant’s motor vehicle without disclosing the intended use of such parts to the insured or third party claimant. In all instances where non-OEM aftermarket crash parts are intended for use by an insurer:

(a) The written estimate shall clearly identify each such part.

(b) A disclosure document containing the following information in no smaller print than ten (10) point type or larger type shall appear on or be attached to the insured’ s or third party claimant’s copy of the estimate: “This estimate has been prepared based on the use of one or more crash parts supplied by a source other than the manufacturer of your motor vehicle. Warranties applicable to these replacement parts are provided by the parts manufacturer or distributor rather than by the manufacturer of your vehicle.”

(2) Non-OEM after market crash parts shall not be used on current year model or immediate prior year model motor vehicles without the express permission of the insured or third party claimant.

History

• Authority: T.C.A. §§56-2-301, 56-8-104(8) and 56-8-113.
• Administrative History: Original rule filed August 4, 1989; effective September 18, 1989. Amendment filed August 13, 1999; effective October 27, 1999. Repeal and new rule filed April 28, 2005; effective July 12, 2005.

Tenn. Comp. R. & Regs. 0780-01-59-.05 ENFORCEMENT

Violations of this regulation shall be enforced through the Unfair Claim Settlement Practices Act, T.C.A. § 56-8- 104(8), as provided in T.C.A. §§ 56-8-107 through 56-8-112.

History

• Authority: T.C.A. §§ 56-2-301, 56-8-104(8) and 56-8-113.
• Administrative History: Original rule filed August 4, 1989; effective September 18, 1989. Repeal and new rule filed April 28, 2005; effective July 12, 2005.

Tenn. Comp. R. & Regs. 0780-01-59-.06 SEVERABILITY

If any section or portion of a section of this regulation or the applicability thereof to any person or circumstance, is held invalid by a court, the remainder of this regulation, or the applicability of such provision with a person shall not be affected thereby.

History

• Authority: T.C.A. §§56-2-301, 56-8-104(8) and 56-8-113.
• Administrative History: Original rule filed August 4, 1989; effective September 18, 1989. Repeal and new rule filed April 28, 2005; effective July 12, 2005.

Chapter 0780-01-60 Legal Insurance

Tenn. Comp. R. & Regs. 0780-01-60-.01 PURPOSE

The purpose of this Chapter is to implement the provisions of T.C.A., Title 56, Chapter 43, known as the ‘‘Tennessee Legal Insurance Act.’’

History

• Authority: T.C.A. §§56—2—301 and 56—43—112.
• Administrative History: Original rule filed March 6, 1991; effective April 20, 1991.

Tenn. Comp. R. & Regs. 0780-01-60-.02 APPLICABILITY AND SCOPE

Theses rules shall apply to all persons, other than authorized insurers, attempting to engage in the business of legal insurance in this state. Any authorized insurer which elects to obtain a certificate of

authority pursuant to T.C.A. §56—43—105 shall also be governed by this chapter.

History

• Authority: T.C.A. §§56—2—301 and 56—43—112. Authority: Original rule filed March 6, 1991; effective April 20, 1991.

Tenn. Comp. R. & Regs. 0780-01-60-.03 DEFINITIONS

(1)Act means the Tennessee Legal Insurance Act as codified in T.C.A. §56—43—101 et seq., including any subsequent amendment.

(2)Authorized Insurer means any insurer licensed pursuant to the general insurance laws of the State of Tennessee, as codified in Title 56, T.C.A., other than insurers licensed pursuant to Title 56, Chapter 43.

(3)Certificate of Authority means an authorization issued by the commissioner pursuant to Title 56, Chapter 43, to sell legal insurance.

History

• Authority: T.C.A. §§56—2—301 and 56—43—112.
• Administrative History: Original rule filed March 6, 1991; effective April 20, 1991.

Tenn. Comp. R. & Regs. 0780-01-60-.04 APPLICATIONS

(1)Each application for a certificate of authority shall be verified by an officer or authorized representative of the applicant and shall set forth or be accompanied by the following:

(a)A review of application fee in the sum of five hundred dollars ($500);

(b)A properly certified copy of the corporation charter;

(c)A properly certified copy of the corporation by-laws;

(d)A plan of operation;

(e)All agreements with attorneys for the provision of legal services;

(f)Any agreement with another person authorized under this chapter, an insurer licensed under the general insurance law to do business in this state to provide reinsurance, or an agency of the federal or state government for insuring payment of the cost of legal services or the provision for automatic applicability of an alternative coverage in the event the insurer is unable to perform its obligations;

(g)A deposit meeting the requirements of Rule 0780—1—60—.05(1)(d):

(h)A statement of its financial condition and business on December 31 of the year preceding the date on which it shall apply for permission to transact business, in such form and detail as the commissioner may require, signed and sworn to by its president and secretary, or other proper officers;

(i)If a foreign corporation, a certified statement of the secretary of state to the effect that its name complies with the requirements of Title 48, Chapter 14 or Title 48, Chapter 54 as applicable;

(j)If a foreign corporation and if licensed as an insurer in the state of domicile, a certificate of good standing from its state of domicile;

(k)A duly executed power of attorney appointing the commissioner and duly authorized deputies as the true and lawful attorneys of the applicant in and for the state, upon whom all lawful process in any legal action or proceeding against the applicant on a cause of action arising in this state may be served;

(l)A filing fee in the sum of one hundred dollars ($100);

(m)Such other information as the commissioner may require in order to make the determination required in T.C.A. §56—43—105.

(2)No person shall be qualified or authorized to do business under the Act until the commissioner has determined that:

(a)The person’s plan of operation is sound;

(b)The incorporaters, directors and proposed officers are of known good character and there is no good reason to believe that they are affiliated, directly or indirectly, through ownership, control, management, reinsurance transactions or other insurance or business relations with any person or persons known to have been involved in the improper manipulation of assets, accounts, reinsurance, or any matter inimical to the business of insurance;

(c)The person is fully and legally organized under the laws of the state of its incorporation;

(d)The person demonstrates the willingness and ability to assure that the promised benefits can be provided.

History

• Authority: T.C.A. §§56—2—301, 56—4—101, 56—43—104, 56—43—105, 56—43—112 and 56—43—115.
• Administrative History: Original rule filed March 6, 1991; effective April 20, 1991.

Tenn. Comp. R. & Regs. 0780-01-60-.05 FINANCIAL REQUIREMENTS

(1)An insurer shall meet the following requirements to become licensed under this Act:

(a)An insurer shall, at all times, maintain capital of at least $100,000.

(b)In addition to the requirement of paragraph (a) above each insurer shall have and maintain surplus of at least one-third (1/3) of gross premium;

(c)Any person transacting the business of legal insurance on January 1, 1990 shall meet the surplus requirements of subpart (b) supra by December 31, 1991.

(d)Each insurer licensed under this act shall satisfy the commissioner that it has and shall maintain on deposit with the state treasurer at least $100,000 in cash or its equivalent; but the commissioner may, in his discretion, accept as an equivalent bonds of the United States, or any agency or instrumentality of the United States which have been included in the three highest grades by any of the recognized securities rating firms, bonds of this state, bonds of the state of domicile, or bonds publicly issued by any solvent institution created or existing under the laws of the United States or any state thereof which have been included in the three highest grades by any of the recognized securities rating firms. Notwithstanding the foregoing, the commissioner may decline to accept as a deposit any specific issue of securities that he has determined may not provide the necessary protection to policyholders and creditors in the United States. This deposit shall be an admitted asset on the financial statement of the plan.

(e)An insurer must maintain at all times proper reserves for unearned subscription fees and unearned premiums, and for unpaid attorney service fees, including provision for unreported and undischarged legal cases and other known liabilities. To receive credit for reinsurance of reserve requirements under the Act, the assuming insurer must meet the requirements set forth in T.C.A. §56—2—207 through 56—2—209.

(2)The statutory accounting method shall be used in computing the minimum requirements under the Act and in all evaluations of the financial condition of insurers.

History

• Authority: T.C.A. §§56—2—301, 56—43—109, 56—43—112 and 56—43—115.
• Administrative History: Original rule filed March 6, 1991; effective April 20, 1991.

Tenn. Comp. R. & Regs. 0780-01-60-.06 INVESTMENTS

All assets of the plan shall be invested pursuant to T.C.A. §56—3—301 et seq. and any assets not qualifying under those sections shall not be admitted and will not be used in the computation of capital and surplus as required by Rule 0780—1—60—.05.

History

• Authority: T.C.A. §§56—2—301, 56—43—110 and 56—43—112.
• Administrative History: Original rule filed March 6, 1991; effective April 20, 1991.

Tenn. Comp. R. & Regs. 0780-01-60-.07 LICENSING OF AGENTS

No person within this state shall sell or solicit legal insurance under the Act unless properly licensed as a limited insurance representative in accordance with T.C.A. §56—6—131 et seq.

History

• Authority: T.C.A. §§56—2—301, 56—6—138 and 56—43—112.
• Administrative History: Original rule filed March 6, 1991; effective April 20, 1991.

Tenn. Comp. R. & Regs. 0780-01-60-.08 PENALTIES

(1)Premium taxes required by T.C.A. §56—43—116 are due and payable on or before March 1, annually. Failure to file the required return and pay taxes due promptly and correctly shall subject the insurer to the penalties set out in T.C.A. §56—4—216.

(2)Failure to file the annual report prescribed by the commissioner on or before March 1, shall subject the insurer to the penalties set out in T.C.A. §56—1—502.

History

• Authority: T.C.A. §§56—2—301, 56—43—112 and 56—43—118.
• Administrative History: Original rule filed March 6, 1991; effective April 20, 1991.

Chapter 0780-01-61 Long-Term Care Insurance

Tenn. Comp. R. & Regs. 0780-01-61-.01 PURPOSE

The purpose of these rules is to implement T.C.A. §§ 56-42-101, et seq., to promote the public interest, to promote the availability of long-term care insurance coverage, to protect applicants for long-term care insurance from unfair or deceptive sales or enrollment practices, to facilitate public understanding and comparison of long-term care insurance coverages, and to facilitate flexibility and innovation in the development of long-term care insurance.

History

• Authority: T.C.A. §§ 56-42-102 and 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.02 AUTHORITY

These rules are issued pursuant to the authority vested in the Commissioner under T.C.A. §§ 56-42-101, et seq.

History

• Authority: T.C.A. §§ 56-42-102 and 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.03 APPLICABILITY AND SCOPE

(1) Except as otherwise specifically provided, this rule applies to all long-term care insurance policies, including qualified long-term care contracts and life insurance policies that accelerate benefits for long-term care, delivered or issued for delivery in this state on or after the effective date of these rules by insurers; fraternal benefit societies; nonprofit health, hospital and medical service corporations; prepaid health plans; health maintenance organizations and all similar organizations. Certain provisions of this rule apply only to qualified long-term care insurance contracts as noted.

(2) Additionally, this rule is intended to apply to policies having indemnity benefits that are triggered by activities of daily living and sold as disability income insurance, if:

(a) The benefits of the disability income policy are dependent upon or vary in amount based on the receipt of long-term care services;

(b) The disability income policy is advertised, marketed or offered as insurance for longterm care services; or (c) Benefits under the policy may commence after the policyholder has reached Social Security’s normal retirement age unless benefits are designed to replace lost income or pay for specific expenses other than long-term care services.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.04 DEFINITIONS

(1) In the event the definitions in these rules and T.C.A. §§ 56-42-101, et seq., conflict, the definitions in the statute control.

(2) “Applicant” means:

(a) In the case of an individual long-term care insurance policy, the person who seeks to contract for benefits; and (b) In the case of a group long-term care insurance policy, the proposed certificate holder.

(3) “Certificate” means any certificate issued under a group long-term care insurance policy, which policy has been delivered or issued for delivery in this state.

(4) “Commissioner” means the commissioner of commerce and insurance.

(5) (a) “Exceptional increase” means only those increases filed by an insurer as exceptional for which the Commissioner determines the need for the premium rate increase is justified:

1. Due to changes in laws or regulations applicable to long-term care coverage in this state; or 2. Due to increased and unexpected utilization that affects the majority of insurers of similar products.

(b) Except as provided in Rule 0780-1-61-.20, exceptional increases are subject to the same requirements as other premium rate schedule increases.

(c) The Commissioner may request a review by an independent actuary or a professional actuarial body of the basis for a request that an increase be considered an exceptional increase.

(d) The Commissioner, in determining that the necessary basis for an exceptional increase exists, shall also determine any potential offsets to higher claims costs.

(6) “Group long-term care insurance” means a long-term care insurance policy which is delivered or issued for delivery in this state and issued to:

(a) One (1) or more employers or labor organizations, or to a trust or to the trustees of a fund established by one (1) 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 such association:

1. Is composed of individuals all of whom are or were actively engaged in the same profession, trade or occupation; and 2. Has been maintained in good faith for purposes other than obtaining insurance;

(c) 1. An association or a trust or the trustee or trustees of a fund established, created or maintained for the benefit of members of one (1) or more associations. Prior to advertising, marketing or offering such 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 one hundred (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 (1) year; and have a constitution and bylaws which provide that:

(i) The association or associations hold regular meetings not less than annually to further purposes of the members;

(ii) Except for credit unions, the association or associations collect dues or solicit contributions from members; and (iii) The members have voting privileges and representation on the governing board and committees;

2. Thirty (30) days after such filing, the association or associations will be deemed to satisfy such organizational requirements, unless the Commissioner makes a finding that the association or associations do not satisfy those organizational requirements; or (d) A group other than as described in Paragraphs (5)(a) through (5)(c) of this rule, subject to a finding by the Commissioner that:

3. The issuance of the group policy is not contrary to the best interest of the public;

4. The issuance of the group policy would result in economies of acquisition or administration; and 3. The benefits are reasonable in relation to the premiums charged.

(7) “Incidental,” as used in Rule 0780-1-61-.20(10), means that the value of the long-term care benefits provided is less than ten percent (10%) of the total value of the benefits provided over the life of the policy. These values shall be measured as of the date of issue.

(8) “Long-term care insurance” means any insurance policy or rider advertised, marketed, offered or designed to provide coverage for not less than twelve (12) consecutive months for each covered person on an expense incurred, indemnity, prepaid or other basis, for one (1) 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. “Long-term care insurance” includes group and individual policies or riders whether issued by insurers, fraternal benefit societies, nonprofit health, hospital, and medical service corporations, prepaid health plans, health maintenance organizations or any similar organization. “Long-term care insurance” does 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 protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage.

(9) “Policy” means 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.

(10) “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 (6) months preceding the effective date of coverage of an insured person.

(11) “Qualified actuary” means a member in good standing of the American Academy of Actuaries.

(12) (a) “Qualified long-term care insurance contract” or “federally tax-qualified long-term care insurance contract” means 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:

1. 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.

2. 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 deductible 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.

3. The contract is guaranteed renewable, within the meaning of Section 7702B(b)(1)(C) of the Internal Revenue Code of 1986, as amended.

4. 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 Paragraph (12)(a)5. of this rule.

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.

6. 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” 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.

(13) “Similar policy forms” means all of the long-term care insurance policies and certificates issued by an insurer in the same long-term care benefit classification as the policy form being considered. Certificates of groups that meet the definition in this rule are not considered similar to certificates or policies otherwise issued as long-term care insurance, but are similar to other comparable certificates with the same long-term care benefit classifications. For purposes of determining similar policy forms, long-term care benefit classifications are defined as follows: institutional long-term care benefits only, non-institutional long-term care benefits only, or comprehensive long-term care benefits.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.05 POLICY DEFINITIONS

(1) No long-term care insurance policy delivered or issued for delivery in this state shall use the terms set forth below, unless the terms are defined in the policy and the definitions satisfy the following requirements:

(a) “Activities of daily living” means at least bathing, continence, dressing, eating, toileting and transferring.

(b) “Acute condition” means that the individual is medically unstable. Such an individual requires frequent monitoring by medical professionals, such as physicians and registered nurses, in order to maintain his or her health status.

(c) “Adult day care” means a program for six (6) or more individuals, of social and healthrelated services provided during the day in a community group setting for the purpose of supporting frail, impaired elderly or other disabled adults who can benefit from care in a group setting outside the home.

(d) “Bathing” means washing oneself by sponge bath; or in either a tub or shower, including the task of getting into or out of the tub or shower.

(e) “Cognitive impairment” means a deficiency in a person’s short or long-term memory, orientation as to person, place and time, deductive or abstract reasoning, or judgment as it relates to safety awareness.

(f) “Continence” means the ability to maintain control of bowel and bladder function; or, when unable to maintain control of bowel or bladder function, the ability to perform associated personal hygiene (including caring for catheter or colostomy bag).

(g) “Dressing” means putting on and taking off all items of clothing and any necessary braces, fasteners or artificial limbs.

(h) “Eating” means feeding oneself by getting food into the body from a receptacle (such as a plate, cup or table) or by a feeding tube or intravenously.

(i) “Hands-on assistance” means physical assistance (minimal, moderate or maximal) without which the individual would not be able to perform the activity of daily living.

(j) “Home health care services” means medical and non-medical services, provided to ill, disabled or infirm persons in their residences. Such services may include homemaker services, assistance with activities of daily living and respite care services.

(k) “Medicare” means The Health Insurance for the Aged Act, Title XVIII of the Social Security Amendments of 1965 as Then Constituted or Later Amended, or Title I, Part I of Public Law 89-97, as Enacted by the Eighty-Ninth Congress of the United States of America and popularly known as the Health Insurance for the Aged Act, as then constituted and any later amendments or substitutes thereof, or words of similar import.

(l) “Mental or nervous disorder” shall not be defined to include more than neurosis, psychoneurosis, psychopathy, psychosis, or mental or emotional disease or disorder.

(m) “Personal care” means the provision of hands-on services to assist an individual with activities of daily living.

(n) “Skilled nursing care,” “intermediate care,” “personal care,” “home care” and other services shall be defined in relation to the level of skill required, the nature of the care and the setting in which care must be delivered.

(o) “Toileting” means getting to and from the toilet, getting on and off the toilet, and performing associated personal hygiene.

(p) “Transferring” means moving into or out of a bed, chair or wheelchair.

(q) All providers of services, including but not limited to “skilled nursing facility,” “extended care facility,” “intermediate care facility,” “convalescent nursing home,” “personal care facility,” and “home care agency” shall be defined in relation to the services and facilities required to be available and the licensure or degree status of those providing or supervising the services. The definition may require that the provider be appropriately licensed or certified.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.06 POLICY PRACTICES AND PROVISIONS

(1) Renewability. The terms “guaranteed renewable” and “non-cancelable” shall not be used in any individual long-term care insurance policy without further explanatory language in accordance with the disclosure requirements of Rule 0780-1-61-.09.

(a) No such policy issued to an individual shall contain renewal provisions less favorable to the insured than “guaranteed renewable.” However, the Commissioner may authorize non-renewal on a statewide basis, on terms and conditions deemed necessary by the Commissioner, to best protect the interest of the insureds, if the insurer demonstrates:

1. That renewal will jeopardize the insurer’s solvency; or 2. That:

(i) The actual paid claims and expenses have substantially exceeded the premium and investment income associated with the policies;

(ii) The policies will continue to experience substantial and unexpected losses over their lifetime;

(iii) The projected loss experience of the policies cannot be significantly improved or mitigated through reasonable rate adjustments or other reasonable methods; and (iv) The insurer has made repeated and good faith attempts to stabilize loss experience of the policies, including the timely filing for rate adjustments.

(b) The term “guaranteed renewable” may be used when the insured has the right to continue the long-term care insurance in force by the timely payment of premiums and when the insurer has no unilateral right to make any change in any provision of the policy or rider while the insurance is in force, and cannot decline to renew, except that rates may be revised by the insurer on a class basis.

(c) The term “non-cancelable” may be used only when the insured has the right to continue the long-term care insurance in force by the timely payment of premiums during which period the insurer has no right to unilaterally make any change in any provision of the insurance or in the premium rate.

(d) The term “level premium” may only be used when the insurer does not have the right to change the premium.

(e) In addition to the other requirements of this rule, a qualified long-term care insurance contract shall be guaranteed renewable, within the meaning of Section 7702B(b)(l)(C) of the Internal Revenue Code of 1986, as amended.

(2) Limitations and Exclusions. A policy may not be delivered or issued for delivery in this state as long-term care insurance if the policy limits or excludes coverage by type of illness, treatment, medical condition or accident, except as follows:

(a) Preexisting conditions or diseases.

(b) Mental or nervous disorders; however, this shall not permit exclusion or limitation of benefits on the basis of Alzheimer’s disease.

(c) Alcoholism and drug addiction.

(d) Illness, treatment or medical condition arising out of:

1. War or act of war (whether declared or undeclared);

2. Participation in a felony, riot or insurrection;

3. Service in the armed forces or units auxiliary thereto;

4. Suicide (sane or insane), attempted suicide or intentionally self-inflicted injury; or 5. Aviation (this exclusion applies only to non-fare-paying passengers).

(e) Treatment provided in a government facility (unless otherwise required by law), services for which benefits are available under Medicare or other governmental program (except Medicaid), any state or federal workers compensation, employer’s liability or occupational disease law, or any motor vehicle no-fault law, services provided by a member of the covered persons immediate family and services for which no charge is normally made in the absence of insurance.

(f) Expenses for services or items available or paid under another long-term care insurance or health insurance policy.

(g) In the case of a qualified long-term care insurance contract, expenses for services or items to the extent that the expenses are reimbursable under Title XVIII of the Social Security Act or would be so reimbursable but for the application of a deductible or coinsurance amount.

(h) This paragraph is not intended to prohibit exclusions and limitations by type of provider or territorial limitations.

(3) Extension of Benefits. Termination of long-term care insurance shall be without prejudice to any benefits payable for institutionalization if the institutionalization began while the long-term care insurance was in force and continues without interruption after termination. The extension of benefits beyond the period the long-term care insurance was in force may be limited to the duration of the benefit period, if any, or to payment of the maximum benefits and may be subject to any policy waiting period, and all other applicable provisions of the policy.

(4) Continuation or Conversion.

(a) Group long-term care insurance issued in this state on or after the effective date of this

rule shall provide covered individuals with a basis for continuation or conversion of coverage.

(b) For the purposes of this rule, “a basis for continuation of coverage” means a policy provision that maintains coverage under the existing group policy when the coverage would otherwise terminate and which is subject only to the continued timely payment of premium when due. Group policies that restrict provision of benefits and services to, or contain incentives to use certain providers or facilities may provide continuation benefits that are substantially equivalent to the benefits of the existing group policy.

The Commissioner shall make a determination as to the substantial equivalency of benefits, and in doing so, shall take into consideration the differences between managed care and non-managed care plans, including, but not limited to, provider system arrangements, service availability, benefit levels and administrative complexity.

(c) For the purposes of this rule, “a basis for conversion of coverage” means a policy provision that an individual whose coverage under the group policy would otherwise terminate or has been terminated for any reason, including discontinuance of the group policy in its entirety or with respect to an insured class, and who has been continuously insured under the group policy (and any group policy which it replaced), for at least six (6) months immediately prior to termination, shall be entitled to the issuance of a converted policy by the insurer under whose group policy he or she is covered, without evidence of insurability.

(d) For the purposes of this rule, “converted policy” means an individual policy of long-term care insurance providing benefits identical to or benefits determined by the Commissioner to be substantially equivalent to or in excess of those provided under the group policy from which conversion is made. Where the group policy from which conversion is made restricts provision of benefits and services to, or contains incentives to use certain providers and/or facilities, the Commissioner, in making a determination as to the substantial equivalency of benefits, shall take into consideration the differences between managed care and non-managed care plans, including, but not limited to, provider system arrangements, service availability, benefit levels and administrative complexity.

(e) Written application for the converted policy shall be made and the first premium due, if any, shall be paid as directed by the insurer not later than thirty-one (31) days after termination of coverage under the group policy. The converted policy shall be issued effective on the day following the termination of coverage under the group policy, and shall be renewable annually.

(f) Unless the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy shall be calculated on the basis of the insured’s age at inception of coverage under the group policy from which conversion is made. Where the group policy from which conversion is made replaced previous group coverage, the premium for the converted policy shall be calculated on the basis of the insured’s age at inception of coverage under the group policy replaced.

(g) Continuation of coverage or issuance of a converted policy shall be mandatory, except where:

1. Termination of group coverage resulted from an individual’s failure to make any required payment of premium or contribution when due; or 2. The terminating coverage is replaced not later than thirty-one (31) days after termination, by group coverage effective on the day following the termination of coverage:

(i) Providing benefits identical to or benefits determined by the Commissioner to be substantially equivalent to or in excess of those provided by the terminating coverage; and (ii) The premium for which is calculated in a manner consistent with the requirements of subparagraph (f) of this rule.

(h) Notwithstanding any other provision of this rule, a converted policy issued to an individual who at the time of conversion is covered by another long-term care insurance policy that provides benefits on the basis of incurred expenses, may contain a provision that results in a reduction of benefits payable if the benefits provided under the additional coverage, together with the full benefits provided by the converted policy, would result in payment of more than one hundred percent (100%) of incurred expenses. The provision shall only be included in the converted policy if the converted policy also provides for a premium decrease or refund which reflects the reduction in benefits payable.

(i) The converted policy may provide that the benefits payable under the converted policy, together with the benefits payable under the group policy from which conversion is made, shall not exceed those that would have been payable had the individual’s coverage under the group policy remained in force and effect.

(j) Notwithstanding any other provision of this rule, an insured individual whose eligibility for group long-term care coverage is based upon his or her relationship to another person shall be entitled to continuation of coverage under the group policy upon termination of the qualifying relationship by death or dissolution of marriage.

(k) For the purposes of this rule a “managed-care plan” is a health care or assisted living arrangement designed to coordinate patient care or control costs through utilization review, case management or use of specific provider networks.

(5) Discontinuance and Replacement.

(a) If a group long-term care policy is replaced by another group long-term care policy issued to the same policyholder, the succeeding insurer shall offer coverage to all persons covered under the previous group policy on its date of termination. Coverage provided or offered to individuals by the insurer and premiums charged to persons under the new group policy:

1. Shall not result in an exclusion for preexisting conditions that would have been covered under the group policy being replaced; and 2. Shall not vary or otherwise depend on the individual’s health or disability status, claim experience or use of long-term care services.

(6) Premiums.

(a) The premium charged to an insured shall not increase due to either:

1. The increasing age of the insured at ages in excess of sixty-five (65); or 2. The duration the insured has been covered under the policy.

(b) The purchase of additional coverage shall not be considered a premium rate increase, but for purposes of the calculation required under Rule 0780-1-61-.26, the portion of the premium attributable to the additional coverage shall be added to and considered

part of the initial annual premium.

(c) A reduction in benefits shall not be considered a premium change, but for purpose of the calculation required under Rule 0780-1-61-.26, the initial annual premium shall be based on the reduced benefits.

(7) Electronic Enrollment for Group Policies.

(a) In the case of a group as defined in this Chapter, any requirement that a signature of an insured be obtained by an insurance producer or insurer shall be deemed satisfied if:

1. The consent is obtained by telephonic or electronic enrollment by the group policyholder or insurer. A verification of enrollment information shall be provided to the enrollee;

2. The telephonic or electronic enrollment provides necessary and reasonable safeguards to assure the accuracy, retention and prompt retrieval of records; and 3. The telephonic or electronic enrollment provides necessary and reasonable safeguards to assure that the confidentiality of individually identifiable information and privileged information is maintained.

(b) The insurer shall make available upon request of the Commissioner, records that will demonstrate the insurer’s ability to confirm enrollment and coverage amounts.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.07 UNINTENTIONAL LAPSE

(1) Each insurer offering long-term care insurance shall, as a protection against unintentional lapse, comply with the following:

(a) Notice before lapse or termination. No individual long-term care policy or certificate shall be issued until the insurer has received from the applicant either a written designation of at least one (1) person, in addition to the applicant, who is to receive notice of lapse or termination of the policy or certificate for nonpayment of premium, or a written waiver dated and signed by the applicant electing not to designate additional persons to receive notice. The applicant has the right to designate at least one (1) person who is to receive the notice of termination, in addition to the insured.

Designation shall not constitute acceptance of any liability on the third party for services provided to the insured. The form used for the written designation must provide space clearly designated for listing at least one (1) person. The designation shall include each person’s full name and home address. In the case of an applicant who elects not to designate an additional person, the waiver shall state: “Protection against unintended lapse. I understand that I have the right to designate at least one (1) person other than myself to receive notice of lapse or termination of this long-term care insurance policy for nonpayment of premium. I understand that notice will not be given until thirty (30) days after a premium is due and unpaid. I elect NOT to designate a person to receive this notice.” The insurer shall notify the insured of the right to change this written designation, no less often than once every two (2) years.

(b) When the policyholder or certificate holder pays the premium for a long-term care insurance policy or certificate through a payroll or pension deduction plan, the requirements contained in Paragraph (1) of this rule need not be met until sixty (60) days after the policyholder or certificate holder is no longer on such a payment plan.

The application or enrollment form for such policies or certificates shall clearly indicate the payment plan selected by the applicant.

(c) Lapse or termination for nonpayment of premium. No individual long-term care policy or certificate shall lapse or be terminated for nonpayment of premium unless the insurer, at least thirty (30) days before the effective date of the lapse or termination, has given notice to the insured and to those persons designated pursuant to paragraph (1)(a) above, at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by first class United States mail, postage prepaid; and notice may not be given until thirty (30) days after a premium is due and unpaid. Notice shall be deemed to have been given as of five (5) days after the date of mailing.

(2) Reinstatement. In addition to the requirement in Paragraph (1) of this rule, a long-term care insurance policy or certificate shall include a provision that provides for reinstatement of coverage, in the event of lapse, if the insurer is provided proof that the policyholder or certificate holder was cognitively impaired or had a loss of functional capacity before the grace period contained in the policy expired. This option shall be available to the insured if requested within five (5) months after termination and shall allow for the collection of past due premium, where appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity contained in the policy and certificate.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.08 REQUIRED DISCLOSURE PROVISIONS

(1) Renewability. Individual long-term care insurance policies shall contain a renewability provision. The provision shall be appropriately captioned, shall appear on the first page of the policy, and shall clearly state that the coverage is guaranteed renewable or noncancelable. This provision shall not apply to policies that do not contain a renewability provision, and under which the right to nonrenew is reserved solely to the policyholder.

(2) A long-term care insurance policy or certificate, other than one where the insurer does not have the right to change the premium, shall include a statement that premium rates may change.

(3) Riders and Endorsements. Except for riders or endorsements by which the insurer effectuates a request made in writing by the insured under an individual long-term care insurance policy, all riders or endorsements added to an individual long-term care insurance policy after date of issue or at reinstatement or renewal that reduce or eliminate benefits or coverage in the policy shall require signed acceptance by the individual insured. After the date of policy issue, any rider or endorsement which increases benefits or coverage with a concomitant increase in premium during the policy term must be agreed to in writing signed by the insured, except if the increased benefits or coverage are required by law. Where a separate additional premium is charged for benefits provided in connection with riders or endorsements, the premium charge shall be set forth in the policy, rider or endorsement.

(4) Payment of Benefits. A long-term care insurance policy that provides for the payment of benefits based on standards described as “usual and customary,” “reasonable and customary” or words of similar import shall include a definition of these terms and an explanation of the terms in its accompanying outline of coverage.

(5) Limitations. If a long-term care insurance policy or certificate contains any limitations with respect to preexisting conditions, the limitations shall appear as a separate paragraph of the policy or certificate and shall be labeled as “Preexisting Condition Limitations.”

(6) Other Limitations or Conditions on Eligibility for Benefits. A long-term care insurance policy or certificate containing any limitations or conditions for eligibility other than those prohibited in T.C.A. § 56-42-105 shall set forth a description of the limitations or conditions, including any required number of days of confinement, in a separate paragraph of the policy or certificate and shall label such paragraph “Limitations or Conditions on Eligibility for Benefits.”

(7) Disclosure of Tax Consequences. With regard to life insurance policies that provide an accelerated benefit for long-term care, a disclosure statement is required at the time of application for the policy or rider and at the time the accelerated benefit payment request is submitted that receipt of these accelerated benefits may be taxable, and that assistance should be sought from a personal tax advisor. The disclosure statement shall be prominently displayed on the first page of the policy or rider and any other related documents. This paragraph shall not apply to qualified long-term care insurance contracts.

(8) Benefit Triggers. Activities of daily living and cognitive impairment shall be used to measure an insured’s need for long term care and shall be described in the policy or certificate in a separate paragraph and shall be labeled “Eligibility for the Payment of Benefits.” Any additional benefit triggers shall also be explained in this section. If these triggers differ for different benefits, explanation of the trigger shall accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too shall be specified.

(9) A qualified long-term care insurance contract shall include a disclosure statement in the policy and in the outline of coverage in the same format as contained in Appendix H of this

Chapter that the policy is intended to be a qualified long-term care insurance contract under

Section 7702B(b) of the Internal Revenue Code of 1986, as amended.

(10) A nonqualified long-term care insurance contract shall include a disclosure statement in the policy and in the outline of coverage in the same format as contained in Appendix H of this

Chapter that the policy is not intended to be a qualified long-term care insurance contract.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.09 REQUIRED DISCLOSURE OF RATING PRACTICES TO CONSUMERS

(1) This rule shall apply as follows:

(a) Except as provided in Paragraph (1)(b) of this rule, this rule applies to any long-term care policy or certificate issued in this state on or after six (6) months after the effective date of this rule.

(b) For certificates issued on or after the effective date of this amended rule under a group long-term care insurance policy as defined in this Chapter, which policy was in force at the time this amended rule became effective, the provisions of this rule shall apply on the policy anniversary following twelve (12) months after the effective date of this rule.

(2) Other than policies for which no applicable premium rate or rate schedule increases can be made, insurers shall provide all of the information listed in this paragraph to the applicant at the time of application or enrollment, unless the method of application does not allow for delivery at that time. In such a case, an insurer shall provide all of the following information to the applicant no later than at the time of delivery of the policy or certificate:

(a) A statement that the policy may be subject to rate increases in the future.

(b) An explanation of potential future premium rate revisions, and the policyholder’s or certificate holder’s option in the event of a premium rate revision.

(c) The premium rate or rate schedules applicable to the applicant that will be in effect until a request is made for an increase.

(d) A general explanation for applying premium rate or rate schedule adjustments that shall include:

1. A description of when premium rate or rate schedule adjustments will be effective (e.g., next anniversary date, next billing date, etc.); and 2. The right to a revised premium rate or rate schedule as provided in Paragraph (2)(c) of this rule if the premium rate or rate schedule is changed.

(e) 1. Information regarding each premium rate increase on this policy form or similar policy forms over the past ten (10) years for this state or any other state that, at a minimum, identifies:

(i) The policy forms for which premium rates have been increased;

(ii) The calendar years when the form was available for purchase; and (iii) The amount or percent of each increase. The percentage may be expressed as a percentage of the premium rate prior to the increase, and may also be expressed as minimum and maximum percentages if the rate increase is variable by rating characteristics.

2. The insurer may, in a fair manner, provide additional explanatory information related to the rate increases.

3. An insurer shall have the right to exclude from the disclosure premium rate increases that only apply to blocks of business acquired from other nonaffiliated insurers or the long-term care policies acquired from other nonaffiliated insurers when those increases occurred prior to the acquisition.

4. If an acquiring insurer files for a rate increase on a long-term care policy form acquired from nonaffiliated insurers or a block of policy forms acquired from nonaffiliated insurers on or before the later of the effective date of this rule or the end of a twenty-four (24) month period following the acquisition of the block or policies, the acquiring insurer may exclude that rate increase from the disclosure.

However, the nonaffiliated selling company shall include the disclosure of that rate increase in accordance with Paragraph (2)(a) of this rule.

5. If the acquiring insurer in Paragraph (2)(e)4. of this rule files for a subsequent rate increase, even within the twenty-four (24) month period, on the same policy form acquired from nonaffiliated insurers or block of policy forms acquired from nonaffiliated insurers referenced in subparagraph 4. of this rule, the acquiring insurer must make all disclosures required by Paragraph (5) of this rule, including disclosure of the earlier rate increase referenced in Paragraph (2)(d) of this rule.

(3) An applicant shall sign an acknowledgement at the time of application, unless the method of application does not allow for signature at that time, that the insurer made the disclosure required by this rule. If due to the method of application the applicant cannot sign an acknowledgement at the time of application, the applicant shall sign no later than at the time of delivery of the policy or certificate.

(4) An insurer shall use the forms in Appendices D and I of this Chapter to comply with the requirements of this rule.

(5) An insurer shall provide notice of an upcoming premium rate schedule increase to all policyholders or certificate holders, if applicable, at least forty-five (45) days prior to the implementation of the premium rate schedule increase by the insurer. The notice shall include the information required by Paragraph (2) of this rule when the rate increase is implemented.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.10 INITIAL FILING REQUIREMENTS

(1) This rule applies to any long-term care policy issued in this state on or after six (6) months after the effective date of these rules.

(2) An insurer shall provide the information listed in this paragraph to the Commissioner at least thirty (30) days prior to making a long-term care insurance form available for sale.

(a) A copy of the disclosure documents required in Rule 0780-61-.09; and (b) An actuarial certification consisting of at least the following:

1. A statement that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premium rate schedule is reasonably expected to be sustainable over the life of the form with no future premium increases anticipated;

2. A statement that the policy design and coverage provided have been reviewed and taken into consideration;

3. A statement that the underwriting and claims adjudication processes have been reviewed and taken into consideration;

4. A complete description of the basis for contract reserves that are anticipated to be held under the form, to include:

(i) Sufficient detail or sample calculations provided so as to have a complete depiction of the reserve amounts to be held;

(ii) A statement that the assumptions used for reserves contain reasonable margins for adverse experience;

(iii) A statement that the net valuation premium for renewal years does not increase (except for attained-age rating where permitted); and (iv) A statement that the difference between the gross premium and the net valuation premium for renewal years is sufficient to cover expected renewal expenses; or if such a statement cannot be made, a complete description of the situations where this does not occur;

(I) An aggregate distribution of anticipated issues may be used as long as the underlying gross premiums maintain a reasonably consistent relationship;

(II) If the gross premiums for certain age groups appear to be inconsistent with this requirement, the Commissioner may request a demonstration under Paragraph (3) of this rule based on a standard age distribution; and 5. (i) A statement that the premium rate schedule is not less than the premium rate schedule for existing similar policy forms also available from the insurer except for reasonable differences attributable to benefits; or (ii) A comparison of the premium schedules for similar policy forms that are currently available from the insurer with an explanation of the differences.

(3) (a) The Commissioner may request an actuarial demonstration that benefits are reasonable in relation to premiums. The actuarial demonstration shall include either premium and claim experience on similar policy forms, adjusted for any premium or benefit differences, relevant and credible data from other studies, or both.

(b) In the event the Commissioner asks for additional information under this provision, the period in Paragraph (2) of this rule does not include the period during which the insurer is preparing the requested information.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.11 PROHIBITION AGAINST POST-CLAIMS UNDERWRITING

(1) All applications for long-term care insurance policies or certificates except those that are guaranteed issue shall contain clear and unambiguous questions designed to ascertain the health condition of the applicant.

(2) (a) If an application for long-term care insurance contains a question that asks whether the applicant has had medication prescribed by a physician, it must also ask the applicant to list the medication that has been prescribed.

(b) If the medications listed in the application were known by the insurer, or should have been known at the time of application, to be directly related to a medical condition for which coverage would otherwise be denied, then the policy or certificate shall not be rescinded for that condition.

(3) Except for policies or certificates which are guaranteed issue:

(a) The following language shall be set out conspicuously and in close conjunction with the applicant’s signature block on an application for a long-term care insurance policy or certificate:

Caution: If your answers on this application are incorrect or untrue, [company] has the right to deny benefits or rescind your policy.

(b) The following language, or language substantially similar to the following, shall be set out conspicuously on the long-term care insurance policy or certificate at the time of delivery:

Caution: The issuance of this long-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address].

(c) Prior to issuance of a long-term care policy or certificate to an applicant age eighty (80) or older, the insurer shall obtain one of the following:

1. A report of a physical examination;

2. An assessment of functional capacity;

3. An attending physician’s statement; or 4. Copies of medical records.

(4) A copy of the completed application or enrollment form (whichever is applicable) shall be delivered to the insured no later than at the time of delivery of the policy or certificate unless it was retained by the applicant at the time of application.

(5) Every insurer or other entity selling or issuing long-term care insurance benefits shall maintain a record of all policy or certificate rescissions, both state and countrywide, except those that the insured voluntarily effectuated and shall annually furnish this information to the Commissioner in the form set forth in Appendix C to this Chapter.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.12 MINIMUM STANDARDS FOR HOME HEALTH AND COMMUNITY CARE BENEFITS

IN LONG-TERM CARE INSURANCE POLICIES.

(1) A long-term care insurance policy or certificate shall not, if it provides benefits for home health care or community care services, limit or exclude benefits:

(a) By requiring that the insured or claimant would need skilled care in a skilled nursing facility if home health care services were not provided;

(b) By requiring that the insured or claimant first or simultaneously receive nursing or therapeutic services, or both, in a home, community or institutional setting before home health care services are covered;

(c) By limiting eligible services to services provided by registered nurses or licensed practical nurses;

(d) By requiring that a nurse or therapist provide services covered by the policy that can be provided by a home health aide, or other licensed or certified home care worker acting within the scope of his or her licensure or certification;

(e) By excluding coverage for personal care services provided by a home health aide;

(f) By requiring that the provision of home health care services be at a level of certification or licensure greater than that required by the eligible service;

(g) By requiring that the insured or claimant have an acute condition before home health care services are covered;

(h) By limiting benefits to services provided by Medicare-certified agencies or providers; or (i) By excluding coverage for adult day care services.

(2) A long-term care insurance policy or certificate, if it provides for home health or community care services, shall provide total home health or community care coverage that is a dollar amount equivalent to at least one-half of one year’s coverage available for nursing home benefits under the policy or certificate, at the time covered home health or community care services are being received. This requirement shall not apply to policies or certificates issued to residents of continuing care retirement communities.

(3) Home health care coverage may be applied to the non-home health care benefits provided in the policy or certificate when determining maximum coverage under the terms of the policy or certificate.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.13 REQUIREMENT TO OFFER INFLATION PROTECTION

(1) No insurer may offer a long-term care insurance policy unless the insurer also offers to the policyholder, in addition to any other inflation protection, the option to purchase a policy that provides for benefit levels to increase with benefit maximums or reasonable durations which are meaningful to account for reasonably anticipated increases in the costs of long-term care services covered by the policy. Insurers must offer to each policyholder, at the time of purchase, the option to purchase a policy with an inflation protection feature no less favorable than one (1) of the following:

(a) Increases benefit levels annually in a manner so that the increases are compounded annually at a rate not less than five percent (5%);

(b) Guarantees the insured individual the right to periodically increase benefit levels without providing evidence of insurability or health status so long as the option for the previous period has not been declined. The amount of the additional benefit shall be no less than the difference between the existing policy benefit and that benefit compounded annually at a rate of at least five percent (5%) for the period beginning with the purchase of the existing benefit and extending until the year in which the offer is made; or (c) Covers a specified percentage of actual or reasonable charges and does not include a maximum specified indemnity amount or limit.

(2) Where the policy is issued to a group, the required offer in Paragraph (1) of this rule shall be made to the group policyholder; except, if the policy is issued to a group as defined in this

Chapter other than to a continuing care retirement community, the offering shall be made to each proposed certificate holder.

(3) The offer in Paragraph (1) of this rule shall not be required of life insurance policies or riders containing accelerated long-term care benefits, nor expense incurred long-term care insurance policies.

(4)

(a) Insurers shall include the following information in or with the outline of coverage:

1. A graphic comparison of the benefit levels of a policy that increases benefits over the policy period with a policy that does not increase benefits. The graphic comparison shall show benefit levels over at least a twenty (20) year period.

2. Any expected premium increases or additional premiums to pay for automatic or optional benefit increases. If premium increases or additional premiums will be based on the attained age of the applicant at the time of the increase, the insurer shall also disclose the magnitude of the potential premiums the applicant would need to pay at ages seventy-five (75) and eighty-five (85) for benefit increases.

(b) An insurer may use a reasonable hypothetical, or a graphic demonstration, for the purposes of this disclosure.

(5) Inflation protection benefit increases under a policy which contains these benefits shall continue without regard to an insured’s age, claim status or claim history, or the length of time the person has been insured under the policy.

(6) An offer of inflation protection that provides for automatic benefit increases shall include an offer of a premium which the : insurer expects to remain constant. The offer shall disclose in a conspicuous manner that the premium may change in the future unless the premium is guaranteed to remain constant.

(7) Inflation protection as provided in Paragraph (1)(a) of this rule shall be included in a long-term care insurance policy unless an insurer obtains a rejection of inflation protection signed by the policyholder as required in this rule. The rejection may be either in the application or on a separate form The rejection shall be considered a part of the application and shall state:

“I have reviewed the outline of coverage and the graphs that compare the benefits and premiums of this policy with and without inflation protection. Specifically, I have reviewed Plans ____, and I reject inflation protection.”

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.14 REQUIREMENTS FOR APPLICATION FORMS AND REPLACEMENT COVERAGE

(1) Questions Concerning Replacement. Application forms shall include the following questions designed to elicit information as to whether, as of the date of the application, the applicant has another long-term care insurance policy or certificate in force or whether a long-term care policy or certificate is intended to replace any other accident and sickness or long-term care policy or certificate presently in force. A supplementary application or other form to be signed by the applicant and insurance producer, except where the coverage is sold without an insurance producer, containing the questions may be used. With regard to a replacement policy issued to a group as defined by this Chapter, the following questions may be modified only to the extent necessary to elicit information about health or long-term care insurance policies other than the group policy being replaced, provided that the certificate-holder has been notified of the replacement.

(a) Do you have another long-term care insurance policy or certificate in force (including health care service contract, health maintenance organization contract)?

(b) Did you have another long-term care insurance policy or certificate in force during the last twelve (12) months?

1. If so, with which company?

2. If that policy lapsed, when did it lapse?

(c) Are you covered by TennCare?

(d) Do you intend to replace any of your medical or health insurance coverage with this policy [certificate]?

(2) Insurance producers shall list any other health insurance policies they have sold to the applicant.

(a) List policies sold that are still in force.

(b) List policies sold in the past five (5) years that are no longer in force.

(3) Solicitations Other than Direct Response. Upon determining that a sale will involve replacement, an insurer, other than an insurer using direct response solicitation methods, or its insurance producer, shall furnish the applicant, prior to issuance or delivery of the individual long-term care insurance policy, a notice regarding replacement of accident and sickness or long-term care coverage. One copy of the notice shall be retained by the applicant and an additional copy signed by the applicant shall be retained by the insurer.

The required notice shall be identical or substantially similar to the Notice provided in

Appendix A of this Chapter.

(4) Where replacement is intended, the replacing insurer shall notify, in writing, the existing insurer of the proposed replacement. The existing policy shall be identified by the insurer, name of the insured and policy number or address including zip code. Notice shall be made within five (5) working days from the date the application is received by the insurer or the date the policy is issued, whichever is sooner.

(5) Life insurance policies that accelerate benefits for long-term care shall comply with this rule if the policy being replaced is a long-term care insurance policy. If the policy being replaced is a life insurance policy, the insurer shall comply with the replacement requirements of Tennessee Code Annotated, Title 56. If a life insurance policy that accelerates benefits for long-term care is replaced by another such policy, the replacing insurer shall comply with both the long-term care and the life insurance replacement requirements.

(6) Direct Response Solicitations. Insurers using direct response solicitation methods shall deliver a notice regarding replacement of accident and sickness or long-term care coverage to the applicant upon issuance of the policy. The required notice shall be identical or substantially similar to the Notice provided in Appendix B of this Chapter.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.15 REPORTING REQUIREMENTS

(1) Every insurer shall maintain records for each insurance producer of that insurance producer’s amount of replacement sales as a percent of the insurance producer’s total annual sales and the amount of lapses of long-term care insurance policies sold by the insurance producer as a percent of the insurance producer’s total annual sales.

(2) Every insurer shall report annually by June 30 the ten percent (10%) of its insurance producers with the greatest percentages of lapses and replacements as measured by Paragraph (1) of this rule. The insurer shall use the form as set out in Appendix J of this

Chapter.

(3) Reported replacement and lapse rates do not alone constitute a violation of insurance laws or necessarily imply wrongdoing. The reports are for the purpose of reviewing more closely insurance producer activities regarding the sale of long-term care insurance.

(4) Every insurer shall report annually by June 30 the number of lapsed policies as a percent of its total annual sales and as a percent of its total number of policies in force as of the end of the preceding calendar year. The insurer shall use the form as set out in Appendix J of this

Chapter.

(5) Every insurer shall report annually by June 30 the number of replacement policies sold as a percent of its total annual sales and as a percent of its total number of policies in force as of the preceding calendar year. The insurer shall use the form as set out in Appendix J of this

Chapter.

(6) Every insurer shall report annually by June 30, for qualified long-term care insurance contracts, the number of claims denied for each class of business, expressed as a percentage of claims denied. The insurer shall use the form as set out in Appendix G of this

Chapter.

(7) Every insurer or other entity selling or issuing long-term care insurance benefits shall maintain a record of all policy or certificate recissions, both state and nationwide, except those initiated by the insured and shall annually furnish this information to the Commissioner in the format as set out in Appendix C of this Chapter.

(8) For purposes of this rule:

(a) “Policy” means only long-term care insurance;

(b) Subject to Paragraph (8)(c) of this rule, “claim” means a request for payment of benefits under an in-force policy regardless of whether the benefit claimed is covered under the policy or any terms or conditions of the policy have been met;

(c) “Denied” means the insurer refuses to pay a claim for any reason other than for claims not paid for failure to meet the waiting period or because of an applicable preexisting condition; and (d) “Report” means on a statewide basis.

(9) Reports required under this rule shall be filed with the Commissioner.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.16 LICENSING

A producer is not authorized to sell, solicit or negotiate with respect to long-term care insurance except as authorized by T.C.A. §§ 56-6-101, et seq.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 20, 1991; effective August 4, 1991. Repeal and new rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.17 DISCRETIONARY POWERS OF COMMISSIONER

(1) The Commissioner may upon written request and after an administrative hearing, issue an order to modify or suspend a specific provision or provisions of this Chapter with respect to a specific long-term care insurance policy or certificate upon a written finding that:

(a) The modification or suspension would be in the best interest of the insureds;

(b) The purposes to be achieved could not be effectively or efficiently achieved without the modification or suspension; and (c) 1. The modification or suspension is necessary to the development of an innovative and reasonable approach for insuring long-term care;

2. The policy or certificate is to be issued to residents of a life care or continuing care retirement community or some other residential community for the elderly and the modification or suspension is reasonably related to the special needs or nature of such a community; or 3. The modification or suspension is necessary to permit long-term care insurance to be sold as part of, or in conjunction with, another insurance product.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.18 RESERVE STANDARDS

(1) When long-term care benefits are provided through the acceleration of benefits under group or individual life insurance policies or riders to such policies, policy reserves for the benefits shall be determined in accordance with T.C.A. § 56-1-403. Claim reserves shall also be established in the case when the policy or rider is in claim status.

Reserves for policies and riders subject to this rule should be based on the multiple decrement model utilizing all relevant decrements except for voluntary termination rates.

Single decrement approximations are acceptable if the calculation produces essentially similar reserves, if the reserve is clearly more conservative, or if the reserve is immaterial.

The calculations may take into account the reduction in life insurance benefits due to the payment of long-term care benefits. However, in no event shall the reserves for the longterm care benefit and the life insurance benefit be less than the reserves for the life insurance benefit assuming no long-term care benefit.

In the development and calculation of reserves for policies and riders subject to this rule, due regard shall be given to the applicable policy provisions, marketing methods, administrative procedures and all other considerations which have an impact on projected claim costs, including, but not limited to, the following:

(a) Definition of insured events;

(b) Covered long-term care facilities;

(c) Existence of home convalescence care coverage;

(d) Definition of facilities;

(e) Existence or absence of barriers to eligibility;

(f) Premium waiver provision;

(g) Renewability;

(h) Ability to raise premiums;

(i) Marketing method;

(j) Underwriting procedures;

(k) Claims adjustment procedures;

(l) Waiting period;

(m) Maximum benefit;

(n) Availability of eligible facilities;

(o) Margins in claim costs;

(p) Optional nature of benefit;

(q) Delay in eligibility for benefit;

(r) Inflation protection provisions; and (s) Guaranteed insurability option.

(2) Any applicable valuation morbidity table shall be certified as appropriate as a statutory valuation table by a member of the American Academy of Actuaries.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.19 LOSS RATIO

(1) This rule shall apply to all long term care insurance policies or certificates except those covered under Rules 0780-1-61-.10 and 0780-1-61-.20.

(2) Benefits under long-term care insurance policies shall be deemed reasonable in relation to premiums provided the expected loss ratio is at least sixty percent (60%), calculated in a manner which provides for adequate reserving of the long-term care insurance risk. In evaluating the expected loss ratio, due consideration shall be given to all relevant factors, including:

(a) Statistical credibility of incurred claims experience and earned premiums;

(b) The period for which rates are computed to provide coverage;

(c) Experienced and projected trends;

(d) Concentration of experience within early policy duration;

(e) Expected claim fluctuation;

(f) Experience refunds, adjustments or dividends;

(g) Renewability features;

(h) All appropriate expense factors;

(i) Interest;

(j) Experimental nature of the coverage;

(k) Policy reserves;

(l) Mix of business by risk classification; and (m) Product features such as long elimination periods, high deductibles and high maximum limits.

(3) Paragraph (2) of this rule shall not apply to life insurance policies that accelerate benefits for long-term care. A life insurance policy that funds long-term care benefits entirely by accelerating the death benefit is considered to provide reasonable benefits in relation to premiums paid, if the policy complies with all of the following provisions:

(a) The interest credited internally to determine cash value accumulations, including longterm care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long-term care set forth in the policy;

(b) The portion of the policy that provides life insurance benefits meets the nonforfeiture requirements of T.C.A. § 56-7-401.

(c) The policy meets the disclosure requirements of T.C.A. § 56-42-105(i); and (d) An actuarial memorandum is filed with the Department of Commerce and Insurance that includes:

1. A description of the basis on which the long-term care rates were determined;

2. A description of the basis for the reserves;

3. A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;

4. A description and a table of each actuarial assumption used. For expenses, an insurer must include percent of premium dollars per policy and dollars per unit of benefits, if any;

5. A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;

6. The estimated average annual premium per policy and the average issue age;

7. A statement as to whether underwriting is performed at the time of application.

The statement shall indicate whether underwriting is used and, if used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting. Concerning a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs; and 8. A description of the effect of the long-term care policy provision on the required premiums, nonforfeiture values and reserves on the underlying life insurance policy, both for active lives and those in long-term care claim status.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.20 PREMIUM RATE SCHEDULE INCREASES

(1) This rule shall apply as follows:

(a) Except as provided in Paragraph (1)(b), this rule applies to any long-term care policy or certificate issued in this state on or after six (6) months after the effective date of these rules.

(b) For certificates issued on or after the effective date of this amended rule under a group long-term care insurance policy as defined in this Chapter, which policy was in force at the time this amended rule became effective, the provisions of this paragraph shall apply on the policy anniversary following twelve (12) months after the effective date of this rule.

(2) An insurer shall provide notice of a pending premium rate schedule increase, including an exceptional increase, to the Commissioner at least thirty (30) days prior to the notice to the policyholders and shall include:

(a) Information required by Rule 0780-1-61-.09;

(b) Certification by a qualified actuary that:

1. If the requested premium rate schedule increase is implemented and the underlying assumptions, which reflect moderately adverse conditions, are realized, no further premium rate schedule increases are anticipated;

2. The premium rate filing is in compliance with the provisions of this rule;

(c) An actuarial memorandum justifying the rate schedule change request that includes:

1. Lifetime projections of earned premiums and incurred claims based on the filed premium rate schedule increase; and the method and assumptions used in determining the projected values, including reflection of any assumptions that deviate from those used for pricing other forms currently available for sale.

(i) Annual values for the five (5) years preceding and the three (3) years following the valuation date shall be provided separately;

(ii) The projections shall include the development of the lifetime loss ratio, unless the rate increase is an exceptional increase;

(iii) The projections shall demonstrate compliance with Paragraph (3) of this

rule; and (iv) For exceptional increases, (I) The projected experience should be limited to the increases in claims expenses attributable to the approved reasons for the exceptional increase; and (II) In the event the Commissioner determines as provided in Rule 0780- 1-61-.04(5)(d) that offsets may exist, the insurer shall use appropriate net projected experience;

2. Disclosure of how reserves have been incorporated in this rate increase whenever the rate increase will trigger contingent benefit upon lapse;

3. Disclosure of the analysis performed to determine why a rate adjustment is necessary, which pricing assumptions were not realized and why, and what other actions taken by the company have been relied on by the actuary;

4. A statement that policy design, underwriting and claims adjudication practices have been taken into consideration; and 5. In the event that it is necessary to maintain consistent premium rates for new certificates and certificates receiving a rate increase, the insurer will need to file composite rates reflecting projections of new certificates;

(d) A statement that renewal premium rate schedules are not greater than new business premium rate schedules except for differences attributable to benefits, unless sufficient justification is provided to the Commissioner; and (e) Sufficient information for review and approval of the premium rate schedule increase by the Commissioner.

(3) All premium rate schedule increases shall be determined in accordance with the following requirements:

(a) Exceptional increases shall provide that seventy percent (70%) of the present value of projected additional premiums from the exceptional increase will be returned to policyholders in benefits;

(b) Premium rate schedule increases shall be calculated such that the sum of the accumulated value of incurred claims, without the inclusion of active life reserves, and the present value of future projected incurred claims, without the inclusion of active life reserves, will not be less than the sum of the following:

1. The accumulated value of the initial earned premium times fifty-eight percent (58%);

2. Eighty-five percent (85%) of the accumulated value of prior premium rate schedule increases on an earned basis;

3. The present value of future projected initial earned premiums times fifty-eight percent (58%); and 4. Eighty-five percent (85%) of the present value of future projected premiums not in Paragraph (3)(b)3. of this rule on an earned basis.

(c) In the event that a policy form has both exceptional and other increases, the values in Paragraphs (3)(b)2. and (3)(b)4. of this rule will also include seventy percent (70%) for exceptional rate increase amounts.

(4) For each rate increase that is implemented, the insurer shall file for approval by the Commissioner updated projections, as defined in Paragraph (2)(c)1. of this rule, annually for the next three (3) years and include a comparison of actual results to projected values. The Commissioner may extend the period to greater than three (3) years if actual results are not consistent with projected values from prior projections. For group insurance policies that meet the conditions in Paragraph (11) of this rule, the projections required by this paragraph shall be provided to the policyholder in lieu of filing with the Commissioner.

(5) If any premium rate in the revised premium rate schedule is greater than two hundred (200%) percent of the comparable rate in the initial premium schedule, lifetime projections, as defined in Paragraph (2)(c)1. of this rule, shall be filed for approval by the Commissioner every five (5) years following the end of the required period in Paragraph (4) of this rule. For group insurance policies that meet the conditions in Paragraph (11) of this rule, the projections required by this paragraph shall be provided to the policyholder in lieu of filing with the Commissioner.

(6) (a) If the Commissioner has determined that the actual experience following a rate increase does not adequately match the projected experience and that the current projections under moderately adverse conditions demonstrate that incurred claims will not exceed proportions of premiums specified in Paragraph (3) of this rule, the Commissioner may require the insurer to implement any of the following:

1. Premium rate schedule adjustments; or 2. Other measures to reduce the difference between the projected and actual experience.

(b) In determining whether the actual experience adequately matches the projected experience, consideration should be given to Paragraph (2)(c)5. of this rule, if applicable.

(7) If the majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse, the insurer shall file:

(a) A plan, subject to Commissioner approval, for improved administration or claims processing designed to eliminate the potential for further deterioration of the policy form requiring further premium rate schedule increases, or both, or to demonstrate that appropriate administration and claims processing have been implemented or are in effect; otherwise the Commissioner may impose the condition in Paragraph (8) of this

rule; and (b) The original anticipated lifetime loss ratio, and the premium rate schedule increase that would have been calculated according to Paragraph (3) of this rule had the greater of the original anticipated lifetime loss ratio or fifty-eight percent (58%) been used in the calculations described in Paragraphs (3)(b)1. and (3)(b)3. of this rule.

(8) (a) For a rate increase filing that meets the following criteria, the Commissioner shall review, for all policies included in the filing, the projected lapse rates and past lapse rates during the twelve (12) months following each increase to determine if significant adverse lapsation has occurred or is anticipated:

1. The rate increase is not the first rate increase requested for the specific policy form or forms;

2. The rate increase is not an exceptional increase; and 3. The majority of the policies or certificates to which the increase is applicable are eligible for the contingent benefit upon lapse.

(b) In the event significant adverse lapsation has occurred, is anticipated in the filing or is evidenced in the actual results as presented in the updated projections provided by the insurer following the requested rate increase, the Commissioner may determine that a rate spiral exists. Following the determination that a rate spiral exists, the Commissioner may require the insurer to offer, without underwriting, to all in force insureds subject to the rate increase the option to replace existing coverage with one or more reasonably comparable products being offered by the insurer or its affiliates.

1. The offer shall:

(i) Be subject to the approval of the Commissioner;

(ii) Be based on actuarially sound principles, but not be based on attained age; and (iii) Provide that maximum benefits under any new policy accepted by an insured shall be reduced by comparable benefits already paid under the existing policy.

2. The insurer shall maintain the experience of all the replacement insureds separate from the experience of insureds originally issued the policy forms. In the event of a request for a rate increase on the policy form, the rate increase shall be limited to the lesser of:

(i) The maximum rate increase determined based on the combined experience; and (ii) The maximum rate increase determined based only on the experience of the insureds originally issued the form plus ten percent (10%).

(9) If the Commissioner determines that the insurer has exhibited a persistent practice of filing inadequate initial premium rates for long-term care insurance, the Commissioner may, in addition to the provisions of Paragraph (8) of this rule, prohibit the insurer from either of the following:

(a) Filing and marketing comparable coverage for a period of up to five (5) years; or (b) Offering all other similar coverages and limiting marketing of new applications to the products subject to recent premium rate schedule increases.

(10) Paragraphs (1) through (9) of this rule shall not apply to policies for which the long-term care benefits provided by the policy are incidental, as defined in Rule 0780-1-61-.04(7), if the policy complies with all of the following provisions:

(a) The interest credited internally to determine cash value accumulations, including longterm care, if any, are guaranteed not to be less than the minimum guaranteed interest rate for cash value accumulations without long-term care set forth in the policy;

(b) The portion of the policy that provides insurance benefits other than long-term care coverage meets the nonforfeiture requirements in T.C.A. § 56-7-401.

(c) The policy meets the disclosure requirements of T.C.A. § 56-42-105(i).

(d) An actuarial memorandum is filed with the Department of Commerce and Insurance that includes:

1. A description of the basis on which the long-term care rates were determined;

2. A description of the basis for the reserves;

3. A summary of the type of policy, benefits, renewability, general marketing method, and limits on ages of issuance;

4. A description and a table of each actuarial assumption used. For expenses, an insurer must include percent of premium dollars per policy and dollars per unit of benefits, if any;

5. A description and a table of the anticipated policy reserves and additional reserves to be held in each future year for active lives;

6. The estimated average annual premium per policy and the average issue age;

7. A statement as to whether underwriting is performed at the time of application.

The statement shall indicate whether underwriting is used and, if used, the statement shall include a description of the type or types of underwriting used, such as medical underwriting or functional assessment underwriting. Concerning a group policy, the statement shall indicate whether the enrollee or any dependent will be underwritten and when underwriting occurs; and 8. A description of the effect of the long-term care policy provision on the required premiums, nonforfeiture values and reserves on the underlying insurance policy, both for active lives and those in long-term care claim status.

(11) Paragraphs (6) and (8) of this rule shall not apply to group insurance policies as defined in this Chapter where:

(a) The policies insure 250 or more persons and the policyholder has 5,000 or more eligible employees of a single employer; or (b) The policyholder, and not the certificate holders, pays a material portion of the premium, which shall not be less than twenty percent (20%) of the total premium for the group in the calendar year prior to the year a rate increase is filed.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.21 FILING REQUIREMENT

Prior to an insurer or similar organization offering group long-term care insurance to a resident of this state pursuant to T.C.A. § 56-42-104, it shall file with the Commissioner evidence that the group policy or certificate hereunder has been approved by a state having statutory or regulatory long-term care insurance requirements substantially similar to those adopted in this state.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.22 FILING REQUIREMENTS FOR ADVERTISING

(1) Every insurer, health care service plan or other entity providing long-term care insurance or benefits in this state shall provide a copy of any long-term care insurance advertisement intended for use in this state whether through written, radio or television medium to the Commissioner for review or approval by the Commissioner to the extent it may be required under state law. In addition, all advertisements shall be retained by the insurer, health care service plan or other entity for at least three (3) years from the date the advertisement was first used.

(2) The Commissioner may exempt from these requirements any advertising form or material when, in the Commissioner’s opinion, this requirement may not be reasonably applied.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.23 STANDARDS FOR MARKETING

(1) Every insurer, health care service plan or other entity marketing long-term care insurance coverage in this state, directly or through its producers, shall:

(a) Establish marketing procedures and insurance producer training requirements.

1. Any marketing activities, including any comparison of policies by its insurance producers or other producers will be fair and accurate; and 2. Excessive insurance is not sold or issued.

(b) Display prominently by type, stamp or other appropriate means, on the first page of the outline of coverage and policy the following: “Notice to buyer: This policy may not cover all of the costs associated with long-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations.”

(c) Provide copies of the disclosure forms as required by Rule 0780-1-61-.09 to the applicant.

(d) Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for long-term care insurance already has accident and sickness or long-term care insurance and the types and amounts of any such insurance, except that in the case of qualified long-term care insurance contracts, an inquiry into whether a prospective applicant or enrollee for long-term care insurance has accident and sickness insurance is not required.

(e) Every insurer or entity marketing long-term care insurance shall establish auditable procedures for verifying compliance with Paragraph (1) of this rule.

(f) If the state in which the policy or certificate is to be delivered or issued for delivery has a senior insurance counseling program approved by the Commissioner, the insurer shall, at solicitation, provide written notice to the prospective policyholder and certificate holder that the program is available and the name, address and telephone number of the program.

(g) For long-term care insurance policies and certificates, use the terms “non-cancelable” or “level premium” only when the policy or certificate conforms to Rule 0780-1-61- .06(1)(c).

(h) Provide copies of the disclosure forms required in Rule 0780-1-61-.09 and to the applicant.

(i) Provide an explanation of contingent benefit upon lapse provided for in Rule 0780-1- 61-.26(6).

(2) In addition to the practices prohibited in T.C.A. §§ 56-8-101, et seq., the following acts and practices are prohibited:

(a) Twisting. Knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing, or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on or convert any insurance policy or to take out a policy of insurance with another insurer.

(b) High pressure tactics. Employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.

(c) Cold lead advertising. Making use, directly or indirectly, of any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance producer or insurance company.

(d) Misrepresentation. Misrepresenting a material fact in selling or offering to sell a longterm care insurance policy.

(3) (a) With respect to the obligations set forth in this paragraph, the primary responsibility of an association, as defined in T.C.A. § 56-42-103, when endorsing or selling long-term care insurance, shall be to educate its members concerning long-term care issues in general so that its members can make informed decisions. Associations shall provide objective information regarding long term care insurance policies or certificates endorsed or sold by such associations to ensure that members of such associations receive a balanced and complete explanation of the features in the policies or certificates that are being endorsed or sold.

(b) The insurer shall file with the Commissioner the following material:

1. The policy and certificate, 2. A corresponding outline of coverage, and 3. All advertisements requested by the Department of Commerce and Insurance.

(c) The association shall disclose in any long-term care insurance solicitation:

1. The specific nature and amount of the compensation arrangements (including all fees, commissions, administrative fees and other forms of financial support) that the association receives from endorsement or sale of the policy or certificate to its members; and 2. A brief description of the process under which the policies and the insurer issuing the policies were selected.

(d) If the association and the insurer have interlocking directorates or trustee arrangements, the association shall disclose that fact to its members.

(e) The board of directors of associations selling or endorsing long-term care insurance policies or certificates shall review and approve the insurance policies as well as the compensation arrangements made with the insurer.

(f) The association shall also:

1. At the time of the association’s decision to endorse, engage the services of a person with expertise in long-term care insurance not affiliated with the insurer to conduct an examination of the policies, including its benefits, features, and rates and update the examination thereafter in the event of material change.

2. Actively monitor the marketing efforts of the insurer and its insurance producer.

3. Review and approve all marketing materials or other insurance communications used to promote sales or sent to members regarding the policies or certificates.

4. Subparts 1. through 3. of this subparagraph shall not apply to qualified long-term care insurance contracts.

(g) No group long-term care insurance policy or certificate may be issued to an association unless the insurer files with the Commissioner the information required in this rule.

(h) The insurer shall not issue a long-term care policy or certificate to an association or continue to market such a policy or certificate unless the insurer certifies annually that the association has complied with the requirements set forth in this rule.

(i) Failure to comply with the filing and certification requirements of this rule constitutes an unfair trade practice in violation of T.C.A. §§ 56-8-101, et seq.

History

• Authority: T.C.A. §§ 56-6-124, 56-8-104(1), 56-8-113, 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.24 SUITABILITY

(1) This rule shall not apply to life insurance policies that accelerate benefits for long-term care.

(2) Every insurer, health care service plan or other entity marketing long-term care insurance (the “issuer”) shall:

(a) Develop and use suitability standards to determine whether the purchase or replacement of long-term care insurance is appropriate for the needs of the applicant;

(b) Train its insurance producers in the use of its suitability standards; and (c) Maintain a copy of its suitability standards and make them available for inspection upon request by the Commissioner.

(3) (a) To determine whether the applicant meets the standards developed by the issuer, the insurance producer and issuer shall develop procedures that take the following into consideration:

1. The ability to pay for the proposed coverage and other pertinent financial information related to the purchase of the coverage;

2. The applicant’s goals or needs with respect to long-term care and the advantages and disadvantages of insurance to meet these goals or needs; and 3. The values, benefits and costs of the applicant’s existing insurance, if any, when compared to the values, benefits and costs of the recommended purchase or replacement.

(b) The issuer, and where an insurance producer is involved, the insurance producer, shall make reasonable efforts to obtain the information set out in Paragraph (3)(a) of this

rule. The efforts shall include presentation to the applicant, at or prior to application, of the Long-Term Care Insurance Personal Worksheet as set forth in Appendix D to this

Chapter. The personal worksheet used by the issuer shall contain, at a minimum, the information in the sample made Appendix D to this Chapter, in not less than twelve (12) point type. The issuer may request the applicant to provide additional information to comply with its suitability standards. A copy of the issuer’s personal worksheet shall be filed with the Commissioner.

(c) A completed personal worksheet shall be returned to the issuer prior to the issuer’s consideration of the applicant for coverage, except the personal worksheet need not be returned for sales of employer group long-term care insurance to employees and their spouses.

(d) The sale or dissemination outside the company or agency by the issuer or insurance producer, of information obtained through the Long-Term Care Insurance Personal Worksheet is prohibited.

(4) The issuer shall use the suitability standards it has developed pursuant to this rule in determining whether issuing long-term care insurance coverage to an applicant is appropriate.

(5) Insurance producers shall use the suitability standards developed by the issuer in marketing long-term care insurance on behalf of the issuer.

(6) At the same time as the personal worksheet is provided to the applicant, the disclosure form entitled, “Things You Should Know Before You Buy Long-Term Care Insurance” shall be provided. All such disclosure forms shall be identical to the sample format made Appendix E to this Chapter, in not less than twelve (12) point type.

(7) If the issuer determines that the applicant does not meet its financial suitability standards, or if the applicant has declined to provide the information, the issuer may reject the application.

In the alternative, the issuer shall send the applicant a letter similar to the letter in Appendix F to this Chapter. However, if the applicant has declined to provide financial information, the issuer may use some other method to verify the applicant’s intent. Either the applicant’s returned letter or a record of the alternative method of verification shall be made part of the applicant’s file.

(8) The issuer shall report annually to the Commissioner the total number of applications received from residents of this state, the number of those who declined to provide information on the personal worksheet, the number of applicants who did not meet the suitability standards, and the number of those who chose to confirm after receiving a suitability letter.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.25 PROHIBITION AGAINST PREEXISTING CONDITIONS AND PROBATIONERY

PERIODS IN REPLACEMENT POLICIES OR CERTIFICATES.

If a long-term care insurance policy or certificate replaces another long-term care policy or certificate, the replacing insurer shall waive any time periods applicable to preexisting conditions and probationary periods in the new long-term care policy for similar benefits to the extent that similar exclusions have been satisfied under the original policy.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.26 NONFORFEITURE BENEFIT REQUIREMENT

(1) This rule does not apply to life insurance policies or riders containing accelerated long-term care benefits.

(2) Except as provided in Paragraph (3) of this rule, a long-term care 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.

(3) When a group long-term care insurance policy is issued, the offer required in Paragraph (2) of this rule shall be made to the group policyholder. However, if the policy is issued as group long-term care insurance as defined in this Chapter, other than to a continuing care retirement community or other similar entity, the offering shall be made to each proposed certificateholder.

(4) A policy or certificate offered with nonforfeiture benefits shall have coverage elements, eligibility, benefit triggers and benefit length that are the same as coverage to be issued without nonforfeiture benefits. The nonforfeiture benefit included in the offer shall be the benefit described in Paragraph (7) of this rule and the offer shall be in writing if the nonforfeiture benefit is not otherwise described in the Outline of Coverage or other materials given to the prospective policyholder.

(5) If the offer required to be made is rejected, the insurer shall provide the contingent benefit upon lapse described in this rule.

(6) (a) After rejection of the offer, for individual and group policies without nonforfeiture benefits issued after the effective date of this rule, the insurer shall provide a contingent benefit upon lapse.

(b) In the event a group policyholder elects to make the nonforfeiture benefit an option to the certificate holder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse.

(c) The contingent benefit upon lapse shall be triggered every time an insurer increases the premium rates to a level which results in a cumulative increase of the annual premium equal to or exceeding the percentage of the insured’s initial annual premium set forth below based on the insured’s issue age, and the policy or certificate lapses within 120 days of the due date of the premium so increased. Unless otherwise required, policyholders shall be notified at least thirty (30) days prior to the due date of the premium reflecting the rate increase.

Triggers for a Substantial Premium Increase Percent Increase Over Issue Age Initial Premium 29 and under 200% 30-34 190% 35-39 170% 40-44 150% 45-49 130% 50-54 110% 55-59 90% 60 70% 61 66% 62 62% 63 58% 64 54% 65 50% 66 48% 67 46% 68 44% 69 42% 70 40% 71 38% 72 36% 73 34% 74 32% 75 30% 76 28% 77 26% 78 24% 79 22% 80 20% 81 19% 82 18% 83 17% 84 16% 85 15% 86 14% 87 13% 88 12% 89 11% 90 and over 10% (d) On or before the effective date of a substantial premium increase as defined in Paragraph (6)(c) of this rule, the insurer shall:

1. Offer to reduce policy benefits provided by the current coverage without the requirement of additional underwriting so that required premium payments are not increased;

2. Offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of Paragraph (7) of this rule. This option may be elected at any time during the 120-day period referenced in Paragraph (6)(c) of this rule; and 3. Notify the policyholder or certificate holder that a default or lapse at any time during the 120-day period referenced in Paragraph (6)(c) of this rule shall be deemed to be the election of the offer to convert as referenced in Paragraph (6)(d)2 of this rule.

(7) Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse, are described in this paragraph:

(a) For purposes of this paragraph, attained age rating is defined as a schedule of premiums starting from the issue date which increases age at least one percent (1%) per year prior to age fifty (50), and at least three percent (3%) per year beyond age fifty (50).

(b) For purposes of this paragraph, the nonforfeiture benefit shall be of a shortened benefit period providing paid-up long-term care insurance coverage after lapse. The same benefits (amounts and frequency in effect at the time of lapse but not increased thereafter) will be payable for a qualifying claim, but the lifetime maximum dollars or days of benefits shall be determined as specified in Paragraph (7)(c) of this rule.

(c) The standard nonforfeiture credit will be equal to one hundred percent (100%) of the sum of all premiums paid, including the premiums paid prior to any changes in benefits.

The insurer may offer additional shortened benefit period options, as long as the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration. However, the minimum nonforfeiture credit shall not be less than thirty (30) times the daily nursing home benefit at the time of lapse. In either event, the calculation of the nonforfeiture credit is subject to the limitation of Paragraph (8) of this

rule.

(d) 1. The nonforfeiture benefit shall begin not later than the end of the third year following the policy or certificate issue date. The contingent benefit upon lapse shall be effective during the first three (3) years as well as thereafter.

2. Notwithstanding Paragraph (7)(d)1. for a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of:

(i) The end of the tenth (10th) year following the policy or certificate issue date; or (ii) The end of the second (2nd) year following the date the policy or certificate is no longer subject to attained age rating.

(e) Nonforfeiture credits may be used for all care and services qualifying for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.

(8) All benefits paid by the insurer while the policy or certificate is in premium paying status and in the paid up status will not exceed the maximum benefits which would be payable if the policy or certificate had remained in premium paying status.

(9) There shall be no difference in the minimum nonforfeiture benefits as required under this paragraph for group and individual policies.

(10) The requirements set forth in this rule shall become effective twelve (12) months after the effective date of this rule and shall apply as follows:

(a) Except as provided in Paragraph (10)(b), the provisions of this paragraph apply to any long-term care policy issued in this state on or after the effective date of this rule.

(b) For certificates issued on or after the effective date of this rule, under a group long-term care insurance policy as defined in this Chapter, which policy was in force at the time this amended rule became effective, the provisions of this paragraph shall not apply.

(11) Premiums charged for a policy or certificate containing nonforfeiture benefits or a contingent benefit upon lapse shall be subject to the loss ratio requirements of Rule 0780-1-61-.19 treating the policy as a whole.

(12) To determine whether contingent nonforfeiture benefit upon lapse provisions are triggered under Paragraph (6)(c) of this rule, a replacing insurer that purchased or otherwise assumed a block or blocks of long-term care insurance policies from another insurer shall calculate the percentage increase based on the initial annual premium paid by the insured when the policy was first purchased from the original insurer.

(13) A nonforfeiture benefit for qualified long-term care insurance contracts that are level premium contracts shall be offered that meets the following requirements:

(a) The nonforfeiture provision shall be appropriately captioned;

(b) The nonforfeiture provision shall provide a benefit available in the event of a default in the payment of any premiums and shall state that the amount of the benefit may be adjusted subsequent to being initially granted only as necessary to reflect changes in claims, persistency and interest as reflected in changes in rates for premium paying contracts approved by the Commissioner for the same contract form; and (c) The nonforfeiture provision shall provide at least one (1) of the following:

1. Reduced paid-up insurance;

2. Extended term insurance;

3. Shortened benefit period; or 4. Other similar offerings approved by the Commissioner.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.27 STANDARDS FOR BENEFIT TRIGGERS

(1) A long-term care insurance policy shall condition the payment of benefits on a determination of the insured’s ability to perform activities of daily living and on cognitive impairment. Eligibility for the payment of benefits shall not be more restrictive than requiring either a deficiency in the ability to perform not more than three (3) of the activities of daily living or the presence of cognitive impairment.

(2) (a) Activities of daily living shall include at least the following, as defined in Rule 0780-1- 61-.05 and in the policy:

1. Bathing;

2. Continence;

3. Dressing;

4. Eating;

5. Toileting; and 6. Transferring.

(b) Insurers may use activities of daily living to trigger covered benefits in addition to those contained in Paragraph (2)(a) of this rule as long as they are defined in the policy.

(3) An insurer may use additional provisions for the determination of when benefits are payable under a policy or certificate; however the provisions shall not restrict, and are not in lieu of, the requirements contained in Paragraphs (1) and (2) of this rule.

(4) For purposes of this rule, the determination of a deficiency shall not be more restrictive than:

(a) Requiring the hands-on assistance of another person to perform the prescribed activities of daily living; or (b) If the deficiency is due to the presence of a cognitive impairment, supervision or verbal cueing by another person is needed in order to protect the insured or others.

(5) Assessments of activities of daily living and cognitive impairment shall be performed by licensed or certified professionals, such as physicians, nurses or social workers.

(6) Long term care insurance policies shall include a clear description of the process for appealing and resolving benefit determinations.

(7) The requirements set forth in this rule shall be effective twelve (12) months after the effective date of this rule and shall apply as follows:

(a) Except as provided in subparagraph (b) of this paragraph, the provisions of this rule apply to a long-term care policy issued in this state on or after the effective date of the

rule.

(b) For certificates issued on or after the effective date of this paragraph, under a group long-term care insurance policy as defined in this Chapter that was in force at the time this amended rule became effective, the provisions of this paragraph shall not apply.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.28 ADDITIONAL STANDARDS FOR BENEFIT TRIGGERS FOR QUALIFIED LONG-

TERM CARE INSURANCE CONTRACTS.

(1) For purposes of this rule the following definitions apply:

(a) “Qualified long-term care services” means services that meet the requirements of

Section 7702B(c)(l) of the Internal Revenue Code of 1986, as amended, as follows: necessary diagnostic, preventive, therapeutic, curative, treatment, mitigation and rehabilitative services, and maintenance or personal care services which are required by a chronically ill individual, and are provided pursuant to a plan of care prescribed by a licensed health care practitioner.

(b) 1. “Chronically ill individual” has the meaning prescribed for this term by Section 7702B(c)(2) of the Internal Revenue Code of 1986, as amended. Under this provision, a “chronically ill individual” means any individual who has been certified by a licensed health care practitioner as:

(i) Being unable to perform (without substantial assistance from another individual) at least two (2) activities of daily living for a period of at least ninety (90) days due to a loss of functional capacity; or (ii) Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment.

2. The term “chronically ill individual” shall not include an individual otherwise meeting these requirements unless within the preceding twelve-month period a licensed health care practitioner has certified that the individual meets these requirements.

(c) “Licensed health care practitioner” means a physician, as defined in 42 USC 1395x(r), a registered professional nurse, licensed social worker or other individual who meets requirements prescribed by the Secretary of the Treasury.

(d) “Maintenance or personal care services” means any care the primary purpose of which is the provision of needed assistance with any of the disabilities as a result of which the individual is a chronically ill individual (including the protection from threats to health and safety due to severe cognitive impairment).

(2) A qualified long term care insurance contract shall pay only for qualified long term care services received by a chronically ill individual provided pursuant to a plan of care prescribed by a licensed health care practitioner.

(3) A qualified long-term care insurance contract shall condition the payment of benefits on a determination of the insured’s inability to perform activities of daily living for an expected period of at least ninety (90) days due to a loss of functional capacity or to severe cognitive impairment.

(4) Certifications regarding activities of daily living and cognitive impairment required pursuant to Paragraph (3) of this rule shall be performed by the following licensed or certified professionals: physicians, registered professional nurses, licensed social workers, or other individuals who meet the requirements prescribed by the Secretary of the Treasury.

(5) Certifications required pursuant to Paragraph (3) of this rule may be performed by a licensed health care professional at the direction of the carrier as is reasonably necessary with respect to a specific claim, except that when a licensed health care practitioner has certified that an insured is unable to perform activities of daily living for an expected period of at least ninety (90) days due to a loss of functional capacity and the insured is in claim status, the certification may not be rescinded and additional certifications may not be performed until after the expiration of the ninety-day period.

(6) Qualified long-term care insurance contracts shall include a clear description of the process for appealing and resolving disputes with respect to benefit determinations.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.29 STANDARD FORMAT OUTLINE OF COVERAGE

(1) This paragraph implements, interprets and makes specific, the provisions of T.C.A. § 56-42- 105(g) in prescribing a standard format and the content of an outline of coverage.

(a) The outline of coverage shall be a free-standing document, using no smaller than tenpoint type.

(b) The outline of coverage shall contain no material of an advertising nature.

(c) Text that is capitalized or underscored in the standard format outline of coverage may be emphasized by other means that provide prominence equivalent to the capitalization or underscoring.

(d) Use of the text and sequence of text of the standard format outline of coverage is mandatory, unless otherwise specifically indicated.

(e) All outlines of coverage used in this state shall be in a format identical or substantially similar to the sample format in Appendix H to this Chapter.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original rule filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.30 REQUIREMENT TO DELIVER SHOPPER’S GUIDE

(1) A long-term care insurance shopper’s guide in the format developed by the National Association of Insurance Commissioners, or a guide developed or approved by the Commissioner, shall be provided to all prospective applicants of a long-term care insurance policy or certificate.

(a) In the case of insurance producer solicitations, an insurance producer must deliver the shopper’s guide prior to the presentation of an application or enrollment form.

(b) In the case of direct response solicitations, the shopper’s guide must be presented in conjunction with any application or enrollment form.

History

• Authority: T.C.A. § 56-42-105.
• Administrative History: Original filed June 15, 2005; effective August 29, 2005.

Tenn. Comp. R. & Regs. 0780-01-61-.31 LONG-TERM CARE INSURANCE PARTNERSHIP PROGRAM

(1) In accordance with Section 6021 of the Deficit Reduction Act of 2005 (Pub.L. 109-171) and in addition to the applicable provisions of this Chapter, the provisions of this Rule shall apply to any Qualified State Long-Term Care Insurance Partnership Policy.

(2) As used in this Rule, “Qualified State Long-Term Care Insurance Partnership Policy” or “Partnership Policy” means an insurance policy that:

(a) Covers an insured who was a resident of Tennessee, or another state that has a Partnership Program, when coverage first became effective under the policy;

(b) Is a qualified long-term care insurance policy as defined in Section 7702B(b) of the Internal Revenue Code of 1986 and was issued no earlier than February 8, 2006;

(c) Meets all the applicable requirements of this Chapter and the requirements of the National Association of Insurance Commissioners’ Long-Term Care Insurance Model Act and Model Regulation as those requirements are set forth in Section 1917(b)(5)(A) of the Social Security Act (42 U.S.C. 1396p(b)(5)(A)); and (d) Provides the following inflation protections:

1. For a person who is less than sixty-one (61) years of age as of the date of purchase of the policy, the policy provides compound annual inflation protection;

2. For a person who is at least sixty-one (61) years of age but less than seventy-six (76) years of age as of the date of purchase of the policy, the policy provides some level of inflation protection; and 3. For a person who is at least seventy-six (76) years of age as of the date of purchase of the policy, the policy may provide inflation protection, but is not required.

(3) (a) An insurer or its agent, soliciting or offering to sell a policy that is intended to qualify as a Partnership Policy, shall provide to each prospective applicant a Long-Term Care Insurance Partnership Program Notice in a form identical to or substantially similar to

Appendix K, outlining the requirements and benefits of a partnership policy. A similar notice may be used for this purpose if filed and approved by the commissioner. The Partnership Program Notice shall be provided with the required Outline of Coverage.

(b) An insurer or its agent, soliciting or offering to sell a policy that is intended to qualify as a Partnership Policy, shall provide to each prospective applicant a pamphlet approved by the Commissioner that explains rules regarding Medicaid eligibility. Copies of the pamphlet can be accessed through request to the Department or on the Department’s web site.

(c) A Partnership Policy issued or issued for delivery in Tennessee shall be accompanied by a Long-Term Care Insurance Partnership Disclosure Notice in a form identical to or substantially similar to Appendix L explaining the benefits associated with a Partnership Policy and indicating that at the time issued, the policy is a Qualified State Long-Term Care Insurance Partnership Policy. A similar notice may be used if filed and approved by the Commissioner. The Partnership Disclosure Notice shall also include a statement indicating that by purchasing this Partnership Policy, the insured does not automatically qualify for Medicaid.

(4) (a) A Partnership Policy shall not be issued or issued for delivery in Tennessee unless filed with and approved by the Commissioner. Any policy submitted for certification as a Partnership Policy shall be accompanied by an Issuer Certification Form identical to

Appendix M, or a similar form filed and approved by the Commissioner.

(b) A policy which was issued on or after February 8, 2006 and which otherwise satisfied all the terms and requirements to be a Partnership Policy shall be eligible for an exchange to a Partnership Policy on or after October 1, 2008. The insurer that issued such a policy shall be required to either issue a Partnership Rider amending the existing policy or exchange the existing policy for a Partnership Policy. Such rider may be issued or such exchange made only after the policy to which it pertains has been filed and approved by the Commissioner as a Partnership Policy under the process set forth in Subparagraph (4)(a) of this Rule. The insurer shall provide the insured with the same materials as those issued to the purchaser of a new policy, as provided in Paragraph (3) above.

(c) Insurers requesting to make use of a previously approved policy form as a Qualified State Long-Term Care Partnership Policy shall submit to the Commissioner an Issuer Certification Form signed by an officer of the company.

(5) (a) An individual may not sell, solicit or negotiate long-term care insurance unless the individual is licensed as an insurance producer who is currently licensed to sell long term care insurance and has completed a one-time training course by or before July 1, 2009. An individual who is not licensed to sell long-term care insurance by July 1, 2008, must take the one-time training course before beginning to sell long-term care products. Individuals who are not already exempt from continuing education requirements under T.C.A. § 56-6-107(c), must also complete continuing education courses every twenty-four (24) months. The training must meet the requirements set forth in subsection (b) of this Paragraph.

(b) 1. The one-time training required by this Rule shall be no less than eight (8) hours and the ongoing training required by this Rule shall be no less than four (4) hours.

2. The training required under subdivision Paragraph (5)(b)1. shall consist of topics related to long-term care insurance, long-term care services and, if applicable, qualified state long-term care insurance partnership programs, including, but not limited to:

(i) State and federal regulations and requirements and the relationship between qualified state long-term care insurance partnership programs and other public and private coverage of long-term care services, including Medicaid;

(ii) Available long-term services and providers;

(iii) Changes or improvements in long-term care services or providers;

(iv) Alternatives to the purchase of private long-term care insurance;

(v) The effect of inflation on benefits and the importance of inflation protection; and (vi) Consumer suitability standards and guidelines.

3. The training required by this Rule shall not include training that is insurer or company product specific or that includes any sales or marketing information, materials, or training, other than those required by state or federal law.

4. Non-resident insurance producers who meet the education and training requirements of their home state will be deemed to meet the requirements for education and training in this state.

(c) 1. Insurers subject to this Chapter shall obtain verification that a producer has received training required by this Rule before a producer is permitted to sell, solicit or negotiate the insurer’s long-term care insurance products, maintain records subject to the state’s record retention requirements, and make that verification available to the commissioner upon request.

2. Insurers subject to this Chapter shall maintain records with respect to the training of its producers concerning the distribution of its partnership policies that will allow the Commissioner to provide assurance to the state Medicaid agency that producers have received the training contained in this Rule and that producers have demonstrated an understanding of Partnership Policies and their relationship to public and private coverage of long-term care, including Medicaid, in this state. These records shall be made available to the Commissioner upon request.

History

• Authority: Pub.L. 109-171, § 6021(a)(1), 42 U.S.C. § 1396p(b), T.C.A. §§ 56-6-107, 56-8-101 et seq, 56-8-104, 56-42-101, et seq, 56-42-105, 56-42-109, 56-42-110, The TN Medicaid State Plan, TN 08-001, eff. 10/1/08, and 2008 Tenn. Pub. Act Ch. 1058.
• Administrative History: Original rule filed November 24, 2008; effective February 7, 2009. APPENDIX A NOTICE TO APPLICANT REGARDING REPLACEMENT OF INDIVIDUAL ACCIDENT AND SICKNESS OR LONG-TERM CARE INSURANCE [INSURANCE COMPANY NAME AND ADDRESS] SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE. According to [your application] [information you have furnished] you intend to lapse or otherwise terminate existing accident and sickness or long-term care insurance and replace it with an individual long-term care insurance policy to be issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy. (Rule 0780-01-61, Appendix A, continued) You should review this new coverage carefully, comparing it with all accident and sickness or long-term care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision. Statement To Applicant By Insurance producer [Broker Or Other Representative]: (Use additional sheets, as necessary.) I have reviewed your current medical or health insurance coverage. I believe the replacement of insurance involved in this transaction materially improves your position. My conclusion has taken into account the following considerations, which I call to your attention: 1. Health conditions that you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy. 2. State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. The insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy. 3. If you are replacing existing long-term care insurance coverage, you may wish to secure the advice of your present insurer or its insurance producer regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage. 4. [To be included only if the application is attached to the policy.] If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, read the copy of the application attached to your new policy and be sure that all questions are answered fully and correctly. Omissions or misstatements in the application could cause an otherwise valid claim to be denied. Failure to include all material medical information on the application may provide a basis for the company to deny any future claims and to refund your premium as though your policy had never been in force. Carefully check the application and write to [company name and address] within thirty (30) days if any information is not correct and complete, or if any past medical history has been left out of the application. The above “Notice to Applicant” was delivered to me on: ____________________________________ (Date) ____________________________________ (Applicant’s Signature) APPENDIX B NOTICE TO APPLICANT REGARDING REPLACEMENT OF ACCIDENT AND SICKNESS OR LONG- TERM CARE INSURANCE [INSURANCE COMPANY NAME AND ADDRESS] SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FURTURE. According to [your application] [information you have furnished] you intend to lapse or otherwise terminate existing accident and sickness or long-term care insurance and replace it with the long-term care insurance policy delivered herewith issued by [company name] Insurance Company. Your new policy provides thirty (30) days within which you may decide, without cost, whether you desire to keep the policy. For your own information and protection, you should be aware of and seriously consider certain factors which may affect the insurance protection available to you under the new policy. You should review this new coverage carefully, comparing it with all accident and sickness or long-term (Rule 0780-01-61, Appendix B, continued) care insurance coverage you now have, and terminate your present policy only if, after due consideration, you find that purchase of this long-term care coverage is a wise decision. Statement To Applicant By Insurance Producer [Broker Or Other Representative]: (Use additional sheets, as necessary.) I have reviewed your current medical or health insurance coverage. I believe the replacement of insurance involved in this transaction materially improves your position. My conclusion has taken into account the following considerations, which I call to your attention: 1. Health conditions that you may presently have (preexisting conditions), may not be immediately or fully covered under the new policy. This could result in denial or delay in payment of benefits under the new policy, whereas a similar claim might have been payable under your present policy. 2. State law provides that your replacement policy or certificate may not contain new preexisting conditions or probationary periods. The insurer will waive any time periods applicable to preexisting conditions or probationary periods in the new policy (or coverage) for similar benefits to the extent such time was spent (depleted) under the original policy. 3. If you are replacing existing long-term care insurance coverage, you may wish to secure the advice of your present insurer or its insurance producer regarding the proposed replacement of your present policy. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage. 4. [To be included only if the application is attached to the policy.] If, after due consideration, you still wish to terminate your present policy and replace it with new coverage, read the copy of the application attached to your new policy and be sure that all questions are answered fully and correctly. Omissions or misstatements in the application could cause an otherwise valid claim to be denied. Failure to include all material medical information on the application may provide a basis for the company to deny any future claims and to refund your premium as though your policy had never been in force. Carefully check the application and write to [company name and address] within thirty (30) days if any information is not correct and complete, or if any past medical history has been left out of the application. The above “Notice to Applicant” was delivered to me on: ____________________________________ (Date) ____________________________________ (Applicant’s Signature) APPENDIX C RESCISSION REPORTING FORM FOR LONG-TERM CARE POLICIES FOR THE STATE OF TENNESSEE FOR THE REPORTING YEAR _______ Company Name: _______________________________________________ NAIC Number: ________ Company Address: ______________________________________________________________________ Contact Person: ________________________________________________ Phone No. ____________ E-mail address: (Rule 0780-01-61, Appendix C, continued) ________________________________________________________________________ Due: March 1 annually Instructions: The purpose of this form is to report all rescissions of long-term care insurance policies or certificates. Those rescissions voluntarily effectuated by an insured are not required to be included in this report. Name of Insured Policy/Ce rtificate # Policy Form # Date of Policy Issuance Date(s) Claim(s) submitted Date of Rescissio n Detailed Reason for Rescissio n Signature: ____________________________________________________________________________________ __ Name and Title Date APPENDIX D LONG TERM CARE INSURANCE PERSONAL WORKSHEET People buy long-term care insurance for many reasons. Some don’t want to use their own assets to pay for long-term care. Some buy insurance to make sure they can choose the type of care they get. Others don’t want their family to have to pay for care or don’t want to go on Medicaid. But long term care insurance may be expensive and may not be right for everyone. By state law, the insurance company must fill out part of the information on this worksheet and ask you to fill out the rest to help you and the company decide if you should buy this policy. Premium Information. Policy Form Number(s) _____________________ The premium for the coverage you are considering will be [$_________ per month, or $_______ per year,] [a one-time single premium of $__.] Type of Policy (non-cancelable/guaranteed renewable): ________________________________ The Company’s Right to Increase Premiums: _______________________________________ [The company cannot raise your rates on this policy.] [The company has a right to increase premiums on this policy form in the future, provided it raises rates for all policies in the same class in this state.] Insurers shall use appropriate bracketed statement. Rate guarantees shall not be shown on this form. Rate Increase History. (Rule 0780-01-61, Appendix D, continued) The company has sold long-term care insurance since [year] and has sold this policy since [year]. [The company has never raised its rates for any long-term care policy it has sold in this state or any other state.] [The company has not raised its rates for this policy form or similar policy forms in this state or any other state in the last 10 years.] [The company has raised its premium rates on this policy form or similar policy forms in the last 10 years. Following is a summary of the rate increase(s).] The insurer shall list each premium increase it has instituted on this or similar policy forms in this state or any other state during the last 10 years. The list shall provide the policy form, the calendar years the form was available for sale, and the calendar year and the amount (percentage) of each increase. The insurer shall provide minimum and maximum percentages if the rate increase is variable by rating characteristics. The insurer may provide, in a fair manner, additional explanatory information as appropriate. Questions Related to Your Income. How will you pay each year’s premium? …From my Income …From my Savings\Investments …My Family will Pay … Have you considered whether you could afford to keep this policy if the premiums went up, for example, by 20%? …Yes …No What is your annual income? …Under $10,000 …$10,000 - 20,000 …$20,000 - 30,000 …$30,000 - 50,000 …Over $50,000 How do you expect your income to change over the next 10 years? …No change …Increase …Decrease If you will be paying premiums with money received only from your own income, a rule of thumb is that you may not be able to afford this policy if the premiums will be more than 7% of your income. Will you buy inflation protection? … Yes … No If not, how you will pay for the difference between future costs and your daily benefit amount? …From my Income …From my Savings\Investments …My Family will Pay The national average annual cost of care in [insert year] was [insert $ amount], but this figure varies across the country. In ten years the national average annual cost would be about [insert $ amount] if costs increase 5% annually. What elimination period are you considering? Number of days _______ Approximate cost for that period of care: $________ How are you planning to pay for your care during the elimination period? (Rule 0780-01-61, Appendix D, continued) …From my Income …From my Savings\Investments …My Family will Pay Questions Related to Your Savings and Investments. Not counting your home, about how much are all of your assets (your savings and investments) worth? …Under $20,000 …$20,000 - $30,000 …$30,000 - $50,000 …Over $50,000 How do you expect your assets to change over the next ten years? …Stay about the same …Increase …Decrease If you are buying this policy to protect your assets and your assets are less than $30,000, you may wish to consider other options for financing your long-term care. DISCLOSURE STATEMENT … The answers to the questions above describe my financial situation. or … I choose not to complete this information. … I acknowledge that the carrier and/or its insurance producer (below) has reviewed this form with me including the premium, premium rate increase history and potential for premium increases in the future. [For direct mail situations, use the following: I acknowledge that I have reviewed this form including the premium, premium rate increase history and potential for premium increases in the future.] I understand the above disclosures. I understand that the rates for this policy may increase in the future. (This box must be checked). Signed:_____________________________________ ______________________________ (Applicant) (Date) … I explained to the applicant the importance of completing this information. Signed:___________________________________ ______________________________ (Insurance producer) (Date) Insurance producer’s Printed Name: ___________________________________ (Rule 0780-01-61-.28, Appendix D, continued) In order for us to process your application, please return this signed statement to [name of company], along with your application. … My insurance producer has advised me that this policy does not seem to be suitable for me. However, I still want the company to consider my application. Signed:_____________________________________ ______________________________ (Applicant) (Date) The company may contact you to verify your answers. APPENDIX E THINGS YOU SHOULD KNOW BEFORE YOU BUY LONG-TERM CARE INSURANCE Long-Term Care Insurance A long-term care insurance policy may pay most of the costs for your care in a nursing home. Many policies also pay for care at home or other community settings. Since policies can vary in coverage, you should read this policy and make sure you understand what it covers before you buy it. You should not buy this insurance policy unless you can afford to pay the premiums every year. Remember that the company can increase premiums in the future. The personal worksheet includes questions designed to help you and the company determine whether this policy is suitable for your needs. Medicare Medicare does not pay for most long-term care. TennCare Medicaid Your choice of long-term care services may be limited if you are receiving TennCare. To learn more about TennCare, contact the TennCare Bureau. Shopper’s Guide Make sure the insurance company or insurance producer gives you a copy of a book called the National Association of Insurance Commissioners, “Shopper’s Guide to Long-Term Care Insurance”. Read it carefully. If you have decided to apply for long-term care insurance, you have the right to return the policy within 30 days and get back any premium you have paid if you are dissatisfied for any reason or choose not to purchase the policy. Counseling Free counseling and additional information about long-term care insurance are available through your state’s insurance counseling program. Contact your state insurance department or department on aging for more information about the senior health insurance counseling program in your state. Facilities Some long-term care insurance contracts provide for benefit payments in certain facilities only if they are licensed or certified, such as in assisted living centers. However, not all states regulate these facilities in the same way. Also, many people move to a different state from where they purchased their long-term care insurance policy. Read the (Rule 0780-01-61-.28, Appendix E, continued) policy carefully to determine what types of facilities qualify for benefit payments, and to determine that payment for a covered service will be made if you move to a state that has a different licensing scheme for facilities than the one in which you purchased the policy. APPENDIX F LONG-TERM CARE INSURANCE SUITABILITY LETTER Dear [Applicant]: Your recent application for long-term care insurance included a “personal worksheet,” which asked questions about your finances and your reasons for buying long-term care insurance. For your protection, state law requires us to consider this information when we review your application, to avoid selling a policy to those who may not need coverage. [Your answers indicate that long-term care insurance may not meet your financial needs. We suggest that you review the information provided along with your application, including the booklet “Shopper’s Guide to Long-Term Care Insurance” and the page titled “Things You Should Know Before Buying Long- Term Care Insurance.” Your state insurance department also has information about long-term care insurance and may be able to refer you to a counselor free of charge who can help you decide whether to buy this policy.] [You chose not to provide any financial information for us to review.] We have suspended our final review of your application. If, after careful consideration, you still believe this policy is what you want, check the appropriate box below and return this letter to us within the next 60 days. We will then continue reviewing your application and issue a policy if you meet our medical standards. If we do not hear from you within the next 60 days, we will close your file and not issue you a policy. You should understand that you will not have any coverage until we hear back from you, approve your application and issue you a policy. Please check one box and return in the enclosed envelope. … Yes, although my worksheet indicates that long-term care insurance may not be a suitable purchase, I wish to purchase this coverage. Please resume review of my application. … No, I have decided not to buy a policy at this time. Signed: ___________________________________ ______________________ (Applicant’s Signature) (Date) Please return to [issuer] at [address] by [date]. APPENDIX G CLAIMS DENIAL REPORTING FORM FOR LONG-TERM CARE INSURANCE FOR THE STATE OF TENNESSEE FOR THE REPORTING YEAR _______ Company Name: _______________________________________________ NAIC Number: ________ Company Address: ______________________________________________________________________ Contact Person: ________________________________________________ Phone No. ____________ E-mail address: ________________________________________________________________________ Line of Business: _____Individual Group Due: June 30 annually Instructions The purpose of this form is to report all long-term care claim denials under in-force long-term care insurance policies. “Denied” means a claim that is not paid for any reason other than for claims not paid for failure to meet the waiting period or because of an applicable preexisting condition. State Data Nationwide Data 1 Total Number of Long-Term Care Claims Reported 2 Total Number of Long-Term Care Claims Denied/Not Paid Number of Claims Not Paid due to Preexisting Condition Exclusion Number of Claims Not Paid due to Waiting (Elimination) Period Not Met Net Number of Long-Term Care Claims Denied for Reporting Purposes (Line 2 Minus Line 3 Minus Line Percentage of Long-Term Care Claims Denied of Those Reported (Line 5 Divided By Line 1) 7 Number of Long-Term Care Claim Denied due to: Long-Term Care Services Not Covered under the Policy 9 Provider/Facility Not Qualified under the Policy Benefit Eligibility Criteria Not Met Other Notes: 1. The nationwide data may be viewed as a more representative and credible indicator where the data for claims reported and denied for your state are small in number. 2. Example-home health care claim filed under a nursing home only policy. 3. Example-a facility that does not meet the minimum level of care requirements or the licensing requirements as outlined in the policy. 4. Examples-a benefit trigger not met, certification by a licensed health care practitioner not provided, no plan of care. APPENDIX H FORMAT FOR OUTLINE OF COVERAGE FOR LONG-TERM CARE INSURANCE [Company Name] [Address - City & State] [Telephone Number] Long-Term Care Insurance Outline Of Coverage [Policy Number or Group Master Policy and Certificate Number] [Except for policies or certificates which are guaranteed issue, the following caution statement, or language substantially similar, must appear as follows in the outline of coverage.] Caution: The issuance of this long-term care insurance [policy] [certificate] is based upon your responses to the questions on your application. A copy of your [application] [enrollment form] [is enclosed] [was retained by you when you applied]. If your answers are incorrect or untrue, the company has the right to deny benefits or rescind your policy. The best time to clear up any questions is now, before a claim arises! If, for any reason, any of your answers are incorrect, contact the company at this address: [insert address] 1. This policy is [an individual policy of insurance] [a group policy] which was issued in the [indicate jurisdiction in which group policy was issued]. 2. Purpose Of Outline Of Coverage. This outline of coverage provides a very brief description of the important features of the policy. You should compare this outline of coverage to outlines of coverage for other policies available to you. This is not an insurance contract, but only a summary of coverage. Only the individual or group policy contains governing contractual provisions. This means that the policy or group policy sets forth in detail the rights and obligations of both you and the insurance company. Therefore, if you purchase this coverage, or any other coverage, it is important that you Read Your Policy (Or Certificate) Carefully! 3. Federal Tax Consequences. This [policy] [certificate] is intended to be a federally tax-qualified long-term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986, as amended. OR Federal Tax Implications of this [policy] [certificate]. This [policy] [certificate] is not intended to be a federally tax-qualified long-term care insurance contract under Section 7702B(b) of the Internal Revenue Code of 1986, as amended. Benefits received under the [policy] [certificate] may be taxable as income. 4. Terms Under Which The Policy Or Certificate May Be Continued In Force Or Discontinued. (a) For long-term care health insurance policies or certificates describe one of the following permissible policy renewability provisions: (1) [Policies and certificates that are guaranteed renewable shall contain the following statement:] Renewability: This Policy [Certificate] Is Guaranteed Renewable. This means you have the right, subject to the terms of your policy, [certificate] to continue this policy as long as you pay your premiums on time. [Company Name] cannot change any of the terms of your policy on its own, except that, in the future, it may increase the premium you pay. (2) [Policies and certificates that are non-cancelable shall contain the following statement:] Renewability: This Policy [Certificate] Is Noncancellable. This means that you have the right, subject to the terms of your policy, to continue this policy as long as you pay your premiums on time. [Company Name] cannot change (Rule 0780-01-61-.28, Appendix H, continued) any of the terms of your policy on its own and cannot change the premium you currently pay. However, if your policy contains an inflation protection feature where you choose to increase your benefits, [Company Name] may increase your premium at that time for those additional benefits. (b) [For group coverage, specifically describe continuation/conversion provisions applicable to the certificate and group policy.] (c) [Describe waiver of premium provisions or state that there are not such provisions.] 5. Terms Under Which The Company May Change Premiums. [In bold type larger than the maximum type required to be used for the other provisions of the outline of coverage, state whether or not the company has a right to change the premium, and if a right exists, describe clearly and concisely each circumstance under which the premium may change.] 6. Terms Under Which The Policy Or Certificate May Be Returned And Premium Refunded. (a) [Provide a brief description of the “right to return-free look” provision of the policy.] (b) [Include a statement that the policy either does or does not contain provisions providing for a refund or partial refund of premium upon the death of an insured or surrender of the policy or certificate. If the policy contains such provisions, include a description of them.] 7. This Is Not Medicare Supplement Coverage. If you are eligible for Medicare, review the Medicare Supplement Buyer’s Guide available from the insurance company. (a) [For insurance producers] Neither [insert company name] nor its insurance producers represent Medicare, the federal government or any state government. (b) [For direct response] [insert company name] is not representing Medicare, the federal government or any state government. 8. Long-Term Care Coverage. Policies of this category are designed to provide coverage 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, such as in a nursing home, in the community or in the home. This policy provides coverage in the form of a fixed dollar indemnity benefit for covered long-term care expenses, subject to policy [limitations] [waiting periods] and [coinsurance] requirements. [Modify this paragraph if the policy is not an indemnity policy.] 9. Benefits Provided By This Policy. (a) [Covered services, related deductibles, waiting periods, elimination periods and benefit maximums.] (b) [Institutional benefits, by skill level.] (c) [Non-institutional benefits, by skill level.] (d) Eligibility for Payment of Benefits [Activities of daily living and cognitive impairment shall be used to measure an insured’s need for long-term care and must be defined and described as part of the outline of coverage.] [Any additional benefit triggers must also be explained. If these triggers differ for different benefits, explanation of the triggers should accompany each benefit description. If an attending physician or other specified person must certify a certain level of functional dependency in order to be eligible for benefits, this too must be specified.] [If activities of daily living (ADLs) are used to measure an insured’s need for long-term care, then these qualifying criteria or screens must be explained. 10. Limitations And Exclusions. [Describe:] (a) Preexisting conditions; (b) Non-eligible facilities and provider; (c) Non-eligible levels of care (e.g., unlicensed providers, care or treatment provided by a (Rule 0780-01-61-.28, Appendix H, continued) family member, etc.); (d) Exclusions and exceptions; (e) Limitations. [This section should provide a brief specific description of any policy provisions which limit, exclude, restrict, reduce, delay, or in any other manner operate to qualify payment of the benefits described in Number 6 above.] This policy may not cover all the expenses associated with your long-term care needs. 11. Relationship Of Cost Of Care And Benefits. Because the costs of long-term care services will likely increase over time, you should consider whether and how the benefits of this plan may be adjusted. [As applicable, indicate the following:] (a) That the benefit level will not increase over time; (b) Any automatic benefit adjustment provisions; (c) Whether the insured will be guaranteed the option to buy additional benefits and the basis upon which benefits will be increased over time if not by a specified amount or percentage; (d) If there is such a guarantee, include whether additional underwriting or health screening will be required, the frequency and amounts of the upgrade options, and any significant restrictions or limitations; (e) And finally, describe whether there will be any additional premium charge imposed, and how that is to be calculated. 12. Alzheimer’s Disease And Other Organic Brain Disorders. [State that the policy provides coverage for insureds clinically diagnosed as having Alzheimer’s disease or related degenerative and dementing illnesses. Specifically describe each benefit screen or other policy provision which provides preconditions to the availability of policy benefits for such an insured.] 13. Premium. [(a) State the total annual premium for the policy;] [(b) If the premium varies with an applicant’s choice among benefit options, indicate the portion of annual premium which corresponds to each benefit option.] 14. Additional Features. [(a) Indicate if medical underwriting is used;] [(b) Describe other important features.] APPENDIX I LONG-TERM CARE INSURANCE POTENTIAL RATE INCREASE DISCLOSURE FORM [Insurers shall provide all of the following information to the applicant:] 1. [Premium Rate] [Premium Rate Schedules]: [Premium rate] [Premium rate schedules] that [is][are] applicable to you and that will be in effect until a request is made and [filed][approved] for an increase [is][are] [on the application][$]) Drafting Note: Use “approved” in states requiring prior approval of rates. 2. The [premium] [premium rate schedule] for this policy [will be shown on the schedule page of] [will be attached to] your policy. 3. Rate Schedule Adjustments: (Rule 0780-01-61, Appendix I, continued) The company will provide a description of when premium rate or rate schedule adjustments will be effective (e.g., next anniversary date, next billing date, etc.) (fill in the blank): __________________. 4. Potential Rate Revisions: This policy is Guaranteed Renewable. This means that the rates for this product may be increased in the future. Your rates cannot be increased due to your increasing age or declining health, but your rates may go up based on the experience of all policyholders with a policy similar to yours. If you receive a premium rate or premium rate schedule increase in the future, you will be notified of the new premium amount and you will be able to exercise at least one of the following options: ƒ Pay the increased premium and continue your policy in force as is. ƒ Reduce your policy benefits to a level such that your premiums will not increase. (Subject to state law minimum standards.) ƒ Exercise your nonforfeiture option if purchased. (This option is available for purchase for an additional premium.) ƒ Exercise your contingent nonforfeiture rights. (This option may be available if you do not purchase a separate nonforfeiture option.) Contingent Nonforfeiture If the premium rate for your policy goes up in the future and you didn’t buy a nonforfeiture option, you may be eligible for contingent nonforfeiture. Here’s how to tell if you are eligible: You will keep some long-term care insurance coverage, if: • Your premium after the increase exceeds your original premium by the percentage shown (or more) in the following table; and • You lapse (not pay more premiums) within 120 days of the increase. The amount of coverage (i.e., new lifetime maximum benefit amount) you will keep will equal the total amount of premiums you’ve paid since your policy was first issued. If you have already received benefits under the policy, so that the remaining maximum benefit amount is less than the total amount of premiums you’ve paid, the amount of coverage will be that remaining amount. Except for this reduced lifetime maximum benefit amount, all other policy benefits will remain at the levels attained at the time of the lapse and will not increase thereafter. Should you choose this Contingent Nonforfeiture option, your policy, with this reduced maximum benefit amount, will be considered “paid-up” with no further premiums due. Example: • You bought the policy at age 65 and paid the $1,000 annual premium for 10 years, so you have paid a total of $10,000 in premium. • In the eleventh year, you receive a rate increase of 50%, or $500 for a new annual premium of $1,500, and you decide to lapse the policy (not pay any more premiums). • Your “paid-up” policy benefits are $10,000 (provided you have a least $10,000 of benefits remaining under your policy.) (Rule 0780-01-61, Appendix I, continued) CONTINGENT NONFORFEITURE CUMULATIVE PREMIUM INCREASE OVER INITIAL PREMIUM THAT QUALIFIES FOR CONTINGENT NONFORFEITURE (Percentage increase is cumulative from date of original issue. It does not represent a one-time increase.) Issue Age Percent Increase Over Initial Premium 29 and under 200% 30-34 190% 35-39 170% 40-44 150% 45-49 130% 50-54 110% 55-59 90% 60 70% 61 66% 62 62% 63 58% 64 54% 65 50% 66 48% 67 46% 68 44% 69 42% 70 40% 71 38% 72 36% 73 34% 74 32% 75 30% 76 28% 77 26% 78 24% 79 22% 80 20% 81 19% 82 18% 83 17% 84 16% 85 15% 86 14% 87 13% 88 12% 89 11% 90 and over 10% APPENDIX J LONG-TERM CARE INSURANCE REPLACEMENT AND LAPSE REPORTING FORM FOR THE STATE OF TENNESSEE FOR REPORTING YEAR ________ Company Name: _______________________________________________ NAIC Number: ________ Company Address: ______________________________________________________________________ Contact Person: ________________________________________________ Phone No. ____________ E-mail address: ________________________________________________________________________ Due: June 30 annually INSTRUCTIONS The purpose of this form is to report on a statewide basis information regarding long-term care insurance policy replacements and lapses. Specifically, every insurer shall maintain records for each insurance producer on that insurance producer’s amount of long-term care insurance replacement sales as a percent of the insurance producer’s total annual sales and the amount of lapses of long-term care insurance policies sold by the insurance producer as a percent of the insurance producer’s total annual sales. The tables below should be used to report the ten percent (10%) of the insurer’s insurance producers with the greatest percentages of replacements and lapses. Listing of the 10% of Insurance producers with the Greatest Percentage of Replacements Insurance Producer’s Name Number of Policies Sold By This Insurance Producer Number of Policies Replaced By This Insurance Producer Number of Replacements As % of Number Sold By This Insurance Producer Listing of the 10% of Insurance producers with the Greatest Percentage of Lapses Insurance Producer’s Name Number of Policies Sold By This Insurance Producer Number of Policies Lapsed By This Insurance Producer Number of Lapses As % of Number Sold By This Insurance Producer COMPANY TOTALS: Percentage of Replacement Policies Sold to Total Annual Sales ____% Percentage of Replacement Policies Sold to Policies In Force ____% (as of the end of the preceding calendar year) Percentage of Lapsed Policies to Total Annual Sales _____% Percentage of Lapsed Policies to Policies In Force (as of the end of the preceding calendar year) _____% APPENDIX K LONG-TERM CARE INSURANCE PARTNERSHIP PROGRAM NOTICE IMPORTANT CONSUMER INFORMATION REGARDING THE TENNESSEE LONG-TERM CARE INSURANCE PARTNERSHIP PROGRAM Some long-term care insurance [policies] [certificates] sold in Tennessee may qualify for the Tennessee Long-Term Care Insurance Partnership Program (the Partnership Program). The Partnership Program is a partnership between state government and private insurance companies to assist individuals in planning their long-term care needs. Insurance companies voluntarily agree to participate in the Partnership Program by offering long-term care insurance coverage that meets certain State and Federal requirements. Long-term care insurance policies [certificates] that qualify as Partnership Policies [Certificates] may protect the [policyholder’s] [certificateholder's] assets through a feature known as “Asset Disregard” under TennCare, Tennessee’s Medicaid program. Asset Disregard means that an amount of the [policyholder’s] [certificateholder’s] assets equal to the amount of long-term care insurance benefits received under a qualified Partnership [Policy] [Certificate] will be disregarded for the purpose of determining the insured’s eligibility for Medicaid. This generally allows a person to keep assets equal to the insurance benefits received under a qualified Partnership [Policy] [Certificate] without affecting the person’s eligibility for Medicaid. All other Medicaid eligibility criteria will apply and special rules may apply to persons whose home equity exceeds $500,000. Asset Disregard is not available under a long-term care insurance [policy] [certificate] that is not a Partnership [Policy] [Certificate]. Therefore, you should consider if Asset Disregard is important to you, and whether a Partnership Policy meets your needs. The purchase of a Partnership Policy does not automatically qualify you for Medicaid. What are the Requirements for a Partnership [PoIicy] [Certificate]? In order for a [policy] [certificate] to qualify as a Partnership [Policy] [Certificate], it must, among other requirements: • be issued to an individual on or after February 8, 2006; • cover an individual who was a Tennessee resident when coverage first becomes effective under the policy; • be a tax-qualified policy under § 7702(B)(b) of the Internal Revenue Code of 1986; • meet stringent consumer protection standards; and • meet the following inflation requirements: o For ages 60 or younger - provides compound annual inflation protection o For ages 61 to 75 -provides some level of inflation protection o For ages 76 and older - no purchase of inflation protection is required If you apply and are approved for long-term care insurance coverage, [carrier name] will provide you with written documentation as to whether or not your [policy] [certificate] qualifies as a Partnership [Policy] [Certificate]. What Could Disqualify a [Policy] [Certificate] as a Partnership Policy. Certain types of changes to a Partnership [Policy] [Certificate] could affect whether or not such [policy] [certificate] continues to be a Partnership [Policy] [Certificate]. If you purchase a Partnership [Policy] [Certificate] and later decide to make any changes, you should first consult with [carrier name] to determine the effect of a proposed change. In addition, if you move to a state that does not maintain a Partnership Program or does not recognize your [policy] [certificate] as a Partnership [Policy] [Certificate], you would not receive beneficial treatment of your [policy] [certificate] under the Medicaid program of that state. The information contained in this disclosure is based on current Tennessee and Federal laws. These laws may be subject to change. Any change in law could reduce or eliminate the beneficial treatment of your [policy] [certificate] under Tennessee’s Medicaid program. (Rule 0780-01-61, Appendix K, continued) Additional Information. If you have questions regarding long-term care insurance [policies] [certificates] please contact [carrier name.] If you have questions regarding current laws governing Medicaid eligibility, you should contact the Bureau of TennCare. APPENDIX L LONG-TERM CARE INSURANCE PARTNERSHIP STATUS DISCLOSURE NOTICE IMPORTANT INFORMATION REGARDING YOUR [POLICY’S] [CERTIFICATE’S] LONG-TERM CARE INSURANCE PARTNERSHIP STATUS This disclosure notice is issued in conjunction with your long-term care policy: Some long-term care insurance [policies] [certificates] sold in Tennessee qualify for the Tennessee Long- Term Care Insurance Partnership Program. Insurance companies voluntarily agree to participate in the Partnership Program by offering long-term care insurance coverage that meets certain State and Federal requirements. Long-term care insurance [policies] [certificates] that qualify as Partnership [Policies] [Certificates] may be entitled to special treatment, and in particular an “Asset Disregard,” under Tennessee’s Medicaid program. Asset Disregard means that an amount of the [policyholder’s] [certificateholder’s] assets equal to the amount of long-term care insurance benefits received under a qualified Partnership [Policy] [Certificate] will be disregarded for the purpose of determining the insured’s eligibility for Medicaid. This generally allows a person to keep assets equal to the insurance benefits received under a qualified Partnership [Policy] [Certificate] without affecting the person’s eligibility for Medicaid. All other Medicaid eligibility criteria will apply and special rules may apply to persons whose home equity exceeds $[500,000]. Asset Disregard is not available under a long-term care insurance [policy] [certificate] that is not a Partnership [Policy] [Certificate]. The purchase of this Partnership Policy does not automatically qualify you for Medicaid. Partnership [Policy] [Certificate] Status. Your long-term care insurance [policy] [certificate] is intended to qualify as a Partnership [Policy] [Certificate] under the Tennessee Long-Term Care Partnership Program as of your [Policy's] [Certificate’s] effective date. What Could Disqualify Your [Policy] [Certificate] as a Partnership Policy. If you make any changes to your [policy] [certificate], such changes could affect whether your [policy] [certificate] continues to be a Partnership Policy. Before you make any changes, you should consult with [insert name of carrier] to determine the effect of a proposed change. In addition, if you move to a State that does not maintain a Partnership Program or does not recognize your [policy] [certificate] as a Partnership [Policy] [Certificate], you would not receive beneficial treatment of your [policy] [certificate] under the Medicaid program of that State. The information contained in this Notice is based on current State and Federal laws. These laws may be subject to change. Any change in law could reduce or eliminate the beneficial treatment of your [policy] [certificate] under Tennessee’s Medicaid program. Additional Information. If you have questions regarding your insurance [policy] [certificate] please contact [insert name of carrier.] If you have questions regarding current laws governing Medicaid eligibility, you should contact the Bureau of TennCare. (Rule 0780-01-61, Appendix M, continued) APPENDIX M ISSUER CERTIFICATION FORM (relating to Qualified State Long-Term Care Insurance Partnership) Under Section 1917(b)(5)(B)(iii) of the Social Security Act (42 U.S.C. 1396p(b)(5)(B)(iii)), the State insurance commissioner of a State implementing a qualified State long-term care insurance partnership (“Qualified Partnership”) may certify that long-term care insurance policies (including certificates issued under a group insurance contract) covered under the Qualified Partnership meet certain consumer protection requirements, and policies so certified are deemed to satisfy such requirements. These consumer protection requirements are set forth in Section 1917(b)(5)(A) of the Social Security Act (42 U.S.C. 1396p(b)(5)(A)) and principally include certain specified provisions of the Long-Term Care Insurance Model Regulation and Long-Term Care Insurance Model Act promulgated by the National Association of Insurance Commissioners (as adopted as of October 2000) (referred to herein as the “2000 Model Regulation” and “2000 Model Act” respectively). In order to provide each State insurance commissioner with information necessary to provide a certification for policies, this Issuer Certification Form requests information and a certification from issuers of long-term care insurance policies with respect to policy forms that may be covered under the Qualified Partnership of the State. An insurance company may request certification of policies from time to time and, accordingly, may supplement this issuer certification form, e.g., as it introduces new long-term care insurance policy forms for issuance. I. GENERAL INFORMATION A. Name, address and telephone number of issuer: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ B. Name, address, telephone number, and email address (if available) of an employee of issuer who will be the contact person for information relating to this form: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ C. Policy form number(s) (or other identifying information, such as certificate series) for policies covered by this Issuer Certification Form: _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Specimen copies of each of the above policy forms, including any riders and endorsements, shall be provided upon request. (Rule 0780-01-61, Appendix M, continued) II. QUESTIONS REGARDING APPLICABLE PROVISIONS OF THE 2000 MODEL REGULATION AND 2000 MODEL ACT Please answer each of the questions below with respect to the policy forms identified in Section I.C above. For purposes of answering the questions below, any provision of the 2000 Model Regulation or 2000 Model Act listed below shall be treated as including any other provision of the 2000 Model Regulation or 2000 Model Act necessary to implement the provision. Are the following requirements of the 2000 Model Regulation met with respect to all policies (including certificates issued under a group insurance contract) intended to be covered under the Qualified Partnership that are issued on each of the policy forms identified in Section I.C above? Yes ___ No ___ N/A ___ A. Section 6A (relating to guaranteed renewal or noncancellability), other than paragraph (5) thereof, and the requirements of Section 6B of the 2000 Model Act relating to such section 6A. Yes ___ No ___ N/A ___ B. Section 6B (relating to prohibitions on limitations and exclusions) other than paragraph (7) thereof. Yes ___ No ___ N/A ___ C. Section 6C (relating to extension of benefits). Yes ___ No ___ N/A ___ D. Section 6D (relating to continuation or conversion of coverage). Yes ___ No ___ N/A ___ E. Section 6E (relating to discontinuance and replacement of policies). Yes ___ No ___ N/A ___ F. Section 7 (relating to unintentional lapse). Yes ___ No ___ N/A ___ G. Section 8 (relating to disclosure), other than Sections 8F, 8G, 8H, and 8I thereof. Yes ___ No ___ N/A ___ H. Section 9 (relating to required disclosure of rating practices to consumer). Yes ___ No ___ N/A ___ I. Section 11 (relating to prohibitions against post-claims underwriting). Yes ___ No ___ N/A ___ J. Section 12 (relating to minimum standards). Yes ___ No ___ N/A ___ K. Section 14 (relating to application forms and replacement coverage). Yes ___ No ___ N/A ___ L. Section 15 (relating to reporting requirements). Yes ___ No ___ N/A ___ M. Section 22 (relating to filing requirements for marketing). Yes ___ No ___ N/A ___ N. Section 23 (relating to standards for marketing), including inaccurate completion of medical histories, other than paragraphs (1), (6), and (9) of Section 23C. Yes ___ No ___ N/A ___ O. Section 24 (relating to suitability). Yes ___ No ___ N/A ___ P. Section 25 (relating to prohibition against preexisting conditions and probationary periods in replacement policies or certificates). (Rule 0780-01-61, Appendix M, continued) Yes ___ No ___ N/A ___ Q. The provisions of section 26 relating to contingent nonforfeiture benefits, if the policyholder declines the offer of a nonforfeiture provision described in Section 7702B(g)(4) of the Internal Revenue Code of 1986 (26 U.S.C. 7702B(g)(4)). Yes ___ No ___ N/A ___ R. Section 29 (relating to standard format outline of coverage). Yes ___ No ___ N/A ___ S. Section 30 (relating to requirement to deliver shopper’s guide). Are the following requirements of the 2000 Model Act met with respect to all policies (including certificates issued under a group insurance contract) intended to be covered under the Qualified Partnership that are issued on each of the policy forms identified in section I.C above? Yes ___ No ___ N/A ___ A. Section 6C (relating to preexisting conditions). Yes ___ No ___ N/A ___ B. Section 6D (relating to prior hospitalization). Yes ___ No ___ N/A ___ C. The provisions of Section 8 relating to contingent nonforfeiture benefits. Yes ___ No ___ N/A ___ D. Section 6F (relating to right to return). Yes ___ No ___ N/A ___ E. Section 6G (relating to outline of coverage). Yes ___ No ___ N/A ___ F. Section 6H (relating to requirements for certificates under group plans). Yes ___ No ___ N/A ___ G. Section 6J (relating to policy summary). Yes ___ No ___ N/A ___ H. Section 6K (relating to monthly reports on accelerated death benefits). Yes ___ No ___ N/A ___ I. Section 7 (relating to incontestability period). In order for a policy to be covered under the Qualified Partnership of the State, the answers to all questions above should be “yes” (or “N/A” where all requirements with respect to a provision above are not applicable). If answers differ between policy forms (e.g., a requirement would be answered “Yes” for one form and “N/A” for another), you should use separate Issuer Certification Forms for such policies. III. CERTIFICATION I hereby certify that the answers, accompanying documents, and other information set forth herein are, to the best of my knowledge and belief, true, correct, and complete. _________________ __________________________________ Date Name and title of officer of the Issuer __________________________________ Signature of officer of the Issuer

Chapter 0780-01-62 Life, Accident and Health Reinsurance Agreements

Tenn. Comp. R. & Regs. 0780-01-62-.01 AUTHORITY

This Chapter is adopted and promulgated by the Commissioner of the Department of Commerce and Insurance for the State of Tennessee pursuant to Section 56—1—701 and 56—2—301 of the Tennessee Code Annotated.

History

• Authority: T.C.A. §§ 56—1—701 and 56—2—301.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994.

Tenn. Comp. R. & Regs. 0780-01-62-.02 PREAMBLE

(1)The Tennessee Department of Commerce and Insurance recognizes that licensed insurers routinely enter into reinsurance agreements that yield legitimate relief to the ceding insurer from strain to surplus.

(2)However, it is improper for a licensed insurer, in the capacity of ceding insurer, to enter into reinsurance agreements for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business being reinsured. In substance or effect, the expected potential liability to the ceding insurer remains basically unchanged by the improper reinsurance transaction, notwithstanding certain risk elements in the reinsurance agreement, such as catastrophic mortality or extraordinary survival. The terms of such improper agreements referred to herein and described in

Rule 0780—1—62—.04:

(a)Violate T.C.A. §§56—1—501 and 56—1—503 requiring sworn financial statements to properly reflect the financial condition of the ceding insurer and requiring assets and liabilities to be computed and allowed in accordance with the statutes stated therein and related rules;

(b)May cause an agreement resulting in a ceding insurer improperly reducing liabilities or establishing assets for reinsurance ceded; and (c)May cause the application of any Sections of the insurance code including Title 56, Chapter 9, or regulations relating to creating a situation where an insurer may be hazardous, financially or otherwise, to policyholders, creditors and/or the public.

History

• Authority: T.C.A. §§56—1—501, 56—1—701, 56—2—301 and 56—9—508.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994.

Tenn. Comp. R. & Regs. 0780-01-62-.03 SCOPE

This regulation shall apply to all licensed domestic life and accident and health insurers and to all other licensed life and accident and health insurers which are not subject to a substantially similar regulation in their domiciliary state. This regulation shall also similarly apply to licensed property and casualty insurers with respect to their accident and health business.

This regulation shall not apply to assumption reinsurance, yearly renewable term reinsurance and certain nonproportional reinsurance such as stop loss or catastrophe reinsurance.

History

• Authority: T.C.A. §§56—1—701 and 56—2—301.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994.

Tenn. Comp. R. & Regs. 0780-01-62-.04 ACCOUNTING REQUIREMENTS

(1)No insurer subject to this regulation shall, for reinsurance ceded, reduce any liability or establish any asset in any financial statement filed with the Department if, by the terms of the reinsurance agreement, in substance or effect, any of the following conditions exist:

(a)Renewal expense allowances provided or to be provided to the ceding insurer by the reinsurer in any accounting period, are not sufficient to cover anticipated allocable renewal expenses of the ceding insurer on the portion of the business reinsured, unless a liability is established for the present value of the shortfall (using assumptions equal to the applicable statutory reserve basis on the business reinsured). Those expenses include commissions, premium taxes and direct expenses including, but not limited to, billing, valuation, claims and maintenance expected by the company at the time the business is reinsured;

(b)The ceding insurer can be deprived of surplus or assets at the reinsurer’s option or automatically upon the occurrence of some event, such as the insolvency of the ceding insurer, except that termination of the reinsurance agreement by the reinsurer for nonpayment of reinsurance premiums or other amounts due, such as modified coinsurance reserve adjustments, interest and adjustments on funds withheld, and tax reimbursements, shall not be considered to be such a deprivation of surplus or assets;

(c)The ceding insurer is required to reimburse the reinsurer for negative experience under the reinsurance agreement, except that neither offsetting experience refunds against current and prior years’ losses under the agreement nor payment by the ceding insurer of an amount equal to the current and prior years’ losses under the agreement upon voluntary termination of in force reinsurance by the ceding insurer shall be considered such a reimbursement to the reinsurer for negative experience. Voluntary termination does not include situations where termination occurs because of unreasonable provisions which allow the reinsurer to reduce its risk under the agreement. An example of such a provision is the right of the reinsurer to increase reinsurance premiums or risk and expense charges to excessive levels forcing the ceding company to prematurely terminate the reinsurance treaty;

(d)The ceding insurer must, at specific points in time scheduled in the agreement, terminate or automatically recapture all or part of the reinsurance ceded;

(e)The reinsurance agreement involves the possible payment by the ceding insurer to the reinsurer of amounts other than from income realized from the reinsured policies. For example, it is improper for a ceding company to pay reinsurance premiums, or other fees or charges to a reinsurer which are greater than the direct premiums collected by the ceding company;

(f)The treaty does not transfer all of the significant risk inherent in the business being reinsured. The following table identifies for a representative sampling of products or type of business, the risks which are considered to be significant. For products not specifically included, the risks determined to be significant shall be consistent with this table.

Risk categories: 1.Morbidity 2.Mortality 3.Lapse This is the risk that a policy will voluntarily terminate prior to the recoupment of a statutory surplus strain experienced at issue of the policy. 4.Credit Quality (C1)

This is the risk that invested assets supporting the reinsured business will decrease in value. The main hazards are that assets will default or that there will be a decrease in earning power. It excludes market value declines due to changes in interest rate. 5.Reinvestment (C3)

This is the risk that interest rates will fall and funds reinvested (coupon payments or monies received upon asset maturity or call) will therefore earn less than expected. If asset durations are less than liability durations, the mismatch will increase. 6.Disintermediation (C3)

This is the risk that interest rates rise and policy loans and surrenders increase or maturing contracts do not renew at anticipated rates of renewal. If asset durations are greater than the liability durations, the mismatch will increase. Policyholders will move their funds into new products offering higher rates. The company may have to sell assets at a loss to provide for these withdrawals. + = Significant 0 = Insignificant RISK CATEGORY From Subsection(1)(f) above PRODUCTS OR TYPE OF BUSINESS1 2 3 4 5 6 Health Insurance — other than LTC/LTD*+ 0 + 0 0 0 Health Insurance — LTC/LTD*+ 0 + + + 0 Immediate Annuities0 + 0 + + 0 Single Premium Deferred Annuities0 0 + + + + Flexible Premium Deferred Annuities0 0 + + + + Guaranteed Interest Contracts0 0 0 + + + Other Annuity Deposit Business0 0 + + + + March, 19943 Single Premium Whole Life0 + + + + + Traditional Non—Par Permanent0 + + + + + Traditional Non—Par Term0 + + 0 0 0 Traditional Par Permanent0 + + + + + Traditional Par Term0 + + 0 0 0 Adjustable Premium Permanent0 + + + + + Indeterminate Premium Permanent0 + + + + + Universal Life Flexible Premium0 + + + + + Universal Life Fixed Premium0 + + + + + Universal Life Fixes Premium dump—in premiums allowed0 + + + + + *LTC = Long Term Care Insurance LTD = Long Term Disability Insurance (g)1.The credit quality, reinvestment, or disintermediation risk is significant for the business reinsured and the ceding company does not (other than for the classes of business excepted in Paragraph (1)(g)2. either transfer the underlying assets to the reinsurer or legally segregate such assets in a trust or escrow account or otherwise establish a mechanism satisfactory to the commissioner which legally segregates, by contract or contract provision, the underlying assets. 2.Notwithstanding the requirements of Paragraph (1)(g)1., the assets supporting the reserves for the following classes of business and any classes of business which do not have a significant credit quality, reinvestment or disintermediation risk may be held by the ceding company without segregation of such assets:

Health Insurance — LTC/LTD Traditional Non—Par Permanent Traditional Par Permanent Adjustable Premium Permanent Indeterminate Premium Permanent Universal Life Fixed Premium (no dump—in premiums allowed)

The associated formula for determining the reserve interest rate adjustment must use a formula which reflects the ceding company’s investment earning and incorporates all realized and unrealized gains and losses reflected in the statutory statement. The following is an acceptable formula:

Rate = 2 ( I + CG)

X+Y-I-CG

Where:Iis the net investment income CGis capital gains less capital losses Xis the current year cash and invested assets plus investment income due and accrued less borrowed money Yis the same as X but for the prior year (h)Settlements are made less frequently than quarterly or payments due from the reinsurer are not made in cash within ninety (90) days of the settlement date.

(i)The ceding insurer is required to make representations or warranties not reasonably related to the business being reinsured.

(j)The ceding insurer is required to make representations or warranties about future performance of the business being reinsured.

(k)The reinsurance agreement is entered into for the principal purpose of producing significant surplus aid for the ceding insurer, typically on a temporary basis, while not transferring all of the significant risks inherent in the business reinsured and, in substance or effect, the expected potential liability to the ceding insurer remains basically unchanged.

(2)Notwithstanding Paragraph (1), an insurer subject to this regulation may, with the prior approval of the commissioner, take such reserve credit or establish such asset as the commissioner may deem consistent with the Insurance Laws, Rules or Regulations, including actuarial interpretations or standards adopted by the Department.

(3)(a)Agreements entered into after the effective date of this regulation which involve the reinsurance of business issued prior to the effective date of the agreements, along with any subsequent amendments thereto, shall be filed by the ceding company with the commissioner within thirty (30) days from its date of execution. Each filing shall include data detailing the financial impact of the transaction. The ceding insurer’s actuary who signs the financial statement actuarial opinion with respect to valuation of reserves shall consider this regulation and any applicable actuarial standards of practice when determining the proper credit in financial statements filed with the department. The actuary should maintain adequate documentation and be prepared upon request to describe the actuarial work performed for inclusion in the financial statements and to demonstrate that such work conforms to this regulation.

(b)Any increase in surplus net of federal income tax resulting from arrangements described in Paragraph (3)(a) shall be identified separately on the insurer’s statutory financial statement as a surplus item (aggregate write-ins for gains and losses in surplus in the Capital and Surplus Account, page 4 of the Annual Statement) and recognition of the surplus increase as income shall be reflected on a net of tax basis in the “Reinsurance ceded” line, page 4 of the Annual Statement as earnings emerge from the business reinsured. {For example, on the last day of calendar year N, company XYZ pays a $20 million initial commission and expense allowance to company ABC for reinsuring an existing block of business. Assuming a 34% tax rate, the net increase in surplus at inception is $13.2 million ($20 million — $6.8 million) which is reported on the “Aggregate write-ins for gains and losses in surplus” line in the Capital and Surplus account. $6.8 million (34% of $20 million) is reported as income on the “Commissions and expense allowances on reinsurance ceded” line of the Summary of Operations.

At the end of year N+1 the business has earned $4 million. ABC has paid $.5 million in profit and risk charges in arrears for the year and has received a $1 million experience refund. Company ABC’s annual statement would report $1.65 million (66% of ($4 million — $1 million — $.5 million) up to a maximum of $13.2 million) on the “Commissions and expense allowance on reinsurance ceded” line of the Summary of Operations, and =$1.65 million on the “Aggregate write-ins for gains and losses in surplus” line of the Capital and Surplus account. The experience refund would be reported separately as a miscellaneous income item in the Summary of Operations.}

History

• Authority: T.C.A. §§56—1—501, 56—1—701 and 56—2—301.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994.

Tenn. Comp. R. & Regs. 0780-01-62-.05 WRITTEN AGREEMENTS

(1)No reinsurance agreement or amendment to any agreement may be used to reduce any liability or to establish any asset in any financial statement filed with the Department, unless the agreement, amendment or a binding letter of intent has been duly executed by both parties no later than the “as of date” of the financial statement.

(2)In the case of a letter of intent, a reinsurance agreement or an amendment to a reinsurance agreement must be executed within a reasonable period of time, not exceeding ninety (90) days from the execution date of the letter of intent, in order for credit to be granted for the reinsurance ceded.

(3)The reinsurance agreement shall contain provisions which provide that:

(a)The agreement shall constitute the entire agreement between the parties with respect to the business being reinsured thereunder and that there are no understandings between the parties other than as expressed in the agreement; and (b)Any change or modification to the agreement shall be null and void unless made by amendment to the agreement and signed by both parties.

History

• Authority: T.C.A. §§56—1—701 and 56—2—301.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994.

Tenn. Comp. R. & Regs. 0780-01-62-.06 EXISTING AGREEMENTS

Insurers subject to this regulation shall reduce to zero by December 31, 1996 any reserve credits or assets established with respect to reinsurance agreements entered into prior to the effective date of this regulation which, under the provisions of this

regulation would not be entitled to recognition of the reserve credits or assets; provided, however, that the reinsurance agreements will not entitle the ceding company to any recognition of reserve credits or assets prior to December 31, 1996 if the agreements were not in compliance with laws or regulations in existence immediately preceding the effective date of this

regulation.

History

• Authority: T.C.A. §§56—1—701 and 56—2—301.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994.

Tenn. Comp. R. & Regs. 0780-01-62-.07 SEVERABILITY

If any provisions of this regulation, or their application to any person or circumstance, is held invalid, such determination shall not affect other provisions or applications of this regulation which can be given effect without the invalid provision or application, and to that end the provisions of this regulation are separable.

History

• Authority: T.C.A. §§56—1—701 and 56—2—301.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994.

Chapter 0780-01-63 Credit for Reinsurance

Tenn. Comp. R. & Regs. 0780-01-63-.01 AUTHORITY

This chapter is promulgated pursuant to the authority granted by T.C.A. §§ 56-2-208(b)(6), 56-2- 209(e), and 56-2-301.

History

• Authority: T.C.A. §§ 56-2-280(b)(6), 56-2-209(e), and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rules filed March 2, 2018; effective May 31, 2018.

Tenn. Comp. R. & Regs. 0780-01-63-.02 PURPOSE

The purpose of this chapter is to set forth rules and procedural requirements that the commissioner deems necessary to carry out the provisions of T.C.A. §§ 56-2-208 and 56-2-209. The actions and information required by this chapter are hereby declared to be necessary and appropriate in the public interest and for the protection of the ceding insurers and policyholders in this state.

History

• Authority: T.C.A. §§ 56-2-208, 56-2-209, 56-2-209(e), and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rules filed March 2, 2018; effective May 31, 2018.

Tenn. Comp. R. & Regs. 0780-01-63-.03 CREDIT FOR REINSURANCE – REINSURER LICENSED IN THIS STATE

Pursuant to T.C.A. § 56-2-208(b)(2), the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that was licensed in this state as of any date on which statutory financial statement credit for reinsurance is claimed.

History

• Authority: T.C.A. §§ 56-2-208(1), 56-2-208(b)(2), 56-2-209(e), and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rules filed March 2, 2018; effective May 31, 2018.

Tenn. Comp. R. & Regs. 0780-01-63-.04 , Rule 0780-01-63-.05, Rule 0780-01-63-.06, Rule 0780-01-63-.07 or Rule 0780-01-63-.10 or otherwise in compliance with T.C.A. §§ 56-2-208 and 56-2-209 after the adoption of this chapter unless the reinsurance agreement:

(1) Includes a proper insolvency clause, which stipulates that reinsurance is payable directly to liquidator or successor without diminution regardless of the status of the ceding company, pursuant to T.C.A. § 56-2-207;

(2) Includes a provision pursuant to T.C.A. § 56-2-208(b) whereby the assuming insurer, if an unauthorized assuming insurer, has submitted to the jurisdiction of an alternative dispute resolution panel or court of competent jurisdiction within the United States, has agreed to comply with all requirements necessary to give such court or panel jurisdiction, has designated an agent upon whom service of process may be effected, and has agreed to abide by the final decision of the court or panel; and (3) Includes a proper reinsurance intermediary clause, if applicable, which stipulates that the credit risk for the intermediary is carried by the assuming insurer.

History

• Authority: T.C.A. §§ 56-2-207, 56-2-208, 56-2-209, 56-2-209(e), and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rules filed March 2, 2018; effective May 31, 2018. Rule was originally numbered 0780-01-63-.13 but was renumbered 0780- 01-63-.14 with the introduction of a new rule 0780-01-63-.08 filed March 2, 2022; effective May 31, 2022. Amendments filed March 2, 2022; effective May 31, 2022.

Tenn. Comp. R. & Regs. 0780-01-63-.05 CREDIT FOR REINSURANCE – REINSURER DOMICILED AND LICENSED

IN ANOTHER STATE.

(1) Pursuant to T.C.A. § 56-2-208(b)(4) the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that as of any date on which statutory financial statement credit for reinsurance is claimed:

(a) Is domiciled in (or, in the case of a United States branch of an alien assuming insurer, is entered through) a state that employs standards regarding credit for reinsurance substantially similar to those applicable under T.C.A. §§ 56-2-208 and 56-2-209 and this chapter;

(b) Maintains a surplus as regards policyholders in an amount not less than twenty million dollars ($20,000,000); and (c) Files a properly executed Form AR-1 (Appendix A of this chapter) with the commissioner as evidence of its submission to this state’s authority to examine its books and records.

(2) The provisions of this rule relating to surplus as regards policyholders shall not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system. As used in this rule, “substantially similar” standards means credit for reinsurance standards that the commissioner determines in the commissioner’s sole discretion to equal or exceed the standards of T.C.A. §§ 56-2-208 and 56-2-209 and this

chapter.

History

• Authority: T.C.A. §§ 56-2-208, 56-2-209, and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rules filed March 2, 2018; effective May 31, 2018.

Tenn. Comp. R. & Regs. 0780-01-63-.06 CREDIT FOR REINSURANCE – REINSURERS MAINTAINING TRUST FUNDS

(1) Pursuant to T.C.A. § 56-2-208(b)(5), the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer which, as of any date on which statutory financial statement credit for reinsurance is claimed, and thereafter for so long as credit for reinsurance is claimed, maintains a trust fund in an amount prescribed below in a qualified United States financial institution as defined in T.C.A. § 56-2-209(d), for the payment of the valid claims of its United States domiciled ceding insurers, their assigns and successors in interest. The assuming insurer shall report annually to the commissioner substantially the same information as that required to be reported on the National Association of Insurance Commissioners annual statement form by licensed insurers, to enable the commissioner to determine the sufficiency of the trust fund.

(2) The following requirements apply to the following categories of assuming insurer:

(a) 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 United States domiciled 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 subparagraph (b) of this paragraph.

(b) At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three (3) 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 United States 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 thirty percent (30%) of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers covered by the trust.

(c) 1. The trust fund for a group including incorporated and individual unincorporated underwriters shall consist of:

(i) For reinsurance ceded under reinsurance agreements with an inception, amendment or renewal date on or after January 1, 1993, funds in trust in an amount not less than the respective underwriters' several liabilities attributable to business ceded by United States domiciled ceding insurers to any underwriter of the group;

(ii) For reinsurance ceded under reinsurance agreements with an inception date on or before December 31, 1992, and not amended or renewed after that date, notwithstanding the other provisions of this chapter, funds in trust in an amount not less than the respective underwriters' several insurance and reinsurance liabilities attributable to business written in the United States; and (iii) In addition to these trusts, the group shall maintain a trusteed surplus of which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of the United States domiciled ceding insurers of any member of the group for all the years of the account.

2. 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. The group shall, within ninety (90) days after its financial statements are due to be filed with the group's domiciliary regulator, provide to the commissioner:

(i) An annual certification by the group's domiciliary regulator of the solvency of each underwriter member of the group; or (ii) If a certification is unavailable, a financial statement, prepared by independent public accountants, of each underwriter member of the group.

(d) 1. The trust fund for a group of incorporated insurers under common administration, whose members possess aggregate policyholders surplus of ten billion dollars ($10,000,000,000) (calculated and reported in substantially the same manner as prescribed by the annual statement instructions and Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners) and which has continuously transacted an insurance business outside the United States for at least three (3) years immediately prior to making application for accreditation, shall:

(i) Consist of funds in trust in an amount not less than the assuming insurers' several liabilities attributable to business ceded by United States domiciled ceding insurers to any members of the group pursuant to reinsurance contracts issued in the name of such group;

(ii) Maintain a joint trusteed surplus of which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of United States domiciled ceding insurers of any member of the group; and (iii) File with the commissioner a properly executed Form AR-1 (Appendix A of this chapter) as evidence of the submission to this state's authority to examine the books and records of any of its members and shall certify that any member examined will bear the expense of any such examination.

2. Within ninety (90) days after the statements are due to be filed with the group's domiciliary regulator, the group shall file with the commissioner an annual certification of each underwriter member's solvency by the member's domiciliary regulators, and financial statements, prepared by independent public accountants, of each underwriter member of the group.

(3) (a) Credit for reinsurance shall not be granted unless the form of the trust and any amendments to the trust have been approved by either the commissioner of the state where the trust is domiciled or the commissioner of another state who, pursuant to the terms of the trust instrument, has accepted responsibility for regulatory oversight of the trust. 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:

1. Contested claims shall be valid and enforceable out of funds in trust to the extent remaining unsatisfied thirty (30) days after entry of the final order of any court of competent jurisdiction in the United States;

2. Legal title to the assets of the trust shall be vested in the trustee for the benefit of the grantor's United States ceding insurers, their assigns and successors in interest;

3. The trust shall be subject to examination as determined by the commissioner;

4. The trust shall remain in effect for as long as the assuming insurer, or any member or former member of a group of insurers, shall have outstanding obligations under reinsurance agreements subject to the trust; and 5. No later than February 28 of each year the trustees of the trust shall report to the commissioner in writing setting forth the balance in 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 shall not expire prior to the following December 31.

(b) 1. Notwithstanding any other provisions of the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by this paragraph or if the granter 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 over the trust or other designated receiver 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 over the trust in accordance with the laws of the state in which the trust is domiciled applicable to the liquidation of domestic insurance companies.

3. If the commissioner with regulatory oversight over the trust determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the United States beneficiaries of the trust, the commissioner with regulatory oversight over the trust shall return the assets, or any part thereof, to the trustee for distribution in accordance with the trust agreement.

4. The grantor shall waive any right otherwise available to it under United States law that is inconsistent with this provision.

(4) For purposes of this rule, the term “liabilities” shall mean the assuming insurer's gross liabilities attributable to reinsurance ceded by United States domiciled insurers excluding liabilities that are otherwise secured by acceptable means, and, shall include:

(a) For business ceded by domestic insurers authorized to write accident and health, and property and casualty insurance:

1. Losses and allocated loss expenses paid by the ceding insurer, recoverable from the assuming insurer;

2. Reserves for losses reported and outstanding;

3. Reserves for losses incurred but not reported;

4. Reserves for allocated loss expenses; and 5. Unearned premiums.

(b) For business ceded by domestic insurers authorized to write life, health, and annuity insurance:

1. Aggregate reserves for life policies and contracts net of policy loans and net due and deferred premiums;

2. Aggregate reserves for accident and health policies;

3. Deposit funds and other liabilities without life or disability contingencies; and 4. Liabilities for policy and contract claims.

(5) Assets deposited in trusts established pursuant to T.C.A. § 56-2-208(b) and this rule shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States financial institution as defined in T.C.A. § 56-2-209(c), clean, irrevocable, unconditional and “evergreen” letters of credit issued or confirmed by a qualified United States financial institution, as defined in T.C.A. § 56-2-209(c), and investments of the type specified in this paragraph, but investments in or issued by an entity controlling, controlled by or under common control with either the grantor or the beneficiary of the trust shall not exceed five percent (5%) of total investments. No more than twenty percent (20%) of the total of the investments in the trust may be foreign investments authorized under Rule 0780-01-63-.06(5)(a)5., Rule 0780-01-63-.06(5)(c), Rule 0780-01-63-.06(5)(f)2., or Rule 0780-01-63-.06(5)(g), and no more than ten percent (10%) of the total of the investments in the trust may be securities denominated in foreign currencies.

For purposes of applying the preceding sentence, a depository receipt denominated in United States dollars and representing rights conferred by a foreign security shall be classified as a foreign investment denominated in a foreign currency. The assets of a trust established to satisfy the requirements of T.C.A. § 56-2-208(b) shall be invested only as follows:

(a) Government obligations that are not in default as to principal or interest, that are valid and legally authorized and that are issued, assumed or guaranteed by:

1. The United States or by any agency or instrumentality of the United States;

2. A state of the United States;

3. A territory, possession or other governmental unit of the United States;

4. An agency or instrumentality of a governmental unit referred to in parts 2. and 3. of this subparagraph if the obligations shall be by law (statutory or otherwise) payable, as to both principal and interest, from taxes levied or by law required to be levied or from adequate special revenues pledged or otherwise appropriated or by law required to be provided for making these payments, but shall not be obligations eligible for investment under this paragraph if payable solely out of special assessments on properties benefited by local improvements; or 5. The government of any other country that is a member of the Organization for Economic Cooperation and Development and whose government obligations are rated A or higher, or equivalent, by a rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners;

(b) Obligations that are issued in the United States, or that are dollar denominated and issued in a non-United States market, by a solvent United States institution (other than an insurance company) or that are assumed or guaranteed by a solvent United States institution (other than an insurance company) and that are not in default as to principal or interest if the obligations:

1. Are rated A or higher (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners, or if not so rated, are similar in structure and other material respects to other obligations of the same institution that are so rated;

2. Are insured by at least one authorized insurer (other than the investing insurer or a parent, subsidiary or affiliate of the investing insurer) licensed to insure obligations in this state and, after considering the insurance, are rated AAA (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners; or 3. Have been designated as Class One or Class Two by the Securities Valuation Office of the National Association of Insurance Commissioners;

(c) Obligations issued, assumed or guaranteed by a solvent non-United States institution chartered in a country that is a member of the Organization for Economic Cooperation and Development or obligations of United States corporations issued in a non-United States currency, provided that in either case the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners;

(d) An investment made pursuant to the provisions of Rule 0780-01-63-.06(5)(a), (b) or (c) shall be subject to the following additional limitations:

1. An investment in or loan upon the obligations of an institution other than an institution that issues mortgage-related securities shall not exceed five percent (5%) of the assets of the trust;

2. An investment in any one mortgage-related security shall not exceed five percent (5%) of the assets of the trust;

3. The aggregate total investment in mortgage-related securities shall not exceed twenty-five percent (25%) of the assets of the trust; and 4. Preferred or guaranteed shares issued or guaranteed by a solvent United States institution are permissible investments if all of the institution's obligations are eligible as investments under Rule 0780-01-63-.06(5)(b)1. and 3. but shall not exceed two percent (2%) of the assets of the trust.

(e) As used in this chapter:

1. “Mortgage-related security” means an obligation that is rated AA or higher (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners and that either:

(i) Represents ownership of one or more promissory notes or certificates of interest or participation in the notes (including any rights designed to assure servicing of, or the receipt or timeliness of receipt by the holders of the notes, certificates, or participation of amounts payable under, the notes, certificates, or participation), that:

(I) Are directly secured by a first lien on a single parcel of real estate, including stock allocated to a dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling or mixed residential and commercial structure, or on a residential manufactured home as defined in 42 U.S.C. § 5402(6), whether the manufactured home is considered real or personal property under the laws of the state in which it is located; and (II) Were originated by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution that is supervised and examined by a federal or state housing authority, or by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to 12 U.S.C. §§ 1709 and 1715-b, or, where the notes involve a lien on the manufactured home, by an institution or by a financial institution approved for insurance by the Secretary of Housing and Urban Development pursuant to 12 U.S.C. § 1703; or (ii) Is secured by one or more promissory notes or certificates of deposit or participations in the notes (with or without recourse to the insurer of the notes) and, by its terms, provides for payments of principal in relation to payments, or reasonable projections of payments, or notes meeting the requirements of subpart (i), items (I) and (II) of this part.

2. “Promissory notes,” when used in connection with a manufactured home, shall also include a loan, advance or credit sale as evidenced by a retail installment sales contract or other instrument.

(f) Equity Interests.

1. Investments in common shares or partnership interests of a solvent United States institution are permissible if:

(i) Its obligations and preferred shares, if any, are eligible as investments under this paragraph (5); and (ii) The equity interests of the institution (except an insurance company) are registered on a national securities exchange as provided in the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a to 78kk or otherwise registered pursuant to that Act, and if otherwise registered, price quotations for them are furnished through a nationwide automated quotations system approved by the Financial Industry Regulatory Authority, or successor organization.

A trust shall not invest in equity interests under this subparagraph (f) an amount exceeding one percent (1%) of the assets of the trust even though the equity interests are not so registered and are not issued by an insurance company.

2. Investments in common shares of a solvent institution organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development, if:

(i) All its obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners; and (ii) The equity interests of the institution are registered on a securities exchange regulated by the government of a country that is a member of the Organization for Economic Cooperation and Development;

3. An investment in or loan upon any one institution's outstanding equity interests shall not exceed one percent (1%) of the assets of the trust. The cost of an investment in equity interests made pursuant to this subparagraph (f), when added to the aggregate cost of other investments in equity interests then held pursuant to this subparagraph (f), shall not exceed ten percent (10%) of the assets in the trust.

(g) Obligations issued, assumed or guaranteed by a multinational development bank, provided the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the National Association of Insurance Commissioners.

(h) Investment Companies.

1. Securities of an investment company registered pursuant to the Investment Company Act of 1940, 15 U.S.C. § 80a, are permissible investments if the investment company:

(i) Invests at least ninety percent (90%) of its assets in the types of securities that qualify as an investment under Rule 0780-01-63-.06(5)(a), (b), or (c) or invests in securities that are determined by the commissioner to be substantively similar to the types of securities set forth in Rule 0780-01-63- .06(5)(a), (b), or (c); or (ii) Invests at least ninety percent (90%) of its assets in the types of equity interests that qualify as an investment under Rule 0780-01-63-.06(5)(f)1.

2. Investments made by a trust in investment companies under this subparagraph shall not exceed the following limitations:

(i) An investment in an investment company qualifying under Rule 0780-01- 63-.06(5)(h)1.(i) shall not exceed ten percent (10%) of the assets in the trust and the aggregate amount of investment in qualifying investment companies shall not exceed twenty-five percent (25%) of the assets in the trust; and (ii) Investments in an investment company qualifying under Rule 0780-01-63- .06(5)(h)1.(ii) shall not exceed five percent (5%) of the assets in the trust and the aggregate amount of investment in qualifying investment companies shall be included when calculating the permissible aggregate value of equity interests pursuant to Rule 0780-01-63-.06(5)(f)1.

(i) Letters of Credit.

1. In order for a letter of credit to qualify as an asset of the trust, the trustee shall have the right and obligation pursuant to the deed of trust or some other binding agreement (as duly approved by the commissioner), to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiaries of the trust if the letter of credit will otherwise expire without being renewed or replaced.

2. The trust agreement shall provide that the trustee shall be liable for its negligence, willful misconduct or lack of good faith. The failure of the trustee to draw against the letter of credit in circumstances where such draw would be required shall be deemed to be negligence and/or willful misconduct.

(6) A specific security provided to a ceding insurer by an assuming insurer pursuant to Rule

Tenn. Comp. R. & Regs. 0780-01-63-.07 CREDIT FOR REINSURANCE – CERTIFIED REINSURERS

(1) Pursuant to T.C.A. § 56-2-208(b)(6), the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that has been certified as a reinsurer in this state at all times for which statutory financial statement credit for reinsurance is claimed under this paragraph. The credit allowed shall be based upon the security held by or on behalf of the ceding insurer in accordance with a rating assigned to the certified reinsurer by the commissioner. The security shall be in a form consistent with the provisions of T.C.A. §§ 56-2-208(b)(6), 56-2-209(a) and (b) and either Rule 0780-01-63-.11, Rule 0780-01-63-.12 or

Rule 0780-01-63-.13. The amount of security required in order for full credit to be allowed shall correspond with the following requirements:

(a) Ratings Security Required Secure – 1 0% Secure – 2 10% Secure – 3 20% Secure – 4 50% Secure – 5 75% Vulnerable – 6 100% (b) Affiliated reinsurance transactions shall receive the same opportunity for reduced security requirements as all other reinsurance transactions.

(c) The commissioner shall require the certified reinsurer to post one hundred percent (100%), for the benefit of the ceding insurer or its estate, security upon the entry of an order of rehabilitation, liquidation or conservation against the ceding insurer.

(d) In order to facilitate the prompt payment of claims, a certified reinsurer shall not be required to post security for catastrophe recoverables for a period of one (1) year from the date of the first instance of a liability reserve entry by the ceding company as a result of a loss from a catastrophic occurrence as recognized by the commissioner.

The one (1) year deferral period is contingent upon the certified reinsurer continuing to pay claims in a timely manner. Reinsurance recoverables for only the following lines of business as reported on the National Association of Insurance Commissioners annual financial statement related specifically to the catastrophic occurrence will be included in the deferral:

1. Line 1: Fire 2. Line 2: Allied Lines 3. Line 3: Farm owners multiple peril 4. Line 4: Homeowners multiple peril 5. Line 5: Commercial multiple peril 6. Line 9: Inland Marine 7. Line 12: Earthquake 8. Line 21: Auto physical damage (e) Credit for reinsurance under this rule shall apply only to reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer. Any reinsurance contract entered into prior to the effective date of the certification of the assuming insurer that is subsequently amended after the effective date of the certification of the assuming insurer, or a new reinsurance contract, covering any risk for which collateral was provided previously, shall only be subject to this rule with respect to losses incurred and reserves reported from and after the effective date of the amendment or the new contract.

(f) Nothing in this rule shall prohibit the parties to a reinsurance agreement from agreeing to provisions establishing security requirements that exceed the minimum security requirements established for certified reinsurers under this Rule.

(2) Certification Procedure.

(a) The commissioner shall post notice on the insurance department's website promptly upon receipt of any application for certification, including instructions on how members of the public may respond to the application. The commissioner may not take final action on the application until at least thirty (30) days after posting the notice required by this subparagraph.

(b) The commissioner shall issue written notice to an assuming insurer that has made application and been approved as a certified reinsurer. Included in such notice shall be the rating assigned the certified reinsurer in accordance with Rule 0780-01-63-.07(1).

The commissioner shall publish a list of all certified reinsurers and their ratings on the insurance department's website.

(c) In order to be eligible for certification, the assuming insurer shall meet 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 Rule 0780-01-63-.07(3).

2. The assuming insurer must maintain capital and surplus, or its equivalent, o f no less than two hundred fifty million dollars ($250,000,000) calculated in accordance with 0780-01-63-.07(2)(d)8. This requirement may also be satisfied by an association including incorporated and individual unincorporated underwriters having minimum capital and surplus equivalents (net of liabilities) of at least two hundred fifty million dollars ($250,000,000) and a central fund containing a balance of at least two hundred fifty million dollars ($250,000,000).

3. The assuming insurer must maintain fin ancial strength ratings from two (2) or more rating agencies deemed acceptable by the commissioner. These ratings shall be based on interactive communication between the rating agency and the assuming insurer and shall not be based solely on publicly avail able information.

These financial strength ratings will be one factor used by the commissioner in determining the rating that is assigned to the assuming insurer. Acceptable rating agencies include the following:

(i) Standard & Poor's;

(ii) Moody's Investors Service;

(iii) Fitch Ratings;

(iv) A.M. Best Company; or (v) Any other Nationally Recognized Statistical Rating Organization.

4. The ce rtified reinsurer must comply with any other requirements reasonably imposed by the commissioner.

(d) Each certified reinsurer shall be rated on a legal entity basis, with due consideration be ing given to the group rating where appropriate, except that an association including incorporated and individual unincorporated underwriters that has been approved to do business as a single certified reinsurer may be evaluated on the basis of its group rating. Factors that may be considered as part of the evaluation process include, but are not limited to, the following:

1. The certified reinsurer's financial strength rating from an acceptable rating ag ency. The maximum rating that a certified reinsurer may be assigned will correspond to its financial strength rating as outlined in the table below. The commissioner shall use the lowest financial strength rating received from an approved rating agency in establishing the maximum rating of a certified reinsurer. A failure to obtain or maintain at least two (2) financial s trength ratings from acceptable rating agencies will result in loss of eligibility for certification:

Ratings Best S&P Moody’s Fitch Secure – 1 A++ AAA Aaa AAA Secure – 2 A+ AA+, AA, AA- Aa1, Aa2, Aa3 AA+, AA, AA- Secure – 3 A A+, A A1, A2 A+, A Secure – 4 A- A- A3 A- Secure – 5 B++, B+ BBB+, BBB, BBB- Baa1, Baa2, Baa3 BBB+, BBB, BBB- Vulnerable – 6 B, B-, C++, C+, C, C-, D, E, F BB+, BB, BB-, B+, B, B-, CCC, CC, C, D, R Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, C BB+, BB, BB-, B+, B, B-, CCC+, CC, CCC-, DD 2. The business practices of the certified reinsurer in dealing with its ceding insurers, including its record of compliance with reinsurance contractual terms and obligations;

3. For certi fie d reinsurers domiciled in the United States, a review of the most recent applicable National Association of Insurance Commissioners Annual Statement Blank, either Schedule F (for property/casualty reinsurers) or Schedule S (for life and health reinsurers);

4. For certified reinsurers not domiciled in the United States, a review annually of Form CR-F (for property/casualty reinsurers), attached as Appendix B to this

chapter and incorporated herein by reference, or Form CR-S (for life and health reinsurers), attached as Appendix C to this chapter and incorporated herein by reference;

5. The reputation of the certified reinsurer for prompt payment of claims under reinsurance agreements, based on an analysis of ceding insurers' Schedule F reporting of overdue reinsurance recoverables, including the proportion of obligations that are more than ninety (90) days past due or are in dispute, with specific attention given to obligations payable to companies that are in administrative supervision or receivership;

6. Regulatory actions against the certified reinsurer;

7. The report of the independent auditor on the financial statements of the insurance enterprise, on the basis described in part 8., below;

8. For certified reinsurers not domiciled in the United States, audited financial statements, regulatory filings, and actuarial opinion (as filed with the non-United States jurisdiction supervisor, with a translation into English). Upon the initial application for certification, the commissioner will consider audited financial statements for the last two (2) years filed with its non-United States jurisdiction supervisor;

9. The liquidation priority of obligations to a ceding insurer in the certified reinsurer's domiciliary juri sdiction in the context of an insolvency proceeding;

10. A certified reinsurer's participation in any solvent scheme of arrangement, or similar procedure, which involves United States ceding insurers. The commissioner shall receive prior notice from a certified reinsurer that proposes participation by the certif ied reinsurer in a solvent scheme of arrangement; and 11. Any other information deemed relevant by the commissioner.

(e) Based on the analysis conducted under Rule 0780-01-63-.07(2)(d)5. of a certified reinsurer's reputation for prompt payment of claims, the commissioner may make appropriate adjustments in the security the certified reinsurer is required to post to protect its liabilities to United States ceding insurers, provided that the commissioner shall, at a minimum, increase the security the certified reinsurer is required to post by one rating level under Rule 0780-01-63-.07(2)(d)1. if the commissioner finds that:

1. More than fifteen percent (15%) of the certified reinsurer's ceding insurance clients have overdue reinsurance recoverables on paid losses of ninety (90) days or more which are not in dispute and which exceed one hundred thousand dollars ($100,000) for each cedent; or 2. The aggregate amount of reinsurance recoverables on paid losses which are not in dispute that are overdue by ninety (90) days or more exceeds fifty million dollars ($50,000,000).

(f) The assuming insurer must submit a properly executed Form CR-1 (adopted as

Appendix D of this chapter and incorporated herein by reference) as evidence of its submission to the jurisdiction of this stat e, appointment of the commissioner as an agent for the service of process in this state, and agreement to provide security for one hundred percent (100%) of the assuming insurer's liabilities attributable to reinsurance ceded by United States ceding insurers if it resists enforcement of a final United States judgment. The commissioner shall not certify any assuming insurer that is domiciled in a jurisdiction that the commissioner has determined does not adequately and promptly enforce final United States judgments or arbitration awards.

(g) The certified reinsurer 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. The applicable information filing requirements are, as follows:

1. Notification within ten (10) days of any regulatory actions taken against the certified reinsurer, any change in the provisions of its domiciliary license or any change in rating by an approved rati ng agency, including a statement describing such changes and the reasons therefore;

2. Annually, Form CR-F (Appendix B of this chapter) or CR-S (Appendix C of this

chapter), as applicable;

3. Annually, the report of the independent auditor on the financial statements of the insurance enterprise, on the basis described in part 4., below.

4. Annually, the most recent audited financial statements, regulatory filings, and actuarial opinion (as filed with the certified reinsurer's supervisor, with a translation int o English). Upon the initial certification, audited financial statements for the last two (2) years filed with the certified reinsurer's supervisor;

5. At least annually, an updated list of all disputed and overdue reinsurance claims regarding reinsurance assumed from United States domestic ceding insurers;

6. A certification from the certified reinsurer's domestic regulator that the certified reinsurer is in good standing and maintains capital in excess of the jurisdiction's highest regulatory action level; and 7. Any other information that the commissioner may reasonably require.

(h) Change in Rating or Revocation of Certification.

1. In the case of a downgrade by a rating agency or other disqualifying circumstance, the commissioner shall upon written notice assign a new rating to the certified reinsurer in accordance with the requirements of Rule 0780-01-63- .07(2)(d)1.

2. The commissioner shall have the authority to suspend, revoke, or otherwise modify a certified reinsurer's certification at any time if the certif ied reinsurer fails to meet its obligations or security requirements under this Rule, or if other financial or operating results of the certified reinsurer, or documented significant delays in payment by the certified reinsurer, lead the commissioner to reconsider the certified reinsurer's ability or willingness to meet its contractual obligations.

3. If the rating of a certified reinsurer is upgraded by the commissioner, the certified reinsurer may meet the security requirements applicable to its new rating on a prospective basis, but the commissioner shall require the certi fied reinsurer to post security under the previously applicable security requirements as to all contracts in force on or before the effective date of the upgraded rating. If the rating of a certified reinsurer is downgraded by the commissioner, the commissioner shall require the certified reinsurer to meet the security requirements applicable to its new rating for all business it has assumed as a certified reinsurer.

4. Upon revocation of the certification of a certified reinsurer by the commissioner, the assuming insurer shall be required to post security in accordance with Rule

Tenn. Comp. R. & Regs. 0780-01-63-.08 CREDIT FOR REINSURANCE - RECIPROCAL JURISDICTIONS

(1) Pursuant to T.C.A. §§ 56-2-208 and 56-2-209, the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer that is licensed to write reinsurance by, and has its head office or is domiciled in, a Reciprocal Jurisdiction, and which meets the other requirements of this regulation.

(2) A “Reciprocal Jurisdiction” is a jurisdiction, as designated by the commissioner pursuant to

Rule 0780-01-63-.08(4), 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 the European Union, is a member state of the European Union.

For purposes of this paragraph, 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; or (c) A qualified jurisdiction, as determined by the commissioner pursuant to T.C.A. 56-2- 208(b) and Rule 0780-01-63-.07(3), which is not otherwise described in subparagraph (a) or (b) above, and which the commissioner determines meets all of the following additi onal requirements:

1. Provides that an insurer which has its head office or is domiciled in such qualified jurisdiction shall receive credit for reinsurance ceded to a U.S.-domiciled assuming insurer in the same manner as credit for reinsurance is received for reinsurance assumed by insurers domiciled in such qualified jurisdiction;

2. Does not require a U.S.-domiciled assuming insurer to establish or maintain a local presence as a condition for entering into a reinsurance agreement with any ceding insurer subject to regulation by the non-U.S. jurisdiction or as a condition to allow the ceding insurer to recognize credit for such reinsurance;

3. Recognizes the U.S. state regulatory approach to group supervision and group capital, by providing written confirmation by a competent regulatory authority, in such qualified jurisdiction, that insurers and insurance groups that are domiciled or maintain their headquarters in this state or another jurisdiction accredited by the NAIC shall be subject only to worldwide prudential insurance group supervision including worldwide group governance, solvency and capital, and reporting, as applicable, by the commissioner or the commissioner of the domiciliary state and will not be subject to group supervision at the level of the worldwide parent undertaking of the insurance or reinsurance group by the qualified jurisdiction; and 4. Provides written confirmation by a competent regulatory authority in such qualified jurisdiction that information regarding insurers and their parent, subsidiary, or affiliated entities, if applicable, shall be provided to the commissioner in accordance with a memorandum of understanding or similar document between the commissioner and such qualified jurisdiction, including but not limited to the International Association of Insurance Supervisors Multilateral Memorandum of Understanding or other multilateral memoranda of understanding coordinated by the NAIC.

(3) Credit shall be allowed when the reinsurance is ceded from an insurer domiciled in this state to an assuming insurer meeting each of the conditions set forth below.

(a) The assuming insurer must be licensed to transact reinsurance by, and have its head office or be domiciled in, a Reciprocal Jurisdiction.

(b) The assuming insurer must have and maint ain on an ongoing basis minimum capital and surplus, or its equivalent, calculated on at least an annual basis as of the preceding December 31 or at the annual date otherwise statutorily reported to the Reciprocal Jurisdiction, and confirmed as set forth in Rule 0780-01-63-.08(3)(g) according to the methodology of its domiciliary jurisdiction, in the following amounts:

1. No less than $250,000,000; or 2. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters:

(i) Minimum capital and surplus equivalents (net of liabilities) or own funds of the equivalent of at least $250,000,000; and (ii) A central fund containing a balance of the equivalent of at least $250,000,000.

(c) The assuming insurer must have and maintain on an ongoing basis a minimum solvency or capital ratio, as applicable, as follows:

1. If the assuming insurer has its head office or is domiciled in a Reciprocal Jurisdiction as defined in T.C.A. § 0780-01-63-.08(2)(a), the ratio specified in the applicable covered agreement;

2. If the assuming insurer is domiciled in a Reciprocal Jurisdiction as defined in

Rule 0780-01-63-.08(2)(b), a risk-based capital (RBC) ratio of three hundred percent (300%) of the authorized control level, calculated i n accordance with the formula developed by the NAIC; or 3. If the assuming insurer is domiciled in a Reciprocal Jurisdiction as defined in

Rule 0780-01-63-.08(2)(c), after consultation with the Reciprocal Jurisdiction and considering any recommendations published through the NAIC Committee Process, such solvency or capital ratio as the commissioner determines to be an effective measure of solvency.

(d) The assuming insurer must agree to and provide adequate assurance, in the form of a properly executed Form RJ-1, atta ched as Appendix E to this chapter and incorporated herein by this reference, of its agreement to the following:

1. The assuming insurer must agree to provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in Rule 0780-01-63-.08(3)(b) or (c), or if any regulatory action is taken against it for serious noncompliance with applicable law.

2. The assuming insurer must 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.

(i) The commissioner may also require that such consent be provided and included in each reinsurance agreement under the commissioner's jurisdiction.

(ii) Nothing in this provision 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 such agreements are unenforceable under applicable insolvency or delinquency laws.

3. The assuming insurer must consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer, that have been declared enforceable in the territory where the judgment was obtained.

4. Each reinsurance agreement must include a provision requiring the assuming insurer to provide security in an amount equal to one hundred percent (100%) 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 estate, if applicable.

5. The assuming insurer must 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 one hundred percent (100%) security to the ceding insurer consistent with the terms of the scheme, should the assuming insurer enter into such a solvent scheme of arrangement. Such security shall be in a form consistent with the provisions of T.C.A § 56-2-208(b)(6), Rule 0780-01-63-.10, and 0780-01-63-.11, 0780-01-63- .12, and 0780-01-63-.13. For purposes of this regulation, the term “solvent scheme of arrangement” means a foreign or alien statutory or regulatory compromise procedure subject to requisite majority creditor approval and judicial sanction in the assuming insurer's home jurisdiction either to finally commute liabilities of duly noticed classed members or creditors of a solvent debtor, or to reorganize or restructure the debts and obligations of a solvent debtor on a final

basis, and which may be subject to judicial recognition and enforcement of the arrangement by a governing authority outside the ceding insurer's home jurisdiction.

6. The assuming insurer must agree in writing to meet the applicable information filing requirements as set forth in Rule 0780-01-63-.08(3)(e).

(e) The assuming insurer or its legal successor must provide, if requested by the commissioner, on behalf of itself and any legal predecessors, the following documentation to the commissioner:

1. For the two years preceding entry into the reinsurance agreement and on an annual basis thereafter, the assuming insurer's annual audited financial statements, in accordance with the applicable law of the jurisdiction of its head office or domiciliary jurisdiction, as applicable, including the external audit report;

2. For the two years preceding entry into the reinsurance agreement, the solvency and financial condition report or actuarial opinion, if filed with the assuming insurer's supervisor;

3. Prior to entry into the reinsurance agreement and not more than semi-annually thereafter, an updated lis t of all disputed and overdue reinsurance claims outstanding for 90 days or more, regarding reinsurance assumed from ceding insurers domiciled in the United States; and 4. Prior to entry into the reinsurance agreement and not more than semi-annually thereafter, information regarding the assuming insurer's assumed reinsurance by ceding insurer, ceded reinsurance by the assuming insurer, and reinsurance recoverable on paid and unpaid losses by the assuming insurer to allow for the evaluation of the criteria set forth in Rule 0780-01-63-.08(3)(f).

(f) The assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreements. The lack of prompt payment will be evidenced if any of the following criteria is met:

1. More than fifteen percent (15%) of the reinsurance recoverables from the assuming insurer are overdue and in dispute as reported to the commissioner;

2. More than fifteen percent (15%) of the assuming insurer's ceding insurers or reinsurers have overdue reinsurance recoverable on paid losses of 90 days or more which are not in dispute and which exceed for each ceding insurer $100,000, or as otherwise specified in a covered agreement; or 3. The aggregate amount of reinsurance recoverable on paid losses which are not in dispute, but are overdue by 90 days or more, exceeds $50,000,000, or as otherwise specified in a covered agreement.

(g) The assuming insurer's supervisory authority must confirm to the commissioner on an annual basis that the assuming insurer complies with the requirements set forth in Rule 0780-01-63-.08(3)(b) and (c).

(h) Nothing in this provision precludes an assuming insurer from providing the commissioner with information on a voluntary basis.

(4) The commissioner shall timely create and publish a list of Reciprocal Jurisdictions.

(a) A list of Reciprocal Jurisdictions is published through the NAIC Committee Process.

The commissioner's list shall include any Reciprocal Jurisdiction as defined under Rule 0780-01-63-.08(2)(a)-(b), 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 Recipr ocal Jurisdictions as provided by applicable law, regulation, or in accordance with criteria published through the NAIC Committee Process.

(b) The commissioner may remove a jurisdiction from the list of Reciprocal Jurisdictions upon a determination that the jurisdiction no longer meets one or more of the requirements of a Reciprocal Jurisdiction, as provided by applicable law, regulation, or in accordance with a process published through the NAIC Committee Process, except that the commissioner shall not remove from the list a Reciprocal Jurisdiction as defined under Rule 0780-01-63-.08(2)(a)-(b). Upon removal of a Reciprocal Jurisdiction from this list, credit for reinsurance ceded to an assuming insurer domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to T.C.A. § 56-2-208(b) or

Rule 0780-01-63.

(5) The commissioner shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this Rule and to which cessions shall be granted credit in accordance with this Rule.

(a) If an NAIC accredited jurisdiction has determined that the conditions set forth in Rule 0780-01-63-.08(3) have been met, the commissioner has the discretion to defer to that jurisdiction's determination, and add such assuming insurer to the list of assuming insurers to which cessions shall be granted credit in accordance with this paragraph.

The commissioner may accept financial documentation filed with another NAIC accredited jurisdiction or with the NAIC in satisfaction of the requirements of Rule 0780-01-63-.08(3).

(b) When requesting that the commissioner defer to another NAIC accredit ed jurisdiction's determination, an assuming insurer must submit a properly executed Form RJ-1 and additional information as the commissioner may require. A state that has received such a request will noti fy other states through the NAIC Committee Process and provide relevant information with respect to the determination of eligibility.

(6) If the commissioner determines that an assuming insurer no longer meets one or more of the requirements under this Rule, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this Rule.

(a) 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 Rule 0780-01-63-.10.

(b) 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 the provisions of Rule 0780-01-63-.10.

(7) Before denying statement credit or imposing a requirement to post security with respect to

Rule 0780-01-63-.08(6) of this regulation or adopting any similar requirement that will have substantially the same regulatory impact as security, the commissioner shall:

(a) Communicate with the ceding insurer, the assuming insurer, and the assuming insurer's supervisory authority that the assuming insurer no longer satisfies one of the conditions listed in Rule 0780-01-63-.08(3);

(b) Provide the assuming insurer with 30 days from the initial communication to submit a plan to remedy the defect, and 90 days from the initial communication to remedy the defect, except in exceptional circumstances in which a shorter period is necessary for policyholder and other consumer protection;

(c) After the expiration of 90 days or less, as set out in Rule 0780-01-63-.08(7)(b) above, if the commissioner determines that no or insufficient action was taken by the assuming insurer, the commissioner may impose any of the requirements as set out in this paragraph; and (d) Provide a written explanation to the assuming insurer of any of the requirements set out in this paragraph.

(8) 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 liabilities.

History

• Authority: T.C.A. §§ 56-2-208, 56-2-209, and 56-2-301.
• Administrative History: New rule filed March 2, 2022; effective May 31, 2022.

Tenn. Comp. R. & Regs. 0780-01-63-.09 CREDIT FOR REINSURANCE REQUIRED BY LAW

Pursuant to T.C.A. § 56-2-208(b)(7), the commissioner shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of T.C.A. § 56-2-208(b)(2), (3), (4), (5), or (6), but only as to the insurance of risks located in jurisdictions where the reinsurance is required by the applicable law or regulation of that jurisdiction. As used in this rule, “jurisdiction” means state, district or territory of the United States and any lawful national government.

History

• Authority: T.C.A. §§ 56-2-208, 56-2-209, and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rules filed March 2, 2018; effective May 31, 2018. Rule was originally numbered 0780-01-63-.08 but was renumbered 0780-01-63-.09 with the introduction of a new rule 0780-01-63-.08 filed March 2, 2022; effective May 31, 2022.

Tenn. Comp. R. & Regs. 0780-01-63-.10 ASSET OR REDUCTION FROM LIABILITY FOR REINSURANCE CEDED TO AN

UNAUTHORIZED ASSUMING INSURER NOT MEETING THE REQUIREMENTS OF RULES 0780-01-

63-.03 THROUGH 0780-01-63-.09.

(1) Pursuant to T.C.A. § 56-2-209(a), the commissioner shall allow a reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of T.C.A. § 56-2-208(b) in an amount not exceeding the liabilities carried by the ceding insurer. 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 exclusive benefit of the ceding insurer, under a reinsurance contract with such assuming insurer as security for the payment of obligations under the reinsurance contract. The security shall be 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 United States financial institution as defined in T.C.A. § 56-2-209(d). This security may be in the form of any of the following:

(a) Cash;

(b) Securities listed by the Securities Valuation Offi ce 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;

(c) Clean, irrevocable, unconditio nal and “evergreen” letters of credit issued or confirmed by a qualified United States institution, as defined in T.C.A. § 56-2-209(c), effective no later than December 31 of the year for which 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. Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance (or confirmation) shall, notwithstanding the issuing (or confirming) instit ution'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; or (d) Any other form of security acceptable to the commissioner.

(2) An admitted asset or a reduction from liability for reinsurance ceded to an unauthorized assuming insurer pursuant to this rule shall be allowed only when the requirements of Rule

Tenn. Comp. R. & Regs. 0780-01-63-.11 TRUST AGREEMENTS QUALIFIED UNDER RULE 0780-01-63-.10

(1) As used in this rule:

(a) “Beneficiary” means the entity for whose sole benefit the trust has been established and any successor of the beneficiary by operation of law. If a court of law appoints a successor in interest to the named beneficiary, then the named benefic iary includes and is limited to the court appointed domiciliary receiver (including conservator, rehabilitator or liquidator).

(b) “Grantor'' means the entity that has established a trust for the sole benefit of the beneficiary. When established in conjunction with a reinsurance agreement, the grantor is the unlicensed, unaccredited assuming insurer.

(c) “Obligations,” as used in Rule 0780-01-63-.11(2)(k), below, means:

1. Reinsured losses and allocated loss expenses paid by the ceding company, but not recovered from the assuming insurer;

2. Reserves for reinsured losses reported and outstanding;

3. Reserves for reinsured losses incurred but not reported; and 4. Reserves for allocated reinsured loss expenses and unearned premiums.

(2) Required Conditions.

(a) The trust agreement shall be entered into between the beneficiary, the grantor and a trustee which shall be a qualified United States financial institution as defined in T.C.A. § 56-2-209(d).

(b) The trust agreement shall create a trust account into which assets shall be deposited.

(c) All assets in the trust account shall be held by the trustee at the trustee's office in the United States.

(d) The trust agreement shall provide that:

1. The beneficiary shall have the right to withdraw assets from the trust account at any time, without notice to the grantor, subject only to written notice from the beneficiary to the trustee;

2. No other statement or document is required to be presented in order to withdraw assets, except that the beneficiary may be required to acknowledge receipt of withdrawn assets;

3. It is not subject to any conditions or qualifications outside the trust agreement; and 4. It shall not contain references to any other agreements or documents except as provided for under Rule 0780-01-63-.11(2)(k) and (I).

(e) The trust agreement shall be established for the sole benefit of the beneficiary.

(f) The trust agreement shall require the trustee to:

1. Receive assets and hold all assets in a safe place;

2. Determine that all assets are in such form that the beneficiary, or the trustee upon direction by the beneficiary, may whenever necessary negotiate any such assets, without consent or signature from the grantor or any other person or entity;

3. Furnish to the grantor and the beneficiary a statement of all assets in the trust account upon its inception and at intervals no less frequent than the end of each calendar quarter;

4. Notify the grantor and the beneficiary within ten (10) days, of any deposits to or withdrawals from the trust account;

5. Upon written demand of the beneficiary, immediately take any and all steps necessary to transfer absolutely and unequivocally all right, title and interest in the assets held in the trust account to the beneficiary and deliver physical custody of the assets to the beneficiary; and 6. Allow no substitutions or withdrawals of assets from the trust account, except on written instructions from the beneficiary, except that the trustee may, without the consent of but with notice to the beneficiary, upon call or maturity of any trust asset, withdraw such asset upon condition that the proceeds are paid into the trust account.

(g) The trust agreement shall provide that at least thirty (30) days, but not more than fortyfive (45) days, prior to termination of the trust account, written notification of termination shall be delivered by the trustee to the beneficiary.

(h) The trust agreement shall be made subject to and governed by the laws of the state in which the trust is domiciled.

(i) The trust agreement shall prohibit invasion of the trust corpus for the purpose of paying commission to, or reimbursing the expenses of, the trustee. In order for a letter of credit to qualify as an asset of the trust, the trustee shall have the right and the obligation pursuant to the deed of trust or some other binding agreement (as duly approved by the commissioner), to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiaries of the trust if the letter of credit will otherwise expire without being renewed or replaced.

(j) The trust agreement shall provide that the trustee shall be liable for its own negli gence, willful misconduct or lack of good faith. The failure of the trustee to draw against the letter of credit in circumstances where such draw would be required shall be deemed to be negligence and/or willful misconduct.

(k) Notwith standing other provisions of this chapter, when a trust agreement is established in conjunction with a reinsurance agreement covering risks other than life, annuities and accident and health, where it is customary practice to provide a trust agreement for a specific purpose, the trust agreement may provide that the ceding insurer shall undertake to use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, only for the foll owing purposes:

1. To pay or reimburse the ceding insurer for the assuming insurer's share under the specific reinsurance agreement regarding any losses and allocated loss expenses paid by the ceding insurer, but not recovered from the assuming insurer, or for unearned premiums due to the ceding insurer if not otherwise paid by the assuming insurer;

2. To make payment to the assuming insurer of any amounts held in the trust account that exceed one hundred two percent (102%) of the actual amount required to fund the assuming insurer's obligations under the specific reinsurance agreement; or 3. Where the ceding insurer has received notification of termination of the trust account and where the assuming insurer's entire obligations under the specific reinsurance agreement remain unliquidated and undischarged ten (10) days prior to the termination date, to withdraw amounts equal to the obligations and deposit those amounts in a separate account, in the name of the ceding insurer in any qualified United States financial institu tio n as defined in T.C.A. § 56-2-209(d) apart from its general assets, in trust for such uses and purposes specified in parts 1. and 2., above, as may remain executory after such withdrawal and for any period after the termination date.

(I) Notwithstanding other provisions of this chapter, when a trust agreement is established to meet the requirements of Rule 0780-01-63-.10 in conjunction with a reinsurance agreement covering life, annuities or accident and health risks, where it is customary to provide a trust agreement for a specific purpose, the trust agreement may provide that the ceding insurer shall undertake to use and apply amounts drawn upon the trust account, without diminution because of the insolvency of the ceding insurer or the assuming insurer, only for the following purposes:

1. To pay or reimburse the ceding insurer for:

(i) The assuming insurer's share under the specific reinsurance agreement of premiums returned, but not yet recovered from the assuming insurer, to the owners of policies reinsured under the reinsurance agreement on account of cancellations of the policies; and (ii) The assuming insurer's share under the specific reinsurance agreement of surrenders and benefits or losses paid by the ceding insurer, but not yet recovered from the assuming insurer, under the terms and provisions of the policies reinsured under the reinsurance agreement; and 2. To pay to the assuming insurer amounts held in the trust account in excess of the amount necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer; or 3. Where the ceding insurer has received notification of termination of the trust and where the assuming insurer's entire obligations under the specific reinsurance agreement remain unliquidated and undischarged ten (10) days prior to the termination date, to withdraw amounts equal to the assuming insurer's share of liabilities, to the extent that the liabilities have not yet been funded by the assuming insurer, and deposit those amounts in a separate account, in the name of the ceding insurer in any qualified United States financial institution apart from its general assets, in trust for the uses and purposes specified in parts 1. and 2., above, as may remain executory after withdrawal and for any period after the termination date.

(m) Either the reinsurance agreement or the trust agreement must stipulate that the assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States bank and payable in United States dollars, and investments permitted under Title 56 of the Tennessee Code Annotated or any combination of the above, provided investments in or issued by an entity controlling, controlled by or under common control with eith er the grantor or the beneficiary of the trust shall not exceed five percent (5%) of total investments. The agreement may further specify the types of investments to be deposited. If the reinsurance agreement covers life, annuities or accident and health risks, then the provisions required by this paragraph must be included in the reinsurance agreement.

(3) Permitted Conditions.

(a) The trust agreement may provide that the trustee may resign upon delivery of a written notice of resignation, effective not less than ninety (90) days after the beneficiary and grantor receive the notice and that the trustee may be removed by the grantor by delivery to the trustee and the beneficiary of a written notice of removal, effective not less than ninety (90) days after the trustee and the beneficiary receive the notice, provided that no such resignation or removal shall be effective until a successor trustee has been duly appointed and approved by the beneficiary and the grantor and all assets in the trust have been duly transferred to the new trustee.

(b) The grantor may have the full and unqualified right to vote any shares of stock in the trust account and to receive from time to time payments of any dividends or interest upon any shares of stock or obligations included in the trust account. Any interest or dividends shall be either forwarded promptly upon receipt to the grantor or deposited in a separate account established in the grantor's name.

(c) The trustee may be given authority to invest, and accept substitutions of, any funds in the account, provided that no investment or substitution shall be made without prior approval of the beneficiary, unless the trust agreement specifies categories of investments acceptable to the beneficiary and authorizes the trustee to invest funds and to accept substitutions which the trustee determines are at least equal in current fair market value to the assets withdrawn and that are consistent with the restrictio ns in

Rule 0780-01-63-.11(4)(a)2.

(d) The trust agreement may provide that the beneficiary may at any time designate a party to which all or part of the trust assets are to be transferred. Transfer may be conditioned upon the trustee receiving, prior to or simultaneously, other specified assets.

(e) The trust agreement may provide that, upon termination of the trust account, all assets not previously withdrawn by the beneficiary shall, with written approval by the beneficiary, be delivered over to the grantor.

(4) Additional conditions applicable to reinsurance agreements:

(a) A reinsurance agreement may contain provisions that:

1. Require the assuming insurer to enter into a trust agreement and to establish a trust account for the benefit of the ceding insurer, and specifying what the agreement is to cover;

2. Require the assuming insurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may whenever necessary negotiate these assets without consent or signature from the assuming insurer or any other entity;

3. Require that all settlements of account between the ceding insurer and the assuming insurer be made in cash or its equivalent; and 4. Stipulate that the assuming insurer and the ceding insurer agree that the assets in the trust account, established pursuant to the provisions of the reinsurance agreement, may be withdrawn by the ceding insurer at any time, notwithstanding any other provisions in the reinsurance agreement, and shall be utilized and applied by the ceding insurer or its successors in interest by operation of law, including without limitation any liquidator, rehabilitator, receiver or conservator of such company, without diminution because of insolvency on the part of the ceding insurer or the assuming insurer, only for the following purposes:

(i) To pay or reimburse the ceding insurer for:

(I) The assuming insurer's share under the specific reinsurance agreement of premiums returned, but not yet recovered from the assuming insurer, to the owners of policies reinsured under the reinsurance agreement because of cancellations of such policies;

(II) The assuming insurer's share of surrenders and benefits or losses paid by the ceding insurer pursuant to the provisions of the policies reinsured under the reinsurance agreement; and (Ill) Any other amounts necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer; and (ii) To make payment to the assuming insurer of amounts held in the trust account in excess of the amount necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer.

(b) The reinsurance agreement may also contain provisions that:

1. Give the assuming insurer the right to seek approval from the ceding insurer, which shall not be unreasonably or arbitrarily withheld, to withdraw from the trust account all or any part of the trust assets and transfer those assets to the assuming insurer, provided:

(i) The assuming insurer shall, at the time of withdrawal, replace the withdrawn assets with other qualified assets having a current fair market value equal to the market value of the assets withdrawn so as to maintain at all times the deposit in the required amount; or (ii) After withdrawal and transfer, the current fair market value of the trust account is no less than one hundred two percent (102%) of the required amount.

2. Provide for the return of any amount withdrawn in excess of the actual amounts required for Rule 0780-01-63-.11(4)(a)4., and for interest payments at a rate not in excess of the pri me rate of interest on such amounts;

3. Permit the award by any arbitration panel or court of competent jurisdiction of:

(i) Interest at a rate different from that provided in part 2. of this subparagraph (b);

(ii) Court or arbitration costs;

(iii) Attorney's fees; and (iv) Any other reasonable expenses.

(c) Financial reporting.

A trust agreement may be used to reduce any liabilit y for reinsurance ceded to an unauthorized assuming insurer in financial statements required to be filed with this department in compliance with the provisions of this chapter when established on or before the date of filing of the financial statement of the ceding insurer. Further, the reduction for the existence of an acceptable trust account may be up to the current fair market value of acceptable assets available to be withdrawn from the trust account at that time, but such reduction shall be no greater than the specific obligations under the reinsurance agreement that the trust account was established to secure.

(d) Existing agreements.

Notwithstanding the effective date of this chapter, any trust agreement or underlying reinsurance agreement in existence prior to the effective date of this chapter will continue to be acceptable until September 1, 2022, at which time the agreement will have to be in full compliance with this chapter for the trust agreement to be acceptable.

(e) The failure of any trust agreement to specifically identify the beneficiary as defined in

Rule 0780-01-63-.11(1) shall not be construed to affect any actions or rights which the commissioner may take or possess pursuant to the provisions of the laws of this state.

History

• Authority: T.C.A. §§ 56-2-208, 56-2-209, and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rules filed March 2, 2018; effective May 31, 2018. Rule was originally numbered 0780-01-63-.10 but was renumbered 0780-01-63-.11 with the introduction of a new rule 0780-01-63-.08 filed March 2, 2022; effective May 31, 2022. Amendments filed March 2, 2022; effective May 31, 2022.

Tenn. Comp. R. & Regs. 0780-01-63-.12 LETTERS OF CREDIT QUALIFIED UNDER RULE 0780-01-63-.10

(1) The letter of credit must be clean, irrevocable and unconditional and issued or confirmed by a qualified United States financial institution as defined in T.C.A. § 56-2-209(c). The letter of credit shall contain an issue date and expiration date and shall stipulate that the beneficiary need only draw a sight draft under the letter of credit and present it to obtain funds and that no other document need be presented. The letter of credit shall also indicate that it is not subject to any condition or qualifications outside the letter of credit. In addition, the letter of credit itself shall not contain reference to any other agreements, documents or entities, except as provided in Rule 0780-01-63-.12(8)(a), below. As used in this rule, “beneficiary” means the domestic insurer for whose benefit the letter of credit has been established and any successor of the beneficiary by operation of law. If a court of law appoints a successor in interest to the named beneficiary, then the named beneficiary includes and is limited to the court appointed domiciliary receiver (including conservator, rehabilitator or liquidator).

(2) The heading of the letter of credit may include a boxed section which contains the name of the applicant and other appropriate notations to provide a reference for the letter of credit.

The boxed section shall be clearly marked to indicate that such information is for internal identification purposes only.

(3) The letter of credit shall contain a statement to the effect that the obligation of the qualified United States financial institution under the letter of credit is in no way contingent upon reimbursement with respect thereto.

(4) The term of the letter of credit shall be for at least one (1) year and shall contain an “evergreen clause” which prevents the expiration of the letter of credit without due notice from the issuer. The “evergreen clause” shall provide for a period of no less than thirty (30) days notice prior to expiration date or nonrenewal.

(5) The letter of credit shall state whether it is subject to and governed by the laws of this state or the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce Publication 600 (UCP 600) or International Standby Practices of the International Chamber of Commerce Publication 590 (ISP98), or any successor publication, and all drafts drawn thereunder shall be presentable at an office in the United States of a qualified United State financial institution.

(6) If the letter of credit is made subject to the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce Publication 600 (UCP 600) or International Standby practices of the International Chamber of Commerce Publication 590 (ISP98), or any successor publication, the letter of credit shall specifically address and provide for an extension of time to draw against the letter of credit in the event that one or more of the occurrences specified in Article 36 of Publication 600 or any other successor public ation, occur.

(7) If the letter of credit is issued by a United States financial institution authorized to issue letters of credit by the laws under which it was organized, other than a qualified United States financial institution as defined in T.C.A. § 56-2-209(c), then the following additional requirements shall be met:

(a) The issuing financial institution shall formally designate the confirming qualified United States financial institution as its agent for the receipt and payment of the drafts; and (b) The “evergreen clause” shall provide for thirty (30) days notice prior to expiration date or nonrenewal.

(8) Reinsurance agreement provisions.

(a) The reinsurance agreement in conjunction with which the letter of credit is obtained may contain provisions that:

1. Require the assuming insurer to provide letters of credit to the ceding insurer and specify what they are to cover;

2. Stipulate that the assuming insurer and ceding insurer agree that the letter of credit provided by the assuming insurer pursuant to the provisions of the rei nsurance agreement may be drawn upon at any time, notwithstanding any other provisions in the agreement, and shall be utilized by the ceding insurer or its successors in interest only for one or more of the foll owing reasons:

(i) To pay or reimburse the ceding insurer for:

(I) The assuming insurer's share under the specific reinsurance agreement of premiums returned, but not yet recovered from the assuming insurers, to the owners of policies reinsured under the reinsurance agreement on account of cancellatio ns of such policies;

(II) The assuming insurer's share, under the specific reinsurance agreement, of surrenders and benefits or losses paid by the ceding insurer, but not yet recovered from the assuming insurers, under the terms and provisions of the policies reinsured under the reinsurance agreement; and (Ill) Any other amounts necessary to secure the credit or reduction from liability for reinsurance taken by the ceding insurer;

(ii) Where the letter of credit will expire without renewal or be reduced or replaced by a letter of credit for a reduced amount and where the assuming insurer's entire obligations under the reinsurance agreement remain unliquidated and undischarged ten (10) days prior to the termination date, to withdraw amounts equal to the assuming insurer's share of the liabilities, to the extent that the liabilities have not yet been funded by the assuming insurer and exceed the amount of any reduced or replacement letter of credit, and deposit of those amounts in a separate account in the name of the ceding insurer in a qualified U.S. financial institution apart from its general assets, in trust for such uses and purposes as specified in Rule 0780-01-63-.12(8)(a)2.(i) as may remain after withdrawal and for any period after the termination date.

3. All of the foregoing provisions of subparagraph (a) should be applied without diminution because of insolvency on the part of the ceding insurer or assuming insurer.

(b) Nothing contained in subparagraph (a), above, shall preclude the ceding insurer and assuming insurer from providing for:

1. An interest payment, at a rate not in excess of the prime rate of interest, on the amounts held pursuant to Rule 0780-01-63-.12(8)(a)2.; or 2. The return of any amounts drawn down on the letters of credit in excess of the actual amounts required for the above or any amounts that are subsequently determined not to be due.

History

• Authority: T.C.A. §§ 56-2-208, 56-2-209, and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rules filed March 2, 2018; effective May 31, 2018. Rule was originally numbered 0780-01-63-.11 but was renumbered 0780-01-63-.12 with the introduction of a new rule 0780-01-63-.08 filed March 2, 2022; effective May 31, 2022. Amendments filed March 2, 2022; effective May 31, 2022.

Tenn. Comp. R. & Regs. 0780-01-63-.13 OTHER SECURITY

A ceding insurer may take credit for unencumbered funds withheld by the ceding insurer in the United States subject to withdrawal solely by the ceding insurer and under its exclusive control.

History

• Authority: T.C.A. §§ 56-2-207, 56-2-208, 56-2-208(6), 56-2-209, 56-2-209(e), and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rules filed March 2, 2018; effective May 31, 2018. Rule was originally numbered 0780-01-63-.12 but was renumbered 0780-01-63-.13 with the introduction of a new rule 0780-01-63-.08 filed March 2, 2022; effective May 31, 2022.

Tenn. Comp. R. & Regs. 0780-01-63-.14 REINSURANCE CONTRACT

Credit will not be granted, nor an asset or reduction from liability allowed, to a ceding insurer for reinsurance effected with assuming insurers meeting the requirements of Rule 0780-01-63-.03, Rule

Tenn. Comp. R. & Regs. 0780-01-63-.15 CONTRACTS AFFECTED

All new and renewal reinsurance transactions entered into after the effective date of this chapter shall conform to the requirements of T.C.A. §§ 56-2-207, 56-2-208, and 56-2-209 and this chapter if credit is to be given to the ceding insurer for such reinsurance.

History

• Authority: T.C.A. §§ 56-2-207, 56-2-208, 56-2-209, 56-2-209(e), and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rules filed March 2, 2018; effective May 31, 2018. Rule was originally numbered 0780-01-63-.14 but was renumbered 0780- 01-63-.15 with the introduction of a new rule 0780-01-63-.08 filed March 2, 2022; effective May 31, 2022.

Tenn. Comp. R. & Regs. 0780-01-63-.16 SEVERABILITY

If any provision of this chapter, or the application of the provision to any person or circumstance, is held invalid, the remainder of the chapter, and the application of the provision to persons or circumstances other than those to which it is held invalid, shall not be affected.

History

• Authority: T.C.A. §§ 56-2-208, 56-2-209, and 56-2-301.
• Administrative History: Original rule filed March 2, 2018; effective May 31, 2018. Rule was originally numbered 0780-01-63-.15 but was renumbered 0780-01-63-.16 with the introduction of a new rule 0780-01-63-.08 filed March 2, 2022; effective May 31, 2022. (This space intentionally left blank.) APPENDIX A: FORM AR-1 FORM AR-1 CERTIFICATE OF ASSUMING INSURER I, , _____________________________________ (name of officer) (title of officer) of ________________________________________________________________, the assuming insurer (name of assuming insurer) under a reinsurance agreement with one or more insurers domiciled in ___________________________________________, hereby certify that (name of state) ___________________________________________________________________(“Assuming Insurer”): (name of assuming insurer) Submits to the jurisdiction of any court of competent jurisdiction in ___________________________ (ceding insurer’s state of domicile) for the adjudication of any issues arising out of the reinsurance agreement, agrees to comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or any appellat e court in the event of an appeal. Nothing in this paragraph constitutes or should be understood to constitute a waiver of Assuming Insurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the Unite d States. This paragraph is not intended to conflict with or override the obligation of the parties to the reinsurance agreement to arbitrate their disputes if such an obligation is created in the agreement. 2. Designates the Insurance Commissioner of ____________________________________ (ceding insurer’s state of domicile) as its lawful attorney upon whom may be served any lawful process in any action, suit or proceeding arising out of the reinsurance agreement instituted by or on behalf of the ceding insurer. 3. Submits to the authority of the Insurance Commissioner of ______________________to examine (ceding insurer’s state of domicile) its books and records and agrees to bear the expense of any such examination. 4. Submits with this form a current list of insurers domiciled in ____________________________ (ceding insurer’s state of domicile) rei nsured by Assuming Insurer and undertakes to submit additions to or deletions from the list to the Insurance Commissioner at least once per calendar quarter. Dated: ____________________ _____________________________________________ (name of assuming insurer) BY: _________________________________________ (name of officer) __________________________________________ (title of officer) APPENDIX B: FORM CR-F APPENDIX C: FORM CR-S APPENDIX C: FORM CR-S (continued) APPENDIX C: FORM CR-S (continued) APPENDIX D: FORM CR-1 FORM CR-1 CERTIFI CATE OF CERTIFIED REINSURER I,,__________________________________ (name of officer) (title of officer) of ________________________________________________________________, the assuming insurer (name of assuming insurer) under a reinsurance agreement with one or more insurers domiciled in ___________________________, in order to be considered for approval in this state, hereby certify that (name of state) _________(“Assuming Insurer”): (name of assuming insurer) 1. Submits to the jurisdiction of any court of competent jurisdiction in _____________________________ (ceding insurer’s state of domicile) for the adjudication of any issues arising out of the reinsurance agreement, agrees to comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or any appellate court in the event of an appeal. Nothing in this paragraph constitutes or should be understood to constit ute a waiver of Assuming Insurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitt ed by the laws of the United States or of any state in the United States. This paragraph is not intended to conflict with or override the obligation of the parties to the reinsurance agreement to arbitrate their disputes if such an obligation is created in the agreement. 2. Designates the Insurance Commissioner of _____________________________________________ (ceding insurer’s state of domicile) as its lawful attorney upon whom may be served any lawful process in any action, suit or proceeding arising out of the reinsurance agreement instituted by or on behalf of the ceding insurer. 3. Agrees to provide security in an amount equal to 100% of liabilities attributable to U.S. ceding insurers if it resists enforcement of a final U.S. judgment or properly enforceable arbitration award. 4. Agrees to provide notification within 10 days of any regulatory actions taken against it, any change in the provisions of its domiciliary license or any change in its rating by an approved rating agency, including a statement describing such changes and the reasons therefore. 5. Agrees to annually file information comparable to relevant provisions of the NAIC financial statement for use by insurance markets in accordance with Rule 0780-01-63-.07. 6. Agrees to annuall y file the report of the independent auditor on the financial statements of the insurance enterprise. 7. Agrees to annually file audited financial statements, regulatory filings, and actuarial opinion in accordance with Rule 0780-01-63-.07. 8. Agrees to annually file an updated list of all disputed and overdue reinsurance claims regarding reinsurance assumed from U.S. domestic ceding insurers. 9. Is in good standing as an insurer or reinsurer with the supervisor of its domiciliary jurisdiction. Dated: ___________________________ _____________________________________________ (name of assuming insurer) BY: _________________________________________ (name of officer) _____________________________________________ (title of officer) APPENDIX E: FORM RJ-1 FORM RJ-1 CERTIFICATE OF REINSURER DOMICILED IN RECIPROCAL JURISDICTION I, , (name of officer) (title of officer) of, the assuming insurer (name of assuming insurer) under a reinsurance agreement with one or more insurers domiciled in __________________, in order to (name of state) be considered for approval in this state, hereby certify that ____________________(“Assuming Insurer”): (name of assuming insurer) 1. Submits to the jurisdiction of any court of competent jurisdiction in Tennessee for the adjudication of any issues arising out of the reinsurance agreement, agrees to comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or any appellate court in the event of an appeal. The assuming insurer agrees that it will include such consent in each reinsurance agreement, if requested by the commissioner. Nothing in this paragraph constitutes or should be understood to constitute a waiver of assuming insurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. This paragraph is not intended to conflict with or override the obligation of the parties to the reinsurance agreement to arbitrate their disputes if such an obligation is created in the agreement, except to the extent such agreements are unenforceable under applicable insolvency or deli nquency laws. 2. Designates the Insurance Commissioner of Tennessee as its lawful attorney in and for the state of Tennessee upon whom may be served any lawful process in any action, suit or proceeding in this state arising out of the reinsurance agreement instituted by or on behalf of the ceding insurer. 3. Agrees to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer, that have been declared enforceable in the territory where the judgment was obtained. 4. Agrees to provide prompt written notice and explanation if it falls below the minimum capital and surplus or capital or surplus ratio, or if any regulatory action is taken against it for serious noncompliance with applicable law. 5. Confirms that it is not presently participating in any solvent scheme of arrangement, which involves insurers domiciled in Tennessee. If the assuming insurer enters into such an arrangement, the assuming insurer agrees to notify the ceding insurer and the commissioner, and to provide 100% security to the ceding insurer consistent with the terms of the scheme. 6. Agrees that in each reinsurance agreement it will provide security in an amount equal to 100% of the assuming insurer’s liabilities attributable to rei nsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final U.S. judgment, that is enforceable under the law of the territory in which it was obtained, or a properly enforceable arbitration award whether obtained by the ceding insurer or by its resolution estate, if applicable. 7. Agrees to provide the documentation in accordance with Rule 0780-01-63-.08(3)(e), if requested by the commissioner. Dated: ___________________________ _____________________________________________ (name of assuming insurer) BY: _________________________________________ (name of officer) _____________________________________________ (title of officer)

Chapter 0780-01-64 Actuarial Opinion and Memorandum Regulations

Tenn. Comp. R. & Regs. 0780-01-64-.01 PURPOSE

The purpose of this Chapter is to prescribe:

(1) Requirements for statements of actuarial opinion that are to be submitted in accordance with T.C.A. § 56-1-402, and for memoranda in support thereof;

(2) Rules applicable to the appointment of an appointed actuary; and (3) Guidance as to the meaning of “adequacy of reserves.”

History

• Authority: T.C.A. §§ 56-2-301, 56-1-402, 56-1-402(d)-(g), 56-1-501(d), 56-25-1601 and 56-25-1602.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed May 11, 2009; effective July 25, 2009.

Tenn. Comp. R. & Regs. 0780-01-64-.02 SCOPE

(1) This Chapter shall apply to all life insurance companies and fraternal benefit societies doing business in this State and to all life insurance companies and fraternal benefit societies that are authorized to reinsure life insurance, annuities or accident and health insurance business in this State. This Chapter shall be applied in a manner that allows the appointed actuary to utilize his or her professional judgment in performing the asset analysis and developing the actuarial opinion and supporting memoranda, consistent with relevant actuarial standards of practice. However, the commissioner shall have the

authority to specify specific methods of actuarial analysis and actuarial assumptions when, in the commissioner’s judgment, these specifications are necessary for an acceptable opinion to be rendered relative to the adequacy of reserves and related items.

(2) This Chapter shall be applicable to all annual statements filed with the office of the commissioner after the effective date of this Chapter. A statement of opinion on the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance Rule 0780-01-64-.06, and a memorandum in support thereof in accordance with Rule 0780-01-64-.07, shall be required each year.

History

• Authority: T.C.A. §§ 56-2-301, 56-1-402, 56-402(d)-(g), 56-1-501(d), 56-25-1601 and 56-25-1602.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed May 11, 2009; effective July 25, 2009. ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64

Tenn. Comp. R. & Regs. 0780-01-64-.03 AUTHORITY

This Chapter is issued pursuant to the authority vested in the Commissioner of Commerce and Insurance of the State of Tennessee under T.C.A. §§ 56-1-402, 56-1-403 and 56-1-501(d). This

Chapter will take effect for annual statements beginning in the year 2009.

History

• Authority: T.C.A. §§ 56-2-301, 56-1-402, 56-1-402(d)-(g), 56-1-403, 56-1-501(d), 56-25-1601 and 56- 25-1602.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed May 11, 2009; effective July 25, 2009.

Tenn. Comp. R. & Regs. 0780-01-64-.04 DEFINITIONS

As used in this Chapter, unless noted otherwise, the following definitions shall apply:

(1) “Actuarial Opinion” means the opinion of an appointed actuary regarding the adequacy of the reserves and related actuarial items based on an asset adequacy analysis in accordance with Rule 0780-01-64-.06 and with applicable Actuarial Standards of Practice.

(2) “Actuarial Standards Board” means the board established by the American Academy of Actuaries to develop and promulgate standards of actuarial practice.

(3) “Annual statement” means the statement required by T. C. A. § 56-1-501 or 56-25-1602 to be filed by the company with the commissioner annually.

(4) “Appointed actuary” means an individual who is appointed or retained in accordance with the requirements set forth in Rule 0780-01-64-.05(3) to provide the actuarial opinion and supporting memorandum as required by T.C.A. § 56-1-402.

(5) “Asset adequacy analysis” means an analysis that meets the standards and other requirements referred to in Rule 0780-01-64-.05(4).

(6) “Commissioner” means the Commissioner of the Department of Commerce and Insurance.

(7) “Company” means a life insurance company, fraternal benefit society or reinsurer subject to the provisions of this Chapter.

(8) “Department” means the Department of Commerce and Insurance.

(9) “NAIC” means the National Association of Insurance Commissioners.

(10) “Qualified actuary” means an individual who meets the requirements set forth in Rule 0780-01-60-.05(2).

History

• Authority: T.C.A. §§ 56-2-301, 56-1-402, 56-1-402 (d)-(g), 56-1-501, 56-1-501(d), 56-25-1601 and 56- 25-1602.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed May 11, 2009; effective July 25, 2009.

Tenn. Comp. R. & Regs. 0780-01-64-.05 GENERAL REQUIREMENTS

(1) Submission of Statement of Actuarial Opinion.

(a) There is to be included on or attached to Page 1 of the annual statement for each year beginning with the year in which this Chapter becomes effective the statement of an appointed actuary, entitled, “Statement of Actuarial Opinion,”

ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64

(0780-01-64-.05, continued) setting forth an opinion relating to reserves and related actuarial items held in support of policies and contracts, in accordance with Rule 0780-01-64-.06.

(b) Upon written request by the company, the commissioner may grant an extension of the date for submission of the statement of actuarial opinion.

(2) Qualified Actuary. A “qualified actuary” is an individual who:

(a) Is a member in good standing of the American Academy of Actuaries;

(b) Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements;

(c) Is familiar with the valuation requirements applicable to life and health insurance companies;

(d) Has not been found by the commissioner (or if so found has subsequently been reinstated as a qualified actuary), following appropriate notice and hearing, to have:

1. Violated any provision of, or any obligation imposed by, the Insurance Law or other law in the course of his or her dealings as a qualified actuary;

2. Been found guilty of fraudulent or dishonest practices;

3. Demonstrated his or her incompetency, lack of cooperation, or untrustworthiness to act as a qualified actuary;

4. Submitted to the commissioner during the past five (5) years, pursuant to this chapter, an actuarial opinion or memorandum that the commissioner rejected because it did not meet the provisions of this chapter including standards set by the Actuarial Standards Board; or 5. Resigned or been removed as an actuary within the past five (5) years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; and (e) Has not failed to notify the commissioner of any action taken by any commissioner of any other state similar to that under Rule 0780-01-64-.05(2)(d).

(3) Appointed Actuary. An “appointed actuary” is a qualified actuary who is appointed or retained to prepare the Statement of Actuarial Opinion required by this Chapter, either directly by or by the authority of the board of directors through an executive officer of the company other than the qualified actuary. The company shall give the commissioner timely written notice of the name, title (and, in the case of a consulting actuary, the name of the firm) and manner of appointment or retention of each person appointed or retained by the company as an appointed actuary and shall state in the notice that the person meets the requirements set forth in Rule 0780-01-64-.05(2). Once notice is furnished, no further notice is required with respect to this person, provided that the company shall give the commissioner timely written notice in the event the actuary ceases to be appointed or retained as an appointed actuary or to meet the requirements set forth in Rule 0780-01- 64-.05(2). If any person appointed or retained as an appointed actuary replaces a ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64 (0780-01-64-.05, continued) previously appointed actuary, the notice shall so state and give the reasons for replacement.

(4) Standards for Asset Adequacy Analysis. The asset adequacy analysis required by this

Chapter:

(a) Shall conform to the Standards of Practice as promulgated from time to time by the Actuarial Standards Board and any additional standards under this Chapter, which standards are to form the basis of the statement of actuarial opinion in accordance with this Chapter; and (b) Shall be based on methods of analysis as are deemed appropriate for such purposes by the Actuarial Standards Board.

(5) Liabilities to be Covered.

(a) Under authority of T.C.A. § 56-1-402, the statement of actuarial opinion shall apply to all in force business on the statement date, whether directly issued or assumed, regardless of when or where issued, e.g., reserves of Exhibits 8, 9 and 10, and claim liabilities in Exhibit 11, Part 1 and equivalent items in the separate account statement or statements.

(b) If the appointed actuary determines as the result of asset adequacy analysis that a reserve should be held in addition to the aggregate reserve held by the company and calculated in accordance with methods set forth in T.C.A. §§ 56-1- 402 through 56-1-403, the company shall establish the additional reserve.

(c) Additional reserves established under Rule 0780-01-64-.05(5)(b) and deemed not necessary in subsequent years may be released. Any amounts released shall be disclosed in the actuarial opinion for the applicable year. The release of such reserves would not be deemed an adoption of a lower standard of valuation.

History

• Authority: T.C.A. §§ 56-2-301, 56-1-402, 56-4-402 (d)-(g), 56-1-501(d), 56-25-1601 and 56-25-1602.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed May 11, 2009; effective July 25, 2009.

Tenn. Comp. R. & Regs. 0780-01-64-.06 STATEMENT OF ACTUARIAL OPINION BASED ON AN ASSET ADEQUACY

ANALYSIS.

(1) General Description. The statement of actuarial opinion submitted in accordance with this

Rule shall consist of:

(a) A paragraph identifying the appointed actuary and his or her qualifications [see

Rule 0780-01-64-.06(2)(a)];

(b) A scope paragraph identifying the subjects on which an opinion is to be expressed and describing the scope of the appointed actuary’s work, including a tabulation delineating the reserves and related actuarial items that have been analyzed for asset adequacy and the method of analysis, [see Rule 0780-1-64- .06(2)(b)] and identifying the reserves and related actuarial items covered by the opinion that have not been so analyzed;

(c) A reliance paragraph describing those areas, if any, where the appointed actuary has deferred to other experts in developing data, procedures or assumptions, {e.g., anticipated cash flows from currently owned assets, including variation in cash flows according to economic scenarios [see Rule 0780-01-64-.06(2)(c)]}, ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64 (0780-01-64-.06, continued) supported by a statement of each such expert in the form prescribed by Rule 0780-01-64-.06(5); and (d) An opinion paragraph expressing the appointed actuary’s opinion with respect to the adequacy of the supporting assets to mature the liabilities [see Rule 0780-01- 64-.06(2)(f)].

(e) One or more additional paragraphs will be needed in individual company cases as follows:

1. If the appointed actuary considers it necessary to state a qualification of his or her opinion;

2. If the appointed actuary must disclose an inconsistency in the method of analysis or basis of asset allocation used at the prior opinion date with that used for this opinion;

3. If the appointed actuary must disclose whether additional reserves as of the prior opinion date are released as of this opinion date, and the extent of the release;

4. If the appointed actuary chooses to add a paragraph briefly describing the assumptions that form the basis for the actuarial opinion.

(2) Recommended Language. The following paragraphs are to be included in the statement of actuarial opinion in accordance with this Rule. Language is that which in typical circumstances should be included in a statement of actuarial opinion. The language may be modified as needed to meet the circumstances of a particular case, but the appointed actuary should use language that clearly expresses his or her professional judgment.

However, in any event the opinion shall retain all pertinent aspects of the language provided in this Rule.

(a) The opening paragraph should generally indicate the appointed actuary’s relationship to the company and his or her qualifications to sign the opinion. For a company actuary, the opening paragraph of the actuarial opinion should include a statement such as:

“I, [name], am [title] of [insurance company name] and a member of the American Academy of Actuaries. I was appointed by, or by the authority of, the Board of Directors of said insurer to render this opinion as stated in the letter to the commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”

For a consulting actuary, the opening paragraph should include a statement such as:

“I, [name], a member of the American Academy of Actuaries, am associated with the firm of [name of consulting firm]. I have been appointed by, or by the authority of, the Board of Directors of [name of company] to render this opinion as stated in the letter to the commissioner dated [insert date]. I meet the Academy qualification standards for rendering the opinion and am familiar with the valuation requirements applicable to life and health insurance companies.”

(b) The scope paragraph should include a statement such as:

ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64

(0780-01-64-.06, continued)

“I have examined the actuarial assumptions and actuarial methods used in determining reserves and related actuarial items listed below, as shown in the annual statement of the company, as prepared for filing with the state regulatory officials, as of December 31, [insert year]. Tabulated below are those reserves and related actuarial items which have been subjected to asset adequacy analysis.

Asset Adequacy Tested Amounts – Reserves and Liabilities Statement Items Formula Reserves (1)

Additional Actuarial Reserves* (2)

Analysis Method** Other Amount (3)

Total Amount (1)+(2)+(3)

(4)

Exhibit 8 A Life Insurance B Annuities C Supplementary Contracts Involving Life Contingencies D Accidental Death Benefit E Disability – Active F Disability – Disabled G Miscellaneous Total (Exhibit 8 Item 1, Page 3)

Exhibit 9 A Active Life Reserve B Claim Reserve Total (Exhibit 9 Item 2, Page 3)

Exhibit 10 Premium and Other Deposit Funds (Column 5, Line 14)

Guaranteed Interest Contracts (Column 2, Line 14)

Other (Column 6, Line 14)

Supplemental Contracts and Annuities Certain (Column 3, Line 14)

Dividend Accumulations or Refunds (Column 4, Line 14)

Total Exhibit 10 (Column 1, Line 14)

ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64

(0780-01-64-.06, continued)

Exhibit 11 Part 1 1 Life (Page 3, Line 4.1) 2 Health (Page 3, Line 4.2)

Total Exhibit 11,

Part 1 Separate Accounts (Page 3 of the Annual Statement of the Separate Accounts, Lines 1, 2, 3.1, 3.2, 3.3)

TOTAL RESERVES

IMR (General Account, Page _____ Line ______)

(Separate Accounts, Page _____ Line _____)

AVR*** (Page _____ Line_____)

Net Deferred and Uncollected Premium Notes:

(*) The additional actuarial reserves are the reserves established under Rule 0780-01-64-.05(5)(b).

(**) The appointed actuary should indicate the method of analysis, determined in accordance with the standards for asset adequacy analysis referred to in Rule 0780-01-64-.05(4), by means of symbols that should be defined in footnotes to the table.

(***) Allocated amount of Asset Valuation Reserve (“AVR”).”

(c) If the appointed actuary has relied on other experts to develop certain portions of the analysis, the reliance paragraph should include a statement such as:

“I have relied on [name], [title] for [e.g., “anticipated cash flows from currently owned assets, including variations in cash flows according to economic scenarios” or “certain critical aspects of the analysis performed in conjunction with forming my opinion”], as certified in the attached statement. I have reviewed the information relied upon for reasonableness.”

A statement of reliance on other experts should be accompanied by a statement by each of the experts in the form prescribed by Rule 0780-01-64-.06(5).

(d) If the appointed actuary has examined the underlying asset and liability records, the reliance paragraph should include a statement such as:

“My examination included such review of the actuarial assumptions and actuarial methods and of the underlying basic asset and liability records and such tests of the actuarial calculations as I considered necessary. I also reconciled the underlying basic asset and liability records to [exhibits and schedules listed as applicable] of the company’s current annual statement.”

(e) If the appointed actuary has not examined the underlying records, but has relied upon data (e.g., listings and summaries of policies in force or asset records) prepared by the company, the reliance paragraph should include a statement such as:

ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64

(0780-01-64-.06, continued)

“In forming my opinion on [specify types of reserves] I relied upon data prepared by [name and title of company officer certifying in force records or other data] as certified in the attached statements. I evaluated that data for reasonableness and consistency. I also reconciled that data to [exhibits and schedules to be listed as applicable] of the company’s current annual statement. In other respects, my examination included review of the actuarial assumptions and actuarial methods used and tests of the calculations I considered necessary.”

The section shall be accompanied by a statement by each person relied upon in the form prescribed by Rule 0780-01-64-.06(5).

(f) The opinion paragraph should include a statement such as:

“In my opinion the reserves and related actuarial values concerning the statement items identified above:

1. Are computed in accordance with presently accepted actuarial standards consistently applied and are fairly stated, in accordance with sound actuarial principles;

2. Are based on actuarial assumptions that produce reserves at least as great as those called for in any contract provision as to reserve basis and method, and are in accordance with all other contract provisions;

3. Meet the requirements of the Insurance Law and regulations of the state of [state of domicile], and are at least as great as the minimum aggregate amounts required by the state in which this statement is filed;

4. Are computed on the basis of assumptions consistent with those used in computing the corresponding items in the annual statement of the preceding year-end (with any exceptions noted below); and 5. Include provision for all actuarial reserves and related statement items which ought to be established.

The reserves and related items, when considered in light of the assets held by the company with respect to such 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, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the company. (At the discretion of the commissioner, this language may be omitted for an opinion filed on behalf of a company doing business only in this state and in no other state.)

The actuarial methods, considerations and analyses used in forming my opinion conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis of this statement of opinion.”

“This opinion is updated annually as required by statute. To the best of my knowledge, there have been no material changes from the applicable date of the annual statement to the date of the rendering of this opinion which should be considered in reviewing this opinion.” or ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64 (0780-01-64-.06, continued)

“The following material changes which occurred between the date of the statement for which this opinion is applicable and the date of this opinion should be considered in reviewing this opinion: [Describe the change or changes.]”

“The impact of unanticipated events subsequent to the date of this opinion is beyond the scope of this opinion. The analysis of the asset adequacy portion of this opinion should be viewed recognizing that the company’s future experience may not follow all the assumptions used in this analysis. ____________________________________________ Signature of Appointed Actuary ____________________________________________ Address of Appointed Actuary ____________________________________________ Telephone Number of Appointed Actuary ____________________________________________ Date”

(3) Assumptions for New Issues.

The adoption for new issues or new claims or other new liabilities of an actuarial assumption that differs from a corresponding assumption used for prior new issues or new claims or other new liabilities is not a change in actuarial assumptions within the meaning of this Rule 0780-01-64-.06.

(4) Adverse Opinions.

If the appointed actuary is unable to form an opinion, then he or she shall refuse to issue a statement of actuarial opinion. If the appointed actuary’s opinion is adverse or qualified, then he or she shall issue an adverse or qualified actuarial opinion explicitly stating the reasons for the opinion. This statement should follow the scope paragraph and precede the opinion paragraph.

(5) Reliance on Information Furnished by Other Persons.

If the appointed actuary relies on the certification of others on matters concerning the accuracy or completeness of any data underlying the actuarial opinion, or the appropriateness of any other information used by the appointed actuary in forming the actuarial opinion, the actuarial opinion should so indicate the persons the actuary is relying upon and a precise identification of the items subject to reliance. In addition, the persons on whom the appointed actuary relies shall provide a certification that precisely identifies the items on which the person is providing information and a statement as to the accuracy, completeness or reasonableness, as applicable, of the items. This certification shall include the signature, title, company, address and telephone numbers of the person rendering the certification, as well as the date on which it is signed.

(6) Alternate Option.

(a) T.C.A. §§ 56-1-402 through 56-1-403 gives the commissioner broad authority to accept the valuation of a foreign insurer when that valuation meets the requirements applicable to a company domiciled in this state in the aggregate. As an alternative to the requirements of Rule 0780-01-64-.06(2)(f)(3), the ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64 (0780-01-64-.06, continued) commissioner may make one or more of the following additional approaches available to the opining actuary:

1. A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and the formal written standards and conditions of this state for filing an opinion based on the law of the state of domicile.” If the commissioner chooses to allow this alternative, a formal written list of standards and conditions shall be made available. If a company chooses to use this alternative, the standards and conditions in effect on July 1 of a calendar year shall apply to statements for that calendar year, and they shall remain in effect until they are revised or revoked. If no list is available, this alternative is not available.

2. A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have verified that the company’s request to file an opinion based on the law of the state of domicile has been approved and that any conditions required by the commissioner for approval of that request have been met.” If the commissioner chooses to allow this alternative, a formal written statement of such allowance shall be issued no later than March 31 of the year it is first effective. It shall remain valid until rescinded or modified by the commissioner. The rescission or modifications shall be issued no later than March 31 of the year they are first effective. Subsequent to that statement being issued, if a company chooses to use this alternative, the company shall file a request to do so, along with justification for its use, no later than April 30 of the year of the opinion to be filed. The request shall be deemed approved on October 1 of that year if the commissioner has not denied the request by that date.

3. A statement that the reserves “meet the requirements of the insurance laws and regulations of the State of [state of domicile] and I have submitted the required comparison as specified by this state.”

(i) If the commissioner chooses to allow this alternative, a formal written list of products [to be added to the table in Rule 0780-01- 64-.06(6)(a)(3.)(ii)] for which the required comparison shall be provided will be published. If a company chooses to use this alternative, the list in effect on July 1 of a calendar year shall apply to statements for that calendar year, and it shall remain in effect until it is revised or revoked. If no list is available, this alternative is not available.

(ii) If a company desires to use this alternative, the appointed actuary shall provide a comparison of the gross nationwide reserves held to the gross nationwide reserves that would be held under the codification standards of the NAIC. Gross nationwide reserves are the total reserves calculated for the total company in force business directly sold and assumed, indifferent to the state in which the risk resides, without reduction for reinsurance ceded. The information provided shall be at least:

ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64

(0780-01-64-.06, continued)

(1)

Product Type (2)

Death Benefit or Account Value (3)

Reserves Held (4)

Codification Reserves (5)

Codification Standard (iii) The information listed shall include all products identified by either the state of filing or any other states subscribing to this alternative.

(iv) If there is no codification standard for the type of product or risk in force or if the codification standard does not directly address the type of product or risk in force, the appointed actuary shall provide detailed disclosure of the specific method and assumptions used in determining the reserves held.

(v) The comparison provided by the company is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

(b) Notwithstanding the above, the commissioner may reject an opinion based on the laws and regulations of the state of domicile and require an opinion based on the laws of this state. If a company is unable to provide the opinion within sixty (60) days of the request or such other period of time determined by the commissioner after consultation with the company, the commissioner may contract an independent actuary at the company’s expense to prepare and file the opinion.

History

• Authority: T.C.A. §§ 56-2-301, 56-1-402, 56-1-402 (d)-(g), 56-1-403, 56-1-501(d), 56-25-1601 and 56- 25-1602.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed May 11, 2009; effective July 25, 2009.

Tenn. Comp. R. & Regs. 0780-01-64-.07 DESCRIPTION OF ACTUARIAL MEMORANDUM INCLUDING AN ASSET

ADEQUACY ANALYSIS AND REGULATORY ASSET ADEQUACY ISSUES SUMMARY.

(1) General.

(a) In accordance with T.C.A. §§ 56-1-402(d)-(h) and 56-1-501(d), the appointed actuary shall prepare a memorandum to the company describing the analysis done in support of his or her opinion regarding the reserves. The memorandum shall be made available for examination by the commissioner upon his or her request but shall be returned to the company after such examination and shall not be considered a public record of the department or subject to automatic filing with the commissioner, as more fully stated in T.C.A. § 56-1-402(g)(7).

(b) In preparing the memorandum, the appointed actuary may rely on, and include as a part of his or her own memorandum, memoranda prepared and signed by other actuaries who are qualified within the meaning of Rule 0780-01-64-.05(2), with respect to the areas covered in such memoranda, and so state in their memoranda.

(c) If the commissioner requests a memorandum and no such memorandum exists or if the commissioner finds that the analysis described in the memorandum fails to meet the standards of the Actuarial Standards Board or the standards and requirements of this Chapter, the commissioner may designate a qualified actuary to review the opinion and prepare such supporting memorandum as is ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64 (0780-01-64-.07, continued) required for review. The reasonable and necessary expense of the independent review shall be paid by the company but shall be directed and controlled by the commissioner.

(d) The reviewing actuary shall have the same status as an examiner for purposes of obtaining data from the company and the work papers and documentation of the reviewing actuary shall be retained by the commissioner; provided, however, that any information provided by the company to the reviewing actuary and included in the work papers shall be considered as material provided by the company to the commissioner and shall be kept confidential to the same extent as is prescribed by law with respect to other material provided by the company to the commissioner pursuant to the statutes governing this Chapter. The reviewing actuary shall not be an employee of a consulting firm involved with the preparation of any prior memorandum or opinion for the insurer pursuant to this

Chapter for any one of the current year or the preceding three (3) years.

(e) In accordance with T.C.A. § 56-1-402(d)-(g), the appointed actuary shall prepare a regulatory asset adequacy issues summary, the contents of which are specified in Rule 0780-01-64-.07(3). The regulatory asset adequacy issues summary will be submitted no later than March 15 of the year following the year for which as statement of actuarial opinion based on asset adequacy is required. The regulatory asset adequacy issues summary is to be kept confidential to the same extent and under the same conditions as the actuarial memorandum.

(2) Details of the Memorandum Section Documenting Asset Adequacy Analysis.

When an actuarial opinion is provided, the memorandum shall demonstrate that the analysis has been done in accordance with the standards for asset adequacy referred to in Rule 0780-01-64-.05(4) and any additional standards under this Chapter. It shall specify:

(a) For reserves:

1. Product descriptions including market description, underwriting and other aspects of a risk profile and the specific risks the appointed actuary deems significant;

2. Source of liability in force;

3. Reserve method and basis;

4. Investment reserves;

5. Reinsurance arrangements;

6. Identification of any explicit or implied guarantees made by the general account in support of benefits provided through a separate account or under a separate account policy or contract and the methods used by the appointed actuary to provide for the guarantees in the asset adequacy analysis;

7. Documentation of assumptions to test reserves for the following:

(i) Lapse rates (both base and excess);

(ii) Interest crediting rate strategy;

ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64

(0780-01-64-.07, continued)

(iii) Mortality;

(iv) Policyholder dividend strategy;

(v) Competitor or market interest rate;

(vi) Annuitization rates;

(vii) Commissions and expenses; and (viii) Morbidity.

The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions.

(b) For assets:

1. Portfolio descriptions, including a risk profile disclosing the quality, distribution and types of assets;

2. Investment and disinvestment assumptions;

3. Source of asset data;

4. Asset valuation bases; and 5. Documentation of assumptions made for:

(i) Default costs;

(ii) Bond call function;

(iii) Mortgage prepayment function;

(iv) Determining market value for assets sold due to disinvestment strategy; and (v) Determining yield on assets acquired through the investment strategy.

The documentation of the assumptions shall be such that an actuary reviewing the actuarial memorandum could form a conclusion as to the reasonableness of the assumptions.

(c) For the analysis basis:

1. Methodology;

2. Rationale for inclusion or exclusion of different blocks of business and how pertinent risks were analyzed;

3. Rationale for degree of rigor in analyzing different blocks of business (include in the rationale the level of “materiality” that was used in determining how rigorously to analyze different blocks of business);

ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64

(0780-01-64-.07, continued)

4. Criteria for determining asset adequacy (include in the criteria the precise basis for determining if assets are adequate to cover reserves under “moderately adverse conditions” or other conditions as specified in relevant actuarial standards of practice); and 5. Whether the impact of federal income taxes was considered and the method of treating reinsurance in the asset adequacy analysis;

(d) Summary of material changes in methods, procedures, or assumptions from prior year’s asset adequacy analysis;

(e) Summary of results; and (f) Conclusions.

(3) Details of the Regulatory Asset Adequacy Issues Summary.

(a) The regulatory asset adequacy issues summary shall include:

1. Descriptions of the scenarios tested (including whether those scenarios are stochastic or deterministic) and the sensitivity testing done relative to those scenarios. If negative ending surplus results under certain tests in the aggregate, the actuary should describe those tests and the amount of additional reserve as of the valuation date which, if held, would eliminate the negative aggregate surplus values. Ending surplus values shall be determined by either extending the projection period until the in force and associated assets and liabilities at the end of the projection period are immaterial or by adjusting the surplus amount at the end of the projection period by an amount that appropriately estimates the value that can reasonably be expected to arise from the assets and liabilities remaining in force;

2. The extent to which the appointed actuary uses assumptions in the asset adequacy analysis that are materially different from the assumptions used in the previous asset adequacy analysis;

3. The amount of reserves and the identity of the product lines that had been subjected to asset adequacy analysis in the prior opinion but were not subject to analysis for the current opinion;

4. Comments on any interim results that may be of significant concern to the appointed actuary;

5. The methods used by the actuary to recognize the impact of reinsurance on the company’s cash flows, including both assets and liabilities, under each of the scenarios tested; and 6. Whether the actuary has been satisfied that all options whether explicit or embedded, in any asset or liability (including but not limited to those affecting cash flows embedded in fixed income securities) and equity-like features in any investments have been appropriately considered in the asset adequacy analysis.

(b) The regulatory asset adequacy issues summary shall contain the name of the company for which the regulatory asset adequacy issues summary is being ACTUARIAL OPINION AND MEMORANDUM REGULATION 0780-01-64 (0780-01-64-.07, continued) supplied and shall be signed and dated by the appointed actuary rendering the actuarial opinion.

(4) Conformity to Standards of Practice. The memorandum shall include a statement:

“Actuarial methods, considerations and analyses used in the preparation of this memorandum conform to the appropriate Standards of Practice as promulgated by the Actuarial Standards Board, which standards form the basis for this memorandum.”

(5) Use of Assets Supporting the Interest Maintenance Reserve and the Asset Valuation Reserve.

An appropriate allocation of assets in the amount of the interest maintenance reserve (“IMR”), whether positive or negative, shall be used in any asset adequacy analysis.

Analysis of risks regarding asset default may include an appropriate allocation of assets supporting the asset valuation reserve (“AVR”); these AVR assets may not be applied for any other risks with respect to reserve adequacy. Analysis of these and other risks may include assets supporting other mandatory or voluntary reserves available to the extent not used for risk analysis and reserve support.

The amount of the assets used for the AVR shall be disclosed in the table of reserves and liabilities of the opinion and in the memorandum. The method used for selecting particular assets or allocated portions of assets shall be disclosed in the memorandum.

(6) Documentation. The appointed actuary shall retain on file, for at least seven (7) years, sufficient documentation so that it will be possible to determine the procedures followed, the analyses performed, the bases for assumptions and the results obtained.

History

• Authority: T.C.A. §§ 56-2-301, 56-1-402, 56-1-402 (d)-(g), 56-1-403, 56-1-411, 56-1-413, 56-1-501(d), 56-25-1601 and 56-25-1602.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed May 11, 2009; effective July 25, 2009.

Tenn. Comp. R. & Regs. 0780-01-64-.08 REPEALED

History

• Authority: T.C.A. §§56-1-402(d)-(g), 56-1-501(d) and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal filed May 11, 2009; effective July 25, 2009. 0780-01-64-09 REPEALED. Authority: T.C.A. §§56-1-402(d)-(g), 56-1-501(d) and 56-2-301.

Tenn. Comp. R. & Regs. 0780-01-64-.10 REPEALED

History

• Authority: T.C.A. §§56-1-402(d)-(g), 56-1-501(d) and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal filed May 11, 2009; effective July 25, 2009.

Chapter 0780-01-65 Annual Financial Reporting

Tenn. Comp. R. & Regs. 0780-01-65-.01 AUTHORITY

This Chapter is promulgated by the commissioner of commerce and insurance pursuant to T.C.A. §§ 56-1-501(h) and 56-2-301.

History

• Authority: T.C.A. §§ 56-1-408, 56-1-409, 56-1-410, 56-1-411, 56-1-501(h), and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009.

Tenn. Comp. R. & Regs. 0780-01-65-.02 PURPOSE

The purpose of this Chapter is to improve the commissioner’s surveillance of the financial condition of insurers by requiring (1) an annual audit of financial statements reporting the financial position and the results of operations of insurers by independent certified public accountants; (2)

Communication of Internal Control Related Matters Noted in an Audit, and (3) Management’s Report of Internal Control over Financial Reporting.

History

• Authority: T.C.A. §§ 56-1-501(h) and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009.

Tenn. Comp. R. & Regs. 0780-01-65-.03 SCOPE

(1) Every insurer as defined in Rule 0780-01-65-.04 shall be subject to this Chapter.

Insurers having direct premiums written in this state of less than $1,000,000 in any calendar year and less than 1,000 policyholders or certificateholders of direct written policies nationwide at the end of the calendar year shall be exempt from this Chapter for the year (unless the commissioner makes a specific finding that compliance is necessary for the commissioner to carry out statutory responsibilities) except that insurers having assumed premiums pursuant to contracts and/or treaties of reinsurance of $1,000,000 or more will not be so exempt.

(2) Foreign or alien insurers filing the audited financial report in another state, pursuant to that state’s requirement for filing of audited financial reports, which has been found by the commissioner to be substantially similar to the requirements herein, are exempt from Rules 0780-01-65-.05 through .14 if:

(a) A copy of the audited financial report, Communication of Internal Control Related Matters Noted in an Audit, and the Accountant’s Letter of Qualifications that are filed with the other state are filed with the commissioner in accordance with the filing dates specified in Rules 0780-01-65-.05, .12 and .13, respectively (Canadian insurers may submit accountants’ reports as filed with the Office of the Superintendent of Financial Institutions, Canada).

(b) A copy of any Notification of Adverse Financial Condition Report filed with the other state is filed with the commissioner within the time specified in Rule

Tenn. Comp. R. & Regs. 0780-01-65-.04 DEFINITIONS

(1) “Accountant” or “independent certified public accountant” means an independent certified public accountant or accounting firm in good standing with the American Institute of Certified Public Accountants (AICPA) and in all states in which he or she is licensed to practice; for Canadian and British companies, it means a Canadianchartered or British-chartered accountant.

(2) An “affiliate” of, or person “affiliated” with, a specific person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

(3) “Audit committee” means a committee (or equivalent body) established by the board of directors of an entity for the purpose of overseeing the accounting and financial reporting processes of an insurer or group of insurers, and audits of financial statements of the insurer or group of insurers. The audit committee of any entity that controls a group of insurers may be deemed to be the audit committee for one or more of these controlled insurers solely for the purposes of this Chapter at the election of the controlling person. Refer to Rule 0780-01-65-.15(6) for exercising this election. If an audit committee is not designated by the insurer, the insurer’s entire board of directors shall constitute the audit committee.

(4) “Audited financial report” means and includes those items specified in Rule 0780-01- 65-.06.

(5) “Commissioner” means the commissioner of commerce and insurance.

(6) “Department” means the department of commerce and insurance.

(7) “Group of insurers” means those licensed insurers included in the reporting requirements of Title 56, Chapter 11 of the Tennessee Code Annotated, or a set of insurers as identified by management, for the purpose of assessing the effectiveness of Internal control over financial reporting.

(8) “Indemnification” means an agreement of indemnity or a release from liability where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing of other misrepresentations made by the insurer or its representatives.

(9) “Independent board member” has the same meaning as described in Rule 0780-01- 65-.15(5).

(10) “Insurer” means an insurer or insurance company as defined in Tenn. Code Ann. § 56-1-102 and authorized to do business in Tennessee under a license or a certificate of authority from the commissioner as referenced in Title 56 Chapter 2 or Chapter 25 of the Tennessee Code Annotated.

(11) “Internal audit function” means a person or persons that provide independent, objective and reasonable assurance designed to add value and improve an organization’s operations and accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

(12) “Internal control over financial reporting” means a process effected by an entity’s board of directors, management and other personnel designed to provide reasonable assurance regarding the reliability of the financial statements, i.e., those items specified in Rule 0780-01-65-.06(2)(b)-(g) and includes those policies and procedures that:

(a) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets;

(b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements, i.e., those items specified in

Rule 0780-01-65-.06(2)(b)-(g) and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements, i.e., those items specified in Rule 0780-01-65-.06(2)(b)-(g).

(13) “NAIC” means the National Association of Insurance Commissioners.

(14) “SEC” means the United States Securities and Exchange Commission.

(15) “Section 404” means Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC’s rules and regulations promulgated thereunder.

(16) “Section 404 Report” means management’s report on “internal control over financial reporting” as defined by the SEC and the related attestation report of the independent certified public accountant as described in Paragraph (1) of this Rule.

(17) “SOX Compliant Entity” means an entity that either is required to be compliant with, or voluntarily is compliant with, all of the following provisions of the Sarbanes-Oxley Act of 2002: (i) the preapproval requirements of Section 201 (Section 10A(i) of the Securities Exchange Act of 1934); (ii) the audit committee independence requirements of Section 301 (Section 10A(m)(3) of the Securities Exchange Act of 1934); and (iii) the internal control over financial reporting requirements of Section 404 (Item 308 of SEC Regulation S-K).

History

• Authority: T.C.A. §§ 56-1-102; 56-1-501(h); 56-2-201, et seq.; 56-2-301; 56-11-101, et seq.; 56- 25-1602; Title 56, Chapters 2 and 11 of the Tennessee Code Annotated; and Sarbanes-Oxley Act of 2002, Sections 201, 301, 302, and 404.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009. Amendments filed June 28, 2018; effective September 26, 2018.

Tenn. Comp. R. & Regs. 0780-01-65-.05 GENERAL REQUIREMENTS RELATED TO FILING AND EXTENSIONS FOR

FILING OF ANNUAL AUDITED FINANCIAL REPORTS AND AUDIT COMMITTEE

APPOINTMENT.

(1) All insurers shall have an annual audit by an independent certified public accountant and shall file an audited financial report with the commissioner on or before June 1 for the year ended December 31 immediately preceding. The commissioner may require an insurer to file an audited financial report earlier than June 1 with ninety (90) days advance notice to the insurer.

(2) Extensions of the June 1 filing date may be granted by the commissioner for thirtyday periods upon a showing by the insurer and its independent certified public accountant of the reasons for requesting an extension and determination by the commissioner of good cause for an extension. The request for extension must be submitted in writing not less than ten (10) days prior to the due date in sufficient detail to permit the commissioner to make an informed decision with respect to the requested extension.

(3) If an extension is granted in accordance with the provisions in Paragraph (2) of this

Rule, a similar extension of thirty (30) days is granted to the filing of Management’s Report of Internal Control over Financial Reporting described in Rule 0780-01-65- .18.

(4) Every insurer required to file an annual audited financial report pursuant to this

Chapter shall designate a group of individuals as constituting its audit committee, as defined in Rule 0780-01-65-.04. The audit committee of an entity that controls an insurer may be deemed to be the insurer’s audit committee for purposes of this

Chapter at the election of the controlling person.

History

• Authority: T.C.A. §§ 56-1-501(h) and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009. Amendments filed June 28, 2018; effective September 26, 2018.

Tenn. Comp. R. & Regs. 0780-01-65-.06 CONTENTS OF ANNUAL AUDITED FINANCIAL REPORT

(1) The annual audited financial report shall report the financial position of the insurer as of the end of the most recent calendar year and the results of its operations, cash flows and changes in capital and surplus for the year then ended in conformity with statutory accounting practices prescribed, or otherwise permitted, by the department of insurance of the state of domicile.

(2) The annual audited financial report shall include the following:

(a) Report of independent certified public accountant;

(b) Balance sheet reporting admitted assets, liabilities, capital and surplus;

(c) Statement of operations;

(d) Statement of cash flow;

(e) Statement of changes in capital and surplus;

(f) Notes to financial statements. These notes shall be those required by the appropriate NAIC Annual Statement Instructions and the NAIC Accounting Practices and Procedures Manual. The notes shall include a reconciliation of differences, if any, between the audited statutory financial statements and the corresponding annual statement filed pursuant to Title 56, Chapter 1, Part 5 of the Tennessee Code Annotated or other applicable insurance statutory requirement with a written description of the nature of these differences; and (g) The financial statements included in the audited financial report shall be prepared in a form and using language and groupings substantially the same as the relevant sections of the annual statement of the insurer filed with the commissioner, and the financial statement shall be comparative, presenting the amounts as of December 31 of the current year and the amounts as of the immediately preceding December 31. (However, in the first year in which an insurer is required to file an audited financial report, the comparative data may be omitted).

History

• Authority: T.C.A. §§ 56-1-501, 56-1-501(a)-(h), 56-2-301, and 56-44-102.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009.

Tenn. Comp. R. & Regs. 0780-01-65-.07 DESIGNATION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT

(1) Each insurer required by this Chapter to file an annual audited financial report must within sixty (60) days after becoming subject to the requirement, register with the commissioner in writing the name and address of the independent certified public accountant or accounting firm retained to conduct the annual audit set forth in this

Chapter. Insurers not retaining an independent certified public accountant on the effective date of this Chapter shall register the name and address of their retained independent certified public accountant not less than six (6) months before the date when the first audited financial report is to be filed.

(2) The insurer shall obtain a letter from the accountant, and file a copy with the commissioner stating that the accountant is aware of the provisions of the insurance code and the regulations of the insurance department of the state of domicile that relate to accounting and financial matters and affirming that the accountant will express his or her opinion on the financial statements in terms of their conformity to the statutory accounting practices prescribed or otherwise permitted by that insurance department, specifying such exceptions as he or she may believe appropriate.

(3) If an accountant who was the accountant for the immediately preceding filed audited financial report is dismissed or resigns, the insurer shall within five (5) business days notify the commissioner of this event. The insurer shall also furnish the commissioner with a separate letter within ten (10) business days of the above notification stating whether in the twenty-four (24) months preceding such event there were any disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure; which disagreements, if not resolved to the satisfaction of the former accountant, would have caused him or her to make reference to the subject matter of the disagreement in connection with his or her opinion. The disagreements required to be reported in response to this Rule include both those resolved to the former accountant’s satisfaction and those not resolved to the former accountant’s satisfaction.

Disagreements contemplated by this Rule are those that occur at the decisionmaking level, i.e., between personnel of the insurer responsible for presentation of its financial statements and personnel of the accounting firm responsible for rendering its report. The insurer shall also in writing request the former accountant to furnish a letter addressed to the insurer stating whether the accountant agrees with the statements contained in the insurer’s letter and, if not, stating the reasons for which he or she does not agree; and the insurer shall furnish the responsive letter from the former accountant to the commissioner together with its own.

History

• Authority: T.C.A. §§ 56-1-501(h) and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009.

Tenn. Comp. R. & Regs. 0780-01-65-.08 .

History

• Authority: T.C.A. §§ 56-1-501(h) and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009.

Tenn. Comp. R. & Regs. 0780-01-65-.09 CONSOLIDATED OR COMBINED AUDITS

An insurer may make written application to the commissioner for approval to file audited consolidated or combined financial statements in lieu of separate annual audited financial statements if the insurer is part of a group of insurance companies that utilizes a pooling or one hundred percent (100%) reinsurance agreement that affects the solvency and integrity of the insurer’s reserves and the insurer cedes all of its direct and assumed business to the pool. In these cases, a columnar consolidating or combining worksheet shall be filed with the report, as follows:

(1) Amounts shown on the consolidated or combined audited financial report shall be shown on the worksheet;

(2) Amounts for each insurer subject to this Rule shall be stated separately;

(3) Noninsurance operations may be shown on the worksheet on a combined or individual basis;

(4) Explanations of consolidating and eliminating entries shall be included; and (5) A reconciliation shall be included of any differences between the amounts shown in the individual insurer columns of the worksheet and comparable amounts shown on the annual statements of the insurers.

History

• Authority: T.C.A. §§ 56-1-501(h) and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009.

Tenn. Comp. R. & Regs. 0780-01-65-.10 SCOPE OF AUDIT AND REPORT OF INDEPENDENT CERTIFIED PUBLIC

ACCOUNTANT.

Financial statements furnished pursuant to Rule 0780-01-65-.06 shall be examined by the independent certified public accountant. The audit of the insurer’s financial statements shall be conducted in accordance with generally accepted auditing standards. In accordance with AU

Section 319 of the Professional Standards of the AICPA, Consideration of Internal Control in a Financial Statement Audit, the independent certified public accountant should obtain an understanding of internal control sufficient to plan the audit. To the extent required by AU 319, for those insurers required to file a Management’s Report of Internal Control over Financial Reporting pursuant to Rule 0780-01-65-.18, the independent certified public accountant should consider (as that term is defined in Statement on Auditing Standards (SAS) No. 102, Defining Professional Requirements in Statements on Auditing Standards or its replacement) the most recently available report in planning and performing the audit of the statutory financial statements.

Consideration shall be given to the procedures illustrated in the Financial Condition Examiners Handbook promulgated by the NAIC as the independent certified public accountant deems necessary.

History

• Authority: T.C.A. §§ 56-1-501(h) and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009.

Tenn. Comp. R. & Regs. 0780-01-65-.11 NOTIFICATION OF ADVERSE FINANCIAL CONDITION

(1) The insurer required to furnish the annual audited financial report shall require the independent certified public accountant to report, in writing, within five (5) business days to the board of directors or its audit committee any determination by the independent certified public accountant that the insurer has materially misstated its financial condition as reported to the commissioner as of the balance sheet date currently under audit or that the insurer does not meet the minimum capital and surplus requirement of the Tennessee insurance laws and regulations as of that date. An insurer that has received a report pursuant to this Paragraph shall forward a copy of the report to the commissioner within five (5) business days of receipt of the report and shall provide the independent certified public accountant making the report with evidence of the report being furnished to the commissioner. If the independent certified public accountant fails to receive the evidence within the required five (5) business day period, the independent certified public accountant shall furnish to the commissioner a copy of its report within the next five (5) business days.

(2) No independent certified public accountant shall be liable in any manner to any person for any statement made in connection with the Paragraph (1) of this Rule if the statement is made in good faith in compliance with that Paragraph.

(3) If the accountant, subsequent to the date of the audited financial report filed pursuant to this Chapter, becomes aware of facts that might have affected his or her report, the accountant must take such action as prescribed in Volume 1, Section AU 561 of the Professional Standards of the AICPA.

History

• Authority: T.C.A. §§ 56-1-501(h) and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009.

Tenn. Comp. R. & Regs. 0780-01-65-.12 COMMUNICATION OF INTERNAL CONTROL RELATED MATTERS NOTED

IN AN AUDIT.

(1) In addition to the annual audited financial report, each insurer shall furnish the commissioner with a written communication as to any unremediated material weaknesses in its Internal control over financial reporting noted during the audit.

Such communication shall be prepared by the accountant within sixty (60) days after the filing of the annual audited financial report, and shall contain a description of any unremediated material weakness (as the term material weakness is defined by Statement on Auditing Standard 60, Communication of Internal Control Related Matters Noted in an Audit, or its replacement) as of December 31 immediately preceding (so as to coincide with the audited financial report discussed in Rule 0780- 01-65-.05(1)) in the insurer’s Internal control over financial reporting noted by the accountant during the course of their audit of the financial statements. If no unremediated material weaknesses were noted, the communication should so state.

(2) The insurer is required to provide a description of remedial actions taken or proposed to correct unremediated material weaknesses, if the actions are not described in the accountant’s communication.

History

• Authority: T.C.A. §§ 56-1-501(h) and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009.

Tenn. Comp. R. & Regs. 0780-01-65-.13 ACCOUNTANT’S LETTER OF QUALIFICATIONS

The accountant shall furnish the insurer in connection with, and for inclusion in, the filing of the annual audited financial report, a letter stating:

(1) That the accountant is independent with respect to the insurer and conforms to the standards of his or her profession as contained in the Code of Professional Ethics and pronouncements of the AICPA and the Rules of Professional Conduct of the Tennessee Board of Public Accountancy, or similar code;

(2) The background and experience in general, and the experience in audits of insurers of the staff assigned to the engagement and whether each is an independent certified public accountant. Nothing within this Chapter shall be construed as prohibiting the accountant from utilizing such staff as he or she deems appropriate where use is consistent with the standards prescribed by generally accepted auditing standards;

(3) That the accountant understands the annual audited financial report and his opinion thereon will be filed in compliance with this Chapter and that the commissioner will be relying on this information in the monitoring and regulation of the financial position of insurers;

(4) That the accountant consents to the requirements of Rule 0780-01-65-.14 and that the accountant consents and agrees to make available for review by the commissioner, or the commissioner’s designee or appointed agent, the workpapers, as defined in Rule 0780-01-65-.14;

(5) A representation that the accountant is properly licensed by an appropriate state licensing authority and is a member in good standing in the AICPA; and (6) A representation that the accountant is in compliance with the requirements of Rule

Tenn. Comp. R. & Regs. 0780-01-65-.14 AVAILABILITY AND MAINTENANCE OF INDEPENDENT CERTIFIED

PUBLIC ACCOUNTANTS WORKPAPERS.

(1) Workpapers are the records kept by the independent certified public accountant of the procedures followed, the tests performed, the information obtained, and the conclusions reached pertinent to the accountant’s audit of the financial statements of an insurer. Workpapers, accordingly, may include audit planning documentation, work programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents and schedules or commentaries prepared or obtained by the independent certified public accountant in the course of his or her audit of the financial statements of an insurer and which support the accountant’s opinion.

(2) Every insurer required to file an audited financial report pursuant to this Chapter, shall require the accountant to make available for review by department examiners, all workpapers prepared in the conduct of the accountant’s audit and any communications related to the audit between the accountant and the insurer, at the offices of the insurer, at the offices of the department or at any other reasonable place designated by the commissioner. The insurer shall require that the accountant retain the audit workpapers and communications until the department has filed a report on examination covering the period of the audit but no longer than seven (7) years from the date of the audit report.

(3) In the conduct of the aforementioned periodic review by the department examiners, it shall be agreed that photocopies of pertinent audit workpapers may be made and retained by the department. Such reviews by the department examiners shall be considered investigations and all working papers and communications obtained during the course of such investigations shall be afforded the same confidentiality as other examination workpapers generated by the department as provided for under Tenn. Code Ann. § 56-1-411 and other statutory provisions.

History

• Authority: T.C.A. §§ 56-1-411, 56-1-501(h), 56-2-301, 56-11-108, 56-11-109, and 56-46-109.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009.

Tenn. Comp. R. & Regs. 0780-01-65-.15 REQUIREMENTS FOR AUDIT COMMITTEES

(1) This Rule shall not apply to foreign or alien insurers licensed in this state or an insurer that is a SOX Compliant Entity or a direct or indirect wholly-owned subsidiary of a SOX Compliant Entity.

(2) The audit committee shall be directly responsible for the appointment, compensation and oversight of the work of any accountant (including resolution of disagreements between management and the accountant regarding financial reporting) for the

purpose of preparing or issuing the audited financial report or related work pursuant to this Chapter. Each accountant shall report directly to the audit committee.

(3) The audit committee of an insurer or group of insurers shall be responsible for overseeing the insurer’s internal audit function and granting the person or persons performing the function suitable authority and resources to fulfill their responsibilities if required by Rule 0780-01-65-.16 of this Chapter.

(4) Each member of the audit committee shall be a member of the board of directors of the insurer or a member of the board of directors of an entity elected pursuant to Paragraph (7) of this Rule and Rule 0780-01-65-.04(3).

(5) In order to be considered independent for purposes of this Rule, a member of the audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept any consulting, advisory or other compensatory fee from the entity or be an affiliated person of the entity or any subsidiary thereof. However, if law requires board participation by otherwise non-independent members, that law shall prevail and such members may participate in the audit committee and be designated as independent for audit committee purposes, unless they are an officer or employee of the insurer or one of its affiliates.

(6) If a member of the audit committee ceases to be independent for reasons outside the member’s reasonable control, that person, with notice by the responsible entity to the state, may remain an audit committee member of the responsible entity until the earlier of the next annual meeting of the responsible entity or one year from the occurrence of the event that caused the member to be no longer independent.

(7) To exercise the election of the controlling person to designate the audit committee for purposes of this Chapter, the ultimate controlling person shall provide written notice to the commissioners of the affected insurers. Notification shall be made timely prior to the issuance of the statutory audit report and include a description of the basis for the election. The election can be changed through notice to the commissioner by the insurer, which shall include a description of the basis for the change. The election shall remain in effect for perpetuity, until rescinded.

(8) (a) The audit committee shall require the accountant that performs for an insurer any audit required by this Chapter to timely report to the audit committee in accordance with the requirements of SAS 61, Communication with Audit Committees, or its replacement, including:

1. All significant accounting policies and material permitted practices;

2. All material alternative treatments of financial information within statutory accounting principles that have been discussed with management officials of the insurer, ramifications of the use of the alternative disclosures and treatments, and the treatment preferred by the accountant; and 3. Other material written communications between the accountant and the management of the insurer, such as any management letter or schedule of unadjusted differences.

(b) If an insurer is a member of an insurance holding company system, the reports required by Paragraph (8)(a) of this Rule may be provided to the audit committee on an aggregate basis for insurers in the holding company system, provided that any substantial differences among insurers in the system are identified to the audit committee.

(9) The proportion of independent audit committee members shall meet or exceed the following criteria:

Prior Calendar Year Direct Written and Assumed Premiums $0 - $300,000,000 Over $300,000,000 - $500,000,000 Over $500,000,000 No minimum requirements. See also Note A and B.

Majority (50% or more) of members shall be independent.

See also Note A and B.

Supermajority of members (75% or more) shall be independent. See also Note A.

Note A: The commissioner has authority afforded by state law to require the entity’s board to enact improvements to the independence of the audit committee membership if the insurer is in a risk-based capital (RBC) action level event, as described in Title 56, Chapter 46 of the Tennessee Code Annotated, meets one or more of the standards of an insurer deemed to be in hazardous financial condition, or otherwise exhibits qualities of a troubled insurer.

Note B: All insurers with less than five hundred million dollars ($500,000,000) in prior year direct written and assumed premiums are encouraged to structure their audit committees with at least a supermajority of independent audit committee members.

Note C: Prior calendar year direct written and assumed premiums shall be the combined total of direct premiums and assumed premiums from non-affiliates for the reporting entities.

(10) An insurer with direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than five hundred million dollars ($500,000,000) may make application to the commissioner for a waiver from this Rule’s requirements based upon hardship. The insurer shall file, with its annual statement filing, the approval for relief from this Rule with the states that it is licensed in or doing business in and the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.

History

• Authority: T.C.A. §§ 56-1-501(h), 56-2-301, and 56-46-101, et seq.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009. Amendments filed June 28, 2018; effective September 26, 2018.

Tenn. Comp. R. & Regs. 0780-01-65-.16 INTERNAL AUDIT FUNCTION REQUIREMENTS

(1) Exemption – An insurer is exempt from the requirements of this section if:

(a) 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); and (b) If the insurer is a member of a group of insurers, the group 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).

(2) Function – The insurer or group of insurers shall establish an internal audit function providing independent, objective and reasonable assurance to the audit committee and insurer management regarding the insurer’s governance, risk management and internal controls. This assurance shall be provided by performing general and specific audits, reviews and tests and by employing other techniques deemed necessary to protect assets, evaluate control effectiveness and efficiency, and evaluate compliance with policies and regulations.

(3) Independence – In order to ensure that internal auditors remain objective, the internal audit function must be organizationally independent. Specifically, the internal audit function will not defer ultimate judgment on audit matters to others and shall appoint an individual to head the internal audit function who will have direct and unrestricted access to the board of directors. Organizational independence does not preclude dual-reporting relationships.

(4) Reporting – The head of the internal audit function shall report to the audit committee regularly, but no less than annually, on the periodic audit plan, factors that may adversely impact the internal audit function’s independence or effectiveness, material findings from completed audits and the appropriateness of corrective actions implemented by management as a result of audit findings.

(5) Additional Requirements – If an insurer is a member of an insurance holding company system or included in a group of insurers, the insurer may satisfy the internal audit function requirements set forth in this section at the ultimate controlling parent level, an intermediate holding company level or the individual legal entity level.

History

• Authority: T.C.A. §§ 56-1-501(h), 56-2-301, and 56-46-101, et seq.
• Administrative History: New rule filed June 28, 2018; effective September 26, 2018.

Tenn. Comp. R. & Regs. 0780-01-65-.17 CONDUCT OF INSURER IN CONNECTION WITH THE PREPARATION OF

REQUIRED REPORTS AND DOCUMENTS.

(1) No director or officer of an insurer shall, directly or indirectly:

(a) Make or cause to be made a materially false or misleading statement to an accountant in connection with any audit, review or communication required under this Chapter; or (b) Omit to state, or cause another person to omit to state, any material fact necessary in order to make statements made, in light of the circumstances under which the statements were made, not misleading to an accountant in connection with any audit, review or communication required under this

Chapter.

(2) No officer or director of an insurer, or any other person acting under the direction thereof, shall directly or indirectly take any action to coerce, manipulate, mislead or fraudulently influence any accountant engaged in the performance of an audit pursuant to this Chapter if that person knew or should have known that the action, if successful, could result in rendering the insurer’s financial statements materially misleading.

(3) For purposes of Paragraph (2) of this Rule, actions that, “if successful, could result in rendering the insurer’s financial statements materially misleading” include, but are not limited to, actions taken at any time with respect to the professional engagement period to coerce, manipulate, mislead or fraudulently influence an accountant:

(a) To issue or reissue a report on an insurer’s financial statements that is not warranted in the circumstances (due to material violations of statutory accounting principles prescribed by the commissioner, generally accepted auditing standards, or other professional or regulatory standards);

(b) Not to perform audit, review or other procedures required by generally accepted auditing standards or other professional standards;

(c) Not to withdraw an issued report; or (d) Not to communicate matters to an insurer’s audit committee.

History

• Authority: T.C.A §§ 56-1-501, 56-1-501(h), 56-1-503, and 56-2-301.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Amendment filed August 6, 2009; effective November 4, 2009. Rule was previously numbered 0780-01-65-.16 but was renumbered 0780-01-65-.17 with the introduction of a new rule 0780-01-65-.16 filed June 28, 2018; effective September 26, 2018.

Tenn. Comp. R. & Regs. 0780-01-65-.18 MANAGEMENT’S REPORT OF INTERNAL CONTROL OVER FINANCIAL

REPORTING.

(1) Every insurer required to file an audited financial report pursuant to this Chapter that has annual direct written and assumed premiums, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, of five hundred million dollars ($500,000,000) or more shall prepare a report of the insurer’s or group of insurers’ internal control over financial reporting, as these terms are defined in Rule 0780-01-65-.04. The report shall be filed with the commissioner along with the Communication of Internal Control Related Matters Noted in an Audit described under Rule 0780-01-65-.12. Management’s Report of Internal Control over Financial Reporting shall be as of December 31 immediately preceding.

(2) Notwithstanding the premium threshold in Paragraph (1) of this Rule, the commissioner may require an insurer to file Management’s Report of Internal Control over Financial Reporting if the insurer is in any RBC level event, or meets any one or more of the standards of an insurer deemed to be in hazardous financial condition as identified in the insurance code or as specifically described in Rule 0780-01-66.

(3) An insurer or a group of insurers that is (a) Directly subject to Section 404;

(b) Part of a holding company system whose parent is directly subject to Section 404;

(c) Not directly subject to Section 404 but is a SOX Compliant Entity; or (d) A member of a holding company system whose parent is not directly subject to

Section 404 but is a SOX Compliant Entity;

May file its or its parent’s Section 404 Report and an addendum in satisfaction of this

Rule’s requirement provided that those internal controls of the insurer or group of insurers having a material impact on the preparation of the insurer’s or group of insurers’ audited statutory financial statements (those items included in Rule 0780- 01-65-.06(2)(b)-(g)) were included in the scope of the Section 404 Report. The addendum shall be a positive statement by management that there are no material processes with respect to the preparation of the insurer’s or group of insurers’ audited statutory financial statements (those items included in Rule 0780-01-65- .06(2)(b)-(g)) excluded from the Section 404 Report. If there are internal controls of the insurer or Group of insurers that have a material impact on the preparation of the insurer’s or group of insurers’ audited statutory financial statements and those internal controls were not included in the scope of the Section 404 Report, the insurer or group of insurers may either file (i) a report under this Rule, or (ii) the

Section 404 Report and a report under this Rule for those internal controls that have a material impact on the preparation of the insurer’s or group of insurers’ audited statutory financial statements not covered by the Section 404 Report.

(4) Management’s Report of Internal Control over Financial Reporting shall include:

(a) A statement that management is responsible for establishing and maintaining adequate internal control over financial reporting;

(b) A statement that management has established internal control over financial reporting and an assertion, to the best of management’s knowledge and belief, after diligent inquiry, as to whether its internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles;

(c) A statement that briefly describes the approach or processes by which management evaluated the effectiveness of its internal control over financial reporting;

(d) A statement that briefly describes the scope of work that is included and whether any internal controls were excluded;

(e) Disclosure of any unremediated material weaknesses in the internal control over financial reporting identified by management as of December 31 immediately preceding. Management is not permitted to conclude that the internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of financial statements in accordance with statutory accounting principles if there is one or more unremediated material weaknesses in its internal control over financial reporting;

(f) A statement regarding the inherent limitations of internal control systems; and (g) Signatures of the chief executive officer and the chief financial officer (or equivalent position/title).

(5) Management shall document and make available upon financial condition examination the basis upon which its assertions, required in Paragraph (4) of this

Rule, above, are made. Management may base its assertions, in part, upon its review, monitoring and testing of internal controls undertaken in the normal course of its activities.

(a) Management shall have discretion as to the nature of the internal control framework used, and the nature and extent of documentation, in order to make its assertion in a cost effective manner and, as such, may include assembly of or reference to existing documentation.

(b) Management’s Report on Internal Control over Financial Reporting, required by Paragraph (1) of this Rule, and any documentation provided in support thereof during the course of a financial condition examination, shall be kept confidential by the commissioner.

History

• Authority: T.C.A. §§ 56-1-411, 56-1-501(h), 56-2-301, and 56-46-105(b)(2).
• Administrative History: Original rule filed August 6, 2009; effective November 4, 2009. Rule was previously numbered 0780-01-65-.17 but was renumbered 0780-01-65-.18 with the introduction of a new rule 0780-01-65-.16 filed June 28, 2018; effective September 26, 2018.

Tenn. Comp. R. & Regs. 0780-01-65-.19 EXEMPTIONS AND EFFECTIVE DATES

(1) Upon written application of any insurer, the commissioner may grant an exemption from compliance with any and all provisions of this Chapter if the commissioner finds, upon review of the application, that compliance with this Chapter would constitute a financial or organizational hardship upon the insurer. An exemption may be granted at any time and from time to time for a specified period or periods. Within ten (10) days from a denial of an insurer’s written request for an exemption from this Chapter, the insurer may request in writing a hearing on its application for an exemption. The hearing shall be held in accordance with the Tennessee Uniform Administrative Procedures Act, as codified in Title 4, Chapter 5, Part 3 of the Tennessee Code Annotated.

(2) Domestic insurers retaining a certified public accountant on the effective date of this

Chapter who qualify as independent shall comply with this Chapter for the year ending December 31, 2009 and each year thereafter unless the commissioner permits otherwise.

(3) Domestic insurers not retaining a certified public accountant on the effective date of this Chapter who qualifies as independent may meet the following schedule for compliance unless the commissioner permits otherwise.

(a) As of December 31, 2009, file with the commissioner an audited financial report;

(b) For the year ending December 31, 2009 and each year thereafter, such insurers shall file with the commissioner all reports and communication required by this Chapter.

(4) Foreign insurers shall comply with this Chapter for the year ending December 31, 2009 and each year thereafter, unless the commissioner permits otherwise.

(5) The requirements of Rule 0780-01-65-.08(4) of this Chapter shall be in effect for audits of the year beginning January 1, 2010 and thereafter.

(6) The requirements of Rule 0780-01-65-.05(4) and Rule 0780-1-65-.15 of this Chapter are to be in effect January 1, 2010. An insurer or group of insurers that is not required to have independent audit committee members or only a majority of independent audit committee members (as opposed to a supermajority) because the total written and assumed premium is below the threshold and subsequently becomes subject to one of the independence requirements due to changes in premium shall have one (1) year following the year the threshold is exceeded (but not earlier than January 1, 2010) to comply with the independence requirements.

Likewise, an insurer that becomes subject to one of the independence requirements as a result of a business combination shall have one (1) calendar year following the date of acquisition or combination to comply with the independence requirements.

(7) The requirements of Rule 0780-01-65-.18 of this Chapter are effective beginning with the reporting period ending December 31, 2010 and each year thereafter. An insurer or group of insurers that is not required to file a report because the total written premium is below the threshold and subsequently becomes subject to the reporting requirements shall have two (2) years following the year the threshold is exceeded (but not earlier than December 31, 2010) to file a report. Likewise, an insurer acquired in a business combination shall have two (2) calendar years following the date of acquisition or combination to comply with the reporting requirements.

(8) The requirements of Rule 0780-01-65-.16 are to be in effect January 1, 2020. If an insurer or group of insurers that is exempt from the Rule 0780-01-65-.16 requirements no longer qualifies for that exemption, it shall have one (1) year after the year the threshold is exceeded to comply with the requirements of Rule 0780-01-65-.16.

History

• Authority: T.C.A. §§ 4-5-301, et seq.; 56-1-501(h); and 56-2-301.
• Administrative History: Original rule filed August 6, 2009; effective November 4, 2009. Amendments filed June 28, 2018; effective September 26, 2018. Rule was previously numbered 0780-01-65-.18 but was renumbered 0780-01-65-.19 with the introduction of a new rule 0780-01-65-.16 filed June 28, 2018; effective September 26, 2018.

Tenn. Comp. R. & Regs. 0780-01-65-.20 CANADIAN AND BRITISH COMPANIES

(1) In the case of Canadian and British insurers, the annual audited financial report shall be defined as the annual statement of total business on the form filed by such companies with their supervision authority duly audited by an independent chartered accountant.

(2) For such insurers, the letter required in Rule 0780-01-65-.07(2) shall state that the accountant is aware of the requirements relating to the annual audited financial report filed with the commissioner pursuant to Rule 0780-01-65-.05 and shall affirm that the opinion expressed is in conformity with those requirements.

History

• Authority: T.C.A. §§ 56-1-501(h) and 56-2-301.
• Administrative History: Original rule filed August 6, 2009; effective November 4, 2009. Rule was previously numbered 0780-01-65-.19 but was renumbered 0780-01-65-.20 with the introduction of a new rule 0780-01-65-.16 filed June 28, 2018; effective September 26, 2018.

Tenn. Comp. R. & Regs. 0780-01-65-.21 SEVERABILITY PROVISION

If any Rule or portion of a Rule of this Chapter or its applicability to any person or circumstance is held invalid by a court, the remainder of the Chapter or the applicability of the provision to other persons or circumstances shall not be affected.

History

• Authority: T.C.A. §§ 56-1-501(h) and 56-2-301.
• Administrative History: Original rule filed August 6, 2009; effective November 4, 2009. Rule was previously numbered 0780-01-65-.20 but was renumbered 0780-01-65-.21 with the introduction of a new rule 0780-01-65-.16 filed June 28, 2018; effective September 26, 2018.

Tenn. Comp. R. & Regs. 0780-01-54-.09 , Rule 0780-01-78-.04, or Rule 0780-01-83-.08.

(6) The commissioner may hold a hearing in accordance with the procedures set out in Title 4, Chapter 5, Part 3 of the Tennessee Code Annotated to determine whether an independent certified public accountant is qualified and, considering the evidence presented, may rule that the accountant is not qualified for purposes of expressing his or her opinion on the financial statements in the annual audited financial report made pursuant to this Chapter and require the insurer to replace the accountant with another whose relationship with the insurer is qualified within the meaning of this

Chapter.

(7) (a) The commissioner shall not recognize as a qualified independent certified public accountant, nor accept an annual audited financial report, prepared in whole or in part by an accountant who provides to an insurer, contemporaneously with the audit, the following non-audit services:

1. Bookkeeping or other services related to the accounting records or financial statements of the insurer;

2. Financial information systems design and implementation;

3. Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;

4. Actuarially-oriented advisory services involving the determination of amounts recorded in the financial statements. The accountant may assist an insurer in understanding the methods, assumptions and inputs used in the determination of amounts recorded in the financial statement only if it is reasonable to conclude that the services provided will not be subject to audit procedures during an audit of the insurer’s financial statements. An accountant’s actuary may also issue an actuarial opinion or certification (“opinion”) on an insurer’s reserves if the following conditions have been met:

(i) Neither the accountant nor the accountant’s actuary has performed any management functions or made any management decisions;

(ii) The insurer has competent personnel (or engages a third party actuary) to estimate the reserves for which management takes responsibility; and (iii) The accountant’s actuary tests the reasonableness of the reserves after the insurer’s management has determined the amount of the reserves;

5. Internal audit outsourcing services;

6. Management functions or human resources;

7. Broker or dealer, investment adviser, or investment banking services;

8. Legal services or expert services unrelated to the audit; or 9. Any other services that the commissioner determines, by regulation, are impermissible.

(b) In general, the principles of independence with respect to services provided by the qualified independent certified public accountant are largely predicated on three basic principles, violations of which would impair the accountant’s independence. The principles are that the accountant cannot function in the role of management, cannot audit his or her own work, and cannot serve in an advocacy role for the insurer.

(8) Insurers having direct written and assumed premiums of less than one hundred million dollars ($100,000,000) in any calendar year may request an exemption from Paragraph (7)(a) of this Rule. The insurer shall file with the commissioner a written statement discussing the reasons why the insurer should be exempt from these provisions. If the commissioner finds, upon review of this statement, that compliance with this Chapter would constitute a financial or organizational hardship upon the insurer, an exemption may be granted.

(9) A qualified independent certified public accountant who performs the audit may engage in other non-audit services, including tax services, that are not described in Paragraph (7)(a) of this Rule or that do not conflict with Paragraph (7)(b) of this Rule, only if the activity is approved in advance by the audit committee, in accordance with Paragraph (10) of this Rule.

(10) All auditing services and non-audit services provided to an insurer by the qualified independent certified public accountant of the insurer shall be preapproved by the audit committee. The preapproval requirement is waived with respect to non-audit services if the insurer is a SOX Compliant Entity or a direct or indirect wholly-owned subsidiary of a SOX Compliant Entity or:

(a) The aggregate amount of all such non-audit services provided to the insurer constitutes not more than five percent (5%) of the total amount of fees paid by the insurer to its qualified independent certified public accountant during the fiscal year in which the non-audit services are provided;

(b) The services were not recognized by the insurer at the time of the engagement to be non-audit services; and (c) The services are promptly brought to the attention of the audit committee and approved prior to the completion of the audit by the audit committee or by one or more members of the audit committee who are the members of the board of directors to whom authority to grant such approvals has been delegated by the audit committee.

(11) The audit committee may delegate to one or more designated members of the audit committee the authority to grant the preapprovals required by Paragraph (10) of this

Rule. The decisions of any member to whom this authority is delegated shall be presented to the full audit committee at each of its scheduled meetings.

(12) (a) The commissioner shall not recognize an independent certified public accountant as qualified for a particular insurer if a member of the board, president, chief executive officer, controller, chief financial officer, chief accounting officer, or any person serving in an equivalent position for that insurer, was employed by the independent certified public accountant and participated in the audit of that insurer during the one-year period preceding the date that the most current statutory opinion is due. This Rule shall only apply to partners and senior managers involved in the audit. An insurer may make application to the commissioner for relief from the above requirement on the

basis of unusual circumstances.

(b) The insurer shall file, with its annual statement filing, the approval for relief from Subparagraph (a) of this Paragraph with the states that it is licensed in or doing business in and the NAIC. If the nondomestic state accepts electronic filing with the NAIC, the insurer shall file the approval in an electronic format acceptable to the NAIC.

History

• Authority: T.C.A. §§ 4-5-301, 56-1-501(b), 56-1-501(h), 56-2-301, and 56-44-102.
• Administrative History: Original rule filed October 5, 1995; effective December 19, 1995. Repeal and new rule filed March 16, 2005; effective May 30, 2005. Amendment filed August 6, 2009; effective November 4, 2009.

Chapter 0780-01-66 Standards and Commissioner's Authority for Companies deemed to be in Hazardous Financial Condition

Tenn. Comp. R. & Regs. 0780-01-66-.01 AUTHORITY

This chapter is adopted and promulgated by the Tennessee Department of Commerce and Insurance pursuant to T.C.A. §§4- 5-101 et seq., 56-1-408, 56-1-409, 56-2-301, 56-9-101, 56-9-106, 56-9-503, 56-9- 508, 56-11-206, and 56-11-209.

History

• Authority: T.C.A. §§ 4-5-101 et seq., 56-1-408, 56-1-409, 56-2-301, 56-9-101, 56-9-106, 56-9-503, 56- 9-508, 56-11-206 and 56-11-209.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994.

Tenn. Comp. R. & Regs. 0780-01-66-.02 PURPOSE

(1) The purpose of this chapter is to set forth the standards which the Commissioner may use for identifying insurers found to be in such condition as to render the further transaction or continuance of their business hazardous, financially or otherwise, to their policyholders, creditors or the general public.

(2) This chapter is intended to aid in early detection of any potentially dangerous condition in an insurer and to afford prompt application of appropriate corrective measures, thereby implementing express purposes of the Insurers’ Rehabilitation and Liquidation Act, T.C.A. §56-9-101 et seq.

(3) This chapter shall not be interpreted to limit the powers granted the Commissioner by any laws or parts of laws of this state, nor shall this chapter be interpreted to supersede any laws or parts of laws of this state.

History

• Authority: T.C.A. §§ 56-1-416, 56-1-408, 56-1-409, 56-2-301, 56-9-101 et seq., 56-9-106, 56-9-409, 56- 1-417, 56-2-301, 56-9-503, 56-9-508, 56-11-108, 56-11-109, 56-11-206, 56-11-209, 56-11-106, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994. Amendment filed August 13, 2014; effective November 11, 2014.

Tenn. Comp. R. & Regs. 0780-01-66-.03 STANDARDS

The following standards, either singly or a combination of two or more, may be considered by the commissioner to determine whether the continued operation of any insurer transacting an insurance business in this state might be deemed to be hazardous to its policyholders, creditors or the general public. The commissioner may consider:

(1) Adverse findings reported in financial condition and market conduct examination reports, audit reports, and actuarial opinions, reports or summaries;

November. 2014 (Revised) 2 (2) The National Association of Insurance Commissioners Insurance Regulatory Information System and its other financial analysis solvency tools and reports;

(3) Whether the insurer has made adequate provision, according to presently accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the insurer, when considered in light of the assets held by the insurer with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on such assets, and the considerations anticipated to be received and retained under such policies and contracts;

(4) The ability of an assuming reinsurer to perform and whether the insurer’s reinsurance program provides sufficient protection for the insurer’s remaining surplus after taking into account the insurer’s cash flow and the classes of business written as well as the financial condition of the assuming reinsurer;

(5) Whether the insurer’s operating loss in the last twelve-month period or any shorter period of time, including but not limited to net capital gain or loss, change in non-admitted assets, and cash dividends paid to shareholders, is greater than fifty percent (50%) of the insurer’s remaining surplus as regards policyholders in excess of the minimum required;

(6) Whether the insurer's operating loss in the last twelve-month period or any shorter period of time, excluding net capital gains, is greater than twenty percent (20%) of the insurer's remaining surplus as regards policyholders in excess of the minimum required;

(7) Whether a reinsurer, obligor or any entity within the insurer’s insurance holding company system, is insolvent, threatened with insolvency or delinquent in payment of its monetary or other obligations, and which in the opinion of the commissioner may affect the solvency of the insurer;

(8) Contingent liabilities, pledges or guaranties which either individually or collectively involve a total amount which in the opinion of the commissioner may affect the solvency of the insurer;

(9) Whether any “controlling person” as defined in T.C.A. §§ 56-10-201 and 56-11-101 of an insurer is delinquent in the transmitting to, or payment of, net premiums to the insurer;

(10) The age and collectability of receivables;

(11) Whether the management of an insurer, including officers, directors, or any other person who directly or indirectly controls the operation of the insurer, fails to possess and demonstrate the competence, fitness and reputation deemed necessary to serve the insurer in such position;

(12) Whether management of an insurer has failed to respond to inquiries relative to the condition of the insurer or has furnished false and misleading information concerning an inquiry;

(13) Whether the insurer has failed to meet financial and holding company filing requirements in the absence of a reason satisfactory to the commissioner;

(14) Whether management of an insurer either has filed any false or misleading sworn financial statement, or has released false or misleading financial statement to lending institutions or to the general public, or has made a false or misleading entry, or has omitted an entry of material amount in the books of the insurer;

(15) Whether the insurer has grown so rapidly and to such an extent that it lacks adequate financial and administrative capacity to meet its obligations in a timely manner;

November. 2014 (Revised) 3 (16) Whether the insurer has experienced or will experience in the foreseeable future cash flow or liquidity problems;

(17) Whether management has established reserves that do not comply with minimum standards established by state insurance laws, regulations, statutory accounting standards, sound actuarial principles and standards of practice;

(18) Whether management persistently engages in material under reserving that results in adverse development;

(19) Whether transactions among affiliates, subsidiaries or controlling persons for which the insurer receives assets or capital gains, or both, do not provide sufficient value, liquidity or diversity to assure the insurer's ability to meet its outstanding obligations as they mature; or, (20) Any other finding determined by the commissioner to be hazardous to the insurer’s policyholders, creditors or general public.

History

• Authority: T.C.A. §§ 56-1-408, 56-9-101 et seq., 56-1-409, 56-1-416, 56-1-417, 56-2-301, 56-11-106, 56-11-109 and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994. Repeal and new rule filed August 13, 2014; effective November 11, 2014.

Tenn. Comp. R. & Regs. 0780-01-66-.04 COMMISSIONER’S AUTHORITY

(1) For the purposes of making a determination of an insurer’s financial condition under this

chapter, the Commissioner may:

(a) Disregard any credit or amount receivable resulting from transactions with a reinsurer which is insolvent, impaired or otherwise subject to a delinquency proceeding;

(b) Make appropriate adjustments including disallowance to asset values attributable to investments in or transactions with parents, subsidiaries or affiliates consistent with the NAIC Accounting Policies And Procedures Manual, state laws and regulations;

(c) Refuse to recognize the stated value of accounts receivable if the ability to collect receivables is highly speculative in view of the age of the account or the financial condition of the debtor;

(d) Increase the insurer’s liability in an amount equal to any contingent liability, pledge, or guarantee not otherwise included if there is a substantial risk that the insurer will be called upon to meet the obligation undertaken within the next twelve-month period.

(2) If the Commissioner determines that the continued operation of the insurer licensed to transact business in this state may be hazardous to its policyholders, creditors or the general public, then the Commissioner may, upon a determination, issue an order consistent with applicable statutes requiring the insurer to:

(a) Reduce the total amount of present and potential liability for policy benefits by reinsurance;

(b) Reduce, suspend or limit the volume of business being accepted or renewed;

(c) Reduce general insurance and commission expenses by specified methods;

(d) Increase the insurer’s capital and surplus;

November. 2014 (Revised) 4 (e) Suspend or limit the declaration and payment of dividend by an insurer to its stockholders or to its policyholders;

(f) File reports in a form acceptable to the Commissioner concerning the market value of an insurer’s assets;

(g) Limit or withdraw from certain investments or discontinue certain investment practices to the extent the Commissioner deems necessary;

(h) Document the adequacy of premium rates in relation to the risks insured;

(i) File, in addition to regular annual statements, interim financial reports on the form adopted by the National Association of Insurance Commissioners or in such format as promulgated by the Commissioner;

(j) Correct corporate governance practice deficiencies, and adopt and utilize governance practices acceptable to the commissioner;

(k) Provide a business plan to the commissioner in order to continue to transact business in the state;

(l) Adjust rates for any non-life insurance product written by the insurer that the commissioner considers necessary to improve the financial condition of the insurer; or, (m) Take any other appropriate remedial action.

If the insurer is a foreign insurer the Commissioner’s order may be limited to the extent provided by statute.

(3) (a) Any insurer subject to an order under Subparagraph (2) may request a hearing to review that order, which request must be received within thirty (30) days of the issuance of the order or review shall be deemed waived. The order shall be accompanied by notice of the conduct, condition or ground upon which the Commissioner based the order and notice of an opportunity to be heard consistent with the provisions of the Uniform Administrative Procedures Act, compiled in Title 4,

Chapter 5 of the Tennessee Code Annotated. Unless mutually agreed between the Commissioner and the insurer, the hearing shall occur within fifteen (15) days after the date of the request for hearing and shall be held at the main offices of the Department or, in the discretion of the Commissioner, at some other place convenient to the parties designated by the Commissioner. When the date, time and place of the hearing is determined, notice of same shall be given to the insurer.

(b) The order provided for in Subparagraph (2) is not an order of administrative supervision. The Commissioner deems that such order relates to supervision in that it is administrative corrective action to determine the condition of the insurer and to abate the Commissioner’s determination that the insurer may be in hazardous or potentially dangerous condition. An insurer’s failure to comply with the order could lead to administrative supervision or other proceedings.

(c) Matters under this chapter shall be treated in compliance with T.C.A. §56-9-504.

History

• Authority: T.C.A. §§ 4-5-101 et seq., 56-1-408, 56-1-409, 56-1-416, 56-1-417, 56-2-301, 56-9-101 et seq., 56-9-106, 56-9-503, 56-9-504, 56-9-508,56-11-106, 56-11-109, 56-11-206, 56-11-209, and 2014 November. 2014 (Revised) 5 Public Acts, Chapter 583.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994. Amendments filed August 3, 2014; effective November 11, 2014.

Tenn. Comp. R. & Regs. 0780-01-66-.05 JUDICIAL REVIEW

Any order or decision of the Commissioner shall be subject to review in accordance with the Uniform Administrative Procedures Act, Title 4, Chapter 5 of the Tennessee Code Annotated.

History

• Authority: T.C.A. §§4-5-101 et seq., 56-1-408, 56-1-409, 56-2-301, 56-9-101, 56-9-106, 56-9-503, 56-9- 508, 56-11-206 and 56-11-209.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994.

Tenn. Comp. R. & Regs. 0780-01-66-.06 SEVERABILITY

If any provisions of this chapter be held invalid, the remainder shall not be affected.

History

• Authority: T.C.A. §§56-1-408, 56-1-409, 56-2-301, 56-9-101, 56-9-106, 56-9-503, 56-9-508, 56-11- 206 and 56-11-209.
• Administrative History: Original rule filed December 20, 1993; effective March 5, 1994.

Chapter 0780-01-67 Insurance Holding Company System Regulations with Reporting Forms and Instructions

Tenn. Comp. R. & Regs. 0780-01-67-.01 AUTHORITY

This Chapter is promulgated pursuant to the authority granted by T.C.A. §§ 56-2-301 and 56-11-109, and additionally as to health maintenance organizations, by T.C.A. §§ 56-32-121(d) and 56-32-122.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119 and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.02 PURPOSE

The purpose of this Chapter is to set forth rules and procedural requirements which the Commissioner deems necessary to carry out the provisions of the Insurance Holding Company System Act, T.C.A. §§ 56-11-101 et seq., hereinafter referred to as “the Act.” The information called for by this Chapter has been prescribed by the National Association of Insurance Commissioners and is hereby declared to be necessary and appropriate in the public interest and for the protection of the policyholders in this State.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.03 DEFINITIONS

(1) “Executive officer” means chief executive officer, chief operating officer, chief financial officer, treasurer, secretary, controller, and any other individual performing functions corresponding to those performed by the foregoing officers under whatever title.

(2) “Ultimate controlling person” means that person which is not controlled by any other person.

(3) Unless the context otherwise requires, other terms found in this Chapter and in T.C.A. §56- 11-101 are used as defined in the Act. Other nomenclature or terminology is according to T.C.A., Title 56, or industry usage if not defined by Title 56.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.04 FORMS – GENERAL REQUIREMENTS

(1) Forms A, B, C, D, E and F are intended to be guides in the preparation of the statements required by T.C.A. §§ 56-11-103 through 56-11-106. They are not intended to be blank forms which are to be filled in. The statements filed shall contain the numbers and captions of all items, but the text of the items may be omitted provided the answers thereto are prepared in such a manner as to indicate clearly the scope and coverage of the items. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted.

Unless expressly provided otherwise, if any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made.

(2) Three (3) complete copies of each statement including exhibits and all other papers and documents filed as a part thereof, shall be filed with the Commissioner by personal delivery or mail addressed to: Commissioner of the Department of Commerce and Insurance, State of Tennessee, 500 James Robertson Parkway, Nashville, Tennessee 37243, Attention:

Director, Financial Affairs Section . At least one of the copies shall be signed in the manner prescribed on the form. Unsigned copies shall be conformed. If the signature of any person is affixed pursuant to a power of attorney or other similar authority, a copy of the power of attorney or other authority shall also be filed with the statement.

(3) If an applicant requests a hearing on a consolidated basis under T.C.A. § 56-11-103(d)(3), in addition to filing the Form A with the commissioner, the applicant shall file a copy of Form A with the National Association of Insurance Commissioners (NAIC) in electronic form.

(4) Statements shall be easily readable and suitable for review and reproduction. Debits in credit categories and credits in debit categories shall be designated so as to be clearly distinguishable as such on photocopies. Statements shall be in the English language and monetary values shall be stated in United States currency. If any exhibit or other paper or document filed with the statement is in a foreign language, it shall be accompanied by a translation into the English language and any monetary value shown in a foreign currency normally shall be converted into United States currency.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.05 FORMS – INCORPORATION BY REFERENCE, SUMMARIES, AND OMISSIONS

(1) Information required by an item of Form A, Form B, Form D, Form E or Form F may be incorporated by reference in answer or partial answer to any other item. Information contained in any financial statement, annual report, proxy statement, statement filed with a governmental authority, or any other document may be incorporated by reference in answer or partial answer to any item of Form A, Form B, Form D, Form E or Form F provided the document is filed as an exhibit to the statement. Excerpts of documents may be filed as exhibits if the documents are extensive. Documents currently on file with the Commissioner which were filed within three (3) years need not be attached as exhibits. References to information contained in exhibits or in documents already on file shall clearly identify the material and shall specifically indicate that such material is to be incorporated by reference in answer to the item. Matter shall not be incorporated by reference in any case where the incorporation would render the statement incomplete, unclear or confusing.

(2) Where an item requires a summary or outline of the provisions of any document, only a brief statement shall be made as to the pertinent provisions of the document. In addition to the statement, the summary or outline may incorporate by reference particular parts of any exhibit or document currently on file with the Commissioner which was filed within three (3) years and may be qualified in its entirety by such reference. In any case where two (2) or more documents required to be filed as exhibits are substantially identical in all material respects except as to the parties thereto, the dates of execution, or other details, a copy of only one of the documents need be filed with a schedule identifying the omitted documents and setting forth the material details in which the documents differ from the documents, a copy of which is filed.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.06 FORMS – INFORMATION UNKNOWN OR UNAVAILABLE AND EXTENSION OF

TIME TO FURNISH.

If it is impractical to furnish any required information, document or report at the time it is required to be filed, there shall be filed with the Commissioner a separate document:

(1) Identifying the information, document or report in question;

(2) Stating why the filing thereof at the time required is impractical; and (3) Requesting an extension of time for filing the information, document or report to a specified date. The request for extension shall be deemed granted unless the Commissioner within sixty (60) days after receipt thereof enters an order denying the request.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.07 FORMS – ADDITIONAL INFORMATION AND EXHIBITS

In addition to the information expressly required to be included in Form A, Form B, Form C, Form D, Form E and Form F, the Commissioner may request such further material information, if any, as may be necessary to make the information contained therein not misleading. The person filing may also file such exhibits as it may desire in addition to those expressly required by the statement. The exhibits shall be so marked as to indicate clearly the subject matters to which they refer. Changes to Form A, B, C, D, E or F shall include on the top of the cover page the phrase: “Change No. [insert number] to” and shall indicate the date of the change and not the date of the original filing.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.08 ACQUISITION OF CONTROL – STATEMENT FILING (FORM A)

A person required to file a statement pursuant to T.C.A. § 56-11-103 shall furnish the required information on Form A, hereby made a part of this Chapter. Such person shall also furnish the required information on Form E, hereby made a part of this Chapter and described in Rule 0780-01-67-.11.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.09 AMENDMENTS TO FORM A

The applicant shall promptly advise the Commissioner of any changes in the information furnished on Form A arising subsequent to the date upon which the information was furnished but prior to the Commissioner’s disposition of the application.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.10 ACQUISITION OF DOMESTIC INSURERS

(1) If the person being acquired is deemed to be a “domestic insurer” solely because of the provisions of T.C.A. § 56-11-103(a)(4)-(5), the name of the domestic insurer on the cover page should be indicated as follows:

“ABC Insurance Company, a subsidiary of XYZ Holding Company.”

(2) Where a T.C.A. § 56-11-103(a)(4)-(5) insurer is being acquired, references to “the insurer” contained in Form A shall refer to both the domestic subsidiary insurer and the person being acquired.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.11 PRE-ACQUISITION NOTIFICATION (FORM E)

(1) If a domestic insurer, including any person controlling a domestic insurer, is proposing a merger or acquisition pursuant to T.C.A. § 56-11-103(a) that person shall file a preacquisition notification form, Form E, which was developed pursuant to T.C.A. § 56-11- 104(c)(1).

(2) Additionally, if a non-domiciliary insurer licensed to do business in this state is proposing a merger or acquisition pursuant to T.C.A. § 56-11-104 that person shall file a pre-acquisition notification form, Form E. No pre-acquisition notification form need be filed if the acquisition is beyond the scope of T.C.A. § 56-11-104 as set forth in T.C.A. § 56-11-104(b)(2).

(3) In addition to the information required by Form E, the Commissioner may wish to require an expert opinion as to the competitive impact of the proposed acquisition.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.12 ANNUAL REGISTRATION OF INSURERS – STATEMENT FILING FORM B

An insurer required to file an annual registration statement pursuant to T.C.A. § 56-11-105 shall furnish the required information on Form B, hereby made a part of this Chapter.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.13 SUMMARY OF REGISTRATION – STATEMENT FILING (FORM C)

An insurer required to file an annual registration statement pursuant to T.C.A. § 56-11-105 is also required to furnish information required on Form C, hereby made a part of this Chapter.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.14 ALTERNATIVE AND CONSOLIDATED REGISTRATION

(1) Any authorized insurer may file a registration statement on behalf of any affiliated insurer or insurers which are required to register under T.C.A. § 56-11-105. A registration statement may include information not required by the Act regarding any insurer in the insurance holding company system even if the insurer is not authorized to do business in this State. In lieu of filing a registration statement on Form B, the authorized insurer may file a copy of the registration statement or similar report which it is required to file in its State of domicile, provided:

(a) The statement or report contains substantially similar information required to be furnished on Form B; and (b) The filing insurer is the principal insurance company in the insurance holding company system.

(2) The question of whether the filing insurer is the principal insurance company in the insurance holding company system is a question of fact and an insurer filing a registration statement or report in lieu of Form B on behalf of an affiliated insurer, shall set forth a brief statement of facts which will substantiate the filing insurer’s claim that it, in fact, is the principal insurer in the insurance holding company system.

(3) With the prior approval of the Commissioner, an unauthorized insurer may follow any of the procedures which could be done by an authorized insurer under paragraph (1) above.

(4) Any insurer may take advantage of the provisions of T.C.A. § 56-11-105(h) and (i) without obtaining the prior approval of the Commissioner. The Commissioner, however, reserves the right to require individual filings if he or she deems such filings necessary in the interest of clarity, ease of administration or the public good.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.15 DISCLAIMER AND TERMINATION OF REGISTRATION

(1) A disclaimer of affiliation or a request for termination of registration claiming that a person does not, or will not upon the taking of some proposed action, control another person (hereinafter referred to as the “subject”) shall contain the following information:

(a) The number of authorized, issued and outstanding voting securities of the subject;

(b) With respect to the person whose control is denied and all affiliates of such person, the number and percentage of shares of the subject’s voting securities which are held of record or known to be beneficially owned, and the number of shares concerning which there is a right to acquire, directly or indirectly;

(c) All material relationships and bases for affiliation between the subject and the person whose control is denied and all affiliates of such person;

(d) A statement explaining why the person should not be considered to control the subject.

(2) A request for termination of registration shall be deemed to have been granted unless the Commissioner, within thirty (30) days after receipt of the request, notifies the registrant otherwise.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.16 TRANSACTIONS SUBJECT TO PRIOR NOTICE – NOTICE FILING (FORM D)

(1) An insurer required to give notice of a proposed transaction pursuant to T.C.A. § 56-11-106 shall furnish the required information on Form D, hereby made a part of this Chapter.

(2) Agreements for cost sharing services and management services shall at a minimum and as applicable:

(a) Identify the person providing services and the nature of such services;

(b) Set forth the methods to allocate costs;

(c) Require timely settlement, not less frequently than on a quarterly basis, and compliance with the requirements in the Accounting Practices and Procedures Manual;

(d) Prohibit advancement of funds by the insurer to the affiliate except to pay for services defined in the agreement;

(e) State that the insurer will maintain oversight for functions provided to the insurer by the affiliate and that the insurer will monitor services annually for quality assurance;

(f) Define books and records of the insurer to include all books and records developed or maintained under or related to the agreement;

(g) Specify that all books and records of the insurer are and remain the property of the insurer and are subject to control of the insurer;

(h) State that all funds and invested assets of the insurer are the exclusive property of the insurer, held for the benefit of the insurer and are subject to the control of the insurer;

(i) Include standards for termination of the agreement with and without cause;

(j) Include provisions for indemnification of the insurer in the event of gross negligence or willful misconduct on the part of the affiliate providing the services;

(k) Specify that, if the insurer is placed in receivership or seized by the commissioner under Title 56, Chapter 9:

1. All of the rights of the insurer under the agreement extend to the receiver or commissioner; and, 2. All books and records will immediately be made available to the receiver or the commissioner, and shall be turned over to the receiver or commissioner immediately upon the receiver or the commissioner’s request;

(l) Specify that the affiliate has no automatic right to terminate the agreement if the insurer is placed in receivership pursuant to Title 56, Chapter 9; and (m) Specify that the affiliate will continue to maintain any systems, programs, or other infrastructure notwithstanding a seizure by the commissioner under the Title 56,

Chapter 9, and will make them available to the receiver, for so long as the affiliate continues to receive timely payment for services rendered.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119, and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.17 EXTRAORDINARY DIVIDENDS AND OTHER DISTRIBUTIONS

(1) Requests for approval of extraordinary dividends or any other extraordinary distribution to shareholders shall include the following:

(a) The amount of the proposed dividend;

(b) The date established for payment of the dividend;

(c) A statement as to whether the dividend is to be in cash or other property and, if in property, a description thereof, its cost, and its fair market value together with an explanation of the basis for valuation;

(d) A copy of the calculations determining that the proposed dividend is extraordinary. The work paper shall include the following information:

1. The amounts, dates and form of payment of all dividends or distributions (including regular dividends but excluding distributions of the insurer’s own securities) paid within the period of twelve (12) consecutive months ending on the date fixed for payment of the proposed dividend for which approval is sought and commencing on the day after the same day of the same month in the last preceding year;

2. Surplus as regards policyholders (total capital and surplus) as of the 31st day of December next preceding;

3. If the insurer is a life insurer, the net gain from operations for the 12-month period ending the 31st day of December next preceding;

4. If the insurer is not a life insurer, the net income less realized capital gains for the 12-month period ending the 31st day of December next preceding; and 5. If the insurer is not a life insurer, the dividends paid to stockholders excluding distributions of the insurer’s own securities in the preceding two (2) calendar years;

(e) A balance sheet and statement of income for the period intervening from the last annual statement filed with the Commissioner and the end of the month preceding the month in which the request for dividend approval is submitted; and (f) A brief statement as to the effect of the proposed dividend upon the insurer’s surplus and the reasonableness of surplus in relation to the insurer’s outstanding liabilities and the adequacy of surplus relative to the insurer’s financial needs.

(2) Subject to T.C.A. § 56-11-106(b) each registered insurer and each registered health maintenance organization shall report to the Commissioner all dividends and other distributions to shareholders within fifteen (15) business days following the declaration thereof, including the same information required by subparagraph (1)(d) above.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-206 and 56-11-209.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.18 ADEQUACY OF SURPLUS

The factors set forth in T.C.A. § 56-11-106(d) are not intended to be an exhaustive list. In determining the adequacy and reasonableness of an insurer’s surplus no single factor is necessarily controlling. The Commissioner instead will consider the net effect of all of these factors plus other factors bearing on the financial condition of the insurer. In comparing the surplus maintained by other insurers, the Commissioner will consider the extent to which each of these factors varies from company to company and in determining the quality and liquidity of investments in subsidiaries, the Commissioner will consider the individual subsidiary and may discount or disallow its valuation to the extent that the individual investments so warrant.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119 and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.19 SUBSIDIARIES OF DOMESTIC INSURERES

The authority to invest in subsidiaries under T.C.A. § 56-11-102(b) is in addition to any authority to invest in subsidiaries which may be contained in any other provision of T.C.A., Title 56.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119 and 2014 Public Acts, Chapter 583.
• Administrative History: Original rule filed March 31, 1995; effective June 16, 1995. Amendments and new rules filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.20 AMENDMENTS TO FORM B

(1) An amendment to Form B shall be filed within fifteen (15) days after the end of any month in which there is a material change to the information provided in the annual registration statement.

(2) Amendments shall be filed in the Form B format with only those items which are being amended reported. Each amendment shall include at the top of the cover page “Amendment No. [insert number] to Form B for [insert year]” and shall indicate the date of the change and not the date of the original filings.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119 and 2014 Public Acts, Chapter 583.
• Administrative History: New rule filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.21 ENTERPRISE RISK REPORT

The ultimate controlling person of an insurer required to file an enterprise risk report pursuant to T.C.A. § 56-11-105(l) shall furnish the required information on Form F, hereby made a part of this Chapter.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119 and 2014 Public Acts, Chapter 583.
• Administrative History: New rule filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.22 NONREFUNDABLE FEE FOR REVIEW OF FORM A FILINGS FOR MERGERS

BETWEEN STOCK INSURANCE COMPANIES.

(1) Pursuant to T.C.A. § 56-10-104(a)(5), whenever stock insurance companies submit a proposed plan of merger pursuant to T.C.A. § 56-10-104, such proposed plan of merger shall be accompanied by a nonrefundable fee in the amount of Six Hundred, Seventy-Five Dollars ($675.00).

(2) Pursuant to § 56-11-103(b)(12) and this rule, whenever an insurance company files a Form A, the insurance company shall submit with the Form A filing a nonrefundable fee of Six Hundred, Seventy-Five Dollars ($675.00).

History

• Authority: T.C.A. §§ 56-2-301, 56-10-104, 56-11-101 through 56-11-119 and 2014 Public Acts, Chapter 583.
• Administrative History: New rule filed December 2, 2015; effective March 1, 2016.

Tenn. Comp. R. & Regs. 0780-01-67-.23 SEVERABILITY CLAUSE

If any provision of this Chapter, or the application thereof to any person or circumstance, is held invalid, such determination shall not affect other provisions or applications of this Chapter which can be given effect without the invalid provision or application, and to that end the provisions of this Chapter are severable.

History

• Authority: T.C.A. §§ 56-2-301, 56-11-101 through 56-11-119 and 2014 Public Acts, Chapter 583.
• Administrative History: New rule filed December 2, 2015; effective March 1, 2016. FORM A STATEMENT REGARDING THE ACQUISITION OF CONTROL OF OR MERGER WITH A DOMESTIC INSURER ____________________________________ Name of Domestic Insurer BY ____________________________________ Name of Acquiring Person (Applicant) Filed with the Insurance Department of _____________________________________________________ (State of domicile of insurer being acquired) Dated:, 20_ Name, Title, address and telephone number of Individual to Whom Notices and Correspondence Concerning this Statement Should be Addressed: ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ITEM 1. METHOD OF ACQUISITION State the name and address of the domestic insurer to which this application relates and a brief description of how control is to be acquired. ITEM 2. IDENTITY AND BACKGROUND OF THE APPLICANT (a) State the name and address of the applicant seeking to acquire control over the insurer. (b) If the applicant is not an individual, state the nature of its business operations for the past 5 years or for such lesser period as such person and any predecessors thereof shall have been in existence. Briefly describe the business intended to be done by the applicant and the applicant’s subsidiaries. (c) Furnish a chart or listing clearly presenting the identities of the interrelationships among the applicant and all affiliates of the applicant. Indicate in such chart or listing the percentage of voting securities of each such person which is owned or controlled by the applicant or by any other such person. If control of any person is maintained other than by the ownership or control of voting securities, indicate the basis of such control. As to each person specified in such chart or listing indicate the type of organization (e.g. corporation, trust, partnership) and the state or other jurisdiction of domicile. If court proceedings involving a reorganization or liquidation are pending with respect to any such person, indicate which person, and set forth the title of the court, nature of proceedings and the date when commenced. ITEM 3. IDENTITY AND BACKGROUND OF INDIVIDUALS ASSOCIATED WITH THE APPLICANT On the biographical affidavit, include a third party background check, and state the following with respect to (1) the applicant if (s)he is an individual or (2) all persons who are directors, executive officers or owners of 10% or more of the voting securities of the applicant if the applicant is not an individual. (a) Name and business address. (b) Present principal business activity, occupation or employment including position and office held and the name, principal business and address of any corporation or other organization in which such employment is carried on. (c) Material occupations, positions, offices or employment during the last 5 years, giving the starting and ending dates of each and the name, principal business and address of any business corporation or other organization in which each such occupation, position, office or employment was carried on; if any such occupation, position, office or employment required licensing by or registration with any federal, state or municipal governmental agency, indicate such fact, the current status of such licensing or registration, and an explanation of any surrender, revocation, suspension or disciplinary proceedings in connection therewith. (d) Whether or not such person has ever been convicted in a criminal proceeding (excluding minor traffic violations) during the last 10 years and, if so, give the date, nature of conviction, name and location of court, and penalty imposed or other disposition of the case. ITEM 4. NATURE, SOURCE AND AMOUNT OF CONSIDERATION (a) Describe the nature, source and amount of funds or other considerations used or to be used in effecting the merger or other acquisition of control. If any part of the same is represented or is to be represented by funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding or trading securities, furnish a description of the transaction, the names of the parties thereto, the relationship, if any, between the borrower and the lender, the amounts borrowed or to be borrowed, and copies of all agreements, promissory notes and security arrangements relating thereto. (b) Explain the criteria used in determining the nature and amount of such consideration. (c) If the source of the consideration is a loan made in the lender’s ordinary course of business and if the applicant wishes the identity of the lender to remain confidential, he must specifically request that the identity be kept confidential. ITEM 5. FUTURE PLANS OF INSURER Describe any plans or proposals which the applicant may have to declare an extraordinary dividend, to liquidate the insurer, to sell its assets to or merge it with any person or persons or to make any other material change in its business operations or corporate structure or management. ITEM 6. VOTING SECURITIES TO BE ACQUIRED State the number of shares of the insurer’s voting securities which the applicant, its affiliates and any person listed in Item 3 plan to acquire, and the terms of the offer, request, invitation, agreement or acquisition, and a statement as to the method by which the fairness of the proposal was arrived at. ITEM 7. OWNERSHIP OF VOTING SECURITIES State the amount of each class of any voting security of the insurer which is beneficially owned or concerning which there is a right to acquire beneficial ownership by the applicant, its affiliates or any person listed in Item 3. ITEM 8. CONTRACTS, ARRANGEMENTS, OR UNDERSTANDINGS WITH RESPECT TO VOTING SECURITIES OF THE INSURER Give a full description of any contracts, arrangements or understandings with respect to any voting security of the insurer in which the applicant, its affiliates or any person listed in Item 3 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 the contracts, arrangements or understandings have been entered into. ITEM 9. RECENT PURCHASES OF VOTING SECURITIES Describe any purchases of any voting securities of the insurer by the applicant, its affiliates or any person listed in Item 3 during the 12 calendar months preceding the filing of this statement. Include in the description the dates of purchase, the names of the purchasers, and the consideration paid or agreed to be paid therefor. State whether any shares so purchased are hypothecated. ITEM 10.RECENT RECOMMENDATIONS TO PURCHASE Describe any recommendations to purchase any voting security of the insurer made by the applicant, its affiliates or any person listed in Item 3, or by anyone based upon interviews or at the suggestion of the applicant, its affiliates or any person listed in Item 3 during the 12 calendar months preceding the filing of this statement. ITEM 11.AGREEMENTS WITH BROKER-DEALERS Describe the terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of voting securities of the insurer for tender and the amount of any fees, commissions or other compensation to be paid to broker-dealers with regard thereto. ITEM 12.FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements, exhibits, and three-year financial projections of the insurer(s) shall be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached. (b) The financial statements shall include the annual financial statements of the persons identified in Item 2(c) for the preceding 5 fiscal years (or for such lesser period as such applicant and its affiliates and any predecessors thereof shall have been in existence), and similar information covering the period from the end of such person’s last fiscal year, if the information is available. The statements may be prepared on either an individual basis, or, unless the Commissioner otherwise requires, on a consolidated basis if consolidated statements are prepared in the usual course of business. The annual financial statements of the applicant shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the applicant is an insurer which is actively engaged in the business of insurance, the financial statements need not be certified, provided they are based on the Annual Statement of the person filed with the insurance department of the person’s domiciliary state and are in accordance with the requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of the state. (c) File as exhibits copies of all tender offers for, requests or invitations for, tenders of, exchange offers for, and agreements to acquire or exchange any voting securities of the insurer and (if distributed) of additional soliciting material relating thereto, any proposed employment, consultation, advisory or management contracts concerning the insurer, annual reports to the stockholders of the insurer and the applicant for the last two fiscal years, and any additional documents or papers required by Form A or Rules 0780-01- 67-.04 and 0780-01-67-.06. ITEM 13.AGREEMENT REQUIREMENTS FOR ENTERPRISE RISK MANAGEMENT Applicant agrees to provide, to the best of its knowledge and belief, the information required by Form F within fifteen (15) days after the end of the month in which the acquisition of control occurs. ITEM 14.SIGNATURE AND CERTIFICATION Signature and certification required as follows: SIGNATURE Pursuant to the requirements of Tenn. Code Ann. § 56-11-103 ________________ has caused this application to be duly signed on its behalf in the City of __________________ and State of ___________________ on the _____________ day of , 20. (SEAL)_________________________ Name of Applicant BY________________________________ (Name) (Title) Attest: ___________________________ (Signature of Officer) ___________________________ (Title) CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached application dated , 20, for and on behalf of (Name of Applicant); that (s)he is the (Title of Officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with the instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief. (Signature) (Type or print name beneath) FORM B INSURANCE HOLDING COMPANY SYSTEM ANNUAL REGISTRATION STATEMENT Filed with the Insurance Department of the State of____________________ By ____________________________________ Name of Registrant On Behalf of Following Insurance Companies Name Address ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ Date:, 20 Name, Title, Address and telephone number of Individual to Whom Notices and Correspondence Concerning This Statement Should Be Addressed: ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ITEM 1. IDENTITY AND CONTROL OF REGISTRANT Furnish the exact name of each insurer registering or being registered (hereinafter called “the Registrant”), the home office address and principal executive offices of each; the date on which each registrant became part of the insurance holding company system; and the method(s) by which control of each registrant was acquired and is maintained. ITEM 2. ORGANIZATIONAL CHART Furnish a chart or listing clearly presenting the identities of and interrelationships among all affiliated persons within the insurance holding company system. The chart or listing should show the percentage of each class of voting securities of each affiliate which is owned, directly or indirectly, by another affiliate. If control of any person within the system is maintained other than by the ownership or control of voting securities, indicate the basis of control. As to each person specified in the chart or listing indicate the type of organization (e.g., corporation, trust, partnership) and the state or other jurisdiction of domicile. ITEM 3. THE ULTIMATE CONTROLLING PERSON As to the ultimate controlling person in the insurance holding company system furnish the following information: (a) Name; (b) Home office address; (c) Principal executive office address; (d) The organizational structure of the person, i.e., corporation, partnership, individual, trust, etc.; (e) The principal business of the person; (f) The name and address of any person who holds or owns 10% or more of any class of voting security, the class of such security, the number of shares held of record or known to be beneficially owned, and the percentage of class so held or owned; and (g) If court proceedings involving a reorganization or liquidation are pending, indicate the title and location of the court, the nature of proceedings and the date when commenced. ITEM 4. BIOGRAPHICAL INFORMATION If the ultimate controlling person is a corporation, an organization, a limited liability company, or other legal entity, furnish the following information for the directors and executive officers of the ultimate controlling person: the individual’s name and address, his or her principal occupation and all offices and positions held during the past 5 years, and any conviction of crimes other than minor traffic violations. If the ultimate controlling person is an individual, furnish the individual's name and address, his or her principal occupation and all offices and positions held during the past 5 years, and any conviction of crimes other than minor traffic violations. ITEM 5. TRANSACTIONS AND AGREEMENTS Briefly describe the following agreements in force, and transactions currently outstanding or which have occurred during the last calendar year between the registrant and its affiliates: (a) Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the Registrant or of the Registrant 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 Registrant’s assets to liability, other than insurance contracts entered into in the ordinary course of the registrant’s business; (e) All management agreements, service contracts and all cost-sharing arrangements; (f) Reinsurance agreements; (g) Dividends and other distributions to shareholders; (h) Consolidated tax allocation agreements; and (i) Any pledge of the registrant’s stock and/or of the stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system. No information need be disclosed if such information is not material for purposes of T.C.A. § 56-11-105. Sales, purchases, exchanges, loans or extensions of credit, investments or guarantees involving one-half of 1% or less of the registrant’s admitted assets as of the 31st day of December next preceding shall not be deemed material. The description shall be in a manner as to permit the proper evaluation thereof by the Commissioner, and shall include at least the following: the nature and purpose of the transaction, the nature and amounts of any payments or transfers of assets between the parties, the identity of all parties to the transaction, and relationship of the affiliated parties to the registrant. ITEM 6. LITIGATION OR ADMINISTRATIVE PROCEEDINGS A brief description of any litigation or administrative proceedings of the following types, either then pending or concluded within the preceding fiscal year, to which the ultimate controlling person or any of its directors or executive officers was a party or of which the property of any such person is or was the subject; give the names of the parties and the court or agency in which the litigation or proceeding is or was pending: (a) Criminal prosecutions or administrative proceedings by any government agency or authority which may be relevant to the trustworthiness of any party thereto; and (b) Proceedings which may have a material effect upon the solvency or capital structure of the ultimate holding company including, but not necessarily limited to, bankruptcy, receivership or other corporate reorganizations. ITEM 7. STATEMENT REGARDING PLAN OR SERIES OF TRANSACTIONS The insurer shall furnish a statement that transactions entered into since the filing of the prior year’s annual registration statement are not part of a plan or series of like transactions, the purpose of which is to avoid statutory threshold amounts and the review that might otherwise occur. ITEM 8. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements and exhibits should be attached to this statement as an appendix, but list under this item the financial statements and exhibits so attached. (b) If the ultimate controlling person is a corporation, an organization, a limited liability company, or other legal entity, the financial statements shall include the annual financial statements of the ultimate controlling person in the insurance holding company system as of the end of the person’s latest fiscal year. If at the time of the initial registration, the annual financial statements for the latest fiscal year are not available, annual statements for the previous fiscal year may be filed and similar financial information shall be filed for any subsequent period to the extent such information is available. Such financial statements may be prepared on either an individual basis; or, unless the Commissioner otherwise requires, on a consolidated basis if consolidated statements are prepared in the usual course of business. Other than with respect to the foregoing, such financial statement shall be filed in a standard form and format adopted by the National Association of Insurance Commissioners, unless an alternative form is accepted by the Commissioner. Documentation and financial statements filed with the Securities and Exchange Commission or audited GAAP financial statements shall be deemed to be an appropriate form and format. Unless the Commissioner otherwise permits, the annual financial statements shall be accompanied by the certificate of an independent public accountant to the effect that the statements present fairly the financial position of the ultimate controlling person and the results of its operations for the year then ended, in conformity with generally accepted accounting principles or with requirements of insurance or other accounting principles prescribed or permitted under law. If the ultimate controlling person is an insurer which is actively engaged in the business of insurance, the annual financial statements need not be certified, provided they are based on the Annual Statement of the insurer’s domiciliary state and are in accordance with requirements of insurance or other accounting principles prescribed or permitted under the law and regulations of that state. Any ultimate controlling person who is an individual may file personal financial statements that are reviewed rather than audited by an independent public accountant. The review shall be conducted in accordance with standards for review of personal financial statements published in the Personal Financial Statements Guide by the American Institute of Certified Public Accountants. Personal financial statements shall be accompanied by the independent public accountant's Standard Review Report stating that the accountant is not aware of any material modifications that should be made to the financial statements in order for the statements to be in conformity with generally accepted accounting principles. (c) Exhibits shall include copies of the latest annual reports to shareholders of the ultimate controlling person and proxy material used by the ultimate controlling person; and any additional documents or papers required by Form B or Rules 0780-01-67-.04 and 0780- 01-67-.06. ITEM 9. FORM C REQUIRED A Form C, Summary of Changes to Registration Statement, must be prepared and filed with this Form B. ITEM 10.SIGNATURE AND CERTIFICATION Signature and certification required as follows: SIGNATURE Pursuant to the requirements of T.C.A. § 56-11-105, Registrant has caused this annual registration statement to be duly signed on its behalf of the City of _________________ and State of ______________ on the ____________ day of , 20 . (SEAL) Name of Applicant BY________________________________ (Name) (Title) Attest: ___________________________ (Signature of Officer) ___________________________ (Title) CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached annual registration statement dated , 20, for and on behalf of (Name of Applicant); that (s)he is the (Title of Officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief. (Signature) (Type or print name beneath)______________ FORM C SUMMARY OF CHANGES TO REGISTRATION STATEMENT Filed with the Insurance Department of the State of____________________ By ____________________________________ Name of Registrant On Behalf of Following Insurance Companies Name Address ___________________________________________________________________________________ ___________________________________________________________________________________ ___________________________________________________________________________________ ___________________________________________________________________________________ Date:,20_____ Name, Title, Address and telephone number of Individual to Whom Notices and Correspondence Concerning This Statement Should Be Addressed: ___________________________________________________________________________________ ___________________________________________________________________________________ ___________________________________________________________________________________ Furnish a brief description of all items in the current annual registration statement which represent changes from the prior year’s annual registration statement. The description shall be in a manner as to permit the proper evaluation thereof by the Commissioner, and shall include specific references to Item numbers in the annual registration statement and to the terms contained therein. Changes occurring under Item 2 of Form B insofar as changes in the percentage of each class of voting securities held by each affiliate is concerned, need only be included where such changes are ones which result in ownership or holdings of 10% or more of voting securities, loss or transfer of control, or acquisition or loss of partnership interest. Changes occurring under Item 4 of Form B need only be included where an individual is, for the first time, made a director or executive officer of the ultimate controlling person; a director or executive officer terminates his or her responsibilities with the ultimate controlling person; or in the event an individual is named president of the ultimate controlling person. If a transaction disclosed on the prior year’s annual registration statement has been changed, the nature of such change shall be included. If a transaction disclosed on the prior year’s annual registration statement has been effectuated, furnish the mode of completion and any flow of funds between affiliates resulting from the transaction. The insurer shall furnish a statement that transactions entered into since the filing of the prior year’s annual registration statement are not part of a plan or series of like transactions whose purpose it is to avoid statutory threshold amounts and the review that might otherwise occur. SIGNATURE AND CERTIFICATION Signature and certification required as follows: Pursuant to the requirements of T.C.A. § 56-11-105, Registrant has caused this annual registration statement to be duly signed on its behalf of the City of _________________ and State of ______________ on the ____________ day of , 20 . (SEAL)__________ Name of Applicant BY__________________________________ (Name) (Title) Attest: ___________________________ (Signature of Officer) ___________________________ (Title) CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached annual registration statement dated , 20, for and on behalf of (Name of Applicant); that (s)he is the (Title of Officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief. (Signature) (Type or print name beneath)__________ FORM D PRIOR NOTICE OF A TRANSACTION Filed with the Insurance Department of the State of______________________ By _____________________________________ Name of Registrant On Behalf of Following Insurance Companies Name Address ___________________________________________________________________________________ ___________________________________________________________________________________ ___________________________________________________________________________________ ___________________________________________________________________________________ Date:, 20__ Name, Title, Address and telephone number of Individual to Whom Notices and Correspondence Concerning This Statement Should Be Addressed: ___________________________________________________________________________________ ___________________________________________________________________________________ ___________________________________________________________________________________ ITEM 1. IDENTITY OF PARTIES TO TRANSACTION Furnish the following information for each of the parties to the transaction: (a) Name; (b) Home office address; (c) Principal executive office address; (d) The organizational structure, i.e. corporation, partnership, individual, trust, etc.; (e) A description of the nature of the parties’ business operations; (f) Relationship, if any, of other parties to the transaction to the insurer filing the notice, including any ownership or debtor/creditor interest by any other parties to the transaction in the insurer seeking approval, or by the insurer filing the notice in the affiliated parties; (g) Where the transaction is with a non-affiliate, the name(s) of the affiliate(s) which will receive, in whole or in substantial part, the proceeds of the transaction. ITEM 2. DESCRIPTION OF THE TRANSACTION Furnish the following information for each transaction for which notice is being given: (a) A statement as to whether notice is being given under T.C.A. § 56-11-106(a)(2)(A)-(E); (b) A statement of the nature of the transaction; (c) A statement of how the transaction meets the 'fair and reasonable' standard of T.C.A. § 56-11-106(a)(1)(A); and (d) The proposed effective date of the transaction. ITEM 3. SALES, PURCHASES, EXCHANGES, LOANS, EXTENSIONS OF CREDIT, GUARANTEES OR INVESTMENTS Furnish a brief description of the amount and source of funds, securities, property or other consideration for the sale, purchase, exchange, loan, extension of credit, guarantee, or investment, whether any provision exists for purchase by the insurer filing notice, by any party to the transaction, or by any affiliate of the insurer filing notice, a description of the terms of any securities being received, if any, and a description of any other agreements relating to the transaction such as contracts or agreements for services, consulting agreements and the like. If the transaction involves other than cash, furnish a description of the consideration, its cost and its fair market value, together with an explanation of the basis for evaluation. If the transaction involves a loan, extension of credit or a guarantee, furnish a description of the maximum amount which the insurer will be obligated to make available under such loan, extension of credit or guarantee, the date on which the credit or guarantee will terminate, and any provisions for the accrual of or deferral of interest. If the transaction involves an investment, guarantee or other arrangement, state the time period during which the investment, guarantee or other arrangement will remain in effect, together with any provisions for extensions or renewals of such investments, guarantees or arrangements. Furnish a brief statement as to the effect of the transaction upon the insurer’s surplus. No notice need be given if the maximum amount which can at any time be outstanding or for which the insurer can be legally obligated under the loan or extension of credit is less than (a) in the case of non-life insurers, the lesser of 3% of the insurer’s admitted assets or 25% of surplus as regards policyholders, or with respect to health maintenance organizations, net worth, or (b) in the case of life insurers, 3% of the insurer’s admitted assets, each as of the 31st day of December next preceding. No notice need be given unless the maximum amount which can at any time be outstanding or for which the insurer can be legally obligated under the guarantee exceeds the lesser of .5% of the insurer’s or health maintenance organization’s admitted assets or 10% of surplus as regards policyholders, or with respect to health maintenance organizations, net worth, as of the 31 st day of December next preceding. However, if the guarantee is not quantifiable as to amount, notice shall be required. ITEM 4. LOANS OR EXTENSIONS OF CREDIT TO A NON-AFFILIATE If the transaction involves a loan or extension of credit to any person who is not an affiliate, furnish a brief description of the agreement or understanding whereby the proceeds of the proposed transaction, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase the assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit, and specify in what manner the proceeds are to be used to loan to, extend credit to, purchase assets of or make investments in any affiliate. Describe the amount and source of funds, securities, property or other consideration for the loan or extension of credit and, if the transaction is one involving consideration other than cash, a description of its cost and its fair market value together with an explanation of the basis for evaluation. Furnish a brief statement as to the effect of the transaction upon the insurer’s surplus. No notice need be given if the loan or extension of credit is one which equals less than, in the case of non-life insurers, the lesser of 3% of the insurer’s or health maintenance organization’s admitted assets or 25% of surplus as regards policyholders, or with respect to health maintenance organizations, net worth, or, with respect to life insurers, 3% of the insurer’s admitted assets, each as of the 31st day of December next preceding. ITEM 5. REINSURANCE If the transaction is a reinsurance agreement or modification thereto, as described by T.C.A. § 56-11-106(a)(2)(C)(ii), or a reinsurance pooling agreement or modification thereto as described by T.C.A. § 56-11-106(a)(2)(C)(i), furnish a description of the known and/or estimated amount of liability to be ceded and/or assumed in each calendar year, the period of time during which the agreement will be in effect, and a statement whether an agreement or understanding exists between the insurer and non-affiliate to the effect that any portion of the assets constituting the consideration for the agreement will be transferred to one or more of the insurer’s affiliates. Furnish a brief description of the consideration involved in the transaction, and a brief statement as to the effect of the transaction upon the insurer’s surplus. No notice need be given for reinsurance agreements or modifications thereto if the reinsurance premium or a change in the insurer’s liabilities, or the projected reinsurance premium or change in the insurer’s liabilities in any of the next three years, in connection with the reinsurance agreement or modification thereto is less than 5% of the insurer’s surplus as regards policyholders, or, with respect to health maintenance organizations, net worth, as of the 31st day of December next preceding. Notice shall be given for all reinsurance pooling agreements including modifications thereto. ITEM 6. MANAGEMENT AGREEMENTS, SERVICE AGREEMENTS AND COST SHARING ARRANGEMENTS For management and service agreements, furnish: (a) A brief description of the managerial responsibilities, or services to be performed; (b) A brief description of the agreement, including a statement of its duration, together with brief descriptions of the basis for compensation and the terms under which payment or compensation is to be made. For cost-sharing arrangements, furnish: (a) A brief description of the purpose of the agreement; (b) A description of the period of time during which the agreement is to be in effect; (c) A brief description of each party’s expenses or costs covered by the agreement; (d) A brief description of the accounting basis to be used in calculating each party's costs under the agreement; (e) A brief statement as to the effect of the transaction upon the insurer’s policyholder surplus; (f) A statement regarding the cost allocation methods that specifies whether proposed charges are based on “cost or market.” If market based, rationale for using market instead of cost, including justification for the company’s determination that amounts are fair and reasonable; and (g) A statement regarding compliance with the NAIC Accounting Practices and Procedure Manual regarding expense allocation. ITEM 7. SIGNATURE AND CERTIFICATION Signature and certification required as follows: SIGNATURE Pursuant to the requirements of T.C.A. § 56-11-106, _________ has caused this application to be duly signed on its behalf in the City of _____________ and State of ________________ on the ____________ day of , 20 . (SEAL)________________ Name of Applicant BY__________________________________ (Name) (Title) Attest: ___________________________ (Signature of Officer) ___________________________ (Title) CERTIFICATION The undersigned deposes and says that (s)he has duly executed the attached application dated , 20, for and on behalf of (Name of Applicant); that (s)he is the (Title of Officer) of such company and that (s)he is authorized to execute and file such instrument. Deponent further says that (s)he is familiar with such instrument and the contents thereof, and that the facts therein set forth are true to the best of his/her knowledge, information and belief. (Signature) (Type or print name beneath)_________ FORM E PRE-ACQUISITION NOTIFICATION FORM REGARDING THE POTENTIAL COMPETITIVE IMPACT OF A PROPOSED MERGER OR ACQUISITION BY A NON-DOMICILIARY INSURER DOING BUSINESS IN THIS STATE OR BY A DOMESTIC INSURER ___________________________________ Name of Applicant ___________________________________ Name of Other Person Involved in Merger or Acquisition Filed with the Insurance Department of ____________________________________________________________________________________ Dated:__, 20 _______________ Name, title, address and telephone number of person completing this statement: ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ITEM 1. NAME AND ADDRESS State the names and addresses of the persons who hereby provide notice of their involvement in a pending acquisition or change in corporate control. ITEM 2. NAME AND ADDRESSES OF AFFILIATED COMPANIES State the names and addresses of the persons affiliated with those listed in Item 1. Describe their affiliations. ITEM 3. NATURE AND PURPOSE OF THE PROPOSED MERGER OR ACQUISITION State the nature and purpose of the proposed merger or acquisition. ITEM 4. NATURE OF BUSINESS State the nature of the business performed by each of the persons identified in response to Item 1 and Item 2. ITEM 5. MARKET AND MARKET SHARE State specifically what market and market share in each relevant insurance market the persons identified in Item 1 and Item 2 currently enjoy in this state. Provide historical market and market share data for each person identified in Item 1 and Item 2 for the past five years and identify the source of such data. Provide a determination as to whether the proposed acquisition or merger, if consummated, would violate the competitive standards of the state as stated in T.C.A. § 56-11- 104(d). If the proposed acquisition or merger would violate competitive standards, provide justification of why the acquisition or merger would not substantially lessen competition or create a monopoly in the state. For purposes of this question, market means direct written insurance premium in this state for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this state. FORM F ENTERPRISE RISK REPORT Filed with the Insurance Department of the State of______________________ By ____________________________________ Name of Registrant/Applicant On Behalf of/Related to Following Insurance Companies Name Address ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ Date:, 20_ Name, Title, Address and telephone number of Individual to Whom Notices and Correspondence Concerning This Statement Should Be Addressed: ____________________________________________________________________________________ ____________________________________________________________________________________ ____________________________________________________________________________________ ITEM 1.ENTERPRISE RISK The Registrant/Applicant, to the best of its knowledge and belief, shall provide information regarding the following areas that could produce enterprise risk as defined in T.C.A. § 56-11-101(b)(4), provided such information is not disclosed in the Insurance Holding Company System Annual Registration Statement filed on behalf of itself or another insurer for which it is the ultimate controlling person:  Any material developments regarding strategy, internal audit findings, compliance or risk management affecting the insurance holding company system;  Acquisition or disposal of insurance entities and reallocating of existing financial or insurance entities within the insurance holding company system;  Any changes of shareholders of the insurance holding company system exceeding ten percent (10%) or more of voting securities;  Developments in various investigations, regulatory activities or litigation that may have a significant bearing or impact on the insurance holding company system;  Business plan of the insurance holding company system and summarized strategies for next 12 months;  Identification of material concerns of the insurance holding company system raised by supervisory college, if any, in last year;  Identification of insurance holding company system capital resources and material distribution patterns;  Identification of any negative movement, or discussions with rating agencies which may have caused, or may cause, potential negative movement in the credit ratings and individual insurer financial strength ratings assessment of the insurance holding company system (including both the rating score and outlook);  Information on corporate or parental guarantees throughout the holding company and the expected source of liquidity should such guarantees be called upon; and  Identification of any material activity or development of the insurance holding company system that, in the opinion of senior management, could adversely affect the insurance holding company system. The Registrant/Applicant may attach the appropriate form most recently filed with the U.S. Securities and Exchange Commission, provided the Registrant/Applicant includes specific references to those areas listed in Item 1 for which the form provides responsive information. If the Registrant/Applicant is not domiciled in the U.S., it may attach its most recent public audited financial statement filed in its country of domicile, provided the Registrant/Applicant includes specific references to those areas listed in Item 1 for which the financial statement provides responsive information. ITEM 2: OBLIGATION TO REPORT. If the Registrant/Applicant has not disclosed any information pursuant to Item 1, the Registrant/Applicant shall include a statement affirming that, to the best of its knowledge and belief, it has not identified enterprise risk subject to disclosure pursuant to Item 1.

Chapter 0780-01-68 Guidelines for Discharge of Postpartum Mother and Newborns

Tenn. Comp. R. & Regs. 0780-01-68-.01 PURPOSE

The purpose of this chapter is to assure that all health plans and health care providers follow certain guidelines in the care of mothers and newborn infants and to establish those guidelines.

History

• Authority: T.C.A. §§4—5—101 et seq., 56—2—301, 56—32—218 and 56—7—2350.
• Administrative History: Original rule filed June 6, 1996; effective August 16, 1996.

Tenn. Comp. R. & Regs. 0780-01-68-.02 APPLICABILITY

This chapter shall apply to all individual, franchise, blanket or group health care insurance policies and all health care plan contracts issued pursuant to chapter 25, 26, 27, 28, 29, and 32 of title 56.

History

• Authority: T.C.A. §§4—5—101 et seq., 56—2—301, 56—32—218 and 56—7—2350.
• Administrative History: Original rule filed June 6, 1996; effective August 16, 1996.

Tenn. Comp. R. & Regs. 0780-01-68-.03 EFFECT OF COMPLIANCE

All health plans are prohibited from excluding a provider from participation in a network and prohibited from refusing or reducing reimbursement to a provider solely related to a provider's compliance with this chapter.

History

• Authority: T.C.A. §§4—5—101 et seq., 56—2—301, 56—32—218 and 56—7—2350.
• Administrative History: Original rule filed June 6, 1996; effective August 16, 1996.

Tenn. Comp. R. & Regs. 0780-01-68-.04 GENERAL GUIDELINES

(1)All health plans and health care providers shall take into consideration the following general guidelines for the hospital discharge of mothers and newborn infants following delivery.

(a)The decision to discharge postpartum mothers and newborns less than 24-48 hours after delivery should be made based upon discharge criteria collaboratively developed and adopted by obstetricians, pediatricians, family practitioners, delivery hospitals, and health plans. The criteria must be contingent upon appropriate preparation, meeting in-hospital criteria for both mother and infant, and the planning and implementation of appropriate follow-up. An individualized plan of care must include identification of a primary care provider for both mother and infant and arrangements for follow-up evaluation of the newborn.

(b)Length of hospital stay is only one factor to consider when attempting to optimize patient outcomes for postpartum mothers and newborns. Excellent outcomes are possible even when length of stay is very brief (less than 24 hours) if perinatal health care is well planned, allows for continuity of care, and patients are well chosen. Some postpartum mothers and/or newborns may require extended hospitalization (greater than 48-72 hours) despite meticulous care due to medical, obstetric, or neonatal complications. The decision for time of discharge must be individualized and made by the physicians caring for the mother-infant pair. The following guidelines have been developed to aid in the identification of postpartum mothers and newborns who may be candidates for discharge prior to 24-48 hours. The guidelines also provide examples where discharge is inappropriate.

Tenn. Comp. R. & Regs. 0780-01-68-.05 SPECIFIC GUIDELINES

(1)Discharge Planning.

(a)Discharge planning should occur in a planned and systematic fashion for all postpartum mothers and newborns in order to enhance care, prevent complications and minimize the need for rehospitalization. Prior to discharge a discussion should be held between the physician or another health care provider and the mother (and father if possible) about any expected perinatal problems and ways to cope with those problems. The parties should discuss plans for future and immediate care as well as instructions to follow in the event of an emergency or complication.

(b)Follow-up care must be planned for both mother and infant at the time of discharge. For patients leaving the hospital prior to 24-48 hours, contact within 48-72 hours of discharge is recommended and may include appropriate follow-up within 48-72 hours as deemed necessary by the attending provider, depending upon individual patient need. This follow-up visit will be acknowledged as a provider encounter.

(c)Maternal considerations. Prior to discharge, the mother should be informed of normal postpartum events including but not limited to: 1.Lochial patterns; 2.Range of activity and exercise; 3.Breast care; 4.Bladder care; 5.Dietary needs; 6.Perineal care; 7.Emotional responses; 8.Conditions to report to physician or other health care provider including:

(i)Elevation of temperature, (ii)Chills, (iii)Leg pains, and (iv)Increased vaginal bleeding. 9.Method of contraception; 10.Coitus resumption; and 11.Specific instructions for follow-up (routine and emergent).

(d)Neonatal Considerations. Prior to discharge, the following points should be reviewed with the mother or, preferably, with both parents: 1.Condition of the infant; 2.Immediate needs of the infant; (eg., feeding methods and environmental supports); 3.Instructions to follow in the event of a newborn complication or emergency; 4.Feeding techniques; 5.Skin care, including cord care and genital care; 6.Temperature assessment and measurement with the thermometer; 7.Assessment of neonatal well-being; 8.Recognition of illness, including jaundice; 9.Proper infant safety including use of car seat and sleeping position; 10.Reasonable expectations for the future; and 11.Importance of maintaining immunization begun with initial dose of hepatitis B vaccine.

(2)Criteria for Maternal Discharge Less Than 24-48 Hours Following Delivery.

(a)Prior to discharge of the mother, the following should occur: 1.The mother should have been observed after delivery for a sufficient time to ensure that her condition is stable, that she has sufficiently recovered and that she may be safely transferred to outpatient care. 2.Laboratory evaluations should be obtained and include ABO blood group and Rh typing with appropriate use of Rh immune globulin and hematocrit or hemoglobin. 3.The mother should have received adequate preparation for and be able to assume self-care and immediate neonatal care.

(b)Factors which may exclude maternal discharge prior to 24-48 hours include: 1.Abnormal bleeding. 2.Fever equal to or greater than 100.4 degrees. 3.Inadequate or no prenatal care. 4.Cesarean section. 5.Untreated or unstable maternal medical condition. 6.Uncontrolled hypertension. 7.Inability to void. 8.Inability to tolerate solid foods. 9.Adolescent mother without adequate support or the establishment of appropriate follow-up. A nurse home visit within 24-48 hours of discharge would constitute appropriate follow-up. 10.All efforts should be made to keep mother and infant together to ensure simultaneous discharge. 11.Psychosocial problems (maternal or family) which have been identified prenatally or in hospital. If appropriate follow-up has not been established, a nurse home visit within 24-48 hours of discharge would constitute appropriate follow-up.

(3)Criteria for Neonatal Discharge Less than 24-48 Hours Following Delivery.

(a)The nursery stay is planned to allow the identification of early problems and to reinforce instruction in preparation for care of the infant at home. Complications often are not predictable by prenatal and intrapartum events. Because many neonatal problems do not become apparent until several days after birth there is an element of medical risk in early neonatal discharge. Most problems are manifest during the first 12 hours, and discharge at or prior to 24 hours is appropriate for many newborns. 1.Prior to discharge of the newborn at 24-48 hours, the following should have occurred:

(i)The course of antepartum, intrapartum, and postpartum care for both mother and fetus should be without problems which may lead to newborn complications.

(ii)The infant is a single birth at 37 to 42 weeks’ gestation and the birth weight is appropriate for gestational age according to appropriate intrauterine growth curves.

(iii)The infant’s vital signs are documented as being normal and stable for the 12 hours preceding discharge, including a respiratory rate below 60/minute, a heart rate of 100 to 160 beats per minute, and an axillary temperature of 36.1 degrees C in an open crib with appropriate clothing.

(iv)The infant has urinated and passed at least one stool.

(v)No evidence of excessive bleeding after circumcision greater than 2 hours.

(vi)The infant has completed at least two successful feedings, with documentation that the baby is able to coordinate sucking, swallowing, and breathing while feeding.

(vii)No evidence of significant jaundice in the first 24 hours of life.

(viii)The parent’s or caretaker’s knowledge, ability, and confidence to provide adequate care for the infant are documented.

(ix)Laboratory data are available and reviewed including:

(I)Maternal syphilis and hepatitis B surface antigen status.

(II)Cord or infant blood type and direct Coomb’s test result as clinically indicated.

(x)Screening tests are performed in accordance with state regulations. If the test is performed before 24 hours of milk feeding, a system for repeating the test must be assured during the follow-up visit.

(xi)Initial hepatitis B vaccine is administered or a scheduled appointment for its administration has been made.

(xii)A physician-directed source of continuing medical care for both the mother and the infant is identified. For newborns discharged less than 24-48 hours after delivery, a definitive plan for contact within 48-72 hours after discharge has been made. A nurse home visit within 24-48 hours would be considered appropriate follow-up. 2.Maternal factors which may exclude discharge of the newborn prior to 24-48 hours include:

(i)Inadequate or no prenatal care;

(ii)Medical conditions that pose a significant risk to the infant;

(iii)Group B streptococcus colonization;

(iv)Untreated syphilis;

(v)Suspected active genital herpes;

(vi)HIV;

(vii)Adolescent mother without adequate support or the establishment of appropriate follow-up. A nurse home visit within 24-48 hours of discharge would constitute appropriate follow-up;

(viii)Mental retardation or psychiatric illness; and (ix)Requirements for continued maternal hospitalization. 3.Newborn factors which may exclude discharge of the newborn prior to 24-48 hours include:

(i)Pre-term gestation (less than 37 weeks);

(ii)Small for gestational age;

(iii)Large for gestational age;

(iv)Abnormal physical exam, vital signs, color, activity, feeding or stooling;

(v)Significant congenital malformations; and (vi)An abnormal laboratory finding such as:

(I)Hypoglycemia, (II)Hyperbilirubinemia, (III)Polycythemia, (IV)Anemia, and (V)Rapid plasma reagin positive.

History

• Authority: T.C.A. §§4—5—101 et seq., 56—2—301, 56—32—218 and 56—7—2350.
• Administrative History: Original rule filed June 6, 1996; effective August 16, 1996.

Chapter 0780-01-69 Minimum Reserve Standards for Individual and Group Health Insurance Contracts

Tenn. Comp. R. & Regs. 0780-01-69-.01 SCOPE

(1) These standards apply to all individual and group accident and health insurance coverages except credit insurance, hereinafter “health insurance.”

(2) When an insurer determines that adequacy of its health insurance reserves requires reserves in excess of the minimum standards specified herein, such increased reserves shall be held and shall be considered the minimum reserves for that insurer.

(3) With respect to any block of contracts, or with respect to an insurer’s health business as a whole, a prospective gross premium valuation is the ultimate test of reserve adequacy as of a given valuation date. Such a gross premium valuation will take into account, for contracts in force, in a claims status, or in a continuation of benefits status on the valuation date, the present value as of the valuation date of: all expected benefits unpaid, all expected expenses unpaid, and all unearned or expected premiums, adjusted for future premium increases reasonably expected to be put into effect.

(4) Such a gross premium valuation is to be performed whenever a significant doubt exists as to reserve adequacy with respect to any major block of contracts, or with respect to the insurer's health business as a whole. In the event inadequacy is found to exist, immediate loss recognition shall be made and the reserves restored to adequacy. Adequate reserves (inclusive of claim, premium and contract reserves, if any) shall be held with respect to all contracts, regardless of whether contract reserves are required for such contracts under these standards.

(5) Whenever minimum reserves, as defined in these standards, exceed reserve requirements as determined by a prospective gross premium valuation, such minimum reserves remain the minimum requirement under these standards.

History

• Authority: T.C.A. §§ 56-1-418 and 56-2-301.
• Administrative History: Original rule filed December 19, 1997; effective March 4, 1998. Amendments filed July 19, 2018; effective October 17, 2018.

Tenn. Comp. R. & Regs. 0780-01-69-.02 CALCULATION OF RESERVES

(1) For policies issued on or after January 1, 2017, the minimum reserve standards for individual and group accident and health policies shall be calculated in accordance with the National Association of Insurance Commissioners (NAIC) Valuation Manual in effect for the period at the time of the review of the adequacy of the minimum reserves. The commissioner may also employ other guidelines or procedures the commissioner deems appropriate.

(2) Reserve standards for policies issued before January 1, 2017, including claims incurred before, on and after January 1, 2017, on those policies, shall follow the requirements in the NAIC Accounting Practices and Procedures Manual, Appendix A, A-010.

History

• Authority: T.C.A. §§ 56-1-418; 56-1-901, et seq.; 56-1-904; 56-1-906; 56-1-909; and 56-2-301.
• Administrative History: Original rule filed December 19, 1997; effective March 4, 1998. Amendments filed July 19, 2018; effective October 17, 2018.

Tenn. Comp. R. & Regs. 0780-01-69-.03 REPEALED

History

• Authority: T.C.A. §§ 56-1-418 and 56-2-301.
• Administrative History: Original rule filed December 19, 1997; effective March 4, 1998. Repeal filed July 19, 2018; effective October 17, 2018.

Tenn. Comp. R. & Regs. 0780-01-69-.07 REPEALED

History

• Authority: T.C.A. §§ 56-1-418, 56-1-901, et seq., 56-1-904, 56-1-906, 56-1-909, and 56-2-301.
• Administrative History: Emergency rules filed April 11, 2017; effective through October 8, 2017. Amendments filed July 7, 2017; effective October 5, 2017. Repeal filed July 19, 2018; effective October 17, 2018. APPENDIX A. REPEALED. APPENDIX B. REPEALED. APPENDIX C. REPEALED.

Tenn. Comp. R. & Regs. 0780-01-69-.04 REPEALED

History

• Authority: T.C.A. §§ 56-1-418 and 56-2-301.
• Administrative History: Original rule filed December 19, 1997; effective March 4, 1998. Repeal filed July 19, 2018; effective October 17, 2018.

Tenn. Comp. R. & Regs. 0780-01-69-.05 REPEALED

History

• Authority: T.C.A. §§ 56-1-418 and 56-2-301.
• Administrative History: Original rule filed December 19, 1997; effective March 4, 1998. Repeal filed July 19, 2018; effective October 17, 2018.

Tenn. Comp. R. & Regs. 0780-01-69-.06 REPEALED

History

• Authority: T.C.A. §§ 56-1-418, 56-1-901, et seq., 56-1-904, 56-1-906, 56-1-909, and 56-2-301.
• Administrative History: Emergency rules filed April 11, 2017; effective through October 8, 2017. Amendments filed July 7, 2017; effective October 5, 2017. Repeal filed July 19, 2018; effective October 17, 2018.

Chapter 0780-01-70 Tennessee Charitable Gift Annuities Regulations

Tenn. Comp. R. & Regs. 0780-01-70-.01 PURPOSE

The purpose of this Chapter is to set standards to assist the commissioner of the Tennessee Department of Commerce and Insurance in administering the laws relating to the Tennessee Charitable Gift Annuity Act of 2008.

History

• Authority: T.C.A. §§ 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 831.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Tenn. Comp. R. & Regs. 0780-01-70-.02 SCOPE

This Chapter applies to all charitable organizations issuing charitable gift annuities in this State unless specifically exempted by the commissioner pursuant to T.C.A. § 56-52-104.

History

• Authority: T.C.A. §§ 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 831.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Tenn. Comp. R. & Regs. 0780-01-70-.03 AUTHORITY

This Chapter is issued pursuant to the authority vested in the commissioner pursuant to T.C.A. §§ 56- 52-101 through 56-52-111.

History

• Authority: T.C.A. §§ 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 831.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Tenn. Comp. R. & Regs. 0780-01-70-.04 DEFINITIONS

(1) “Annuity” means a contract or agreement, both with and without a life or mortality element, to make periodic payments, whether in fixed or variable dollar amounts, or both, at specified intervals;

TENNESSEE CHARITABLE GIFT ANNUITY REGULATIONS 0780-01-70

(2) (a) “Charitable gift annuity” means a transfer of cash, securities, annuities or other property by a donor to a charitable organization in return for an annuity issued by a charitable organization;

(b) “Charitable gift annuity” does not include a charitable remainder trust or a charitable lead trust or other similar arrangement where the charitable organization does not issue an annuity and incur a financial obligation to guarantee annuity payments.

“Charitable gift annuity” also does not mean any transfer of cash, securities, annuities or other property by a donor to a charitable organization in return for an annuity where a commission is paid to any person as a result of such transfer;

(3) “Charitable gift annuity separate account” means any segregated account established by a charitable organization to which such organization allocates cash, securities, annuities or other property transferred by a donor to such organization that are to be applied to the terms of a charitable gift annuity issued in connection with such transfer to fund benefits under such charitable gift annuity;

(4) “Charitable organization” means an entity described by:

(a) Section 501(c)(3) Internal Revenue Code of 1986 (26 U.S.C. Section 501(c)(3)); or (b) Section 170(c), Internal Revenue Code of 1986 (26 U.S.C. Section 170(c));

(5) “Commissioner” means the commissioner of the Tennessee Department of Commerce and Insurance;

(6) “Department” means the Tennessee Department of Commerce and Insurance;

(7) “NAIC” means the National Association of Insurance Commissioners;

(8) “Person” means any natural or artificial person including, but not limited to, an individual, partnership, association, trust or corporation; and (9) “Uniform Administrative Procedures Act” means the act compiled in T.C.A. §§ 4-5-101, et seq.

History

• Authority: T.C.A. §§ 4-5-101, et seq., 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 831.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Tenn. Comp. R. & Regs. 0780-01-70-.05 LICENSING REQUIREMENTS

(1) The following items are required to be submitted for the initial registration of any person wishing to apply for a certificate of authority to issue charitable gift annuities:

(a) A completed application form adopted for use by the commissioner verified by two (2) of the charitable organization’s principal officers;

(b) A statement that the charitable organization maintains a charitable gift annuity separate account, invested in accordance with the prudent investor standard as set forth in the Tennessee Uniform Prudent Investor Act, that equals either the total amount of donations for outstanding charitable gift annuities to which the account applies or one hundred ten percent (110%) of the reserves calculated in a manner consistent with T.C.A § 56-52-104(b). In meeting the charitable gift annuity separate account reserve requirement, either by holding the total amount of donations or one hundred ten TENNESSEE CHARITABLE GIFT ANNUITY REGULATIONS 0780-01-70 percent (110%) of the reserves, a charitable organization shall maintain a segregated account for the payment of charitable gift annuities issued in this State on or after January 1, 2009. If the charitable organization maintains a charitable gift annuity separate account that equals one hundred ten percent (110%) of the reserves, the charitable organization must also submit an actuarial opinion;

(c) A statement certifying that the charitable organization does not use persons that receive commissions for the sale, solicitation or negotiation of charitable gift annuities;

(d) A certificate from the Internal Revenue Service stating that the charity qualifies as an organization described in sections 501(c)(3) and 170(c)(2) of the Internal Revenue Code of 1986;

(e) Financial statement as of the end of the charitable organization’s previous fiscal year that includes contact information for the charitable organization and has been attested to by two (2) principal officers or has been audited by an independent qualified certified public accountant; and (f) A fee in the amount of six hundred and seventy-five dollars ($675) or in an amount otherwise specified in T.C.A. § 56-4-101(a)(1).

(2) The commissioner may, after receiving an application under this Paragraph, request from a charitable organization additional information as deemed necessary or appropriate in reviewing such application.

(3) If the commissioner finds that the applicant is in sound financial condition and is otherwise qualified, the commissioner shall issue to the applicant a certificate of authority. If the commissioner does not so find, the commissioner shall deny issuance of the certificate of

authority and notify the applicant in writing stating the reasons.

(4) For matters pertaining to the issuance of charitable gift annuities, the charitable organization must appoint the commissioner as attorney to receive service of lawful process in any action, suit, or proceeding in any court. This appointment is irrevocable, and binds the charitable organization and any successor in interest, and shall remain in effect so long as there is in force in Tennessee any contract made or issued by the charitable organization, or any obligation arising therefrom.

(5) Unless directed otherwise by the Commissioner, an applicant shall file the information required under this Rule with the commissioner by personal delivery or mail addressed to:

Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Davy Crockett Tower, Fourth Floor, Nashville, Tennessee 37243, Attention: Charitable Gift Annuity Specialist.

History

• Authority: T.C.A. §§ 56-4-101, 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 831.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Tenn. Comp. R. & Regs. 0780-01-70-.06 ANNUAL REPORTING REQUIREMENTS

(1) A charitable organization authorized under this Chapter shall annually file a report verified by at least two (2) principal officers with the commissioner covering the preceding fiscal year.

The report is due ninety (90) days after the close of the charitable organization's fiscal year or at a later date approved by the commissioner. In lieu of a verified report, a charitable organization may submit a report that has been audited by an independent qualified certified TENNESSEE CHARITABLE GIFT ANNUITY REGULATIONS 0780-01-70 public accountant within one hundred and fifty (150) days after the close of the charity's fiscal year.

(2) All charitable organizations maintaining a charitable gift annuity separate account that equals one hundred ten percent (110%) of the reserves must annually submit an actuarial opinion prepared by a qualified actuary concurrently with either the verified report or the audited report.

(3) All charitable organizations licensed pursuant to this Chapter must use either the annual report form adopted by the commissioner or the state of domicile of the charitable organization if that report contains substantially the same information as the report required by Title 56, Chapter 52. The annual report form adopted by the commissioner shall be made available to each charitable organization upon request.

(4) In addition to the form required by this Rule, all charitable organizations licensed pursuant to this Chapter must submit an annual continuance fee in the amount of one hundred dollars ($100.00) by March 1.

History

• Authority: T.C.A. §§ 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 831.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Tenn. Comp. R. & Regs. 0780-01-70-.07 APPROVAL OF RATES AND FORMS

(1) No form of a charitable gift annuity shall be issued in this state without the approval of the commissioner.

(2) Each annuity agreement form shall include the following information:

(a) The value of the property to be transferred;

(b) The amount of the annuity, calculated pursuant to the suggested charitable gift annuity rates approved by the American Counsel on Gift Annuities or such other methodology approved by the Commissioner, to be paid to the donor or other annuitant;

(c) The manner in which and the intervals at which payment is to be made;

(d) The age and sex of the person or persons during whose life payment is to be made (use of the date of birth and gender specific pronouns are acceptable);

(e) The reasonable value as of the date of the agreement of the benefits created as calculated using methodology approved by the Internal Revenue Service (the annuity agreement need not state the methodology being used, simply the figure derived by the methodology); and (f) The date the payments are to begin.

(3) All requests for approval under this Paragraph shall be filed with the commissioner no later than thirty (30) days prior to the proposed date of offering of the charitable gift annuity by a charitable organization.

(4) The commissioner may, after receiving a request for approval, request from a charitable organization additional information as deemed necessary or appropriate in reviewing such request.

TENNESSEE CHARITABLE GIFT ANNUITY REGULATIONS 0780-01-70

(5) Upon receiving a request for approval containing all of the information required by Rule 0780- 01-70-.07(2), and receiving all information requested pursuant to Rule 0780-01-70-.07(3), the commissioner shall issue the requesting party in writing a notice of approval or denial of the request.

(6) A charitable organization shall not offer in this State a charitable gift annuity without approval of the commissioner. Notwithstanding the foregoing, if the commissioner does not deny a request for approval within thirty (30) days of having received all requested information under this rule, the request for approval shall be deemed to have been approved by the commissioner.

History

• Authority: T.C.A. §§ 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 831.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Tenn. Comp. R. & Regs. 0780-01-70-.08 EXAMINATION AUTHORITY AND RECORD KEEPING REQUIREMENTS

(1) The commissioner has the authority to examine such charitable organizations’ assets, liabilities and other affairs as they pertain to charitable gift annuity agreements entered into pursuant to Title 56, Chapter 52 and this Chapter in determining whether such charitable organizations are in compliance with the laws or regulations applicable to them. Reasonable expenses of such examinations shall be assessed against the charitable organization.

(2) The commissioner has the authority to investigate the affairs of any person acting as a charitable organization in this State in order to determine whether such person is in violation of this Title 56, Chapter 52 and this Chapter.

(3) Each charitable organization shall maintain its accounts, books and records in a form and manner approved by the commissioner for a period of not less than five (5) years.

(4) All charitable organizations licensed under this Chapter 56, Title 52 and this Chapter must maintain a copy of the signed statement as required by T.C.A. § 56-52-109 for the life of the charitable gift annuity.

(5) All examinations shall be conducted pursuant to T.C.A. § 56-1-411. Once the examination report is completed and the rebuttal period has expired, the commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner's work papers and enter an order:

(a) Adopting the examination report as filed or with modification 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 such violation;

(b) 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 T.C.A. § 56-1-411(c)(2); or (c) Calling for an investigatory hearing with no less than twenty (20) days' notice to the company for purposes of obtaining additional documentation, data, information and testimony.

(6) If the examination reveals that the company is operating in violation of any law, regulation or prior order, the commissioner in such written order may require the company to take any TENNESSEE CHARITABLE GIFT ANNUITY REGULATIONS 0780-01-70 action the commissioner considers necessary or appropriate in accordance with the report of examination or the hearing, if any, on such. That order shall be subject to judicial review in accordance with the provisions of title 27, chapter 9.

(7) Nothing contained in this Title 56, Chapter 52 and this Chapter shall prevent or be construed as prohibiting the commissioner from disclosing the examination report after an order adopting an examination report has been entered. The confidentiality and privileges provisions found in T.C.A. §§ 56-1-411 and 56-8-107 shall also apply.

History

• Authority: T.C.A. §§ 56-1-411, 56-8-107, 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 831.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Tenn. Comp. R. & Regs. 0780-01-70-.09 PROCEDURES FOR PUBLIC COMPLAINTS

(1) Complaints concerning charitable organizations regulated under Title 56, Chapter 52 and this

Chapter or other applicable insurance law shall be handled by the Consumer Insurance Services Section (or successor organizational unit) of the Department’s Insurance Division.

(2) The Consumer Insurance Services Section (or successor organizational unit) shall record and review all complaints received under this Rule, and the process for such review and disposition shall be the same as that for all other complaints submitted to the Consumer Insurance Services Section.

(3) Upon receiving notice of a complaint from the Consumer Insurance Services Section, a charitable organization licensed under this Chapter shall send a written response to the Consumer Insurance Services Section within thirty (30) days thereafter.

History

• Authority: T.C.A. §§ 56-8-107, 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 831.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Tenn. Comp. R. & Regs. 0780-01-70-.10 PENALTIES

(1) In addition to any other reason set forth in statute, the commissioner may deny, suspend or revoke the certificate of authority of any charitable organization upon finding that:

(a) The charitable organization has failed to provide any information required for a certificate of authority under this Chapter;

(b) The charitable organization is violating any of the provisions of Title 56, Chapter 52 and this Chapter or any other law or regulation applicable to it;

(c) The charitable organization is not fulfilling its contractual obligations under the charitable gift annuity;

(d) The charitable organization is in unsound financial condition and is now or would become reasonably unable to make the payments that it contracts for in the charitable gift annuities issued in this state or another state;

(e) The charitable gift organization fails to maintain separate assets for its charitable gift annuities in conformity with the prudent investor standard as set forth in the Tennessee Uniform Prudent Investor Act of 2002, compiled in T.C.A. §§ 35-14-101, et seq.; or TENNESSEE CHARITABLE GIFT ANNUITY REGULATIONS 0780-01-70 (f) The charitable organization is conducting business in a deceptive, untrustworthy or fraudulent manner, which includes using persons who receive commissions for the sale, solicitation or negotiation of charitable gift annuities on behalf of the charitable organization.

(2) All hearings to revoke or suspend a certificate of authority under this Rule shall be held in conformity with the Uniform Administrative Procedures Act and the Rules of Procedure for Contested Cases of the Rules of the Secretary of State as compiled at Chapter 1360-04-01.

History

• Authority: T.C.A. §§ 35-14-101 through 114, 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 831.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Tenn. Comp. R. & Regs. 0780-01-70-.11 SEVERABILITY PROVISION

If any Rule or portion of a Rule of this Chapter or its applicability to any person or circumstance is held invalid by a court, the remainder of the Chapter or the applicability of the provision to other persons or circumstances shall not be affected. To this end, the provisions of this chapter are declared severable.

History

• Authority: T.C.A. §§ 56-52-101 through 56-52-111 and 2008 Public Acts, Chapter 83.
• Administrative History: Public necessity rule filed February 2, 2009; effective through July 17, 2009. Public necessity rule filed February 2, 2009, and effective through July 17, 2009, expired effective July 18, 2009; rule reverted to its previous status. Original rule filed May 5, 2009; effective July 19, 2009.

Chapter 0780-01-71 Life Settlements

Tenn. Comp. R. & Regs. 0780-01-71-.01 AUTHORITY

(1) These rules are adopted by the Commissioner of Commerce and Insurance pursuant to the authority in T.C.A. § 56-50-110, the Life Settlements Act.

History

• Authority: T.C.A. §56-50-110.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003.

Tenn. Comp. R. & Regs. 0780-01-71-.02 DEFINITIONS

(1) In addition to the definitions in T.C.A. § 56-50-102, the following definitions apply to this regulation:

(a) “Advertising” means any written, electronic or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, the Internet or similar communications media, including film strips, motion pictures and videos, published, disseminated, circulated or placed before the public, directly or indirectly, for the purpose of creating an interest in or inducing a person to sell a life insurance policy pursuant to a life settlement contract.

(b) “Business of life settlements” means any activity involved in, but not limited to, the offering, solicitation, negotiation, procurement, effectuation, purchasing, financing, monitoring, tracking, underwriting, selling, transferring, assigning, pledging, hypothecating or in any other manner, of life settlement contracts.

(c) “Chronically ill” means:

1. Being unable to perform at least two (2) activities of daily living (i.e., eating, toileting, transferring, bathing, dressing or continence);

2. Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment; or 3. Having a level of disability similar to that described in 1. above as determined by the Secretary of Health and Human Services;

(d) “Commissioner” means the Commissioner of Commerce and Insurance.

(e) “Identifying information” means an owner’s or insured’s address, telephone number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, social security number, or any other information that is likely to lead to the identification of the owner or insured;

(f) “Insured” means the person covered under the policy being considered for settlement;

(g) “Life expectancy” means the mean of the number of months the individual insured under the life insurance policy to be settled can be expected to live as determined by the life settlement provider considering medical records and appropriate experiential data;

(h) “Net death benefit” means the amount of the life insurance policy or certificate to be settled less any outstanding debts or liens; and (i) “Terminally ill” means having an illness or sickness that can reasonably be expected to result in death in twenty-four (24) months or less.

History

• Authority: T.C.A. §56-50-110.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003.

Tenn. Comp. R. & Regs. 0780-01-71-.03 LICENSE REQUIREMENTS

(1) In addition to the information required in T.C.A. § 56-50-103 and in this rule, the commissioner may ask for other information necessary to determine whether the applicant for a license as a life settlement provider, life settlement broker or life settlement representative complies with the requirements of T.C.A. § 56-50-103.

(2) The application shall be accompanied by the appropriate license fee. The license may be renewed yearly by payment of the appropriate license renewal fee and a current copy of a letter or certificate of good standing obtained from the filing officer of the applicant’s state of domicile. If a life settlement provider, life settlement broker or life settlement representative fails to pay the renewal fee within the time prescribed, or a life settlement provider fails to submit the reports required by T.C.A. § 56-50-106, such nonpayment or failure to submit the required reports shall result in lapse of the license.

(3) If at the time of renewal, lapse, or action by the commissioner pursuant to T.C.A. § 56-50-104, a life settlement provider has life settlements where the insured has not died, it shall do one of the following (the commissioner may specify which course of action is required hereunder in connection with an action by the commissioner pursuant to T.C.A. § 56-50-104):

(a) Renew or maintain a current licensed status until the earlier of the following events:

1. The date the life settlement provider properly assigns, sells or otherwise transfers the life settlements where the insured has not died; or 2. The date that the last insured covered by a life settlement transaction has died.

(b) Appoint, in writing, either the life settlement provider that entered into the life settlement contract, the life settlement broker who received commissions from the life settlement, if applicable, or any other life settlement provider or life settlement broker licensed in this state to make all inquiries to the insured, or the insured’s designee, regarding health status of the insured or any other matters.

(4) Applicants for life settlement provider and life settlement broker licenses shall submit:

(a) 1. An audited financial statement with the life settlement provider application;

2. An attested financial statement with the life settlement broker application;

(b) A list of all life settlement contract transactions previously conducted where the owner and/or insured is or was then a resident of this state;

(c) For each life settlement contract transaction reported under subparagraph (4)(b), a report shall be made including the following information:

1. Date of life settlement contract;

2. Owner’s relationship to the insured;

3. Mean life expectancy of the insured at time of contract in months;

4. Face amount of policy settled;

5. Net death benefit settled;

6. Net amount paid to owner;

7. Amount of fee or commission paid to life settlement representative(s) and life settlement broker (if life settlement broker was involved), if applicant is applying for a life settlement provider license;

8. Amount of fee or commission paid to any other person involved in the life settlement, as well as name and address of the recipients;

9. Statement of whether the insured is living or deceased, and date of death if applicable;

10. Name and address of each life settlement broker through whom the applicant purchased a policy from an owner who resided in this state at the time of contract, if applicant is applying for a life settlement provider license; and 11. Name and address of the life settlement provider, if the applicant is applying for a life settlement broker license.

(5) The license issued to a life settlement provider, life settlement broker or life settlement representative shall be a limited license that allows it to operate only within the scope of its license.

History

• Authority: T.C.A. §§56-50-103 and 56-50-110.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003.

Tenn. Comp. R. & Regs. 0780-01-71-.04 DISCIPLINARY GROUNDS

(1) Pursuant to the provisions of T.C.A. § 56-50-104, the following are deemed “fraudulent or dishonest practices” by a licensee, applicant for renewal, or any officer, partner, member or key management personnel, without limiting those terms to the practices specified herein:

(a) Soliciting or encouraging a person to apply for a life insurance policy for the purpose of entering into a life settlement contract based upon the newly obtained life insurance policy;

(b) Entering into a life settlement contract based upon a life insurance contract within a two-year period commencing with the date of issuance of the insurance policy or certificate unless the owner certifies to the life settlement provider that one or more of the following conditions have been met within the two-year period:

1. The policy was issued upon the owner’s exercise of conversion rights arising out of a group or individual policy, provided the total of the time covered under the conversion policy plus the time covered under the prior policy is at least twenty-four (24) months. The time covered under a group policy shall be calculated without regard to any change in insurance carriers, provided the coverage has been continuous and under the same group sponsorship;

2. (i) The owner submits independent evidence to the life settlement provider that one or more of the following conditions have been met within the two-year period:

(I) The owner or insured was diagnosed as terminally or chronically ill after the issuance of the policy;

(II) The owner’s spouse has died;

(III) The owner divorces his or her spouse;

(IV) The owner retires from full-time employment;

(V) The owner becomes physically or mentally disabled and a physician determines that the disability prevents the owner from maintaining full-time employment;

(VI) The owner experiences a significant decrease in income that is unexpected and that impairs the owner’s reasonable ability to pay the policy premiums;

(VII) The owner disposes of his or her ownership interests in a closely held corporation.

(ii) Copies of the independent evidence described in Paragraph (i) of this subsection and documents required by § 56-50-109(a) shall be submitted to the insurer when the life settlement provider submits a request to the insurer for verification of coverage. The copies shall be accompanied by a letter of attestation from the life settlement provider that the copies are true and correct copies of the documents received by the life settlement provider.

3. If the life settlement provider submits to the insurer a copy of the owner’s or insured’s certification described in this subsection (b) when the provider submits a request to the insurer to effect the transfer of the policy or certificate to the life settlement provider, the copy shall be deemed to conclusively establish that the life settlement contract satisfies the requirements of this subsection and the insurer shall timely respond to the request.

(c) Entering into a life settlement contract based upon a life insurance policy which was issued to an owner as the result of an application which contained untrue information regarding the insured’s medical history or health status;

(d) Encouraging or soliciting a person to provide untrue information regarding the person’s medical

history or health status;

(e) Accepting funds from individual investor sources to be used as consideration for a life settlement contract prior to identifying a life insurance policy available for settlement;

(f) Representing to any person that the life insurance policy upon which a life settlement contract is based, is guaranteed by the Tennessee Life and Health Guaranty Fund;

(g) Presenting, causing to be presented or preparing false material information, or concealing material information, as part of, in support of or concerning a fact material to one or more of the following:

1. An application for the issuance of a life settlement contract or insurance policy;

2. The underwriting of a life settlement contract or insurance policy;

3. A claim payment or benefit pursuant to a life settlement contract or insurance policy;

4. Premiums paid on a life insurance policy;

5. Payments and changes in ownership or beneficiary made in accordance with the terms of a life settlement contract or life insurance policy;

6. The reinstatement or conversion of a life insurance policy;

7. In the solicitation, offer, effectuation or sale of a life settlement contract or life insurance policy;

8. The issuance of written evidence of a life settlement contract or life insurance policy; or 9. A financing transaction.

(h) Removing, concealing, altering, destroying or sequestering from the commissioner the assets or records of a licensee, applicant for renewal, or other person engaged in the business of life settlements;

(i) Misrepresenting or concealing the financial condition of a licensee, applicant for renewal, financing entity, insurer or other person.

History

• Authority: T.C.A. §§56-1-204, 56-12-218, 56-50-104, 56-50-106, 56-50-107, and 56-50-110.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003.

Tenn. Comp. R. & Regs. 0780-01-71-.05 STANDARDS FOR EVALUATION OF REASONABLE PAYMENTS

(1) In order to assure that owners receive a reasonable return for settling an insurance policy, the following shall be the minimum discounted value that the owner must receive:

Insured’s Life Expectancy Minimum Percentage of Face Value Less Outstanding Loans Received by Owner (a) Less than 6 months [80%]

(b) At least 6 but less than 12 months [70%]

(c) At least 12 but less than 18 months [65%]

(d) At least 18 but less than 24 months [60%]

(e) At least 24 but less than 30 months [55%]

(f) At least 30 but less than 42 months [50%]

(e) Forty-two months or more Owner must receive at least Cash Surrender Value of Policy (2) The percentage may be reduced by [5%] for settling a policy written by an insurer rated less than the highest [4] categories by A.M. Best, or a comparable rating by another rating agency.

History

• Authority: T.C.A. §§56-50-105 and 56-50-110.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003.

Tenn. Comp. R. & Regs. 0780-01-71-.06 REPORTING REQUIREMENTS

(1) On March 1 of each calendar year, each life settlement provider conducting business in this state shall make a report to the commissioner of all life settlement transactions where the owner and/or the insured is a resident of this state containing the following information for the previous calendar year:

(a) For each life settlement contract transaction participated in during the reporting period:

1. Date of the life settlement contract;

2. Owner’s and/or insured’s state of residence at the time of the contract, if both are not residents of this state;

3. Owner’s relationship to the insured;

4. Mean life expectancy of the insured at time of contract in months;

5. Face amount of policy settled;

6. Net death benefit settled;

7. Net amount paid to owner;

8. Amount of fee or commission paid to life settlement representative(s) and life settlement broker (if life settlement broker was involved):

9. Amount of fee or commission paid to any other person involved in the life settlement, as well as name and address of the recipients;

10. Source of policy (B-Broker; D-Direct Purchase; SM-Secondary Market);

11. Type of coverage (I-Individual or G-Group) and name of insurance company issuing the policy;

12. Period of time the policy had been in effect at the time of life settlement;

13. Disease classification (if applicable); and 14. Type of funding (I- Institutional; S – Individual Investor).

(b) For life settlements where death has occurred during the reporting period:

1. Date of life settlement contract;

2. Owner’s and/or insured’s state of residence at the time of the contract, if both were not residents of this state;

3. Mean life expectancy of the insured at time of contract in months;

4. Net death benefit collected;

5. If no death benefit collected, reason for no collection;

6. Total premiums paid to maintain the policy (WP-Waiver of Premium; NA-Not Applicable);

7. Net amount paid to owner;

8. Cause of death;

9. Date of death;

10. Amount of time between date of contract and date of death in months; and 11. Difference between the number of months that passed between the date of contract and the date of death and the mean life expectancy in months as determined by the reporting company;

(c) Name and address of each life settlement broker through whom the reporting company purchased a policy from an owner who resided in this state at the time of contract;

(d) Number of policies reviewed and rejected;

(e) Number of policies purchased in the secondary market as a percentage of total policies purchased; and (f) Number of policies settled in this state as a percentage of the total number of policies purchased in all states.

(2) On March 1 of each calendar year, each life settlement broker in this state shall make a report to the commissioner of all life settlement transactions where the owner and/or the insured is a resident of this state containing the following information for the previous calendar year:

(a) Date of the life settlement contract;

(b) Owner’s and/or insured’s state of residence at the time of contract, if both are not residents of this state;

(c) Owner’s relationship to insured;

(d) Face amount of policy settled;

(e) Net death benefits settled;

(f) Net amount paid to owner;

(g) Itemization and total of fees or commissions paid to life settlement broker and life settlement representatives;

(h) Relationship of life settlement broker and/or life settlement representative to the owner and/or insured prior to the life settlement contract transaction;

(i) Name and address of the life settlement provider.

History

• Authority: T.C.A. §§56-50-106 and 56-50-110.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003.

Tenn. Comp. R. & Regs. 0780-01-71-.07 EXAMINATIONS AND INVESTIGATIONS

(1) The commissioner may conduct an examination or investigation under T.C.A. § 56-50-101 et seq. of an applicant, licensee, or any other persons engaged in the business of life settlements as often as, or when, the commissioner in his or her sole discretion deems it reasonably necessary to protect the interests of the public.

(2) Record Retention Requirements (a) A person required to be licensed by T.C.A. § 56-50-101 et seq. shall retain copies of all:

1. Proposed, offered or executed contracts, underwriting documents, policy forms, and applications from the date of the proposal, offer or execution of the contract, whichever is later;

2. All checks, drafts or other evidence and documentation related to the payment, transfer, deposit or release of funds from the date of the transaction; and 3. All other records and documents related to the requirements of T.C.A. § 56-50-101 et seq.

(b) The records required to be retained by subsection (a) shall be retained until five (5) years after the death of the insured that is the subject of the life settlement contract. Records required to be retained must be legible and complete and may be retained in paper, photograph, microprocess, magnetic, mechanical, or electronic media, or by any process that accurately reproduces or forms a durable medium for the reproduction of a record.

(c) If no life settlement contract is executed between an owner and a life settlement provider, the records required to be retained by subsection (a) shall be retained for a period of three (3) years after the date the proposed or offered contract is rejected or contract negotiations cease, whichever date is last. Records required to be retained must be legible and complete and may be retained in paper, photograph, microprocess, magnetic, mechanical, or electronic media, or by any process that accurately reproduces or forms a durable medium for the reproduction of a record.

(3) Conduct of Examinations and Investigations (a) Upon determining that an examination should be conducted, the commissioner shall issue an examination order appointing one or more examiners to perform the examination and instructing them as to the scope of the examination. In conducting the examination, the examiner shall observe those guidelines and procedures set forth in the “Examiners’ Handbook” adopted by the National Association of Insurance Commissioners (NAIC). The commissioner may also employ such other guidelines or procedures as the commissioner may deem appropriate.

(b) Every applicant, licensee or person from whom information is sought, its officers, directors, partners, members, employees and agents shall provide to the examiners timely, convenient and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, assets and computer or other recordings relating to the property, assets, business and affairs of the applicant or licensee being examined. The officers, directors, partners, members, employees, contractors and agents of the applicant, licensee or person shall facilitate the examination and aid in the examination so far as it is in their power to do so. The refusal of an applicant or licensee, by its officers, directors, partners, members, employees, agents, or contractors, to submit to examination or to comply with any reasonable written request of the commissioner shall be grounds for denial of an application for a license, suspension, revocation or nonrenewal of any license or authority held by the licensee to engage in the life settlement business or other business subject to the jurisdiction of the commissioner. Any proceedings for suspension, revocation or nonrenewal of any license or authority shall be conducted pursuant to the Uniform Administrative Procedures Act, Tennessee Code Annotated Title 4, Chapter 5.

(c) The commissioner shall have the power to issue subpoenas, to administer oaths and to examine under oath any person as to any matter pertinent to an examination or investigation. Upon the failure or refusal of a 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 may be punishable as contempt of court.

(d) When making an examination under T.C.A. § 56-50-101 et seq., the commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants or other professionals and specialists as examiners, the cost of which shall be borne by the applicant or licensee that is the subject of the examination.

(4) Any person engaged in the business of life settlements having knowledge or a reasonable belief that a fraudulent act is being, will be, or has been committed in connection with a life settlement transaction shall provide to the commissioner the information required by, and in a manner prescribed by the commissioner.

(5) Any other person having knowledge or a reasonable belief that a fraudulent act is being, will be, or has been committed in connection with a life settlement transaction shall provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

History

• Authority: T.C.A. §§56-1-204, 56-50-103, 56-50-106, 56-50-107, 56-50-110, and 56-53-109.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003.

Tenn. Comp. R. & Regs. 0780-01-71-.08 GENERAL RULES

(1) With respect to policies containing a provision for double or additional indemnity for accidental death, the additional payment shall remain payable to the beneficiary last named by the owner prior to entering into the life settlement contract, or to such other beneficiary, other than the life settlement trust, provider, or financing entity as the owner may thereafter designate, or in the absence of a beneficiary, to the estate of the owner.

(2) Payment of the proceeds of a life settlement pursuant to T.C.A. § 56-50-109 shall be by means of wire transfer to the account of the owner or by certified check or cashier’s check.

(3) Payment of the proceeds to the owner pursuant to a life settlement contract shall be made in a lump sum except where the life settlement provider has purchased an annuity or similar financial instrument issued by a licensed insurance company or bank, or an affiliate of either. Retention of a portion of the proceeds by the life settlement provider or escrow agent is not permissible.

(4) A life settlement provider, life settlement broker or life settlement representative shall not discriminate in the making or solicitation of life settlements on the basis of race, age, sex, national origin, creed, religion, occupation, marital or family status or sexual orientation, or discriminate between owners with dependents and without.

(5) A life settlement provider, life settlement broker or life settlement representative shall not pay or offer to pay any finder’s fee, commission or other compensation to any insured’s physician, or to an attorney, accountant or other person providing medical, legal or financial planning services to the owner, or to any other person acting as an agent of the owner with respect to the life settlement.

(6) A life settlement provider, life settlement broker, or any officer, partner, member, employee, affiliate, agent, contractor or life settlement representative shall not solicit investors who have treated or have been asked to treat the illness of the insured whose coverage would be the subject of the investment.

(7) Within twenty (20) days after an owner or insured executes documents necessary to transfer any rights under a life insurance policy or within twenty (20) days of entering any agreement, option, promise or any other form of understanding, expressed or implied, relating to the business of life settlements, the life settlement provider shall give written notice to the insurer that issued the insurance policy that the policy has or will become a settled policy or otherwise be involved in the business of life settlements.

The notice shall be accompanied by the documents required by Paragraph (8) below.

(8) The life settlement provider shall deliver a copy of the owner’s certification pursuant to 0780-1-71- .04(1)(b) if applicable, a copy of a medical release, a copy of the owner’s application for the life settlement contract, the notice required under paragraph (7) above and a request for verification of coverage (Appendices A or B to this rule) to the insurer that issued the life policy that is the subject of the transaction.

(9) The insurer shall respond to a request for verification of coverage (Appendices A or B to this rule) submitted by the life settlement provider within thirty (30) calendar days of the date the request is received and shall indicate whether, based upon the medical evidence and documents provided, the insurer intends to pursue an investigation at this time regarding the validity of the insurance contract.

(10) Advertising standards:

(a) Owners and insureds are to be provided with clear and unambiguous statements in the advertisement of life settlements and are to be assured in the receipt of clear, truthful and adequate disclosure of the benefits, risks, limitations and exclusions of any life settlement contract. The purpose of these guidelines and standards of permissible and impermissible conduct in the advertisement of life settlements is to assure that product descriptions are presented in a manner that prevents unfair, deceptive or misleading advertising and is conducive to accurate presentation and description of life settlements through the advertising media and material used by life settlement licensees.

(b) These standards shall apply to any advertising of life settlement contracts or related products or services intended for dissemination in this state, including Internet advertising viewed by persons located in this state.

(c) Every life settlement licensee shall establish and at all times maintain a system of control over the content, form and method of dissemination of all advertisements of its contracts, products and services. All advertisements, regardless of by whom written, created, designed or presented, shall be the responsibility of the life settlement licensee, as well as the individual who created or presented the advertisement. A system of control shall include regular routine notification, at least once a year, to agents and others authorized by the life settlement licensee who disseminate advertisements of the requirements and procedures for approval prior to the use of any advertisements not furnished by the life settlement licensee.

(d) rtisements shall be truthful and not misleading by fact or implication. The form and content of an advertisement of a life ettlement contract shall be sufficiently complete and clear so as to avoid deception. It shall not have the capacity or tendency to mislead or deceive.

(e) Certain life settlement advertisements are deemed false and misleading on their face and are prohibited. False and misleading life settlement advertisements include, but are not limited to, the following misrepresentations:

1. “Guaranteed,” “safe,” “secure,” “backed by federal law,” “backed by state law,” or “state guaranty funds,” or similar representations;

2. “No risk,” “low risk,” “minimal risk,” or similar representations;

3. “No sales charges or fees” or similar representations;

4. “High yield,” “superior return,” “excellent return,” “high return,” “quick profit,” or similar representations;

5. Purported favorable representations or testimonials about the benefits of life settlement contracts taken out of context from newspapers, magazines, trade papers, journals, radio and television programs, and all other forms of print and electronic media.

(f) The information required to be disclosed under this subsection shall not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the advertisement so as to be confusing or misleading.

1. An advertisement shall not omit material information or use words, phrases, statements, references or illustrations if the omission or use has the capacity, tendency or effect of misleading or deceiving as to the nature or extent of any benefit, loss covered, premium payable, or state or federal tax consequence. The fact that the life settlement contract offered is made available for inspection prior to consummation of the sale, or an offer is made to refund the payment if the owner is not satisfied or that the life settlement contract includes a “free look” period that satisfied or exceeds legal requirements, does not remedy misleading statements.

2. An advertisement shall not use the name or title of a life insurance company or a life insurance policy unless advertisement has been approved by the insurer.

3. An advertisement shall not represent that premium payments will not be required to be paid on the life insurance policy that is the subject of the life settlement contract in order to maintain that policy, unless that is the fact.

4. An advertisement shall not state or imply that interest charged on an accelerated death benefit or policy loan is unfair, inequitable or in any manner an incorrect or improper practice.

5. The words “free,” “no cost,” “without cost,’ “no additional cost,” “at no extra cost,” or any words of similar import shall not be used with respect to any benefit or service unless true. An advertisement may specify the charge for a benefit or service or may state that a charge is included in the payment or use other appropriate language.

(g) Testimonials, appraisals or analysis used in advertisements must be genuine; represent current opinion of the author; be applicable to the life settlement contract, if any; and be accurately reproduced with sufficient completeness to avoid misleading or deceiving prospective owners as to the nature or scope of the testimonials, appraisal, analysis or endorsement. In using testimonials, appraisals or analysis, the life settlement licensee makes as its own all the statements contained therein, and the statements are subject to all the provisions of this subsection.

1. If the individual making a testimonial, appraisal, analysis or an endorsement has a financial interest in the life settlement provider or related entity as a stockholder, director, officer, employee or otherwise, or receives any benefit directly or indirectly other than required union scale wages, that fact shall be prominently disclosed in the advertisement.

2. An advertisement shall not state or imply that a life settlement contract benefit or service has been approved or endorsed by a group of individuals, society, association or other organization unless that is the fact and unless any relationship between an organization and the life settlement licensee is disclosed. If the entity making the endorsement or testimonial is owned, controlled or managed by the life settlement licensee, or receives any payment or other consideration from the life settlement licensee for making an endorsement or testimonial, that fact shall be disclosed in the advertisement.

3. When an endorsement refers to benefits received under a life settlement contract all pertinent information shall be retained for a period of five (5) years after its use.

(h) An advertisement shall not contain statistical information unless it accurately reflects recent and relevant facts. The source of all statistics used in an advertisement shall be identified.

(i) An advertisement shall not disparage insurers, life settlement providers, life settlement brokers, insurance producers, policies, services or methods of marketing.

(j) The name of a life settlement licensee shall be clearly identified in all advertisements about the licensee or its life settlement contract products or services, and if any specific life settlement contract is advertised, the life settlement contract shall be identified either by form number or some other appropriate description. If an application is part of the advertisement, the name of the life settlement provider shall be shown on the application.

(k) An advertisement shall not use a trade name, group designation, name of the parent company of a life settlement licensee, name of a particular division of the life settlement licensee, service mark, slogan, symbol or other device or reference without disclosing the name of the life settlement licensee, if the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the life settlement licensee, or to create the impression that a company other than the life settlement licensee would have any responsibility for the financial obligation under a life settlement contract.

(l) An advertisement shall not use any combination of words, symbols or physical materials that by their content, phraseology, shape, color or other characteristics are so similar to a combination of words, symbols or physical materials used by a government program or agency or otherwise appear to be of such a nature that they tend to mislead owners or insureds into believing that the solicitation is in some manner connected with a government program or agency.

(m) An advertisement may state that a life settlement licensee is licensed in the state where the advertisement appears, provided it does not exaggerate that fact or suggest or imply that a competing life settlement licensee may not be so licensed. The advertisement may ask the audience to consult the licensee’s web site or contact the Department of Commerce and Insurance to find out if the state requires licensing and, if so, whether the life settlement provider or life settlement broker is licensed.

(n) An advertisement shall not create the impression that the life settlement provider, its financial condition or status, the payment of claims or the merits, desirability, or advisability of its life settlement contracts are recommended or endorsed by any governmental entity.

(o) The name of the actual licensee shall be stated in all of its advertisements. An advertisement shall not use a trade name, any group designation, name of any affiliate or controlling entity of the licensee, service mark, slogan, symbol or other device in a manner that would have the capacity or tendency to mislead or deceive as to the true identity of the actual licensee or create the false impression that an affiliate or controlling entity would have any responsibility for the financial obligation of the licensee.

(p) An advertisement shall not directly or indirectly create the impression that any division or agency of the state or of the United States government endorses, approves or favors:

1. Any life settlement licensee or its business practices or methods of operation;

2. The merits, desirability or advisability of any life settlement contract;

3. Any life settlement contract; or 4. Any life insurance policy or life insurance company.

(q) If the advertisement emphasizes the speed with which the settlement will occur, the advertising must disclose the average time frame from completed application to the date of the offer and from acceptance of the offer to receipt of the funds by the owner;

(r) If the advertising emphasizes the dollar amounts available to owners, the advertising shall disclose the average purchase price as a percent of the face value obtained by owners contracting with the licensee during the past six (6) months.

(11) If a life settlement provider enters into a life settlement that allows the owner to retain an interest in the policy, the life settlement contract shall contain the following provisions:

(a) A provision that the life settlement provider will effect the transfer of the amount of the death benefit only to the extent or portion of the amount settled. Benefits in excess of the amount settled shall be paid directly to the owner’s beneficiary by the insurance company;

(b) A provision that the life settlement provider will, upon acknowledgment of the perfection of the transfer, either;

1. Advise the insured, in writing, that the insurance company has confirmed the owner’s interest in the policy; or 2. Send a copy of the instrument sent from the insurance company to the life settlement company that acknowledges the owner’s interest in the policy; and (c) A provision that apportions the premiums to be paid by the life settlement company and the owner. It is permissible for the life settlement contract to specify that all premiums shall be paid by the life settlement company.

History

• Authority: T.C.A. §§56-50-102, 56-50-103, 56-50-105, 56-50-108, 56-50-109, and 56-50-110.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003.

Tenn. Comp. R. & Regs. 0780-01-71-.09 DISCLOSURE

(1) A disclosure document containing the disclosures required by the Life Settlements Act and this rule shall be provided before or concurrent with taking an application for a life settlement contract:

(a) The disclosure document shall contain the following language: “All medical, financial, personal information solicited or obtained by a life settlement company or life settlement broker about an owner and insured, including the owner’s and insured’s identity or the identity of family members, a spouse or a significant other, may be disclosed as necessary to effect the life settlement between the owner and the life settlement provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides the funds for the purchase of this policy. You may be asked to renew your permission to share information every two years.”

(b) The information shall not be disclosed in any form to any person, unless disclosure:

1. Is requested by the commissioner or any other governmental officer or agency; or 2. Is necessary to effect the life settlement between the owner and the life settlement provider, and the owner and insured have provided prior written consent to the disclosure; or 3. Is a term of or condition to the transfer of a life policy by one life provider to another life settlement provider.

(c) Notwithstanding any other provisions, for the purposes of complying with Paragraph (b) above, the use of this information by the life settlement provider or the life settlement broker or their authorized representatives in the following situations shall be deemed necessary to the completion of the life settlement contract or an acceptable term of or condition to the transfer of a life policy from one life settlement provider to another life settlement provider:

1. To make contacts with the insured for the purpose of determining his or her health status;

2. To detect fraud in accordance with the life settlement provider’s or life settlement broker’s anti-fraud plan;

3. To effectuate institutional risk control within the life settlement provider or life settlement broker;

4. To purchase stop loss coverage; or 5. To permit a financing entity to finance the purchase of policies by a life settlement provider.

(2) No later than the date on which the life settlement contract is signed by all parties, the life settlement provider shall provide the following disclosures displayed conspicuously in the life settlement contract or in a separate document signed by the owner and the life settlement provider or life settlement broker:

(a) The name, address and telephone number of the life settlement provider;

(b) The name, business address, and telephone number of any independent third party escrow agent involved in the transaction, the right of the owner to inspect or receive copies of the relevant escrow or trust agreements or documents;

(c) If a life settlement broker is involved, the amount and method of calculating the broker’s compensation. The term “compensation” includes anything of value paid or given to a life settlement broker for the placement of a policy.

(d) If a life settlement broker is involved in the transaction, the broker shall disclose all settlement offers received by the broker for the owner’s life policy.

(3) Before or concurrent with taking an application for a life settlement contract and the date on which the life settlement contract is signed by all parties, the life settlement provider shall clearly provide in substance the following fraud warnings to the owner displayed conspicuously in the life settlement contract or in a separate document signed by the owner and the life settlement provider or life settlement broker:

“It is a crime to knowingly provide false, incomplete or misleading information in an application for insurance or an application for a viatical or life settlement contract with an intent to defraud. Penalties include imprisonment, fines and denial of insurance benefits.”

(4) If the life settlement provider transfers ownership or changes the beneficiary of the life policy, the provider shall communicate the change in ownership or beneficiary to the insured within twenty (20) days after the change.

History

• Authority: T.C.A. §§56-50-105, 56-50-106, 56-50-108, 56-50-109, 56-50-110, 56-53-102, 56-53-104, and 56- 53-111.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003.

Tenn. Comp. R. & Regs. 0780-01-71-.10 PROHIBITED PRACTICES

(1) A life settlement provider, life settlement broker or life settlement representative shall not provide identifying information to any person, except to the commissioner or to any other governmental officer or agency, unless the insured and owner provide written consent to the release of the information.

(2) A life settlement provider, life settlement broker or life settlement representative shall obtain from a person that is provided with medical, financial, identifying information or information otherwise deemed to be nonpublic personal information pursuant to the Gramm-Leach-Bliley Financial Services Modernization Act of 1999, except the commissioner or any other governmental officer or agency, a signed affirmation that the person or entity will not further divulge the information without procuring the express, written consent of the insured for the disclosure. Notwithstanding the foregoing, if a life settlement provider, life settlement broker or life settlement representative is served with a subpoena by a person other than the commissioner or any other governmental officer or agency and, therefore, compelled to produce records containing identifying information, it shall notify the owner and the insured in writing at their last known addresses within five (5) business days after receiving notice of the subpoena, unless required by law to provide earlier or different notice.

(3) A life settlement provider shall not act also as a life settlement broker, whether entitled to collect a fee directly or indirectly, in the same life settlement.

(4) A life settlement broker shall not, without the written agreement of the owner obtained prior to performing any services in connection with a life settlement, seek or obtain any compensation from the owner.

(5) A life settlement provider shall not use a longer life expectancy than is supported by medical history and health status in order to reduce the payout to which the owner is entitled.

History

• Authority: T.C.A. §§56-50-106, 56-50-109, and 56-50-110.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003.

Tenn. Comp. R. & Regs. 0780-01-71-.11 INSURANCE COMPANY PRACTICES

(1) Life insurance companies authorized to do business in this state shall respond to a request for verification of coverage from a life settlement provider or a life settlement broker within thirty (30) calendar days of the date a request is received, subject to the following conditions:

(a) A current authorization consistent with applicable law, signed by the policy owner or certificateholder, accompanies the request;

(b) In the case of an individual policy, submission of a form substantially similar to Appendix A, which has been completed by the life settlement provider or life settlement broker in accordance with the instructions on the form, and (c) In the case of group insurance coverage:

1. Submission of a form substantially similar to Appendix B, which has been completed by the life settlement provider or life settlement broker in accordance with the instructions on the form, and 2. Which has previously been referred to the group policyholder and completed to the extent the information is available to the group policyholder.

(2) Nothing in this section shall prohibit a life insurance company and a life settlement provider or a life settlement broker from using another verification of coverage form that has been mutually agreed upon in writing in advance of submission of the request.

(3) A life insurance company may not charge a fee for responding to a request for information from a life settlement provider or life settlement broker in compliance with this section in excess of any usual and customary charges to policy owners, certificateholders or insureds for similar services.

(4) The life insurance company may send an acknowledgment of receipt of the request for verification of coverage to the policy owner or certificateholder and, where the policy owner or certificate owner is other than the insured, to the insured. The acknowledgment may contain a general description of any accelerated death benefit that is available under a provision of or rider to the life insurance contract.

History

• Authority: T.C.A. §56-50-110.
• Administrative History: Original rule filed February 7, 2003; effective April 23, 2003. APPENDIX A VERIFICATION OF COVERAGE FOR INDIVIDUAL POLICIES Section One: (To be completed by the Life Settlement Provider or Life Settlement Broker) Insurance Company: Name of Policy Owner: Policy Number: Policy Owner’s Social Security Number: Name of Insured: Policy Owner’s Address: (Street) Insured’s date of birth: (City/State) Please provide the information requested in Section Two (below) with regard to the policy identified above and in accordance with the attached authorization. In addition, please provide the forms checked below which are available from your company to complete a life settlement transaction: Absolute Assignment/Change of Ownership/Life Assignment Form Change of Beneficiary Release of Irrevocable Beneficiary (if applicable) Waiver of Premium Claim Form Disability Waiver of Premium Approval Letter Date Signature of a representative of Life Settlement Broker or Life Settlement Provider Full name and address of Life Settlement Broker or Life Settlement Provider Section Two: (To be completed by the life insurance company) 1) Face amount of policy: $ 2) Original date of issue: / / Month/Date/Year) 3) Was face amount increased after original issue date? no yes a) If yes, when: / / b) Amount of increase $__________ 4) Type of policy: (Term/Whole Life/Universal Life/Variable Life) 5) Is policy participating? no yes (Rule 0780-1-71-Appendix A, continued) a) If yes, what is current dividend election? 6) Current net death benefit: (Enter full amount payable, including any additional insurance, and/or dividends accumulated at interest, minus policy loans, outstanding interest on policy loans and/or accelerated death benefits paid) 7) a) Current cash value: $ (Enter full amount, including cash value of any additional insurance and/or dividends accumulated at interest, minus policy loans and outstanding interest on policy loans b) Current surrender value: $ c) Is the Cash Value paid to the Beneficiary in addition to the Face Amount? no yes d) Is there collateral assignment against this policy now? no yes If yes, Assignee of record: __________________________ e) What is the length of the contestability period? Current beyond contestability? no yes f) Is this a Group Conversion? no yes If yes, is the contestability period waived? no yes 8) Terms of policy loans: a) Amount of policy loans taken: $ b) Amount of outstanding interest on policy loan: $ c) Current interest rate: 9) Has policy lapsed? no yes a) If yes, when did policy lapse? / / If policy has lapsed, is coverage continued under non-forfeiture option? no yes If yes, indicate which option, amount of coverage, duration, etc.: 10) Is policy in force? no yes a) If yes, has the policy been reinstated within the last two years? no yes If yes, date of reinstatement: / / 11) Amount of contract/scheduled premiums: $ 12) Current premium mode: (Monthly, semi-annually, etc.) a) When is next premium due? / / (Month/Day/Year) 13) Does the policy include a disability premium waiver provision/rider? no yes a) If yes, are premiums currently being waived? no yes b) If yes, since when? / / c) How often is continued eligibility reviewed? d) When is next review? / / 14) Can payment of all or part of the death benefit be accelerated under this policy? no yes a) If yes, by what method is the benefit calculated, the lien method or the discount method? b) If lien method, what is the interest rate? c) Can any remaining death benefit be assigned? no yes (Rule 0780-1-71-Appendix A, continued) 15) Has a claim for accelerated death benefit been submitted? no yes a) If yes, was payment made under this provision? no yes Amount paid: Date paid: 16) Do current records show any assignments of record? no yes 17) Do current records show any outstanding liens or encumbrances or collateral assignments of record? no yes If yes, please give name: ___________________________ 18) Please identify current primary beneficiaries: a) Are they named irrevocably, or is owner otherwise limited in designation of new beneficiaries? no yes 19) Have any riders been added to this policy after issue? no yes If yes, please identify: 20) If an ownership or beneficiary change or assignment were to be made on this policy, to whom would the completed forms be sent for recording? Name: Title: Company Name: Department: Address (No P.O. Box, please) City: State: ZIP: Telephone No: Fax: The answers provided reflect information contained in the company’s records as of: (date) Signature: Name: (Printed) Title: Company: Direct Telephone No: Direct Fax No: APPENDIX B VERIFICATION OF GROUP LIFE INSURANCE BENEFITS Section One: (To be completed by the Life Settlement Provider or Life Settlement Broker Insurance Company Name of Employee/Member Employer/Policyholder Name Insured’s Date of Birth Policy Number Insured’s Social Security Number Certificate Number Employee/Membership Number Please provide the information requested in Section Two or Section Three, as appropriate, with regard to the individual and coverage described, in accordance with the attached authorization. In addition, please provide the forms checked below which are available from your company to complete a life settlement transaction: Absolute Assignment Change of Beneficiary (irrevocable if applicable) Disability Waiver of premium claim or Disability Waiver of premium award letter __ Date Signature of a representative of Life Settlement Broker or Life Settlement Provider Full name and address of Life Settlement Broker or Life Settlement Provider Section Two: (To be completed by the employer/group policyholder and the insurer. Both should indicate the parts they completed.) 1) BASIC COVERAGE: a) Is the plan self-insured or is coverage provided under a group policy issued by a life insurance company? b) Name of plan administrator: ___________________________________________ If by a group policy, please provide the name of the insurance company for BASIC life insurance coverage: c) Effective date of BASIC life insurance coverage: d) Face amount of BASIC life insurance: (Rule 0780-1-71-Appendix B, continued) e) Does the amount of coverage decrease for any reason? no yes If yes, please explain: _______________________________________________ f) Does BASIC coverage plan have contestable provisions? no yes If yes, what is the length of the provision and when does it end: _____________________________________________________________ g) Is BASIC coverage subject to a suicide provision? no yes If yes, what is the length of the provision and when does it end: _____________________________________________________________ h) Monthly premium paid by employer/group policyholder for BASIC life insurance: $ i) Certificate Number: _____________________________________________ j) Monthly premium paid by employee/insured for BASIC life insurance: $ k) Is BASIC life insurance coverage Term Universal Life? i) If Universal Life, please indicate cash value, if any: Is this amount payable in addition to the face amount? no yes l) Is coverage in force? no yes m) Has the policy ever lapsed? no yes If yes, date of lapse //____ n) At the time of the original application, was the insured required to have a medical or non-medical examination, including blood work? no yes o) When is next premium due? p) Has employee’s coverage under this plan ever been reinstated? no yes i) If yes, date of reinstatement: q) Is the employee presently working? no yes If no, is the employee on approved waiver of premium? no yes If no, is the waiver of premium pending? no yes How long will the waiver of premium continue? _______________________ What is the date of the last day worked by the employee? //______ r) If the employee terminates before a period of 3 to 5 years, can the policy be converted to an individual policy? no yes If yes, how much of the total face amount can be converted? $________________ Is the conversion to an individual policy guaranteed without a medical examination or medical questions? no yes 2) SUPPLEMENTAL (OPTIONAL) COVERAGE a) Insurance Company for SUPPLEMENTAL life insurance coverage: b) Effective date of SUPPLEMENTAL life insurance coverage: c) Face amount of SUPPLEMENTAL life insurance: d) Does SUPPLEMENTAL coverage plan have contestable provisions? no yes e) Is SUPPLEMENTAL coverage subject to a suicide provision? no yes f) Monthly premium paid by employer/group policyholder for SUPPLEMENTAL life insurance: $ g) Monthly premium paid by employee/insured for SUPPLEMENTAL life insurance: $ (Rule 0780-1-71-Appendix B, continued) h) Is SUPPLEMENTAL life insurance coverage Term Universal Life? i) If Universal Life, please indicate cash value, if any: Is this amount payable in addition to the face amount? no yes i) Is coverage in force? no yes j) When is next premium due? k) Has employee’s coverage under this policy been reinstated within the last two years? no yes i) If yes, date of reinstatement: 3) DISABILITY WAIVER OF PREMIUM a) Does plan provide for waiver of premium in the event of employee/insured’s disability? BASIC no yes What is the waiting period? ___________ SUPPLEMENTAL no yes What is the waiting period? _____________ b) Are premiums currently being waived under disability premium waiver? BASIC? no yes SUPPLEMENTAL? no yes c) Who pays premiums under disability premium waiver? BASIC Insurance carrier Employer SUPPLEMENTAL Insurance carrier Employer d) What was the date of approval? e) Next review date? f) Does the employer continue to pay the premium while the insured is on the “elimination period”? g) Does the insured have to pay to keep the coverage in force? h) If the insured is no longer eligible for waiver, what amount of coverage can be converted to an individual policy? $ i) Will a new suicide/contestability clause be in effect for the converted policy? no yes ii) Will assignee be notified if insured is no longer eligible for waiver? no yes Does the assignee have the right without the insured’s participation to convert the policy? no yes i) Does the employer continue to pay the premium while the insured is on the “elimination period”? no yes j) Does the insured have to pay to keep the coverage in force? no yes 4) BENEFICIARIES, ASSIGNMENTS AND LIMITATIONS a) Who are the primary beneficiaries of the coverage(s)? BASIC SUPPLEMENTAL: b) Is any beneficiary under this policy designated irrevocably, or is insured otherwise limited in designation of new beneficiaries? no yes c) Can this coverage be assigned? (Rule 0780-1-71-Appendix B, continued) BASIC no yes If yes, to a corporation? no yes To someone not related to insured? no yes SUPPLEMENTAL no yes If yes, to a corporation? no yes To someone not related to insured? no yes d) Can the BASIC and SUPPLEMENTAL policy be assigned for value? no yes e) Do records show any assignments of record? no yes f) Do records show any outstanding liens or encumbrances of record? no yes g) Are there any collateral assignments on the policy? no yes If yes, please provide the name of the assignee: _________________________ h) The following parties (as applicable) should indicate whether they will provide notice to the assignee if the master policy is terminated. Group policyholder no yes Third party administrator (if any) no yes Insurance company no yes i) Can Assignee convert the coverage without the permission of insured? no yes 6) ACCELERATED DEATH BENEFITS a) Is there an Accelerated Death Benefit available under the coverage? BASIC no yes SUPPLEMENTAL no yes b) Has request for Accelerated Death Benefit been made? no yes c) Has payment been made to insured under this provision? no yes i) Amount paid: Date paid: ii) Is this amount a lien against death proceeds? no yes Interest rate iii) Can the remaining death benefit be assigned? no yes 7) MISCELLANEOUS a) Is coverage portable? BASIC no yes SUPPLEMENTAL no yes b) If insured is no longer eligible for coverage under the group, will Assignee be notified? no yes c) If master policy discontinues, what amount can be converted to an individual policy? $________ d) Is this plan administered by a third party? no yes (Rule 0780-1-71-Appendix B, continued) If yes, please provide the name, address and telephone number of administrator: Name: Title Company name: Department: Street Address: (No P.O. Box please) City: State: Zip: Telephone number: ( ) Fax: ( ) If a change of beneficiary form or assignment were to be made for this coverage, to whom should the completed forms be sent? Name: Title Company name: Department: Street Address: (No P.O. Box please) City: State: Zip: Telephone number: ( ) Fax: ( ) 1) How much insurance can be converted if the master contract terminates? $______________ 2) How much insurance can be converted is the insured terminates employment before five years? $_________________ 3) Can the assignee convert the entire settled/ viaticated death benefit if the insured is on DPW and the master contract terminates? no yes 4) Is the insured on short term disability? no yes If yes, when does the insured become eligible for long term disability? 5) Is the insured on long term disability? no yes If yes, can the assignee convert the entire settled/ viaticated death benefit should the insured’s disability cease? 6) What is the insured’s current employment status? _______________ The answers provided reflect information in our files as of (date) Signature: Name: Date: Title: Company: Direct telephone number: ( ) Direct fax number: ( ) Information not provided by the employer may be obtained from the insurance company if different from administrator identified above: Name: Title (Rule 0780-1-71-Appendix B, continued) Company name: Department: Address: City: State: Zip: Telephone number: ( ) Fax: ( ) Section Three: The insurance company or the third party administrator named above is requested to complete the information not provided by the employer in Section Two, above, Items number: The answers provided to the identified questions reflect information in the files of the insurance company as of (date) Signature: Name: Date: Title: Company: Direct telephone number: ( ) Direct fax number: ( )

Chapter 0780-01-72 Privacy of Consumer Information Regulations

Tenn. Comp. R. & Regs. 0780-01-72-.01 AUTHORITY

These rules are promulgated pursuant to the authority granted by 2001 Tenn. Pub. Acts ch. 107, § 1, likely to be codified at Chapter 8 of the Tennessee Insurance Law, Title 56.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.02 PURPOSE AND SCOPE

(1)Purpose. These rules govern the treatment of nonpublic personal information about individuals by all licensees of the Insurance Division of the Department of Commerce and Insurance. These rules:

(a)Require a licensee to provide notice to individuals about its privacy policies and practices;

(b)Describe the conditions under which a licensee may disclose nonpublic personal information about individuals to affiliates and nonaffiliated third parties; and (c)Provide methods for individuals to prevent a licensee from disclosing nonpublic personal information.

(2)Scope. These rules apply to nonpublic personal information about individuals who obtain or are claimants or beneficiaries of products or services primarily for personal, family or household purposes from licensees. These rules do not apply to information about companies or about individuals who obtain products or services for business, commercial or agricultural purposes.

(3)Compliance. A licensee domiciled in this state that is in compliance with these rules in a state that has not enacted laws or rules that meet the requirements of Title V of the Gramm-Leach-Bliley Act (Pub. Law No. 106-102) may nonetheless be deemed to be in compliance with Title V of the Gramm- Leach-Bliley Act in the other state.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.03 RULE OF CONSTRUCTION

The examples provided in these rules and the sample clauses provided in Appendix A of these rules are not exclusive. Compliance with an example or use of a sample clause, to the extent applicable, constitutes compliance with these rules.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.04 DEFINITIONS

As used in these rules, unless the context requires otherwise:

(1)“Affiliate” means a company that controls, is controlled by or is under common control with another company.

(2)(a)“Clear and conspicuous” means that a notice is reasonably understandable and designed to call attention to the nature and significance of the information in the notice.

(b)Examples. 1.Reasonably understandable. A licensee makes its notice reasonably understandable if it:

(i)Presents the information in the notice in clear, concise sentences, paragraphs and sections;

(ii)Uses short explanatory sentences or bullet lists whenever possible;

(iii)Uses definite, concrete, everyday words and active voice whenever possible;

(iv)Avoids multiple negatives;

(v)Avoids legal and highly technical business terminology whenever possible; and (vi)Avoids explanations that are imprecise and readily subject to different interpretations. 2.Designed to call attention. A licensee designs its notice to call attention to the nature and significance of the information in it if the licensee:

(i)Uses a plain-language heading to call attention to the notice;

(ii)Uses a typeface and type size that are easy to read;

(iii)Provides wide margins and ample line spacing;

(iv)Uses boldface or italics for key words; and (v)In a form that combines the licensee’s notice with other information, uses distinctive type size, style, and graphic devices, such as shading or sidebars. 3.Notices on web sites. If a licensee provides a notice on a web page, the licensee designs its notice to call attention to the nature and significance of the information in it if the licensee uses text or visual cues to encourage scrolling down the page if necessary to view the entire notice and ensure that other elements on the web site (such as text, graphics, hyperlinks or sound) do not distract attention from the notice, and the licensee either:

(i)Places the notice on a screen that consumers frequently access, such as a page on which transactions are conducted; or (ii)Places a link on a screen that consumers frequently access, such as a page on which transactions are conducted, that connects directly to the notice and is labeled appropriately to convey the importance, nature and relevance of the notice.

(3)“Collect” means to obtain information that the licensee organizes or can retrieve by the name of an individual or by identifying number, symbol or other identifying particular assigned to the individual, irrespective of the source of the underlying information.

(4)“Commissioner” means the Commissioner of the Department of Commerce and Insurance for the State of Tennessee.

(5)“Company” means a corporation, limited liability company, business trust, general or limited partnership, association, sole proprietorship or similar organization.

(6)(a)“Consumer” means an individual who seeks to obtain, obtains or has obtained an insurance product or service from a licensee that is to be used primarily for personal, family or household purposes, and about whom the licensee has nonpublic personal information, or that individual’s legal representative.

(b)Examples. 1.An individual who provides nonpublic personal information to a licensee in connection with obtaining or seeking to obtain financial, investment or economic advisory services relating to an insurance product or service is a consumer regardless of whether the licensee establishes an ongoing advisory relationship. 2.An applicant for insurance prior to the inception of insurance coverage is a licensee’s consumer. 3.An individual who is a consumer of another financial institution is not a licensee’s consumer solely because the licensee is acting as agent for, or provides processing or other services to, that financial institution. 4.An individual is a licensee’s consumer if:

(i)(I)the individual is a beneficiary of a life insurance policy underwritten by the licensee;

(II)the individual is a claimant under an insurance policy issued by the licensee;

(III)the individual is an insured or an annuitant under an insurance policy or an annuity, respectively, issued by the licensee; or (IV)the individual is a mortgagor of a mortgage covered under a mortgage insurance policy; and (ii)the licensee discloses nonpublic personal information about the individual to a nonaffiliated third party other than as permitted under rules 0780-1-72-.14, 0780- 1-72-.15 and 0780-1-72-.16 of this chapter. 5.Provided that the licensee does not disclose to a nonaffiliated third party nonpublic personal information about such an individual other than as permitted under rules 0780- 1-72-.14, 0780-1-72-.15 and 0780-1-72-.16 of this chapter, an individual is not the consumer of the licensee solely because he or she is:

(i)A participant or a beneficiary of an employee benefit plan that the licensee administers or sponsors or for which the licensee acts as a trustee, insurer or fiduciary;

(ii)Covered under a group or blanket insurance policy or group annuity contract issued by the licensee;

(iii)A beneficiary in a workers’ compensation plan; or, (iv)A claimant under an insurance policy issued by the licensee. 6.(i)The individuals described in Subparagraph 5(i) through (iv) of this paragraph are consumers of a licensee if the licensee does not meet the condition delineated in Subparagraph 5.

(ii)In no event shall the individuals, solely by virtue of the status described in Subparagraph 5(i) through (iv) above, be deemed to be customers for purposes of these rules. 7.An individual is not a licensee’s consumer solely because he or she is a beneficiary of a trust for which the licensee is a trustee. 8.An individual is not a licensee’s consumer solely because he or she has designated the licensee as trustee for a trust.

(7)“Consumer reporting agency” has the same meaning as in Section 603(f) of the federal Fair Credit Reporting Act (15 U.S.C. § 1681a(f)).

(8)“Control” means:

(a)Ownership, control or power to vote twenty-five percent (25%) or more of the outstanding shares of any class of voting security of the company, directly or indirectly, or acting through one or more other persons;

(b)Control in any manner over the election of a majority of the directors, trustees or general partners (or individuals exercising similar functions) of the company; or (c)The power to exercise, directly or indirectly, a controlling influence over the management or policies of the company, as the commissioner determines.

(9)“Customer” means a consumer who has a customer relationship with a licensee.

(10)(a)“Customer relationship” means a continuing relationship between a consumer and a licensee under which the licensee provides one or more insurance products or services to the consumer that are to be used primarily for personal, family or household purposes.

(b)Examples. 1.A consumer has a continuing relationship with a licensee if:

(i)The consumer is a current policyholder of an insurance product issued by or through the licensee; or (ii)The consumer obtains financial, investment or economic advisory services relating to an insurance product or service from the licensee for a fee. 2.A consumer does not have a continuing relationship with a licensee if:

(i)The consumer applies for insurance but does not purchase the insurance;

(ii)The licensee sells the consumer airline travel insurance in an isolated transaction;

(iii)The individual is no longer a current policyholder of an insurance product or no longer obtains insurance services with or through the licensee;

(iv)The consumer is a beneficiary or claimant under a policy and has submitted a claim under a policy choosing a settlement option involving an ongoing relationship with the licensee;

(v)The consumer is a beneficiary or a claimant under a policy and has submitted a claim under that policy choosing a lump sum settlement option;

(vi)The customer’s policy is lapsed, expired or otherwise inactive or dormant under the licensee’s business practices, and the licensee has not communicated with the customer about the relationship for a period of twelve (12) consecutive months, other than annual privacy notices, material required by law or regulation, communication at the direction of a state or federal authority, or promotional materials;

(vii)The individual is an insured or an annuitant under an insurance policy or annuity, respectively, but is not the policyholder or owner of the insurance policy or annuity; or (viii)For the purposes of these rules, the individual’s last known address according to the licensee’s records is deemed invalid. An address of record is deemed invalid if mail sent to that address by the licensee has been returned by the postal authorities as undeliverable and if subsequent attempts by the licensee to obtain a current valid address for the individual have been unsuccessful.

(11)(a)“Financial institution” means any institution the business of which is engaging in activities that are financial in nature or incidental to such financial activities as described in Section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1843(k)).

(b)Financial institution does not include: 1.Any person or entity with respect to any financial activity that is subject to the jurisdiction of the Commodity Futures Trading Commission under the Commodity Exchange Act (7 U.S.C. §§ 1, et seq.); 2.The Federal Agricultural Mortgage Corporation or any entity charged and operating under the Farm Credit Act of 1971 (12 U.S.C. §§ 2001, et seq.); or 3.Institutions chartered by Congress specifically to engage in securitizations, secondary market sales (including sales of servicing rights) or similar transactions related to a transaction of a consumer, as long as the institutions do not sell or transfer nonpublic personal information to a nonaffiliated third party.

(12)(a)“Financial product or service” means a product or service that a financial holding company could offer by engaging in an activity that is financial in nature or incidental to such a financial activity under Section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. § 1843(k)).

(b)Financial service includes a financial institution’s evaluation or brokerage of information that the financial institution collects in connection with a request or an application from a consumer for a financial product or service.

(13)[Reserved]

(14)[Reserved]

(15)[Reserved]

(16)(a)“Insurance product or service” means any product or service that is offered by a licensee pursuant to the insurance laws of this state.

(b)Insurance service includes a licensee's evaluation, brokerage or distribution of information that the licensee collects in connection with a request or an application from a consumer for a insurance product or service.

(17)(a)“Licensee” means all licensed insurers, agents and other persons licensed or required to be licensed, or authorized or required to be authorized, or registered or required to be registered pursuant to the Tennessee Insurance Law, codified at Tennessee Code Annotated, Title 56.

(b)A licensee is not subject to the notice and opt out requirements for nonpublic personal information set forth in Articles I, II, III and IV (rules 0780-1-72-.01 through 0780-1-72-.16) of this chapter if the licensee is an employee, agent or other representative of another licensee (“the principal”) and: 1.The principal otherwise complies with, and provides the notices required by, the provisions of this chapter; and 2.The licensee does not disclose any nonpublic personal information to any person other than the principal or its affiliates in a manner permitted by this chapter.

(c)1.Subject to Subparagraph 2., “licensee” shall also include an unauthorized insurer that accepts business placed through a licensed surplus lines agent in this state, but only in regard to the surplus lines placements placed pursuant to the Surplus Lines Insurance Act, codified at Tennessee Code Annotated, Title 56, Chapter 14. 2.A surplus lines agent or surplus lines insurer shall be deemed to be in compliance with the notice and opt out requirements for nonpublic personal information set forth in Articles I, II, III and IV (rules 0780-1-72-.01 through 0780-1-72-.16) of this chapter provided:

(i)The agent or insurer does not disclose nonpublic personal information of a consumer or a customer to nonaffiliated third parties for any purpose, including joint servicing or marketing under rule 0780-1-72-.14 of this chapter, except as permitted by rules 0780-1-72-.15 or 0780-1-72-.16 of this chapter; and (ii)The agent or insurer delivers a notice to the consumer at the time a customer relationship is established on which the following is printed in 16-point type:

Privacy Notice “Neither the U.S. brokers [or agents] that handled this insurance nor the insurers that have underwritten this insurance will disclose nonpublic personal information concerning the buyer to nonaffiliates of the brokers [or agents] or insurers except as permitted by law.”

(18)(a)“Nonaffiliated third party” means any person except: 1.A licensee’s affiliate; or 2.A person employed jointly by a licensee and any company that is not the licensee’s affiliate (but nonaffiliated third party includes the other company that jointly employs the person).

(b)Nonaffiliated third party includes any company that is an affiliate solely by virtue of the direct or indirect ownership or control of the company by the licensee or its affiliate in conducting merchant banking or investment banking activities of the type described in Section 4(k)(4)(H) of the federal Bank Holding Company Act (12 U.S.C. § 1843(k)(4)(H)) or insurance company investment activities of the type described in Section 4(k)(4)(I) of the federal Bank Holding Company Act (12 U.S.C. § 1843(k)(4)(I)).

(19)(a)“Nonpublic personal information” means: 1.Personally identifiable financial information; and 2.Any list, description or other grouping of consumers (and publicly available information pertaining to them) that is derived using any personally identifiable financial information that is not publicly available.

(b)Nonpublic personal information does not include: 1.[Reserved] 2.Publicly available information, except as included on a list described in Subsection (19)(a)2. of this section; or 3.Any list, description or other grouping of consumers (and publicly available information pertaining to them) that is derived without using any personally identifiable financial information that is not publicly available.

(c)Examples of lists. 1.Nonpublic personal information includes any list of individuals’ names and street addresses that is derived in whole or in part using personally identifiable financial information that is not publicly available, such as account numbers. 2.Nonpublic personal information does not include any list of individuals’ names and addresses that contains only publicly available information, is not derived in whole or in

part using personally identifiable financial information that is not publicly available, and is not disclosed in a manner that indicates that any of the individuals on the list is a consumer of a financial institution.

(20)[Reserved]

(21)[Reserved]

(22)(a)“Personally identifiable financial information” means any information: 1.A consumer provides to a licensee to obtain an insurance product or service from the licensee; 2.About a consumer resulting from a transaction involving an insurance product or service between a licensee and a consumer; or 3.The licensee otherwise obtains about a consumer in connection with providing an insurance product or service to that consumer.

(b)Examples. 1.Information included. Personally identifiable financial information includes:

(i)Information a consumer provides to a licensee on an application to obtain an insurance product or service;

(ii)Account balance information and payment history;

(iii)The fact that an individual is or has been one of the licensee’s customers or has obtained an insurance product or service from the licensee;

(iv)Any information about the licensee’s consumer if it is disclosed in a manner that indicates that the individual is or has been the licensee’s consumer;

(v)Any information that a consumer provides to a licensee or that the licensee or its agent otherwise obtains in connection with collecting on a loan or servicing a loan;

(vi)Any information the licensee collects through an Internet cookie (an informationcollecting device from a web server); and (vii)Information from a consumer report. 2.Information not included. Personally identifiable financial information does not include:

(i)[Reserved]

(ii)A list of names and addresses of customers of an entity that is not a financial institution; and (iii)Information that does not identify a consumer, such as aggregate information or blind data that does not contain personal identifiers such as account numbers, names or addresses.

(23)(a)“Publicly available information” means any information that a licensee has a reasonable basis to believe is lawfully made available to the general public from: 1.Federal, state or local government records; 2.Widely distributed media; or 3.Disclosures to the general public that are required to be made by federal, state or local law.

(b)Reasonable basis. 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: 1.That the information is of the type that is available to the general public; and 2.Whether an individual can direct that the information not be made available to the general public and, if so, that the licensee’s consumer has not done so.

(c)Examples. 1.Government records. Publicly available information in government records includes information in government real estate records and security interest filings. 2.Widely distributed media. Publicly available information from widely distributed media includes information from a telephone book, a television or radio program, a newspaper or a web site that is available to the general public on an unrestricted basis. A web site is not restricted merely because an Internet service provider or a site operator requires a fee or a password, so long as access is available to the general public. 3.Reasonable basis.

(i)A licensee has a reasonable basis to believe that mortgage information is lawfully made available to the general public if the licensee has determined that the information is of the type included on the public record in the jurisdiction where the mortgage would be recorded.

(ii)A licensee has a reasonable basis to believe that an individual’s telephone number is lawfully made available to the general public if the licensee has located the telephone number in the telephone book or the consumer has informed you that the telephone number is not unlisted.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.05 ; 2.The licensee has provided to the consumer an opt out notice as required in Section 0780- 1-72-.08; 3.The licensee has given the consumer a reasonable opportunity, before it discloses the information to the nonaffiliated third party, to opt out of the disclosure; and 4.The consumer does not opt out.

(b)Opt out definition. Opt out means a direction by the consumer that the licensee not disclose nonpublic personal information about that consumer to a nonaffiliated third party, other than as permitted by Sections 0780-1-72-.14, 0780-1-72-.15 and 0780-1-72-.16.

(c)Examples of reasonable opportunity to opt out. A licensee provides a consumer with a reasonable opportunity to opt out if: 1.By mail. The licensee mails the notices required in Paragraph (a) of this subsection to the consumer and allows the consumer to opt out by mailing a form, calling a toll-free telephone number or any other reasonable means within thirty (30) days from the date the licensee mailed the notices. 2.By electronic means. A customer opens an on-line account with a licensee and agrees to receive the notices required in Paragraph (a) of this subsection electronically, and the licensee allows the customer to opt out by any reasonable means within thirty (30) days after the date that the customer acknowledges receipt of the notices in conjunction with opening the account. 3.Isolated transaction with consumer. For an isolated transaction such as providing the consumer with an insurance quote, a licensee provides the consumer with a reasonable opportunity to opt out if the licensee provides the notices required in Paragraph (a) of this subsection at the time of the transaction and requests that the consumer decide, as a necessary part of the transaction, whether to opt out before completing the transaction.

(2)Application of opt out to all consumers and all nonpublic personal information.

(a)A licensee shall comply with this section, regardless of whether the licensee and the consumer have established a customer relationship.

(b)Unless a licensee complies with this section, the licensee may not, directly or through any affiliate, disclose any nonpublic personal information about a consumer that the licensee has collected, regardless of whether the licensee collected it before or after receiving the direction to opt out from the consumer.

(3)Partial opt out. A licensee may allow a consumer to select certain nonpublic personal information or certain nonaffiliated third parties with respect to which the consumer wishes to opt out.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.06 ANNUAL PRIVACY NOTICES TO CUSTOMERS REQUIRED

(1)(a)General rule. A licensee shall provide a clear and conspicuous notice to customers that accurately reflects its privacy policies and practices not less than annually during the continuation of the customer relationship. Annually means at least once in any period of twelve (12) consecutive months during which that relationship exists. A licensee may define the twelve (12) consecutive month period, but the licensee shall apply it to the customer on a consistent basis.

(b)Example. A licensee provides a notice annually if it defines the twelve (12)- consecutive-month period as a calendar year and provides the annual notice to the customer once in each calendar year following the calendar year in which the licensee provided the initial notice. For example, if a customer opens an account on any day of year 1, the licensee shall provide an annual notice to that customer by December 31 of year 2.

(c)A licensee need not provide an annual notice when an annual notice has been provided by an affiliated licensee, so long as the notice clearly identifies all licensees to whom the notice applies and is accurate with respect to the licensee and the other institutions.

(2)(a)Termination of customer relationship. A licensee is not required to provide an annual notice to a former customer. A former customer is an individual with whom a licensee no longer has a continuing relationship.

(b)Examples. 1.A licensee no longer has a continuing relationship with an individual if the individual no longer is a current policyholder of an insurance product or no longer obtains insurance services with or through the licensee. 2.A licensee no longer has a continuing relationship with an individual if the individual’s policy is lapsed, expired or otherwise inactive or dormant under the licensee’s business practices, and the licensee has not communicated with the customer about the relationship for a period of twelve (12) consecutive months, other than to provide annual privacy notices, material required by law or regulation, or promotional materials. 3.For the purposes of these regulations, a licensee no longer has a continuing relationship with an individual if the individual’s last known address according to the licensee’s records is deemed invalid. An address of record is deemed invalid if mail sent to that address by the licensee has been returned by the postal authorities as undeliverable and if subsequent attempts by the licensee to obtain a current valid address for the individual have been unsuccessful. 4.A licensee no longer has a continuing relationship with a customer in the case of providing real estate settlement services, at the time the customer completes execution of all documents related to the real estate closing, payment for those services has been received, or the licensee has completed all of its responsibilities with respect to the settlement, including filing documents on the public record, whichever is later.

(2)Delivery. When a licensee is required by this section to deliver an annual privacy notice, the licensee shall deliver it according to rule 0780-1-72-.10.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.07 INFORMATION TO BE INCLUDED IN PRIVACY NOTICES

(1)General rule. The initial, annual and revised privacy notices that a licensee provides under rules

Tenn. Comp. R. & Regs. 0780-01-72-.08 FORM OF OPT OUT NOTICE TO CONSUMERS AND OPT OUT METHODS

(1)(a)Form of opt out notice. If a licensee is required to provide an opt out notice under Section 0780-1-72-.11(1), it shall provide a clear and conspicuous notice to each of its consumers that accurately explains the right to opt out under that section. The notice shall state: 1.That the licensee discloses or reserves the right to disclose nonpublic personal information about its consumer to a nonaffiliated third party; 2.That the consumer has the right to opt out of that disclosure; and 3.A reasonable means by which the consumer may exercise the opt out right.

(b)Examples. 1.Adequate opt out notice. A licensee provides adequate notice that the consumer can opt out of the disclosure of nonpublic personal information to a nonaffiliated third party if the licensee:

(i)Identifies all of the categories of nonpublic personal information that it discloses or reserves the right to disclose, and all of the categories of nonaffiliated third parties to which the licensee discloses the information, as described in Section 0780-1-72-.07(1)(b) and (c), and states that the consumer can opt out of the disclosure of that information; and (ii)Identifies the insurance products or services that the consumer obtains from the licensee, either singly or jointly, to which the opt out direction would apply. 2.Reasonable opt out means. A licensee provides a reasonable means to exercise an opt out right if it:

(i)Designates check-off boxes in a prominent position on the relevant forms with the opt out notice;

(ii)Includes a reply form together with the opt out notice;

(iii)Provides an electronic means to opt out, such as a form that can be sent via electronic mail or a process at the licensee’s web site, if the consumer agrees to the electronic delivery of information; or (iv)Provides a toll-free telephone number that consumers may call to opt out. 3.Unreasonable opt out means. A licensee does not provide a reasonable means of opting out if:

(i)The only means of opting out is for the consumer to write his or her own letter to exercise that opt out right; or (ii)The only means of opting out as described in any notice subsequent to the initial notice is to use a check-off box that the licensee provided with the initial notice but did not include with the subsequent notice. 4.Specific opt out means. A licensee may require each consumer to opt out through a specific means, as long as that means is reasonable for that consumer.

(2)Same form as initial notice permitted. A licensee may provide the opt out notice together with or on the same written or electronic form as the initial notice the licensee provides in accordance with

Section 0780-1-72-.05.

(3)Initial notice required when opt out notice delivered subsequent to initial notice. If a licensee provides the opt out notice later than required for the initial notice in accordance with Section 0780-1-72-.05, the licensee shall also include a copy of the initial notice with the opt out notice in writing or, if the consumer agrees, electronically.

(4)Joint relationships.

(a)If two (2) or more consumers jointly obtain an insurance product or service from a licensee, the licensee may provide a single opt out notice. The licensee’s opt out notice shall explain how the licensee will treat an opt out direction by a joint consumer (as explained in Paragraph (e) of this subsection).

(b)Any of the joint consumers may exercise the right to opt out. The licensee may either: 1.Treat an opt out direction by a joint consumer as applying to all of the associated joint consumers; or 2.Permit each joint consumer to opt out separately.

(c)If a licensee permits each joint consumer to opt out separately, the licensee shall permit one of the joint consumers to opt out on behalf of all of the joint consumers.

(d)A licensee may not require all joint consumers to opt out before it implements any opt out direction.

(e)Example. If John and Mary are both named policyholders on a homeowner’s insurance policy issued by a licensee and the licensee sends policy statements to John’s address, the licensee may do any of the following, but it shall explain in its opt out notice which opt out policy the licensee will follow: 1.Send a single opt out notice to John’s address, but the licensee shall accept an opt out direction from either John or Mary. 2.Treat an opt out direction by either John or Mary as applying to the entire policy. If the licensee does so and John opts out, the licensee may not require Mary to opt out as well before implementing John’s opt out direction. 3.Permit John and Mary to make different opt out directions. If the licensee does so:

(i)It shall permit John and Mary to opt out for each other;

(ii)If both opt out, the licensee shall permit both of them to notify it in a single response (such as on a form or through a telephone call); and (iii)If John opts out and Mary does not, the licensee may only disclose nonpublic personal information about Mary, but not about John and not about John and Mary jointly.

(5)Time to comply with opt out. A licensee shall comply with a consumer’s opt out direction as soon as reasonably practicable after the licensee receives it.

(6)Continuing right to opt out. A consumer may exercise the right to opt out at any time.

(7)Duration of consumer’s opt out direction.

(a)A consumer’s direction to opt out under this section is effective until the consumer revokes it in writing or, if the consumer agrees, electronically.

(b)When a customer relationship terminates, the customer’s opt out direction continues to apply to the nonpublic personal information that the licensee collected during or related to that relationship. If the individual subsequently establishes a new customer relationship with the licensee, the opt out direction that applied to the former relationship does not apply to the new relationship.

(8)Delivery. When a licensee is required to deliver an opt out notice by this section, the licensee shall deliver it according to Section 0780-1-72-.10.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.09 REVISED PRIVACY NOTICES

(1)General rule. Except as otherwise authorized in these regulations, a licensee shall not, directly or through an affiliate, disclose any nonpublic personal information about a consumer to a nonaffiliated third party other than as described in the initial notice that the licensee provided to that consumer under Section 0780-1-72-.05, unless:

(a)The licensee has provided to the consumer a clear and conspicuous revised notice that accurately describes its policies and practices;

(b)The licensee has provided to the consumer a new opt out notice;

(c)The licensee has given the consumer a reasonable opportunity, before the licensee discloses the information to the nonaffiliated third party, to opt out of the disclosure; and (d)The consumer does not opt out.

(2)Examples.

(a)Except as otherwise permitted by Sections 0780-1-72-.14, 0780-1-72-.15 and 0780-1-72-.16, a licensee shall provide a revised notice before it: 1.Discloses a new category of nonpublic personal information to any nonaffiliated third party; 2.Discloses nonpublic personal information to a new category of nonaffiliated third party; or 3.Discloses nonpublic personal information about a former customer to a nonaffiliated third party, if that former customer has not had the opportunity to exercise an opt out right regarding that disclosure.

(b)A revised notice is not required if the licensee discloses nonpublic personal information to a new nonaffiliated third party that the licensee adequately described in its prior notice.

(3)Delivery. When a licensee is required to deliver a revised privacy notice by this section, the licensee shall deliver it according to Section 0780-1-72-.10.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.10 DELIVERY

(1)How to provide notices. A licensee shall provide any notices that these regulations require so that each consumer can reasonably be expected to receive actual notice in writing or, if the consumer agrees, electronically.

(2)(a)Examples of reasonable expectation of actual notice. A licensee may reasonably expect that a consumer will receive actual notice if the licensee: 1.Hand-delivers a printed copy of the notice to the consumer; 2.Mails a printed copy of the notice to the last known address of the consumer separately, or in a policy, billing or other written communication; 3.For a consumer who conducts transactions electronically, posts the notice on the electronic site and requires the consumer to acknowledge receipt of the notice as a necessary step to obtaining a particular insurance product or service; 4.For an isolated transaction with a consumer, such as the licensee providing an insurance quote or selling the consumer travel insurance, posts the notice and requires the consumer to acknowledge receipt of the notice as a necessary step to obtaining the particular insurance product or service.

(b)Examples of unreasonable expectation of actual notice. A licensee may not, however, reasonably expect that a consumer will receive actual notice of its privacy policies and practices if it: 1.Only posts a sign in its office or generally publishes advertisements of its privacy policies and practices; or 2.Sends the notice via electronic mail to a consumer who does not obtain an insurance product or service from the licensee electronically.

(3)Annual notices only. A licensee may reasonably expect that a customer will receive actual notice of the licensee’s annual privacy notice if:

(a)The customer uses the licensee’s web site to access insurance products and services electronically and agrees to receive notices at the web site and the licensee posts its current privacy notice continuously in a clear and conspicuous manner on the web site; or (b)The customer has requested that the licensee refrain from sending any information regarding the customer relationship, and the licensee’s current privacy notice remains available to the customer upon request.

(4)Oral description of notice insufficient. A licensee may not provide any notice required by these regulations solely by orally explaining the notice, either in person or over the telephone.

(5)Retention or accessibility of notices for customers.

(a)For customers only, a licensee shall provide the initial notice required by Section 0780-1-72- .05(1)(a), the annual notice required by Section 0780-1-72-.06(1), and the revised notice required by Section 0780-1-72-.09 so that the customer can retain them or obtain them later in writing or, if the customer agrees, electronically.

(b)Examples of retention or accessibility. A licensee provides a privacy notice to the customer so that the customer can retain it or obtain it later if the licensee: 1.Hand-delivers a printed copy of the notice to the customer; 2.Mails a printed copy of the notice to the last known address of the customer; or 3.Makes its current privacy notice available on a web site (or a link to another web site) for the customer who obtains an insurance product or service electronically and agrees to receive the notice at the web site.

(6)Joint notice with other financial institutions. A licensee may provide a joint notice from the licensee and one or more of its affiliates or other financial institutions, as identified in the notice, as long as the notice is accurate with respect to the licensee and the other institutions. A licensee also may provide a notice on behalf of another financial institution.

(7)Joint relationships. If two (2) or more consumers jointly obtain an insurance product or service from a licensee, the licensee may satisfy the initial, annual and revised notice requirements of Sections 0780- 1-72-.05(1), 0780-1-72-.06(1) and 0780-1-72-.09(1), respectively, by providing one notice to those consumers jointly.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.11 LIMITS ON DISCLOSURE OF NONPUBLIC PERSONAL INFORMATION TO

NONAFFILIATED THIRD PARTIES.

(1)(a)Conditions for disclosure. Except as otherwise authorized in these regulations, a licensee may not, directly or through any affiliate, disclose any nonpublic personal information about a consumer to a nonaffiliated third party unless: 1.The licensee has provided to the consumer an initial notice as required under Section

Tenn. Comp. R. & Regs. 0780-01-72-.12 LIMITS ON REDISCLOSURE AND REUSE OF NONPUBLIC PERSONAL

INFORMATION.

(1)(a)Information the licensee receives under an exception. If a licensee receives nonpublic personal information from a nonaffiliated financial institution under an exception in Sections 0780-1- 72-.15 or 0780-1-72-.16 of these regulations, the licensee’s disclosure and use of that information is limited as follows: 1.The licensee may disclose the information to the affiliates of the financial institution from which the licensee received the information; 2.The licensee may disclose the information to its affiliates, but the licensee’s affiliates may, in turn, disclose and use the information only to the extent that the licensee may disclose and use the information; and 3.The licensee may disclose and use the information pursuant to an exception in Sections

Tenn. Comp. R. & Regs. 0780-01-72-.13 LIMITS ON SHARING ACCOUNT NUMBER INFORMATION FOR MARKETING

PURPOSES.

(1)General prohibition on disclosure of account numbers. A licensee shall not, directly or through an affiliate, disclose, other than to a consumer reporting agency, a policy number or similar form of access number or access code for a consumer’s policy or transaction account to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing through electronic mail to the consumer.

(2)Exceptions. Subsection (1) of this section does not apply if a licensee discloses a policy number or similar form of access number or access code:

(a)To the licensee’s service provider solely in order to perform marketing for the licensee’s own products or services, as long as the service provider is not authorized to directly initiate charges to the account;

(b)To a licensee who is a producer solely in order to perform marketing for the licensee’s own products or services; or (c)To a participant in an affinity or similar program where the participants in the program are identified to the customer when the customer enters into the program.

(3)Examples.

(a)Policy number. A policy number, or similar form of access number or access code, does not include a number or code in an encrypted form, as long as the licensee does not provide the recipient with a means to decode the number or code.

(b)Policy or transaction account. For the purposes of this section, a policy or transaction account is an account other than a deposit account or a credit card account. A policy or transaction account does not include an account to which third parties cannot initiate charges.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.14 EXCEPTION TO OPT OUT REQUIREMENTS FOR DISCLOSURE OF NONPUBLIC

PERSONAL INFORMATION FOR SERVICE PROVIDERS AND JOINT MARKETING.

(1)General rule.

(a)The opt out requirements in Sections 0780-1-72-.08 and 0780-1-72-.11 do not apply when a licensee provides nonpublic personal information to a nonaffiliated third party to perform services for the licensee or functions on the licensee’s behalf, if the licensee: 1.Provides the initial notice in accordance with Section 0780-1-72-.05; and, 2.Enters into a contractual agreement with the third party that prohibits the third party from disclosing or using the information other than to carry out the purposes for which the licensee disclosed the information, including use under an exception in Sections

Tenn. Comp. R. & Regs. 0780-01-72-.16 OTHER EXCEPTIONS TO NOTICE AND OPT OUT REQUIREMENTS FOR

DISCLOSURE OF NONPUBLIC PERSONAL INFORMATION.

(1)Exceptions to opt out requirements. The requirements for initial notice to consumers in Section 0780- 1-72-.05(a)(b), the opt out in Sections 0780-1-72-.08 and 0780-1-72-.11, and service providers and joint marketing in Section 0780-1-72-.14 do not apply when a licensee discloses nonpublic personal information:

(a)With the consent or at the direction of the consumer, provided that the consumer has not revoked the consent or direction;

(b)1.To protect the confidentiality or security of a licensee’s records pertaining to the consumer, service, product or transaction; 2.To protect against or prevent actual or potential fraud or unauthorized transactions; 3.For required institutional risk control or for resolving consumer disputes or inquiries; 4.To persons holding a legal or beneficial interest relating to the consumer; or 5.To persons acting in a fiduciary or representative capacity on behalf of the consumer;

(c)To provide information to insurance rate advisory organizations, guaranty funds or agencies, agencies that are rating a licensee, persons that are assessing the licensee’s compliance with industry standards, and the licensee’s attorneys, accountants and auditors;

(d)To the extent specifically permitted or required under other provisions of law and in accordance with the federal Right to Financial Privacy Act of 1978 (12 U.S.C. §§ 3401, et seq.), to law enforcement agencies (including the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Office of Thrift Supervision, National Credit Union Administration, the Securities and Exchange Commission, the Secretary of the Treasury, with respect to 31 U.S.C. Chapter 53, Subchapter II (Records and Reports on Monetary Instruments and Transactions) and 12 U.S.C. Chapter 21 (Financial Recordkeeping), a state insurance authority, and the Federal Trade Commission), selfregulatory organizations or for an investigation on a matter related to public safety;

(e)1.To a consumer reporting agency in accordance with the federal Fair Credit Reporting Act (15 U.S.C. §§ 1681, et seq.); or 2.From a consumer report reported by a consumer reporting agency;

(f)In connection with a proposed or actual sale, merger, transfer or exchange of all or a portion of a business or operating unit if the disclosure of nonpublic personal information concerns solely consumers of the business or unit;

(g)1.To comply with federal, state or local laws, rules and other applicable legal requirements; 2.To comply with a properly authorized civil, criminal or regulatory investigation, or subpoena or summons by federal, state or local authorities; or 3.To respond to judicial process or government regulatory authorities having jurisdiction over a licensee for examination, compliance or other purposes as authorized by law; or (h)For purposes related to the replacement of a group benefit plan, a group health plan, a group welfare plan or a workers’ compensation plan.

(2)Example of revocation of consent. A consumer may revoke consent by subsequently exercising the right to opt out of future disclosures of nonpublic personal information as permitted under Section 0780-1-72-.08(6.).

(3)Any and all notice requirements mandated by these regulations shall not be required of those entities placed into liquidation or rehabilitation by the commissioner pursuant to Tennessee Code Annotated, Title 56, Chapter 9.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.15 and 0780-1-72-.16.

Sample Clause A-2, Alternative 1:

We may disclose the following kinds of nonpublic personal information about you:

Information we receive from you on applications or other forms, such as [provide illustrative examples, such as “your name, address, social security number, assets, income, and beneficiaries”];

Information about your transactions with us, our affiliates or others, such as [provide illustrative examples, such as “your policy coverage, premiums, and payment history”]; and Information we receive from a consumer reporting agency, such as [provide illustrative examples, such as “your creditworthiness and credit history”].

Sample Clause A-2, Alternative 2:

We may disclose all of the information that we collect, as described [describe location in the notice, such as “above” or “below”].

A-3–Categories of information a licensee discloses and parties to whom the licensee discloses (institutions that do not disclose outside of the exceptions)

A licensee may use this clause, as applicable, to meet the requirements of Sections 0780-1-72-.07(1)(b), (c), and (d) to describe the categories of nonpublic personal information about customers and former customers that the licensee discloses and the categories of affiliates and nonaffiliated third parties to whom the licensee discloses. A licensee may use this clause if the licensee does not disclose nonpublic personal information to any party, other than as permitted by the exceptions in Sections 0780-1-72-.15 and 0780-1-72-.16.

Sample Clause A-3:

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law.

A-4–Categories of parties to whom a licensee discloses (institutions that disclose outside of the exceptions)

A licensee may use this clause, as applicable, to meet the requirement of Section 0780-1-72-.07(1)(c) to describe the categories of affiliates and nonaffiliated third parties to whom the licensee discloses nonpublic personal information. This clause may be used if the licensee discloses nonpublic personal information other than as permitted by the exceptions in Sections 0780-1-72-.14, 0780-1-72-.15 and 0780-1-72-.16, as well as when permitted by the exceptions in Sections 0780-1-72-.15 and 0780-1-72-.16.

Sample Clause A-4:

We may disclose nonpublic personal information about you to the following types of third parties:

(Rule 0780-1-72-Appendix A, continued)

Financial service providers, such as [provide illustrative examples, such as “life insurers, automobile insurers, mortgage bankers, securities broker-dealers, and insurance agents”];

Non-financial companies, such as [provide illustrative examples, such as “retailers, direct marketers, airlines, and publishers”]; and Others, such as [provide illustrative examples, such as “non-profit organizations”].

We may also disclose nonpublic personal information about you to nonaffiliated third parties as permitted by law.

A-5–Service provider/joint marketing exception A licensee may use one of these clauses, as applicable, to meet the requirements of Section 0780-1-72-.07(1)(e) related to the exception for service providers and joint marketers in Section 0780-1-72-.14. If a licensee discloses nonpublic personal information under this exception, the licensee shall describe the categories of nonpublic personal information the licensee discloses and the categories of third parties with which the licensee has contracted.

Sample Clause A-5, Alternative 1:

We may disclose the following information to companies that perform marketing services on our behalf or to other financial institutions with which we have joint marketing agreements:

Information we receive from you on applications or other forms, such as [provide illustrative examples, such as “your name, address, social security number, assets, income, and beneficiaries”];

Information about your transactions with us, our affiliates or others, such as [provide illustrative examples, such as “your policy coverage, premium, and payment history”]; and Information we receive from a consumer reporting agency, such as [provide illustrative examples, such as “your creditworthiness and credit history”].

Sample Clause A-5, Alternative 2:

We may disclose all of the information we collect, as described [describe location in the notice, such as “above” or “below”] to companies that perform marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements.

A-6–Explanation of opt out right (institutions that disclose outside of the exceptions)

A licensee may use this clause, as applicable, to meet the requirement of Section 0780-1-72-.07(1)(f) to provide an explanation of the consumer’s right to opt out of the disclosure of nonpublic personal information to nonaffiliated third parties, including the method(s) by which the consumer may exercise that right. The licensee may use this clause if the licensee discloses nonpublic personal information other than as permitted by the exceptions in Sections 0780-1-72-.14, 0780-1-72-.15 and 0780-1-72-.16.

Sample Clause A-6:

If you prefer that we not disclose nonpublic personal information about you to nonaffiliated third parties, you may opt out of those disclosures, that is, you may direct us not to make those disclosures (other than disclosures permitted by law). If you wish to opt out of disclosures to nonaffiliated third parties, you may [describe a reasonable means of opting out, such as “call the following toll-free number: (insert number)].

A-7–Confidentiality and security (all institutions)

(Rule 0780-1-72-Appendix A, continued)

A licensee may use this clause, as applicable, to meet the requirement of Section 0780-1-72-.07(1)(h) to describe its policies and practices with respect to protecting the confidentiality and security of nonpublic personal information.

Sample Clause A-7:

We restrict access to nonpublic personal information about you to [provide an appropriate description, such as “those employees who need to know that information to provide products or services to you”]. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your nonpublic personal information.

Tenn. Comp. R. & Regs. 0780-01-72-.17 [RESERVED]

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.18 [RESERVED]

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.19 [RESERVED]

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.20 [RESERVED]

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.21 [RESERVED]

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.22 PROTECTION OF FAIR CREDIT REPORTING ACT

Nothing in these regulations shall be construed to modify, limit or supersede the operation of the federal Fair Credit Reporting Act (15 U.S.C. §§ 1681, et seq.), and no inference shall be drawn on the basis of the provisions of these regulations regarding whether information is transaction or experience information under Section 603 of that Act.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.23 NONDISCRIMINATION

A licensee shall not unfairly discriminate against any consumer or customer because that consumer or customer has opted out from the disclosure of his or her nonpublic personal information pursuant to the provisions of these regulations. Nothing in this section shall prohibit licensees from engaging in their appropriate or acceptable methods for insurance underwriting.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.24 VIOLATION

Any violation of this rule shall subject the violator to the penalties delineated and/or referenced in 2001 Tenn. Pub.

Acts ch. 107.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.25 SEVERABILITY

If any section or portion of a section of these regulations or its applicability to any person or circumstance is held invalid by a court, the remainder of the regulation or the applicability of the provision to other persons or circumstances shall not be affected.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001.

Tenn. Comp. R. & Regs. 0780-01-72-.26 EFFECTIVE DATE

(1)Effective date. These regulations impose substantially and materially the same requirements as Public Necessity Rules that became effective July 1, 2001. These regulations are intended to make permanent the requirements of the Public Necessity Rules. These regulations are intended to become effective on or after November 19, 2001.

(2)(a)Notice requirement for consumers who are the licensee’s customers on the compliance date. By July 1, 2001, a licensee shall provide an initial notice, as required by Section 0780-1-72-.05, to consumers who are the licensee’s customers on July 1, 2001.

(b)Example. A licensee provides an initial notice to consumers who are its customers on July 1, 2001, if, by that date, the licensee has established a system for providing an initial notice to all new customers and has mailed the initial notice to all the licensee’s existing customers.

(3)Two-year grandfathering of service agreements. Until July 1, 2002, a contract that a licensee has entered into with a nonaffiliated third party to perform services for the licensee or functions on the licensee’s behalf satisfies the provisions of Section 0780-1-72-.14(1)(a)2. of these regulations, even if the contract does not include a requirement that the third party maintain the confidentiality of nonpublic personal information, as long as the licensee entered into the agreement on or before July 1, 2000.

History

• Authority: Public Acts of 2001; Chapter 107; §1.
• Administrative History: Original rule filed August 30, 2001; effective November 13, 2001. Appendix A – Sample Clauses Licensees, including a group of financial holding company affiliates that use a common privacy notice, may use the following sample clauses, if the clause is accurate for each institution that uses the notice. (Note that disclosure of certain information, such as assets, income and information from a consumer reporting agency, may give rise to obligations under the federal Fair Credit Reporting Act, such as a requirement to permit a consumer to opt out of disclosures to affiliates or designation as a consumer reporting agency if disclosures are made to nonaffiliated third parties.) A-1–Categories of information a licensee collects (all institutions) A licensee may use this clause, as applicable, to meet the requirement of Section 0780-1-72-.07(1)(a) to describe the categories of nonpublic personal information the licensee collects. Sample Clause A-1: We collect nonpublic personal information about you from the following sources: (Rule 0780-1-72-Appendix A, continued) Information we receive from you on applications or other forms; Information about your transactions with us, our affiliates or others; and Information we receive from a consumer reporting agency. A-2–Categories of information a licensee discloses (institutions that disclose outside of the exceptions) A licensee may use one of these clauses, as applicable, to meet the requirement of Section 0780-1-72-.07(1)(b) to describe the categories of nonpublic personal information the licensee discloses. The licensee may use these clauses if it discloses nonpublic personal information other than as permitted by the exceptions in Sections 0780-1-72-.14,

Chapter 0780-01-73 Repealed

Tenn. Comp. R. & Regs. 0780-01-73-.01 REPEALED

History

• Authority: T.C.A. §§ 56-32-118; 56-32-218(a); and Public Acts of 2001, Chapter 209, § 1.
• Administrative History: Original rule filed April 4, 2002; effective June 18, 2002. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-73-.06 REPEALED

History

• Authority: T.C.A. §§ 56-32-118; 56-32-218(a); 71-5-191; and Public Acts of 2001, Chapter 209, § 1.
• Administrative History: Original rule filed April 4, 2002; effective June 18, 2002. Amendment filed October 24, 2002; effective January 7, 2003. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-73-.02 REPEALED

History

• Authority: T.C.A. §§ 56-32-118; 56-32-218(a); and Public Acts of 2001, Chapter 209, § 1.
• Administrative History: Original rule filed April 4, 2002; effective June 18, 2002. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-73-.03 REPEALED

History

• Authority: T.C.A. §§ 56-32-118; 56-32-218(a); 71-5-191; and Public Acts of 2001, Chapter 209, § 1.
• Administrative History: Original rule filed April 4, 2002; effective June 18, 2002. Amendment filed October 24, 2002; effective January 7, 2003. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-73-.04 REPEALED

History

• Authority: T.C.A. §§ 56-32-118; 56-32-218(a); 71-5-191; and Public Acts of 2001, Chapter 209, § 1.
• Administrative History: Original rule filed April 4, 2002; effective June 18, 2002. Amendment filed October 24, 2002; effective January 7, 2003. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-73-.05 REPEALED

History

• Authority: T.C.A. §§ 56-32-118; 56-32-218(a); and Public Acts of 2001, Chapter 209, § 1.
• Administrative History: Original rule filed April 4, 2002; effective June 18, 2002. Repeal filed September 23, 2024; effective December 22, 2024.

Chapter 0780-01-74 Repealed

Tenn. Comp. R. & Regs. 0780-01-74-.01 REPEALED

History

• Authority: T.C.A. §§56-6-106, 56-6-124, and 56-35-201.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 14, 2004; effective June 28, 2004. New rule filed April 14, 2004; effective June 28, 2004. Repeal filed October 18, 2007; effective January 1, 2008.

Tenn. Comp. R. & Regs. 0780-01-74-.02 REPEALED

History

• Authority: T.C.A. §§56-6-105 through 56-6-106 and 56-6-124.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 14, 2004; effective June 28, 2004. New rule filed April 14, 2004; effective June 28, 2004. Repeal filed October 18, 2007; effective January 1, 2008.

Tenn. Comp. R. & Regs. 0780-01-74-.03 REPEALED

History

• Authority: T.C.A. §§56-6-124 and 56-32-214.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 14, 2004; effective June 28, 2004. New rule filed April 14, 2004; effective June 28, 2004. Repeal filed October 18, 2007; effective January 1, 2008.

Chapter 0780-01-75 Reserved

Tenn. Comp. R. & Regs. 0780-01-75 Reserved

RULES

OF TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE

INSURANCE DIVISION

Chapter 0780-01-76 Self-Insurance Associations and Non-Profit Business Coalitions for Health

Tenn. Comp. R. & Regs. 0780-01-76-.01 PURPOSE AND SCOPE

The purpose of this Chapter is to regulate the offering of health benefits by employers of the same trade or professional association and non-profit business coalitions for health that choose to self-insure. The provisions of this Chapter shall apply to self-insured qualified multiple employer welfare arrangements that are established or maintained in the State of Tennessee.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.02 DEFINITIONS

(1) “Allowable Benefit” means a benefit to provide medical, surgical, or hospital care or benefits.

(2) “Claims Liability” means the total of all incurred claims for allowable benefits under a self-funded qualified multiple employer welfare arrangement that is not reimbursed or reimbursable by stop-loss insurance, subrogation, or other sources.

(3) “Commissioner” means the Commissioner of Commerce and Insurance.

(4) “Health Benefit Plan” or “Plan” means a policy, contract, certificate or agreement offered by a multiple employer welfare arrangement for or to reimburse any of the costs of health care services. “Health benefit plan” includes accident only, credit health, dental, vision, Medicare supplement, or long-term care coverage issued as a supplement to liability insurance; automobile medical payment insurance; short-term and catastrophic health insurance policies; and a policy that pays on a cost-incurred basis.

“Health benefit plan” does not include worker’s compensation or similar insurance.

(5) “Multiple Employer Welfare Arrangement” has the meaning given in 29 U.S.C. 1002(40)(a).

(6) “Person” means any natural or artificial person including, but not limited to, an individual, partnership, association, trust, or corporation.

(7) “Qualified Actuary” means an individual who;

(a) Is a member in good standing of the American Academy of Actuaries;

(b) Is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements;

(c) Is familiar with the valuation requirements applicable to life and health insurance companies; and (d) Has not been found by the Commissioner (or if so found has subsequently been reinstated as a qualified actuary), following appropriate notice and hearing to have:

1. Violated any provision of, or any obligation imposed by, the Insurance Law or other law in the course of his or her dealings as a qualified actuary; or 2. Been found guilty of fraudulent or dishonest practices; or 3. Demonstrated his or her incompetence, lack of cooperation, or untrustworthiness to act as a qualified actuary; or 4. Submitted to the Commissioner during the past five (5) years an actuarial opinion or memorandum that the Commissioner rejected because it did not meet the provision of this chapter including standards set by the Actuarial Standards Board; or 5. Resigned or been removed as an actuary within the past five (5) years as a result of failure to adhere to generally acceptable actuarial standards; and (8) “Qualified Multiple Employer Welfare Arrangement” is a multiple employer welfare arrangement that also meets the conditions of either subparagraph (a) or (b) below:

(a) Consists of ten (10) or more employers of the same trade or professional association provided that the association:

1. Has been actively in existence for at least five (5) years;

2. Has been formed and maintained in good faith for purposes other than obtaining insurance;

3. Does not condition membership in the association on any health status-related factor relating to an individual (including an employee of an employer or a dependent of an employee); and 4. Does not make health insurance coverage offered through the association available other than in connection with a member of the association; or (b) Consists of ten (10) or more employers of the same non-profit business coalition for health provided that the coalition:

4. Has been actively in existence for at least five (5) years;

5. Has been formed and maintained in good faith for purposes other than obtaining insurance;

6. Does not condition membership in the coalition on any health status-related factor relating to an individual (including an employee of an employer or a dependent of an employee); and 4. Does not make health insurance coverage offered through the coalition available other than in connection with a member of the coalition.

(9) “Self-funded Qualified Multiple Employer Welfare Arrangement” or “Arrangement” means a qualified multiple employer welfare arrangement that does not provide for payment of benefits solely through a policy of insurance issued by one or more authorized insurance companies.

(10) “Surplus” means the excess of assets of a self-funded qualified multiple employer welfare arrangement minus the liabilities of the arrangement.

(11) “Tennessee Insurance Law” means Tenn. Code Ann. §§56-1-101, et seq., as well as any rules promulgated thereunder.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.03 CERTIFICATE OF AUTHORITY REQUIRED

(1) A person may not establish or maintain a self-funded qualified multiple employer welfare arrangement in this State without a certificate of authority issued to the arrangement by the Commissioner.

(2) A self-funded qualified multiple employer welfare arrangement is deemed established or maintained in this State if:

(a) One (1) or more of the employer members participating in the arrangement is domiciled or maintains its principal place of business in this State;

(b) The arrangement solicits an employer that is domiciled in this state or has its principal headquarters or principal administrative offices in this state; or (c) The arrangement is principally located in this state.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.04 AUTHORITY TO ACT AS A SELF-FUNDED QUALIFIED MULTIPLE EMPLOYER

WELFARE ARRANGEMENT.

(1) The Commissioner may not issue a certificate of authority to a self-funded qualified multiple employer welfare arrangement unless the arrangement establishes to the satisfaction of the Commissioner that:

(a) Employers participating in the arrangement are members of either the same trade or professional association or a non-profit coalition for health;

(b) Employers or employees participating in the arrangement exercise direct control over the arrangement;

1. Direct control exists if the employer or employees participating in the arrangement have the right to elect at least seventy-five percent (75%) of the individuals designated in the arrangement’s organizational documents as having control over the operations of the arrangement and the individuals designated in the arrangement’s organizational documents in fact exercise control over the operation of the arrangement;

2. Use of a third-party administrator to process claims and to assist in the administration of the arrangement is not evidence of the lack of exercise of control over the operations of the arrangement;

(c) The arrangement provides only allowable benefits;

(d) The arrangement has adequate facilities and competent personnel, as determined by the Commissioner, to service the health benefit plan or has contracted with an administrator licensed or exempt for licensure under Title 56, Chapter 6, Part 4 to service the health benefit plan;

(e) The arrangement does not solicit participation in the arrangement from the general public, except the arrangement may employ or independently contract with a licensed insurance producer who may be paid a commission or other remuneration to enroll employers in the arrangement;

(f) The arrangement is not organized or maintained solely as a conduit for the collection of premiums and the forwarding of premiums to an insurance company;

(g) The arrangement has deposited with the Commissioner a bond in an amount to be determined by the Commissioner, to be used for the payment of claims in the event the arrangement becomes insolvent and has submitted to the Commissioner a written plan of operation that, in the discretion of the Commissioner, ensures the financial integrity of the arrangement;

(h) The arrangement is not in a hazardous financial condition;

1. In determining whether an arrangement is in a hazardous financial condition, the Commissioner may consider the following:

(i) The financial statements of the arrangement or any employer participating in the arrangement;

(ii) Types and levels of stop-loss insurance coverage, including attachment points of the coverage;

(iii) Whether a deposit is required for each employee covered under the arrangement equal to at least one month’s cost of providing benefits under the arrangement;

(iv) The experience of the individuals who will be involved in the management of the arrangement, including employees, independent contractors, and consultants; and (v) Other factors the Commissioner considers relevant to determining whether the arrangement is in a hazardous financial condition, including, but not limited to, those standards enumerated in Rule 0780-1-66-.03.

(2) The Commissioner may require that the articles, bylaws, agreements, trusts, or other documents or instruments describing the rights and obligations of the employers, employees, and beneficiaries of the arrangement require that employers participating in the arrangement are liable for a pro rata share of all liabilities of the arrangement that are unpaid.

(3) The arrangement shall maintain both specific and aggregate stop-loss insurance coverage covering one hundred percent (100%) of claims in excess of the attachment points recommended by a qualified actuary.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.05 APPLICATION FOR A CERTIFICATE OF AUTHORITY

(1) To apply for a certificate of authority, an arrangement shall file with the Commissioner an application on a form adopted by the Commissioner, accompanied by a fee as set under Tenn. Code Ann. §56-4- 101(a)(1), showing its name, the location of its home office, its date of organization, its state of domicile, and additional information that the Commissioner may reasonably require in order to determine an arrangement’s qualifications to obtain a certificate of authority hereunder.

(2) The application shall be submitted together with:

(a) A copy of all articles, bylaws, agreements, trusts, or other documents or instruments describing the rights and obligations of the employers, employees, and beneficiaries of the arrangement;

(b) A copy of each summary plan description of the arrangement filed or required to be filed with the United States Department of Labor, including any amendments to each description;

(c) Evidence of coverage of or letter of intent to participate executed by at least ten (10) employers providing allowable benefits;

(d) Financial statements for the preceding five (5) fiscal years or for such lesser period as such applicant shall have been in existence, and similar information covering the period from the end of such person’s last fiscal year, if the information is available.

1. The financial statements of the applicant shall be accompanied by the certificate of an independent public accountant to the effect that such statements present fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual.

(e) Proof that the arrangement maintains and will continue to maintain fidelity bonds required by the United States Department of Labor under 29 U.S.C. 1001-1461 (Employee Retirement Income Security Act of 1974);

(f) A copy of any stop-loss insurance policies maintained or proposed to be maintained by the arrangement;

(g) Biographical reports, on forms prescribed by the National Association of Insurance Commissioners, evidencing the general trustworthiness and competence of each individual who is serving or who will serve as a managing employee or fiduciary of the arrangement;

(h) A notarized statement executed by an officer of the arrangement certifying, to the best knowledge and belief of the officer, that the information provided in the application is true and correct and that the arrangement is in compliance with the requirements in 1. 29 U.S.C. 1001-1461 (Employee Retirement Income Security Act of 1974) or a statement of any requirements with which the arrangement is not in compliance and a statement of proposed corrective action; and 2. Rule 0780-1-76-.06.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.06 MINIMUM SURPLUS

A self-funded qualified multiple employer welfare arrangement shall establish and maintain surplus equal to the greater of the following:

(1) Thirty percent (30%) of the unpaid claims liability of the arrangement; or (2) The amount recommended and certified by a qualified actuary.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.07 INVESTMENTS

A self-funded qualified multiple employer welfare arrangement shall maintain an amount at least equal to eightyfive percent (85%) of its net admitted assets on a statutory basis in the following:

(1) Cash and cash equivalents;

(2) The fully insured portion of a bank deposit when the insurance is provided by a solvent agency of the United States government or by collateral;

(3) A certificate of deposit issued by a bank or other financial institution whose deposits qualify for Federal Deposit Insurance Corporation protection; provided, if the Commissioner determines that the amount of the certificate of deposit purchased by an insurer in any one bank is not a sound investment, the Commissioner may require the insurer to liquidate that portion found to be an unsound investment;

(4) A share of savings account of a savings and loan or building and loan association, to the extent that an account is insured by the Federal Deposit Insurance Corporation; or (5) A rated credit instrument that is issued, assumed, guaranteed, or insured by the United States or Canada or by a government-sponsored enterprise of the United States or Canada if the instrument is assumed, guaranteed, or insured by the United States or Canada or is otherwise backed or supported by the full faith and credit of the United States or Canada.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.08 CONTRIBUTION RATES

(1) A self-funded qualified multiple employer welfare arrangement shall establish and maintain contribution rates that fund the greater of:

(a) The amount recommended and certified by a qualified actuary in order for the self-funded qualified multiple employer welfare arrangement to remain financially solvent; or (b) The sum of projected claims liability for the year, plus all projected costs of operation of the arrangement for the year, plus an amount equal to any deficiency in the surplus of the arrangement for all prior years, minus an amount equal to the surplus of the arrangement in excess of the minimum required level of surplus.

(2) A self-funded qualified multiple employer welfare arrangement shall establish and maintain contribution rates that are not excessive, inadequate, or unfairly discriminatory.

(3) A self-funded qualified multiple employer welfare arrangement shall, before use, file with the Commissioner:

(a) A rate or fee of any kind to be charged a participating employer or employee;

(b) Every rating manual, schedule, plan, rule, or formula; and (c) Any modification to the rating manual, schedule, plan, rule or formula.

(4) The Commissioner shall disapprove a contribution rate or fee submitted under paragraph (3) of this

rule that does not meet the requirements of paragraphs (1) and (2) of this section or is in any respect not in compliance with or in violation of law.

(5) A filing under paragraph (3) of this rule must state the effective date and must provide a comprehensive description of the coverage.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.09 REPORTING REQUIREMENTS

(1) A self-funded qualified multiple employer welfare arrangement shall file with the Commissioner on or before June 1 of each year on the National Association of Insurance Commissioner’s annual health blank, a full and true statement of its financial condition, transactions, and affairs as of the preceding December 31, including:

(a) A statement of financial condition accompanied by the certificate of an independent public accountant to the effect that such statement presents fairly the financial position of the applicant and the results of its operations for the year then ended, in conformity with statutory accounting procedures.

(b) A statement of change in financial condition for the year accompanied by an actuarial opinion by a qualified actuary that includes:

1. A certification that the unpaid claim liability of the arrangement meets the requirements of Chapter 0780-1-69.

2. The recommended level of specific and aggregate stop-loss insurance the arrangement should maintain; and 3. A description of the actuarial soundness of the arrangement, including any recommended actions the arrangement should take to improve its actuarial soundness;

(c) A statement of the arrangement’s contribution rates for the next year;

(d) A report showing the number of participating employers and number of covered lives at the end of the year and contributions received during the year in the state;

(e) Any information required by statute or rule relating to the arrangement’s compliance with the requirements in Tenn. Code Ann. §56-7-109; and (f) Additional information the Commissioner determines is necessary in order to determine the financial integrity of the arrangement.

(2) A self-funded qualified multiple employer welfare arrangement shall, within sixty (60) days after the end of each quarter, file with the Commissioner, on the National Association of Insurance Commissioner’s quarterly health blank, a full and true statement of its financial condition, transactions, and affairs as of the preceding quarter, including (a) A statement of financial condition;

(b) A statement of change in financial condition for the period since the end of the prior year;

(c) A report showing the number of participating employers and number of covered lives at the end of the quarter and contributions received during the quarter in the state, and (d) Additional information the Commissioner determines is necessary in order to determine the financial integrity of the arrangement.

(3) A self-funded qualified multiple employer welfare arrangement shall file with the Commissioner a copy of the arrangement’s Internal Revenue Service Form 5500, including all attachments to the form.

(4) A self-funded qualified multiple employer welfare arrangement shall, before execution, file with the Commissioner a copy of any stop-loss or excess policies or agreements maintained or proposed to be maintained by the arrangement. The arrangement shall verify with the Commissioner that all such policies or agreements have been filed and approved by the Commissioner.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.10 CONSUMER INFORMATION NOTICE

A self-funded qualified multiple employer welfare arrangement must provide a written notice to each participating employee at the time that coverage becomes effective. The notice must state the following in a clear and conspicuous manner, and in at least ten (10) point type:

(1) The health coverage is issued by a self-funded qualified multiple employer welfare arrangement;

(2) Coverage and benefits provided under a self-funded qualified multiple employer welfare arrangement are not protected by the Tennessee Life and Health Insurance Guaranty Association; and (3) If the self-funded qualified multiple employer welfare arrangement does not pay expenses that are eligible for payment under the plan for any reason, the employer or employee covered by the plan will be responsible for the payment of those expenses.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.11 EXAMINATIONS AND INVESTIGATIONS

(1) The Commissioner has the authority to examine the affairs of any self-funded qualified multiple employer welfare arrangement that has applied for or received a certificate of authority under this

Chapter in order to determine the financial condition of the arrangement or to determine whether the arrangement is in compliance with all insurance laws applicable to it. Such examinations shall be conducted at least once every five (5) years, and all expenses of such examinations shall be assessed against the arrangement.

(2) The Commissioner has the authority to investigate the affairs of any person acting as a multiple employer welfare arrangement, or any person associated or affiliated with a multiple employer welfare arrangement, that offers or proposes to offer health benefits in this State in order to determine whether such person is in violation of the Tennessee Insurance Law or this Chapter.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.12 LICENSING OF AGENTS

(1) Any person soliciting membership in a self-funded qualified multiple employer welfare arrangement must be licensed by the Commissioner as an insurance producer in the line of accident and health insurance in order to do so.

(2) No person shall solicit membership in a self-funded qualified multiple employer welfare arrangement unless the arrangement has obtained a certificate of authority from the Commissioner pursuant to the terms of this Chapter.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.13 TAXES

The tax imposed on a self-funded qualified multiple employer welfare arrangement shall be the same amount imposed upon accident and health insurers under Tenn. Code Ann. §56-4-205.

History

• Authority: T.C.A. §56-26-204(b) and (c).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.14 MISREPRESENTATION PROHIBITED

No person shall make a material misrepresentation or omit to state a material fact in connection with the offering of health benefits by a self-funded qualified multiple employer welfare arrangement to members of a trade or professional association, or of a non-profit business coalition for health.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.15 PROHIBITED USE OF CERTAIN NAMES

A self-funded qualified multiple employer welfare arrangement may not use a name that includes the words “insurance,” “casualty,” “surety,” “health and accident,” “mutual,” or other terms descriptive of an insurer or insurance business. A self-funded qualified multiple employer welfare arrangement may not have or use a name that is the same as or so similar to that of another self-funded qualified multiple employer welfare arrangement or insurer that the name is likely to mislead the public.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.16 APPLICABILITY OF OTHER PROVISIONS

(1) In addition to the provisions contained or referred to in this chapter, the following chapters and provisions of Tenn. Code Ann. Title 56 also apply with respect to self-funded qualified multiple employer welfare arrangements to the extent applicable:

(a) Tenn. Code Ann. Title 56, Chapter 7 to the extent the sections contained therein apply to health and accident insurers; and (b) Tenn. Code Ann. Title 56, Chapter 26, Part 1.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.17 EXEMPTIONS

An arrangement that is licensed by the Commissioner as a staff leasing company and has received approval from the Commissioner of its plan for self-insuring health benefits pursuant to the provisions of Tenn. Code Ann. §62-43- 113(d) and the guidelines established thereunder shall be exempt from the requirements of this Chapter.

History

• Authority: T.C.A. §§56-26-204(b), 62-43-104(a), and 62-43-113(d).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.18 CEASE AND DESIST ORDERS

(1) Except as otherwise provided in paragraph (2) of this rule, after notice and opportunity for a hearing, the Commissioner may issue an order requiring a self-funded qualified multiple employer welfare arrangement to cease and desist from engaging in any act or practice found to be in violation of any applicable statute or provision under the Tennessee Insurance Law, this Chapter, or any order of the Commissioner.

(2) Whenever the Commissioner determines that a self-funded qualified multiple employer welfare arrangement has been established or maintained in this State in violation of Rule 0780-1-76-.03, the Commissioner may issue a cease and desist order ex parte and without prior notice being given to the arrangement; provided, however, that the Commissioner shall provide the arrangement notice and the opportunity for hearing to challenge the issuance of the cease and desist order.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.19 PENALTIES

(1) After notice and an opportunity for a hearing, the Commissioner may revoke or suspend a self-funded qualified multiple employer welfare arrangement’s certificate of authority upon a finding that any of the following exists:

(a) The arrangement is in a hazardous financial condition;

(b) The arrangement fails to pay any premium tax, regulatory fee or assessment, or special fund contribution imposed upon the arrangement at the time when such obligations are owed;

(c) The arrangement fails to cooperate in any examination or investigation initiated by the Commissioner pursuant to Rule 0780-1-76-.11.

(d) The arrangement fails to comply with any of the provisions of this rule, or with any lawful order of the Commissioner, including those issued pursuant to Rule 0780-1-76-.18, within the time prescribed;

(e) The arrangement fraudulently obtained its certificate of authority;

(f) The arrangement made a misrepresentation in the application for the certificate of authority; or (g) The arrangement has misappropriated, converted, illegally withheld, or refused to pay over upon proper demand any monies that belong to a member, an employee of a member, or a person otherwise in its fiduciary capacities.

(2) With respect to any arrangement licensed or required to be licensed under this Chapter, and in addition to or in lieu of any action taken in Rule 0780-1-76-.18 or paragraph (1) of this rule, the Commissioner may assess a civil penalty against such arrangement in an amount not less than one thousand dollars ($1,000) nor more than five thousand dollars ($5,000) for each separate violation of a statute or rule applicable to the arrangement. Each day of continued violation constitutes a separate violation.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Tenn. Comp. R. & Regs. 0780-01-76-.20 APPLICABILITY OF THE INSURERS REHABILITATION AND LIQUIDATION ACT

The proceedings authorized by Title 56, Chapter 9 may be applied to self-funded qualified multiple employer welfare arrangements. A self-funded qualified multiple employer welfare arrangement established or maintained in this State shall be included in the definition of the term “insurer” found in Tenn. Code Ann. §56-9-103(12) for all such purposes.

History

• Authority: T.C.A. §56-26-204(b).
• Administrative History: Original rule filed April 14, 2004; effective June 28, 2004.

Chapter 0780-01-77 Interpretive Opinions

Tenn. Comp. R. & Regs. 0780-01-77-.01 INTERPRETIVE OPINIONS

(1) In case of any question concerning insurance law administered by the Commissioner of Commerce and Insurance, the Insurance Division staff may, in its sole discretion, consider a request for an interpretive opinion. If issued, an interpretive opinion only expresses the current position of the Division staff with respect to enforcement, and is not binding on the Commissioner or third parties.

(2) The Insurance Division will maintain an index chronologically and by statutory section of all written interpretive opinions issued. Copies of such letters may be reviewed in the Division’s office and copies thereof obtained upon payment of reasonable costs of duplication.

History

• Authority: T.C.A. §§56-2-301 and 56-4-101.
• Administrative History: Original rule filed August 17, 2004; effective October 31, 2004.

Chapter 0780-01-78 Tennessee County Mutual Insurance Company Act

Tenn. Comp. R. & Regs. 0780-01-78-.01 PURPOSE AND SCOPE

The following rules developed by the Department of Commerce and Insurance concern the implementation of the Tennessee Mutual County Insurance Company Act of 2006 (the “Act”) located at T.C.A. § 56-22-101, et seq. The purpose of these rules is to set forth the requirements and standards that the commissioner will utilize in the regulation of county mutual insurance companies.

History

• Authority: T.C.A. §§ 56-22-101, et seq., and 56-22-120.
• Administrative History: Original rule filed October 19, 2007; effective January 2, 2008.

Tenn. Comp. R. & Regs. 0780-01-78-.02 DEFINITIONS

(1) “Commissioner” means the Commissioner of the Department of Commerce and Insurance;

(2) “Compensation expense ratio” means the ratio of the total compensation (including, but not limited to, salaries, commissions, insurance benefits and retirement account contributions, as well as all local, state and federal taxes associated with such compensation) paid to all officers, directors, employees and other individuals who exercise authority over the underwriting decisions of a county mutual insurance company to the gross premium of the county mutual insurance company;

(3) “County Mutual Insurance Company” means a person that is authorized to provide insurance coverage under Tenn. Code Ann. § 56-22-101, et seq.;

(4) “Department” means the Tennessee Department of Commerce and Insurance;

(5) “Gross premium” means maximum gross premiums as provided in the policy contracts, new and renewal, including policy or membership fees, whether paid in

part or in whole by cash, automatic premium loans, dividends applied in any manner whatsoever, and without deduction or exclusion of dividends in any manner, but excluding premiums returned on cancelled policies, on account of reduction in rates, or reductions in the amount insured;

(6) “NAIC” means the National Association of Insurance Commissioners;

(7) “Policyholder” means a person who is insured by a county mutual insurance company;

January, 2008 1 (8) “Premium” means money given in consideration to a county mutual insurance company on account of or in connection with an insurance policy for a specified policy period;

(9) “Surplus” means the accumulated assets of a county mutual insurance company that exceed the county mutual insurance company’s accrued losses and expenses.

History

• Authority: T.C.A. §§ 56-22-109(a)(4), and 56-22-120.
• Administrative History: Original rule filed October 19, 2007; effective January 2, 2008.

Tenn. Comp. R. & Regs. 0780-01-78-.03 COMPENSATION EXPENSE RATIO

(1) No county mutual insurance company’s compensation expense ratio may exceed thirty percent (30%) for any given year.

(2) Any county mutual insurance company whose compensation expense ratio exceeds thirty percent (30%) for any given year shall be considered to be operating in a hazardous financial condition.

History

• Authority: T.C.A. §§ 56-22-107(b), 56-22-119, and 56-22-120.
• Administrative History: Original rule filed October 19, 2007; effective January 2, 2008.

Tenn. Comp. R. & Regs. 0780-01-78-.04 ANNUAL STATEMENT REQUIREMENTS

(1) All county mutual insurance companies shall prepare their annual statements, as well as any and all other financial information required by T.C.A. §§ 56-22-101, et seq. in accordance with the NAIC’s Accounting Practices and Procedures Manual in effect for the period covered by the annual statement.

(2) A county mutual insurance company shall prepare its annual statement according to the NAIC’s Quarterly and Annual Statement Instructions—Property/Casualty, utilizing those instructions that are applicable and pertinent to the completion of the annual statement blank prescribed by the commissioner.

(3) When a county mutual insurance company has greater than one million dollars ($1,000,000) in gross premium in a given year, it shall be required, in addition to the filing of the annual statement as required by subparagraph (1) of this Rule, to file financial reports audited by a certified public accountant licensed as such by the State of Tennessee on or before June 1 for the year ended December 31 immediately preceding.

(4) When a county mutual insurance company has greater than one million dollars ($1,000,000) in gross premium in a given year, it shall be required, in addition to other requirements contained in this Rule, to file an opinion of an appointed actuary in accordance with the NAIC’s Quarterly and Annual Statement Instructions— Property/Casualty.

History

• Authority: T.C.A. §§ 56-22-109(a)(4), and 56-22-120.
• Administrative History: Original rule filed October 19, 2007; effective January 2, 2008.

Tenn. Comp. R. & Regs. 0780-01-78-.05 DIVIDENDS

(1) No county mutual insurance company may pay a dividend to its policyholders in any year in which its surplus is less than that of the previous year without providing the commissioner with such information as might be deemed necessary by the commissioner to determine that such payment is reasonable. No payment may be January, 2008 2 made until the commissioner informs the county mutual insurance company in writing that such payment has been deemed reasonable by the commissioner.

(2) No county mutual insurance company may pay a dividend to its policyholders which would cause the county mutual insurance company to fall below one hundred twenty percent (120%) of the surplus level required to do business in its geographic area, as found in T.C.A. §§ 56-22-105(c) and 56-22-106(f)(1), or which might otherwise cause it to fail to maintain a surplus of at least thirty three percent (33%) of the county mutual insurance company’s gross premium for the twelve (12) month period prior to the declaration of the dividend, as found in T.C.A. § 56-22-106(f)(2).

History

• Authority: §§ T.C.A. 56-22-109(b), and 56-22-120.
• Administrative History: Original rule filed October 19, 2007; effective January 2, 2008. January, 2008 3

Chapter 0780-01-79 Uniform Reporting System for the All Payer Claims Database

Tenn. Comp. R. & Regs. 0780-01-79-.01 PURPOSE AND SCOPE

This Chapter contains the provisions for submission of health care claims data sets by health insurance issuers.

History

• Authority: 2009 Public Acts, Chapter 611 and T.C.A. § 56-2-125.
• Administrative History: Emergency rule filed March 11, 2010; effective through September 7, 2010. Original rule filed June 10, 2010; effective September 8, 2010.

Tenn. Comp. R. & Regs. 0780-01-79-.02 DEFINITIONS

Unless the context indicates otherwise, the following words and phrases shall have the following meanings:

(1) "Address" means street address, post office box numbers, apartment numbers, e-mail addresses, web universal resource locator (URL) and internet protocol (IP) address number.

(2) "Capitated services" means services rendered by a provider through a contract in which payments are based upon a fixed dollar amount for each member on a monthly basis.

(3) "Commissioner" means the commissioner of the Tennessee Department of Commerce and Insurance.

(4) “Comprehensive medical insurance policy” means an insurance policy covering all that a defined population might reasonably require in order to be in good health, including as a minimum, but not limited to, emergency care, inpatient hospital and physician care, ambulatory physician care and outpatient preventative medical services.

(5) "Department" means the Tennessee Department of Commerce and Insurance.

(6) "Designee" means an entity with which the Department and/or the department of finance and administration have entered into an arrangement pursuant to which the entity performs data management and collecting functions, and under which the entity is strictly prohibited from using or releasing the information and data obtained in such a capacity for any purposes other than those specified in the agreement.

(7) "Direct identifier" means any information, other than case or code numbers used to create anonymous or encrypted data, that plainly discloses the identity of an individual, including:

(a) Patient names;

(b) Patient Street addresses other than town or city, state and zip code;

(c) All elements of patient birth dates, except year of birth;

(d) Patient telephone numbers;

(e) Patient facsimile numbers;

(f) Patient electronic mail addresses;

(g) Patient social security numbers;

(h) Medical record numbers;

(i) Health Plan beneficiary numbers;

(j) Patient account numbers;

(k) Patient certificate/license numbers;

(l) Vehicle identifiers and serial numbers including license plates;

(m) Device identifiers and serial numbers;

(n) Web universal resource locators (URLs);

(o) Internet protocol (IP) address numbers;

(p) Biometric identifiers, including fingerprints, voice prints, and genetic code;

(q) Full-face photographic images and any comparable images; or (r) Any other unique patient identifying number, characteristic, or code except encrypted index numbers assigned prior to the transmission by health insurance issuers to the state or designated entity for the purpose of linking procedures by patient, provided a patient’s identity cannot be known from the encrypted index number.

(8) “Group health plan” means an employee welfare benefit plan, as defined in the Employee Retirement Income Security Act of 1974 ("ERISA") § 3(1), codified in 29 U.S.C. § 1002(1), to the extent that the plan provides medical care to employees or their dependents, as defined under the terms of the plan, or an administrator of such a plan. For purposes of this rule, “group health plan” shall not mean any plan which is offered through a health insurance issuer;

(9) "Health care claims data" means information consisting of, or derived directly from, member eligibility files, medical claims files, and pharmacy claims files submitted by health insurance issuers.

(10) "Health care practitioner" means physicians and all others certified, registered or licensed in the healing arts, including, but not limited to:

(a) Nurses;

(b) Advanced practice nurses (c) Podiatrists;

(d) Optometrists;

(e) Pharmacists;

(f) Chiropractors;

(g) Physical therapists;

(h) Psychologists; and (i) Physicians' assistants.

(11) “Health insurance issuer” means an entity subject to the insurance laws of this state, or subject to the jurisdiction of the commissioner, that contracts or offers to contract to provide health insurance coverage, including but not limited to, an insurance company, a health maintenance organization and a nonprofit hospital and medical service corporation. In addition, a “health insurance issuer” also means a pharmacy benefits manager, a third party administrator, and an entity described in § 56-2-121.

(12) "Hospital" means a licensed acute or specialty care institution.

(13) "Medical claims file" means a data file composed of service level remittance information for all non-denied adjudicated claims for each billed service including, but not limited to:

(a) Member demographics;

(b) Provider information;

(c) Charge/payment information; and (d) Clinical diagnosis/procedure codes.

(14) "Member" means the subscriber and any spouse and/or dependent who is covered by the subscriber's policy.

(15) "Member eligibility file" means a data file containing demographic information for each individual member eligible for medical or pharmacy benefits for one or more days of coverage at any time during the reporting month.

(16) “Pharmacy benefits manager” means a person, business or other entity and any wholly or partially owned subsidiary of the entity, that administers the medication and/or device portion of pharmacy benefits coverage.

(17) "Pharmacy claims file" means a data file containing service level remittance information from all non-denied adjudicated claims for each prescription including, but not limited to:

(a) Member demographics;

(b) Provider information;

(c) Charge/payment information; and (d) National drug codes.

(18) "Plan sponsor" means any person, other than an insurer, who establishes or maintains a plan covering residents of the state of Tennessee, including, but not limited to, plans established or maintained by employers or jointly by one or more employers and one or more employee organizations, committee, joint board of trustees or other similar group of representatives of the parties that establish or maintain the plan.

(19) "Provider" means a health care facility, health care practitioner, health product manufacturer, health product vendor or pharmacy.

(20) “Sub-contractor” means any entity that contracts with a group health plan or health insurance issuer to provide insurance services.

(21) "Subscriber" means the certificate holder.

(22) “Third party administrator” means an entity that, on behalf of a health insurance issuer, employer or other entity, provides health benefits coverage or health insurance coverage, as defined in T.C.A. § 56-2-125(a)(5), to individuals in this state, receives or collects charges, contributions or premiums for, or adjudicates, processes or settles claims in connection with, any type of health benefit provided in, or as an alternative to, health insurance coverage.

History

• Authority: 2009 Public Acts, Chapter 611 and T.C.A. § 56-2-125.
• Administrative History: Emergency rule filed March 11, 2010; effective through September 7, 2010. Original rule filed June 10, 2010; effective September 8, 2010.

Tenn. Comp. R. & Regs. 0780-01-79-.03 HEALTH CARE CLAIMS DATA SET FILING DESCRIPTION

(1) Beginning on June 1, 2010, and continuing thereafter in accordance with the submission schedule set forth in Rule 0780-01-79-.05, each health insurance issuer shall submit to the Department, or its designee, a completed health care claims data set for all residents of Tennessee. Each health insurance issuer shall also submit all health care claims processed by any sub-contractor on its behalf. The health care claims data set shall include member eligibility files (for the pharmacy benefit and the medical benefit), a medical claims file, and a pharmacy claims file.

(2) The Department, or its designee, shall provide a phone number, e-mail address and mailing address of a contact person who can provide information on the status of data files submitted.

(3) The Department will prepare the All Payer Claims Database Procedure Manual that will list the variables to be reported, their descriptions and reporting format, the thresholds required for a submission to be deemed complete, the method for sending data, and other information associated with data submission. The Department shall make future changes in the Procedure Manual when the Commissioner deems changes to be necessary. Reporting entities will be notified in writing by the Department of all revisions. These revisions become effective one hundred and eighty (180) calendar days following the date of written notification. At that time, failure to meet the amended requirements are subject to the penalties as prescribed by T.C.A. § 56-2-125.

(4) The minimum data set for each reported member eligibility file will include the following elements, except as otherwise set forth in the All Payer Claims Database Procedure Manual:

(a) Eligibility;

(b) Type of insurance;

(c) Coverage type;

(d) Encrypted index numbers for linking procedures by patient;

(e) Member’s relationship to subscriber;

(f) Member gender;

(g) Member year of birth;

(h) Member age in months; and (i) Member city, state, and zip code of residence.

(5) The minimum data set for each reported medical claims file will include the following elements, except as otherwise set forth in the All Payer Claims Database Procedure Manual:

(a) National Plan ID;

(b) Insurance type;

(c) Payer claim control number;

(d) Claim line counter;

(e) Insured group or policy number for non-individual groups;

(f) Encrypted index numbers for linking procedures by patient;

(g) Member’s relationship to subscriber;

(h) Member gender;

(i) Member year of birth;

(j) Member age in months;

(k) Member city, state, and zip code of residence;

(l) Paid date;

(m) Admission time and date;

(n) Admission type;

(o) Source of admission;

(p) Discharge hour;

(q) Discharge status;

(r) Service provider number;

(s) Service provider tax ID;

(t) National service provider ID;

(u) Type of service provider;

(v) Service provider name;

(w) Service provider specialty;

(x) Service provider address;

(y) Type of bill;

(z) Place of service;

(aa) Claim status;

(bb) Admitting diagnosis;

(cc) E-code;

(dd) Principal diagnosis;

(ee) Other diagnoses;

(ff) Onset of diagnosis code;

(gg) Revenue code;

(hh) ICD-9-CM procedure codes;

(ii) Current claims terminology;

(jj) Health care common procedural coding system;

(kk) Dates of service;

(ll) Quantity of services performed;

(mm) Charge amount;

(nn) Paid amount;

(oo) Prepaid amount;

(pp) Copay amount;

(qq) Coinsurance amount;

(rr) Deductible amount;

(ss) DRG and version number;

(tt) APC and version number;

(uu) Drug code;

(vv) Billing provider number; and (ww) Billing provider name.

(6) The minimum data set for each reported pharmacy claims file will include the following elements, except as otherwise set forth in the All Payer Claims Database Procedure Manual:

(a) National Plan ID;

(b) Insurance type;

(c) Payer claim control number;

(d) Claim line counter;

(e) Insured group or policy number;

(f) Encrypted index numbers for linking procedures by patient;

(g) Member’s relationship to subscriber;

(h) Member gender;

(i) Member year of birth;

(j) Member age in months;

(k) Member city, state, and zip code of residence;

(l) Date service approved;

(m) Pharmacy number;

(n) Pharmacy Tax ID;

(o) Pharmacy country code;

(p) Claims status;

(q) Drug code;

(r) Drug name;

(s) New prescription or refill;

(t) Generic drug indicator;

(u) Dispense as written code;

(v) Compound drug indicator;

(w) Date prescription filled;

(x) Quantity dispensed;

(y) Days of supply;

(z) Gross amount due;

(aa) Total amount paid;

(bb) Ingredient cost/list price;

(cc) Postage amount claimed;

(dd) Dispensing fee paid;

(ee) Copay;

(ff) Coinsurance amount;

(gg) Prescribing physician name; and (hh) Prescribing physician number.

(7) The Department, or its designee, shall also provide an electronic newsletter or other method of communicating information to health insurance issuers regarding the receipt, processing and loading of data files.

(8) Health insurance issuers that are not pharmacy benefits managers and that paid a total of less than $5,000,000 for covered residents of Tennessee during the previous calendar year shall not be required to submit their health care claims data set. In calculating its paid claims, each health insurance issuer must include all health care claims for covered individuals processed by any subcontractor on its behalf.

(9) Pharmacy benefit managers that paid a total of less than $1,000,000 for covered residents of Tennessee during the previous calendar year shall not be required to submit their health care claims data set. In calculating its paid claims, each pharmacy benefits manager must include all health care claims for covered individuals processed by any subcontractor on its behalf.

(10) In instances where more than one entity is involved in the administration of a policy, the health insurance issuer responsible for submitting the claims data on policies shall be the one that has written the policies.

(11) The Department may enter into an agreement with a third party designee to collect and process the data. The agreement shall provide that the third party designee shall be strictly prohibited from collecting direct identifiers and from releasing or using data or information obtained in its capacity as a collector and processor of the data for any purposes other than those specifically authorized by the agreement.

History

• Authority: 2009 Public Acts, Chapter 611 and T.C.A. § 56-2-125.
• Administrative History: Emergency rule filed March 11, 2010; effective through September 7, 2010. Original rule filed June 10, 2010; effective September 8, 2010.

Tenn. Comp. R. & Regs. 0780-01-79-.04 GENERAL REQUIREMENTS FOR HEALTH CARE CLAIMS DATA SUBMISSION

(1) Capitated services claims. Claims for capitated services shall be reported with all medical and pharmacy file submissions.

(2) Claim records. Records for medical and pharmacy claims file submissions shall be reported at the visit, service, or prescription level. The submission of the medical and pharmacy claims shall be based upon the paid dates and not upon the dates of service associated with the claims.

(3) Specific/Unique Coding. With the exception of provider codes and provider specialty codes, specific or unique coding systems shall not be permitted as part of the health care claims data set submission.

(4) Medical Claims File Exclusions. Claims for stand-alone insurance policies shall be excluded if the stand-alone coverage is provided for the following types of services:

(a) Specific disease;

(b) Accident;

(c) Injury;

(d) Hospital indemnity;

(e) Disability;

(f) Long-term care;

(g) Vision coverage; or (h) Durable medical equipment.

(5) Claims for the types of services in (4) above shall be included in the medical claims file submission if they are covered by a comprehensive medical insurance policy.

(6) Behavioral or Mental Health Claims. All claims related to behavioral, mental health, or substance abuse treatment shall be included in the medical claims file.

(7) Claims related to Medicare supplemental, TRICARE supplemental, or other supplemental health insurance policies are to be excluded if the plan of benefits are not considered to be primary. If the policies cover health care services entirely excluded by the Medicare, TRICARE, or other program, the claims must be submitted.

(8) Member Eligibility File Exclusions. Members without medical and/or pharmacy coverage during the month reported shall be excluded.

(9) Pharmacy Claims File Exclusions. Claims for pharmacy services generated from non-retail pharmacies that do not contain national drug codes shall be included in the following files:

(a) If the pharmacy claims are covered under the medical benefit they shall be included in the medical claims file and not the pharmacy claims file;

(b) If the claim is covered under the prescription benefit then the claim shall be included in the pharmacy claims file;

(c) If the claims are submitted as standard UB04, NSF, or ANSI 935 formatted transactions without NDC codes, the claim shall be included in the medical claims file.

(10) Registration Form.

(a) Each health insurance issuer, whether they are subject to the reporting requirements of

Rule 0780-01-79-.05 or not, shall submit an annual registration form to the Department, or the Department’s designee, every year by July 1. The form shall be in the format approved by the Commissioner.

(b) At a minimum, the form shall contain the following information:

1. Company name;

2. NAIC code;

3. Mailing address;

4. Information about whether the company conducts health insurance-related business;

5. Number of Tennessee members covered; 6 The total amount paid by the health insurance issuer during the year on covered lives in Tennessee; and, 7. Name, e-mail address and address of the person completing the form.

(c) Health insurance issuers shall submit a registration form by April 1, 2010, and annually thereafter.

(11) No health insurance issuer shall replace a complete data file submission more than one year after the end of the month in which the file was submitted unless it can establish exceptional circumstances for the replacement. Any replacements after this period shall be approved by the Department. Individual adjustment records shall be submitted with a monthly data file submission.

History

• Authority: 2009 Public Acts, Chapter 611, T.C.A. §§ 56-2-125 and 56-2-301.
• Administrative History: Emergency rule filed March 11, 2010; effective through September 7, 2010. Original rule filed June 10, 2010; effective September 8, 2010.

Tenn. Comp. R. & Regs. 0780-01-79-.05 SUBMISSION SCHEDULE

(1) Health insurance issuers shall report historical health care claims data according to the following schedule:

Time Span Submission Due Date January 1-31, 2009 June 1, 2010 February 1 – June 30, 2009 July 1, 2010 July 1, 2009 – September 30, November 1, 2010 (2) Once each health insurance issuer has completed submitting historical health care claims data, it shall submit health care claims data monthly. Submissions are due on the first day of the month for health care claims data covering the time span of the month preceding the prior month, or according to the following schedule:

Time Span Submission Due Date October December 1 November January 1 December February 1 January March 1 February April 1 March May 1 April June 1 May July 1 June August 1 July September 1 August October 1 September November 1 (3) The commissioner, in the commissioner's discretion, may allow some health insurance issuers to submit data on a quarterly basis.

(4) Group health plans shall be exempt from the data reporting requirements of T.C.A. § 56-2- 125 and this rule to the extent that they do not use heath insurance issuers to administer health benefits. However, such group health plans may submit data in accordance with this

rule.

History

• Authority: 2009 Public Acts, Chapter 611, T.C.A. §§ 56-2-125 and 56-2-301.
• Administrative History: Emergency rule filed March 11, 2010; effective through September 7, 2010. Original rule filed June 10, 2010; effective September 8, 2010.

Tenn. Comp. R. & Regs. 0780-01-79-.06 COMPLIANCE WITH DATA STANDARDS AND PENALTIES FOR NON-

COMPLIANCE.

(1) Compliance.

(a) Health insurance issuers shall make every effort to report the data fields as described in the Procedure Manual if the data field is present in any part of their data systems.

Health insurance issuers shall submit data fields even in circumstances where the data is integrated from multiple systems. The Procedure Manual shall include minimum thresholds for submissions to be considered complete.

(b) The Department, or its designee, shall evaluate each member eligibility file, medical claims file and pharmacy claims file to determine compliance with the Procedure Manual.

(c) Upon completion of the evaluation, the Department or its designee shall promptly notify each health insurance issuer whether its data submissions satisfy the standards. This notification shall identify the specific file and the data elements that do not satisfy the standards.

(d) Each health insurance issuer notified of a non-compliant data submission shall respond within 10 business days of the notification by making the changes necessary to satisfy the standards.

(2) Penalties for Non-Compliance.

(a) The Department may assess a civil penalty of up to one hundred dollars ($100.00) per day for delinquent claims submissions.

(b) Failure to conform to the requirements for submission shall result in the rejection of the applicable data file(s). All rejected files shall be resubmitted in the appropriate, corrected form to the Department, or their designee, within 10 business days. The Department may assess a civil penalty of up to one hundred dollars ($100.00) per day for rejected files not resubmitted within 10 business days.

(c) The Commissioner has the authority to delay, reduce, or waive any penalty for not correcting any particular data element if:

1. Correcting the failure would be excessively onerous for the health insurance issuer on technical grounds such as: the health insurance issuer does not gather the particular data element or does not store the particular data element;

2. The health insurance issuer is working diligently, in the Commissioner’s judgment, to correct the failure; or, 3. The failure to correct is due to force majeure or other events of extraordinary circumstances clearly beyond the control of the health insurance issuer.

History

• Authority: 2009 Public Acts, Chapter 611, T.C.A. §§ 56-2-125 and 56-2-301.
• Administrative History: Emergency rule filed March 11, 2010; effective through September 7, 2010. Original rule filed June 10, 2010; effective September 8, 2010.

Tenn. Comp. R. & Regs. 0780-01-79-.07 SEVERABILITY PROVISION

If any Rule or portion of a Rule of this Chapter or its applicability to any person or circumstance is held invalid by a court, the remainder of the Chapter or the applicability of the provision to other persons or circumstances shall not be affected. To this end, the provisions of this chapter are declared severable.

History

• Authority: 2009 Public Acts, Chapter 611, T.C.A. §§ 56-2-125 and 56-2-301.
• Administrative History: Emergency rule filed March 11, 2010; effective through September 7, 2010. Original rule filed June 10, 2010; effective September 8, 2010.

Chapter 0780-01-80 Tennessee Vehicle Protection Product Act Regulations

Tenn. Comp. R. & Regs. 0780-01-80-.01 PURPOSE

(1) The purpose of this Chapter is to set standards to assist the commissioner of commerce and insurance in administering the Tennessee Vehicle Protection Product Act (“Act”), as provided for in T.C.A. § 56-55-113.

History

• Authority: T.C.A. §§ 56-55-101, et seq.
• Administrative History: Original rule filed April 22, 2008, to be effective July 6, 2008; however, the House Government Operations Committee stayed the rule; new effective date August 16, 2008.

Tenn. Comp. R. & Regs. 0780-01-80-.02 SCOPE

(1) This Chapter shall not be interpreted to limit the powers granted the commissioner by any laws or parts of laws of this State, nor shall this Chapter be interpreted to supersede any laws or parts of laws of this State.

History

• Authority: T.C.A. § 56-55-113.
• Administrative History: Original rule filed April 22, 2008, to be effective July 6, 2008; however, the House Government Operations Committee stayed the rule; new effective date August 16, 2008. 0780-1-80-03 AUTHORITY. (1) This Chapter is issued pursuant to the authority vested in the commissioner of Commerce and Insurance of the State of Tennessee pursuant to T.C.A. §§ 56-55- 101 through 56-55-115. Authority: T.C.A. §§ 56-55-101, et seq.

Tenn. Comp. R. & Regs. 0780-01-80-.04 DEFINITIONS

(1) “Act” means the Tennessee Vehicle Protection Product Act, T.C.A. §§ 56-55-101, et seq.;

(2) “Administrator” means a third party, other than the warrantor, who is designated by the warrantor to be responsible for the administration of vehicle protection product warranties;

August, 2008 2 (3) “Commissioner” means the commissioner of the Tennessee Department of Commerce and Insurance;

(4) “Department” means the Tennessee Department of Commerce and Insurance;

(5) “Incidental costs” means expenses resulting from loss or damage to a vehicle, as specified in the warranty, incurred by the warranty holder, related to the failure of the vehicle protection product to perform as provided in the warranty. “Incidental costs” may include, but not be limited to, insurance policy deductibles, rental vehicle charges, the difference between the actual value of the stolen vehicle at the time of theft and the cost of a replacement vehicle, sales taxes, registration fees, transaction fees, and mechanical inspection fees. “Incidental costs” do not include the costs specified in the warranty to repair, replace or provide a refund for a vehicle protection product that fails to perform as provided in the warranty. “Incidental costs” may be determined by a formula or by a fixed amount, either of which must be set forth in the warranty;

(6) “Person” means any natural or artificial person including, but not limited to, an individual, partnership, association, trust or corporation;

(7) (a) “Vehicle protection product” means a vehicle protection device, system, or service that:

(i) Is installed on or applied to a vehicle;

(ii) Is designed to prevent loss or damage to a vehicle from a specific cause; and (iii) Includes a written warranty;

(b) “Vehicle protection product” includes, but is not limited to, alarm systems, body

part marking products, steering locks, window etch products, pedal and ignition locks, fuel and ignition kill switches, and electronic, radio, and satellite tracking devices;

(8) “Vehicle protection product warranty” or “warranty” means a written agreement by a warrantor that provides that, if the vehicle protection product fails to prevent loss or damage to a vehicle from a specific cause, then the warranty holder shall be paid specified incidental costs by the warrantor as a result of the failure of the vehicle protection product to perform pursuant to the terms of the warranty;

(9) “Vehicle protection product warrantor” or “warrantor” means a person who is contractually obligated to the warranty holder under the terms of the vehicle protection product warranty agreement. “Warrantor” does not include an authorized insurer;

(10) “Warranty holder” means the person who purchases a vehicle protection product or who is a permitted transferee; and (11) “Warranty reimbursement insurance policy” means a policy of insurance that is issued to the vehicle protection product warrantor to provide reimbursement to the warrantor, or to pay on behalf of the warrantor, all covered contractual obligations August, 2008 3 incurred by the warrantor under the terms and conditions of the insured vehicle protection product warranties sold by the warrantor.

History

• Authority: T.C.A. §§ 56-55-102 and 56-55-113.
• Administrative History: Original rule filed April 22, 2008, to be effective July 6, 2008; however, the House Government Operations Committee stayed the rule; new effective date August 16, 2008.

Tenn. Comp. R. & Regs. 0780-01-80-.05 WARRANTOR FILING REQUIREMENTS

(1) The following items are required to be submitted upon the initial registration of any person wishing to register to operate as a warrantor of vehicle protection products, and annually thereafter in order to renew the registration:

(a) The information required by T.C.A. § 56-55-104(b). This information shall be submitted on a form created by the commissioner;

(b) Copies of any warranty reimbursement insurance policy or policies which are to cover any vehicle protection product warranties provided in this State. Such policies must conform to the requirements found in T.C.A. §§ 56-55-105 and 56-55-106;

(c) Two (2) copies of each warranty the registrant proposes to use in this State, including each warranty already registered for use that the renewal applicant proposes to use;

(d) An appointment of the commissioner and the commissioner’s deputies and successors as true and lawful attorneys upon whom any and all lawful process may be served on behalf of the warrantor in connection with any business done by the warrantor under T.C.A. §§ 56-55-101, et seq. Such appointment shall be made on a form created by the commissioner;

(e) A registration fee in the amount of five hundred fifteen dollars ($515.00); and (f) A self addressed stamped envelope.

(2) A complete copy of each registration form, including all required exhibits and other papers and documents filed as a part thereof, shall be filed with the commissioner by personal delivery or mail addressed to: Department of Commerce and Insurance, State of Tennessee, 500 James Robertson Parkway, Davy Crockett Tower, Fourth Floor, Nashville, Tennessee 37243, Attention: Vehicle Protection Product Specialist.

The registration form shall be manually signed.

(3) Should the registration form submitted upon the initial registration of a warrantor be deficient in any information required by T.C.A. §§ 56-55-105 or 56-55-106 and Paragraphs (1) and (2) of this Rule, the commissioner shall notify that initial registrant immediately of all such deficiencies. The initial registrant shall have fortyfive (45) days from the date the notice was sent by the commissioner to correct all deficiencies. Should the initial registrant not correct all deficiencies within the fortyfive (45) days, the commissioner shall deem the application abandoned. Any registrant who has abandoned an application must reapply as set forth in Paragraphs (1) and (2) of this Rule in order to register as a warrantor.

(4) Should there be any change(s) in a registrant’s information provided pursuant to this

Rule prior to the registrant’s renewal, the commissioner must be notified, in writing, August, 2008 4 within thirty (30) days of such change(s) by personal delivery or mail addressed to:

Department of Commerce and Insurance, State of Tennessee, 500 James Robertson Parkway, Davy Crockett Tower, Fourth Floor, Nashville, Tennessee 37243, Attention:

Vehicle Protection Product Specialist. The written notice shall state any change(s) to the information and what the information stated before the change(s). The written notice shall be manually signed. Changes in a registrant’s information include, but are not limited to, changes to any of the warranties previously registered and changes to the warranty reimbursement insurance policy. A change in a registrant’s information does not include the use of any additional warranties not previously registered. Such warranties must be submitted for registration prior to use.

(5) If a registrant fails to properly renew its registration by July 1 of each year, the commissioner shall give the registrant written notice of the failure to properly register.

The registrant shall then have thirty (30) days from the date of the receipt of the notice of the failure to properly register to complete the registration before the registration is canceled. Any registrant with a canceled registration must reapply as set forth in Paragraphs (1) and (2) of this Rule in order to obtain a new registration.

History

• Authority: T.C.A. §§ 56-55-104, 56-55-105, 56-55-106, 56-55-112 and 56-55-113.
• Administrative History: Original rule filed April 22, 2008, to be effective July 6, 2008; however, the House Government Operations Committee stayed the rule; new effective date August 16, 2008.

Tenn. Comp. R. & Regs. 0780-01-80-.06 USE OF SURPLUS LINES INSURERS

(1) A warrantor may secure a warranty reimbursement insurance policy or policies which are to cover any vehicle protection product warranties provided in this State from a surplus lines insurer. Such policies must conform to the requirements found in T.C.A. §§ 56-55-105 and 56-55-106, and must be secured through a licensed surplus lines agent who represents a surplus lines insurer that is domiciled in the United States, and eligible under T.C.A. §§ 56-14-101, et seq., to provide such coverage.

History

• Authority: T.C.A. §§ 56-55-105, 56-55-106, 56-55-113 and 56-14-101, et seq.
• Administrative History: Original rule filed April 22, 2008, to be effective July 6, 2008; however, the House Government Operations Committee stayed the rule; new effective date August 16, 2008.

Tenn. Comp. R. & Regs. 0780-01-80-.07 VEHICLE PROTECTION PRODUCT WARRANTY FORM REQUIREMENTS

(1) All vehicle protection product warranty forms required to be submitted under T.C.A. § 56-55-104(b) and Rule 0780-1-80-.05 shall contain the language and disclosures required by T.C.A. § 56-55-107, and may not contain any of the language or statements prohibited by T.C.A. § 56-55-109.

(2) No vehicle protection product warranty shall contain any typeface smaller than twelve (12) point font, and the typeface chosen must be easily readable. All vehicle protection product warranties must be written in English but may be written in other languages as well so long as the translation of the warranty is a reasonable translation; any discrepancies in a translated warranty should be read in favor of the purchaser of the warranty.

History

• Authority: T.C.A. §§ 56-55-104, 56-55-107, 56-55-109 and 56-55-113.
• Administrative History: Original rule filed April 22, 2008, to be effective July 6, 2008; however, the House Government Operations Committee stayed the rule; new effective date August 16, 2008. August, 2008 5

Tenn. Comp. R. & Regs. 0780-01-80-.08 RECORD KEEPING REQUIREMENTS

(1) Each vehicle protection product warrantor shall maintain its accounts, books and records in the manner outlined in T.C.A. § 56-55-110.

History

• Authority: T.C.A. §§ 56-55-110 and 56-55-113.
• Administrative History: Original rule filed April 22, 2008, to be effective July 6, 2008; however, the House Government Operations Committee stayed the rule; new effective date August 16, 2008.

Tenn. Comp. R. & Regs. 0780-01-80-.09 PROCEDURES FOR PUBLIC COMPLAINTS

(1) Complaints concerning vehicle protection product warranties and/or the warrantors who provide such warranties shall be handled by the Consumer Insurance Services

Section (or successor organizational unit) of the Department’s Insurance Division.

(2) The Consumer Insurance Services Section (or successor organizational unit) shall record and review all complaints received under this Rule, and the process for such review and disposition shall be the same as that for all other complaints submitted to the Consumer Insurance Services Section.

History

• Authority: T.C.A. §§ 56-8-107, 56-8-118, 56-55-109, 56-55-111 and 56-55-113.
• Administrative History: Original rule filed April 22, 2008, to be effective July 6, 2008; however, the House Government Operations Committee stayed the rule; new effective date August 16, 2008.

Tenn. Comp. R. & Regs. 0780-01-80-.10 CEASE AND DESIST ORDERS AND PENALTIES

(1) If the commissioner determines that any person is violating any section of the Act or any of the provisions of this Chapter, the commissioner may issue an order directing the warrantor to cease and desist from engaging in those acts, practices or transactions that are found to violate the Act or this Chapter, and may issue an order prohibiting the warrantor from continuing to offer any vehicle protection product in violation of the Act or the provisions of this Chapter.

(2) The commissioner may, after notice and a hearing, levy a civil penalty in an amount not to exceed five thousand dollars ($5,000) against the warrantor of a vehicle protection product or person required to be registered to provide a vehicle protection product, upon a finding that the warrantor or the person required to be registered as a warrantor has violated any provision of the Act or of this Chapter. Each vehicle protection product warranty provided in violation of the Act and/or this Chapter and/or each day of continued violation shall constitute a separate violation for purposes of determining the possible amount of penalty under this section.

History

• Authority: T.C.A. §§ 56-55-111 and 56-55-113.
• Administrative History: Original rule filed April 22, 2008 to be effective July 6, 2008; however, the House Government Operations Committee stayed the rule; new effective date August 16, 2008.

Chapter 0780-01-81 Administration of Self Insurance Workers' Compensation Programs by Single Employers or Pools

Tenn. Comp. R. & Regs. 0780-01-81-.01 PURPOSE AND SCOPE

The purpose of this Chapter is to regulate the person(s) administering workers’ compensation benefits for employers that self-insure pursuant to T.C.A. §§ 50-6-405(b) and (c).

History

• Authority: T.C.A. §§ 50-6-405(b), 50-6-405(c) and 50-6-405(h).
• Administrative History: Original rule filed September 12, 2005; effective November 26, 2005.

Tenn. Comp. R. & Regs. 0780-01-81-.02 DEFINITIONS

(1) “Affiliate” or “affiliated” means an entity or person who directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, a specified entity or person.

(2) “Commissioner” means the Commissioner of the Department of Commerce and Insurance.

(3) “Control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct and/or cause the direction of the management and/or policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or non-management 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, ten percent (10%) or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by the Insurance Holding Company System Act, T.C.A. §§ 56-11-201, et seq., that control does not exist in fact. The Commissioner may determine, after furnishing all persons in interest notice and an opportunity to be heard and making specific findings of fact to support the determination, that control exists in fact, notwithstanding the absence of a presumption to that effect or the filing of a disclaimer in like manner to T.C.A. § 56-11-205(k).

(4) “Employer” means a single employer that is self-insuring their workers’ compensation liabilities under T.C.A. § 50-6-405(a) pursuant to T.C.A. §§ 50-6-405(a) and (b).

(5) “GAAP” means United States generally accepted accounting principles consistently applied.

(6) “Insurance producer” means a person who sells, solicits or negotiates a contract of insurance as those terms are defined in this Rule.

(7) “Insurer” means a person undertaking to provide workers’ compensation insurance coverage through a company requiring a certificate of authority issued pursuant to T.C.A. § 56-2-205.

(8) “NAIC” means the National Association of Insurance Commissioners.

(9) “Negotiate” means the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance or plan of self-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 coverage from insurers for the purchaser.

(10) “Person” means an individual or business entity.

(11) “Sell” means to exchange a contract of insurance or plan of self-insurance by any means, for money or its equivalent, on behalf of an insurer, employer, or pool.

(12) “Solicit” means attempting to sell insurance or a plan of self-insurance or asking or urging a person to apply for a particular kind of insurance or plan of self-insurance from a particular insurer, employer, or pool.

(13) “Third party administrator” means a person who directly or indirectly collects charges or premiums from, adjusts or settles claims, or provides loss control or account managing services in connection with workers’ compensation insurance coverage offered or provided by a self-insured employer under T.C.A. §§ 50-6-405(a) and (b), or a self-insured pool under T.C.A. § 50-6-405(c), except any of the following:

(a) An insurance producer licensed to sell insurance coverage in this state, whose activities are limited exclusively to the sale of insurance;

(b) A person who adjusts or settles claims in the normal course of that person’s practice or employment as an attorney at law and who does not collect charges or premiums in connection with workers’ compensation insurance coverage;

(c) A person licensed as a managing general agent in this state, whose activities are limited exclusively to the scope of activities conveyed under such license;

(d) A self-insured employer under T.C.A. §§ 50-6-405(a) and (b), or a self-insured pool under T.C.A. § 50-6-405(c) which have been granted a certificate of authority by the Commissioner, as long as their activities are limited to their own self-insurance programs and do not perform such services for others;

(e) A third party administrator who is affiliated with an insurer, as defined in this Rule, and who only performs the contractual duties (between the third party administrator and the insurer) of a third party administrator for the direct and assumed insurance business of the affiliated insurer. The insurer is responsible for the acts of the third party administrator and is responsible for providing all of the third party administrator’s books and records to the Commissioner, upon a request from the Commissioner;

(f) An employee of a licensed third party administrator who performs functions as part of their employment with the licensed third party administrator; and (g) An administrator, as that term is used in Chapter 0780-01-54, appropriately licensed by the Commissioner that does not perform any of the acts set forth herein except the collection of premium or charges in connection with the workers’ compensation coverage by the pool in which the person acts an administrator.

(h) A Tennessee licensed insurance company that performs services on behalf of a selfinsured employer under T.C.A. §§ 50-6-405(a) and (b) or a self-insured pool under T.C.A. § 50-6-405(c).

(14) “Pool” means a self-insurance pool operating pursuant to T.C.A. § 50-6-405(c).

(15) “Workers’ compensation benefits and/or insurance coverage” means the benefits intended to pay the liabilities that arise out of the requirements of T.C.A. § 50-6-405(a) for an employer’s liability.

History

• Authority: T.C.A. §§50-6-405(b), 50-6-405(c), 50-6-405(h), 56-6-101, et seq. and 56-6-501, et seq.
• Administrative History: Original rule filed September 12, 2005; effective November 26, 2005. Amendment filed October 13, 2008; effective December 27, 2008.

Tenn. Comp. R. & Regs. 0780-01-81-.03 WRITTEN AGREEMENT NECESSARY

(1) No third party administrator shall act as such without a written agreement between the third party administrator and the employer or pool, and the written agreement shall be retained as

part of the official records of the employer or pool and the third party administrator for the duration of the agreement and for five (5) years thereafter. The agreement shall contain all provisions required by this Chapter, except insofar as these requirements do not apply to the functions performed by the third party administrator.

(2) The written agreement shall include a statement of all of the duties that the third party administrator is expected to perform on behalf of the employer or pool.

(3) The employer, pool, or third party administrator may, with written notice, terminate the written agreement for cause as provided in the agreement. The employer or pool shall fulfill any and all lawful obligations with respect to workers’ compensation benefits affected by the written agreement, regardless of any dispute between the employer or pool and the third party administrator.

History

• Authority: T.C.A. §§ 50-6-405(b), 50-6-405(c) and 50-6-405(h).
• Administrative History: Original rule filed September 12, 2005; effective November 26, 2005.

Tenn. Comp. R. & Regs. 0780-01-81-.04 PAYMENT TO THIRD PARTY ADMINISTRATOR

The payment of claim payments forwarded by the employer or pool to the third party administrator shall not be deemed to have been paid to the employee until the payments are actually received by the employee, unless any different standard has been promulgated under the workers’ compensation law by the Department of Labor and Workforce Development.

History

• Authority: T.C.A. §§ 50-6-405(b), 50-6-405(c) and 50-6-405(h).
• Administrative History: Original rule filed September 12, 2005; effective November 26, 2005.

Tenn. Comp. R. & Regs. 0780-01-81-.05 MAINTENANCE OF INFORMATION

(1) A third party administrator shall maintain and make available to the employer or pool complete books and records of all transactions performed on behalf of the employer or pool.

The books and records shall be maintained in accordance with prudent standards of insurance record keeping and shall be maintained by the third party administrator for a period of not less than five (5) years from the date of their creation, unless the agreement between the employer or pool and the third party administrator is terminated prior to the five (5) years.

(2) The Commissioner shall have access to all books and records maintained by a third party administrator for the purposes of examination, audit, and inspection. Pursuant to the Commissioner’s role, applicable common law and statutory protections and privileges, and examination and investigative authority including those conferred under T.C.A. §§ 50-6-405, 56-1-409, and any other provisions of T.C.A. Title 56 or 50 that may be pertinent, any documents, materials, or other information in the possession or control of the Commissioner that are furnished by a third party administrator, insurance producer or an employee or agent thereof acting on behalf of the third party administrator, insurance producer, or obtained by the Commissioner shall be confidential by law and privileged, shall not be subject to public inspection as provided in T.C.A. § 10-7-503, may be shielded from subpoena or eligible for a protective order under applicable laws and court procedure rules, and may be shielded from discovery or inadmissible as evidence in any private civil action. However, the Commissioner is authorized to use such documents, materials or other information in furtherance of any regulatory or legal action brought as part of the Commissioner’s official duties. The costs of such examination, audit, or inspection, including such experts which the Commissioner deems necessary to contract, may be assessed, in the discretion of the Commissioner, to the third party administrator, employer, or pool.

(3) The Commissioner or any person who received documents, materials, or other information while acting under the authority of the Commissioner may resist under any applicable laws and court rules being called to testify in any private civil action concerning any confidential documents, materials, or information referenced in Paragraph (2) of this Rule. By this Rule, the Commissioner does not waive any right he or she may have to determine and assert the scope of confidentiality and privilege relating to particular documents, materials, or other information obtained or maintained under the Commissioner’s authority.

(4) In order to assist in the performance of his or her duties, the Commissioner:

(a) May share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to Paragraph (2) of this Rule, with other state and federal agencies, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information;

(b) May receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC, its affiliates or subsidiaries 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 documents, materials, or information; and (c) May enter into agreements governing sharing and use of information consistent with this Paragraph.

(5) To the extent allowed under applicable law, the Commissioner deems that no waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information is intended or shall occur as a result of disclosure to the Commissioner under this Rule or as a result of sharing as authorized in Paragraph (4) of this Rule.

(6) Nothing in this Chapter shall prohibit the Commissioner from releasing documents relating to contested cases or examination reports or orders which are open to public inspection pursuant to T.C.A. § 10-7-503.

(7) The employer or pool shall own the records generated by the third party administrator pertaining to the employer or pool, however, the third party administrator shall retain the right to continuing access to books and records necessary to permit the third party administrator to fulfill all of its contractual obligations to employers or pools. Nothing in this Paragraph shall restrict the ability of a third party administrator and an employer or pool from entering into a contract which would allow the third party administrator to make copies of documents in their possession after the termination of their agreement with the employer or pool.

(8) If the employer or pool and the third party administrator cancel their agreement pursuant to

Rule 0780-01-81-.03(3), notwithstanding the provisions of Paragraph (1) of this Rule, the third party administrator may by written agreement with the employer or pool transfer all records to a new third party administrator rather than retain them for five (5) years. In such cases, the new third party administrator shall acknowledge, in writing, that it is responsible for retaining the records of the prior third party administrator as required in Paragraph (1) of this

Rule.

History

• Authority: T.C.A. §§ 50-6-405, 50-6-405(a)(2), 50-6-405(b), 50-6-405(c), 50-6-405(c)(4)(C), 50-6- 405(h), 10-7-503(a), 10-7-504, 56-1-204, 56-1-408 through 409, 56-1-411 through 413, 56-6-120, 56-8- 104(8), 56-8-107, 56-8-118, 56-44-105.
• Administrative History: Original rule filed September 12, 2005; effective November 26, 2005.

Tenn. Comp. R. & Regs. 0780-01-81-.06 RESPONSIBILITIES OF EMPLOYER OR POOL

(1) If an employer or pool utilizes the services of a third party administrator, the employer or pool shall be responsible for determining the benefits, premium rates, and claims payment procedures applicable to the benefits and for securing reinsurance, stop loss insurance or excess coverage, if any. The rules pertaining to these matters shall be provided, in writing by the employer or pool to the third party administrator. The responsibilities of the third party administrator as to any of these matters shall be set forth in the written agreement between the third party administrator and the employer or pool.

(2) Nothing in this Chapter shall relieve an employer or pool of the ultimate responsibility for the competent administration and timely payment of workers’ compensation benefits as required by T.C.A. §§ 50-6-205 and 56-8-104 and any rules promulgated thereunder.

History

• Authority: T.C.A. §§ 50-6-405(b), 50-6-405(c), 50-6-405(h), 50-6-205, 56-8-102(3) and 56-8-104.
• Administrative History: Original rule filed September 12, 2005; effective November 26, 2005.

Tenn. Comp. R. & Regs. 0780-01-81-.07 COLLECTION OF MONIES AND PAYMENTS OF CLAIMS

(1) All monies collected by a third party administrator on behalf of or for an employer or pool, and the return of monies received from that employer or pool, shall be held by the third party administrator in a fiduciary capacity. The monies shall be immediately remitted to the person entitled to them or shall be deposited promptly in a fiduciary account established and maintained by the third party administrator in a federally or state insured financial institution.

The written agreement between the third party administrator and the employer or pool shall provide for the third party administrator to periodically, but no less than quarterly, render an accounting to the employer or pool detailing all transactions performed by the third party administrator pertaining to the business underwritten by the employer or pool.

(2) If monies deposited in a fiduciary account have been collected on behalf of or for one or more employers or pools, the third party administrator shall keep records clearly recording the deposits in and withdrawals from the account on behalf of each employer or pool. The third party administrator shall keep copies of all the records and, upon request of an employer or pool, shall furnish the employer or pool with copies of the records pertaining to the deposits and withdrawals.

(3) All claims paid by the third party administrator from funds collected on behalf of or for an employer or pool shall be paid only on drafts, electronic transfer, or checks of and as authorized by the employer or pool.

(4) All third party administrators shall comply with the prompt pay standards set forth in both T.C.A. Title 50 and Title 56 for the payment of workers’ compensation benefits.

History

• Authority: T.C.A. §§ 50-6-405(b), 50-6-405(c), 50-6-405(h), 50-6-205, and 56-8-104.
• Administrative History: Original rule filed September 12, 2005; effective November 26, 2005.

Tenn. Comp. R. & Regs. 0780-01-81-.08 DISCLOSURE OF CHARGES AND FEES

Third party administrators shall disclose to the employer or pool all affiliates of the third party administrator providing services to the employer or pool and any fees in addition to those paid to the third party administrator for such services.

History

• Authority: T.C.A. §§ 50-6-405(b), 50-6-405(c) and 50-6-405(h).
• Administrative History: Original rule filed September 12, 2005; effective November 26, 2005.

Tenn. Comp. R. & Regs. 0780-01-81-.09 CERTIFICATE OF AUTHORITY

(1) A person shall apply to be a third party administrator upon an application to be specified by the Commissioner and shall receive a certificate of authority or license from the Commissioner, prior to performing any function of a third party administrator in this state. It shall be unlawful for any person to operate in this state as a third party administrator without a certificate of authority or license.

(2) The application shall include or be accompanied by the following information and documents:

(a) All basic organizational documents of the applicant, including any articles of incorporation, articles of association, partnership agreement, trade name certificate, pool agreement, shareholder agreement and other applicable documents and all amendments to such documents;

(b) The bylaws, rules, regulations or similar documents regulating the internal affairs of the applicant;

(c) NAIC Biographical Affidavit for individuals who are responsible for the conduct of 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 or the partners or members in the case of a partnership, association or limited liability company; any shareholders or member holding directly or indirectly ten percent (10%) or more of the voting stock, voting securities or voting interest of the applicant; and any other person who exercises control or influence over the affairs of the applicant;

(d) Audited annual financial statements for the past year that are no more than six (6) months older than the date of application that prove that the applicant has a positive net worth. In lieu of audited financial statements, an applicant may submit financial statements or reports that are attested to by a company officer in a form approved by the commissioner. If attested, the attestation must refer to the financial statement by date and bear original signatures and notarized seal. The financial statements may be prepared on a GAAP basis but the commissioner reserves the ability to only consider assets that would be admitted by the NAIC’s Accounting Practices and Procedures Manual. The financial statement must be in the name of the applicant or prepared on a consolidated basis that includes a columnar consolidating or combining worksheet that is filed with the report and includes the following:

1. Amounts shown on the consolidated audited or attested financial report shall be shown on the worksheet;

2. Amounts for each entity shall be stated separately;

3. Explanations of consolidation and eliminating entries; and 4. Other information as the commissioner may require in determining the current financial condition of the applicant.

(e) A statement describing the business plan including information on staffing levels and activities proposed in this state and nationwide. The plan shall provide details setting forth the applicant’s capability for providing a sufficient number of experienced and qualified personnel in the areas of claims adjustment, claims processing, record keeping and underwriting recommendations; and (f) Such other pertinent information as may be required by the Commissioner.

(3) Proof of a fidelity bond, fidelity insurance coverage and/or crime insurance coverage in the amount of Two Hundred Fifty Thousand Dollars ($250,000) issued in the name of the applicant. The deductible on the bond or insurance policy may not exceed ten percent (10%) of the third party administrator’s or applicant’s net worth as determined by the commissioner.

(a) Bonds and insurance must be written by an insurance company licensed to do business in Tennessee.

(b) Bonds and insurance policies must specify the beginning and end date. The notation “until cancelled” is not acceptable for purposes of this subparagraph.

(c) The Department of Commerce and Insurance shall be listed as the certificate holder on the bond or insurance policy so as to be notified in the event of the bond or policy’s cancellation.

(4) A third party administrator licensed or applying for licensure under this Chapter shall make available for inspection by the Commissioner its accounts, records, and files for examination, and make its officers available to give information with respect to its affairs, as often as reasonably required by the Commissioner.

(5) The Commissioner may refuse to issue a certificate of authority or license if the Commissioner determines that the third party administrator, or any individual responsible for the conduct of affairs of the third party administrator is not competent, trustworthy, financially responsible or of good personal and business reputation, or has had an insurance or a third party administrator certificate of authority or license denied or revoked for cause by any jurisdiction, or if the Commissioner determines that any of the grounds set forth in Rule 0780- 01-81-.10 exists with respect to the third party administrator.

(6) A certificate of authority or license issued under this Chapter shall remain valid, unless surrendered, suspended or revoked by the Commissioner, for a period of one (1) year.

(7) A third party administrator licensed or applying for licensure under this Chapter shall immediately notify the Commissioner of any material change in its ownership, control, or any other fact or circumstance affecting its qualification for a certificate of authority or license in this State.

(8) All third party administrators shall annually on or before the anniversary date of the granting of its certificate of authority renew its certificate of authority.

(9) A third party administrator that holds a license as a service company at the time of the effective date of this Chapter has until January 1, 2006, to obtain a certificate of authority under this Chapter.

History

• Authority: T.C.A. §§ 50-6-405(b), 50-6-405(c), 50-6-405(h), 56-1-409 and 4-5-320.
• Administrative History: Original rule filed September 12, 2005; effective November 26, 2005. Amendments filed October 13, 2008; effective December 27, 2008.

Tenn. Comp. R. & Regs. 0780-01-81-.10 GROUNDS FOR DENIAL, SUSPENSION, OR REVOCATION OF CERTIFICATE OF

AUTHORITY.

(1) The certificate of authority or license of a third party administrator may be denied, suspended, or revoked if the Commissioner finds that the third party administrator:

(a) Has violated any lawful rule or order of the Commissioner or any provision of the insurance laws of this state specifically applicable to third party administrators;

(b) Is in an unsound financial or operational condition. The Commissioner, in evaluating the financial or operational condition of a third party administrator, may utilize the criteria contained in Chapter 0780-01-66. The Commissioner may consider such other factors in evaluating the financial or operational condition of a third party administrator deemed to be appropriate;

(c) Is using such methods or practices in the conduct of its business so as to render its further transaction of business in this state hazardous or injurious to insured persons or the public;

(d) Has failed to pay any judgment rendered against it in this state within sixty (60) days after the judgment has become final;

(e) Has refused to be examined or to make available its accounts, records and files for examination, or if any individual responsible for the conduct or affairs of the third party administrator, including 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 or the partners or members in the case of a partnership, association or limited liability company; any shareholder or member holding directly or indirectly ten percent (10%) or more of the voting stock, voting securities or voting interest of the third party administrator; and any other person who exercises control or influence over the affairs of the third party administrator; has refused to give information with respect to its affairs or has refused to perform any other legal obligation as to an examination, when required by the Commissioner;

(f) Has, without just cause, refused to pay proper claims or perform services arising under its contracts or has, without just cause, caused covered employees to accept less than the amount due them or caused covered employees to employ attorneys or bring suit against the third party administrator or employer or pool to secure full payment or settlement of such claims;

(g) At any time fails to meet any qualification for which issuance of the certificate could have been refused had the failure then existed and been known to the Commissioner;

(h) If any of the individuals responsible for the conduct of its affairs, including 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 or the partners or members in the case of a partnership, association or limited liability company; any shareholder or member holding directly or indirectly ten percent (10%) or more of its voting stock, voting securities or voting interest; and any other person who exercises control or influence over its affairs; has been convicted of, or has entered a plea of guilty or nolo contendere to, a felony without regard to whether adjudication was withheld;

(i) Is under suspension or revocation in another state; or (j) Has failed to timely file its annual renewal application pursuant to Rule 0780-01-81-.09.

(2) The Commissioner may, in his or her discretion after making the finding required by T.C.A. § 4-5-320 that public health, safety or welfare imperatively requires emergency action, and without advance notice or hearing, immediately suspend the certificate of authority or license of a third party administrator if the Commissioner finds that one or more of the following circumstances exist:

(a) The third party administrator is insolvent or impaired;

(b) A proceeding for receivership, conservatorship, rehabilitation, or other delinquency proceeding regarding the third party administrator has been commenced in any state; or (c) The financial condition or business practices of the third party administrator otherwise pose an imminent threat to the public health, safety, or welfare of the residents of this state.

(3) Any action by the Commissioner to suspend or revoke a certificate of authority pursuant to this Chapter shall be governed by the Uniform Administrative Procedures Act, compiled in T.C.A. §§ 4-5-101, et seq.

(4) The Commissioner may serve a notice or order in any action arising under this Chapter by registered or certified mail to the third party administrator at the address of record in the files of the Commissioner. Service in the manner set forth herein shall be deemed to constitute service and reasonable notice to such third party administrator or applicant. The Commissioner may also serve notice of such action to all known employers or pools serviced by the third party administrator.

(5) Nothing in this Rule shall be deemed to create a private cause of action against a third party administrator.

History

• Authority: T.C.A. §§ 50-6-405(b), 50-6-405(c), 50-6-405(h) and 4-5-320.
• Administrative History: Original rule filed September 12, 2005; effective November 26, 2005.

Chapter 0780-01-82 Rating Appeals Before the Commissioner

Tenn. Comp. R. & Regs. 0780-01-82-.01 PURPOSE

The purpose of this Chapter is to:

(1) Set forth requirements for insurers and rate service organizations in providing a process whereby insureds of workers’ compensation policies may request a review of the application of the insurer’s or rate service organization’s rating system to the insured’s coverage in this state;

(2) Establish procedures for such insureds in this state to appeal to the commissioner an insurer’s or rate service organization’s application of the rating system to the insured’s insurance coverage; and (3) Provide guidelines in determining what information an insurer must provide to insureds seeking pertinent information under T.C.A. § 56-5-309(a), the length of time an insurer has to provide such information, and what an insurer may charge for such information.

History

• Authority: T.C.A. §§ 56-2-301 and 56-5-309.
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Tenn. Comp. R. & Regs. 0780-01-82-.02 SCOPE

This Chapter applies to all insureds of workers’ compensation policies delivered in the State of Tennessee.

History

• Authority: T.C.A. §§ 56-2-301 and 56-5-309.
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Tenn. Comp. R. & Regs. 0780-01-82-.03 AUTHORITY

This Chapter is promulgated pursuant to the authority contained in T.C.A. §§ 56-5- 309(d), 4-5-102, 4-5-219, 56-2-301.

History

• Authority: T.C.A. §§ 4-5-102, 4-5-219, 56-2-301 and 56-5-309(d).
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Tenn. Comp. R. & Regs. 0780-01-82-.04 DEFINITIONS

(1) “Administrative Procedures Division” means the Administrative Procedures Division of the Office of the Secretary of State, 312 Eighth Avenue, 8th Floor, William R.

Snodgrass Tower, Nashville, Tennessee 37243, Telephone (615) 741-7008.

(2) “Commissioner” means the Commissioner of the Tennessee Department of Commerce and Insurance or the commissioner’s designee.

(3) “Costs of the appeal” means the charges of the Administrative Procedures Division and Court Reporters, for participating in any appeal brought under this Chapter. The charges of the Court Reporters shall also include transcription costs.

(4) “Department” means the Tennessee Department of Commerce and Insurance.

(5) “Division” means the Insurance Division of the Tennessee Department of Commerce and Insurance.

(6) “Improper classification” means any classification not done in conformity with the established rules and guidelines of the designated rate service organization.

(7) “Insurer” means all corporations, associations, partnerships, pools established under T.C.A. § 50-6-405(c)(1), or individuals engaged as principals in the business of workers’ compensation insurance.

(a) “Insurer” includes the Tennessee Workers’ Compensation Insurance Plan developed by the commissioner pursuant to T.C.A. § 56-5-314(c).

(b) “Insurer” does not include a surplus lines insurance company.

(8) “Party” means:

(a) The named person whose legal rights, duties and privileges or immunities are being adjudicated in the appeal;

(b) Any other person who is duly granted intervention in the appeal; and (c) Any agency named as a party to the adjudicative proceeding entitled to or permitted by the law being enforced to participate fully in the proceeding.

(9) “Person” means an individual or business entity.

(10) “Rate Service Organization” means a rate service organization licensed by the commissioner pursuant to T.C.A. § 56-5-310.

(11) “Rating System” means the systematic process of determining workers’ compensation premium based upon rules published in the applicable manuals, workers’ compensation statutes, and the insurer’s rate pages.

(12) “Uniform Administrative Procedures Act” means the act compiled in T.C.A. Title 4,

Chapter 5, including the contested case provisions of the Act in Part 3 thereof.

History

• Authority: T.C.A. §§ 4-5-301 et seq., 50-6-405, 56-1-102, 56-5-309, 56-5-320(b) and (c).
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Tenn. Comp. R. & Regs. 0780-01-82-.05 REQUEST TO REVIEW

(1) (a) Every insurer and rate service organization doing business in this state shall provide a process by which insureds may request the review of the application of the insurer’s or rate service organization’s rating system to that person’s insurance coverage.

(b) At a minimum, each process required in Subparagraph (a) of this Paragraph shall contain the following:

1. The insurer or rate service organization shall have thirty (30) days, after receipt by the insurer or rate service organization of a written request to review, to consider the request to review and communicate its decision to the requesting party.

2. The insurer or rate service organization shall provide its decision on the merits of the request in writing to the requesting party and shall specify the reason for its decision.

(2) Every insurer shall provide to its insureds a copy of its process at the time of the initial issuance of the insurance policy. In the event an insurer changes its process, it shall notify its insureds no later than at the time of the next renewal.

History

• Authority: T.C.A. §§ 56-5-309(b) and (d) and 56-5-314(c).
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Tenn. Comp. R. & Regs. 0780-01-82-.06 FILING OF APPEALS

(1) Any person aggrieved by a decision on the merits of the appeal rendered pursuant to

Rule 0780-1-82-.05, or any person that does not receive a written decision on a request for review submitted pursuant to Rule 0780-1-82-.05 within forty-five (45) days from the date the insured sends the request to review to the insurer or rate service organization, shall have the right to appeal the decision of the insurer or rate service organization to the commissioner, subject to the conditions set forth in this

Chapter. The commissioner shall presume that after the expiration of forty-five days, the insurer or rate service organization has failed to act within the required thirty (30) day period provided for in T.C.A. § 56-5-309(b).

(2) In order to be considered, any appeal filed pursuant to this Chapter must meet the following requirements:

(a) The appeal must be filed with the commissioner within thirty (30) days of either:

1. The receipt of the decision; or 2. Expiration of the forty-five (45) day period provided for in Rule 0780-1- 82-.06(1);

(b) The appeal must contain a short and plain statement as to what portion of the decision is being appealed and the basis for such appeal;

(c) The appeal must be accompanied by the written decision rendered by the insurer or rate service organization or if applicable, a written statement from the insured that a request for review was made over forty-five days (45) ago and that no response has been received;

(d) The appeal should specify the date in which the insured would like to have the hearing consistent with the dates provided in Rule 0780-1-82-.07(1); and (e) The appeal must be accompanied by a certification from the insured or the insured’s attorney that a copy of any materials filed with the commissioner have also been sent to the Administrative Procedures Division of the Office of the Secretary of State and all parties to the dispute.

1. In sending the appeal, the insured may use any method allowed by law for legal service of process.

2. The appeal to the commissioner shall be sent to the Department of Commerce and Insurance, Davy Crockett Tower, Actuarial Services

Section, 4 th Floor, 500 James Robertson Parkway, Nashville, Tennessee 37243.

History

• Authority: T.C.A. § 56-5-309(b), (c) and (d).
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Tenn. Comp. R. & Regs. 0780-01-82-.07 SCHEDULING OF APPEALS

(1) The Division shall establish hearing dates in consultation with the Administrative Procedures Division. The Division shall place on its web-site the dates on which appeals may be heard. Appellants shall use only such dates in meeting the requirements of Rule 0780-1-82-.06(2)(d). Where practical, the appellant shall attempt to contact all parties to the dispute in order to schedule the hearing on a date agreeable to all the parties.

(2) Upon receipt of a petition for appeal and a requested hearing date, the Division shall issue a Notice of Hearing to all parties to the appeal specifying the date, place and time in which the matter will be heard. A hearing shall not be conducted earlier than thirty (30) days following the issuance of the Notice of Hearing.

(3) Any request for continuance or postponement of a hearing shall be filed with and heard by the administrative law judge appointed by the Administrative Procedures Division.

History

• Authority: T.C.A. §§ 4-5-307, 4-5-308, 56-5-309(b), (c) and (d), and Tenn. Comp. R. & Regs.

Tenn. Comp. R. & Regs. 0780-01-82-.08 PROCEDURE FOR APPEALS

(1) All hearings conducted pursuant to this Chapter shall be held in conformity with the Uniform Administrative Procedures Act provisions for contested cases and the Rules of Procedure for Contested Cases of the Rules of the Secretary of State as compiled at Chapter 1360-4-1.

(2) All appeals heard under this Chapter shall be heard by the commissioner in the presence of an administrative judge appointed by the Administrative Procedures Division.

(3) The Division may intervene in any appeal brought under this Chapter:

(a) If in the Division’s opinion, the appeal involves issues or the outcome of the appeal could directly or indirectly affect the regulatory responsibilities of the Division;

(b) The Division believes that the commissioner should consider imposing the sanctions authorized under T.C.A. § 56-5-309(c), in which case the Division shall give notice of the proposed imposition of sanctions through its notice of intervention; or (c) For other good cause.

(4) At the end of the hearing, the commissioner may:

(a) Make a ruling and may order one or more of the parties to submit a draft order for consideration. Any such ruling shall either assess one of the parties the costs of the appeal, or request argument from the parties as to the issue as to which party should be assessed such costs; or (b) Order one or more party to submit proposed Findings of Fact and Conclusions of Law for consideration by the commissioner. All such proposed Findings of Fact and Conclusions of Law shall address the issue of which party should be assessed the costs of the appeal.

History

• Authority: T.C.A. §§ 4-5-301 et seq., 4-5-219, and 56-5-309(b), (c), and (d).
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Tenn. Comp. R. & Regs. 0780-01-82-.09 SETTLEMENT OF APPEALS

(1) In lieu of having an appeal, the parties may agree at any time to the informal settlement of the matter being appealed.

(2) All settlement agreements shall provide for the payment of all costs of the appeal. In the event the settlement agreement does not contain any such provision, the commissioner may assess all costs against the insurer or rate service organization that was a party to the appeal.

History

• Authority: T.C.A. §§ 4-5-105 and 56-5-309(b) and (d).
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Tenn. Comp. R. & Regs. 0780-01-82-.10 FINAL ORDER

(1) The commissioner shall issue an order within sixty (60) days of the date of the receipt of the transcript of the hearing or the receipt of any proposed Findings of Fact and Conclusions of Law, whichever is later. The commissioner may have additional time to render a Final Order upon waiver, consent of the parties to such extended period, or for good cause shown in accordance with T.C.A. § 4-5-314(g).

(2) Orders issued under Paragraph (1) of this Rule:

(a) Shall contain Findings of Fact based exclusively upon the evidence of record in the adjudicative proceeding and on matters officially noticed in that proceeding;

(b) May utilize the commissioner’s experience, technical competence and specialized knowledge in the evaluation of evidence (c) Shall contain Conclusions of Law as to whether there was a proper application of the insurer’s or rate service organization’s rating system to the appellant’s insurance coverage;

(d) Shall order the payment of any unpaid premiums owed by the insured to the insurer as a result of the proper application of the insurer’s or rate service organization’s rating system to the appellant’s insurance coverage;

(e) Shall order the return or crediting of premiums paid by a insured that were not lawfully owed due to the improper application of the insurer’s or rate service organization’s rating system to the appellant’s insurance coverage;

(f) Shall specify the amount of time the insured has to make payment;

(g) Shall assign the costs of the appeal, in the commissioner’s discretion, to the non-prevailing party;

(h) Shall order that an insurer is not entitled to premiums invoiced or billed to the insured due to the incorrect application of the insurer’s or rate service organization’s rating system to the appellant’s insurance coverage; and (i) May impose civil penalties of up to ten thousand dollars ($10,000) per occurrence upon a finding that a workers’ compensation insurer, without any lawful basis, has assessed an employer premium:

1. For individuals who are not employees; or 2. On the basis of improper classification of employees.

2. In determining whether to impose a civil penalty, under T.C.A. § 56-5- 309(c), the Commissioner may take into account the facts and circumstances of the particular appeal under review, including whether the action by the insurer was in good faith based on the information available to it at the time the action was taken.

3. Any penalties assessed under this Chapter shall be made payable to the Department.

(3) Any order issued under this Rule shall be considered a Final Order of the Department.

(4) All orders issued under this Rule shall be sent by the commissioner to each party.

The commissioner shall also cause to be published on the Division’s web-site all final non-appealable orders issued under this Rule for at least ten (10) years from the date of entry.

History

• Authority: T.C.A. §§ 4-5-314 and 56-5-309(b), (c) and (d).
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Tenn. Comp. R. & Regs. 0780-01-82-.11 JUDICIAL REVIEW

A person who is aggrieved by a Final Order entered pursuant to this Chapter is entitled to judicial review pursuant to T.C.A. § 4-5-322.

History

• Authority: T.C.A. §§ 4-5-322 and 56-5-309(b), (c) and (d).
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Tenn. Comp. R. & Regs. 0780-01-82-.12 INFORMATION PROVIDED TO INSUREDS

(1) To the extent applicable, every insurer or rate service organization shall, within a reasonable time after receipt of a written request and upon payment of a reasonable charge, furnish to any insured affected by a rate published by it, all pertinent information as to such rate. However, the insurer’s obligation to furnish loss run

history to an insured shall be consistent with the requirements of T.C.A. § 56-5-323.

(2) For purposes of this Rule:

(a) A “reasonable time” means the later of thirty (30) days from the date of the receipt of the request or fourteen (14) days from the date of payment of the reasonable fee;

(b) A “reasonable charge” means a fee not to exceed twenty-five dollars ($25).

However, with respect to loss sensitive plans the fee must not exceed fifty dollars ($50); and (c) “Pertinent information” means the following:

1. The schedule rating worksheet if applicable to the insured;

2. The insured’s experience modification worksheet and an explanation as to how the policyholder can obtain the National Council on Compensation Insurance’s publication, “The ABC’s of Experience Rating”;

3. Applicable premium discount and small deductible tables if applicable; and 4. With respect to loss sensitive plans, (i) The insurer’s worksheets, including their loss rating model and the development of the insurance charges;

(ii) A statement as to how much the company has built in for claims and loss control expenses, profit, as well as general expenses and taxes; and (iii) A detailed statement as to how the insurer arrived at the premium.

History

• Authority: T.C.A. §§ 56-2-301 and 56-5-309(a) and (d).
• Administrative History: Original rule filed December 11, 2007; effective February 24, 2008.

Chapter 0780-01-83 Self-Insured Workers' Compensation Single Employers

Tenn. Comp. R. & Regs. 0780-01-83-.01 PURPOSE AND SCOPE

The purpose of this Chapter is to provide for the administration of the regulation of Employers that self-insure their workers’ compensation liabilities in this State pursuant to T.C.A. § 50-6-405(b) in order to better protect the health and welfare of the Employees working for such Employers as well as the public at large.

History

• Authority: T.C.A. §§50-6-405(b)(8) and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.02 DEFINITIONS

(1). “Aggregate Excess Insurance” means the amount of insurance required to cover the total accumulated workers’ compensation benefits for all claims payable for a given period of time with the Employer retaining an obligation for a designated amount as a deductible and the insurer paying all amounts due thereafter up to a maximum total obligation.

(2) “Certificate of Authority” means a license issued by the Commissioner to an Employer granting it the

authority to self-insure the workers’ compensation liabilities of its Employees in this State.

(3) “Commissioner” means the Commissioner of Commerce and Insurance.

(4) “Department” means the Tennessee Department of Commerce and Insurance.

(5) “Employee” means an employee of an Employer that self-insures its workers’ compensation benefits and liabilities pursuant to T.C.A. § 50-6-405(a)(2).

(6) “Employer” means an employer that self-insures its workers’ compensation liabilities pursuant to T.C.A. § 50-6-405(a)(2).

(7) “IBNR” means incurred but not reported claims.

(8) “Impaired Employer” means an Employer:

(a) Whose liabilities exceed the value of its assets and/or that has stopped paying debts in the ordinary course of business or is unable to pay them as its debts fall due, as may be shown by an excess of the Employer’s required reserves and other liabilities over its assets;

October, 2005 (b) Who has suspended payment of workers’ compensation benefits as determined by the Commissioner;

(c) Who has filed for relief under bankruptcy laws;

(d) Against whom bankruptcy proceedings have been filed; or (e) For whom a receiver has been appointed by a court of this state.

(9) “Known Claims” means claims that have been incurred by an Employee of the Employer and submitted to an Employer for payment of workers’ compensation benefits.

(10) “Loss Prevention Effort” means an ongoing effort by the Employer to integrate health and safety into the workplace in such a manner that occupational injuries and illnesses are reduced.

(11) “Loss Prevention Plan” means a plan developed by the Employer with the primary emphasis on reduction of workplace injuries and illnesses.

(12) “Loss Prevention Services” means services designed to advise and assist Employers in the identification, evaluation, and control of existing and potential causes of accidents and occupational health and safety problems.

(13) “Loss Prevention Services Program” means a program intended to promote occupational health and safety, and to help eliminate and control work hazards to Employees.

(14) “Loss Reserves” means funds of the Employer immediately available to pay:

(a) Known or open claims and expenses therewith;

(b) IBNR and expenses associated therewith;

(c) Unearned premiums; and (d) Bad or uncollectible debts.

(15) “NAIC” means the National Association of Insurance Commissioners.

(16) “Person” means an individual or a business entity.

(17) “Qualified Actuary” means an individual who:

(a) Is a member in good standing of the American Academy of Actuaries and an associate or fellow of the Casualty Actuarial Society;

(b) Is qualified to sign statements of actuarial opinion for workers’ compensation insurance company annual statements in accordance with the American Academy of Actuaries and Casualty Actuarial Society’s qualification standards for actuaries signing such statements;

(c) Is familiar with the reserve requirements applicable to workers’ compensation insurance companies and self-insuring Employers; and (d) Has not been found by the Commissioner (or if so found has subsequently been reinstated as a qualified actuary), following appropriate notice and hearing to have:

October, 2005 1. Violated any provision of, or any obligation imposed by, the Tennessee Insurance Law or other law in the course of his or her dealings as a qualified actuary;

2. Been found guilty of fraudulent or dishonest practices;

3. Demonstrated his or her incompetence, lack of cooperation, or untrustworthiness to act as a qualified actuary;

4. Submitted to the Commissioner during the past five (5) years an actuarial opinion or memorandum that the Commissioner rejected because it did not meet the provision of this Chapter including standards set by the Actuarial Standards Board; or 5. Resigned or been removed as an actuary within the past five (5) years as a result of failure to adhere to generally acceptable actuarial standards.

(18) “Qualified United States Financial Institution” shall have the meaning assigned by T.C.A. § 56-2- 209(c).

(19) “Reserve” means the amount necessary to satisfy all debts, past, present, and future, incurred by reason of industrial accidents or occupational diseases, the origins of which commenced prior to the date of reserve determination.

(20) “Specific Excess Insurance” means the amount of insurance required to cover the workers’ compensation benefits arising out of a specific occurrence (accident) or occupational disease under the Workers’ Compensation Law with the Employer retaining an obligation for a designated amount as a deductible and the insurer assuming the obligation for all amounts due thereafter up to a maximum total obligation.

(21) “Tennessee Insurance Law” means any law administered by the Commissioner affecting the business of insurance in this state, including, but not limited to T.C.A. § 50-6-405 and T.C.A. §§ 56-1-101, et.

seq. as well as any rules promulgated thereunder.

(22) “Third party administrator” means any person engaged by an Employer, excluding an employee of the Employer, to carry out the policies established by the Employer and to provide day to day management of the Employer’s workers’ compensation benefits.

(23) “Workers’ compensation” means both workers’ compensation and employer’s liability as prescribed under Title 50, Chapter 6 of the Tennessee Code Annotated.

History

• Authority: T.C.A. §§ 50-6-405(b)(8) and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.03 CERTIFICATE OF AUTHORITY REQUIRED

No person shall act as an Employer without a Certificate of Authority issued to it by the Commissioner.

History

• Authority: T.C.A. §§ 50-6-405(b)(3), 50-6-405(b)(8) and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.04 APPLICATION FOR CERTIFICATE OF AUTHORITY

(1) To apply for a Certificate of Authority, an Employer shall file with the Commissioner an application on a form adopted by the Commissioner, accompanied by a non-refundable filing fee as set under T.C.A. § 56-4-101(a)(1). A person in this state applying for a Certificate of Authority to act as an Employer shall, under penalty of refusal, suspension or revocation of the certificate of authority, October, 2005 declare therein that the statements made in the application are true, correct and complete to the best of the person’s knowledge and belief.

(2) An application of an Employer or prospective Employer shall include the following documentation, together with such other information or documentation as the Commissioner may require:

(a) Financial statements.

1. The last three (3) Form 10-K’s filed by the Employer with the U. S. Securities and Exchange Commissioner, if such Employer files such 10-K’s; and 2. The Employer’s independently audited financial statements according to Generally Accepted Auditing Standards of the American Institute of Certified Public Accountants with the accompanying footnotes and the auditor’s opinion for the preceding three (3) fiscal years.

(b) Loss history.

1. Documentation evidencing the applicant’s loss history to include the following:

(i) The applicant’s organizational structure and management background;

(ii) The applicant’s profit and loss history for the past three (3) years;

(iii) The applicant’s workers’ compensation loss history for the past three (3) years; and (iv) The number of Employees employed by the applicant and/or affected by the applicant’s self-insurance program.

(c) Administration.

1. A plan for claims administration that is acceptable to the Commissioner and that designates a third party administrator.

(i) An Employer may not contract for services with a third party administrator unless the third party administrator holds a certificate of authority issued by the Commissioner pursuant to any applicable statutes or rules.

2. Copies of each contract entered into with a person that provides claims services, underwriting services, or accident prevention services if the provider of those services is not an Employee of the applicant.

(3) The Commissioner shall evaluate the information contained in the application required to be filed under this Rule to assure that no gaps in funding exist and that funds necessary to pay the financial obligations of the Employer will be available on a timely basis. The Commissioner may, in addition to any other factors set forth in this Chapter, consider the following factors in reviewing an application for a Certificate of Authority under this Rule:

(a) The applicant’s organizational structure and management background;

(b) The applicant’s profit and loss history;

(c) The applicant’s workers’ compensation loss history;

October, 2005 (d) The source and reliability of the financial information submitted by the applicant;

(e) The number of Employees affected by self-insurance;

(f) The applicant’s access to excess insurance markets;

(g) Financial ratios, indexes, or other financial measures that the Commissioner finds appropriate, including but not limited to the following:

1. Liquidity ratio;

2. Ratio of current assets to current liabilities;

3. Ratio of tangible net worth to long-term debt;

4. Ratio of tangible net worth to total liabilities;

5. Cash flow;

6. Working capital; and 7. Profitability.

(h) Any other information considered appropriate by the Commissioner.

(4) If an applicant is a subsidiary, the applicant’s parent organization must guarantee the obligations imposed on the applicant by this Chapter and the Tennessee workers’ compensation obligations as contained in T.C.A. § 50-6-405(a).

(5) The Commissioner may require any documents from the Employer necessary to verify the information contained in an application.

History

• Authority: T.C.A. §§ 50-6-405(a), 50-6-405(b)(1)-(b)(2), 50-6-405(b)(8), and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.05 SECURITY DEPOSITY REQUIREMENTS

(1) Each Employer shall provide security for incurred liabilities for compensation through a deposit with the Commissioner in the following forms:

(a) Negotiable securities;

(b) Surety bonds;

(c) Certificates of deposit; or (d) Letters of credit.

(2) The sum of the securities on deposit with the Commissioner shall be at least equal to the greater of the following:

(a) $500,000;

(b) One hundred and twenty-five percent (125%) of the Employer’s incurred liabilities for compensation; or October, 2005 (c) Such other amount determined by the Commissioner to be necessary to provide sufficient security.

(3) The security, or a contract between the Employer, a depository institution and the Commissioner evidencing the security held in said depository institution for purposes of compliance with this Rule, shall be held by the Commissioner and shall be conditioned to run solely and directly for the benefit of the Employees of the Employer.

(4) Any legal actions to enforce the payment of the security being held for purposes of compliance with this section shall be brought by the Commissioner for the benefit of the Employees of the Employer.

(5) The security held pursuant to this Rule may be used for the payment of any and all fees or costs required to administer the disbursement of the proceeds to or for the benefit of the Employees.

(6) The venue for any suit filed by the Commissioner under this provision is in Davidson County, Tennessee.

(7) Negotiable securities.

(a) All negotiable securities filed under this Rule shall be the classes of securities listed below and shall be subject to the following requirements:

1. Obligations issued, assumed or guaranteed by any business entity created or existing under the laws of the United States or any state thereof; provided, that the obligation is or the issuing, assuming or guaranteeing business entities’ long term obligations are rated one (1) of the four (4) highest grades by any of the nationally recognized statistical rating organizations recognized by the securities valuation office of the National Association of Insurance Commissioners or one (1), two (2) or three (3) by the securities valuation office of the National Association of Insurance Commissioners.

2. Obligations, not in default as to principal or interest, which are valid and legally authorized obligations issued, assumed or guaranteed by the United States, or by any state thereof, or by any county, city, town, village, municipality or district therein, or by any political subdivision thereof, or by any civil division or public instrumentality of one (1) or more of the foregoing, if, by statutory or other legal requirements applicable thereto, such obligations are payable, as to both principal and interest, from taxes levied, or by such law required to be levied, upon all taxable property or all taxable income within the jurisdiction of such governmental unit or from adequate special revenues pledged or otherwise appropriated or by such law required to be provided for the purpose of such payment, but not including any obligations payable solely out of special assessments on properties benefited by local improvements.

(b) Before accepting any negotiable security for purposes of this Rule, the Commissioner shall determine whether such negotiable security is suitable for such use. The Commissioner shall consider, as appropriate, the interest rate, credit, liquidity, price, transaction, and other risks associated with such negotiable security.

(8) Bonds.

(a) All bonds filed under this Rule shall be issued by an insurer authorized to do business in the state of Tennessee and the insurer shall maintain at least an A rating as determined by the A.M.

Best Company.

October, 2005 (b) Any bond issued by an insurer for purposes of this Rule shall contain a provision requiring the insurer to give the Commissioner ninety (90) days’ written notice of its intention to cancel such bond. The insurer shall not cancel such bond until written notice is given to the Commissioner and a copy of such notice is given to the Employer.

(c) An insurer that cancels a bond issued pursuant to this Rule before the date specified in the written notice as set forth above shall be liable to the Employees of the Employer for any lawful workers’ compensation claims that were incurred on or before the date the bond was cancelled in amounts up to the maximum penal sum of the bond.

(9) Certificates of deposit.

(a) All certificates of deposit filed under this Rule must be held in a depository institution that is located in the state of Tennessee and is either federally chartered or state chartered.

(b) If a certificate of deposit is filed with the Commissioner, an agreement shall be entered into between the Commissioner, the depository institution and the Employer pledging the certificate of deposit for the benefit of the Employer’s Employees. The agreement shall contain a provision executed between the depository institution and the Employer requiring the Employer and the depository institution to give at least ninety (90) days’ written notice of their intention not to renew the certificate of deposit and a provision that, unless written notice not to renew is given to the Commissioner by the Employer and depository institution within ninety (90) days, the certificate of deposit shall be automatically renewed. The Employer shall submit to the Commissioner, on an annual basis, the status of such certificate of deposit, including evidence of its renewal.

(c) If the Employer and depository institution fail to comply with T.C.A. § 50-6-405(b)(1)(G)(i) or this Rule, the certificate of deposit shall be automatically renewed.

(d) Any interest accruing on the certificate of deposit while held in the depository institution shall be returned to the Employer at the termination of the certificate of deposit, with the prior written approval of the Commissioner, provided that no claim is due or asserted against the certificate of deposit by the Commissioner.

(10) Letters of credit.

(a) Any letter of credit filed under this Rule must be issued or guaranteed by a Qualified United States Financial Institution that is located in the State of Tennessee.

(b) If an Employer elects to secure payment of its workers’ compensation claims by way of a letter of credit, an agreement shall be entered into between the Commissioner, the Employer and the depository institution pledging the letter of credit for the benefit of the Employer’s Employees and naming the Commissioner as beneficiary under such letter of credit.

(c) Such letter of credit shall be clean, irrevocable and unconditional and shall contain a provision which requires the issuer to automatically renew such letter of credit unless the issuer shall provide at least ninety (90) days’ prior written notice to the Commissioner of an intention to revoke or not renew such letter of credit. The Employer shall annually submit to the Commissioner information regarding the status of such letter of credit, including evidence of its renewal.

(d) Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or configuration shall, notwithstanding the issuing or confirming institution’s subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable October, 2005 as security until their expiration, extension, renewal, modification or amendment, whichever occurs first.

(11) An Employer shall notify the Commissioner if the security no longer meets the requirements of this

Rule. Such notice shall be given no later than fifteen (15) days from the time the Employer determines or should have determined that the security no longer meets such requirements.

(12) Any security held for purposes of compliance with this Rule shall be held for a minimum of ten (10) years after the Employer is no longer self-insured and the Employer shall maintain the fair market value of security on deposit at not less than five hundred thousand dollars ($500,000), unless otherwise approved by the Commissioner.

(13) Any security held for purposes of compliance with this Rule shall be in a form substantively that has been previously approved by the Commissioner. Any security that fails to meet any requirement under this section shall not be considered for purposes of determining an Employer’s compliance with any of the security maintenance requirements of this Rule.

History

• Authority: T.C.A. §§ 50-6-405(b)(1), 50-6-405(b)(8), 50-6-405(e), and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.06 ;

October, 2005 (d) The Employer has failed to pay any premium tax, regulatory penalty or assessment imposed upon the Employer at the time when such obligations are owed;

(e) The Employer has failed to cooperate in any examination or investigation initiated by the Commissioner pursuant to Rule 0780-1-83-.12;

(f) The Employer, or an officer or director thereof, has failed to comply with any of the provisions of this Chapter, or with any lawful orders of the Commissioner, within the time prescribed;

(g) The Employer, or an officer or director thereof, has failed to comply with any of the provisions of the Tennessee Insurance Law or any applicable regulations issued thereunder;

(h) The Employer, or an officer or director thereof, has provided incorrect, misleading, incomplete or materially untrue information to the Commissioner;

(i) The Employer, or an officer or director thereof, has been convicted of a felony deemed by the Commissioner to be related to the Employer’s overall fitness to self-insure and the Employer has failed to remove the officer or director;

(j) The Employer has failed to comply with any law applicable to the Employer with respect to the prompt payment of claims, including, but not limited to, those found in Tennessee Code Annotated Title 50, Chapter 6, and Title 56;

(k) The Employer is not sufficiently qualified or has not employed persons sufficiently qualified to administer a self-insurance program;

(l) The Employer fraudulently obtained its Certificate of Authority; or (m) The Employer made a misrepresentation in the application for the Certificate of Authority.

(2) An Employer’s failure to file any financial statements or reports required under this Chapter, authorizes the Commissioner to assess a civil penalty of one hundred dollars ($100) per day for each day of delinquency.

History

• Authority: T.C.A. §§ 50-6-405(b)(2)(A), 50-6-405(b)(4), and 50-6-405(b)(8).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.07 RESERVE REQUIREMENTS

(1) Each Employer shall establish and maintain adequate loss reserves for, as determined by a qualified actuary:

(a) Known claims and expenses associated therewith; and (b) Claims incurred but not reported and expenses associated therewith.

(2) In addition to the minimum requirements for reserves set out in this Chapter, the Commissioner may require, after notice and opportunity for hearing, additional amounts so that an Employer’s reserves are reasonable in relation to the Employer’s outstanding workers’ compensation liabilities and adequate to meet an Employer’s financial needs. For purposes of this Rule, in determining whether an Employer’s reserves are adequate, the following factors, among others, shall be considered:

(a) The size of the Employer as measured by its assets, capital and surplus, reserves, and other appropriate criteria;

(b) The classes of risks in which the Employer is self-insuring and the experience of losses for such classes;

(c) The loss history of the Employer;

(d) The nature and extent of the Employer’s excess insurance coverage;

(e) The quality, diversification and liquidity of the Employer’s investment portfolio; and (f) The recent past and projected future trend in the size of the Employer’s investment portfolio.

History

• Authority: T.C.A. §§ 50-6-405(a)(2), 50-6-405(b)(1), 50-6-405(b)(8), and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.08 REPORTING REQUIREMENTS

(1) Every Employer no later than the last day of the sixth month after the end of its immediately preceding fiscal year shall file an annual report with the Commissioner to include the following:

(a) Independently audited financial statements according to Generally Accepted Auditing Standards of the American Institute of Certified Public Accountants;

(b) Claims information, such as loss run information, in the form and manner prescribed by the Commissioner; and (c) A detailed accounting for reserves for losses outstanding incurred in connection with workers’ compensation self-insurance.

October, 2005 (2) Every Employer shall biennially and no later than the last day of the sixth month after the end of its immediately preceding fiscal year file with the Commissioner an opinion from a qualified actuary attesting to the adequacy of the Employer’s reserves.

(3) An Employer that amends its charter, articles of incorporation, or partnership agreement to change its identity or business structure, or in any other manner materially alters its status as it existed at the time of issuance of its Certificate of Authority shall, within thirty (30) days after the amendment or other action, notify the Commissioner of such action and provide the Commissioner with a copy of such amendment or other action.

(4) An Employer that changes its third party administrator shall notify the Commissioner at least thirty (30) days prior to any such change, and shall file a copy of the contract with its new third party administrator at that time.

(5) An Employer who declares voluntary bankruptcy or who is placed into involuntary bankruptcy under U.S.C. Title 11 shall notify the Commissioner, in writing, of the filing of a petition for bankruptcy within twenty-four (24) hours of such filing. An Employer shall also so notify the Commissioner of any affiliates of the Employer which have declared bankruptcy or have been placed into involuntary bankruptcy under U.S.C. Title 11. These notices should be sent to the following address: General Counsel, Department of Commerce and Insurance, Davy Crockett Tower, Fifth Floor, 500 James Robertson Parkway, Nashville, Tennessee 37243.

History

• Authority: T.C.A. §§ 50-6-405(b)(2), 50-6-405(b)(8), and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.09 LOSS PREVENTION

Each Employer shall implement and maintain a loss prevention effort, loss prevention plan, and a loss prevention services program and shall maintain written documentation of such plan and provide such documentation to the Commissioner upon request.

History

• Authority: T.C.A. §§ 50-6-405(b)(8) and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.10 TAXES AND DELINQUENCIES

(1) Each Employer shall be subject to pay a tax computed pursuant to T.C.A. § 56-4-207. Such tax shall also include the surcharge imposed on insurance companies pursuant to T.C.A. § 56-4-207 to be earmarked for the administration of the Tennessee Occupational Safety and Health Act, as contained in T.C.A. § 50-3-101, et seq.

(2) No grace period for the filing of returns and payments shall be allowed. A premium tax return and payment made to the Commissioner shall not be considered as paid on or before the due date unless:

(a) The premium tax return and payment are received by the Commissioner on or before the due date;

(b) The premium tax return and payment bears a post office cancellation mark stamped by the United States post office on or before the due date, or are mailed by certified or registered mail, or have a certificate of mailing on or before the due date. A premium tax return and payment received by the Commissioner bearing a metered mail stamp and no post office cancellation mark stamped by the United States post office shall be deemed filed and received on the date such premium tax return arrives at the Commissioner; or October, 2005 (c) In the event a premium tax return and payment are mailed but not received by the Commissioner, or received and the cancellation mark is illegible or omitted, such return and payment shall be deemed filed and received on the date they were mailed, if the sender establishes that the premium tax return and payment were deposited in the United States mail.

In order to establish proof of mailing under these circumstances, a record authenticated by the United States post office that the original mailing was sent registered mail, certified mail, or by certificate of mailing, shall be the only proof accepted by the Commissioner.

History

• Authority: T.C.A. §§ 50-6-405(b)(8), 50-6-405(h), 56-4-207 and 56-4-216.
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.11 SERVICE OF PROCESS

Every Employer that has operated, will operate, or is operating in this State as a self-insurer shall be deemed through acceptance of its Certificate of Authority to have appointed the Commissioner as its attorney-in-fact to receive service of legal process issued against it in this State with respect to its self-insurance of workers’ compensation liabilities. The appointment shall be irrevocable, shall bind any successor in interest, and shall remain in effect as long as there is in this State any obligation or liability of the Employer.

History

• Authority: T.C.A. §§ 50-6-405(b)(8) and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.12 EXAMINATIONS AND INVESTIGATIONS

(1) The Commissioner has the authority to examine the affairs of any Employer that has applied for or received a Certificate of Authority under this Chapter in order to determine the financial condition of the arrangement or to determine whether the arrangement is in compliance with all insurance laws and regulations applicable to it. Such examinations shall be conducted when ever deemed necessary but no less than once every five (5) years, and all expenses of such examinations shall be assessed against the Employer, including the costs of contract examiners or specialists.

(2) The Commissioner has the authority to investigate the affairs of any Employer that self-insures its workers’ compensation liabilities in this state in order to determine whether such person is in violation of the Tennessee Insurance Law or this Chapter.

History

• Authority: T.C.A. §§ 50-6-405(b)(7)-(b)(8), 50-6-405(h), and 56-1-408 through 56-1-413.
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.13 SUSPENSION OR REVOCATION OF CERTIFICATE OF AUTHORITY

(1) After notice and an opportunity for a hearing, unless the Commissioner meets the standards for summary proceedings contained in T.C.A. § 50-6-405(b)(4), the Commissioner may revoke or suspend the Certificate of Authority or a license issued under this Chapter upon a finding that any of the following exists:

(a) The Employer is in a hazardous financial or operational condition. The Commissioner, in evaluating the financial or operational condition of an Employer, may utilize the criteria contained in Rule 0780-1-66 and Rule 0780-1-83-.04(3). The Commissioner may consider such other factors in evaluating the financial or operational condition of an Employer deemed to be appropriate;

(b) The Employer has failed to maintain the security deposit required by Rule 0780-1-83-.05;

(c) The Employer has failed to maintain excess insurance in the amount or form required by Rule

Tenn. Comp. R. & Regs. 0780-01-83-.14 SURRENDER OF CERTIFICATE OF AUTHORITY

(1) An Employer may surrender its Certificate of Authority to self-insure at any time with the approval of the Commissioner. The Commissioner shall not grant the request of any Employer to surrender its Certificate of Authority until such time as the Employer has demonstrated to the Commissioner’s satisfaction that it has established an adequate program to pay all incurred losses, including unreported losses, that arise out of accidents or occupational diseases first distinctly manifested during the period of self-insurance.

(2) An Employer whose Certificate of Authority has been revoked, suspended, surrendered or otherwise terminated is not relieved of the obligation for compensation to an Employee for any compensable injury that occurred during the period of self-insurance.

History

• Authority: T.C.A. §§ 50-6-405(b)(8) and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005. October, 2005

Tenn. Comp. R. & Regs. 0780-01-83-.15 IMPAIRED EMPLOYERS

If an Employer has become an Impaired Employer as determined by the Commissioner, the Commissioner shall protect the Employees of such Employer by promptly:

(1) Calling the security deposit and placing the funds in an account identifying the Impaired Employer; and (2) Begin paying benefits out of the Impaired Employer’s account under the authority of this Rule or as directed by the court that takes jurisdiction of the funds under applicable law.

History

• Authority: T.C.A. §§ 50-6-405(b)(8) and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Tenn. Comp. R. & Regs. 0780-01-83-.16 SEVERABILITY

If any section or portion of a section of these regulations or its applicability to any person or circumstance is held invalid by a court, the remainder of the regulation or the applicability of the provision to other persons or circumstances shall not be affected.

History

• Authority: T.C.A. §§ 50-6-405(b)(8) and 50-6-405(h).
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005.

Chapter 0780-01-84 Medical and Professional Malpractice Claims and Expense Reporting

Tenn. Comp. R. & Regs. 0780-01-84-.01 REPEALED

History

• Authority: T.C.A. §§ 56-2-301; 56-32-118; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005. Amendment filed January 16, 2007, effective April 1, 2007. Amendment filed February 3, 2009; effective April 19, 2009. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-84-.10 REPEALED

History

• Authority: T.C.A. §§ 56-2-301; 56-32-118; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.
• Administrative History: Original rule filed February 3, 2009; effective April 19, 2009. Repeal filed September 23, 2024; effective December 22, 2024. APPENDIX A SPREADSHEET NAME, FIELD REQUIREMENT OR COLUMN HEADING DESCRIPTION OF DATA SOUGHT TECHNICAL FORMATTING OF DATA SOUGHT Pending Claims Spreadsheet This should contain information for pending claims that have been asserted through a lawsuit or by other means. This should not include information on claims that have been paid pursuant to a settlement or judgment. Closed Claims Spreadsheet This should contain information for claims that have been paid pursuant to a settlement or judgment, including claims that were settled or adjudicated with the condition of open medical treatment for the claimant. Entity Name This should be the name of the entity submitting the information required by T.C.A. §§ 56-54-101, et seq, and this Chapter. Data shall be in alpha-numeric format and reflect the name of the entity as found in the entity’s licensure materials (e.g.—insurance company’s certificate of authority). Entity Address 1 This should be the address of the entity submitting the information required by T.C.A. §§ 56-54-101, et seq, and this Chapter. Data shall be in alpha-numeric format and reflect the home office address of the entity. Entity Address 2 This field may be used if the address of the entity is more Data shall be in alpha-numeric format and reflect the home (Rule 0780-01-84-Appendix A, continued) than one (1) line, but may be left blank if the address of the entity is only one (1) line. office address of the entity. Entity Address City This should be the address city of the entity submitting the information required by T.C.A. §§ 56-54-101, et seq, and this Chapter. Data shall be in alpha-numeric format and reflect the home office address city of the entity. Entity Address State This should be the address state of the entity submitting the information required by T.C.A. §§ 56-54-101, et seq, and this Chapter. Data shall be in alpha-numeric format and reflect the home office address state of the entity. The address state shall be two (2) capitalized characters conforming to the United States Postal Service’s state abbreviations conventions. Entity Address ZIP Code This should be the address ZIP Code of the entity submitting the information required by T.C.A. §§ 56-54-101, et seq, and this Chapter. Data shall be in numeric format and reflect the home office address zip code of the entity. This field shall be presented as a five (5) digit numeral. If applicable, the five (5) digit zip code may be followed by the United States Postal Service’s “+4” code, in which case the sixth character must be a plus sign (+), with the seventh, eighth, ninth and tenth characters being numerals. Entity Contact Person This should be the name of a contact person representing the entity submitting the information required by T.C.A. §§ 56-54-101, et seq, and this Chapter. Data shall be in alpha-numeric format, with the first name of the contact person stated first, followed by a space, followed by the last name of the contact person. Entity Contact Telephone Number This should be the telephone number of a contact person representing the entity submitting the information required by T.C.A. §§ 56-54-101, et seq, and this Chapter. Data shall be in alpha-numeric format. The first three (3) characters must be the area code. The fourth character must be a hyphen. The fifth, sixth, and seventh characters must be the three (3) digit prefix that follows the area code. The eighth character must be a hyphen. The ninth, tenth, eleventh, and twelfth characters must be the last four (4) digits of the phone number. If there is an extension that should be entered, an “x” or an “X” shall be placed in the thirteenth position followed immediately by the extension number with a (Rule 0780-01-84-Appendix A, continued) maximum of six (6) alphanumeric characters. Entity Contact Electronic Mail Address This should be the electronic mail address of a contact person representing the entity submitting the information required by T.C.A. §§ 56-54-101, et seq, and this Chapter Data shall be in alpha-numeric format and reflect the full electronic mail address of the entity contact person. Claim and Incident Identifier This should be the identifier assigned to the claim or incident, if companion claims have been made by a claimant, by the insuring entity, self-insurer, facility or provider. Data shall be in alpha-numeric format and as found in the reporting entity’s records. Type of Health Care Professional This should list the type of health care professional against whom the claim was made. Data shall be chosen from a listing of health care professional options found on the commissioner’s form. Health Care Professional Specialty (if applicable) This should list the medical specialty of the health care professional against whom the claim was made. Data shall be chosen from a listing of health care professional specialty options found on the commissioner’s form. License Number This should be the health care institution or provider’s license or certificate number. Data shall be presented in the format of the entire license number expressed numerically without any other characters [e.g.—hyphens (-)] or spaces within the license number. Health Care Facility Type This should be the type of health care facility where the medical malpractice incident occurred. Data shall be chosen from a listing of health care facility options found on the commissioner’s form. Health Care Facility Location This should be the primary location within a facility where the medical malpractice incident occurred. Data shall be in alpha-numeric format and reflect the primary location within a facility where the medical malpractice incident occurred. Incident Location City This should be the address city of the location where the medical malpractice incident occurred. Data shall be in alpha-numeric format and reflect the address city where the medical malpractice incident occurred. Incident Location County This should be the address county of the location where the medical malpractice incident occurred. Data shall be in alpha-numeric format and reflect the address county where the medical malpractice incident occurred. Date of Incident This should be the date on which the incident that was the proximate cause of the medical malpractice claim. Data shall be in Gregorian USA format with a four (4) digit year (MM/DD/YYYY). This means a two (2) digit month (with leading zeros when necessary), a slash (/), a two (2) digit day (with (Rule 0780-01-84-Appendix A, continued) leading zeros when necessary), a slash (/), and a four (4) digit year. Type for Claim This should be the reason for the medical malpractice claim. The reporting entity must use the same allegation group and specific allegation codes that are used for mandatory reporting to the National Practitioner Data Bank. Data shall be in alpha-numeric format and use the allegation group and specific allegation codes that are used for mandatory reporting to the National Practitioner Data Bank. Date of Notice This should be the date on which notice was provided to the insuring entity, self-insurer, facility or provider. Data shall be in Gregorian USA format with a four (4) digit year (MM/DD/YYYY). This means a two (2) digit month (with leading zeros when necessary), a slash (/), a two (2) digit day (with leading zeros when necessary), a slash (/), and a four (4) digit year. Injured Person’s Sex This should be the gender of the injured person. Data shall be chosen from a listing of gender options found on the commissioner’s form. Injured Person’s Age This should be the age of the injured person on the date of the incident. Data shall be presented as a numeral and should reflect the age of the injured person as of the date of the incident. Claimant’s Social Security Number This should be the Social Security Number held by the person making the claim. Data shall be presented in the following format: the first, second and third characters must be numerals, the forth character must be a hyphen (-), the fifth and sixth characters must be numerals, the seventh character must be a hyphen (-), and the eighth, ninth, tenth and eleventh characters must be numerals. (XXX-XX-XXXX) Severity of Malpractice Injury This should be the severity of the malpractice injury using the National Practitioner Data Bank severity scale. Data shall be in alpha-numeric format and reflect the severity of the malpractice injury using the National Practitioner Data Bank severity scale. Policy Limits This should be the policy limits of the medical professional liability insurance policy covering the claim. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. Asserted Damages (other than set forth in lawsuit) This should include an amount that has been asserted against a reporting entity in a manner other than by filing a lawsuit. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. If data is entered in this column, no data should be entered in the column titled “Damages Claimed by Lawsuit”. (Rule 0780-01-84-Appendix A, continued) Damages Claimed by Lawsuit This should include the amount of damages asserted against a reporting entity in a lawsuit. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. If data is entered in this column, no data should be entered in the column titled “Asserted Damages (other than set forth in lawsuit)”. Date of the Filing of a Lawsuit This should be the date that any lawsuit was filed asserting damages against a reporting entity. Data shall be in Gregorian USA format with a four (4) digit year (MM/DD/YYYY). This means a two (2) digit month (with leading zeros when necessary), a slash (/), a two (2) digit day (with leading zeros when necessary), a slash (/), and a four (4) digit year. Data should be entered in this column only if data is also entered in the column titled “Damages Claimed by Lawsuit”. Amount Paid by Settlement This should include the total amount paid pursuant to a settlement between the injured person and the insuring entity, self-insurer, facility or provider. If there is more than one (1) defendant, this should include the total indemnity paid by or on behalf of this facility or provider. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. If data is entered in this column, no data should be entered in the column titled “Amount Paid by Judgment”. Amount Paid by Judgment This should include the total amount paid pursuant to a judgment against the insuring entity, self-insurer, facility or provider. If there is more than one (1) defendant, this should include the total indemnity paid by or on behalf of this facility or provider. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. If data is entered in this column, no data should be entered in the column titled “Amount Paid by Settlement”. Amount Paid by Alternative Dispute Resolution This should include the total amount paid pursuant to alternative dispute resolution, such as arbitration, mediation, private trial and other common dispute resolution methods, by the insuring entity, self-insurer, facility or provider. If there is more than one (1) defendant, this should include the total indemnity paid by or on behalf of this facility or provider. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. If data is entered in this column, no data should be entered in the column titled “Amount Paid by Settlement”. Did Settlement Occur Prior to Trial This should state whether the settlement was reached before Data shall be chosen from a listing of yes or no options (Rule 0780-01-84-Appendix A, continued) or after the date of the trial. found on the commissioner’s form. Economic Damages Paid Pursuant to Judgment This should include the amount of the judgment that was identified as economic damages. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. Non-Economic Damages Paid Pursuant to Judgment This should include the amount of the judgment that was identified as non-economic damages. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. Punitive Damages Paid Pursuant to Judgment This should include the amount of the judgment that was identified as punitive damages. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. Economic Damages Paid Pursuant to Settlement or Other This should include insuring entity’s or self-insurer’s best estimate of the amount of economic damages included in the settlement. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. Non-Economic Damages Paid Pursuant to Settlement or Other This should include the insuring entity’s or self-insurer’s best estimate of the amount of noneconomic damages included in the settlement. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. Attorney Fees Paid to Defense Counsel This should include the amount that was paid to defend the medical or professional malpractice claim. This should not include the expense related to expert witness fees, court costs, deposition costs, and other legal expenses. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. Expert Witness Fees Paid in Defense of Claim This should include the expert witness fees that were expended by the reporting entity. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. Court Costs Paid in Defense of Claim This should include the court costs that were expended by the reporting entity. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. Other Legal Fees and/or Defense Costs This should include any other legal fees or defense costs not specifically identified that were expended by the reporting entity. Data shall be presented as currency data in units of U.S. dollars rounded to the nearest whole dollar amount. Date of Final Indemnity Payment (if applicable) This should be the date in which the insuring entity, self-insurer, facility or provider made its final payment to the injured person. Data shall be in Gregorian USA format with a four (4) digit year (MM/DD/YYYY). This means a two (2) digit month (with leading zeros when necessary), a slash (/), a two (2) digit day (with leading zeros when necessary), a slash (/), and a four (4) digit year. Date Claim Was Closed This should be the date in which Data shall be in Gregorian USA (Rule 0780-01-84-Appendix A, continued) final action was taken by the insuring entity, self-insurer, facility or provider to close the claim. format with a four (4) digit year (MM/DD/YYYY). This means a two (2) digit month (with leading zeros when necessary), a slash (/), a two (2) digit day (with leading zeros when necessary), a slash (/), and a four (4) digit year. Name of Attorney Representing the Claimant This should name the attorney(s) representing the claimant and who received attorneys fees from representing the claimant. Data shall be in alpha-numeric format, with the first name of the attorney stated first, followed by a space, followed by the last name of the attorney. Authority: T.C.A. §§ 56-2-301; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.

Tenn. Comp. R. & Regs. 0780-01-84-.02 REPEALED

History

• Authority: T.C.A. §§ 56-2-301; 56-32-118; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005. Amendment filed January 16, 2007; effective April 1, 2007. Amendment filed February 3, 2009; effective April 19, 2009. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-84-.03 REPEALED

History

• Authority: T.C.A. §§ 56-2-301; 56-32-118; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005. Amendment filed January 16, 2007; effective April 1, 2007. Amendment filed February 3, 2009; effective April 19, 2009. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-84-.04 REPEALED

History

• Authority: T.C.A. §§ 56-2-301; 56-32-118; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005. Amendment filed January 16, 2007; effective April 1, 2007. Amendment filed February 3, 2009; effective April 19, 2009. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-84-.05 REPEALED

History

• Authority: T.C.A. §§ 56-2-301; 56-32-118; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.
• Administrative History: Original rule filed January 16, 2007; effective April 1, 2007. Amendment filed February 3, 2009; effective April 19, 1009. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-84-.06 REPEALED

History

• Authority: T.C.A. §§ 56-2-301; 56-32-118; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.
• Administrative History: Original rule filed August 11, 2005; effective October 25, 2005. Amendment filed January 16, 2007; effective April 1, 2007. Amendment filed February 3, 2009; effective April 19, 2009. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-84-.07 REPEALED

History

• Authority: T.C.A. §§ 56-2-301; 56-32-118; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.
• Administrative History: Original rule filed February 3, 2009; effective April 19, 2009. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-84-.08 REPEALED

History

• Authority: T.C.A. §§ 56-2-301; 56-32-118; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.
• Administrative History: Original rule filed February 3, 2009; effective April 19, 2009. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-01-84-.09 REPEALED

History

• Authority: T.C.A. §§ 56-2-301; 56-32-118; 56-54-101, et seq.; and 56-54-110; and 2008 Tenn. Pub. Acts, Ch. 1009.
• Administrative History: Original rule filed February 3, 2009; effective April 19, 2009. Repeal filed September 23, 2024; effective December 22, 2024.

Chapter 0780-01-85 Market Conduct Annual Statement Filing Requirements

Tenn. Comp. R. & Regs. 0780-01-85-.01 PURPOSE

The purpose of this Chapter is to set forth the manner in which insurers licensed in the State of Tennessee, except those that write only accident and health insurance, file market conduct annual statements with the commissioner in order to foster nationwide consistency in market conduct oversight.

History

• Authority: 2009 Public Acts, Chapter 383 and T.C.A. § 56-8-107.
• Administrative History: Original rule filed August 13, 2014; effective November 11, 2014.

Tenn. Comp. R. & Regs. 0780-01-85-.02 SCOPE

Every insurer authorized to do business under the provisions of Title 56, that is required to file annual statements pursuant to T.C.A. §§ 56-1-501, 56-44-102, or otherwise by law, with the exception of those that write only accident and health insurance, must file market conduct annual statements in the manner provided by this Chapter.

History

• Authority: 2009 Public Acts, Chapter 383 and T.C.A. § 56-8-107.
• Administrative History: Original rule filed August 13, 2014; effective November 11, 2014.

Tenn. Comp. R. & Regs. 0780-01-85-.03 AUTHORITY

This Chapter is promulgated by the commissioner pursuant to 2009 Public Acts, Chapter 383 and T.C.A. § 56-8-107.

History

• Authority: 2009 Public Acts, Chapter 383 and T.C.A. § 56-8-107.
• Administrative History: Original rule filed August 13, 2014; effective November 11, 2014.

Tenn. Comp. R. & Regs. 0780-01-85-.04 DEFINITIONS

(1) “Commissioner” means the commissioner of the Tennessee Department of Commerce and Insurance.

(2) “Department” means the Tennessee Department of Commerce and Insurance.

(3) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

(4) "NAIC" means the National Association of Insurance Commissioners.

History

• Authority: 2009 Public Acts, Chapter 383 and T.C.A. § 56-8-107.
• Administrative History: Original rule filed August 13, 2014; effective November 11, 2014. November, 2014 2

Tenn. Comp. R. & Regs. 0780-01-85-.05 MARKET CONDUCT ANNUAL STATEMENT

(1) Every insurer with a certificate of authority in this State, with the exception of those that write only accident and health insurance, shall electronically file with the commissioner its market conduct annual statement, as authorized by T.C.A. § 56-8-107, in accordance with the filing instructions published by the NAIC.

(2) For purposes of this chapter, the market conduct annual statement filing is not complete until it has been received by the commissioner, in either hard copy or electronic form, as designated by the commissioner.

History

• Authority: 2009 Public Acts, Chapter 383 and T.C.A. § 56-8-107.
• Administrative History: Original rule filed August 13, 2014; effective November 11, 2014.

Tenn. Comp. R. & Regs. 0780-01-85-.06 CONFIDENTIAL MATERIALS

All testimony, documents and other information submitted pursuant to Rule 0780-01-85-.05, and all records and documents maintained pursuant to Rule 0780-01-85-.05 shall be privileged and shall not be disclosed pursuant to T.C.A. § 10-7-503 or 56-1-602, nor shall they be admissible as evidence in any civil proceeding not brought by the commissioner. The commissioner, within the commissioner's discretion, may share the documents and information with other state or federal agencies, or with any law enforcement authority.

History

• Authority: 2009 Public Acts, Chapter 383 and T.C.A. § 56-8-107.
• Administrative History: Original rule filed August 13, 2014; effective November 11, 2014.

Tenn. Comp. R. & Regs. 0780-01-85-.07 VIOLATIONS AND PENALTIES

Any insurer that fails to make and file its market conduct annual statement in the form and time provided by Rule 0780-01-85-.05 shall be subject to the applicable penalties provided for by T.C.A. § 56-2-305, as well as such other sanctions provided for by law.

History

• Authority: 2009 Public Acts, Chapter 383 and T.C.A. §§ 56-2-305 and 56-8-107.
• Administrative History: Original rule filed August 13, 2014; effective November 11, 2014.

Tenn. Comp. R. & Regs. 0780-01-85-.08 SEVERABILITY

If any provision of this Chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the Chapter and the application of such provision to other persons or circumstance shall not be affected thereby. To this end, the provisions of this chapter are declared severable.

History

• Authority: 2009 Public Acts, Chapter 383 and T.C.A. § 56-8-107.
• Administrative History: Original rule filed August 13, 2014; effective November 11, 2014.

Chapter 0780-01-86 Suitability in Annuity Transactions

Tenn. Comp. R. & Regs. 0780-01-86-.01 PURPOSE

(1) The purpose of this Chapter is to require producers, as defined in this Chapter, to act in the best interest of the consumer when making a recommendation of an annuity and to require insurers to establish and maintain a system to supervise recommendations so that the insurance needs and financial objectives of consumers at the time of the transaction are effectively addressed.

(2) Nothing herein shall be construed to create or imply a private cause of action for a violation of this Chapter or to subject a producer to civil liability under the best interest standard of care outlined in rule 0780-01-86-.06 of this Chapter or under standards governing the conduct of a fiduciary or a fiduciary relationship.

History

• Authority: T.C.A. §§ 56-2-301, 56-2-305, 56-3-508, 56-6-112, 56-6-124, and 56-8-101, et seq.
• Administrative History: Original rule filed April 22, 2008; effective July 6, 2008. Repeal and new rule filed August 3, 2015; effective November 1, 2015. Amendments filed January 17, 2023; effective April 17, 2023.

Tenn. Comp. R. & Regs. 0780-01-86-.02 SCOPE

This Chapter shall apply to any sale or recommendation of an annuity.

History

• Authority: T.C.A. §§ 56-2-301, 56-2-305, 56-3-508, 56-6-112, 56-6-124, and 56-8-101, et seq.
• Administrative History: Original rule filed April 22, 2008; effective July 6, 2008. Repeal and new rule filed August 3, 2015; effective November 1, 2015. Amendments filed January 17, 2023; effective April 17, 2023.

Tenn. Comp. R. & Regs. 0780-01-86-.03 AUTHORITY

This Chapter is issued under the authority of T.C.A. §§ 56-2-301, 56-2-305, 56-3-508, 56-6-112(a), 56-6- 112(d), 56-6-124(a), and 56-8-101 et seq.

History

• Authority: T.C.A. §§ 56-2-301, 56-2-305, 56-3-508, 56-6-112, 56-6-124, and 56-8-101, et seq.
• Administrative History: Original rule filed April 22, 2008; effective July 6, 2008. Repeal and new rule filed August 3, 2015; effective November 1, 2015. Amendments filed January 17, 2023; effective April 17, 2023.

Tenn. Comp. R. & Regs. 0780-01-86-.04 EXEMPTIONS

Unless otherwise specifically included, this Chapter shall not apply to transactions involving:

(1) Direct response solicitations where there is no recommendation based on information collected from the consumer pursuant to this Chapter;

(2) Contracts used to fund:

(a) An employee pension or welfare benefit plan that is covered by the Employee Retirement and Income Security Act (ERISA);

(b) A plan described by Sections 401(a), 401(k), 403(b), 408(k), or 408(p) of the Internal Revenue Code (IRC), as amended, if established or maintained by an employer;

(c) A government or church plan defined in Section 414 of the IRC, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under Section 457 of the IRC; or (d) A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;

(3) Settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process; or (4) Formal prepaid funeral contracts.

History

• Authority: T.C.A. §§ 56-2-301, 56-2-305, 56-3-508, 56-6-112, 56-6-124, and 56-8-101, et seq.
• Administrative History: Original rule filed April 22, 2008; effective July 6, 2008. Repeal and new rule filed August 3, 2015; effective November 1, 2015. Amendments filed January 17, 2023; effective April 17, 2023.

Tenn. Comp. R. & Regs. 0780-01-86-.05 DEFINITIONS

(1) “Annuity” means an annuity that is an insurance product under state law that is individually solicited, whether the product is classified as an individual or group annuity.

(2) “Cash compensation” means any discount, concession, fee, service fee, commission, sales charge, loan, override, or cash benefit received by a producer in connection with the recommendation or sale of an annuity from an insurer, intermediary, or directly from the consumer.

(3) “Commissioner” means the Commissioner of the Tennessee Department of Commerce and Insurance.

(4) “Consumer profile information” means information that is reasonably appropriate to determine whether a recommendation addresses the consumer’s financial situation, insurance needs, and financial objectives, including, at a minimum, the following:

(a) Age;

(b) Annual income;

(c) Financial situation and needs, including debts and other obligations;

(d) Financial experience;

(e) Insurance needs;

(f) Financial objectives;

(g) Intended use of the annuity;

(h) Financial time horizon;

(i) Existing assets or financial products, including investment, annuity, and insurance holdings;

(j) Liquidity needs;

(k) Liquid net worth;

(l) Risk tolerance, including but not limited to, willingness to accept non-guaranteed elements in the annuity;

(m) Financial resources used to fund the annuity; and (n) Tax status.

(5) “Continuing Education Credit” or “CE Credit” means one continuing education credit as defined in rule 0780-01-56.

(6) “Continuing Education Provider” or “CE Provider” means an individual or entity that is approved to offer continuing education courses pursuant to rule 0780-01-56.

(7) “FINRA” means the Financial Industry Regulatory Authority or a succeeding agency.

(8) “Insurer” means a company required to be licensed under the laws of this state to provide insurance products, including annuities.

(9) “Producer” means a person or entity required to be licensed under the laws of this state to sell, solicit, or negotiate insurance, including annuities. For purposes of this Chapter, “producer” includes an insurer where no producer is involved.

(10) “Intermediary” means an entity contracted directly with an insurer or with another entity contracted with an insurer to facilitate the sale of the insurer’s annuities by producers.

(11) “Material conflict of interest” means a financial interest of the producer in the sale of an annuity that a reasonable person would expect to influence the impartiality of a recommendation. “Material conflict of interest” does not include cash compensation or noncash compensation.

(12) “Non-cash compensation” means any form of compensation that is not cash compensation, including, but not limited to, health insurance, office rent, office support, and retirement benefits.

(13) “Non-guaranteed elements” means the premiums, credited interest rates (including any bonus), benefits, values, dividends, non-interest-based credits, charges, or elements of formulas used to determine any of these, that are subject to company discretion and are not guaranteed at issue. An element is considered non-guaranteed if any of the underlying nonguaranteed elements are used in its calculation.

(14) “Recommendation” means advice provided by a producer to an individual consumer that was intended to result or does result in a purchase, an exchange, or a replacement of an annuity in accordance with that advice. Recommendation does not include general communication to the public, generalized customer services assistance or administrative support, general educational information and tools, prospectuses, or other product and sales material.

(15) “Replacement” means a transaction in which a new annuity is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer whether or not a producer is involved, that by reason of the transaction, an existing annuity or other insurance policy has been or is to be any of the following:

(a) Lapsed, forfeited, surrendered, or partially surrendered; assigned to the replacing insurer; or otherwise terminated;

(b) Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;

(c) Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;

(d) Reissued with any reduction in cash value; or (e) Used in a financed purchase.

(16) “SEC” means the United States Securities and Exchange Commission.

History

• Authority: T.C.A. §§ 56-2-301, 56-2-305, 56-3-508, 56-6-112, 56-6-124, and 56-8-101, et seq.
• Administrative History: Original rule filed April 22, 2008; effective July 6, 2008. Repeal and new rule filed August 3, 2015; effective November 1, 2015. Amendments filed January 17, 2023; effective April 17, 2023.

Tenn. Comp. R. & Regs. 0780-01-86-.06 DUTIES OF INSURERS AND PRODUCERS

(1) Best Interest Obligations. A producer, when making a recommendation of an annuity, shall act in the best interest of the consumer under the circumstances known at the time the recommendation is made, without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest. A producer has acted in the best interest of the consumer if they have satisfied the following obligations regarding care, disclosure, conflict of interest, and documentation:

(a) 1. Care obligation. The producer, in making a recommendation, shall exercise reasonable diligence, care, and skill to:

(i) Know the consumer’s financial situation, insurance needs, and financial objectives;

(ii) Understand the available recommendation options after making a reasonable inquiry into options available to the producer;

(iii) Have a reasonable basis to believe the recommended option effectively addresses the consumer’s financial situation, insurance needs, and financial objectives over the life of the product, as evaluated in light of the consumer profile information; and (iv) Communicate the basis or bases of the recommendation.

2. The requirements under Part 1. of this subparagraph include making reasonable efforts to obtain consumer profile information from the consumer prior to the recommendation of an annuity.

3. The requirements under Part 1. of this subparagraph require a producer to consider the types of products the producer is authorized and licensed to recommend or sell that address the consumer’s financial situation, insurance needs, and financial objectives. This does not require analysis or consideration of any products outside the authority and license of the producer or other possible alternative products or strategies available in the market at the time of the recommendation. Producers shall be held to standards applicable to producers with similar authority and licensure.

4. The requirements under this paragraph do not create a fiduciary obligation or relationship and only create a regulatory obligation as established in this rule.

5. The consumer profile information; characteristics of the insurer; and product costs, rates, benefits, and features are those factors generally relevant in determining whether an annuity effectively addresses the consumer’s financial situation, insurance needs, and financial objectives, but the level of importance of each factor under the care obligation of this subparagraph may vary depending on the facts and circumstances of a particular case. However, each factor may not be considered in isolation.

6. The requirements under Part 1. of this subparagraph include having a reasonable basis to believe the consumer would benefit from certain features of the annuity, such as annuitization, death or living benefit, or other insurancerelated features.

7. The requirements under Part 1. of this subparagraph apply to the particular annuity as a whole and the underlying subaccounts to which funds are allocated at the time of purchase or exchange of an annuity, and riders and similar product enhancements, if any.

8. The requirements under Part 1. of this subparagraph do not mean the annuity with the lowest one-time or multiple occurrence compensation structure shall necessarily be recommended.

9. The requirements under Part 1. of this subparagraph do not mean the producer has ongoing monitoring obligations under the care obligation under this subparagraph, although such an obligation may be separately owed under the terms of a fiduciary, consulting, investment advising, or financial planning agreement between the consumer and the producer.

10. In the case of an exchange or replacement of an annuity, the producer shall consider the whole transaction, which includes taking into consideration whether:

(i) The consumer will incur a surrender charge; be subject to the commencement of a new surrender period; lose existing benefits, such as death, living, or other contractual benefits; or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements;

(ii) The replacing product would substantially benefit the consumer in comparison to the replaced product over the life of the product; and (iii) The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding sixty (60) months.

11. Nothing in this Chapter should be construed to require a producer to obtain any license other than a producer license with the appropriate line of authority to sell, solicit, or negotiate insurance in this state, including but not limited to, any securities license, in order to fulfill the duties and obligations contained in this

rule; provided the producer does not give advice or provide services that are otherwise subject to securities laws or engage in any other activity requiring other professional licenses.

(b) Disclosure obligation.

1. Prior to the recommendation or sale of an annuity, the producer shall prominently disclose to the consumer on a form substantially similar to Appendix A:

(i) A description of the scope and terms of the relationship with the consumer and the role of the producer in the transaction;

(ii) An affirmative statement on whether the producer is licensed and authorized to sell the following products:

(I) Fixed annuities;

(II) Fixed indexed annuities;

(III) Variable annuities;

(IV) Life insurance;

(V) Mutual funds;

(VI) Stocks and bonds; and (VII) Certificates of deposit;

(iii) An affirmative statement describing the insurers the producer is authorized, contracted (or appointed), or otherwise able to sell insurance products for, using the following descriptions:

(I) From one insurer;

(II) From two or more insurers; or (III) From two or more insurers although primarily contracted with one insurer.

(iv) A description of the sources and types of cash compensation and noncash compensation to be received by the producer, including whether the producer is to be compensated for the sale of a recommended annuity by commission as part of premium or other remuneration received from the insurer, intermediary, or other producer or by fee as a result of a contract for advice or consulting services; and (v) A notice of the consumer’s right to request additional information regarding cash compensation described in Part 2. of this subparagraph.

2. Upon request of the consumer or the consumer’s designated representative, the producer shall disclose:

(i) A reasonable estimate of the amount of cash compensation to be received by the producer, which may be stated as a range of amounts or percentages; and (ii) Whether the cash compensation is a one-time or multiple occurrence amount, and, if a multiple occurrence amount, the frequency and amount of the occurrence, which may be stated as a range of amounts or percentages.

3. Prior to or at the time of the recommendation or sale of an annuity, the producer shall have a reasonable basis to believe the consumer has been informed of various features of the annuity, such as the potential surrender period and surrender charge; potential tax penalty if the consumer sells, exchanges, surrenders, or annuitizes the annuity; mortality and expense fees; investment advisory fees; any annual fees; potential charges for and features of riders or other options of the annuity; limitations on interest returns; potential changes in non-guaranteed elements of the annuity, insurance, and investment components; and market risk.

(c) Conflict of interest obligation. A producer shall identify and avoid or reasonably manage and disclose material conflicts of interest, including material conflicts of interest related to an ownership interest.

(d) Documentation obligation. A producer shall at the time of recommendation or sale:

1. Make a written record of any recommendation and the basis for the recommendation subject to this Chapter;

2. Obtain a consumer signed statement on a form substantially similar to Appendix B documenting:

(i) A customer’s refusal to provide the consumer profile information, if any; and (ii) A customer’s understanding of the ramifications of not providing his or her consumer profile information or providing insufficient consumer profile information; and 3. Obtain a consumer signed statement on a form substantially similar to Appendix C acknowledging the annuity transaction is not recommended if a customer decides to enter into an annuity transaction that is not based on the producer’s recommendation.

(e) Application of the best interest obligation. Any requirement applicable to a producer under this paragraph shall apply to every producer who has exercised material control or influence in the making of a recommendation and has received direct compensation as a result of the recommendation or sale, regardless of whether the producer has had any direct contact with the consumer. Activities such as providing or delivering marketing or educational materials, product wholesaling, or other back office product support, and general supervision of a producer do not, in and of themselves, constitute material control or influence.

(2) Transactions not based on a recommendation.

(a) Except as provided under subparagraph (b) of this paragraph, a producer shall have no obligation to a consumer under paragraph (1)(a) of this rule related to any annuity transaction if:

1. No recommendation is made;

2. A recommendation was made and was later found to have been prepared based on materially inaccurate information provided by the consumer;

3. A consumer refuses to provide relevant consumer profile information and the annuity transaction is not recommended; or 4. A consumer decides to enter into an annuity transaction that is not based on a recommendation of the producer.

(b) An insurer’s issuance of an annuity subject to subparagraph (a) of this paragraph shall be reasonable under all the circumstances actually known to the insurer at the time the annuity is issued.

(3) Supervision system.

(a) Except as permitted under paragraph (2) of this rule, an insurer may not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity would effectively address the particular consumer’s financial situation, insurance needs, and financial objectives based on the consumer’s consumer profile information.

(b) An insurer shall establish and maintain a supervision system that is reasonably designed to achieve the insurer’s and its producers’ compliance with this rule, including, but not limited to, the following:

1. The insurer shall establish and maintain reasonable procedures to inform its producers of the requirements of this Chapter and shall incorporate the requirements of this Chapter into relevant producer training manuals;

2. The insurer shall establish and maintain standards for producer product training and shall establish and maintain reasonable procedures to require its producers to comply with the requirements of rule 0780-01-86-.07;

3. The insurer shall provide product-specific training and training materials which explain all material features of its annuity products to its producers;

4. The insurer shall establish and maintain procedures for the review of each recommendation prior to issuance of an annuity that are designed to ensure there is a reasonable basis to determine that the recommended annuity would effectively address the particular consumer’s financial situation, insurance needs, and financial objectives. Such review procedures may apply a screening system for the purpose of identifying selected transactions for additional review and may be accomplished electronically or through other means including, but not limited to, physical review. Such an electronic or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria;

5. The insurer shall establish and maintain reasonable procedures to detect recommendations that are not in compliance with paragraphs (1), (2), (4), and (5) of this rule. This may include, but is not limited to, confirmation of the consumer’s consumer profile information, systematic customer surveys, producer and consumer interviews, confirmation letters, producer statements or attestations, and programs of internal monitoring. Nothing in this part prevents an insurer from complying with this part by applying sampling procedures, or by confirming the consumer profile information or other required information under this Chapter after issuance or delivery of the annuity;

6. The insurer shall establish and maintain reasonable procedures to assess, prior to or upon issuance or delivery of an annuity, whether a producer has provided to the consumer the information required to be provided under this Chapter;

7. The insurer shall establish and maintain reasonable procedures to identify and address suspicious consumer refusals to provide consumer profile information;

8. The insurer shall establish and maintain reasonable procedures to identify and eliminate any sales contests, sales quotas, bonuses, and non-cash compensation that are based on the sales of specific annuities within a limited period of time. The requirements of this part are not intended to prohibit the receipt of health insurance, office rent, office support, retirement benefits, or other employee benefits by employees as long as those benefits are not based upon the volume of sales of a specific annuity within a limited period of time; and 9. The insurer shall annually provide a written report to senior management, including to the senior manager responsible for audit functions, which details a review, with appropriate testing, reasonably designed to determine the effectiveness of the supervision system, the exceptions found, and corrective action taken or recommended, if any.

(c) 1. Nothing in this paragraph restricts an insurer from contracting for performance of a function (including maintenance of procedures) required under this paragraph.

An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to rule 0780-01-86-.08 regardless of whether the insurer contracts for performance of a function and regardless of the insurer’s compliance with Part 2. of this subparagraph.

2. An insurer’s supervision system under this paragraph shall include supervision of contractual performance under this paragraph. This includes, but is not limited to, the following:

(i) Monitoring and, as appropriate, conducting audits to assure that the contracted function is properly performed; and (ii) Annually obtaining a certification from a senior manager who has responsibility for the contracted function that the manager has a reasonable basis to represent, and does represent, that the function is properly performed.

(d) An insurer is not required to include in its system of supervision:

1. A producer’s recommendations to consumers of products other than the annuities offered by the insurer; or 2. Consideration of or comparison to options available to the producer or compensation relating to those options other than annuities or other products offered by the insurer.

(4) Prohibited practices. Neither a producer nor an insurer shall dissuade, or attempt to dissuade, a consumer from:

(a) Truthfully responding to an insurer’s request for confirmation of the consumer profile information;

(b) Filing a complaint; or (c) Cooperating with the investigation of a complaint.

(5) Safe harbor.

(a) Recommendations and sales of annuities made in compliance with comparable standards shall satisfy the requirements under this rule. This paragraph applies to all recommendations and sales of annuities made by financial professionals in compliance with business rules, controls, and procedures that satisfy a comparable standard even if such standard would not otherwise apply to the product or recommendation at issue.

However, nothing in this paragraph shall limit the commissioner’s ability to investigate and enforce the provisions of this rule.

(b) Nothing in subparagraph (a) of this paragraph shall limit the insurer’s obligation to comply with subparagraph (3)(a) of this rule, although the insurer may base its analysis on information received from either the financial professional or the entity supervising the financial professional.

(c) For subparagraph (a) of this paragraph to apply, an insurer shall:

1. Monitor the relevant conduct of the financial professional seeking to rely on subparagraph (a) of this paragraph or the entity responsible for supervising the financial professional, such as the financial professional’s broker-dealer or an investment adviser registered under federal or Tennessee securities laws, using information collected in the normal course of an insurer’s business; and 2. Provide to the entity responsible for supervising the financial professional seeking to rely on subparagraph (a) of this paragraph, such as the financial professional’s broker-dealer or investment adviser registered under federal or Tennessee securities laws, information and reports that are reasonably appropriate to assist such entity to maintain its supervision system.

(d) For purposes of this paragraph, “financial professional” means a producer that is regulated and acting as:

1. A broker-dealer registered under federal or Tennessee securities laws or a registered representative of a broker-dealer;

2. An investment adviser registered under federal or Tennessee securities laws or an investment adviser representative associated with a federal or Tennessee registered investment adviser; or 3. A plan fiduciary under Section 3(21) of the Employee Retirement Income Security Act of 1974 (ERISA) or fiduciary under Section 4975(e)(3) of the Internal Revenue Code (IRC) or any amendments or successor statutes thereto.

(e) For purposes of this paragraph, “comparable standards” means:

1. With respect to broker-dealers and registered representatives of broker-dealers, applicable SEC and FINRA rules pertaining to best interest obligations and supervision of annuity recommendations and sales, including, but not limited to,

Regulation Best Interest and any amendments or successor rules thereto;

2. With respect to investment advisers registered under federal or Tennessee securities laws or investment adviser representatives, the fiduciary duties and all other requirements imposed on such investment advisers or investment adviser representatives by contract or under either the Investment Advisers Act of 1940 or Tennessee securities law, including but not limited to, the Form ADV and interpretations; and 3. With respect to plan fiduciaries or fiduciaries, the duties, obligations, prohibitions, and all other requirements attendant to such status under ERISA or the IRC and any amendments or successor statutes thereto.

History

• Authority: T.C.A. §§ 56-2-301, 56-2-305, 56-3-508, 56-6-112, 56-6-124, and 56-8-101, et seq.
• Administrative History: Original rule filed April 22, 2008; effective July 6, 2008. Repeal and new rule filed August 3, 2015; effective November 1, 2015. Amendments filed January 17, 2023; effective April 17, 2023.

Tenn. Comp. R. & Regs. 0780-01-86-.07 PRODUCER TRAINING

(1) A producer shall not solicit the sale of an annuity product unless the producer has adequate knowledge of the product to recommend the annuity and the producer is in compliance with the insurer's standards for product training. A producer may rely on insurer-provided productspecific training standards and materials to comply with this rule.

(2) (a) 1. A producer who engages in the sale of annuity products shall complete a onetime four (4) credit training course approved by the department of commerce and insurance and provided by the department of commerce and insurance-approved education provider.

2. Producers who hold a life insurance line of authority prior to the effective date of this Chapter and who desire to sell annuities shall complete the requirements of this paragraph within six (6) months after the effective date of this Chapter.

Individuals who obtain a life insurance line of authority on or after the effective date of this Chapter may not engage in the sale of annuities until the annuity training course required under this rule has been completed.

(b) The minimum length of the training required under this paragraph shall be sufficient to qualify for at least four (4) CE credits but may be longer.

(c) The training required under this paragraph shall include information on the following topics:

1. The types of annuities and various classifications of annuities;

2. Identification of the parties to an annuity;

3. How product specific annuity contract provisions affect consumers;

4. The application of income taxation of qualified and non-qualified annuities;

5. The primary uses of annuities; and 6. Appropriate standard of conduct, sales practices, replacement, and disclosure requirements.

(d) Providers of courses intended to comply with this paragraph shall cover all topics listed in the prescribed outline and shall not present any marketing information or provide training on sales techniques or provide specific information about a particular insurer's products. Additional topics may be offered in conjunction with and in addition to the required outline.

(e) A provider of an annuity training course intended to comply with this rule shall register as a CE provider in this state and comply with the rules and guidelines applicable to producer continuing education courses as set forth in Chapter 0780-01-56.

(f) A producer who has completed an annuity training course approved by the department of commerce and insurance prior to the effective date of these rules, shall, within six (6) months after the effective date of these rules, complete either:

1. A new four (4) credit training course approved by the department of commerce and insurance; or 2. An additional one-time one (1) credit training course approved by the department of commerce and insurance and provided by the department of commerce and insurance-approved education provider on appropriate sales practices, replacement, and disclosure requirements under this amended Chapter.

(g) Annuity training courses may be conducted and completed by classroom or self-study methods in accordance with Chapter 0780-01-56.

(h) Providers of annuity training shall comply with the reporting requirements and shall issue certificates of completion in accordance with Chapter 0780-01-56.

(i) The satisfaction of the training requirements of another state that are substantially similar to the provisions of this paragraph shall be deemed to satisfy the training requirements of this rule in this state.

(j) The satisfaction of the components of the training requirements of any course or courses with components substantially similar to the provisions of this paragraph shall be deemed to satisfy the training requirements of this paragraph in this state.

(k) An insurer shall verify that a producer has completed the annuity training course required under this paragraph before allowing the producer to sell an annuity product for that insurer. An insurer may satisfy its responsibility under this paragraph by obtaining certificates of completion of the training course or obtaining reports provided by commissioner-sponsored database systems or vendors or from a reasonably reliable commercial database vendor that has a reporting arrangement with approved insurance education providers.

History

• Authority: T. C.A. §§ 56-2-301, 56-2-305, 56-3-508, 56-6-107, 56-6-112, 56-6-118(b), 56-6-124, and 56- 8-101, et seq., and Tenn. Comp. Rules and Regs. 0780-01-56-.08.
• Administrative History: Original rule filed April 22, 2008; effective July 6, 2008. Repeal and new rule filed August 3, 2015; effective November 1, 2015. Amendments filed January 17, 2023; effective April 17, 2023.

Tenn. Comp. R. & Regs. 0780-01-86-.08 COMPLIANCE MITIGATION; PENALTIES; ENFORCEMENT

(1) An insurer is responsible for compliance with this Chapter. If a violation occurs, either because of the action or inaction of the insurer or its producer, the commissioner may order, pursuant to statutory authority granting power for such order:

(a) An insurer to take reasonably appropriate corrective action for any consumer harmed by a failure to comply with this Chapter by the insurer, by its producer, or an entity contracted to perform the insurer's supervisory duties;

(b) A general agency, independent agency, or the producer to take reasonably appropriate corrective action for any consumer harmed by the producer's violation of this Chapter; and (c) Appropriate penalties and sanctions.

(2) Any applicable penalty under T.C.A. §§ 56-1-411, 56-2-305, 56-6-112, or 56-8-101, et seq. for a violation of this Chapter may be reduced or eliminated if corrective action for the consumer was taken promptly after a violation was discovered or the violation was not part of a pattern or practice.

(3) The authority to enforce compliance with this Chapter is vested exclusively with the commissioner.

History

• Authority: T.C.A. §§ 56-1-408, 56-1-409, 56-1-411, 56-1-416, 56-2-301, 56-2-305, 56-3-508, 56-6-112, 56-6-124, and 56-8-101, et seq.
• Administrative History: Original rule filed April 22, 2008; effective July 6, 2008. Repeal and new rule filed August 3, 2015; effective November 1, 2015. Amendments filed January 17, 2023; effective April 17, 2023.

Tenn. Comp. R. & Regs. 0780-01-86-.09 RECORDKEEPING

(1) Insurers, general agents, independent agencies, and producers shall maintain or be able to make available to the commissioner records of the information collected from the consumer, disclosures made to the consumer, including summaries of oral disclosures, and other information used in making the recommendations that were the basis for insurance transactions for five (5) years after the insurance transaction is completed by the insurer. An insurer is permitted, but shall not be required, to maintain documentation on behalf of a producer.

(2) Records required to be maintained by this Chapter may be maintained in paper, photographic, micro-process, magnetic, mechanical or electronic media or by any process that accurately reproduces the actual document.

History

• Authority: T.C.A. §§ 56-1-408, 56-1-409, 56-1-411, 56-1-416, 56-2-301, 56-2-305, 56-3-508, 56-6-112, 56-6-124(a), and 56-8-101, et seq.
• Administrative History: Original rule filed April 22, 2008; effective July 6, 2008. Repeal and new rule filed August 3, 2015; effective November 1, 2015. Amendments filed January 17, 2023; effective April 17, 2023.

Tenn. Comp. R. & Regs. 0780-01-86-.10 EFFECTIVE DATE

The amendments to this rule chapter shall take effect January 1, 2024.

History

• Authority: T.C.A. §§ 56-2-301, 56-2-305, 56-3-508, 56-6-112, 56-6-124, and 56-8-101, et seq.
• Administrative History: New rule filed January 17, 2023; effective April 17, 2023. APPENDIX A INSURANCE AGENT (PRODUCER) DISCLOSURE FOR ANNUITIES Do Not Sign Unless You Have Read and Understand the Information in this Form. Date: ________________________ INSURANCE AGENT (PRODUCER) INFORMATION (“Me”, “I”, “My”) First Name: ___________________________ Last Name: ____________________________________ Business\Agency Name: __________________________ Website: _____________________________ Business Mailing Address:____________________________________________________________________________ Business Telephone Number: ___________________________________________________________ Email Address:_______________________________________________________________________ National Producer Number in [state]:______________________________________________________ CUSTOMER INFORMATION (“You”, “Your”) First Name: _____________________________Last Name: _________________________________ What Types of Products Can I Sell You? I am licensed to sell annuities to You in accordance with state law. If I recommend that You buy an annuity, it means I believe that it effectively meets Your financial situation, insurance needs, and financial objectives. Other financial products, such as life insurance or stocks, bonds and mutual funds, also may meet Your needs. I offer the following products: □ Fixed or Fixed Indexed Annuities □ Variable Annuities □ Life Insurance I need a separate license to provide advice about or to sell non-insurance financial products. I have checked below any non-insurance financial products that I am licensed and authorized to provide advice about or to sell. □ Mutual Funds □ Stocks/Bonds □ Certificates of Deposits (Rule 0780-01-86 Appendix A, continued) Whose Annuities Can I Sell to You? I am authorized to sell: □ Annuities from Only One Insurer □ Annuities from Two or More Insurers □ Annuities from Two or More Insurers although I primarily sell annuities from: _____________________ How I’m Paid for My Work: It’s important for You to understand how I’m paid for my work. Depending on the particular annuity You purchase, I may be paid a commission or a fee. Commissions are generally paid to Me by the insurance company while fees are generally paid to Me by the consumer. If You have questions about how I’m paid, please ask Me. Depending on the particular annuity You buy, I will or may be paid cash compensation as follows: □ Commission, which is usually paid by the insurance company or other sources. If other sources, describe: . □ Fees (such as a fixed amount, an hourly rate, or a percentage of your payment), which are usuall y paid directly by the customer. □ Other (Describe):_____________________________________. If You have questions about the above compensation I will be paid for this transaction, please ask me. I may also receive other indirect compensation resulting from this transaction (sometimes called “noncash” compensation), such as health or retirement benefits, office rent and support, or other incentives from the insurance company or other sources. By signing below, You acknowledge that You have read and understand the information provided to You in this document. ___________________________________________________ Customer Signature ___________________________________________________ Date ___________________________________________________ Agent (Producer) Signature ___________________________________________________ Date APPENDIX B CONSUMER REFUSAL TO PROVIDE INFORMATION Do Not Sign Unless You Have Read and Understand the Information in this Form. Why are You being given this form? You’re buying a financial product – an annuity. To recommend a product that effectively meets Your needs, objectives, and situation, the agent, broker, or company needs information about You, Your financial situation, insurance needs, and financial objectives. If You sign this form, it means You have not given the agent, broker, or company some or all the information needed to decide if the annuity effectively meets Your needs, objectives, and situation. You may lose protections under the Insurance Code of Tennessee if You sign this form or provide inaccurate information. Statement of Purchaser: □ I refuse to provide this information at this time. □ I have chosen to provide limited information at this time. ________________________________________________ Customer Signature ________________________________________________ Date APPENDIX C Consumer Decision to Purchase an Annuity NOT Based on a Recommendation Do Not Sign This Form Unless You Have Read and Understand It. Why are You being given this form? You are buying a financial product – an annuity. To recommend a product that effectively meets your needs, objectives, and situation, the agent, broker, or company has the responsibility to learn about You, your financial situation, insurance needs, and financial objectives. If You sign this form, it means You know that you’re buying an annuity that was not recommended. Statement of Purchaser: I understand that I am buying an annuity, but the agent, broker, or company did not recommend that I buy it. If I buy it without a recommendation, I understand I may lose protections under the Insurance Code of Tennessee. ________________________________________________ Customer Signature ________________________________________________ Date ________________________________________________ Agent/Producer Signature ________________________________________________ Date

Chapter 0780-01-88 Reserved

Tenn. Comp. R. & Regs. 0780-01-88-.01 RESERVED

History

• Authority: T.C.A. §§ 56-7-2801, et seq., and 56-7-2814, and Pub.L. 104-191, 110 Stat. 1936 (1996).
• Administrative History: Emergency rule filed July 26, 2005; effective through January 7, 2006. Emergency rule expired January 7, 2006; rule reverted to reserved status on January 8, 2006.

Tenn. Comp. R. & Regs. 0780-01-88-.02 RESERVED

History

• Authority: T.C.A. §§ 56-7-2802 and 56-7-2814.
• Administrative History: Emergency rule filed July 26, 2005; effective through January 7, 2006.Emergency rule expired January 7, 2006; rule reverted to reserved status on January 8, 2006.

Tenn. Comp. R. & Regs. 0780-01-88-.03 RESERVED

History

• Authority: T.C.A. §§ 56-7-2814, 56-8-104(6) and 56-8-113, Pub.L. 104-191, 110 Stat. 1936 (1996), 45 C.F.R. §146.150(a), and 45 C.F.R. §148.120.
• Administrative History: Emergency rule filed July 26, 2005; effective through January 7, 2006.Emergency rule expired January 7, 2006; rule reverted to reserved status on January 8, 2006.

Tenn. Comp. R. & Regs. 0780-01-88-.04 RESERVED

History

• Authority: T.C.A. §§ 56-7-2814, 56-8-104(6) and 56-8-113.
• Administrative History: Emergency rule filed July 26, 2005; effective through January 7, 2006.Emergency rule expired January 7, 2006; rule reverted to reserved status on January 8, 2006.

Tenn. Comp. R. & Regs. 0780-01-88-.05 RESERVED

History

• Authority: T.C.A. §§ 56-7-2814 and 56-8-113.
• Administrative History: Emergency rule filed July 26, 2005; effective through January 7, 2006.Emergency rule expired January 7, 2006; rule reverted to reserved status on January 8, 2006.

Chapter 0780-01-89 Military Sales Practices

Tenn. Comp. R. & Regs. 0780-01-89-.01 PURPOSE

The purpose of this Chapter is to implement the provisions of 2007 Tenn. Pub. Act Ch. 339, concerning military sales practices.

(1) The purpose of this regulation is to set forth standards to protect active duty service members of the United States Armed Forces from dishonest and predatory insurance sales practices by declaring certain identified practices to be false, misleading, deceptive or unfair.

(2) Nothing herein shall be construed to create or imply a private cause of action for a violation of this Chapter.

History

• Authority: 2007 Tenn. Pub. Act Ch. 339, T.C.A. §§ 56-8-120, 56-8-104(11), 56-8-113, and Military Personnel Financial Services Protection Act, Pub. L. No. 109-290 (2006).
• Administrative History: Original rule filed October 11, 2007; effective December 25, 2007.

Tenn. Comp. R. & Regs. 0780-01-89-.02 SCOPE

This Chapter shall apply only to the solicitation or sale of any life insurance or annuity product by an insurer or insurance producer to an active duty service member of the United States Armed Forces.

History

• Authority: 2007 Tenn. Pub. Act Ch. 339, T.C.A. §§ 56-8-120, 56-8-104(11), 56-8-113, and Military Personnel Financial Services Protection Act, Pub. L. No. 109-290 (2006).
• Administrative History: Original rule filed October 11, 2007; effective December 25, 2007.

Tenn. Comp. R. & Regs. 0780-01-89-.03 AUTHORITY

This Chapter is issued under the authority of 2007 Tenn. Pub. Act Ch. 339.

History

• Authority: 2007 Tenn. Pub. Act Ch. 339, T.C.A. §§ 56-8-120, 56-8-104(11), 56-8-113, and Military Personnel Financial Services Protection Act, Pub. L. No. 109-290 (2006).
• Administrative History: Original rule filed October 11, 2007; effective December 25, 2007.

Tenn. Comp. R. & Regs. 0780-01-89-.04 EXEMPTIONS

(1) This Chapter shall not apply to solicitations or sales involving:

(a) Credit insurance;

December, 2007 1 (b) Group life insurance or group annuities where there is no in-person, face-to-face solicitation of individuals by an insurance producer or where the contract or certificate does not include a side fund;

(c) An application to the existing insurer that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised; or, when the existing policy or contract is being replaced by the same insurer pursuant to a program filed with and approved by the commissioner; or, when a term conversion privilege is exercised among corporate affiliates;

(d) Individual stand-alone health policies, including disability income policies;

(e) Contracts offered by Servicemembers’ Group Life Insurance (SGLI) or Veterans’ Group Life Insurance (VGLI), as authorized by 38 U.S.C. Section 1965 et seq.;

(f) Life insurance contracts offered through or by a non-profit military association, qualifying under Section 501(c)(23) of the Internal Revenue Code (IRC), and which are not underwritten by an insurer; or (g) Contracts used to fund:

1. An employee pension or welfare benefit plan that is covered by the Employee Retirement and Income Security Act (ERISA);

2. A plan described by Sections 401(a), 401(k), 403(b), 408(k), or 408(p) of the IRC, as amended, if established or maintained by an employer;

3. A government or church plan defined in Section 414 of the IRC, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under Section 457 or the IRC;

4. A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;

5. Settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process; or 6. Prearranged funeral contracts.

(2) Nothing herein shall be construed to abrogate the ability of nonprofit organizations (and/or other organizations) to educate members of the United States Armed Forces in accordance with Department of Defense DoD Instruction 1344.07 – PERSONAL COMMERCIAL SOLICITATION ON DoD INSTALLATIONS or successor directive.

(3) For purposes of this Chapter, general advertisements, direct mail and internet marketing shall not constitute “solicitation.” Telephone marketing shall not constitute “solicitation” provided the caller explicitly and conspicuously discloses that the product concerned is life insurance and makes no statements that avoid a clear and unequivocal statement that life insurance is the subject matter of the solicitation. Provided however, nothing in this paragraph shall be construed to exempt an insurer or insurance producer from the regulation in any in-person, face-to-face meeting established as a result of the “solicitation” exemptions identified in this Paragraph.

December, 2007 2

History

• Authority: 2007 Tenn. Pub. Act Ch. 339, T.C.A. §§ 56-8-120, 56-8-104(11), 56-8-113, and Military Personnel Financial Services Protection Act, Pub. L. No. 109-290 (2006).
• Administrative History: Original rule filed October 11, 2007; effective December 25, 2007.

Tenn. Comp. R. & Regs. 0780-01-89-.05 DEFINITIONS

(1) “Active Duty” means full-time duty in the active military service of the United States and includes members of the reserve component (National Guard and Reserve) while serving under published orders for active duty or full-time training. The term does not include members of the reserve component who are performing active duty or active duty for training under military calls or orders specifying periods of less than thirty-one (31) calendar days;

(2) “Department of Defense (DoD) Personnel” means all active duty service members and all civilian employees, including nonappropriated fund employees and special government employees, of the Department of Defense;

(3) “Door to Door” means a solicitation or sales method whereby an insurance producer proceeds randomly or selectively from household to household without prior specific appointment;

(4) “General Advertisement” means an advertisement having as its sole purpose the promotion of the reader’s or viewer’s interest in the concept of insurance, or the promotion of the insurer or the insurance producer;

(5) “Insurer” means an insurance company required to be licensed under the laws of this state to provide life insurance products, including annuities;

(6) “Insurance producer” means a person required to be licensed under the laws of this state to sell, solicit or negotiate life insurance, including annuities;

(7) “Known” or “Knowingly” means, depending on its use herein, the insurance producer or insurer had actual awareness, or in the exercise of ordinary care should have known, at the time of the act or practice complained of, that the person solicited is a service member;

(8) “Life Insurance” means 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, and unless otherwise specifically excluded, includes individually issued annuities;

(9) “Military Installation” means any federally owned, leased, or operated base, reservation, post, camp, building, or other facility to which service members are assigned for duty, including barracks, transient housing, and family quarters;

(10) “MyPay” is a Defense Finance and Accounting Service (DFAS) web-based system that enables service members to process certain discretionary pay transactions or provide updates to personal information data elements without using paper forms;

(11) “Service Member” means any active duty officer (commissioned and warrant) or enlisted member of the United States Armed Forces;

(12) “Side Fund” means a fund or reserve that is part of or otherwise attached to a life insurance policy (excluding individually issued annuities) by rider, endorsement or other mechanism which accumulates premium or deposits with interest or by other means. The term does not include:

(a) Accumulated value or cash value or secondary guarantees provided by a universal life policy;

December, 2007 3 (b) Cash values provided by a whole life policy which are subject to standard nonforfeiture law for life insurance; or (c) A premium deposit fund which:

1. Contains only premiums paid in advance which accumulate at interest;

2. Imposes no penalty for withdrawal;

3. Does not permit funding beyond future required premiums;

4. Is not marketed or intended as an investment; and 5. Does not carry a commission, either paid or calculated.

(13) “Specific Appointment” means a prearranged appointment agreed upon by both parties and definite as to place and time; and (14) “United States Armed Forces” means all components of the Army, Navy, Air Force, Marine Corps, and Coast Guard.

History

• Authority: 2007 Tenn. Pub. Act Ch. 339, T.C.A. §§ 56-8-120, 56-8-104(11), 56-8-113, and Military Personnel Financial Services Protection Act, Pub. L. No. 109-290 (2006).
• Administrative History: Original rule filed October 11, 2007; effective December 25, 2007.

Tenn. Comp. R. & Regs. 0780-01-89-.06 PRACTICES DECLARED FALSE, MISLEADING, DECEPTIVE OR UNFAIR ON

A MILITARY INSTALLATION.

(1) The following acts or practices when committed on a military installation by an insurer or insurance producer with respect to the in-person, face-to-face solicitation of life insurance are declared to be false, misleading, deceptive or unfair:

(a) Knowingly soliciting the purchase of any life insurance product “door to door” or without first establishing a specific appointment for each meeting with the prospective purchaser;

(b) Soliciting service members in a group or “mass” audience or in a “captive” audience where attendance is not voluntary;

(c) Knowingly making appointments with or soliciting service members during their normally scheduled duty hours;

(d) Making appointments with or soliciting service members in barracks, day rooms, unit areas, or transient personnel housing or other areas where the installation commander has prohibited solicitation;

(e) Soliciting the sale of life insurance without first obtaining permission from the installation commander or the commander’s designee;

(f) Posting unauthorized bulletins, notices or advertisements;

(g) Failing to present DD Form 2885, Personal Commercial Solicitation Evaluation, to service members solicited or encouraging service members solicited not to complete or submit a DD Form 2885; or December, 2007 4 (h) Knowingly accepting an application for life insurance or issuing a policy of life insurance on the life of an enlisted member of the United States Armed Forces without first obtaining for the insurer’s files a completed copy of any required form which confirms that the applicant has received counseling or fulfilled any other similar requirement for the sale of life insurance established by regulations, directives or rules of the DoD or any branch of the Armed Forces.

(2) The following acts or practices when committed on a military installation by an insurer or insurance producer constitute corrupt practices, improper influences or inducements and are declared to be false, misleading, deceptive or unfair:

(a) Using DoD personnel, directly or indirectly, as a representative or agent in any official or business capacity with or without compensation with respect to the solicitation or sale of life insurance to service members; or (b) Using an insurance producer to participate in any United States Armed Forces sponsored education or orientation program.

History

• Authority: 2007 Tenn. Pub. Act Ch. 339, T.C.A. §§ 56-8-120, 56-8-104(11), 56-8-113, and Military Personnel Financial Services Protection Act, Pub. L. No. 109-290 (2006).
• Administrative History: Original rule filed October 11, 2007; effective December 25, 2007.

Tenn. Comp. R. & Regs. 0780-01-89-.07 PRACTICES DECLARED FALSE, MISLEADING, DECEPTIVE OR UNFAIR

REGARDLESS OF LOCATION

(1) The following acts or practices by an insurer or insurance producer constitute corrupt practices, improper influences or inducements and are declared to be false, misleading, deceptive or unfair:

(a) Submitting, processing or assisting in the submission or processing of any allotment form or similar device used by the United States Armed Forces to direct a service member’s pay to a third party for the purchase of life insurance. The foregoing includes, but is not limited to, using or assisting in using a service member's “MyPay” account or other similar internet or electronic medium for such purposes. This subparagraph does not prohibit assisting a service member by providing insurer or premium information necessary to complete any allotment form;

(b) Knowingly receiving funds from a service member for the payment of premium from a depository institution with which the service member has no formal banking relationship. For purposes of this subparagraph, a formal banking relationship is established when the depository institution:

1. Provides the service member a deposit agreement and periodic statements and makes the disclosures required by the Truth in Savings Act, 12 U.S.C. § 4301 et seq. and the regulations promulgated thereunder; and 2. Permits the service member to make deposits and withdrawals unrelated to the payment or processing of insurance premiums.

(c) Employing any device or method or entering into any agreement whereby funds received from a service member by allotment for the payment of insurance premiums are identified on the service member’s Leave and Earnings Statement or equivalent or successor form as “Savings” or “Checking” and where the service member has no formal banking relationship as defined in subparagraph (1)(b) of this Rule;

December, 2007 5 (d) Entering into any agreement with a depository institution for the purpose of receiving funds from a service member whereby the depository institution, with or without compensation, agrees to accept direct deposits from a service member with whom it has no formal banking relationship;

(e) Using DoD personnel, directly or indirectly, as a representative or agent in any official or unofficial capacity with or without compensation with respect to the solicitation or sale of life insurance to service members who are junior in rank or grade, or to the family members of such personnel;

(f) Offering or giving anything of value, directly or indirectly, to DoD personnel to procure their assistance in encouraging, assisting or facilitating the solicitation or sale of life insurance to another service member;

(g) Knowingly offering or giving anything of value to a service member for his or her attendance at any event where an application for life insurance is solicited; or (h) Advising a service member to change his or her income tax withholding or state of legal residence for the sole purpose of increasing disposable income to purchase life insurance.

(2) The following acts or practices by an insurer or insurance producer lead to confusion regarding source, sponsorship, approval or affiliation and are declared to be false, misleading, deceptive or unfair:

(a) Making any representation, or using any device, title, descriptive name or identifier that has the tendency or capacity to confuse or mislead a service member into believing that the insurer, insurance producer or product offered is affiliated, connected or associated with, endorsed, sponsored, sanctioned or recommended by the U.S.

Government, the United States Armed Forces, or any state or federal agency or government entity. Examples of prohibited insurance producer titles include, but are not limited to, “Battalion Insurance Counselor,” “Unit Insurance Advisor,”

“Servicemen's Group Life Insurance Conversion Consultant” or “Veteran’s Benefits Counselor.”

Nothing herein shall be construed to prohibit a person from using a professional designation awarded after the successful completion of a course of instruction in the business of insurance by an accredited institution of higher learning. Such designations include, but are not limited to, Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), Master of Science In Financial Services (MSFS), or Masters of Science Financial Planning (MS); or (b) Soliciting the purchase of any life insurance product through the use of or in conjunction with any third party organization that promotes the welfare of or assists members of the United States Armed Forces in a manner that has the tendency or capacity to confuse or mislead a service member into believing that either the insurer, insurance producer or insurance product is affiliated, connected or associated with, endorsed, sponsored, sanctioned or recommended by the U.S. Government, or the United States Armed Forces.

(3) The following acts or practices by an insurer or insurance producer lead to confusion regarding premiums, costs or investment returns and are declared to be false, misleading, deceptive or unfair:

December, 2007 6 (a) Using or describing the credited interest rate on a life insurance policy in a manner that implies that the credited interest rate is a net return on premium paid; or (b) Excluding individually issued annuities, misrepresenting the mortality costs of a life insurance product, including stating or implying that the product “costs nothing” or is “free”.

(4) The following acts or practices by an insurer or insurance producer regarding SGLI or VGLI are declared to be false, misleading, deceptive or unfair:

(a) Making any representation regarding the availability, suitability, amount, cost, exclusions or limitations to coverage provided to a service member or dependents by SGLI or VGLI, which is false, misleading or deceptive;

(b) Making any representation regarding conversion requirements, including the costs of coverage, or exclusions or limitations to coverage of SGLI or VGLI to private insurers which is false, misleading or deceptive; or (c) Suggesting, recommending or encouraging a service member to cancel or terminate his or her SGLI policy or issuing a life insurance policy which replaces an existing SGLI policy unless the replacement shall take effect upon or after the service member’s separation from the United States Armed Forces.

(5) The following acts or practices by an insurer and or insurance producer regarding disclosure are declared to be false, misleading, deceptive or unfair:

(a) Deploying, using or contracting for any lead generating materials designed exclusively for use with service members that do not clearly and conspicuously disclose that the recipient will be contacted by an insurance producer, if that is the case, for the purpose of soliciting the purchase of life insurance;

(b) Failing to disclose that a solicitation for the sale of life insurance will be made when establishing a specific appointment for an in-person, face-to-face meeting with a prospective purchaser;

(c) Excluding individually issued annuities, failing to clearly and conspicuously disclose the fact that the product being sold is life insurance;

(d) Failing to make, at the time of sale or offer to an individual known to be a service member, the written disclosures required by Section 10 of the “Military Personnel Financial Services Protection Act,” Pub. L. No. 109-290, p.16; or (e) Excluding individually issued annuities, when the sale is conducted in-person face-toface with an individual known to be a service member, failing to provide the applicant at the time the application is taken:

1. An explanation of any free look period with instructions on how to cancel if a policy is issued; and 2. Either a copy of the application or a written disclosure. The copy of the application or the written disclosure shall clearly and concisely set out the type of life insurance, the death benefit applied for and its expected first year cost.

(6) The following acts or practices by an insurer or insurance producer with respect to the sale of certain life insurance products are declared to be false, misleading, deceptive or unfair:

December, 2007 7 (a) Excluding individually issued annuities, recommending the purchase of any life insurance product which includes a side fund to a service member unless the insurer has reasonable grounds for believing that the life insurance death benefit, standing alone, is suitable;

(b) Offering for sale or selling a life insurance product which includes a side fund to a service member who is currently enrolled in SGLI, is presumed unsuitable unless, after the completion of a needs assessment, the insurer demonstrates that the applicant’s SGLI death benefit, together with any other military survivor benefits, savings and investments, survivor income, and other life insurance are insufficient to meet the applicant’s insurable needs for life insurance.

1. “Insurable needs” are the risks associated with premature death taking into consideration the financial obligations and immediate and future cash needs of the applicant’s estate and/or survivors or dependents; or 2. “Other military survivor benefits” include, but are not limited to: the Death Gratuity, Funeral Reimbursement, Transition Assistance, Survivor and Dependents’ Educational Assistance, Dependency and Indemnity Compensation, TRICARE Healthcare benefits, Survivor Housing Benefits and Allowances, Federal Income Tax Forgiveness, and Social Security Survivor Benefits.

(c) Excluding individually issued annuities, offering for sale or selling any life insurance contract which includes a side fund:

1. Unless interest credited accrues from the date of deposit to the date of withdrawal and permits withdrawals without limit or penalty;

2. Unless the applicant has been provided with a schedule of effective rates of return based upon cash flows of the combined product. For this disclosure, the effective rate of return will consider all premiums and cash contributions made by the policyholder and all cash accumulations and cash surrender values available to the policyholder in addition to life insurance coverage. This schedule will be provided for at least each policy year from one (1) to ten (10) and for every fifth policy year thereafter ending at age 100, policy maturity or final expiration; and 3. Which by default diverts or transfers funds accumulated in the side fund to pay, reduce or offset any premiums due.

(d) Excluding individually issued annuities, offering for sale or selling any life insurance contract which after considering all policy benefits, including but not limited to endowment, return of premium or persistency, does not comply with standard nonforfeiture law for life insurance; or (e) Selling any life insurance product to an individual known to be a service member that excludes coverage if the insured’s death is related to war, declared or undeclared, or any act related to military service except for accidental death coverage, e.g., double indemnity, which may be excluded.

History

• Authority: 2007 Tenn. Pub. Act Ch. 339, T.C.A. §§ 56-8-120, 56-8-104(11), 56-8-113, and Military Personnel Financial Services Protection Act, Pub. L. No. 109-290 (2006).
• Administrative History: Original rule filed October 11, 2007; effective December 25, 2007. December, 2007 8

Tenn. Comp. R. & Regs. 0780-01-89-.08 SEVERABILITY

If any provision of this Chapter or the application thereof to any person or circumstance is held invalid for any reason, the invalidity shall not affect the other provisions or any other application of this Chapter which can be given effect without the invalid provisions or application. To this end all provisions of this Chapter are declared to be severable.

History

• Authority: 2007 Tenn. Pub. Act Ch. 339, T.C.A. §§ 56-8-120, 56-8-104(11), 56-8-113, and Military Personnel Financial Services Protection Act, Pub. L. No. 109-290 (2006).
• Administrative History: Original rule filed October 11, 2007; effective December 25, 2007. RULE 0780-1-89-.09 EFFECTIVE DATE. This regulation shall become effective January 1, 2008, and shall apply to acts or practices committed on or after the effective date. Authority: 2007 Tenn. Pub. Act Ch. 339, T.C.A. §§ 56-8-120, 56-8-104(11), 56-8-113, and Military Personnel Financial Services Protection Act, Pub. L. No. 109-290 (2006).

Chapter 0780-01-90 Crop Insurance Adjusters

Tenn. Comp. R. & Regs. 0780-01-90-.01 PURPOSE

The purpose of this Chapter is to provide rules to assist the commissioner in administering the laws relating to the licensure and regulation of crop insurance adjusters, as provided for in T.C.A. §§ 56-6- 1001, et seq. This Chapter should not be viewed as replacing any other or additional statutory requirements not explicitly included in this Chapter. Nothing in this Chapter authorizes any crop insurance adjuster to engage in conduct that constitutes the “practice of law” or “law business” as defined in title 23,

chapter 3 or under the rules of the Tennessee Supreme Court.

History

• Authority: 2009 Public Acts, Chapter 476 and T.C.A. §§ 56-2-301 and 56-6-1001 et seq.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010.

Tenn. Comp. R. & Regs. 0780-01-90-.02 SCOPE

This Chapter applies to all persons acting as crop insurance adjusters in this state as governed by T.C.A. §§ 56-6-1001, et seq. Pursuant to T.C.A. §§ 56-6-1001, et seq., the crop insurance adjuster license to be issued by the commissioner shall be a multi-peril crop insurance adjuster license.

History

• Authority: 2009 Public Acts, Chapter 476 and T.C.A. §§ 56-2-301 and 56-6-1001 et seq.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010.

Tenn. Comp. R. & Regs. 0780-01-90-.03 AUTHORITY

This Chapter is issued pursuant to the authority vested in the commissioner pursuant to T.C.A. §§ 56-6- 1001 et seq.

History

• Authority: 2009 Public Acts, Chapter 476 and T.C.A. §§ 56-2-301 and 56-6-1001 et seq.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010. September, 2010 2

Tenn. Comp. R. & Regs. 0780-01-90-.04 DEFINITIONS

(1) "Commissioner" means the Commissioner of Commerce and Insurance;

(2) "Crop" means and includes any agricultural product, including livestock, nursery product, tree and product from a tree, as well as anything insured by the Federal Crop Insurance Corporation under a crop insurance program;

(3) (a) “Crop insurance adjuster” means any person, who, for compensation or any other thing of value, does any of the following:

(i) Acts or aids in investigating, verifying, substantiating, estimating, appraising, determining, presenting, and discussing the value of the claim, and/or effectuating the resolution of a claim for loss or damage covered by an insurance contract that insures crops;

(ii) Advertises for employment as an adjuster of claims arising under insurance contracts that insure crops or solicits business or represents to the public to be a crop insurance adjuster of insurance claims, for losses or damages arising out of policies of insurance that insure crops; or (iii) Directly or indirectly solicits business, investigates or adjusts losses, or advises an insured about claims for losses or damages arising out of policies of insurance that insure crops, when doing any of the foregoing for or on behalf of another person engaged in the business of adjusting losses or damages covered by an insurance policy that insures crops, for the insured.

(b) Nothing in this Chapter shall:

(i) Authorize any crop insurance adjuster or person operating at the direction of a crop insurance adjuster to engage in conduct that constitutes the “practice of law” or “law business” as defined in title 23, chapter 3 or under the rules of the Tennessee Supreme Court; or (ii) Affect or alter, in any way, the contractual obligations of an insured to its insurance company and the duty of good faith each owes the other;

(4) "Department" means the Department of Commerce and Insurance;

(5) “NAIC” means the National Association of Insurance Commissioners;

(6) "Person" means a natural person; and, (7) "Risk Management Agency" means that agency of the United States Department of Agriculture acting on behalf of the Federal Crop Insurance Corporation to administer federal crop insurance programs.

History

• Authority: 2009 Public Acts, Chapter 476 and T.C.A. §§ 56-2-301 and 56-6-1001 et seq.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010. September, 2010 3

Tenn. Comp. R. & Regs. 0780-01-90-.05 QUALIFICATION FOR THE ISSUANCE OF A LICENSE

(1) A person shall apply for and receive from the commissioner a multi-peril crop insurance adjuster license to operate as a multi-peril crop insurance adjuster in this State. All applications for licensure shall contain the following:

(a) A completed application form adopted by the commissioner and/or the NAIC, manually signed by the applicant;

(b) Proof of the completion and passing of the Risk Management Agency-approved Proficiency test for multi-peril crop insurance adjusters as required by Rule 0780-01- 90-.08; and (c) A non-refundable filing fee of one hundred dollars ($100.00);

(2) Before issuing a multi-peril crop insurance adjuster license to an applicant under this

Chapter, the commissioner shall find that the applicant:

(a) Has not committed any act that is grounds for denial, suspension or revocation of a license as set forth in Rule 0780-01-90-.11;

(b) Is trustworthy, reliable and of good reputation. The applicant shall demonstrate these characteristics to the commissioner on an NAIC biographical affidavit;

(c) Has paid all fees as set forth in this chapter; and, (d) Is at least eighteen (18) years of age.

(3) Unless directed otherwise by the Department, an applicant shall file the information required under this Rule with the commissioner by personal delivery or mail addressed to: Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Davy Crockett Tower, Nashville, Tennessee 37243, Attention: Agent Licensing Section.

(4) The commissioner may require any documents or materials reasonably necessary to verify the information contained in the application.

(5) Applicants should allow thirty (30) days for the Department’s review and potential granting of the application upon the Department’s receipt of all required information.

History

• Authority: 2009 Public Acts, Chapter 476 and T.C.A. §§ 56-2-301 and 56-6-1001 et seq.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010.

Tenn. Comp. R. & Regs. 0780-01-90-.06 ISSUANCE AND MAINTENANCE OF LICENSE

(1) Unless denied licensure under this chapter, persons who have met the requirements of this

Chapter shall be issued a multi-peril crop insurance adjuster license.

(2) The license shall contain the licensee's name, city and state of business address, personal identification number, the date of issuance, the expiration date, and any other information the commissioner deems necessary.

(3) A multi-peril crop insurance adjuster license shall remain in effect for twenty-four (24) months from the last day of the licensee’s birth month occurring after the license is issued, unless September, 2010 4 revoked or suspended. The commissioner may renew a license issued under this Chapter, as long as the request for renewal and the fee set forth in the Rule 0780-01-90-.07 is paid and any other requirements for license renewal are met by the date of the license's expiration.

(4) The licensee shall inform the commissioner, by any means acceptable to the commissioner, of a change of address, change of legal name, or change of material information submitted on the application within thirty (30) days of the change.

History

• Authority: 2009 Public Acts, Chapter 476 and T.C.A. §§ 56-2-301 and 56-6-1001 et seq.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010.

Tenn. Comp. R. & Regs. 0780-01-90-.07 LICENSE RENEWAL

(1) A multi-peril crop insurance adjuster shall renew such adjuster's license every other year on or before the end of the multi-peril crop insurance adjuster’s birth month in order to continue to operate in this State. All applications for renewal shall contain the following:

(a) A completed renewal form adopted by the commissioner and signed by the applicant;

(b) Proof of completion of no less than twenty-four (24) hours of continuing education courses approved by the commissioner; and (c) A non-refundable renewal fee of one hundred dollars ($100.00).

(2) (a) A multi-peril crop insurance adjuster who allows the adjuster's license to lapse may, within twelve (12) months from the date of expiration, be issued a new multi-peril crop insurance adjuster license upon the commissioner's receipt of the request for renewal.

However, a lapsed license fee in the amount of double the unpaid renewal fee shall be required, and the license shall be subject to any other penalties as provided by law, before the license will be renewed.

(b) If the commissioner receives the request for reinstatement and the required lapsed license fee within sixty (60) days of the date the license lapsed, the commissioner shall reinstate the license retroactively to the date the license lapsed. If the commissioner receives the request for reinstatement and the required lapsed license fee after sixty (60) days, but within one (1) year of the date the license lapsed, the commissioner shall reinstate the license prospectively with the date the license is reinstated. If the person applies for reinstatement more than one (1) year from date of lapse, the person shall reapply for the license under this part.

(3) A licensed multi-peril crop insurance adjuster that is unable to comply with license renewal procedures due to military service, a long-term medical disability, or some other extenuating circumstance, may request a waiver of those procedures. Upon such request, the commissioner may grant a waiver of any examination requirement, fine, or other sanction imposed for failure to comply with renewal procedures.

(4) Unless directed otherwise by the Department, an applicant shall file the information required under this Rule with the commissioner by personal delivery or mail addressed to: Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Davy Crockett Tower, Nashville, Tennessee 37243, Attention: Agent Licensing Section.

(5) In order to ensure the prompt review and potential granting of a renewal application, applicants should file all information required under Paragraph (1) of this Rule thirty (30) days prior to the end of the multi-peril crop insurance adjuster’s birth month.

September, 2010 5

History

• Authority: 2009 Public Acts, Chapter 476 and T.C.A. §§ 56-2-301 and 56-6-1001 et seq.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010.

Tenn. Comp. R. & Regs. 0780-01-90-.08 EXAMINATION REQUIREMENTS

(1) All individuals applying for a multi-peril crop insurance adjuster license are required to pass the Risk Management Agency-approved Proficiency test for multi-peril crop insurance adjusters.

(2) The commissioner may enter into a contract with a testing organization for the examination of applicants for a license as a multi-peril crop insurance adjuster. Notwithstanding any other provisions of this Chapter 0780-01-90, such contract may provide that the testing organization shall:

(a) Assume responsibility for the administration and grading of the examination; and (b) Charge and collect from each applicant the fee for administering the examination.

(3) No individual taking an examination for a multi-peril crop insurance adjuster license shall possess or examine the examination questions and/or answers prior to the time of examination, nor shall any such individual use improper notes or other reference materials during the examination. Furthermore, no person shall have such questions or answers reproduced and/or disseminated for the purposes of assisting an applicant in passing an examination.

History

• Authority: 2009 Public Acts, Chapter 476 and T.C.A. §§ 56-2-301 and 56-6-1001 et seq.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010.

Tenn. Comp. R. & Regs. 0780-01-90-.09 CONTINUING EDUCATION REQUIREMENT

(1) An individual, who holds a multi-peril crop insurance adjuster license shall satisfactorily complete a minimum of twenty-four (24) hours of continuing education courses, including ethics, reported on a biennial basis in conjunction with the license renewal cycle. The education required by this section shall be in addition to any other continuing education requirements required for other professional licenses held by the individuals licensed under

Chapter 56, Part 6 of the Tennessee Code Annotated.

(2) Only continuing education courses approved by the commissioner shall be used to satisfy the continuing education requirement of Paragraph (1).

History

• Authority: 2009 Public Acts, Chapter 476 and T.C.A. §§ 56-2-301 and 56-6-1001 et seq.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010.

Tenn. Comp. R. & Regs. 0780-01-90-.10 PROCEDURES FOR PUBLIC COMPLAINTS

(1) Complaints concerning crop insurance adjusters shall be handled by the Consumer Insurance Services Section (or successor organizational unit) of the Department’s Insurance Division.

September, 2010 6 (2) The Consumer Insurance Services Section (or successor organizational unit) shall record and review all complaints received under this Rule, and the process for such review and disposition shall be the same as that for all other complaints submitted to the Consumer Insurance Services Section.

(3) Upon receiving notice of a complaint from the Consumer Insurance Services Section, a crop insurance adjuster shall send a written response to the Consumer Insurance Services

Section within thirty (30) days thereafter.

History

• Authority: 2009 Public Acts, Chapter 476 and T.C.A. §§ 56-2-301, 56-6-1001 et seq., Title 56, Chapters 8 and 53.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010.

Tenn. Comp. R. & Regs. 0780-01-90-.11 GROUNDS FOR PROBATION, SUSPENSION, REVOCATION, REFUSAL TO ISSUE

AND REFUSAL TO RENEW A LICENSE.

(1) The commissioner may place on probation, suspend, revoke or refuse to issue or renew a multi-peril crop insurance adjuster's license, or may levy a civil penalty in accordance with T.C.A. § 56-2-305, or any combination of actions, for any one (1) or more of the following causes:

(a) Providing materially incorrect, misleading, incomplete, or untrue information in the license application or renewal application;

(b) Violating any laws administered by the commissioner, or violating lawful regulations, or final orders of the commissioner or of another state's commissioner;

(c) Obtaining or attempting to obtain a license through misrepresentation or fraud;

(d) Improperly withholding, misappropriating, or converting to the licensee's own use any moneys or properties received in the course of conducting business under this license;

(e) Intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance;

(f) Having been convicted of a felony or any other offense involving dishonesty, fraud, deceit or misrepresentation, in a final decision of a court of competent jurisdiction;

(g) Having committed any insurance unfair trade practice or insurance fraud prohibited under chapters 8 and 53 of this title;

(h) Using fraudulent, coercive or dishonest practices, or demonstrating incompetence, untrustworthiness or financial irresponsibility in the conduct of business in this state or elsewhere;

(i) Having an insurance producer license, public adjuster license or crop insurance adjuster license, or its equivalent, suspended or revoked in this or any other state, province, district or territory;

(j) Forging another's name to an application for insurance or to any document related to an insurance transaction;

(k) Cheating on an examination for an insurance license;

September, 2010 7 (l) Knowingly accepting insurance business from an individual who is not licensed by the commissioner but who is required to be so licensed;

(m) Allowing a person not licensed under T.C.A. § 56-6-1001 et seq. and this Chapter to perform actions requiring licensure under T.C.A. § 56-6-1001 et seq. and this Chapter; or, (n) Any other grounds or violations permissible by statute.

(2) Any action by the commissioner to put on probation, suspend, revoke or deny the renewal of a license pursuant to this Chapter shall be governed by the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

(3) In the event that the action of the commissioner is to deny an application for a license, the commissioner shall notify the applicant and advise the applicant, in writing, of the denial of the applicant's application within thirty (30) days of such denial.

(4) The commissioner shall retain the authority to enforce this Chapter and T.C.A. § 56-6-1001 et seq. and impose any penalty or remedy authorized by this Chapter or T.C.A. § 56-6-1001 et seq., or any other provision of Title 56 against any person who is under investigation for or charged with a violation of this Rule, even if the person's license or registration has been surrendered or has lapsed by operation of law.

(5) The commissioner may serve a notice or order in any action arising under this Chapter or T.C.A. § 56-6-1001 et seq. by registered or certified mail to the multi-peril crop insurance adjuster or applicant at the address of record on file with the commissioner. The multi-peril crop insurance adjuster or applicant shall be deemed to have designated such address and such manner of service as sufficient for reasonable notice of proceedings under this Chapter and T.C.A. § 56-6-1001 et seq.

History

• Authority: 2009 Public Acts, Chapter 476, Tenn. Code Ann. §§ 4-5-308, 56-2-301, 56-2-305, 56-6-1001 et seq., Title 4, Chapter 5, Title 56, Chapters 8 and 53.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010.

Tenn. Comp. R. & Regs. 0780-01-90-.12 SEVERABILITY PROVISION

If any Rule or portion of a Rule of this Chapter or its applicability to any person or circumstance is held invalid by a court, the remainder of the Chapter or the applicability of the provision to other persons or circumstances shall not be affected. To this end, the provisions of this Chapter are declared severable.

History

• Authority: 2009 Public Acts, Chapter 476 and Tenn. Code Ann. §§ 56-2-301 and 56-6-1001 et seq.
• Administrative History: Emergency rule filed January 29, 2010; effective through July 28, 2010. Emergency rule filed January 29 expired effective July 29, 2010; rule reverted to its reserved status. Original rule filed June 16, 2010; effective September 14, 2010.

Chapter 0780-01-91 Public Adjusters

Tenn. Comp. R. & Regs. 0780-01-91-.01 PURPOSE

The purpose of this Chapter is to provide rules to assist the commissioner in administering the laws relating to the licensure and regulation of public adjusters, as provided for in T.C.A. §§ 56-6- 901, et seq. This Chapter should not be viewed as replacing any other or additional statutory requirements not explicitly included in this Chapter. Nothing in this Chapter authorizes any public adjuster or person operating at the direction of a public adjuster to engage in conduct that is law practice or law business as defined in title 23, chapter 3 or under the rules of the Tennessee Supreme Court.

History

• Authority: T.C.A. §§ 56-6-901, et seq.
• Administrative History: Original rule filed March 26, 2007; effective June 9, 2007.

Tenn. Comp. R. & Regs. 0780-01-91-.02 SCOPE

(1) This Chapter applies to all persons acting as public adjusters in this state. This Chapter does no apply to:

(2) An attorney at law admitted to practice in this state or an employee of such attorney acting under such attorney’s supervision;

(3) A person who negotiates or settles claims arising under a life or health insurance policy or annuity contract;

(4) A person employed only for the purpose of obtaining facts surrounding a loss or furnishing technical assistance to a licensed public adjuster, including without limitation photographers, contractors, appraisers of value, private investigators, engineers and handwriting experts;

(5) A licensed health care provider, employee of a licensed health care provider, who prepares or files a health claim form on behalf of a patient;

(6) A person who settles subrogation claims between insurers; or (7) A person who is employed by, or under contract to, an insurance company acting under such company’s employment or contract.

History

• Authority: T.C.A. §§ 56-6-903 and 56-6-920.
• Administrative History: Original rule filed March 26, 2007; effective June 9, 2007.

Tenn. Comp. R. & Regs. 0780-01-91-.03 AUTHORITY

(1) This Chapter is issued pursuant to the authority vested in the commissioner pursuant to T.C.A. § 56-6-920.

History

• Authority: T.C.A. § 56-9-920.
• Administrative History: Original rule filed March 26, 2007; effective June 9, 2007.

Tenn. Comp. R. & Regs. 0780-01-91-.04 DEFINITIONS

(1) “Commissioner” means the Commissioner of the Tennessee Department of Commerce and Insurance;

(2) “Department” means the Tennessee Department of Commerce and Insurance;

(3) “NAIC” means the National Association of Insurance Commissioners; and (4) “Public adjuster” means any person, other than someone who is employed by an insurance carrier, who, for compensation or any other thing of value, on behalf of the insured:

(a) Acts or aids, solely in relation to first party claims arising under insurance contracts that insure the real or personal property of the insured on behalf of an insured, in investigating, verifying, substantiating, estimating, appraising, determining, presenting, and discussing the value of the claim, and effectuating the resolution of a claim for loss or damage covered by an insurance contract;

(b) Advertises for employment as a public adjuster of insurance claims or solicits business or represents to the public to be a public adjuster of first party insurance claims, for losses or damages arising out of policies of insurance that insure real or personal property; or (c) Directly or indirectly solicits business, investigates or adjusts losses, or advises an insured about first party claims for losses or damages arising out of policies of insurance that insure real or personal property for another person engaged in the business of adjusting losses or damages covered by an insurance policy, for the insured.

History

• Authority: T.C.A. §§ 56-6-902 and 56-6-920.
• Administrative History: Original rule filed March 26, 2007; effective June 9, 2007.

Tenn. Comp. R. & Regs. 0780-01-91-.05 INITIAL LICENSE REQUIREMENTS

(1) A public adjuster shall apply for and receive from the commissioner a public adjuster license to operate as a public adjuster in this State. All applications for licensure shall contain the following:

(a) A completed application form adopted by the commissioner and/or the NAIC manually signed by the applicant or an officer or director of the business entity;

(b) Unless exempt pursuant to T.C.A. § 56-6-907, proof of the completion and passing of an examination required by Rule 0780-1-91-.06; and (c) A non-refundable filing fee of one hundred dollars ($100.00).

(2) Unless directed otherwise by the Department, an applicant shall file the information required under this Rule with the commissioner by personal delivery or mail addressed to: Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Davy Crockett Tower, Ninth Floor, Nashville, Tennessee 37243, Attention: Agent Licensing Section.

(3) Applicants should allow thirty (30) days for the Department’s review and granting of the application upon receipt of all required information.

History

• Authority: T.C.A. §§ 56-6-905, 56-6-906, 56-6-907, 56-6-910(c), and 56-6-920.
• Administrative History: Original rule filed March 26, 2007; effective June 9, 2007.

Tenn. Comp. R. & Regs. 0780-01-91-.06 EXAMINATION REQUIREMENTS

(1) All individuals applying for a public adjuster license, unless otherwise exempted by law, are required to pass a written examination in order to test the applicant’s knowledge as to the duties and responsibilities of a public adjuster and the insurance laws and regulations of this state.

(2) Each examination for a license shall be approved for use by the commissioner. Examinations for licensing shall be at such reasonable times and places accessible to the applicants as are designated by the commissioner.

(3) An individual taking an examination pursuant to this Rule shall pay a non-refundable fee of fifty dollars ($50.00) in order to take such examination. An individual who takes an examination more than once shall pay the examination fee for each subsequent taking of the examination, regardless of the reason for the subsequent examinations.

(4) The minimum score that will be considered as a passing score for any examination given hereunder is seventy percent (70%). Any score on an exam below seventy percent (70%) shall be considered a failing score.

(a) An individual who has failed to pass an examination for a license applied for may take another examination following the expiration of thirty (30) days from the date of the applicant’s last unsuccessful examination upon submission of the examination fee.

(b) An individual who has received a failing score on three (3) successive attempts of taking an examination for a license applied for will not be permitted to take a subsequent examination until the expiration of one (1) year from the date of the taking of the individual’s last unsuccessful examination. After the one (1) year period, the individual may retake the examination. The individual shall also be required to file a new application accompanied by the appropriate filing and examination fees.

(5) The commissioner may enter into a contract with a testing organization for the examination of applicants for license as a public adjuster. Notwithstanding any other provisions of this

Chapter, such contract may provide that the testing organization shall:

(a) Assume responsibility for the administration and grading of the examination; and (b) Charge and collect from each applicant the fee as established in Rule 0780-1-91-.06(3).

(6) No individual taking an examination for a public adjuster license shall possess or examine the examination questions and/or answers prior to the time of examination, nor shall any such individual use improper notes or other reference materials during the examination.

Furthermore, no person shall have such questions or answers reproduced and/or disseminated for the purposes of assisting an applicant in passing an examination.

(7) All individuals desiring to take a test under this Rule shall submit to the commissioner:

(a) Two (2) full sets of fingerprints;

(b) A certified check in the amount of forty-eight dollars ($48.00) made payable to the Tennessee Bureau of Investigation representing the cost of having criminal history record checks performed;

(c) A reasonable administrative fee representing the cost of the collection and transmission of fingerprint data made payable to the contractor.

History

• Authority: T.C.A. §§ 56-6-904, 56-6-905, 56-6-906, and 56-6-920.
• Administrative History: Original rule filed March 26, 2007; effective June 9, 2007.

Tenn. Comp. R. & Regs. 0780-01-91-.07 RENEWAL REQUIREMENTS

(1) A public adjuster shall renew its license every other year prior to the anniversary date of the initial granting of the license in order to continue to operate in this State. All applications for renewal shall contain the following:

(a) A completed renewal form adopted by the commissioner signed by the applicant or an officer or director of the business entity in a manner acceptable to the commissioner;

(b) Proof of either:

1. Completion of no less than twenty-four (24) hours of continuing education courses approved by the commissioner; or 2. Completion of the applicant’s resident state’s continuing education requirements if the applicant’s home state gives credit to residents of this state on a substantially similar basis; and (c) A non-refundable renewal fee of one hundred dollars ($100.00).

(2) Unless directed otherwise by the Department, an applicant shall file the information required under this Rule with the commissioner by personal delivery or mail addressed to: Tennessee Department of Commerce and Insurance, 500 James Robertson Parkway, Davy Crockett Tower, Ninth Floor, Nashville, Tennessee 37243, Attention: Agent Licensing Section.

(3) In order to ensure the prompt review and granting of a renewal application, applicants should file all information required under Paragraph (1) of this Rule thirty (30) days prior to the anniversary date of granting of the initial license.

History

• Authority: T.C.A. §§ 56-6-905, 56-6-907, 56-6-909, 56-6-912, and 56-6-920.
• Administrative History: Original rule filed March 26, 2007; effective June 9, 2007.

Tenn. Comp. R. & Regs. 0780-01-91-.08 PROCEDURES FOR PUBLIC COMPLAINTS

(1) Complaints concerning public adjusters shall be handled by the Consumer Insurance Services

Section (or successor organizational unit) of the Department’s Insurance Division.

(2) The Consumer Insurance Services Section (or successor organizational unit) shall record and review all complaints received under this Rule, and the process for such review and disposition shall be the same as that for all other complaints submitted to the Consumer Insurance Services Section.

(3) Upon receiving notice of a complaint from the Consumer Insurance Services Section, a public adjuster shall send a written response to the Consumer Insurance Services Section within thirty (30) days thereafter.

History

• Authority: T.C.A. §§ 56-1-106, 56-6-909(d), 56-6-910(a), 56-6-919, 56-6-920, Title 56, Chapters 8 and 53.
• Administrative History: Original rule filed March 26, 2007; effective June 9, 2007.

Chapter 0780-01-92 Rules Related to Form and Rate Filings for Health Insurance Coverage Not Subject to the Authority of the Patient Protection and Affordable Care Act of 2010

Tenn. Comp. R. & Regs. 0780-01-92-.01 DEFINITIONS

As used in this Chapter:

(1) "Accident and health insurance" means insurance against bodily injury, disablement or death, by accident or accidental means, or the expense of bodily injury, disablement or death, against disablement or expense resulting from sickness, and every insurance pertaining thereto; providing for the mental and emotional welfare of an individual and members of the individual's family by defraying the cost of legal services; or providing aggregate or excess stop-loss coverage in connection with employee welfare benefit plans, managed care organizations participating in commercial plans or the TennCare program, or both, health maintenance organizations, long-term care facilities and physician-hospital organizations as defined in T.C.A. § 56-32-102;

(2) "Health insurance coverage" means benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise and including items and services paid for as medical care) under any policy, certificate, or agreement offered by a health insurance issuer; it does not include excepted benefits as described by section 2791(c) of the Public Health Service Act, compiled in 42 U.S.C. § 300gg-91(c).

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-26-102, 56-26-103, 56-26-114, 56-26- 202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-92-.02 APPLICATION OF CHAPTER

This Chapter shall not apply to health insurance coverage provided to any individual or small employer as regulated by Tenn. Comp. R. & Regs. 0780-01-93. This Chapter shall apply to all other types of accident and health insurance. The provisions of this Chapter are severable. If any provision of this Chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this Chapter which can be given effect without the invalid provision or application.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-26-102, 56-26-103, 56-26-114, 56-26- 202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original chapter filed November 22, 2011; effective February 20, 2012. THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010

Tenn. Comp. R. & Regs. 0780-01-92-.03 GENERAL FILING REQUIREMENTS

(1) All the provisions of this Chapter, Rule 0780-01-92-.01 through Rule 0780-01-92-.08, apply to individual policy forms except as specifically provided in Rule 0780-01-92-.03(8).

(2) Each form shall be listed in a cover letter or in an attached list and all covering letters and lists shall be in duplicate. Rates and subsequent rate revisions must be filed with all accident and sickness policy forms as specified in T.C.A. §§ 56-26-102 and 56-26-202, and each policy form filing must be accompanied by a schedule of the proposed premium rates, except revised policy forms previously filed, rider and endorsement forms which do not require a change in rates.

(3) The marketing method to be used (e.g., individual sales, franchise, blanket, direct mail, group) shall be identified. Submission of mass-marketed policies, excluding individually marketed and underwritten policies and group policies as defined in T.C.A. § 56-26-201, shall include a description of the marketing program and state any fees involved.

(4) All filings must be submitted by the company concerned. If the filing is submitted through a third party, the filing should be accompanied by a letter of authorization signed by an officer of the insurance company.

(5) If the form being submitted is intended to replace an approved form already on file, a list of the material changes made in the new form must accompany the transmittal letter.

(6) All blank spaces in each policy form, except an application, must be filled in and completed with hypothetical data to indicate the purpose and use of the form. If there are numerical variables contained within the policy form, the range of variables must be stated in the policy form.

(7) When submitting a policy form to which a copy of the application must be attached when issued, a copy of the appropriate application shall be attached to the policy form. If the application has already been approved, the form number and date of approval shall be stated in the transmittal letter.

(8) The requirements of this paragraph shall apply solely to group accident and sickness policies and forms except for major medical health insurance coverage as referenced in T.C.A. § 56- 26-102(d) and to coverage regulated under Tenn. Comp. R. & Regs. 0780-01-93.

(a) As to experience-rated group insurance, premium rates and classifications need not be filed; however, form filings must be accompanied by a statement signed by an authorized person on behalf of the company that:

1. The policy filing is experience-rated group insurance, and 2. The premium rates and classification of risks are available for review by the Commissioner of Insurance upon request.

(b) As to other than experience-rated group insurance, the applicable premium rates and classifications must accompany the form filing, and the filing must be accompanied by a certification by an authorized person on behalf of the company that the premium rates are not unreasonable in relation to benefits provided, and that actuarial data and experience shall be maintained by the company and available for review by the commissioner upon request.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-26-102, 56-26-103, 56-26-114, 56-26- THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010 202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-92-.04 ACTUARIAL MEMORANDUM

Each rate submission shall include an actuarial memorandum describing the basis on which rates were determined and shall indicate and describe the calculation of the ratio, hereinafter called ‘‘anticipated loss ratio‘‘, of the present value of the expected benefits to the present value of the expected premiums over the entire period for which rates are computed to provide coverage. Each rate submission must also include a certification by a qualified actuary that to the best of the actuary’s knowledge and judgment the rate filing is in compliance with the applicable laws and regulations of this state and that the benefits are reasonable in relation to premiums.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-26-102, 56-26-103, 56-26-114, 56-26- 202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-92-.05 PREVIOUSLY APPROVED FORMS

Filings of rate revisions for a previously approved policy, rider or endorsement form shall also include the following:

(1) A statement of the scope and reason for the revision, and an estimate of the expected average effect on premiums, including the anticipated loss ratio for the form;

(2) A statement as to whether the filing applies only to new business, only to in-force business, or both, and the reasons;

(3) A history of the experience under existing rates, including at least the data indicated in Rule 0780-1- 92-.06. The history may also include, if available and appropriate, the ratios of actual claims to the claims expected according to the assumptions underlying the existing rates.

Additional data might include: substitution of actual claim run-offs for claim reserves and liabilities; determination of loss ratios with the increase in policy reserves (other than unearned premium reserves) added to benefits rather than subtracted from premiums; accumulations of experience funds; substitution of net level policy reserves for preliminary term policy reserves; adjustment of premiums to an annual mode basis; or other adjustments or schedules suited to the form and to the records of the company. All additional data must be reconciled, as appropriate, to the required data; and (4) The date and magnitude of each previous rate change, if any.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-26-102, 56-26-103, 56-26-114, 56-26- 202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010)).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-92-.06 EXPERIENCE RECORDS

Insurers shall maintain records of earned premiums and incurred benefits for each calendar year for each policy form, including data for rider and endorsement forms which are used with the policy form, on the same basis, including all reserves, as required for the Accident and Health Policy Experience Exhibit.

Separate data may be maintained for each rider or endorsement form to the extent appropriate.

THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010

Experience under forms which provide substantially similar coverage may be combined. The data shall be for all years of issue combined, for each calendar year of experience since the year the form was first issued, except that data for calendar years prior to the most recent five years may be combined.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-26-102, 56-26-103, 56-26-114, 56-26- 202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-92-.07 EVALUATING EXPERIENCE DATA

In determining the credibility and appropriateness of experience data, due consideration must be given to all relevant factors, such as:

(1) Statistical credibility of premiums and benefits, e.g., low exposure, low loss frequency;

(2) Experienced and projected trends relative to the kind of coverage, e.g. inflation in medical expenses, economic cycles affecting disability income experience;

(3) The concentration of experience at early policy durations where select morbidity and preliminary term reserves are applicable and where loss ratios are expected to be substantially lower than at later policy durations; and (4) The mix of business by risk classification.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-26-102, 56-26-103, 56-26-114, 56-26- 202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 15, 2011; effective February 22, 2012.

Tenn. Comp. R. & Regs. 0780-01-92-.08 REASONABLENESS OF BENEFITS IN RELATION TO PREMIUMS

(1) New Forms With respect to a new form, benefits may be considered reasonable in relation to premiums provided the anticipated loss ratio is at least as great as shown in the following table:

Type of Renewal Clause Coverage OR CR GR NC Medical Expense 60% 55% 55% 50% Loss of Income and Other 60% 55% 50% 45% Definitions of Renewal Clause OR - Optionally Renewable: renewal is at the option of the insurance company.

CR - Conditionally Renewable: renewal can be declined by the insurance company only for stated reasons other than deterioration of health.

THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010

GR - Guaranteed Renewable: renewal cannot be declined by the insurance company for any reason, but the insurance company can revise rates on a class basis.

NC - Non-Cancellable: renewal cannot be declined nor can rates be revised by the insurance company.

If satisfactory justification is submitted to the Department of Insurance for a policy form, including riders and endorsements, under which the expected average annual premium per policy is $100 or more but less than $200, the company may be permitted to subtract up to 5 percentage points from the numbers in the table above, or if less than $100, subtract up to 10 percentage points.

The average annual premium per policy and the average anticipated loss ratio shall be computed by the insurer based on an anticipated distribution of business by all applicable criteria having a price difference, such as age, sex, amount, dependent status, rider frequency, etc., except assuming an annual mode for all policies (i.e., the fractional premium loading shall not affect the average annual premium or anticipated loss ratio calculation).

(2) Rate Revisions.

With respect to filings of rate revisions for a previously approved form, benefits may be considered reasonable in relation to premiums provided the following standards are met:

(a) With respect to policies issued on and after the effective date of the revision, the standards are the same as in Paragraph (1) of this Rule, except that the average annual premiums shall be determined based on an actual rather than an anticipated distribution of business.

(b) With respect to policies issued prior to the effective date of the revision, both subparagraph (a) above and this subparagraph (b) shall be at least as great as the standards in Paragraph (1) of this Rule:

1. The anticipated loss ratio over the entire period for which the revised rates are computed to provide coverage;

2. The ratio of (i) to (ii) where:

(i) is the sum of the accumulated benefits, from the original effective date of the form to the effective date of the revision, and the present value of future benefits, and (ii) is the sum of the accumulated premiums, from the original effective date of the form to the effective date of the revision, and the present value of the future premiums, such present values to be taken over the entire period for which the revised rates are computed to provide coverage, and such accumulated benefits and premiums to include an explicit estimate of the actual benefits and premiums from the last date as of which an accounting has been made to the effective date of the revision. Interest shall be used in the calculation of these accumulated benefits and premiums and present values only if it is a significant factor in the calculation of this loss ratio.

3. Other methods, in addition to those in this Paragraph (2) may be used to calculate rate revisions. However, the minimum anticipated loss ratio thus calculated must be at least as great as the standards in Paragraph (1), with THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010 consideration given active life reserves, and such methods must be approved by the Insurance Commissioner.

(3) Anticipated loss ratios different from those indicated in Paragraphs (1) and (2) above will require justification based on the special circumstances that may be applicable.

(a) Examples of coverages that may receive special consideration are as follows:

1. accident only;

2. short term non-renewable, e.g., airline trip; student accident;

3. specified peril, e.g., cancer, common carrier; and 4. other special risks.

(b) Examples of other factors that may receive special consideration are as follows:

1. marketing methods, giving due consideration to acquisition and administration costs and to premium mode;

2. extraordinary expenses;

3. high risk of claim fluctuation because of the low loss frequency or the catastrophic or experimental nature of the coverage; and 4. product features such as long elimination periods, high deductibles and high maximum limits.

(4) Companies are urged to review their experience periodically and to file rate revisions, as appropriate, in a timely manner to avoid the necessity of later filing of exceptionally large rate increases.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-26-102, 56-26-103, 56-26-114, 56-26- 202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-92-.09 CLAIM FORMS FOR REPORTING BY HEALTH CARE PROVIDERS

(1) No later than July 1, 1994, all insurance companies offering for sale health care policies in this state shall require all policyholders and third party claimants to utilize the following standardized forms when making a claim against any health care insurance policy in effect in this state:

(a) Centers for Medicare and Medicaid (CMS) Form 1500 for health care practitioner claims other than dental. Health care practitioners who bill patients directly shall provide a properly completed CMS Form 1500 in addition to any other form used to bill the patient when requested by the patient.

(b) Form UB04 for hospital and other institutional care claims. Institutional care practitioners who bill patients directly shall provide a properly completed UB04 in addition to any other form used to bill the patient when requested by the patient.

THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010

(c) American Dental Association Claim Form for dental health care claims. Dentists who bill patients directly shall provide a properly completed Claim Form in addition to any other form used to bill the patient when requested by the patient.

(d) The National Council for Prescription Drug Programs (NCPDP) Universal Claim Form for pharmacy claims. Pharmacists who bill patients directly shall provide a properly completed Universal Claim Form in addition to any other form used to bill the patient when requested by the patient.

(e) The ANSI X12N standard format for the health care transaction sets for claims submission (837) and claims payment (835) for all issuers and health care providers who receive claims or sent payment by electronic means.

(2) All forms required by this Rule shall be updated to meet the requirements of federal law or state laws implementing federal or state health care reimbursement programs.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-7-1008, 56-26-102, 56-26-103, 56-26- 114, 56-26-202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Chapter 0780-01-93 Rules Related to Form and Rate Filings for Health Insurance Coverage Subject to the Authority of the Patient Protection and Affordable Care Act of 2010

Tenn. Comp. R. & Regs. 0780-01-93-.01 DEFINITIONS

As used in this Chapter:

(1) "Health insurance coverage" means benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise and including items and services paid for as medical care) under any policy, certificate, or agreement offered by a health insurance issuer; it does not include excepted benefits. For purposes of this Chapter, health insurance coverage shall have the same meaning as that given “major medical health insurance” in T.C.A. § 56-26-102 (d).

(2) "Health insurance issuer" means an entity, including a small employer carrier, subject to the insurance laws of this state, or subject to the jurisdiction of the commissioner, that contracts or offers to contract to provide health insurance coverage, including but not limited to an insurance company, a health maintenance organization and a nonprofit hospital and medical service corporation.

(3) "Individual health insurance coverage" means health insurance coverage offered to individuals in the individual market, but does not include short-term limited duration insurance.

(4) “Small employer” has the same meaning given in Title 56, Chapter 7, Section 2203.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-7-2203, 56-7-2802, 56-26-102, 56-26- 103, 56-26-114, 56-26-202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-93-.02 APPLICATION OF CHAPTER

(1) The provisions of this Chapter shall apply to health insurance coverage issued to any individual or small employer. The provisions of this Chapter are severable. If any provision of this Chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this Chapter which can be given effect without the invalid provision or application.

THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010

(2) This Chapter does not apply to any policy as described by Section 2791(c) of the Public Health Service Act, compiled in 42 U.S.C. § 300gg-91(c).

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-7-2203, 56-7-2802, 56-26-102, 56-26- 103, 56-26-114, 56-26-202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 28, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-93-.03 GENERAL FILING REQUIREMENTS

(1) All initial premium rates and forms for new policies and revised premium rates on any previously approved policies must be filed for approval for all health insurance coverage as specified in T.C.A. §56-26-102(a).

(2) Each form shall be listed in a cover letter or in an attached list or in the general filing information of an electronic filing system.

(3) The marketing method to be used (e.g., individual sales, franchise, blanket, direct mail, group, exchanges) shall be identified.

(4) All filings must be submitted by the company concerned. If the filing is submitted through a third party, the filing should be accompanied by a letter of authorization signed by an officer of the insurance company.

(5) All blank spaces in each policy form, except an application, must be filed in and completed with hypothetical data to indicate the purpose and use of the form. If the form includes a range of numerical variables, these variables must be in the actual form.

(6) When submitting a policy form to which a copy of the application must be attached when issued, a copy of the appropriate application shall be attached to the policy form. If the application has already been approved, the form number and date of approval shall be stated in the transmittal letter.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-7-2802, 56-26-102, 56-26-103, 56-26- 114, 56-26-202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-93-.04 ACTUARIAL MEMORANDUM

Each rate submission shall include an actuarial memorandum describing the basis on which rates were determined and shall indicate and describe the calculation of the ratio hereinafter called ‘‘anticipated medical loss ratio’’, of the present value of the expected benefits to the present value of the expected premiums over the entire period for which rates are computed to provide coverage. Each rate submission must also include a certification by a qualified actuary that to the best of the actuary’s knowledge and judgment the rate filing is in compliance with the applicable laws and regulations of this state and that the benefits are reasonable in relation to premiums.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-7-2802, 56-26-102, 56-26-103, 56-26- 114, 56-26-202, 56-27-112, 56-28-106, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012. THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010

Tenn. Comp. R. & Regs. 0780-01-93-.05 PREVIOUSLY APPROVED FORMS

The filing of revised premium rates on any previously approved policy, endorsement, rider, certificate or application shall also include the following:

(1) A statement of the scope and reason for the revision, and an estimate of the expected average effect on premiums, including the anticipated medical loss ratio for the form;

(2) A statement as to whether the filing applies only to new business, only to in-force business, or both, and the reasons it applies only to new or only to in-force business;

(3) A history of the experience under existing rates, including at least the data indicated in Rule

Tenn. Comp. R. & Regs. 0780-01-93-.06 ELECTRONIC FILING

Beginning January 1, 2012, all filings submitted pursuant to this Chapter shall be filed electronically. All electronic filings shall be made via the System for Electronic Rate and Form Filing (SERFF).

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-7-2802, 56-26-102, 56-26-103, 56-26- 114, 56-26-202, 56-27-112, 56-28-106, 56-29-117, and 56-32-107.
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-93-.07 EXPERIENCE RECORDS

Insurers shall maintain records of earned premiums and incurred benefits for each calendar year for each policy form, including data for rider and endorsement forms which are used with the policy form, on the same basis, including all reserves, as required for the Accident and Health Policy Experience Exhibit.

Separate data may be maintained for each rider or endorsement form to the extent appropriate.

Experience under forms which provide substantially similar coverage may be combined. The data shall be for all years of issue combined, for each calendar year of experience since the year the form was first issued, except that data for calendar years prior to the most recent five years may be combined.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-7-2802, 56-26-102, 56-26-103, 56-26- 114, 56-26-202, 56-27-112, 56-28-106, 56-29-117, 56-32-107, and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012. THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010

Tenn. Comp. R. & Regs. 0780-01-93-.08 REASONABLENESS OF BENEFITS IN RELATION TO PREMIUM

(1) New Forms and Rate Revisions (a) New forms and filings of new premium rates on a previously approved policy, endorsement rider, or certificate benefits will be presumed to be reasonable in relation to premiums provided the anticipated medical loss ratio is at least 80% in the individual and small group markets for all health insurance; however, failure to meet the anticipated medical loss ratio alone will not constitute an unreasonable rate.

(b) The medical loss ratio shall be calculated pursuant to the standards set forth by the U.S. Department of Health and Human Services interim final regulation at 45 C.F.R.

part 158 or the corresponding section of any future HHS regulation. For the purposes of this Rule, “small group market” shall mean products sold to employers who employed an average of at least 1 but not more than 100 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year.

(2) Companies are urged to review their experience periodically and to file rate revisions, as appropriate, in a timely manner to avoid the necessity of later filing of exceptionally large rate increases.

History

• Authority: T.C.A. §§ 4-5-206, 56-1-212, 56-2-201, 56-2-301, 56-7-2802, 56-26-102, 56-26-103, 56-26- 114, 56-26-202, 56-27-112, 56-28-106, 56-29-117, 56-32-107, Public Law 111-148 as amended by Public Law 111-152 (2010), and 45 C.F.R. part 158.
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-93-.09 CLAIM FORMS FOR REPORTING BY HEALTH CARE PROVIDERS

(1) No later than July 1, 1994, all insurance companies offering for sale health care policies in this state shall require all policyholders and third party claimants to utilize the following standardized forms when making a claim against any health care insurance policy in effect in this state:

(a) Centers for Medicare and Medicaid (CMS) Form 1500 for health care practitioner claims other than dental. Health care practitioners who bill patients directly shall provide a properly completed CMS Form 1500 in addition to any other form used to bill the patient when requested by the patient.

(b) Form UB04 for hospital and other institutional care claims. Institutional care practitioners who bill patients directly shall provide a properly completed UB04 in addition to any other form used to bill the patient when requested by the patient.

(c) American Dental Association Claim Form for dental health care claims. Dentists who bill patients directly shall provide a properly completed Claim Form in addition to any other form used to bill the patient when requested by the patient.

(d) The National Council for Prescription Drug Programs (NCPDP) Universal Claim Form for pharmacy claims. Pharmacists who bill patients directly shall provide a properly completed Universal Claim Form in addition to any other form used to bill the patient when requested by the patient.

THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010

(e) The ANSI X12N standard format for the health care transaction sets for claims submission (837) and claims payment (835) for all issuers and health care providers who receive claims or sent payment by electronic means.

(2) All forms required by this Rule shall be updated to meet the requirements of federal law or state laws implementing federal or state health care reimbursement programs.

History

• Authority: T.C.A. §§ 4-5-208, 56-1-212, 56-2-201, 56-2-301, 56-7-1008, 56-7-2802, 56-26-102, 56-26- 103, 56-26-114, 56-26-202, 56-27-112, 56-28-106, 56-29-116, 56-29-117, 56-32-107 and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Original rule filed November 22, 2011; effective February 20, 2012.

Tenn. Comp. R. & Regs. 0780-01-93-.10 RESERVED

History

• Authority: T.C.A. §§ 4-5-208, 56-1-212, 56-2-201, 56-2-301, 56-7-2802, 56-26-102, 56-26-103, 56-26- 114, 56-26-202, 56-27-112, 56-28-106, 56-29-116, 56-29-117, 56-32-107, and Public Law 111-148 as amended by Public Law 111-152 (2010).
• Administrative History: Emergency rule filed August 29, 2011; effective through February 25, 2012. Emergency rule filed August 29, 2011 expired effective February 26, 2012; rule reverted to a reserved status.

Chapter 0780-01-94 Use of Senior-Specific Designations in Life Insurance and Annuities

Tenn. Comp. R. & Regs. 0780-01-94-.01 PURPOSE

The purpose of this Chapter is to set forth standards to protect consumers from misleading and fraudulent marketing practices with respect to the use of senior-specific certifications and professional designations in the solicitation, sale or purchase of, or advice made in connection with, a life insurance or annuity product.

History

• Authority: T.C.A. §§ 56-8-101, et seq., and 56-8-108.
• Administrative History: Original rules filed October 11, 2016; effective January 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-94-.02 SCOPE

This Chapter shall apply to any solicitation, sale or purchase of, or advice made in connection with, a life insurance or annuity product by an insurance producer.

History

• Authority: T.C.A. §§ 56-8-101, et seq., and 56-8-108.
• Administrative History: Original rules filed October 11, 2016; effective January 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-94-.03 AUTHORITY

(1) This Chapter is issued under the authority of T.C.A. §§ 56-8-101, et seq.

(2) Nothing in this Chapter shall limit the commissioner's authority to enforce existing provisions of law.

History

• Authority: T.C.A. §§ 56-8-101, et seq., and 56-8-108.
• Administrative History: Original rules filed October 11, 2016; effective January 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-94-.04 DEFINITIONS

For purposes of this Chapter, (1) “Commissioner” means the commissioner of commerce and insurance; and (2) “Insurance producer” means a person required to be licensed under the laws of this state to sell, solicit or negotiate insurance, including annuities.

History

• Authority: T.C.A. §§ 56-8-101, et seq., and 56-8-108.
• Administrative History: Original rules filed October 11, 2016; effective January 9, 2017.

Tenn. Comp. R. & Regs. 0780-01-94-.05 PROHIBITED USES OF SENIOR SPECIFIC CERTIFICATIONS AND PROFESSIONAL

DESIGNATIONS.

(1)

(a) It is an unfair and deceptive act or practice in the business of insurance within the meaning of T.C.A. § 56-8-103 for an insurance producer to use a senior-specific certification or professional designation that indicates or implies in such a way as to mislead a purchaser or prospective purchaser that the insurance producer has special certification or training in advising or servicing seniors in connection with the solicitation, sale or purchase of a life insurance or annuity product or in the provision of advice as to the value of or the advisability of purchasing or selling a life insurance or annuity product, either directly or indirectly through publications or writings, or by issuing or promulgating analyses or reports related to a life insurance or annuity product.

(b) The prohibited use of senior-specific certifications or professional designations includes, but is not limited to, the following:

1. Use of a certification or professional designation by an insurance producer who has not actually earned or is otherwise ineligible to use such certification or designation;

2. Use of a nonexistent or self-conferred certification or professional designation;

3. Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training or experience that the insurance producer using the certification or designation does not have; and 4. Use of a certification or professional designation that was obtained from a certifying or designating organization that:

(i) Is primarily engaged in the business of or instruction in sales or marketing;

(ii) Does not have reasonable standards or procedures for assuring the competency of its certificants or designees;

(iii) Does not have reasonable standards or procedures for monitoring and disciplining its certificants or designees for improper or unethical conduct; or (iv) Does not have reasonable continuing education requirements for its certificants or designees in order to maintain the certificate or designation.

(2) There is a rebuttable presumption that a certifying or designating organization is not disqualified solely for purposes of part 4. of subparagraph (1)(b) of this rule when the certification or designation issued from the organization does not primarily apply to sales or marketing and when the organization or the certification or designation in question has been accredited by:

(a) The American National Standards Institute (ANSI);

(b) The National Commission for Certifying Agencies; or (c) An organization that is on the United States Department of Education’s list entitled “Accrediting Agencies Recognized for Title IV Purposes” and the designation or credential issued therefrom does not primarily apply to sales and/or marketing.

(3) In determining whether a combination of words (or an acronym standing for a combination of words) constitutes a senior-specific certification or professional designation indicating or implying that a person has a special certification or training in advising or servicing senior citizens or retirees the following factors to be considered shall include:

(a) Use of one or more words such as “senior”, “retirement”, “elder”, or like words combined with one or more words such as “certified”, “registered”, “chartered”, “adviser”, “specialist”, “consultant”, “planner”, or like words, in the name of the certification or professional designation; and (b) The manner in which those words are combined.

(4)

(a) For purposes of this chapter, a senior-specific certification or professional designation does not include a job title within an organization that is licensed or registered by a state, federal, or self-regulatory financial services regulatory agency, unless it is used in a manner that would confuse or mislead a reasonable consumer, when that job title:

1. Indicates seniority or standing within the organization; or 2. Specifies an individual’s area of specialization within the organization; unless 3. Such job title is used in a way that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees.

(b) For purposes of this paragraph (4), financial services regulatory agency includes, but is not limited to, an agency that regulates insurers, insurance producers, broker-dealers, broker-dealer agents, investment adviser representatives, or investment companies as defined under the Investment Company Act of 1940.

History

• Authority: T.C.A. §§ 56-8-101, et seq., and 56-8-108.
• Administrative History: Original rules filed October 11, 2016; effective January 9, 2017.

Chapter 0780-01-95 Pharmacy Benefits Managers

Tenn. Comp. R. & Regs. 0780-01-95-.01 SCOPE

This chapter applies to all pharmacies and pharmacy benefits managers, including agents designated to handle matters on behalf of pharmacies or pharmacy benefits managers, conducting business in the State of Tennessee.

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023.

Tenn. Comp. R. & Regs. 0780-01-95-.02 DEFINITIONS

(1) All words and phrases used but not defined in this chapter that are defined in T.C.A. title 56,

chapter 7, part 31 or part 32 shall have the meaning set forth therein.

(2) For the purposes of this chapter:

(a) “Audit” means an examination by the Commissioner to determine the financial condition of, or legality of conduct by, a PBM pursuant to T.C.A. § 56-7-3101(b)(1)(A). This definition shall not apply to a PBM’s audit of a pharmacy referenced in Rule 0780-01-95- .09 and Rule 0780-01-95-.15(1)(g).

(b) “Cash discount” means a deduction from the invoice paid by a pharmacy for a prescription drug or device if the invoice is paid on or before a specified date or in cash.

(c) “Commissioner” means the commissioner of the department of commerce and insurance or the commissioner’s designee.

(d) “Control” has the same meaning as that term is defined in T.C.A. § 56-11-101(3).

(e) “Department” means the department of commerce and insurance.

(f) “Initial appeal” means the process required under T.C.A. § 56-7-3206(c)(2) and administered by a pharmacy benefits manager by which a pharmacy, or a pharmacy services administrative organization acting on behalf of a pharmacy, may appeal a reimbursement received from a pharmacy benefits manager that is not at least the actual cost to the pharmacy for a prescription drug or device.

(g) “MAC list” means a maximum allowable cost list as defined in T.C.A. § 56-7-3102.

(h) “Majority wholesaler” means the wholesaler from whom a pharmacy purchased the majority of its prescription pharmaceutical products for resale in the calendar year preceding the calendar year during which the claim that is the subject of an initial appeal is processed.

(i) “PBM” means a pharmacy benefits manager as defined in T.C.A. § 56-7-3102.

(j) “Pharmacy” means a pharmacy as defined in T.C.A. § 56-7-3102 and includes an agent acting on behalf of a pharmacy, including but not limited to a pharmacy services administrative organization.

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023. Amendments filed March 28, 2024; effective June 26, 2024.

Tenn. Comp. R. & Regs. 0780-01-95-.03 APPROVAL OF INITIAL APPEAL PROCESS

(1) No PBM may utilize an initial appeal process until it has received approval from the Commissioner stating the PBM’s initial appeal process meets the requirements of T.C.A. § 56- 7-3206(c)(2) and this chapter. A PBM shall utilize only one appeal process for all initial appeals filed with the PBM.

(2) PBMs must submit the following to the Commissioner as part of an application for approval of an initial appeal process, along with the application fee required under Rule 0780-01-95-.07(1):

(a) The name of the PBM;

(b) The contact information, including phone number and email address, for the primary individual responsible for managing the application for the PBM;

(c) The contact information, including phone number and email address, for the primary individual who will manage the PBM’s appeal process. This may be the same individual designated in subparagraph (b);

(d) Certification the PBM will accept from a pharmacy the standard appeal form created by the Department to file an initial appeal;

(e) The appeal form the PBM will accept from a pharmacy to file an initial appeal, if the PBM intends to offer its own appeal form in addition to the standard appeal form created by the Department;

(f) A comprehensive list of all information and documents requested from a pharmacy at the initiation of an initial appeal in addition to the standard appeal form provided by the Department or the PBM’s appeal form submitted to the Department pursuant to subparagraph (e) of this paragraph, including any forms used to request such information;

(g) A list of the position(s) responsible for reviewing initial appeals received from a pharmacy, along with the training, experience, and education required of the position(s);

(h) A summary, sufficient to the Commissioner, of how the PBM will comply with the timing and notice requirements under T.C.A. § 56-7-3206(c)(2)(B)(ii) and Rule 0780-01-95-.05;

(i) Certification the PBM will not assess any costs to the pharmacy for any services provided in connection with the initial appeal;

(j) The email address to which the Commissioner shall send notice to the PBM of an external appeal to the Commissioner pursuant to T.C.A. § 56-7-3206(g)(2);

(k) Certification the PBM will require the name of a pharmacy’s wholesaler or manufacturer, as applicable, from which the pharmacy purchased the drug or medical product or device at issue as part of its processing of claims for reimbursement from pharmacies. A PBM shall request this information as part of its processing of claims for reimbursement;

(l) A description, sufficient to the Commissioner, of how the PBM will track initial appeals such that it can reasonably determine, upon being provided the wholesaler or manufacturer in a claim, if an adjusted rate of reimbursement applies; and (m) Any other documentation or information requested by the Commissioner regarding an initial appeal process.

(3) (a) Within 60 days of receipt of a complete application for approval of an initial appeal process containing all information required and requested under paragraph (2) of this

rule and the required application fee, the Commissioner may:

1. Approve the initial appeal process upon determining that, in the Commissioner’s discretion, the initial appeal process:

(i) Meets the requirements of paragraph (2) of this rule; and (ii) Is reasonable and efficient;

2. Deny an initial appeal process for failure to meet, in the Commissioner’s discretion, the requirements of subparts (3)(a)1.(i) or (ii) of this rule. The Commissioner shall provide the reason for denial in writing to the applicant; or 3. Extend the timeline for rendering a decision by providing the parties with written notice that includes a good-faith estimate of the additional time needed to make a decision. The Commissioner may subsequently further extend any such extended timeline by providing additional written notice to the parties of an updated goodfaith estimate of the additional time needed to make a decision prior to the expiration of the previous extension.

(b) If the Commissioner does not take one of the actions listed in subparagraph (3)(a) of this

rule within 60 days of receipt of a complete application, or within the extended timeline if extended pursuant to part (3)(a)3. of this rule, the application shall be deemed approved.

(4) Denial under part (3)(a)2. of this rule shall not preclude a PBM from submitting a new application for approval of an initial appeal process, accompanied by a new application fee, upon correcting any defects that caused the previous denial.

(5) A PBM may utilize an approved initial appeal process without the need for additional review by the Commissioner unless:

(a) The PBM materially changes the structure of, or the steps contained in, its initial appeal process. Material changes include but are not limited to:

1. Changing deadlines that are not otherwise set out in law or rule;

2. Any change to the information required from pharmacies to participate in any part of an initial appeal process. Changing or editing the forms on which pharmacies submit information to a PBM, without changing the type or scope of information required on a form, is not a material change; or 3. Assessing any cost to a pharmacy for any services provided in connection with an initial appeal; or (b) There is a change in the position(s) assigned to review an initial appeal. Staffing turnover for the position(s) that review initial appeals does not constitute a change under this subparagraph.

(6) No less than 60 days prior to the date on which a PBM plans to implement a change to its initial appeal process as described in paragraph (5) of this rule, a PBM shall notify the Commissioner and pay the fee required under Rule 0780-01-95-.07(2). The notice shall contain a detailed explanation of the change and include any supporting documentation necessary to fully explain the change. The Commissioner shall review the notice and any supporting documentation and may:

(a) Request additional information;

(b) Require the PBM submit an application under paragraph (2) of this rule, including the required application fee, that reflects the changed initial appeal process;

(c) Approve the changed initial appeal process contingent on the PBM meeting certain conditions outlined in writing and sent to the PBM;

(d) Approve the changed initial appeal process; or (e) Deny the changed initial appeal process.

(7) Notwithstanding paragraph (5) of this rule, the Commissioner may, after notice and hearing, revoke approval of an initial appeal process that has been previously approved or deemed approved for any violation of this chapter.

(8) This rule shall not apply to a PBM that meets the requirements of T.C.A. § 56-7-3206(d) by utilizing a reimbursement methodology that is identical to the methodology provided for in the state plan for medical assistance approved by the federal Centers for Medicare and Medicaid Services.

(9) Beginning January 1, 2023, a PBM may utilize a temporary appeal process that is deemed temporarily approved as set out in this paragraph until the PBM’s initial appeal process is approved by the Commissioner pursuant to paragraph (3) of this rule.

(a) In order to utilize a temporary appeal process to review initial appeals, a PBM must:

1. Prior to January 31, 2023, submit a certification, on a form provided by the Commissioner, that the PBM’s temporary appeal process complies:

(i) With T.C.A. § 56-7-3206(c)(2)(B)(ii) and (iii); and (ii) To the greatest extent possible, this chapter;

2. Submit a description of the steps involved in its temporary appeal process, and how that process differs, if at all, from the requirements of this chapter;

3. Pay the fee required under Rule 0780-01-95-.07(3); and 4. Certify that all information submitted pursuant to this subparagraph is true and accurate to the best of the PBM’s knowledge.

(b) A PBM’s submission of all information required under subparagraph (a) of this paragraph shall constitute the Commissioner’s approval for purposes of T.C.A. § 56-7- 3206(c)(2)(B)(i) and paragraph (1) of this rule. The Commissioner’s approval under this paragraph constitutes only temporary, terminable permission to utilize a temporary appeal process. The Commissioner’s temporary approval of a PBM’s initial temporary appeal process shall expire 60 days after the PBM’s first submission of all information required under subparagraph (a) of this paragraph, except as provided in subparagraph (c) of this paragraph.

1. Notwithstanding a temporary appeal process being deemed temporarily approved pursuant to subparagraph (b) of this paragraph, the Commissioner may withdraw approval of a PBM’s temporary appeal process for any reason in the sole discretion of the Commissioner by providing the PBM with written notice stating the temporary approval of the PBM’s temporary appeal process is withdrawn and a statement of deficiencies in the temporary appeal process that must be addressed. Upon receiving this deficiency notice from the Commissioner, the PBM shall cease utilizing the temporary appeal process for which temporary approval was withdrawn within five business days after receipt of the deficiency notice. If the PBM does not submit a corrected approval process as set out in part 2. of this subparagraph within five business days of receipt of the Commissioner’s notice, the PBM shall not process initial appeals until a corrected temporary appeal process is submitted pursuant to part 2. of this subparagraph or an approved appeal process is otherwise in place.

2. The PBM may resume using a temporary appeal process after receiving a deficiency notice pursuant to part 1. of this subparagraph, if the PBM’s temporary approval process is not expired pursuant to subparagraph (c) of this paragraph, by submitting a corrected temporary appeal process to the Commissioner accompanied by a signed, written statement by the PBM certifying it has addressed all deficiencies identified by the Commissioner in the deficiency notice.

Upon submission of the corrected temporary appeal process and signed statement, the corrected temporary appeals process shall be deemed temporarily approved and subject to part 1. of this subparagraph. The PBM may use its corrected temporary appeal process to review any initial appeals received between the time it received a denial notice from the Commissioner pursuant to

part 1. of this subparagraph and its corrected temporary appeal process was deemed temporarily approved. The Commissioner’s approval of a PBM’s corrected temporary appeal process shall expire 60 days after the PBM’s submission of the corrected information pursuant to this part, except as provided in subparagraph (c) of this paragraph.

(c) A PBM that utilizes a temporary appeal process must submit a complete application pursuant to paragraph (2) of this rule prior to the expiration of the Commissioner’s approval of its temporary appeal process. Notwithstanding subparagraph (b) of this paragraph, if a PBM submits a complete application pursuant to paragraph (2) of this

rule, the PBM may, upon notice from the Commissioner that a complete application has been received, continue to utilize a temporary appeal process that has been deemed temporarily approved until the Commissioner approves its application pursuant to paragraph (3) of this rule unless the Commissioner withdraws approval of the temporary appeal process pursuant to part (b)1. of this paragraph.

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023.

Tenn. Comp. R. & Regs. 0780-01-95-.04 ACTIONS DURING AND AFTER AN INITIAL APPEAL

(1) Upon filing an initial appeal with a PBM, the pharmacy shall provide the PBM with a copy of the invoice(s) demonstrating the pharmacy’s actual cost as of the date of the filing of the initial appeal by the pharmacy. If the pharmacy receives any additional discounts, price concessions, rebates, or other reductions, excluding cash discounts, during the pendency of an initial appeal, the pharmacy shall inform the PBM of the additional discount, price concession, rebate, or other reduction, excluding a cash discount. The PBM may consider the additional discount, price concession, rebate, or other reduction, excluding a cash discount, when calculating the pharmacy’s actual cost. Additional discounts, price concessions, rebates, or other reductions received after the resolution of an initial appeal shall not be grounds for reconsideration of any initial appeal previously considered and resolved.

(2) A PBM shall request from each pharmacy filing an initial appeal the name and contact information of the wholesaler or manufacturer from which it purchased the prescription drug or device at issue. Failure of a pharmacy to provide this information shall not constitute grounds to deny an initial appeal; provided, however, if a PBM denies an initial appeal as otherwise allowed by law or this chapter and the pharmacy fails to provide this information or the PBM does not already have this information on file pursuant to Rule 0780-01-95-.03(2)(k), a PBM may presume the prescription drug or device at issue is available at a lower cost from the wholesaler or manufacturer from which the pharmacy purchased the prescription drug or device at issue.

(3) If a pharmacy’s initial appeal is resolved in favor of the appealing pharmacy, the PBM shall comply with the provisions of T.C.A. § 56-7-3206(c)(3) and, further, provide the pharmacy the following in writing:

(a) A statement the initial appeal is granted, along with a summary outlining the basis for its decision;

(b) Notification the PBM has adjusted the challenged rate of reimbursement;

(c) Detailed instructions for how to reverse and rebill the claim upon which the initial appeal is based; and (d) Written notification the PBM has issued payment to the pharmacy showing the exact amount of the payment.

(4) (a) When applying the findings from an initial appeal that was resolved in favor of a pharmacy to other similarly situated pharmacies as to the rate of reimbursement and actual cost for the particular drug or medical product or device that was at issue in the initial appeal, a PBM shall, within seven business days of resolution of an initial appeal, apply the findings retroactively as set out in subparagraph (b) of this paragraph to all similarly situated pharmacies that received the challenged rate of reimbursement for the particular drug or medical product or device that was at issue in the initial appeal, including any appeals pending with a PBM where the challenged rate of reimbursement is the subject of the pending appeal, by:

1. Notifying all similarly situated pharmacies of the adjusted rate of reimbursement in writing. The notice shall contain the applicable national drug code number or the unique device identifier at issue, as appropriate, and the rate of reimbursement to which the similarly situated pharmacy is now entitled for the drug or medical product or device; and 2. Paying all similarly situated pharmacies the difference in the original rate of reimbursement the similarly situated pharmacy received and the adjusted rate of reimbursement that resulted from the initial appeal resolved in favor of a pharmacy.

The PBM shall not charge any fees or require any additional documentation from similarly situated pharmacies to pay the difference required under this part.

(b) The findings from an initial appeal resolved in favor of a pharmacy shall be applied retroactively under subparagraph (a) of this paragraph by applying the adjusted rate to all similarly situated pharmacies beginning on the date of service of the claim that was the subject of the initial appeal and continuing to apply that rate going forward until the appealing pharmacy and the similarly situated pharmacy or pharmacies were no longer entitled to the same rate of reimbursement for the drug or medical product or device at issue.

(c) A PBM shall track initial appeals such that it can reasonably determine if an adjusted rate of reimbursement applies.

(5) If a pharmacy’s initial appeal is resolved against the appealing pharmacy, the PBM shall comply with the provisions of T.C.A. § 56-7-3206(c)(4).

(a) 1. The PBM shall determine whether the product associated with the national drug code number or unique device identifier is available at a cost that is less than the challenged rate of reimbursement from a pharmaceutical wholesaler in this state as of the date the initial appeal was received from the appealing pharmacy. The PBM shall make a reasonable effort to identify such information and must provide to the pharmacy any information complying with, and as set out in, T.C.A. § 56-7- 3206(c)(4)(A).

2. For purposes of this subparagraph (a), the product associated with the national drug code number or unique device identifier at issue shall be deemed available if, at the time the initial appeal was received by the PBM, the product was in stock with a wholesaler operating in this state.

3. If, after a reasonable effort to identify the information needed to make the determination required under part 1. of this subparagraph, the PBM is unable to make the determination solely because the wholesalers contacted by the PBM failed to provide the information needed by the PBM within the timeframe within which the PBM must resolve initial appeals, the PBM shall presume that the product associated with the national drug code number or unique device identifier at issue was not available at a cost that is less than the challenged rate of reimbursement from a pharmaceutical wholesaler in this state as of the date the initial appeal was received from the appealing pharmacy.

4. If a PBM fails to provide the information required under T.C.A. § 56-7-3206(c)(4)(A) within the required timeframe, it shall be deemed to have determined there is no pharmaceutical wholesaler operating in this state that offered the product associated with the national drug code number or unique device identifier at issue at a cost that is less than the challenged rate of reimbursement as of the date the initial appeal was received from the appealing pharmacy.

(b) 1. The pharmacy shall provide the PBM with the name of its majority wholesaler for the purpose of allowing the PBM to accurately fulfill its obligations under T.C.A. § 56-7-3206(c)(4)(B). The PBM shall then determine whether the prescription drug or device at issue is available from the pharmaceutical wholesaler at a cost that is less than the challenged rate of reimbursement as of the date the initial appeal was received from the appealing pharmacy. If the pharmacy fails to provide the name of its majority wholesaler within two business days of a request by the PBM to provide that name, the PBM may presume the prescription drug or device at issue is available at a cost that is less than the challenged rate of reimbursement from the pharmacy’s majority wholesaler and take no further action pursuant to T.C.A. § 56-7-3206(c)(4) or this subparagraph (b).

2. For purposes of this subparagraph (b), the product associated with the national drug code number or unique device identifier at issue shall be deemed available if, at the time the initial appeal was received by the PBM, the product was in stock from the pharmacy’s majority wholesaler.

3. If, after contacting the pharmacy’s majority wholesaler to identify the information needed to make the determination required under part 1. of this subparagraph, the PBM is unable to make the determination solely because the wholesaler failed to provide the information needed by the PBM within the timeframe within which the PBM must resolve initial appeals, the PBM shall presume that the product associated with the national drug code number or unique device identifier at issue was not available at a cost that is less than the challenged rate of reimbursement from the wholesaler as of the date the initial appeal was received from the appealing pharmacy.

(c) The pharmacy shall cooperate with the PBM to assist in its search under subparagraphs (a) and (b) of this paragraph; provided, however, that, except as provided in part (b)1. of this paragraph, neither the pharmacy’s nor a wholesaler’s failure to cooperate or provide the PBM information shall be grounds for the PBM to fail to meet its obligations under T.C.A. § 56-7-3206(c)(4) or this paragraph.

(d) Even if the PBM determines it has a basis to deny an initial appeal for a reason other than that the pharmacy was reimbursed actual cost, the PBM shall follow the requirements set out in T.C.A. § 56-7-3206(c)(4).

(e) If a pharmacy’s initial appeal is resolved against the appealing pharmacy and the PBM is required to adjust the challenged rate of reimbursement pursuant to T.C.A. § 56-7- 3206(c)(4)(B), the PBM shall, to effectuate adjustment of the challenged rate, apply the findings from the appeal as to the rate of reimbursement for the drug or medical product or device at issue to other similarly situated pharmacies in the same manner as set forth in paragraph (4) of this rule.

(6) If a pharmacy’s initial appeal is resolved against the appealing pharmacy, the PBM shall provide the pharmacy the following in writing:

(a) A statement the initial appeal is denied, along with a summary outlining the basis for its decision;

(b) If applicable, evidence the PBM has adjusted the challenged rate of reimbursement;

(c) If applicable, detailed instructions for how to reverse and rebill the claim upon which the initial appeal is based;

(d) If applicable, written notification the PBM has issued payment to the pharmacy showing the exact amount of the payment; and (e) Instructions on how to make an external appeal of the PBM’s decision to the Commissioner by:

1. Explaining how to submit an appeal, including the appropriate phone number or website address for the Department where appeals are accepted. Each PBM shall be responsible for ensuring the information provided to pharmacies pursuant to this part 1. is accurate; and 2. Including the following statement:

Pursuant to T.C.A. § 56-7-3206(g)(2), you have the right to appeal this decision to the Commissioner of the Tennessee Department of Commerce and Insurance.

(7) (a) If a PBM is required to pay a pharmacy any additional money upon resolution of an initial appeal, including a payment to a similarly situated pharmacy under part (4)(a)2. of this

rule, the PBM shall adjust the rate of reimbursement and make such payment within seven business days after notice of the initial appeal is received by the PBM. However, subject to subparagraph (b), the timeline for making the payment(s) shall not begin until the appealing pharmacy has reversed and rebilled its claim showing the adjusted rate of reimbursement.

(b) If the appealing pharmacy fails to reverse and rebill its claim pursuant to subparagraph (a), the PBM shall adjust the rate of reimbursement and make the payment(s) no later than fifteen business days after the PBM receives notice of the initial appeal.

(8) A PBM shall retain all records related to an initial appeal pursuant to Rule 0780-01-95-.14. A PBM shall provide the Department access to all records upon request and comply with requests for information regardless of whether the request is part of an audit by the Department.

(9) A PBM shall not assess any costs to a pharmacy for any services provided by the PBM in connection with an initial appeal.

(10) An initial appeal shall not result in a pharmacy, whether the appealing pharmacy or a similarly situated pharmacy, being required to reimburse or refund a PBM any portion of a payment previously received by the pharmacy.

(11) This rule applies only to initial appeals submitted to a PBM under the PBM’s initial appeal process established in accordance with T.C.A. § 56-7-3206(c)(2)(A) and approved pursuant to

Rule 0780-01-95-.03.

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023. Amendments filed March 28, 2024; effective June 26, 2024.

Tenn. Comp. R. & Regs. 0780-01-95-.05 TIMING AND NOTICE REQUIREMENTS FOR INITIAL APPEAL PROCESSES

(1) A PBM’s initial appeal process, or a pharmacy’s participation in an initial appeal, must meet the following requirements:

(a) The pharmacy must file its initial appeal within seven business days of its submission of the initial claim for reimbursement for the drug or medical product or device;

(b) The PBM or covered entity must make a final determination resolving the pharmacy’s initial appeal within seven business days of the PBM’s or covered entity’s receipt of an initial appeal that includes all information required by paragraph (2) of this rule; and (c) Each PBM shall make its initial appeal process available on its secure website. The PBM’s secure website must include all deadlines applicable to its initial appeal process, a description of the steps contained within its initial appeal process, and a telephone number, email address, web portal, or any other process that a pharmacy may use to submit initial appeals. The website shall clearly state that the PBM’s initial appeal process is available for all prescription drugs or devices in Tennessee for which a pharmacy alleges it did not receive its actual cost.

(2) The timeline for making a final determination resolving an initial appeal under T.C.A. § 56-7- 3206(c)(2)(B)(ii) shall not begin until the PBM has received all required information sufficient to allow the PBM to conduct a complete analysis of the initial appeal. A PBM shall be deemed to have received all required information sufficient to allow the PBM to conduct a complete analysis of the initial appeal upon receipt of:

(a) A complete version of either an initial appeal form provided by the Commissioner to be used by a pharmacy to file an initial appeal or the PBM’s appeal form submitted and approved pursuant to Rule 0780-01-95-.03(2)(e); and (b) Certification from the pharmacy it has provided the PBM with all invoices or other records demonstrating the pharmacy’s actual cost for the drug or medical product or device at issue, which shall take into account all discounts, price concessions, rebates, or other reductions received as of the date the pharmacy filed its initial appeal.

(3) If a PBM receives an initial appeal from a pharmacy that does not contain all information required under paragraph (2) of this rule, the PBM shall accept the incomplete initial appeal and hold it open pending receipt of additional information from the pharmacy. Within five business days of receipt of an incomplete initial appeal, the PBM shall notify the pharmacy of the information needed to complete the initial appeal and initiate the PBM’s review. The pharmacy may respond within five business days of receipt of the PBM’s notice outlining the requested information. If the pharmacy provides the requested information, the timeline for making a final determination outlined in subparagraph (1)(b) of this rule shall start. If the pharmacy fails to provide the requested information within five business days of receipt of the PBM’s notice, the PBM may deny the initial appeal pursuant to T.C.A. § 56-7-3206(c)(4).

(4) A PBM may not delay the start of its review of an initial appeal by:

(a) Requiring additional or different information from a pharmacy beyond what is required to be submitted to the PBM under its initial appeal process approved by the Commissioner pursuant to Rule 0780-01-95-.03(3)(a)1.; or (b) Basing the delay on administrative or non-substantive errors or omissions in any of the filings that do not affect the overall validity of the initial appeal.

(5) If a PBM fails to comply with the timing and notice requirements under T.C.A. § 56-7- 3206(c)(2)(B)(ii) and this rule, the pharmacy’s initial appeal shall be resolved by the PBM in favor of the pharmacy. If a pharmacy fails to comply with the timing requirements under T.C.A. § 56-7-3206(c)(2)(B)(ii) and this rule, the PBM may deny the initial appeal pursuant to T.C.A. § 56-7-3206(c)(4).

(6) Each PBM must submit the initial appeal process it will use for approval by the Commissioner regardless of whether it outsources the administration of its initial appeal process to a thirdparty administrator or a different PBM. Each PBM will retain ultimate responsibility for ensuring it complies with this paragraph regardless of whether the PBM conducts its own initial appeal process or utilizes another PBM or a third-party administrator.

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023. Amendments filed March 28, 2024; effective June 26, 2024.

Tenn. Comp. R. & Regs. 0780-01-95-.06 EXTERNAL APPEAL PROCESS

(1) A pharmacy that alleges it did not receive at least its actual cost for a prescription drug or device after resolution of an initial appeal filed with a PBM shall have the right to appeal the decision of the PBM to the Commissioner. The Commissioner may delegate the review and resolution of a pharmacy’s appeal under this paragraph, and any decision by the third-party reviewer shall have the same force and effect as a decision by the Commissioner. Any reference to the Commissioner in this rule shall also include a third-party reviewer properly designated by the Commissioner to review and resolve appeals.

(2) An appeal filed pursuant to paragraph (1) of this rule must:

(a) Be filed with the Commissioner, in such manner as the Commissioner may require, within 30 days of the pharmacy’s receipt of the PBM’s final determination resolving the pharmacy’s initial appeal, unless a different timeframe is approved in writing pursuant to paragraph (3) of this rule;

(b) Contain a summary of:

1. The grounds of the appeal to the Commissioner;

2. The relief requested by the pharmacy; and 3. The basis on which the pharmacy believes it is due the relief;

(c) Include a copy of the written decision rendered by the PBM;

(d) Contain a copy of the invoice(s) showing the pharmacy’s purchase price for the drug or medical product or device at issue;

(e) Contain a list of all discounts, price concessions, rebates, or other reductions, excluding cash discounts, that were, or should have been, reported to the PBM pursuant to Rule 0780-01-95-.04(1), including supporting documentation for each discount, price concession, rebate, or other reduction;

(f) Be submitted on a form or through an electronic process made available by the Department;

(g) Contain a certification that all information submitted pursuant to paragraph (1) of this rule is true and accurate to the best of the pharmacy’s knowledge; and (h) Provide any other documentation or information requested by the Commissioner regarding the pharmacy’s appeal.

(3) The Commissioner will not consider any information or documentation received from the pharmacy more than 30 days after the pharmacy’s receipt of the PBM’s final determination resolving the pharmacy’s initial appeal filed with the PBM unless the information reasonably should have been submitted and the withholding of information prevented the Commissioner from reviewing relevant or necessary information as part of the appeal. Prior to the expiration of the 30-day timeframe, the pharmacy may request in writing additional time to investigate and compile the information needed to submit an appeal pursuant to paragraph (1) of this rule.

Upon receipt of the pharmacy’s written request, or upon the Commissioner’s own determination, the Commissioner may, in the Commissioner’s discretion, grant the pharmacy an additional period of time determined to be necessary by the Commissioner for good cause shown.

(4) Appeals that do not contain all information required under paragraph (2) of this rule shall be considered incomplete and will not qualify for review by the Commissioner under paragraph (7) of this rule until all information has been received. If an appeal is still incomplete more than 30 days after the pharmacy’s receipt of the PBM’s final determination resolving the pharmacy’s initial appeal, or such other timeframe approved in writing pursuant to paragraph (3) of this

rule, the pharmacy’s appeal shall be automatically denied.

(5) The pharmacy whose appeal was denied pursuant to paragraph (4) of this rule may petition the Commissioner in writing for reconsideration and the Commissioner may, in the Commissioner’s discretion, grant the petition for reconsideration upon showing good cause for failing to meet the required deadline.

(a) When granting a petition for reconsideration, the Commissioner shall establish a new deadline by which all information must be received, and the pharmacy’s failure to meet that deadline for any reason will result in an automatic denial of the appeal, which shall be final.

(b) For purposes of this paragraph (5), good cause shall not include reasons or processes that were totally or mostly within the control of the appealing pharmacy, including but not limited to administrative oversight, clerical errors, or lack of sufficient personnel.

(6) Within ten business days of receipt of notice from the Commissioner the PBM’s decision has been appealed, the PBM may file a response to the pharmacy’s appeal by providing information supporting its decision made during its internal appeal process.

(7) No more than 90 days after the later of the receipt of a complete appeal containing all information required and requested under paragraph (2) of this rule or the receipt of the PBM’s response allowed under paragraph (6) of this rule, the Commissioner may:

(a) Grant the appeal, in whole or in part, and order the PBM to make such portion of the requested payment to the pharmacy as the Commissioner determines is appropriate to result in the pharmacy receiving at least its actual cost for the prescription drug or medical product or device at issue;

(b) Deny the appeal, in whole or in part; or (c) Extend the timeline for rendering a decision by providing the parties with written notice that includes a good-faith estimate of the additional time needed to make a decision.

(8) Upon granting or denying an appeal pursuant to paragraph (7) of this rule, the Commissioner shall send the parties a copy of the decision that contains a written justification. The decision of the Commissioner rendered pursuant to paragraph (7) of this rule is final and is not eligible for additional administrative review.

(9) If a PBM is required to pay a pharmacy any additional money upon resolution of an appeal pursuant to this rule, the PBM shall make such payment within seven business days of receipt of the Commissioner’s written notice issued pursuant to paragraph (8) of this rule. The PBM shall also provide the Department with proof the PBM has reimbursed the pharmacy at least its actual cost for the prescription drug or medical product or device at issue, including a statement of the additional amount paid to the pharmacy, within seven business days of issuing the payment to the pharmacy.

(10) If a PBM is required to adjust a challenged rate of reimbursement after an appeal pursuant to this rule is resolved against the PBM, the PBM shall apply the findings from the appeal as to the rate of reimbursement for the drug or medical product or device at issue to other similarly situated pharmacies in the same manner as set forth in Rule 0780-01-95-.04(4).

(11) All costs associated with conducting an appeal under this rule, including the expenses of the Department, shall be paid by the applicable PBM. The Commissioner shall bill the PBM upon the conclusion of the appeal. The PBM shall pay the bill in full within 30 days of receipt. Failure to pay a bill in full within 30 days of receipt shall, pursuant to T.C.A. § 56-7-3110, be grounds for the Commissioner to:

(a) Suspend, revoke, or refuse to renew a PBM’s license issued by the Department; and (b) Order the PBM to pay additional monetary penalties.

(12) If a PBM fails to timely pay a bill due pursuant to paragraph (11) of this rule and the Department incurs any costs associated with conducting an appeal under this rule, including but not limited to reimbursement to a third-party contractor, the PBM shall reimburse the Department for those costs, which shall include any fees or interest paid by the Department due to the PBM’s failure to pay. The Commissioner shall bill the PBM upon incurring those costs and the PBM shall pay the bill in full within 30 days of receipt. Failure to pay a bill in full within 30 days of receipt shall be grounds for the Commissioner to take any action outlined in paragraph (11) of this rule.

(13) When possible, a pharmacy may aggregate and submit appeals for simultaneous review by the Commissioner, or the Commissioner may, in the Commissioner’s discretion, aggregate appeals, when the specific reason for denial of the appeals aggregated involves a dispute regarding a common substantive question of fact or law. The mere fact that a claim is not paid, or that appeals relate to the same PBM, does not create a common substantive question of fact or law.

(14) This rule applies only to appeals of a PBM’s decision rendered pursuant to its initial appeal process established in accordance with T.C.A. § 56-7-3206(c)(2)(A) and approved pursuant to

Rule 0780-01-95-.03.

History

• Authority: T.C.A. §§ 56-2-305, 56-7-3101, 56-7-3110, and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023.

Tenn. Comp. R. & Regs. 0780-01-95-.07 FEES

Fees for services provided by the Department pursuant to this chapter shall be as follows:

(1) Review of an application for approval of an initial appeal process under Rule 0780-01-95- .03(2), including but not limited to a request for review and approval of an initial appeal process outsourced pursuant to Rule 0780-01-95-.05(7): $1,000.00 (2) Review of a request to change an initial appeal process under Rule 0780-01-95-.03(6): $1,000.00 (3) Review of an application for a temporary appeal process under Rule 0780-01-95-.03(9): $1,000.00 (4) Review of a delinquent license renewal application under Rule 0780-01-95-.13(5): $250.00 (5) Review of an annual report under Rule 0780-01-95-.15: $2,000.00

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023. Amendments filed March 28, 2024; effective June 26, 2024.

Tenn. Comp. R. & Regs. 0780-01-95-.08 PLANS UTILIZING A REIMBURSEMENT METHODOLOGY IDENTICAL TO THE

METHODOLOGY USED BY THE STATE PLAN FOR MEDICAL ASSISTANCE APPROVED BY THE

FEDERAL CENTERS FOR MEDICARE AND MEDICAID SERVICES.

(1) As used in T.C.A. § 56-7-3206(d)(2), a reimbursement methodology is identical to the methodology provided for in the state plan for medical assistance approved by the federal Centers for Medicare and Medicaid Services if the reimbursement methodology is identical in all respects, including, but not limited to, that requests for reimbursement are submitted to the Division of TennCare as set out in that methodology and the methodology complies with the Division of TennCare Pharmacy Provider Manual, or a successor manual, as amended or updated, and all laws and rules of the Division of TennCare related to reimbursement.

(2) A pharmacy that alleges it did not receive at least its actual cost for a prescription drug or device after resolution of an appeal filed with a PBM pursuant to T.C.A. § 56-7-3206(d)(2) shall appeal the decision to the Division of TennCare as set out in the applicable laws and rules. Such appeals are not subject to review or appeal under this chapter.

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023.

Tenn. Comp. R. & Regs. 0780-01-95-.09 AUDITS BY PHARMACY BENEFITS MANAGERS

(1) A PBM’s recoupment of funds from a pharmacy after an audit pursuant to T.C.A. § 56-7-3103 may not reduce the pharmacy’s compensation for the prescription drug or device at issue to an amount that is less than the pharmacy’s actual cost for the prescription drug or device as of the date the audit is commenced unless specifically allowed in law.

(2) When a PBM’s audit of a pharmacy pursuant to T.C.A. § 56-7-3103 results in a recoupment, in addition to any other requirement imposed in law or rule, a PBM shall include in the documentation of the audit information that demonstrates how the recoupment did not result in the pharmacy receiving less than its actual cost for each affected prescription drug or device at issue, including but not limited to:

(a) The rationale that led the PBM to decide the pharmacy was overpaid for each claim that is subject to recoupment, along with supporting documentation; and (b) An itemized breakdown for each claim that is subject to recoupment showing, at least, a comparison of what the pharmacy actually received and what the pharmacy should have received.

(3) A PBM shall retain all records related to an audit of a pharmacy pursuant to T.C.A. § 56-7-3103 for the greater of five years or until the PBM is audited by the Department. A PBM shall provide the Department access to all records upon request and comply with requests for information regardless of whether the request is part of a departmental audit.

(4) This rule does not limit or prohibit a PBM’s ability to audit a pharmacy or recoup funds as allowed by T.C.A. § 56-7-3103.

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023.

Tenn. Comp. R. & Regs. 0780-01-95-.10 DETERMINATION OF PHARMACY’S PROFESSIONAL DISPENSING FEE

(1) (a) To determine whether a pharmacy’s annual prescription volume for calendar year 2023 is at a level that, if the pharmacy were a TennCare-participating ambulatory pharmacy, would qualify the pharmacy for the enhanced professional dispensing fee for a lowvolume pharmacy, each pharmacy that expects to qualify as a low-volume pharmacy for calendar year 2023 shall file with a PBM from whom the pharmacy expects to receive a dispensing fee during 2023 a certification stating the pharmacy expects to qualify as a low-volume pharmacy for calendar year 2023. Each certification shall contain a statement that the certification is true and accurate to the best of the knowledge of the individual filing the certification on behalf of the pharmacy.

(b) Beginning with certifications made for dispensing fees to be paid during calendar year 2024, to determine whether a pharmacy’s annual prescription volume is at a level that, if the pharmacy were a TennCare-participating ambulatory pharmacy, would qualify the pharmacy for the enhanced professional dispensing fee for a low-volume pharmacy, each pharmacy that will qualify as a low-volume pharmacy, as determined pursuant to subparagraph (2)(b) of this rule, shall, on or before December 1 of each year, file with a PBM from whom the pharmacy expects to receive a dispensing fee a certification stating the pharmacy will qualify as a low-volume pharmacy for the coming calendar year. Each certification shall contain a statement that the certification is true and accurate to the best of the knowledge of the individual filing the certification on behalf of the pharmacy. The pharmacy’s certification submitted, or failure to submit a certification, pursuant to this paragraph shall determine the pharmacy’s dispensing fee for the respective calendar year, unless a pharmacy submits a certification pursuant to paragraphs (3) or (4) of this

rule.

(c) Upon receipt of a pharmacy’s certification pursuant to subparagraph (1)(b) of this rule, the PBM shall pay the pharmacy the appropriate dispensing fee for prescriptions filled on or after January 1 of the calendar year for which the certification was submitted.

Except as provided in Tenn. Code Ann. § 56-7-3103, a PBM may not recoup any portion of a dispensing fee from a pharmacy that accurately certifies its annual prescription volume.

(2) (a) When submitting a certification pursuant to subparagraph (1)(a) of this rule, a pharmacy shall base the determination of whether its prescription volume for the coming calendar year will qualify the pharmacy for the enhanced professional dispensing fee on the pharmacy’s actual prescription volume from July 1, 2021, to June 30, 2022.

(b) When submitting a certification pursuant to subparagraph (1)(b) of this rule, a pharmacy shall:

1. Base the determination of whether it will qualify for the enhanced professional dispensing fee on the pharmacy’s actual prescription volume from July 1 of the year prior to the year during which the certification is due to June 30 of the year during which the certification is due. For example, certifications submitted on or before December 1, 2024, for calendar year 2025 shall be based on a pharmacy’s actual prescription volume from July 1, 2023, to June 30, 2024; and 2. Along with the certification, submit proof of the pharmacy’s actual prescription volume, which may be in the form of aggregate claims data or similar information.

A pharmacy’s certification shall not be considered complete until the pharmacy has also submitted proof pursuant to this part.

(3) If a pharmacy fails to timely submit a certification pursuant to paragraph (1) of this rule with a PBM with whom the pharmacy has an ongoing business relationship, the pharmacy shall be presumed to be a high-volume pharmacy. However, if a pharmacy later certifies it qualifies for the enhanced professional dispensing fee for a low-volume pharmacy by meeting the requirements of parts 1. and 2. of subparagraph (2)(b) of this rule, the PBM shall pay the certifying pharmacy the enhanced professional dispensing fee for prescriptions dispensed beginning on the seventh business day after the PBM receives the complete certification.

(4) If a pharmacy receives, or expects to receive, a dispensing fee from a PBM with whom the pharmacy did not anticipate doing business at the time the pharmacy was required to file the certification under paragraph (1) of this rule, the pharmacy shall file the certification with the PBM simultaneously with the claim for reimbursement or within one business day of discovering the need to file the certification, whichever is later. The certification submitted pursuant to this paragraph must meet the requirements of parts 1. and 2. of subparagraph (2)(b) of this rule. The PBM shall pay the certifying pharmacy the enhanced professional dispensing fee for prescriptions dispensed on or after the day the PBM receives the complete certification.

(5) For calendar year 2023, a pharmacy shall file the certification required under paragraph (1)(a) of this rule on or before January 31, 2023. Until a pharmacy files the certification required under paragraph (1)(a) of this rule, the pharmacy shall be presumed to be a high-volume pharmacy and shall not qualify for the enhanced professional dispensing fee for a low-volume pharmacy.

If a pharmacy certifies it qualifies for the enhanced professional dispensing fee for a low-volume pharmacy, the PBM shall pay the certifying pharmacy the enhanced professional dispensing fee for prescriptions dispensed on or after the seventh business day after the PBM receives the certification.

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023.

Tenn. Comp. R. & Regs. 0780-01-95-.11 AUDITS AND AUDIT REPORTS

(1) Pursuant to T.C.A. § 56-7-3101(b)(1)(A), the Commissioner may, at any time the Commissioner believes it is reasonably necessary, audit any PBM licensed by the Department to determine whether the PBM is compliant with Tennessee laws pertaining to PBMs, including but not limited to T.C.A. Title 56, Chapter 7, Parts 31 and 32 and T.C.A. Title 56, Chapter 8,

Part 1.

(2) The Commissioner shall have, and a PBM shall provide the Commissioner, convenient and free access to all books, records, securities, documents, and any and all files relating to the PBM’s property, assets, business, and affairs any time the Commissioner determines it is necessary. The officers, directors, employees, and agents of the PBM shall facilitate and aid in the audit so far as it is in their power to do so.

(3) Pursuant to T.C.A. § 56-1-204, the Commissioner may administer oaths and examine under oath any person relative to the business of the PBM being audited.

(4) When conducting an audit of a PBM pursuant to paragraph (1) of this rule, the Commissioner may retain subject matter experts, attorneys, appraisers, independent actuaries, independent certified public accountants, certified financial examiners, or other professionals and specialists to assist in the audit.

(5) The Commissioner shall make a full and true report of the audit, which shall comprise only facts ascertained from the books, papers, records, securities, or documents of the PBM, or other evidence obtained by investigation of the Commissioner, or ascertained from the testimony of officers or agents or other persons examined under oath concerning the business, affairs, assets, and obligations of the PBM. The report of the audit shall be verified by the oath of the auditor in charge of the audit and shall be prima facie evidence in any action or proceeding in the name of the state against the PBM, its officers or agents upon the facts stated in the report.

(6) In the conduct of an audit, the Commissioner shall, to the extent deemed prudent by the Commissioner, adhere to the criteria set forth in the National Association of Insurance Commissioners Market Regulation Handbook and Financial Condition Examiners Handbook, as applicable, that were in effect when the audit commenced. The Commissioner may also employ other guidelines or procedures the Commissioner deems appropriate. The Commissioner shall disclose in writing to the PBM any other guidelines or procedures to be used prior to commencing an audit.

(7) Upon receipt of the verified report from the auditor in charge, the Commissioner shall transmit the report to the PBM examined, together with a notice that affords the PBM no less than thirty calendar days, or such shorter time period as determined by the Commissioner based on the circumstances of the audit, to make a written submission or rebuttal with respect to any matters contained in the audit report.

(8) Upon expiration of the end of the PBM’s rebuttal period, the Commissioner shall fully consider and review the report, together with any submissions or rebuttals from the PBM and any relevant portions of the auditor’s work papers, and enter an order:

(a) Adopting the report as filed or with modifications or corrections; or (b) Rejecting the report with directions to the auditors to reopen the audit for purposes of obtaining additional data, documentation, or information, and refiling pursuant to paragraph (7).

(9) If the audit reveals that the PBM is operating in violation of any law, rule, or prior order of the Commissioner, the Commissioner may, by order issued pursuant to the Uniform Administrative Procedures Act compiled in T.C.A. Title 4, Chapter 5, require the PBM to take any action the Commissioner considers necessary or appropriate to cure the violation, including but not limited to the payment of civil penalties. No PBM shall violate any order issued under this paragraph.

History

• Authority: T.C.A. §§ 56-7-3101, 56-7-3206, and 56-7-3210.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023. Amendments filed March 28, 2024; effective June 26, 2024.

Tenn. Comp. R. & Regs. 0780-01-95-.12 AUDIT COSTS

(1) A PBM audited under Rule 0780-01-95-.11 shall pay all proper charges incurred in the audit, including the expenses of the Commissioner.

(2) The compensation of third parties retained by the Commissioner to assist with an audit pursuant to Rule 0780-01-95-.11(4) shall be fixed by the Commissioner at a reasonable amount commensurate with usual compensation for like services, which may include an overhead expense factor to cover the cost of employee benefits as well as the per diem expense allowance and transportation costs paid to the third parties.

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: Emergency rules filed December 29, 2022; effective through June 27, 2023. New rules filed March 29, 2023; effective June 27, 2023. Amendments filed March 28, 2024; effective June 26, 2024.

Tenn. Comp. R. & Regs. 0780-01-95-.13 LICENSING

(1) No person or entity may act as a PBM in this state without first receiving a PBM license from the Department in accordance with T.C.A. § 56-7-3113 and this rule.

(2) In addition to the requirements of T.C.A. § 56-7-3113, an applicant must also submit the following as directed by the Department as part of an application for a PBM license, which must be current as of the date of submission:

(a) Any trade names or d/b/a names used by the applicant;

(b) The name and address of the applicant’s agent for service of process in this state;

(c) The applicant’s federal employer identification number;

(d) Copies of the original, certified organizational documents of the applicant, including but not limited to the following, as applicable:

1. Articles of incorporation or association, as applicable, and all amendments;

2. Partnership agreements and all amendments;

3. Trade name certificates and all amendments;

4. Trust agreements and all amendments;

5. Shareholder agreements and all amendments;

6. Bylaws and all amendments; and 7. For PBMs not domiciled in Tennessee, proof of registration with the Tennessee Secretary of State;

(e) Certification that all information submitted pursuant to this paragraph is true and accurate to the best of the applicant’s knowledge;

(f) An audited financial statement accompanied by an audit report prepared by a certified public accountant for the applicant’s most recently ended fiscal year for which an audited financial statement is available; and (g) Any other documentation or information requested by the Department.

(3) An applicant—or upon approval of an application and issuance of a license, a PBM—shall report any material changes in the information provided pursuant to paragraph (2) to the Department within sixty days of the change.

(4) When submitting a renewal application, a PBM must only submit information required under paragraph (2) that was either not previously submitted in a prior application, or that has changed since it was last submitted. For information required under paragraph (2) that was previously submitted and has not since changed, a PBM may submit a certification stating this, along with references to the particular paragraphs or subparagraphs of this rule to which the certification applies.

(5) Licenses no less than one calendar day and no more than thirty calendar days past their expiration date shall be considered delinquent but may still be renewed pursuant to paragraph (4) of this rule.

(a) For licenses that have been expired no less than one day and no more than thirty calendar days, the PBM may submit a renewal application pursuant to paragraph (4) of this rule, along with the delinquent renewal fee required under Rule 0780-01-95-.07(4).

This delinquent renewal fee shall be in addition to the renewal fee required under T.C.A. § 56-7-3113(e)(1).

(b) For licenses that have been expired more than thirty calendar days, the PBM must submit a new application pursuant to paragraph (2) of this rule.

(c) Approval of a delinquent renewal application shall be retroactive to the date the PBM submitted the application. However, approval of a delinquent renewal application shall not relieve the PBM of any penalties or other disciplinary action for unlicensed activity that occurred between the time the PBM’s license expired and the PBM submitted a delinquent renewal application.

(6) A PBM shall report to the Commissioner any administrative, judicial, or disciplinary action taken against the PBM in another jurisdiction or by another governmental agency in this state within sixty days of the final disposition of the matter. The report must include a copy of any order entered or other relevant legal document that contains the terms of the resolution of the matter reported.

History

• Authority: T.C.A. § 56-7-3101.
• Administrative History: New rules filed March 28, 2024; effective June 26, 2024.

Tenn. Comp. R. & Regs. 0780-01-95-.14 RECORD KEEPING

PBMs shall maintain all records and information necessary to appropriately demonstrate to the Commissioner compliance with all applicable laws and rules, including but not limited to T.C.A. Title 56,

Chapter 7, Parts 31 and 32; T.C.A. Title 56, Chapter 8, Part 1; and this chapter. The records maintained pursuant to this rule include, but are not limited to, records regarding a PBM’s activities pertaining to each covered entity to which the PBM provides services. PBMs shall maintain all records and information as required under this rule for a period of at least five years or as directed otherwise in writing by the Commissioner.

History

• Authority: T.C.A. § 56-7-3101.
• Administrative History: New rules filed March 28, 2024; effective June 26, 2024.

Tenn. Comp. R. & Regs. 0780-01-95-.15 ANNUAL REPORTS

(1) Beginning April 1, 2025, and annually on or before April 1 of each year thereafter, each PBM shall file with the Commissioner a written report that contains the following information for the preceding calendar year on a form and in the manner provided by the Commissioner, along with the review fee required under Rule 0780-01-95-.07(5):

(a) The total number of claims paid by the PBM for prescription drugs or devices;

(b) The total number of claims paid by the PBM to pharmacies physically located in Tennessee, or to mail order pharmacies or specialty pharmacies on behalf of Tennessee residents, for prescription drugs or devices;

(c) Descriptions of all fees assessed by the PBM to pharmacies physically located in Tennessee, mail order pharmacies that serve Tennessee residents, or specialty pharmacies that serve Tennessee residents;

(d) A schedule listing the unique identifier used by the PBM for internal distribution and identification of each MAC list used for pharmacy reimbursement at any point during the year for any pharmacy physically located in Tennessee, any mail order pharmacy that served Tennessee residents, or any specialty pharmacy that served Tennessee residents. For each MAC list, the PBM must specify:

1. Each pharmacy network that utilizes the MAC list as a basis for reimbursement, with each network identified by the unique identifier provided in part (e)1.;

2. The policies, procedures, or criteria used to determine which prescription drugs or devices are placed on the MAC list; and 3. The policies, procedures, or criteria used when updating the MAC list;

(e) A schedule of all the PBM’s pharmacy networks that contain pharmacies physically located in Tennessee, mail order pharmacies that serve Tennessee residents, or specialty pharmacies that serve Tennessee residents. For each network, the schedule must include the following information:

1. The unique identifier of the network used by the PBM for internal distribution and identification;

2. A description of the network’s purpose;

3. A schedule of all pharmacies physically located in Tennessee, mail order pharmacies that serve Tennessee residents, and specialty pharmacies that serve Tennessee residents that were removed from the network, along with the following information for each pharmacy removed;

(i) Pharmacy name and national provider identifier; and (ii) The name of the network from which the applicant was removed; and 4. A schedule of denied network applications received from pharmacies physically located in Tennessee, mail order pharmacies that would have served Tennessee residents, or specialty pharmacies that would have served Tennessee residents, along with the following information for each application:

(i) Pharmacy name and national provider identifier; and (ii) The name of the network into which the applicant was seeking entry;

(f) A schedule of all pharmacies contracted with the PBM that are physically located in Tennessee, mail order pharmacies that served Tennessee residents, or specialty pharmacies that served Tennessee residents. For each pharmacy listed, provide the following information:

1. Name and national provider identifier;

2. Total dollar amount of claims paid by the PBM to the pharmacy;

3. Total number of claims paid by the PBM to the pharmacy;

4. The unique identifier of the PBM’s network(s) in which the pharmacy participates;

5. The start and end date(s) of all contracts with the pharmacy, including all amendments, addendums, exhibits, provider manuals, and other documents that contain terms or conditions material to the contractual relationship between the PBM and the pharmacy;

6. Whether the pharmacy is an affiliate of or shares any common ownership through a parent entity with the PBM; and 7. Whether the pharmacy certified as a low-volume pharmacy with the PBM pursuant to Rule 0780-01-95-.10 for any portion of the calendar year;

(g) 1. A complete schedule of pharmacy audits completed during the previous calendar year for pharmacies physically located in Tennessee, mail order pharmacies that served Tennessee residents, or specialty pharmacies that served Tennessee residents, along with the following information on each completed audit:

(i) The name of the pharmacy audited and the pharmacy’s national provider identifier;

(ii) The start and completion date of the audit;

(iii) Total number of claims audited;

(iv) Preliminary recoupment amount(s), if any; and (v) Final recoupment amount(s), if any.

2. For purposes of this subparagraph (g), a PBM’s audit of a pharmacy includes, but is not limited to, activities by a PBM that may be described as periodic audits; investigations; prescription validation requests; fraud, waste, and abuse reviews; desktop audits; or other similar processes or reviews intended to allow a PBM to inspect a pharmacy’s internal records or processes;

(h) The number of initial appeals filed with the PBM;

(i) The number of initial appeals resolved in favor of pharmacies;

(j) The number of initial appeals resolved against pharmacies;

(k) The total amount of money paid to appealing pharmacies as a result of initial appeals resolved in favor of pharmacies;

(l) The total amount of money paid to similarly situated pharmacies as a result of initial appeals resolved in favor of pharmacies;

(m) The number of initial appeals that were appealed to the Commissioner of which the PBM received notice;

(n) A written statement certifying the PBM meets the requirements of Rule 0780-01-95- .05(1)(c) along with timestamped screenshots of the PBM’s website showing the required information is on the PBM’s website and is readily accessible by pharmacies; and (o) Any other documentation or information requested by the Commissioner.

(2) PBMs may exclude information from the report required under paragraph (1) if the information pertains exclusively to plans in T.C.A. § 56-7-3102(1)(B).

(3) On or before August 1, 2024, each PBM shall file with the Commissioner a written report that contains the information required under subparagraphs (h) through (o) of paragraph (1) for calendar year 2023 on a form and in the manner provided by the Commissioner, along with the review fee required under Rule 0780-01-95-.07(5).

(4) The Commissioner may extend a PBM’s deadline for filing its annual report for good cause shown.

(5) (a) A PBM may redact information from its annual report that is confidential or proprietary information or a trade secret as those terms, or substantially similar terms as determined by the Department, are defined in Tennessee or federal law. Upon request from the Commissioner, a PBM shall provide the specific authority and rationale on which it based its determination that redacted information is confidential or proprietary or a trade secret.

(b) A PBM shall not redact information from annual reports pursuant to subparagraph (a) as confidential or proprietary information or trade secrets if such information is confidential under Tennessee or federal law such that the Department determines it is not available for public inspection while in the Department’s possession.

History

• Authority: T.C.A. § 56-7-3101.
• Administrative History: New rules filed March 28, 2024; effective June 26, 2024.

Tenn. Comp. R. & Regs. 0780-01-95-.16 VIOLATIONS; CONTROL OF PBM

(1) The following acts are violations of this chapter:

(a) A PBM fails to timely submit all information, including updates to information, required pursuant to this chapter;

(b) A PBM provides any false, misleading, or deceptive information to the Department;

(c) A PBM fails to comply with a requirement of, or engages in any action prohibited by, this

chapter; or (d) Information submitted to the Department indicates any of the following are not authorized to transact business in this state; are not financially responsible as indicated by evidence of financial negligence, financial fraud, or gross mismanagement; or have engaged in any false, fraudulent, or dishonest practices in the course of business:

1. The PBM;

2. Any of the PBM’s officers, directors, partners, members, or managers; or 3. Any person or entity with control of a PBM.

(2) A violation of this chapter may subject a PBM to the sanctions described in T.C.A. § 56-2-305.

(3) A person or entity that has, or that triggers a presumption of, control of a PBM may disclaim control in the same manner allowed under T.C.A. § 56-11-105(k).

History

• Authority: T.C.A. §§ 56-2-305 and 56-7-3101.
• Administrative History: New rules filed March 28, 2024; effective June 26, 2024.

Tenn. Comp. R. & Regs. 0780-01-95-.17 EXCLUSIONS

This chapter shall not apply to a health plan that provides coverage only for accidental injury, specified disease, hospital indemnity, Medicare supplement, disability income, other long-term care, or plans subject to regulation under Medicare Part D.

History

• Authority: T.C.A. §§ 56-7-3101 and 56-7-3206.
• Administrative History: New rules filed March 28, 2024; effective June 26, 2024.

0780-02 Division of Fire Prevention

Chapter 0780-02-01 Electrical Installations

Tenn. Comp. R. & Regs. 0780-02-01-.01 SCOPE

(1) The provisions of this chapter shall apply to:

(a) Installation of electrical conductors and equipment within or on public and private buildings or other structures, including manufactured homes, modular building units and recreational vehicles not otherwise exempt under the provisions of Tenn. Code Ann. Title 68, Chapters 102 and 126; and floating buildings and other premises such as yards, carnivals, parking and other lots; and industrial substations.

(b) Installation of conductors that connect to the supply of electricity.

(c) Installations of other outside conductors on the premises.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143, and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Amendment filed July 15, 2003; effective September 28, 2003. Repeal and new rule filed November 14, 2008; effective January 28, 2009.

Tenn. Comp. R. & Regs. 0780-02-01-.02 , may be exceeded if written documentation is submitted from an engineer licensed in the State of Tennessee approving the additional voltage.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143(b)(2), 68-102-602, and 68-102-603.
• Administrative History: Emergency rule filed December 30, 2013; effective through June 28, 2014. Emergency rule filed June 27, 2014; expired effective December 24, 2014. On December 25, 2014, the rule reverted to its previous reserved status. New rule filed September 30, 2014; effective December 29, 2014. Amendments filed December 19, 2017; effective March 19, 2018.

Tenn. Comp. R. & Regs. 0780-02-01-.03 APPROVAL OF ELECTRICAL PRODUCTS

(1) Approved Testing Laboratories.

(a) Any materials, equipment, devices or applicants that meet one (1) of the following requirements will be accepted as compliant by the Commissioner of Commerce and Insurance, or the Commissioner’s designee, when properly installed or used:

1. Bear a label, symbol or other identifying mark of one (1) of the independent testing laboratories approved by the Commissioner. A list of approved independent testing laboratories shall be maintained and published by the Division of Fire Prevention.

2. Certification by another independent testing agency or laboratory to meet a standard which, in the judgment of the Commissioner, or Commissioner’s designee, provides an adequate level of safety by being:

(i) Recognized nationally as an electrical product safety standard;

(ii) Revised periodically to accommodate the latest developments in electrical products and installations; and (iii) Developed by the publisher in a manner which affords adequate opportunity for presentation and consideration of views of industry groups, experts, users, consumers, governmental authorities, and others having broad experience in the field involved.

(b) Any standard which is accepted by the American National Standards Institute (ANSI) shall be deemed to satisfy the requirements of (1)(a)2. above.

(c) Where there is no published standard for a product under consideration which meets the requirements of (1)(a)2. above, the testing agency or laboratory must identify, and justify the adequacy of, the standard or specifications on which its certification is based.

(d) Components of certified products must be evaluated for compliance with applicable safety standards, and determined to be suitable for use in such products.

(2) In lieu of evaluation by a testing agency or laboratory in accordance with paragraph (1)(a) above, the Commissioner of Commerce and Insurance, or designee, may consider other satisfactory evidence that a product meets safe and proper standards.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143, and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Amendment filed June 27, 1990; effective August 11, 1990. Amendment filed November 14, 2008; effective January 28, 2009. Amendment filed September 17, 2010; effective December 16, 2010. Amendments filed September 30, 2014; effective December 29, 2014. Amendments filed June 20, 2019; effective September 18, 2019.

Tenn. Comp. R. & Regs. 0780-02-01-.04 INSPECTIONS

(1) Inspections of electrical installations may be conducted by deputy inspectors appointed under contract with the Commissioner of Commerce and Insurance pursuant to T.C.A. § 68-102- 143. In circumstances where the need arises as determined by the Commissioner of Commerce and Insurance, or designee, deputy fire marshals are authorized to conduct inspections of electrical installations.

(a) Fees for such inspections for services, including all circuits connected thereto, based on total ascertainable ampere capacity, are specified in Tenn. Comp. R. & Regs. 0780- 02-01-.21. If the total ampere capacity is not ascertainable, the inspector may negotiate the fee based on the estimated number of required inspections; however, any such fee shall be subject to review and approval by the Commissioner of Commerce and Insurance, or designee, prior to issuance of a permit.

(b) Fees charged for additional inspections, including inspections necessitated by rejections and inspections for circuits not previously connected to the service, shall be based on the ascertainable ampere capacity of the service or ascertainable ampere capacity of the previously unconnected circuit, and shall not exceed the maximum amounts specified in Tenn. Comp. R. & Regs. 0780-02-01-.21.

(c) Inspectors may not charge mileage in excess of the standard travel reimbursement rate, as determined by the Tennessee Department of Finance and Administration, per mile each way for any special trip(s) requested by a property owner or contractor. This mileage charge must be approved in advance by the Commissioner of Commerce and Insurance, or designee.

(2) (a) Inspections shall be required on:

1. Complete new installations;

2. HVAC equipment;

3. New services, re-connections, or changes in services to existing installations;

4. Additions to existing installations, such as swimming pools, water well pumps to the wellhead, motor installations, additional rooms or spaces to existing buildings, grain drying equipment and out buildings;

5. Heat cable installations before being concealed by plaster, sheet rock, or other methods;

6. Conduit or raceways in or under masonry before covering with concrete or other permanent materials;

7. Conductors or raceways installed in all structures. This inspection is required prior to the concealing of such conductors or raceways by wall covering materials or by insulation;

8. Temporary services, which include temporary service poles and temporary service releases;

9. Electrical signs; and 10. Floating cabins as defined by 18 C.F.R. § 1304.101.

(b) A minimum of two (2) inspections shall be required on wiring installed within or on public and private buildings or other structures. The installer shall notify the electrical inspector in writing whenever any part of a wiring installation is to be hidden from view by insulation or the permanent placement of part of the building. No wiring or raceways shall be concealed until it has been inspected and approved by the inspector. A final inspection shall be requested upon completion of the entire electrical installation.

(3) When the initial (“rough-in”) inspection is conducted:

(a) All applicable circuit conductors and outlet boxes shall be installed;

(b) All joints shall be made; and (c) All grounding connections shall be in compliance with Section 300.10 of the 2017 edition of the National Electrical Code except as set forth in the exceptions enumerated in this subparagraph.

1. Exception No. 1: Where that portion of an installation which constitutes service conductors and equipment is changed or modified.

2. Exception No. 2: Where all wiring or raceway is exposed.

3. Exception No. 3: The requirements of (a) above shall not apply where inspection is performed on raceway systems only.

(4) The electrical contractor, the mechanical contractor, or the permit holder shall be responsible for ensuring the inspector has access to the site for inspection.

(5) The permit holder shall notify the inspector when the electrical installation is ready for inspection.

(6) Except as provided in Tenn. Comp. R. & Regs. 0780-02-01-.05(2) and for installers licensed in accordance with T.C.A. Title 69, Chapter 10, the inspector shall not issue a final certificate of approval on an installation performed by any person, firm, corporation or legal entity not duly licensed in accordance with T.C.A. Title 62, Chapter 6.

(7) It is not intended that electric service to an existing installation be disrupted pending inspection of additions or changes to such service; however, an inspection shall be required within seven (7) days of re-connection by the Power Supplier.

(8) Whenever service equipment has been changed out or upgraded on any existing structures, a safety inspection will be conducted pursuant to T.C.A. § 68-102-143.

(9) Inspections shall not be required on:

(a) Minor repair work, such as replacement of lamps or connection of portable devices to suitable receptacles which have been permanently installed; and (b) Installation, alteration, or repair of electric wiring or equipment installed by an electrical distribution agency for use in the generation, transmission, distribution, or metering of electrical energy.

(10) The inspector shall not issue a final certificate of approval on an installation if a building permit has not been obtained, if required, plans have not been reviewed and approved by the Department of Commerce and Insurance, if required, or all inspections have not been performed pursuant to Tenn. Comp. R. & Regs. 0780-02-23-.07.

(11) For residential and commercial buildings, electrical power shall be supplied to the building in order for the inspector to perform the final inspection. If a service release permit is purchased, the permit shall expire forty-five (45) days after the inspection has been performed, and a new permit will be required.

(12) If an initial (“rough-in”) inspection was not conducted as required and the covering of the wiring was inadvertent, the Commissioner, or designee, may accept a letter from a professional engineer registered in Tennessee verifying that the installation is compliant with the adopted electrical code and that it does not present any risks from electrical hazards or fire. Receptacles, switches, and light fixtures, however, must still be removed for inspection.

Only one (1) letter may be obtained within a twelve (12) month period unless the person making the written request can show justifiable cause for granting a second request.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143, and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Amendment filed June 27, 1990; effective August 11, 1990. Amendment filed September 22, 1993; effective January 28, 1994. Amendment filed November 4, 1996; effective March 28, 1997. Amendment filed July 13, 1999; effective September 26, 1999. Amendment filed July 15, 2003; effective September 28, 2003. Amendments filed November 14, 2008; effective January 28, 2009. Amendments filed September 17, 2010; effective December 16, 2010. Amendments filed September 30, 2014; effective December 29, 2014. Amendments filed December 19, 2017; effective March 19, 2018. Amendments filed March 31, 2022; effective June 29, 2022. Amendments filed April 15, 2025; effective July 14, 2025.

Tenn. Comp. R. & Regs. 0780-02-01-.05 PERMITS

(1) No electrical wiring on which an inspection is required by this chapter shall be installed without securing an electrical permit from the power distributor, local building official, Commissioner, or designee, or other issuing agent authorized by the Commissioner, or designee. Issuing agents may charge a fee of no more than five dollars ($5.00) for the issuing of a permit. This fee is in addition to all applicable inspection fees in Tenn. Comp. R.& Regs. 0780-02-01-.21.

(2) Residential and Non-Residential Property Owner’s Permits (a) Any person may perform electrical work (for which an inspection is required) upon his/her own residence provided he/she first applies for and obtains a residential property owner’s electrical permit. This permit shall only extend to the applicant and the immediate members of the applicant’s family. The permit shall not authorize assistance by any other person not duly licensed in accordance with T.C.A. Title 62, Chapter 6. A residential property owner’s permit shall automatically expire upon completion of the work for which the permit was issued. All work done under such permit shall be subject to regular inspection requirements and fees and other applicable laws and regulations.

Only one (1) property owner’s permit may be obtained within a twelve (12) month period unless the property owner can establish loss of his/her home by fire, windstorm, etc.; and (b) Any non-residential property owner may obtain a permit for electrical work to be performed on his/her property by an employee(s) licensed pursuant to T.C.A. Title 62,

Chapter 6, or T.C.A. Title 69, Chapter 10, if required, who will be performing the work in accordance with his/her duties as an employee(s) of the property owner. A nonresidential property owner’s permit shall be limited to the specific property listed on the permit and shall automatically expire upon completion of the work for which the permit was issued. All work done under such permit shall be subject to regular inspection requirements and fees and other applicable laws and regulations.

(3) No permit shall be required for installation of electrical systems by manufacturers of factory manufactured structures, recreational vehicles, or modular building units. This rule does not exempt owners of any manufactured home, recreational vehicle or modular building unit from the required installation permit and inspection governed by this chapter.

(4) When applying for a permit, an applicant shall present:

(a) Payment in the amount of the permit fee; and (b) Except for a residential property owner’s permit, proof of licensure pursuant to T.C.A.

Title 62, Chapter 6 or T.C.A. Title 69, Chapter 10. For a non-residential property owner’s permit, the license number of the employee(s) to perform the work and certification that the employee(s) licensed pursuant to T.C.A. Title 62, Chapter 6 or T.C.A. Title 69, Chapter 10, will be performing the work in accordance with his/her duties as an employee(s) of the property owner.

(5) All electrical permits are non-transferable.

(6) In the event of rejection of an electrical installation by the inspector, a new electrical permit must be applied for and obtained.

(7) Every electrical permit shall expire two (2) years from the date of issue unless:

(a) The inspector determines that substantial progress has been made in the work authorized by the permit;

(b) The permit holder is granted an exception after submitting a written request to the Commissioner, or designee. No electrical work for which a permit is required shall be commenced in any building or premises until a permit to perform such work is obtained; or (c) The permit is for a service release, in which case, the permit shall expire forty-five (45) days after the inspection has been performed.

(8) A copy of the permit shall be posted onsite where the inspection is to occur before the first inspection is conducted. Failure to post the permit may result in a rejected inspection.

(9) If a refund for a permit fee for inspection is requested, eighty-five percent (85%) of the permit fee, the fee that would have been paid to the inspector for the inspection, will be refunded.

The remaining fifteen percent (15%) of the permit fee is non-refundable to cover administrative and processing costs. Requests for refunds shall be made to the Division of Fire Prevention on the applicable form, completed in full, prior to an inspection being performed.

(10) Bad payment will result in the revocation of an issued permit. Bad payment includes, but is not limited to, a returned check, dishonored electronic payment, or declined credit card payment.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143, and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Amendment filed June 27, 1990; effective August 11, 1990. Amendment filed September 22, 1993; effective January 28, 1994. Amendment filed November 4, 1996; effective March 28, 1997. Amendment filed October 15, 1999; effective December 29, 1999. Amendment filed July 15, 2003; effective September 28, 2003. Amendments filed November 14, 2008; effective January 28, 2009. Amendments filed September 17, 2010; effective December 16, 2010. Amendments filed December 19, 2017; effective March 19, 2018. Amendments filed June 20, 2019; effective September 18, 2019. Amendments filed March 31, 2022; effective June 29, 2022. Amendments filed April 15, 2025; effective July 14, 2025.

Tenn. Comp. R. & Regs. 0780-02-01-.06 EMERGENCY SITUATIONS

(1) Power suppliers may energize services under emergency conditions resulting from windstorm, earthquakes or other catastrophic occurrences.

(2) Connections for emergency or delayed inspections shall not be made unless a permit has been obtained.

History

• Authority: T.C.A. §§ 68-102-113 and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987.

Tenn. Comp. R. & Regs. 0780-02-01-.07 SPECIAL OCCUPANCIES

(1) All lighting fixtures in barns and other outbuildings shall be of the non-conductor type directly fastened to the outlet box. Drop lights shall not be installed in barns or other buildings, unless specifically approved for the purpose used. All convenience receptacles in outbuildings shall be at least three (3) feet above floor level. Wiring in hay mows shall be installed in conduit or otherwise protected against mechanical injury.

(2) Conductors serving swimming pools which originate at a dwelling unit service equipment or sub-panel located on the interior of the dwelling unit may be installed utilizing the appropriate wiring methods contained in Chapter 3 of the 2017 edition of the National Electrical Code.

The wiring method shall comply with Article 680, 2017 edition of the National Electrical Code regarding that portion of the installation on the exterior of the dwelling unit.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143, and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Amendment filed June 27, 1990; effective August 11, 1990. Amendment filed November 4, 1996; effective March 28, 1997. Amendment filed June 13, 1999; effective September 26, 1999. Amendment filed July 15, 2003; effective September 28, 2003. Amendment filed November 14, 2008; effective January 28, 2009. Amendments filed December 19, 2017; effective March 19, 2018.

Tenn. Comp. R. & Regs. 0780-02-01-.08 METER LOCATION

(1) The power supplier will determine the physical location of the meter base.

(2) For multi-occupancy structures, metering equipment shall be identified to indicate the occupancy serviced.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143, and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Amendment filed November 4, 1996; effective March 28, 1997.

Tenn. Comp. R. & Regs. 0780-02-01-.09 INSTALLATIONS SERVED BY MULTIPLE SOURCES

Transfer equipment associated with installations served by alternate sources of supply shall be equipped with the necessary equipment to prevent backfeed of power onto the power supplier’s system when the power supplier’s local system is not energized by its own source of power. Protective equipment and installation of equipment to prevent backfeed shall be approved by the power supplier.

History

• Authority: T.C.A. §§ 68-102-113 and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987.

Tenn. Comp. R. & Regs. 0780-02-01-.10 SERVICE ENTRANCE CONDUCTORS

Service entrance conductors shall be installed in conduit where such conductors serve a structure with exterior walls of brick, stone, masonry, metal or metal-clad.

History

• Authority: T.C.A. §§ 68-102-113 and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987.

Tenn. Comp. R. & Regs. 0780-02-01-.11 DWELLING UNITS

(1) Where installed as separate units, ovens and cooktop units shall be served by individual circuits.

(2) Only designated circuits shall be energized following a “service release” inspection. Such an inspection shall only be valid for a period of forty-five (45) days from the date of inspection.

(3) All electrical connection, including HVAC equipment, shall be completed and inspected prior to final approval pursuant to T.C.A. §§ 68-102-143(c) and (e), except as defined in paragraph (2) of this section.

(4) No newly constructed one-family or two-family dwelling shall be approved for connection of electric service on a permanent basis under T.C.A. § 68-102-143, unless the dwelling is equipped with a smoke alarm that has been:

(a) Listed in accordance with the standards of Underwriters Laboratories, or another testing agency or laboratory accepted by the state fire marshal; and (b) Installed in accordance with the building construction safety standards adopted pursuant to T.C.A. § 68-120-101 and in accordance with the manufacturer’s directions, unless those directions conflict with applicable standards adopted by the state fire marshal. Notwithstanding the building construction safety standards adopted pursuant to T.C.A. § 68-120-101, battery operated smoke alarms shall be permitted when installed in buildings without commercial power.

(5) Service equipment shall have only one (1) main means of disconnecting services of two hundred twenty-five (225) amps or below.

(6) The installation of receptacles for island counter spaces and peninsular counter spaces below the countertop shall be optional.

(7) Receptacles shall not be required in the wall space behind doors which may be opened fully against a wall surface. Wall space measurement shall begin at the edge of the door when fully opened.

(8) Light fixtures in crawl spaces shall have guarded covers.

(9) Occupancy of a dwelling shall be prohibited before final inspection has been completed and approved.

(10) In Article 334.15(C) of the 2017 edition of the National Electrical Code, Nonmetallic-Sheathed Cable shall not be required to be run through bored holes in unfinished basements and crawl spaces with less than four feet (4’) and six inches (6”) of clearance.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143, 68-102-150, and 68-120-111.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Amendment filed June 27, 1990; effective August 11, 1990. Amendment filed September 22, 1993; effective January 28, 1994. Amendment filed November 4, 1996; effective March 7, 1997. Amendment filed July 13, 1999; effective September 26, 1999. Amendment filed July 15, 2003; effective September 28, 2003. Repeal and new rule filed November 14, 2008; effective January 28, 2009. Amendments filed December 19, 2017; effective March 19, 2018.

Tenn. Comp. R. & Regs. 0780-02-01-.12 OVERCURRENT PROTECTION

Circuit breakers used as overcurrent protection for circuits serving devices not requiring a grounded (neutral) conductor, such as a 240V water heater, shall be multipole breakers. Single pole circuit breakers with tie handles shall not be approved for this purpose.

History

• Authority: T.C.A. §§ 68-102-113 and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Amendment filed June 27, 1990; effective August 11, 1990.

Tenn. Comp. R. & Regs. 0780-02-01-.13 WORK SPACE ABOUT HVAC EQUIPMENT

(1) Installation in attic spaces.

(a) Entrance way providing access to equipment shall not be less than the largest piece of equipment to be replaced.

(b) There shall be a vertical clearance of at least four (4) feet and six (6) inches for use by those conducting necessary examination. In addition there shall be a walkway not less than twenty-four (24) inches wide on the ceiling joist running from the attic opening to the equipment, without an obstruction.

(2) Installation in crawl spaces underneath buildings.

(a) Entrance way providing access to equipment shall not be less than the largest piece of equipment to be replaced.

(b) There shall be a vertical clearance of at least four (4’) feet and six (6”) inches unobstructed crawl space to the unit.

(c) If four (4’) feet and six (6”) inches of clearance cannot be maintained, the unit shall be located no more than twelve (12’) feet from the entrance opening and a clear unobstructed crawl space not less than thirty (30”) inches in height and twenty-four (24”) inches in width shall be maintained.

(d) Light fixtures in crawl spaces shall have guarded covers.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143, and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Amendment filed June 27, 1990; effective August 11, 1990. Amendment filed September 22, 1993; effective January 28, 1994. Amendment filed November 4, 1996; effective March 7, 1997. Amendment filed November 14, 2008; effective January 28, 2009.

Tenn. Comp. R. & Regs. 0780-02-01-.14 REPEALED

History

• Authority: T.C.A. §§ 68-102-113 and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Repeal filed June 27, 1990; effective August 11, 1990.

Tenn. Comp. R. & Regs. 0780-02-01-.15 USED MANUFACTURED HOMES

(1) Manufactured homes shall have listed, enclosed-type service-entrance equipment located inside the manufactured home, with proper rated overcurrent protection for each branch circuit. Overcurrent protection for circuits of twenty (20) amperes or less may be either circuit breakers, or plug fuses and fuse holders of Type “S”, and shall be of the time-delay type. The manufactured home disconnecting means located inside shall be fed from an outside location with a feeder from the main service entrance for such manufactured home. If the supply or feeder from the main service to the disconnecting means located inside does not have a grounding conductor as required by Article 550 of the 2017 edition of the National Electrical Code, one shall be installed.

(2) Inspection shall be both visual and mechanical; switch and receptacle plates and light fixtures will be removed to check conductor connections, insulation of splices, boxes, and general code requirements.

(3) After the mechanical test and visual inspections have been made, a safety inspection certificate may be issued as determined by the inspector.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143, 68-102-147, and 68-102-150.
• Administrative History: Original rule certified June 10, 1974. Amendment filed October 24, 1974; effective January 17, 1975. Amendment filed April 20, 1978; effective May 22, 1978. Repeal and new rule filed October 27, 1981; effective December 11, 1981. Repeal and new rule filed June 28, 1984; effective July 28, 1984. Repeal and new rule filed March 12, 1987; effective April 26, 1987. Amendment filed June 27, 1990; effective August 11, 1990. Amendment filed September 22, 1993; effective January 28, 1994. Amendment filed November 4, 1996; effective March 28, 1997. Amendment filed July 13, 1999; effective September 26, 1999. Amendment filed July 15, 2003; effective September 28, 2003. Repeal and new rule filed November 14, 2008; effective January 28, 2009. Amendments filed December 19, 2017; effective March 19, 2018.

Tenn. Comp. R. & Regs. 0780-02-01-.16 REPEALED

History

• Authority: T.C.A. § 68-102-113.
• Administrative History: Original rule filed June 27, 1990; effective August 11, 1990. Repeal filed July 15, 2003; effective September 28, 2003.

Tenn. Comp. R. & Regs. 0780-02-01-.17 LOCAL ORDINANCES

No city, county, town, municipal corporation, metropolitan government or political subdivision of this state shall adopt or enforce any ordinance prescribing less stringent electrical standards than those established hereunder as determined by the Division.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143, and 68-102-150.
• Administrative History: Original rule filed June 27, 1990; effective August 11, 1990.

Tenn. Comp. R. & Regs. 0780-02-01-.18 PERMIT ISSUING AGENTS

(1) All individuals, including all business entities, municipalities, and cooperatives, who undertake to issue electrical permits under this chapter must hold a current contract with the Department of Commerce and Insurance, as administered through the Electrical Section of the Division of Fire Prevention.

(2) State deputy electrical inspectors are ineligible to become issuing agents. Additionally, without prior approval from the Department, no individual or business entity in any way related to or financially associated with any Department official will be allowed to become an issuing agent.

History

• Authority: T.C.A. §§ 68-102-113 and 68-102-143.
• Administrative History: Original rule filed October 15, 1999; effective December 29, 1999. Amendments filed March 31, 2022; effective June 29, 2022.

Tenn. Comp. R. & Regs. 0780-02-01-.19 REPEALED

History

• Authority: T.C.A. § 68-102-113.
• Administrative History: Original rule filed October 15, 1999; effective December 29, 1999. Repeal filed July 15, 2003; effective September 28, 2003.

Tenn. Comp. R. & Regs. 0780-02-01-.20 LOCAL GOVERNMENT AUTHORIZATION TO PERFORM ELECTRICAL

INSPECTIONS.

(1) (a) Pursuant to T.C.A. § 68-102-143(b)(1), the Commissioner of Commerce and Insurance may authorize a local government to conduct electrical inspections through the local government’s appointed deputy inspectors. This inspection authority shall cover all types of electrical installations in accordance with the law, except for state owned or state leased properties which remain under the jurisdiction of the Commissioner.

(b) Deputy inspectors appointed in such a manner are authorized to inspect electrical installations upon receipt of a request from the owner of the property or from any person, association or corporation supplying electrical energy to the installations, or from municipal governing bodies, or from the county legislative body of the county in which the installations are located and the inspectors for their compensation are authorized to charge for and received a fee for each inspection.

(c) If a conflict arises between the state fire marshal and the local government relative to the application or interpretation of the same or substantially identical electrical safety standards, then the determination of the state fire marshal shall supersede the conflicting application or interpretation by the local government.

(d) This rule sets forth the criteria by which local governments may seek authorization to perform electrical inspections and procedures by which the Commissioner, or designee, may review such authorization.

(2) Initial Authorization.

(a) Prior to being authorized to perform electrical inspections, the local government, through the county executive, the county commission, the mayor or the city council, shall make a written request to the state fire marshal.

(b) The request shall be completed on a form approved by the state fire marshal and shall contain the following information:

1. The title(s) and edition(s) of the code(s) that will be adopted and enforced;

2. The number and types of inspections of each installation (final, rough-in, temporary, HVAC, service release, re-inspect) that will be conducted;

3. A detailed description of the permit issuance and record-keeping process for all inspection activities;

4. The names of all persons who are employed by the local government to perform electrical inspections and who have successfully completed the respective certification examinations of the International Association of Electrical Inspectors (IAEI- 1 & 2 Family and Electrical General or Electrical Commercial), the International Code Council (ICC- Residential Electrical Inspector and Commercial Electrical Inspector), or any other certification designations approved by the Commissioner, or designee. All necessary certifications shall be obtained prior to performing electrical inspections.

(c) After receipt of the information required in paragraph (2)(b) of this rule, the state fire marshal will schedule a pre-authorization review to take place at the applying local government’s office. During this review, the state fire marshal may review any and all records related to the local government’s proposed electrical inspection program, including the certification records of persons employed to perform electrical inspections.

(d) If after consideration of the information required in paragraph (2)(b) of this rule and after the pre-authorization review the state fire marshal determines that the local government can adequately enforce electrical codes and conduct electrical inspections, the state fire marshal may authorize the local government to conduct electrical inspections.

(3) The local government’s adopted electrical code publication shall be current within seven (7) years of the date of the latest edition thereof, unless otherwise approved by the state fire marshal.

(4) Review of Local Government Authorization.

(a) For any local government that was authorized to conduct electrical inspections before January 1, 2005, the state fire marshal will conduct a review as soon as practicable of the local government’s authorization to conduct electrical inspections to determine whether the local government is adequately enforcing the adopted electrical codes and is properly performing inspections.

(b) For any local government that is authorized to conduct electrical inspections on or after January 1, 2005, the state fire marshal will conduct a review of the local government’s authorization to conduct electrical inspections to determine whether the local government is adequately enforcing the adopted electrical codes, is properly performing inspections and is otherwise in compliance with the information originally submitted to the state fire marshal for purposes of gaining authorization to perform electrical inspections. The review provided by this paragraph shall take place at least once every three (3) years.

(c) Each local government that is reviewed pursuant to this paragraph will be notified of the review in writing. When a local government is subject to the review provided by this paragraph, the local government shall submit the information required for initial authorization by paragraph (2)(b) of this rule on a form provided by the state fire marshal within thirty (30) days of its receipt of the form.

(d) As part of the review, the state fire marshal may also conduct an on-site visit to the local government to review the electrical permit and inspection process.

(e) The state fire marshal may request any other documentation it deems necessary for the local government to evidence compliance with the requirements for initial authorization set forth in paragraph (2)(b) of this rule.

(f) Report of Review.

1. After conclusion of the review, the state fire marshal will notify the local government in writing whether there are any area(s) in which the local government is not adequately enforcing the adopted electrical codes or properly performing inspections.

2. If the local government is not adequately enforcing the adopted electrical codes or properly performing inspections, the notification will contain recommended corrective action, and the local government will be directed to submit a plan of corrective action to the state fire marshal within thirty (30) days after its receipt of the notification. The plan of corrective action shall be sufficiently detailed so as to ensure compliance with all requirements for initial authorization.

3. Within thirty (30) days after receipt of the local government’s plan of corrective action, the state fire marshal shall either approve or disapprove the plan. If the plan is approved, the state fire marshal may conduct periodic follow-up reviews to ensure continued compliance with the plan. If the plan is not approved, the state fire marshal may remove the local government’s authorization to conduct electrical inspections.

History

• Authority: T.C.A. §§ 68-102-113 and 68-102-143(b)(1).
• Administrative History: Original rule filed March 7, 2005; effective May 21, 2005. Emergency rule filed June 30, 2010; effective through December 27, 2010. Amendments filed September 17, 2010; effective December 16, 2010. Amendments filed December 19, 2017; effective March 19, 2018.

Tenn. Comp. R. & Regs. 0780-02-01-.21 INSPECTION FEES

The inspection fee for each inspection for services shall not exceed the following:

Final Inspection: Fee 0-200 ampere capacity $35.00 201-400 ampere capacity $40.00 401-600 ampere capacity $50.00 601-1000 ampere capacity $90.00 1,001 ampere capacity and above (“Nonstandard permit”) Fee is negotiable; however, any such fee shall be subject to review and approval by the Commissioner, or designee.

Rough-In Inspection: 0-1,000 ampere capacity $35.00 1,001 ampere capacity and above $35.00 Re-Inspection:

Based on rejection of 0-1,000 ampere capacity $35.00 Based on rejection of 1,001 ampere capacity and above $35.00 Inspection of a Dwelling Unit’s Heating and/or Cooling System $35.00 (e.g. HVAC)

Consultation Inspection (optional/available upon request) $50.00 Service Release Inspection (valid for 45 days) Fee is based on ampere capacity of service.

Inspection of Floating Cabins $150.00 Inspection of Boat Docks and Marinas Fee is negotiable based upon the number of subpanels, panels, and the ampere capacity of service; however, any such fee shall be subject to review and approval by the Commissioner, or designee.

Recreational Vehicle Parks Fee is negotiable based upon the number of pedestals and the ampere capacity of service; however, any such fee shall be subject to review and approval by the Commissioner, or designee.

History

• Authority: T.C.A. §§ 68-102-113, 68-102-143(b)(2), 68-102-602, and 68-102-603.
• Administrative History: Emergency rule filed December 30, 2013; effective through June 28, 2014. Emergency rule filed June 27, 2014; expired effective December 24, 2014. On December 25, 2014, the rule reverted to its previous reserved status. New rule filed September 30, 2014; effective December 29, 2014. Amendments filed March 23, 2017; effective June 21, 2017. Amendments filed March 31, 2022; effective June 29, 2022. Amendments filed April 15, 2025; effective July 14, 2025.

Tenn. Comp. R. & Regs. 0780-02-01-.22 BOAT DOCKS AND MARINAS

(1) Safety inspections of boat docks and marinas shall include, but are not limited to, a review of all sources of electrical supply, including ship-to-shore power pedestals, submergible pumps, and sewage pump-out facilities, that could result in unsafe electrical current in the water for the purpose of ensuring compliance with the standards for maintenance of electrical wiring and equipment that were applicable to the marina at the time of installation.

(2) (a) In the event that a deficiency is found during a safety inspection, any subsequent inspection required for the inspection of repairs made to address such deficiency shall be conducted by a deputy electrical inspector commissioned under T.C.A. § 68-102- 143, and in accordance with T.C.A. § 68-102-143 and Tenn. Comp. R. & Regs. 0780- 02-01.

(b) The permit fee for inspection of boat docks and marinas is negotiable based upon the number of subpanels, panels and the ampere capacity of service; however, any such fee shall be subject to review and approval by the Commissioner of Commerce and Insurance, or designee.

(3) Any main overcurrent protective device installed or replaced on or after April 1, 2015, that feeds a marina shall have ground-fault protection and meet all requirements in Article 555.3 in the edition of the National Electrical Code adopted in Tenn. Comp. R. & Regs. 0780-02-01- .02.

(4) Inspections shall be performed in accordance with the adopted electrical code edition effective at the time of installation. If the time of installation cannot be determined, the installation shall be inspected in accordance with the pertinent section related to Marinas and Boatyards, Article 555 in the edition of the National Electrical Code adopted in Tenn. Comp.

R. & Regs. 0780-02-01-.02, unless otherwise authorized by the Commissioner of Commerce and Insurance, or designee.

(5) The regulation regarding a maximum of one thousand (1000) volts phase to phase being permitted in yard and pier distribution systems as specified in Article 555.4, Distribution System of the edition of the National Electrical Code adopted in Tenn. Comp. R. & Regs.

Tenn. Comp. R. & Regs. 0780-02-01-.23 FLOATING CABINS

(1) Floating cabins located on the Tennessee River System and regulated by the Tennessee Valley Authority (TVA) must comply with 18 C.F.R. § 1304, and specifically 18 C.F.R. § 1304.103(e) regarding electrical inspections, and Article 553 of the National Electrical Code.

(2) Inspections shall be performed in accordance with the adopted electrical code edition effective at the time of installation. If the time of installation cannot be determined, the installation shall be inspected in accordance with the pertinent section related to floating cabins, Article 553 in the edition of the National Electrical Code adopted in Tenn. Comp. R. & Regs. 0780-02-01-.02, unless otherwise authorized by the Commissioner of Commerce and Insurance, or designee.

History

• Authority: T.C.A. § 68-102-113 and 18 C.F.R. § 1304.
• Administrative History: New rule filed March 31, 2022; effective June 29, 2022.

Chapter 0780-02-02 Codes and Standards

Tenn. Comp. R. & Regs. 0780-02-02-.01 ADOPTION BY REFERENCE

(1) Unless otherwise provided by applicable law or the provisions of this chapter, the required minimum standards for fire prevention, fire protection, and building construction safety in the state of Tennessee shall be those prescribed in the following publications:

(a) The International Building Code (IBC), 2021 edition, published by the International Code Council (ICC), except for the following changes:

1. Remove Chapter 11 Accessibility.

2. The requirements of Section 423 Storm Shelters shall not be required.

3. Section 903.3.1.2 NFPA 13R sprinkler systems shall be replaced with the following:

Automatic sprinkler systems in Group R occupancies may be installed throughout in accordance with NFPA 13R where the Group R occupancy meets all of the following conditions:

(i) Four stories or less above grade plane.

(ii) For occupancies other than Group R-2, the floor level of the highest story is 30 feet (9144 mm) or less above the lowest level of fire department vehicle access.

For Group R-2 occupancies, the roof assembly is less than 45 feet (13716 mm) above the lowest level of fire department vehicle access. The height of the roof assembly shall be determined by measuring the distance from the lowest required fire vehicle access road surface adjacent to the building to the eave of the highest pitched roof, the intersection of the highest roof to the exterior wall, or the top of the highest parapet, whichever yields the greatest distance.

(iii) The floor level of the lowest story is 30 feet (9144 mm) or less below the lowest level of fire department vehicle access.

The number of stories of Group R occupancies constructed in accordance with Sections 510.2 and 510.4 of the International Building Code shall be measured from grade plane.

4. For Group E occupancies in all jurisdictions in Tennessee, local education agencies, public charter schools, and non-public schools may allow classroom doors to be locked to prevent unwanted entry provided that the locking means meets the requirements in the National Fire Protection Association (NFPA)

(2021) Section 15.2.2.2.4.1.

5. For college and university instructional buildings in all jurisdictions in Tennessee, college and university administrators may allow classroom doors to be locked to prevent unwanted entry provided that the locking means meets the requirements in the NFPA (2021) Section 39.2.2.2.2.

6. Dwellings licensed by the Department of Human Services (DHS) as Family Home Daycares shall use Appendix AM of the 2021 International Residential Code.

7. Where ASCE 7-16 is referenced for seismic design or mapped ground accelerations, ASCE 7-22 mapped ground accelerations may be used to determine the S1 and Ss values.

8. The requirements for flammable gas shall be those found in the International Building Code (IBC), 2024 edition, published by the International Code Council (ICC), and shall include the following:

(i) For Chapter 2, the definition for Flammable Gas shall be replaced with the definition found in the 2024 International Building Code.

(ii) For flammable gases, Table 307.1(1) shall be replaced with Table 307.1(1) of the 2024 International Building Code.

(iii) For flammable gases, Section 307.4 High-Hazard Group H-2 shall be replaced with Section 307.4 High-Hazard Group H-2 of the 2024 International Building Code.

(iv) For flammable gases, Section 307.5 High-Hazard Group H-3 shall be replaced with Section 307.5 High-Hazard Group H-3 of the 2024 International Building Code.

(v) For flammable gases, Section 414.2.5 shall be replaced with Section 414.2.5 of the 2024 International Building Code.

(vi) For flammable gases, Table 414.5.1 shall be replaced with Table 414.5.1 of the 2024 International Building Code.

(b) The International Fuel Gas Code (IFGC), 2021 edition, published by the International Code Council (ICC).

(c) The International Mechanical Code (IMC), 2021 edition, published by the International Code Council (ICC).

(d) The International Plumbing Code (IPC), 2021 edition, published by the International Code Council (ICC).

(e) The International Property Maintenance Code (IPMC), 2021 edition, published by the International Code Council (ICC), except the following sections shall be removed: 302.4 Weeds, 302.8 Motor Vehicles, 302.9 Defacement of Property, 304.2 Protective Treatment, 304.8 Decorative Features, 304.14 Insect Screens, and 308 Rubbish and Garbage.

(f) The International Fire Code (IFC), 2021 edition, published by the International Code Council (ICC), except for the following changes:

1. Section 510.1 Exception 2 shall be replaced with the following:

Where it is determined by the local fire chief in coordination with local law enforcement and EMS that the radio coverage system is not needed.

2. Section 903.3.1.2 NFPA 13R sprinkler systems shall be replaced with the following:

Automatic sprinkler systems in Group R occupancies may be installed throughout in accordance with NFPA 13R where the Group R occupancy meets all of the following conditions:

(i) Four stories or less above grade plane.

(ii) For other than Group R-2 occupancies, the floor level of the highest story is 30 feet (9144 mm) or less above the lowest level of fire department vehicle access.

For Group R-2 occupancies, the roof assembly is less than 45 feet (13716 mm) above the lowest level of fire department vehicle access. The height of the roof assembly shall be determined by measuring the distance from the lowest required fire vehicle access road surface adjacent to the building to the eave of the highest pitched roof, the intersection of the highest roof to the exterior wall, or the top of the highest parapet, whichever yields the greatest distance.

(iii) The floor level of the lowest story is 30 feet (9144 mm) or less below the lowest level of fire department vehicle access. The number of stories of Group R occupancies constructed in accordance with Sections 510.2 and 510.4 of the International Building Code shall be measured from grade plane.

3. Appendix L (Requirements for Fire Fighter Air Replenishment Systems) shall be optional.

4. For Group E occupancies in all jurisdictions in Tennessee, local education agencies, public charter schools, and non-public schools may allow classroom doors to be locked to prevent unwanted entry provided that the locking means meets the requirements in the National Fire Protection Association (NFPA)

(2021) Section 15.2.2.2.4.1.

5. For college and university instructional buildings in all jurisdictions in Tennessee, college and university administrators may allow classroom doors to be locked to prevent unwanted entry provided that the locking means meets the requirements in the NFPA (2021) Section 39.2.2.2.2.

6. The requirements for flammable gas shall be those found in the International Fire Code (IFC), 2024 edition, published by the International Code Council (ICC), and shall include the following:

(i) For Chapter 2, the definition for Flammable Gas shall be replaced with the definition found in the 2024 International Fire Code.

(ii) For flammable gases, Table 911.1 shall be replaced with Table 911.1 of the 2024 International Fire Code.

(iii) For flammable gases, Table 5003.1.1(1) shall be replaced with Table 5003.1.1(1) of the 2024 International Fire Code.

(iv) For flammable gases, Table 5003.1.1(3) shall be replaced with Table 5003.1.1(3) of the 2024 International Fire Code.

(v) For flammable gases, Section 5003.8.3.5 shall be replaced with Section 5003.8.3.5 of the 2024 International Fire Code.

(vi) For flammable gases, Section 5003.11 shall be replaced with Section 5003.11 of the 2024 International Fire Code.

(g) The International Energy Conservation Code (IECC), 2021 edition, published by the International Code Council (ICC), except for the following changes:

1. Remove C405.11 Automatic Receptacle Control, C405.12 Energy Monitoring, and C408 Commissioning.

2. The 2006 edition shall apply to the following occupancy classifications as defined by the International Building Code (IBC), 2021 edition:

(i) Moderate-hazard factory industrial, Group F-1;

(ii) Low-hazard factory industrial, Group F-2;

(iii) Moderate-hazard storage, Group S-1; and (iv) Low-hazard storage, Group S-2.

3. For daycares licensed by DHS not located in a dwelling unit, the 2015 edition shall apply, except C408 System Commissioning shall be removed.

(h) The International Existing Building Code (IEBC), 2021 edition, published by the International Code Council (ICC), except for the following changes:

1. Remove Chapter 3 Section 306 Accessibility for existing buildings.

2. Replace Section 405.2.3.3 Extent of repair for noncompliant buildings with the following:

If the evaluation does not establish that the building in its predamaged condition complies with the provisions of Section 405.2.3.1, then the building, including its foundation, shall be retrofitted to comply with the provisions of this section. The wind loads for the repair and retrofit shall be those required by the building code in effect at the time of original construction, unless the damage was caused by wind, in which case the wind loads shall be in accordance with the International Building Code. The seismic loads for this retrofit design shall be those required by the building code in effect at the time of original construction, but not less than the reduced seismic forces.

3. Replace 405.2.4 Substantial structural damage to gravity load-carrying components with the following:

Gravity load-carrying components that have sustained substantial structural damage shall be rehabilitated to comply with the applicable provisions for dead, live, and snow loads in the International Building Code. Undamaged gravity loadcarrying components, including undamaged foundation components, that receive dead, live, or snow loads from rehabilitated components shall also be rehabilitated if required to comply with the design loads of the rehabilitation design.

4. The requirements of Section 303 Storm Shelters are not required.

(i) NFPA 101 Life Safety Code, 2021 edition, published by the National Fire Protection Association (NFPA), shall govern new Small Residential Board and Care facilities that:

1. Are a change of occupancy from either a residential occupancy or a health care occupancy; and 2. House eight (8) or fewer residents, and all residents have and maintain the ability to move reliably and escape to a point of safety as a group within three (3) minutes.

(j) No provision of the preceding cited publications shall be adopted that conflicts with:

1. The installation and service standards of portable fire extinguishers and fixed fire extinguisher systems in Tenn. Comp. R. & Regs. 0780-02-14-.02; and 2. The standards for engaging in the liquefied petroleum gas business in Tenn.

Comp. R. & Regs. 0780-02-17-.02.

(2) Paragraph (1) of this rule shall not be construed as adopting any provision of the cited publications which establishes:

(a) An optional or recommended, rather than mandatory, standard or practice;

(b) Any agency, procedure, fees, or penalties for administration or enforcement purposes inconsistent with the statute or rules; or (c) Any permits, fees, or inspections that are inconsistent with Tenn. Comp. R. & Regs. 0780-02-03 or other rules of the Department of Commerce and Insurance.

History

• Authority: T.C.A. §§ 68-102-113 and 68-120-101.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 17, 1976; effective September 16, 1976. Repeal and new rule filed July 27, 1982; effective August 26, 1982. Amendment filed October 11, 1985; effective November 10, 1985. Amendment filed July 9, 1990; effective August 23, 1990. Amendment filed March 13, 1996; effective May 27, 1996. Amendment filed October 14, 1997; effective December 28, 1997. Amendment filed June 12, 2001; effective August 26, 2001. Amendment filed March 19, 2004; effective June 2, 2004. Amendment filed November 16, 2007; withdrawn December 28, 2007. Emergency rule filed January 25, 2008; effective through July 8, 2008. Emergency rule filed July 8, 2008; effective through December 20, 2008. Amendment filed June 18, 2008; effective September 1, 2008. Amendments filed October 2, 2008; effective December 16, 2008. Amendments filed March 29, 2010; effective June 27, 2010. Repeal and amendments filed May 6, 2016; effective August 4, 2016. Emergency rules filed June 1, 2018; effective through November 28, 2018. Amendments filed August 24, 2018; effective November 22, 2018. Emergency rule filed June 14, 2023; effective through December 11, 2023. Emergency rule expired effective December 12, 2023, and the rule reverted to its previous status. Amendments filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-02-.02 DEFINITIONS

(1) For the purposes of this chapter, the following definition is applicable:

(a) “Exempt Jurisdiction” means a local government jurisdiction that has complied with the requirements of T.C.A. § 68-120-101(b)(2).

History

• Authority: T.C.A. § 68-120-101(b)(4)(B).
• Administrative History: Original rule filed July 27, 1982; effective August 26, 1982. Repeal and amendments filed May 6, 2016; effective August 4, 2016. Amendments filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-02-.03 RETROACTIVE ENFORCEMENT

Any existing building which conformed to the standards legally effective at the time of its construction shall not be subject to the standards adopted by reference in Tenn. Comp. R. & Regs. 0780-02-02-.01, unless the nonconformity of the building to such standards poses a serious life safety hazard. However, any construction as defined in Tenn. Comp. R. & Regs. 0780-02-03-.01 undertaken after the effective date of this chapter shall be in compliance with the standards adopted by reference in Tenn. Comp. R. & Regs. 0780-02-02-.01.

History

• Authority: T.C.A. §§ 53-2413, 68-102-113, 68-120-101, and 68-120-102 and Chapter 857, Public Acts of 1982.
• Administrative History: Original rule filed July 27, 1982; effective August 26, 1982. Amendment filed June 12, 2001; effective August 26, 2001. Repeal and amendments filed May 6, 2016; effective August 4, 2016.

Tenn. Comp. R. & Regs. 0780-02-02-.04 ALTERNATIVES AND CONFLICTS

(1) In the event of a conflict or inconsistency between the codes adopted by reference in Tenn.

Comp. R. & Regs. 0780-02-02-.01, the provisions of the Tennessee Public Building Accessibility Act, T.C.A. §§ 68-120-201, et seq., shall prevail if such conflict or inconsistency relates to accessibility.

(2) In the event of a conflict or inconsistency between either standards adopted by reference in Tenn. Comp. R. & Regs. 0780-02-02-.01 and 0780-02-01 (Electrical Installations), the provisions of Tenn. Comp. R. & Regs. 0780-02-01 (Electrical Installations) shall prevail.

(3) In the event of a disputed interpretation of a code section or standard, the ruling of the Division shall prevail.

(4) Nothing in this rule shall abrogate any right of appeal granted under T.C.A., Title 68, Chapters 102 and 120.

(5) Where the International Building Code adopted in this chapter allows a building to be built to the International Residential Code, the building shall not be classified as a one- and twofamily dwelling for the purposes of applying the fire sprinkler requirements of T.C.A. § 68- 120-201.

(6) Where strict compliance with the code requirements would be impractical, impossible, or when strict compliance would not significantly increase safety standards, the Division may approve or accept alternative means of accomplishing the objectives of this chapter.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-101, and 68-120-106.
• Administrative History: Original rule filed July 27, 1982; effective August 26, 1982. Amendment filed November 14, 1983; effective December 14, 1983. Amendment filed July 9, 1990; effective August 23, 1990. Amendment filed October 14, 1997, effective December 28, 1997. Amendment filed March 19, 2004; effective June 2, 2004. Amendment filed November 16, 2007; withdrawn December 28, 2007. Amendment filed June 18, 2008; effective September 1, 2008. Amendment filed October 2, 2008; effective December 16, 2008. Repeal and amendments filed May 6, 2016; effective August 4, 2016. Emergency rules filed June 1, 2018; effective through November 28, 2018. Amendments filed August 24, 2018; effective November 22, 2018. Amendments filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-02-.05 LOCAL ORDINANCES

(1) A local jurisdiction that adopts and enforces building construction and fire safety codes pursuant to T.C.A. § 68-120-101(b)(2)(A) shall forward all relevant local ordinances to the Division within sixty (60) days of adopting the ordinance.

(a) A local jurisdiction shall conduct an initial plans review for an average of eighty percent (80%) of the jurisdiction’s construction projects within thirty (30) days of receipt of an application.

(b) A local jurisdiction shall perform an inspection within thirty (30) days of when the request is made.

(2) A local jurisdiction that adopts and enforces building construction and fire safety codes pursuant to T.C.A. § 68-120-101(b)(2)(A) shall adopt an edition of a building construction or fire safety code within seven (7) years of the most current published edition.

(3) Except as provided in T.C.A. § 68-120-101, or otherwise approved in writing by the Division, no political subdivision of the state of Tennessee shall adopt or enforce any ordinance prescribing less stringent standards of fire prevention, fire protection, or building construction safety than those established in this chapter.

(a) The locally adopted codes and standards may not be lessened without submitting a draft of the ordinance for local adoption to the Division for review and approval prior to becoming effective.

(b) If a local jurisdiction adopts less stringent codes and standards without prior approval in writing from the Division, then the locally adopted amendment to the building construction and fire safety codes shall be invalid.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-101, and 68-120-106.
• Administrative History: Original rule filed July 17, 1982; effective August 26, 1982. Amendment filed October 11, 1985; effective November 10, 1985. Repeal and amendments filed May 6, 2016; effective August 4, 2016. Amendments filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-02-.06 AUDITS OF LOCAL CODES ENFORCEMENT AGENCIES

(1) INITIATION OF AUDIT

(a) The Division shall audit each exempt jurisdiction no less than once every three (3) years. The Division shall notify the exempt jurisdiction of the commencement of the audit.

(b) The Division shall submit a questionnaire to the jurisdiction to gather information needed for the audit. The exempt jurisdiction shall submit the following information on a form provided by the Division within thirty (30) days of its receipt of the form:

1. The name and title, mailing address, email, and telephone number of the official accountable for the exempt jurisdiction’s codes enforcement operations;

2. The name, mailing address, email, and main telephone number of the head of the exempt jurisdiction’s highest executive officer;

3. The edition date and type of building and fire codes currently enforced by the exempt jurisdiction, along with ordinances and/or amendments to the codes enforced by the exempt jurisdiction. Amendments that lessen the adopted code requirements must be specifically identified by the jurisdiction;

4. A list of the exempt jurisdiction’s building and fire officials, with certification numbers and certification expiration dates, who are responsible for the exempt jurisdiction’s plans review and field inspections;

5. Assurance that the jurisdiction performs inspections of building code, fire code, or other building safety complaints and that noncompliant items are corrected;

6. A statement of whether the jurisdiction performs enforcement of codes for Educational Group E occupancies;

7. The average number of days an inspection has been performed after a request for the inspection has been made by the permit holder; and 8. Any other information needed for completion of the audit.

(2) PLANS REVIEW AND INSPECTION AUDIT

(a) The exempt jurisdiction shall make approved sets of plans for buildings under construction available to the Division. The exempt jurisdiction shall provide inspection reports as requested.

(b) The Division shall select and review an approved set of plans for a building project for compliance with the jurisdiction’s codes and established timeframes.

(c) The exempt jurisdiction shall submit the approved building plans for the building project selected pursuant to subparagraph (2)(b), and any subsequently requested plans, to the Division within ten (10) days of the request.

(d) The Division may select a building project that has been recently completed when the jurisdiction does not have a building project that is adequate for the audit.

(e) The Division shall perform an inspection of the building project selected for audit pursuant to subparagraph (2)(b). The local officials shall be in attendance during the inspection.

(3) AUDIT REPORT

The Division will notify the jurisdiction in writing whether the jurisdiction is adequately enforcing the adopted codes or properly performing timely inspections.

(4) PLAN OF CORRECTIVE ACTION

(a) When the Division determines that a jurisdiction is at risk of not adequately enforcing its adopted code, including but not limited to not adequately performing inspections, the Division may issue a written audit report to the jurisdiction setting out each finding of the Division constituting grounds for such determination and require the jurisdiction to submit an acceptable Plan of Corrective Action (POCA) to the Division detailing how and when each item will be corrected. The Division may require the POCA to include additional Division oversight, including but not limited to additional building inspections and training, or any other measure the Division deems appropriate to ensure the jurisdiction adequately enforces its adopted code and adequately performs inspections.

(b) A POCA required pursuant to subparagraph (a) shall be submitted to the Division within thirty (30) days of the jurisdiction’s receipt of the audit report unless the Division designates a greater or lesser time in the audit report. If a different timeframe is set out in the audit report, then the POCA may be submitted within that timeframe. Upon receipt and review, the Division shall issue a written response approving or denying the POCA.

1. If the Division approves the POCA, then the jurisdiction must perform the steps identified in the POCA according to the timeframes therein.

2. If the Division denies the POCA, the Division may offer the jurisdiction an opportunity to submit an amended POCA.

(i) If the Division offers the jurisdiction an opportunity to submit an amended POCA, then the jurisdiction must resubmit the amended POCA within the timeframe set by the Division in the notice of the denial.

(ii) Approval or denial of an amended POCA after a denied POCA shall follow the same process for approval or denial of a POCA as set out in this subparagraph.

(c) If a jurisdiction fails to complete the steps or meet the timelines set out in the POCA and the Division determines the jurisdiction is still at risk of not adequately enforcing its adopted code, including but not limited to not adequately performing inspections, the Division may:

1. Request a new POCA according to the procedure set out in subparagraph (b); or 2. Approve an amendment to the existing POCA.

(d) If a jurisdiction fails to complete the steps or meet the timelines set out in a POCA and the Division determines the jurisdiction is no longer merely at risk but is not adequately enforcing its adopted code, including but not limited to inadequately performing inspections, the Division shall proceed with removing the jurisdiction’s exempt status as set out in subparagraph (5)(a).

(e) When the Division determines that a jurisdiction has implemented its approved POCA and made all necessary corrections, the Division shall issue a letter to the local officials to notify the jurisdiction in writing that they are adequately enforcing adopted codes and performing timely inspections and that the POCA is closed.

(f) Nothing in this paragraph shall be construed as requiring the Division to request a POCA, allow submission of a POCA, or allow a jurisdiction to continue to implement a POCA if the Division determines the jurisdiction is not adequately enforcing its adopted code, including but not limited to not adequately performing inspections in a manner requiring that the Division remove the jurisdiction’s exempt status as set out in subparagraph (5)(a).

(5) LOSS OF EXEMPT STATUS

(a) Where a jurisdiction is found to be inadequately enforcing its code, including but not limited to properly performing timely inspections, the jurisdiction’s exempt status shall be removed.

(b) Notice and hearing regarding the removal of a jurisdiction’s exempt status shall be as set out in the Uniform Administrative Procedures Act, T.C.A., Title 4, Chapter 5.

History

• Authority: T.C.A. § 68-120-101(b).
• Administrative History: New rules filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-02-.07 MOBILE FOOD UNITS

(1) An applicant for a mobile food unit permit shall submit a completed application on a form as prescribed by the Division along with a non-refundable application fee of three hundred dollars ($300). If applicable, the application shall include:

(a) The owner and operator’s contact information and business name;

(b) Date of application;

(c) Vehicle license plate number and Vehicle Identification Number;

(d) Cooking equipment and fuel that will be utilized;

(e) Type of cooking and processes used;

(f) Anticipated locations of operation;

(g) Preferred region for inspection; and (h) Such other information as the Division may request.

(2) Upon receipt of a complete application and the application fee, the Division shall direct the applicant to schedule an inspection.

(3) The Division shall issue a permit upon an approved inspection of a mobile food unit confirming that the mobile food unit meets the applicable standards set by statute.

(4) The mobile food unit shall prominently display the most recent permit issued by the Division while the mobile food unit is in use. This permit must be visible from the outside of the mobile food unit.

(5) Mobile food unit permits shall be effective for three hundred sixty-five (365) days from the date of issue and shall not be subject to renewal. A mobile food unit must obtain a new permit following the expiration of an existing permit.

(6) Upon a failed inspection for permitting approval, the Division shall inform the applicant of all code deficiencies and advise the applicant to schedule a follow-up inspection upon their correction if the applicant intends to pursue a permit with the Division.

(7) Any subsequent inspection(s) required as a result of a failed inspection shall require a fee of one hundred fifty dollars ($150).

(8) The Division will conduct an initial inspection for permitting approval and may conduct additional inspections upon receipt of a complaint or if the Division determines the inspections are necessary to address code violations or an observation of unlawful conditions in violation of the standards in T.C.A. § 68-102-123(e). If the code violations have not been corrected within the thirty-day period, then the mobile food unit shall discontinue service under the Division’s permit until the violations have been corrected. If the Division determines at any time that the holder of a permit does not meet all requirements for the issuance of the permit or that there are code violations, the Commissioner may issue an order as provided by T.C.A. § 68-102-123(f).

(9) If a mobile food unit changes, removes, or adds any equipment installed in the mobile food unit beyond the equipment that was inspected for approved permit, the permit-holder shall apply for and receive a new mobile food unit permit, including paying all fees for such a new permit, prior to operating the mobile food unit.

History

• Authority: T.C.A. §§ 68-102-123 and 68-102-155 and Chapter 390, Public Acts of 2023.
• Administrative History: Emergency rule filed October 3, 2023; effective through March 31, 2024. Emergency rule expired effective April 1, 2024, and the rule reverted to its previous status. New rules filed January 17, 2025; effective April 17, 2025.

Chapter 0780-02-03 Review of Construction Plans and Specifications

Tenn. Comp. R. & Regs. 0780-02-03-.01 DEFINITIONS

(1) As used in this Chapter, unless the context otherwise requires:

(a) “As-built plans” means the submission of construction plans and details for existing buildings sufficient to provide life safety and building code compliance with the adopted codes.

(b) “Construction” means the erection of a new building; an addition to an existing building; alteration or repair of primary structural members; a change of occupancy or occupancy group; an alteration of the required elements of the corridors and exits of a building’s means of egress; an alteration of a fire resistance rated component or assembly; a change in the construction type of a building; or the installation or alteration of a fire sprinkler system, fire suppression system, fire alarm system, smoke control system, or fuel-fired equipment. The term “construction” shall not be construed to include excavation or site preparation.

(c) “Consultation” means an onsite fire and building codes evaluation by the Division to determine work needed to bring a building into compliance with its proposed use. A consultation is a general evaluation for major code items and is not a guarantee that all code required updates will be discovered.

(d) “Division” means the Division of Fire Prevention of the Department of Commerce and Insurance.

(e) “Educational occupancy” means the use of a structure or a portion of a structure for educational purposes by six (6) or more persons for more than twelve (12) hours per week, but no more than eight (8) hours in a single day. Educational purposes shall mean a program that receives credit for grades kindergarten through twelfth (12th) grade and shall also include early education and pre-K programs regulated by the Department of Education (DOE) but shall not include dual enrollment programs located in a higher education classroom.

(f) “Inspection of construction” means an onsite assessment by the Division to determine whether building construction is in compliance with approved plans and codes.

(g) “Limited plans review” means the submission of construction documents including the following items:

1. A site plan or dimensioned aerial view showing fire department access;

2. Floor plans including life safety plan(s);

3. Door schedule;

4. Window schedule for emergency escape and rescue windows;

5. Locations and BTUs of fuel-fired equipment;

6. For existing sprinkler systems, the type of system;

7. For new fire sprinkler systems, fire sprinkler shop drawings and calculations;

8. Fire alarm system device locations;

9. Emergency light locations;

10. Exit sign locations;

11. Location, rating, and detail for fire-rated assemblies; and 12. Accessible routes and accessible means of egress pursuant to T.C.A. § 68-120- 204.

(h) “Local government” means any city, county, town, municipal corporation, metropolitan government, or political subdivision.

(i) “State building” means a building or tenant space owned, leased, or leased with an option to purchase by the State of Tennessee or any department, institution, or agency.

State buildings also include privately owned buildings on state property.

History

• Authority: T.C.A. §§ 68-102-113 and 68-120-101.
• Administrative History: Original rule certified June 10, 1974. Repeal and new rule filed August 17, 1976; effective September 16, 1976. Repeal and new rule filed July 27, 1982; effective August 26, 1982. Amendment filed October 11, 1985; effective November 10, 1985. Amendment filed July 9, 1990; effective August 23, 1990. Amendment filed March 13, 1996; effective May 27, 1996. Amendment filed June 12, 2001; effective August 26, 2001. Amendments filed October 19, 2005; effective January 2, 2006. Emergency rule filed July 27, 2007; effective through January 8, 2008. Amendment filed November 16, 2007; withdrawn December 28, 2007. Emergency rule expired January 9, 2008 and reverted to rule in effect on July 26, 2007. Amendment filed December 11, 2007; effective February 24, 2008. Amendment filed June 18, 2008; effective September 1, 2008. Amendments filed October 2, 2008; effective December 16, 2008. Amendments filed March 29, 2010; effective June 27, 2010. Amendments filed December 8, 2022; effective March 8, 2023. Amendments filed January 23, 2025; effective April 23, 2025.

Tenn. Comp. R. & Regs. 0780-02-03-.02 SUBMISSION OF PLANS

(1) No person shall commence construction of any Educational occupancy or daycare center that is licensed by the Department of Human Services (DHS) or the Department of Education (DOE) until plans and specifications have been submitted to and approved in writing by the Division. The following exceptions to such plans review will apply:

(a) An existing building converting to a DHS licensed daycare or DOE Educational occupancy and enrolling forty-nine (49) or fewer children or students may submit plans and specifications for limited plans review in lieu of the consultation.

(b) An existing building converting to a DHS licensed daycare or DOE Educational occupancy and enrolling forty-nine (49) or fewer children or students may have review for code compliance determined through a consultation by the Division with the following requirements:

1. After paying the applicable fee, the Division shall conduct a consultation, prior to beginning construction, to inform the owners of requirements for fire hydrant(s), fire department access, fire safety systems, fire separation, means of egress, or other significant upgrades needed.

2. The fee shall include up to three (3) inspections during construction to identify non-compliant work, and one (1) final inspection prior to occupancy.

3. Additional inspections may be required to determine compliance depending on the complexity of the structure. Additional inspections required shall be purchased by the daycare operator or operator’s representative.

4. In complex cases, the Division may require registrant plans and the applicable plans review fee to be submitted for review and approval.

(c) An existing building converting to a DHS licensed daycare or DOE Educational occupancy and enrolling between fifty (50) to ninety-nine (99) children or students shall submit plans and specifications for a limited plans review. An applicable review fee as authorized by this Chapter will apply.

(2) No person shall commence construction of an Assembly Group A structure or portion of a structure, as defined in the building code adopted in Chapter 0780-02-02, with a calculated occupant load of three hundred (300) or more persons until plans and specifications have been submitted to and approved in writing by the Division.

(a) For the purposes of application of the building code adopted in Chapter 0780-02-02, rooms, buildings or structures used as banquet halls where the primary purpose is not serving both food and alcoholic drinks may be classified as Assembly Group A-3.

(b) This requirement shall not apply to buildings or structures located in a jurisdiction of local government that has obtained an exemption authorized by T.C.A. § 68-120- 101(b)(2).

(3) No person shall commence construction of any Business Group B structure or portion of a structure, as defined in the building code adopted in Chapter 0780-02-02, that is three (3) stories or more, until plans and specifications have been submitted to and approved in writing by the Division. This requirement shall not apply to buildings or structures located in a jurisdiction of local government that has obtained an exemption authorized by T.C.A. § 68- 120-101(b)(2).

(4) No person shall commence construction of any Residential Group R structure or portion of a structure, as defined in the building code adopted in Chapter 0780-02-02 until plans and specifications have been submitted to and approved in writing by the Division.

(a) This requirement shall not apply to buildings or structures regulated by Chapter 0780- 02-23.

(b) This requirement shall not apply to buildings or structures located in a jurisdiction of local government that has obtained an exemption authorized by T.C.A. § 68-120- 101(b)(2).

(5) No person shall commence construction of any covered mall building, as defined in the building code adopted in Chapter 0780-02-02, until plans and specifications have been submitted to and approved in writing by the Division. This requirement shall not apply to buildings or structures located in a jurisdiction of local government that has obtained an exemption authorized by T.C.A. § 68-120-101(b)(2).

(6) No person shall commence construction of any High-hazard Group H-1 or H-2 structure or portion of a structure, as defined in the building code adopted in Chapter 0780-02-02, until plans and specifications have been submitted to and approved in writing by the Division.

Structures used only for storage of materials shall not require plans and specifications and approval by the Division. This requirement shall not apply to buildings or structures located in a jurisdiction of local government that has obtained an exemption authorized by T.C.A. § 68- 120-101(b)(2).

(7) No person shall commence construction of any Institutional Group I structure or portion of a structure, as defined in the building code adopted in Chapter 0780-02-02, with accommodations for overnight sleeping until plans and specifications have been submitted to and approved in writing by the Division.

(a) This requirement shall not apply to structures that are regulated by other state agencies for building and fire safety.

(b) This requirement shall not apply to buildings or structures located in a jurisdiction of local government that has obtained an exemption authorized by T.C.A. § 68-120- 101(b)(2).

(8) No person shall commence construction of any occupancy that requires an inspection by the Division for initial licensure requirements of other state departments or agencies until plans and specifications have been submitted to and approved in writing by the Division.

(9) No person shall commence construction of any Institutional Group I-3 structure or portion of a structure, as defined in the building code adopted in Chapter 0780-02-02, or change occupancy condition until plans and specifications have been submitted to and approved in writing by the Division. This requirement shall not apply to buildings or structures located in a jurisdiction of local government that has obtained an exemption authorized by T.C.A. § 68- 120-101(b)(2).

(10) No person shall commence construction of any state-owned building until plans and specifications have been submitted to and approved in writing by the Division. This requirement shall not apply to state buildings that are leased and located in a jurisdiction of local government that has obtained an exemption authorized by T.C.A. § 68-120-101(b)(2).

(11) For buildings that meet the plans submission requirements of 0780-02-03-.02(1) through (10), any factory manufactured structure which has been designed and constructed in accordance with the Tennessee Modular Building Act (T.C.A. §§ 68-126-301 et seq.) shall be exempt from plan submission of the building or structure; however, submission of modular unit specifications and a site plan showing building location, fire department access, fire hydrant locations and testing, site work for fire alarm and fire protection systems, and adjacent buildings or structures shall be required to be submitted. Additional plans may be required as deemed necessary by the Division.

(a) Except for state buildings (owned and leased), educational occupancies, and day care centers licensed by the Department of Human Services or the Department of Education, this requirement shall not apply to buildings or portions that are located in a jurisdiction of local government that has obtained an exemption authorized by T.C.A. § 68-120-101(b)(2).

(b) A single Educational Group E modular classroom that is located outside of a jurisdiction of local government that has obtained an exemption authorized by T.C.A. § 68-120-101(b)(2) shall be exempt from plan submission requirements but must be inspected.

(c) All schools that are located outside jurisdictions that have obtained an exemption authorized by T.C.A. § 68-120-101(b)(2) must notify the Division of a re-located modular unit and an inspection shall be performed by the Division.

(12) Any single-story, open-air pavilion or shed shall not require plans to be submitted and approved by the Division. Open-air shall mean that eighty (80) percent of the building’s perimeter and interior are open to the outside from the floor to the roof or ceiling.

(13) When an assembly occupancy’s occupant load exceeds two hundred fifty (250), the Division may require plans to be submitted for a No Review Letter in order to calculate the maximum occupant load if, upon inspection, it appears that the calculation might be incorrect.

History

• Authority: T.C.A. §§ 68-102-113 and 68-120-101.
• Administrative History: Original rule filed August 17, 1976; effective September 16, 1976. Repealed and new rule filed July 27, 1982; effective August 26, 1982. Amendment filed October 11, 1985; effective November 10, 1985. Amendment filed July 9, 1990; effective August 23, 1990. Amendment filed March 13, 1996; effective May 27, 1996. Amendment filed June 12, 2001; effective August 26, 2001. Amendments filed October 19, 2005; effective January 2, 2006. Emergency rule filed July 27, 2007; effective through January 8, 2008. Emergency rule expired January 9, 2008 and reverted to rule in effect on July 26, 2007. Amendment filed December 11, 2007; effective February 24, 2008. Amendments filed October 2, 2008; effective December 16, 2008. Amendments filed March 29, 2010; effective June 27, 2010. Amendments filed December 8, 2022; effective March 8, 2023. Amendments filed January 23, 2025; effective April 23, 2025.

Tenn. Comp. R. & Regs. 0780-02-03-.03 REQUIREMENTS

(1) Plans and specifications required by 0780-02-03-.02 shall:

(a) Comply with the regulations in the statutes and rules controlling the profession of architects and engineers in Tennessee;

(b) Comply with the requirements of Submittal Documents of the building code adopted in

Chapter 0780-02-02; and (c) Be accompanied by an estimate, certified by the owner or the authorized representative, of the total construction cost of the project. The Division may request additional verification of cost prior to the issuance of a certificate of occupancy.

(2) Shop drawings for fire protection sprinkler systems shall be submitted in accordance with the provisions of Chapter 0780-02-07 (Fire Protection Sprinkler System Contractors) of the Rules and Regulations of the State of Tennessee.

(3) Plans and specifications, shop drawings, or statements of work required to be submitted under this Chapter must be submitted electronically through the electronic plans submission portal in a format acceptable by the Division.

(4) A written statement of work that includes adequate documents for construction, including but not limited to manufacturer’s product specifications or shop drawings, with the appropriate review fee shall be accepted instead of sealed plans and specifications for the following:

(a) Projects to existing structures with an estimated construction cost of less than twentyfive thousand dollars ($25,000), other than a change of occupancy.

(b) The alteration or repair of a fire alarm system or its components in an existing structure.

(c) The Division may require a Tennessee registered architect or engineer sealed plans and specifications for review based on the size or complexity of a project.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-101, 68-120-101(a), and 68-120-101(d).
• Administrative History: Original rule filed July 27, 1982; effective August 26, 1982. Amendment filed October 11, 1985; effective November 10, 1985. Amendment filed March 13, 1996; effective May 27, 1996. Amendment filed June 12, 2001; effective August 26, 2001. Amendment filed October 2, 2008; effective December 16, 2008. Amendment filed March 29, 2010; effective June 27, 2010. Amendments filed December 8, 2022; effective March 8, 2023.

Tenn. Comp. R. & Regs. 0780-02-03-.04 FEES

(1) The fee for review of plans and specifications for construction shall be as specified in the following table:

Total Project Construction Cost Fee $0.00 to $1,000,000.00 $2.50 per thousand or fraction thereof ($250.00 minimum) $1,000,000.01 or more $2,500.00 for the first $1,000,000.00 plus $2.00 for each additional thousand or fraction thereof.

Such fee shall be payable in full at the time of initial submission of plans and specifications.

(a) If a state building or educational occupancy is also reviewed for compliance with building construction safety standards by a local government which has obtained the exemption authorized by T.C.A. § 68-120-101(b)(2), the fee for review under this

Chapter shall be reduced by fifty percent (50%), but the fee shall not be less than two hundred fifty dollars ($250.00).

(b) If plans and specifications must be resubmitted because their approval has become invalid under rule 0780-02-03-.05, the fee established in this rule will be imposed.

(c) Where a building governed by the provisions of this Chapter is constructed in violation of this Chapter, the fee for the review of the plans and specifications shall be the applicable review fee authorized by this Chapter based on the current cost to build the building using the latest available Building Valuation Data published by the International Code Council (using a 0.60 Cost Modifier, except for the footnotes).

(2) The Division may issue a letter stating that plans are not required to be reviewed (a “no review letter”).

(a) The fee for obtaining a no review letter shall be one hundred dollars ($100.00).

(b) The no review letter fee shall be applied to the plan review fee if it is determined that plans are required to be reviewed.

(3) The Division may require appropriate documentation of costs (such as contractors’ bids or invoice) if:

(a) In the Division’s opinion, the construction cost of a project has been underestimated in the certification submitted pursuant to rule 0780-02-03-.03(3) based on the latest available Building Valuation Data published by the International Code Council (using a 0.60 Cost Modifier, except for the footnotes); or (b) The scope of a project is substantially revised after the initial plan submission. After initial review, if such documentation warrants an additional plan review charge it shall be computed, assessed, and paid promptly.

(4) Project numbers shall be assigned by the Department for each building of a multiple building submission and project construction costs shall be stated for each building, and all fees shall be calculated using construction costs on a per building basis.

(5) An additional fee of fifteen dollars ($15.00) per building for receiving plans or specifications electronically shall be applied.

(6) For those making payment over the internet, payment of an internet payment processing fee, not to exceed two and one-half percent (2 1/2%) of the total fee, to be used solely to defray the costs of any payments processed electronically shall be applied.

History

• Authority: T.C.A §§ 68-102-113, 68-120-101, 68-120-101(a), and 68-120-101(d).
• Administrative History: Original rule filed July 27, 1982; effective August 26, 1982. Amendment filed November 14, 1983; effective December 14, 1983. Amendment filed October 11, 1985; effective November 10, 1985. Amendment filed September 18, 2002; effective December 2, 2002. Repeal and new rule filed October 19, 2005; effective January 2, 2006. Amendment filed October 2, 2008; effective December 16, 2008. Amendments filed March 29, 2010; effective June 27, 2010. Amendments filed December 8, 2022; effective March 8, 2023.

Tenn. Comp. R. & Regs. 0780-02-03-.05 APPROVAL OF PLANS

(1) The Division shall examine or cause to be examined the accompanying submittal documents and shall approve the documents if they are in compliance with the minimum standards for fire prevention, fire protection, and building construction safety in effect at the time of the initial submission.

(a) Approval may be granted for construction of foundations or any other part of a building or structure before the construction documents for the whole building or structure have been submitted, provided that adequate information and detailed statements have been submitted. The project’s owner, designer or contractor shall proceed at their own risk and without assurance that approval for the entire structure will be granted.

(b) Plans and specifications submittals that have been found to have deficiency(s) that prevent approval shall be closed due to inactivity eighteen (18) months after the most recent review if no response is submitted by the architect or engineer to correct the deficiency(s). After the closure of a project due to inactivity, new plans and specifications will be required to be submitted to the codes in effect at the time of the new submission along with the applicable fees. The Commissioner of Commerce and Insurance, or the Commissioner’s designee, is authorized to allow the file to remain open for an additional period of time. A request to keep the file open must be requested in writing and justifiable cause must be demonstrated.

(c) If submitted plans and specifications have not been approved within twelve (12) months after the effective date of any adopted revisions to the codes in effect at the time of the initial submission, the submittal shall be closed and new plans and specifications will be required to be submitted in compliance with the codes in effect at the time of the new submission along with the applicable fees. The Commissioner of Commerce and Insurance, or the Commissioner’s designee, is authorized to allow the file to remain open for an additional period of time. A request to keep the file open must be requested in writing and justifiable cause must be demonstrated.

(2) The Division will not issue a review of plans and specifications unless a plans review submittal form and all fees have been received by the Division except where state agencies are to be billed or journal vouchered for the fees.

(a) When the fee for review of plans and specifications for construction is to be collected from another state department or agency, review may begin once all information needed to invoice or journal voucher the other state department or agency has been received.

(3) No final approval of plans and specifications shall be valid unless the construction represented by such plans and specifications has substantially progressed within six (6) months after the effective date of any adopted revisions of the standards in effect at the time of the initial submission. Construction must be completed and a certificate of occupancy issued within twenty-four (24) months after the commencement of construction; provided, however, the Division, upon appropriate written request and for good cause shown, may grant written approval of additional time to complete construction.

(4) A full-sized paper copy of the approved plans and specifications shall be placed on the job site prior to the commencement of construction and shall be retained on the job site until a certificate of occupancy has been issued by the Division. The approved plans shall be located in an area that is readily available to the inspector. If the plans are not readily available to the inspector during the inspection, the inspector may fail the inspection.

(5) Construction shall proceed in accordance with the plans and specifications as approved. If construction is completed in accordance with the approved plans and specifications, the building represented by such plans and specifications shall be exempt from subsequently adopted standards for fire prevention, fire protection, and building construction safety, unless the non-conformity of the building to such standards poses a serious life safety hazard.

(6) No approval of, or failure to review, plans and specifications by the Division shall relieve the owner, developer, contractor, or designing architect or engineer of their respective responsibilities for compliance with applicable codes respecting fire prevention, fire protection, and building construction.

(7) Where a building governed by the provisions of this Chapter is constructed in violation of this

Chapter, original registered architect and engineer designed plans and specifications shall be submitted for review and approval. If such plans and specifications cannot be produced, asbuilt plans shall be submitted. The plans and specifications shall meet the more stringent requirements of the codes in effect at the time of construction and the currently adopted codes for existing buildings prior to approval. After plans are approved and the construction has been properly inspected, the Division will issue the owner a letter stating that the facility has been determined to comply with this Chapter. An applicable review fee as authorized by this Chapter will apply based on the value of the building at the time of submission.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-101, 68-120-101(a), and 68-120-101(d).
• Administrative History: Original rule filed July 27, 1982; effective August 26, 1982. Amendment filed November 14, 1983; effective December 14, 1983. Amendment filed October 11, 1985; effective November 10, 1985. Amendment filed July 9, 1990; effective August 22, 1990. Amendment filed March 13, 1996; effective May 27, 1996. Amendment filed June 12, 2001; effective August 26, 2001. Amendments filed October 19, 2005; effective January 2, 2006. Amendments filed October 2, 2008; effective December 16, 2008. Amendments filed March 29, 2010; effective June 27, 2010. Amendments filed December 8, 2022; effective March 8, 2023.

Tenn. Comp. R. & Regs. 0780-02-03-.06 INSPECTION OF CONSTRUCTION

(1) Construction or work for which approval is required shall be subject to inspection by the Division and such construction or work shall remain accessible and exposed for inspection purposes until approved. Any portions of an approval following an inspection that do not comply with adopted codes and standards shall be corrected and shall not be construed as approved by the Division. Inspections presuming to give authority to violate or cancel the provisions of the code shall not be valid. It shall be the duty of the contractor to cause the work to remain accessible and exposed for inspection purposes. The Division shall not be liable for expenses incurred in the removal or replacement of any material required to allow inspection.

(2) The Division is authorized to accept reports of approved inspection agencies, provided such agencies satisfy the requirements as to qualifications and reliability. Such reports shall be made readily available to the inspector.

(3) It shall be the duty of the contractor or their duly authorized agent to notify the Division when work is ready for inspection. It shall be the duty of the contractor to provide access to and means for inspections of such work that are required by the code. If the inspector cannot access the work or if the work is not completed by the time of inspection and the contractor does not contact the inspector in advance to reschedule the inspection, the inspector may fail the inspection.

(4) In addition to any inspection required by this rule, the Division may require a structural analysis by a Tennessee registered architect or engineer to determine the adequacy of structural systems for the proposed change of occupancy, addition, or alteration.

History

• Authority: T.C.A. §§ 68-102-113 and 68-120-101.
• Administrative History: Original rule filed July 27, 1982; effective August 20, 1982. Amendment filed June 12, 2001; effective August 26, 2001. Amendments filed December 8, 2022; effective March 8, 2023. Amendments filed January 23, 2025; effective April 23, 2025.

Tenn. Comp. R. & Regs. 0780-02-03-.07 ISSUANCE OF PERMITS AND INSPECTION FEES

(1) Except as provided in 0780-02-03-.02 and 0780-02-03-.08, no official of state or local government shall issue a permit authorizing any construction for which written approval of plans and specifications is required under this Chapter unless the applicant furnishes sufficient evidence of receipt of such approval. Upon notice from the Division to the issuer of permits issued in violation of this regulation, the issuer shall immediately revoke the permit, and any construction on such project must cease until proper approval is obtained and permit issued pursuant to this Chapter.

(2) The fee for DHS Daycares or DOE Educational Occupancies allowed to have compliance determined by inspection in accordance with Tenn. Comp. R. & Regs. 0780-02-03-.02 shall be the following:

(a) Initial consultation and four (4) inspections: $1,000.00.

(b) Additional inspections: $160.00 each.

Such fees shall be paid in full prior to the consultation.

(3) No fee shall be charged for an inspection requested by the Division to investigate a complaint, or an inspection made pursuant to T.C.A. §§ 68-102-116 and 68-102-117.

History

• Authority: T.C.A. §§ 68-102-113 and 68-120-101.
• Administrative History: Original rule filed July 27, 1982; effective August 20, 1982. Amendment filed March 13, 1996; effective May 27, 1996. Amendment filed June 12, 2001; effective August 26, 2001. Amendments filed January 23, 2025; effective April 23, 2025.

Tenn. Comp. R. & Regs. 0780-02-03-.08 EXEMPTIONS

This Chapter shall not apply to any building or facility that is exempt from the Division’s building construction safety standards under T.C.A. § 68-120-101.

History

• Authority: T.C.A. §§ 68-102-113 and 68-120-101. Administrative Authority: Original rule filed July 27, 1982; effective August 26, 1982. Amendment filed October 11, 1985; effective November 10, 1985. Repeal and new rule filed October 19, 2005; effective January 2, 2006. Rule was previously numbered

Tenn. Comp. R. & Regs. 0780-02-03-.09 CERTIFICATE OF OCCUPANCY

(1) Where approval of plans is required by this Chapter, no building or structure shall be used or occupied, and no change in the existing occupancy classification of a building or structure or portion shall be made, until the Division has issued a certificate of occupancy. Issuance of a certificate of occupancy shall not be construed as an approval of a violation of the provisions of this code or of other ordinances of the jurisdiction.

(2) The certificate of occupancy shall state:

(a) The project name and location of the building;

(b) The construction type of the building;

(c) The occupancy classification of the building under the standards adopted by reference in rule 0780-02-02-.01; and (d) The names of the building owner, contractor, plans examiner who approved the project, and project architect or engineer.

(3) A temporary certificate of occupancy may be issued by the Division for a portion or portions of a building that may be occupied safely prior to final completion of the building.

(4) The Division is authorized to, in writing, suspend or revoke a certificate of occupancy issued under the provisions of this code when the certificate is either issued in error or on the basis of incorrect information supplied, or when it is determined that the building or structure or a portion is in violation of any ordinance or regulation or any of the provisions of the code.

History

• Authority: T.C.A. §§ 68-102-113 and 68-120-101.
• Administrative History: Original rule filed October 11, 1985; effective November 10, 1985. Amendment filed June 12, 2001; effective August 26, 2001. Amendments filed October 19, 2005; effective January 2, 2006. Rule was previously numbered 0780-02- 03-.10 but was renumbered 0780-02-03-.09 with the deletion of original rule 0720-02-03-.08 filed December 8, 2022; effective March 8, 2023. Amendments filed December 8, 2022; effective March 8, 2023.

Tenn. Comp. R. & Regs. 0780-02-03-.10 DISPUTE RESOLUTION

(1) Disputes that arise during the plans review process shall be resolved as follows:

(a) When a dispute as to the interpretation or applicability of a code provision arises between the owner or designer of a project and the plans examiner, the dispute shall be submitted to the Plans Examiner Manager of Codes Enforcement for resolution.

(b) If the owner or designer disagrees with the decision of the Plans Examiner Manager of Codes Enforcement, the dispute shall be submitted to the Director of Codes Enforcement for resolution.

(c) If the owner or designer disagrees with the decision of the Director of Codes Enforcement, the dispute shall be submitted to the Assistant Commissioner for Fire Prevention for resolution.

(d) If the owner or designer disagrees with the decision of the Assistant Commissioner for Fire Prevention, the dispute shall be submitted to the Commissioner of Commerce and Insurance or the Commissioner’s designee for resolution.

(e) If the owner or designer disagrees with the decision of the Commissioner of Commerce and Insurance or the Commissioner’s designee, the owner or designer may elect to have the dispute submitted to a panel of outside parties for resolution.

1. The panel of outside parties shall consist of three (3) individuals, one (1) selected by the owner or designer, one (1) selected by the Commissioner of Commerce and Insurance and one (1) selected by the Executive Director of the Board of Architectural and Engineering Examiners.

2. The members of the panel shall have a background in architecture, engineering, plans review, construction or building/codes inspections. Panel members shall be compensated at a rate of one hundred fifty dollars ($150.00) per day.

3. The owner or designer seeking to have the dispute submitted to the panel of outside parties shall submit an application for appeal on a form provided by the Division along with an application fee of one hundred dollars ($100.00). The owner or designer shall pay a fee of four hundred fifty dollars ($450.00) for each day of the appeal to pay the per diem of the panel members.

(f) At any point during this process, the parties may agree to submit the dispute to the publisher of the code section at issue for an opinion.

(2) Disputes that arise during the inspection process shall be resolved as follows:

(a) When a dispute arises as to the interpretation or applicability of a code provision between the owner, designer or contractor on a project and the Fire and Building Code Inspector inspecting the project, and the project is being constructed in accordance with plans and specifications approved by the Division, the dispute shall be submitted to the Fire and Building Code Manager.

(b) If the owner, designer or contractor disagrees with the decision of the Fire and Building Code Manager, the dispute shall be submitted to the Director of Codes Enforcement for resolution.

(c) If the owner, designer or contractor disagrees with the decision of the Director of Codes Enforcement, the dispute shall be submitted to the Assistant Commissioner for Fire Prevention for resolution.

(d) If the owner, designer or contractor disagrees with the decision of the Assistant Commissioner for Fire Prevention, the dispute shall be submitted to the Commissioner of Commerce and Insurance or the Commissioner’s designee for resolution.

(e) If the owner, designer or contractor disagrees with the decision of the Commissioner of Commerce and Insurance or the Commissioner’s designee, the owner, designer or contractor may elect to have the dispute submitted to a panel of outside parties for resolution.

1. The panel of outside parties shall consist of three (3) individuals, one (1) selected by the owner, designer or contractor, one (1) selected by the Commissioner of Commerce and Insurance and one (1) selected by the Executive Director of the Board of Architectural and Engineering Examiners.

2. The members of the panel shall have a background in architecture, engineering, plans review, construction or building/codes inspections. Panel members shall be compensated at a rate of one hundred fifty dollars ($150.00) per day.

3. The owner, designer or contractor seeking to have the dispute submitted to the panel of outside parties shall submit an application for appeal on a form provided by the Division along with an application fee of one hundred dollars ($100.00).

The owner, designer or contractor shall pay a fee of four hundred fifty dollars ($450.00) for each day of the appeal to pay the per diem of the panel members.

(f) At any point during this process, the parties may agree to submit the dispute to the publisher of the code section at issue for an opinion.

(3) The entire dispute resolution process set forth in paragraphs (1) and (2) above shall be completed as quickly as possible, but no more than thirty (30) calendar days from the date that the dispute is first submitted for resolution, unless the dispute is submitted to the code publisher for an opinion.

(4) If there are any fees charged by the code publisher for rendering its opinion, those fees shall be paid by the owner of the project before final approval of the subject plans and specifications will be issued by the Division.

(5) Any appeal of the dispute beyond the Commissioner of Commerce and Insurance shall be submitted in accordance with the provisions of the Uniform Administrative Procedures Act, compiled at T.C.A. §§ 4-5-301 et seq., pertaining to Contested Case Hearings.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-101(a) and (d), and 68-120-401.
• Administrative History: New rule filed October 2, 2008; effective December 16, 2008. Amendments filed March 29, 2010; effective June 27, 2010. Rule was previously numbered 0780-02-03-.11 but was renumbered 0780-02-03-.10 with the deletion of original rule 0720-02-03-.08 filed December 8, 2022; effective March 8, 2023. Amendments filed December 8, 2022; effective March 8, 2023.

Tenn. Comp. R. & Regs. 0780-02-03-.11 GRANDFATHER PROVISION FOR REVIEW OF PLANS

At the submitter’s request, plans submitted within one hundred twenty (120) days after the effective date of newly adopted building, fire and life safety codes may be reviewed under the codes that were in effect on the day immediately prior to the effective date of the newly adopted codes. The plans submitted under this section shall still be subject to the provisions rule 0780-02-03-.05(1).

History

• Authority: T.C.A. §§ 68-102-113 and 68-120-101(a) and (d).
• Administrative History: New rule filed October 2, 2008; effective December 16, 2008. Amendment filed March 29, 2010; effective June 27, 2010. Rule was previously numbered 0780-02-03-.12 but was renumbered 0780-02-03-.11 with the deletion of original rule 0720-02-03-.08 filed December 8, 2022; effective March 8, 2023.

Tenn. Comp. R. & Regs. 0780-02-03-.12 EQUIVALENCIES

(1) Wherever there are practical difficulties involved in carrying out the provisions of this Chapter and the codes adopted in this Chapter, the Commissioner of Commerce and Insurance, or the Commissioner’s designee, shall have the authority to grant modifications for individual cases, upon application of the owner or owner’s representative, provided the Commissioner of Commerce and Insurance, or the Commissioner’s designee, shall first find that the special individual reason makes the strict application of the codes adopted in this Chapter impractical and the modification is in compliance with the intent and purpose of the codes adopted in this

Chapter and that such modification does not lessen, health, accessibility, life and fire safety, or structural requirements. The details of action granting modifications shall be recorded and kept in the files of the Division.

(2) The provisions of the codes adopted in this Chapter are not intended to prevent the installation of any material or to prohibit any design or method of construction not specifically prescribed by this code, provided that any such alternative has been approved. An alternative material, design or method of construction shall be approved where the Commissioner of Commerce and Insurance, or the Commissioner’s designee, finds that the proposed design is satisfactory and complies with the intent of the codes adopted in this Chapter, and that the material, method or work offered is, for the purpose intended, at least the equivalent of that prescribed by the codes adopted in this Chapter in quality, strength, effectiveness, fire resistance, durability and safety.

History

• Authority: T.C.A. §§ 68-102-113 and 68-120-101(a) and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Rule was previously numbered 0780-02-03-.13 but was renumbered 0780-02-03-.12 with the deletion of original rule 0720-02-03-.08 filed December 8, 2022; effective March 8, 2023. Amendments filed December 8, 2022; effective March 8, 2023.

Chapter 0780-02-04 Manufactured Housing

Tenn. Comp. R. & Regs. 0780-02-04-.01 DEFINITIONS

For purposes of this chapter, unless context otherwise requires, the definitions of terms contained in the Uniform Standards Code for Manufactured Homes Act (T.C.A. Title 68, Chapter 126, Part 2) and the Tennessee Manufactured Home Installation Act (T.C.A. Title 68, Chapter 126, Part 4) shall be applicable.

In addition, the following definitions are applicable to this chapter:

(1) “HUD label” means the approved form of certification by the manufacturer that, under 24 C.F.R. § 3282.362(c)(2)(i), is permanently affixed to each transportable section of each manufactured home manufactured for sale to a purchaser in the United States (“label” or “certification label” as defined by 24 C.F.R. § 3282.7).

(2) “Used manufactured home” means any manufactured home which has been previously owned or occupied by a purchaser or consumer.

History

• Authority: T.C.A. §§ 68-126-202, 68-126-204, 68-126-210, 68-126-402, and 68-126-405.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 20, 1978; effective May 22, 1978. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed November 12, 1986; effective December 27, 1986. Amendment filed June 15, 1988; effective September 28, 1988. Amendment filed March 12, 2004; effective May 26, 2004. Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.02 LICENSING OF MANUFACTURERS

(1) An applicant for a license as a manufacturer shall complete an application form prescribed by the commissioner and submit the same to the commissioner along with a nonrefundable application fee of one hundred dollars ($100.00). The applicant shall also submit proof of a surety bond as prescribed in T.C.A. § 68-126-206.

(2) A license as a manufacturer shall expire one (1) year after the date of issuance, unless renewed. The fee for renewal of a license as a manufacturer is one hundred dollars ($100.00).

(3) Any manufacturer who fails to renew a license prior to its expiration but before ninety days (90) days after expiration shall pay a late penalty of fifty dollars ($50.00) in addition to the renewal fee. Licenses renewed during this ninety (90) day grace period shall be considered inactive from the date of expiration to the date of renewal.

(4) Any person desiring to renew a license later than ninety (90) days after the date of expiration shall submit a new application and meet all other application requirements.

(5) Proof of a surety bond, as prescribed in T.C.A. § 68-126-206, shall be submitted with each application for renewal.

(6) Any manufacturer who conducts business in this State without proper licensure shall be assessed a civil penalty up to one thousand one hundred dollars ($1,100.00) for each manufactured home manufactured prior to licensure or annual renewal.

(7) All licensed manufacturers are required to keep the commissioner apprised of their current mailing address, email address, and phone number to be used for communications with the department by informing the department within thirty (30) calendar days of any change in the information previously provided to the commissioner.

History

• Authority: T.C.A. §§ 68-126-204, 68-126-206, and 68-126-210.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 20, 1978; effective May 22, 1978. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed November 12, 1986; effective December 27, 1986. Amendment filed June 15, 1988; effective September 28, 1988. Amendment filed March 12, 2004; effective May 26, 2004. Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.03 LICENSING OF RETAILERS

(1) An applicant for a license as a retailer shall complete an application form prescribed by the commissioner and submit the same to the commissioner along with a nonrefundable application fee of forty dollars ($40.00). The applicant shall also submit proof of a surety bond as prescribed in T.C.A. § 68-126-206.

(2) An applicant for a license as a manufactured home retailer shall provide proof, at the time of application, of having completed a fifteen (15) hour course, approved by the commissioner, in the installation of manufactured homes.

(3) An applicant for a license as a manufactured home retailer shall provide proof, at the time of application, of having passed an examination, approved by the commissioner, in the installation of manufactured homes.

(4) A license as a retailer shall expire one (1) year after the date of issuance, unless renewed.

The fee for renewal of a license as a retailer is forty dollars ($40.00). At the time of renewal, the retailer shall provide the commissioner a list of certified employees who hold an active certification issued by the commissioner pursuant to T.C.A. § 68-126-206(a).

(5) Any retailer who fails to renew a license prior to its expiration but before ninety (90) days after expiration shall pay a late penalty of fifty dollars ($50.00) in addition to the renewal fee.

Licenses renewed during this ninety (90) day grace period shall be considered inactive from the date of expiration to the date of renewal.

(6) Any person desiring to renew a license later than ninety (90) days after the date of expiration shall submit a new application and meet all other application requirements.

(7) Proof of a surety bond, as prescribed in T.C.A. § 68-126-206, shall be submitted with each application for renewal.

(8) Any retailer who conducts business in this State without proper licensure shall be assessed a civil penalty up to one thousand one hundred dollars ($1,100.00) for each manufactured home sold prior to licensure or annual renewal.

(9) All licensed retailers are required to keep the commissioner apprised of their current mailing address, email address, and phone number to be used for communications with the department by informing the department within thirty (30) calendar days of any change in the information previously provided to the commissioner.

History

• Authority: T.C.A. §§ 68-126-204, 68-126-206, and 68-126-210.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 20, 1978; effective May 22, 1978. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed December 13, 1985; effective January 12, 1986. Amendment filed March 12, 2004; effective May 26, 2004. Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.04 LICENSING OF INSTALLERS

(1) An applicant for a license as an installer shall complete an application form prescribed by the commissioner and submit the same to the commissioner along with a nonrefundable application fee of twenty-five dollars ($25.00). The applicant shall also submit proof of a surety bond as prescribed in T.C.A. § 68-126-404.

(2) An applicant for a license as an installer shall provide proof, at the time of application, of having completed a fifteen (15) hour course, approved by the commissioner, in the installation of manufactured homes.

(3) An applicant for a license as an installer shall provide proof, at the time of application, of having passed an examination, approved by the commissioner, in the installation of manufactured homes.

(4) A license as an installer shall expire one (1) year after the date of issuance, unless renewed.

The fee for renewal of a license as an installer is twenty-five dollars ($25.00).

(5) Any installer who fails to renew a license prior to its expiration but before ninety (90) days after its expiration shall pay a late penalty of fifty dollars ($50.00) in addition to the renewal fee. Licenses renewed during this ninety (90) day grace period shall be considered inactive from the date of expiration to the date of renewal.

(6) Any person desiring to renew a license later than ninety (90) days after the date of expiration shall submit a new application and meet all other application requirements.

(7) Proof of a surety bond, as prescribed in T.C.A. § 68-126-404, shall be submitted with each application for renewal.

(8) Any installer who conducts business in this State without proper licensure shall be assessed a civil penalty up to one thousand one hundred dollars ($1,100.00) for each manufactured home set up prior to licensure or annual renewal.

(9) All licensed installers are required to keep the commissioner apprised of their current mailing address, email address, and phone number to be used for communications with the department by informing the department within thirty (30) calendar days of any change in the information previously provided to the commissioner.

History

• Authority: T.C.A. §§ 68-126-204, 68-126-206, 68-126-210, 68-126-404, and 68-126-410.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 20, 1978; effective May 22, 1978. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed June 15, 1988; effective September 28, 1988. Amendment filed March 12, 2004; effective May 26, 2004. Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.05 CONTINUING EDUCATION

(1) As a prerequisite to renewing a license as a retailer or an installer, the licensee shall have obtained five (5) hours of continuing education credit during the twelve (12) month period immediately preceding the current expiration date.

(2) A continuing education course must be approved by the commissioner before the licensee will be granted credit for the course.

(3) The licensee shall provide verification to the commissioner of having obtained the continuing education credits required by this rule. Verification consists of a form from the course provider certifying attendance at the course and the number of continuing education hours obtained at the course.

(4) The licensee shall submit to the commissioner the licensee’s verification form after taking the course and prior to the expiration of his or her license. The licensee is responsible for ensuring timely submittal of the required verification.

(5) In order to obtain approval to provide course instruction, the course provider shall submit to the commissioner materials including an outline of the course instruction, biography of the instructor, the methods and tools that will be used in the course, number of instruction hours provided, and the dates and times the course will be offered. If the course is to be offered virtually, the materials shall identify and provide access to the virtual platform to be used. A course provider seeking approval of a course pursuant to this paragraph shall submit the required documentation no later than thirty (30) days prior to the first offering of the course.

(6) A licensee may apply on an individual basis for continuing education credit for a course which has not been approved in advance by the commissioner by submitting an agenda, the number of instructional hours provided, the dates and times the course was offered, verification of attendance by both the licensee and the course instructor, and any additional information requested by the commissioner as necessary for review of the course. A licensee seeking approval of a course pursuant to this paragraph shall submit the required documentation as soon as practicable after completion of the course; provided, credit will not be granted later than thirty (30) days after the date of the course. No credit for the course will be awarded unless and until the course is approved by the commissioner or the commissioner’s representative.

(7) Continuing education credit will not be awarded for any course taken more than one (1) time every four (4) years.

History

• Authority: T.C.A. §§ 68-126-204, 68-126-206, 68-126-210, and 68-126-404.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 20, 1978; effective May 22, 1978. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed March 12, 2004; effective May 26, 2004 (Formerly 0780-02-04-.02). Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.06 ACCEPTABLE COURSE TOPICS

(1) Credit may be granted for either qualifying or continuing education courses that cover installation topics. Examples of acceptable course topics consist of information contained within, but not limited to, any of the following governing documents:

(a) 24 C.F.R. § 3280, Manufactured Home Construction and Safety Standards;

(b) 24 C.F.R. § 3282, Manufactured Home Procedural and Enforcement Regulations;

(c) 24 C.F.R. § 3284, Manufactured Housing Program Fee;

(d) 24 C.F.R. § 3285, Model Manufactured Home Installation Standards;

(e) 24 C.F.R. § 3286, Manufactured Homes Installation Program;

(f) 24 C.F.R. § 3288, Manufactured Home Dispute Resolution Program;

(g) Tennessee Code Annotated §§ 68-126-101 et seq., 68-126-201 et seq., and 68-126- 401 et seq.;

(h) Tennessee laws and rules governing manufactured homes and manufactured home installation; and (i) ANSI 225.1, 1994 Edition, for the installation of used manufactured homes.

(2) Each course offered for qualifying education shall provide at least fifteen (15) hours of training for participants.

(3) Each course offered for continuing education purposes only shall provide at least five (5) hours of instruction.

History

• Authority: T.C.A. §§ 68-126-204, 68-126-206, 68-126-210, and 68-126-404.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 20, 1978; effective May 22, 1978. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed June 15, 1988; effective September 28, 1988. Amendment filed March 12, 2004; effective May 26, 2004 (Formerly 0780-02-04-.03). Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.07 APPROVAL OF ANCHORING-STABILIZING SYSTEMS

(1) Any system (or component thereof) designed to be used in installations subject to the Tennessee Manufactured Home Installation Act must be approved for such use by the commissioner. To secure approval of a product, the manufacturer shall submit the following information:

(a) Detailed drawings (prepared by a registered professional engineer) of each type of anchor submitted for approval.

1. Each drawing shall specify model identification, dimensions, types of welds or fastenings, construction materials, and method of securing straps.

(b) Test data (prepared and certified by a recognized independent testing laboratory) regarding the destructibility of each ground anchor model.

1. The data shall demonstrate the capability of each model to withstand a force of not less than four thousand seven hundred twenty-five (4,725) pounds without failure, with straps or cable connected to the anchor head connecting device.

(2) Each model must be field tested and certified for holding power by a recognized independent testing laboratory. The lab report shall show the following:

(a) Model tested as described by engineering drawings;

(b) Method of installation;

(c) Date of installation;

(d) Date of pull-out test;

(e) Soil profile description;

(f) Location of field test;

(g) Test equipment used;

(h) Pounds of force exerted and resultant vertical and horizontal movements (in inches) of anchor; and (i) Failure point of anchor. Failure occurs when the point of connection between the tie and anchor moves more than two (2) inches in the direction of the vertical tie or the anchor is displaced horizontally more than four (4) inches at the point where the tie attaches to the anchor when a load of four thousand seven hundred twenty-five (4,725) pounds or less is applied and the anchoring equipment is installed in accordance with the manufacturer’s instructions.

(3) Within sixty (60) days after receipt of a submission, the commissioner will inform the manufacturer by letter of the results of its review. If approval of a product is denied, such letter shall state the reason(s) for the denial.

(4) Should any change in construction or material be made in a model, approval of that model is withdrawn. The revised model must be completely resubmitted for approval under this rule.

History

• Authority: T.C.A. §§ 68-126-204, 68-126-210, 68-126-401, and 68-126-405.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 20, 1978; effective May 22, 1978. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed March 12, 2004; effective May 26, 2004 (Formerly 0780-02-04-.04). Repeal filed September 23, 2024; effective December 22, 2024. New rule filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.08 FEES FOR ENFORCEMENT OF FEDERAL STANDARDS

(1) The following schedule of fees is hereby established for the performance of Production Inspection Primary Inspection Agency (IPIA) services specified in the United States Department of Housing and Urban Development (HUD) manufactured home procedural and enforcement regulations:

(a) For plant approval pursuant to 24 C.F.R. § 3282.362(b), including preparation and issuance of a certification report, forty dollars ($40.00) per inspector per hour, plus the reasonable and necessary expenses of each inspector assigned to the inspection team. The inspector shall be reimbursed for reasonable travel expenses in accordance with the state travel regulations promulgated by the commissioner of finance and administration.

(b) For production surveillance pursuant to 24 C.F.R. § 3282.362(c), thirty dollars ($30.00) for each floor to which a HUD label is affixed and forty dollars ($40.00) per inspector per hour, plus the reasonable and necessary expenses of each inspector assigned, for inspection services in excess of those required by the cited section. The inspector shall be reimbursed for reasonable travel expenses in accordance with the state travel regulations promulgated by the commissioner of finance and administration.

History

• Authority: T.C.A. §§ 68-126-204 and 68-126-210.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 20, 1978; effective May 22, 1978. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed March 12, 2004; effective May 26, 2004 (Formerly 0780-02-04-.05). Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.09 INSPECTIONS OF RETAIL LOTS

All manufactured homes on which a HUD label is required are subject to inspection on retailers’ lots for transit damage, HUD label tampering, retailer performance, and retailer alterations (see 24 C.F.R. § 3282-303(a) and (b)).

History

• Authority: T.C.A. §§ 68-126-204 and 68-126-210.
• Administrative History: Original rule certified June 10, 1974. Repeal filed April 20, 1978; effective May 22, 1978. New rule filed June 28, 1984; effective July 28, 1984. Repeal filed June 15, 1988; effective September 28, 1988. Amendment filed March 12, 2004; effective May 26, 2004 (Formerly 0780-02-04-.06). Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.10 RESPONSIBILITIES OF RETAILERS

Within five (5) days after receipt of any manufactured home not bearing a HUD label, the retailer shall notify the manufacturer and the commissioner in writing of the omission. Immediately upon receipt of such notification, the manufacturer shall provide evidence to the commissioner of the HUD label assigned to the unit at the time of manufacture.

History

• Authority: T.C.A. §§ 68-126-202, 68-126-204, 68-126-210, and 68-126-405.
• Administrative History: Original rule filed March 12, 2004; effective May 26, 2004 (Formerly 0780-02-04-.07). Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.11 USED MANUFACTURED HOMES

(1) When offering a used manufactured home for sale to a consumer located in the State of Tennessee, a retailer shall complete the Used Manufactured Home Form (“Form”) prescribed by the commissioner and affix said Form to the applicable manufactured home.

(2) At the time of sale of a used manufactured home, a retailer shall:

(a) Complete the “Consumer Information” section of the Form;

(b) Complete the “Retailer Signature” portion of the Form;

(c) Require the purchaser to complete the “Consumer Signature” portion of the Form;

(d) Provide the purchaser a copy of the completed Form; and (e) Retain a copy of the completed Form with the permanent sales record of the manufactured home.

History

• Authority: T.C.A. §§ 68-126-202, 68-126-210, and 68-126-405.
• Administrative History: Original rule filed March 12, 2004; effective May 26, 2004 (Formerly 0780-02-04-.08). Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.12 REMOVAL OF INSTALLATION PERMIT DECAL OR HUD LABEL

No installation permit decal or HUD label, once affixed, shall be removed from any unit or transferred from one unit to another.

History

• Authority: T.C.A. §§ 68-126-204 and 68-126-210.
• Administrative History: Original rule filed March 12, 2004; effective May 26, 2004. Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.13 RED TAGS

(1) No new or used manufactured home bearing a red tag because of violation(s) of any of the standards applicable to manufactured homes shall be moved, shipped, sold, or leased until the violation(s) is corrected and the red tag is removed by the commissioner.

(2) Any unit moved, shipped, sold, or leased prior to the removal of the red tag shall:

(a) Be returned to the retailer’s lot for reinspection by the commissioner; or (b) May remain at the location to which the unit had been delivered; provided, the retailer shall pay a fee of forty dollars ($40.00) per hour, including travel time to and from the location, plus all reasonable and necessary expenses incurred by the commissioner.

The commissioner’s designee that conducts the reinspection shall be reimbursed for reasonable travel expenses in accordance with the state travel regulations promulgated by the commissioner of finance and administration.

(3) After the first reinspection, the retailer shall pay a fee of one hundred dollars ($100.00) for each subsequent inspection on the same unit.

History

• Authority: T.C.A. §§ 68-126-202, 68-126-204, and 68-126-210.
• Administrative History: Original rule filed March 12, 2004; effective May 26, 2004. Amendments filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.14 INSTALLATION REPORTS AND INSTALLATION PERMIT DECALS

(1) Installation reports required by T.C.A. § 68-126-406(e) shall be submitted to the commissioner for each manufactured home installed no later than seven (7) calendar days from the date of placement of the installation permit decal on the home. An installation permit decal shall not be placed on any home until the set-up of the home, as defined by T.C.A. § 68-126-402, is complete.

(2) Placement of an installation permit decal in a manufactured home constitutes the licensee’s certification that the home has been installed in accordance with T.C.A. § 68-126-403.

(3) The commissioner or commissioner’s designee may limit the number of decals a licensee may purchase during a given time frame after providing notice to the affected licensee(s) and county clerk(s).

History

• Authority: T.C.A. §§ 68-126-210, 68-126-402, 68-126-405, and 68-126-406.
• Administrative History: New rule filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.15 IMMINENT SAFETY HAZARD VIOLATIONS

When a manufactured home fails inspection due to an Imminent Safety Hazard (“ISH”) violation, the licensee responsible for installation of the home shall, in addition to the requirements found in T.C.A. § 68-126-410(b)(2), correct any and all ISH violations as soon as possible, but no later than seventy-two (72) hours after notification of the violation, unless an alternate timeline has been approved by the commissioner.

History

• Authority: T.C.A. §§ 68-126-210, 68-126-402, 68-126-405, and 68-126-410.
• Administrative History: New rule filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-04-.16 CONSUMER COMPLAINTS

(1) Manufacturers, retailers, and installers shall comply with all requests for information made by the department regarding a consumer complaint.

(2) Manufacturers, retailers, and installers shall respond to all communications from the department, including but not limited to submission of response forms and submission of evidence of repairs made, related to consumer complaints, within the designated time frame.

If a specific time frame is not provided, then a response shall be required no later than fourteen (14) calendar days from receipt of the correspondence.

(3) Any licensee’s failure to respond, failure to provide requested information, or failure to return required forms within the provided time frame shall be assessed a civil penalty up to five hundred dollars ($500.00) for each instance of failure.

History

• Authority: T.C.A. §§ 68-126-202, 68-126-205, 68-126-208, 68-126-210, and 68-126-212.
• Administrative History: New rule filed November 7, 2025; effective February 5, 2026.

Chapter 0780-02-05 Repealed

Tenn. Comp. R. & Regs. 0780-02-05-.01 REPEALED

History

• Authority: T.C.A. §§ 68-126-204, 68-126-402, and 68-126-405.
• Administrative History: Original rule certified June 10, 1974. Repeal filed July 22, 1982; effective August 26, 1982. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed August 2, 1993; effective December 3, 1993. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-05-.05 REPEALED

History

• Authority: T.C.A. §§ 68-126-204, 68-126-403, and 68-126-405.
• Administrative History: Original rule certified June 10, 1974. Repeal filed July 22, 1982; effective August 26, 1982. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-05-.02 REPEALED

History

• Authority: T.C.A. §§ 68-126-204, 68-126-403, and 68-126-405.
• Administrative History: Original rule certified June 10, 1974. Repeal filed July 22, 1982; effective August 26, 1982. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed September 20, 1984; effective December 14, 1984. Amendment filed August 2, 1993; effective December 3, 1993. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-02-05-.03 REPEALED

History

• Authority: T.C.A. §§ 68-126-204, 68-126-401, and 68-126-405.
• Administrative History: Original rule certified June 10, 1974. Repeal filed July 22, 1982; effective August 26, 1982. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed August 2, 1993; effective December 3, 1993. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-05-.04 REPEALED

History

• Authority: T.C.A. §§ 68-126-204, 68-126-405, and 68-126-406.
• Administrative History: Original rule certified June 10, 1974. Repeal filed July 22, 1982; effective August 26, 1982. New rule filed June 28, 1984; effective July 28, 1984. Amendment filed March 12, 2004; effective May 26, 2004. (Formerly 0780- 02-05-.05) Repeal filed September 23, 2024; effective December 22, 2024.

Chapter 0780-02-06 Repealed

Tenn. Comp. R. & Regs. 0780-02-06 Repealed

RULES

OF DEPARTMENT OF COMMERCE AND INSURANCE

DIVISION OF FIRE PREVENTION

REPEALED

Chapter 0780-02-07 Fire Protection Sprinkler System Contractors

Tenn. Comp. R. & Regs. 0780-02-07-.01 DEFINITIONS

(1) For purposes of this Chapter, unless the context otherwise requires, the definitions of terms contained in Tenn. Code Ann. § 62-32-101 are applicable. In addition:

(a) “Business” means the planning, selling, installing, or servicing of fire protection sprinkler systems.

(b) “Certificate” means a certificate of registration issued to a fire protection sprinkler contractor by the Department of Commerce and Insurance.

(c) “Inspection” means a visual examination of a sprinkler system or portion thereof to verify that it appears to be in operating condition and free from physical damage.

(d) “License” means a license issued by the Department of Commerce and Insurance to a responsible managing employee.

(e) “NFPA” means the National Fire Protection Association, Inc., a nationally recognized standards making organization.

(f) “NICET” means the National Institute for Certification in Engineering Technologies.

(g) “Point of Service” means the point immediately after the tap of the service main where water is used exclusively for fire protection purposes.

(h) “Repair” means any work performed after initial installation on a fire protection sprinkler system, not including inspecting and testing.

(i) “Service” means to repair, test, or inspect. For the purposes of Tenn. Code Ann. Title 62, Chapter 32, Part 1, the definition of service does not include the inspection or testing of backflow preventers by employees or agents of public water systems regulated under Tenn. Code Ann. § 68-221-701, et seq. and Tenn. Comp. R & Regs.

Tenn. Comp. R. & Regs. 0780-02-07-.02 PURPOSE

The purpose of this Chapter is to regulate persons engaged in the business of planning, selling, installing, or servicing fire protection sprinkler systems in the interest of safeguarding lives and property pursuant to Tenn. Code Ann. § 62-32-103.

History

• Authority: T.C.A. § 62-32-103.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985. Amendment filed April 2, 1990; effective May 17, 1990. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-07-.03 ADOPTION BY REFERENCE OF STANDARDS

Unless otherwise provided by applicable law or the provisions of this Chapter, the required minimum standards for planning, selling, installing, and servicing fire protection sprinkler systems shall be as prescribed in Tenn. Comp. R & Regs. 0780-02-02, as may be amended from time to time.

History

• Authority: T.C.A. §62-32-103.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985. Amendment filed April 2, 1990; effective May 17, 1990. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-07-.04 CERTIFICATION OF REGISTRATION

(1) Any application for a certificate of registration as a fire protection sprinkler system contractor must be signed by the sole proprietor, by each partner of a partnership, or by the president and secretary of a corporation or organization. The application shall include written authorization for representatives of the Department to enter, examine, and inspect any premise, building, room, or establishment used by the applicant while engaged in the business to determine compliance with Tenn. Code Ann. Title 62, Chapter 32, Part 1.

(2) Every fire protection sprinkler system contractor shall maintain a specific business location, which shall be indicated on the certificate.

(3) A change in ownership invalidates the current certificate. To assure continuance of registration, an application for a new certificate should be submitted to the Department at least fourteen (14) days prior to such change.

(4) Any change in a corporation's president or secretary must be reported in writing to the Department within fourteen (14) days. A revised certificate will not be required when such change is properly reported.

(5) A certificate does not authorize any person to enforce this Chapter or to enter any building without permission (6) A revised certificate will be required in the event of a change of a company’s name which does not include a company’s change of ownership. Any such change must be reported within fourteen (14) days.

(7) Any application that remains pending for twelve (12) months will expire. Refundable fees will be refunded if a written request is made to the Department within six (6) months of the expiration of the application.

History

• Authority: T.C.A. § 62-32-103, 62-32-105, and 62-32-107.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-07-.05 RESPONSIBLE MANAGING EMPLOYEE LICENSE

(1) An application for a license as a responsible managing employee shall include:

(a) Proof of registration in Tennessee as a professional engineer or architect; or (b) A copy of NICET's letter notifying the applicant of successful completion of the examination for certification of level III for fire protection engineering technician.

(2) The fire protection sprinkler system contractor for which an individual serves as a responsible managing employee will be noted on the face of the license.

(3) A revised license is required in the event of:

(a) Termination of employment as responsible managing employee;

(b) New employment as responsible managing employee; or (c) Change of mailing address.

(4) Within fourteen (14) days after the occurrence of any change requiring revision of a license, the licensee shall notify the Department in writing of the change and surrender the license.

(5) A duplicate license must be obtained from the Department to replace a lost or destroyed license. The licensee shall promptly notify the Department in writing of the loss or destruction.

(6) A licensee shall not permit the use of his license by other persons.

(7) Any application that remains pending for twelve (12) months will expire. Refundable fees will be refunded if a written request is made to the Department within six (6) months of the expiration of the application.

History

• Authority: T.C.A. §§ 62-32-103 and 62-32-106.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-07-.06 ALTERATION OF CERTIFICATE OR LICENSE

A certificate or license shall become void if it is in any way altered.

History

• Authority: T.C.A. § 62-32-105.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985.

Tenn. Comp. R. & Regs. 0780-02-07-.07 FEES

(1) Fees will be charged in accordance with the following schedule:

(a) Certificate 1. Application $100.00 2. Issuance $500.00 3. Renewal $200.00 (b) License 1. Application $ 25.00 2. Issuance $200.00 3. Renewal $ 75.00 (c) Duplicate certificate or license $75.00 (2) Every fee charged under this rule shall be paid by check or money order payable to the Tennessee Department of Commerce and Insurance.

(3) A renewal application accompanied by the required fee is deemed to be timely filed if received before or on the expiration date of the certificate or license for which renewal is sought.

History

• Authority: T.C.A. §§ 62-32-103, 62-32-107, and 62-32-110.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985. Amendments filed April 30, 2009; effective July 14, 2009. 0780-02-07-08 INSTALLATION, INSPECTION AND SERVICE. (1) All fire protection sprinkler systems under Tenn. Code Ann. §§ 62-32-101 and 62-32-103 shall be installed under the supervision of a licensed responsible managing employee. (2) Installation of fire protection sprinkler systems, beginning at the point of service, shall be in compliance with all applicable laws, codes, and standards. (3) Upon completion of installation, the responsible managing employee shall post a contractor's material and test certificate for aboveground and underground piping where appropriate, on or near the system riser. This certificate shall be obtained from the Department and shall be distributed as follows: (a) Original copy to be kept at the fire protection sprinkler system site. (b) Second copy to be retained by the installer. (c) Third copy to be sent to the local authority having jurisdiction within ten (10) days after completion of the installation. (d) Fourth copy to be sent to the Department within ten (10) days after completion of the installation. (4) Inspection and service, where required, shall be conducted by a registered fire protection sprinkler system contractor in accordance with the standards. Written reports of inspections shall be completed and filed in accordance with paragraph (3) of this rule. (5) Complete records shall be kept of the tests and operations of each system. The records shall be available for examination by the Department or its representative. (6) Simple maintenance of the fire protection sprinkler system, such as replacing a sprinkler head, may be performed by the owner, or by full-time persons employed by the owner of the sprinkler system. (7) If a registered professional architect or engineer is acting in the capacity of a fire protection sprinkler system contractor, such as installing or overseeing the installation of the sprinkler system, he or she must be registered with the Department as a fire protection sprinkler system contractor. Registration is not required if acting solely in his or her professional capacity as a designer of the fire protection sprinkler system. (8) New installation of a fire protection sprinkler system must be performed by a fire protection sprinkler system contractor registered by the Department, or by his or her responsible managing employee licensed by the Department and on staff with the contractor. Authority: T.C.A. §§62-32-101, 62-32-102, and 62-32-103.

Tenn. Comp. R. & Regs. 1200-05-01-.17 .

(j) “Shop Drawings” means working drawings indicating the fabrication, assembly, installation or erection of a fire protection sprinkler system's components.

(k) “Standards” means those standards adopted herein.

(l) “Test” means subjection of a fire protection sprinkler system to any procedure necessary to insure its proper operation or installation.

(m) “Water Supply” means public and private utility water mains, gravity tanks, pressure tanks, reservoirs, wells, and all other water sources.

History

• Authority: T.C.A. § 62-32-103.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985. Amendment filed April 2, 1990; effective May 17, 1990. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-07-.09 SPRINKLER SYSTEM SHOP DRAWINGS

(1) On projects whose construction plans and specifications are subject to reviews by the Department under Tenn. Comp. R & Regs. 0780-02-03, fire protection sprinkler system shop drawings (and where applicable, hydraulic calculations) shall be submitted to the Department for approval prior to installation of the system. Such shop drawings shall be accompanied by the prescribed plans review submittal form and fee.

(2) Shop drawings submitted to the Department for review shall be sufficiently detailed to enable the reviewer to determine accurately whether the proposed installation would be in compliance with the standards. In addition, shop drawings shall provide information relating to the methods of valve supervision and type of alarm system provided.

(3) Where shop drawings have been submitted to the Department for review, subsequent alterations or additions shall be noted and submitted on updated shop drawings. When an alteration consists of ten (10) sprinkler heads or less and all floor areas were protected prior to the alteration, updated shop drawings need not be submitted. Shop drawings must be submitted for all alterations consisting of more than ten (10) sprinkler heads. Shop drawings must also be submitted for addition to systems protecting previously unprotected areas.

(4) Shop drawings submitted to the Department for review shall bear the:

(a) Certificate number of the contractor;

(b) Date of preparation of the shop drawings; and (c) Signature and license number of the responsible managing employee.

History

• Authority: T.C.A. §§ 62-32-103 and 62-32-112.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-07-.10 SERVICE TAGS

(1) After installation or service, a service tag indicating all work that has been done will be completed in detail, and attached to the fire protection sprinkler system in such a position as to permit convenient inspection and not hamper its actuation or operation.

(2) A new service tag shall be attached each time an inspection or service is performed.

(3) Service tags shall be approximately three (3) inches by five (5) inches in size, and shall not be red in color.

(4) Service tags shall bear the following information:

(a) "DO NOT REMOVE BY ORDER OF THE STATE FIRE MARSHAL" (all capital letters at least 10-point boldface type);

(b) Contractor's name, address, and certificate number;

(c) Responsible managing employee's name and license number;

(d) Date;

(e) Type of work;

(f) Service performed;

(g) Results of two (2) inch drain test; and (h) Owner's name and address.

(5) Service tags may be printed and established for any five year period. After each printing, one tag shall be forwarded to the State Fire Marshal.

(6) Only authorized employees of a fire protection sprinkler system contractor may remove a service tag.

(7) If impairments are found, the inspector shall notify the building owner (or his representative) and the authority having jurisdiction, and shall complete and attach a red tag (see Rule 0780-02-07-.11). A service tag shall not be installed on the system until the impairments have been corrected and the system has been re-inspected and found to be in good operating condition.

History

• Authority: T.C.A. §62-32-103.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985.

Tenn. Comp. R. & Regs. 0780-02-07-.11 RED TAGS

(1) Red tags shall be the same size as service tags.

(2) Red tags shall bear the following information:

(a) "DO NOT REMOVE BY ORDER OF THE STATE FIRE MARSHAL" (all capital letters at least 10-point boldface type);

(b) Contractor's name, address, and certificate number;

(c) Responsible managing employee's name and license number;

(d) Date;

(e) Impairments; and (f) Owner's name and address.

(3) Red tags may be printed and established for any five year period. After each printing, one tag shall be forwarded to the State Fire Marshal.

(4) Only authorized employees of a fire protection sprinkler system contractor or authorized representatives of the State Fire Marshal may remove a red tag.

(5) Nothing in this chapter shall relieve a fire protection sprinkler system contractor from the responsibility to comply with any applicable local law requiring notification to local authorities whenever a fire protection sprinkler system becomes inoperable.

History

• Authority: T.C.A. § 62-32-103.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985.

Tenn. Comp. R. & Regs. 0780-02-07-.12 ENFORCEMENT

The State Fire Marshal may make or cause to be made, inspection from time to time to assure compliance with the provisions of T.C.A. §§ 62-32-101 and 62-32-103. Where any inspection discloses violation(s) of the law or this chapter, the State Fire Marshal may order the correction of the violation(s) upon such terms as may be deemed appropriate.

History

• Authority: T.C.A. 62-32-103.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985.

Tenn. Comp. R. & Regs. 0780-02-07-.13 SEVERABILITY

If any provision of this Chapter or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the Chapter which can be given effect without the invalid provision or applications, and to that end the provisions of this

Chapter are declared to be severable.

History

• Authority: T.C.A. 62-32-103.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985.

Tenn. Comp. R. & Regs. 0780-02-07-.14 EFFECTIVE DATE

History

• Authority: T.C.A. 62-32-103.
• Administrative History: Original rule filed April 29, 1985; effective May 29, 1985. Amendment filed April 2, 1990; effective May 17, 1990.

Chapter 0780-02-08 Repealed

Tenn. Comp. R. & Regs. 0780-02-08-.01 REPEALED

History

• Authority: T.C.A. §§ 68-126-202, 68-126-210, and 68-126-405.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-08-.08 REPEALED

History

• Authority: T.C.A. §§ 68-126-202, 68-126-204, 68-126-210, and 68-126-405.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-02-08-.02 REPEALED

History

• Authority: T.C.A. §§ 68-126-202, 68-126-210, and 68-126-405.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-08-.03 REPEALED

History

• Authority: T.C.A. §§ 68-126-202, 68-126-210, and 68-126-405.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-08-.04 REPEALED

History

• Authority: T.C.A. §§ 68-126-202, 68-126-210, and 68-126-405.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-08-.05 REPEALED

History

• Authority: T.C.A. §§ 68-126-204 and 68-126-210.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Repeal filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-08-.06 REPEALED

History

• Authority: T.C.A. §§ 68-126-202, 68-126-204, 68-126-210, and 68-126-405.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed November 7, 2025; effective February 5, 2026.

Tenn. Comp. R. & Regs. 0780-02-08-.07 REPEALED

History

• Authority: T.C.A. §§ 68-126-202, 68-126-204, 68-126-208, 68-126-210, and 68-126-405.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed March 12, 2004; effective May 26, 2004. Repeal filed November 7, 2025; effective February 5, 2026.

Chapter 0780-02-09 Third-Party Inspections and Third-Party Plans Review

Tenn. Comp. R. & Regs. 0780-02-09-.01 DEFINITIONS

(1) As used in this chapter, unless the context otherwise requires:

(a) “Applicable codes” means the building code adopted by the Division or by the local government examining third-party inspections and third-party plans review where the building is located.

(b) “Conflict of interest” means an affiliation or relationship as defined pursuant to T.C.A. § 68-120-101(k)(1)(A).

(c) “Discipline” means a plans examination or inspection of building, fire, mechanical, plumbing, or electrical code.

(d) “Division” means the Division of Fire Prevention of the Department of Commerce and Insurance.

(e) “Exempt jurisdiction” means a local government acting pursuant to T.C.A. § 68-120- 101(b)(2).

(f) “Local department” means the department(s) enforcing building and/or fire codes within a local government.

(g) “Local government” means any city, county, town, municipal, corporation, metropolitan government, or political subdivision.

(h) “Statewide building program” means the adoption and enforcement of codes pursuant to T.C.A. § 68-120-101(a).

(i) “Third-party inspector” means an individual that meets the requirements as defined in T.C.A. § 68-120-101(k)(1)(B).

(j) “Third-party plans examiner” means an individual that meets the requirements as defined in T.C.A. § 68-120-101(k)(1)(C).

History

• Authority: Chapter 771, Public Acts of 2024 and T.C.A. § 68-120-101.
• Administrative History: Emergency rules filed September 24, 2024; effective through March 23, 2025. Emergency rules expired effective March 24, 2025, and the rules reverted to their previous statuses. New rules filed April 15, 2025; effective July 14, 2025.

Tenn. Comp. R. & Regs. 0780-02-09-.02 REGISTRATION REQUIREMENTS

(1) In an exempt jurisdiction, a person may engage a third-party plans examiner to perform a review of plans and specifications, and a third-party inspector to perform building construction inspections, in lieu of such examinations or inspections being performed by the exempt jurisdiction. A third-party inspector or third-party plans examiner must be appropriately registered with the Division at the time the inspection or examination is performed.

(2) An applicant may only have one (1) registration as a third-party plans examiner and one (1) registration as a third-party inspector. If an applicant holds multiple qualifications sufficient to register as a third-party examiner or a third-party inspector, such as being registered as both an architect and an engineer, the applicant shall designate which qualification shall be tied to the third-party registration.

(3) An applicant may request registration with the Division as the following:

(a) Third-party plans examiner; or (b) Third-party inspector.

(4) An applicant for registration as a third-party plans examiner shall submit the following to the Division:

(a) A completed application for registration on a form as prescribed by the Division; and (b) Proof of one (1) of the following:

1. Active registration as an engineer with the Tennessee state board of examiners for architects and engineers;

2. Active registration as an architect with the Tennessee state board of examiners for architects and engineers; or 3. Active certification from the International Code Council (ICC) or National Fire Protection Association (NFPA) as a plans examiner.

(5) An applicant for registration as a third-party inspector shall submit the following to the Division:

(a) A completed application for registration on a form as prescribed by the Division; and (b) Proof of one (1) of the following:

1. Active registration as an engineer with the Tennessee state board of examiners for architects and engineers;

2. Active registration as an architect with the Tennessee state board of examiners for architects and engineers;

3. Active certification from the International Code Council (ICC), National Fire Protection Association (NFPA), or other nationally or internationally recognized certifying organization; or 4. Active state certification as a building, fire, mechanical, or plumbing inspector.

(6) A certificate of registration as a third-party inspector or third-party plans examiner shall expire when the corresponding engineer registration, architect registration, or professional certification expires and shall renew with the corresponding registration or certification so long as the person intends to continue acting as a third-party plans examiner or third-party inspector.

(7) Each registrant shall notify the Division within fifteen (15) days if the registrant’s engineer’s license, architect’s license, or certification becomes invalid.

(8) Any registration as a third-party inspector or third-party plans examiner shall automatically terminate if the registrant’s corresponding engineer’s license, architect’s license, or certification is revoked or otherwise becomes invalid.

(9) The Commissioner of Commerce and Insurance, or the Commissioner’s designee, may revoke a registration as a third-party inspector or third-party plans examiner following notice and an opportunity for a hearing in accordance with the provisions of the Uniform Administrative Procedures Act, compiled in T.C.A. §§ 4-5-301 et seq., if:

(a) The individual is found to be inadequately performing plans review or inadequately enforcing the adopted code, including but not limited to properly performing timely inspections;

(b) The individual has provided false or misleading information to the Division;

(c) The individual has provided false or misleading information as part of any third-party plans examination or third-party inspection;

(d) The individual concealed a conflict of interest in the performance of third-party plans examination or third-party inspection;

(e) The individual has had their registration as an engineer or architect with the Tennessee state board of examiners for architects and engineers, state certification as a building, fire, mechanical, or plumbing inspector, or any other similar state regulatory board, revoked; or (f) The Commissioner of Commerce and Insurance determines any other grounds with the showing of good cause.

(10) The Commissioner of Commerce and Insurance, or the Commissioner’s designee, may refuse to issue a registration as a third-party inspector or third-party plans examiner to an individual for any of the grounds set out in paragraph (9).

History

• Authority: Chapter 771, Public Acts of 2024 and T.C.A. § 68-120-101.
• Administrative History: Emergency rules filed September 24, 2024; effective through March 23, 2025. Emergency rules expired effective March 24, 2025, and the rules reverted to their previous statuses. New rules filed April 15, 2025; effective July 14, 2025.

Tenn. Comp. R. & Regs. 0780-02-09-.03 REQUIRED DOCUMENTS

(1) A person, or person’s designee, who retains a third-party plans examiner and has exhausted the exempt jurisdiction’s review process and is requesting the Division review the building plans shall submit documents for review in accordance with the procedures determined by the Division.

(2) The person, or person’s designee, shall submit all required documents as described in Tenn.

Comp. R. & Regs. 0780-02-09-.03 pursuant to T.C.A. § 68-120-101(k).

(3) For review of plans, the person, or designee, that engages a third-party plans examiner to examine plans and specifications prior to construction as required by T.C.A. § 68-120- 101(k)(2)(D)(i) shall provide the following to the Division in a manner approved by the Division for review and approval:

(a) A copy of the withdrawal of review filed with the exempt jurisdiction;

(b) The appropriate fee as established in Tenn. Comp. R. & Regs. 0780-02-03, Review of Plans and Specifications;

(c) The name of the exempt jurisdiction with a statement of all applicable codes of the exempt jurisdiction and the codes used to perform the plans examination, and any modifications to the prescriptive code that were granted by the exempt jurisdiction;

(d) Stamped and sealed copy(ies) of all plans and shop drawings, if required;

(e) The building name and intended address;

(f) For each discipline of code review, the third-party plans examiner’s name and registration number assigned by the Division;

(g) The local building official’s and fire official’s names and contact information;

(h) A statement under penalty of perjury by the third-party plans examiner declaring the plans comply with the applicable codes and no deficiencies remain;

(i) Copies of any local ordinances and local amendments to the code that govern the review;

(j) The occupancy classification of the structure;

(k) An affidavit from the third-party plans examiner that no conflict of interest exists between the party requesting the third-party and the third-party conducting the review; and (l) Any other documents deemed necessary by the Division after initial review to ensure compliance with applicable codes.

(4) The person, or designee, who engages a third-party inspector to conduct commercial, electrical, or residential building construction inspections as required by T.C.A. § 68-120- 101(k)(3)(D)(i) and has exhausted the exempt jurisdiction’s review process and is requesting the Division review the inspection report shall provide the following to the Division in a manner approved by the Division for review and approval:

(a) A copy of the withdrawal of review filed with the exempt jurisdiction;

(b) The appropriate fee as established in Tenn. Comp. R. & Regs. 0780-02-09-.05;

(c) The name of the exempt jurisdiction with a statement of all applicable codes of the exempt jurisdiction and codes used to conduct the inspection and any equivalencies granted;

(d) Copy(ies) of the inspection report(s) and any proposed occupancy release(s);

(e) The building name and address;

(f) The third-party inspector’s name and registration number assigned by the Division;

(g) The local building official’s and fire official’s names and contact information;

(h) The type of inspection conducted (including occupancy and inspection type);

(i) A statement under penalty of perjury by the third-party inspector declaring that no deficiencies of the applicable codes were identified or identifies all deficiencies of the applicable codes;

(j) Copies of any local ordinances and local amendments to the code used for the inspection;

(k) The occupancy classification for which the structure was inspected;

(l) An affidavit from the third-party inspector that no conflict of interest exists between the party requesting the third-party and the third-party conducting the review; and (m) Any other documents deemed necessary by the Division to ensure compliance with applicable codes.

History

• Authority: Chapter 771, Public Acts of 2024 and T.C.A. § 68-120-101.
• Administrative History: Emergency rules filed September 24, 2024; effective through March 23, 2025. Emergency rules expired effective March 24, 2025, and the rules reverted to their previous statuses. New rules filed April 15, 2025; effective July 14, 2025.

Tenn. Comp. R. & Regs. 0780-02-09-.04 INSPECTIONS AND PLANS REVIEW

(1) All third-party inspections shall be conducted on-site by the registrant signing the inspection report.

(2) A separate third-party inspection shall be completed each time an inspection is required in accordance with local inspection requirements. A single inspection by a third-party inspector for an entire project shall be rejected.

(3) If the Division approves the third-party inspection or third-party plans, the Division shall issue a written letter of approval to the third-party.

(4) If the Division determines deficiencies are present after review of the third-party inspection documents or review of third-party plans, the Division shall issue a written report setting out each finding of deficiency.

(a) The person, or person’s designee, shall submit a written response to each item detailing how each deficiency has been corrected.

(5) If the Division determines more information is necessary to ensure compliance with applicable codes, the Division shall issue a written report requesting the additional information.

(a) The person, or person’s designee, shall submit a written response to each item that adequately details and addresses the Division’s questions.

(6) The Division, during the required audit of an exempt jurisdiction pursuant to T.C.A. § 68-120- 101(b), shall include in the audit a determination of whether the exempt jurisdiction is adequately reviewing third-party inspections and third-party plans review.

History

• Authority: Chapter 771, Public Acts of 2024 and T.C.A. § 68-120-101.
• Administrative History: Emergency rules filed September 24, 2024; effective through March 23, 2025. Emergency rules expired effective March 24, 2025, and the rules reverted to their previous statuses. New rules filed April 15, 2025; effective July 14, 2025.

Tenn. Comp. R. & Regs. 0780-02-09-.05 FEES

(1) If a person, or person’s designee, submits commercial building plans or construction inspection reports examined by a third-party inspector in an exempt jurisdiction to the Division for approval, the Division shall charge the following fee:

(a) The fee for review of plans and specifications for construction shall be two hundred and fifty dollars ($250.00) plus two dollars and fifty cents ($2.50) per each one thousand dollars ($1,000.00) of the proposed construction cost or fraction thereof by which the total valuation of the proposed construction exceeds one hundred thousand dollars ($100,000.00). Such fee shall be payable in full at the time of initial submission of plans and specifications.

(b) The fee for each commercial construction inspection shall be three hundred dollars ($300.00).

(2) If a person, or person’s designee, submits a residential building inspection report examined by a third-party inspector in an exempt jurisdiction to the Division for approval, the Division’s fees shall be those as stated in Tenn. Comp. R. & Regs. 0780-02-23.

(3) If a person, or person’s designee, submits an electrical inspection report examined by a thirdparty inspector in an exempt jurisdiction to the Division for approval, the Division’s fees shall be those as stated in Tenn. Comp. R. & Regs. 0780-02-01.

(4) Bad payment will result in the cancellation of review of plans and specifications and review of building construction inspection reports. Bad payment includes, but is not limited to, a returned check, dishonored electronic payment, or declined credit card payment.

(5) Refunds shall not be made once the Division provides a timely response to the submission.

(6) A full refund of all fees shall be made if the Division fails to respond to the submission within ten (10) business days.

(7) Refunds shall be made to the person or company that remitted the payment.

History

• Authority: Chapter 771, Public Acts of 2024 and T.C.A. § 68-120-101.
• Administrative History: Emergency rules filed September 24, 2024; effective through March 23, 2025. Emergency rules expired effective March 24, 2025, and the rules reverted to their previous statuses. New rules filed April 15, 2025; effective July 14, 2025.

Chapter 0780-02-10 Commercial Places of Assembly

Tenn. Comp. R. & Regs. 0780-02-10-.01 INSPECTION OF EXITS

Not more than ninety (90) minutes prior to the scheduled commencement of any noncontinuous activity, event, performance, show, meeting, function, or other occasion for which persons will gather at a Class A or B commercial place of assembly (as defined in the 1973 edition of the Life Safety Code NFPA No. 101), the owner (or his designee pursuant to written authority, instructions, or procedures) shall inspect every required exit, way of approach thereto, and way of departure therefrom. If such inspection reveals that any required means of egress is obstructed, inaccessible, locked, fastened, or otherwise unsuited for immediate use, the scheduled program shall not begin, nor shall admittance to the place of assembly be permitted, until necessary corrective action has been completed.

History

• Authority: T.C.A. §§ 53-2413 and 53-2517. Rule filed September 13, 1977; effective October 13, 1977.

Tenn. Comp. R. & Regs. 0780-02-10-.02 ANNOUNCEMENTS

Immediately prior to the start of the program, the owner or his authorized agent shall orally notify all attendees concerning the location of the exit(s) to be used in case of fire or other emergency.

History

• Authority: T.C.A. §§ 53-2413 and 53-2517. Rule filed September 13, 1977; effective October 13, 1977.

Tenn. Comp. R. & Regs. 0780-02-10-.03 RECORDS

Accurate records of all inspections, corrections, and notifications made pursuant to this

chapter shall be kept and retained for at least two (2) years in the offices of the respective building owners. The records shall contain:

(a)a brief description of each activity, event, performance, etc., including date, time, and location;

(b)the name and signature of the person who performed each requirement of this chapter; and (c)the date and time when each requirement was performed.

Such records shall be made available upon request to the State Fire Marshal, his deputies, or assistants.

History

• Authority: T.C.A. §§ 53-2413 and 53-2517. Rule filed September 13, 1977; effective October 13, 1977.

Tenn. Comp. R. & Regs. 0780-02-10-.04 ALTERNATIVES

In cases of practical difficulty or undue hardship, or in which compliance herewith would not significantly increase life safety, the State Fire Marshal may approve or accept alternative means of accomplishing the objectives of this chapter.

History

• Authority: T.C.A. § 53-2413 and 53-2517. Rule filed September 13, 1977; effective October 13, 1977.

Chapter 0780-02-11 Repealed

Tenn. Comp. R. & Regs. 0780-02-11 Repealed

RULES

OF THE DEPARTMENT OF COMMERCE AND INSURANCE

DIVISION OF FIRE PREVENTION

BOARD OF BOILER RULES

This chapter is amended by T.C.A. §§68-20-101, 68-20-102, and 4-5-202 (see chapter 0800-3-3) filed March 27, 1991; effective June 29, 1991.

Chapter 0780-02-12 Reserved

Tenn. Comp. R. & Regs. 0780-02-12 Reserved

RULES

OF THE TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE

DIVISION OF FIRE PREVENTION

Chapter 0780-02-13 Modular Building Units

Tenn. Comp. R. & Regs. 0780-02-13-.01 DEFINITIONS

(1) For purposes of this chapter, unless the context otherwise requires, the definitions of terms contained in T.C.A. § 68-126-303 are applicable. In addition:

(a) “Approved construction inspection agency” means an approved inspection agency which is responsible for performing the functions described in Rule 0780-02-13-.07.

(b) “Approved design review agency” means an approved inspection agency which is responsible for performing the functions described in Rule 0780-02-13-.05.

(c) “Approved Construction Inspection Program” means the third-party inspection program utilizing a design review agency and construction inspection agency.

(d) “Building system” means model plans, specificatio ns, and documentation for a system or type of modular building unit, or for the foundation, structural, electrical, mechanical, plumbing, gas, fire protection, or other system(s) thereof affecting health and safety.

(e) “Closed constructio n” means any modular building unit, component, assembly, or system manufactured in such a manner that all concealed parts or processes of manufacturing cannot be inspected before installati on at the site without disassembly, damage, or destruction.

(f) “Commissioner” means the Commissioner of Commerce and Insurance.

(g) “Commissioner’s Inspection Review Program” means the State Fire Marshal’s inspection programs authorized in Tenn. Comp. R. & Regs. 0780-02-23 for one and two family dwellings, in Tenn. Comp. R. & Regs. 0780-02-03 for commercial structures, and in Tenn. Comp. R. and Regs. 0780-02-01 for electrical installations.

(h) “Compliance assurance program” means the system, documentation, and methods of assuring that modular building units and their components, including the manufacturing, storage, transportation, assembly, handling, and installation thereof, conform to the standards.

(i) “Component” means any assembly, sub-assembly, or combinati on of elements for use as a part of a modular building unit, which may include the structural, electrical, mechanical, plumbing, fire protection, or other system(s) thereof affecting life safety.

(j) “Damage” means any impairment, adulteration, or breakage occurring to a modular building unit, or any part thereof, that causes it not to comply with the standards.

(k) “Dealer” means any person engaged in the sale, brokerage, or distribution, by consignment or otherwise, of modular building units or components to persons who in good faith purchase such units or components for purposes other than resale.

(l) “Department” means the Department of Commerce and Insurance.

(m) “Director” means the director of the modular building units section of the Division of Fire Prevention.

(n) “Division” means the Division of Fire Prevention of the Department of Commerce and Insurance.

(o) “Installer” means any person engaged in the assembly of modular building units on-sit e or the process or affixing components to land, a foundation, footings, utilities, or an existing building.

(p) “Label” means an insignia approved by the Department for certifying compliance with the standards.

(q) “Manufacturer” means any person engaged in the process of making, fabricating, constructing, forming, assembling, or reassembling modular building units or components from raw, unfinished, semi-finished, or finished materials.

(r) “Model” means a specific design of modular build ing unit which is based upon size, room arrangement, method of construction, location, arrangement or size of plumbing, mechanical or electrical equipment, and systems therein in accordance with plans and specifications submitted to an approved design review agency.

(s) “Open construction” means any modular building unit, component, assembly, or system manufactured in such a manner that all portions can be readily inspected at the site without disassembly, damage, or destruction.

(t) “Person” means any individual, firm, association, partnership, or corporation.

(u) “Site” means the location on which a modular building unit is installed or is to be installed.

(v) “Sleeping Cabin” means a recreational building or structure used as a transient occupancy with not more than twelve (12) occupants that does not contain a kitchen. A Sleeping Cabin is not a Sleeping Unit as defined by the International Building Code,

Section 202.

(w) “Standards” means the standards for the construction and installation of modular building units established by Rule 0780-02-13-.02.

(x) “Standard design” means any modular building unit, component, model or series intended for duplication or repetitive manufacture.

(y) “System prototype” means a specific design or modular building unit designated by the manufacturer to be the standard for imitation reproduction. A system prototype may include options that do not affect the performance function of any system.

History

• Authority: T.C.A. §§ 68-102-113, 68-126-302, 68-126-303, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004. Amendment filed June 15, 2009; effective August 29, 2009. Amendments filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.02 STANDARDS AND INSPECTION PROGRAMS

(1) Unless otherwise provided by applicable law or the provisions of this chapter, the standards for the construction and installation of modular building units in the State of Tennessee shall be those prescribed in:

(a) The National Electrical Code, as adopted in Chapter 0780-02-01-.02 [Adoption by Reference];

(b) The International Building Code, as adopted in Chapter 0780-02-02-.01 [Adoption by Reference], except that:

1. Section 1204.1 does not apply to stand alone toilet facilities that are not used in the months of December through February and are winterized in accordance with the manufacturer instructions; and 2. Sleeping Cabins are not required to have minimum plumbing facilities within the structure as required by Table 2902.1, but must have minimum plumbing fixtures located not more than two hundred (200) feet from the nearest door;

(c) The International Fire Code as adopted in Chapter 0780-02-02-.01 [Adoption by Reference];

(d) For state buildings, educational occupancies, and any other occupancy requiring an inspection by the state fire marshal for initial licensure, the Life Safety Code as adopted in Chapter 0780-02-02-.01 [Adoption by Reference];

(e) The International Mechanical Code as adopted in Chapter 0780-02-02-.01 [Adoption by Reference];

(f) The International Fuel Gas Code as adopted in Chapter 0780-02-02-.01 [Adoption by Reference];

(g) The International Plumbing Code as adopted in Chapter 0780-02-02-.01 [Adoption by Reference], except that:

1. Structures classified as Business (Group B) and Storage (S-1 or S-2), that are not intended for use by the general public and that have the required number of plumbing fixtures within five hundred (500) feet of the nearest door, are not required to have the minimum number of toilet facilities in accordance with Table 403.1 within the structure itself;

2. Sleeping Cabins are not required to have minimum plumbing facilities within the structure as required by Table 403.1, but must have minimum plumbing fixtures located not more than two hundred (200) feet from the nearest door;

(h) The International Energy Conservation Code as adopted in Chapter 0780-02-02-.01 [Adoption by Reference];

(i) The Tennessee Public Buildings Accessibility Act, T.C.A. §§ 68-120-201 to -205), where applicable; and (j) Safety Glazing Materials, T.C.A. §§ 68-120-301 to -306, where applicable.

(2) In the event of a conflict or inconsist ency among the codes herein adopted by reference, the more stringent code provision shall prevail.

(3) In lieu of the codes listed in subparagraphs (1)(b) through (1)(e) and (1)(i) above, the International Residential Code for One and Two Family Dwellings as adopted in Chapter

Tenn. Comp. R. & Regs. 0780-02-13-.03 LICENSES

(1) (a) No person shall engage in business as a manufacturer of modular building units for sale or installation in the State of Tennessee without first having obtained a manufacturer’s license from the Department.

(b) No person shall engage in business as a dealer of modular building units in the State of Tennessee without first having obtained a dealer’s license from the Department.

(c) No person shall engage in business as an installer of modular building units in the State of Tennessee without first having obtained an installer’s license from the Department.

(2) A separate license shall be required for each manufacturing facility operated by a manufacturer, or place of business operated by a dealer or installer under this chapter.

(3) An applicati on for a license required hereunder shall be submitted on the form prescri bed by the Department, and accompanied by a non-refundable applicati on fee as follows:

Manufacturer .................................................................................. $150.00 Dealer......................................................................................... $150.00 Installer........................................................................................... $150.00 (4) The application shall be submitted on a form prescribed by the Department and include the following information:

(a) Name and address of the applicant;

(b) Ownership and management of the applicant’s business;

(c) The applicant’s experi ence in modular building unit manufacturing, sales, or installation;

(d) Any manufacturer’s, dealer’s or installer’s licenses held by the applicant in this or another state;

(e) Any disciplinary action affecting any such licenses;

(f) If applying to be a manufacturer, under which inspection program the manufacturer will operate, and (g) Any other information necessary to eff ectively administer the program.

(5) The Department shall be notified in writing of any change in the information furnished in an application, prior to and throughout licensure, within thirty (30) days of such change.

(6) The Department shall issue a license to qualified applicants upon receipt of the appropriate lic ense fee as follows:

Manufacturer ................................................................................ $1000.00 Dealer............................................................................................. $500.00 Installer........................................................................................... $250.00 (7) All licenses issued hereunder are not transferable or assignable and shall expire on June 30 of each year and are invalid from that date onward unless renewed. An initial license that is issued between April 1 and June 30 during any given year shall expire on June 30 of the following year.

(8) An applicati on for renewal of a license shall be submitted on the form prescribed by the Department, and accompanied by the appropriate renewal fee as follows:

Manufacturer ................................................................................. $ 500.00 Dealer............................................................................................ $ 250.00 Installer.......................................................................................... $ 150.00 (9) Any manufacturer, dealer, or install er who fails to renew such manufacturer’s, dealer’s , or installer’s license on or before its expiration date, June 30, and until August 31 shall be required to pay one-half (1/2) of the license fee, in addition to the fee established in paragraph (9) of this rule.

(10) Any manufacturer, dealer, or installer who has failed to renew his or her manufacturer’s, dealer’s or installer’s license as of September 1 of each year shall be required to apply for a new license as prescribed in paragraphs three (3) through (6) of this

rule.

(11) Any change of ownership shall require a new license.

(12) Any applicant for a new or renewal of a license as a manufacturer, dealer or installer of modular building units shall submit a surety bond executed by the applicant (as principal) and by a surety company qualified to do business in this state (as surety).

(a) Each bond shall be for the benefit of any person who suffers loss or damage resulting from code-related non-compliance with the Tennessee Modular Building Act or the rul es duly promulgated thereunder by such manufacturer, dealer or installer.

(b) The bond shall be in the following amounts:

Manufacturer ................................................................ $100,000.00 Dealer............................................................................. $50,000.00 Installer........................................................................... $25,000.00 (c) Each bond shall cover code-related non-compliances occurring during the license period. A new bond or proper continuation certificate shall be submitted with each application for license renewal. The aggregate liability of the surety for code-related non-compliances occurring in each license year shall in no event exceed the amount of the bond for that year. If applicant can show proof of an effective bond or insurance coverage that would cover the manufacture of a modular building unit, such as a requirement under the Board of Licensing Contractors, this section does not require a separate bond.

(d) A separate bond shall be required for each place of business operated by a manufacturer, dealer or installer.

(13) An applicati on for a new or renewal of a license will not be considered complete until all required information, the bond and fees have been submitted.

History

• Authority: T.C.A. §§ 68-102-113 and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004. Amendment fil ed June 15, 2009; effective August 29, 2009. Amendments filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.04 APPROVAL OF DESIGN REVIEW AGENCIES

(1) No person shall act as a design review agency under this Chapter without a valid letter of approval from the Department.

(2) An application for approval as a design review agency shall be submitted on the form prescri bed by the Department. The applications shall be accompanied by:

(a) A non-refundable original application fee of five hundred dollars ($500.00); and (b) A prospectus describing:

1. The applicant’s qualifications to review plans, specifications, and building systems of modular building units or components for compliance with the standards;

2. The education and qualifications of the employees who would conduct the actual reviews of plans, specifications, and building systems;

3. The management and professional personnel (including an architect or engineer duly registered in the State of Tennessee) responsible for compliance with the provisions of this Chapter;

4. The applicant’s experience in third-party design review;

5. The applicant’s organizational structure; and 6. The relationship which the applicant would establish with approved construction inspection agencies to ensure that modular building units and components are produced in accordance with the standards.

(3) The Department shall be notified in writing of any change in the information furnished in an application, prior to and throughout licensure, within thirty (30) days of such change.

(4) The Department shall issue a letter of approval to qualified applicants.

(5) All approvals issued under this rule shall expire on June 30 of each year. An initial approval that is issued between April 1 and June 30 during any given year shall expire on June 30 of the following year.

(6) An applicati on for renewal of an approval shall be submitted on the form prescri bed by the Department, and accompanied by a non-refundable renewal application fee of two hundred and fifty dollars ($250.00).

(7) Any design review agency that fai ls to renew such design review agency’s approval on or before its expiration date, June 30, and until August 31 shall be required to pay one-half (1/2) of the approval fee, in addition to the fee established in paragraph (6) of this rule.

(8) Any design review agency that has fai led to renew such design review agency’s approval as of September 1 of each year shall be required to apply for a new approval as prescri bed in paragraph two (2) of this rule.

(9) Any change of ownership shall require a new approval.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305, 68-102-113, 68-126-302, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004. Amendment filed June 15, 2009; effective August 29, 2009. Amendments filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.05 RESPONSIBILITIES OF APPROVED DESIGN REVIEW AGENCIES

(1) Each approved design review agency shall discharge the following responsibilities:

(a) Investigation, evaluation, testing, review, and if justified, approval of the standards of each model building system (or amendment thereto) submitted by the manufacturer(s) which such agency serves;

(b) Investigation, evaluation, and, if justified, approval of the compliance assurance program (or amendment thereto) relating to the manufacture of modular building units and components described in each set of building system documentation submitted to such agency;

(c) Preparation and periodic revision, as necessary, of the building system approval report for each set of approved building system documentation and related compliance assurance program; and (d) Preparation of all reports which the Department may reasonably require in carrying out its responsibilities under this Chapter.

(2) An approved design review agency shall not perform any consulting engineering services relating to modular building units or components for any manufacturer which such agency serves.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305, 68-102-113, 68-126-302, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004.

Tenn. Comp. R. & Regs. 0780-02-13-.06 APPROVAL OF CONSTRUCTION INSPECTION AGENCIES

(1) No person shall act as a construction inspection agency under this Chapter without a valid letter of approval from the Department.

(2) An application for approval as a construction inspection agency shall be submitted on the form prescribed by the Department. The application shall be accompanied by:

(a) A non-refundable original application fee of five hundred dollars ($500.00);

(b) A prospectus describing:

1. The applicant’s qualifications to inspect equipment systems;

2. The education and qualifications of the employees who would conduct the actual inspections;

3. The applicant’s experience in third-party inspecti ons;

4. The applicant’s organizational structure;

5. The relationship which the applicant would establish with approved design review agencies to ensure that modular building units and components are produced in accordance with the standards; and (c) Proof that all employees who conduct inspectio ns have certifications from at least one (1) of the following nationally recognized code organizations:

6. National Fire Protection Association (NFPA); or 2. International Code Council (ICC);

7. Southern Building Code Congress International (SBCCI);

8. Building Officials and Code Administrators International (BOCA); or 5. International Conference of Building Officials (ICBO).

(3) The Department shall be notified in writing of any change in the inf ormation furnished in an application, prior to and throughout licensure, within thirty (30) days of such change.

(4) The Department shall issue a letter of approval to qualified applicants.

(5) All approvals issued under this rule shall expire on June 30 of each year. An initial approval that is issued between April 1 and June 30 during any given year shall expire on June 30 of the following year.

(6) An applicati on for renewal of an approval shall be submitted on the form prescri bed by the Department prior to expiration, and accompanied by a non-refundable renewal application fee of two hundred and fifty dollars ($250.00).

(7) Any construction inspection agency that fails to renew such construction inspection agency’s approval on or before its expiration date, June 30, and until August 31 shall be required to pay one-half (1/2) of the approval fee, in addition to the fee established in paragraph (6) of this rule.

(8) Any construction inspection agency that has fai led to renew such construction inspection agency’s approval as of September 1 of each year shall be required to apply for a new approval as prescribed in paragraph two (2) of this rule.

(9) Any change of ownership shall require a new approval.

History

• Authority: T.C.A. §§ 68-102-113, 68-126-302, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004. Amendment filed June 15, 2009; effective August 29, 2009. Amendments filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.07 RESPONSIBILITIES OF APPROVED CONSTRUCTION INSPECTION AGENCIES

(1) Each approved construction inspection agency shall discharge the following responsibilities:

(a) Monitoring the compliance assurance program of each manufacturer which such agency serves;

(b) Verifying that modular building units and components have been manufactured pursuant to approved building system documentation and an approved compliance assurance program;

(c) Authorizing the attachment of labels to such modular building units and components; and (d) Preparing all reports which the Department may reasonably require in carrying out its responsibilities under this Chapter, including monthly inspection reports and monthly production reports (Form A). These reports may be required to be submitted electronically.

(2) Initial Plant Certification Inspection (a) No label shall be affixed to any modular building unit or component until the approved construction inspection agency has completed an initial plant certification inspection of the manufacturer’s facility. The initial plant certification inspection for manufacturers located outside the State of Tennessee must be performed on the first unit designated for placement in the State of Tennessee. The initial plant certification inspection for manufacturers located inside the State of Tennessee must be performed on the first unit placed into production.

(b) The initial plant certification inspection shall consist of a complete evaluation of the manufacturer’s adherence to its compliance assurance program and capability of producing a unit, including any component(s), in accordance with the approved building system.

(c) The approved construction inspection agency shall become familiar with every aspect of the manufacturer’s approved building system and compliance assurance program.

(d) The approved construction inspection agency shall make a complete inspection of the manufacture of at least one modular building unit and any component(s) pertaining to that particular unit throughout all of the operation in the facility. If the first unit inspected or any component(s) pertaining to that particular unit fails to conform to the standards, additional units and component(s) shall be similarly inspected until the agency is satisfied that the manufacturer is complying with the approved building system and the standards.

(3) Plant Certification Report. If, on the basis of the initial plant certification inspection, the approved construction inspection agency determines that the manufacturer is in compliance with its approved building system, compliance assurance program, and the standards, the agency shall prepare and forward to the Department a certification report within thirty (30) days of the completion of the initial plant certification inspection. The certification report shall include:

(a) The name and address of the manufacturing facility;

(b) The name of the approved design review agency which approved the manufacturer's building system and compliance assurance program, and the dates of approval;

(c) The names and titles of the inspection agency personnel performing the initial plant certification inspection;

(d) The serial numbers of the modular building units or components inspected;

(e) A full report of all inspections conducted, nonconformities observed and corrective actions taken;

(f) The date of certification; and (g) The label number(s) assigned to the unit.

(4) Frequency of Inspections (a) After initial plant certification, the approved construction inspection agency shall inspect:

1. Each modular building unit or component in at least one stage of construction; and 2. Every stage of construction during the course of each inspection visit to a manufacturing facility.

(b) The Department may waive compliance with a compliance assurance program at the request of the manufacturer. Upon the grant of such waiver, the manufacturer shall have each modular building unit or component which it produces completely inspected by an approved construction inspection agency.

(c) The approved construction inspection agency shall conduct unannounced inspections at the manufacturing site to review any aspects of the manufacturing process.

(d) Nothing in this paragraph shall preclude an approved construction inspection agency from conducting inspections at a greater frequency than the minimum prescribed herein if, in the agency’s or Department’s professional judgment, such action is necessary to discharge its responsibilities properly. In determining the appropriate frequency of inspection for any manufacturer, an approved construction inspection agency should consider such factors as:

1. The production volume of the factory;

2. The complexity of the design;

3. The qualifications of the manufacturer’s quality control personnel;

4. The experience record of the manufacturer; and 5. The failure to follow compliance assurance procedures.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305, 68-102-113, 68-126-302, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004. Amendments filed June 15, 2009; effective August 29, 2009. Amendments filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.08 COMBINED AGENCIES

Nothing in this Chapter shall preclude the Department from approving a qualified person as both a Design Review and Construction Inspection agency. The Design Review Agency and the Construction Inspection Agency need not be the same agency. However, a manufacturing facility may not have multiple Design Review Agencies or multiple Construction Inspection Agencies at the same time.

History

• Authority: T.C.A. §§ 68-102-113, 68-126-302, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004.

Tenn. Comp. R. & Regs. 0780-02-13-.09 BUILDING SYSTEMS AND COMPLIANCE ASSURANCE PROGRAMS

(1) Approval Required for the Approved Construction Inspection Program.

(a) No modular building unit or component shall be manufactured for sale or installation in this state until the buildi ng system and compliance assurance program therefor have been approved by an approved design review agency and filed with the Department.

(b) Separate approval of a building system and compliance assurance program must be obtained for each manufacturing facility at which the manufacturer intends to produce modular building units or components.

(c) The manufacturer shall submit three (3) copies of or an electronic copy, in a form acceptable to the Department, of the proposed building system and compliance assurance program documentation to an approved design review agency in the manner prescribed in this rule.

(2) Submission of Building Systems.

(a) General Requirements.

1. A model building system shall bear the name, address, phone number, fax number, signature, date and seal of the responsible architect and/or engineer, duly registered in the State of Tennessee, certifying that the model building system complies with applicable standards. The model building system must be sealed in accordance with the statutes and rules concerni ng the practice of architecture and engineering in Tennessee.

2. All documents submitted shall indicate the manufacturer’s name, office address, e-mail address, tel ephone number, fax number and the address of the manufacturing facility. Where a manufacturer operates more than one facility, each facility shall be assigned a sequential plant number and all documentation shall include the appropria te plant number.

3. The manufacturer shall submit plans showing all elements relating to specific systems on properly identifiable separate sheets. All sheets shall contain the plan number (identified as “plan number”) assigned by the architect or engineer and a blank rectangular space near the title box for the approved design review agency’s stamp of approval. The above mentioned plan number shall identify the manufacturer by using the initials of the manufacturer’s company name and sequential numbering for each submittal. All Compliance Assurance Manual revisions will be assigned a sequential revision number.

4. All work to be performed on-site, including location and connection of all equipment, appliances, and systems, including fire protection sprinkler systems and commercial hood and duct systems, shall be identified and distinguished from work to be performed in the manufacturing facility.

5. The nature, grade, and quality of all materials shall be specified.

6. Design drawings, details, calculations and test reports shall be submitted when required or requested by the Department. These items may be required to be submitted electronically.

7. Design drawings and details shall be drawn to scale, dated, and identified. The number of sheets in each set shall be indicated in an index on the cover sheet.

8. Floor plans shall indicate the location of the label(s) and manufacturer’s data plate.

9. Floor plans shall also identify the use of all rooms and spaces by name and/or number.

10. A properly completed submittal form and fee (Rule 0780-02-13-.09(4)(b)) shall be submitted for each compliance assurance manual, building system manual, model, plan, design specification or revision.

(b) Requir ed construction details for each set of model plans.

1. The building system for a modular buil ding unit shall provide or show, but not be limited to, the following details, including the method of their testing or evaluating (or both):

(i) General :

(I) Details and methods of installation of modular building units or components on foundations and/or to each other;

(II) All exterior elevations;

(III) Cross sections as necessary to identify major building components;

(IV) Details of flashing, such as at openings and at penetrations through roofs and sub-component connections. Indicate flashing material and gauge to be used;

(V) Attic access and attic ventilation;

(VI) Exterior wall, roof, and soffit material as well as finish;

(VII) Interior wall, floor, and ceiling finish material;

(VIII) Tenant separation walls with UL or equivalent assembly details and all application instructions;

(IX) Sizes, locations and types of doors and windows, and a complete hardware schedule;

(X) Recommended foundation plans, vents, and under-floor access;

(XI) Insulation value for water, piping, air ducts, walls, attic flues, and ground flues (if above grade); and (XII) Information contained in the manufacturer’s data plate;

(ii) Component Usage:

(I) Occupancy classification;

(II)

Area, height and number of stories;

(III) Type of construction;

I. Construction Type; and II. Spri nklered or Unsprinklered;

(IV) Fire resistance ratings; and (V) Occupant load;

(iii) Space and Fire Safety:

(I) Detail of fire resistance rated assemblies, and all application instructions for all stairway enclosures, doors, including door frames, hardware and other accessories, walls, tenant separation walls, floors, ceilings, partitions, columns, roof, and shaft enclosures;

(II) Details as to width of all aisles, exits, corridors, passageways, and stairway enclosures;

(III) Flame spread and smoke development classification of finished materials;

(IV) Fire stopping details, and all application instructions for penetrations of all rated construction; and (V) Location of all smoke detectors;

(iv) Structural :

(I) Engineer’s calculations of structural members, framing, and foundation, where appropriate;

(II) Design soil bearing value;

(III) Structural and framing details of all floors, walls, and roof;

(IV) Details and stress diagrams of roof trusses;

(V) Details of reinforcing steel;

(VI) Complete loading schedule, including roof, handrail, guardrail, floor, wind, snow, and seismic loading;

(VII) Column loads and column schedule;

(VIII) Lintel schedule;

(IX) Size, spacing, and details of all structural elements;

(X) Grade or quality of all structural elements (lumber, steel, etc.);

(XI) Elevation of structural elements, walls, or sections thereof providing resistance to vertical loads or lateral forces; and (XII) Complete details of all structural connections;

(v) Mechanical:

(I) Separate floor plan(s) with the location of all equipment and appliances. Indicate equipment and appliances listed or labeled by approved agencies;

(II) Heat gain and loss calculations;

(III) Manufacturer’s name, make, model, number, BTU, input rating of all equipment and appli ances, as appropriate, or the equivalent thereof;

(IV) Duct and register locations, sizes, and materials;

(V) Clearances from combustible material or surfaces for all ducts, flues, and chimneys;

(VI) Method of providing required combustion air and return air;

(VII) Location, size, and weight of flues, vents, and chimneys and clearances from air intakes and other vents and flu es;

(VIII) Details regarding dampers in duct penetrating fire separations;

(IX) Complete drawings of fire sprinkler system, standpipe system, and fire alarm system. Site water flow requirements are subject to the local authority having jurisdiction; and (X) Detail of elevator or escalator system, including method of emergency operation;

(vi) Plumbing:

(I) Separate flo or plan(s) and/or schematic drawing(s) of the plumbing layout, including, but not limited to, size of piping, fittings, traps and vents, cleanouts and valves, of gas, water, waste and drainage system(s);

(II) Plumbing materials, and location of all equipment and appliances to be used. Indicate the fixture unit capacity of the system(s) and make, model, and rating/capacity of equipment and appliances. Indicate equipment and appliances listed or labeled by approved agencies;

(III) Make and model of safety controls (such as for water heaters), their location, and whether listed or labeled by approved agencies;

(IV) Method of supporting piping and intervals of support;

(V) I. Location, size and height of vents above roofs and requir ed clearances, including, but not limited to, clearances from air intakes, other vents, and flues; and II. Location, size and access to automatic air admittance valves;

(VI) Location and methods of penetration of piping through load-bearing structural members; and (VII) Methods of testing; and (vii) Electrical:

(I) Separate flo or plan(s) with single line diagram of the entire electrical installation;

(II) Load calculations for servi ce and feeders;

(III) Sizes of all feeders and branch circuits;

(IV) Size, rating, and location of main disconnect/overcurrent protective devices;

(V) Method of interconnection between modular building units or components and location of connections;

(VI) Location of all outlets and junction boxes; and (VII) Method of mounting fixtures and wiring installations.

2. The requirements of this subparagraph (b) shall apply to building systems for components only to the extent deemed necessary by the approved design review agency or the Department to permit proper evaluations of such components.

(3) Submission of Compliance Assurance Programs.

(a) General Requirements.

1. It is the responsibility of the manufacturer to:

(i) Execute every aspect of its compli ance assurance program; and (ii) Take any required correctiv e action with respect to such program.

2. The manufacturer shall cooperate with the approved construction inspection agency by providing such agency with all necessary reports, information, documents, records, facilities, equipment samples, and other assistance for assuring compliance.

3. An application for approval of a compliance assurance program shall be submitted in the form of a compliance assurance manual containing complete documentation of all the compliance assurance activities of the manufacturer.

The manual shall include an index, and shall treat in detail the following material:

(i) Organizational Structure.

(I) An organizational structure (including names, training, and qualifications of responsible officers and employees) for implementing and maintaining the compliance assurance program, and its functional relationship to other elements of the manufacturer's organizational structure. The personnel in charge of the compliance assurance program must be independent of the production department.

(II) A uniform system of audit (in-depth analysis of program effectiveness and means to identify deficiencies) to monitor program performance periodically.

(III) Complete and reliable records of manufacturing and site operations (if any). (Suitable means of storage, preservation, and accessibility of copies of forms to be utilized shall be included.)

(IV) A system to control changes in production or inspection procedures.

(V) A system to assure that working drawings and specifications, working instructions and standards, procurement documents, etc., conform to the approved building system.

(VI) A serial numbering system for modular building units or components.

(VII) The method of storing, handling, issuing, attaching, and accounting for all labels to assure that they are attached only to modular building units or components manufactured pursuant to an approved building system and inspected pursuant to an approved compliance assurance program.

(VIII) A procedure for periodic revision of the manual.

(ii) Materials Control.

(I) Procedures to assure effective control over procurement sources to ensure that materials, supplies, and other items used in production and site operations (if any) conform to the approved building system.

(II) Procedures for inspection of materials, supplies, and other items at the point of receipt.

(III) Method of protection of materials, supplies, and other items against deterioration prior to their incorporation in the labeled modular building unit or component.

(IV) Provision for disposal of rejected materials, supplies, and other items.

(iii) Production Control.

(I) Procedures for timely remedial and preventive measures to assure product quality.

(II) Provision, maintenance, and use of testing and inspecting equipment to assure compliance with the approved building system.

(III) Provision for frequency of sampling inspections.

(IV) Provision of necessary authority to reject defective work and carry out compliance assurance functions, notwithstanding any conflict with production department goals and needs.

(V) A schematic detail of the manufacturing operation showing the location of inspection stations and hold points for mandatory inspection characteristi cs.

(VI) Inspection and test procedures, including accept/reject crite ria and mandatory inspection characteristics.

(VII) Standards of workmanship.

(VIII) Provision for disposal of rejects.

(iv) Finished Product Control.

(I) Procedure for final inspection of all modular building units or components before shipment to the site or storage point, including identification and labeling.

(II) Procedure for handling and storing all finished modular building units or components, both at the manufacturing plant or other storage point and after delivery to the site.

(III) Procedure for packing, packaging, and shipping operations and related inspectio ns.

(v) Installation Control.

(I) Installation procedures, including component placement, equipment, and procedures, field erection and finishing work, utility connection instructions, and all appropriate on-site inspection criteria and test descriptions.

(II) Organization provisions for field repair and disposal of rejects.

(4) Review and Approval.

(a) The approved design review agency shall evaluate the building system and compliance assurance program documentation to determine compliance with the standards. Such agency may require tests to determine whether a building system or compliance assurance program meets the standards if that determination cannot be made from evaluation of plans, specifications, and documentation alone.

(b) The approved design review agency shall approve the manufacturer’s building system and compliance assurance program when it determines that they meet these standards. Within thirty (30) days of approval, such agency shall forward to both the manufacturer and Department a complete copy of the approved building system and compliance assurance program documentation, which the Department may require to be submitted electronically. Each set of model plans, building system manual or compliance assurance manual submittal to the Department shall be accompanied by:

1. A filing fee of one hundred and fifty dollars ($150.00); and 2. For those making payment by over the Internet, payment of an internet payment processing fee, not to exceed two and one half percent (2 1/2%), to be used solely to defray the costs of any payments processed electronically.

(c) Commencement of Construction.

1. All commercial Modular Building Unit plans must be submitted to the Department, and a Notification of Receipt and Filing Letter indicating the plans have been filed issued by the Department, prior to the commencement of construction of the Modular Building Unit. The construction inspection agency shall not inspect or allow a label to be affixed to any commercial Tennessee modular building unit for which plans have not been filed with the Department and a Notification of Receipt and Filing Letter issued.

2. All plans for One and Two Family Dwellings must be submitted to the Department. Manufacturers of One and Two Family Dwellings may commence construction on the unit before the Department has issued the Notification of Receipt and Filing Letter indicating the plans have been filed; however, any deficiencies found prior to the issuance of the Noti fication of Receipt and Filing Letter must be remedied during the construction process before the modular building unit is permitted to be labeled.

(5) Amendments. The procedures set out in this rule for submission, review, and approval of building systems and complia nce assurance programs shall be followed with regard to proposed amendments thereto.

(6) Variations.

(a) No approved building system (or amendment thereto) shall be varied in any way without prior authorizati on by the approved design review agency and the documentation of such prior authorization being received and filed by the Department.

(b) All approved variations must be submitted to the Department and shall be made a part of the written record of the approval of the building system.

(7) Withdrawal of Approval.

(a) The Department or approved design review agency may withdraw the approval of any building system or compliance assurance program if:

1. Such approval was granted in error;

2. Such approval was granted on the basis of incorrect information; or 3. Such building system or compliance assurance program fails to comply with the provisions of this chapter.

(b) The Department or agency instituting withdrawal of approval shall notify the manufacturer in writing within ten (10) days of the effective date of such withdrawal.

Such notice shall clearly set forth the reasons for the withdrawal of approval.

(c) Upon such withdrawal of approval, the manufacturer shall not attach a label to any modular buil ding unit or component manufactured pursuant to the building system or compliance assurance program whose approval was withdrawn. However, the Department or approved construction inspection agency may thereafter label such units or components as it determines to be in compliance with the standards after a complete inspection.

(d) The manufacturer shall return all unused labels allocated for modular building units or components to the Department within thirty (30) days after the effective date of withdrawal of approval of the building system or compliance assurance program pursuant to which such units or components are manufactured. The manufacturer shall also return to the Department all labels which it determines for any reason are no longer needed.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305, 68-102-113, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004. Amendments filed June 15, 2009; effective August 29, 2009. Amendments filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.10 DATA PLATES

(1) The manufacturer shall place directly or by reference on one or more permanent data plates the following information:

(a) The manufacturer’s name and address;

(b) The manufacturer’s serial number of the unit or component;

(c) The label number(s);

(d) The date of manufacture;

(e) The name of the manufacturer and the model designation of each major factory installed appliance; and (f) The title and edition of each applicable nationally recognized code with which the unit or component complies.

(2) The data plate(s) shall also include the following information, if required by the standards:

(a) Identification of permissible type of gas for appliances and directions for water and drain connection;

(b) Snow, wind, seismic, and other live loads;

(c) Electrical ratings - instructions and warnings on voltage; and (d) Special conditions or limitations on use of the unit or component, including unsuitability for areas in which specified environmental conditions prevail.

(3) The data plate(s) shall be attached to the modular building unit or component in the vicinity of the electrical distribution panel, or in some other location where it will be readily accessible for inspection.

(4) If, in the opinion of the Department, the shape or size of a component is such that a data plate cannot be attached to it permanently, the information required by this rule may be placed (a) In a manual crated with the component, if such information will be needed by future occupants of the building; or (b) On a tag attached to the crate in which the component is shipped, if such information will not be needed by future occupants of the building. If life safety is affected, the item in question shall be plainly designated.

(5) The manufacturer shall keep a permanent record of the completed data plate on every modular building unit produced.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305, 68-102-113, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004. Amendments filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.11 LABELS

(1) The label shall be permanently attached to each transportable modular building unit to demonstrate all components accepted as having been manufactured in accordance with the standards. Modular buildings reviewed under the Approved Construction Inspection program shall have a label affixed by means of four (4) pop rivets or drive screws, on a permanent non-removable building component in a visible location as shown on the approved model building system. Modular buildings reviewed under Commissioner’s Inspection Review Program shall have a label affixed to the electrical panel box.

(2) The Department will supply labels to approved construction inspection agencies upon request. Each label will be numbered, and will bear the following statement:

This modular building unit or component has been manufactured and inspected in accordance with the Tennessee Modular Building Act and rules promulgated thereunder.

Unauthorized removal of this label is prohibited.

(3) The approved construction inspection agency and the manufacturer shall keep permanent records of the handling of all labels. A copy of such records shall be sent to the Department upon request. The records shall specify at least:

(a) The label number(s) attached to modular building units or components;

(b) Each unit or component to which a label has been attached, and the number of such label;

(c) The disposition of any damaged or rejected labels; and (d) The location and custody of all unused labels.

(4) (a) The fee for each label to be attached to a modular building unit or component shall be fifty dollars ($50.00).

(b) The fee for replacement of a lost, damaged, or removed label shall be fifty dollars ($50.00) per label.

(c) The approved construction inspection agency shall collect all label fees from the manufacturer before assigning labels for attachment in a plant.

(d) Requests for labels shall be submitted electronically. Label fees shall be submitted in a method acceptable to the Department, which may include cash, check, money order or electronically. The department may charge an internet payment processing fee, not to exceed two and one half percent (2 1/2%), to those making payment over the Internet to be used solely to defray the costs of any payments processed electronically.

(e) The approved construction inspection agency shall forward all payment for labels to the Department within ten (10) days after receipt of such payment.

(5) (a) Units and components shall be labeled at the time of construction prior to leaving the manufacturing facility’s production line, and prior to being placed on the facility yard.

(b) Once a unit or component has been labeled, no person may remove the label without obtaining prior authorization, in writing, from the Department.

(c) Manufacturers operating more than one facility may not transfer any labels without obtaining prior authorization, in writing, from the Department.

History

• Authority: T.C.A. §§ 68-102-113 and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed November 20, 1987; effective January 4, 1988. Amendment filed June 10, 2004; effective August 24, 2004. Amendment filed June 15, 2009; effective August 29, 2009. Amendments filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.12 ALTERATIONS OF LABELED UNITS

(1) No modular building unit or component bearing a label shall be modified prior to or during installation unless an approved design review agency has approved the modification and obtained prior written approval from the Department.

(2) An approved construction inspection agency or an inspector working under the Commissioner’s Inspection Program shall inspect any modified component wherever it is located in Tennessee. Such inspection may include such tests or destructive or nondestructive disassembly as such agency or inspector with supervisor’s approval deems necessary to assure compliance with this chapter.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305, 68-102-113, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004. Amendments filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.13 REMOVAL OF LABELS

(1) The Department or an approved inspection agency shall remove or cause to be removed any labels from modular building units or components found not to comply with the manufacturer’s approved building system or approved compliance assurance program.

(2) The Department or agency instituting removal of a label shall send the manufacturer a written notice setting forth the reasons for such removal within ten (10) days thereafter.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986.

Tenn. Comp. R. & Regs. 0780-02-13-.14 INSTALLATION PROCEDURES

(1) The installation of a modular building unit or component shall conform to the specifications contained in the manufacturer’s approved building system.

(2) The manufacturer or dealer shall furnish the installer and affected local government with a complete set of installation specifications at least ten (10) days prior to the commencement of installation work.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986.

Tenn. Comp. R. & Regs. 0780-02-13-.15 LOCAL GOVERNMENT PROCEDURES

(1) A local government may require, and charge a fee for, a building permit prior to the installation of a modular building unit or component. If requested by the local government, an applicant for such permit shall furnish:

(a) A statement, signed by the applicant or his agent (with the appropriate address), that the work to be performed under such permit will include the installation of a labeled modular building unit or component in accordance with the provisions of this Chapter; and (b) A true copy of the approved building system pursuant to which the modular building unit or component was or is to be manufactured (unless that information has previously been furnished to such local government).

(2) A local government may inspect site preparation work and foundations, as well as the structural, mechanical, plumbing, and electrical connection(s) among modular building units, for compliance with applicable law.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305, 68-102-113, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004.

Tenn. Comp. R. & Regs. 0780-02-13-.16 DEPARTMENT FUNCTIONS AND COMMISSIONER’S INSPECTION PROGRAM

(1) Inspectio ns and Monitoring of the Approved Construction Inspection Program.

(a) The Commissioner and the Commissioner’s authorized representatives may, at reasonable hours and without advance notice:

1. Inspect any activities carried on by a manufacturer, dealer, installer, design review agency or construction inspection agency which are regulated under this

chapter; and 2. Monitor the performance of any approved design review agency or construction inspection agency in order to determine whether it is properly discharging its responsibilities under this chapter.

(b) With respect to any monitoring conducted pursuant to subparagraph (1)(a)2. above, the Department will:

1. Keep on file in its offices a report of its findings;

2. Send a copy of such report to any affected approved inspection agency; and 3. Notify such agency of any deficiencies and the time by which they must be corrected.

(2) Commissioner’s Inspection Program.

(a) Residential Inspections for modular building units will be conducted as site-built construction as authorized in Tenn. Comp. R & Regs. 0780-02-23. All permits and inspections authorized in that chapter will be required for modular building units excluding footings and foundations.

(b) Commercial Inspections for modular building units will be conducted as site-built construction as authorized in Tenn. Comp. R. & Regs. 0780-02-02. All plans review and inspections authorized in that chapter will be required for modular building units.

(c) Electrical Inspections for modular building units will be conducted as site-built electrical installations as authorized in Tenn. Comp. R. & Regs. 0780-02-01. All permits and inspections authorized in that chapter will be required for modular building units.

(3) Technical Services.

(a) Upon request, the Department will provide clarification in the field of technical data relating to the application of the standards.

(b) The fee for field technical services by the Department shall be forty dollars ($40.00) per man-hour, plus all necessary expenses in accordance with the comprehensive travel regulations as promulgated by the Department of Finance and Administration and approved by the Attorney General. The minimum time billed shall be four (4) hours.

(4) Damaged Units or Components.

(a) The Department will require any damaged modular building unit or component to be brought into compliance with the standards promptly. If any such unit or component is not brought into compliance within a reasonable time, or if it is so damaged that it cannot be brought into compliance, the Department will order that label be removed from such unit or component.

(b) Irreparably damaged modular building units or components shall be disposed of in accordance with applicable law.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305, 68-102-113, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed June 10, 2004; effective August 24, 2004. Amendments filed June 15, 2009; effective August 29, 2009. Amendments filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.17 DISCIPLINARY PROCEEDINGS

(1) The Commissioner may refuse to issue or renew, or suspend or revoke, any license to act as a manufacturer, dealer, or installer, or any approval to act as a design review agency or construction inspection agency, on any of the following grounds:

(a) Obtaining or attempting to obtain such license or approval by fraud or misrepresentation;

(b) Violation of any provision of this Chapter or Tenn. Code Ann. Title 68, Chapter 126,

Part 3;

(c) Willful or consistent failure to comply with the standards;

(d) Conviction in a court of competent jurisdiction of any crime relating to activities regulated by this chapter;

(e) Employment of fraudulent devices, methods, or practices in connection with activities regulated by this chapter;

(f) Offering for sale, either wholesale or retail, products of an unlicensed manufacturer;

(g) Offering for sale, either wholesale or retail, unlabeled modular building units or components;

(h) Having such license or approval refused, suspended, or revoked by another state;

(i) Any cause for which issuance of such license or approval could have been refused had it existed and been known to the Commissioner at the time of issuance; or (j) Selling modular building units to an unlicensed dealer.

(2) The Department will notify all licensed manufacturers of any suspension or revocation of approval of a design review or construction inspection agency. Such notice will contain instructions as to the disposition of modular building units or components previously labeled by the agency whose approval has been suspended or revoked.

(3) A design review or construction inspection agency whose approval has been suspended or revoked shall, within thirty (30) days of such suspension or revocation, deliver to the custody of the Department:

(a) Copies of all records required to have been kept by the agency; and (b) All labels in the possession, or under the control or responsibility, of the agency.

(4) The Commissioner may, in a lawful proceeding respecting any individual or entity required to be licensed, or approved or who is otherwise subject to regulation by the Department, in addition to or in lieu of any other lawful disciplinary action, assess a civil penalty for each separate violation of a statute or rule by such individual/entity. The amount of any such civil penalty assessed shall be a minimum of one hundred dollars ($100.00) and shall not exceed five thousand dollars ($5000.00) for each day of violation or for each act of violation.

(a) In determining the amount of a civil penalty the Commission may consider the following factors:

(i) Whether the amount imposed will be a substantial economic deterrent to the violator;

(ii) The circumstances leading to the violation;

(iii) The severity of the violation and the risk of harm to the public;

(iv) The economic benefits gained by the violator as a result of non-compliance; and (v) The interest of the public.

(b) For purposes of the assessment of civil penalties pursuant to this rule, each separate act shall constitute a separate violation and each day of continued violation shall constitute a separate violation.

History

• Authority: T.C.A. §§ 68-102-113, and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed October 2, 1989; effective January 29, 1990. Amendment filed June 10, 2004; effective August 24, 2004. Amendment filed June 15, 2009; effective August 29, 2009.

Tenn. Comp. R. & Regs. 0780-02-13-.18 CONTESTED CASES

The provisions of the Uniform Administrative Procedures Act (Tenn. Code Ann. Title 4, Chapter 5) shall govern all matters and procedures respecting the hearing and judicial review of any contested case (as defined therein) arising under this chapter.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986.

Tenn. Comp. R. & Regs. 0780-02-13-.19 SEVERABILITY

If any provision of this chapter or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions of applications of the

chapter which can be given effect without the invalid provision or application, and to that end the provisions of this chapter are declare to be severable.

History

• Authority: T.C.A. §§ 68-36-302 through 68-36-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986.

Tenn. Comp. R. & Regs. 0780-02-13-.20 APPLICABILITY

After January 4, 1988, the provisions of this chapter shall apply to all modular building units and components, including those not intended or used for residential occupancy, except any storage building having an area of less than one hundred fifty (150) square feet and no electrical or plumbing systems.

History

• Authority: T.C.A. §§ 68-102-113 and 68-126-305.
• Administrative History: Original rule filed November 20, 1987; effective January 4, 1988. Amendment filed June 10, 2004; effective August 24, 2004.

Tenn. Comp. R. & Regs. 0780-02-13-.21 DISPUTE RESOLUTION

(1) Disputes that arise during the process by which the Department reviews whether a modular building unit or component has been manufactured and inspected in accordance with the Tennessee Modular Building Act shall be resolved as follows:

(a) When a dispute arises between the owner, design review agency, construction inspection agency, manufacturer, installer, or contractor on a project and the Department as to the interpretation or applicability of a provision of the adopted codes and standards, the dispute shall be submitted to the Director for resolution.

(b) If the disputing party disagrees with the decision of the Director, the dispute shall be submitted to the Director’s supervisor within the Division for resolution.

(c) If the disputing party disagrees with the decision of the Director’s supervisor within the Division, the dispute shall be submitted to the Commissioner of Commerce and Insurance, or designee, for resolution.

(d) At any point during this process, the parties may agree to submit the dispute to the publisher of the applicable codes and standards for a written opinion.

(2) The entire dispute resolution process set forth in paragraph (1) above shall be completed as quickly as possible, but no more than thirty (30) calendar days from the date that the dispute is first submitted for resolution, unless the dispute is submitted to the publisher of the codes and standards for an opinion or an extension is granted at the Commissioner’s discretion.

(3) If there are any fees charged by the publisher for rendering a written opinion, those fees shall be paid by the disputing party before an acknowledgement from the Department recognizing compliance with the Tennessee Modular Building Act is issued.

History

• Authority: T.C.A. §§ 68-102-113, 68-126-302, and 68-126-305.
• Administrative History: New rule filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-13-.22 EQUIVALENCIES

(1) Wherever there are practical difficulties involved in carrying out the provisions of this chapter and the codes and standards adopted in this chapter, the Commissioner, or designee, shall have the authority to grant modifications for individual cases, upon application of the owner or owner’s representative, provided the Commissioner, or designee, shall first find that the special reason makes the strict application of the codes and standards adopted in this

chapter impractical, that the modification is in compliance with the intent and purpose of the codes and standards adopted in this chapter, and that such modification does not lessen health, accessibility, life and fire safety, or structural requirements. The details of action granting modifications shall be recorded and kept in the files of the Division.

(2) The provisions of the codes and standards adopted in this chapter are not intended to prevent the installation of any material or to prohibit any design or method of construction not specifically prescribed by the codes and standards, provided that any such alternative has been approved. An alternative material, design or method of construction shall be approved where the Commissioner, or designee, finds that the proposed design is satisfactory, that it complies with the intent of the codes and standards adopted in this chapter, and that the material, method or work offered is, for the purpose intended, at least the equivalent of that prescribed by the codes and standards adopted in this chapter in quality, strength, effectiveness, fire resistance, durability and safety.

(3) A party may request that an existing modular building unit be assigned a label if the party is currently licensed in Tennessee as a modular building unit manufacturer or retailer, or was licensed as such at the time of manufacture. The party shall provide the following information upon request:

(a) All plans by which the structure was constructed, sealed by a licensed Tennessee architect or engineer;

(b) Copies of all plant records pertaining to the inspection of the unit at the time of the manufacture, if applicable;

(c) A written statement from a Tennessee-approved third-party design review agency, Tennessee-approved construction inspection agency, or Tennessee licensed engineer or architect, which provides that the modular building unit meets all current applicable codes and regulations for the construction of modular building. Dismantling of part of the structure may be required in order to ensure that the structural, plumbing, mechanical, and electrical systems are compliant;

(d) The location on which the structure will be installed;

(e) Whether the structure will be pri vately or publicly owned;

(f) Other states’ programs, if applicable, that have approved the structure as a modular building unit, including contact information and any applicable plan number or other identifying information for such approval; and (g) Any and all inf ormation otherwise requested by the Department.

History

• Authority: T.C.A. §§ 68-102-113, 68-126-302, and 68-126-305.
• Administrative History: New rule filed March 31, 2021; effective June 29, 2021.

Tenn. Comp. R. & Regs. 0780-02-23-.02 [Adoption by Reference] may be used for any “dwelling” (as defined therein) covered by such code. This includes units that a manufacturer designates or describes as being a “tiny home” where all of the following apply:

(a) The unit is built upon a fixed chassis but does not fall under the regulation of the U.S.

Department of Housing and Urban Development;

(b) The unit is designed primarily for use as a dwelling unit that includes permanent provisions for water supply and sanitation; and (c) The unit is provided with an engineered anchoring system design for permanent installation.

(4) This rule shall not be construed as adopting any provision of the cited publications which establishes:

(a) An optional or recommended, rather than mandatory, standard or practice; or (b) Any agency, procedure, fees, or penalties for administration or enforcement purposes.

(5) In order to provide a transition period for the application of newly adopted codes, for a period of one hundred and twenty (120) days after the eff ective date of a code change, a manufacturer may begin construction of modular units based on previously approved plans for the codes that were in effect on the day immediately prior to the effective date of the newly adopted codes.

(6) Inspections shall be conducted through one of the following programs:

(a) Approved Construction Inspection Program; or (b) Commissioner’s Inspection Program (residential or commercial and electrical).

History

• Authority: T.C.A. §§ 68-102-113 and 68-126-305.
• Administrative History: Original rule filed September 17, 1986; effective November 1, 1986. Amendment filed November 20, 1987; effective January 4, 1988. Amendment filed October 2, 1989; effective January 29, 1990. Amendment filed June 10, 2004; effective August 24, 2004. Amendment filed June 15, 2009; effective August 29, 2009. Amendments filed March 31, 2021; effective June 29, 2021.

Chapter 0780-02-14 Fire Extinguishers

Tenn. Comp. R. & Regs. 0780-02-14-.01 DEFINITIONS

(1) For purposes of this Chapter, unless the context otherwise requires, the definitions of terms contained in Tenn. Code Ann. § 62-32-203 are applicable. In addition:

(a) “Authorization” means authorization issued by the Division (and noted on a firm's certificate of registration) to perform hydrostatic testing.

(b) “Business” means the installation or service of portable fire extinguishers or fixed fire extinguisher systems.

(c) “Certificate” means a certificate of registration issued by the Division to a firm, or to a branch office of a firm.

(d) “Impairment” means a condition which would not permit a portable fire extinguisher or fixed fire extinguisher system to operate in a manner consistent with its original design and installation.

(e) “Inspection” means the act of checking portable fire extinguishers or fixed fire extinguisher systems against the applicable specifications, standards, and manufacturer’s installation manuals. An inspection shall not include items required to be inspected at thirty (30) day intervals as indicated by Standard for Portable Fire Extinguishers (NFPA 10-2007), published by the National Fire Protection Association (NFPA).

(f) “License” means a license issued by the Division to an extinguisher specialist.

(g) “Manufacturer’s examination” means an examination on the business which is either:

1. administered by a manufacturer or portable fire extinguishers and/or fixed fire extinguisher systems and approved by the Division; or 2. administered or sanctioned by the Division.

(h) “NFPA” means the National Fire Protection Association, Inc., a nationally recognized standards making organization.

(i) “Permit” means a permit issued by the Division to an extinguisher technician.

(j) “School” means a course of instruction or study on the business.

(k) “Standards” means the standards for the installation and service of portable fire extinguishers and fixed fire extinguisher systems established by Tenn. Comp. R & Regs. 0780-02-14-.02.

History

• Authority: T.C.A. §§ 62-32-202 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-14-.02 STANDARDS

(1) Unless otherwise provided by applicable law or the provisions of this Chapter, the standards for the installation and service of portable fire extinguishers and fixed fire extinguisher systems in the State of Tennessee shall be those prescribed in:

(a) Standard for Portable Fire Extinguishers (NFPA 10-2007), published by the National Fire Protection Association (NFPA), Batterymarch Park, Quincy, MA 02269.

(b) Standard on Carbon Dioxide Extinguishing Systems (NFPA 12-2008), published by the NFPA.

(c) Standard on Halon 1301 Fire Extinguishing Systems (NFPA 12A-2004), published by the NFPA.

(d) Standard for Dry Chemical Extinguishing Systems (NFPA 17-2002), published by the NFPA.

(e) Standard for Wet Chemical Extinguishing Systems (NFPA 17A-2002), published by the NFPA.

(f) Standard on Wetting Agents (NFPA 18-2006), published by the NFPA.

(g) Standard for Ventilation Control and Fire Protection of Commercial Cooking Operations (NFPA 96-2008), published by the NFPA.

(h) Standard for Aircraft Hand Portable Fire Extinguishers (NFPA 408-2004), published by the NFPA.

(i) Standard on Clean Agent Fire Extinguishing Systems (NFPA 2001-2008), published by the NFPA.

(j) Standard for Fixed Aerosol Fire-Extinguishing Systems (NFPA 2010-2006), published by the NFPA.

(2) This rule shall not be construed as adopting any provision of the cited publications which establishes:

(a) An optional or recommended, rather than mandatory, standard or practice; or (b) Any agency, procedures, fees, or penalties for administration or enforcement purposes.

History

• Authority: T.C.A. §§62-32-202 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-14-.03 CERTIFICATE OF REGISTRATION

(1) An application for a certificate of registration as a firm must be signed by the sole proprietor, by each partner of a partnership, or by the president and secretary of a corporation or organization. The application shall include:

(a) Written consent for representatives of the Division to enter, examine, and inspect any premises, building, room, or establishment used by the applicant while engaged in the business to determine compliance with the provisions of T.C.A. Title 62, Chapter 32,

Part 2, and this chapter; and (b) A statement detailing the applicant's qualifications (including education and experience) to engage in the business.

(2) Before granting a certificate, the Division (or an individual or agency approved by the Division) must determine that the applicant maintains a shop sufficiently equipped to enable the firm to service adequately the portable fire extinguishers and/or fixed fire extinguisher systems which it sells and installs.

(3) Every firm shall maintain a specific business location, which shall be indicated on the certificate.

(4) Each certificate shall be conspicuously posted on the premises of the firm office for which it is issued.

(5) A change of ownership of a registered firm, or branch office thereof, invalidates the current certificate. To assure continuation of the business, an application for a new certificate should be submitted to the Division, not less than fourteen (14) days prior to such change.

(6) A change of name, location, or mailing address requires a revised certificate. In the event of such change, the certificate holder shall, within fourteen (14) days thereafter, send to the Division:

(a) Written notice of the change; and (b) The current certificate.

History

• Authority: T.C.A. §§62-32-202, 62-32-204 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987.

Tenn. Comp. R. & Regs. 0780-02-14-.04 AUTHORIZATION

If an applicant for a certificate of registration as a firm seeks authorization to perform hydrostatic testing, the applicant shall demonstrate to the Division's satisfaction that at least one (1) employee of the firm is qualified to provide such service.

History

• Authority: T.C.A. §§ 62-32-202, 62-32-204 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987.

Tenn. Comp. R. & Regs. 0780-02-14-.05 EXTINGUISHER SPECIALIST LICENSE

(1) An application for a license as an extinguisher specialist shall include:

(a) A written statement from the firm for which the applicant works, supporting the applicant's competency to act as an extinguisher specialist; and (b) Satisfactory proof of the applicant's successful completion of a manufacturer's examination and school.

(2) A change of firm affiliation, name, home address, or mailing address requires a revised license. In the event of such change, the licensee shall, within fourteen (14) days thereafter, send to the Division:

(a) Written notice of the change;

(b) The current license.

(3) No holder of an extinguisher specialist license shall:

(a) Permit the use of such license by other persons;

(b) Engage in the business unless such licensee is an employee, agent, or servant of a registered firm, or (c) Perform any act of business which is beyond the limitations of his firm's certificate.

History

• Authority: T.C.A. §§ 62-32-202, 62-32-204 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-14-.06 EXTINGUISHER TECHNICIAN PERMIT

(1) An application for an extinguisher technician permit shall include satisfactory proof of the applicant’s successful completion of a manufacturer’s examination and school. Such examination may be less comprehensive and rigorous than that required by an applicant for an extinguisher specialist license.

(2) A change of firm affiliation, name, home address, or mailing address requires a revised permit. In the event of such change, the permit holder shall, within fourteen (14) days thereafter, send to the Division:

(a) Written notice of the change; and (b) The current permit.

History

• Authority: T.C.A. §§ 62-32-202, 62-32-204 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-14-.07 TEMPORARY APPROVAL

(1) Pending the Department's consideration of an applicant's qualifications for a certificate, authorization, license, or permit, the Department may grant the applicant temporary approval to act as a firm, extinguisher specialist, or extinguisher technician upon receipt of the required application (accompanied by the proper fee).

(2) Any temporary approval granted pursuant to this rule shall expire when the application has been finally determined by the Department.

History

• Authority: T.C.A. §§ 62-32-202 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987.

Tenn. Comp. R. & Regs. 0780-02-14-.08 ALTERATION OF CERTIFICATE, LICENSE, OR PERMIT

A certificate, license, or permit shall become void if it is in any way altered.

History

• Authority: T.C.A. §§ 62-32-202 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987.

Tenn. Comp. R. & Regs. 0780-02-14-.09 RESTRICTIONS

(1) No certificate or license will be issued to any person who is under eighteen (18) years of age.

(2) If the Division determines that an applicant for a certificate, license, or permit is qualified to engage only in the installation and service of portable fire extinguishers, the Division shall limit the terms of the certificate, license, or permit accordingly.

(3) If an applicant qualifies for a license or permit by passing a test administered by a manufacturer, the Division may limit the business which may be conducted under such license or permit to installation or service of that manufacturer's equipment.

(4) A certificate or license does not authorize the holder to:

(a) Enforce the provisions of this chapter;

(b) Enter any building without the owner's consent; or (c) Perform hydrostatic testing without complying with all applicable regulations of the United States Department of Transportation.

(5) Nothing in this chapter shall:

(a) Preclude a manufacturer from limiting its authorization to install or service its portable fire extinguishers or fixed fire extinguisher systems to those persons who meet criteria established by the manufacturer; or (b) Relieve a firm from the responsibility to comply with any applicable local law requiring notification to local authorities whenever a portable fire extinguisher or fixed fire extinguisher system becomes inoperable.

History

• Authority: T.C.A. §§ 62-32-202 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987.

Tenn. Comp. R. & Regs. 0780-02-14-.10 INSPECTION AND SERVICE

Inspection and service, where required, shall be performed by a registered firm.

History

• Authority: T.C.A. §§ 62-32-202 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987.

Tenn. Comp. R. & Regs. 0780-02-14-.11 SERVICE TAGS

(1) Whenever a firm performs an installation, service, or inspection, the firm shall:

(a) Indicate on an external "service tag" or internal service marking (as appropriate) the following information:

1. "DO NOT REMOVE BY ORDER OF THE STATE FIRE MARSHAL" (all capital letters at least 10-point boldface type);

2. Firm's name, address and certificate number;

3. Extinguisher specialist's name, license number, and signature;

4. Date;

5. Type of work performed;

6. Date of last hydrostatic test performed; and 7. Owner's name and address.

AND (b) Attach the service tag to (or imprint the service marking on) the portable fire extinguisher or fixed fire extinguisher system.

(2) (a) Service tags shall be approximately 5 1/4 inches in height and 2 5/8 inches in width, and shall not be red in color. They shall be attached in such a position as to permit convenient inspection and not hamper actuation or operation of the equipment.

(b) Service markings shall be indelibly imprinted on the inside of the equipment.

(3) Only authorized employees of a firm, authorized representatives of the Division, or local officials having jurisdiction may remove a service tag.

History

• Authority: T.C.A. §§ 62-32-202 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987.

Tenn. Comp. R. & Regs. 0780-02-14-.12 RED TAGS

(1) A firm shall securely attach a red tag to:

(a) A portable fire extinguisher when conditions described in 5-1.3 of NFPA 10 are found; and (b) A fixed fire extinguisher system if:

1. The system met the applicable standards at the time of installation, but does not meet the current standards;

2. The system must, in the course of installation or service, be left unattended in any condition other than automatic operation in all required appurtenant devices; and 3. An impairment or hazard extension (modification) is found.

(2) Whenever action is taken under paragraph (1) of this rule, the firm shall promptly:

(a) Transmit written notice (with appropriate recommendations) to the owner (or his representative); or (b) Furnish copies of the notice to the Division and the local officials having jurisdiction.

(3) If a portable fire extinguisher is red-tagged, it shall be removed from service and replaced with an approved substitute.

(4) A service tag shall not be installed on a red-tagged portable fire extinguisher or fixed fire extinguisher system until it has been re-inspected and found to be in compliance with the standards.

(5) Red tags shall be the same size as service tags.

(6) Red tags shall bear the following information:

(a) "DO NOT REMOVE BY ORDER OF THE STATE FIRE MARSHAL" (all capital letters at least 10-point boldface type);

(b) Firm's name, address, and certificate number;

(c) Extinguisher specialist's name, license number, and signature;

(d) Date;

(e) Impairment; and (f) Owner's name and address.

(7) Only authorized employees of a firm, authorized representatives of the Division, or local officials having jurisdiction may remove a red tag.

History

• Authority: T.C.A. §§ 62-32-202 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987.

Tenn. Comp. R. & Regs. 0780-02-14-.13 ENFORCEMENT

The Division may make or cause to be made inspections from time to time to assure compliance with the provisions of T.C.A., Title 62, Chapter 32, Part 2, and this chapter. Where any such inspection discloses violation(s) of the law or this chapter, the Division may order the correction of the violation(s) upon such terms as may be deemed appropriate.

History

• Authority: T.C.A. §§ 62-32-202 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987. 0780-02-14.-14 FEES. (1) Fees will be charged in accordance with the following schedule: (a) Certificate. 1. Main Office (i) Application $ 50 (ii) Initial $300 (iii) Renewal $200 2. Branch Office (i) Application $ 50 (ii) Initial $ 50 (iii) Renewal $ 50 (b) Authorization to perform hydrostatic testing of fire extinguishers. 1. Initial $ 50 2. Renewal $ 25 (c) License. 1. Application $ 25 2. Initial $ 50 3. Renewal $ 50 (d) Permit. $ 30 (e) Duplicates. 1. Certificate $ 50 2. License $ 30 3. Permit $ 20 (f) Changes. 1. Certificate $ 50 2. License $ 30 3. Permit $ 20 (g) Changes of Ownership. 1. Main Office $300 2. Branch Office $ 50 (2) Every fee charged under this rule shall be paid by check or money order payable to the Tennessee Department of Commerce and Insurance. (3) A renewal application accompanied by the required fee is deemed to be timely filed if it received before or on the expiration date of the license or registration for which renewal is sought. (4) The Division, or its designee, administering the examination may charge an appropriate fee to be paid by the applicant for each examination or reexamination for portable or fixed extinguisher specialist license, or portable or fixed extinguisher technician permit. Authority: T.C.A. §§ 62-32-202, 62-32-204, 62-32-210, and 62-32-211.

Tenn. Comp. R. & Regs. 0780-02-14-.15 SEVERABILITY

If any provision of this chapter or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the chapter which can be given effect without the invalid provision or applications, and to that end the provisions of this

chapter are declared to be severable.

History

• Authority: T.C.A. §§ 62-32-202 and 62-32-211.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987.

Tenn. Comp. R. & Regs. 0780-02-14-.16 EFFECTIVE DATE

The provisions of this chapter shall take effect on January 1, 1987; except, however that the information required by paragraph (3)(a) of Rule 0780-02-14-.11 SERVICE TAGS and paragraph (6)(a) of Rule 0780-02-14-.12 RED TAGS shall not be mandatory until July 1, 1987.

History

• Authority: the agency will fill out the authority for this one.
• Administrative History: Original rule filed November 17, 1986, effective January 1, 1987.

Chapter 0780-02-15 Blasting Standards

Tenn. Comp. R. & Regs. 0780-02-15-.01 DEFINITIONS

(1) For purposes of this chapter, except where the context otherwise requires, the definitions applicable to this chapter are those found in Tenn. Code Ann. § 68-105-102. In addition, the following definitions are applicable to the standards adopted in rule 0780-02-15-.02:

(a) “Blast area” means the area including the blast site and the immediate adjacent area within the influence of flying rock, missiles and concussion.

(b) “Blast site” means the area where explosive material is handled during loading of the blast hole, including fifty (50) feet in all directions from the perimeter formed by the loaded holes. A minimum of thirty (30) feet can replace the fifty (50) feet requirement if the perimeter for loaded holes is marked and separated from the non-blast site areas by a barrier. The fifty (50) feet distance requirements, as applicable, apply in all directions along the full depth of the blasthole. In underground blasts, at least fifteen (15) feet of solid rib, pillar or broken rock can be substituted for the fifty (50) feet distance.

(c) “Blast zone” means the area beyond the blast area that may be influenced by blasting operations. Areas beyond the initial blast area must have reasonable precautionary measures such as posting of signs and guards and redirection of traffic.

(d) “Binary explosive” means a blasting explosive formed by mixing or combining two (2) plosophoric materials which must be specifically packaged for that purpose (for example, ammonium nitrate and nitromethane).

(e) “Bulk mix” means a mass of explosive material prepared for use in bulk form without packaging.

(f) “Bulk mix delivery equipment” means equipment (usually a motor vehicle with or without a mechanical delivery device) that transports explosive materials in bulk form for mixing or loading directly into boreholes or both.

(g) “Fire-resistant construction” means construction designed to provide reasonable protection against fire. For exterior walls of magazines constructed of wood, this is defined as the fire resistance equivalency provided by sheet metal of not less than twenty-six (26) gauge.

(h) “Flyrock” means any dirt, mud, stone, fragmented rock or other material that is displaced from the point of the blast, traveling in the air or along the ground.

(i) “Inhabited building” means any building or structure regularly used in whole or part as a place of human habitation. The term includes any church, school, store, railway passenger station, airport passenger terminal and any other building or structure where people are accustomed to congregate or assemble. The term does not include any building or structure occupied in connection with the manufacture, transportation, storage, or use of explosive materials.

(j) “Labeled” means equipment or materials to which has been attached a label, symbol or other identifying mark of an organization that is acceptable to the Commissioner or his or her authorized representative and concerned with product evaluation that maintains periodic inspection of production of labeled equipment or materials and by whose labeling the manufacturer indicates compliance with appropriate standards or performance in a specified manner.

(k) “Listed” means equipment, materials or services included in a list published by an organization acceptable to the Commissioner or his or her authorized representative and concerned with evaluation of products or services that maintains periodic inspection of production of listed equipment or materials or periodic evaluation of services and whose listing states either that the equipment, material or service meets identified standards or has been tested and found suitable for a specified purpose.

(l) “Manufacturing” means mixing, blending, extruding, assembling, disassembling, chemical synthesis and other functions involved in making a product or device that is intended to explode.

(m) “Plosophoric materials” means two (2) or more unmixed, commercially manufactured, prepackaged chemical ingredients (including oxidizers, flammable liquids or solids or similar ingredients) that are not classified as explosives but that, where mixed or combined, form a blasting explosive.

History

• Authority: T.C.A. §§68-105-108 and 68-105-116.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Amendment filed February 13, 2003; effective April 29, 2003.

Tenn. Comp. R. & Regs. 0780-02-15-.02 MINIMUM STANDARDS FOR BLASTING; ADOPTION BY REFERENCE

(1) Unless otherwise provided by applicable law or the provisions of this Chapter, the required minimum standards for blasting in the State of Tennessee shall be those prescribed in Tenn.

Code Ann. Title 68, Chapter 105, et seq. and those in the following publications:

(a) The following portions of the Code of Federal Regulations (CFR) that pertain to a specific explosive situation or application:

1. Code of Federal Regulations, Title 27, Alcohol, Tobacco, Firearms and Explosives (ATF), Chapter II, Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice, Subchapter C, Explosives, Part 555 Commerce in Explosives (most recent edition). This CFR includes conduct of business, storage of explosives and magazine construction.

2. Code of Federal Regulations, Title 49, Transportation, Subtitle B, Other Regulations Relating to Transportation, Chapter I, Research and Special Programs Administration, Department of Transportation, Subchapter C, Hazardous Materials Regulations, Part 172 Hazardous Materials Table, Special Provisions, Hazardous Materials Communications, Emergency Response Information, and Training Requirements, Part 173 Shippers, General Requirements for Shipments and Packagings, Part 177, Carriage by Public Highway and Part 178, Specifications for Packagings (most recent edition). This CFR includes classification, packaging and transportation.

3. Code of Federal Regulations, Title 49, Transportation, Subtitle B, Other Regulations Relating to Transportation, Chapter III, Federal Motor Carrier Safety Administration, Department of Transportation, Subchapter B, Federal Motor Carrier Safety Regulations, Part 383, Commercial Driver’s License Standards;

Requirements and Penalties, Part 384, State Compliance with Commercial Driver’s License Program, Part 393, Parts and Accessories Necessary for Safe Operation, Part 396, Inspection, Repair, and Maintenance and Part 397, Transportation of Hazardous Materials; Driving and Parking Rules (most recent edition). This CFR includes transportation of explosives.

4. Code of Federal Regulations, Title 29, Labor, Subtitle B, Regulations Relating to Labor, Chapter XVII, Occupational Safety and Health Administration, Department of Labor, Part 1910, Occupational Safety and Health Standards, Subpart H, Hazardous Materials and Part 1926, Safety and Health Regulations for Construction, Subpart U, Blasting and the Use of Explosives (most recent edition). This CFR includes materials hazard communications and work place safety around blasting and drilling operations.

5. Code of Federal Regulations, Title 30, Mineral Resources, Chapter I, Mine Safety and Health Administration, Department of Labor, Subchapter K, Metal and Nonmetal Mine Safety and Health, Part 56, Safety and Health Standards, Surface Metal and Nonmetal Mines, Subpart E, Explosives and Part 57, Safety and Health Standards, Underground Metal and Non-Metal Mines, Subpart E, Explosives and Subchapter O, Coal Mine Safety and Health, Part 72, Health Standards for Coal Mines and Part 75, Mandatory Safety Standards, Underground Coal Mines, Subpart N, Explosives and Blasting (most recent edition). This CFR includes mine safety.

6. Code of Federal Regulations, Title 30, Mineral Resources, Chapter VII, Office of Surface Mining Reclamation and Enforcement, Department of the Interior (most recent edition). This CFR includes blasting in open pits and coal mines, blasting in proximity of inhabited buildings, pre-blast surveys and notification of plans to conduct blasting.

(2) The codes adopted by reference herein shall not be construed as adopting any agency or procedure for administration or enforcement purposes.

(3) In the event of a conflict or inconsistency among codes adopted by reference herein, the more stringent code provision shall prevail, except as specified in paragraph (4) below.

(4) All persons governed by this rule shall conform to the adopted standard that is specifically applicable to the application or endeavor.

History

• Authority: T.C.A §§68-105-108 and 68-105-116.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Amendment filed February 13, 2003; effective April 29, 2003.

Tenn. Comp. R. & Regs. 0780-02-15-.03 REGISTRATION AND FEES

(1) The Department shall have the following four (4) classifications of registration:

(a) Blaster;

(b) Limited Blaster;

(c) Handler; and (d) Firm.

(2) An applicant for registration as a blaster shall:

(a) Submit a completed application on a form as prescribed by the Department along with a non-refundable application fee of fifteen dollars ($15.00);

(b) Pass the examination prescribed by the Department;

(c) Provide proof of having obtained one (1) year previous practical experience under the supervision of a registered, experienced blaster; and (d) Pay a registration fee of three hundred dollars ($300.00).

(3) An applicant for registration as a limited blaster shall:

(a) Submit a completed application on a form as prescribed by the Department along with a non-refundable application fee of fifteen dollars ($15.00);

(b) Pass the examination prescribed by the Department;

(c) Provide proof of having obtained one (1) year previous practical experience under the supervision of a registered, experienced limited blaster; and (d) Pay a registration fee of two hundred dollars ($200.00).

(4) An applicant for registration as a handler shall:

(a) Submit a completed application on a form as prescribed by the Department along with a non-refundable application fee of fifteen dollars ($15.00);

(b) Pay a registration fee of one hundred dollars ($100.00); and (c) Certify, by means of the applicant’s signature, knowledge of storage, security and accountability regulations established by applicable statutes, rules, and adopted standards.

(5) An applicant for registration as a firm shall:

(a) Submit a completed application on a form as prescribed by the Department along with a non-refundable application fee of fifteen dollars ($15.00);

(b) Pay a registration fee of seven hundred fifty dollars ($750.00); and (c) Submit proof of insurance required by Tenn. Code Ann. § 68-105-112.

(6) An applicant for registration by reciprocity shall submit a completed application a form as prescribed by the Department. The application must be accompanied by a non-refundable application fee of fifteen dollars ($15.00), the registration fee required by this chapter and a letter of good standing from the reciprocal state. The registration fee will be determined by the above-referenced classification scheme.

(7) A certificate of registration shall expire three (3) years following the date of its issuance or renewal and is invalid on that date unless renewed. Each registrant shall be required to renew by submitting a completed application as prescribed for the same to the Department, along with a renewal fee of three hundred dollars ($300.00) for blasters, two hundred dollars ($200.00) for limited blasters, one hundred dollars ($100.00) for handlers, and seven hundred fifty dollars ($750.00) for firms.

(8) An applicant for renewal of a blaster’s, limited blaster’s or handler’s registration shall also submit proof of having obtained the continuing education credits, required in rule 0780-02-15- .05 of this chapter during the preceding renewal period.

(9) A late fee of twenty-five dollars ($25.00) will be assessed against a registrant who renews registration late, but before one (1) year after the date of its expiration. A completed application on a form as prescribed by the Department must be submitted along with the applicable renewal fee to the Department.

(10) A registrant who fails to renew registration within one (1) year after expiration shall reapply for registration, pay the applicable fee and take the examination approved by the Department.

(11) The Department will issue to each registrant a pocket identification card.

(12) An applicant who fails an examination for registration may retake the examination after thirty (30) days after the test date without paying another application fee. An applicant who fails the examination twice shall reapply and pay the required application fee.

(13) Registration certificates or pocket identification cards that have been lost, misplaced or destroyed may be replaced upon submission of a fee of fifteen dollars ($15.00).

(14) No registration issued under this chapter may be assigned or transferred.

(15) The Department may designate a third party to administer and charge a reasonable fee for each examination or reexamination administered to applicants for blaster’s and limited blaster’s registrations.

(16) Any application that remains pending for twelve (12) months will expire. Refundable fees will be refunded if a written request is made to the Department within six (6) months of the expiration of the application.

History

• Authority: T.C.A. §§68-105-106, 65-105-108, 68-105-112, 68-105-113, 68-105-114, 68-105-116, and 68-105-121.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Amendment filed February 13, 2003; effective April 29, 2003. Amendment filed April 30, 2009; effective July 14, 2009. Amendment filed May 15, 2009; effective July 29, 2009.

Tenn. Comp. R. & Regs. 0780-02-15-.04 CLASSIFICATIONS OF REGISTRATION

(1) Blaster:

(a) A blaster is a person who is in responsible charge of any or all of the following during a blasting operation:

1. Direct supervision of the loading of explosives and firing of a blast;

2. Testing/inspection of initiation systems;

3. Control of initiation devices;

4. Completion and signature of the blaster’s report and or blast records;

5. Duties of handler as described in (3) below.

(b) The blaster shall be present when the charge is detonated.

(c) The blaster shall complete and sign a record for each blast pursuant to the requirements of Tenn. Code Ann. § 68-105-107.

(2) Limited blaster:

(a) A limited blaster is a person who is in responsible charge of individual blasts that shall not exceed five (5) pounds of explosives for each blast. A limited blaster is a person who is in responsible charge any or all of the following for individual blasts:

1. Direct supervision of loading of explosives and firing of a blast;

2. Testing/inspection of initiation systems;

3. Control of initiation devices;

4. Completion and signature of the blaster’s report and or blast records;

5. Duties of handler as described in number three (3) below.

(b) The limited blaster shall be present when the charge is detonated.

(c) The limited blaster shall complete and sign a record for each blast pursuant to the requirements of Tenn. Code. Ann. § 68-105-107.

(3) Handler:

(a) A handler is a person who engages in any or all of the following activities:

1. Ensures the explosives in the handler’s control are secured;

2. Ensures explosives are properly stored in approved magazines or are properly attended;

3. Directs the transportation of explosives;

4. Maintains inventory of explosive materials.

(b) A handler shall comply with all applicable statutes, rules and adopted standards.

(c) A handler may engage in blasting activity; provided, the handler engages in such operations under the direct supervision of a blaster or limited blaster.

(4) Firm:

(a) A firm is an entity engaged in blasting activity which purchases, receives or takes possession of explosives.

History

• Authority: T.C.A. §§68-105-106, 68-105-108, 68-105-113, 68-105-114, and 68-105-116.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Amendment filed February 13, 2003; effective April 29, 2003.

Tenn. Comp. R. & Regs. 0780-02-15-.05 CONTINUING EDUCATION

(1) As a prerequisite to renewing registration, registrants are required to obtain the following continuing education credits per renewal cycle:

(a) Blasters must obtain sixteen (16) hours of continuing education credits;

(b) Limited blasters must obtain eight (8) hours of continuing education credits;

(c) Handlers must obtain six (6) hours of continuing education credits.

(2) A continuing education course must be approved by the Commissioner or his or her authorized representative before the registrant will be granted credit for the course.

(3) The registrant shall provide verification to the Commissioner or his or her authorized representative of having obtained the continuing education credits required by this rule.

Verification consists of a form certifying attendance at the course and the number of continuing education hours obtained at the course and signed by both the registrant and the course instructor.

(4) The registrant shall submit to the Commissioner or his or her authorized representative the registrant’s verification form after taking the course and prior to the expiration of his or her registration. The registrant is responsible for ensuring timely submittal of the required verification. Documentation that shows that the registrant self-taught himself or herself without course instruction will not be accepted for continuing education credit.

(5) In order to obtain approval to provide course instruction, the course provider shall submit to the Commissioner or his or her authorized representative materials including an outline of the course instruction, biography of the instructor, the methods and tools that will be utilized in the course, number of instruction hours provided and the dates and times the course will be offered. A course provider seeking approval of a course pursuant to this paragraph shall submit the required documentation no later than ten (10) business days prior to the first offering of the course.

(6) A blaster, limited blaster or handler may apply on an individual basis for continuing education credit for a course which has not been approved in advance by the Commissioner or his or her authorized representative by submitting an agenda, number of instructional hours provided, biography of the instructor, the dates and times the course was offered, verification of attendance by both the registrant and the course instructor and any additional information requested by the Commissioner or his or her authorized representative as necessary for review of the course. A blaster, limited blaster or handler seeking approval of a course pursuant to this paragraph shall submit the required documentation no later than thirty (30) days after having taken the class. No credit for the course will be awarded unless and until the course is approved by the Commissioner or his or her authorized representative.

(7) Credit will be given to instructors who are registered for the teaching of courses. Instructors who are registered blasters may receive up to six (6) hours of credit for teaching per renewal cycle. Instructors who are registered limited blasters may receive up to four (4) hours of credit for teaching per renewal cycle. Instructors who are registered handlers may receive up to two (2) hours of credit per renewal cycle. Instructors shall receive credit only once for teaching an approved course.

(8) Credit may be granted for educational offerings which cover blasting-related topics such as those listed in paragraph (9) below which are consistent with the purpose of continuing education. Training may include a combination of classroom and/or practical field exercises.

(a) The viewing of video tapes is not acceptable for continuing education credit unless incorporated into a course wherein an instructor is available to accurately respond to questions raised from the viewing and correct any outdated information contained in the video tape.

(b) Acceptable sources of training are any in-state or out-of-state individuals, associations or entities that provide or deliver courses of instruction, training or educational sessions.

(9) The following list is not a complete list of continuing education topics, but the list represents acceptable course content:

(a) Job site:

1. Blast planning (including measuring the blast zone and selection of the drill bit size);

2. Blast site safety (including loading of holes, initiation of the blast and firing of the shot);

(b) Commerce in explosives (Federal and State requirements);

(c) United States Department of Transportation requirements (including proper packaging and labeling and commingling hazardous material);

(d) Subjects related to explosives, which can include the following:

1. New products;

2. Magazine housekeeping;

3. Blast design;

4. Safety;

5. Packing and unpacking explosives;

6. Storage practices;

7. Magazine construction;

8. Placarding;

9. Handling misfires.

(10) Registrants who take more than the required continuing education for the previous renewal period will not be permitted to carry-over the credit hours into the next renewal cycle.

(11) The Commissioner may conduct random audits of registrants and continuing education courses to assure compliance with this rule. Each registrant is responsible for maintaining sufficient records which may be used to support claimed continuing education credits.

History

• Authority: T.C.A. §§68-105-108, 68-105-116, and 68-105-121.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Amendment filed February 13, 2003; effective April 29, 2003. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-15-.06 BLASTING RESTRICTIONS

(1) Flyrock traveling in the air or along the ground that could result in personal injury or property damage shall not be cast from the point of the blast.

(2) The Commissioner or his or her authorized representative may require that special precautions be employed to reduce or control flyrock when a flyrock violation results from a blasting operation.

(3) Unless prior approval has been given by the Commissioner or his or her authorized representative, tunneling and surface blasting operations shall only be conducted during daylight hours. A written request for approval for blasting during nighttime hours must be submitted to the Commissioner or his or her authorized representative at least five (5) days in advance of the blasting operation at night. The Commissioner or his or her authorized representative may grant an exception to the five (5) day advance notice requirement in emergency circumstances as long as the Commissioner or his or her authorized representative has sufficient relevant information concerning the blasting operation to make a determination.

(4) A written request for approval of all non-emergency variations from the law or rules will require five (5) days advance notice to the Commissioner or his or her authorized representative. The Commissioner or his or her authorized representative may grant an exception to the five (5) day advance notice requirement in emergency circumstances as long as the Commissioner or his or her authorized representative has sufficient relevant information to make a determination.

History

• Authority: T.C.A. §§68-105-108 and 68-105-116.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Amendment filed February 13, 2003; effective April 29, 2003.

Tenn. Comp. R. & Regs. 0780-02-15-.07 BLASTING STORAGE AND DESTRUCTION OF MATERIALS

(1) Blasting Storage (a) Temporary storage. Explosives may be stored in an approved Type 2 or Type 3 magazine or day box for one (1) day’s usage only during daytime blasting operations and must be removed from temporary storage at the end of the work day. If the blasting firm or blaster has requested the Commissioner or his or her authorized representative to approve blasting at night, then the Commissioner or his or her authorized representative shall also consider appropriate requests to approve the extended use of the temporary storage during the nighttime blasting operations. The magazine or day box must be attended by a blaster, limited blaster or handler who has access to and knowledge of the contents. A blaster, limited blaster or handler must also be actively and directly in contact with, or within the sight of, without the aid of telescopic optical equipment or electronic devices, the temporary storage to maintain sufficient control.

(b) If the Commissioner finds emergency circumstances exist, in order to protect the safety and wellbeing of the public and individuals connected to the blasting operation, the Commissioner may direct his or her authorized representative to barricade the storage containers, relocate the explosive materials, or restrict the quantity of explosive materials that are handled at any temporary storage location.

(c) The blaster, limited blaster, handler or blasting firm shall post the following warning sign on all normal access roads to unattended explosive storage magazines:

DANGER

NEVER FIGHT EXPLOSIVE FIRES

EXPLOSIVES ARE STORED ON THIS SITE

CALL__________________

The sign shall be weather-resistant with a reflective surface and lettering at least two (2) inches or fifty (50) millimeters high.

(d) The blaster, limited blaster, handler or blasting firm shall provide reasonable precautionary measures such as posting of signs and guards and redirection of traffic in areas beyond the initial blast area in the blast zone.

(2) Destruction of Materials (a) In the event that it becomes necessary to destroy any explosives that present an immediate risk to people or property, all handling of explosives shall cease and the manufacturer or the Commissioner or his or her authorized representative shall be contacted immediately for assistance in coordination with other law enforcement officials. The manufacturer’s directions for destruction shall be followed without deviation unless otherwise directed by the Commissioner or his or her authorized representative.

History

• Authority: T.C.A. §§68-105-108 and 68-105-116.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Amendment filed February 13, 2003; effective April 29, 2003.

Tenn. Comp. R. & Regs. 0780-02-15-.08 PLOSOPHORIC MATERIALS OR BINARY MATERIALS

(1) Mixed or combined plosophoric materials are explosive materials and shall be stored and used in the same manner.

(2) Storage. Plosophoric materials shall be permitted to be stored in the same magazine with explosive materials, provided their total weight is included in the weight of explosives permitted in the magazine in order to comply with the quantity-distance requirements of the American Table of Distances for Storage of Explosives. Storage shall not introduce a hazard due to chemical incompatibility.

(3) Use (a) Binary or plosophoric materials shall be mixed or combined at the point of use and the procedures recommended by the manufacturer shall be followed strictly.

(b) Because the mixing or combining of plosophoric components produces an explosive material, the number of packages of the binary/plosophoic material combined at any one time shall be limited to the number needed for immediate use. The Commissioner or his or her authorized representative may waive this limitation upon appropriate request; provided, the extra binary/plosophoric material produced can be handled and stored in the same manner as explosive material.

(4) Record Keeping and Reporting (a) Thefts of plosophoric materials during transportation, storage and use shall be reported to the Commissioner or his or her authorized representative and law enforcement, as required for loss or thefts of explosive materials.

History

• Authority: T.C.A. §§68-105-108 and 68-105-116.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Amendment filed February 13, 2003; effective April 29, 2003.

Tenn. Comp. R. & Regs. 0780-02-15-.09 REPEALED

History

• Authority: T.C.A. §§68-105-108 and 68-105-116.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Repeal filed February 13, 2003; effective April 29, 2003.

Tenn. Comp. R. & Regs. 0780-02-15-.10 REPEALED

History

• Authority: T.C.A. §§68-105-108 and 68-105-116.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Repeal filed February 13, 2003; effective April 29, 2003.

Tenn. Comp. R. & Regs. 0780-02-15-.11 REPEALED

History

• Authority: T.C.A. §§68-105-108 and 68-105-116.
• Administrative History: Original rule filed July 11, 1991; effective August 25, 1991. Repeal filed February 13, 2003; effective April 29, 2003.

Chapter 0780-02-16 Certified Codes Inspectors Standards and Qualifications

Tenn. Comp. R. & Regs. 0780-02-16-.01 GENERAL REQUIREMENTS

(1) The purpose of inspector certification is to establish uniform minimum requirements designed to increase the level of competency and reliability of code enforcement personnel to the level that will enhance each local government's ability to protect the lives and property of its citizens from improper construction, fire, and related hazards.

(2) All applications or documents for certification shall be submitted to the State Fire Marshal's Office. All applications for initial certificati on and recertification shall be completed, in full, on forms approved by the State Fire Marshal’s Office.

(3) The applicant for certification shall provide satisfactory proof to the State Fire Marshal, or designee, that th e applicant understands applicable building, fire, plumbing, mechanical, electrical, or fuel gas codes through the regulations established in Tenn. Comp. R. & Regs. 0780-02-16. Application matters not specifically addressed herein will be at the discretion of the State Fire Marshal, or designee.

(4) When a certified codes inspector performs inspections pursuant to Tenn. Comp. R. & Regs. 0780-02-16, the codes inspector shall carry a certification identification card issued by the State Fire Marshal’s Office. Specialties in which the inspector is authorized to perform codes inspections may be listed on the certification identification card.

(5) Any new applicant fo r certification as a building, fire, plumbing, or mechanical codes inspector has up to twelve (12) months from the date of employment to satisfy the requirements fo r certification and submit the required application to the State Fire Marshal’s Office. All requirements for certification shall be satisfied within the first twelve (12) months of employment or excused for just cause by the State Fire Marshal, or designee. A new applicant shall be eligible to utilize the twelve (12) month period only once, unless otherwise authorized by the State Fire Marshal, or designee. An applicant to become an electrical code inspector must be certified before conducting any codes inspections.

(6) Municipalities and counties shall notify the State Fire Marshal’s Office within sixty (60) days after any new codes inspector who is required to obtain certification is hired. The notice shall be on a form provided by the State Fire Marshal’s Of fice for th is purpose and shall contain the name of the newly hired codes inspector and th e date of employment.

(7) Persons who conduct fire prevention inspections or pre-fire planning inspections are not required to be certified unless part of their job duties also includes fi re, building, plumbing, mechanical, electrical, or fuel gas code inspections.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-106, 68-120-113, and 68-120-118.
• Administrative History: Original rule filed July 28, 1993; effective October 11, 1993. Repeal and new rule filed August 22, 2008; effective November 5, 2008. Amendment filed September 25, 2009; effective February 28, 2010. Amendments filed December 19, 2017; effective March 19, 2018. Emergency rules filed December 30, 2019; effective through June 27, 2020. Amendments filed March 26, 2020; effective June 24, 2020.

Tenn. Comp. R. & Regs. 0780-02-16-.02 DEFINITIONS

(1) “Building Code Inspection” means an inspection fo r the purpose of enforcing and determining compliance with the adopted building code and as a result of which citations for failure to comply may be issued or other remedies or measures for enforcement of the building code may be in voked.

(2) “Building Code Inspector” means an individual who as part of his/her job duties performs building code inspections or resolves conflicts relative to application of the adopted building code. The inspector’s status shall be determined by job duties rather than job titl e.

(3) “Certification” means the designation and authorization conferred by the State Fire Marshal, or designee, on a municipal, county, and state employed inspector, who has made application and provided the satisfactory requisite understanding of applicable building, fi re, plumbing, mechanical, or fuel gas codes, to conduct or perform inspections and enforces adopted codes.

(4) “Chapter” means Tenn. Code Ann. §§ 68-120-101, et seq.

(5) “Continuing Education” means training courses related to the knowledge and enforcement of relevant code(s) and which are approved by the State Fire Marshal, or designee, for a designated specialty or specialties. The State Fire Marshal, or designee, shall specify the amount of credit hours awarded for approved training courses.

(6) “Department” means the Tennessee Department of Commerce and Insurance.

(7) “Electrical Code Inspection” means an inspection for the purpose of enforcing and determining compliance with the adopted electrical code and as a result of which cita tions for failure to comply may be issued or other remedies or measures for enforcement of the electrical code may be invoked.

(8) “Electrical Code Inspector” means an individual who as part of his/her job duties performs electrical code inspections or resolves conflicts relative to application of the adopted electrical code. The inspector’s status shall be determined by job duties rather than job title.

(9) “Fire Code In spection” means an inspection for the purpose of enforcing and determining compliance with the adopted fir e code and as a result of which citations for failure to comply may be issued or other remedies or measures for enforcement of the fire code may be in voked.

(10) “Fir e Code Inspector” means an individual who as part of his/her job duties performs fire code in spections or resolves conflicts relative to application of the adopted fire code. The inspector’s status shall be determined by job duties rather than job titl e.

(11) “Fire Prevention Inspection” means an inspection conducted by fire department personnel other than a fire code inspector. This inspection is advisory in nature (i.e. maintenance and housekeeping) by the fire department personnel and may result in a fi re code inspection.

(12) “Mechanical Code Inspection” means an inspection for the purpose of enforcing and determining compliance with the adopted mechanical or fuel gas code and as a result of which citations for failure to comply may be issued or other remedies or measures for enforcement of the mechanical or fuel gas code may be invoked.

(13) “Mechanical Code Inspector” means an individual who as part of his/her job duties performs mechanical or fuel gas code inspections or resolves conflicts relativ e to application of the adopted mechanical or fuel gas code. The inspector’s status shall be determined by job duties rather than job title.

(14) “Plumbing Code Inspection” means an inspection for the purpose of enforcing and determining compliance with the adopted plumbing code and as a result of which citations for failure to comply may be is sued or other remedies or measures for enforcement of the plumbing code may be invoked.

(15) “Plumbing Code Inspector” means an individual who as part of his/her jo b duties performs plumbing code inspections or resolves conflicts relative to application of th e adopted plumbing code. The inspector’s status shall be determined by job duties rather than job title.

(16) “Pre-Fire Planning Inspection” means a walk-through inspection for the purpose of determining building layout and other building conditions to aid firefighters if a fire occurs.

(17) “Specialty” or “specialties” means the designated field(s) of code(s) in which an inspector is certified and authorized to inspect, and which includes the following: Fire, Electrical, Building Commercial, Building Residential, Mechanical Commercial, Mechanical Residential, Plumbing Commercial and Plumbing Residential.

(18) “State Fire Marshal” means the Commissioner of the Department of Commerce and Insurance.

(19) “State Fire Marshal’s Office” means the Division of Fire Prevention at the Department of Commerce and Insurance.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-106, 68-120-113, and 68-120-118.
• Administrative History: Original rule filed July 28, 1993; effective October 11, 1993. Repeal and new rule filed August 22, 2008; effective November 5, 2008. Amendments filed September 25, 2009; effective February 28, 2010. Amendments filed December 19, 2017; effective March 19, 2018. Emergency rules filed December 30, 2019; effective through June 27, 2020. Amendments filed March 26, 2020; effective June 24, 2020.

Tenn. Comp. R. & Regs. 0780-02-16-.03 CERTIFICATION

(1) Any applicant seeking to obtain in itial certification as a certified codes inspector may contact the State Fire Marshal’s Office in Nashville or go to th e department’s website to acquire a copy of the required application form. An applicant shall submit a completed application form and eli gibility verification fo rm along with the required fee of forty-five dollars ($45.00) to the State Fire Marshal’s Office prior to obtaining certification.

(2) An applicant shall submit proof of successfully completing a recognized and accepted training course provided by professional codes organizations id entified in Tenn. Comp. R. & Regs.

Tenn. Comp. R. & Regs. 0780-02-16-.04 ACCEPTABLE STANDARDS, ORGANIZATIONS, AND COURSES

(1) The State Fire Marshal, or designee, shall determine the acceptable requirements for certification and each specialty in which an inspector performs inspections.

(2) The State Fire Marshal, or designee, shall recognize and accept certification from the following professional codes organizations as providing the appropriate level of standards and qualifications necessary for certification:

(a) International Code Council (ICC);

(b) National Fire Protection Association (NFPA);

(c) International Association of Electrical Inspectors (IAEI);

(d) Other appropriate professional codes organizations recognized by the State Fire Marshal, or designee; or, (e) Successful completion of an equivalent examinatio n administered at the discretion of the State Fire Marshal, or designee.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-106, 68-120-113, and 68-120-118.
• Administrative History: Original rule filed July 28, 1993; effective October 11, 1993. Repeal and new rule fi led August 22, 2008; effective November 5, 2008. Amendments filed December 19, 2017; effective March 19, 2018. Emergency rules filed December 30, 2019; effective through June 27, 2020. Amendments filed March 26, 2020; effective June 24, 2020.

Tenn. Comp. R. & Regs. 0780-02-16-.05 STANDARDS AND QUALIFICATIONS

In order to enable applicants for certification th e opportunity to acquire the knowledge and skills required to attain certification, the State Fire Marshal, or designee, shall establish or contract for training courses which meet the minimum standards and qualifications necessary for certification under this chapter.

These training courses shall be made available to governmental employees and other individuals with building, fire safety, plumbing, electrical, mechanical, or fuel gas code inspection enforcement responsibilities.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-106, 68-120-113, and 68-120-118.
• Administrative History: Original rule filed July 28, 1993; effective October 11, 1993. Repeal and new rule filed August 22, 2008; effective November 5, 2008. Amendment filed September 25, 2009; effective February 28, 2010. Amendments filed December 19, 2017; effective March 19, 2018. Emergency rules filed December 30, 2019; effective through June 27, 2020. Amendments filed March 26, 2020; effective June 24, 2020.

Tenn. Comp. R. & Regs. 0780-02-16-.06 RENEWAL OF CERTIFICATION

(1) Certification is valid for three (3) years. To renew a certification, inspectors shall submit a completed renewal application along with a fee of thirty-five dollars ($35.00) to the State Fire Marshal’s Office. The State Fire Marshal’s Office shall send each certified codes inspector a renewal application for certification at le ast sixty (60) days prior to the date of expiration of the original certificate. The renewal application for certification will be mailed by the State Fire Marshal’s Office to the last known business address, unless the inspector has requested otherwise.

(2) Certified codes in spectors shall have up to sixty (60) days following the expiration of their certification to fulfill all requirements for renewal of certification. All applications for renewal of certification filed during this late period shall be accompanied by a la te penalty fee of ten dollars ($10.00) in addition to the certific ation fee of thirty-five dollars ($35.00). Certifications are invalid during this late period and inspections shall not be performed by the inspector until an application for renewal of certification is approved.

(3) If the sixty (60) day late period has expired prior to an inspector fulfilling all requirements for renewal of certification, then the inspector shall apply for a new certification in accordance with T.C.A. §§ 68-120-113 and 68-120-118, and Tenn. Comp. R. & Regs. 0780-02-16.

(4) Certified fire, build ing, plumbing, and mechanical codes inspectors may renew certification as follows:

(a) Attendance and successful completion of State Fire Marshal, or designee, approved training courses which provide instruction related to an inspector’s specialty or to the appropriate code(s) for the purpose of attaining credit for renewal of certification.

Training courses should be approved in advance to receive credit; however, the State Fire Marshal, or designee, in his/her discretion, may approve a course and award specifi ed hours of credit after it is given. Organizations are encouraged to submit courses to the State Fire Marshal’s Office for approval at least fourteen (14) days prior to th e scheduled date of the course. There is a minimum requirement of thirty-six (36) hours of continuing education during the three (3) year certification period in order to renew certification. Proof of completion of thirty-six (36) hours of continuing education within thirty -six (36) months prior to renewal of certification shall be submit ted to the State Fire Marshal’s Office. The State Fire Marshal’s Of fice will not be responsible for training expenses incurred by inspectors.

(b) Successful completion of an examination administered at the discretion of the State Fire Marshal, or designee.

(c) Successful completion during the previous th ree (3) years of the next higher level of certification offered by a recognized and approved professional codes organization listed in Tenn. Comp. R. & Regs. 0780-02-16-.04.

(5) Certified electrical codes inspectors may renew certification as follows:

(a) Attendance and successful completion of State Fire Marshal, or designee, approved training courses which provide instruction related to electrical installations for the

purpose of attaining credit for renewal of certification. Training courses should be approved in advance to receive credit; however, the State Fire Marshal, or designee, in his/her discretion, may approve a course and award specified hours of credit after it is given. Organizations are encouraged to submit courses to the State Fire Marshal’s Office for approval at least fourteen (14) days prior to the scheduled date of the course.

There is a minimum requirement of twenty-four (24) hours of continuing education during the three (3) year certification period in order to renew certification. Proof of completion of twenty-four (24) hours of continuing education within thirty-six (36) months prior to renewal of certification shall be submitted to the State Fire Marshal’s Office. The State Fire Marshal’s Office will not be responsible for training expenses incurred by inspectors.

(b) Successful completion of an examination administered at the discretion of the State Fire Marshal, or designee.

(c) Successful completion during the previous three (3) years of the next higher level of certification offered by a recognized and approved professional electrical codes organization listed in Tenn. Comp. R. & Regs. 0780-02-16-.04.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-106, 68-120-113, and 68-120-118.
• Administrative History: Original rule filed July 28, 1993; effective October 11, 1993. Repeal and new rule filed August 22, 2008; effective November 5, 2008. Amendment filed September 25, 2009; effective February 28, 2010. Amendments filed December 19, 2017; effective March 19, 2018. Emergency rules filed December 30, 2019; effective through June 27, 2020. Amendments filed March 26, 2020; effective June 24, 2020.

Tenn. Comp. R. & Regs. 0780-02-16-.07 DENIAL, SUSPENSION, OR REVOCATION OF CERTIFICATION

(1) The State Fire Marshal, or designee, may refuse to issue, renew, or deny any application for certification or recertification if the specified requirements have not been fulfilled.

(2) The State Fire Marshal, or designee, may revoke, modify, suspend, or condition the certification of an inspector, if the State Fire Marshal, or designee, finds that the inspector has violated this chapter or any rule or regulation lawfully promulgated under this chapter.

Examples of these include, but are not limited to:

(a) The requirements for certification had not been met prior to certification;

(b) Any continuing responsibilities associated with certification are not being fulfilled;

(c) The inspector is not properly enforcing the provisions of this chapter;

(d) Any fraud, collusion, misrepresentation, or substantial mistake was involved in the procurement of certification; or (e) The inspector conducted an in spection on work performed or installations made by the in spector or by a member of the inspector’s immediate family, or th e inspector conducted an inspection on work performed or installations made by an entity or organization owned by the inspector or owned by any member of the inspector’s immediate family.

(3) The provisions of the Uniform Administrative Procedures Act, compiled in T.C.A. Title 4,

Chapter 5, shall govern all matters concerning the hearing and judicial review of any contested case arising under this chapter and any applicable rules and regulations.

History

• Authority: T.C.A. §§ 68-102-113, 68-120-106, and 68-120-113.
• Administrative History: Original rule filed July 28, 1993; effective October 11, 1993. Amendments filed December 19, 2017; effective March 19, 2018. Amendments filed March 26, 2020; effective June 24, 2020.

Tenn. Comp. R. & Regs. 0780-02-16-.08 EXPEDITED APPLICATIONS AND ACTIVE MILITARY SERVICE

(1) An applicant for certification meeting the requirements of T.C.A. § 4-3-1304(d)(1) may:

(a) Be issued a certification upon application and payment of all fees required for the issuance of such certification if, in the opinion of the State Fire Marshal, or designee, the requirements for certification of such other state are substantially equivalent to that required in Tennessee; or (b) Be issued a temporary certification as described herein if the State Fire Marshal, or designee, determines that the applicant’s certification does not meet the requirements for substantial equivalency, but that the applicant could perform additional acts, including, but not limited to education, training, or experience, in order to meet the requirements for the certification to be substantially equivalent. The State Fire Marshal’s Office may issue a temporary certification upon application and payment of all fees required for issuance of a regular certification of the same type which shall allow such person to perform services as if fully certified for a set period of time that is determined to be sufficient by the State Fire Marshal, or designee, for the applicant to complete such requirements.

1. After completing those additional requirements and providing the State Fire Marshal’s Office with sufficient proof thereof as may be required, a full certification shall be issued to the applicant with an issuance date of the date of the original issuance of the temporary certification and an expiration date as if the full certification had been issued at that time.

2. A temporary certification shall be issued for a period no longer than the length of a renewal cycle for a full certification of the same type.

3. A temporary certification shall expire upon the date set by the State Fire Marshal’s Office and shall not be subject to renewal except through the completion of the requirements for substantial equivalency as required by the State Fire Marshal, or designee, or by an extension of time granted for good cause by the State Fire Marshal, or designee.

4. Should an extension to a temporary certification cause the temporary certification to be in effect longer than the renewal cycle of a full certification, then the holder of the temporary certification shall file a renewal application with such documentation and fees, including completion of continuing education, as are required by the State Fire Marshal, or designee, for all other renewals of a full certification of the same type.

(2) Military education, training, or experience completed by a person described at T.C.A. § 4-3- 1304(d)(1)(B)(ii)(a)-(c) shall be accepted toward the qualifications, in whole or in part, to receive any certification issued by the State Fire Marshal’s Office if such military education, training, or experience is determined by the State Fire Marshal, or designee, to be substantially equivalent to the education, training, or experience required for the issuance of such certification.

(3) Any certified inspector who is a member of the national guard or a reserve component of the armed forces of the United States called to active duty whose certification expires during the period of activation shall be eligible to be renewed upon the inspector being released from active duty without payment of late fees or other penalties.

(a) The certification shall be eligible for renewal pursuant to this subsection for six (6) months from the person’s release from active duty.

(b) Any person renewing under this subsection shall provide the State Fire Marshal’s Office such supporting documentation evidencing activation as may be required by the State Fire Marshal’s Office prior to renewal of any certification pursuant to this chapter.

History

• Authority: T.C.A. §§ 4-3-1304(d)(1), 8-120-118, 68-102-113, 68-120-106, 68-120-113, and 68-120-118.
• Administrative History: Original rule filed December 19, 2017; effective March 19, 2018.

Chapter 0780-02-17 Liquefied Petroleum Gas Safety Regulations

Tenn. Comp. R. & Regs. 0780-02-17-.01 DEFINITIONS

(1) For purposes of this Chapter, unless the context otherwise requires, the definitions of terms contained in Tenn. Code Ann. § 68-135-101 are applicable. In addition:

(a) “Division” shall mean the Division of Fire Prevention of the Department of Commerce and Insurance.

(b) “NFPA” shall mean the National Fire Protection Association, Inc., a nationally recognized standards making organization.

(c) “Responsible Managing Employee (R.M.E.)” shall be the person responsible for active management of a licensed liquefied petroleum gas dealer facility, except for Class V facilities.

(d) “Good engineering practice” and the “bottle exchange business” shall be used to describe the type of safe placement for liquefied petroleum gas containers awaiting commercial use or resale.

History

• Authority: T.C.A. §§68-135-101, 68-135-107, and 68-102-113.
• Administrative History: Original rule filed April 21, 1994; effective July 5, 1994. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-17-.02 ADOPTION BY REFERENCE

(1) Unless otherwise provided by applicable law or the provisions of this Chapter, the required minimum standards of engaging in the liquefied petroleum gas business in the State of Tennessee shall be those prescribed in Tenn. Code Ann. § 68-135-101 et seq., and those in the following publications published by the National Fire Protection Association, Inc. (NFPA), Post Office Box 9101 Batterymarch Park, Quincy, Massachusetts 10029-9101:

(a) The 2008 edition of NFPA 58: Liquefied Petroleum Gas Code in its entirety; and (b) Those applicable portions of the 2006 edition of NFPA 54: National Fuel Gas Code that are related to liquefied petroleum gas in the vapor phase.

(2) In the event of a conflict or inconsistency between these codes adopted by reference, the more stringent code provision shall control; and in the event of a conflict or inconsistency between these codes adopted by reference and Tenn. Code Ann. § 68-135-101 et seq., the provisions of Tenn. Code Ann. § 68-135-101 et seq. shall control.

(3) Except where the context requires otherwise and in no way excluding the NFPA definitions adopted by reference, these rules adopt the same purpose and definitions as found in Tenn.

Code Ann. § 68-135-101.

History

• Authority: T.C.A. §§68-135-101, 68-135-107, and 68-102-113.
• Administrative History: Original rule filed April 21, 1994; effective July 5, 1994. Amendment filed November 25, 2002; effective February 8, 2003. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-17-.03 EXAMINATIONS AND RESPONSIBLE MANAGING EMPLOYEES

(1) At all liquefied petroleum gas business facilities in Tennessee, including all dealers licensed as Class I, Class II, Class III, and Class IV, where those facilities are directly engaging in the delivering, installing, or servicing of liquefied petroleum gas equipment, there shall be at least one person or full-time employee thereof to be known hereafter as the R.M.E. (Responsible Managing Employee) whose responsibility shall be to ensure compliance with the safety standards adopted in this Chapter within their individual business facility by being present within the service area of the facility or by remaining readily available by telephonic or other immediate communication means with company employees within said business facility when offsite.

(2) The R.M.E. shall be determined and designated by all licensees at each and every business facility currently licensed and engaging in the activities described in paragraph (1) of this rule, which shall mean one individual per location. All applicants who become licensed after the effective date of these rules will from the date of receiving their license have three months to designate an R.M.E. and so inform the Division. The information designating the R.M.E. must be submitted, along with a statement affirming that the R.M.E. will comply with paragraph (1) of this rule, on a form as prescribed by the Division.

(3) All licensees must provide notification on a form prescribed by the Division within fourteen (14) days of any change in designation of their R.M.E.

(4) The R.M.E. shall be examined by the Division for the purpose of determining whether he/she has adequate knowledge of these regulations promulgated by the State Fire Marshal in the interest of safeguarding life, health, and property.

(5) The R.M.E. may for the express language of NFPA 58 be construed to mean the training agent referred to in that section.

(6) This rule will not affect the applicant, or in the case of a firm or corporation, the person charged with the active management thereof, whether or not that person is designated as an R.M.E., who will also be examined for the stated purpose by the Division as per Tenn. Code Ann. § 68-135-103.

(7) The examination shall cover the minimum standards of the codes adopted by reference herein, and may include material from a national certification program. The examination shall be given by the Division, or its designee, at its discretion and at reasonable times and locations to all those persons as required by law and these rules to take the examination.

(8) The applicant, or in the case of a firm or corporation, the person charged with the active management thereof, and/or the R.M.E. should contact the Division of Fire Prevention, Permits and Licenses Section, or its designee, for arrangements to take the examination within the time limits stated in paragraph (2) of this rule.

(9) The Division, or its designee, administering the examination may charge an appropriate fee to be paid by the applicant for each examination or reexamination.

History

• Authority: T.C.A. §§68-135-103, 68-135-107, and 68-102-113.
• Administrative History: Original rule filed April 21, 1994; effective July 5, 1994. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-17-.04 STORAGE OF PORTABLE CONTAINERS AWAITING USE OR RESALE

(1) With respect to NFPA 58, section 8.4.2 as adopted herein, “good engineering practice” as it relates to what is commonly referred to as the “bottle exchange business” (where certain portable liquefied petroleum gas containers are in commerce awaiting use or resale), will require the safe placement of those containers at the establishment where they are located by the owner or person responsible for their placement. Such safe placement and storage will be subject to approval of the Division through its fire safety inspectors.

History

• Authority: T.C.A. §§68-135-103, 68-135-107, and 68-102-113.
• Administrative History: Original rule filed April 21, 1994; effective July 5, 1994. Amendment filed April 30, 2009; effective July 14, 2009.

Tenn. Comp. R. & Regs. 0780-02-17-.05 PENALTIES AND ENFORCEMENT

(1) Regarding the liquefied petroleum gas business in Tennessee, the Division shall undertake an active enforcement policy with regards to any violations, of Tenn. Code Ann. § 68-135-101 et seq., and these regulations as adopted.

(2) Any written complaints of violations of the law or regulations or reports made pursuant to Tenn. Code Ann. § 68-135-109 shall result in an investigation by the Division to determine their validity. After such investigation if there are grounds to prove that an individual engaging in the liquefied petroleum gas business in Tennessee has violated the law or regulations, the State Fire Marshal shall convene a hearing after affording all due process under Tenn. Code Ann. § 68-135-106. At the conclusion of such hearing, and upon a finding of fault the State Fire Marshal may revoke or suspend any license or renewal previously granted.

(3) Where the violation is one which is particularly hazardous to the public or is in blatant disregard of the law or regulations, the State Fire Marshal may proceed in its discretion with either criminal or civil penalties as provided in the law at Tenn. Code Ann. §§ 68-135-110 and 68-135-111.

Authority T.C.A. §§68-102-113, 68-135-106, 68-135-107, 68-135-110, and 68-135-111. Administrative

History: Original rule filed April 21, 1994; effective July 5, 1994. Amendment filed April 30, 2009; effective July 14, 2009.

Chapter 0780-02-18 Tennessee Equitable Restroom Act Rules and Regulations

Tenn. Comp. R. & Regs. 0780-02-18-.01 PURPOSE

(1) The purpose of this chapter is to implement the Tennessee Equitable Restroom Act T.C.A. §§ 68-120-501, et seq., and mitigate the lengthy delays which women face in gaining access to restroom facilities in public places.

History

• Authority: T.C.A. §§ 68-120-203(3)(B), 68-120-502(6), and 68-120-506.
• Administrative History: Original rule filed September 12, 1996; November 26, 1996. Amendments filed December 9, 2015; effective March 8, 2016.

Tenn. Comp. R. & Regs. 0780-02-18-.02 JURISDICTION AND EFFECTIVE DATES

(1) Application. This chapter shall apply to the following facilities where the public congregates:

(a) sports and entertainment arenas;

(b) musical amphitheaters;

(c) stadiums;

(d) community and convention halls;

(e) amusement facilities;

(f) zoos; and (g) specialty event centers located in public parks.

(2) Exemptions. This chapter does not apply to the following:

(a) Hotels. For purposes of this regulation, hotel means an establishment as defined in T.C.A. § 68-14-302(6);

(b) Food service establishment, as defined in T.C.A. § 68-14-703(9)(A);

(c) A state or local park with a seating capacity for less than two hundred fifty (250) persons; or (d) Automobile race tracks where portable facilities can be located and which were in existence prior to July 1, 1985.

(3) Effective dates. The effective date for this chapter is as follows:

(a) New facilities where the public congregates. Implementation of this regulation will be based upon contracts for design or construction executed on or after the effective date of these rules.

(b) Existing facilities where the public congregates. Implementation of this regulation will be based upon contracts for the design or construction of the renovation executed on or after the effective date of these rules. An existing facility where the public congregates will be considered to be renovated if:

1. Its rehabilitation requires more than fifty percent (50%) of the gross floor area or volume of the entire building to be rebuilt. Cosmetic work such as painting, wall covering, wall paneling, floor covering, and suspended ceiling work are not included.

2. An addition is made to an existing facility where the public congregates. The requirements of this regulation shall apply only to the portion of the building which is being renovated.

History

• Authority: T.C.A. §§ 68-120-203(3)(B), 68-120-502(6), 68-120-504, 68-120-505, and 68-120-506.
• Administrative History: Original rule filed September 12, 1996; November 26, 1996. Amendments filed December 9, 2015; effective March 8, 2016.

Tenn. Comp. R. & Regs. 0780-02-18-.03 RESTROOM REQUIREMENTS

(1) The edition of the building construction standard(s) adopted in Tenn. Comp. R. & Regs. 0780-02-02 (Codes and Standards) shall be utilized to determine the minimum number of water closets and plumbing fixtures required for restroom facilities in public places.

History

• Authority: T.C.A. §§ 68-120-203(3)(B), 68-120-502(6), 68-120-503, and 68-120-506.
• Administrative History: Original rule filed September 12, 1996; November 26, 1996. Amendments filed December 9, 2015; effective March 8, 2016.

Tenn. Comp. R. & Regs. 0780-02-18-.04 ENFORCEMENT AND INSPECTIONS

(1) The responsible authority for the enforcement of these regulations shall be the local building inspector and:

(a) The State Building Commission with respect to State public buildings as provided in T.C.A. § 4-15-106(a); and (b) The State Fire Marshal with respect to public buildings reviewed under the authority of T.C.A. § 68-120-101(d).

History

• Authority: T.C.A. §§ 68-120-203(3), 68-120-502(6), and 68-120-506.
• Administrative History: Original rule filed September 12, 1996; November 26, 1996. Amendments filed December 9, 2015; effective March 8, 2016.

Chapter 0780-02-19 Repealed

Tenn. Comp. R. & Regs. 0780-02-19-.01 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.13 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b), 68-120-101(b)(3)(B), and 68-120-101(b)(4)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.02 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.03 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.04 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.05 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.06 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.07 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.08 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.09 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.10 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.11 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Tenn. Comp. R. & Regs. 0780-02-19-.12 REPEALED

History

• Authority: T.C.A. §§ 68-120-101(b) and 68-120-101(b)(3)(B).
• Administrative History: Original rule filed March 16, 2005; effective May 30, 2005. Repeal filed January 17, 2025; effective April 17, 2025.

Chapter 0780-02-20 Fire Department Recognition

Tenn. Comp. R. & Regs. 0780-02-20-.01 DEFINITIONS

(1) Career fire department shall mean a fire department consisting of only paid firefighters.

(2) Combination fire department shall mean a fire department consisting of any mixture of career and volunteer firefighters.

(3) New Fire Department shall mean any fire department formed after July 1, 2003.

(4) Recognized fire department shall mean a fire department that has obtained a certificate of recognition from the Department of Commerce and Insurance, State Fire Marshal’s Office, which includes a municipality, county or political subdivision operating as a fire department, or an organization, agency, or entity operating as a fire department.

(5) Recognition shall mean that designation to be conferred on the fire department by the State Fire Marshal’s Office after making application and meeting all the requirements found in T.C.A. § 68-102-301 et seq.

(6) State Fire Marshal shall mean the Division of Fire Prevention at the Department of Commerce and Insurance.

(7) Volunteer fire department shall mean a fire department consisting of only un-paid firefighters.

History

• Authority: T.C.A. §§ 68-102-303 and 68-102-304.
• Administrative History: Original rule filed June 8, 2004; effective August 22, 2004. Amendment filed May 26, 2015; effective August 24, 2015.

Tenn. Comp. R. & Regs. 0780-02-20-.02 GENERAL REQUIREMENTS

(1) No municipality, county, political subdivision, organization, agency or entity shall operate a fire department within the State of Tennessee unless it has been duly recognized by the State Fire Marshal.

(2) No new fire department may be established or recognized in Tennessee without the approval of the local elected governing body. This approval shall include the geographical territory to be covered by the new fire department.

(3) No governmental unit, person, organization, agency or entity shall receive or solicit money from any source, including local, state, or federal government, for the purpose of operating a fire department unless the governmental unit, person, organization, agency, or entity maintains a valid certificate of registration from the State Fire Marshal.

History

• Authority: T.C.A. §§ 68-102-303, 68-102-304, and 68-102-306.
• Administrative History: Original rule filed June 8, 2004; effective August 22, 2004. Repeal and new rule filed May 26, 2015; effective August 24, 2015.

Tenn. Comp. R. & Regs. 0780-02-20-.03 REGISTRATION

(1) The municipality, county, political subdivision, organization, agency or entity desiring to operate a fire department shall file an application with the State Fire Marshal and submit a fee of fifty dollars ($50.00).

(2) Registration will be valid for three (3) years from the date of issuance.

History

• Authority: T.C.A. §§ 68-102-303 and 68-102-304.
• Administrative History: Original rule filed June 8, 2004; effective August 22, 2004. Repeal and new rule filed May 26, 2015; effective August 24, 2015.

Tenn. Comp. R. & Regs. 0780-02-20-.04 REPEALED

History

• Authority: T.C.A. §§ 68-102-303, 68-102-304, 68-102-306, 68-102-108, and 68-102-111.
• Administrative History: Original rule filed June 8, 2004; effective August 22, 2004. Repeal filed May 26, 2015; effective August 24, 2015.

Tenn. Comp. R. & Regs. 0780-02-20-.05 RECOGNIZED FIRE DEPARTMENTS

(1) A recognized fire department shall notify the State Fire Marshal’s Office within thirty (30) days of the termination, resignation or appointment of a new fire chief.

(2) The municipality, county, political subdivision, organization, agency or entity filing the notification must be in compliance with T.C.A. § 68-102-108 and properly designate an Assistant to the Commissioner unless appointed pursuant to T.C.A. § 68-102-109.

(a) Within ten (10) days after the appointment of a new Assistant to the Commissioner, the person vacating the office shall return the certificate and card of appointment to the State Fire Marshal’s Office in Nashville.

(b) Within thirty (30) days after the appointment of a new Assistant to the Commissioner, the name and contact information for the new Assistant to the Commissioner shall be submitted to the State Fire Marshal.

History

• Authority: T.C.A. §§ 68-102-108, 68-102-303, 68-102-304 and 68-102-305.
• Administrative History: Original rule filed June 8, 2004; effective August 22, 2004. Repeal and new rule filed May 26, 2015; effective August 24, 2015.

Tenn. Comp. R. & Regs. 0780-02-20-.06 RENEWAL

(1) Before the three (3) year period of the certificate of recognition has expired, the fire department must submit a fee of fifty dollars ($50.00) to the State Fire Marshal along with a renewal application properly completed to obtain renewal of the certificate of recognition. The application for renewal must include verification of the geographical territory to be covered by the department.

(2) The fire department shall submit the renewal application at least thirty (30) days prior to expiration of the fire department’s certificate of recognition.

(3) The State Fire Marshal will send each recognized fire department a renewal notice approximately six (6) months prior to expiration of the three (3) year recognition period.

(4) All fire departments shall notify the State Fire Marshal within thirty (30) days of any change in geographical territory to be covered by such fire department.

(a) The fire department shall provide proof of the approval of the local elected governing body of any change in territorial boundaries.

(b) The fire department shall provide the State Fire Marshal with a written description or geographic description of territorial boundaries.

History

• Authority: T.C.A. §§ 68-102-303 and 68-102-304.
• Administrative History: Original rule filed June 8, 2004; effective August 22, 2004. Repeal and new rule filed May 26, 2015; effective August 24, 2015.

Tenn. Comp. R. & Regs. 0780-02-20-.07 NONRENEWAL, REVOCATION, OR SUSPENSION OF CERTIFICATE OF

RECOGNITION.

(1) The State Fire Marshal may refuse to issue or renew, and revoke or suspend any application for or certificate of recognition for any recognized fire department if:

(a) The fire department has violated any provision of this chapter or any other state or federal law, or has violated any regulation duly promulgated by the State Fire Marshal;

(b) The fire department fails to renew its certification;

(c) The fire department fails to submit the required fee; or, (d) The local elected governing body withdraws recognition of the fire department.

(2) The State Fire Marshal will notify the local elected governing body within thirty (30) days of refusing to renew, revoking or suspending any certificate of recognition of a fire department.

(3) The local elected governing body will notify the State Fire Marshal within thirty (30) days of withdrawing approval of the fire department.

(4) The local elected governing body must send the State Fire Marshal an updated geographical territory to be covered by the remaining recognized fire department(s) no more than thirty (30) days after a fire department has lost its recognized status.

(5) The Uniform Administrative Procedures Act, compiled in title 4, chapter 5, will govern all matters and procedures respecting the hearing and judicial review of any contested case arising under this rule.

History

• Authority: T.C.A. §§ 68-102-101, 68-102-303, 68-102-304 and 68-102-306.
• Administrative History: Original rule filed May 26, 2015; effective August 24, 2015.

Chapter 0780-02-21 Fireworks

Tenn. Comp. R. & Regs. 0780-02-21-.01 DEFINITIONS

(1) “Registrant” means any person who is licensed as an exhibitor or certified as an outdoor display operator, proximate pyrotechnic operator, or flame effect operator.

(2) “State fire marshal” means the Commissioner of the Department of Commerce and Insurance.

History

• Authority: T.C.A. §68-102-113.
• Administrative History: Original rule filed July 23, 2007; effective October 6, 2007.

Tenn. Comp. R. & Regs. 0780-02-21-.02 ADOPTION BY REFERENCE

(1) Unless otherwise provided by applicable law or the provisions of this chapter, the required minimum standards for the use, exhibition, or display of fireworks, pyrotechnics, or flame effects not classified as D.O.T. Class C common fireworks (also known as 1.4G fireworks) in the State of Tennessee shall be those in T.C.A.

Title 68, Chapter 104, et seq., and those in the following publications:

(a) Standard for Flame Effects Before an Audience (NFPA 160-2006), published by the National Fire Protection Association (NFPA), Batterymarch Park, Quincy, MA 02269;

(b) Code for Fireworks Display (NFPA 1123-2006), published by the NFPA;

(c) Code for the Manufacture, Transportation, Storage, and Retail Sale of Fireworks and Pyrotechnic Articles (NFPA 1124-2006), published by the NFPA;

(d) Standards for the Use of Pyrotechnics Before a Proximate Audience (NFPA 1126-2006), published by the NFPA;

History

• Authority: T. C. A. §§68-102-113 and 68-104-214.
• Administrative History: Original rule filed July 23, 2007; effective October 6, 2007.

Tenn. Comp. R. & Regs. 0780-02-21-.03 LICENSURE OF EXHIBITORS; CERTIFICATION OF OPERATORS

(1) Requirements for licensure as an exhibitor are those at T.C.A §§ 68-104-102 and 68-104-204.

(2) An applicant for certification as an outdoor fireworks display operator shall:

(a) Submit a certification fee of one hundred dollars ($100) (of which twenty ($20) is non-refundable) with the application form prescribed by the state fire marshal;

(b) Pass the examination prescribed by the state fire marshal;

(c) Provide proof satisfactory to the state fire marshal of having worked under competent supervision on at least three (3) outdoor fireworks displays in the three (3) years immediately preceding the application.

(3) An applicant for certification as a proximate pyrotechnic display operator shall:

(a) Submit a certification fee of one hundred dollars ($100) (of which twenty ($20) is non-refundable) with the application form prescribed by the state fire marshal;

(b) Pass the examination prescribed by the state fire marshal;

(c) Provide proof satisfactory to the state fire marshal of having worked under competent supervision on at least three (3) proximate pyrotechnic displays in the three (3) years immediately preceding the application.

(4) An applicant for certification as a flame effect display operator shall:

(a) Submit a certification fee of one hundred dollars ($100) (of which twenty ($20) is non-refundable) with the application form prescribed by the state fire marshal;

(b) Pass the examination prescribed by the state fire marshal;

(c) Provide proof satisfactory to the state fire marshal of having worked under competent supervision on at least three (3) flame effect displays in the three (3) years immediately preceding the application.

(5) If an applicant applies for more than one certification, the applicant may take the examination for any or all certifications and pay a certification fee of two hundred dollars ($200).

(6) Any application that remains pending for twelve (12) months will expire. Refundable fees will be refunded if a written request is made to the state fire marshal within six (6) months of the expiration of the application.

History

• Authority: T. C. A. §§68-102-113, 68-104-102, 68-104-204, 68-104-208, and 68-104-214.
• Administrative History: Original rule filed July 23, 2007; effective October 6, 2007.

Tenn. Comp. R. & Regs. 0780-02-21-.04 RENEWALS

(1) Renewal notices will be sent out by the state fire marshal sixty (60) days prior to expiration of each license or certification.

(2) A certified outdoor fireworks display operator, proximate pyrotechnic display operator, or a flame effect operator with an unexpired certificate may apply for a new certificate at any time before the certificate expires. A certificate holder whose certificate has been expired for ninety (90) or fewer days may renew the certificate and have it retroactive to the date the old certificate expired by applying and paying a fee equal to one and one-half (1 ½) times the normal fee.

(3) The renewal fee for a single certification is one hundred dollars ($100). The renewal fee for multiple certifications is two hundred dollars ($200).

(4) Proof of satisfaction of continuing education requirements must be provided as a prerequisite to renewal.

History

• Authority: T. C. A. §§68-102-113 and 68-104-214.
• Administrative History: Original rule filed July 23, 2007; effective October 6, 2007.

Tenn. Comp. R. & Regs. 0780-02-21-.05 TRAINING; CONTINUING EDUCATION

(1) A continuing education course must be approved by the state fire marshal before the registrant will be granted credit for the course.

(2) The registrant shall provide verification to the state fire marshal of having obtained the continuing education credits required by § 68-104-208(d). Verification consists of a form certifying attendance at the course and the number of continuing education credits obtained at the course and signed by both the registrant and the course instructor.

(3) The registrant shall submit to the state fire marshal the registrant’s verification form after completing the course and prior to his or her renewal. The registrant is responsible for ensuring timely submittal of the required verification. Documentation that shows that the registrant self-taught himself or herself without course instruction will not be accepted for continuing education credit.

(4) In order to obtain approval to provide course instruction, the course provider shall submit to the state fire marshal materials including an outline of the course instruction, biography of the instructor, the methods and tools that will be utilized in the course, number of instruction hours provided, and the dates and times the course will be offered. A course provider seeking approval of a course pursuant to this paragraph shall submit the required documentation no later than ten (10) business days prior to the first offering of the course.

(5) Credit may be granted, in the discretion of the state fire marshal, for the instruction of continuing education courses.

(6) Registrants who take more than the required continuing education for the previous renewal period will not be permitted to carry-over the credit hours into the next renewal cycle.

(7) The state fire marshal may conduct random audits of registrants and continuing education courses to ensure compliance with this rule. Each registrant is responsible for maintaining sufficient records which may be used to support claimed continuing education credits.

(8) The state fire marshal may require completion of specific continuing education classes in order to renew registration.

(9) Registrants will not receive credit for taking a course more than once each renewal cycle.

(10) Registrants may obtain continuing education training for renewal by retaking and passing the appropriate examination for the certification desired; provided, however, that the registrant provides valid documentation of proof of taking and earning a passing score on the appropriate examination, and submits this information along with the completed renewal form and renewal fee prior to the expiration date for such certification.

History

• Authority: T. C. A. §§68-102-113, 68-104-208(d), 68-104-208(d)(2), and 68-104-214.
• Administrative History: Original rule filed July 23, 2007; effective October 6, 2007. Amendment filed May 15, 2009; effective July 29, 2009.

Tenn. Comp. R. & Regs. 0780-02-21-.06 EXAMINATIONS

Each examination can be taken a second time immediately following the first attempt if necessary. If a passing score is not achieved after the second attempt, then the applicant may only take the examination once every thirty (30) days thereafter.

History

• Authority: T. C. A. §§68-102-113, 68-104-208, and 68-104-214.
• Administrative History: Original rule filed July 23, 2007; effective October 6, 2007.

Tenn. Comp. R. & Regs. 0780-02-21-.07 PERMITS

(1) Retailers and seasonal retailers will be required to obtain a permit for each retail sales location.

(2) An expedited permit fee of fifty dollars ($50) will be charged, in addition to the regular display permit fee, for any public display permit application that is received by the state fire marshal’s office within ten (10) days prior to the date of the display. An application is considered received on the date that both the completed application and appropriate fee are received by the state fire marshal.

(3) The state fire marshal may issue a multiple display permit, for a fee not to exceed four hundred dollars ($400), to an exhibitor, sponsor, or operator that is conducting multiple displays that are essentially identical at a single location. A multiple display permit may be issued for multiple displays, performed on different dates, but are the same in regards to the display items, location, site arrangement, and emergency personnel locations. A multiple display permit expires one (1) year after issuance.

History

• Authority: T. C. A. §§68-102-113, 68-104-102(c), 68-104-211(a), and 68-104-212.
• Administrative History: Original rule filed July 23, 2007; effective October 6, 2007. Amendment filed May 15, 2009; effective July 29, 2009.

Chapter 0780-02-22 Fire Standard Compliant Cigarettes

Tenn. Comp. R. & Regs. 0780-02-22-.01 DEFINITIONS

(1) As used in this chapter, unless the context otherwise requires, the definitions of terms contained in T.C.A. § 68-102-502 are applicable.

(2) “Attorney general” means the attorney general and reporter or the attorney general’s designee;

(3) "Brand family" means all styles of cigarettes sold under the same trademark and differentiated from one another by means of additional modifiers or descriptors, including, but not limited to, "menthol," "lights," "kings," and "100s," and includes any brand name, alone or in conjunction with any other word, trademark, logo, symbol, motto, selling message, recognizable pattern of colors, or any other indicia of product identification identical or similar to, or identifiable with, a previously known brand of cigarettes;

(4) "State fire marshal" means the commissioner of commerce and insurance or the commissioner's designee;

History

• Authority: T.C.A. §§ 68-102-502 and 68-102-507.
• Administrative History: Original rule filed September 29, 2009; effective December 28, 2009.

Tenn. Comp. R. & Regs. 0780-02-22-.02 CERTIFICATIONS

(1) Each manufacturer shall submit to the state fire marshal a written certification on a form provided by the state fire marshal containing the information required in T.C.A. § 68-102-504, along with the name and address of the true holder of the trademark rights.

(2) Each written certification shall include a non-refundable fee as provided in T.C.A. § 68-102-504 payable to the Tennessee State Fire Marshal for each brand family of cigarettes listed in a certification.

(3) A certification will be considered complete if all information required by T.C.A. § 68- 102-504 and the name of the true holder of the trademark rights in a cigarette brand appears in the submission form.

(4) The state fire marshal will promptly notify a manufacturer if a certification is incomplete, and will provide the manufacturer a reasonable opportunity to correct the incomplete certification. The certification will remain invalid until properly completed and re-submitted to the state fire marshal.

History

• Authority: T.C.A. §§ 68-102-504 and 68-102-507.
• Administrative History: Original rule filed September 29, 2009; effective December 28, 2009.

Tenn. Comp. R. & Regs. 0780-02-22-.03 TEST STANDARDS

(1) Testing of cigarettes shall meet the requirements in T.C.A. § 68-102-503.

(2) Alternative testing (a) A manufacturer of a cigarette that the state fire marshal determines cannot be tested in accordance with the test method prescribed in T.C.A. § 68-102- 503(a)(1) shall propose a test method and performance standard for the cigarette to the state fire marshal.

(b) In proposing an alternative test method and performance standard, the manufacturer of the cigarette shall:

(i) describe why the cigarette cannot be tested in accordance with the test method specified in T.C.A. § 68-102-503(a)(1);

(ii) describe the test method and performance standard requesting to be used;

(iii) specify if the test method and performance method is based on a recognized national standard;

(iv) describe how the test method and performance standard requesting is equivalent to the standards contained in T.C.A. § 68-102-503(a); and (v) provide information as to whether another state has approved the alternative test method and performance standard for the cigarette or any other cigarette.

(c) Upon a determination by the state fire marshal that the performance standard proposed by the manufacturer is equivalent to the performance standard prescribed in T.C.A. § 68-102-503(a)(3), or a determination that another state has enacted reduced cigarette ignition propensity standards that include a test method and performance standard that are equivalent to those contained in T.C.A. § 68-102-503(a) and officials responsible for implementing those requirements have approved the proposed alternative test method and performance standard for a particular cigarette, the state fire marshal shall approve the proposed test method.

(d) If the state fire marshal approves the proposed test method, the manufacturer may employ such test method.

History

• Authority: T.C.A. §§ 68-102-503 and 68-102-507.
• Administrative History: Original rule filed September 29, 2009; effective December 28, 2009.

Tenn. Comp. R. & Regs. 0780-02-22-.04 MARKINGS

Cigarettes that are certified by a manufacturer in accordance with T.C.A. § 68-102-504 and this

chapter shall be marked as required by T.C.A. § 68-102-505.

History

• Authority: T.C.A. §§ 68-102-505 and 68-102-507.
• Administrative History: Original rule filed September 29, 2009; effective December 28, 2009.

Tenn. Comp. R. & Regs. 0780-02-22-.05 CIVIL PENALTIES

The state fire marshal may assess a civil penalty for each separate violation of T.C.A. Title 68,

Chapter 102, Part 5 pursuant to T.C.A. § 68-102-506.

(1) In determining the amount of a civil penalty the state fire marshal may consider the following factors:

(a) whether the amount imposed will be a substantial economic deterrent to the violator;

(b) the circumstances leading to the violation;

(c) the severity of the violation and the risk of harm to the public;

(d) the economic benefits gained by the violator as a result of non-compliance; and (e) the interest of the public.

History

• Authority: T.C.A. §§ 68-102-503, 68-102-506 and 68-102-507.
• Administrative History: Original rule filed September 29, 2009; effective December 28, 2009.

Tenn. Comp. R. & Regs. 0780-02-22-.06 FORFEITURES AND SEIZURES OF CIGARETTES

A notice of forfeiture or seizure of cigarettes, forfeited pursuant to T.C.A. § 68-102-506(e) or seized pursuant to T.C.A. § 68-102-506(g), will be mailed to the true holder of the trademark rights in the cigarette brand in order to afford the true holder an opportunity to inspect the cigarettes. Forfeited or seized cigarettes may be destroyed sixty (60) days after the mailing of the notice of forfeiture or seizure.

History

• Authority: T.C.A. §§ 68-102-506(e) and (g), and 68-102-507.
• Administrative History: Original rule filed September 29, 2009; effective December 28, 2009.

Chapter 0780-02-23 One and Two Family Dwellings and Townhouses

Tenn. Comp. R. & Regs. 0780-02-23-.01 DEFINITIONS

(1) For the purposes of this chapter, the following definitions are applicable. All other definitions shall be as provided by the building and electrical codes and standards currently adopted by the Department:

(a) Addition means an increase in floor area or height of structure.

(b) Construction means the erection of a new building containing a detached one (1) or two (2) family dwelling or townhouse, a change of occupancy of an existing building to a one (1) or two (2) family dwelling or townhouse or, after October 1, 2011, an addition to an existing detached one (1) or two (2) family dwelling or townhouse of thirty (30) square feet or more of interior space. The term “construction” shall not be construed to include excavation, site preparation or renovation. The term “construction” shall also not be construed to include the construction or placement of a modular or manufactured home under T.C.A. Title 68, Chapter 126; however, the term “construction” shall include any additional on-site construction to a modular or manufactured home.

(c) Department means the Department of Commerce and Insurance.

(d) Deputy State Building Inspector (DBI) means any person who meets the qualifications in T.C.A. § 68-120-101(f)(1) and (2) and is appointed by the Commissioner of Commerce and Insurance to perform inspections of one (1) and two (2) family dwelling and townhouse construction.

(e) Division means the Division of Fire Prevention of the Department of Commerce and Insurance.

(f) Fire renovation means a renovation required after a fire regardless of whether the walls must be reconstructed.

(g) Local government means any city, county, town, municipal corporation, metropolitan government, or political subdivision of the state of Tennessee.

(h) One (1) and two (2) family dwelling means a building that contains one (1) or two (2) dwelling units used, intended, or designed to be built, used, rented, leased, let or hired out to be occupied for living purposes.

(i) Property owner’s permit means permit applied for by a record owner of the property in order to build a one (1) family dwelling in which the owner intends to live upon completion.

(j) Renovation means interior or exterior painting, papering, tiling, carpeting, cabinet installation, counter top installation, reroofing, residing, glazing or replacing windows or doors, floor finishing, repairs to existing chimneys, stairs, porches, underpinnings, exterior siding or roof and similar activities, additions of exterior space and additions of less than thirty (30) square feet of interior space.

(k) Townhouse means a single family dwelling unit constructed in a group of three (3) or more attached units that extends from foundation to roof, separated by a two (2) hour fire resistance rated wall assembly, not more than three (3) stories in height, with a separate means of egress, and an open space or public way on at least two (2) sides.

(l) Transient occupant means a person who occupies a single dwelling unit for not more than thirty (30) days.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed November 4, 2016; effective February 2, 2017.

Tenn. Comp. R. & Regs. 0780-02-23-.02 ADOPTION BY REFERENCE

(1) Unless otherwise provided by applicable law or the provisions of this chapter, the required minimum codes and standards for the construction of one (1) and two (2) family dwellings, townhouses, and additions thereto of thirty (30) square feet or more of interior space in the State of Tennessee shall be those prescribed in the following publications:

(a) International Residential Code (IRC), 2018 edition, published by the International Code Council, Inc. (ICC), 500 New Jersey Avenue Northwest, 6th Floor, Washington, D.C., 20001, and Appendix Q except that:

1. Section R313 Automatic Fire Sprinkler Systems is not mandatory, pursuant to T.C.A. § 68-120-101(a)(8).

2. Chapters 34-43 relating to Electrical Installations are deleted and electrical standards adopted in 0780-02-01 Electrical Installations shall apply.

3. Figure R301.2(2) Seismic Design Categories is deleted and replaced with Figure R301.2(2) Seismic Design Categories Site Class D from 2015 IRC.

4. Section R314.6 Power Source relating to Smoke Alarms is amended to create Exception 3 that shall read:

Exception 3. Interconnection and hardwiring of smoke alarms in existing areas shall not be required where the alterations or repairs do not result in the removal of interior walls or ceiling finishes exposing the structure.

5. Section N1102.4.1.2 (R402.4.1.2) Testing is replaced with Section N1102.4.2.1 Testing Option and Section N1102.4.2.2 Visual Inspection from 2009 IRC.

6. Section N1103.3.3 (R403.3.3) Duct Testing (Mandatory) and Section N1103.3.4 (R403.3.4) Duct Leakage (Prescriptive) are optional.

7. Table N1102.1.2 (R402.1.2) Insulation and Fenestration Requirement by Component and Table N1102.1.4 (R402.1.4) Equivalent U-Factors from 2018 IRC are replaced with Table N1102.1 Insulation and Fenestration Requirements by Component and Table N1102.1.2 Equivalent U-Factor from 2009 IRC.

8. Section N1102.4.4 (R402.4.4) Rooms Containing Fuel-Burning Appliances is deleted in its entirety.

9. Table N1102.1 Insulation and Fenestration Requirements by Component in the 2009 edition is adopted and amended by adding the following as footnote “l”:

“Log walls complying with ICC400 and with a minimum average wall thickness of 5” or greater shall be permitted in Zone 3 when a Fenestration U-Factor of .50 or lower is used, a Skylight U-Factor of .65 or lower is used, a Glazed Fenestration SHGC of .30 or lower is used, a 90 AFUE Furnace is used, an 85 AFUE Boiler is used, and a 9.0 HSPF Heat Pump (heating) and 15 SEER (cooling) are used.”

10. Table N1102.1 Insulation and Fenestration Requirements by Component in the 2009 edition is adopted and amended by adding the following as footnote “m”:

“Log walls complying with ICC400 and with a minimum average wall thickness of 5” or greater shall be permitted in Zone 4 when a Fenestration U-Factor of .35 or lower is used, a Skylight U-Factor of .60 or lower is used, a 90 AFUE Furnace is used, an 85 AFUE Boiler is used, and a 9.0 HSPF Heat Pump (heating) and 15 SEER (cooling) are used.”

(b) International Energy Conservation Code (IECC), 2018 edition, published by the ICC, except that:

1. Section R402.4.1.2 Testing is deleted and replaced with Section 402.4.2.1 Testing Option and Section 402.4.2.2 Visual Inspection Option from 2009 IECC.

2. Section R403.3.3 Duct Testing (Mandatory) and Section R403.3.4 Duct Leakage (Prescriptive) are optional.

3. Table 402.1.2 Insulation and Fenestration Requirements by Component and Table R402.1.4 Equivalent U-Factors are deleted and replaced with Table 402.1.1 Insulation and Fenestration Requirements by Component and Table 402.1.3 Equivalent U-Factors 2009 IECC.

(2) Paragraph (1) of this rule shall not be construed as adopting any provision of the cited publications which establishes:

(a) Any provision superseded by law;

(b) An optional or recommended, rather than mandatory, standard or practice; or (c) Any agency, procedure, fees, or penalties for administration or enforcement purposes inconsistent with these rules.

(3) The provisions of the cited publications adopted by reference in paragraph (1) shall govern the manner in which:

(a) The codes and standards are applied to construction of one (1) and two (2) family dwellings, townhouses, and additions thereto of thirty (30) or more square feet of interior space as defined in this chapter;

(b) Occupancies and types of construction are classified for the purpose of determining minimum requirements of the codes and standards; and (c) The specific requirements of the codes and standards may be modified to permit the use of alternate materials or methods of construction.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed November 4, 2016; effective February 2, 2017. Amendments filed April 17, 2020; effective July 16, 2020.

Tenn. Comp. R. & Regs. 0780-02-23-.03 CONFLICTS

(1) In the event of a conflict or inconsistency between the codes and standards adopted by reference in Tenn. Comp. R. & Regs. 0780-02-23-.02 and 0780-02-01-.02 (Electrical Installations), the most stringent provisions shall control.

(2) Nothing in this rule shall abrogate any right of appeal granted under T.C.A. Title 68, Chapters 102 and 120.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed November 4, 2016; effective February 2, 2017.

Tenn. Comp. R. & Regs. 0780-02-23-.04 APPLICATION

(1) After October 1, 2010, the commencement of any construction, as defined in rule 0780-02- 23-.01, of one and two family dwellings or townhouses undertaken shall be in compliance with the standards adopted by reference in rule 0780-02-23-.02.

(2) After October 1, 2011, the commencement of any construction, as defined in rule 0780-02- 23-.01, of additions to one and two family dwellings or townhouses of thirty (30) square feet or more of interior space undertaken shall be in compliance with the standards adopted by reference in rule 0780-02-23-.02.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010.

Tenn. Comp. R. & Regs. 0780-02-23-.05 PERMITS

(1) No construction of a one (1) or two (2) family dwelling or townhouse shall be started without securing a building permit from an issuing agent authorized by the Commissioner of Commerce and Insurance, except in an exempt jurisdiction or in the unincorporated areas of a county or in a municipality that have opted out of these provisions. A separate permit shall be required for each unit of a townhouse. Issuing agents shall receive no more than fifteen dollars ($15.00) for each issued permit. This fifteen-dollar ($15.00) fee shall be remitted from the applicable permit fee for inspection referenced in Tenn. Comp. R. & Regs. 0780-02-23- .08.

(2) No construction of an addition to a one (1) or two (2) family dwelling or townhouse of thirty (30) square feet or more of interior space shall be started without securing a building permit from an issuing agent authorized by the Commissioner of Commerce and Insurance, except in an exempt jurisdiction or in the unincorporated areas of a county or in a municipality that have opted out of these provisions. Issuing agents shall receive no more than fifteen dollars ($15.00) for each issued permit. This fifteen-dollar ($15.00) fee shall be remitted from the applicable permit fee for inspection referenced in Tenn. Comp. R. & Regs. 0780-02-23-.08.

(3) A property owner’s permit shall automatically expire upon completion of the work for which the permit was issued. All work done under such permit shall be subject to regular inspection requirements and fees and other applicable laws and regulations. Pursuant to T.C.A. § 62-6- 103, an individual may obtain only one (1) property owner’s permit within a twenty-four (24) month period.

(4) (a) When applying for a permit, an applicant shall complete a form prescribed by the Department containing at least the following information:

1. The location where the work will be performed, including street address, if available;

2. A description of the work to be performed;

3. The use and occupancy of the structure;

4. The valuation of the project;

5. The square footage of the construction;

6. The signature of the applicant; and 7. If applicable, a copy of the form issued by the appropriate municipal or county official stating the estimated tax liability if required by T.C.A. § 67-4-2910(a)(1).

(b) When applying for a permit, an applicant shall present:

1. Payment in an acceptable form in the amount of the permit fee; and 2. Licensure pursuant to T.C.A. Title 62, Chapter 6 (proof of licensure is not required for a property owner purchasing the permit when the property owner is performing the work).

(c) When applying for a permit, an applicant shall certify and have proof available, if requested, of:

1. Availability of public sewer or a septic permit; and 2. Any license or permit required by state law or local ordinance.

(5) All building permits are non-transferable.

(6) In the event more than one (1) rejection is issued during the building inspection process, an additional inspection permit shall be obtained for each subsequent rejection.

(7) (a) A building permit shall be void if the authorized work is not commenced within one hundred eighty (180) days after its issuance. If the work authorized by a permit is commenced and then suspended or abandoned for a period of one hundred eighty (180) days, a building permit shall be void. The Commissioner of Commerce and Insurance, or designee, is authorized to grant one (1) or more extensions of time, for a period of not more than one hundred eighty (180) days each. All extensions shall be requested in writing and justifiable cause demonstrated.

(b) Every building permit shall expire two (2) years from the date of issue or upon the issuance of the certificate of occupancy unless:

1. The Commissioner of Commerce and Insurance, or designee, determines that substantial progress has been made in the work authorized by the permit; and 2. The permit holder is granted an exception or extension after submitting a written request to the Commissioner of Commerce and Insurance, or designee.

(c) No construction work for which a permit is required shall be commenced in any building or premises until a permit to perform such work is obtained.

(8) The original permit, along with any other required state or local permit, shall be placed on site and shall be readily available for inspection. Upon completion of a request form prescribed by the Department, a duplicate original permit may be obtained for a fee of ten dollars ($10.00) in the event of the loss or destruction of the original permit.

(9) It shall be the responsibility of all persons performing work on the site to comply with the required codes and standards.

(10) The issuance of a permit shall not be construed to be a permit for, or an approval of, any violation of any of the provisions of this chapter or of any state law or regulation or any ordinance of the local jurisdiction. Permits presuming to give authority to violate or cancel the provisions of this chapter, any state law or regulation or any ordinance of the local jurisdiction shall not be valid. The issuance of a permit based on construction documents or other data shall not prevent the Division from requiring the correction of errors in the construction documents or other data. The Division is also authorized to prevent occupancy or use of a structure where there is a violation of the chapter or any state law or regulation.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed November 4, 2016; effective February 2, 2017. Amendments filed April 17, 2020; effective July 16, 2020. Amendments filed November 27, 2023; effective February 25, 2024.

Tenn. Comp. R. & Regs. 0780-02-23-.06 ISSUANCE OF PERMITS IN VIOLATION OF THIS CHAPTER

(1) The Division may suspend or revoke a permit issued under the provisions of this chapter wherever the permit is issued in error or on the basis of incorrect, inaccurate or incomplete information, or in violation of any state law or regulation or any of the provisions of this

chapter.

(2) Upon notice from the Division to the issuer, the issuer shall immediately revoke any permit issued in violation of state law or regulation or this chapter, and any construction on such project must cease until proper approval is obtained and a new permit issued pursuant to this

chapter.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010.

Tenn. Comp. R. & Regs. 0780-02-23-.07 INSPECTIONS

(1) Inspections of construction of one (1) family and two (2) family dwellings, townhouses begun after October 1, 2010, and additions thereto of thirty (30) square feet or more of interior space begun after October 1, 2011, will be conducted by deputy building inspectors appointed under contract with the Commissioner of Commerce and Insurance pursuant to T.C.A. § 68-120-101.

(a) Fees for such inspections for services in subparagraph (2)(a) are specified in rule

Tenn. Comp. R. & Regs. 0780-02-23-.08 FEES

(1) The fee shall be payable in full at the time of application for a building permit. The fee shall be determined based on actual expected construction costs; however, the actual costs shall not be less than the construction cost based on the latest available Building Valuation Data published by the International Code Council (using a 0.60 Cost Modifier, except for the footnotes). The fee for a permit for construction shall be as specified in the following table:

Total Construction Cost Fee $0.00 to $5,000 $100 $5,001 to $100,000 $350 $100,001 to $150,000 $400 $150,001 to $200,000 $450 $200,001 to $250,000 $500 $250,001 to $300,000 $550 $300,001 AND UP $550 for the first $300,000; plus $50.00 for each additional fifty thousand dollars ($50,000) above $300,000 or fraction thereof.

(a) When the permit fee is to be collected from another state department or agency, the permit may be issued once all information needed to invoice or journal voucher the other state department or agency has been received.

(b) If the application for a building permit must be resubmitted because its issuance has become invalid under paragraph (3) of rule 0780-02-23-.05, the fee established in this

rule shall be imposed.

(2) After October 1, 2011, the fee for a plumbing and mechanical inspection shall be one hundred dollars ($100.00) in addition to other applicable fees.

(3) The fee for a slab inspection, other than monolith pours, shall be one hundred dollars ($100.00) in addition to other applicable fees.

(4) The fee for a prefabricated wall inspection shall be one hundred dollars ($100.00) in addition to other applicable fees.

(5) The fee for a re-inspection necessitated by more than one (1) rejection on a project shall be one hundred dollars ($100.00).

(6) The fee for a consultation inspection or a temporary certificate of occupancy shall be one hundred dollars ($100.00).

(7) The Division may require appropriate documentation of costs (such as contractors’ bids or invoice) if:

(a) In the Division’s opinion, the construction cost of a project has been underestimated in a permit application based on the latest available Building Valuation Data published by the International Code Council (using a 0.60 Cost Modifier, except for the footnotes).

(b) After initial review, if such documentation warrants an additional permit charge it shall be computed, assessed, and paid promptly and no further construction shall be authorized pursuant to the authority of the permit until payment is made.

(8) If a permit expires before completion of a project or a project is stopped before its completion, the permit holder shall be entitled to a refund of the inspection fees that would have been due to the deputy building inspector under their contract for any required inspection under Tenn.

Comp. R. & Regs. 0780-02-23-.08 that was not performed, provided that the permit holder requests such refund on a form prescribed by the Division no less than sixty (60) days prior to the expiration of the permit.

(9) Any person who begins any work on any building or structure before obtaining the necessary permit required under this chapter shall be subject to an additional fee of one hundred percent (100%) of the required permit fee for each violation.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed November 4, 2016; effective February 2, 2017.

Tenn. Comp. R. & Regs. 0780-02-23-.09 CERTIFICATE OF OCCUPANCY

(1) A new one (1) or two (2) family dwelling, townhouse, where construction began after October 1, 2010, or any additions thereto of thirty (30) square feet or more of interior space regulated under this chapter, where construction began after October 1, 2011, shall not be occupied until the Division has issued a certificate of occupancy.

(2) A certificate of occupancy shall be issued after the passage of all inspections required by this

chapter and passage of the final electrical inspection.

(3) The certificate of occupancy shall state:

(a) The building permit number;

(b) The address of the building;

(c) The name and address of the building owner;

(d) The name of the deputy building inspector;

(e) The edition of the codes and standards the building permit was issued under; and (f) The date of issuance.

(4) A temporary certificate of occupancy may be issued by the Division for a portion or portions of the construction that may be occupied safely prior to final completion of the building.

(5) The Division may suspend or revoke a certificate of occupancy issued under the provisions of this chapter if the certificate of occupancy is issued in error, or on the basis of incorrect, inaccurate or incomplete information, or in violation of any state law or regulation or any of the provisions of this chapter.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed November 4, 2016; effective February 2, 2017.

Tenn. Comp. R. & Regs. 0780-02-23-.10 DISPUTE RESOLUTION

(1) Disputes that arise during the inspection process shall be resolved as follows:

(a) When a dispute arises as to the interpretation or applicability of a provision of the adopted codes and standards between the owner, designer or contractor on a project and the deputy building inspector inspecting the project, the dispute shall be submitted to the Director over residential inspections, or designee, for resolution.

(b) If the owner, designer or contractor disagrees with the decision of the Director over residential inspections, or designee, the dispute shall be submitted to the Director’s supervisor within the Division for resolution.

(c) If the owner, designer or contractor disagrees with the decision of the Director’s supervisor within the Division, the dispute shall be submitted to the Commissioner of Commerce and Insurance, or designee, for resolution.

(d) At any point during this process, the parties may agree to submit the dispute to the publisher of the applicable codes and standards for a written opinion.

(2) The entire dispute resolution process set forth in paragraph (1) above shall be completed as quickly as possible, but no more than thirty (30) calendar days from the date that the dispute is first submitted for resolution, unless the dispute is submitted to the publisher of the codes and standards for an opinion.

(3) If there are any fees charged by the publisher for rendering a written opinion, those fees shall be paid by the owner, designer or contractor of the project before a certificate of occupancy will be issued by the Division.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed November 4, 2016; effective February 2, 2017.

Tenn. Comp. R. & Regs. 0780-02-23-.11 EQUIVALENCIES

(1) Wherever there are practical difficulties involved in carrying out the provisions of this chapter and the codes and standards adopted in this chapter, the Commissioner of Commerce and Insurance, or designee, shall have the authority to grant modifications for individual cases, upon application of the owner or owner’s representative, provided the Commissioner of Commerce and Insurance, or designee, shall first find that the special individual reason makes the strict application of the codes and standards adopted in this chapter impractical and the modification is in compliance with the intent and purpose of the codes and standards adopted in this chapter and that such modification does not lessen health, accessibility, life and fire safety, or structural requirements. The details of action granting modifications shall be recorded and kept in the files of the Division.

(2) The provisions of the codes and standards adopted in this chapter are not intended to prevent the installation of any material or to prohibit any design or method of construction not specifically prescribed by the codes and standards, provided that any such alternative has been approved. An alternative material, design or method of construction shall be approved where the Commissioner of Commerce and Insurance, or designee, finds that the proposed design is satisfactory and complies with the intent of the codes and standards adopted in this

chapter, and that the material, method or work offered is, for the purpose intended, at least the equivalent of that prescribed by the codes and standards adopted in this chapter in quality, strength, effectiveness, fire resistance, durability and safety.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed November 4, 2016; effective February 2, 2017.

Tenn. Comp. R. & Regs. 0780-02-23-.12 LOCAL GOVERNMENT ENFORCING RESIDENTIAL BUILDING CODES AND

STANDARDS.

Purpose. Pursuant to T.C.A. § 68-120-101, a local government may be responsible for adopting and enforcing residential building construction and fire safety codes and standards for one (1) and two (2) family dwellings, townhouses, and additions thereto of thirty (30) square feet or more of interior space.

The county or city is authorized to charge and receive a fee for each inspection performed. This rule sets forth the criteria by which local governments are authorized to adopt and enforce residential building codes and standards and the procedures by which the Division may review such authorization. A local government, as authorized by T.C.A. § 68-120-101(b)(7), may adopt an ordinance or resolution related to exterior construction materials for aesthetic purposes only.

(1) Initial Authorization.

(a) On or before July 1, 2010, or upon subsequent adoption thereof, a local government meeting the requirements of T.C.A. § 68-120-101, to adopt and enforce residential building construction and fire safety codes and standards for one (1) and two (2) family dwellings, townhouses and additions thereto of thirty (30) square feet or more of interior space, shall provide the Division with the following information:

1. The titles and editions of the residential building construction and fire safety codes and standards for one (1) and two (2) family dwellings and townhouses adopted and enforced by the local government;

2. The number and types of inspections that will be conducted;

3. A description of the permit issuance, enforcement, and recordkeeping process for all residential inspection activities.

4. The names of all persons who are employed by the local government to perform residential building inspections on the construction of one (1) and two (2) family dwellings, townhouses, and additions thereto of thirty (30) square feet or more of interior space and who meet the training requirements of T.C.A. §§ 68-120- 101(f)(1)(B), 68-120-113, and 68-120-118;

5. Any other documentation the Division deems necessary from a local government to evidence compliance with the requirements of T.C.A. §§ 68-120-101, 68-120- 113 and 68-120-118. The Division may conduct an on-site review of the local government’s residential building permit and inspection process; and 6. A statement guaranteeing that the local government will not allow inspectors (contractors or employees) to inspect the work of family members or other relations where such an inspection would create a conflict or give the appearance of impropriety. If a question about the degree of kinship or the relationship arises, the local government shall err on the side of caution and prevent such inspections. If there is a conflict between the local government and the State Fire Marshal’s determination, the State Fire Marshal’s decision shall prevail.

(2) Except as provided in T.C.A. § 68-120-101, or otherwise approved in writing by the state fire marshal, no city, county, town, municipal corporation, metropolitan government, or political subdivision of the State of Tennessee shall adopt or enforce any ordinance prescribing less stringent standards of fire prevention, fire protection, or building construction safety than those established hereunder. The residential building construction and fire safety codes and standards adopted by a local government shall be current within seven (7) years of the date of the latest edition published. Any amendments to the editions of the standards and codes adopted by the local government shall be designed to afford a reasonable degree of safety to life and property from fire and hazards incident to the design, construction, alteration, and repair of buildings or structures within the jurisdiction. If a local government adopts a less stringent seismic standard, the local government shall submit the request in writing with a letter from an engineer registered in Tennessee confirming that the proposed standards afford, to a reasonable degree, building construction standards to protect life and property. A local government may also request to adopt a less stringent seismic standard proposed by a different political subdivision if that standard was previously approved by the state fire marshal.

(3) Review of Local Government Authorization.

(a) For any local government that is authorized to adopt and enforce residential building construction and fire safety codes and standards for one (1) and two (2) family dwellings, townhouses, and additions thereto of thirty (30) square feet or more of interior space, the Division will conduct a review of the local government’s authorization at least once every three (3) years. The local government shall submit the following information on a form provided by the Division within thirty (30) days of its receipt of the form.

1. The titles and editions of the residential building construction and fire safety codes and standards for one (1) and two (2) family dwellings and townhouses adopted and enforced by the local government;

2. The number and types of residential inspections that are conducted;

3. A description of the permit issuance, enforcement, and recordkeeping process for all residential inspection activities;

4. The names of all persons who are employed by the local government to perform residential building inspections on the construction of one (1) and two (2) family dwellings, townhouses, and additions of thirty (30) square feet or more of interior space and who meet the training requirements of T.C.A. §§ 68-120-101(f)(1)(B), 68-120-113 and 68-120-118; and, 5. Any other documentation the Division deems necessary from the local government to evidence compliance with the requirements of T.C.A. §§ 68-120- 101, 68-120-113 and 68-120-118. The Division may conduct an on-site review of the local government’s residential building permit and inspection process.

(b) Each local government selected for an on-site review pursuant to this paragraph shall be notified of the review in writing.

(c) Report of Review.

1. After conclusion of the review, the Division shall notify the local government in writing whether the local government’s adopted residential building construction and fire safety codes and standards are current as required by law, whether there are any areas in which the local government is not adequately enforcing the adopted codes and standards, and whether the local government’s personnel is properly performing inspections.

2. If the local government has not adopted current residential building codes and standards, is not adequately enforcing the adopted codes and standards, or is not properly performing inspections, the notification shall contain recommended corrective action, and the local government shall be directed to submit a plan of corrective action to the Division within thirty (30) days after its receipt of the notification. The plan of corrective action shall be sufficiently detailed so as to ensure compliance with all requirements for initial authorization.

3. Within thirty (30) days after receipt of the local government’s plan of corrective action, the Division shall either approve or disapprove the plan. If the plan is approved, the Division may conduct periodic follow-up reviews to ensure continued compliance with the plan. If the plan is not approved, the Division may remove the local government’s authorization to conduct building inspections on the construction of one (1) and two (2) family dwellings, townhouses, and additions thereto of thirty (30) square feet or more of interior space.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed November 4, 2016; effective February 2, 2017. Amendments filed April 17, 2020; effective July 16, 2020. Amendments filed September 29, 2022; effective December 28, 2022. Amendments filed November 27, 2023; effective February 25, 2024.

Tenn. Comp. R. & Regs. 0780-02-23-.13 PERMIT ISSUING AGENTS

(1) All individuals, including all business entities, local governments and cooperatives, who issue building permits under this chapter, must hold a current contract with the Department of Commerce and Insurance, as administered through the Division of Fire Prevention.

(2) State deputy building inspectors are ineligible to become issuing agents. Additionally, without prior approval from the Department, no individual or business entity in any way related to or financially associated with any Department official will be allowed to become an issuing agent.

History

• Authority: T.C.A. § 68-120-101(a), (b), and (d).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed September 29, 2022; effective December 28, 2022.

Tenn. Comp. R. & Regs. 0780-02-23-.14 LOCAL GOVERNMENT OPTING OUT OF THESE PROVISIONS

Any local government opting out of the provisions of T.C.A. § 68-120-101 regarding residential building codes and standards for one (1) and two (2) family dwellings, townhouses and additions thereto of thirty (30) square feet or more of interior space shall submit to the Division the following:

(1) A certified copy of the resolution opting out of these provisions;

(2) The date of the next election for the legislative body; and (3) The name and mailing address of the person responsible by law for recordkeeping for the legislative body and to whom any notifications should be sent.

History

• Authority: T.C.A. § 68-120-101(b).
• Administrative History: Original rule filed March 29, 2010; effective June 27, 2010. Amendments filed November 4, 2016; effective February 2, 2017.

Tenn. Comp. R. & Regs. 0780-02-23-.15 DWELLING UNITS

(1) A single dwelling unit providing complete independent living facilities including, but not limited to, permanent provisions for living, sleeping, eating, cooking and sanitation, may meet the requirements of a one (1) and two (2) family dwelling and shall not be subject to the provisions of Tenn. Comp. R. & Regs. 0780-02-03 (Review of Construction Plans and Specifications) if and only if the dwelling unit:

(a) Is three (3) stories or less;

(b) Has a maximum occupancy of twelve (12) or fewer transient occupants; and (c) And consists of a gross area of less than five thousand (5,000) square feet.

(2) A boarding house or congregate living facility shall meet the requirements of the applicable standards adopted pursuant to T.C.A. § 68-120-101 and Tenn. Comp. R. & Regs. 0780-02- 02 (Codes and Standards) and 0780-02-03 (Review of Construction Plans and Specifications).

(3) Smoke alarms in dwelling units shall be no more than ten (10) years old from the date of manufacture. Battery-only powered devices shall be powered by a ten (10) year sealed battery.

History

• Authority: T.C.A. § 68-120-101.
• Administrative History: New rule filed November 4, 2016; effective February 2, 2017. Amendments filed November 27, 2023; effective February 25, 2024.

Chapter 0780-02-24 Volunteer Firefighter Equipment and Training Grant Program

Tenn. Comp. R. & Regs. 0780-02-24-.01 DEFINITIONS

(1) “Career Fire Department” means a fire department recognized by the State Fire Marshal’s Office, pursuant to T.C.A. § 68-102-304, comprised of fifty-one percent (51%) or more firefighters employed on a full-time basis.

(2) “Department” means the Tennessee Department of Commerce and Insurance.

(3) “Federal grants” means any federal discretionary grant program that awards financial assistance to be used for the purpose of the purchase of firefighting equipment and training including, but not limited to, the Federal Emergency Management Agency Assistance to Firefighters Grants (AFG).

(4) “Firefighting equipment” means the equipment used by a firefighter to contain or extinguish fires and to protect the life of the firefighter, other than fire trucks or vehicles.

(5) “Grantee” means an individual or organization that has been awarded financial assistance under one of the federal discretionary grant programs including, but not limited to, AFG, or under the volunteer firefighter equipment and training grant program from the State Fire Marshal’s Office.

(6) “Matching funds” means the amount of a project that a grantee agreed to provide in return for being awarded a federal grant.

(7) “Personal Protective Equipment (PPE)” means items compliant with the most current Occupational Safety and Health Administration (OSHA) or National Fire Protection Association (NFPA) standards to enhance the operational safety of the firefighter.

(8) “State Fire Marshal” means the Commissioner of the Department of Commerce and Insurance, or designee.

(9) “State Fire Marshal’s Office” means the Division of Fire Prevention at the Department of Commerce and Insurance.

(10) “Volunteer fire department” means a fire department recognized by the State Fire Marshal’s Office, pursuant to T.C.A. § 68-102-304, and classified by the Tennessee Fire Incident Reporting System (TFIRS) as a volunteer fire department.

(11) “Volunteer firefighter” means a duly appointed member of a fire department who is not employed in a full-time capacity with the department. Volunteer firefighters may receive life insurance, health insurance, workers’ compensation insurance, length of service awards, pay per-call or per-hour, or similar compensation.

History

• Authority: T.C.A. § 68-102-154.
• Administrative History: Emergency rules filed December 30, 2019; effective through June 27, 2020. Emergency rules expired effective June 28, 2020. Original rules filed June 23, 2020; effective September 21, 2020. Amendments filed November 18, 2021; effective February 16, 2022.

Tenn. Comp. R. & Regs. 0780-02-24-.02 APPLICATIONS AND TECHNICAL REQUIREMENTS

(1) Fire departments shall complete applications on forms provided by the State Fire Marshal’s Office. The State Fire Marshal’s Office will develop a form for the federal matching fund and a form for the firefighter equipment and training grant program. The application for the firefighter equipment and training grant program will include technical requirements established by the State Fire Marshal’s Office to be used to determine grant recipients.

(2) In addition to other technical requirements established by the State Fire Marshal’s Office and published with the application, preference will also be given to the volunteer fire departments which:

(a) Comply with the fire reporting requirements pursuant to T.C.A. § 68-102-111;

(b) File an annual financial report with the Comptroller of the Treasury pursuant to T.C.A. § 68-102-309; and (c) Meet the minimum training requirements established in T.C.A § 4-24-112(a)-(e).

(3) Application deadlines will be established annually by the State Fire Marshal’s Office based on available funding and will be published on the Department’s website.

(4) The applications shall be reviewed in accordance with state law and contracting rules and procedures established by the Central Procurement Office at the Department of General Services.

(5) Applications for matching funds to meet local match requirements for federal grants shall include a copy of the award letter of the federal grant for firefighting equipment.

History

• Authority: T.C.A. §§ 68-102-154, 68-102-304, and 68-102-309.
• Administrative History: Emergency rules filed December 30, 2019; effective through June 27, 2020. Emergency rules expired effective June 28, 2020. Original rules filed June 23, 2020; effective September 21, 2020. Amendments filed November 18, 2021; effective February 16, 2022.

Tenn. Comp. R. & Regs. 0780-02-24-.03 ELIGIBILITY

(1) To be eligible to receive an award for the volunteer firefighter equipment and training grant program or for the federal matching funds, a volunteer fire department shall:

(a) Be recognized by the State Fire Marshal’s Office, pursuant to T.C.A. § 68-102-304; and (b) Be classified as a volunteer fire department by the Tennessee Fire Incident Reporting System (TFIRS).

History

• Authority: T.C.A. § 68-102-154.
• Administrative History: Emergency rules filed December 30, 2019; effective through June 27, 2020. Emergency rules expired effective June 28, 2020. Original rules filed June 23, 2020; effective September 21, 2020.

Tenn. Comp. R. & Regs. 0780-02-24-.04 AWARD SELECTIONS

(1) The grant award selection committee shall be comprised of seven (7) members: three (3) representatives from the Tennessee Fire Chief’s Association, three (3) representatives from the Tennessee Firemen’s Association, and the Assistant Commissioner of Fire Prevention. The representatives from the Associations shall be from the three (3) grand divisions of the state and shall serve for staggered terms not to exceed three (3) years.

(2) The total amount of grants awarded annually must be divided equally among the three (3) grand divisions of the state.

(3) The committee will prioritize awarding grants for matching funds.

(4) The Commissioner shall endeavor to award all funds appropriated to the program each year, and any funds remaining will not revert to the general fund but will remain available for expenditure in subsequent fiscal years pursuant to T.C.A. § 68-102-154(d).

History

• Authority: T.C.A. § 68-102-154.
• Administrative History: Emergency rules filed December 30, 2019; effective through June 27, 2020. Emergency rules expired effective June 28, 2020. Original rules filed June 23, 2020; effective September 21, 2020.

Chapter 0780-03 Repealed

Tenn. Comp. R. & Regs. 0780-03 Repealed

RULES

OF THE TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE

DIVISION OF ADMINISTRATIVE PROCEDURAL RULES

0780-04 Division of Securities

Chapter 0780-04-01 General Administration

Tenn. Comp. R. & Regs. 0780-04-01-.01 RETAINED POWERS

It is the express intent of these rules that such powers as are herein delegated by the commissioner are also retained and may be exercised by the commissioner at the commissioner’s election.

History

• Authority: T.C.A. §§. 48-1-115 and 48-1-116.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed December 23, 2014; effective March 23, 2015. On January 27, 2015, the Tennessee Department of Commerce and Insurance filed a withdrawal of the amendment. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-01-.02 SHORT TITLE

These rules may be cited as the Tennessee Securities Rules.

History

• Authority: T.C.A. §§ 48-1-115 and 48-1-116.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Amendment filed July 5, 1983; effective August 4, 1983. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed December 23, 2014; effective March 23, 2015. On January 27, 2015, the Tennessee Department of Commerce and Insurance filed a withdrawal of the amendment. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-01-.03 DEFINITIONS

(1) When used in these rules and in the Tennessee Securities Act of 1980, as amended, unless the context otherwise requires:

(a) “Act” shall mean Chapter 866 of the Public Acts of 1980, otherwise known as the Tennessee Securities Act of 1980, as amended, and its codification in the Tennessee Code Annotated.

(b) “Assistant commissioner” shall mean the assistant commissioner for the Securities Division of the Department of Commerce and Insurance of the state of Tennessee, or any successor person authorized to exercise similar functions.

(c) “CRD System” shall mean the NASAA/FINRA Central Registration Depository System, commonly known as “CRD” and/or “Web CRD”.

(d) “Division” shall mean the assistant commissioner, staff, employees, and agents of the Securities Division of the Department of Commerce and Insurance of the state of Tennessee or such other agency as shall administer the Act or any successor statute.

(e) “FINRA” shall mean the Financial Industry Regulatory Authority.

(f) “Government Securities Broker-Dealer” shall mean a broker-dealer who effects transactions only in securities issued or guaranteed by the United States or an instrumentality thereof.

(g) “IARD” shall mean the Investment Adviser Registration Depository as operated by the FINRA in cooperation with NASAA, other states, and the United States.

(h) “NASAA” shall mean the North American Securities Administrators Association, Inc.

(i) “NASD” shall mean the National Association of Securities Dealers, Inc. and/or the National Association of Securities Dealers Regulation, Inc. (now known as FINRA).

(j) “Nasdaq National Market” shall mean a distinct tier of The Nasdaq Stock Market comprised of securities that meet the requirements of and are authorized as a Nasdaq National Market security.

(k) “Rules” shall mean the Rules of the Department of Commerce and Insurance, Securities Division, as set forth in Chapter 0780-04.

(l) “SEC” shall mean the Securities and Exchange Commission of the United States or its staff, as appropriate.

(m) “Security” shall include the practice of “equity funding”, “security funding”, or “life funding” whereby mutual fund shares and insurance contracts are sold as a package with mutual fund shares being pledged as collateral for loans, the proceeds of which are used to pay the premium on life insurance policies.

(n) “State” shall mean any state, territory, or possession of the United States, the District of Columbia, and Puerto Rico.

(o) “Substantially all of the voting securities of the bank or other bank holding company” as used in T.C.A. § 48-1-103(b)(10) shall mean eighty percent (80%) or more of each class of such voting securities.

(p) “UAPA” shall mean the Uniform Administrative Procedures Act as set forth in T.C.A. § 4-5-101, et seq., and any rules promulgated thereunder to the extent such rules are not inconsistent with the Act or these Rules.

(2) In construing terms used in these Rules and in the Act, the commissioner, to the extent consistent with the purposes fairly intended by the policy and provisions of the Act, will consider definitions, case law, SEC rules, and interpretive releases under the following federal statutes:

(a) The Securities Act of 1933 (the “1933 Act”);

(b) The Securities Exchange Act of 1934 (the “1934 Act”);

(c) The Trust Indenture Act of 1939 (the “Trust Indenture Act”);

(d) The Investment Company Act of 1940 (the “Investment Company Act”); and (e) The Investment Advisers Act of 1940 (the “Investment Advisers Act”).

(3) Unless the context otherwise requires or a rule expressly provides otherwise, terms defined in the Act shall have the same meaning when used in these Rules.

History

• Authority: T.C.A §§ 48-1-103(b)(10), 48-1-115, 48-1-116, and Public Acts of 2001, Chapter 61.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Amendment filed January 13, 1983; effective February 14, 1983. Amendment filed July 5, 1983; effective August 4, 1983. Amendment filed March 7, 1984; effective April 6, 1984. Amendment filed November 21, 1985; effective December 21, 1985. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed May 15, 2002; effective July 29, 2002. Amendment filed April 5, 2004; effective June 19, 2004. Amendment filed December 23, 2014; effective March 23, 2015. On January 27, 2015, the Tennessee Department of Commerce and Insurance filed a withdrawal of the amendment. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-01-.04 ADMINISTRATION OF THE ACT

(1) General.

(a) The commissioner delegates to the assistant commissioner all of the power and duties granted to and imposed upon the commissioner by the Act, except the power:

1. To impose any sanction pursuant to T.C.A. §§ 48-1-104, 48-1-108, 48-1-109, 48- 1-112, 48-1-116, or 48-1-121 in any contested case, as such term is defined in the UAPA;

2. To adopt any rule as such term is defined in the UAPA;

3. To grant immunity to any person pursuant to T.C.A. § 48-1-118(d); and 4. To appoint any investigative agent pursuant to T.C.A. § 48-1-118.

(b) Without limiting the foregoing delegation, the assistant commissioner is expressly empowered to:

1. Issue orders of investigation pursuant to T.C.A. § 48-1-118(a);

2. Conduct investigations as provided by T.C.A. § 48-1-118(b);

3. Issue exemption orders pursuant to T.C.A. § 48-1-103(b)(11);

4. Issue orders of effective registration, orders of denial, and other orders not involving any sanctions; and 5. Accept, on behalf of the commissioner, settlement agreements reached between the Division and any person pursuant to T.C.A. § 4-5-105.

(c) The Division’s office hours shall be between 8:00 a.m. and 4:30 p.m. (Central Time) on weekdays, except legal holidays. Normally, appointments will not be made before 8:30 a.m. or after 4:00 p.m.

(d) Unless expressly required or requested otherwise, only the original executed copy of each form is required. If a document or form pertains to more than one security, subject, or application, a separate copy and transmittal letter for each security, subject, or application shall be filed, except as expressly provided otherwise elsewhere in these Rules.

(2) Filing Fees.

(a) All fees required by the Act that are submitted directly to the Division shall be made by check payable to the order of the Tennessee Department of Commerce and Insurance.

Certified checks are not required.

(b) Pursuant to T.C.A. § 48-1-107(b), the minimum non-refundable filing fee for all applications for securities registration shall be three hundred dollars ($300). If an application is withdrawn prior to effectiveness or before a pre-effective stop order is entered, the Division shall retain the minimum filing fee and refund the remainder, if any, to the applicant in accordance with subparagraph (2)(c) of this Rule.

(c) Refunds of refundable fees will not be made unless a written request is filed with the Division specifying the following:

1. The name of the applicant;

2. The law under which the application was filed and the approximate date of filing; and 3. The amount of the funds claimed as due and the grounds upon which the claim is made.

(3) Filing Requirements.

(a) Applications, reports, and registration statements, including exhibits, shall be filed on good quality white paper, eight and one-half (8 ½) inches by eleven (11) inches or eight and one-half (8 ½) inches by fourteen (14) inches in size. Tables, charts, maps, and financial statements may be on larger paper if folded to those sizes and the final prospectus may be on smaller paper if the registrant so desires.

(b) All documents filed with the Division shall be in clear and easily readable form and suitable for photocopying and/or scanning.

(c) Exhibits may be attached or filed separately, properly marked or identified.

(d) Each copy of registration statements, prospectuses, offering circulars, and offering memoranda must be bound securely. The Division reserves the right to reject any such document the pages of which are not securely bound together.

(e) 1. All applications, reports, registration statements, financial statements, correspondence, exhibits, and/or other information required or requested pursuant to the Act or these Rules may be submitted to the Division in the paper format prescribed in this paragraph (3) or through the CRD System or other electronic data gathering, access, and retrieval methods acceptable to the Division.

2. Applications, reports, registration statements, financial statements, correspondence, exhibits, and/or other information filed through the CRD System or other electronic data gathering, access, and retrieval methods acceptable to the Division shall be in clear, easily accessible, and readable formats which shall be suitable for reproduction on good quality white paper eight an one-half (8 ½) inches by eleven (11) inches or eight and one-half (8 ½) inches by fourteen (14) inches in size.

3. Upon conversion and preservation through the CRD System or the Division’s electronic data gathering, access, and retrieval methods, all original applications, reports, registration statements, financial statements, correspondence, exhibits, and/or other information filed in the paper format prescribed in this paragraph (3) may be stored and subsequently destroyed pursuant to records management procedures consistent with those adopted and amended by the Division from time to time.

(4) Forms.

(a) All filings submitted with the Division shall be on the proper form as designated under these Rules. An application shall be deemed submitted on the proper form unless objection to the form is made by the Division prior to the effective date of the application. The following forms, as in effect at the time of use, are approved for filing with the Division:

1. “Form U-1”, Uniform Application to Register Securities;

2. “Form U-2”, Uniform Consent to Service of Process (naming the commissioner as the party to be served);

3. “Form U-2A”, Uniform Form of Corporate Resolution;

4. “Form U4”, Uniform Application for Securities Industry Registration or Transfer;

5. “Form U5”, Uniform Termination Notice for Securities Industry Registration;

6. “Form U7”, Small Company Offering Registration Form;

7. “Form U-CF”, Uniform Notice of Federal Crowdfunding Offering;

8. “Form USB”, Uniform Surety Bond;

9. “Form BD”, Uniform Application for Broker-Dealer Registration;

10. “Form BDW”, Uniform Request for Broker-Dealer Withdrawal;

11. “Form ADV”, Uniform Application for Investment Adviser Registration;

12. “Form ADV-E”, Certificate of Accounting of Client Securities and Funds in the Possession or Custody of an Investment Adviser;

13. “Form ADV-W”, Notice of Withdrawal from Registration as an Investment Adviser;

14. “Form D”, Notice of Sale of Securities Pursuant to Regulation D, Section 4(6), and/or Uniform Limited Offering Exemption;

15. “Form NF”, Uniform Investment Company Notice Filing;

16. “Form IN-0911”, Application for Registration as an Oil and Gas Issuer-Dealer;

17. “Form IN-1460”, Notice of Sale of Securities Pursuant to Accredited Investor Exemption;

18. “Form IN-1461”, Notice of Sale of Securities Pursuant to Employee Stock Purchase/Option Plan Exemption;

19. “Form IN-1493”, Designation of Accountant;

20. “Regulation A – Tier 2”, Uniform Notice Filing of Regulation A – Tier 2 Offering; and 21. “Notice of Exemption”, Notice of Intention to Offer or Sell Securities Pursuant to the Invest Tennessee Exemption.

(b) All instructions on the above named forms are applicable, except as expressly provided elsewhere in these Rules, and are adopted verbatim and incorporated herein by reference.

(c) In cases where a form, as set out in subparagraph (4)(a), directly or indirectly requires the maintenance of certain books and records, the registrant shall maintain adequate books and records to comply with the filing requirements of the form and all books and records requirements as provided in the Act and the Rules.

(5) Division Records.

(a) In compliance with the Tennessee Public Records Act, T.C.A. § 10-7-503(a)(2)(A-B), the Division shall make available to the public for inspection any part of an application to register securities, notice filing, or a filing pursuant to a claim of exemption from securities registration, except as set forth in subparagraph (5)(f) of this Rule.

(b) 1. The Division shall make available to the public for inspection in connection with any registered broker-dealer or investment adviser or applicant for broker-dealer or investment adviser registration or notice filing by an investment adviser:

(i) The current Form BD or the current Form ADV and all schedules and exhibits thereto; and (ii) Financial statements filed pursuant to these Rules within the preceding five (5) years.

2. Any noncurrent Form BD filings, noncurrent Form ADV filings, noncurrent schedules and exhibits to such forms and financial statements filed pursuant to these Rules prior to the preceding five (5) years may be preserved by the Division in paper or electronic format for public inspection or may be stored and subsequently destroyed pursuant to records management procedures consistent with those adopted and amended by the Division from time to time.

(c) With respect to any registered agent or investment adviser representative or application for an agent’s or investment adviser representative’s registration, the Division shall make available to the public for inspection the Form U4 and Form U5 of such agent or investment adviser representative, together with all exhibits.

(d) The Division shall not make available to the public for inspection any document or other material it obtains in connection with any matter which is the subject of a private investigation or that it obtains for the purpose of determining whether to commence a private or public investigation until such time, if ever, such document or other material is used in litigation or in a contested case.

(e) Any document which is available for inspection shall also be available for copying (including electronic reproduction through the CRD System or other electronic data gathering, access, and retrieval method acceptable to the Division) upon payment of the cost of copies as determined by the Division from time to time.

(f) Requests for Confidentiality.

1. Introduction. Upon the grant of a request made pursuant to part (5)(f)2. of this

Rule, the assistant commissioner will withhold from public inspection, for such time as in the assistant commissioner’s judgment is necessary, information received in connection with a registration statement, application, or report, if the assistant commissioner finds that such information is reasonably shown to be:

(i) Proprietary information that is in fact confidential, including, but not limited to, trade secrets, the release of which would be damaging or prejudicial to the business concerned; or (ii) Financial information that is in fact confidential, the release of which would be damaging or prejudicial to the person concerned.

2. Request for Confidentiality. A request for confidential treatment of any information received in connection with any registration statement, application, or report submitted to the assistant commissioner should accompany the submission of such information and such information must be submitted separately from other parts of the filing and marked “Confidential Treatment Requested”. The request for confidentiality will itself be available for public inspection and should not contain information for which confidential treatment is requested. Such request must be signed by the person filing the registration statement, application, or report and contain the following:

(i) A statement identifying the information which is the subject of the request and the registration statement, application, or report relating thereto;

(ii) A statement of the grounds upon which the request is made, including a statement as to the confidentiality of the information and the measures taken to protect its confidentiality, and a statement of the adverse consequences which are expected to result if the information is disclosed through the public records of the Division;

(iii) A statement of the specific time for which confidential treatment of the information is necessary and the basis for such conclusions; and (iv) A statement of the extent to which such information has been or will be disclosed to present or proposed investors, franchisees, lenders, or other persons.

3. Denial of Request. Material for which confidential treatment is requested shall not be deemed filed unless the request is granted, and may be withdrawn by the applicant if the request is denied, unless (i) the assistant commissioner has already taken an official action in reliance on such information prior to receiving the request for confidential treatment, (ii) the assistant commissioner determines that the withdrawal of such information is otherwise contrary to the public interest or the protection of investors, or (iii) the material for which confidential treatment is requested is otherwise required to be filed with the Division elsewhere in these Rules. If withdrawn, such information will not be considered by the assistant commissioner in connection with the registration statement, application, or report.

4. Granting Request. If a request for confidential treatment is granted, the person making such request will be notified in writing, the information will be marked “confidential” and kept separate from the public file, and the registration statement, application, or report will be noted with substantially the following legend: “Additional portions of this filing have been granted confidential treatment and are contained in a separate confidential file.”

5. Disclosure of Confidential Information.

(i) Information held confidential pursuant to part (5)(f)4. of this Rule may be disclosed by the assistant commissioner, at any time and in the assistant commissioner’s sole discretion, whether on the assistant commissioner’s own motion or upon the request of any person.

(I) To other state or federal regulatory agencies, in accordance with law;

(II) When necessary or appropriate in any proceeding or investigation pursuant to the law under which the information was filed; or (III) Upon a determination by the assistant commissioner that continued confidential treatment is no longer justified because the reasons therefore no longer exist or because public interest in disclosing such information outweighs the public interest in not doing so. If the assistant commissioner concludes that the disclosure of such information is necessary and in the public interest and that it is impractical under the circumstances to give notice to the person who requested confidential treatment of the information, the information may be disclosed without notice. Otherwise, the person who requested confidential treatment of such information will be given notice that the release of such information is under consideration and the reasons therefore, and an opportunity to make written representations promptly, within not more than five (5) business days, regarding the continued need and justification for continued confidentiality.

(ii) Requests to Inspect Confidential Information. A request to inspect confidential information pursuant to subitem (5)(f)5.(i)(III) of this Rule should be in writing, signed by the person making the request, and must state the justification for the request. A copy of the request for inspection will ordinarily be forwarded to the person who requested confidential treatment of the information in accordance with subitem (5)(f)5.(i)(III) of this

Rule. If a request for inspection should be held confidential, the reasons therefore must be stated in such request, in accordance with part (5)(f)2. of this Rule.

(iii) Nothing contained herein shall be interpreted as affording any person a right to withdraw information once it has been received by the assistant commissioner, except as provided in part (5)(f)3. of this Rule.

6. All documents described in paragraph (5) of this Rule may be maintained or submitted to the Division through the CRD System or other electronic data gathering, access, and retrieval methods acceptable to the Division.

History

• Authority: T.C.A. §§ 48-1-103(b)(11), 48-1-104, 48-1-107(b), 48-1-108, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-115, 48-1-116, 48-1-117, 48-1-118, 48-1-121, 48-1-125, 4-5-105, 10-7-503(a)(2)(A-B), Public Acts of 1997, Chapter 164, § 8, and Public Acts of 2001, Chapter 61.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed November 6, 1997; effective January 20, 1998. Amendment filed May 15, 2002; effective July 29, 2002. Amendment filed April 5, 2004; effective June 19, 2004. Amendment filed December 23, 2014; effective March 23, 2015. On January 27, 2015, the Tennessee Department of Commerce and Insurance filed a withdrawal of the amendment. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed September 28, 2017; effective December 27, 2017.

Tenn. Comp. R. & Regs. 0780-04-01-.05 NO-ACTION LETTERS AND INTERPRETIVE OPINIONS

(1) In case of any question concerning the Act, the Division staff may in its sole discretion entertain a request for a no-action letter or interpretive opinion. If issued, a no-action letter or an interpretive opinion only expresses the current position of the Division staff with respect to enforcement, and is not binding on the commissioner or third parties. A request for a noaction letter or interpretive opinion must be in writing and in the format described in SEC Release No. 33-6269.

(2) The Division will maintain an index, chronologically and by statutory section, of all no-action letters and interpretive opinions issued. Copies of such letters may be reviewed in the Division’s office and copies thereof obtained upon payment of reasonable costs of duplication.

History

• Authority: T.C.A. §§ 48-1-115, 48-1-116, and 48-1-117(e).
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed December 23, 2014; effective March 23, 2015. On January 27, 2015, the Tennessee Department of Commerce and Insurance filed a withdrawal of the amendment. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-01-.06 REPEALED

History

• Authority: Public Acts of 1980, Chapter 866, § 16(a).
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Repeal filed September 28, 1990; effective November 12, 1990. Amendment filed December 23, 2014; effective March 23, 2015. On January 27, 2015, the Tennessee Department of Commerce and Insurance filed a withdrawal of the amendment. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Chapter 0780-04-02 Securities Registration and Exemptions

Tenn. Comp. R. & Regs. 0780-04-02-.01 REGISTRATION BY COORDINATION

(1) Securities may be registered by coordination with SEC registration. A registration statement and a prospectus for such securities shall be filed with a completed and properly executed Form U-1, including all applicable exhibits thereto, a Form U-2, a Form U-2A (if applicable), and the appropriate filing fee computed in accordance with T.C.A. § 48-1-107(b). The registrant shall also provide, or in Item 8(k) of the Form U-1 undertake to provide promptly if unavailable on the date of filing:

(a) Any additional exhibits included in Part II of the applicable SEC registration statement;

(b) Any applicable cross-reference sheet, including but not limited to cross-reference sheets adopted by NASAA; and (c) Such other information as the Division may require to determine that the offering meets applicable fairness guidelines and that the registration statement does not include any untrue statement of a material fact required to be stated therein or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they are made, not misleading.

(2) Only those offerings registered by coordination in this state on Forms 1-A, S-1, S-2, S-3, S-4, S-11, SB-1, and SB-2, or any successors to these forms, are subject to review under the applicable portions of Rule 0780-04-02-.06.

(3) Until such time as an applicant has complied with all filing requirements and Division comments, the applicant may waive automatic concurrent effectiveness by written notice to the Division. Once an applicant has fully complied with the filing requirements set forth in the Act and in these Rules, and has satisfied all outstanding comments issued by the Division, the commissioner shall make the application to register effective or conditionally clear the application to register until notification of SEC effectiveness, subject to any condition or limitations imposed by the Division. The Division shall give notice by mail of the effective date of registration to each registrant, but such notice shall be conditioned upon the Division’s receipt of notice from the applicant of the date that its registration statement was made effective by the SEC.

(4) Every registration statement covering securities registered by coordination is effective for one (1) year from the effective date. Renewals of registrations by coordination may be made in accordance with Rule 0780-04-02-.05.

History

• Authority: T.C.A. §§ 48-1-105, 48-1-107, 48-1-115, and 48-1-116.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-02-.02 REGISTRATION BY QUALIFICATION

(1) An application filed pursuant to T.C.A. § 48-1-106 shall contain, at a minimum, all of the information and the documents specified in Schedule A of the 1933 Act to the extent applicable, unless filed pursuant to a registration statement or notice filing format prescribed by the SEC.

(2) A prospectus or offering circular shall be submitted with a completed and properly executed Form U-1 and the appropriate filing fee computed in accordance with T.C.A. § 48-1-107(b), and shall contain or be accompanied by the following information;

(a) The Uniform Consent to Service of Process on Form U-2 required by T.C.A. § 48-1- 124(e);

(b) The Uniform Form of Corporate Resolution on Form U-2A, if applicable;

(c) Any applicable cross-reference sheet, including but not limited to cross-reference sheets adopted by NASAA; and (d) Such other information as the Division may require to determine that the offering meets applicable fairness guidelines and that the prospectus or offering circular does not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading.

(3) All notices, circulars, advertisements, sales literature, or communications required to be filed by T.C.A. § 48-1-106(b)(5) shall be filed according to the terms and conditions set forth in

Rule 0780-04-02-.04.

(4) All offerings registered by qualification are subject to review under the applicable portions of

Rule 0780-04-02-.06.

(5) Every registration statement covering securities registered by qualification is effective for one (1) year from the effective date. Renewals of registrations by qualification may be made in accordance with Rule 0780-04-02-.05.

History

• Authority: T.C.A. §§ 48-1-106, 48-1-107, 48-1-113, 48-1-115, 48-1-116, 48-1-121(c), and 48-1-124(e) and Public Acts of 2001, Chapter 61.
• Administrative History: Original rule filed January 13, 1983; effective February 14, 1983. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-02-.03 SECURITIES REGISTRATION GENERALLY

(1) Review Procedures for Registrations.

(a) At the time an application to register securities that is subject to review under either paragraph (3) of Rule 0780-04-02-.01 or paragraph (4) of Rule 0780-04-02-.02 is filed and the proper fee is received, the Division may in its sole discretion make a preliminary review of the application to determine which of the following review procedures will be employed in connection with the filing:

1. Deferred Review. If the Division staff has determined after an initial analysis that the application is so deficient or presents problems so serious that the Division could not justify spending more time in reviewing the application, review will be deferred and the applicant will be promptly notified. Detailed comments will not be prepared or issued and it will be the responsibility of the applicant to consider whether to withdraw or amend the application.

2. Summary Review. This category of review involves notification to an applicant that the Division staff has made only a summary review of the application and only such comments as may arise from such review will be made. In such cases, applicants may be required to furnish as supplemental information certain representations on behalf of the issuer, including representations that the issuer is aware that the Division staff has made only a summary rather than a detailed full review of the application.

3. Full Review. In the final category of review, applications will receive a more complete accounting, financial, and legal review. The Division staff will undertake to provide timely comments regarding the application for registration, which may include requirements for additional exhibits or supplemental data. Upon satisfactory compliance with any comments, the Division shall declare the application effective or conditionally clear the application pending notice of SEC effectiveness without a receipt of representation letters from the persons mentioned in the preceding part (1)(a)2.

(b) Notwithstanding the type of review performed, the burden of compliance with the Act and these Rules remains with the issuer and as a matter of law cannot be shifted to the Division’s staff.

(2) Post Effective Reports.

(a) The assistant commissioner may as a condition to registration require the person who filed the application for registration to file specified current financial information on a periodic basis. The assistant commissioner may also as a condition to registration require the filing of periodic reports on the use of proceeds. Such information may be submitted in letter form or by filing a copy of any form containing the required information that the issuer has filed with the SEC or any state securities agency.

(b) The person who filed the application for registration shall file a final sales report of the dollar amount and number of securities sold in this state, provided, however, that no final sales report shall be due with respect to any twelve (12) month period covering an initial registration or a renewal pursuant to which the maximum filing fee was paid pursuant to T.C.A. § 48-1-107(b). Unless an extension is granted by the assistant commissioner, such report shall be filed within thirty (30) days after the expiration of the effectiveness of the registration statement or the termination or completion of the offering of the securities covered by the registration statement, whichever is earlier.

The report may be submitted in letter form or by filing a copy of any form containing the required information that the issuer has filed with the SEC or any state securities agency.

(3) Legend Requirement.

(a) Offering documents for securities to be registered in this state and registered or to be registered with the SEC under the 1933 Act shall contain on the cover page substantially the following legend in capital letters and, if printed, in boldface roman type at least as high as ten (10) point modern type:

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE

SECURITIES AND EXCHANGE COMMISION OR ANY STATE SECURITIES

COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR

ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR

ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE

CONTRARY IS A CRIMINAL OFFENSE.

(b) Offering documents for securities to be registered in this state that will not be registered with the SEC under the 1933 Act shall contain on the cover page substantially the following legend in capital letters and, if printed, in boldface roman type at least as high as ten (10) point modern type:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND

EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM

REGISTRATION SET FORTH IN THE SECURITIES ACT OF 1933. THESE

SECURITIES HAVE BEEN REGISTERED WITH THE TENNESSEE DEPARTMENT

OF COMMERCE AND INSURANCE. SUCH REGISTRATION DOES NOT

CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF ANY SECURITY,

NOR HAS THE TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE

PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION

CONTAINED IN THIS OFFERING DOCUMENT. ANY REPRESENTATION TO THE

CONTRARY IS A CRIMINAL OFFENSE.

(4) Prospectuses.

(a) Preliminary Prospectuses. The publication and distribution of preliminary prospectuses in connection with proposed offerings to Tennessee residents shall be permitted if such preliminary prospectuses:

1. Are used for the purpose of obtaining indications of interest (as distinguished from firm commitments to purchase) in the proposed securities;

2. Are filed with the Division no later than the date of first use in this state; and 3. Contain the legend required by the SEC, if applicable, or substantially the following legend in capital letters and, if printed, in at least as high as ten (10) point modern boldface roman type on the cover:

AN APPLICATION TO REGISTER THESE SECURITIES HAS BEEN FILED

WITH THE TENNESSEE COMMISSIONER OF COMMERCE AND

INSURANCE. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS

TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION

BECOMES EFFECTIVE.

(b) Any person filing a registration statement pursuant to T.C.A. § 48-1-105 that is described in paragraph (2) of Rule 0780-04-02-.01 or pursuant to T.C.A. § 48-1-106 shall promptly file with the Division all amendments to each registration statement (other than amendments which merely delay the effective date of the registration statement) and all supplements to each addition or deletion to the offering material made in the amendment.

(c) After the effective date of an application to register securities, no prospectus shall be used in this state unless it contains all supplements to the prospectus as of the date of its use.

(5) Abandonment. If an application to register securities has been on file with the Division for more than one (1) year without becoming registered, or if no written communication addressing offering terms in response to comments or a substantive amendment is received in connection with the application for a period of six (6) months, the Division may, in its discretion, determine whether the application for registration has been abandoned by the following procedure:

(a) Notice will be sent to the correspondent designated on the Form U-1, as amended, by certified mail, return receipt requested, at the correspondent’s most recent address designated on the Form U-1. Such notice will inform the correspondent that the application for registration is out of date and must either be updated or withdrawn within thirty (30) days after the date of such notice.

(b) If the correspondent fails to respond to such a notice by filing a substantive update or withdrawing the application for registration, the Division may enter an order declaring the application for registration abandoned.

(c) If applicable, the applicant may request a return of the refundable portion of the registration fee pursuant to subparagraph (2)(c) of Rule 0780-04-01-.04.

(6) Blank-Check Offerings.

(a) This paragraph (6) is not intended to apply to offerings to be registered where the type of business or property is identified in the registration statement but the specific property or investment has not been identified. Specifically, this paragraph (6) shall not be applied to non-specified blind-pool offerings with adequate disclosure of investment objectives.

(b) An issuer must disclose with specificity, in the registration statement, its business plan and its intended use of net proceeds from an offering to be registered. The description of the issuer’s business plan and use of net proceeds must enable offerees to know with reasonable certainty what types of business or industry the issuer will be engaged in, the types of products or services the issuer will manufacture, sell, or provide, and the identity and experience of the principal managers of the business to be acquired or developed.

(c) An offering of securities by a development stage company that commits less than seventy-five percent (75%) of the net proceeds of an offering for use in a specific business to be acquired or developed shall be considered a blank-check offering. The commissioner shall deem the registration statement of a blank-check offering to be one that omits to state a necessary material fact under T.C.A. § 48-1-121(a)(2) and the blank-check offering itself as one that would work, or tend to work, a fraud on purchasers, and may take any action authorized by law, including but not limited to the issuance of an order pursuant to T.C.A. §§ 48-1-108 and 48-1-116 denying, suspending, or revoking registration or the use of any exemption, which order may name the issuer, its controlling persons, and any underwriter or seller of the securities.

(d) For purposes of this paragraph (6), the terms below shall have the following meanings;

1. “Development stage company” shall mean any issuer devoting substantially all of its efforts to establishing a new business and either: (i) planned principal operations have not commenced; or (ii) planned principal operations have commenced, but there has been no significant revenue therefrom.

2. “Net proceeds” shall mean the amount of offering proceeds remaining after payment of selling commissions and expenses and all other expenses paid or payable in connection with the offer and sale of securities, such as printing, legal, accounting, and filing fees.

(7) Multiple Securities Under Single Registration Statement.

Any issuer filing an initial or renewal application for registration of more than one security pursuant to a single registration statement may file:

(a) A single Form U-1 if that form is completed to clearly enumerate each security and the proposed dollar amount of each security for which the application for registration is being made; and (b) A single check combining the filing fees payable for the securities listed on the Form U- 1.

History

• Authority: T.C.A. §§ 48-1-105, 48-1-106, 48-1-107, 48-1-108, 48-1-115, 48-1-116, and 48-1-121.
• Administrative History: Original rule filed January 13, 1983; effective February 14, 1983. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-02-.04 ADVERTISING AND SALES LITERATURE

(1) All advertising and sales literature of any kind to be used directly or indirectly in connection with the offer or sale of securities registered or subject to registration in this state, whether through written, radio, or television medium, except advertising and sales literature described in SEC Rule 134 (17 C.F.R. § 230.134), shall be filed with the Division prior to the proposed use date or circulation date.

(2) For purposes of this Rule, the term “advertising and sales literature” shall be deemed to include any communication distributed or made available to prospective investors or the public by any person to offer to sell or to induce the sale of securities other than a prospectus, a preliminary prospectus, or any prospectus supplements that have been filed with the Division as part of an application for registration. The sales material shall present a balanced discussion of both risk and reward. The contents of advertising and sales literature shall be consistent with representations in the prospectus.

(3) No advertising or sales literature of any kind shall contain:

(a) Any untrue statement of material fact or any omission to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

(b) Any statement or implication that the securities offered are without risk, that returns are assured, or that failure or loss of the investment is not possible.

(4) All advertising or sales literature of any kind used in connection with offerings registered or to be registered shall contain:

(a) The name of the issuer and of the person circulating or publishing the same.

(b) A statement showing the relationship between the issuer or dealer and every person whose name is used or from whom quotations are made.

(c) A statement clearly indicating the source and authority of all reports, statements, or claims used in whole or in part or in any manner referred to therein.

(d) 1. Substantially the following legend:

“THIS IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER

TO BUY THE SECURITIES DESCRIBED HEREIN. AN OFFERING IS MADE

ONLY BY THE PROSPECTUS”.

2. If printed, the legend shall appear on the face of the advertising or sales literature in type as large as that used generally in the body thereof.

(5) Oral statements made by salesmen or other persons in connection with the purchase or sale of a security registered or to be registered supplementing, interpreting, or explaining any advertising or sales literature or made in connection with sales meetings or seminars shall be consistent with representations in the prospectus.

(6) The commissioner may notify the filer in writing if he/she determines that the advertising and sales literature submitted in accordance with paragraph (1) of this Rule fails to conform with the provisions of this Rule, or the Act, or has been otherwise determined to be unfair or deceptive. Such notice shall specify the reason(s) for the commissioner’s determination and shall afford the filer a right to a hearing in compliance with the UAPA.

(7) After notice and a hearing, the commissioner may order any person to cease and desist from using any advertising and sales literature that is determined to violate this Chapter.

(8) Failure of the commissioner to issue a notice pursuant to paragraph (6) of this Rule shall not relieve any person of responsibility for compliance with this chapter, nor will this failure waive any right of the commissioner to bring an action against a person for violation of this Chapter.

(9) The provisions of paragraphs (1) through (8) of this Rule shall not apply to advertising or sales literature of any kind meeting the requirements of SEC Rules 134 (17 C.F.R. § 230.134), 156 (17 C.F.R. § 230.156), and 482 (17 C.F.R. § 230.482) or any successor rules relating to advertising and sales literature used in the sale of investment company shares registered pursuant to the Investment Company Act, unless such advertising or sales literature is not filed with and is not subject to review by the FINRA or the SEC.

History

• Authority: T.C.A. §§ 48-1-105, 48-1-106, 48-1-107, 48-1-113, 48-1-115, 48-1-116, and 48-1-121; and 17 C.F.R. §§ 230.134, 230.156, and 230.482.
• Administrative History: Original rule filed January 13, 1983; effective February 14, 1983. Amendment filed August 29, 1984; effective September 28, 1984. Amendment filed March 20, 1985; effective June 14, 1985. Amendment filed January 29, 1988; effective April 27, 1988. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-02-.05 RENEWALS

(1) Registration statements are effective for a period of one (1) year from the date of effectiveness and may be renewed, unless a more specific rule regulating a certain type of security states to the contrary, for additional periods of one (1) year by filing an application for renewal not later than twenty (20) days prior to the expiration of the present registration period. The application for renewal must contain the following:

(a) A completed and properly executed Form U-1, Form U-2, and, if applicable, Form U- 2A;

(b) One (1) copy of the latest form of prospectus and each supplement to the latest form of prospectus, if any;

(c) A sales report containing:

1. The number of Tennessee investors;

2. The number of shares of each class of securities sold to Tennessee investors during the present registration period; and 3. The aggregate offering amount of each class of securities sold to Tennessee investors during the present registration period.

(d) A copy of the issuer’s financial statements for the most recent fiscal year end, prepared in accordance with generally accepted accounting principles;

(e) A statement specifying the section of the Act pursuant to which the registration statement is to be renewed;

(f) The appropriate filing fee computed in accordance with T.C.A. § 48-1-107(b); and (g) Any other such information, forms, or documents as the Division may request.

(2) If the issuer elects to increase the amount of securities registered in the state at the time of renewal by amending the Form U-1 to reflect the increased amount to be registered, the filing fee required under subparagraph (1)(f) must be computed based upon the increased amount of securities.

(3) If the name of the offering or the name of the issuer has been changed during the present registration period without prior notice to the Division, or if the name of the offering or the name of the issuer will be changed as part of an upcoming renewal, the application for renewal must include the following items in addition to the items listed under paragraph (1):

(a) A completed and properly executed Form U-1, Form U-2, and, if applicable, Form U- 2A, each amended to reflect the change in name(s); and (b) If changing the name of the offering, the fee as set forth in T.C.A. § 48-1-107(n).

(4) All forms and documents required under this Rule and which have been filed and recorded on the Electronic Data Gathering Access and Retrieval (EDGAR) system, the Interactive Data Electronic Applications (IDEA) system, the Electronic Filing Depository (EFD), or any other electronic data gathering system either maintained by the SEC or approved by the Division, may be incorporated by reference in lieu of filing such documents in paper form. If an issuer applying for renewal of registration elects to file such forms by reference, the issuer must:

(a) Provide an accurate filing number or other designation used by the SEC;

(b) Ensure that a printed or electronically stored copy of all required documents and forms is immediately accessible to the Division; and (c) Provide the Division with a paper copy of such forms upon request.

History

• Authority: T.C.A. §§ 48-1-106, 48-1-107, 48-1-115, and 48-1-116 and Public Acts of 2001, Chapter 61.
• Administrative History: Original rule filed September 28, 1990; effective November 12, 1990. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed February 1, 2018; effective May 2, 2018.

Tenn. Comp. R. & Regs. 0780-04-02-.06 STANDARDS OF FAIRNESS AND REASONABLENESS

(1) General Rule.

All securities covered by this Rule shall be offered upon such terms and conditions that the potential rewards to the investors and to the promoter or issuer of the securities bear a reasonable relation to the risks assumed by each.

(2) Applicability.

(a) Unless different criteria for a specific type of security are set forth elsewhere in these Rules, this Rule shall apply to:

1. All offerings filed for registration in this state pursuant to T.C.A. § 48-1-105, except as provided in paragraph (3) of Rule 0780-04-02-.01; and 2. All offerings filed for registration in this state pursuant to T.C.A. § 48-1-106.

(b) With respect to offerings registered by coordination or by qualification, if there is any conflict between the disclosure or accounting requirements of this Rule and those of the SEC, the Division may accept compliance with the SEC requirements in lieu of compliance with this Rule.

(3) Variances.

The standards set forth in this Rule are intended to furnish guidelines for the determination that an application for registration meets the requirement of paragraph (1) of this Rule. These standards are not meant to preclude the application of more liberal or more stringent standards if the circumstances of a particular application for registration so justify. The Division may modify or waive any of the standards set forth in paragraph (4) of this Rule where good cause is shown or where the goal sought to be achieved by these guidelines can be accomplished by other means. Good cause may be shown by a demonstration of adequate alternative safeguards built into a particular offering that bring that offering within the spirit of paragraph (1) of this Rule.

(4) Standards.

(a) An offering which meets the applicable provisions of this paragraph (4) will be deemed to meet the standard of paragraph (1) of this Rule.

(b) The following definitions shall apply to this Rule except as expressly provided otherwise herein:

1. “Earnings Per Share” means net profits determined on a per share basis after taxes but before extraordinary items, calculated in accordance with generally accepted accounting principles consistently applied on a fully diluted basis.

2. “Equity Investment of Promoters” means the total of all cash, together with the reasonable value of all assets contributed to the issuer as determined by qualified independent appraisals acceptable to the assistant commissioner, and may be adjusted by the earned surplus or deficit of the issuer subsequent to the dates of contribution.

3. “Equity Security” means any common stock or similar security; or any instrument convertible, with or without consideration, into such a security, or carrying a warrant, option, or right to subscribe to or purchase such a security, or any such warrant, option, or right.

4. “Firm Market” means a market in which quoted prices are those at which a security can actually be bought and sold currently, and are not quotes that are merely based on historical prices.

5. “Person” means any individual, corporation, partnership, trust, or other legal entity, or any unincorporated association or organization, and includes the following: (i) any relative, spouse, or relative of the spouse of the specified person; (ii) any trust or estate in which the specified person or any of the persons specified in (i) collectively own five percent (5%) or more of the total beneficial interest or of which any of such persons serve as trustee, executor, or in any similar capacity; and (iii) any corporation or other organization (other than the issuer corporation) in which the specified person or any of the persons specified in (i) are the beneficial owners collectively of five percent (5%) or more of any class of equity securities or five percent (5%) or more of the equity interest.

6. “Promoter” means: (i) any person who, acting alone or in conjunction with one (1) or more persons, directly or indirectly, takes the initiative in founding and organizing the business or enterprise of a corporation; (ii) any person who, in connection with the founding or organizing of the business or enterprise of a corporation, directly or indirectly, receives in consideration of services or property or both services and property five percent (5%) or more of any class of equity security of the corporation or five percent (5%) or more of the proceeds from the sale of any class of equity security of the corporation; provided, however, that a person who receives such securities or proceeds solely as underwriting commissions shall not be deemed a promoter within the meaning of this clause if such person does not otherwise take part in founding and organizing the enterprise; (iii) any person who is an officer, director, or who beneficially owns, directly or indirectly, more than five percent (5%) of any class of equity security of a corporation, excluding any unaffiliated institutional investor that purchased its shares more than two (2) years prior to the filing date of the proposed offering; and (iv) any person who is an affiliate of a person specified under clause (i), (ii), or (iii), of this part 6.

7. “Promotional or Development Stage Corporation” means a corporation which has no public market for its shares and has no significant earnings. All other corporations shall be deemed “Seasoned Corporations”.

8. “Promotional Shares” means those equity securities which were issued within three (3) years prior to the filing date or are to be issued to promoters for a consideration valued at less than eighty-five percent (85%) of the proposed public offering price excluding the number of such securities calculated by dividing eighty-five percent (85%) of the public offering price per share into the total consideration paid by promoters for their shares. Equity securities which were, or are to be, issued for services rendered, patents, copyrights, or other intangibles are presumed to be promotional shares unless the value of such intangibles has been established to the satisfaction of the Division. In determining the consideration paid or the value of property under this definition, the Division may recognize as consideration any property, including patents, copyrights, or other intangibles (except goodwill) to the extent that the fair market value of such assets is established to the Division’s satisfaction. Consideration for equity securities may include the fair market value of such assets if the fair market value can be determined by an independent appraisal (according to recognized standards of valuation) that is acceptable to the Division and may also include verifiable out-of-pocket development or marketing expenses (excluding promoters’ salaries) paid by promoters to the extent such expenses are not reimbursed by the issuer. Excluded from this definition shall be any shares issued to promoters at the same price paid by unaffiliated persons in offerings made pursuant to SEC Regulation D.

EXAMPLE: Calculations of number of promotional shares. # of shares Total Price Paid Per Share Shares Held by Promoters 100 $1.00 Public Offering Price Per Share $10.00 Total Paid by Promoters $100.00 Public Offering Price Per $10 x .85 Share x .85 Fully Paid Shares $100.00 $8.50 = 11.77* Shares Held by Promoters 100 - Fully Paid Shares -12* Number of Promotional Shares 88 *Rounded 9. “Public Market” means, with respect to the equity securities of an issuer, that one of the following criteria is met:

(i) The security is traded on a national or regional stock exchange registered under the 1934 Act;

(ii) The security is designated on the Nasdaq National Market; or (iii) Each of the following criteria is met:

(I) There were at least three hundred (300) holders of the security at the beginning and end of the six (6) month period preceding the date of the filing;

(II) At least two hundred thousand (200,000) shares of the security are publicly outstanding (exclusive of securities held by officers, directors, and five percent (5%) holders);

(III) At least two (2) broker-dealers regularly make a market in the security;

(IV) At least one (1) financial publication regularly quotes the market price;

(V) Trading of the security in the six (6) month period preceding the date of the filing averaged at least one hundred (100) transactions or at least five percent (5%) of the outstanding securities (not including securities held by officers, directors, and five percent (5%) security holders) per month; and (VI) The bid price and the asking price represent quotations in a firm market.

10. “Significant Earnings” shall be deemed to exist if the corporation’s earnings record over the last five (5) years (or such shorter period of the corporation’s existence, but in no event less than three (3) years) demonstrates that it would have met either of the earnings tests set forth in items (4)(f)4.(i)(I)–(II) of this

Rule based upon its shares outstanding immediately before the proposed public offering.

11. “Unaffiliated Institutional Investor” includes any unaffiliated: bank; investment company registered under the Investment Company Act or a business development company as defined in Section 2(a)(48) of the Investment Company Act; small business investment company licensed by the U.S. Small Business Administration under Section 301 of the Small Business Investment Act of 1958; employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974; insurance company; private business development company as defined in Section 202(a)(22) of the Investment Advisers Act or comparable business entity engaged as a substantial part of its business in the purchase and sale of securities and which owns less than twenty percent (20%) of the securities to be outstanding at the completion of the proposed public offering.

(c) Options and Warrants.

The amounts and kinds of options and warrants to purchase securities issued or sold, other than ratably in connection with a proposed offering of equity securities or securities convertible into equity securities, shall be reasonable. The amounts and kinds of options and warrants are presumed to be reasonable if they satisfy the following conditions:

1. With respect to options or warrants to underwriters:

(i) The options or warrants are issued to the managing underwriters under a firm commitment underwriting agreement only after the entire issue has been sold, provided that the options and warrants are not assignable or transferable except among or to the partners, or officers and directors of the managing underwriters;

(ii) The exercise price of the options or warrants is at least equal to the public offering price with a step-up of the exercise price of either seven percent (7%) each year such options and warrants are outstanding, or in the alternative, an overall twenty percent (20%) step-up at any time after one (1) year from the date of issuance. The step-up shall commence twelve (12) months after the grant of the options or warrants. The election as to either step-up alternative must be made by the underwriters at the time that the options or warrants are issued;

(iii) The options or warrants are issued by a relatively small company other than a seasoned issuer with a public market, or where it appears from all of the facts and circumstances that the issuance of options or warrants is necessary to obtain competent investment banking services, provided that the direct commissions to the underwriters are lower than the usual and customary commissions would be in the absence of such options and warrants;

(iv) The securities covered by the options and warrants consist solely of securities of the same class and of the same issuer as those securities proposed to be sold to the public in the offering under consideration;

(v) The number of shares covered by all options or warrants does not exceed twelve percent (12%) of the securities proposed to be sold to the public in the offering under consideration;

(vi) The options or warrants do not exceed five (5) years in duration and are exercisable no sooner than one (1) year after issuance; and (vii) The value of the options or warrants shall be included in the computation of underwriting commissions and discounts. The market value of such options or warrants, if any, shall be used, and where no market value exists, a presumed fair value of not less than twenty percent (20%) of the public offering price of the stock to which the options or warrants relate shall be used, unless evidence indicates that a different value exists.

2. With respect to options or warrants issued to persons other than underwriters in connection with financing arrangements made by the issuer, the options or warrants are issued as a result of bona fide negotiations between the issuer and persons not affiliated with the issuer, and upon terms and conditions which are reasonable in light of the proposed public offering.

3. The total amount of options and warrants issued or reserved for issuance at the date of the public offering, excluding those issued in connection with acquisitions, does not exceed either twelve percent (12%) of the shares to be outstanding upon completion of the offering or twelve percent (12%) of the shares outstanding during the twelve (12) month period commencing with the effective date of the registration. The number of options and warrants issued or reserved for issuance may be disregarded if the issuer states in the prospectus that the amount of outstanding options and warrants shall not exceed the above amount during the period the registration statement is effective with the Division.

4. All options and warrants except those issued to financing institutions other than underwriters shall be issued at not less than eighty-five percent (85%) of fair market value on the date of issuance, or where no market exists, at not less than eighty-five percent (85%) of book value on the date of issuance, and the exercise price shall not be subject to change by the issuer except in accordance with antidilution provisions in effect on the date of issuance.

(d) Offering Price.

1. The offering price of equity securities of seasoned corporations may be deemed unfair to the purchasers unless at least one (1) of the following conditions is met:

(i) The price for the equity security does not exceed thirty-three (33) times the issuer’s net earnings per share for the last twelve (12) months, or does not exceed thirty-three (33) times its average annual net earnings per share for the last three (3) years prior to the proposed offering date;

(ii) The price of the equity security is based on a public market; or (iii) If there is no public market, the issuer may show that the proposed priceearnings ratio is justified in relation to price earnings ratios of comparable companies by means of published industry guides that include key business ratios. Comparable companies shall mean companies similar in terms of size, history of operations, industry and products, and other relevant factors. Key business ratios include but are not limited to liquidity ratios, activity ratios, leverage ratios, profitability ratios, and common stock ratios.

2. The offering price of equity securities of promotional or development stage corporations shall be reasonably related to the price paid for the stock by promoters or controlling persons of the issuer except as permitted by subparagraph (4)(f) of this Rule regarding promotional shares. Facts and circumstances to be considered shall include, but are not limited to, the following: the price paid for the equity securities by promoters or controlling persons of the issuer in transactions effected within three (3) years prior to the public offering; the book value of the equity security; the market value of the corporation’s assets; and the sophistication of the proposed purchasers.

(e) Selling Commissions and Expenses.

1. The aggregate amount of underwriters’ and sellers’ discounts, commissions, and other compensation shall be reasonable. Such compensation is presumed reasonable if the total of all underwriters’ or sellers’ compensation and other expenses in connection with the offering does not exceed fifteen percent (15%) of the gross proceeds of the offering, except that in the case of securities which qualify for registration on Forms S-B1 or S-B2 under the 1933 Act or which qualify for exemption pursuant to Regulation A under the 1933 Act, the total underwriters’ and sellers’ compensation and all other expenses will be presumed reasonable if not in excess of twenty percent (20%) of the gross proceeds of the offering. See also subpart (4)(c)1.(vii) of this Rule.

2. Compensation to be received by underwriters or sellers shall include, but is not limited to, the following:

(i) Underwriter’s discounts, commissions, or concessions;

(ii) Non-accountable expense allowances;

(iii) Expenses incurred by an underwriter or related person payable by the issuer or from the proceeds of the offering to or on behalf of an underwriter or related person;

(iv) Finder’s fees known to be payable at the commencement of the offering;

(v) Wholesaler’s fees;

(vi) Financial consulting and advisory fees, whether in the form of cash, securities, or any other item of value which are connected with or related to the offering unless an ongoing financial consulting or advisory relationship between the proposed issuer or affiliate and the proposed underwriter or related person has been established at least twelve (12) months prior to the filing of the registration statement;

(vii) Stock, options, warrants, and other securities, the options and warrants to be valued in accordance with subpart (4)(c)1.(vii) of this Rule;

(viii) Special sales incentive items;

(ix) A right provided to an underwriter or related person to require the issuer upon demand to register securities on behalf of the underwriter or person in the future at the expense of the issuer, which shall be valued at one percent (1%) of the gross proceeds of the offering, unless the demand is for only one (1) such registration in which event the right to demand registration shall be valued at one-half of one percent (.5%) of the gross proceeds of the offering; provided, however, that a right to “piggyback” on a non-demand registration shall be valued at one-quarter of one percent (.25%) of the gross proceeds of the offering unless the underwriter agrees to pay its pro rata share of offering expenses incurred as a result of such securities being included in the offering;

(x) Commissions, expense reimbursements, or other compensation to be received by an underwriter or related person as a result of the exercise of the conversion within twelve (12) months following the effective date of the offering of warrants, options, convertible securities, or similar securities distributed as part of the offering; and (xi) If promotional shares are issued to an underwriter, the difference between the consideration paid and the public offering price shall be considered compensation to the underwriters.

3. All underwriter compensation set forth in part (4)(e)2. of this Rule, when added to all other marketing expenses, such as printing costs, registration fees, filing fees, issuer’s attorneys and accounting fees, fees and expenses of underwriters’ counsel, accountable expense allowances paid to underwriters, and miscellaneous marketing expenses, shall not exceed the limit imposed in part (4)(e)1. of this Rule.

4. If the securities are sold under a deferred or installment plan, the underwriters’ or sellers’ commissions payable in cash shall be payable pro rata over the life of the plan.

5. In the case of the sale to the public of outstanding securities held by existing security holders to be sold alone or in conjunction with the sale of securities by the issuer, the selling security holders shall pay, as the case may be, all of their equitable portion of the selling commissions and expenses.

(f) Promotional Shares.

1. Maximum Amount of Promotional Shares. If the maximum amount of promotional shares exceeds thirty-three percent (33%) of the outstanding shares of stock of the issuer after the completion of the offering, the promotional shares will be subject to part (4)(f)3. of this Rule.

2. Mergers, Recapitalizations, Reorganizations, and Stock Splits.

(i) If the maximum amount of dilution to public investors exceeds seventy-five percent (75%) of the public offering price after the completion of the offering, the promotional shares will be subject to part (4)(f)3. of this Rule; and (ii) Even if the amount of dilution to public investors does not exceed seventyfive percent (75%) of the public offering price after the completion of the offering, all shares owned by officers, directors, and parties owning five percent (5%) or more of the outstanding shares of the corporation before the public offering that cause dilution in excess of forty percent (40%) of the public offering price after the completion of the offering shall be subject to escrow pursuant to part (4)(f)3. of this Rule.

3. Escrow of Promotional Shares. The assistant commissioner may require as a condition of registration that all or part of any promotional shares be deposited in escrow absent adequate justification that escrow of such shares is not in the public interest and not necessary for the protection of investors.

4. Release Provisions.

(i) Promotional shares which are to be escrowed shall remain in escrow until the sixth anniversary of the effective date of the registration. On the sixth, seventh, eighth, and ninth anniversary dates, twenty-five percent (25%) of each promoter’s shares shall be released from escrow. Shares may also be released from escrow upon the achievement by the issuer of any of the following tests during the escrow period:

(I) After two (2) consecutive fiscal years from the date of effectiveness, during which the issuer has minimum average annual earnings per share equal to six percent (6%) of the public offering price.

(II) After five (5) fiscal years from the date of effectiveness, the average earnings per share are equal to five percent (5%) or more of the public offering price.

(III) After one (1) year, for a term of at least ninety (90) consecutive trading days following such one (1) year period, and for the thirty (30) trading days prior to the requested termination date of the escrow, the shares of the issuer are trading in a reliable public market at a price at least one-hundred seventy-five percent (175%) of the initial public offering price.

(ii) A request for termination of an escrow based on satisfaction of either of the tests set forth in items (4)(f)4.(i)(I)–(II) of this Rule shall be accompanied by an earnings per share calculation audited and reported on by an independent certified public accountant.

5. Terms of Escrow.

(i) The shares in escrow may be transferred by will or pursuant to the laws of descent and distribution or through appropriate legal proceedings without the consent of the assistant commissioner, but in all such cases the shares shall remain in escrow and subject to the terms of the escrow agreement.

In addition, upon the death of a promoter, such promoter’s escrowed shares may be hypothecated, subject to all of the terms of the escrow agreement, to the extent necessary to pay the expenses of the estate; otherwise, the escrowed shares may not be pledged to secure a debt. The securities in escrow may be transferred by gift to family members, provided that the shares remain subject to the terms of the escrow agreement.

(ii) The shares required to be held in escrow as a condition to registration of a public offering shall not have any right, title, interest, or participation in the assets of the issuer in the event of dissolution, liquidation, merger, consolidation, reorganization, sales of assets, exchange, or any other transaction or proceeding which contemplates or results in the distribution of the assets of the issuer, until the holders of all shares not escrowed have received, or had irrevocably set aside for them, an amount equal to the purchase price per share in the public offering, adjusted for stock splits and stock dividends. Subsequently, the holders of the escrowed shares shall be entitled to receive an amount per share equal to the amount received by or set aside for the holders of the non-escrowed shares, on a per share basis, plus any dividends and interest set aside for the escrowed shares, to the extent any such cash dividends plus interest are not necessary to meet the issuer’s obligation of payment to holders of shares not escrowed, and thereafter all shares shall participate on a pro rata

basis. However, a merger, consolidation, or reorganization may proceed on terms and conditions different than those stated above if a majority of shares held by persons other than promoters approve the terms and conditions by vote at a meeting held for such purpose.

(iii) Shares held in escrow shall continue to have all voting rights to which those shares are entitled. Any dividends paid on such shares shall be paid to the escrow agent and held pursuant to the terms of the escrow agreement. The escrow agent shall treat such dividends as assets available for distribution as provided under subpart (4)(f)5.(ii) of this Rule.

The escrow agent shall place any cash dividends in an interest bearing account. The cash dividends and any interest earned thereon will be disbursed in proportion to the number of shares released from escrow. All certificates representing stock dividends and shares resulting from stock splits of escrowed shares shall be delivered to the escrow agent to be held pursuant to the escrow agreement.

(iv) A summary of the terms of the escrow shall be included in the prospectus and, during the term of the escrow agreement and until the release of all shares from escrow, in subsequent prospectuses, annual reports to shareholders, proxy statements, or other disclosure materials used by shareholders or investors in making decisions with respect to the issuer.

(v) The escrow agent must be satisfactory to the assistant commissioner and may not be affiliated with any promoter of the issuer. The issuer shall not bear any of the fees or expenses associated with the escrow.

(g) Promoters’ Investment. The offering of an issuer that is a promotional or development stage corporation shall be presumed unfair unless the equity investment of the promoters equals at least ten percent (10%) of the tangible net worth of the issuer adjusted for the proposed offering.

(h) Alternative Guidelines for Promotional Shares and Promoters’ Investment:

1. In lieu of the guidelines set forth above in part (4)(d)2. and subparagraphs (4)(f)– (g) of this Rule, an issuer may comply with the standards of this subparagraph (4)(h).

2. An offering of equity securities of a promotional or a development stage corporation may be deemed to be unfair if the ratio of equity capital to equity ownership of the public investors buying pursuant to the proposed offering on a per share basis is more than ten (10) times the ratio of the equity capital to equity ownership of promoters, on a per share basis. For purposes of this part:

(i) With respect to public investors, “equity capital” shall mean the tangible consideration paid by the public investors.

(ii) With respect to promoters, “equity capital” shall mean the greater of the tangible consideration contributed to the equity of the issuer on a fully diluted basis, or the net worth of the issuer demonstrated by the most recent audited balance sheet furnished by the issuer in the registration statement and all interim unaudited balance sheets.

(iii) With respect to promoters, “equity ownership” shall mean the total number of shares owned on a fully diluted basis.

(iv) With respect to public investors, “equity ownership” shall mean the total number of shares to be offered to the public.

EXAMPLE: Calculation of the Ratio of Equity Capital to Equity Ownership on a Per Share Basis.

(The example assumes that there are no outstanding options, warrants, or convertible securities.)

Total # Issuer’s Net Proposed Price Total Tangible of Shares Worth Per Share Consideration Promoters’ 880,000 $500,000 $300,000 Public Investors’ 200,000 $10.00 $2,000,000 Totals 1,080,000 $500,000 $2,300,000 Public Investor’s Equity Capital ------------------------- = $2,000,000 Equity Ownership ____________ == $10.00 200,000 Promoters’ Equity Capital ------------------ = $300,000 Equity Ownership _____________== .34090; .34 x 10 = $3.40 880,000 Promoters’ Net Worth -------------------- = $500,000 Equity Ownership ______________== .56818; .57 x 10 = $5.70 880,000 CONCLUSION : THE ALTERNATIVE TEST IS NOT MET.

$10.00>$3.40 OR 5.70

(i) Voting Rights.

1. Unless either preferential treatment as to dividends and liquidation is provided with respect to the publicly offered securities or a public market exists for the securities, the offering of equity securities of an issuer having more than one class of equity securities outstanding will be deemed unfair to public investors if the class of equity securities offered to the public has no voting rights or less than equal voting rights in proportion to the number of shares of each class outstanding in all matters, including the election of members to the board of directors of the issuers.

2. If at the time of a proposed offering the issuer has authorized preferred stock issued or issuable with rights, preferences, or privileges to be determined by the issuer’s board of directors without further action by stockholders, the offering document shall include a disclosure to the effect that a subsequent determination by the board of directors with respect to the rights, preferences, or privileges of the preferred stock may adversely affect the rights of common stockholders.

(j) Preferred Stock and Debt Securities.

1. The net earnings of the issuer for its last fiscal year prior to the offering or for the average of its last three (3) fiscal years prior to the offering must be sufficient to cover adequately the dividends and redemption requirements, if any, on the preferred stock proposed to be offered. Net earnings shall be determined exclusive of non-recurring items and shall be adjusted for any debt securities or preferred stock to be redeemed with the proceeds of the offering, less applicable income tax effects.

2. The net earnings of the issuer for its last fiscal year prior to the offering, or for the average of its last three (3) fiscal years prior to the offering, must be sufficient to cover adequately its debt service requirements on all debt securities issued subsequent to its last fiscal year (including all securities proposed to be offered).

Net earnings shall be determined before taxes, depreciation, and extraordinary items and shall be adjusted for any debt securities to be redeemed with the proceeds of the offering and for applicable tax effects.

3. Upon completion of the offering, the total amount of debt of the issuer must be reasonable in proportion to the amount of equity of the issuer. Reasonableness is to be determined in relation to the prevailing debt-equity ratios for comparable companies in the issuer’s industry.

4. If the issuer has made or proposes to make any material acquisitions subsequent to the last year specified in parts (4)(j)1.–3. of this Rule, the earnings for each year shall be restated on a pro-forma basis to reflect such acquisition.

5. The sale of preferred stock or debt securities by promotional or development stage corporations is presumed not to meet the standard in paragraph (1) of this

Rule unless a variance is granted pursuant to paragraph (3) of this Rule.

6. The issuer may not bind itself to purchase debt securities or preferred stock at the request of the holder prior to maturity except pursuant to sinking fund provisions or pursuant to some other reasonable method fully disclosed in the prospectus.

(k) Loans to Company Officials.

1. The sale of securities by an issuer may be deemed unfair if the issuer or its affiliates have made, or may make, loans or forbearances to company officers, directors, or controlling persons, other than as described below:

(i) Advances for travel, business expense, relocation, and similar ordinary operating expenditures.

(ii) Any other loans or forbearances for specific purposes directly related to the ordinary course of the issuer’s business, or for bona fide personal emergencies, provided the loans or forbearances are approved by a majority of disinterested members of the issuer’s board of directors.

(iii) Any other loans or forbearances approved by a majority of disinterested shareholders (excluding all company officials and controlling persons) pursuant to a proxy solicitation conforming to the proxy rules set by the SEC.

(iv) An issuer or affiliate whose primary business is that of making loans may make loans to the officers, directors, or controlling persons of the issuer or affiliate provided that the loans:

(I) Will be evidenced by a promissory note naming the lender as payee, and contain an annual percentage rate which is reasonably comparable to that normally charged to non-affiliates by other commercial lenders for similar loans made in the lender’s locale;

(II) Will be repaid pursuant to appropriate amortization schedules and contain default provisions comparable to those normally used by other commercial lenders for similar loans made to non-affiliates in the lender’s locale;

(III) Will be made only if credit reports and financial statements, or other reasonable investigation appropriate in the light of the nature and terms of the loan and which meet the loan policies normally used by other commercial lenders for similar loans made to non-affiliates in the lender’s locale show the loan to be collectible and the borrower a satisfactory credit risk; and (IV) The purpose of the loan and the disbursement of proceeds are reviewed and monitored in a manner comparable to that normally used by other commercial lenders for similar loans made in the lender’s locale.

2. All loans except those described in part (4)(k)1. of this Rule shall be repaid in full prior to the offering. The Division may waive this requirement if:

(i) The issuer is a going concern and repayment of such loan will be made pursuant to appropriate amortization schedules; or (ii) Any portion of the offering is, by, or on behalf of any company official to whom a loan or forbearance has been made, and such person undertakes to effect repayment from the proceeds of the offering and repayment to the extent of such proceeds will be made immediately upon completion of the offering.

3. If the issuer or its affiliates has or will make loans or forbearances to officers, directors, or controlling persons, the prospectus or offering circular shall disclose the terms and details of the loans or forbearances.

(l) Impoundment of Proceeds. The Division may require that as a condition to registration that all proceeds of sales of securities be impounded in escrow until such time that a sufficient amount has been realized to accomplish the purpose of the offering.

(m) Future Self-Dealing Transactions. The prospectus shall contain a statement to the effect that all future transactions with affiliates of the issuer are to be on terms no less favorable than could be obtained from an unaffiliated third party and must be approved by a majority of the directors including the majority of disinterested directors.

(n) Standards for Specific Issuers.

1. Applicability.

(i) The Statements of Policy referred to in this subparagraph (4)(n) apply to the indicated specific type of security and will, by analogy, be applied to securities in other forms. Deviations from these guidelines may be permitted by the Division where good cause is shown in accordance with paragraph (3) of this Rule.

(ii) The Division may grant effectiveness to any offering that is subject to review under guidelines below on a basis other than that permitted in such guidelines where the offering requires each investor in this state (including transferees) to have a minimum net worth of a least two hundred fifty thousand dollars ($250,000) exclusive of home, home furnishings, and automobiles and to have had during the last tax year, and be expected to have during the current tax year a gross income of at least sixty-five thousand dollars ($65,000) or, in the alternative, a minimum net worth of at least five hundred thousand dollars ($500,000) exclusive of home, home furnishings, and automobiles. In the case of such offerings, the Division may require a statement signed by each investor in this state acknowledging how the offering varies from the standards set forth in the guidelines below.

(iii) The term “Administrator” as used in these guidelines shall mean the assistant commissioner.

(iv) Copies of these guidelines may be obtained from the Division upon request and payment in advance of a reasonable charge for copying.

2. Cattle-Feeding Programs.

The Statement of Policy on Registration of Publicly Offered Cattle-Feeding Programs adopted by NASAA, as reported at CCH NASAA Reports ¶601, as it may be amended from time to time, is incorporated herein by reference.

3. Church Bonds.

The Statement of Policy on Church Bonds adopted by NASAA, as reported at CCH NASAA Reports ¶1001, as it may be amended from time to time, is incorporated herein by reference.

4. Commodity Pool Programs.

The Statement of Policy on Registration of Commodity Pool Programs adopted by NASAA, as reported at CCH NASAA Reports ¶1201, as it may be amended from time to time, is incorporated herein by reference.

5. Equipment Programs.

The Statement of Policy on Registration of Equipment Programs adopted by NASAA, as reported at CCH NASAA Reports ¶1601, as it may be amended from time to time, is incorporated herein by reference.

6. Finance Company Debt Securities.

The Statement of Policy on Finance Company Debt Securities adopted by the Central Securities Administrators Council, as reported at CCH Blue Sky Reporter ¶5431, as it may be amended from time to time, is incorporated herein by reference.

7. Health Care Facility Offerings.

The Statement of Policy on Health Care Facility Offerings adopted by NASAA, as reported at CCH NASAA Reports ¶2001, as it may be amended from time to time, is incorporated herein by reference.

8. Oil and Gas Programs.

The Statement of Policy on Registration of Oil and Gas Programs adopted by NASAA, as reported at CCH NASAA Reports ¶2621, as it may be amended from time to time, is incorporated herein by reference.

9. Real Estate Investment Trusts.

The Statement of Policy on Real Estate Investment Trusts adopted by NASAA, as reported at CCH NASAA Reports ¶3401, as it may be amended from time to time, is incorporated herein by reference.

10. Real Estate Programs.

The Statement of Policy on Real Estate Programs adopted by NASAA, as reported at CCH NASAA Reports ¶3601, as it may be amended from time to time, is incorporated herein by reference.

11. Miscellaneous Direct Participation Programs.

In order to provide consistency in its review, the Division will use, to the extent appropriate, the NASAA Statement of Policy on Real Estate Programs, and particularly Sections II, III, and V through IX, as a reference in determining whether types of direct participation programs other than those specifically referenced in parts (4)(n)1.–10. of this Rule meet the standard set forth in paragraph (1) of this Rule.

12. Religious Denominations.

The Guidelines for General Obligation Financing by Religious Denominations adopted by NASAA, as reported at CCH NASAA Reports ¶¶1951–1957, as it may be amended from time to time, is incorporated herein by reference.

(5) Coordinated Review - Equity.

(a) An offering of equity securities which is submitted pursuant to a coordinated review process agreed to by the Division and other states, will be deemed to meet the standard of paragraph (1) of this Rule if it meets all of the terms and conditions of such coordinated review process, as well as meets the following guidelines:

1. The Statement of Policy Regarding Corporate Securities Definitions adopted by NASAA, as reported at CCH NASAA Reports ¶3811 et seq., as it may be amended from time to time, is incorporated herein by reference.

2. The Statement of Policy Regarding the Impoundment of Proceeds adopted by NASAA, as reported at CCH NASAA Reports ¶2151, as it may be amended from time to time, is incorporated herein by reference.

3. The Statement of Policy Regarding Loans and Other Affiliated Transactions adopted by NASAA, as reported at CCH NASAA Reports ¶371, as it may be amended from time to time, is incorporated herein by reference.

4. The Statement of Policy Regarding Options and Warrants adopted by NASAA, as reported at CCH NASAA Reports ¶2801, as it may be amended from time to time, is incorporated herein by reference.

5. The Statement of Policy Regarding Preferred Stock adopted by NASAA, as reported at CCH NASAA Reports ¶3001, as it may be amended from time to time, is incorporated herein by reference.

6. The Statement of Policy Regarding Promoters Equity Investment adopted by NASAA, as reported at CCH NASAA Reports ¶3101, as it may be amended from time to time, is incorporated herein by reference.

7. The Statement of Policy Regarding Promotional Shares adopted by NASAA, as reported at CCH NASAA Reports ¶3201, as it may be amended from time to time, is incorporated herein by reference.

8. The Statement of Policy Regarding Specificity in Use of Proceeds adopted by NASAA, as reported at CCH NASAA Reports ¶¶3831–3837, as it may be amended from time to time, is incorporated herein by reference.

9. The Statement of Policy Regarding Underwriting Expenses and Underwriter’s Warrants, Selling Expenses, and Selling Security Holders adopted by NASAA, as reported at CCH NASAA Reports ¶¶3813–3820, as it may be amended from time to time, is incorporated herein by reference.

10. The Statement of Policy Regarding Unsound Financial Condition adopted by NASAA, as reported CCH NASAA Reports ¶¶3821–3827, as it may be amended from time to time, is incorporated herein by reference.

11. The Statement of Policy Regarding Unequal Voting Rights adopted by NASAA, as reported at CCH NASAA Reports ¶2401, as it may be amended from time to time, is incorporated herein by reference.

12. The Statements of Policy referenced in subparagraph (4)(n) of this Rule will apply to the indicated specific type of security and will, by analogy, be applied to securities in other forms.

(b) Copies of these guidelines and terms and conditions of the coordinated review process may be obtained from the Division upon request and payment in advance of a reasonable charge for copying.

History

• Authority: T.C.A. §§ 48-1-105, 48-1-106, 48-1-107, 48-1-115, and 48-1-116; § 2(a)(48) of the Investment Company Act of 1940; § 301 of the Small Business Investment Act of 1958; Employee Retirement Income Security Act of 1974, Title I; and § 202(a)(22) of the Investment Advisers Act of 1940.
• Administrative History: Original rule filed September 28, 1990; effective November 12, 1990. Amendment filed May 15, 2002; effective July 29, 2002. Amendment filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-02-.07 NON-PROFIT EXEMPTION

(1) All persons offering securities claimed to be exempt under T.C.A. § 48-1-103(a)(7) shall, at least ten (10) days prior to any sale of such securities, file a notice on Form U-1 (including all applicable exhibits thereto) accompanied by the following additional information:

(a) The filing fee as set forth in T.C.A. § 48-1-103(a)(7);

(b) A statement of the basis for the issuer’s qualification for exemption under T.C.A. § 48- 1-103(a)(7);

(c) A copy of the Charter and Bylaws of the issuer or the equivalent entity formation and governance documents;

(d) Proof of consent to service of process as set forth in T.C.A. § 48-1-124;

(e) A description of the method by which full disclosure of material facts will be made to each offeree and a copy of the prospectus, pamphlet, offering circular, or similar literature should be provided;

(f) Copies of all advertising or other material to be distributed in connection with the offering;

(g) A copy of the subscription agreement or other similar agreement;

(h) A copy of any proposed agreement or proposed form of agreement with a securities broker-dealer or underwriter;

(i) A copy of the preliminary or definitive Trust Indenture and/or Trust Agreement, if any;

(j) An opinion of counsel attesting to the authority of the issuer to offer and sell the securities and stating that after the sale the securities will be valid, binding obligations of the issuer in accordance with the issuer’s governing documents;

(k) An undertaking to notify the commissioner immediately upon the receipt of any stop order, denial, order to show cause, suspension, or revocation order, injunction or restraining order, or similar order entered by or issued by any regulatory authority or by any court, concerning the issuer, securities covered by the notice or other securities of the issuer currently being offered to the public;

(l) A statement of whether or not the issuer has ever been the subject of any order described in subparagraph (1)(k) of this Rule, and if so a description of the order; and (m) Any additional information or documentation that the commissioner may require.

(2) In order to be exempt under T.C.A. § 48-1-103(a)(7), a security must meet the following qualifications:

(a) Church Bonds 1. If the issuer is selling Church Bonds, a disclosure document should be prepared in accordance with the Statement of Policy Regarding Church Bonds adopted by NASAA and any successor policy thereto.

2. For the purposes of this Rule, the term “Church Bonds” shall be consistent with the definition set forth in the Statement of Policy Regarding Church Bonds adopted by NASAA and any successor policy thereto.

(b) Church Extension Funds 1. If the issuer is selling notes issued by a Church Extension Fund, a disclosure document should be prepared in accordance with the Statement of Policy Regarding Church Extension Fund Securities adopted by NASAA and any successor policy thereto.

2. For the purposes of this rule, the term “Church Extension Fund” shall be consistent with the definition set forth in the Statement of Policy Regarding Church Extension Fund Securities adopted by NASAA and any successor policy thereto.

(c) For all other securities exempt under T.C.A. § 48-1-103(a)(7) that do not meet the qualifications of subsection (2)(a)–(b), the disclosure document must contain the following information:

1. Financial statements of the issuer prepared in accordance with generally accepted accounting principles including, but not limited to, the following:

(i) A balance sheet as of the end of the most recent fiscal year of the issuer; and (ii) A statement of income for each of the issuer’s three (3) most recent fiscal years.

2. A statement from the issuer setting forth the issuer’s plan for paying the principal and interest due on the securities to be sold, including, but not limited to, anticipated sources of revenue to be used in paying such principal and interest, and supporting financial information;

3. A statement as to whether or not the issuer or any affiliate or predecessor has had any material default during the past ten (10) years in the payment of:

(i) Principal, interest, dividends, or sinking fund installments on any security or indebtedness for borrowed money; or (ii) Rentals under material leases with terms of three (3) years or more; and 4. Full disclosure of all material facts relevant to the offering.

(d) Legend. For all securities exempt under T.C.A. § 48-1-103(a)(7), the offering document shall display on its cover substantially the following information, to the extent appropriate, in capital letters and, if printed, in boldface roman type at least as high as ten (10) point modern type:

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN

EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING,

INCLUDING THE MERITS AND RISKS INVOLVED.

THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR

STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.

FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE

ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY

REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY

AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS

PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE

APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR

EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY

BE REQUIRED TO BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN

INDEFINITE PERIOD OF TIME.

(3) Effective Period. Each offering shall be effective for a period of one (1) year from the date of effectiveness.

(4) Amendments. During the effective period, the issuer shall file supplements and amendments to the originally filed offering documents pursuant to paragraph (1)(e) with the commissioner prior to use in the offering.

(5) Renewal. The offering may be renewed for an additional period of one (1) year by filing the notification requirements of T.C.A. § 48-1-103(a)(7) and this Rule, including the appropriate filing fee, no later than ten (10) days prior to the expiration of effectiveness.

History

• Authority: T.C.A. §§ 48-1-103(a)(7), 48-1-113, 48-1-115, 48-1-116, and 48-1-124.
• Administrative History: Original rule filed September 28, 1990; effective November 12, 1990. Amendment filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed August 14, 2017; effective November 12, 2017.

Tenn. Comp. R. & Regs. 0780-04-02-.08 RESERVED

History

• Authority: T.C.A. §§ 48-1-103(b)(11), 48-1-104, 48-1-113, 48-1-115, 48-1-116, and 48-1-124(e); Public Acts of 1997, Chapter 164, § 1; § 18 of the Securities Act of 1933, as amended by the National Securities Markets Improvement Act of 1996; and 17 C.F.R. §§ 230.252, 230.500, 230.503, 230.505, and 230.508.
• Administrative History: Original rule filed September 28, 1990; effective November 12, 1990. Amendment filed November 6, 1997; effective January 20, 1998. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Repeal filed February 3, 2021; effective May 4, 2021.

Tenn. Comp. R. & Regs. 0780-04-02-.09 SUCCESSOR CORPORATE ISSUERS

(1) If an issuer is a corporate successor to a corporate issuer that met the standards of T.C.A. § 48-1-103(a)(8), at the time of succession, the successor corporate issuer shall be deemed to have met the standards of T.C.A. § 48-1-103(a)(8), if the predecessor and successor corporations taken together do so, provided that:

(a) The succession was primarily for the purpose of changing the state of incorporation of the predecessor or forming a holding company;

(b) The assets and liabilities of the successor at the time of succession were substantially the same as those of the predecessor; and (c) The net income of the predecessor may, in accordance with generally accepted accounting principles, be consolidated with the income of the successor corporation.

History

• Authority: T.C.A. §§ 48-1-103(a)(8), 48-1-115, and 48-1-116.
• Administrative History: Original rule filed September 28, 1990; effective November 12, 1990. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-02-.10 NASDAQ/NMS EXEMPTION

(1) Exemption. By the authority delegated to the commissioner in T.C.A. §§ 48-1-103(b)(11) and 48-1-116, the following transactions are determined to be exempt from T.C.A. §§ 48-1-104 and 48-1-113:

Any sale of securities that are designated or approved for designation upon notice of issuance on the NASDAQ/NMS, any other security of the same issuer that is of senior or substantially equal rank, any security called for by subscription rights or warrants so designated or approved, or any warrant or right to purchase or subscribe to any of the foregoing.

(2) The commissioner:

(a) Shall have the authority by rule or order to deny, suspend, or revoke the exemption created by this Rule as to a specific issuer or category of securities; and (b) May rescind this Rule based on a finding that;

1. The requirements of the NASDAQ/NMS have materially changed from those set forth in paragraph (3) of this Rule and no longer afford equivalent investor protection; or 2. The requirements of the NASDAQ/NMS as set forth in paragraph (3) of this Rule are not applied or enforced sufficiently to afford protection to investors.

(3) (a) 1. The FINRA shall require at least the following minimum standards to be met for the designation of an issuer’s securities on the quotation system:

Alt. No. 1 Alt. No. 2 Net Tangible Assets $4,000,000 $12,000,000 Public Float 500,000 1,000,000 Pre-Tax Income 750,000 -------------- Net Income 400,000 -------------- Shareholders 800/400 800/400 (The minimum number of shareholders under each alternative is eight hundred (800) for companies with five hundred thousand (500,000) to one million (1,000,000) shares publicly held, and four hundred (400) for companies with over one million (1,000,000) shares publicly held and with daily trading volume in excess of two thousand (2,000) shares per day for six (6) months.)

Market Value of Float 3,000,000 15,000,000 Minimum Bid $5/share -------------- Operating History ------------ 3 years 2. The rules of the FINRA shall require at least two (2) authorized market makers for each issuer.

3. For purposes of this subparagraph (3)(a), the term “net tangible assets” is meant to include the value of patents, copyrights, and trademarks but to exclude the value of goodwill.

(b) The FINRA shall require at least the following minimum corporate governance standards for its domestic issuers:

1. Distribution of Annual and Interim Reports.

(i) Each issuer shall distribute to shareholders copies of an annual report containing financial statements of the company and its subsidiaries. The report shall be distributed to shareholders in a reasonable period of time prior to the company’s annual meeting of shareholders and shall be filed with the FINRA at the time it is distributed to shareholders.

(ii) Each issuer which is subject to SEC Rule 13a-13 (17 C.F.R. § 240.13a-13) shall make available to shareholders copies of quarterly reports including statements of operating results either prior to or as soon as practicable following the company’s filing of its Form 10-Q with the SEC. If the form of such quarterly report differs from the Form 10-Q, both the quarterly report and the Form 10-Q shall be filed with the FINRA. The statement of operations contained in quarterly reports shall disclose at a minimum, any substantial items of an unusual or nonrecurrent nature, net income, and the amount of estimated federal taxes.

(iii) Each issuer which is not subject to SEC Rule 13a-13 (17 C.F.R. § 240.13a-13) and which is required to file with the SEC or another federal or state regulatory authority interim reports relating primarily to operations and financial position shall make available to shareholders reports which reflect the information contained in such interim reports. Such reports shall be made available to shareholders either before or as soon as practicable following filing with the appropriate regulatory authority. If the form of the interim report made available to shareholders differs from that filed with the regulatory authority, both the report to shareholders and the report to the regulatory authority shall be filed with the FINRA.

2. Independent Directors. Each issuer shall maintain a minimum of two (2) independent directors on its board of directors. For purposes of this subparagraph (3)(b), “independent director” shall mean a person other than an officer or employee of the issuer or its subsidiaries or any other individual having a relationship which, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

3. Audit Committee. Each issuer shall establish and maintain an audit committee, a majority of the members of which shall be independent directors.

4. Shareholder Meetings. Each issuer shall hold an annual meeting of shareholders and shall provide notice of such meeting to the FINRA.

5. Quorum. Each issuer shall provide for a quorum as specified in its bylaws for any meeting of the holders of common stock; provided, however, that in no case shall such quorum be less than thirty-three and one-third percent (33 1/3%) of the outstanding shares of the issuer’s common voting stock.

6. Solicitation of Proxies. Each issuer shall solicit proxies and provide proxy statements for all meetings of shareholders and shall provide copies of such proxy solicitation to the FINRA.

7. Conflicts of Interest. Each issuer shall conduct an appropriate review of all related party transactions on an ongoing basis and shall use the issuer’s audit committee or a comparable body for the review of potential conflict of interest situations where appropriate.

8. Shareholders’ Approval Policy. Each issuer shall require shareholder approval of the issuance of securities in connection with the following:

(i) Options plans or other special remuneration plans for directors, officers, or key employees.

(ii) Actions resulting in a change in control of the issuer.

(iii) The acquisition, direct or indirect, of a business, a company, tangible or intangible assets, or property or securities representing any such interests:

(I) From a director, officer, or substantial security holder of the issuer (including its subsidiaries and affiliates), or from any company or party in which one of such persons has a direct or indirect interest; and (II) Where the present or potential issuance of common stock or securities convertible into common stock could result in an increase in outstanding common shares of twenty-five percent (25%) or more.

(c) Voting Rights.

1. The FINRA rules shall provide that no rule, stated policy, practice, or interpretation shall permit the authorization for designation on the NASDAQ/NMS (“authorization”) or the continuance of the authorization, of any common stock or other equity security of a domestic issuer if, on or after September 1, 1988, the issuer issues any class of security or takes other corporate action that would have the effect of nullifying, restricting, or disparately reducing the per share voting rights of holders of an outstanding class or classes of common stock of such issuer registered pursuant to Section 12 of the 1934 Act.

2. For purposes of part (3)(c)1. of this Rule, the following shall be presumed to have the effect of nullifying, restricting, or disparately reducing the per share voting rights of an outstanding class or classes of common stock:

(i) Corporate action to impose any restriction on the voting power of shares of the common stock of the issuer held by a beneficial owner or record holder based on the number of shares held by such beneficial owner or record holder;

(ii) Corporate action to impose any restriction on the voting power of shares of the common stock of the issuers held by a beneficial owner or record holder based on the length of time such shares have been held by such beneficial owner or record holder;

(iii) Any issuance of securities through an exchange offer by the issuer for shares of an outstanding class of common stock of the issuer, in which the securities issued have voting rights greater than or less than the per share voting rights of any outstanding class of the common stock of the issuer; or (iv) Any issuance of securities pursuant to a stock dividend, or any other type of distribution of stock in which the securities issued have voting rights greater than the per share voting rights of any outstanding class of the common stock of the issuer.

3. For purposes of part (3)(c)1. of this Rule, the following, standing alone, shall be presumed not to have the effect of nullifying, restricting, or disparately reducing the per share voting rights of holders of an outstanding class or classes of common stock:

(i) The issuance of securities pursuant to an initial registered public offering;

(ii) The issuance of any class of securities, through a registered public offering, with voting rights not greater than the per share voting rights of any outstanding class of common stock of the issuer;

(iii) The issuance of any class of securities to effect a bona fide merger or acquisition, with voting rights not greater than the per share voting rights of any outstanding class of the common stock of the issuer; or (iv) Corporate action taken pursuant to state law requiring a state’s domestic corporation to condition the voting rights of a beneficial or record holder of a specified threshold percentage of the corporation’s voting stock on the approval of the corporation’s independent shareholders.

4. Definitions. For the purposes of this subparagraph (3)(c), the terms below shall have the following meanings and the rules of the FINRA shall include such definitions for purposes of the prohibition in part (3)(c)1. of this Rule:

(i) “Common Stock” shall include any security of an issuer designated as common stock and any security of an issuer, however designated, which by statute or by its terms, is common stock (e.g., a security which entitles the holders thereof to vote generally on matters submitted to the issuer’s security holders for a vote).

(ii) “Equity security” shall include any equity security defined as such pursuant to SEC Rule 3a11-1 (17 C.F.R. § 240.3a11-1).

(iii) “Domestic issuer” shall mean an issuer that is not a “foreign private issuer” as defined in SEC Rule 3b-4 (17 C.F.R. § 240.3b-4).

(iv) “Security” shall include any security defined as such pursuant to Section 3(a)(10) of the 1934 Act, but shall exclude any class of security having a preference or priority over the issuer’s common stock as to dividends, interest payments, redemption, or payments in liquidation, if the voting rights of such securities only become effective as a result of specified events, not relating to an acquisition of the common stock of the issuer, which reasonably can be expected to jeopardize the issuer’s financial ability to meet its payment obligation to the holders of that class of securities.

(d) Maintenance Criteria. After authorization for designation of a security on the NASDAQ/NMS, the issuer of such security must meet the following criteria in order for such designation to continue in effect:

1. The issuer of the security has net tangible assets of at least:

(i) Two million dollars ($2,000,000) if the issuer sustained losses from continuing operations and/or net losses in two (2) of its three (3) most recent fiscal years; or (ii) Four million dollars ($4,000,000) if the issuer has sustained losses from continuing operations and/or net losses in three (3) of its four (4) most recent fiscal years;

2. There are at least two hundred thousand (200,000) publicly held shares;

3. There are at least four hundred (400) shareholders or at least three hundred (300) shareholders of round lots; and 4. The aggregate market value of publicly held shares is at least one million dollars ($1,000,000).

History

• Authority: T.C.A. §§ 48-1-103(b)(11), 48-1-104, 48-1-113, 48-1-115, and 48-1-116; § 3(a)(10) and § 12 of the Securities Exchange Act of 1934; and 17 C.F.R. §§ 240.3a11-1, 240.3b-4, and 240.13a-13.
• Administrative History: Original rule filed September 28, 1990; effective November 12, 1990. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-02-.11 RESCISSION OFFERS

(1) By the authority delegated to the commissioner in T.C.A. §§ 48-1-103(b)(11) and 48-1-116, rescission offers are exempt from T.C.A. § 48-1-104 if all requirements set forth in this rule are met. All rescission offers that do not meet the requirements of this rule must comply with the registration requirements of T.C.A. § 48-1-104.

(2) No rescission offer exempted by this rule may be conducted in this state without obtaining the Division’s prior written approval of the offer.

(3) Any person seeking approval to conduct a rescission offer pursuant to this rule shall first notify the Division in writing. Such notice shall include:

(a) A description of the securities sold;

(b) The dates the securities were sold;

(c) The names of the Tennessee investors who purchased the securities;

(d) When the violation was discovered, if applicable;

(e) How the violation was discovered, if applicable; and (f) A draft copy of the proposed rescission offer document(s).

(4) The draft copy of the proposed rescission offer document(s) must include the following information:

(a) A statement specifying why the rescission offer is being conducted;

(b) Disclosure of all material facts regarding the rescission offer as well as any material facts that have arisen with respect to the issuer and the investment since the initial sale(s) of securities;

(c) Notice of the investor’s right to rescind the purchase and recover the consideration paid plus interest at the legal rate from the date the subscription amount was paid by the investor, calculated in accordance with T.C.A. § 48-1-122(k);

(d) A statement specifying the amount of time in which the investor must elect to accept or reject the offer of rescission, which shall be no less than thirty (30) days from the date the investor received notice of the offer;

(e) A statement describing the effect of the failure of an investor to accept or reject the rescission offer within the designated time period;

(f) A description of the procedure for accepting or rejecting the rescission offer;

(g) A statement that the offeree may wish to consult with independent counsel before deciding to accept or reject the rescission offer so as to be fully informed about the risks and the consequences attached to either choice; and (h) Any other such information as the Division may deem appropriate and necessary for the protection of investors.

(5) The Division reserves the right to review the rescission offer by applying the same standards for a registered offering under the following rules:

(a) 0780-04-02-.03;

(b) 0780-04-02-.04; and (c) 0780-04-02-.06.

(6) A summary of the results of the rescission offer shall be provided to the Division in writing within thirty (30) days of the offer’s conclusion. The summary shall include:

(a) The names of the investors accepting the offer;

(b) The names of the investors declining the offer; and (c) Certified mailing receipts for investors who declined to respond to the offer.

(7) Successful completion of a rescission offer does not relieve the offeror of any civil or administrative liability available under the Act.

History

• Authority: T.C.A. §§ 48-1-103(b)(11), 48-1-104, and 48-1-116.
• Administrative History: New rule filed February 3, 2021; effective May 4, 2021.

Tenn. Comp. R. & Regs. 0780-04-02-.12 NOTICE FILINGS FOR COVERED SECURITIES

(1) Initial notice filings.

(a) Covered securities under T.C.A. § 48-1-125(a)(1)(A)

1. An initial notice filing for any covered security under T.C.A. § 48-1-125(a)(1)(A), intended for sale in this state, must contain:

(i) A copy of the issuer’s prospectus and statement of additional information;

(ii) Either (a) a completed and properly executed notice filing form, designated under 0780-04-01-.04(4), as applicable; or (b) a copy of the issuer’s federal registration statement as filed with the SEC;

(iii) A completed and properly executed consent to service of process on Form U-2, or in such other format acceptable to the Division, as provided under T.C.A. § 48-1-124(e), which may be included in the notice filing form;

(iv) A completed and properly executed Form U-2A, if applicable; and (v) The filing fee as provided under T.C.A. § 48-1-125(a)(1)(A)(ii).

2. An issuer of a covered security under this subparagraph (1)(a) must make an initial notice filing with the Division prior to the sale of such security in this state.

3. Notice filings for any covered security under this subparagraph (1)(a) are effective for one (1) year commencing on the later of the date the filing with the Division is completed or the SEC effective date.

4. A notice filing under this subparagraph (1)(a) may be filed with the Division by complying with the requirements for electronic filing under paragraph (7) of this

Rule.

(b) Covered securities under T.C.A. § 48-1-125(a)(1)(B)

1. An initial notice filing for a covered security which the issuer plans to offer pursuant to Tier 2 of Regulation A (17 C.F.R. §§ 230.251 et seq.) must contain:

(i) Either (a) a completed and properly executed Uniform Notice Filing of

Regulation A – Tier 2 Offering form; or (b) copies of all documents filed with the SEC;

(ii) A completed and properly executed consent to service of process on Form U-2, or in such other format acceptable to the Division, as provided under T.C.A. § 48-1-124(e), which may be included in the Uniform Notice Filing of

Regulation A – Tier 2 Offering form;

(iii) A completed and properly executed Form U-2A, if applicable; and (iv) The filing fee as provided under T.C.A. § 48-1-125(a)(1)(B)(iii).

2. An issuer planning to offer and sell securities under this subparagraph (1)(b) must make an initial notice filing with the Division no later than twenty-one (21) calendar days prior to the initial sale in this state.

3. Notice filings for any covered security under this subparagraph (1)(b) are effective for one (1) year commencing on the date the filing with the Division is completed.

4. A notice filing under this subparagraph (1)(b) may be filed with the Division by complying with the requirements for electronic filing under paragraph (7) of this

Rule.

(c) Covered securities under T.C.A. § 48-1-125(a)(1)(C)

1. An initial notice filing for a covered security exempted from federal registration under § 18(b)(4)(C) of the 1933 Act must contain:

(i) Either (a) a completed and properly executed Form U-CF; or (b) copies of all documents filed with the SEC;

(ii) A completed and properly executed consent to service of process on Form U-2, or in such other format acceptable to the Division, as provided under T.C.A. § 48-1-124(e), which may be included in the Form U-CF;

(iii) A completed and properly executed Form U-2A, if applicable; and (iv) The filing fee as provided under T.C.A. § 48-1-125(a)(1)(C)(i)(c).

2. If the issuer of a covered security under this subparagraph (1)(c) has its principal place of business in this state, the issuer must make an initial filing with the Division concurrently when the issuer files its initial Form C with the SEC.

3. If the issuer of a covered security under this subparagraph (1)(c) has its principal place of business outside this state, but residents of this state have purchased fifty percent (50%) or greater of the aggregate amount of the offering, the issuer must make an initial notice filing with the Division upon learning that such purchases have met the fifty percent (50%) threshold, and, in any event, no later than thirty (30) days from the date of completion of the offering.

4. Notice filings for any covered security under this subparagraph (1)(c) are effective for one (1) year commencing on the date the filing with the Division is completed.

5. A notice filing under this subparagraph (1)(c) may be filed with the Division by complying with the requirements for electronic filing under paragraph (7) of this

Rule.

(d) Covered securities under T.C.A. § 48-1-125(a)(1)(D)

1. An initial notice filing for a covered security exempt from federal registration pursuant to Rule 506 of Regulation D (17 C.F.R. § 230.506) must contain:

(i) A copy of the completed and properly executed Form D as filed with the SEC;

(ii) A completed and properly executed Form U-2A, if applicable;

(iii) A statement specifying the date of first sale in this state; and (iv) The filing fee as provided under T.C.A. § 48-1-125(a)(1)(D)(ii).

2. An issuer of a covered security under this subparagraph (1)(d) must make an initial notice filing with the Division no later than fifteen (15) days after the first sale of such security in this state.

3. Notice filings for covered securities under this subparagraph (1)(d) are effective for one (1) year, commencing on the date the filing with the Division is completed, unless the issuer conducts a continuous offering as provided under T.C.A. § 48-1-125(b)(4) and subparagraph (3)(d) of this Rule.

4. A notice filing under this subparagraph (1)(d) may be filed with the Division by complying with the requirements for electronic filing under paragraph (7) of this

Rule.

(e)

Late Filing Fees.

1. Any initial notice filing made pursuant to T.C.A. § 48-1-125(a)(1)(A)–(D) and subparagraphs (1)(a)–(d) of this Rule which is received more than thirty (30) days after the date of first sale shall be subject to a late filing fee in an amount of one thousand ($1,000) dollars.

2. Any initial notice filing made pursuant to T.C.A. § 48-1-125(a)(1)(A)–(D) and subparagraphs (1)(a)–(d) of this Rule which is received more than one (1) year after the date of first sale shall be subject to a late filing fee in an amount of one thousand five hundred ($1,500) dollars per year. For any partial year, the late renewal fee will be prorated for each full month late.

(2) Amendments to notice filings.

(a) After the initial offer of a covered security in this state, all documents that are part of any amendments to a federal registration statement or Form D filed with the SEC must be filed concurrently with the Division.

(b) An issuer filing an amendment to a notice filing for a covered security which changes the name of the offering of securities must pay a processing fee as provided under T.C.A. § 48-1-125(d) upon filing the amendment with the Division.

(3) Renewal of notice filings.

(a) Covered securities under T.C.A. § 48-1-125(a)(1)(A)

1. Pursuant to T.C.A. § 48-1-125(b)(1), a renewal of a notice filing for a covered security under this subparagraph (3)(a) must contain:

(i) A copy of the issuer’s prospectus and statement of additional information;

(ii) Either (a) a completed and properly executed notice filing form, designated under 0780-04-01-.04(4), as applicable; or (b) a copy of the issuer’s federal registration statement as filed with the SEC;

(iii) A completed and properly executed consent to service of process on Form U-2, or in such other format acceptable to the Division, as provided under T.C.A. § 48-1-124(e), which may be included in the notice filing form;

(iv) A copy of the completed and properly executed Form U-2A submitted as

part of the initial notice filing pursuant to subparagraph (1)(a) of this Rule, if applicable; and (v) The filing fee as provided under T.C.A. § 48-1-125(a)(1)(A).

2. All forms, documents, and fees required for renewal of a notice filing for a covered security under this subparagraph (3)(a) must be filed with the Division no later than the close of business on the tenth (10th) business day prior to the date of expiration of the current notice filing.

3. A notice filing renewal under this subparagraph (3)(a) may be filed with the Division by complying with the requirements for electronic filing under paragraph (7) of this Rule.

(b) Covered securities under T.C.A. § 48-1-125(a)(1)(B)

1. Pursuant to T.C.A. § 48-1-125(b)(2), a renewal of a notice filing for a covered security under this subparagraph (3)(b) must contain:

(i) Either (a) a completed and properly executed Uniform Notice Filing of

Regulation A – Tier 2 Offering form; or (b) copies of all documents filed with the SEC;

(ii) A completed and properly executed consent to service of process on Form U-2, or in such other format acceptable to the Division, as provided under T.C.A. § 48-1-124(e), which may be included in the Uniform Notice Filing of

Regulation A – Tier 2 Offering form;

(iii) A copy of the completed and properly executed Form U-2A submitted as

part of the initial notice filing pursuant to subparagraph (1)(b) of this Rule, if applicable; and (iv) The filing fee as provided under T.C.A. § 48-1-125(b)(2).

2. All forms, documents, and fees required for renewal of a notice filing for a covered security under this subparagraph (3)(b) must be filed with the Division no later than the close of business on the day prior to the date of expiration of the current notice filing.

3. A notice filing renewal under this subparagraph (3)(b) may be filed with the Division by complying with the requirements for electronic filing under paragraph (7) of this Rule.

(c) Covered securities under T.C.A. § 48-1-125(a)(1)(C)

1. Pursuant to T.C.A. § 48-1-125(b)(3), a renewal of a notice filing for a covered security under this subparagraph (3)(c) must contain:

(i) Either (a) a completed and properly executed Form U-CF; or (b) copies of all documents filed with the SEC;

(ii) A completed and properly executed consent to service of process on Form U-2, or in such other format acceptable to the Division, as provided under T.C.A. § 48-1-124(e), which may be included in the Form U-CF;

(iii) A copy of the completed and properly executed Form U-2A submitted as

part of the initial notice filing pursuant to subparagraph (1)(c) of this Rule, if applicable; and (iv) The filing fee as provided under T.C.A. § 48-1-125(b)(3).

2. All forms, documents, and fees required for renewal of a notice filing for a covered security under this subparagraph (3)(c) must be filed with the Division no later than the close of business on the day prior to the date of expiration of the current notice filing.

3. A notice filing renewal under this subparagraph (3)(c) may be filed with the Division by complying with the requirements for electronic filing under paragraph (7) of this Rule.

(d) Covered securities under T.C.A. § 48-1-125(a)(1)(D)

1. Pursuant to T.C.A. § 48-1-125(b)(4), notice filings for covered securities exempt from federal registration pursuant to Rule 506 of Regulation D (17 C.F.R. § 230.506) are effective for one (1) year unless the issuer is conducting a continuous offering, and:

(i) The issuer annually submits to the Division a completed and properly executed amended Form D;

(ii) The issuer annually submits to the Division a copy of the completed and properly executed Form U-2A submitted as part of the initial notice filing pursuant to subparagraph (1)(d) of this Rule, if applicable;

(iii) The issuer submits to the Division all additional amendments concurrent with its filings with the SEC; and (iv) The issuer annually submits to the Division the filing fee as provided under T.C.A. § 48-1-125(b)(4).

2. If the issuer of a covered security under this subparagraph (3)(d) elects to conduct a continuous offering, all forms, documents, and fees must be filed with the Division no later than the close of business on the day prior to the date of expiration of the current notice filing.

3. A notice filing renewal under this subparagraph (3)(d) may be filed with the Division by complying with the requirements for electronic filing under paragraph (7) of this Rule.

(e) Any notice filing, subject to renewal which is not timely renewed, shall expire as provided under T.C.A. § 48-1-125(b)(1)–(4).

(f) A renewal of a notice filing for a covered security shall not stay the expiration of the notice filing if:

1. Such renewal is deficient as determined by the Division; and 2. Such deficiency is not corrected prior to the expiration of the notice filing.

(g) Late Renewal Filing Fees.

1. Any renewal notice filing made pursuant to T.C.A. § 48-1-125(b)(1)–(4) and subparagraphs (3)(a)–(d) of this Rule which is received thirty (30) days or less after the expiration of the prior notice filing or renewal filing shall be subject to a late filing fee in an amount of five hundred ($500) dollars.

2. Any renewal notice filing made pursuant to T.C.A. § 48-1-125(b)(1)–(4) and subparagraphs (3)(a)–(d) of this Rule which is received more than thirty (30) days but less than one (1) year after the expiration of the prior notice filing or renewal filing shall be subject to a late filing fee in an amount of one thousand ($1,000) dollars.

3. Any renewal notice filing made pursuant to T.C.A. § 48-1-125(b)(1)–(4) and subparagraphs (3)(a)–(d) of this Rule which is received more than one (1) year after the expiration of the prior notice filing or renewal filing shall be subject to a late filing fee in an amount of one thousand five hundred ($1,500) dollars per year. For any partial year, the late renewal fee will be prorated for each full late month.

(4) Deficient notice filings.

(a) An issuer who has filed an initial or renewal notice filing for a covered security shall be subject to a stop order of the commissioner suspending the offer or sale of such covered security in this state, as provided under T.C.A. § 48-1-125(c), if:

1. The filing is deficient as determined by the Division by failing to satisfy the document filing requirements of T.C.A. § 48-1-125(a)–(b) and paragraphs (1) through (3) of this Rule; or 2. The filing is deficient as determined by the Division by failing to satisfy the fee requirements of T.C.A. § 48-1-125(a)–(b) and paragraphs (1) through (3) of this

Rule; and 3. The deficiency is not corrected within ten (10) business days of the issuer’s receipt of notification from the Division, or prior to the expiration of the notice filing in the case of renewals.

(b) In any case where the commissioner may issue a stop order, the issuer may be subject to further orders of the commissioner pursuant to T.C.A. § 48-1-116.

(5) Failure to make notice filings.

(a) Any issuer who fails to make a notice filing for a covered security to be sold in this state as set forth under T.C.A. § 48-1-125 and this Rule shall be subject to a stop order of the commissioner, as provided under T.C.A. § 48-1-125(c), suspending the offer or sale of such securities in this state.

(b) For purposes of T.C.A. § 48-1-125(c)(2) and this paragraph (5), a failure to make a notice filing cannot be promptly remedied:

1. If the security is a covered security other than a covered security exempt from federal registration under § 18(b)(4)(C) of the 1933 Act or Rule 506 of Regulation D (17 C.F.R. § 230.506) and the delay in making the notice filing as required under T.C.A. § 48-1-125(a)(1)(A)–(B) exceeds ten (10) business days from the date of the first sale of such security in this state; or 2. If the security is a covered security exempt from federal registration under § 18(b)(4)(C) of the 1933 Act and:

(i) The delay in making the notice filing as required under T.C.A. § 48-1- 125(a)(1)(C)(ii) exceeds ten (10) business days from the date of filing with the SEC; or (ii) The delay in making the notice filing as required under T.C.A. § 48-1- 125(a)(1)(C)(iii) exceeds ten (10) business days from the date upon which the issuer became aware that residents of this state purchased fifty percent (50%) or greater of the aggregate amount of the offering, or, in any event, the notice filing exceeds forty (40) calendar days from the date of the completion of the offering; or 3. If the security is a covered security exempt from federal registration pursuant to

Rule 506 of Regulation D (17 C.F.R. § 230.506) and the delay in making the notice filing as required under T.C.A. § 48-1-125(a)(1)(D) exceeds twenty-five (25) calendar days from the date of the first sale of such security in this state.

(6) Refusal to pay notice filing fees.

For purposes of this Rule, an issuer is deemed to refuse to pay the notice filing fee when:

(a) The issuer is subject to a stop order under the provisions of T.C.A. § 48-1-125(c) and

part 2. of subparagraph (4)(a) of this Rule; or (b) The issuer has failed to make a notice filing as defined in subparagraph (5)(b) of this

Rule, and includes a failure to pay the appropriate notice filing fee.

(7) Electronic filing.

(a) All forms and documents required under T.C.A. § 48-1-125 and this Rule which have been filed and recorded on the Electronic Data Gathering Access and Retrieval (EDGAR) system, the Interactive Data Electronic Applications (IDEA) system, the Electronic Filing Depository (EFD), or any other electronic data gathering system either maintained by the SEC or approved by the Division, may be utilized in lieu of filing such documents in paper form.

(b) If an issuer making a notice filing in this state elects to file electronically, the issuer making the notice filing must:

1. Provide an accurate filing number or other designation used by the SEC; and 2. Ensure that a printed or electronically stored copy of all required documents and forms is immediately accessible to the Division.

History

• Authority: T.C.A. §§ 48-1-102(8)(F)(iv), 48-1-102(8), 48-1-108, 48-1-115, 48-1-116, 48-1-121, 48-1- 124(e), and 48-1-125; Public Acts of 1997, Chapter 164, § 8; § 18 of the Securities Act of 1933, as amended by the National Securities Markets Improvement Act of 1996; and 17 C.F.R. § 230.487.
• Administrative History: Original rule filed November 6, 1997; effective January 20, 1998. Amendment filed May 15, 2002; effective July 29, 2002. Amendment filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed February 1, 2018; effective May 2, 2018. Amendments filed March 3, 2026; effective June 1, 2026.

Tenn. Comp. R. & Regs. 0780-04-02-.13 REPEALED

History

• Authority: T.C.A. §§ 48-1-103(b)(9), 48-1-115, 48-1-116, and 48-1-124; Public Acts of 2001, Chapter 278; and Public Acts of 2023, Chapter 112, § 7.
• Administrative History: Original rule filed May 15, 2002; effective July 29, 2002. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed November 30, 2017; effective February 28, 2018. Repeal filed March 3, 2026; effective June 1, 2026.

Tenn. Comp. R. & Regs. 0780-04-02-.14 NOTICE FILINGS FOR SECURITIES SOLD TO ACCREDITED INVESTORS

(1) All issuers who seek to offer securities in or into this state in reliance on the exemption afforded to sales of securities to accredited investors, as set forth in T.C.A. § 48-1- 103(b)(13), must file with the commissioner no later than fifteen (15) days after the first sale:

(a) One (1) copy of the form entitled “Notice of Sale of Securities Pursuant to Accredited Investor Exemption,” as provided by the Division;

(b) A Form U-2 Uniform Consent to Service of Process;

(c) One (1) copy of the general announcement, if one is made regarding the proposed offering;

(d) A non-refundable filing fee in the amount of five hundred dollars ($500); and (e) A statement noting the date of the first sale, if any, of such security in this state.

History

• Authority: T.C.A. §§ 48-1-103, 48-1-103(b)(14), 48-1-115, 48-1-116, and 48-1-124 and Public Acts of 2001, Chapter 278.
• Administrative History: Original rule filed May 15, 2002; effective July 29, 2002. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed March 3, 2026; effective June 1, 2026.

Tenn. Comp. R. & Regs. 0780-04-02-.15 BANK HOLDING COMPANY EXEMPTION

(1) All persons offering securities claimed to be exempt under T.C.A. § 48-1-103(a)(12) shall, at least ten (10) days prior to any sale of such securities, file a notice on Form U-1 (including all applicable exhibits thereto) accompanied by the following additional information:

(a) The filing fee as set forth in T.C.A. § 48-1-103(a)(12);

(b) Proof of registration with the federal reserve board;

(c) A copy of the registration statement filed with the SEC, if applicable;

(d) Proof of consent to service of process as set forth in T.C.A. § 48-1-124;

(e) Copies of all advertising or other material to be distributed in connection with the offering; and (f) Any additional information or documentation that the commissioner may require.

(2) Effective Period. Each offering shall be effective for a period of one (1) year from the date of effectiveness.

(3) Amendments. During the effective period, the issuer shall concurrently file with the commissioner any amendments filed with the SEC, if applicable.

(4) Renewal. The offering may be renewed for an additional period of one (1) year by filing the notification requirements of T.C.A. § 48-1-103(a)(12) and this Rule, including the appropriate filing fee, no later than ten (10) days prior to the expiration of effectiveness.

History

• Authority: T.C.A. §§ 48-1-103(a)(12), 48-1-103(b)(10), 48-1-113, 48-1-115, 48-1-116, and 48-1-124.
• Administrative History: Original rule filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed August 14, 2017; effective November 12, 2017.

Tenn. Comp. R. & Regs. 0780-04-02-.16 UNSOLICITED TRANSACTION EXEMPTION

(1) Preliminary Notes:

(a) Nothing in this Rule is intended to relieve registered or exempt broker-dealers or agents from the due diligence, suitability, know-your-customer standards, or any other requirements of the law otherwise applicable to such registered or exempt persons.

(2) Exemption. By the authority delegated to the commissioner in T.C.A. §§ 48-1-103(b)(20) and 48-1-116, all registered or exempt broker-dealers who intend to rely upon the exemption afforded to unsolicited non-issuer transactions on the basis of T.C.A. § 48-1-103(b)(20) must comply with the following to be exempt from T.C.A. §§ 48-1-104 and 48-1-113:

(a) Shall retain the following information for each such unsolicited non-issuer transaction:

1. The CRD numbers for the broker-dealer firm and the agent;

2. The name of the broker-dealer;

3. The name of the agent;

4. The date of the transaction;

5. The dollar amount of the transaction, the number of shares, and the price per share;

6. The Cusip number for each security making up the order placed by the purchaser;

7. The name of each security making up the order placed by the purchaser;

8. The purchaser(s)’s account number at the broker-dealer;

9. The broker-dealer’s office address;

10. The broker-dealer’s branch office identification number (if applicable);

11. An indication that the transaction was not solicited in any way by the brokerdealer or any agent of the broker-dealer; and 12. An indication that the broker-dealer:

(i) Acted solely as an agent for the purchaser;

(ii) Had no direct or indirect interest in the sale or distribution of the security ordered by the purchaser; and (iii) Received no commission, profit, or other compensation from any source other than the purchaser.

(b) The information in subparagraph (2)(a) of this Rule must be retained by the brokerdealer for a period of five (5) years from the date of the transaction, in a manner consistent with Rule 0780-04-03-.02(1)(b).

(c) Upon request by the Division, based on a complaint or as the result of a Division examination of the broker-dealer’s books and records, the broker-dealer must provide the purchaser(s) with a document containing the information retained pursuant to subparagraph (2)(a) of this Rule and must obtain the purchaser(s) signed acknowledgement that the transaction was unsolicited. Such acknowledgement may be in the form of a manual or electronic signature.

History

• Authority: T.C.A. §§ 48-1-103(b)(20), 48-1-111, 48-1-115, and 48-1-116 and Public Acts of 2013, Chapter 261.
• Administrative History: Original rule filed June 17, 2014; effective September 15, 2014. Repeal and new rule filed March 16, 2015; effective June 14, 2015.

Tenn. Comp. R. & Regs. 0780-04-02-.17 INVEST TENNESSEE EXEMPTION

(1) Preliminary Notes:

(a) Nothing in this exemption is intended to or should be construed as in any way relieving issuers or persons acting on behalf of issuers from providing disclosure to prospective investors of all of the facts necessary to ensure that potential investors have knowledge of any and all material information necessary for a reasonable investor to determine the risks associated with the offering and all other material information upon which to base a decision as to whether or not to invest and in compliance with the antifraud provisions of the Act.

(b) In view of the objective of this Rule and the purposes and policies underlying the Act, this exemption is not available to any issuer with respect to any offering which, although in technical compliance with this Rule, is part of a plan or scheme to evade registration or the conditions or limitations explicitly stated in the statutory exemption itself or this Rule.

(c) This exemption is not available to an issuer that is in the development stage with either no specific business plan or purpose or has indicated that its business plan or purpose is to engage in a merger or acquisition with an unidentified company or companies or another entity or person.

(d) Nothing in this exemption shall be construed in any way to provide an exemption for offerors or sellers of securities under this exemption from the registration requirements for broker-dealers and broker-dealer agents as set forth in T.C.A. § 48-1-109.

(2) Definitions.

(a) “Accredited investor”, as defined in 17 C.F.R. § 230.501, and as may be amended, means any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person:

1. Any natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds one million dollars ($1,000,000).

(i) Except as provided in subpart (2)(a)1.(ii) of this Rule, for purposes of calculating net worth under this part (2)(a)1.:

(I) The person’s primary residence shall not be included as an asset;

(II) Indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of sale of securities exceeds the amount outstanding sixty (60) days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and (III) Indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability;

(ii) Subpart (2)(a)1.(i) will not apply to any calculation of a person’s net worth made in connection with a purchase of securities in accordance with a right to purchase such securities, provided that:

(I) Such right was held by the person on July 20, 2010;

(II) The person qualified as an accredited investor on the basis of net worth at the time the person acquired such right; and (III) The person held securities of the same issuer, other than such right, on July 20, 2010.

2. Any natural person who had an individual income in excess of two hundred thousand dollars ($200,000) in each of the two (2) most recent years or joint income with that person’s spouse in excess of three hundred thousand dollars ($300,000) in each of those years and has a reasonable expectation of reaching the same income level in the current year; and 3. Any other entity or organization listed in 17 C.F.R. § 230.501, including but not limited to certain banks, savings and loan associations, private development companies, non-profit organizations, and trusts.

(b) “Investment Company” as used in T.C.A. § 48-1-103(a)(13)(A)(vi) means any issuer which:

1. Is or holds itself out as being engaged primarily, or proposed to engage primarily in the business of investing, reinvesting, or trading in securities;

2. Is engaged or proposed to engage in the business of issuing face-amount certificates of the installment type, or has been engaged in such business and has any such certificate outstanding; or 3. Is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding forty percent (40%) of the value of such issuer’s total assets, excluding government securities and cash items, on an unconsolidated basis.

(c) An issuer not “subject to the reporting requirements of Section 13 of the 1934 Act or

Section 15(d) of the 1934 Act” as used in T.C.A. § 48-1-103(a)(13)(A)(vi) means an issuer that is not required to submit periodic reports to the SEC, such as Forms 10-K, 10-Q, and 8-K, as set forth in Sections 13 and 15(d) of the 1934 Act.

(3) Exemption. By the authority delegated to the commissioner in T.C.A. §§ 48-1-103(a)(13) and 48-1-116, any issuer who will offer to sell or sell a security in Tennessee and who intends to rely upon the provisions of T.C.A. § 48-1-103(a)(13) to exempt such issuer from registering the security with the Division must comply, and bears the burden of proof to establish and document that it complies, with all of the terms and conditions of this Rule 0780-04-02-.17:

(a) Intrastate Offering. The sale of the security shall meet the requirements of T.C.A. § 48- 1-103(a)(13)(A)(i) and the federal exemption for intrastate offerings in Section 3(a)(11) of the 1933 Act and SEC Rule 147 (17 C.F.R. § 230.147), as may be amended, as follows:

1. Issuer. The issuer shall be a resident of and doing business in Tennessee.

(i) An issuer shall be deemed to be a Tennessee resident if it meets any of the following requirements:

(I) If the issuer is a corporation, limited partnership, trust, or other form of business entity organized under state law, it must be incorporated or organized in Tennessee;

(II) If the issuer is a general partnership or other form of business entity not organized under state law, its principal office must be located in Tennessee; or (III) If the issuer is an individual, the individual’s principal residence must be in Tennessee.

(ii) An issuer shall be deemed to be doing business in Tennessee if it meets all of the following requirements:

(I) The issuer derived at least eighty percent (80%) of its gross revenues and those of its subsidiaries on a consolidated basis from the operation of a business or of real property located in or from the rendering of services within Tennessee.

I. For its most recent fiscal year, if the first offer of any part of the issue is made during the first six (6) months of the issuer’s current fiscal year; or II. For the first six (6) months of its current fiscal year or during the twelve (12) month fiscal period ending with such six (6) month period, if the first offer of any part of the issue is made during the last six (6) months of the issuer’s current fiscal year from the operation of a business or of real property located in or from the rendering of services within Tennessee; provided, that this provision does not apply to any issuers which have not had gross revenues in excess of five thousand dollars ($5,000) from the sale of products or services or other conduct of its business for its most recent twelve (12) month fiscal period;

(II) The issuer had at the end of its most recent semi-annual fiscal period prior to the first offer of any part of the issue, at least eighty percent (80%) of its assets and those of its subsidiaries on a consolidated

basis located within Tennessee;

(III) The issuer intends to use and uses at least eighty percent (80%) of the net proceeds to the issuer from the offering made pursuant to this Invest Tennessee Exemption in connection with the operation of a business or of real property, the purchase of real property located in, or the rendering of services within Tennessee; and (IV) The issuer’s principal office is located in Tennessee.

(iii) The issuer shall not be, either before or as a result of any offering, an investment company as defined in § 3 of the Investment Company Act.

(iv) The issuer shall not be, either before or as a result of any offering, subject to the reporting requirements of § 13 or § 15(d) of the 1934 Act.

2. Investors. Offers and sales of securities exempt under this Rule shall only be made to Tennessee residents. A single offer or sale to an entity or individual who is not a Tennessee resident shall invalidate the use of this exemption for the entire offering. For purposes of determining the residence of offerees and purchasers:

(i) A corporation, partnership, trust, or other form of business organization shall be deemed to be a Tennessee resident if, at the time of the offer and sale, it has its principal office in Tennessee.

(ii) An individual shall be deemed to be a Tennessee resident if the individual has, at the time of the offer and sale, his or her principal residence in Tennessee.

(iii) A corporation, partnership, trust, or other form of business organization which is organized for the specific purpose of acquiring part of an issue offered pursuant to this Rule shall not be deemed to be a Tennessee resident unless all of the beneficial owners of the organization are Tennessee residents.

Investors shall have the right to cancel investment commitments for any reason until forty-eight (48) hours before the anticipated offering deadline.

3. Offering.

(i) Every offer and sale pursuant to the Invest Tennessee Exemption offering must meet all of the terms and conditions of this Rule.

(ii) Integration. Offers and sales that are made twelve (12) months before the start and/or (6) six months following the completion of this exemption offering will be considered a part of the Invest Tennessee Exemption offering for all compliance purposes, including but not limited to the five million dollar ($5,000,000) aggregate limit per twelve (12) month period. If the issuer conducts another offering during either or both of these twelve (12) and six (6) month periods, the issuer shall bear the burden of proof to establish that the offerings are separate and should not be integrated into the exemption offering.

(iii) The following factors shall be considered in determining whether offers and sales should be integrated for purposes of the Invest Tennessee Exemption:

(I) Whether the sales are part of a single plan of financing;

(II) Whether the sales involve issuance of the same class of securities;

(III) Whether the sales have been made at or about the same time;

(IV) Whether the same type of consideration is being received; and (V) Whether the sales are made for the same general purpose.

4. Limitation on resales. During the period in which securities that are part of an offering pursuant to the Invest Tennessee Exemption are being offered and sold by the issuer, and for a period of nine (9) months from the date of the last sale by the issuer, all resales of any part of the issue, by any person, shall be made only to Tennessee residents.

5. Precautions against interstate offers and sales.

(i) The issuer shall, in connection with any securities sold by it pursuant to this exemption:

(I) Place a legend on the certificate or other document evidencing the security stating that the securities have not been registered under the Act and the 1933 Act and set forth the limitations on resales contained in part (3)(a)4. of this Rule;

(II) Issue stop transfer instructions to the issuer’s transfer agent, if any, with respect to the securities or, if the issuer transfers its own securities, make a notation in the appropriate records of the issuer; and (III) Obtain a written representation from each offeree and purchaser as to such offeree’s and purchaser’s residence.

(ii) The issuer shall, in connection with the issuance of new certificates for any of the securities that are part of the same issue that are presented for transfer during the time period specified in part (3)(a)4. of this Rule, take the steps required by subpart (3)(a)5.(i).

(iii) The issuer shall, in connection with any offers or sales by it pursuant to this exemption, disclose in writing the limitations on resale contained in part (3)(a)4. and items (3)(a)5.(i)(I)–(II).

6. Bank or Depository Institution.

(i) The issuer shall maintain a copy of its escrow agreement with a bank or depository institution authorized to do business in Tennessee in which the issuer will deposit all of the investor funds or cause all of the investor funds to be deposited. The bank or depository institution in which the investor funds are deposited is only responsible to act at the direction of the party establishing the escrow agreement and does not have any duty or liability, contractual or otherwise, to any investor or other person.

(ii) The issuer shall not access the escrow funds until the aggregate funds raised from all investors equals or exceeds the minimum amount specified in the escrow agreement.

(iii) In addition to the forty-eight (48) hour right of cancellation set forth in part (3)(a)2. above, an investor may cancel the investor’s commitment to invest if the target offering amount is not raised before the time stated in the escrow agreement.

7. Sales Report. Upon request of the commissioner, an issuer shall provide a sales report of any offering pursuant to this exemption in a designated format.

(b) Filing Requirement. Before offering to sell any security, the issuer shall file with the Division a notice on the Notice of Intention to Offer or Sell Securities Pursuant to the Invest Tennessee Exemption Form providing the information set forth in T.C.A. § 48-1- 103(a)(13)(A)(v). In conjunction with the notice filing requirements set forth in this subparagraph (3)(b), the issuer shall also be required to:

1. File with the Division Form U-2 Uniform Consent to Service of Process;

2. If the issuer is a corporation, file with the Division Form U-2A Uniform Form of Corporate Resolution;

3. Provide the Division with a copy of the fully executed escrow agreement between the issuer and a bank or depository institution authorized to do business in Tennessee in which the issuer states that it will deposit all of the investor funds or cause all of the investor funds to be deposited, the target offering amount to be raised by the offering plus the minimum aggregate amount before escrowed funds may be accessed by the issuer, and the time limit (to be expressed as a date certain) by which the target offering amount must be reached;

4. Provide the Division with a signed acknowledgement requiring the issuer to notify the commissioner immediately upon the issuance of any stop order, denial, order to show cause, suspension, or revocation order, injunction or restraining order, or similar order entered or issued by any regulatory authority or by any court, concerning the securities covered by the notice or other securities offered or sold by the issuer or any order, judgment, decree, or conviction listed in T.C.A. § 48- 1-103(a)(13)(C)(iii);

5. Provide the Division with a signed statement of whether or not the issuer, an officer, director, partner, or trustee of the issuer, or an individual occupying similar status or performing similar functions for the issuer, or an individual owning ten percent (10%) or more of the outstanding shares of any class or classes of securities issued by the issuer is or has ever been the subject of any order described in subpart (3)(b)4. or any order, judgment, decree, or conviction listed in T.C.A. § 48-1-103(a)(13)(C)(iii);

6. Pay the Division a non-refundable filing fee in the amount of one hundred dollars ($100); and 7. Promptly provide any additional information requested by the Division.

(c) Amendment. The issuer shall amend its notice filing required by subparagraph (3)(b) as is necessary to correct any material change relating to the issuer, the persons acting on behalf of the issuer, or the bank or depository institution in which proceeds from the sale of the security will be deposited. No fee shall be charged to amend the notice filing.

(4) Solicitation via the Internet. An issuer shall not use the Internet to offer or sell securities pursuant to this exemption unless access to the issuer’s website where the offering of securities pursuant to this exemption may be viewed is only available to Tennessee residents, as defined in this Rule, and the issuer can establish that the offering cannot be viewed by residents of other states. The issuer bears the burden of proof and shall keep documentation to prove that no person or entity that is a resident of a state other than Tennessee has accessed the website regarding this intrastate offering.

History

• Authority: T.C.A. §§ 48-1-103, 48-1-103(a)(13), 48-1-115, 48-1-116, and 48-1-124(e); Public Acts of 2014, Chapter 943; and 17 C.F.R. §§ 230.500(f) and 230.504(a)(3).
• Administrative History: Original rule filed September 17, 2015; effective December 16, 2015. Amendments filed March 3, 2026; effective June 1, 2026.

Tenn. Comp. R. & Regs. 0780-04-02-.18 TIER 2 OF REGULATION A SECONDARY SALES EXEMPTION

(1) By the authority delegated to the commissioner in T.C.A. §§ 48-1-103(b)(11) and 48-1-116, the following transactions are determined to be exempt from the requirements of T.C.A. § 48- 1-104:

(2) Any non-issuer transaction by a registered agent of a registered broker-dealer in a security of a class that has been outstanding in the hands of the public for at least 90 days by an issuer that previously sold securities in an offering qualified under Tier 2 of Regulation A, codified at 17 CFR § 230.251 et seq., provided that at the time of the transaction:

(a) The issuer is subject to and current in its ongoing reporting requirements under 17 CFR § 230.257(b);

(b) The issuer of the security is actually engaged in business and not in the organizational stage or in bankruptcy or receivership and is not a blank check, blind pool or shell company whose primary plan of business is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person or persons;

(c) The security is sold at a price reasonably related to the current market price of the security;

(d) The security does not constitute the whole or part of an unsold allotment to, or a subscription or participation by, the broker-dealer as an underwriter of the security; and (e) The issuer of the security has a class of equity securities listed on a national securities exchange registered under the Securities Exchange Act of 1934, or designated for trading on the National Association of Securities Dealers Automated Quotation System (NASDAQ), unless:

1. The issuer of the security has been engaged in continuous business (including predecessors) for at least three years, or 2. The issuer of the security has total assets of at least $2,000,000 based on an audited balance sheet as of a date within 18 months or, in the case of a reorganization or merger where parties to the reorganization or merger had such audited balance sheet, a pro forma balance sheet.

History

• Authority: T.C.A. §§ 48-1-103(b), 48-1-104, and 48-1-116.
• Administrative History: Original rule filed September 30, 2019; effective December 29, 2019.

Tenn. Comp. R. & Regs. 0780-04-02-.19 MANUAL EXEMPTION

(1) By the authority delegated to the commissioner in T.C.A. §§ 48-1-103(b)(11) and 48-1-116, the following non-issuer transaction is exempt from the registration requirement provided in T.C.A. § 48-1-104.

(2) Any non-issuer transaction by a registered agent of a registered broker-dealer, and any resale transaction by a sponsor of a unit investment trust registered under the Investment Company Act of 1940, in a security of a class that has been outstanding in the hands of the public for at least ninety (90) days, provided, at the time of the transaction:

(a) The issuer of the security is actually engaged in business and not in the organizational stage or in bankruptcy or receivership and is not a blank check, blind pool or shell company whose primary plan of business is to engage in a merger or combination of the business with, or an acquisition of, an unidentified person or persons;

(b) The security is sold at a price reasonably related to the current market price of the security;

(c) The security does not constitute the whole or part of an unsold allotment to, or a subscription or participation by, the broker-dealer as an underwriter of the security;

(d) There exists a nationally recognized securities manual or its electronic equivalent designated by rule or order of the commissioner or a document filed with the U.S.

Securities & Exchange Commission (SEC) which is publicly available through the SEC’s Electronic Data Gathering and Retrieval System (EDGAR), containing:

1. A description of the business and operations of the issuer, 2. The names of the issuer’s officers and the names of the issuer’s directors, if any, or, in the case of a non-U.S. issuer, the corporate equivalents of such persons in the issuer’s country of domicile, 3. An audited balance sheet of the issuer as of a date within eighteen (18) months, or in the case of a reorganization or merger where parties to the reorganization or merger had such audited balance sheet, a pro forma balance sheet, and 4. An audited income statement for each of the issuer’s immediately preceding two (2) fiscal years, or for the period of existence of the issuer, if in existence for less than two (2) years or, in the case of a reorganization or merger where the parties to the reorganization or merger had such audited income statement, a pro forma income statement; and (e) The issuer of the security has a class of equity securities listed on a national securities exchange registered under the Securities Exchange Act of 1934, or designated for trading on the National Association of Securities Dealers Automated Quotation System (NASDAQ), unless:

2. The issuer of the security is a unit investment trust registered under the Investment Company Act of 1940, or 2. The issuer of the security has been engaged in continuous business (including predecessors) for at least three (3) years, or 3. The issuer of the security has total assets of at least two million dollars ($2,000,000) based on an audited balance sheet as of a date within eighteen (18) months or, in the case of a reorganization or merger where parties to the reorganization or merger had such audited balance sheet, a pro forma balance sheet.

(3) Definition. For the purposes of this Manual Exemption rule, “nationally recognized securities manuals or its electronic equivalent” shall include: Mergent’s Investor Service, and OTC Markets Group Inc. with respect to securities included in the OTCQX and OTCQB markets.

History

• Authority: T.C.A. §§ 48-1-103(b)(11), 48-1-104, and 48-1-116.
• Administrative History: Original rule filed September 30, 2019; effective December 29, 2019.

Chapter 0780-04-03 Broker-Dealer Regulation

Tenn. Comp. R. & Regs. 0780-04-03-.01 BROKER-DEALER REGISTRATION

(1) CRD System Eligible Broker-Dealer Applicants.

(a) All broker-dealer applicants who are eligible must apply for initial registration in Tennessee through the CRD System by complying with the application procedure required by the CRD System. The application filed through the CRD System shall contain the following, unless waived by order of the commissioner.

1. A Form BD and all information and exhibits required by such Form;

2. The appropriate application fee as set forth in the Act; and 3. Satisfactory evidence of a passing score on an appropriate principal’s examination taken by the executive officers or principals of the applicant.

(b) Broker-dealers applying through the CRD System shall also, concurrently with the filing of an application through the CRD System, file with the Division, unless waived by the commissioner:

1. (i) A copy of the applicant’s most recent annual audited report filed pursuant to SEC Rule 17a-5 (17 C.F.R. § 240.17a-5), plus all quarterly FOCUS Reports filed pursuant to that Rule since the most recent annual audited report; or (ii) If the applicant has not yet had an audit performed pursuant to its first fiscal year of existence, in lieu of complying with subpart (1)(b)1.(i) of this

Rule, it may submit an unaudited balance sheet and income statement in such detail as will disclose the nature and amount of assets and liabilities and the net worth of the applicant. Such financial statements shall be prepared as of a date within thirty (30) days of the filing date and shall be certified as to their correctness by the sole proprietor, a general partner, or a duly authorized executive officer of the applicant, and shall be accompanied by a Designation of Accountant form to be executed by the accountant designated on such form; or (iii) The financial reports required by subparts (1)(b)1.(i)–(ii) of this Rule shall demonstrate compliance with the appropriate net capital requirement for a registered broker-dealer;

2. A copy of the applicant’s FINRA membership agreement; and 3. Such other information as the Division may request from a particular applicant to determine eligibility for registration.

(2) Non-CRD System Broker-Dealer Applicants. All applications for initial registration as a broker-dealer other than those specified in paragraph (1) of this Rule shall be submitted directly to the Division and shall contain the following information, unless waived by order of the commissioner:

(a) A Form BD and all information and exhibits required by such Form;

(b) The appropriate application fee as set forth in the Act;

(c) 1. A balance sheet and income statement as of the end of the applicant’s most recent fiscal year prepared in accordance with generally accepted accounting principles consistently applied and examined and reported on by an independent:

(I) certified public accountant; or (II) public accountant currently licensed in the state of Tennessee, and any subsequent quarterly balance sheets and income statements prepared in accordance with generally accepted accounting principles consistently applied; or 2. If the applicant has not yet had an audit performed in its first year of existence, in lieu of complying with part (2)(c)1. of this Rule, it may submit an unaudited balance sheet and income statement in such detail as will disclose the nature and amount of assets and liabilities and the net worth of the applicant. Such financial statements shall be prepared as of a date within thirty (30) days of the filing date and shall be certified as to their correctness by the sole proprietor, a general partner, or a duly authorized executive officer of the applicant, and shall be accompanied by a Designation of Accountant form as provided by the Division. Such Designation of Accountant form shall be executed by the designated accountant;

3. The financial reports required by parts (2)(c)1. and 2. of this Rule shall demonstrate compliance with the appropriate net capital requirement for a registered broker-dealer;

(d) Satisfactory evidence of a passing score on an appropriate principal’s examination taken by the executive officers or principals of the applicant;

(e) A copy of the applicant’s membership agreement with each self-regulatory organization of which the applicant is a member; and (f) Such other information as the Division may request of a particular applicant to determine eligibility for registration.

(3) An application is deemed filed for purposes of T.C.A. § 48-1-110(a)(4) and this Rule when it is complete. An application is deemed to be complete when all information requested by the Division pursuant to paragraphs (1) or (2) of this Rule is received by the Division.

(4) Renewals.

(a) All broker-dealers who are eligible must apply for renewal of registration in Tennessee through the CRD System by complying with the requirements of the CRD System; and (b) Applications for renewal of other broker-dealers must be submitted directly to the Division and must contain the following:

1. The appropriate renewal form as received from the Division and all information and exhibits required by such form; and 2. The appropriate fee as set forth in the Act.

(5) A person who acts as a “clearing broker-dealer” with respect to any securities transaction in Tennessee must register as a broker-dealer in Tennessee.

(6) A registered broker-dealer shall not conduct business in this state through an agent unless and until the broker-dealer has registered that agent in this state.

(7) Abandonment.

(a) The Division may determine that an application to register a broker-dealer has been abandoned if:

1. The application has been on file with the Division for more than one hundred eighty (180) days without the applicant becoming registered and no written communication has been received by the Division in connection with the application during such time period; or 2. A period of one hundred (180) days has elapsed since the date of the Division’s receipt of the most recent written communication to the Division from or on behalf of the applicant.

(b) Upon the determination that an application through the CRD System has been abandoned, the Division shall, as provided through the routine operation of the CRD System, cancel such application without prejudice.

(c) Upon the determination that an application pursuant to paragraph (2) of this Rule has been abandoned, the Division shall cancel the pending application without prejudice and, within thirty (30) days of such cancellation, mail a notification of the abandonment to the last known business address of the applicant.

(8) Withdrawal of Applications. An application for registration as a broker-dealer may be withdrawn prior to the effectiveness of registration by following the procedures established by the CRD System or, for non-CRD System broker-dealer applicants, by filing a written request for withdrawal directly with the Division.

(9) Revocation or Denial. The registration of a broker-dealer shall be subject to revocation proceedings even though the registrant has filed an application to withdraw its registration, and an application for registration as a broker-dealer shall be subject to denial proceedings even though the applicant has filed a written request to withdraw its application. The commissioner may institute a revocation or denial proceeding under T.C.A. § 48-1-112 within thirty (30) days after the filing date of an application to withdraw on Form BDW by a registrant or a written request to withdraw by an applicant and enter a revocation order as of the last date on which registration was effective or a denial order as of the filing date of the written request to withdraw an application. For purposes of this paragraph, “filing date” shall mean the date upon which the Form BDW filed on behalf of a registrant or a written request filed on behalf of an applicant is actually received by the Division through the CRD System or through a direct filing with the Division, whichever is appropriate for the applicant.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-114, 48-1-115, and 48-1- 116; 17 C.F.R. § 240.15c3-1; 17 C.F.R. § 240.17a-5; and 17 C.F.R. § 402.2.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Amendment filed January 13, 1983; effective February 14, 1983. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed November 6, 1997; effective January 20, 1998. Amendment filed May 15, 2002; effective July 29, 2002. Amendment filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.02 EXCLUSIONS AND EXEMPTIONS FROM BROKER-DEALER REGISTRATION

(1) Exclusions.

(a) Associated Persons of an Issuer.

1. An associated person of an issuer of securities shall not be deemed to be a broker-dealer by reason of his or her participation in the offer, sale, or transfer of the securities of such issuer if the associated person:

(i) Is not subject to a statutory disqualification, as the term is defined in

Section 3(a)(39) of the 1934 Act, at the time of his or her participation;

(ii) Is not compensated in connection with his or her participation by the payment of commissions or other remuneration based either directly or indirectly on transactions in securities;

(iii) Is not at the time of his or her participation an associated person of a broker-dealer; and (iv) Meets the conditions of any one of the following items (1)(a)1.(iv)(I), (1)(a)1.(iv)(II), or (1)(a)1.(iv)(III) of this Rule:

(I) The associated person restricts his or her participation to transactions involving offers, sales, or transfers of securities:

I. To a registered broker-dealer or an institutional investor;

II. That are exempted from the registration requirements of the Act under T.C.A. § 48-1-103(a)(10), or that are offered, sold, or transferred pursuant to transactions that are exempt from the registration requirements of the Act under T.C.A. §§ 48-1- 103(b)(1), (b)(9), or (b)(10); or III. That are excluded from the definition of sale pursuant to T.C.A.

§ 48-1-102(20)(F).

(II) The associated person meets all of the following conditions:

I. The associated person primarily performs, or is intended primarily to perform at the end of the offering, substantial duties for or on behalf of the issuer except in connection with transactions in securities;

II. The associated person was not a broker-dealer, or an associated person of a broker-dealer, within the preceding twelve (12) months; and III. The associated person does not participate in selling an offering of securities for any issuer more than once every twelve (12) months, other than in reliance on items (1)(a)1.(iv)(I) or (1)(a)1.(iv)(III) of this Rule, except that for securities issued pursuant to SEC Rule 415 (17 C.F.R. § 230.415), the twelve (12) months shall begin with the last sale of any security included within one (1) SEC Rule 415 registration.

(III) The associated person restricts his or her participation to any one (1) or more of the following activities:

I. Preparing any written communication or delivering such communication through the mail or other means that does not involve oral solicitation by the associated person of a potential purchaser; provided, however, that the content of such communication is approved by a partner, officer, or director of the issuer;

II. Responding to inquiries of a potential purchaser in a communication initiated by the potential purchaser; provided, however, that the content of such responses are limited to information contained in a registration statement filed under the Act or other offering document; or III. Performing ministerial and clerical work involved in effecting any transaction.

2. No presumption shall arise that an associated person of an issuer has violated T.C.A. § 48-1-109 solely by reason of the associated person’s participation in the offer, sale, or transfer of securities of the issuer if the associated person does not meet the conditions specified in this Rule.

3. Definitions. When used in this Rule:

(i) The term “associated person of an issuer” means any natural person who is a partner, officer, director, or employee of:

(I) The issuer;

(II) A corporate general partner of a limited partnership that is the issuer;

(III) A company or partnership that controls, is controlled by, or is under common control with, the issuer; or (IV) An investment adviser, registered under the Investment Advisers Act to an investment company registered under the Investment Company Act, which is the issuer.

(ii) The term “associated person of a broker-dealer” means any partner, officer, director, or branch manager of such broker-dealer (or the person occupying a similar status or performing similar functions), any person directly or indirectly controlling, controlled by, or under common control with such broker-dealer, any agent of such broker-dealer, or any employee of such broker-dealer, except that any person associated with a brokerdealer whose functions are solely clerical or ministerial and any person who is required under the laws of any state to register as a broker-dealer in that state solely because such person is an issuer of securities or an associated person of an issuer of securities shall not be included in the meaning of such term for purposes of this Rule.

(b) A retail or financing institution whose dealings in securities are limited to transactions for its own account with institutional investors or other retail or financing institutions in notes or other evidences of indebtedness secured by mortgages, deeds of trust, or agreements for the sale of real estate or personalty, will not be deemed a broker-dealer if the entire mortgage, deed of trust, or agreement, together with all notes or other evidences of indebtedness secured thereby, is offered and sold as a unit.

(2) Exemptions.

(a) Certain Canadian Broker-Dealers.

1. Prior to effecting any securities transaction pursuant to the exemption from broker-dealer registration authorized by T.C.A. § 48-1-109(g), a Canadian broker-dealer must receive acknowledgment from the Division of its receipt of English language versions of the following exhibits:

(i) Initial exemption notice filing which contains the following:

(I) Completed current application for registration as is required by the provincial or territorial jurisdiction in which the main office of the Canadian broker-dealer is located;

(II) Evidence of membership in an appropriate Canadian self-regulatory organization, stock exchange, or association of broker-dealers;

(III) Evidence of broker-dealer registration in the provincial or territorial jurisdiction in which the main office of the Canadian broker-dealer is located;

(IV) Copy of the disclosure which will be made to customers that the Canadian broker-dealer is not subject to the full regulatory requirements of the Act;

(V) Full names, and United States Social Security Numbers, if any, of all individuals who will represent the Canadian broker-dealer in effecting or attempting to effect purchases or sales of securities in or into this state and all individuals who will receive compensation specifically related to purchases or sales of securities in or into this state;

(VI) Evidence of registration in the appropriate Canadian provincial or territorial jurisdiction for each individual identified pursuant to item (2)(a)1.(i)(V) of this Rule;

(VII) Form U-2 Uniform Consent to Service of Process;

(VIII) The appropriate nonrefundable fee as set forth in the Act; and (IX) Such other information as the Division may request from a particular Canadian broker-dealer to determine eligibility for exemption from broker-dealer registration pursuant to the provisions of T.C.A. § 48- 1-109(g).

2. (i) Each exemption notice filing expires each December 31 unless timely renewed.

(ii) An exemption notice filing is timely renewed for the next calendar year if English language versions of the following exhibits are received by the Division on or after November 1 and before the current notice filing expires:

(I) Completed current application for registration as is required by the provincial or territorial jurisdiction in which the main office of the Canadian broker-dealer is located;

(II) Full names, and United States Social Security Numbers, if any, of all individuals who will represent the Canadian broker-dealer in effecting or attempting to effect purchases or sales of securities in or into this state and all individuals who will receive compensation specifically related to purchases or sales of securities in or into this state;

(III) The appropriate fee as set forth in the Act; and (IV) Such other information as the Division may request from a particular Canadian broker-dealer to determine continuing eligibility for exemption from broker-dealer registration pursuant to the provisions of T.C.A. § 48-1-109(g).

(iii) An exemption notice filing shall expire on December 31 even if an incomplete renewal filing has been made.

3. Abandonment.

(i) The Division may determine that an incomplete initial exemption notice filing has been abandoned if an incomplete filing has been on file with the Division for more than one hundred eighty (180) days without becoming completed and no written communication has been received by the Division from or on behalf of the filer in connection with the filing during such period.

(ii) Upon the determination that an incomplete initial exemption notice filing has been abandoned, the Division may cancel the incomplete filing without prejudice and, within thirty (30) days of such cancellation, mail notification of the abandonment to the last known business address of the filer.

4. Termination and Withdrawal.

(i) A Canadian broker-dealer may terminate its initial exemption notice filing or renewal exemption notice filing by filing a written request for termination directly with the Division. Annual fees previously received by the Division in conjunction with such terminated exemption notice filings are nonrefundable.

(ii) An incomplete initial exemption notice filing, a renewal exemption notice filing, or an incomplete renewal exemption notice filing may be withdrawn by the Canadian broker-dealer by filing a written request for withdrawal directly with the Division. Annual fees previously received by the Division in conjunction with such withdrawn exemption notice filings are nonrefundable.

(iii) A Canadian broker-dealer which has filed an initial or renewal exemption notice filing, and which has become ineligible for the exemption from broker-dealer registration authorized by T.C.A. § 48-1-109(g) shall immediately notify the Division in writing of the cause of such ineligibility and shall simultaneously, as is appropriate, request a termination or withdrawal pursuant to subparts (2)(a)4.(i) or (2)(a)4.(ii) of this Rule.

5. The filings required in paragraph (2) of the Rule shall constitute filings with the commissioner subject to T.C.A. § 48-1-121(c).

(3) The exclusions and exemptions set forth herein shall not exempt any person from the operation of the antifraud provisions of the Act.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-103(a), 48-1-109, 48-1-112, 48-1-115, 48-1-116, 48-1-121, and 48-1- 124(e) and 17 C.F.R. § 230.415.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Amendment filed January 13, 1983; effective February 14, 1983. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed November 6, 1997; effective January 20, 1998. Amendment filed May 15, 2002; effective July 29, 2002. Amendment filed April 5, 2004; effective June 19, 2004. Amendment filed December 31, 2008; effective March 16, 2009. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed October 11, 2016; effective January 9, 2017. Amendments filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.03 BRANCH OFFICE AND OTHER BUSINESS LOCATIONS OF BROKER-DEALERS

(1) Every broker-dealer registered in this state shall notify the Division of the establishment of any branch office or other business location in this state, as well as its current address and the name or names of the agent or agents currently in charge, by filing Form BR through the CRD System or through direct filing, whichever is appropriate, within thirty (30) days from the date of establishment or change.

(2) Such notification of establishment, change in address, or change in identity of any agent or agents in charge thereof must be filed with the Division through the CRD System or through a direct filing, whichever is appropriate, within thirty (30) days from the date of establishment or change.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-115, and 48-1-116; 17 C.F.R. § 240.15c3-1; 17 C.F.R. § 240.17a-5; and 17 C.F.R. § 402.2.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Amendment filed January 13, 1983; effective February 14, 1983. Amendment filed July 5, 1983; effective August 4, 1983. Amendment filed January 12, 1989; effective February 26, 1989. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed May 15, 2002; effective July 29, 2002. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.04 REGISTERED BROKER-DEALER NET CAPITAL REQUIREMENTS

(1) FINRA Broker-Dealers and Exchange Members.

(a) All broker-dealers, except government securities broker-dealers, who are members of the FINRA or a national exchange, shall have and maintain net capital in such minimum amounts as are prescribed for their activities under SEC Rule 15c3-1 (17 C.F.R. § 240.15c3-1).

(b) The aggregate indebtedness of each broker-dealer, described in subparagraph (1)(a) of this Rule, to all persons shall not exceed the levels prescribed under SEC Rule 15c3-1 (17 C.F.R. § 240.15c3-1).

(c) For purposes of this subparagraph (1)(a), the term “net capital” shall have the same meaning as in SEC Rule 15c3-1 (17 C.F.R. § 240.15c3-1).

(2) Government Securities Broker-Dealer. Each registered government securities broker-dealer shall have and maintain liquid capital in such minimum amounts as are prescribed under Department of Treasury Rule 402.2 (17 C.F.R. § 402.2).

(3) Other Broker-Dealers.

(a) Each registered broker-dealer that does not fall within paragraphs (1) and (2) of this

Rule shall have and maintain a minimum net capital of one hundred thousand dollars ($100,000).

(b) For purposes of this paragraph (3), net capital shall be defined as total assets less total liabilities (net worth) as computed in accordance with generally accepted accounting principles consistently applied.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-115, and 48-1-116; 17 C.F.R. § 240.15c3-1; 17 C.F.R. § 240.17a-5; and 17 C.F.R. § 402.2.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Amendment filed January 13, 1983; effective February 14, 1983. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed May 15, 2002; effective July 29, 2002. Amendment filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.05 BROKER-DEALER REQUIRED RECORDS

(1) Every broker-dealer registered in this state shall make and keep current the following books and records relating to its business, unless waived by order of the commissioner:

(a) Blotters (or other records of original entry) setting forth an itemized daily record of all purchases and sales of securities (including certificate number), all receipts and disbursements of cash, and all other debits and credits. The record shall show the account for which each such transaction was effected, the name and amount of securities, the unit and aggregate purchase or sale price (if any), the trade date, the settlement date, the name or other designation of the person from whom purchased or received or to whom sold or delivered, and some identification of the agent effecting the transaction;

(b) Ledgers reflecting all assets and liabilities, income and expenses, and capital accounts;

(c) Ledgers (or other records) itemizing separately as to each cash and margin account of every customer and of the broker-dealer and partners or principals thereof, all purchases, sales, receipts, and deliveries of securities and commodities for such accounts, and all other debits and credits to such accounts;

(d) Ledgers (or other records) reflecting the following:

1. Securities in transfer;

2. Dividends and interest received;

3. Securities borrowed and securities loaned;

4. Monies borrowed and monies loaned (together with a record of the collateral thereof and any substitutions in such collateral);

5. Securities failed to receive and failed to deliver; and 6. A record of all puts, calls, spreads, and straddles and other options in which the broker-dealer has any direct or indirect interest or which it has granted or guaranteed, containing at least identification of the security and the number of units involved;

(e) A memorandum of each order (order ticket) and of any other instruction given or received for the purchase or sale of securities, whether executed or unexecuted. The memorandum shall show the terms and conditions of the order or instruction, any modification or cancellation thereof, the account for which entered, whether the transaction was unsolicited, the time of entry, the price at which executed, and, to the extent feasible, the time of execution or cancellation. Orders entered pursuant to the exercise of discretionary power by the broker-dealer or any employee thereof shall be so designated. The term “time of entry” shall mean the time when the broker-dealer transmits the order instructions for execution, or, if it is not so transmitted, the time when it is received;

(f) A memorandum (order ticket) of each purchase and sale of securities for the account of the broker-dealer showing the price and, to the extent feasible, the time of execution;

(g) Copies of confirmations of all purchases and sales of securities, whether the confirmations are issued by the broker-dealer or the issuer of the security involved, and copies of notices of all other debits and credits for securities, cash, and other items for the account of customers and partners or principals of the broker-dealer;

(h) A securities record or ledger reflecting separately for each security as of the clearance dates all “long” or “short” positions (including securities in safekeeping) carried by such broker-dealer for its account or for the account of its customers, partners, or principals showing the location of all securities long and the offsetting position to all securities short, and in all cases the name or designation of the account in which each position is carried;

(i) Copies of all communications, correspondence, and other records relating to securities transactions with customers;

(j) A separate file containing all written complaints made or submitted by customers to the broker-dealer or agents relating to securities transactions;

(k) A customer information form (new account information worksheet) for each customer. If recommendations are to be made to the customer, the form shall include such information as is necessary to determine suitability;

(l) For each cash or margin account established and maintained with the broker-dealer, copies of all guarantees of accounts and all powers of attorney and other evidence of the granting of any discretionary authority with respect to the account, the name and address of the beneficial owner of each account, and all margin and lending agreements; provided that in the case of a joint account, or of an account of a corporation, the records are required only as to persons authorized to transact business for the account;

(m) A record of the proof of money balances of all ledger accounts in the form of trial balances. Such trial balances shall be current and prepared at least once a month;

(n) All partnership certificates and agreements or, in the case of a corporation, all articles of incorporation, bylaws, minute books, and stock certificate books of the broker-dealer;

(o) A separate file containing copies of all advertising circulated by the broker-dealer in the conduct of its securities business;

(p) A computation made quarterly (on a calendar year basis) of its net capital and ratio of its aggregate indebtedness to its capital on Form X-17A-5, as adopted by the SEC (FOCUS Report), if the broker-dealer is a broker-dealer described in paragraph (1) of

Rule 0780-04-03-.04. Otherwise, a computation made quarterly (on a calendar year

basis) of its net capital in the manner prescribed in paragraphs (1)–(3) of Rule 0780-04- 03-.04;

(q) All records required under SEC Rule 17a-3 (17 C.F.R. § 240.17a-3) not otherwise delineated in this paragraph (1);

(r) All records made and kept pursuant to Section 17(f)(2) of the 1934 Act and SEC Rule 17f-2 (17 C.F.R. § 240.17f-2); and (s) A complete set of the procedures required by SEC Rule 17a-3 (17 C.F.R. § 240.17a-3) and the systems for applying those procedures shall be kept and maintained at every branch office.

(2) All records required to be kept by paragraph (1) of this Rule shall be kept for a period of five (5) years, or for the period of time such records are required to be maintained by SEC Rule 17a-4 (17 C.F.R. § 240.17a-4), whichever is shorter. For the first two (2) years, such records shall be kept in an easily accessible place.

(3) All broker-dealers who act as investment advisers shall also maintain the records required by

Rule 0780-04-.05.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-113, 48-1-115, 48-1-116, 48-1-118, and 48-1-121(a)(2); 17 C.F.R. § 240.10b-10; 17 C.F.R. § 240.17a-3 through 17 C.F.R. § 240.17a-5; 17 C.F.R. § 240.17a-9T through 17 C.F.R. § 240.17a-11; 17 C.F.R. § 240.17f-2; and the FINRA Rules of Fair Conduct.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Amendment filed January 13, 1983; effective February 14, 1983. Repeal and new rule filed September 28, 1990; effective November 12, 1990. Amendment filed May 15, 2002; effective July 29, 2002. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed September 26, 2023; effective December 25, 2023. Amendments filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.06 BROKER-DEALER REPORTING REQUIREMENTS

(1) Financial Reports.

(a) Upon request by the Division, each registered broker-dealer shall file with the Division a report of its financial condition as of and for each requested fiscal year, including a balance sheet and income statement for such period. This report shall be prepared and filed in accordance with the following requirements:

1. The report shall be certified by an independent certified public accountant or independent public accountant;

2. The audit shall be made in accordance with generally accepted auditing standards. The examination shall include a review of the accounting system and the internal accounting controls and procedures for the safeguarding of securities and funds, including appropriate tests thereof since the prior examination;

3. The report shall be accompanied by an opinion of the accountant as to the broker-dealer’s financial condition which is unqualified except as to matters which would not have a substantial effect on the financial condition of the brokerdealer. In addition, the accountant shall submit, as a supplementary opinion, any comments, based upon the audit, as to any material inadequacies found to exist in the accounting system, the internal accounting controls and procedures for safeguarding securities, and shall indicate any corrective action taken or proposed; and 4. The report shall include as a supporting schedule a computation of net capital as required by paragraphs (1)–(3) of Rule 0780-04-03-.04.

(b) In the Division’s discretion, the Division may waive the requirements of subparagraph (1)(a) of this Rule by allowing the broker-dealer to file the annual financial report required by SEC Rule 17a-5 (17 C.F.R. § 240.17a-5). This report shall be filed in the form specified in SEC Rule 17a-5, and shall be accompanied by a copy of any comments made by the independent accountant as to material inadequacies in accordance with SEC Rule 17a-5.

(2) Criminal, Civil, Administrative, or Self-Regulatory Actions.

(a) Upon request by the Division, each broker-dealer registered in this state shall file with the Division a copy of:

1. Any indictment or information filed in any court of competent jurisdiction naming the broker-dealer, any affiliate, partner, officer, or director of the broker-dealer, or any person occupying a similar status with or performing similar functions for the broker-dealer, alleging the commission of any felony regardless of subject matter, or of any misdemeanor involving a security or any aspect of the securities business or any investment-related business;

2. Any complaint filed in any court of competent jurisdiction naming the brokerdealer, any affiliate, partner, officer, or director of the broker-dealer, or any person occupying a similar status with or performing similar functions for the broker-dealer, seeking a permanent or temporary injunction enjoining any of such person’s conduct or practice involving any aspect of the securities business or any investment-related business; and 3. Any complaint or order filed by a federal or state regulatory agency or selfregulatory organization or the United States Post Office naming the brokerdealer, any affiliate, partner, officer, or director of the broker-dealer, or any person occupying a similar status with or performing a similar function for the broker-dealer, related to the broker-dealer’s securities business or investmentrelated business.

(b) Upon request by the Division, each broker-dealer registered in this state shall file with the Division a copy of any answer, response, or reply to any complaint, indictment, or information described in parts (2)(a)1.–3. of this Rule.

(c) Upon request by the Division, each broker-dealer registered in this state shall file with the Division a copy of any decision, order, or sanction that is made, entered, or imposed with respect to any proceedings described in parts (2)(a)1.–3. of this Rule.

(d) Nothing in paragraph (2) is intended to relieve the registrant from any duty the registrant has to comply with legal process or any reporting requirements elsewhere specified in these Rules or in the Act.

(3) Transfer of Control or Change of Name.

(a) Each broker-dealer registered in this state shall file with the Division a notice of transfer of control or change of name not more than thirty (30) days after the date on which the transfer of control or change of name becomes effective.

(b) Such notice of transfer of control or change of name shall be submitted through the CRD System or directly to the Division, whichever is appropriate.

(c) Such notice of transfer of control or change of name shall be filed as an amendment to a broker-dealer’s existing Form BD or as a complete new Form BD from the successor to a registered broker-dealer as provided under T.C.A. § 48-1-110(c).

(d) Each broker-dealer that files a notice of transfer of control or change of name shall furnish, upon request from the Division, any additional information relating to the transfer of control or change of name within fifteen (15) days of receipt of such request.

Such additional information, if requested, shall be submitted directly to the Division.

(4) Except as otherwise provided in the Act, or in these Rules, all material changes in the information included in a broker-dealer’s most recent application for registration shall be set forth in an amendment to Form BD filed promptly with the Division through the CRD System or by a direct filing, whichever is appropriate.

(5) Every broker-dealer shall file directly with the Division the following reports concerning its net capital, liquid capital, and aggregate indebtedness:

(a) Electronic notice within three (3) business days whenever the net capital or liquid capital of the broker-dealer is less than that which is required by these Rules, specifying the respective amounts of its net capital, liquid capital, and aggregate indebtedness on the date of notice;

(b) A copy of every report or notice required to be filed by the broker-dealer pursuant to SEC Rule 17a-11 (17 C.F.R. § 240.17a-11), contemporaneously with the date of filing with the SEC; and (c) Electronic notice within three (3) business days to the Division of the theft or mysterious disappearance from any office in this state of any securities or funds which might affect the financial stability of the broker-dealer, stating all material facts known to it concerning the theft or disappearance.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-113, 48-1-115, 48-1-116, 48-1-118, and 48-1-121(a)(2); 17 C.F.R. § 240.10b-10; 17 C.F.R. § 240.17a-3 through 17 C.F.R. § 240.17a-5; 17 C.F.R. § 240.17a-9T through 17 C.F.R. § 240.17a-11; 17 C.F.R. § 240.17f-2; and the FINRA Rules of Fair Conduct.
• Administrative History: Original rule filed January 13, 1983; effective February 14, 1983. Amendment filed May 6, 1987; effective June 20, 1987. Amendment filed September 18, 1987; effective November 2, 1987. Amendment filed September 28, 1990; effective November 12, 1990. Amendment filed November 6, 1997; effective January 20, 1998. Amendment filed May 15, 2002; effective July 29, 2002. Amendment filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.07 RULES OF CONDUCT FOR BROKER-DEALERS

(1) Confirmations.

(a) Every broker-dealer shall give or send to the customer a written confirmation, promptly after execution of and before completion of, each transaction. The confirmation shall set forth:

1. A description of the security purchased or sold, the date of the transaction, the price at which the security was purchased or sold, and any commission charged;

2. Whether the broker-dealer was acting for its own account, as agent for the customer, as agent for some other person, or as agent for both the customer and some other person;

3. When the broker-dealer is acting as agent for the customer, either the name of the person from whom the security was purchased or to whom it was sold, or the fact that the information will be furnished upon the request of the customer, if the information is known to, or with reasonable diligence may be ascertained by, the broker-dealer;

4. Whether the transaction was unsolicited; and 5. The name of the agent that effected the transaction.

(b) Compliance with SEC Rule 10b-10 (17 C.F.R. § 240.10b-10) or with Rule 2232 of the FINRA Rules of Fair Practice shall be deemed compliance with this Rule.

(2) Every broker-dealer shall establish and keep current a set of written supervisory procedures and a system for applying such procedures, which may be reasonably expected to prevent and detect any violations of the Act, these Rules, and orders thereunder. The procedures shall include the designation by name or title of a number of supervisory employees reasonable in relation to the number of its registered agents, offices, and transactions in this state. A complete set of the procedures and systems for applying them shall be kept and maintained at every branch office.

(3) A broker-dealer shall not enter into any contract with a customer if the contract contains any conditions, stipulations, or provisions binding the customer to waive any rights under the Act, these Rules, or order thereunder. Any such condition, stipulation, or provision is void.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-113, 48-1-115, 48-1-116, 48-1-118, and 48-1-121(a)(2); 17 C.F.R. § 240.10b-10; 17 C.F.R. § 240.17a-3 through 17 C.F.R. § 240.17a-5; 17 C.F.R. § 240.17a-9T through 17 C.F.R. § 240.17a-11; 17 C.F.R. § 240.17f-2; and the FINRA Rules of Fair Conduct.
• Administrative History: Original rule filed November 6, 1997; effective January 20, 1998. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.08 PROHIBITED BUSINESS PRACTICES

(1) The following shall be deemed “dishonest or unethical business practices” by a broker-dealer under T.C.A. § 48-1-112(a)(2)(G), without limiting that term to the practices specified herein:

(a) Causing any unreasonable delay in the delivery of securities purchased or in the remittance of funds necessary to complete the transaction within the time frame customary in the trade;

(b) Inducing trading in a customer’s account which is excessive in size or frequency in view of the financial resources and character of the account;

(c) Recommending to a customer the purchase, sale, or exchange of any security without reasonable grounds to believe that the transaction or recommendation is suitable for the customer on the basis of information furnished by the customer after reasonable inquiry concerning the customer’s investment objectives, financial situation and needs, and any other information known by the broker-dealer;

(d) Executing a transaction on behalf of a customer without authority to do so;

(e) Exercising any discretionary power in effecting a transaction for a customer’s account without first obtaining written discretionary authority from the customer unless the discretionary power relates solely to the time and/or price for the execution of orders;

(f) Executing any transaction in a margin account without obtaining from the customer an executed written margin agreement prior to settlement date for the initial transaction in the account;

(g) Failing to segregate customers’ free securities or securities in safekeeping;

(h) Hypothecating a customer’s securities without having a lien thereon unless the brokerdealer secures from the customer a properly executed written consent promptly after the initial transaction, except as permitted by Rules of the SEC;

(i) Entering into a transaction with or for a customer at a price not reasonably related to the current market price;

(j) Failing to furnish to a customer purchasing securities in an offering, no later than the due date of confirmation of the transaction, either a final prospectus or a preliminary prospectus and an additional document, which together include all information set forth in the final prospectus;

(k) Charging an undisclosed or unreasonable and inequitable fee for services performed, including miscellaneous services such as collection of monies due for principal, dividends or interest, exchange or transfer of securities, appraisals, safekeeping, or custody of securities and other services related to its securities business;

(l) Offering to buy from or sell to any person any security at a stated price unless such broker-dealer is prepared to purchase or sell, as the case may be, at such price and under such conditions as are stated at the time of such offer to buy or sell;

(m) Representing that a security is being offered to a customer “at the market” or a price relevant to the market price unless the broker-dealer knows or has reasonable grounds to believe that a market for the security exists other than that made, created or controlled by the broker-dealer, or by any person for whom the broker-dealer is acting or with whom the broker-dealer is associated in the distribution, or any person controlled by, controlling or under common control with the broker-dealer;

(n) Effecting any transaction in, or inducing the purchase or sale of, any security by means of any manipulative, deceptive or fraudulent device, practice, plan, program, design or contrivance, which may include, but are not limited to, the following:

1. Effecting any transaction in a security which involves no change in the beneficial ownership thereof;

2. Entering an order or orders for the purchase or sale of any security with the knowledge that an order or orders of substantially the same size, at substantially the same time and substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties for the purpose of creating a false or misleading appearance of active trading in the security or a false or misleading appearance with respect to the market for the security; provided, however, nothing in this subparagraph shall prohibit a broker-dealer from entering bona fide agency cross transactions for its customers;

3. Effecting, alone or with one or more other persons, a series of transactions in any security creating actual or apparent active trading in such security or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others;

(o) Guaranteeing a customer against loss in any securities account of such customer carried by the broker-dealer or in any securities transaction effected by the brokerdealer or in any securities transaction effected by the broker-dealer with or for such customer;

(p) Publishing or circulating, or causing to be published or circulated, any notice, circular, advertisement, newspaper article, investment service, or communication of any kind which purports to report any transaction as a purchase or sale of any security unless such broker-dealer believes that such transaction was a bona fide purchase or sale or such security; or which purports to quote the bid price or asked price for any security, unless such broker-dealer believes that such quotation represents a bona fide bid for, or offer of, such security;

(q) Using any advertising or sales presentation in such a fashion as to be deceptive or misleading;

(r) Failing to disclose to a customer that the broker-dealer is controlled by, controlling, affiliated with or under common control with the issuer of any security before entering into any contract with or for a customer for the purchase or sale of such security, the existence of the control to the customer, and if the disclosure is not made in writing, it shall be supplemented by the giving or sending of written disclosure at or before the completion of the transaction;

(s) Failing to make a bona fide public offering of all of the securities allotted to a brokerdealer for distribution, whether acquired as an underwriter, a selling group member, or from a member participating in the distribution as an underwriter or selling group member;

(t) Failing or refusing to furnish a customer, upon reasonable request, information to which the customer is entitled, or to respond to a formal written demand or complaint;

(u) Failing to pay and fully satisfy any final judgment or arbitration award, resulting from an investment-related, customer-initiated arbitration or court proceeding, unless alternative payment arrangements are agreed to between the customer and the broker-dealer or broker-dealer agent, in writing, and the broker-dealer or broker-dealer agent complies with the terms of the alternative payment arrangement;

(v) Attempting to avoid payment of any final judgment or arbitration award resulting from an investment-related, customer-initiated arbitration or court proceeding, unless alternative payment arrangements are agreed to between the customer and the brokerdealer or broker-dealer agent, in writing, and the broker-dealer or broker-dealer agent complies with the terms of the alternative payment arrangements;

(w) Failing to pay and fully satisfy any fine, civil penalty, order of restitution, order of disgorgement, or similar monetary payment obligation imposed upon the broker-dealer or agent by the SEC, the securities or other financial services regulator of any state or province, or any self-regulatory organization;

(x) Establishing or maintaining an account containing fictitious or disguised information;

(y) Borrowing or unauthorized use of customers’ funds or securities;

(z) Sharing directly or indirectly in profits or losses in the account of any customer without the written authorization of the customer; or without notice to the customer dividing or otherwise splitting the broker-dealer’s commission, profits or other compensation from the purchase or sale of securities;

(aa) Placing an order to purchase or sell a security for the account of a client without

authority to do so;

(bb) Placing an order to purchase or sell a security for the account of a client upon instruction of a third party without first having obtained a written third-party trading authorization from the client;

(cc) Entering into a transaction for its own account with a customer with an unreasonable mark up or mark down. There shall be a rebuttable presumption that any mark up or mark down in excess of the guidelines set by the FINRA is unreasonable;

(dd) Entering into a transaction for its own account with a customer in which a commission is charged;

(ee) Executing orders for the purchase or sale of securities which the broker-dealer knew or should have known were not registered under the Act unless the securities or transactions are exempt under the Act;

(ff) Causing any unreasonable delay in the execution of a transaction on behalf of a customer;

(gg) Extending, arranging for, or participating in arranging for credit to a customer in violation of the 1934 Act or the regulations of the Federal Reserve Board;

(hh) Requiring investment advisory clients of a broker-dealer or an affiliated investment adviser to use the broker-dealer to execute trades for such client, and failing to disclose, in writing, to such clients their rights to use any broker-dealer for trade execution;

(ii) Dishonest use of certifications, professional designations, senior-specific certifications, or senior-specific professional designations, as determined by the Division based on the following nonexclusive criteria and guidelines:

1. The use of a certification, professional designation, senior-specific certification or senior-specific professional designation by any person in connection with the offer, sale, or purchase of securities, or the provision of advice as to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly or through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicates or implies that the user has special certification or training in advising or servicing in such a way as to mislead any person shall be a dishonest and unethical practice within the meaning of T.C.A. § 48-1-112(a)(2)(G). The prohibited use of such certifications or professional designation includes, but is not limited to, the following:

(i) Use of a certification or professional designation by a person who has not actually earned, or is otherwise ineligible to use, such certification or designation;

(ii) Use of a nonexistent or self-conferred certification or professional designation;

(iii) Use of a certification or professional designation that indicates or implies a level of occupational qualifications, obtained through education, training, or experience, that the person using the certification or professional designation does not have; and (iv) Use of a certification or professional designation that was obtained from a designating or certifying organization that:

(I) Is primarily engaged in the business of instruction in sales and/or marketing;

(II) Does not have reasonable standards or procedures for assuring the competency of its designees or certificants;

(III) Does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or (IV) Does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.

2. There is a rebuttable presumption that a designating or certifying organization is not disqualified solely for purposes of subpart (1)(ii)1.(iv) of this Rule when the organization has been accredited by:

(i) The American National Standards Institute;

(ii) The National Commission for Certifying Agencies; or (iii) An organization that is on the United States Department of Education’s list entitled “Accrediting Agencies Recognized for Title IV Purposes” and the designation or credential issued therefrom does not primarily apply to sales and/or marketing.

3. In determining whether a combination of words (or an acronym standing for a combination of words) constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees, factors to be considered shall include:

(i) Use of one or more words such as “senior,” “retirement,” “elder,” like words, or analogous words identifying other affinity groups, combined with one or more words such as “certified,” “registered,” “chartered,” “adviser,”

“specialist,” “consultant,” “planner,” or like words, in the name of the certification or professional designation; and (ii) The manner in which those words are combined.

4. For purposes of part (1)(ii)1. of this Rule, a certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, when that job title:

(i) Indicates seniority or standing within the organization; or (ii) Specifies an individual’s area of specialization within the organization; unless (iii) Such job title is used in a way that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees.

As used herein, financial services regulatory agency includes, but is not limited to, an agency that regulates broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act.

5. Nothing in this Rule shall limit the commissioner’s authority to enforce existing provisions of law.

(jj) Failing to promptly provide information requested by the Division pursuant to the Act or these Rules promulgated thereunder;

(kk) Failing to comply with any applicable provision of conduct rules, any applicable fair practice or ethical standard, or any other applicable law or rule related to conducting business involving securities promulgated by the SEC or any self-regulatory organization;

(ll) The unfair, misleading or unethical practices set forth above are not exclusive of other activities, such as forgery, embezzlement, non-disclosure or misstatement of material facts, manipulations and various deceptions, all of which shall be considered grounds for suspension or revocation, and the commissioner may suspend or revoke a registration when necessary or appropriate in the public interest.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-113, 48-1-115, 48-1-116, 48-1-118, and 48-1-121; 17 C.F.R. § 240.10b-1 through 17 C.F.R. § 240.10b-21; and the FINRA Rules of Fair Conduct.
• Administrative History: Original rule filed November 6, 1997; effective January 20, 1998. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.09 CYBERSECURITY

(1) When used in this Rule:

(a) “Consumer” means an individual who is a Tennessee resident and whose nonpublic information is in a registrant’s possession, custody, or control.

(b) “Cybersecurity event” means an event resulting in unauthorized access to, disruption, or misuse of an information system or any nonpublic information stored on such information system. The term “cybersecurity event” does not include:

1. The unauthorized acquisition of encrypted nonpublic information if the encryption, protective process, or key is not also acquired, released, or used without authorization; or 2. An event regarding which the registrant has determined that the nonpublic information accessed by an unauthorized person has not been used or released and has been returned or destroyed.

(c) “Encrypted” means 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.

(d) “Information system” means any information resources organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of electronic information, as well as any specialized system such as industrial and process controls systems, telephone switching and private branch exchange systems, and environmental control systems.

(e) “Nonpublic information” means information that is not publicly available information and is:

1. Business-related information of a registrant the tampering with which, or unauthorized disclosure, access, or use of which, would cause a material adverse impact to the business, operations, or security of the registrant;

2. Any information concerning a consumer which, because of the name, number, personal mark, or other identifier, can be used to identify such consumer, in combination with any one or more of the following data elements:

(i) Social Security number;

(ii) Driver’s license number or non-driver identification card number;

(iii) Account, credit card, or debit card number;

(iv) Any security code, access code, or password that would permit access to a consumer’s financial account; or (v) Biometric records that would permit access to a consumer’s financial account.

(f) “Publicly available information” means any information that a registrant 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. There is a presumption that a registrant has a reasonable basis to believe that information is lawfully made available to the general public if the registrant has taken steps to determine:

1. That the information is of the type that is available to the general public; and 2. Whether a consumer can direct that the information not be made available to the general public and, if so, that such consumer has not done so.

(g) “Registrant” means any broker-dealer, issuer-dealer, or investment adviser registered or required to be registered pursuant to the Tennessee Securities Act of 1980 (the “Act”).

(h) “Third-party service provider” means a person or business that contracts with a registrant to maintain, process, or store nonpublic information, or otherwise is permitted to access that information, through its provision of services to the registrant.

(2) Information Security Program.

(a) Implementation. Commensurate with the size and complexity of the registrant, the nature and scope of the registrant’s activities, including its use of third-party service providers, and the sensitivity of the nonpublic information used by the registrant or in the registrant’s possession, custody, or control, each registrant shall develop, implement, and maintain a comprehensive written information-security program based on the registrant’s risk assessment, which shall include written policies and procedures.

These written policies and procedures shall contain administrative, technical, physical safeguards, and training for the protection of the registrant’s information system, all nonpublic information in its possession, custody, or control, and all nonpublic information provided to any third-party service provider by the registrant.

(b) Objectives. A registrant’s information-security program shall be designed to:

1. Protect the confidentiality, integrity, and availability of nonpublic information and the security of the information system;

2. Protect against any threats or hazards to the confidentiality, integrity, or availability 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 consumers;

4. Define and periodically reevaluate a schedule for retention of nonpublic information and a mechanism for its destruction when no longer needed for legitimate business purposes of the registrant; and 5. Manage risk through the implementation of security measures, such as:

(i) The placement of access controls on information systems, including controls, like multi-factor authentication, to authenticate and permit access only to authorized individuals to protect against the unauthorized acquisition of nonpublic information;

(ii) Identification and management of data, personnel, devices, systems, and facilities that enable the organization to achieve business purposes in accordance with its relative importance to business objectives and the organization’s risk strategy;

(iii) Restriction of access at physical locations containing nonpublic information to only authorized individuals;

(iv) Encryption or other appropriate means of protection of all nonpublic information during transmission over a network, and all nonpublic information stored on mobile computing or storage devices or media;

(v) Adoption of secure development practices for in-house developed applications utilized by the registrant and procedures for evaluating, assessing, or testing the security of the externally developed application utilized by the registrant;

(vi) Regular testing and monitoring of systems and procedures to detect actual and attempted attacks on, or intrusions into, information systems;

(vii) Incorporation of 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 registrant;

(viii) Implementation of measures to protect against loss, destruction, or damage of nonpublic information due to environmental hazards, such as fire and water damage or other catastrophes or technological failures;

(ix) Development, implementation, and maintenance of procedures for the secure disposal of nonpublic information;

(x) Providing personnel with regular cybersecurity awareness training;

(xi) Reviewing data policies of third-party vendors; or (xii) Any other such measure as may be appropriate for the protection of nonpublic information.

(c) Maintenance. The registrant must review, no less frequently than annually, and modify, as needed, its cybersecurity policies and procedures to ensure the adequacy of the security measures and the effectiveness of their implementation.

(3) Investigation of a Cybersecurity Event.

(a) If the registrant learns or has reason to believe that a cybersecurity event has or may have occurred, the registrant, or an outside service provider designated to act on behalf of the registrant, shall conduct a prompt investigation.

(b) The registrant or outside service provider designated to act on behalf of the registrant shall, at a minimum, determine to the fullest extent possible:

1. Whether a cybersecurity event has occurred;

2. The nature and scope of the cybersecurity event; and 3. Any nonpublic information that may have been involved in the cybersecurity event.

(c) If the registrant determines that a cybersecurity event has occurred, the registrant 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 registrant’s possession, custody, or control.

(d) If the registrant learns that a cybersecurity event has or may have occurred involving its third-party service provider, the registrant shall complete the requirements of this paragraph (3) or confirm and document in writing that the third-party service provider has completed such requirements.

(e) The registrant shall maintain records concerning all cybersecurity events for a period of at least three (3) years from the date of the cybersecurity event and shall produce those records upon request by the Division.

(4) Notification of a Cybersecurity Event.

(a) Notification to the Division.

1. Each registrant shall provide the Division with initial notice as promptly as possible, but in no event later than three (3) business days from a determination that a cybersecurity event has occurred, if:

(i) The registrant maintains its principal office and place of business in this state;

(ii) The cybersecurity event affected, or the registrant has reason to believe the cybersecurity event affected, nonpublic information possessed, maintained, or controlled by the registrant; or (iii) The registrant is required to provide notice to any government agency, selfregulatory organization, or any other supervisory body pursuant to any state or federal law.

2. The initial notice to the Division shall include, in general terms:

(i) The date of the cybersecurity event; and (ii) The name and contact information of a person who is both familiar with the cybersecurity event and authorized to act on behalf of the registrant.

3. Based on the initial notice provided to the Division pursuant to part (a)1. above, the Division may commence a private investigation into the cybersecurity event pursuant to T.C.A. § 48-1-118. If a private investigation is initiated, then the Division may request the following information:

(i) A description of how the information was exposed, lost, stolen, or breached, including the specific roles and responsibilities of third-party service providers, if applicable;

(ii) How the cybersecurity event was discovered;

(iii) Communication logs for the period beginning with the occurrence of the cybersecurity event, discovery of the cybersecurity event, and the registrant’s response;

(iv) Whether any lost, stolen, or breached information has been recovered, and if so, how the recovery was achieved;

(v) The identity of the source of the cybersecurity event;

(vi) Whether the registrant has filed a police report or notified any regulatory, government, or law enforcement agencies, and if so, when such notification was provided;

(vii) A description of the specific types of information acquired without authorization;

(viii) The date(s) that the registrant acquired, and thereafter maintained, possession, custody, or control of the nonpublic information affected by the cybersecurity event;

(ix) The period during which the information system was compromised by the cybersecurity event;

(x) The aggregate number of consumers affected by the cybersecurity event;

(xi) 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;

(xii) A description of efforts being undertaken to remediate the situation which allowed the cybersecurity event to occur;

(xiii) A copy of the registrant’s privacy policy and a statement outlining the steps the registrant will take to investigate and notify consumers affected by the cybersecurity event; and (xiv) Any other such information as the Division may request.

(b) Notification to Consumers.

1. Notification to consumers of a cybersecurity event shall be provided in accordance with the methods and timeframes set forth in T.C.A. § 47-18-2107 and any other applicable laws.

(c) Notification Regarding Cybersecurity Events of Third-Party Service Providers.

1. In the case of a cybersecurity event involving a registrant’s third-party service provider of which the registrant has become aware, the registrant shall treat such event as it would under subparagraph (4)(a).

2. The computation of time shall begin on the first business day following the thirdparty service provider’s notification to the registrant that a cybersecurity event has occurred, or the registrant otherwise acquires actual knowledge of the cybersecurity event.

3. Nothing in this Rule shall prevent or abrogate an agreement between a registrant and another registrant, a third-party service provider, or any other party to fulfill any of the investigation requirements imposed under paragraph (2) or notice requirements imposed under paragraph (3).

(5) Record Keeping. Every registrant shall maintain the following records and information:

(a) A copy of each version of the written information security program implemented by the registrant pursuant to this Rule;

(b) All records documenting the registrant’s compliance with this Rule, including, but not limited to, documentation of the registrant’s compliance with the notification requirements of paragraph (4) of this Rule and its annual review of its information security program required by subparagraph (c) of paragraph (2) of this Rule; and (c) These records must be maintained for a period of no less than three (3) years and shall be provided to the Department upon request.

(6) Noncompliance with this Rule. Any failure by a registrant to comply with the requirements of this Rule shall constitute a dishonest and unethical practice in the securities business in violation of T.C.A. § 48-1-112(a)(2)(G).

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-111, 48-1-112(a)(2)(G), 48-1-116, and 48-1- 118.
• Administrative History: Original rule filed November 6, 1997; effective January 20, 1998. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Amendments filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.10 REPEALED

History

• Authority: T.C.A. §§ 48-1-109, 48-1-112, 48-1-115, and 48-1-116; § 222 of the Investment Advisers Act of 1940, as amended by § 304 of the National Securities Markets Improvement Act; and 17 C.F.R. § 275.204-4.
• Administrative History: Original rule filed November 6, 1997; effective January 20, 1998. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Repeal filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.17 REPEALED

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-112, 48-1-115, and 48-1-116.
• Administrative History: New rule filed May 3, 2023; effective August 1, 2023. Repeal filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.11 REPEALED

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-115, 48-1-116, and 48-1-121; and § 15 of the Securities and Exchange Act of 1934, as amended by § 103(a) of the National Securities Markets Improvement Act of 1996.
• Administrative History: Original rule filed November 6, 1997; effective January 20, 1998. Amendment filed May 15, 2002; effective July 29, 2002. Amendment filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Repeal filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.12 REPEALED

History

• Authority: T.C.A. §§ 48-1-102, 48-1-115, and 48-1-116; § 222 of the Investment Advisers Act of 1940, as amended by § 304 of the National Securities Markets Improvement Act of 1996; and 17 C.F.R. § 275.203(b)(3)-1.
• Administrative History: Original rule filed November 6, 1997; effective January 20, 1998. Amendment filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Repeal filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.13 REPEALED

History

• Authority: T.C.A. §§ 48-1-111, 48-1-112, 48-1-115, 48-1-116, and 48-1-121; Public Acts of 1997, Chapter 164; 17 C.F.R. § 275.204-3; and 17 C.F.R. § 275.206(4)-3.
• Administrative History: Original rule filed November 6, 1997; effective January 20, 1998. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Repeal filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.14 REPEALED

History

• Authority: T.C.A. §§ 48-1-109, 48-1-115, 48-1-116, and 48-1-121; Public Acts of 1997, Chapter 164, § 7; § 222 of the Investment Advisers Act of 1940, as amended by § 304 of the National Securities Markets Improvement Act of 1996; and 17 C.F.R. § 275.206(3)-2.
• Administrative History: Original rule filed November 6, 1997; effective January 20, 1998. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Repeal filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.15 REPEALED

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109(g), 48-1-112, 48-1-115, 48-1-116, 48-1-121, and 48-1-124(e).
• Administrative History: Original rule filed April 5, 2004; effective June 19, 2004. Repeal and new rule filed March 16, 2015; effective June 14, 2015. Repeal filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-03-.16 REPEALED

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-111, 48-1-112(a)(2)(G), 48-1-116, and 48-1- 118.
• Administrative History: New rule filed April 6, 2023; effective July 5, 2023. Repeal filed May 8, 2026; effective August 6, 2026.

Chapter 0780-04-04 Broker-Dealer Agent Regulation

Tenn. Comp. R. & Regs. 0780-04-04-.01 AGENT REGISTRATION

(1) CRD System Eligible Agent Applicants.

(a) All agent applicants who are eligible must apply for initial registration in Tennessee through the CRD System by complying with the application procedure required by the CRD System. The application filed through the CRD System shall contain the following:

1. A Form U4 and all information and exhibits required by such Form;

2. The appropriate application fee as set forth in the Act; and 3. Satisfactory evidence of a passing score by the applicant on the appropriate examinations.

(b) Agents applying for registration through the CRD System shall also provide directly to the Division such other information as the Division may request from a particular applicant to determine eligibility for registration.

(2) Non-CRD System Agent Applicants. All applications for registration as an agent other than those specified in paragraph (1) of this Rule shall be submitted directly to the Division and shall contain the following information:

(a) A Form U4 and all information and exhibits required by such Form;

(b) The appropriate application fee as set forth in the Act;

(c) Satisfactory evidence of a passing score by the applicant on the appropriate examinations; and (d) Such other information as the Division may request of a particular applicant to determine eligibility for registration.

(3) An application is deemed filed for purposes of T.C.A. § 48-1-110(a)(4) and this Rule when it is complete. An application is deemed to be complete when all information requested by the Division pursuant to paragraph (1) or paragraph (2) of this Rule is received by the Division.

(4) Expiration. All agent registrations shall automatically expire on December 31 of each year without notification by the commissioner, unless the registration has been properly renewed, or is withdrawn or terminated.

(5) Renewals. All CRD system registered agents must apply for renewal of registration in Tennessee through the CRD System by complying with the requirements of the CRD System. Applications for renewal of non-CRD System agents must be submitted directly to the Division and must contain the following:

(a) The appropriate renewal form and all information and exhibits required by such form; and (b) The appropriate fee as set forth in the Act.

(6) Transfer. There is no provision under the Act to transfer an individual agent’s registration.

When an agent terminates his or her relationship with a broker-dealer with whom he or she is registered and commences a new relationship with another broker-dealer, a termination of registration shall be effected by the broker-dealer with which the individual agent had the prior relationship and an application for initial registration shall be filed by the broker-dealer with which the individual agent proposes to have the new relationship. The termination of registration shall be effected by the broker-dealer by submitting a Form U5 through the CRD System or directly with the Division, whichever is appropriate, within thirty (30) days of the date of termination. The filings prescribed in this paragraph (6) are not required in the event of a mass transfer of agent registrations pursuant to CRD System operational procedures and are not required in the event of a succession as permitted in T.C.A. § 48-1-110(c).

(7) Temporary Registration. All agent applicants who have voluntarily terminated registration with a broker-dealer and who are eligible under the rules established by the CRD System may apply for temporary registration with another broker-dealer through the CRD System by complying with the procedure required by the CRD System. In the case of voluntary terminations of a non-CRD system agent’s registration with a particular broker-dealer pursuant to paragraph (6) of this Rule, the Division may, in its discretion, allow the agent to be temporarily registered with the broker-dealer with whom the agent is seeking permanent registration. Temporary registration for non-CRD system agents will not be granted until the Form U4 is received by the Division, and a written request is made by the non-CRD system broker-dealer. Any temporary registration for non-CRD system agents shall expire upon the grant or denial of the application for permanent registration, and in no event shall last more than thirty (30) days.

(8) Abandonment.

(a) The Division may determine that an application to register an agent has been abandoned if:

1. The application has been on file with the Division for more than one hundred eighty (180) days without becoming registered and no written communication has been received by the Division in connection with the application during such time period; or 2. A period of one hundred eighty (180) days has elapsed since the date of the Division’s receipt of the most recent written communication to the Division from or on behalf of the applicant.

(b) Upon the determination that an application through the CRD System has been abandoned, the Division shall, as provided through the routine operation of the CRD System, cancel such application without prejudice.

(c) Upon determination that an application submitted pursuant to paragraph (2) has been abandoned, the Division shall cancel the pending application without prejudice and, within thirty (30) days of such cancellation, mail a notification of the abandonment to the last known business address of the applicant.

(9) Withdrawal of Applications. An application for registration as an agent may be withdrawn prior to the effectiveness of registration by following the procedures established by the CRD system, or for non-CRD system applicants, by filing a written request for withdrawal directly with the Division.

(10) Revocation or Denial. The registration of an agent shall be subject to revocation proceedings even though the registrant has filed a Form U5 to terminate his or her registration, and an application for registration as an agent shall be subject to denial proceedings even though the applicant has filed a Form U5 to withdraw his or her application. The commissioner may institute a revocation or denial proceeding under T.C.A. § 48-1-112 within thirty (30) days after the filing date of the Form U5 by a registrant or an applicant and enter a revocation order as of the last date on which registration was effective or a denial order as of the filing date of the Form U5. For purposes of this paragraph (10), “filing date” shall mean the date upon which the Form U5 is filed on behalf of a registrant or an applicant through the CRD System, or for non-CRD System agents, the date upon which the Form U5 is actually received by the Division.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-114, 48-1-115, 48-1-116, 48-1-121, and 48-1-124(e); and 17 C.F.R. § 240.17f-2.
• Administrative History: Original rule filed September 9, 1980; effective October 24, 1980. Repeal filed May 15, 2002; effective July 29, 2002. New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-04-.02 EXEMPTIONS FROM AGENT DEFINITION

(1) An individual associated person of a broker-dealer shall be exempt from the definition of “agent” as defined under T.C.A. § 48-1-102(3) if such individual associated person effects any of the two (2) types of transactions in securities described in paragraph (2) of this Rule for a customer in this state and satisfies the following conditions:

(a) Such individual associated person is not ineligible to register in this state for any reason other than such a transaction in securities;

(b) Such individual associated person is registered with a securities association registered under the 1934 Act and is also registered in at least one (1) state; and (c) The broker-dealer with which such individual person is associated is appropriately registered in this state.

(2) For purposes of this Rule, the following are the two (2) types of transactions referred to in paragraph (1):

(a) A transaction that is effected on behalf of a customer who:

1. Maintained an account with the broker-dealer employing the associated person for thirty (30) days prior to the date of the transaction; and 2. Was assigned to such individual associated person for fourteen (14) days prior to the day of the transaction and such individual associated person is registered with the state in which the customer was resident or was present for at least thirty (30) consecutive days during the one (1) year period prior to the day of the securities transaction; or (b) A transaction that is:

2. Effected on behalf of a customer who maintains an account with the brokerdealer for thirty (30) days prior to the date of the securities transactions; and 2. Effected during the period, beginning on the date on which such individual associated person of a broker-dealer files an application for agent registration in this state and ending on the earlier of:

(i) Sixty (60) days after the date on which the application is filed; or (ii) The date on which this state notifies the associated person that it has denied the application for registration or has stayed the pendency of the application for cause.

For purposes of part (2)(a)2. of this Rule, each of up to three (3) individuals, who are associated persons of a broker-dealer and who are designated by such broker-dealer to effect securities transactions for a customer in this state during the absence or unavailability of the principal associated person for a customer, may be treated as an associated person to which such customer is assigned.

(3) An exemption from the definition of “agent” claimed on the basis of the transaction set forth in subparagraph (2)(a) of this Rule shall not be effective if the customer is present in this state for thirty (30) or more consecutive days or has permanently changed his or her residence to this state and the associated person of the broker-dealer fails to file an application for agent registration in this state pursuant to T.C.A. §§ 48-1-109 and 48-1-110 not later than ten (10) business days after the later of:

(a) The date of the transaction;

(b) The date of discovery of the customer’s presence in this state for thirty (30) or more consecutive days; or (c) The change in the customer’s residence.

(4) The exemptions set forth herein shall not exempt any person from the operation of the antifraud provision of the Act set forth at T.C.A. § 48-1-121.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-115, 48-1-116, and 48-1-121; and § 15 of the Securities and Exchange Act of 1934, as amended by § 103(a) of the National Securities Markets Improvement Act of 1996.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-04-.03 EXAMINATIONS OF AGENTS AND PRINCIPALS

(1) Examination of Agents of Broker-Dealers.

(a) Each applicant for initial registration as an agent of a broker-dealer shall, unless covered by subparagraph (1)(b) or (1)(c) or otherwise waived by the commissioner, have passed within two years of the date of application:

1. The Series 63/Uniform Securities Agent State Law Examination (“Series 63 Examination”) or the Series 66/Uniform Combined State Law Examination (“Series 66 Examination”); and 2. All relevant examinations required by the FINRA and accepted by the Division.

(b) Any individual who has been registered as an agent in any state within twenty-four (24) months from the date of filing an application for registration shall not be required to retake the examinations in subparagraph (1)(a) to be eligible for registration.

(c) Any individual who is not registered as an agent in any state for more than two years but less than five years, who was registered as an agent in at least one jurisdiction for at least one year immediately preceding the termination of the agent registration, who has elected to participate in the FINRA Maintaining Qualifications Program pursuant to FINRA Rule 1240(c), and whose appropriate FINRA qualifying examinations remain valid pursuant to effective participation in the MQP program shall be deemed in compliance with the examination requirements of part (1)(a)1. as long as the individual elects to participate in the NASAA Examination Validity Extension Program within two years of agent registration termination.

(d) Any individual who has not been registered as an agent in any state for more than two years but less than five years, who has elected to participate in the FINRA Maintaining Qualifications Program pursuant to FINRA Rule 1240(c), and whose appropriate FINRA qualifying examinations remain valid pursuant to effective participation in the FINRA Maintaining Qualifications Program shall be deemed in compliance with the examination requirements of part (1)(a)2.

(e) Successful participation in the FINRA Maintaining Qualifications Program shall not extend the Series 66 Examination for purposes of investment adviser representative registration.

(2) Examination of Principals of Broker-Dealers.

(a) Each applicant for initial registration as a principal or supervisory officer of a brokerdealer must receive a passing grade on an appropriate securities examination for principals administered by the FINRA, the New York Stock Exchange, or the SEC.

(3) Waiver.

(a) The commissioner may, upon petition and good cause shown by the applicant, waive any or all of the examination requirements set forth above.

(b) For purposes of this Rule, a duly granted examination waiver by the FINRA, the New York Stock Exchange, or the SEC shall constitute a passing grade for the examination requirements of part (1)(a)1. and subparagraph (2)(a) of this Rule.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-114, 48-1-115, 48-1-116, 48-1-121, and 48-1-124(e).
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-04-.04 AGENT REPORTING REQUIREMENTS

(1) Upon request by the Division, each agent registered in this state shall file with the Division through the agent’s broker-dealer a copy of:

(a) Any indictment or information filed in any court of competent jurisdiction naming the agent and alleging the commission of any felony regardless of subject matter, or any misdemeanor involving a security or any aspect of the securities business or any investment-related business;

(b) Any complaint filed in any court of competent jurisdiction naming the agent and seeking a permanent or temporary injunction enjoining any of such persons from engaging in or continuing any conduct or practice involving any aspect of the securities business or any investment-related business; and (c) Any complaint or order filed by a federal or state regulatory agency or self-regulatory organization or the United States Post Office naming the agent and related to the agent’s securities or investment-related business.

(2) Upon request by the Division, each agent registered in this state shall file with the Division through the agent’s broker-dealer a copy of any answer, response, or reply to any complaint, indictment, or information described in subparagraphs (1)(a)–(c). of this Rule.

(3) Upon request by the Division, each agent registered in this state shall file with the Division through the agent’s broker-dealer a copy of any decision, order, or sanction that is made, entered, or imposed with respect to any proceeding described in subparagraphs (1)(a)–(c) of this Rule.

(4) Nothing in this Rule is intended to relieve the registrant from any duty the registrant has to comply with legal process or any reporting requirements elsewhere specified in these Rules or in the Act.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-113, 48-1-115, 48-1-116, 48-1-118, and 48-1-121(a)(2); 17 C.F.R. § 240.17f-2; 17 C.F.R. § 240.17a-3 through 17 C.F.R. § 240.17a-5; 17 C.F.R. § 240.17a-9T through 17 C.F.R. § 240.17a-11; and the FINRA Rules of Fair Conduct.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-04-.05 PROHIBITED BUSINESS PRACTICES

(1) The following are deemed “dishonest or unethical business practices” by an agent under T.C.A. § 48-1-112(a)(2)(G), without limiting those terms to the practices specified herein:

(a) Engaging in the practice of lending or borrowing money or securities from a customer, or acting as a custodian for money, securities, or an executed stock power of a customer;

(b) Effecting securities transactions not recorded on the regular books or records of the broker-dealer which the agent represents, unless the transactions are authorized in writing by the broker-dealer prior to execution of the transaction;

(c) Establishing or maintaining an account containing fictitious information in order to execute transactions which would otherwise be prohibited;

(d) Sharing directly or indirectly in profits or losses in the account of any customer without the written authorization of the customer and the broker-dealer which the agent represents;

(e) Dividing or otherwise splitting the agent’s commissions, profits, or other compensation receivable in connection with the purchase or sale of securities in this state with any person not registered as an agent for the same broker-dealer, or for an affiliated firm of the same broker-dealer;

(f) Inducing trading in a customer’s account which is excessive in size or frequency in view of the financial resources and character of the account;

(g) Recommending to a customer the purchase, sale, or exchange of any security without reasonable grounds to believe that such transaction or recommendation is suitable for the customer on the basis of information furnished by the customer after reasonable inquiry concerning the customer’s investment objectives, financial situation, and needs, and any other information known by the broker-dealer or agent;

(h) Executing a transaction on behalf of a customer without authority to do so;

(i) Exercising any discretionary power in effecting a transaction for a customer’s account without first obtaining written discretionary authority from the customer, unless the discretionary power relates solely to the time and/or price for the execution of orders;

(j) Extending, arranging for, or participating in arranging for credit to a customer in violation of the 1934 Act or the regulations of the Federal Reserve Board;

(k) Executing any transaction in a margin account without obtaining from the customer an executed written margin agreement prior to settlement date for the initial transaction in the account;

(l) Charging a customer an undisclosed or unreasonable commission or service charge in any transaction executed as agent for the customer;

(m) Failing to segregate customers’ free securities or securities held in safekeeping;

(n) Effecting any transaction in, or inducing the purchase or sale of, any security by means of any manipulative, deceptive, or fraudulent device, practice, plan, program, design or contrivance, which may include but not be limited to:

1. Effecting any transaction in a security which involves no change in the beneficial ownership thereof;

2. Entering an order or orders for the purchase or sale of any security with the knowledge that an order or orders of substantially the same size, at substantially the same time and substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties for the purpose of creating a false or misleading appearance of active trading in the security or a false or misleading appearance with respect to the market for the security; provided, however, nothing in this subsection shall prohibit a broker-dealer from entering bona fide agency cross transactions for its customers;

3. Effecting, alone or with one or more other persons, a series of transactions in any security creating actual or apparent active trading in such security or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others;

(o) Guaranteeing a customer against loss in any securities account of such customer carried by the broker-dealer or in any securities transaction effected by the brokerdealer or in any securities transaction effected by the broker-dealer with or for such customer;

(p) Entering into a transaction with or for a customer at a price not reasonably related to the current market price of the security or receiving an unreasonable commission or profit;

(q) Failing to furnish to a customer purchasing securities in an offering, no later than the due date of confirmation of the transaction, either a final prospectus or a preliminary prospectus and an additional document, which together include all information set forth in the final prospectus;

(r) Executing orders for the purchase or sale of securities which the agent knew or should have known were not registered under the Act unless the securities or transactions are exempt under the Act;

(s) Using any advertising or sales presentation in such a fashion as to be deceptive or misleading;

(t) Violating any rule of a national securities exchange or national securities dealers association of which the agent is an associated person with respect to any customer, transaction, or business in this state;

(u) Causing any unreasonable delay in the execution of a transaction on behalf of a customer;

(v) Failing to provide information requested by the Division pursuant to the Act or these Rules;

(w) Failing to pay and fully satisfy any final judgment or arbitration award, resulting from an investment-related, customer-initiated arbitration or court proceeding, unless alternative payment arrangements are agreed to between the customer and the broker-dealer or broker-dealer agent, in writing, and the broker-dealer or broker-dealer agent complies with the terms of the alternative payment arrangement;

(x) Attempting to avoid payment of any final judgment or arbitration award resulting from an investment-related, customer-initiated arbitration or court proceeding, unless alternative payment arrangements are agreed to between the customer and the brokerdealer or broker-dealer agent, in writing, and the broker-dealer or broker-dealer agent complies with the terms of the alternative payment arrangements;

(y) Failing to pay and fully satisfy any fine, civil penalty, order of restitution, order of disgorgement, or similar monetary payment obligation imposed upon the broker-dealer or agent by the Securities and Exchange Commission, the securities or other financial services regulator of any state or province, or any self-regulatory organization;

(z) Dishonest use of certifications, professional designations, senior-specific certifications, or senior-specific professional designations, as determined by the Division based on the following nonexclusive criteria and guidelines:

1. The use of a certification, professional designation, senior-specific certification or senior-specific professional designation by any person in connection with the offer, sale, or purchase of securities, or the provision of advice as to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly or through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicates or implies that the user has special certification or training in advising or servicing in such a way as to mislead any person shall be a dishonest and unethical practice within the meaning of T.C.A. § 48-1-112(a)(2)(G). The prohibited use of such certifications or professional designation includes, but is not limited to, the following:

(i) Use of a certification or professional designation by a person who has not actually earned, or is otherwise ineligible to use, such certification or designation;

(ii) Use of a nonexistent or self-conferred certification or professional designation;

(iii) Use of a certification or professional designation that indicates or implies a level of occupational qualifications, obtained through education, training, or experience, that the person using the certification or professional designation does not have; and (iv) Use of a certification or professional designation that was obtained from a designating or certifying organization that:

(I) Is primarily engaged in the business of instruction in sales and/or marketing;

(II) Does not have reasonable standards or procedures for assuring the competency of its designees or certificants;

(III) Does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or (IV) Does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.

2. There is a rebuttable presumption that a designating or certifying organization is not disqualified solely for purposes of subpart (1)(y)1.(iv) of this Rule when the organization has been accredited by:

(i) The American National Standards Institute;

(ii) The National Commission for Certifying Agencies; or (iii) An organization that is on the United States Department of Education’s list entitled “Accrediting Agencies Recognized for Title IV Purposes” and the designation or credential issued therefrom does not primarily apply to sales and/or marketing.

3. In determining whether a combination of words (or an acronym standing for a combination of words) constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees, factors to be considered shall include:

(i) Use of one or more words such as “senior,” “retirement,” “elder,” or like words, combined with one or more words such as “certified,” “registered,”

“chartered,” “adviser,” “specialist,” “consultant,” “planner,” or like words, in the name of the certification or professional designation; and (ii) The manner in which those words are combined.

4. For purposes of this Rule, a certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, when that job title:

(i) Indicates seniority or standing within the organization; or (ii) Specifies an individual’s area of specialization within the organization; unless (iii) Such job title is used in a way that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees.

As used herein, financial services regulatory agency includes, but is not limited to, an agency that regulates broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act.

5. Nothing in this Rule shall limit the commissioner’s authority to enforce existing provisions of law; or (aa) Failing to comply with any applicable provision of conduct rules, any applicable fair practice or ethical standard, or any other applicable law or rule related to conducting business involving securities promulgated by the SEC or any self-regulatory organization.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-113, 48-1-115, 48-1-116, 48-1-118, and 48-1-121; 17 C.F.R. § 240.10b-1 through 17 C.F.R. § 240.10b-21; and the FINRA Rules of Fair Conduct.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Chapter 0780-04-05 Investment Adviser Regulation

Tenn. Comp. R. & Regs. 0780-04-05-.01 INVESTMENT ADVISER REGISTRATION

(1) Investment Advisers.

(a) All investment advisers must apply for initial registration in Tennessee through the IARD by complying with the electronic application procedures required by the IARD. The application filed through the IARD shall contain the following, unless waived by order of the commissioner:

1. A Form ADV and all information and exhibits required by such Form;

2. The appropriate application fee as set forth in the Act; and 3. Satisfaction of the investment adviser representative examination requirements under Rule 0780-04-06-.03 by appropriate executive officers or principals of the applicant.

(b) Investment advisers applying through the IARD shall also, concurrently with the filing of an application to the IARD, file with the Division, unless waived by order of the commissioner:

1. (i) If the applicant is a corporation, a certified copy of its articles of incorporation and amendments thereto, and a copy of its bylaws certified by the secretary of the corporation;

(ii) If the applicant is a partnership, a copy of its partnership agreement certified by a general partner; or (iii) If the applicant is a limited liability company, a copy of its articles of organization as filed within the state in which it was formed, and a copy of its operating agreement, if any, certified by a managing member;

2. (i) A balance sheet prepared in accordance with generally accepted accounting principles consistently applied as of a date not more than ninety (90) days prior to the date of such application, which shall demonstrate compliance with the net capital requirement for a registered investment adviser in the state in which the applicant maintains its principal place of business. For purposes of this subpart (1)(b)2.(i), “principal place of business” means the August, 2026 2 executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser; or (ii) For any applicant which has or will have custody of client funds or securities, or which requires or will require prepayment of more than one thousand two hundred dollars ($1,200) in investment advisory fees from any client, six (6) or more months in advance, an audited balance sheet shall be prepared in accordance with subparagraph (1)(b) of Rule 0780-04-05-.07. If such applicant has not yet had an audit performed pursuant to its first fiscal year of existence, it may submit an unaudited balance sheet in such detail as will disclose the nature and amount of assets and liabilities and the net worth and net capital of the applicant. Such balance sheet shall be prepared as of a date within thirty (30) days of the filing date and shall be certified as to its correctness by the sole proprietor, a general partner, or a duly authorized executive officer of the applicant, and shall be accompanied by a designation of accountant to be executed by the accountant so designated to perform the applicant’s first annual audit; and (iii) Such other information as the Division may request of a particular applicant to determine eligibility for registration.

(2) An application is deemed filed for purposes of T.C.A. § 48-1-110(a)(4) and this Rule when it is complete. An application is deemed to be complete when all information requested by the Division pursuant to paragraph (1) of this Rule is received by the Division.

(3) All investment advisers must apply for renewal of registration in Tennessee through the IARD by complying with the requirements of the IARD.

(4) Abandonment.

(a) The Division may determine that an application to register as an investment adviser has been abandoned if:

1. The application has been on file with the Division for more than one hundred eighty (180) days without the applicant becoming registered and no written communication has been received by the Division in connection with the application during such time period; or 2. A period of one hundred eighty (180) days has elapsed since the date of the Division’s receipt of the most recent written communication to the Division from or on behalf of the applicant.

(b) Upon the determination that an application through the IARD has been abandoned, the Division shall, as provided through the routine operation of the IARD, cancel such application without prejudice.

(5) Withdrawal of Applications. An application may be withdrawn prior to the effectiveness of registration by following the procedures established by the IARD.

(6) Revocation or Denial. The registration of an investment adviser shall be subject to revocation proceedings even though the registrant has filed the Form ADV-W to withdraw its registration, and an application for registration as an investment adviser shall be subject to denial proceedings even though the applicant has filed the Form ADV-W to withdraw its application.

The commissioner may institute a revocation or denial proceeding under T.C.A. § 48-1-112 within thirty (30) days after the receipt of the Form ADV-W by a registrant or by an applicant August, 2026 3 and enter a revocation order as of the last date on which registration was effective or a denial order as of the filing date of the Form ADV-W. For purposes of this paragraph, the Division shall be deemed to be in receipt of the Form ADV-W filed on behalf of a registrant or an applicant when the Form ADV-W is actually received by the Division through the IARD and, in the instance of a registrant, a termination examination of the investment adviser pursuant to T.C.A. § 48-1-111(d) is completed to the satisfaction of the assistant commissioner for securities.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-114, 48-1-115, 48-1-116, and 48-1-117; § 222 of the Investment Advisers Act of 1940; 17 C.F.R. § 275.0-3–.0-6; and 17 C.F.R. § 275.203-1–3.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-05-.02 INVESTMENT ADVISER NOTICE FILING

(1) A person who is required to register as an investment adviser pursuant to Section 203 of the Investment Advisers Act and who is an investment adviser as defined by T.C.A. § 48-1-102(13) shall make the following filings with the Division through the IARD by complying with the filing procedures of the IARD:

(a) An initial investment adviser notice filing shall be filed ten (10) days prior to acting as an investment adviser and shall contain the following:

1. A Form ADV and all information and exhibits required by such Form, as submitted to the SEC; and 2. The appropriate notice filing fee as set forth in the Act, unless the investment adviser has previously paid the appropriate investment adviser registration filing fee for the current registration period.

(b) A renewal investment adviser notice filing and the appropriate renewal fee, as set forth in the Act, shall be filed pursuant to the renewal procedures of the IARD for each successive calendar year as is necessary in order to sustain compliance with T.C.A. § 48-1-109(c)(2).

(c) Except as otherwise provided in the Act, all material changes in the information included in an investment adviser’s most recent notice filing shall be set forth in an amendment to Form ADV and filed promptly, but no later than thirty (30) days after the material change, with the Division through the IARD.

(2) The filings required herein shall constitute filings with the commissioner pursuant to T.C.A. § 48-1-121(c) and shall be submitted to the Division through the IARD or submitted to the Division in a manner consistent with the transmittal of such filings to the SEC pursuant to a temporary or continuing hardship exemption as granted by the SEC.

(3) The filings required in subparagraphs (1)(a) and (1)(b) of this Rule are deemed filed for purposes of T.C.A. § 48-1-109(c)(2) and this Rule when they are complete. These filings are deemed to be complete when all required information and fees have been received by the Division.

(4) A complete or incomplete investment adviser notice filing may be withdrawn by the investment adviser by submission of a Form ADV-W through the IARD.

(5) Abandonment of Incomplete Investment Adviser Notice Filings.

(a) The Division may determine that an incomplete notice filing by an investment adviser has been abandoned if:

August, 2026 4 1. The incomplete notice filing has been on file with the Division for more than one hundred eighty (180) days without becoming complete and no written communication has been received by the Division in connection with the notice filing during such time period; or 2. A period of one hundred eighty (180) days has elapsed since the date of the Division’s receipt of the most recent written communication to the Division from or on behalf of the investment adviser.

(b) Upon the determination that an incomplete notice filing has been abandoned through the IARD, the Division shall cancel the incomplete notice filing in the IARD without prejudice.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-115, 48-1-116, and 48-1-121; and § 203 of the Investment Advisers Act of 1940.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-05-.03 EXEMPTION FROM INVESTMENT ADVISER REGISTRATION

(1) Subject to the conditions, restrictions, and exclusions set forth in this Rule, the following persons shall be exempted from the definition of investment adviser pursuant to T.C.A. § 48- 1-102(13)(F) and thereby exempt from the registration requirements for investment advisers set forth in T.C.A. § 48-1-109:

(a) Any person domiciled in this state whose only investment advisory clients are insurance companies;

(b) Any person domiciled in this state who, during the course of the preceding twelve (12) months, has had fewer than fifteen (15) clients and who neither holds himself out generally to the public as an investment adviser nor acts as an investment adviser to any investment company registered under the Investment Company Act; or (c) Any person domiciled in this state who is a private fund adviser and who satisfies all applicable requirements set forth in part (1)(c)2. and 3. of this Rule.

1. Definitions. For purposes of this Rule, the following definitions shall apply:

(i) “Value of primary residence” means the fair market value of a person’s primary residence, subtracted by the amount of debt secured by the property up to its fair market value.

(ii) “Private fund adviser” means an investment adviser who provides advice solely to one or more qualifying private funds.

(iii) “Qualifying private fund” means a private fund that meets the definition of a qualifying private fund in SEC Rule 203(M)-1, 17 C.F.R. 275.203(m)-1.

(iv) “3(c)(1) fund” means a qualifying private fund that is eligible for the exclusion from the definition of an investment company under section 3(c)(1) of the Investment Company Act of 1940, 15 U.S.C. 80a-3(c)(1).

(v) “Venture capital fund” means a private fund that meets the definition of a venture capital fund in SEC Rule 203(l)-1, 17 C.F.R. § 275.203(l)-1.

2. Exemption for private fund advisers. Subject to the additional requirements of part (1)(c)3. of this Rule, a private fund adviser shall be exempt from the registration August, 2026 5 requirements of T.C.A. § 48-1-109 if the private fund adviser satisfies each of the following conditions:

(i) Neither the private fund adviser nor any of its advisory affiliates are subject to an event that would disqualify an issuer under Rule 506(d)(1) of SEC

Regulation D, 17 C.F.R. § 230.506(d)(1);

(ii) The private fund adviser files with the Division each report and amendment thereto that an exempt reporting adviser is required to file with the Securities and Exchange Commission pursuant to SEC Rule 204-4, 17 C.F.R. § 275.204-4; and (iii) The private fund adviser pays the following reporting fees to the Division:

(I) An initial reporting fee in an amount of $150.00; and (II) An annual renewal reporting fee in an amount of $150.00.

3. Additional requirements for private fund advisers to certain 3(c)(1) funds. In order to qualify for the exemption described in part (1)(c)2. of this Rule, a private fund adviser who advises at least one (3)(c)(1) fund that is not a venture capital fund shall, in addition to satisfying each of the conditions specified in subparts (1)(c)2.(i– iii) of this Rule, comply with the following requirements:

(i) The private fund adviser shall advise only those 3(c)(1) funds (other than venture capital funds) whose outstanding securities (other than short-term paper) are beneficially owned entirely by persons who, after deducting the value of the primary residence from the person’s net worth, would each meet the definition of a qualified client in SEC Rule 205-3, 17 C.F.R. § 275.205-3, at the time the securities are purchased from the issuer;

(ii) At the time of purchase, the private fund adviser shall disclose the following in writing to each beneficial owner of a 3(c)(1) fund that is not a venture capital fund:

(I) All services, if any, to be provided to individual beneficial owners;

(II) All duties, if any, the investment adviser owes to the beneficial owners; and (III) Any other material information affecting the rights or responsibilities of the beneficial owners.

(iii) The private fund adviser shall obtain on an annual basis audited financial statements of each 3(c)(1) fund that is not a venture capital fund and shall deliver a copy of such audited financial statements to each beneficial owner of the fund.

4. Federal covered investment advisers. If a private fund adviser is registered with the Securities and Exchange Commission, the adviser shall not be eligible for this exemption and shall comply with the state notice filing requirements applicable to federal covered investment advisers in T.C.A. § 48-1-109(c)(2).

5. Investment adviser representatives. A person is exempt from the registration requirements of T.C.A. § 48-1-109(c) if the person is employed by or associated with an investment adviser that is exempt from registration in this state pursuant August, 2026 6 to subparagraph (1)(c) of this Rule and does not otherwise act as an investment adviser representative.

6. Electronic filing. The report filings described in subpart (1)(c)2.(ii) of this Rule shall be made electronically through the IARD. A report shall be deemed filed when the report and the fee required by subpart (1)(c)2.(iii) of this Rule are filed and accepted by the IARD on the Division’s behalf.

7. Transition. An investment adviser who becomes ineligible for the exemption provided by this Rule must comply with all applicable laws and rules requiring registration or notice filing within ninety (90) days from the date the investment adviser’s eligibility for this exemption ceases.

8. Waiver Authority with Respect to Statutory Disqualification. Subpart (1)(c)2.(i) of this Rule shall not apply upon a showing of good cause and without prejudice to any other action of the Tennessee Securities Division, if the commissioner or the commissioner’s designee determines that it is not necessary under the circumstances that an exemption be denied.

9. Grandfathering for investment advisers to 3(c)(1) funds with non-qualified clients.

An investment adviser to a 3(c)(1) fund (other than a venture capital fund) that has one or more beneficial owners who are not qualified clients as described in subpart (1)(c)3.(i) of this Rule is eligible for the exemption contained in part (1)(c)2. of this

Rule if the following conditions are satisfied:

(i) The subject fund existed prior to the effective date of subparagraph (1)(c) of this Rule;

(ii) As of the effective date of subparagraph (1)(c) of this Rule, the subject fund ceases to accept beneficial owners who are not qualified clients, as described in subpart (1)(c)3.(i) of this Rule;

(iii) The investment adviser discloses in writing the information described in

subpart (1)(c)3.(ii) of this Rule to all beneficial owners of the fund; and (iv) As of the effective date of this regulation, the investment adviser delivers audited financial statements as required by subpart (1)(c)3.(iii) of this Rule.

10. Any person satisfying the requirements of parts (1)(c)2. and 3. of this Rule shall not be subject to the requirements prescribed in Rule 0780-04-03-.07.

(2) (a) No person who is a registered agent or a partner, officer, director, or principal of a registered broker-dealer is eligible for the exemption under paragraph (1) of this Rule.

(b) No person who is a partner, officer, director, contracted representative, or non-clerical, non-ministerial employee of a registered investment adviser is eligible for the exemption under paragraph (1) of this Rule.

(3) This Rule shall not be construed to exempt any person from the operation of the antifraud provisions of the Act.

(4) “Client of an Investment Adviser”

(a) General. For purposes of T.C.A. §§ 48-1-102(13)(E)(ii) and subparagraph 1(b), the following are deemed a single client:

August, 2026 7 1. A natural person, and:

(i) Any minor child of the natural person;

(ii) Any relative, spouse, or relative of the spouse of the natural person who has the same principal residence;

(iii) All accounts of which the natural person and/or the persons referred to in this part (4)(a)1. are the only primary beneficiaries; or (iv) All trusts of which the natural person and/or the persons referred to in this

part (4)(a)1. are the only primary beneficiaries.

2. (i) A corporation, general partnership, limited partnership, limited liability company, trust (other than a trust referred to in subpart (4)(a)1.(iv) of this

Rule), or other legal organization (any of which are referred to hereinafter as a “legal organization”) to which investment advice is provided based on its investment objectives rather than the individual investment objectives of its shareholders, partners, limited partners, members, or beneficiaries (any of which are referred to hereinafter as an “owner”); and (ii) Two (2) or more legal organizations referred to in subpart (4)(a)2.(i) that have identical owners.

(b) Special Rules. For purposes of this paragraph (4):

1. An owner must be counted as a client if the investment adviser provides investment advisory services to the owner separate and apart from the investment advisory services provided to the legal organization, however, the determination that an owner is a client will not affect the applicability of this part (4)(b)1. with regard to any other owner;

2. An owner need not be counted as a client of an investment adviser solely because the investment adviser, on behalf of the legal organization, offers, promotes, or sells interests in the legal organization to the owner, or reports periodically to the owners as a group solely with respect to the performance of or plans for the legal organization’s assets or similar matters;

3. A limited partnership or limited liability company is a client of any general partner, managing member, or other person acting as investment adviser to the partnership or limited liability company;

4. Any person for whom an investment adviser provides investment advisory services without compensation need not be counted as a client;

5. An investment adviser that has its principal office and place of business outside of Tennessee must count only clients that are residents in this state; an investment adviser that has its principal office and place of business in this state must count all clients;

6. An investment adviser may not rely on subpart (4)(a)2.(i) with respect to any company that would be an investment company under section 3(a) of the Investment Company Act, 15 U.S.C. 80a-3(a), but for the exception from that definition by either section 3(c)(1) or 3(c)(7) of such Act, 15 U.S.C. 80a-3(c)(1) or (7); and August, 2026 8 7. For purposes of part (4)(b)5., a client who is an owner of a private fund is a resident of the place at which the client resides at the time of the client’s investment in the fund.

(c) Holding Out. Any investment adviser relying on this paragraph (4) shall not be deemed to be holding itself out generally to the public as an investment adviser, within the meaning of subparagraph (1)(b), solely because such investment adviser participates in a non-public offering of interests in a limited partnership under the 1933 Act.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-115, 48-1-116, and 48-1-121.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-05-.04 INVESTMENT ADVISER NET CAPITAL REQUIREMENTS

(1) Except as provided under paragraph (4) of this Rule, every investment adviser registered or required to be registered shall have and maintain a readily marketable minimum net capital of twenty thousand dollars ($20,000) unless the investment adviser has custody of client funds, in which case the amount shall be thirty-five thousand dollars ($35,000).

(2) For purposes of this Rule, “net capital” shall be defined as total assets less total liabilities (net worth) as computed in accordance with generally accepted accounting principles, consistently applied, but shall not include as assets: prepaid expenses (except as to items properly classified as assets under generally accepted accounting principles), deferred charges, goodwill, franchise rights, organizational expenses, patents, copyrights, marketing rights, unamortized debt discount and expense, all other assets of intangible nature, home, home furnishings, automobiles, and the following:

(a) In the case of an individual: home equity, and any other personal items not readily marketable;

(b) In the case of a corporation: advances or loans to stockholders, officers, or affiliates, and uncollateralized receivables from stockholders, officers, or affiliates;

(c) In the case of a partnership: advances or loans to partners or affiliates, and uncollateralized receivables from partners or affiliates; and (d) In the case of a limited liability company: advances or loans to members or affiliates, personal items not readily marketable, and uncollateralized receivables from members or affiliates.

(3) The Division may require that a current appraisal be submitted to establish the value of any asset.

(4) An investment adviser, which has its principal place of business in another state, shall not be subject to the net capital requirements of paragraph (1) if:

(a) The investment adviser is registered as an investment adviser in the state in which it maintains its principal place of business;

(b) The investment adviser is in compliance with the applicable net capital requirement in the state in which it maintains its principal place of business; and (c) The investment adviser is in compliance with any bonding requirement in the state in which it maintains its principal place of business.

(5) For purposes of this Rule:

August, 2026 9 (a) “Principal place of business” of an investment adviser means the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser; and (b) “Readily marketable” means assets that can be sold or converted to cash within a short period of time, usually within one (1) week, and can include, but is not limited to, publicly traded securities, money market instruments, and certificates of deposit.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-115, 48-1-116, 48-1-117, and 48-1-121; § 222 of the Investment Advisers Act of 1940; and 17 C.F.R. § 275.203A-3.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-05-.05 WRITTEN POLICIES AND PROCEDURES

(1) It is unlawful for an investment adviser registered or required to be registered pursuant to T.C.A. § 48-1-109 to provide investment advice to clients unless the investment adviser establishes, maintains, and enforces written policies and procedures tailored to the investment adviser’s business model, taking into account the size of the firm, type(s) of service(s) provided, and the number of locations of the investment adviser. The written policies and procedures must provide for at least the following:

(a) Compliance Policies and Procedures. The investment adviser must establish, maintain, and enforce written compliance policies and procedures reasonably designed to prevent violations by the investment adviser of the Act and the Rules that the commissioner has adopted under the Act;

(b) Supervisory Policies and Procedures. The investment adviser must establish, maintain, and enforce written supervisory policies and procedures reasonably designed to prevent violations by the investment adviser’s supervised persons of the Act and the Rules that the commissioner has adopted under the Act;

(c) Proxy Voting Policies and Procedures.

1. If the investment adviser has the authority to vote client securities:

(i) The investment adviser must establish, maintain, and enforce written proxy voting policies and procedures that are reasonably designed to ensure that the investment adviser votes client securities in the best interest of clients.

These procedures must include how the investment adviser addresses material conflicts that may arise between its interests and those of the investment adviser’s clients;

(ii) Disclose to clients how they may obtain information from the investment adviser about how it voted with respect to their securities; and (iii) Describe to clients the investment adviser’s proxy voting policies and procedures and, upon request, furnish a copy of the policies and procedures to the requesting client.

2. If the investment adviser does not have the authority to vote client securities then this information must be disclosed to clients.

(d) Physical Security and Cybersecurity Policies and Procedures. The investment adviser must establish, implement, update, and enforce written physical security policies and procedures reasonably designed to ensure the confidentiality, integrity, and availability August, 2026 10 of physical and electronic records and information. The policies and procedures must be tailored to the investment adviser’s business model, taking into account the size of the firm, type(s) of service(s) provided, and the number of locations of the investment adviser. The policies and procedures for cybersecurity must be in conformance with requirements of Rule 0780-04-05-.11.

1. The physical security policies and procedures must:

(i) Protect against reasonably anticipated threats or hazards to the security or integrity of client records and information;

(ii) Ensure that the investment adviser safeguards confidential client records and information; and (iii) Protect any records and information the release of which could result in harm or inconvenience to any client.

2. The physical security policies and procedures must cover at least five (5) functions:

(i) Identify. Develop the organizational understanding to manage information security risk to systems, assets, data, and capabilities.

(ii) Protect. Develop and implement the appropriate safeguards to ensure delivery of critical infrastructure services.

(iii) Detect. Develop and implement the appropriate activities to identify the occurrence of an information security event;

(iv) Respond. Develop and implement the appropriate activities to take action regarding a detected information security event; and (v) Recover. Develop and implement the appropriate activities to maintain plans for resilience and to restore any capabilities or services that were impaired due to an information security event.

3. Privacy Policy. The investment adviser must deliver upon the investment adviser’s engagement by a client, and on an annual basis thereafter, a privacy policy to each client that is reasonably designed to aid in the client’s understanding of how the investment adviser collects and shares, to the extent permitted by state and federal law, non-public personal information. The investment adviser must promptly update and deliver to each client an amended privacy policy if any of the information in the policy becomes inaccurate.

(e) Code of Ethics.

1. The investment adviser must establish, maintain, and enforce a written code of ethics that, at a minimum, includes:

(i) A standard (or standards) of business conduct that the investment adviser requires of its supervised persons, which must reflect the investment adviser’s fiduciary obligations and those of its supervised persons;

(ii) Provisions requiring the investment adviser’s supervised persons to comply with applicable state and federal securities laws;

August, 2026 11 (iii) Provisions requiring all of the investment adviser’s access persons to report, and the investment adviser to review, their personal securities transactions and holdings periodically as provided below;

(iv) Provisions requiring supervised persons to report any violations of the investment adviser’s code of ethics promptly to its chief compliance officer or, provided the investment adviser’s chief compliance officer also receives reports of all violations, to other persons designated in the investment adviser’s code of ethics; and (v) Provisions requiring the investment adviser to provide each of its supervised persons with a copy of the investment adviser’s code of ethics and any amendments, and requiring the investment adviser’s supervised persons to provide it with a written acknowledgment of their receipt of the code and any amendments.

2. Reporting Requirements.

(i) Holdings reports. The code of ethics must require the investment adviser’s access persons to submit to its chief compliance officer or other persons designated in the investment adviser’s code of ethics a report of the access person’s current securities holdings that meets the following requirements:

(I) Content of holdings reports. Each holdings report must contain, at a minimum:

I. The title and type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each reportable security in which the access person has any direct or indirect beneficial ownership;

II. The name of any broker, dealer, or bank with which the access person maintains an account in which any securities are held for the access person’s direct or indirect benefit; and III. The date the access person submits the report.

(II) Timing of holdings reports. The investment adviser’s access persons must each submit a holdings report:

I. No later than ten (10) days after the person becomes an access person, and the information must be current as of a date no more than forty-five (45) days prior to the date the person becomes an access person.

II. At least once each twelve (12)-month period thereafter on a date selected by the investment adviser, and the information must be current as of a date no more than forty-five (45) days prior to the date the report was submitted.

(ii) Transaction reports. The code of ethics must require access persons to submit to the investment adviser’s chief compliance officer or other persons designated in the investment adviser’s code of ethics quarterly securities transactions reports that meet the following requirements:

August, 2026 12 (I) Content of transaction reports. Each transaction report must contain, at minimum, the following information about each transaction involving a reportable security in which the access person had, or as a result of the transaction acquired, any direct or indirect beneficial ownership:

I. The date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and principal amount of each reportable security involved;

II. The nature of the transaction (i.e., purchase, sale, or any other type of acquisition or disposition);

III. The price of the security at which the transaction was effected;

IV. The name of the broker, dealer, or bank with or through which the transaction was effected; and V. The date the access person submits the report.

(II) Timing of transaction reports. Each access person must submit a transaction report no later than thirty (30) days after the end of each calendar quarter, which report must cover, at a minimum, all transactions during the quarter.

(iii) Exceptions from reporting requirements. The investment adviser’s code of ethics need not require an access person to submit:

(I) Any report with respect to securities held in accounts over which the access person had no direct or indirect influence or control;

(II) A transaction report with respect to transactions effected pursuant to an automatic investment plan in which regular periodic purchases or withdrawals are made automatically in or from investment accounts in accordance with a predetermined schedule and allocation, including a dividend reinvestment plan; or (III) A transaction report if the report would duplicate information contained in broker trade confirmations or account statements that the investment adviser holds in its records so long as the investment adviser receives the confirmations or statements no later than thirty (30) days after the end of the applicable calendar quarter.

(iv) Pre-approval of certain investments. The investment adviser’s code of ethics must require its access persons to obtain the investment adviser’s approval before they directly or indirectly acquire beneficial ownership in any security in an initial public offering or in a limited offering.

(v) Small investment advisers. If the investment adviser has only one access person, it is not required to submit reports to itself or to obtain its own approval for investments in any security in an initial public offering or in a limited offering, if the investment adviser maintains records of all of its holdings and transactions that this section would otherwise require the investment adviser to report.

August, 2026 13 (vi) Material non-public information policy and procedures. The investment adviser must establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material, nonpublic information by the investment adviser or any person associated with the investment adviser.

(vii) Business continuity and succession plan. The investment adviser must establish, maintain, and enforce written policies and procedures relating to a business continuity and succession plan. The plan must provide for at least the following:

(I) The protection, backup, and recovery of books and records;

(II) Alternate means of communications with clients, key personnel, employees, vendors, service providers (including third-party custodians), and regulators, including, but not limited to, providing notice of a significant business interruption or the death or unavailability of key personnel or other disruptions or cessation of business activities;

(III) Office relocation in the event of temporary or permanent loss of a principal place of business;

(IV) Assignment of duties to qualified responsible persons in the event of the death or unavailability of key personnel; and (V) Otherwise minimizing service disruptions and client harm that could result from a sudden significant business interruption.

(2) Annual review. The investment adviser must review, no less frequently than annually, the adequacy of the policies and procedures established pursuant to this section and the effectiveness of their implementation.

(3) Chief compliance officer. The investment adviser must designate a supervised person as the chief compliance officer responsible for administering the investment adviser’s policies and procedures.

(4) Definitions. For purposes of this Rule:

(a) “Supervised person” means any partner, officer, director (or other person occupying a similar status or performing similar functions), or employee of an investment adviser, or other person who provides investment advice on behalf of the investment adviser and is subject to the supervision and control of the investment adviser. The definition includes investment adviser representatives, employees, independent contractors, or other associated persons and supervised personnel, or other person acting on the behalf of the investment adviser.

(b) “Chief compliance officer” means a supervised person with the authority and resources to develop and enforce the investment adviser’s policies and procedures. The individual designated to serve as chief compliance officer must be registered as an investment adviser representative and must have the background and skills appropriate for fulfilling the responsibilities of the position.

(c) “Access person” means:

1. Any of the investment adviser’s supervised person:

August, 2026 14 (i) Who has access to non-public information regarding any client’s purchase or sale of securities, or non-public information regarding the portfolio holdings of any reportable fund, or (ii) Who is involved in making securities recommendations to clients, or who has access to such recommendations that are non-public.

2. If providing investment advice is the investment adviser’s primary business, all of its directors, officers, and partners are presumed to be access persons.

(d) “Beneficial ownership” is interpreted in the same manner as it would be under 17 C.F.R. § 240.16a-1 in determining whether a person has beneficial ownership of a security for purposes of section 16 of the 1934 Act (15 U.S.C. 78p) and the rules and regulations thereunder. Any report required by 17 C.F.R. 275.204A-1(b) may contain a statement that the report will not be construed as an admission that the person making the report has any direct or indirect beneficial ownership in the security to which the report relates.

(e) “Federal securities laws” means the 1933 Act (15 U.S.C. 77a-aa), the 1934 Act (15 U.S.C. 78a-mm), the Investment Company Act (15 U.S.C. 80a), the Investment Advisers Act (15 U.S.C. 80b), title V of the Gramm-Leach-Bliley Act (Pub. L. 106-102, 113 Stat. 1338 (1999), the Sarbanes-Oxley Act of 2002 (Pub. L. 107-204, 116 Stat. 745 (2002)), any rules adopted by the SEC under any of these statutes, the Bank Secrecy Act (31 U.S.C. 5311-5314; 5316-5332) as it applies to funds and investment advisers, and any rules adopted thereunder by the SEC or the U.S. Department of the Treasury.

(f) “Fund” means an investment company registered under the Investment Company Act.

(g) “Initial public offering” means an offering of securities registered under the 1933 Act (15 U.S.C. 77a), the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the 1934 Act (15 U.S.C. 78m or 78o(d)).

(h) “Limited offering” means an offering that is exempt from registration under the 1933 Act pursuant to section 4(2) or section 4(5) (15 U.S.C. 77d(2) or 77d(5)) or pursuant to §§ 230.504 or 230.506 of this chapter.

(i) “Purchase or sale of a security” includes, among other things, the writing of an option to purchase or sell a security.

(j) “Reportable security” means a security as defined in Rule 0780-04-01-.03(1)(m), except that it does not include:

1. Direct obligations of the Government of the United States;

2. Bankers’ acceptances, bank certificates of deposit, commercial paper, and highquality short-term debt instruments, including repurchase agreements;

3. Shares issued by money market funds;

4. Shares issued by open-end funds other than reportable funds; and 5. Shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are reportable funds.

August, 2026 15 (k) “State securities laws” means all applicable state securities statutes, rules, and regulations, including, without limitation, the registration, permit or qualification requirements thereunder.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-115, 48-1-116, 48-1-117, and 48-1-121; §§ 203A, 205, and 222 of the Investment Advisers Act of 1940; and 17 C.F.R. § 275.203- 204.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-05-.06 REQUIRED RECORDS

(1) Except as provided in paragraph (4) of this Rule, every registered investment adviser shall maintain and keep true, accurate, and current the following books and records, including but not limited to, originals or electronic copies sent or received by such investment adviser relating to its business, unless waived by the commissioner, and make those books and records available to the commissioner upon request:

(a) Ledgers (or other records) reflecting assets and liabilities, income and expenses, and reserve and capital accounts;

(b) Originals of all written communications received and copies of all written communications sent by the investment adviser relating to:

1. Any recommendation made or proposed to be made and any advice given or proposed to be given;

2. Any receipt, disbursement or delivery of funds or securities; or 3. The placing or execution of any order to purchase or sell any security, provided, however:

(i) That the investment adviser shall not be required to keep any unsolicited market letters and other similar communications of general public distribution not prepared by or for the investment adviser, and (ii) That if the investment adviser sends any notice, circular, or other advertisement offering any report, analysis, publication, or other investment advisory service to more than ten (10) persons, the investment adviser shall not be required to keep a record of the names and addresses of the persons to whom it was sent; except that if the notice, circular, or advertisement is distributed to persons named on any list, the investment adviser shall retain with the copy of the notice, circular, or advertisement a memorandum describing the list and its source;

(c) A record showing all receivables and payables;

(d) A memorandum of each order given by the investment adviser for the purchase or sale of any security; of any instruction received by the investment adviser from the client concerning the purchase, sale, receipt, or delivery of a particular security; and of any modification or cancellation of any such order or instruction. The memoranda shall show the terms and conditions of the order, instruction, modification, or cancellation; shall identify the person connected with the investment adviser who recommended the transaction to the client and the person who placed the order; and shall show the account for which the order was entered, the date of entry, and the bank or broker-dealer by or through whom the order was executed, where appropriate. Orders entered pursuant to the exercise of discretionary power shall be so designated;

August, 2026 16 (e) 1. Records showing separately all securities bought or sold by clients insofar as known to the investment adviser and indicating thereon:

(i) Proper identification of the individual account;

(ii) The date on which such securities were purchased or sold;

(iii) The amount of securities purchased or sold; and (iv) The price at which such securities were purchased or sold; or 2. A record showing:

(i) All securities bought or sold by or for the accounts of all clients of the investment adviser in each month;

(ii) The total number shares bought or sold; and (iii) The lowest and highest price at which such purchases or sales were made during the month;

(f) A list or other record of all accounts which identifies the accounts in which the investment adviser is vested with any discretionary power with respect to the funds, securities or transactions of any client;

(g) A copy of all powers of attorney and other evidences of the granting of any discretionary

authority by any client to the investment adviser;

(h) Copies of all communications, correspondence, and other records relating to securities transactions, and copies of all agreements entered into by the investment adviser with respect to any account, that set forth the fees to be charged and the manner of computation and method of payment thereof. The contracts shall be fair and reasonable and indicate the client’s risk tolerance, investment objectives, annual income, net worth, and liquid net worth, and shall be signed and dated by all persons having an interest in the account;

(i) All partnership certificates and agreements, or all articles of incorporation, bylaws, minute books, and stock certificate books of the investment adviser;

(j) A computation, made monthly, of the investment adviser’s net capital;

(k) Copies of all written agreements, acknowledgments, and solicitor disclosure statements required by Rule 0780-04-05-.10(1);

(l) All checkbooks, bank statements, canceled checks, and cash reconciliations of the investment adviser;

(m) All trial balances, financial statements, and internal audit working papers relating to the business of the investment adviser. For purposes of this Rule, “financial statements” shall mean a balance sheet prepared in accordance with generally accepted accounting principles, an income statement, a cash flow statement, and a net worth computation as required by Rule 0780-04-05-.04;

(n) A record of every transaction in a security in which the investment adviser or any investment advisory representative (as hereinafter defined) of the investment adviser has, or by reason of any transaction acquires, any direct or indirect beneficial ownership.

August, 2026 17 The record shall state the title and amount of the security involved; the date and nature of the transaction (i.e. purchase, sale or other acquisition or disposition); the price at which it was effected; and the name of the broker-dealer or bank with or through whom the transaction was effected. The record may also contain a statement declaring that the reporting or recording of any transaction shall not be construed as an admission that the investment adviser or investment advisory representative has any direct or indirect beneficial ownership in the security. A transaction shall be recorded not later than ten (10) days after the end of the calendar quarter in which the transaction was effected. The records required by this subsection shall not include the following:

1. Transactions effected in any account over which neither the investment adviser nor any investment advisory representative of the investment adviser has any direct or indirect influence or control; and 2. Transaction securities which are direct obligations of the United States;

(o) All accounts, books, internal working papers, and any other records or documents that are necessary to form the basis for or demonstrate the calculation of the performance or rate of return of all managed accounts or securities recommendations in any notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication, including, but not limited to, electronic media that the investment adviser circulates or distributes, directly or indirectly, to two (2) or more persons (other than persons connected with the investment adviser); provided, however, that with respect to the performance of managed accounts, the retention of all account statements, if they reflect all debits, credits, and other transactions in a client’s account for the period of the statement, and all worksheets necessary to demonstrate the calculation of the performance or rate of return of all managed accounts shall be deemed to satisfy the requirements of this subparagraph;

(p) A file containing a copy of all written communications received or sent regarding any litigation involving the investment adviser, any investment adviser representative, or employee, and regarding any written customer or client complaint;

(q) Written information about each investment advisory client that is the basis for making any recommendation or providing any investment advice to the client;

(r) A file containing a copy of each document (other than any notices of general dissemination) that was filed with or received from any state or federal agency or selfregulatory organization and that pertains to the registrant or its investment adviser representatives, of which should contain, but is not limited to, all applications, amendments, renewal filings, and correspondence;

(s) Where the investment adviser inadvertently held or obtained a client’s securities or funds and returned them to the client within three (3) business days of receiving them, or has forwarded checks drawn by clients and made payable to third parties within three (3) business days of receipt, the investment adviser shall keep a ledger or other listing of all securities or funds held or obtained including the following information:

1. Issuer;

2. Type of security and series;

3. Date of issue;

4. For debt instruments, the denomination, interest rate, and maturity date;

August, 2026 18 5. Certificate number, including alphabetical prefix or suffix;

6. Name in which registered;

7. Date given to the investment adviser;

8. Date sent to client, sender, or third party;

9. Form of delivery to client, sender, or third party, or a copy of the form of delivery to client, sender, or third party;

10. Mail confirmation number, if applicable, or confirmation by client, sender, or third party of the funds’ or security’s return; and 11. Date each check was received by the investment adviser;

(t) If an investment adviser obtains possession of securities that are acquired from the issuer in a transaction or chain of transactions not involving any public offering that comply with the exception from custody under Rule 0780-04-05-.10(3), the investment adviser shall keep the following records:

1. A record showing the issuer or current transfer agent’s name, address, phone number, and other applicable contract information pertaining to the party responsible for recording client interests in the securities; and 2. A copy of any legend, shareholder agreement, or other agreement showing that those securities that are transferable only with prior consent of the issuer or holders of the outstanding securities of the issuer;

(u) For an investment adviser that has custody of a client’s funds or securities, all records and evidence of compliance required by Rule 0780-04-05-.10(3)(a);

(v) A copy of each written statement and each amendment or revision, given or sent to any client or prospective client of the investment adviser in accordance with the provisions of the Brochure Requirements found in Rule 0780-04-05-.08, and a record of the dates that each written statement, and each amendment or revision, was given, or offered to be given, to any client or prospective client who subsequently becomes a client;

(w) If an investment adviser has custody solely as a consequence of its authority to make withdrawals from client accounts to pay its investment advisory fee and complies with the terms described under Rule 0780-04-05-.10(3)(e)2., the records required to be made and kept shall include the following:

1. A copy of any and all documents executed by the client, including a limited power of attorney, under which the investment adviser is authorized or permitted to withdraw a client’s funds or securities maintained with a custodian upon the investment adviser’s instruction to the custodian;

2. A journal or other record showing all purchases, sales, receipts and deliveries of securities, including certificate numbers, for the accounts and all other debits and credits to the accounts;

3. A separate ledger account for each client showing all purchases, sales, receipts and deliveries of securities, the date and price of each purchase and sale, and all debits and credits;

August, 2026 19 4. Copies of confirmations of all transactions effected by or for the account of any client;

5. A record for each security in which any client has a position, which record shall show the name of each client having any interest in each security, the amount of interest of each client, and the location of each security;

6. A copy of each of the client’s quarterly account statements as generated and delivered by the qualified custodian. If the investment adviser also generates a statement that is delivered to the client, the adviser shall also maintain copies of the statements along with the date the statements were sent to the clients;

7. If applicable to the investment adviser’s situation, a copy of the special examination report verifying the completion of the examination by an independent certified public accountant and describing the nature and extent of the examination;

8. A record of any finding by the independent certified public accountant of any material discrepancies found during the examination; and 9. If applicable, evidence of the client’s designation of an independent representative;

(x) If an investment adviser has custody because it advises a pooled investment vehicle as defined in Rule 0780-04-05-.10(3)(g)2.(i)(III), the adviser shall also keep the following records:

1. True, accurate, and current account statements;

2. Where the investment adviser complies with Rule 0780-04-05-.10(3)(d)3., the records required to be made and kept shall include the following:

(i) The date(s) of the audit;

(ii) A copy of the audited financial statement; and (iii) Evidence of the mailing of the audited financial statements to all limited partners, members, or other beneficial owners within one hundred twenty (120) days of the end of its fiscal year;

(y) Every investment adviser subject to paragraph (1) of this Rule who renders any investment supervisory or management service to any client shall, with respect to the portfolio being supervised or managed and to the extent that the information is reasonably available to or obtainable by the investment adviser, make and keep true, accurate, and current:

1. Records showing separately for each client the securities purchased and sold, and the date, amount and price of each purchase and sale; and 2. For each security in which any client has a current position, information from which the investment adviser can promptly furnish the name of each client, and the current amount or interest of the client;

(z) An investment adviser subject to paragraph (1) of this Rule, before ceasing to conduct or discontinuing business as an investment adviser shall arrange for and be responsible for the preservation for the books and records required to be maintained and preserved under this Rule for the remainder of the period specified in this Rule, and shall notify the August, 2026 20 Division in writing of the exact address where the books and records will be maintained during the period.

(aa) 1. Pursuant to this Rule the records required to be maintained and preserved may be immediately produced or reproduced, and maintained and preserved for the required time, by an investment adviser on:

(i) Paper or hard copy form, as those records are kept in their original form;

(ii) Micrographic media, including microfilm, or any similar medium; or (iii) Electronic storage media, including any digital storage medium or system that meets the terms of this section.

2. The investment adviser must:

(i) Arrange and index the records in a way that permits easy location, access, and retrieval of any particular record;

(ii) Provide promptly any of the following that the Division may request:

(I) A legible, true, and complete copy of the record in the medium and format in which it is stored;

(II) A legible, true, and complete printout of the record; or (III) Means to access, view, and print records; and (iii) Separately store for the time required for preservation of the original record, a duplicate copy of the record on any medium allowed by this subparagraph.

(bb) Any book or other record made, kept, maintained, and preserved in compliance with Rule 12 C.F.R.§ 275.204-2 under the Investment Advisers Act, which is substantially the same as the book or other record required to be made, kept, maintained, and preserved under this Rule, shall be deemed to be made, kept, maintained, and preserved in compliance with this Rule;

(cc) All payroll records, corporate charters, certificates of incorporation, partnership articles, minute books, and other records routinely kept in the course of operating a business;

(dd) A copy of each notice, circular, advertisement, newspaper article, investment letter, bulletin, or other communication recommending the purchase or sale of a specific security, which the investment adviser circulates or distributes, directly or indirectly, to two (2) or more persons (other than persons connected with the investment adviser), and if the communication does not state the reasons for the recommendation, a memorandum of the investment adviser indicating the reasons therefore; and (ee) For each client that was obtained by the investment adviser by means of a referral from a third party to whom a cash fee was paid by the adviser, the following is required:

1. Evidence of a written agreement, to which the investment adviser is a party, related to the payment of the fee;

2. A signed and dated acknowledgement of receipt from the client evidencing the client’s receipt of the investment adviser’s disclosure statement; and August, 2026 21 3. A copy of a written disclosure statement from the referring party to the investor.

(2) When an investment adviser that is registered in this state is engaged in more than one (1) enterprise or activity, it shall maintain separate books of accounts and records relating to its securities business and the assets shall not be commingled with those of other businesses, and there shall be a clearly defined division with respect to income and expenses.

(3) All records required by paragraph (1) of this Rule shall be kept for a period of five (5) years, or for the period of time such records are required to be maintained by SEC Rule 204-2 (17 C.F.R. § 275.204-2), whichever is shorter. For the first two (2) years, such records shall be kept in an easily accessible place.

(4) An investment adviser which has its principal place of business in another state shall not be subject to the books and records requirement of this Rule if:

(a) The investment adviser is registered as an investment adviser in the state in which it maintains its principal place of business;

(b) The investment adviser is in compliance with the applicable books and records requirements of the state in which it maintains its principal place of business;

(c) The investment adviser makes copies of the books and records available to the commissioner upon request; and (d) The provisions of paragraph (4) would require the investment adviser to maintain books or records in addition to those required under the laws of the state in which the investment adviser maintains its principal place of business.

(5) Definitions. For purposes of this Rule:

(a) “Principal place of business” of an investment adviser means the executive office of the investment adviser from which the officers, partners, or managers of the investment adviser direct, control, and coordinate the activities of the investment adviser; and (b) “Discretionary power” shall not include discretion as to the price at which or the time when a transaction is or is to be effected, if, before the order is given by the investment adviser, the client has directed or approved the purchase or sale of a definite amount of the particular security.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-115, 48-1-116, 48-1-117, and 48-1-121; § 222 of the Investment Advisers Act of 1940; and 17 C.F.R. § 275.204-1.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-05-.07 REPORTING REQUIREMENTS

(1) (a) Each investment adviser registered in this state shall file with the Division, within ninety (90) days after the end of its fiscal year, a copy of its annual statement of financial condition (balance sheet) and thereafter, any other related financial statements which the Division may request.

(b) For any investment adviser registered in this state which has custody of client funds or securities, or which requires prepayment of more than one thousand two hundred dollars ($1,200) in investment advisory fees from any client, six (6) or more months in advance, such statement of financial condition (balance sheet) shall be:

August, 2026 22 1. Certified by an independent certified public accountant or independent public accountant;

2. Prepared in accordance with generally accepted accounting principles consistently applied; and 3. Accompanied by an opinion of the accountant, as to the investment adviser’s financial condition, which is unqualified, except as to matters which would not have a substantial effect on the financial condition of the investment adviser.

(2) (a) Upon request by the Division, each investment adviser registered in this state shall file with the Division a copy of, or any information requested that is related to, the following:

1. Any indictment or information filed in any court of competent jurisdiction naming the investment adviser, any affiliate, partner, officer, or director of the investment adviser, or any person occupying a similar status with or performing similar functions for the investment adviser, alleging the commission of any felony regardless of subject matter, or of any misdemeanor involving a security or any aspect of the securities business or any investment-related business;

2. Any complaint filed in any court of competent jurisdiction naming the investment adviser, any affiliate, partner, officer, or director of the investment adviser, or any person occupying a similar status with or performing similar functions for the investment adviser, seeking a permanent or temporary injunction enjoining any of such persons from engaging in or continuing any conduct or practice involving any aspect of the securities business or any investment-related business; and 3. Any complaint or order filed by a federal or state regulatory agency or selfregulatory organization or the United States Post Office naming the investment adviser, any affiliate, partner, officer, or director of the investment adviser, or any person occupying a similar status with or performing similar functions for the investment adviser, related to the investment adviser’s securities or investmentrelated business.

(b) Upon request of the Division, each investment adviser registered in this state shall file with the Division a copy of, or any information requested that is related to, any answer, response, or reply to any complaint, indictment, or information described in parts (2)(a)1.–3. of this Rule.

(c) Upon request by the Division, each investment adviser registered in this state shall file with the Division a copy of, or any information requested that is related to, any decision, order, or sanction that is made, entered, or imposed with respect to any proceeding described in parts (2)(a)1.–3. of this Rule.

(d) Nothing in this Rule is intended to relieve the registrant from any duty the registrant has to comply with legal process or any reporting requirements elsewhere specified in these Rules or in the Act.

(3) (a) Each investment adviser registered in this state, or which has made a notice filing pursuant to T.C.A. § 48-1-109(c)(2), shall file with the Division through the IARD, a notice of transfer of control or change of name not more than thirty (30) days after the date on which the transfer of control or change of name becomes effective.

(b) Such notice of transfer of control or change of name shall be filed as an amendment to an investment adviser’s existing Form ADV or as a complete new Form ADV from the successor to a registered investment adviser as provided under T.C.A. § 48-1-110(c).

August, 2026 23 (c) Each investment adviser, which files a notice of transfer of control or change of name, shall furnish, upon request from the Division, any additional information relating to the transfer of control or change of name within fifteen (15) days of receipt of such request.

Such additional information, if requested, shall be submitted directly to the Division.

(4) Except as otherwise provided in the Act, all material changes in the information included in an investment adviser’s most recent application for registration shall be set forth in an amendment to Form ADV, pursuant to the updating instructions on Form ADV, and filed promptly, but no later than thirty (30) days after the material change, through the IARD.

(5) Each investment adviser registered in this state shall file with the Division, through the IARD, within ninety (90) days after the end of the registrant’s fiscal year, an annual updated Form ADV prepared pursuant to the updating instructions on Form ADV.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-115, 48-1-116, 48-1-117, and 48-1-121; § 222 of the Investment Advisers Act of 1940; and 17 C.F.R. § 275.204-2.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-05-.08 BROCHURE REQUIREMENTS

(1) General requirements. Unless otherwise provided in this Rule, an investment adviser, registered or required to be registered pursuant to T.C.A. § 48-1-109(c) shall, in accordance with the provisions of this Rule, furnish each investment advisory client and prospective investment advisory client with:

(a) A brochure, which may be a copy of Form ADV Part 2A or written documents containing the information required by Form ADV Part 2A;

(b) A copy of its Part 2B brochure supplement for each individual:

1. Providing investment advice and having direct contact with clients in this state; or 2. Exercising discretion over assets of clients in this state, even if no direct contact is involved.

(c) A copy of its Part 2A Appendix 1 wrap fee brochure if the investment adviser sponsors or participates in a wrap fee account;

(d) A summary of material changes, which may be included in Form ADV Part 2 or given as a separate document. For purposes of this subparagraph, fee changes constitute material changes requiring an update to all parts of Form ADV;

(e) The brochure must comply with the language, organizational format, and filing requirements specified in the Instructions to Form ADV Part 2; and (f) Such other information as the Division may require.

(2) Delivery.

(a) Initial Delivery. An investment adviser, except as provided in subparagraph (2)(c), shall deliver the Part 2A brochure and any brochure supplements required by this section to a prospective investment advisory client:

1. Not less than forty-eight (48) hours prior to entering into any investment advisory contract with such client or prospective client; or August, 2026 24 2. At the time of entering into any such contract, if the investment advisory client has a right to terminate the contract without penalty within five (5) business days after entering into the contract.

(b) Annual Delivery. If material changes have taken place since the last summary and brochure delivery, the investment adviser, except as provided in subparagraph (2)(c), must:

1. Deliver within one hundred twenty (120) days of the end of its fiscal year a free, updated brochure and related brochure supplements which include or are accompanied by a summary of material changes; or 2. Deliver a summary of material changes that includes an offer to provide a copy of the updated brochure and supplements and information on how the client may obtain a copy of the brochures and supplements. Any brochure requested in writing by the investment advisory client pursuant to an offer under this paragraph must be mailed or delivered within seven (7) days of the receipt of the request.

(c) Delivery of the brochure and related brochure supplements required by subparagraphs (2)(a) and (b) need not be made to:

1. Clients who receive only impersonal advice and who pay less than five hundred dollars ($500) in fees per year; or 2. An investment company registered under the Investment Company Act; or 3. A business development company as defined in the Investment Company Act and whose investment advisory contract meets the requirements of section 15c of that Act.

(d) Delivery of the brochure and related brochure supplements required by subparagraphs (2)(a) and (b) may be made electronically if the investment adviser:

1. In the case of an initial delivery to a potential client, obtains a verification that a readable copy of the brochure and supplements were received by the client;

2. In the case of other than initial deliveries, obtains each client’s prior consent to provide the brochure and supplements electronically;

3. Prepares the electronically delivered brochure and supplements in the format prescribed in subparagraph (a) and instructions to Form ADV Part 2;

4. Delivers the brochure and supplements in a format that can be retained by the client in either electronic or paper form; and 5. Establishes procedures to supervise personnel transmitting the brochure and supplements, to prevent violations of this Rule.

(3) Other Disclosures. Nothing in this Rule shall relieve any investment adviser from any obligation pursuant to any provision of the Act or the Rules and regulations thereunder or other federal or state law to disclose any information to its investment advisory clients or prospective investment advisory clients not specifically required by this Rule.

(4) Definitions. For purposes of this Rule:

August, 2026 25 (a) “Contract for impersonal investment advisory services” means any contract relating solely to the provision of investment advisory services:

1. By means of written material or oral statements which do not purport to meet the objectives or needs of specific individuals or accounts;

2. Through the issuance of statistical information containing no expression of opinion as to the investment merits of a particular security; or 3. Any combination of the foregoing services.

(b) “Entering into,” in reference to an investment advisory contract, does not include an extension or renewal without material change of any such contract which is in effect immediately prior to such extension or renewal.

History

• Authority: T.C.A. §§ 48-1-109, 48-1-112, 48-1-115, and 48-1-116; § 222 of the Investment Advisers Act of 1940; and 17 C.F.R. § 275.204-4.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-05-.09 PROHIBITED BUSINESS PRACTICES

(1) A person who is an investment adviser, or a federal covered adviser, is a fiduciary and has a duty to act primarily for the benefit of its clients. The provisions of this Rule shall apply to federal covered investment advisers to the extent that the conduct alleged is fraudulent, deceptive, or as otherwise permitted by the National Securities Markets Improvement Act of 1996 (Pub. L.

No. 104-290). The following are deemed “dishonest or unethical business practices” by an investment adviser under T.C.A. § 48-1-112(a)(2)(G), to the extent permitted under Section 203A of the Investment Advisers Act, without limiting those terms to the practices specified herein:

(a) Recommending to a client to whom investment supervisory, management or consulting services are provided the purchase, sale, or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the client on the basis of information furnished by the client after reasonable inquiry concerning the client’s investment objectives, financial situation and needs, and any other information known by the investment adviser;

(b) Exercising any discretionary power in placing an order for the purchase or sale of securities for a client without obtaining written discretionary authority from the client within ten (10) business days after the date of the first transaction placed pursuant to oral discretionary authority, unless the discretionary power relates solely to the price at which, or the time when, an order involving a definite amount of a specified security shall be executed, or both;

(c) Inducing trading in a client’s account that is excessive in size or frequency in view of the financial resources, investment objectives, and character of the account;

(d) Placing an order to purchase or sell a security for the account of a client without authority to do so;

(e) Placing an order to purchase or sell a security for the account of a client upon instruction of a third party without first having obtained a written third-party trading authorization from the client;

August, 2026 26 (f) Borrowing money or securities from a client unless the client is a broker-dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds;

(g) Loaning money to a client unless the investment adviser is a financial institution engaged in the business of loaning funds or the client is an affiliate of the investment adviser;

(h) Extending, arranging for, or participating in arranging for credit to a client in violation of the 1934 Act or the regulations of the Federal Reserve Board;

(i) Misrepresenting to any advisory client, or prospective advisory client, the qualifications of the investment adviser or any employee of the investment adviser, or misrepresenting the nature of the investment advisory services being offered or fees to be charged for such service, or omitting a material fact necessary to make the statements made regarding qualifications, services, or fees, in light of the circumstances under which they are made, not misleading;

(j) Providing a report or recommendation to any advisory client prepared by someone other than the investment adviser without disclosing that fact. This prohibition does not apply to a situation where the investment adviser uses published research reports or statistical analyses to render advice or where an investment adviser orders such a report in the normal course of providing service;

(k) Charging a client an unreasonable advisory fee. Any fee above two percent (2%) of the client’s assets under management shall create a rebuttable presumption that the fee is unreasonable;

(l) Failing to disclose to clients, in writing, before any advice is rendered, any material conflict of interest relating to the investment adviser or any of its employees which could reasonably be expected to impair the rendering of unbiased and objective advice including:

1. Compensation agreements connected with investment advisory services to clients, which are in addition to compensation from such clients for such services; and 2. Charging a client an investment advisory fee for rendering advice when a commission for executing securities transactions, pursuant to such advice, will be received by the investment adviser or its employees;

(m) Guaranteeing a client that a specific result will be achieved (gain or no loss) with advice which will be rendered;

(n) Publishing, circulating, or distributing any advertisement which does not comply with

Rule 0780-04-05-.10(5) under the Act;

(o) Disclosing the identity, affairs, or investments of any client or former client unless required by law to do so, or unless consented to in writing by the client;

(p) Taking any action, directly or indirectly, with respect to those securities or funds in which any client has any beneficial interest, where the investment adviser has custody or possession of such securities or funds when the investment adviser’s action is subject to and does not comply with the requirements of Rule 0780-04-05-.10(3) under the Act;

(q) Entering into, extending, or renewing any investment advisory contract, unless such contract is in writing and:

August, 2026 27 1. In substance, discloses:

(i) The services to be provided;

(ii) The term of the contract;

(iii) The advisory fee;

(iv) The formula for computing the fee;

(v) The amount of prepaid fee to be returned in the event of contract termination or non-performance;

(vi) Whether the contract grants discretionary power to the investment adviser, to any investment adviser representative(s), or to any combination thereof; and (vii) That no assignments of such contract shall be made by the investment adviser representative without the consent of the other party to the contract;

2. Includes acknowledgment by the client that the client was provided with a copy of the brochure at least forty-eight (48) hours prior to entering into any investment advisory contract. If the brochure was not provided at least forty-eight (48) hours prior to the client entering into the investment advisory contract, then the client has five (5) days to terminate the contract without penalty;

(r) Entering into, extending, or renewing any advisory contract contrary to the provisions of

Section 205 of the Investment Advisers Act. This provision shall apply to all investment advisers registered or required to be registered under this Act, notwithstanding whether such investment adviser would be exempt from federal registration pursuant to Section 203(b) of the Investment Advisers Act;

(s) Indicating, in an advisory contract, any condition, stipulation, or provisions binding any person to waive compliance with any provision of the Act or of the Investment Advisers Act, or any other practice that would violate Section 215 of the Investment Advisers Act;

(t) Engaging in conduct or any act, indirectly or through or by any other person, which would be unlawful for such person to do directly under the provisions of the Act or these Rules;

(u) Failing to provide information requested by the Division pursuant to the Act or these Rules;

(v) Failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information contrary to the provisions of Section 204A of the Investment Advisers Act;

(w) Possessing or utilizing a client’s unique identifying information for access to a client’s account held by the registrant or any other party. This includes, but is not limited to usernames and passwords;

(x) Failing to pay and fully satisfy any final judgment or arbitration award resulting from an investment-related, client or customer-initiated arbitration or court proceeding, unless alternative payment arrangements are agreed to between the client and the investment adviser or investment adviser representative or between the customer and the brokerdealer or broker-dealer agent, in writing, and the broker-dealer or broker-dealer agent complies with the terms of the alternative payment arrangement;

August, 2026 28 (y) Attempting to avoid payment of any final judgment or arbitration award resulting from an investment-related, client or customer-initiated arbitration or court proceeding, unless alternative payment arrangements are agreed to between the client and the investment adviser or investment adviser representative or between the customer and the brokerdealer or broker-dealer agent, in writing, and the broker-dealer or broker-dealer agent complies with the terms of the alternative payment arrangements;

(z) Failing to pay and fully satisfy any fine, civil penalty, order of restitution, order of disgorgement, or similar monetary payment obligation imposed upon the investment adviser or investment adviser representative by the Securities and Exchange Commission, the securities or other financial services regulator of any state or province, or any self-regulatory organization;

(aa) Dishonest use of certifications, professional designations, senior-specific certifications, or senior-specific professional designations, as determined by the Division based on the following nonexclusive criteria and guidelines:

1. The use of a certification, professional designation, senior-specific certification or senior-specific professional designation by any person in connection with the offer, sale, or purchase of securities, or the provision of advice as to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly or through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicates or implies that the user has special certification or training in advising or servicing in such a way as to mislead any person shall be a dishonest and unethical practice within the meaning of T.C.A. § 48-1-112(a)(2)(G). The prohibited use of such certifications or professional designation includes, but is not limited to, the following:

(i) Use of a certification or professional designation by a person who has not actually earned, or is otherwise ineligible to use, such certification or designation;

(ii) Use of a nonexistent or self-conferred certification or professional designation;

(iii) Use of a certification or professional designation that indicates or implies a level of occupational qualifications, obtained through education, training, or experience, that the person using the certification or professional designation does not have; and (iv) Use of a certification or professional designation that was obtained from a designating or certifying organization that:

(I) Is primarily engaged in the business of instruction in sales and/or marketing;

(II) Does not have reasonable standards or procedures for assuring the competency of its designees or certificants;

(III) Does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or August, 2026 29 (IV) Does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.

2. There is a rebuttable presumption that a designating or certifying organization is not disqualified solely for purposes of subpart (1)(ii)1.(iv) of this Rule when the organization has been accredited by:

(i) The American National Standards Institute; or (ii) The National Commission for Certifying Agencies; or (iii) An organization that is on the United States Department of Education’s list entitled “Accrediting Agencies Recognized for Title IV Purposes” and the designation or credential issued therefrom does not primarily apply to sales and/or marketing.

3. In determining whether a combination of words (or an acronym standing for a combination of words) constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees, factors to be considered shall include:

(i) Use of one or more words such as “senior,” “retirement,” “elder,” like words, or analogous words identifying other affinity groups, combined with one or more words such as “certified,” “registered,” “chartered,” “adviser,”

“specialist,” “consultant,” “planner,” or like words, in the name of the certification or professional designation; and (ii) The manner in which those words are combined.

4. For purposes of subpart (aa)1.(ii) of this Rule, a certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, when that job title:

(i) Indicates seniority or standing within the organization; or (ii) Specifies an individual’s area of specialization within the organization; unless (iii) Such job title is used in a way that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees.

As used herein, financial services regulatory agency includes, but is not limited to, an agency that regulates broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act.

(bb) Failing to establish, maintain, and enforce a required policy or procedure.

(2) Nothing in this Rule shall limit the commissioner’s authority to enforce existing provisions of this law.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-113, 48-1-115, 48-1-116, 48-1-118, and 48-1-121(a)(2); § 222 of the Investment Advisers Act of 1940, as amended by § 304(a) of the National Securities Markets Improvement Act of 1996; §§ 203A, 205, and 215 of the August, 2026 30 Investment Advisers Act of 1940; § 17(f)(2) of the Securities Exchange Act of 1934; 17 C.F.R. § 240.10b- 10; 17 C.F.R. § 240.17a-3 through 17 C.F.R. § 240.17a-5; 17 C.F.R. § 240.17a-11; 17 C.F.R. § 240.17f-2; and 17 C.F.R. § 275.204-2.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-05-.10 INVESTMENT ADVISER CONDUCT WHICH OPERATES AS A FRAUD OR DECEIT IN

VIOLATION OF T.C.A. § 48-1-121.

(1) Cash Payments for Client Solicitations.

(a) It shall constitute an act, practice, or course of conduct which operates as a fraud or deceit upon a person, as provided under T.C.A. § 48-1-121, for any investment adviser to pay a cash fee, directly or indirectly, to a solicitor with respect to solicitation activities unless:

1. The solicitor is registered as an investment adviser or investment adviser representative or is exempt from registration as provided for in T.C.A. § 48-1- 109(c);

2. The solicitor is not a person:

(i) Subject to an order issued by the commissioner under T.C.A. § 48-1-112(a) of the Act;

(ii) Convicted of any felony or any misdemeanor within the previous ten (10) years involving conduct described in T.C.A. § 48-1-112(a)(2)(C);

(iii) Who has been found by the commissioner to have engaged, or has been convicted of engaging, in any of the conduct specified in T.C.A. §§ 48-1-121, 48-1-112(a)(2)(B), 48-1-112(a)(2)(J), or has materially aided in the action in violation of T.C.A. §§ 48-1-112(a)(2)(B), 48-1-112(a)(2)(J), or 48-1-121;

(iv) Subject to an order, judgment, or decree described in T.C.A. § 48-1- 112(a)(2)(D) of the Act;

(v) Subject to an order, judgment, or decree issued under section 203(f) of the Investment Advisers Act, or convicted within the previous ten years of any felony or misdemeanor involving conduct described in section 203(e)(2)(A) through (D) of the Investment Advisers Act, or who has been found by the SEC to have engaged, or has been convicted of engaging, in any of the conduct specified in paragraphs (1), (5) or (6) of section 203(e) of the Investment Advisers Act, or is subject to an order, judgment or decree described in section 203(e)(4) of the Investment Advisers Act; or (vi) Subject to an order, judgment, or acceptance, waiver, and consent of any self-regulatory organization that suspends or bars the person from associating with self-regulatory organization members, associates, or agents or engaging in the securities industry;

3. Such cash fee is paid pursuant to a written agreement to which the investment adviser is a party; and 4. Such cash fee is paid to a solicitor:

(i) With respect to solicitation activities for the provision of impersonal investment advisory services only;

August, 2026 31 (ii) Who is:

(I) A partner, officer, director, or employee of such investment adviser; or (II) A partner, officer, director, or employee of a person which controls, is controlled by, or is under common control with such investment adviser; provided that the status of such solicitor as a partner, officer, director, or employee of such investment adviser or other person, and any affiliation between the investment adviser and such other person, is disclosed to the client at the time of the solicitation or referral;

(iii) Other than a solicitor specified in subparts (a)4.(i) or (a)4.(ii) of this paragraph (1) if all of the following conditions are met:

(I) The written agreement required by part (1)(a)3. of this Rule:

I. Describes the solicitation activities to be engaged in by the solicitor on behalf of the investment adviser and the compensation to be received thereof;

II. Contains an undertaking by the solicitor to perform his or her duties under the agreement in a manner consistent with the instructions of the investment adviser and the provisions of the Act and these Rules or of the Investment Advisers Act and the rules promulgated thereunder, whichever is applicable; and III. Requires that the solicitor, at the time of any solicitation activities for which compensation is paid or to be paid by the investment adviser, provide the client with a current copy of the investment adviser’s brochure required by Rule 0780-04-05-.08 or SEC

Rule 204-3 (17 C.F.R. § 275.204-3) as applicable, and a separate written disclosure statement described in subparagraph (b) of this Rule;

(II) The investment adviser receives from the client, prior to, or at the time of, entering into any written or oral investment advisory contract with such client, a signed and dated acknowledgment of receipt of the investment adviser’s brochure and the solicitor’s written disclosure document; and (III) The investment adviser makes a bona fide effort to ascertain whether the solicitor has complied with the agreement, and has a reasonable

basis for believing that the solicitor has so complied.

(b) The separate written disclosure statement required to be furnished by the solicitor to the client pursuant to subitem (1)(a)4.(iii)(I)III. of this Rule shall contain the following information:

1. The name of the solicitor;

2. The name of the investment adviser;

3. The nature of the relationship, including any affiliation, between the solicitor and the investment adviser;

August, 2026 32 4. A statement that the solicitor will be compensated for the solicitor’s solicitation services by the investment adviser;

5. The terms of such compensation arrangement, including a description of the compensation paid or to be paid to the solicitor;

6. The amount, if any, the client will be charged for the cost of obtaining the client’s account in addition to the investment advisory fee; and 7. The differential, if any, among clients, with respect to the amount or level of investment advisory fees charged by the investment adviser, if such differential is attributable to the existence of any arrangement pursuant to which the investment adviser has agreed to compensate the solicitor for soliciting clients for, or referring clients to, the investment adviser.

(c) Nothing in this Rule shall be deemed to relieve any person of any fiduciary or other obligation to which such person may be subject under law.

(d) For purposes of this Rule:

1. “Solicitor” means any person who, directly or indirectly, solicits any client for, or refers any client to, an investment adviser.

2. “Client” includes any prospective client.

3. “Impersonal investment advisory services” means investment advisory services provided solely by means of (i) written materials or oral statements which do not purport to meet the objectives or needs of the specific client, (ii) statistical information containing no expressions of opinions as to the investment merits of particular securities, or (iii) any combination of the foregoing services.

(e) The investment adviser shall retain a copy of each written agreement required by part (1)(a)3. of this Rule as part of the records required to be kept under T.C.A. § 48-1-111(a) and paragraph (1) of Rule 0780-04-05-.06.

(f) The investment adviser shall retain a copy of each acknowledgment and solicitor disclosure document referred to in item (1)(a)4.(iii)(II) of this Rule as part of the records required to be kept under T.C.A. § 48-1-111(a) and paragraph (1) of Rule 0780-04-05- .06.

(g) An investment adviser registered in this state whose principal place of business is located outside this state shall not be subject to the record maintenance requirements of subparagraphs (1)(e) or (1)(f) of this Rule if such investment adviser:

1. Is registered as an investment adviser in the state in which it maintains its principal place of business;

2. Is in compliance with applicable books and records requirements of the state in which it maintains its principal place of business; and 3. The provisions of subparagraphs (1)(e) or (1)(f) of this Rule would require the investment adviser to maintain books or records in addition to those required under the laws of the state in which the investment adviser maintains its principal place of business.

(2) Agency Cross Transactions.

August, 2026 33 (a) For purposes of this Rule, “agency cross transaction for an advisory client” means a transaction in which a person acts as an investment adviser in relation to a transaction in which the investment adviser, or any person controlling, controlled by, or under common control with such investment adviser, including an investment adviser representative, acts as a broker-dealer for both the advisory client and another person on the other side of the transaction. When acting in such capacity such person is required to be registered as a broker-dealer or broker-dealer agent in this state unless excluded from the definition.

(b) It shall constitute an act, practice, or course of business which operates or would operate as a fraud or deceit upon another person within the meaning of T.C.A. § 48-1-121(b)(2) of the Act for any investment adviser, while acting as principal for its own advisory account to knowingly sell any security to or purchase any security from a client, or while acting as broker-dealer for a person other than the client, to knowingly effect any sale or purchase of any security for the account of such client, without disclosing to the client in writing before the completion of the transaction the capacity in which the investment adviser or broker-dealer is acting and obtaining the consent of the client to the transaction. The prohibitions of this subparagraph shall not apply to any transaction with a customer of a broker-dealer if the broker-dealer is not acting as an investment adviser in relation to such transaction.

(c) An investment adviser effecting an agency cross transaction for an advisory client shall be deemed in compliance with T.C.A. § 48-1-121(b)(2) for purposes of this Rule, and with 0780-04-05-.10(2), if the following conditions are met:

1. The advisory client executes a written consent prospectively authorizing the investment adviser to effect agency cross transactions for such client;

2. Before obtaining such written consent from the client, the investment adviser makes full written disclosure to the client that, with respect to agency cross transactions, the investment adviser will act as broker-dealer for, receive commissions from and have a potentially conflicting division of loyalties and responsibilities regarding both parties to the transactions;

3. At or before the completion of each agency cross transaction, the investment adviser or any other person relying on this Rule sends the client a written confirmation. The written confirmation shall include:

(i) A statement of the nature of the transaction;

(ii) The date the transaction took place;

(iii) An offer to furnish, upon request, the time when the transaction took place; and (iv) The source and amount of any other remuneration the investment adviser received or will receive in connection with the transaction. In the case of a purchase, if the investment adviser was not participating in a distribution, or, in the case of a sale, if the investment adviser was not participating in a tender offer, the written confirmation may state whether the investment adviser has been receiving or will receive any other remuneration and that the investment adviser will furnish the source and amount of such remuneration to the client upon the client’s written request;

August, 2026 34 4. At least annually, and with or as part of any written statement or summary of the account from the investment adviser, the investment adviser or any other person relying on this Rule sends each client a written disclosure statement identifying:

(i) The total number of agency cross transactions during the period for the client since the date of the last such statement or summary; and (ii) The total amount of all commissions or other remuneration the investment adviser received or will receive in connection with agency cross transactions for the client during the period.

5. Each written disclosure and confirmation required by this Rule must include a conspicuous statement that the client may revoke the written consent required under part (c)1. of this Rule at any time by providing written notice to the investment adviser, and 6. No agency cross transaction may be effected in which the same investment adviser recommended the transaction to both any seller and any purchaser.

(d) Nothing in this Rule shall be construed to relieve an investment adviser or investment adviser representative from acting in the best interests of the client, including fulfillment of duties with respect to the best price and execution for the particular transaction for the client nor shall it relieve any investment adviser or investment adviser representative of any other disclosure obligations imposed by the Act.

(3) Custody or Possession of Funds or Securities of Clients.

(a) It shall constitute an act, practice, or course of business which operates or would operate as a fraud or deceit upon another person, within the meaning of T.C.A. § 48-1-121(b)(3) of the Act, for any investment adviser in this state who has custody or possession of any funds or securities in which any client has any beneficial interest, to commit an act or take any action, directly or indirectly, with respect to any funds or securities unless:

1. The investment adviser notifies the Division promptly in writing that the investment adviser has or may have custody of funds or securities. Such notification is required to be given on Form ADV;

2. A qualified custodian maintains those funds and securities:

(i) In a separate account for each client under that client’s name; or (ii) In accounts that contain only the investment adviser’s clients’ funds and securities, under the investment adviser’s name as agent or trustee for the clients, or, in the case of a pooled investment vehicle that the investment adviser manages, in the name of the pooled investment vehicle;

3. If an investment adviser opens an account with a qualified custodian on its client’s behalf, under the client’s name, under the name of the investment adviser as agent, or under the name of a pooled investment vehicle, the investment adviser must notify the client in writing of the qualified custodian’s name, address, and the manner in which the funds or securities are maintained, promptly when the account is opened and following any changes to this information. If the investment adviser sends account statements to a client to which the investment adviser is required to provide this notice, the investment adviser must include in the notification provided to that client and in any subsequent account statement the investment August, 2026 35 adviser sends that client a statement urging the client to compare the account statements from the custodian with those from the investment adviser;

4. The investment adviser has a reasonable basis, after due inquiry, for believing that the qualified custodian sends an account statement, at least quarterly, to each client for which it maintains funds or securities identifying the amount of funds and of each security in the account at the end of the period and setting forth all transactions in the account during that period;

5. If the investment adviser or a related person is a general partner of a limited partnership, or managing member of a limited liability company, or holds a comparable position for another type of pooled investment vehicle, the account statements required under part (3)(a)4. of this Rule must be sent to each limited partner, or member or other beneficial owner;

6. The client funds and securities of which the investment adviser has custody are verified by actual examination at least once during each calendar year, by an independent certified public accountant, pursuant to a written agreement between the investment adviser and the independent certified public accountant, at a time that is chosen by the independent certified public accountant without prior notice or announcement to the investment adviser and that is irregular from year to year.

The written agreement must provide for the first examination to occur within six (6) months of becoming subject to this paragraph, except that, if the investment adviser maintains client funds or securities pursuant to this Rule as a qualified custodian, the agreement must provide for the first examination to occur no later than six (6) months after obtaining the internal control report. The written agreement must require the independent certified public accountant to:

(i) File a certificate on Form ADV-E with the Division within one hundred twenty (120) days of the time chosen by the independent certified public accountant in part (3)(a)6. of this Rule, stating that it has examined the funds and securities and describing the nature and extent of the examination;

(ii) Notify the Division within five (5) business days of the finding of any material discrepancies during the course of the examination, via electronic mail or via first class mail, directed to the attention of the Division and the Director of Registration; and (iii) File within four (4) business days of the resignation or dismissal from, or other termination of, the engagement, or removing itself or being removed from consideration for being reappointed, Form ADV-E accompanied by a statement that includes:

(I) The date of such resignation, dismissal, removal, or other termination, and the name, address, and contact information of the independent certified public accountant; and (II) An explanation of any problems relating to examination scope or procedure that contributed to such resignation, dismissal, removal, or other termination; and 7. If the investment adviser maintains, or if the investment adviser has custody because a related person maintains, client funds or securities pursuant to this Rule as a qualified custodian in connection with investment advisory services the investment adviser provides to clients:

August, 2026 36 (i) The independent certified public accountant the investment adviser retains to perform the independent verification required by part (3)(a)6. of this subparagraph (3)(a) must be registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules; and (ii) The investment adviser must obtain, or receive from its related person, within six (6) months of becoming subject to this paragraph, and thereafter no less frequently than once each calendar year, a written internal control report prepared by an independent certified public accountant:

(I) The internal control report must include an opinion of an independent certified public accountant as to whether controls have been placed in operation as of a specific date, and are suitably designed and are operating effectively to meet control objectives relating to custodial services, including the safeguarding of funds and securities held by either the investment adviser or a related person on behalf of the investment adviser’s clients, during the year;

(II) The independent certified public accountant must verify that the funds and securities are reconciled to a custodian other than the investment adviser or the investment adviser’s related person; and (III) The independent certified public accountant must be registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules.

(b) 1. An investment adviser that has custody of client funds due to the execution of a standing letter of authorization shall not be subject to the requirements of subparagraph (3)(a)6. of this Rule, so long as the requirements of subparagraph (3)(b)6. are met.

2. “Standing Letter of Authorization” for purposes of this paragraph means a limited

authority asset transfer authorization granted to an investment adviser through an arrangement established by a client with a qualified custodian.

3. “Transferee” for purposes of this paragraph means the recipient of the funds in a transfer.

4. “Transfer” for purposes of this paragraph means to withdraw client funds from a qualified custodian by execution of a standing letter of authorization and convey such to a transferee.

5. “Transferor” for purposes of this Rule means the sender of the funds in a transfer.

6. The investment adviser shall:

(i) Ensure that its investment advisory contract between the investment adviser and client indicates that the investment adviser shall maintain custody of client funds or securities when executing a standing letter of authorization.

(ii) When acting pursuant to a standing letter of authorization, ensure and maintain a record pursuant to 0780-04-05-.06(1)(u), which shall be available for examination upon request by the Division that:

August, 2026 37 (I) The client provides an instruction to the qualified custodian, in writing, that includes the client’s signature, the transferee’s name, and either the transferee’s address or the transferee’s account number at a custodian to which the transfer should be directed.

(II) The client authorizes the investment adviser, in writing, either on the qualified custodian’s form or separately, to direct transfers to the transferee either on a specified schedule or from time to time.

(III) The client’s qualified custodian performs appropriate verification of the instruction, such as a signature review or other method to verify the client’s authorization, and provides a transfer of funds notice to the client promptly after each transfer.

(IV) The client has the ability to terminate or change the instruction to the client’s qualified custodian.

(V) The investment adviser has no authority or ability to designate or change the identity of the transferee, the address, or any other information about the transferee contained in the client’s instruction.

(VI) The investment adviser maintains records showing that the transferee is not the investment adviser, a related party of the investment adviser, or located at the same address as the investment adviser.

(VII) The client’s qualified custodian sends the client, in writing, an initial notice confirming the instruction and an annual notice reconfirming the instruction.

(iii) Report the custody of the client assets subject to this paragraph in its response to Item 9 of Form ADV.

(c) A client may designate in writing an independent representative to receive, on the client’s behalf, notices and account statements as required under parts (a)3. and (a)4. of this

Rule.

(d) Exceptions.

1. With respect to shares of an open-end company as defined in Section 5(a)(1) of the Investment Company Act (“mutual fund”), the investment adviser may use the mutual fund’s transfer agent in lieu of a qualified custodian for purposes of complying with subparagraph (a) of this Rule;

2. Certain privately offered securities.

(i) The investment adviser is not required to comply with part (a)2. Of this paragraph (3) with respect to securities that are:

(I) Acquired from the issuer in a transaction or chain of transactions not involving any public offering;

(II) Uncertificated and ownership thereof is recorded only on the books of the issuer or its transfer agent in the name of the client; and August, 2026 38 (III) Transferable only with prior consent of the issuer or holders of the outstanding securities of the issuer.

(ii) Notwithstanding subpart (3)(d)2.(i) of this Rule, the provisions of this part (d)2. are available with respect to securities held for the account of a limited partnership, limited liability company, or other type of pooled investment vehicle, only if the limited partnership is audited and the audited financial statements are distributed, as described in part (d)3. of this Rule and the investment adviser notifies the Division in writing that the investment adviser intends to provide audited financial statements, as described above. Such notification is required to be provided on Form ADV.

3. An investment adviser is not required to comply with parts (3)(a)3. and (3)(a)4. and shall be deemed to have complied with part (3)(a)6. of this Rule with respect to the account of a limited partnership (or limited liability company, or another type of pooled investment vehicle) if each of the following conditions are met:

(i) The investment adviser sends to all limited partners (or members or other beneficial owners) at least quarterly, a statement showing:

(I) The total amount of all additions to and withdrawals from the fund as a whole, as well as the opening and closing value of the fund at the end of the quarter based on the custodian’s records;

(II) A listing of all long and short positions on the closing date of the statement in accordance with FASB Rule ASC 946-210-50 and 13F under the Securities Exchange Act of 1934 for investment managers’ annual reports; and (III) The total amount of additions to and withdrawals from the fund by the investor as well as the total value of the investor’s interest in the fund at the end of the quarter.

(ii) At least annually the fund is subject to an audit and distributes its audited financial statements prepared in accordance with generally accepted accounting principles to all limited partners (or members or other beneficial owners) and the Division within one hundred twenty (120) days of the end of its fiscal year;

(iii) The audit is performed by an independent certified public accountant that is registered with and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules;

(iv) Upon liquidation, the investment adviser distributes the fund’s final audited financial statements prepared in accordance with generally accepted accounting principles to all limited partners (or members or other beneficial owners) and the Division promptly after the completion of such audit;

(v) The written agreement with the independent certified public accountant must require the independent certified public accountant to, upon resignation or dismissal from, or other termination of, the engagement, or upon removing itself or being removed from consideration for being reappointed, notify the Division within four (4) business days accompanied by a statement that includes:

August, 2026 39 (I) The date of such resignation, dismissal, removal, or other termination, and the name, address, and contact information of the independent certified public accountant; and (II) An explanation of any problems relating to audit scope or procedure that contributed to such resignation, dismissal, removal, or other termination.

(vi) The investment adviser must also notify the Division in writing that the investment adviser intends to employ the use of the statement delivery and audit safeguards described above. Such notification is required to be given on Form ADV.

4. The investment adviser is not required to comply with this Rule with respect to the account of an investment company registered under the Investment Company Act.

(e) Exemptions.

1. First-Party Transfers.

(i) For purposes of this part (e)1.:

(I) “Same-Name Accounts” means accounts at a qualified custodian where:

I. The client is the named account holder on both the transferor account and the transferee account;

II. The account ownership structure is the same on both the transferor account and transferee account; and III. The transferor account and transferee account both report under the same tax identification number.

(ii) An investment adviser’s authority pursuant to a standing letter of authorization to transfer client assets between a transferee and transferor that have the same-name accounts at the same qualified custodian or between qualified custodians that both have access to the sending and receiving account numbers and client account name does not constitute custody.

2. Automatic Fee Withdrawals. An investment adviser does not have custody of client funds and securities solely as a consequence of its authority to make withdrawals from client accounts to pay its investment advisory fee as long as all of the following conditions are met:

(i) The investment adviser has written authorization from the client to deduct investment advisory fees from the account held with the qualified custodian;

(ii) Each time a fee is directly deducted from a client account, the investment adviser concurrently:

(I) Sends the qualified custodian an invoice or statement of the amount of the fee to be deducted from the client’s account; and August, 2026 40 (II) Sends the client an invoice or statement itemizing the fee. Itemization includes the formula used to calculate the fee, the amount of assets under management the fee is based on, and the time period covered by the fee.

(f) Sending an account statement under part (3)(a)5. of this Rule or distributing audited financial statements under part (3)(d)3. of this Rule shall not satisfy the requirements of this Rule if such account statements or financial statements are sent solely to limited partners (or members or other beneficial owners) that themselves are limited partnerships (or limited liability companies, or another type of pooled investment vehicle) and are related persons of the investment adviser.

(g) Definitions. For purposes of this Rule:

1. “Control” means the power, directly or indirectly, to direct the management or policies of a person whether through ownership of securities, by contract, or otherwise. Control includes:

(i) Each of the investment adviser’s officers, partners, or directors exercising executive responsibility, or persons having similar status or functions, is presumed to control the investment adviser;

(ii) A person is presumed to control a corporation if the person:

(I) Directly or indirectly has the right to vote twenty-five percent (25%) or more of a class of the corporation’s voting securities; or (II) Has the power to sell or direct the sale of twenty-five percent (25%) or more of a class of the corporation’s voting securities;

(iii) A person is presumed to control a partnership if the person has the right to receive upon dissolution, or has contributed, twenty-five percent (25%) or more of the capital of the partnership;

(iv) A person is presumed to control a limited liability company if the person:

(I) Directly or indirectly has the right to vote twenty-five percent (25%) or more of a class of the interests of the limited liability company;

(II) Has the right to receive upon dissolution, or has contributed twentyfive percent (25%) or more of the capital of the limited liability company; or (III) Is an elected manager of the limited liability company; or (v) A person is presumed to control a trust if the person is a trustee or managing agent of the trust.

2. “Custody” means holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them, or has the ability to appropriate them.

The investment adviser has custody if a related person holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them, in connection with investment advisory services the investment adviser provides to clients.

(i) Custody includes:

August, 2026 41 (I) Possession of client funds or securities unless the investment adviser receives them inadvertently and returns them to the sender promptly, but in any case, within three (3) business days of receiving them;

(II) Any arrangement, including a general partner of attorney, under which the investment adviser is authorized or permitted to withdraw client funds or securities maintained with a custodian upon the investment adviser’s instruction to the custodian; and (III) Any capacity, such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust that gives the investment adviser or its supervised person legal ownership of or access to client funds or securities.

(ii) Receipt of checks drawn by clients and made payable to third parties will not meet the definition of custody if forwarded to the third party within three (3) business days of receipt and the investment adviser maintains the records required under Rule 0780-04-05-.06.

3. “Independent certified public accountant” means a certified public accountant who meets the standards of independence described in Rule 2-01(b) and (c) of

Regulation S-X (17 CFR 210.2-01(b) and (c)).

4. “Independent representative” means a person who:

(i) Acts as agent for an investment advisory client, including in the case of a pooled investment vehicle, for limited partners or a limited partnership, members of a limited liability company, or other beneficial owners of another type of pooled investment vehicle, and by law or contract is obliged to act in the best interest of the investment advisory client or the limited partners, members, or other beneficial owners;

(ii) Does not control, is not controlled by, and is not under common control with the investment adviser; and (iii) Does not have, and has not had within the past two (2) years, a material business relationship with the investment adviser.

5. “Qualified custodian” means the following:

(i) A bank, including a trust company, as defined in section 202(a)(2) of the Investment Advisers Act, 15 U.S.C. 80b-2(a)(2), or a savings association as defined in section 3 (b)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(b)(1), that has deposits insured by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act, 12 U.S.C. 1811;

(ii) A broker-dealer registered in this jurisdiction and with the SEC holding the client assets in client accounts;

(iii) A registered futures commission merchant under Section 4f(a) of the Commodity Exchange Act, holding the client assets in client accounts, but only with respect to clients’ funds and security futures, or other securities incidental to transactions in contracts for the purchase or sale of a commodity for future delivery and options thereon; and August, 2026 42 (iv) A foreign financial institution that customarily holds financial assets for its clients, provided that the foreign financial institution keeps the investment advisory clients’ assets in client accounts segregated from its proprietary assets.

6. “Related person” means any person, directly or indirectly, controlling or controlled by the investment adviser, and any person that is under common control with the investment adviser.

(4) Financial and Disciplinary Disclosure (a) It shall constitute an act, practice, or course of business which operates or would operate as a fraud or deceit upon another person within the meaning of T.C.A. § 48-1-121(b)(2) of the Act for any investment adviser to fail to disclose to any client or prospective client all material facts with respect to:

1. A financial condition of the investment adviser that is reasonably likely to impair the ability of the investment adviser to meet contractual commitments to the client, if the investment adviser has discretionary authority (express or implied) or custody over such client’s funds or securities, or requires prepayment of investment advisory fees of more than one thousand two hundred dollars ($1,200) from such client, six (6) months or more in advance; or 2. A legal or disciplinary event that is material to an evaluation of the investment adviser’s integrity or ability to meet contractual commitments to clients.

(b) It shall constitute a rebuttable presumption that the following legal or disciplinary events involving the investment adviser or a management person of the investment adviser (any of the foregoing being referred to hereafter as “person”) that were not resolved in the person’s favor or subsequently reversed, suspended, or vacated are material within the meaning of this part (4)(a)2. for a period of ten (10) years from the time of the event:

1. A criminal or civil action in a court of competent jurisdiction in which the person:

(i) Was convicted, pleaded guilty, or nolo contendere (“no contest”) to a felony or misdemeanor, or is the named subject of a pending criminal proceeding (any of the foregoing referred to hereafter as “action”) and such action involved: an investment-related business; fraud, false statements, or omissions; wrongful taking of property; or bribery, forgery, counterfeiting, or extortion;

(ii) Was found to have been involved in a violation of an investment-related statute or regulation; or (iii) Was the subject of any order, judgment, or decree permanently or temporarily enjoining the person from, or otherwise limiting the person from, engaging in any investment-related activity.

2. Administrative proceedings before the SEC, any other federal regulatory agency, or any state agency (any of the foregoing being referred to hereafter as “Agency”) in which the person:

(i) Was found to have caused an investment-related business to lose its authorization to do business; or August, 2026 43 (ii) Was found to have been involved in a violation of an investment-related statute or regulation and was the subject of an order by the agency denying, suspending, or revoking the authorization of the person to act in, or barring or suspending the person’s association with, an investment-related business, was the subject of an order in which civil penalties were assessed or otherwise significantly limiting the person’s investment-related activities.

3. Self-Regulatory Organization (SRO) proceedings in which the person:

(i) Was found to have caused an investment-related business to lose its authorization to do business; or (ii) Was found to have been involved in a violation of the SRO’s rules and was the subject of an order by the SRO barring or suspending the person from membership or from association with other members, or expelling the person from membership; fining the person more than two thousand five hundred dollars ($2,500); or otherwise significantly limiting the person’s investmentrelated activities.

(c) The information required to be disclosed by subparagraph (4)(a) of this Rule shall be disclosed in writing to clients promptly, and to prospective clients not less than forty-eight (48) hours prior to entering into any written investment advisory contract, or no later than the time of entering into such contract if the client has the right to terminate the contract without penalty within five (5) business days after entering into the contract.

(d) For purposes of this Rule:

1. “Management person” means a person with power to exercise, directly or indirectly, a controlling influence over the management or policies of an investment adviser which is a company or to determine the general investment advice given to clients.

2. “Found” means determined or ascertained by adjudication or consent in a final SRO proceeding, administrative proceeding, or court action.

3. “Investment related” means pertaining to securities, commodities, banking, insurance, or real estate including, but not limited to, acting as or being associated with a broker-dealer, investment adviser, government securities broker or dealer, municipal securities dealer, bank, savings and loan association, entity or person required to be registered under the Commodity Exchange Act (7 U.S.C. § 1 et seq.) or fiduciary.

4. “Involved” means acting or aiding, abetting, causing, counseling, commanding, inducing, conspiring with, or failing to reasonably supervise another in doing an act.

5. “Self-Regulatory Organization” or “SRO” means any national securities or commodities exchange, registered association, or registered clearing agency.

(e) For purposes of calculating the ten (10) year period during which events are presumed to be material under subparagraph 4(b) of this Rule, the date of a reportable event shall be the date on which the final order, judgment, or decree was entered, or the date on which any rights of appeal from preliminary orders, judgments, or decrees lapsed.

(f) Compliance with subparagraph 4(b) of this Rule shall not relieve any investment adviser from the disclosure obligations of subparagraph 4(a) of this Rule. Compliance with August, 2026 44 subparagraph 4(a) of this Rule shall not relieve any investment adviser from any other disclosure requirement under the Act, these Rules, or under any other federal or state law.

(5) Advertisement.

(a) It shall constitute an act, practice, or course of business which operates or would operate as a fraud or deceit upon another person within the meaning of T.C.A. § 48-1-121(b)(2) for any investment adviser or its representative, directly or indirectly, to publish, circulate, or distribute any advertisement:

1. Which refers, directly or indirectly, to any testimonial of any kind concerning the investment adviser or concerning any advice, analysis, report, or other service rendered by such investment adviser;

2. Which refers, directly or indirectly, to past specific recommendations of such investment adviser, which were or would have been profitable to any person; provided, however, that this shall not prohibit an advertisement which sets out or offers to furnish a list of all recommendations made by such investment adviser or its representative within the immediately preceding period of not less than one (1) year, if such advertisement or list includes both of the following:

(i) States the name of each such security recommended, the date and nature of each such recommendation (e.g., whether to buy, sell, or hold), the market price at that time, the price at which the recommendation was to be acted upon, and the most recently available market price of each such security; and (ii) Contains the following cautionary legend on the first page thereof in print or type as large as the largest print or type used in the body or text thereof, “It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list”;

3. Which represents, directly or indirectly, that any graph, chart, formula, or other device being offered can in and of itself be used to determine which securities to buy or sell, or when to buy or sell them; or which represents, directly or indirectly, that any graph, chart, formula, or other device being offered will assist any person in making his or her own decisions as to which securities to buy and sell, or when to buy and sell them, without prominently disclosing in such advertisement the limitations thereof and the difficulties with respect to its use;

4. Contains any statement to the effect that any report, analysis, or other service will be furnished free or without charge, unless such report, analysis, or other service actually is or will be furnished entirely free and without any condition or obligation, directly or indirectly;

5. Represents that the Department, Division, or any of its personnel has approved any advertisement; or 6. Contains any untrue statement of a material fact, or which is otherwise false or misleading.

(b) For purposes of this Rule, the term “advertisement” shall include any notice, circular, letter, or other written communication addressed to more than one (1) person, or any notice or other announcement in any electronic or paper publication or by radio or television, or by any medium, which offers:

August, 2026 45 1. Any analysis, report, or publication concerning securities, or which is to be used in making any determination as to when to buy or sell any security, or which security to buy or sell;

2. Any graph, chart, formula, or other device to be used in making any determination as to when to buy or sell any security, or which security to buy or sell; or 3. Any other investment advisory service with regard to securities.

(6) Nothing in this Rule shall limit the commissioner’s authority to enforce existing provisions of law.

History

• Authority: T.C.A. §§ 48-1-109, 48-1-111, 48-1-115, 48-1-116, and 48-1-121; § 7, § 222 of the Investment Advisers Act of 1940, as amended by § 304 of the National Securities Markets Improvement Act of 1996; § 15 of the Securities Exchange Act of 1934; 17 C.F.R. § 240.15c3-1; 17 C.F.R. § 275.204-3; 17 C.F.R. § 275.206(3)-2; 17 C.F.R. § 275.206(4)-1; and 17 C.F.R. § 275.206(4)-2.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-05-.11 CYBERSECURITY

(1) When used in this Rule:

(a) “Consumer” means an individual who is a Tennessee resident and whose nonpublic information is in a registrant’s possession, custody, or control.

(b) “Cybersecurity event” means an event resulting in unauthorized access to, disruption, or misuse of an information system or any nonpublic information stored on such information system. The term “cybersecurity event” does not include:

1. The unauthorized acquisition of encrypted nonpublic information if the encryption, protective process, or key is not also acquired, released, or used without authorization; or 2. An event regarding which the registrant has determined that the nonpublic information accessed by an unauthorized person has not been used or released and has been returned or destroyed.

(c) “Encrypted” means 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.

(d) “Information system” means any information resources organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of electronic information, as well as any specialized system such as industrial and process controls systems, telephone switching and private branch exchange systems, and environmental control systems.

(e) “Nonpublic information” means information that is not publicly available information and is:

1. Business-related information of a registrant the tampering with which, or unauthorized disclosure, access, or use of which, would cause a material adverse impact to the business, operations, or security of the registrant;

August, 2026 46 2. Any information concerning a consumer which, because of the name, number, personal mark, or other identifier, can be used to identify such consumer, in combination with any one or more of the following data elements:

(i) Social Security number;

(ii) Driver’s license number or non-driver identification card number;

(iii) Account, credit card, or debit card number;

(iv) Any security code, access code, or password that would permit access to a consumer’s financial account; or (v) Biometric records that would permit access to a consumer’s financial account.

(f) “Publicly available information” means any information that a registrant 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. There is a presumption that a registrant has a reasonable basis to believe that information is lawfully made available to the general public if the registrant has taken steps to determine:

1. That the information is of the type that is available to the general public; and 2. Whether a consumer can direct that the information not be made available to the general public and, if so, that such consumer has not done so.

(g) “Registrant” means any broker-dealer, issuer-dealer, or investment adviser registered or required to be registered pursuant to the Tennessee Securities Act of 1980 (the “Act”).

(h) “Third-party service provider” means a person or business that contracts with a registrant to maintain, process, or store nonpublic information, or otherwise is permitted to access that information, through its provision of services to the registrant.

(2) Information Security Program.

(a) Implementation. Commensurate with the size and complexity of the registrant, the nature and scope of the registrant’s activities, including its use of third-party service providers, and the sensitivity of the nonpublic information used by the registrant or in the registrant’s possession, custody, or control, each registrant shall develop, implement, and maintain a comprehensive written information-security program based on the registrant’s risk assessment, which shall include written policies and procedures. These written policies and procedures shall contain administrative, technical, physical safeguards, and training for the protection of the registrant’s information system, all nonpublic information in its possession, custody, or control, and all nonpublic information provided to any third-party service provider by the registrant.

(b) Objectives. A registrant’s information-security program shall be designed to:

1. Protect the confidentiality, integrity, and availability of nonpublic information and the security of the information system;

2. Protect against any threats or hazards to the confidentiality, integrity, or availability of nonpublic information and the information system;

August, 2026 47 3. Protect against unauthorized access to or use of nonpublic information and minimize the likelihood of harm to consumers;

4. Define and periodically reevaluate a schedule for retention of nonpublic information and a mechanism for its destruction when no longer needed for legitimate business purposes of the registrant; and 5. Manage risk through the implementation of security measures, such as:

(i) The placement of access controls on information systems, including controls, like multi-factor authentication, to authenticate and permit access only to authorized individuals to protect against the unauthorized acquisition of nonpublic information;

(ii) Identification and management of data, personnel, devices, systems, and facilities that enable the organization to achieve business purposes in accordance with its relative importance to business objectives and the organization’s risk strategy;

(iii) Restriction of access at physical locations containing nonpublic information to only authorized individuals;

(iv) Encryption or other appropriate means of protection of all nonpublic information during transmission over a network, and all nonpublic information stored on mobile computing or storage devices or media;

(v) Adoption of secure development practices for in-house developed applications utilized by the registrant and procedures for evaluating, assessing, or testing the security of the externally developed application utilized by the registrant;

(vi) Regular testing and monitoring of systems and procedures to detect actual and attempted attacks on, or intrusions into, information systems;

(vii) Incorporation of 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 registrant;

(viii) Implementation of measures to protect against loss, destruction, or damage of nonpublic information due to environmental hazards, such as fire and water damage or other catastrophes or technological failures;

(ix) Development, implementation, and maintenance of procedures for the secure disposal of nonpublic information;

(x) Providing personnel with regular cybersecurity awareness training;

(xi) Reviewing data policies of third-party vendors; or (xii) Any other such measure as may be appropriate for the protection of nonpublic information.

(c) Maintenance. The registrant must review, no less frequently than annually, and modify, as needed, its cybersecurity policies and procedures to ensure the adequacy of the security measures and the effectiveness of their implementation.

August, 2026 48 (3) Investigation of a Cybersecurity Event.

(a) If the registrant learns or has reason to believe that a cybersecurity event has or may have occurred, the registrant, or an outside service provider designated to act on behalf of the registrant, shall conduct a prompt investigation.

(b) The registrant or outside service provider designated to act on behalf of the registrant shall, at a minimum, determine to the fullest extent possible:

1. Whether a cybersecurity event has occurred;

2. The nature and scope of the cybersecurity event; and 3. Any nonpublic information that may have been involved in the cybersecurity event.

(c) If the registrant determines that a cybersecurity event has occurred, the registrant 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 registrant’s possession, custody, or control.

(d) If the registrant learns that a cybersecurity event has or may have occurred involving its third-party service provider, the registrant shall complete the requirements of this paragraph (3) or confirm and document in writing that the third-party service provider has completed such requirements.

(e) The registrant shall maintain records concerning all cybersecurity events for a period of at least three (3) years from the date of the cybersecurity event and shall produce those records upon request by the Division.

(4) Notification of a Cybersecurity Event.

(a) Notification to the Division.

1. Each registrant shall provide the Division with initial notice as promptly as possible, but in no event later than three (3) business days from a determination that a cybersecurity event has occurred, if:

(i) The registrant maintains its principal office and place of business in this state;

(ii) The cybersecurity event affected, or the registrant has reason to believe the cybersecurity event affected, nonpublic information possessed, maintained, or controlled by the registrant; or (iii) The registrant is required to provide notice to any government agency, selfregulatory organization, or any other supervisory body pursuant to any state or federal law.

2. The initial notice to the Division shall include, in general terms:

(i) The date of the cybersecurity event; and (ii) The name and contact information of a person who is both familiar with the cybersecurity event and authorized to act on behalf of the registrant.

August, 2026 49 3. Based on the initial notice provided to the Division pursuant to part (4)(a)1. above, the Division may commence a private investigation into the cybersecurity event pursuant to T.C.A. § 48-1-118. If a private investigation is initiated, then the Division may request the following information:

(i) A description of how the information was exposed, lost, stolen, or breached, including the specific roles and responsibilities of third-party service providers, if applicable;

(ii) How the cybersecurity event was discovered;

(iii) Communication logs for the period beginning with the occurrence of the cybersecurity event, discovery of the cybersecurity event, and the registrant’s response;

(iv) Whether any lost, stolen, or breached information has been recovered, and if so, how the recovery was achieved;

(v) The identity of the source of the cybersecurity event;

(vi) Whether the registrant has filed a police report or notified any regulatory, government, or law enforcement agencies, and if so, when such notification was provided;

(vii) A description of the specific types of information acquired without authorization;

(viii) The date(s) that the registrant acquired, and thereafter maintained, possession, custody, or control of the nonpublic information affected by the cybersecurity event;

(ix) The period during which the information system was compromised by the cybersecurity event;

(x) The aggregate number of consumers affected by the cybersecurity event;

(xi) 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;

(xii) A description of efforts being undertaken to remediate the situation which allowed the cybersecurity event to occur;

(xiii) A copy of the registrant’s privacy policy and a statement outlining the steps the registrant will take to investigate and notify consumers affected by the cybersecurity event; and (xiv) Any other such information as the Division may request.

(b) Notification to Consumers.

1. Notification to consumers of a cybersecurity event shall be provided in accordance with the methods and timeframes set forth in T.C.A. § 47-18-2107 and any other applicable laws.

August, 2026 50 (c) Notification Regarding Cybersecurity Events of Third-Party Service Providers.

1. In the case of a cybersecurity event involving a registrant’s third-party service provider of which the registrant has become aware, the registrant shall treat such event as it would under subparagraph (4)(a).

2. The computation of time shall begin on the first business day following the thirdparty service provider’s notification to the registrant that a cybersecurity event has occurred, or the registrant otherwise acquires actual knowledge of the cybersecurity event.

3. Nothing in this Rule shall prevent or abrogate an agreement between a registrant and another registrant, a third-party service provider, or any other party to fulfill any of the investigation requirements imposed under paragraph (2) or notice requirements imposed under paragraph (3).

(5) Record Keeping. Every registrant shall maintain the following records and information:

(a) A copy of each version of the written information security program implemented by the registrant pursuant to this Rule;

(b) All records documenting the registrant’s compliance with this Rule, including, but not limited to, documentation of the registrant’s compliance with the notification requirements of paragraph (4) of this Rule and its annual review of its information security program required by subparagraph (c) of paragraph (2) of this Rule; and (c) These records must be maintained for a period of no less than three (3) years and shall be provided to the Department upon request.

(6) Noncompliance with This Rule. Any failure by a registrant to comply with the requirements of this Rule shall constitute a dishonest and unethical practice in the securities business in violation of T.C.A. § 48-1-112(a)(2)(G).

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-111, 48-1-112(a)(2)(G), 48-1-116, and 48-1-118.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Chapter 0780-04-06 Investment Adviser Representative Regulation

Tenn. Comp. R. & Regs. 0780-04-06-.01 INVESTMENT ADVISER REPRESENTATIVE REGISTRATION

(1) Investment Adviser Representatives.

(a) All investment adviser representative applicants must apply for initial registration in Tennessee through the IARD and CRD System by complying with the application procedures required by the IARD and CRD System. The application filed through the IARD and CRD System shall contain the following:

1. A Form U4 and all information and exhibits required by such Form;

2. The appropriate application fee as set forth in the Act; and 3. Satisfactory evidence of a passing score by the applicant on the appropriate examinations.

(b) Investment adviser representatives applying for registration through the IARD and CRD System shall also provide directly to the Division such other information as the Division may request from a particular applicant to determine eligibility for registration.

(c) Pursuant to Section 203A(b)(1)(A) of the Investment Advisers Act:

1. An investment adviser representative who has no place of business located within this state, and who is associated with an investment adviser that is registered under Section 203 of the Investment Advisers Act, is not required to register as an investment adviser representative of such investment adviser in this state;

2. An investment adviser representative who does have a place of business located within this state, and who is associated with an investment adviser registered under Section 203 of the Investment Advisers Act and which has filed a completed investment adviser notice filing in this state pursuant to T.C.A. § 48-1-109(c)(2), is required to register as an investment adviser representative of such investment adviser in this state.

(2) An application is deemed filed for purposes of T.C.A. § 48-1-110(a)(4) and this Rule when it is complete. An application is deemed to be complete when all information requested by the Division pursuant to paragraph (1) of this Rule is received by the Division.

August, 2026 2 (3) Renewals. All investment adviser representatives must apply for renewal of registration in Tennessee through the IARD and CRD System by complying with the requirements of the IARD and CRD System.

(4) Revocation or Denial. The registration of an investment adviser representative shall be subject to revocation proceedings even though the registrant has filed a Form U5 to terminate the registrant’s registration, and an application for registration as an investment adviser representative shall be subject to denial proceedings even though the applicant has filed a Form U5 to withdraw the applicant’s application. The commissioner may institute a revocation or denial proceeding under T.C.A. § 48-1-112 within thirty (30) days after the filing date of the Form U5 by a registrant or an applicant and enter a revocation order as of the last date on which registration was effective or a denial order as of the filing date of the Form U5. For purposes of this paragraph (4), “filing date” shall mean the date upon which the Form U5 is filed on behalf of a registrant or an applicant through the IARD and CRD System.

(5) Transfer. There is no provision under the Act to transfer an individual investment adviser representative’s registration. When an investment adviser representative terminates his or her relationship with an investment adviser with whom the registrant is registered and commences a new relationship with another investment adviser, a termination of registration shall be effected by the investment adviser with which the individual investment adviser representative had the prior relationship and an application for initial registration shall be filed by the investment adviser with which the individual investment adviser representative proposes to have the new relationship. The termination of registration shall be effected by the investment adviser by submitting a Form U5 within thirty (30) days of the date of termination. The filings prescribed in this paragraph (5) are not required in the event of a mass transfer of investment adviser representative registrations pursuant to IARD operational procedures and are not required in the event of a succession as permitted in T.C.A. § 48-1-110(c).

(6) Temporary Registration. All investment adviser representative applicants who have voluntarily terminated registration with an investment adviser and who are eligible under the rules established by the IARD may apply for temporary registration with another investment adviser through the IARD by complying with the procedure required by the IARD. Any temporary registration shall expire upon the grant or denial of the application for permanent registration, and in no event shall last more than thirty (30) days.

(7) Abandonment.

(a) The Division may determine that an application to register an investment adviser representative has been abandoned if:

1. The application has been on file with the Division for more than one hundred eighty (180) days without becoming registered and no written communication has been received by the Division in connection with the application during such time period; or 2. A period of one hundred eighty (180) days has elapsed since the date of the Division’s receipt of the most recent written communication to the Division from or on behalf of the applicant.

(b) Upon the determination that an application through the IARD and CRD System has been abandoned, the Division shall, as provided through the routine operation of the IARD and CRD System, cancel such application without prejudice.

(8) Withdrawal of Applications. An application for registration as an investment adviser representative may be withdrawn prior to the effectiveness of registration by following the procedures established by the IARD and CRD System.

August, 2026 3

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-115, and 48-1-116; Public Acts of 2001, Chapter 61; § 222 of the Investment Advisers Act of 1940, as amended by § 304(c) of the National Securities Markets Improvement Act of 1996; 17 C.F.R. § 240.15c3-1; 17 C.F.R. § 240.15Ca2-2; 17 C.F.R. § 240.17a-5; 17 C.F.R. § 275.203A-3; and 17 C.F.R. § 402.2.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-06-.02 EXEMPTIONS FROM INVESTMENT ADVISER REPRESENTATIVE REGISTRATION

(1) An investment adviser representative who is not included in the SEC Rule 203A-3 (17 C.F.R. § 275.203a-3) definition of “investment adviser representative” and who is not associated with an investment adviser which has filed a completed investment adviser notice filing pursuant to T.C.A. § 48-1-109(c)(2), is exempted from the definition of investment adviser representative as defined under T.C.A. § 48-1-102(14).

(2) An individual who solicits, offers, or negotiates for sale of or sells investment advisory services, but who is not compensated directly or indirectly for such activities, is exempted from the definition of investment adviser representative as defined under T.C.A. § 48-1-102(14).

(3) An individual who is employed by or associated with an investment adviser that is exempt from registration in this state pursuant to 0780-04-05-.03(1)(c) and does not otherwise act as an investment adviser representative is exempted from the registration requirements of T.C.A. § 48-1-109(c).

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-115, 48-1-116, and 48-1-121.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-06-.03 EXAMINATION OF INVESTMENT ADVISER REPRESENTATIVES

(1) Each applicant for initial registration as an investment adviser representative shall, unless covered by paragraph (2) or (3) or otherwise waived by the commissioner, have passed:

(a) The Series 65/Uniform Investment Adviser Law Examination (“Series 65 Examination”) within twenty-four (24) months of the date of application; or (b) The Series 66/Uniform Combined State Law Examination (“Series 66 Examination”) and the Series 7/General Securities Representative Examination (“Series 7 Examination”) within twenty-four (24) months of the date of application; and (c) The Securities Industry Essential Examination within forty-eight (48) months of the date of application.

(2) Compliance with paragraph (1) is waived if the applicant has been awarded any of the following designations and is current and in good standing at the time of filing an application:

(a) Certified Financial Planner (“CFP”) awarded by the Certified Financial Planners Board of Standards;

(b) Chartered Financial Consultant (“ChFC”);

(c) Chartered Financial Analyst (“CFA”) awarded by the Institute of Chartered Financial Analysts;

(d) Personal Financial Specialist (“PFS”) awarded by the American Institute of Certified Public Accountants; or August, 2026 4 (e) Any further certificates or credentials that are placed on the NASAA 65 Equivalency List, as maintained and updated by NASAA and the NASAA Exams Advisory Committee.

(3) Any individual who has been registered as an investment adviser representative in any state within two years from the date of filing an application for registration shall not be required to retake the examinations in paragraph (1) to be eligible for registration.

(4) Any individual who is not registered as an investment adviser representative in any state for more than twenty-four (24) months but less than sixty (60) months, who has elected to participate in the FINRA Maintaining Qualifications Program pursuant to FINRA Rule 1240(c), and whose appropriate FINRA qualifying examinations remain valid pursuant to effective participation in the FINRA Maintaining Qualifications Program shall not have to retake the appropriate FINRA qualifying examinations to comply with the examination requirements of paragraph (1); provided, however, that successful participation in the FINRA Maintaining Qualifications Program shall not extend the Series 65 Examination or the Series 66 Examination for purposes of investment adviser representative registration.

(5) Notwithstanding the other provisions of this Rule, an individual who terminates his or her registration as an investment adviser representative may maintain the validity of the Series 65 Examination or the investment adviser representative portion of the Series 66 Examination, as applicable, without being employed by or associated with an investment adviser or federal covered investment adviser for a maximum of five (5) years following the termination of the effectiveness of the investment adviser representative registration if the individual meets all of the following:

(a) The individual previously took and passed the examination for which they seek to maintain validity under this Rule;

(b) The individual was registered as an investment adviser representative for at least one year immediately preceding the termination of the investment adviser representative registration;

(c) The individual was not subject to a statutory disqualification as defined in Section 3(a)(39) of the Exchange Act while registered as an investment adviser representative or at any period after termination of the registration;

(d) The person elects to participate in the Exam Validity Extension Program (“EVEP”) under this paragraph (5) within twenty-four (24) months from the effective date of the termination of the investment adviser representative registration;

(e) The individual does not have a deficiency under the investment adviser representative continuing education program at the time the investment adviser representative registration becomes ineffective;

(f) The person who completes annually on or before December 31 of each calendar year in which the person participates in the IAR EVEP:

1. Six (6) Credits of IAR CE Ethics and Professional Responsibility Content offered by an Authorized Provider, including at least three (3) hours covering the topic of ethics, and 2. Six (6) Credits of IAR CE Products and Practice Content offered by an Authorized Provider;

(g) An individual who elects to participate in EVEP is required to complete credits required by subparagraph (f) of this Rule for each calendar year that elapses after the individual’s August, 2026 5 investment adviser registration became ineffective regardless of when the individual elects to participate in EVEP; and (h) An individual who complies with the FINRA Maintaining Qualification Program under FINRA Rule 1240(c) shall be considered in compliance with part (f)2. of this Rule.

(6) For purposes of this Rule, a duly granted examination waiver by the FINRA, the New York Stock Exchange, or the SEC shall constitute a passing grade for the General Securities Representative Examination (“Series 7 Examination”) requirement of subparagraph (1)(b) and paragraph (3) of this Rule.

(7) The requirements of this Rule shall apply to all applications for investment adviser registration and investment adviser representative registration filed with the Division on or after April 1, 2004.

(8) The commissioner may, upon written request and good cause shown by the applicant, waive the twenty-four (24) month examination time requirement. However, good cause may not be shown for any request to extend the twenty-four (24) month examination time requirement more than thirty (30) additional days.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-115, and 48-1-116; § 222 of the Investment Advisers Act of 1940, as amended by § 304(c) of the National Securities Markets Improvement Act of 1996; 17 C.F.R. § 240.15c3-1; 17 C.F.R. § 240.17a-5; 17 C.F.R. § 275.203A-3; and 17 C.F.R. § 402.2.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-06-.04 INVESTMENT ADVISER REPRESENTATIVE REPORTING REQUIREMENTS

(1) Upon request by the Division, each investment adviser representative registered in this state shall file with the Division through his or her investment adviser, if registered, or directly if his or her investment adviser has filed a completed investment adviser notice filing pursuant to T.C.A. § 48-1-109(c)(2), a copy of:

(a) Any indictment or information filed in any court of competent jurisdiction naming the investment adviser representative and alleging the commission of any felony regardless of subject matter, or any misdemeanor involving a security or any aspect of the securities business or any investment-related business;

(b) Any complaint filed in any court of competent jurisdiction naming the investment adviser representative and seeking a permanent or temporary injunction enjoining any of such persons from engaging in or continuing any conduct or practice involving any aspect of the securities business or any investment-related business; and (c) Any complaint or order filed by a federal or state regulatory agency or self-regulatory organization or the United States Post Office naming the investment adviser representative and related to the investment adviser representative’s securities or investment-related business.

(2) Upon request by the Division, each investment adviser representative registered in this state shall file with the Division through the registrant’s investment adviser, if registered, or directly if the registrant’s investment adviser has filed a completed investment adviser notice filing pursuant to T.C.A. § 48-1-109(c)(2), a copy of any answer, response, or reply to any complaint, indictment, or information described in paragraph (1) of this Rule.

(3) Upon request by the Division, each investment adviser representative registered in this state shall file with the Division through the registrant’s investment adviser, if registered, or directly if the registrant’s investment adviser has filed a completed investment adviser notice filing August, 2026 6 pursuant to T.C.A. § 48-1-109(c)(2), a copy of any decision, order, or sanction that is made, entered, or imposed with respect to any proceeding described in paragraph (1) of this Rule.

(4) Nothing in this Rule is intended to relieve the registrant from any duty the registrant has to comply with legal process or any reporting requirements elsewhere specified in these Rules or in the Act.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-115, 48-1-116, 48-1-117, and 48-1-121; § 222 of the Investment Advisers Act of 1940; and 17 C.F.R. § 275.204.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-06-.05 PROHIBITED BUSINESS PRACTICES

(1) A person who is an investment adviser representative is a fiduciary and has a duty to act primarily for the benefit of his or her clients. The following are deemed “dishonest or unethical business practices” by an investment adviser representative under T.C.A. § 48-1-112(a)(2)(G), to the extent permitted under Section 203A of the Investment Advisers Act, without limiting those terms to the practices specified herein:

(a) Recommending to a client to whom investment supervisory, management or consulting services are provided the purchase, sale, or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the client on the basis of information furnished by the client after reasonable inquiry concerning the client’s investment objectives, financial situation and needs, and any other information known by the investment adviser representative;

(b) Exercising any discretionary power in placing an order for the purchase or sale of securities for a client without obtaining written discretionary authority from the client within ten (10) business days after the date of the first transaction placed pursuant to oral discretionary authority, unless the discretionary power relates solely to the price at which, or the time when, an order involving a definite amount of a specified security shall be executed, or both;

(c) Inducing trading in a client’s account that is excessive in size or frequency in view of the financial resources, investment objectives, and character of the account;

(d) Placing an order to purchase or sell a security for the account of a client without authority from the client to do so;

(e) Placing an order to purchase or sell a security for the account of a client upon instruction of a third party without first having obtained a written third-party trading authorization from the client;

(f) Borrowing money or securities from a client unless the client is a broker-dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds;

(g) Loaning money to a client unless the client is an affiliate of the investment adviser;

(h) Extending, arranging for, or participating in arranging for credit to a client in violation of the 1934 Act or the regulations of the Federal Reserve Board;

(i) Misrepresenting to any advisory client, or prospective advisory client, the qualifications of the investment adviser or any employee of the investment adviser, or misrepresenting the nature of the advisory services being offered or fees to be charged for such service, or omitting a material fact necessary to make the statements made regarding August, 2026 7 qualifications, services, or fees, in light of the circumstances under which they are made, not misleading;

(j) Providing a report or recommendation to any advisory client prepared by someone other than the investment adviser representative, or the investment adviser representative’s investment adviser, without disclosing that fact. This prohibition does not apply to a situation where the investment adviser representative uses published research reports or statistical analyses to render advice or where an investment adviser representative orders such a report in the normal course of providing service;

(k) Charging a client an unreasonable advisory fee. Any fee above two percent (2%) shall create a rebuttable presumption that the fee is unreasonable;

(l) Failing to disclose to clients, in writing, before any advice is rendered, any material conflict of interest relating to the adviser or any of its employees which could reasonably be expected to impair the rendering of unbiased and objective advice including:

1. Compensation agreements connected with advisory services to clients, which are in addition to compensation from such clients for such services; and 2. Charging a client an advisory fee for rendering advice when a commission for executing securities transactions, pursuant to such advice, will be received by the adviser or its employees;

(m) Guaranteeing a client that a specific result will be achieved (gain or no loss) with advice which will be rendered;

(n) Publishing, circulating, or distributing any advertisement which does not comply with

Rule 0780-04-05-.10(5) under the Act;

(o) Disclosing the identity, affairs, or investments of any client or former client unless required by law to do so, or unless consented to by the client;

(p) Entering into, extending, or renewing any investment advisory contract, unless such contract is in writing and, in substance, discloses:

1. The services to be provided;

2. The term of the contract;

3. The advisory fee;

4. The formula for computing the fee;

5. The amount of prepaid fee to be returned in the event of contract termination or non-performance;

6. Whether the contract grants discretionary power to the investment adviser, to any investment adviser representative(s), or to any combination thereof; and 7. That no assignments of such contract shall be made by the investment adviser representative without the consent of the other party to the contract;

(q) Entering into, extending, or renewing any advisory contract contrary to the provisions of

Section 205 of the Investment Advisers Act. This provision shall apply to all investment adviser representatives registered or required to be registered under this Act, August, 2026 8 notwithstanding whether such investment adviser representative would be exempt from federal registration pursuant to Section 203(b) of the Investment Advisers Act;

(r) Indicating, in an advisory contract, any condition, stipulation, or provisions binding any person to waive compliance with any provision of the Act or of the Investment Advisers Act, or any other practice that would violate Section 215 of the Investment Advisers Act;

(s) Engaging in conduct or any act, indirectly or through or by any other person, which would be unlawful for such person to do directly under the provisions of the Act or these Rules;

(t) Failing to provide information requested by the Division pursuant to the Act or these Rules;

(u) Possessing or utilizing a client’s unique identifying information for access to a client’s account held by the registrant or any other party. This includes, but is not limited to usernames and passwords;

(v) Failing to pay and fully satisfy any final judgment or arbitration award resulting from an investment-related, client or customer-initiated arbitration or court proceeding, unless alternative payment arrangements are agreed to between the client and the investment adviser or investment adviser representative or between the customer and the brokerdealer or broker-dealer agent, in writing, and the broker-dealer or broker-dealer agent complies with the terms of the alternative payment arrangement;

(w) Attempting to avoid payment of any final judgment or arbitration award resulting from an investment-related, client or customer-initiated arbitration or court proceeding, unless alternative payment arrangements are agreed to between the client and the investment adviser or investment adviser representative or between the customer and the brokerdealer or broker-dealer agent, in writing, and the broker-dealer or broker-dealer agent complies with the terms of the alternative payment arrangements;

(x) Failing to pay and fully satisfy any fine, civil penalty, order of restitution, order of disgorgement, or similar monetary payment obligation imposed upon the investment adviser or investment adviser representative by the Securities and Exchange Commission, the securities or other financial services regulator of any state or province, or any self-regulatory organization; or (y) Dishonest use of certifications, professional designations, senior-specific certifications, or senior-specific professional designations, as determined by the Division based on the following nonexclusive criteria and guidelines:

1. The use of a certification, professional designation, senior-specific certification or senior-specific professional designation by any person in connection with the offer, sale, or purchase of securities, or the provision of advice as to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly or through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicates or implies that the user has special certification or training in advising or servicing in such a way as to mislead any person shall be a dishonest and unethical practice within the meaning of T.C.A. § 48-1-112(a)(2)(G). The prohibited use of such certifications or professional designation includes, but is not limited to, the following:

(i) Use of a certification or professional designation by a person who has not actually earned, or is otherwise ineligible to use, such certification or designation;

August, 2026 9 (ii) Use of a nonexistent or self-conferred certification or professional designation;

(iii) Use of a certification or professional designation that indicates or implies a level of occupational qualifications, obtained through education, training, or experience, that the person using the certification or professional designation does not have; and (iv) Use of a certification or professional designation that was obtained from a designating or certifying organization that:

(I) Is primarily engaged in the business of instruction in sales and/or marketing;

(II) Does not have reasonable standards or procedures for assuring the competency of its designees or certificants;

(III) Does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or (IV) Does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.

2. There is a rebuttable presumption that a designating or certifying organization is not disqualified solely for purposes of subpart (1)(y)1.(iv) of this Rule when the organization has been accredited by:

(i) The American National Standards Institute; or (ii) The National Commission for Certifying Agencies; or (iii) An organization that is on the United States Department of Education’s list entitled “Accrediting Agencies Recognized for Title IV Purposes” and the designation or credential issued therefrom does not primarily apply to sales and/or marketing.

3. In determining whether a combination of words (or an acronym standing for a combination of words) constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees, factors to be considered shall include:

(i) Use of one or more words such as “senior,” “retirement,” “elder,” like words, or analogous words identifying other affinity groups, combined with one or more words such as “certified,” “registered,” “chartered,” “adviser,”

“specialist,” “consultant,” “planner,” or like words, in the name of the certification or professional designation; and (ii) The manner in which those words are combined.

4. For purposes of part (1)(y)1. of this Rule, a certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, when that job title:

(i) Indicates seniority or standing within the organization; or August, 2026 10 (ii) Specifies an individual’s area of specialization within the organization; unless (iii) Such job title is used in a way that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees.

As used herein, financial services regulatory agency includes, but is not limited to, an agency that regulates broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act.

(2) Nothing in this Rule shall limit the commissioner’s authority to enforce existing provisions of this law.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-109, 48-1-110, 48-1-111, 48-1-112, 48-1-113, 48-1-115, 48-1-116, 48-1-118, and 48-1-121(a)(2); § 222 of the Investment Advisers Act of 1940, as amended by § 304(a) of the National Securities Markets Improvement Act of 1996; §§ 203A, 205, and 215 of the Investment Advisers Act of 1940; § 17(f)(2) of the Securities Exchange Act of 1934; 17 C.F.R. § 240.10b- 10; 17 C.F.R. § 240.17a-3 through 17 C.F.R. § 240.17a-5; 17 C.F.R. § 240.17a-11; 17 C.F.R. § 240.17f-2; and 17 C.F.R. § 275.204-2.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-06-.06 INVESTMENT ADVISER REPRESENTATIVE CONDUCT WHICH OPERATES AS A

FRAUD OR DECEIT IN VIOLATION OF T.C.A. § 48-1-121.

(1) Cash Payments for Client Solicitations.

(a) It shall constitute an act, practice, or course of conduct which operates as a fraud or deceit upon a person, as provided under T.C.A. § 48-1-121, for any investment adviser representative to pay a cash fee, directly or indirectly, to a solicitor with respect to solicitation activities unless:

1. The solicitor is registered as an investment adviser or investment adviser representative or is exempt from registration as provided in T.C.A. § 48-1-109(c);

2. The solicitor is not a person:

(i) Subject to an order issued by the commissioner under T.C.A. § 48-1-112(a) of the Act;

(ii) Convicted of any felony or any misdemeanor within the previous ten (10) years involving conduct described in T.C.A. § 48-1-112(a)(2)(C);

(iii) Who has been found by the commissioner to have engaged, or has been convicted of engaging, in any of the conduct specified in T.C.A. §§ 48-1-121, 48-1-112(a)(2)(B), 48-1-112(a)(2)(J), or has materially aided in the action in violation of T.C.A. §§ 48-1-112(a)(2)(B), 48-1-112(a)(2)(J), or 48-1-121;

(iv) Subject to an order, judgment, or decree described in T.C.A. § 48-1- 112(a)(2)(D) of the Act;

(v) Subject to an order, judgment, or decree issued under section 203(f) of the Investment Advisers Act, or convicted within the previous ten years of any felony or misdemeanor involving conduct described in section 203(e)(2)(A) through (D) of the Investment Advisers Act, or who has been found by the SEC to have engaged, or has been convicted of engaging, in any of the August, 2026 11 conduct specified in paragraphs (1), (5) or (6) of section 203(e) of the Investment Advisers Act, or is subject to an order, judgment or decree described in section 203(e)(4) of the Investment Advisers Act; or (vi) Subject to an order, judgment, or acceptance, waiver, and consent of any self-regulatory organization that suspends or bars the person from associating with self-regulatory organization members, associates, or agents or engaging in the securities industry;

3. Such cash fee is paid pursuant to a written agreement to which the investment adviser representative is a party;

4. Such cash fee is paid to a solicitor:

(i) With respect to solicitation activities for the provision of impersonal advisory services only;

(ii) Who is:

(I) A partner, officer, director, or employee of such investment adviser with whom the investment adviser representative is registered; or (II) A partner, officer, director, or employee of a person which controls, is controlled by, or is under common control with such investment adviser with whom the investment adviser representative is registered; provided that the status of such solicitor as a partner, officer, director, or employee of such investment adviser or other person, and any affiliation between the investment adviser representative and such other person, is disclosed to the client at the time of the solicitation or referral;

(iii) Other than a solicitor specified in subparts (a)4.(i) or (a)4.(ii) of this paragraph, if all of the following conditions are met:

(I) The written agreement required by part (1)(a)3. of this Rule:

I. Describes the solicitation activities to be engaged in by the solicitor on behalf of the investment adviser representative and the compensation to be received thereof;

II. Contains an undertaking by the solicitor to perform the solicitor’s duties under the agreement in a manner consistent with the instructions of the investment adviser representative, the provisions of the Act, these Rules, or of the Investment Advisers Act and the rules promulgated thereunder, whichever is applicable; and III. Requires that the solicitor, at the time of any solicitation activities for which compensation is paid or to be paid by the investment adviser representative, provide the client with a current copy of the investment adviser’s brochure required by

Rule 0780-04-05-.08 or SEC Rule 204-3 (17 C.F.R. § 275.204- 3) as applicable, and a separate written disclosure statement described in subparagraph (1)(b) of this Rule.

August, 2026 12 (II) The investment adviser representative receives from the client, prior to, or at the time of, entering into any written or oral investment advisory contract with such client, a signed and dated acknowledgment of receipt of the investment adviser’s written disclosure statement and the solicitor’s written disclosure document; and (III) The investment adviser representative makes a bona fide effort to ascertain whether the solicitor has complied with the agreement and has a reasonable basis for believing that the solicitor has so complied.

(b) The separate written disclosure statement required to be furnished by the solicitor to the client pursuant to subitem (1)(a)4.(iii)(I)III. of this Rule shall contain the following information:

1. The name of the solicitor;

2. The name of the investment adviser;

3. The nature of the relationship, including any affiliation, between the solicitor and the investment adviser;

4. A statement that the solicitor will be compensated for the solicitor’s solicitation services by the investment adviser;

5. The terms of such compensation arrangement, including a description of the compensation paid or to be paid to the solicitor;

6. The amount, if any, the client will be charged for the cost of obtaining the client’s account in addition to the advisory fee; and 7. The differential, if any, among clients, with respect to the amount or level of advisory fees charged by the investment adviser, if such differential is attributable to the existence of any arrangement pursuant to which the investment adviser has agreed to compensate the solicitor for soliciting clients for, or referring clients to, the investment adviser.

(c) Nothing in this Rule shall be deemed to relieve any person of any fiduciary or other obligation to which such person may be subject under any law.

(d) For purposes of this Rule:

1. “Solicitor” means any person who, directly or indirectly, solicits any client for, or refers any client to, an investment adviser.

2. “Client” includes any prospective client.

3. “Impersonal advisory services” means investment advisory services provided solely by means of (i) written materials or oral statements which do not purport to meet the objectives or needs of the specific client, (ii) statistical information containing no expressions of opinions as to the investment merits of particular securities, or (iii) any combination of the foregoing services.

(e) The investment adviser representative shall provide a copy of each written agreement required by part (1)(a)3. of this Rule to the investment adviser with whom the registrant August, 2026 13 is registered as part of the records required to be kept under T.C.A. § 48-1-111(a) and paragraph (1) of Rule 0780-04-05-.06.

(f) The investment adviser representative shall provide a copy of each acknowledgment and solicitor disclosure document referred to in item (1)(a)4.(iii)(II) of this Rule to the investment adviser with whom the registrant is registered as part of the records required to be kept under T.C.A. § 48-1-111(a) and paragraph (1) of Rule 0780-04-05-.06.

(g) An investment adviser representative registered in this state whose principal place of business is located outside this state shall not be subject to the record maintenance requirements of subparagraphs (1)(e) or (1)(f) of this Rule if:

1. Such investment adviser representative is registered as an investment adviser representative in the state in which the investment adviser with whom the registrant is registered maintains its principal place of business;

2. Such investment adviser representative is in compliance with applicable books and records requirements of the state in which the investment adviser with whom the registrant is registered maintains its principal place of business; and 3. The provisions of subparagraphs (1)(e) or (1)(f) of this Rule would require the investment adviser representative to submit records in addition to those required under the laws of the state in which the investment adviser with whom the registrant is registered maintains its principal place of business.

(2) Agency Cross Transactions.

(a) For purposes of this Rule, “agency cross transaction for an advisory client” means a transaction in which a person acts as an investment adviser in relation to a transaction in which the investment adviser, or any person controlling, controlled by, or under common control with such investment adviser, including an investment adviser representative, acts as a broker-dealer for both the advisory client and another person on the other side of the transaction. When acting in such capacity such person is required to be registered as a broker-dealer or broker-dealer agent in this state unless excluded from the definition.

(b) It shall constitute an act, practice, or course of business which operates or would operate as a fraud or deceit upon another person within the meaning of T.C.A. § 48-1-121(b)(2) of the Act for any investment adviser representative, while acting as principal for its own advisory account to knowingly sell any security to or purchase any security from a client, or while acting as broker-dealer for a person other than the client, to knowingly effect any sale or purchase of any security for the account of such client, without disclosing to the client in writing before the completion of the transaction the capacity in which the investment adviser representative or broker-dealer is acting and obtaining the consent of the client to the transaction. The prohibitions of this subparagraph shall not apply to any transaction with a customer of a broker-dealer if the broker-dealer is not acting as an investment adviser in relation to such transaction.

(c) An investment adviser effecting an agency cross transaction for an advisory client shall be deemed in compliance with T.C.A. § 48-1-121(b)(2) for purposes of this Rule, and with Rule 0780-04-06-.06(2), if the following conditions are met:

1. The advisory client executes a written consent prospectively authorizing the investment adviser to effect agency cross transactions for such client;

August, 2026 14 2. Before obtaining such written consent from the client, the investment adviser makes full written disclosure to the client that, with respect to agency cross transactions, the investment adviser will act as broker-dealer for, receive commissions from and have a potentially conflicting division of loyalties and responsibilities regarding both parties to the transactions;

3. At or before the completion of each agency cross transaction, the investment adviser or any other person relying on this Rule sends the client a written confirmation. The written confirmation shall include:

(i) A statement of the nature of the transaction;

(ii) The date the transaction took place;

(iii) An offer to furnish, upon request, the time when the transaction took place; and (iv) The source and amount of any other remuneration the investment adviser received or will receive in connection with the transaction. In the case of a purchase, if the investment adviser was not participating in a distribution, or, in the case of a sale, if the investment adviser was not participating in a tender offer, the written confirmation may state whether the investment adviser has been receiving or will receive any other remuneration and that the investment adviser will furnish the source and amount of such remuneration to the client upon the client’s written request;

4. At least annually, and with or as part of any written statement or summary of the account from the investment adviser, the investment adviser or any other person relying on this Rule sends each client a written disclosure statement identifying:

(i) The total number of agency cross transactions during the period for the client since the date of the last such statement or summary; and (ii) The total amount of all commissions or other remuneration the investment adviser received or will receive in connection with agency cross transactions for the client during the period.

5. Each written disclosure and confirmation required by this Rule must include a conspicuous statement that the client may revoke the written consent required under part (2)(c)1. of this Rule at any time by providing written notice to the investment adviser.

6. No agency cross transaction may be effected in which the same investment adviser recommended the transaction to both any seller and any purchaser.

(d) Nothing in this Rule shall be construed to relieve an investment adviser or investment adviser representative from acting in the best interests of the client, including fulfillment of duties with respect to the best price and execution for the particular transaction for the client nor shall it relieve any investment adviser or investment adviser representative of any other disclosure obligations imposed by the Act.

(3) Custody or Possession of Funds or Securities of Clients.

(a) It shall constitute an act, practice, or course of business which operates or would operate as a fraud or deceit upon another person, within the meaning of T.C.A. § 48-1-121(b)(3)

August, 2026 15 of the Act, for any investment adviser representative in this state to have custody or possession of any funds or securities in which any client has any beneficial interest.

(4) Financial and Disciplinary Disclosure.

(a) It shall constitute an act, practice, or course of business which operates or would operate as a fraud or deceit upon another person within the meaning of T.C.A. § 48-1-121(b)(2) of the Act for any investment adviser representative to fail to disclose to any client or prospective client all material facts with respect to a legal or disciplinary event that is material to an evaluation of the investment adviser representative’s integrity or ability to meet contractual commitments to clients.

(b) It shall constitute a rebuttable presumption that the following legal or disciplinary events involving the investment adviser representative that were not resolved in the person’s favor or subsequently reversed, suspended, or vacated are material within the meaning of subparagraph 4(a) of this Rule for a period of ten (10) years from the time of the event.

1. A criminal or civil action in a court of competent jurisdiction in which the person:

(i) Was convicted of, or pleaded guilty or nolo contendere (“no contest”) to, any felony or misdemeanor, or is the named subject of a pending criminal proceeding (any of the foregoing referred to hereafter as “action”) and such action involved: an investment-related business; fraud, false statements, or omissions; wrongful taking of property; or bribery, forgery, counterfeiting, or extortion;

(ii) Was found to have been involved in a violation of an investment-related statute or regulation; or (iii) Was the subject of any order, judgment, or decree permanently or temporarily enjoining the person from, or otherwise limiting the person from, engaging in any investment-related activity.

2. Administrative proceedings before the SEC, any other federal regulatory agency, or any state agency (any of the foregoing being referred to hereafter as “Agency”) in which the person:

(i) Was found to have caused an investment-related business to lose its authorization to do business; or (ii) Was found to have been involved in a violation of an investment-related statute or regulation and was the subject of an order by the agency denying, suspending, or revoking the authorization of the person to act in, or barring or suspending the person’s association with, an investment-related business; was the subject of an order in which civil penalties were assessed; or was subject to an order otherwise significantly limiting the person’s investment-related activities.

3. Self-Regulatory Organization (“SRO”) proceedings in which the person:

(i) Was found to have caused an investment-related business to lose its authorization to do business; or (ii) Was found to have been involved in a violation of the SRO’s rules and was the subject of an order by the SRO barring or suspending the person from membership or from association with other members, or expelling the person August, 2026 16 from membership; fining the person more than two thousand five hundred dollars ($2,500); or otherwise significantly limiting the person’s investmentrelated activities.

(c) The information required to be disclosed by paragraph (1) of this Rule shall be disclosed to clients promptly, and to prospective clients not less than forty-eight (48) hours prior to entering into any written investment advisory contract, or no later than the time of entering into such contract if the client has the right to terminate the contract without penalty within five (5) business days after entering into the contract.

(d) For purposes of this Rule:

1. “Found” means determined or ascertained by adjudication or consent in a final SRO proceeding, administrative proceeding, or court action.

2. “Investment related” means pertaining to securities, commodities, banking, insurance, or real estate (including, but not limited to, acting as or being associated with a broker-dealer, investment adviser, government securities broker or dealer, municipal securities dealer, bank, savings and loan association, entity or person required to be registered under the Commodity Exchange Act (7 U.S.C. § 1 et seq.) or fiduciary.

3. “Involved” means acting or aiding, abetting, causing, counseling, commanding, inducing, conspiring with, or failing reasonably to supervise another in doing an act.

4. “Self-Regulatory Organization” or “SRO” means any national securities or commodities exchange, registered association, or registered clearing agency.

(e) For purposes of calculating the ten (10) year period during which events are presumed to be material under subparagraph (4)(b) of this Rule, the date of a reportable event shall be the date on which the final order, judgment, or decree was entered, or the date on which any rights of appeal from preliminary orders, judgments, or decrees lapsed.

(f) Compliance with subparagraph (4)(b) of this Rule shall not relieve any investment adviser representative from the disclosure obligations of subparagraph (4)(a) of this

Rule. Compliance with subparagraph (4)(a) of this Rule shall not relieve any investment adviser representative from any other disclosure requirement under the Act, these Rules, or under any other federal or state law.

(5) Advertisement.

(a) It shall constitute an act, practice, or course of business which operates or would operate as a fraud or deceit upon another person within the meaning of T.C.A. § 48-1-121(b)(2) for any investment adviser representative, directly or indirectly, to publish, circulate, or distribute any advertisement:

1. Which refers, directly or indirectly, to any testimonial of any kind concerning the investment adviser representative or concerning any advice, analysis, report, or other service rendered by such investment adviser representative;

2. Which refers, directly or indirectly, to past specific recommendations of such investment adviser representative, which were or would have been profitable to any person; provided, however, that this shall not prohibit an advertisement which sets out or offers to furnish a list of all recommendations made by such investment August, 2026 17 adviser representative within the immediately preceding period of not less than one (1) year, if such advertisement or list, includes both of the following:

(i) States the name of each such security recommended, the date and nature of each such recommendation (e.g., whether to buy, sell, or hold), the market price at that time, the price at which the recommendation was to be acted upon, and the most recently available market price of each such security; and (ii) Contains the following cautionary legend on the first page thereof in print or type as large as the largest print or type used in the body or text thereof; “It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list”;

3. Which represents, directly or indirectly, that any graph, chart, formula, or other device being offered can in and of itself be used to determine which securities to buy or sell, or when to buy or sell them; or which represents, directly or indirectly, that any graph, chart, formula, or other device being offered will assist any person in making his or her own decisions as to which securities to buy and sell, or when to buy and sell them, without prominently disclosing in such advertisement the limitations thereof and the difficulties with respect to its use;

4. Which contains any statement to the effect that any report, analysis, or other service will be furnished free or without charge, unless such report, analysis, or other service actually is or will be furnished entirely free and without any condition or obligation, directly or indirectly; or 5. Represents that the Department, Division, or any of its personnel has approved any advertisement;

5. Which contains any untrue statement of a material fact, or which is otherwise false or misleading.

(b) For purposes of this Rule, the term “advertisement” shall include any notice, circular, letter, or other written communication addressed to more than one (1) person, or any notice or other announcement in any electronic or paper publication or by radio or television, or by any medium, which offers:

1. Any analysis, report, or publication concerning securities, or which is to be used in making any determination as to when to buy or sell any security, or which security to buy or sell; or 2. Any graph, chart, formula, or other device to be used in making any determination as to when to buy or sell any security, or which security to buy or sell; or 3. Any other investment advisory service with regard to securities.

(c) This Rule shall not apply to those investment adviser representatives solely registered with SEC registered investment advisers.

(6) Nothing in this Rule shall limit the commissioner’s authority to enforce existing provisions of law.

History

• Authority: T.C.A. §§ 48-1-109, 48-1-111, 48-1-115, 48-1-116, and 48-1-121; § 7, § 222 of the Investment Advisers Act of 1940, as amended by § 304 of the National Securities Markets Improvement Act of 1996; § 15 of the Securities Exchange Act of 1934; 17 C.F.R. § 240.15c3-1; 17 C.F.R. § 275.204-3; 17 C.F.R. § August, 2026 18 275.206(3)-2; 17 C.F.R. § 275.206(4)-1; and 17 C.F.R. § 275.206(4)-2.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Tenn. Comp. R. & Regs. 0780-04-06-.07 INVESTMENT ADVISER REPRESENTATIVE CONTINUING EDUCATION

(1) Investment Adviser Representative Continuing Education. Every investment adviser representative registered under T.C.A. § 48-1-109 must complete the following investment adviser representative continuing education requirements each reporting period:

(a) Investment Adviser Representative Ethics and Professional Responsibility Requirement.

An investment adviser representative must complete six (6) credits of investment adviser representative regulatory and ethics content offered by an authorized provider, with at least three (3) hours covering the topic of ethics; and (b) Investment Adviser Representative Products and Practice Requirement. An investment adviser representative must complete six (6) credits of investment adviser representative products and practice content offered by an authorized provider.

(2) Agent of FINRA-Registered Broker-Dealer Compliance. An investment adviser representative who is also registered as an agent of a FINRA member broker-dealer and who complies with FINRA’s continuing education requirements is considered to be in compliance with subparagraph (1)(b) of this Rule for each applicable reporting period so long as FINRA continuing education content meets all of the following baseline criteria as determined by NASAA:

(a) The continuing education content focuses on compliance, regulatory, ethical, and sales practices standards;

(b) The continuing education content is derived from state and federal investment advisory statutes, rules and regulations, securities industry rules and regulations, and accepted standards and practices in the financial services industry; and (c) The continuing education content requires that its participants demonstrate proficiency in the subject matter of the educational materials.

(3) Credentialing Organization Continuing Education Compliance. Credits of continuing education completed by an investment adviser representative who was awarded and currently holds a credential that qualifies for an examination waiver under paragraph (2) of Rule 0780-04-06.-03 comply with subparagraphs (1)(a) and (1)(b) of this Rule provided all of the following are true:

(a) The investment adviser representative completes the credits of continuing education as a condition of maintaining the credential for the relevant reporting period;

(b) The credits of continuing education completed during the relevant reporting period by the investment adviser representative are mandatory to maintain the credential; and (c) The continuing education content provided by the credentialing organization during the relevant reporting period is approved investment adviser representative continuing education content.

(4) Investment Adviser Representative Continuing Education Reporting. Every investment adviser representative is responsible for ensuring that the authorized provider reports to NASAA or its designee the investment adviser representative’s completion of the applicable investment adviser representative continuing education requirements.

August, 2026 19 (5) No Carry-Forward. An investment adviser representative who completes credits of continuing education in excess of the amount required for the reporting period may not carry forward excess credits to a subsequent reporting period.

(6) Failure to Complete or Report. An investment adviser representative who fails to comply with this Rule by the end of a reporting period will renew as “CE Inactive” at the close of the calendar year in this state until the investment adviser representative completes and reports to NASAA or its designee all required investment adviser representative continuing education credits for all reporting periods as required by this Rule. An investment adviser representative who is CE Inactive at the close of the next calendar year is not eligible for investment adviser representative registration or renewal of an investment adviser representative registration.

(7) Discretionary Waiver by the commissioner. The commissioner may, in his or her discretion, waive any requirements of this Rule.

(8) Home State. An investment adviser representative registered or required to be registered in this state who is registered as an investment adviser representative in the individual’s home state is considered to be in compliance with this Rule provided that both of the following are true:

(a) The investment adviser representative’s home state has continuing education requirements that are at least as stringent as this Rule; and (b) The investment representative is in compliance with the home state’s investment adviser representative continuing education requirements.

(9) Unregistered Periods. An investment adviser representative who was previously registered under the Act and became unregistered must complete investment adviser representative continuing education for all reporting periods that occurred between the time that the investment adviser representative became unregistered and when the person became registered again under the Act unless the investment adviser representative takes and passes the examination or receives an examination waiver as required by Rule 0780-04-06-.03 in connection with the subsequent application for registration.

(10) Definitions. As used in this Rule, the following terms mean:

(a) “Approved investment adviser representative continuing education content” means the materials, written, oral, or otherwise that have been approved by NASAA or its designee and which make up the educational program provided to an investment adviser representative under this Rule.

(b) “Authorized provider” means a person that NASAA or its designee has authorized to provide continuing education content required by this Rule.

(c) “Credit” means a unit that has been designated by NASAA or its designee as at least fifty (50) minutes of educational instruction.

(d) “Home state” means the state in which the investment adviser representative has its principal office and place of business.

(e) “Investment adviser representative ethics and professional responsibility content” means approved investment adviser representative continuing education content that addresses an investment adviser representative’s ethical and regulatory obligations.

(f) “Investment adviser representative products and practice content” means approved investment adviser representative continuing education content that addresses an August, 2026 20 investment adviser representative’s continuing skills and knowledge regarding financial products, investment features, and practices in the investment advisory industry.

(g) “Investment adviser representative” means an individual who meets the definition of “investment adviser representative” under the Act and an individual who meets the definition of “investment adviser representative” under T.C.A. § 48-1-102.

(h) “NASAA” means the North American Securities Administrators Association, Inc. or a committee designated by its board of directors.

(i) “Reporting period” means one twelve (12) month period as determined by NASAA and described on the NASAA website, nasaa.org, in the Investment Adviser Representative Continuing Education Frequently Asked Questions. An investment adviser representative’s initial reporting period with this state commences the first day of the first full reporting period after the individual is registered or required to be registered with this state.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-109, 48-1-110, 48-1-112, 48-1-115, and 48-1-116.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

Chapter 0780-04-07 Oil and Gas Issuer-Dealers Regulation

Tenn. Comp. R. & Regs. 0780-04-07-.01 OIL AND GAS ISSUER-DEALERS

(1) Oil and Gas Issuer-Dealer Registration.

(a) All applications for initial registration as an oil and gas issuer-dealer shall contain the following unless waived by order of the commissioner:

1. Form IN-0911, Application for Registration as an Oil and Gas Issuer-Dealer, containing all information and exhibits required by that Form;

2. A Consent to Service of Process and, if applicable, a Uniform Form of Corporate Resolution. Forms U-2 and U-2A are acceptable;

3. A nonrefundable filing fee of one hundred dollars ($100), payable to the Tennessee Department of Commerce and Insurance; and 4. Such other information as the Division may request from a particular applicant to determine eligibility for registration, including but not limited to, the information listed in T.C.A § 48-1-110(f)(4).

(b) All applications for registration must be submitted directly to the Division.

(c) An application is deemed filed for purposes of T.C.A. § 48-1-110(f) and this Rule when it is complete. An application is deemed to be complete when all information requested by the Division pursuant to subparagraph (1)(a) of this Rule is received by the Division.

Registration shall be effective at twelve o’clock (12:00) noon, central time thirty (30) days after receipt of the completed application and the filing fee unless a proceeding has been initiated by the Division to suspend or deny the application pursuant to T.C.A. § 48-1- 110(f)(5) or the thirty (30) day period is waived in writing by the applicant.

(d) Abandonment.

1. The Division may determine that an application to register an Oil and Gas Issuer- Dealer has been abandoned if:

(i) The application has been on file with the Division for more than one hundred eighty (180) days without becoming registered and no written communication has been received by the Division in connection with the application during such time period; or (ii) A period of one hundred eighty (180) days has elapsed since the date of the Division’s receipt of the most recent written communication to the Division from or on behalf of the applicant.

August, 2026 2 2. Upon determination that an application has been abandoned, the Division shall cancel the pending application without prejudice and, within thirty (30) days of such cancellation, mail a notification of the abandonment to the last known business address of the applicant.

(2) Renewal of Registration.

(a) All registrations expire at midnight on December 31 of each year and must be renewed no later than ten (10) business days prior to that date. All renewals shall contain the following:

1. The renewal form provided by the Division with all information and exhibits required by the form; and 2. A nonrefundable renewal fee of fifty dollars ($50), payable to the Tennessee Department of Commerce and Insurance.

(3) Amendments.

(a) The applicant shall notify the Division in writing of any changes in the information provided in the application within ten (10) days of occurrence.

History

• Authority: T.C.A. §§ 48-1-102, 48-1-107, 48-1-110, 48-1-111, 48-1-112, 48-1-113, 48-1-115, 48-1-116, and 48-1-118; § 222 of the Investment Advisers Act of 1940, as amended by § 304(a) of the National Securities Markets Improvement Act of 1996; and §§ 201A, 205, and 215 of the Investment Advisers Act of 1940.
• Administrative History: New rules filed May 8, 2026; effective August 6, 2026.

0780-05 Division of Regulatory Boards

Chapter 0780-05-01 Repealed

Tenn. Comp. R. & Regs. 0780-05-01-.01 REPEALED

History

• Authority: T.C.A. § 68-50-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed June 22, 1984; effective July 22, 1984. Amendment filed June 11, 1986; effective July 11, 1986. Amendment filed August 31, 1990; effective November 28, 1990. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.35 REPEALED

History

• Authority: T.C.A. §§ 56-1-308 and 68-115-207.
• Administrative History: Original rule December 19, 1997; effective March 4, 1998. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.02 REPEALED

History

• Authority: T.C.A. § 68-50-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed June 22, 1984; effective July 22, 1984. Amendment filed August 31, 1990; effective November 28, 1990. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.03 REPEALED

History

• Authority: T.C.A. § 68-50-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed June 22, 1984; Effective July 22, 1984. Amendment filed August 31, 1990; effective November 28, 1990. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.04 REPEALED

History

• Authority: T.C.A. §§ 68-50-207(a) and 68-115-207.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed May 27, 1983; effective June 27, 1983. Amendment filed June 22, 1984; effective July 22, 1984. Amendment filed August 31, 1990; effective November 28, 1990. Amendment filed August 16, 1993; effective October 30, 1993. Amendment filed November 21, 1994; effective February 4, 1995. Amendment filed June 30, 1999; effective September 13, 1999. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.05 REPEALED

History

• Authority: T.C.A. § 68-115-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed May 27, 1983; effective June 27, 1983. Amendment filed June 30, 1999; effective September 13, 1999. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.06 REPEALED

History

• Authority: T.C.A. § 68-115-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed March 19, 1982; effective May 3, 1982. Amendment filed June 11, 1986; effective July 11, 1986. Amendment filed March 14, 2005; effective May 28, 2005. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.07 REPEALED

History

• Authority: Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.08 REPEALED

History

• Authority: § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.09 REPEALED

History

• Authority: § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed March 19, 1982; effective May 3, 1982. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.10 REPEALED

History

• Authority: T.C.A. § 68-50-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed August 31, 1990; effective November 28, 1990. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.11 REPEALED

History

• Authority: § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.12 REPEALED

History

• Authority: T.C.A. § 68-50-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed August 15, 1986; effective November 29, 1986. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.13 REPEALED

History

• Authority: T.C.A. § 68-115-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed March 19, 1982; effective May 3, 1982. Amendment filed June 22, 1984; effective July 22, 1984. Amendment filed March 14, 2005; effective May 28, 2005. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.14 REPEALED

History

• Authority: § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed May 27, 1983; effective June 27, 1983. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.15 REPEALED

History

• Authority: T.C.A. § 68-50-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed June 22, 1984; effective July 22, 1984. Amendment filed June 11, 1986; effective July 11, 1986. Amendment filed August 31, 1990; effective November 28, 1990. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.16 REPEALED

History

• Authority: T.C.A. § 68-115-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed March 14, 2005; effective May 28, 2005. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.17 REPEALED

History

• Authority: § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed May 27, 1983; effective June 27, 1983. Amendment filed June 22, 1984; effective July 22, 1984. Amendment filed June 11, 1986; effective July 11, 1986. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.18 REPEALED

History

• Authority: § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed June 22, 1984; effective July 22, 1984. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.19 REPEALED

History

• Authority: § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed May 27, 1983; effective June 27, 1983. Amendment filed June 22, 1984; effective July 22, 1984. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.20 REPEALED

History

• Authority: T.C.A. § 53-6857.
• Administrative History: Original rule filed May 27, 1983; effective June 27, 1983. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.21 REPEALED

History

• Authority: T.C.A. §§ 53-6857 and 68-115-207.
• Administrative History: Original rule filed May 27, 1983; effective June 27, 1983. Amendment filed March 14, 2005; effective May 28, 2005. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.22 REPEALED

History

• Authority: § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed March 19, 1982; effective May 3, 1982. Amendment filed June 22, 1984; effective July 22, 1984. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.23 REPEALED

History

• Authority: § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.24 REPEALED

History

• Authority: § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Repeal filed June 22, 1984; effective July 22, 1984. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.25 REPEALED

History

• Authority: T.C.A. §§ 68-50-207 and 68-115-207 and § 8, Chapter 727, Public Acts of 1980.
• Administrative History: Original rule filed December 1, 1980; effective January 15, 1981. Amendment filed March 19, 1982; effective May 3, 1982. Amendment filed August 15, 1986; effective November 29, 1986. Amendment filed June 30, 1999; effective September 13, 1999. Amendments filed March 14, 2005; effective May 28, 2005. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.26 REPEALED

History

• Authority: T.C.A. §§ 53-6857, 68-50-207, and 68-115-207.
• Administrative History: Original rule filed May 27, 1983; effective June 27, 1983. Amendment filed June 11, 1986; effective July 11, 1986. Amendment filed August 31, 1990; effective November 28, 1990. Amendment filed March 14, 2005; effective May 28, 2005. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.27 REPEALED

History

• Authority: T.C.A. § 53-6857.
• Administrative History: Original rule filed May 27, 1983; effective June 27, 1983. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.28 REPEALED

History

• Authority: T.C.A. §§ 68-50-207 and 68-115-207.
• Administrative History: Original rule filed June 22, 1984; effective July 22, 1984. Amendment filed March 14, 2005; effective May 28, 2005. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.29 REPEALED

History

• Authority: T.C.A. § 68-50-207.
• Administrative History: Original rule filed June 22, 1984; effective July 22, 1984. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.30 REPEALED

History

• Authority: T.C.A. § 68-50-207.
• Administrative History: Original rule filed June 22, 1984; effective July 22, 1984. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.31 REPEALED

History

• Authority: T.C.A. § 68-50-207.
• Administrative History: Original rule filed June 22, 1984; effective July 22, 1984. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.32 REPEALED

History

• Authority: T.C.A. §§ 68-50-207 and 68-115-207.
• Administrative History: Original rule filed June 11, 1986; effective July 11, 1986. Amendment filed March 14, 2005; effective May 28, 2005. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.33 REPEALED

History

• Authority: T.C.A. § 68-115-207.
• Administrative History: Original rule filed December 19, 1997; effective March 4, 1998. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Tenn. Comp. R. & Regs. 0780-05-01-.34 REPEALED

History

• Authority: T.C.A. § 68-115-207.
• Administrative History: Original rule filed December 19, 1997; effective March 4, 1998. Repealed by Chapter 1149, § 2 of the 2008 Public Acts, effective July 1, 2008.

Chapter 0780-05-02 Private Protective Services

Tenn. Comp. R. & Regs. 0780-05-02-.01 PURPOSE

The purpose of this chapter is to provide for the administration and implementation of the Private Protective Services Licensing and Regulatory Act (T.C.A. §§ 62-35-101 et seq., herein referred to as the “Act”).

History

• Authority: T.C.A. § 62-35-129(b).
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988.

Tenn. Comp. R. & Regs. 0780-05-02-.02 DEFINITIONS

(1) As used in this chapter, unless the context otherwise requires, the definitions of terms contained in § 62-35-102 of the Act are applicable.

(2) The following definitions are also applicable in these rules:

(a) “Baton” means a club, nightstick, or baton that is designed and manufactured for use by a law enforcement officer or security guard/officer.

(b) “Chemical spray” means a chemical composition housed in a handheld dispenser that is designed and manufactured for the purpose of self-defense.

(c) “Employed” means to receive compensation, in any form, for the performance of security guard services and/or patrol services.

(d) “Rifle” means any firearm designed, made, or adapted to be fired from the shoulder and to use the energy of the explosive in a fixed metallic cartridge to fire a projectile through a rifled bore by a single function of the trigger.

(e) “Short barrel” means a barrel length of less than sixteen inches (16′′) for a rifle and eighteen inches (18′′) for a shotgun, or an overall firearm length of less than twenty-six inches (26′′).

(f) “Shotgun” means any firearm designed, made, or adapted to be fired from the shoulder and to use the energy of the explosive in a fixed shotgun shell to fire through a smoothbore barrel either a number of ball shot or a single projectile by a single function of the trigger.

(g) “Special event” means any public event that requires security services for a specific and defined period of time.

(h) “Special event permit” means a permit issued to a licensed Tennessee Contract Security Company that allows for the temporary employment of individuals for security guard and patrol services during a special event.

(i) “Stun gun” means a handheld, electronic control device designed and manufactured for self-defense which emits an electrical spark which may momentarily disable a person.

History

• Authority: T.C.A. §§ 62-35-118, 62-35-126, and 62-35-129.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed January 30, 1997; effective April 15, 1997. Amendments filed April 25, 2018; effective July 24, 2018. Amendments filed March 21, 2025; effective June 19, 2025. Emergency rules filed December 26, 2025; effective through June 24, 2026. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-02-.03 SWORN PEACE OFFICERS

(1) The provisions of the Act do not apply to a full-time sworn peace officer who receives compensation for services as a security guard, patrol guard, or watchperson under a contract with a private business that is properly licensed as a contract security company or registered as a proprietary security organization pursuant to the requirements of the Act. However, this paragraph shall not be construed to exempt such companies, corporations, partnerships, persons, or other organizations from the requirements of the Act, which may include to register as a proprietary security organization or obtain a license as a contract security company.

(2) At any reasonable time upon request, a private business which employs a full-time sworn peace officer or any other individual exempt from the requirements of the Act as a security guard, patrol guard, or watchperson shall make available to the Commissioner:

(a) A copy of the employment contract (if written);

(b) Any policy of insurance which covers or is purported to cover the acts or omissions of the individuals providing security services within the scope of their employment;

(c) Any credentials showing the individual is a full-time or retired law enforcement officer; and (d) Any other documents to show the individual is exempt from the Act’s registration requirements.

History

• Authority: T.C.A. §§ 62-35-103 and 62-35-129.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendments filed March 21, 2025; effective June 19, 2025.

Tenn. Comp. R. & Regs. 0780-05-02-.04 HOSPITALS

(1) If a hospital employs any armed security guards/officers in an employer-employee relationship, such hospital shall comply with all of the requirements for a proprietary security organization under the Act.

(2) If a hospital which employs only unarmed security guards/officers files a notice of revocation of voluntary submission to the provisions of the Act pursuant to T.C.A. § 62-35-123(b), such hospital shall remain subject to the prescribed civil or criminal penalties for acts or omissions occurring between receipt of the notice of voluntary submission and receipt of the notice of revocation.

History

• Authority: T.C.A. §§ 62-35-129(b), 62-35-130(b), and 62-35-136.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed October 21, 1988; effective December 5, 1988.

Tenn. Comp. R. & Regs. 0780-05-02-.05 FINGERPRINTING

(1) Any person required to submit classifiable fingerprints by the Act or this chapter shall be deemed to have supplied the required sets of fingerprints if that applicant causes a private company contracted by the State to electronically transmit that applicant’s classifiable prints directly to the TBI and FBI to forward an electronic report based on that applicant’s fingerprints to the Commissioner.

(2) Any person required to submit fingerprints by the Act or this chapter shall make the arrangements for the processing of his or her fingerprints with the company contracted by the State to provide electronic fingerprinting services directly and shall be responsible for the payment of any fees associated with the processing of fingerprints to the respective agent authorized by the TBI and FBI.

(a) Provided, however, that the Commissioner or the Commissioner’s designee may authorize the submission of three (3) sets of classifiable physical fingerprint cards, at the expense of the applicant and rolled by a qualified person acceptable to the Commissioner or the Commissioner’s designee, for good cause.

(3) In the event an applicant furnishes unclassifiable fingerprints or fingerprints that are unclassifiable by nature then the Commissioner may require the applicant to cease all functions as a security guard officer and the applicant shall submit new fingerprints together with any additional fee(s) charged by the TBI and/or FBI for processing the new fingerprints.

(4) In the event the State no longer contracts with any company to provide an electronic fingerprinting service, then the applicant shall submit three (3) classifiable TBI and FBI fingerprint cards with his or her application and shall pay the Commissioner all processing fees established by the TBI and FBI.

(5) All sets of classifiable fingerprints required by this rule shall be furnished at the expense of the applicant.

(6) Applicants shall in all cases be responsible for paying application fees as established by the Commissioner regardless of the manner of fingerprinting.

History

• Authority: T.C.A. §§ 62-35-105(a)(4)(E), 62-35-116(7), 62-35-119(a)(1)(B) and (C), 62-35-129(b), and 62-35-130(a).
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed July 19, 1990; effective September 2, 1990. Amendment filed February 28, 2001; effective May 14, 2001. Amendments filed December 4, 2015; effective March 3, 2016.

Tenn. Comp. R. & Regs. 0780-05-02-.06 INSURANCE REQUIREMENTS

(1) An applicant for a contract security company license shall furnish, in addition to the information specified in § 62-35-105(a) of the Act, a certificate of insurance which meets the requirements of § 62-35-114.

(2) A proprietary security organization which files a notice under § 62-35-123 of the Act shall furnish, in addition to the information specified therein, a certificate of insurance which meets the requirements of § 62-35-114.

(3) The insurance requirements of T.C.A. § 62-35-114 apply only to licensees and those proprietary security organizations which are covered by the Act. Such requirements do not apply to a private business which procures security guard and/or patrol services from a contract security company.

(4) In the event that a licensee or a proprietary security organization covered by the Act ceases to maintain insurance coverage which meets the requirements of the Act for any reason, such licensee or proprietary security organization shall not provide, employ, or undertake to provide or employ any security guard and/or patrol service until a proper insurance certificate is filed with the Commissioner.

History

• Authority: T.C.A. §§ 62-35-105, 62-35-123, and 62-35-129.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendments filed March 21, 2025; effective June 19, 2025.

Tenn. Comp. R. & Regs. 0780-05-02-.07 APPLICANTS FOR LICENSES

(1) Experience.

(a) Any applicant who seeks to qualify for a contract security company license on the basis of qualified experience must substantiate such experience with suitable documentation of employment (preferably written certifications from employers). The applicant’s claimed experience is subject to such independent verification by the Commissioner as may be deemed warranted.

(b) The Commissioner will not consider experience accumulated without any authorization, permit, or license required by applicable federal, state, or local law.

(2) Examination.

(a) Any applicant who seeks to qualify for a contract security company license by passing an examination must apply directly to the independent testing organization selected by the Commissioner to prepare and grade such examination. Payment of any examination (or reexamination) fee shall be the responsibility of the applicant.

(b) The examination for a contract security company license will cover the following subjects:

1. General duties of a contract security company business;

2. Field note taking and report writing;

3. Emergency procedures;

4. Legal powers and limitations;

5. De-escalation techniques;

6. Proper safe restraint techniques;

7. First aid;

8. Cardiopulmonary resuscitation (CPR);

9. Active shooter; and/or 10. The provisions of the Act and this chapter.

History

• Authority: T.C.A. §§ 62-35-118 and 62-33-129.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendments filed March 21, 2025; effective June 19, 2025.

Tenn. Comp. R. & Regs. 0780-05-02-.08 APPLICANTS FOR REGISTRATION CARDS

(1) Pending issuance or denial of a registration card, an individual may work as an unarmed security guard/officer if he or she:

(a) Has filed with the Commissioner an application which is sufficient on its face in all respects (except for proof of completion of required training). The Commissioner may consider the following documentation as proof that an application has been filed:

1. Postmarked certified United States Mail receipt addressed to the Tennessee Department of Commerce and Insurance and evidencing certified return receipt postage paid;

2. Receipt evidencing shipment of the application to the Tennessee Department of Commerce and Insurance via a commercial courier service;

3. United States Mail return receipt;

4. A printed confirmation for an application and payment summary; or 5. Such other evidence of filing as the Commissioner may deem acceptable;

(b) Has paid the prescribed application and licensing fee; and (c) Keeps on his or her person while on duty, a copy of the completed application that is on file with the Tennessee Department of Commerce and Insurance.

(d) Once an application for a security guard/officer has been denied, then the applicant may not perform the services of a security guard/officer by retaining a copy of a completed and filed application on his or her person.

(e) Once an application for a security guard registration has been denied based on a criminal record, the security guard must immediately cease and desist all security guard activities and may not reapply for a security guard registration, either armed or unarmed, for six (6) months from the date of the registration denial.

(f) A security guard/officer who is working on a pending application in a public school, public charter school, private school, or church-related school must also keep proof of all training requirements necessary to be posted in such school at all times while providing security or patrol services in or at such school, which may include:

1. A copy of a training form from a certified trainer indicated the completed training by the security guard/officer;

2. Any certifications, certificates, cards, or other documentation from an approved provider evidencing the security guard/officer’s completion of the required training; and/or 3. Any proof or documentation of the security guard/officer’s status being exempt from any training requirements.

(g) Any applicant who receives notification of the incomplete status of their application must immediately cease all work as a security guard until such deficiency in his/her application is remediated and the applicant can show proof of such remediation. The Commissioner may consider the following documentation as proof that any defect in an application has been remediated:

1. Correspondence, either in physical or electronic form, which confirms his/her application is complete;

2. Any evidence which tends to substantiate any missing documents and/or information not included in the applicant’s original application have now been received by the program; or 3. Any other evidence of filing as the Commissioner may deem acceptable.

(2) Any holder of, or applicant for, an unarmed security guard/officer registration card who wishes to act as an armed security guard/officer must file a separate application (with the prescribed application and licensing fee) for an armed security guard/officer registration card.

(3) A security guard/officer who holds an active registration card or who has applied for a registration card but who has not completed the additional training required by T.C.A. § 62- 35-118(a)(2)(B) must complete this additional training within fifteen (15) days of being employed by or otherwise providing services for a proprietary security organization that holds a license or permit for on-premises consumption from the alcoholic beverage commission or a beer board.

(4) If a security guard/officer is employed by a contract security company but not placed on a post that would require the additional training pursuant to T.C.A. § 62-35-118(a)(2)(B), then the security guard/officer will not need to complete the additional training unless or until the security guard/officer is placed on a post that would require the additional training required by T.C.A. § 62-35-118(a)(2)(B). If a security guard/officer has been employed by a contract security company for more than fifteen (15) days and is then placed on a post that requires the additional training pursuant to T.C.A. § 62-35-118(a)(2)(B), then the security guard/officer will have fifteen (15) days from the date of being placed on the post to complete the additional training, even if that exceeds fifteen (15) days from the date the guard was originally employed by the contract security company.

(5) A security guard/officer registrant or applicant who is or will be on a post that requires the additional training pursuant to T.C.A. §§ 62-35-118(a)(2)(B) or 62-35-118(e) must submit an application to the Commissioner to add the required classifications to his or her registration card that indicates this security guard/officer has or will complete the required trainings pursuant to T.C.A. §§ 62-35-118(a)(2)(B) or 62-35-118(e). This application must be submitted and all applicable fees paid prior to this guard working at this post. A copy of the application to add these trainings to the registration card must be kept on the security guard/officer’s person, as described in subdivision (1) of this rule.

(6) A security guard/officer who is working at a post requiring the additional training pursuant to T.C.A. §§ 62-35-118(a)(2)(B) or 62-35-118(e) must keep an active registration card showing the added trainings on the card or a copy of the submitted application to add classifications to his or her registration card and proof of the payment of all applicable fees on his or her person while working as a security guard at this post.

(7) (a) If an individual submits an application that is missing information or documentation required for the registration card, the Commissioner will inform the applicant of the deficiency and a deadline to submit the information. If the applicant fails to submit the information or documentation, the Commissioner may close the application, deny the application, or approve it with limitations, as determined within the discretion of the Commissioner.

(b) If an application has been denied due to the failure to provide required documentation or information, the applicant must submit a new application in order to obtain a registration card.

(c) If an application has been closed, it may be re-opened without additional fees or a new application if:

1. The missing information was related to court documents and the missing documents were submitted to the Commissioner within thirty (30) days of closure of the application;

2. The missing information or documents were related to any other deficiency with the application and the missing information or documents were submitted to the Commissioner within ten (10) days of closure of the application; or 3. The applicant submits the documents within a reasonable amount of time from the date of the closure and sufficient justification as to reason for the deficiency, as determined by the Commissioner.

(d) If an application is missing proof of training to add any of the modifiers to the registration card, the Commissioner may approve the application without the requested modifier after informing the applicant of the deficiency and providing an opportunity to submit the required information or documentation.

History

• Authority: T.C.A. §§ 62-35-103, 62-35-116, 62-35-119, and 62-35-129.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed October 21, 1988; effective December 5, 1988. Amendment filed July 19, 1990; effective September 2, 1990. Amendment filed December 14, 1990; effective January 28, 1991. Amendment filed February 28, 2001; effective May 14, 2001. Amendments filed March 21, 2025; effective June 19, 2025. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-02-.09 EXAMINATIONS OF APPLICANTS FOR REGISTRATION CARDS

(1) The examination(s) which must be passed by an applicant for a new registration card will be administered and graded by the applicant’s certified trainer. Such examination(s) shall be:

(a) Written or typed on paper, computer software, or online;

(b) Designed primarily to measure the applicant’s knowledge in the field of security guard and patrol service generally, rather than in policies, procedures, or requirements associated with a particular contract security company or proprietary security organization; and (c) Subject to review and evaluation by the Commissioner at any reasonable time upon request.

(2) If, after review and evaluation of an examination administered by a certified trainer, the Commissioner determines that it does not adequately cover the subjects required by § 62-35- 118 of the Act, the Commissioner shall notify the certified trainer in writing of such determination and the reason(s) for it. Upon receipt of such written notice, the certified trainer shall expeditiously revise the examination to the satisfaction of the Commissioner.

History

• Authority: T.C.A. §§ 62-35-118 and 62-35-129.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendments filed March 21, 2025; effective June 19, 2025.

Tenn. Comp. R. & Regs. 0780-05-02-.10 CERTIFICATES OF COMPLETION OF TRAINING

(1) When an applicant for a registration card (or renewal thereof) successfully completes the training, or applicable refresher training, (including any examination) required by the Act, the applicant’s certified trainer shall submit a statement to the Commissioner on the prescribed form. The statement shall contain:

(a) The name and certification number of the trainer;

(b) The name and Social Security number of the applicant;

(c) The nature of the training completed;

(d) The date of completion; and (e) The applicant’s examination score and/or firearms qualification score.

(2) The Commissioner may refuse to accept a statement submitted pursuant to paragraph (1) above if it is inaccurate or incomplete in any material respect.

(3) The Commissioner may refuse credit for training which is completed earlier than one (1) year prior to the date the application is received by the Tennessee Department of Commerce and Insurance.

(4) An applicant or registered security guard/officer who is requesting to have the de-escalation, safe and proper restraint, first aid, and/or CPR trainings required by T.C.A. § 62-35- 118(a)(2)(B) added to his or her registration card as classifications may complete such trainings through:

(a) A certified trainer approved by the Commissioner to provide any or all of these trainings;

(b) A recognized and/or accredited program approved by the Commissioner to provide any or all of these trainings;

(c) An individual training, program, or course that, in the discretion of the Commissioner, demonstrates sufficient training in the applicable subject; or (d) Any applicable local, state, or federal law enforcement training related to de-escalation, proper and safe restraint, first aid, and/or CPR trainings.

(5) An applicant or registered security guard/officer who is requesting to have the active shooter training required by T.C.A. § 62-35-118(e) added to his or her registration card as a classification may complete such training through:

(a) A certified trainer approved by the Commissioner to provide the training;

(b) A recognized and/or accredited program approved by the Commissioner to provide the training;

(c) An individual training, program, or course that, in the discretion of the Commissioner, demonstrates sufficient training in responding to an active shooter situation; or (d) Any applicable local, state, or federal law enforcement training related to active shooter training that is approved by the Commissioner.

(6) An applicant or registered security guard/officer who is requesting to have the trainings required by T.C.A. §§ 62-35-118(a)(2)(B) or 62-35-118(e) added to his or her registration card must have proof of the completed training(s) submitted to the Commissioner through a completed training form or through any other documentation approved by the Commissioner.

(7) A certified trainer, in his or her discretion, may give a copy of the completed training form to an applicant or registered security guard/officer.

History

• Authority: T.C.A. §§ 62-35-118(c) and 62-35-129(b).
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed October 21, 1988; effective December 5, 1988. Amendment filed July 19, 1990; effective September 2, 1990. Amendment filed December 14, 1990; effective January 28, 1991. Amendment filed February 28, 2001; effective May 14, 2001. Amendments filed March 21, 2025; effective June 19, 2025.

Tenn. Comp. R. & Regs. 0780-05-02-.11 CERTIFIED TRAINERS

(1) Qualifications:

(a) Any individual who seeks to provide training to a security guard/officer to meet the qualifications of the Act, including in the use of any approved firearm(s) and/or less than lethal weapons, must qualify as a certified trainer in accordance with § 62- 35-126 and this rule.

(b) An individual is qualified to provide training to a security guard/officer if the individual has sufficient experience, education, and/or teaching within the relevant subject areas the individual applies to train, as determined by the Commissioner. In addition to the one (1) year supervisory experience requirement, an individual must have at least five (5) years of experience working and/or instructing within the given subject to be qualified to become certified as a security guard/officer trainer. All experience must be based on full-time, compensated working experience specifically related to the security industry, which may include relevant military and/or law enforcement experience.

(c) A certified trainer does not need to hold a registration card related to the type of training the certified trainer is qualified to instruct, however, the certified trainer must be eligible for the type of registration card and/or classification(s) in order to be certified to instruct security guards/officers on the subject. The Commissioner may require the certified trainer to submit the same documentation required for a security guard/officer in order to establish the certified trainer is qualified with the Program. A certified trainer must notify the Commissioner within thirty (30) days of any incident, arrest, or other event that impacts the trainer’s qualifications or ability to instruct security guards/officers.

(d) In order to be qualified to provide enhanced armed guard training, a certified officer must demonstrate personal experience and qualifications in the use and handling of rifles and shotguns, which must include relevant full-time law enforcement, security, and/or military experience.

(e) All experience and education submitted for approval by the Commissioner must be specific to the requested certification and verifiable for the Commissioner. Failure for education or experience to be properly verified may result in the denial of a request for a certification.

(2) Any individual who wishes to become a certified trainer shall submit an application to the Commissioner on the prescribed form. The application shall include:

(a) The full name and business address of the applicant;

(b) Date and place of birth;

(c) One (1) set of classifiable electronic fingerprints as required by the provider approved by the Commissioner;

(d) One (1) head-and-shoulder photograph taken within the last six (6) months;

(e) Disclosure of any affiliation with a contract security company or proprietary security organization;

(f) Identification of the training that the applicant desires to administer:

1. Unarmed security guard/officer training; and/or 2. Armed security guard/officer training.

(g) Identification of any additional classifications of training that the applicant desires to administer:

1. Baton training;

2. Chemical spray training;

3. Stun gun training;

4. De-escalation techniques;

5. Proper and safe restraint techniques;

6. First aid training;

7. Cardiopulmonary resuscitation (CPR) training;

8. Active shooter training; and/or 9. Enhanced armed guard training.

(h) A resume outlining the education and experience of the applicant, including descriptions of all employment or occupations engaged in during the immediate past five (5) years;

(i) Any documentary evidence of qualifications to conduct the training required by the Act, including but not limited to:

1. An instructor’s certificate issued by the Tennessee Peace Officer Standards and Training Commission;

2. An instructor’s certificate issued by a federal, United States military, state, county, or municipal law enforcement agency;

3. An instructor’s certificate issued by the National Rifle Association;

4. For each type of less than lethal weapons training which the applicant desires to provide, a certificate showing that the applicant has completed a course in the instruction of persons in the proper use of the less than lethal weapon and the liabilities associated with its use;

5. For each type of less than lethal weapons training which the applicant desires to provide, a notarized statement by the applicant to the effect that the applicant has, for at least one (1) year prior to November 1, 1996, provided training to security guard/officers or law enforcement officers in the proper use of the less than lethal weapon and the liabilities associated with its use;

6. An active instructor’s certificate issued by the American Red Cross or another recognized and qualified cardiopulmonary resuscitation (CPR) and/or first aid training organization or association;

7. An instructor’s certificate from any certifying agency, association, company, or organization showing the applicant is qualified to instruct individuals on deescalation and/or safe and proper restraint techniques;

8. An instructor’s certificate from any certifying agency, association, company, or organization showing the applicant is qualified to instruct individuals on active shooter trainings; and/or 9. Any letters of recommendation from any previous employers, government agencies, or other qualified individuals or entities that attest to the applicant’s ability to provide trainings pursuant to §§ 62-35-118(a)(2)(B) or 62-35118(e).

(j) The name and qualifications of any instructor whom the applicant intends to appoint to assist in the implementation of the training program.

(3) Each applicant for certification as a trainer must be at least twenty-one (21) years of age and meet the qualifications for a registration card set forth in T.C.A. § 62-35-117. The one (1) year of supervisory experience required by T.C.A. § 62-35-126(a)(2) may consist wholly or partially of teaching the subject of security guard and patrol service.

(4) A trainer shall notify the Commissioner in writing within ten (10) days of any material change in information furnished in connection with an application for certification.

(5) If the Commissioner determines that an applicant for certification as a trainer is qualified to conduct only one (1) type of training permitted by this rule, the Commissioner shall limit the terms of the trainer’s certificate accordingly.

(6) Any instructor assisting in the implementation of a training program shall be under the supervision and control of the certified trainer by which he was appointed. The certified trainer shall be accountable for the performance of each instructor appointed.

(7) Any certified trainer appointing an instructor shall at the time of such appointment submit to the Commissioner documentation that the instructor meets the requirements of T.C.A. § 62- 35-126(c).

(8) If a certified trainer appoints an instructor to assist in any training, the instructor must be under the direct supervision of the certified trainer. The instructor shall not provide any training that the certified trainer is not certified to provide to security guards/officers, unless the instructor has been separately and independently approved by the Commissioner to provide said training. A certified trainer will be responsible and accountable for the actions of his or her instructor.

(9) The nonrefundable fee for certification as a trainer shall be one hundred and sixty dollars ($160.00). The certification shall expire two (2) years after the date of issuance, and shall be renewable upon payment of the renewal fee.

(10) The nonrefundable, nonproratable fee for timely renewal of certification as a certified trainer is one hundred and sixty dollars ($160.00). “Timely renewal” means that all documentation and fees required for renewal have been received by the Department of Commerce and Insurance prior to the expiration of that certified trainer certification.

(11) A certified trainer’s certificate, or a copy thereof, shall be conspicuously displayed at the trainer’s business address.

(12) When a security guard/officer has successfully completed training for a less than lethal weapon listed in this rule, the trainer shall provide the security guard/officer with a card on which the trainer has certified that the security guard/officer has successfully completed the appropriate training required to carry the weapon.

(13) No certified trainer may conduct online training for security guards or security guard applicants for the purpose of meeting the requirements of the Act unless the training has been approved of by the Commissioner to be provided in an online format. A certified trainer who wants to provide online training must submit an application to the Commissioner that includes the following information and documentation:

(a) The specific type of training that will be provided online;

(b) The method, type, and provider for the online training;

(c) The methods the trainer will use to ensure authenticity of who receives the training; and (d) Copies of the provided training or access to the course and examination.

(14) Any training requirements in T.C.A § 62-35-118 that are related to the classroom firearm training, using a silhouette target course, or active shooter training shall be completed in person and shall not be conducted in whole or in part in an online setting. Notwithstanding this requirement, a trainer may use a computer or other electronic means to administer any written examinations required for these trainings or electronic media to assist in providing in person training. Any additional trainings related to these requirements that exceeds the statutory minimum training requirements may be completed in whole or in part online or remotely at the discretion of the trainer.

(15) Any certified trainer who wants to add any of the classifications listed in (2)(g)1.–8. to his or her certification must complete an application to add the classification(s) to his or her certification, submit proof of his or her qualifications to provide training in each classification the trainer is applying to add to his or her certification, and pay a nonrefundable fee of twenty-five dollars ($25.00).

(16) Any certified trainer who wants to add the classification listed in (2)(g)(9) to his or her certification must complete an application to add the classification to his or her certification, submit proof of his or her qualifications to provide training in the classification the trainer is applying to add to his or her certification, and pay a nonrefundable fee of one hundred dollars ($100.00). A certified trainer who wishes to renew this certification shall pay a nonrefundable fee of one hundred dollars ($100.00), which shall be due upon expiration and renewal of the certified trainer’s certificate. This renewal fee will not be prorated.

(17) Any certified trainer who wants to add the classification listed in (2)(g) to his or her certification must submit a curriculum, class information, examination, and any additional information requested by the Commissioner, for review prior to being approved to provide this training. The Commissioner may audit any training course prior to approval or at any time after, at the Commissioner’s discretion.

History

• Authority: T.C.A. §§ 62-35-118, 62-35-118(a), 62-35-126, 62-35-129, and 62-35-129(b).
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed October 21, 1988; effective December 5, 1988. Amendment filed July 19, 1990; effective September 2, 1990. Amendment filed January 30, 1997; effective April 15, 1997. Amendments filed March 21, 2025; effective June 19, 2025. Emergency rules filed December 26, 2025; effective through June 24, 2026. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-02-.12 TRAINING RECORDS

(1) A certified trainer shall maintain accurate records of all students enrolled in any training program administered by the trainer. The records shall include all information and ratings considered by the certified trainer in determining whether a student has successfully completed the training program.

(2) The records required to be kept under paragraph (1) above shall be maintained for a period of at least three (3) years after the student’s completion of the training program. Such records shall be made available to the Commissioner at any reasonable time upon request.

(3) All training forms must contain the original signature of the certified trainer or such other likeness of the legal signature as the Commissioner may deem acceptable. Electronic signatures may be accepted only if they are in a format that cannot be edited or modified after being placed on the training form by the certified trainer.

History

• Authority: T.C.A. §§ 62-35-118 and 62-35-129(b).
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed January 30, 1997; effective April 15, 1997. Amendment filed February 28, 2001; effective May 14, 2001. Amendments filed March 21, 2025; effective June 19, 2025.

Tenn. Comp. R. & Regs. 0780-05-02-.13 MONITORING OF TRAINING PROGRAMS

As a condition of licensure, a certified trainer agrees to periodic monitoring of his/her training program by the Commissioner of Commerce and Insurance or the Commissioner’s designee for the purpose of evaluating the program content, instructor performance, or any other relevant aspect of the administration and conduct of such training program. The certified trainer shall provide the Department with training program dates, times, and locations upon the request of the Department.

History

• Authority: T.C.A. § 62-35-129(b).
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed February 28, 2001; effective May 14, 2001.

Tenn. Comp. R. & Regs. 0780-05-02-.14 WITHDRAWAL OF CERTIFICATION

(1) The Commissioner may withdraw the certification of a trainer if, after reasonable notice and opportunity for hearing, the Commissioner finds that such trainer:

(a) Has violated any provision of the Act or this chapter;

(b) Has become certified through fraud or misrepresentation;

(c) Has falsified any statement or record required to be submitted or kept hereunder;

(d) Has been convicted by a court of competent jurisdiction of a felony or a misdemeanor, if the Commissioner finds that such conviction reflects unfavorably on the trainer’s fitness for certification; or (e) Is demonstrably incompetent to conduct the training required by the Act.

(2) If an individual wishes to terminate his status as a certified trainer, he shall notify the Commissioner in writing. The notice shall include the effective date of the desired termination, and shall be accompanied by the certified trainer’s original certificate.

(3) A withdrawal of certification under this rule shall not affect the creditability of any hours of training satisfactorily completed by a student prior to the effective date of such withdrawal.

History

• Authority: T.C.A. § 62-35-129(b).
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed October 21, 1988; effective December 5, 1988.

Tenn. Comp. R. & Regs. 0780-05-02-.15 AUTHORIZED WEAPONS

(1) Firearms - The holder of a valid armed security guard/officer registration card may carry a firearm in the performance of duties only if:

(a) Armed security guard/officer:

1. The security guard has qualified pursuant to § 62-35-118(b)(2) in the use of such firearm. The security guard must be qualified by a certified trainer for each firearm used in the security guard’s employment; and 2. The firearm is a standard .38 special, .32 auto, .357 magnum, .357 SIG, .380 auto, 9mm, 10mm, .40 S&W, .45 ACP or GAP caliber revolver or semiautomatic pistol, or other firearm approved by the Commissioner. No person shall carry a firearm classified as a pistol caliber carbine, regardless of whether it is classified as a pistol and/or utilizes handgun cartridges, unless the firearm has been approved by the Commissioner for enhanced armed guards and the individual is registered as an enhanced armed guard to use the firearm.

2. No person acting as an armed security guard shall be authorized to carry a short barrel rifle unless the person is authorized to use such firearm as an enhanced armed guard. A short barrel rifle shall be considered a rifle pursuant to these rules.

3. Pursuant to Chapter 344 of the Public Acts of 2025, effective January 1, 2026, no armed security guard/officers will be able to carry a shotgun while providing security services unless the individual has been certified as an enhanced armed security guard/officer. Any armed security guard/officer who has only qualified with a shotgun must qualify with an approved firearm to continue to work as an armed security guard/officer.

(b) Enhanced armed security guard/officer:

1. An enhanced armed security guard/officer may carry any firearm the armed security guard/officer is qualified to carry as an armed security guard/officer.

2. Only an individual who is actively certified as an enhanced armed security guard/officer may use a rifle or shotgun, including a short barrel rifle or short barrel shotgun, during the performance of the armed security guard/officer’s duties as a security guard/officer if it is in compliance with federal law and these rules.

3. In addition to any other firearm the enhanced armed guard is approved to use as an armed security guard/officer, the enhanced armed guard may obtain approval to use a:

(i) Standard, pump-action 12-gauge shotgun; and/or (ii) Standard .223 Rem or 5.56 NATO bolt-action or semi-automatic rifle.

4. A standard shotgun has a fixed stock and does not include a tactical shotgun.

(c) No security guard/officer shall carry a firearm on their person while acting in the role of a security guard/officer regardless of whether or not such individual possesses a handgun carry permit issued by the Department of Safety or is otherwise able to lawfully carry a firearm as a private citizen, unless the security guard is properly registered and certified to carry the firearm pursuant to the Act.

(2) Other Weapons - A security guard/officer may carry a baton, a stun gun or a chemical spray only if:

(a) The security guard/officer has successfully completed the appropriate training for the use of the weapon as established by this rule;

(b) The security guard/officer carries on his or her person a card signed by a trainer certified by the Commissioner to conduct such training to the effect that the security guard/officer has successfully completed the training required to carry the weapon which was administered by the trainer.

(c) The security guard/officer has obtained authorization from the contract security company or proprietary security organization which employs the security guard/officer.

(3) Prior to carrying a baton, a security guard/officer shall complete a minimum of four (4) hours of training administered by a trainer who has been certified by the Commissioner to train security guards/officers in the use of the baton. Such training shall consist of instruction in the proper use of a baton and the liabilities associated with the use of the baton.

(4) Prior to carrying chemical spray, a security guard/officer shall complete a minimum of four (4) hours of training administered by a trainer who has been certified by the Commissioner to train security guards/officers in the use of chemical spray. Such training shall consist of instruction in the proper use of chemical spray and the liabilities associated with the use of chemical spray.

(5) Prior to carrying a stun gun, a security guard/officer shall complete a minimum of four (4) hours of training administered by a trainer who has been certified by the Commissioner to train security guards/officers in the use of stun guns. Such training shall consist of instruction in the proper use of a stun gun and the liabilities associated with the use of the stun gun.

(6) A security guard/officer may not possess any type of weapon that is not provided for by this

rule while acting as a security guard/officer.

History

• Authority: T.C.A. §§ 62-35-129 and 62-35-134.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed October 21, 1988; effective December 5, 1988. Amendment filed April 16, 1992; effective May 31, 1992. Amendment filed January 30, 1997; effective April 15, 1997. Amendment filed February 28, 2001; effective May 14, 2001. Amendments filed March 21, 2025; effective June 19, 2025. Emergency rules filed December 26, 2025; effective through June 24, 2026. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-02-.16 CHANGES OF ADDRESS

(1) A licensee, certified trainer, or proprietary security organization which has filed a notice under § 62-35-123 of the Act shall notify the Commissioner in writing within ten (10) days of any change of business address.

(2) A registrant shall notify the Commissioner in writing within ten (10) days of any change in residential address.

History

• Authority: T.C.A. §§ 62-35-123 and 62-35-129.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed July 19, 1990; effective September 2, 1990. Amendments filed March 21, 2025; effective June 19, 2025.

Tenn. Comp. R. & Regs. 0780-05-02-.17 NOTIFICATION OF TERMINATION

A licensee or proprietary security organization shall notify the Commissioner in writing within ten (10) days of the death or termination of an employee/registrant for any occurrence which could reasonably be expected to affect the employee/registrant’s right to hold a certificate of registration under this chapter.

History

• Authority: T.C.A. §§ 62-35-124 and 62-35-129(b).
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed July 19, 1990; effective September 2, 1990.

Tenn. Comp. R. & Regs. 0780-05-02-.18 INVESTIGATIONS AND COMPLAINTS

(1) The Commissioner may investigate any person engaged, or suspected of engaging, in any business or activity regulated under the Act.

(2) Upon receipt of any written complaint against a licensee, registrant, certified trainer, or proprietary security organization which has filed a notice under T.C.A. § 62-35-123 of the Act, the Commissioner shall promptly transmit a copy of such complaint to the accused party.

Such party shall, within twenty (20) days, file a written answer to the complaint with the Commissioner.

(3) Every licensee and proprietary security organization shall maintain a copy of its roster of security guard(s)/officer(s) and/or exempt individuals providing security or patrol services.

Every licensee and proprietary security organization shall provide such roster upon request of the Commissioner or his or her designees upon request. Failure to immediately furnish a copy of the requested roster is a violation of T.C.A. § 62-35-130(a)(11) and any other related provisions under the Act.

(4) Any licensee, registrant, or other individual, partnership, company, corporation, or entity required to comply with T.C.A. § 62-35-142 shall maintain a copy of its guard roster and provide such guard roster upon request of the Commissioner or his/her designees. Failure to immediately furnish a copy of the requested roster is a violation of T.C.A. § 62-35-130(a)(11) and any other related provisions under the Act.

History

• Authority: T.C.A. §§ 62-35-129, 62-35-130, and 62-35-142.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendments filed March 21, 2025; effective June 19, 2025.

Tenn. Comp. R. & Regs. 0780-05-02-.19 PROHIBITED REPRESENTATIONS

No licensee, registrant, certified trainer, or proprietary security organization shall represent that it (he/she), or any aspect of its (his/her) business or activity, has been recommended or endorsed by the commissioner.

History

• Authority: T.C.A. § 62-35-129(b).
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988.

Tenn. Comp. R. & Regs. 0780-05-02-.20 SURRENDER OF LICENSE OR REGISTRATION CARD

Any license or registration card which is revoked or suspended by the commissioner pursuant to § 62-35- 130 of the Act shall be surrendered to the commissioner within ten (10) days of the effective date of the revocation or suspension.

History

• Authority: T.C.A. § 62-35-129(b).
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988.

Tenn. Comp. R. & Regs. 0780-05-02-.21 COPY FEE

The Commissioner may provide access to the Act and any rules promulgated thereunder in an electronic format through the Department’s website to any licensee, proprietary security organization, or any other person.

History

• Authority: T.C.A. §§ 62-35-129 and 62-35-133.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-02-.22 ENHANCED ARMED GUARDS

(1) Only an armed security guard/officer who holds a valid armed security guard/officer registration card with an enhanced armed guard certification may provide security guard services while using a shotgun and/or rifle. An armed security guard/officer who holds an enhanced armed guard certification may only use a rifle or shotgun that the individual has qualified to carry.

(2) An individual who applies for an enhanced armed guard certification must complete an approved training that is no less than sixteen (16) hours in length, and shall include training covering the following subjects:

(a) Scenario-based training on when a rifle-caliber weapon and/or shotgun may be deployed in an offensive or defensive posture;

(b) Training on the secure storage of a rifle-caliber weapon and/or shotgun when the weapon is not deployed, in compliance with § 62-35-144(c)(1)(B);

(c) A written exam of at least twenty-five (25) questions that covers appropriate nomenclature and safety procedures. An individual must score at least a seventy-five (75%) percent correct score on this examination; and (d) A course of fire that includes the following items integrated into different drills:

1. Firing from a mix of standing and supported positions;

2. Firing from a mix of standing and moving positions;

3. Scenario-based drills that include moving through different locations; and 4. Scenario-based drills involving reloading the firearm or changing magazines.

4. For a rifle-caliber course:

(i) Firing at least ninety (90) total rounds of live ammunition and scoring at least seventy (70%) accuracy across all distances; and (ii) Firing from distances of at least seven (7) yards, fifteen (15) yards, twentyfive (25) yards, and fifty (50) yards.

(iii) The course of fire shall use IPSC/USPSA paper silhouettes with A/B/C scoring zones or any other target/silhouettes approved by the Commissioner.

6. For a shotgun course:

(i) Firing at least twenty (20) total rounds of live ammunition, including both buckshot and slugs, and scoring at least seventy (70%) percent accuracy across all distances; and (ii) Firing from distances of at least seven (7) yards, twelve (12) yards, and twenty (20) yards.

(iii) The course of fire shall use IPSC/USPSA paper silhouettes with A/B/C scoring zones or any other target/silhouettes approved by the Commissioner.

7. An approved certified trainer or other individual who has been approved to provide the enhanced armed guard training shall have the discretion to determine how drills will be set during the training; however, the trainer must ensure that the entire course of fire includes the elements listed above.

(e) Nothing shall prohibit an approved certified trainer or other individual who has been approved to provide the enhanced armed guard training from requiring passing scores on the written exam or course of fire that are higher than the percentages listed above.

Nothing shall prohibit an approved certified trainer or other individual who has been approved to provide the enhanced armed guard training from failing an individual taking the training or requiring remediation related to any observed or noted safety concerns or violations committed by the individual completing the training.

(3) An individual who is disqualified from a registration card pursuant to § 62-35-117 will be ineligible for an enhanced armed guard certification as long as the disqualification is in effect.

(4) An individual who has resigned or retired in lieu of termination is not considered to have retired or separated in good standing, pursuant to § 62-35-144.

(5) The Commissioner will only accept training for an enhanced armed guard certification that has been completed within one (1) calendar year of the date of the application for the certification.

(6) An individual who has qualified for a firearm under an enhanced armed guard certification must requalify with the firearm in order to renew the certification, pursuant to this rule and § 62-35-122(d), on a course of fire and with a written examination consistent with the requirements of this rule.

History

• Authority: T.C.A. §§ 62-35-122, 62-35-123, 62-35-126, and 62-35-129.
• Administrative History: Original rule filed November 17, 1987; effective January 1, 1988. Amendment filed October 21, 1988; effective December 5, 1988. Amendment filed February 28, 2001; effective May 14, 2001. Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-02-.23 FEES

(1) Contract Security Company:

(a) An application for a contract security company shall be accompanied by a nonrefundable, nonproratable application fee of three hundred dollars ($300.00) plus any fingerprint processing fees set by the Tennessee Bureau of Investigation and the Federal Bureau of Investigation.

(b) The Commissioner shall issue a contract security company certification in a form prescribed by the Commissioner upon successful completion of all licensing requirements and upon receipt of a nonrefundable, nonproratable certification fee in accordance with the following schedule:

Number of security guards employed by the company: Amount of fee: 0 - 49 $125.00 50+ $425.00 (c) The fee for the timely renewal of a contract security company certification is:

Number of security guards employed by the company: Amount of fee: 0 - 49 $300.00 50+ $600.00 “Timely renewal” means all documents and fees required for renewal have been received by the Department of Commerce and Insurance prior to the expiration date of the company certification.

(d) The penalty for the late renewal of a contract security company certification shall be in the amount of one hundred dollars ($100.00) for each month which elapses during the three (3) month late renewal period. The penalty for late renewal is nonrefundable and cannot be prorated for portions of any month. Any company which does not submit complete renewal documentation and fees within three (3) months of the company certification expiration must reapply.

(2) Certified Trainer:

(a) An application for a certified trainer’s license shall be accompanied by an application fee in the amount of one hundred dollars ($100.00), a registration fee in the amount of sixty dollars ($60.00), and any fingerprint processing fees set by the Tennessee Bureau of Investigation and the Federal Bureau of Investigation. All registration and application fees shall be nonrefundable and nonproratable.

(b) The Commissioner shall issue a certified trainer’s license in a form prescribed by the Commissioner upon successful completion of all licensing requirements.

(c) The fee for the timely renewal of a trainer certification is one hundred fifty dollars ($150.00). “Timely renewal” means all documents and fees required for renewal have been received by the Department of Commerce and Insurance prior to the expiration date of the certified trainer’s license.

(d) The penalty for the late renewal of a certified trainer’s license shall be in the amount of fifty dollars ($50.00) for each month which elapses during the three (3) month late renewal period. The penalty for late renewal is nonrefundable and cannot be prorated for portions of any month. Any certified trainer who does not submit complete renewal documentation and fees within three (3) months of the certified trainer’s license expiration must reapply.

(3) Security Guard:

(a) Armed Security Guard:

1. An application for an armed security guard registration shall be accompanied by an application fee in the amount of one hundred dollars ($100.00), a registration fee in the amount of thirty dollars ($30.00), and any fingerprint processing fees set by the Tennessee Bureau of Investigation and the Federal Bureau of Investigation. All registration and application fees shall be nonrefundable and nonproratable.

2. The Commissioner shall issue an armed guard registration in a form prescribed by the Commissioner upon successful completion of the registration requirements.

3. The nonrefundable, nonproratable fee for timely renewal of an armed security guard is eighty-five dollars ($85.00). “Timely renewal” means that all documentation and fees required for renewal have been received by the Department of Commerce and Insurance prior to the expiration of the armed security guard registration.

4. The penalty for late renewal of an armed security guard shall be in the amount twenty dollars ($20.00) for each month which elapses during the three (3) month late renewal period. The penalty is nonrefundable and will not be prorated for portions of a month. Any armed security guard who does not submit all required documentation and fees within three (3) months of the armed security guard expiration must reapply.

5. The fee for a conditional armed guard registration is fifteen dollars ($15.00).

(b) Unarmed Security Guard:

1. An application for an unarmed security guard shall be accompanied by an application fee in the amount of seventy-five dollars ($75.00), a registration fee in the amount of twenty dollars ($20.00), and any fingerprint processing fees set by the Tennessee Bureau of Investigation and the Federal Bureau of Investigation.

All registration and application fees shall be nonrefundable and nonproratable.

2. The Commissioner shall issue an unarmed guard registration in a form prescribed by the Commissioner upon successful completion of the registration requirements.

3. The nonrefundable, nonproratable fee for timely renewal of an unarmed security guard is seventy dollars ($70.00). “Timely renewal” means that all documentation and fees required for renewal have been received by the Department of Commerce and Insurance prior to the expiration of that unarmed security guard registration.

4. The penalty fee for late renewal of either an armed or unarmed security guard shall be in the amount twenty dollars ($20.00) for each month which elapses during the three (3) month late renewal period. The penalty is nonrefundable and will not be prorated for portions of a month. Any security guard who does not submit all required documentation and fees within three (3) months of the security guard expiration must reapply.

(c) Changing Guard Status:

1. Individuals who wish to change registration status from an unarmed guard to an armed guard or from an armed guard to an unarmed guard are required to complete a new application and pay all applicable application and licensing fees.

(d)

Adding Classifications to a Registration Card:

1. To add classifications to a security guard registration card regarding the trainings listed in §§ 62-35-118(a)(2)(B) or 62-35-118(e), a security guard/officer must:

(i) Indicate on the security guard/officer’s initial or any renewal application that the applicant intends to add these classifications to the armed security guard/officer’s registration card, timely complete the necessary trainings, and provide proof of these trainings to the Commissioner; or (ii) Complete an application to add these classifications to the armed security guard/officer’s registration card, timely complete the necessary trainings, provide proof of these trainings to the Commissioner, and pay a nonrefundable twenty-five-dollar ($25.00) application fee. Upon approval, the security guard/officer will be issued a new card showing the added classifications. The application fee to add these classifications shall be per application, regardless of whether the application is to add one or more classifications to a single registration card.

2. To add the enhanced armed guard certification to a security guard registration card, a security guard/officer must:

(i) Complete an application to add this certification to the armed security guard/officer’s registration card, provide proof of all required training and qualifications, and pay a nonrefundable two hundred dollar ($200.00) application fee. Upon approval, the security guard/officer will be issued a separate card showing the enhanced armed guard certification.

(ii) The enhanced armed guard certification shall be effective for one (1) year from the date of issuance. If the security guard/officer’s armed guard registration becomes inactive, suspended, revoked, or expired while the enhanced armed guard certification is active, the enhanced armed guard certification shall automatically become inactive until the armed guard registration becomes active again. Any period of the enhanced armed guard certification becoming inactive shall not extend the expiration date of the certification.

(iii) In order to renew the enhanced armed guard certification, a security guard/officer must timely submit a renewal application and pay a nonrefundable application fee of two hundred dollars ($200.00). A late fee may be assessed per month consistent with these rules.

(4) Proprietary Security Organizations:

(a) A proprietary security organization that has a license or permit for on-premises consumption from the Tennessee Alcoholic Beverage Commission or a beer board shall submit an application to the Commissioner and pay a nonrefundable fee of one hundred dollars ($100).

(b) All other proprietary security organization registrations are exempt from the requirements to pay any fees, complete registration renewals, and the provisions related to registration expiration.

(c) Registration as a proprietary security organization that has a license or permit for onpremises consumption from the Alcoholic Beverage Commission or a beer board shall expire two years from the date it is granted.

(d) The fee for timely renewal of a proprietary security organization registration is one hundred dollars ($100.00). “Timely renewal” means that all documentation and fees required for renewal have been received by the Department of Commerce and Insurance prior to the expiration of the registration.

(e) The penalty fee for late renewal of a proprietary security organization registration shall be in the amount of twenty dollars ($20.00) for each month which elapses during the three (3) month late renewal period. The penalty is nonrefundable and will not be prorated for portions of a month. Any proprietary security organization that does not submit all required documentation and fees within three (3) months of the registration expiration must complete a new registration application.

(f) A proprietary security organization that is already registered with the Commissioner without completing the requirements listed above under subsection (4)(a) must submit an application to the Commissioner for a new registration to comply with the requirements of this section.

(5) The fee for a duplicate certification, license or registration is twenty-five dollars ($25.00).

History

• Authority: T.C.A. §§ 62-35-122, 62-35-123, 62-35-126, and 62-35-129.
• Administrative History: Original rule filed July 19, 1990; effective September 2, 1990. Amendment filed December 14, 1990; effective January 28, 1991. Amendment filed April 16, 1992; effective May 31, 1992. Amendment filed January 30, 1997; effective April 15, 1997. Amendment filed October 14, 1998; effective December 28, 1998. Amendment filed February 28, 2001; effective May 14, 2001. Amendments filed March 21, 2025; effective June 19, 2025. Emergency rules filed December 26, 2025; effective through June 24, 2026. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-02-.24 COMPLETION OF TRAINING

(1) Any security guard/officer who is either (1) employed by a proprietary security organization that holds a license or permit for on-premises consumption from the Tennessee Alcoholic Beverage Commission or a beer board; or (2) employed by a contract security company for the purposes of performing security guard and patrol services at a commercial establishment that holds a license or permit for on-premises consumption from the Tennessee Alcoholic Beverage Commission or a beer board; must submit an application to the Commissioner prior to providing services at this establishment to indicate that the security guard/officer will or has completed the necessary requirements to be qualified to work at this establishment and complete the necessary training described in T.C.A. § 62-35-118(a)(2)(B) within fifteen (15) days of providing services at this establishment.

(2) Any armed security guard/officer who is employed or contracted to provide security or patrol services at a public school, public charter school, private school, or church-related school must submit an application to the Commissioner prior to providing services at such school to indicate that the security guard/officer will complete or has completed the necessary requirements to be qualified to provide services at a school and complete the necessary training described in T.C.A. § 62-35-118 prior to providing any security or patrol services in or at the school. An armed security guard may submit an application prior to completing any or all required trainings, however, the armed security guard shall not provide security or patrol services prior to completing all required trainings.

(3) Approval or denial of completed training listed in T.C.A. §§ 62-35-118(a)(2)(B) or 62-35- 118(e) shall be at the discretion of the Commissioner. Acceptable forms of this training may include:

(a) De-escalation training:

1. A properly completed training form from a certified trainer who is approved by the Commissioner to provide this training evidencing the applicant’s completion of a de-escalation training that is no less than one (1) hour in duration;

2. A certificate or transcript from a nationally recognized organization evidencing the applicant’s completion of a de-escalation training that is no less than one (1) hour in duration;

3. A certificate or transcript from a local, state, or federal law enforcement agency or other government agency evidencing the applicant’s completion of a deescalation training that is no less than one (1) hour in duration; or 4. Any other documentation approved by the Commissioner to prove an applicant’s completion of a de-escalation training that is no less than one (1) hour in duration.

(b)

Proper and safe restraint training:

1. A properly completed training form from a certified trainer who is approved by the Commissioner to provide this training evidencing the applicant’s completion of a proper and safe restraint training that is no less than one (1) hour in duration;

2. A certificate or transcript from a nationally recognized organization evidencing the applicant’s completion of a proper and safe restraint training that is no less than one (1) hour in duration;

3. A certificate or transcript from a local, state, or federal law enforcement agency or other government agency evidencing the applicant’s completion of a proper and safe restraint training that is no less than one (1) hour in duration; or 4. Any other documentation approved by the Commissioner to prove an applicant’s completion of a proper and safe restraint training that is no less than one (1) hour in duration.

(c) First aid training:

1. A properly completed training form from a certified trainer who is approved by the Commissioner to provide this training evidencing the applicant’s completion of a first aid training that is no less than one (1) hour in duration;

2. A certificate or transcript from a nationally recognized organization evidencing the applicant’s completion of a first aid training that is no less than one (1) hour in duration;

3. A certificate or transcript from a local, state, or federal law enforcement agency, hospital, emergency services agency, or other government agency evidencing the applicant’s completion of a first aid training that is no less than one (1) hour in duration; or 4. Any other documentation approved by the Commissioner to prove an applicant’s completion of a first aid training that is no less than one (1) hour in duration.

(d) Cardiopulmonary resuscitation (CPR) training:

1. A properly completed training form from a certified trainer who is approved by the Commissioner to provide this training evidencing the applicant’s completion of a CPR training that is no less than one (1) hour in duration;

2. A certificate or transcript from a nationally recognized organization evidencing the applicant’s completion of a CPR training that is no less than one (1) hour in duration;

3. A certificate or transcript from a local, state, or federal law enforcement agency, hospital, emergency services agency, or other government agency evidencing the applicant’s completion of a CPR training that is no less than one (1) hour in duration; or 4. Any other documentation approved by the Commissioner to prove an applicant’s completion of a CPR training that is no less than one (1) hour in duration.

(e) Active shooter training:

1. A properly completed training form from a certified trainer who is approved by the Commissioner to provide this training evidencing the applicant’s completion of active shooter training that is no less than eight (8) hours in duration;

2. A certificate or transcript from a nationally recognized organization evidencing the applicant’s completion of active shooter training that is no less than eight (8) hours in duration;

3. A certificate or transcript from a local, state, or federal law enforcement agency, hospital, emergency services agency, or other government agency evidencing the applicant’s completion of active shooter training that is no less than eight (8) hours in duration;

4. Any other documentation approved by the Commissioner to prove an applicant’s completion of active shooter training that is no less than eight (8) hours in duration; or 5. A combination of completed active shooter trainings as evidenced by the types of acceptable trainings above that are in total at least eight (8) hours in duration.

(4) Any guard/officer or applicant who holds an active certification in de-escalation, proper and safe restraint, first aid and/or CPR from a nationally recognized organization and is in good standing with this certification by the certifying organization may submit proof of the active certification with any application by the guard or applicant, even if the certification training was more than one (1) year from the date of the application.

(5) Notwithstanding subsection (d) above, any trainings listed in subsection (c) must be completed within one (1) year of the date of the guard/officer’s or applicant’s application.

(6) If the Commissioner does not approve of an applicant or security guard/officer’s completed trainings required by T.C.A. §§ 62-35-118(a)(2)(B) and/or 62-35-118(e) but otherwise approves the application or renewal thereof submitted by an applicant or security guard, then the applicant or guard/officer shall immediately cease performing services as a security guard at a location or post requiring the training required for the location. If the applicant or security guard/officer otherwise holds an active registration card without these additional classifications, then the individual may continue to provide services as a security guard/officer on posts where the guard/officer is not required to have these additional trainings.

(7) Proof of refresher trainings related to the classifications listed in T.C.A. §§ 62-35- 118(a)(2)(B) and 62-35-118(e) shall meet the criteria listed in (b) of this rule.

History

• Authority: T.C.A. §§ 62-35-103, 62-35-115, 62-35-118, 62-35-119, 62-35-122, and 62-35-129.
• Administrative History: Original rule filed December 14, 1990. Repeal filed September 23, 2024; effective December 22, 2024. New rule filed March 21, 2025; effective June 19, 2025.

Tenn. Comp. R. & Regs. 0780-05-02-.25 SPECIAL EVENT PERMIT

(1) Any licensed Tennessee Contract Security Company that seeks to qualify for a special event permit as defined by § 62-35-105(d) shall submit an application to the Commissioner on a prescribed form. The application shall include:

(a) Names of temporary security officers;

(b) Addresses of temporary security officers;

(c) Birth dates of temporary security officers;

(d) Whether the temporary security officer is licensed in another jurisdiction, and if so, which state and license number;

(e) Names and registration numbers of all security guards providing security and/or patrol services at the event who are actively registered in Tennessee;

(f) Names, active status, and law enforcement affiliation of any individuals providing security and/or patrol services at the event who are exempt law enforcement officers under the Act; and (g) Identity, location, and date of special event for which the temporary security officers are to be employed.

(2) The nonrefundable fee shall be one thousand dollars ($1,000.00) per special event. The special event permit shall expire on the end date as indicated on the printed permit.

(3) The Commissioner reserves the right to limit, deny, and/or revoke any special event permit granted to a licensed Tennessee Contract Security Company, in accordance with §§ 62-35- 105(g) and 62-35-130. The Commissioner may limit, deny, and/or revoke any special event permit for any reason within the Commissioner’s discretion, which may include:

(a) The failure to submit a complete application within the time required by this rule;

(b) Any misconduct, fraud, misrepresentation, and/or prior discipline by the Contract Security Company;

(c) Any facts or circumstances that show a special event permit is not necessary to provide security for the event and/or that the request is for an event that is not deemed a special event; and/or (d) For any other circumstances that necessitate the limitation, denial, and/or revocation of the special event permit.

(4) Applications and temporary security officer rosters for a special event permit shall be submitted at least ten (10) days prior to the start date of the special event. The Contract Security Company shall provide written notice to the Commissioner of any additions to the roster prior to the event.

(5) As a condition of approval, the licensed Tennessee Contract Security Company affirms that each temporary security officer named on the application submitted in accordance with paragraph (1) will be identifiable by uniform as security officers employed under the special event license.

(6) As a condition of approval, the licensed Tennessee Contract Security Company affirms that each temporary security officer named on the application submitted in accordance with paragraph (1) has not worked more than ten (10) days in the current calendar year as a temporary security officer.

(7) Any licensed Tennessee Contract Security Company approved for a special event permit shall maintain accurate records for all persons employed as temporary security officers for a period of one (1) calendar year from the last day of the special event. The records shall include the name, date of birth, social security number, and number of days the temporary security officer has been employed as a temporary security officer during the current calendar year pursuant to § 62-35-105(d).

History

• Authority: T.C.A. §§ 62-35-105, 62-35-129, and 62-35-130.
• Administrative History: Original rule filed April 25, 2018; effective July 24, 2018. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-02-.26 CONTINUING EDUCATION

(1) Any continuing education submitted by certified trainers as part of their applications for renewal must be related to private security. The Commissioner shall have the discretion to determine whether any continuing education is relevant to private security and may accept in whole, accept in part, or deny any hours submitted for approval of continuing education.

(2) The twelve (12) required aggregate continuing education hours may be obtained from one or more providers.

(3) Continuing education courses that are relevant to private security may include, but are not limited to:

(a) Instructor-level courses provided by any private entities related to training individuals on any topic listed in § 62-35-118;

(b) Trainings by law enforcement or other governmental agencies related to training law enforcement officers, security guards, government officials, or other individuals on any topics related to emergency procedures or any other topic listed in § 62-35-118; and/or (c) Courses provided by any post-secondary education institutions related to any laws, duties, or responsibilities of law enforcement, private security, or first responders.

(4) Any continuing education courses submitted for approval must include the date of the course, number of hours for the training, subject of the course, information on who provided the training, sufficient information to substantiate that it is relevant, and information to allow the Commissioner to verify that the information provided by the applicant. The Commissioner may require the submission of additional documentation, such as a course listing, agenda, or other relevant documents to verify that the continuing education hours were sufficient in length and relevance under this rule.

(5) All continuing education must be completed within two (2) years preceding the date of expiration for the trainer’s certificate. No hours will roll over to the next renewal cycle.

(6) If a certified trainer has not completed his or her continuing education requirements during the appropriate renewal cycle, the Commissioner may deny the renewal application, close the application until the outstanding hours are completed, or hold the application pending completion of the outstanding hours. Additionally, the Commissioner may assess a civil penalty against the certified trainer for the failure to timely complete continuing education hours.

History

• Authority: T.C.A. §§ 62-35-129 and 62-35-140.
• Administrative History: New rules filed March 17, 2026; effective June 15, 2026.

Chapter 0780-05-03 Repealed

Tenn. Comp. R. & Regs. 0780-05-03 Repealed

RULES

OF THE DEPARTMENT OF COMMERCE AND INSURANCE

REGULATORY BOARDS

TABLE OF CONTENTS

Authority: T.C.A. §§56-1-308, 68-115-207, and 68-115-402; and Tenn. Pub. Acts of 2004, Chapter 930.

Administrative History: Original rule filed December 19, 1997; effective March 4, 1998. Repeal filed March 14, 2005; effective May 28, 2005.

Chapter 0780-05-04 Repealed

Tenn. Comp. R. & Regs. 0780-05-04 Repealed

RULES

OF THE DEPARTMENT OF COMMERCE AND INSURANCE

DIVISION OF REGULATORY BOARDS

Authority: T.C.A. §62-26-303(a). Administrative History: Original rule filed January 7, 1991; effective February 21, 1991. Repeal filed June 9, 2003; effective September 23, 2003.

Chapter 0780-05-05 Repealed

Tenn. Comp. R. & Regs. 0780-05-05-.01 REPEALED

History

• Authority: T.C.A. § 62-31-207(a).
• Administrative History: Original rule filed February 6, 1991; effective March 23, 1991. Repealed by Chapter 731 of the 1996 Public Acts, effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-05-.05 REPEALED

History

• Authority: T.C.A. §§ 62-31-202 and 62-31-207(a).
• Administrative History: Original rule filed February 6, 1991; effective March 23, 1991. Repealed by Chapter 731 of the 1996 Public Acts, effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-05-.02 REPEALED

History

• Authority: T.C.A. § 62-31-207(a).
• Administrative History: Original rule filed February 6, 1991; effective March 23, 1991. Repealed by Chapter 731 of the 1996 Public Acts, effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-05-.03 REPEALED

History

• Authority: T.C.A. §§ 62-31-202 and 62-31-207(a).
• Administrative History: Original rule filed February 6, 1991; effective March 23, 1991. Repealed by Chapter 731 of the 1996 Public Acts, effective July 1, 1996. 0780-05-05-04 REPEALED. Authority: T.C.A. §§ 62-31-201, 62-31-202, and 62-31-207(a).

Chapter 0780-05-06 Soil Scientists

Tenn. Comp. R. & Regs. 0780-05-06-.01 PURPOSE

The rules in this chapter implement the Tennessee Soil Scientist Licensure Act of 2009, Tennessee Code Annotated, Title 62, Chapter 18.

History

• Authority: T.C.A. § 62-18-211.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011.

Tenn. Comp. R. & Regs. 0780-05-06-.02 DEFINITIONS

Definitions for this chapter shall be as follows:

(1) “Inactive” means a professional soil scientist who has obtained inactive status from the commissioner and is not required to comply with continuing education requirements as prescribed herein. A professional soil scientist in inactive status may not engage in the practice of soil science;

(2) “Retired” means a professional soil scientist who has obtained retired status from the commissioner and is not required to comply with continuing education or renewal requirements or pay renewal fees as prescribed herein. A retired professional soil scientist may not engage in the practice of soil science and a license in retired status may not be reactivated.

History

• Authority: T.C.A. § 62-18-211.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011. Repeal and new rule filed July 25, 2014; effective October 23, 2014.

Tenn. Comp. R. & Regs. 0780-05-06-.03 APPLICATION FOR LICENSE

(1) Any person who seeks to be licensed as a professional soil scientist shall complete an application on a form prescribed by the commissioner and submit such application to the commissioner accompanied by the required fee and additional documentation.

(2) Applications for licensure are available upon request from the commissioner.

(3) Any application submitted which is deficient or fails to meet all application requirements for licensure will be returned to the applicant with written notification of the nature of the deficiencies and will be placed in “pending” status. Satisfactory completion of application must be made within sixty (60) days from the date of initial application. If satisfactory completion is not made within this period the application will be deemed denied; however, the applicant may submit a new application and fee.

(4) Any application submitted may be withdrawn; however, any submitted application fee will not be refunded.

History

• Authority: T.C.A. § 62-18-211.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011.

Tenn. Comp. R. & Regs. 0780-05-06-.04 APPLICATION REQUIREMENTS

(1) Any person who desires to obtain a license as a professional soil scientist shall submit an application to the commissioner, along with the required application fee and all required documentation, including proof that the applicant:

(a) Has graduated from an accredited college or university with a Bachelor of Science degree or higher in soils, agronomy or a closely related field. The applicant shall have successfully completed a minimum of fifteen (15) semester hours of course work in soil science as required by T.C.A. § 62-18-208(a)(1);

(b) Has at least three (3) years of soil science professional experience. Any combination of the following kinds of education and experience qualify towards accumulating the required (3) years:

1. Masters of science degree in soils, agronomy or a closely related field and two (2) years of professional experience;

2. Doctorate degree in soils, agronomy or a closely related field and one (1) year of professional experience; or, 3. Each year of teaching or soil science research by persons teaching upper-level soil science courses at the college or university levels; provided, that such teaching or research can be demonstrated to be of a sufficiently responsible nature to be equivalent to a year of professional experience.

(c) Has passed the fundamentals examinations administered by the Council of Soil Science Examiners (CSSE).

The commissioner shall waive the examination requirement for licensure as a soil scientist for an applicant who makes written application to the commissioner not later than July 1, 2011, and who otherwise meets the requirements of this rule.

History

• Authority: T.C.A. §§ 62-18-208 and 62-18-211.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011. Amendment filed July 25, 2014; effective October 23, 2014. Amendments filed September 27, 2018; effective December 26, 2018.

Tenn. Comp. R. & Regs. 0780-05-06-.05 RENEWAL REQUIREMENTS

(1) A professional soil scientist license issued pursuant to this chapter shall expire two (2) years from the date of its issuance and shall become invalid on that date unless renewed.

(2) In order to renew his or her license, a licensee shall submit a renewal application with the appropriate renewal fee and submit a signed statement setting forth the number of continuing education hours that he or she has completed during the reporting period. No less than twelve (12) hours of continuing education will be required during the two (2) year period immediately preceding renewal. One (1) of the twelve (12), but no more than three (3) continuing education hours required for renewal shall be in ethics.

(3) A licensee who fails to pay the renewal fee or fails to comply with any of the prerequisites for renewal of a license before the expiration date of the license will have six (6) months after the expiration date of the license to renew the license upon payment of the renewal fee, payment of a late penalty of twenty-five dollars ($25.00) for each month or fraction of a month that renewal is late, and submission of proof of compliance with any other prerequisites to renewal.

(4) Any person seeking renewal of a license more than six (6) months after the expiration date of the license is required to reapply for licensure and fulfill all of the requirements for initial licensure.

History

• Authority: T.C.A. § 62-18-211.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011. Repeal and new rule filed July 25, 2014; effective October 23, 2014. Amendments filed September 27, 2018; effective December 26, 2018.

Tenn. Comp. R. & Regs. 0780-05-06-.06 RETIRED OR INACTIVE STATUS

(1) A licensee may request to place his or her license in inactive or retired status by:

(a) Submitting a written request to place his or her license in inactive or retired status to the commissioner; and (b) Paying an inactive or retirement fee.

(2) A licensee may request to have his or her license reinstated after it has been placed in inactive status by:

(a) Submitting a written request to have his or her license returned to active status;

(b) Paying a reinstatement fee; and (c) Submitting evidence satisfactory to the commissioner that the licensee has completed twelve (12) hours of continuing education in the two (2) years immediately preceding the date of the request for reinstatement.

(3) A retired professional soil scientist may not engage in the practice of soil science and a license in retired status may not be reinstated.

History

• Authority: T.C.A. § 62-18-211.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011. Repeal and new rule filed July 25, 2014; effective October 23, 2014.

Tenn. Comp. R. & Regs. 0780-05-06-.07 FEES

(1) Nonrefundable application fee $100.00 (2) The examination fee will be set by the entity designated by the State to administer the examination.

(3) Initial license and renewal fee for active license $300.00 (4) Renewal fee for inactive license $200.00 (5) Inactive or retirement status fee $25.00 (6) Reinstatement to active status fee $25.00 (7) The late renewal penalty fee is $25.00 per month for each month or fraction of a month that a renewal is late.

(8) Duplicate license fee because license is lost, destroyed, or mutilated $25.00

History

• Authority: T.C.A. §§ 62-18-209 and 62-18-211.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011. Amendments filed September 27, 2018; effective December 26, 2018.

Tenn. Comp. R. & Regs. 0780-05-06-.08 SEALS

(1) The design of a licensee’s seal required by T.C.A. § 62-18-211(2) shall be two inches in diameter and, regardless of whether it is applied to documentation through physical or electronic means, shall appear as follows:

(2) The licensee shall affix his or her seal to all original sheets of any bound or unbound plans, plats, drawings, reports or other soil scientist papers or documents involving soil science work developed by the licensee or under the licensee’s responsible charge of work.

(3) The licensee shall superimpose his or her signature and date of signature across the face and beyond the circumference of the seal on the documents listed in subsection (2) above.

(4) The licensee shall superimpose his or her signature and date of signature across the face and beyond the circumference of the seal on the documents listed in subsection (2) above.

(5) Any portions of plans, plats, drawings, reports, or other soil science papers or documents involving soil science work prepared in part by a licensee operating as a consultant on a project shall place his or her signature on the pages of the document for which the licensee is responsible.

(6) No licensee shall affix his or her seal or signature to plans, plats, drawings, reports or other soil science papers or documents developed by others not under the licensee’s responsible charge of work as defined by T.C.A. § 62-18-203(6).

(7) Responsible Charge of Work.

(a) Plans, plats, drawings, reports or other soil science papers or documents involving soil science work prepared in part or in whole by a licensee or the licensee’s subordinate will be deemed to have been prepared under the responsible charge of the licensee only when:

1. The client or employer requesting preparation of plans, plats, drawings, reports or other soil science papers or documents makes the request directly to the licensee or to the licensee’s subordinate at the time initial client or employer (Rule 0780-05-06-.08. continued) contact is made, so long as the licensee has the right to control and direct the subordinate in the material detail of how the work is to be performed;

2. The licensee supervises and is involved in the preparation and approval of the plans, plats, drawing, reports or other soil science papers or documents and has input into and full knowledge of their preparation prior to their completion;

3. The licensee reviews the final plans, plats, drawings, reports or other soil science papers or documents; and 4. The licensee has the authority to, and does, make any necessary and appropriate changes to the final plans, plats, drawings, reports or other soil science papers or documents.

(b) Any changes made to the final plans, plats, drawings, reports or other soil science papers or documents after final revision and sealing by the licensee are prohibited by any person other than the licensee.

(c) The mere review of work prepared by another person, even if that person is the licensee’s subordinate, does not constitute responsible charge of work unless the licensee has met the criteria set out above.

History

• Authority: T.C.A. § 62-18-211.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011. Repeal and new rule filed July 25, 2014; effective October 23, 2014.

Tenn. Comp. R. & Regs. 0780-05-06-.09 CIVIL PENALTIES

(1) With respect to any licensed professional soil scientist, the commissioner may, in addition to or in lieu of any other lawful disciplinary action, assess a civil penalty against a licensee for each separate violation of a statute, rule, or commissioner’s order pertaining to licensed professional soil scientists, in accordance with the following schedule:

Violation Penalty T.C.A. § 62-18-207 $100 - $1,000 T.C.A. § 62-18-217 $100 - $1,000

Rule 0780-05-06-.08 $100 - $1,000

Rule 0780-05-06-.10 $100 - $1,000 Commissioner’s order $100 - $1,000 (2) With respect to any other person required to be licensed in this state as a licensed professional soil scientist, the commissioner may assess a civil penalty against such person for each separate violation of statute in accordance with the following schedule:

Violation Penalty (a) T.C.A. § 62-18-204 $100 - $1,000 (3) Each day of continued violation may constitute a separate violation.

(4) In determining the amount of any civil penalty to be assessed pursuant to this rule, the commissioner may consider factors including, but not limited to, the following:

(a) Whether the amount imposed will be a substantial economic deterrent to the violator;

(b) The circumstances leading to the violation;

(Rule 0780-05-06-.09. continued)

(c) The severity of the violation and the risk of harm to public;

(d) The economic benefits gained by the violator as a result of noncompliance; and (e) The interest of the public.

History

• Authority: T.C.A. §§ 62-18-211 and 62-18-219.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011. Repeal and new rule filed July 25, 2014; effective October 23, 2014.

Tenn. Comp. R. & Regs. 0780-05-06-.10 CODE OF ETHICS

(1) Licensees shall uphold the public health, safety and welfare in the performance of professional services.

(2) Licensees shall observe and comply with all federal, state and local building, fire, safety, real estate, or mining codes, as well as other laws, codes, ordinances, or regulations pertaining to the practice of soil science.

(3) Licensees shall not undertake any type of work that he or she is not competent to undertake unless the licensee discloses his or her lack of training, experience, or education in writing to all appropriate parties prior to undertaking the work.

(4) Licensees shall not affix their signatures and/or seal any plans, plats, drawings, reports, or other soil science papers or documents with subject matter in which they lack competence acquired through education or experience, nor shall licensees affix their signatures and/or seal plans, plats, drawings, reports or other soil science papers or documents that were not prepared or reviewed by the licensee or the licensee’s subordinate and approved by the licensee.

(5) Opinions expressed by licensees for any purpose in the course of his or her professional practice shall only be based on their education and experience.

(6) Licensees shall not disclose any information about the lawful business affairs or technical processes of a client or employer without the approval of the client or employer, or the client’s/employer’s designated representative, unless required by subpoena or in response to a complaint filed by the commissioner.

(7) Licensees shall not participate in any illegal activities, or knowingly permit the publication of his or her plans, plats, drawings, reports, or other soil science papers or documents for illegal purposes.

(8) Licensees shall not issue false or misleading information or statements to a client.

(9) No licensee shall accept compensation or any other consideration from more than one (1) interested party for the same service without the written consent of all interested parties.

(10) No licensee shall accept or offer commissions or allowances, directly or indirectly, from third parties dealing with the client or employer in connection with work for which the licensee is in responsible charge.

(11) Before the execution of a contract to perform soil science services, a licensee shall disclose to the client or employer any actual or potential conflicts of interest that might affect the licensee’s ability to serve the client or employer.

(12) Licensees shall not engage in false or misleading advertising or otherwise misrepresent any matters to the public.

(13) Licensees shall respond to all of the commissioner’s written requests for information within the time frame specified on the written request.

History

• Authority: T.C.A. §§ 62-18-211 and 62-18-215.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011. Repeal and new rule filed July 25, 2014; effective October 23, 2014.

Tenn. Comp. R. & Regs. 0780-05-06-.11 CONTINUING EDUCATION

(1) “Continuing education hours” means an hour consisting of not less than fifty (50) minutes of instruction or presentation acceptable to the commissioner or as otherwise noted in this rule.

Continuing education hours received through post-secondary education institutions will be awarded according to the following table:

(a) One (1) university semester hour of credit..................15 continuing education hours (b) One (1) university quarter hour of credit.....................10 continuing education hours (2) A licensee seeking regular biennial renewal shall, as a prerequisite for renewal, show that he or she has completed no less than twelve (12) hours of continuing education during the two (2)-year period immediately preceding renewal.

(3) One (1) of the twelve (12) continuing education hours each licensee obtains for renewal shall be in ethics.

(4) Activities eligible for continuing education hours include:

(a) Professional meetings (no maximum), including short courses, workshops, clinics, conferences, symposia, seminars, field days, scientific presentations and distance education.

(b) Self-directed study, including reading of scientific journals and books with a 2,500-word professional article equaling one continuing education hour. Self-directed study may account for a maximum of three (3) continuing education hours per two (2)-year period.

(c) Soil science-related community service (2 continuing education hours maximum per renewal period), including serving on committees and community service related to the profession of soil science. Such service shall be deemed to be equal to two (2) continuing education hours per two (2)-year period.

(d) Authoring or preparation of educational materials; this credit may be claimed only on the renewal period on which the educational materials are initially prepared and/or presented. Such work shall be deemed to be equal to two (2) continuing education hours per two (2)-year period.

(5) Each licensee shall, when making application for renewal, submit on the prescribed form a signed statement setting forth the number of continuing education hours that he or she has completed during the reporting period. Licensees shall retain documentation evidencing their continuing education hours for at least five (5) years subsequent to the date of submission.

(6) The commissioner may verify information licensees submit under this rule at the commissioner’s discretion upon written notice to the licensee.

(7) If any continuing education hours claimed in a statement submitted by a licensee pursuant to paragraph (5) of this rule are disapproved, the commissioner shall notify the licensee of the reason for disapproval. The commissioner may allow a specified period of time, up to six (6) months, for correction of the deficiencies noted.

History

• Authority: T.C.A. § 62-18-211.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011. Repeal and new rule filed July 25, 2014; effective October 23, 2014.

Tenn. Comp. R. & Regs. 0780-05-06-.12 RECIPROCITY

Pursuant to T.C.A. § 62-18-212, the commissioner may grant a license as a professional soil scientist to an individual who holds a like, unexpired license as a professional soil scientist issued by another state, territory, or possession of the United States, the District of Columbia, or any foreign country if such jurisdiction’s examination and requirements for licensure are of a standard substantially equal to those required by the commissioner for initial licensure in Tennessee. Such applicant shall file with the commissioner the required application and fee, along with proof that the applicant holds a current, valid license as a professional soil scientist and the requirements necessary for obtaining such license.

History

• Authority: T.C.A. § 62-18-211.
• Administrative History: Original rule filed April 20, 2011; effective July 19, 2011. Repeal and new rule filed July 25, 2014; effective October 23, 2014.

Chapter 0780-05-07 Geologist

Tenn. Comp. R. & Regs. 0780-05-07-.01 PURPOSE

The rules in this chapter implement the Geologist Licensure Act of 2007.

History

• Authority: Chapter 495 of the Public Acts of 2007, §§ 2 and 15 and T.C.A. § 62-36-101, et seq. [effective January 1, 2008].
• Administrative History: Public necessity rule filed November 21, 2007; effective through May 10, 2008. Rule expired May 11, 2008; reverted back to its prior status. Original rule filed March 26, 2008; effective June 9, 2008.

Tenn. Comp. R. & Regs. 0780-05-07-.02 DEFINITIONS

In addition to the definitions contained in T.C.A. § 62-36-103, the following definitions are applicable to this chapter:

(1) “Completed application” means the submission of the application form approved by the commissioner with all of the questions answered to the satisfaction of the commissioner, and accompanied by the required fee and all required documentation;

(2) “Licensee” means an individual who holds a current, unexpired license as a professional geologist issued by the commissioner.

History

• Authority: Chapter 495 of the Public Acts of 2007, §§ 2 and 15 [effective January 1, 2008].
• Administrative History: Public necessity rule filed November 21, 2007; effective through May 10, 2008. Rule expired May 11, 2008; reverted back to its prior status. Original rule filed March 26, 2008; effective June 9, 2008.

Tenn. Comp. R. & Regs. 0780-05-07-.03 APPLICATION FOR LICENSE

(1) Any person who seeks to be licensed as a professional geologist shall complete an application on a form prescribed by the commissioner and submit the completed application to the commissioner, along with the required application fee and all required documentation.

(2) Applications for licensure are available upon request from the commissioner.

(3) Any application submitted which lacks required information or reflects a failure to meet any requirement for licensure will be returned to the applicant with written notification of the information that is lacking or the reason(s) the application does not meet the requirements for licensure and will be held in “pending” status until satisfactorily completed within a reasonable period of time, not to exceed sixty (60) days from the date of application. After the sixty (60) day period, if the application is not satisfactorily completed, then the applicant shall reapply.

(4) Any application submitted may be withdrawn; provided, however, that the application fee will not be refunded.

History

• Authority: T. C. A. §§ 62-36-108 and 62-36-114; Chapter 495 of the Public Acts of 2007, §§ 9, 12, and 15 [effective January 1, 2008].
• Administrative History: Public necessity rule filed November 21, 2007; effective through May 10, 2008. Rule expired May 11, 2008; reverted back to its prior status. Original rule filed March 26, 2008; effective June 9, 2008.

Tenn. Comp. R. & Regs. 0780-05-07-.04 APPLICATION REQUIREMENTS

(1) Beginning January 1, 2008, any person who desires to obtain a license as a professional geologist shall submit an application to the commissioner, along with the required application fee and all required documentation.

(2) On or after January 1, 2008, but before January 1, 2009, an applicant for licensure shall furnish evidence satisfactory to the commissioner that the applicant:

(a) Has graduated from an accredited college or university; and (b) Has successfully completed a minimum of thirty (30) semester or forty-five (45) quarter hours of course work in geology, geophysics, geochemistry, engineering geology or their subdivisions.

(3) On or after January 1, 2008, but before January 1, 2009, the commissioner may waive the academic requirements for licensure, if the applicant can demonstrate that the applicant has performed the following for five (5) consecutive years immediately prior to submitting a completed application to the commissioner:

(a) engaged in the practice of geology;

(b) taught geology at the college or university level; or (c) engaged in geology research at the college or university level.

(4) On or after January 1, 2009, an applicant for licensure shall furnish evidence satisfactory to the commissioner that the applicant:

(a) Has graduated from an accredited college or university;

(b) Has successfully completed a minimum of thirty (30) semester or forty-five (45) quarter hours of course work in geology, geophysics, geochemistry, engineering geology or their subdivisions;

(c) Has passed an examination approved by the commissioner;

(d) Has at least five (5) years of geological education and professional experience. In addition to the education and experience described in T.C.A. §62-36-109(a)(2), the following shall qualify as professional experience:

1. Experience as a registered or licensed professional geologist;

2. Experience as a subordinate or geologist in training working under the supervision of a registered or licensed professional geologist; or 3. Experience practicing geology while in responsible charge of work.

(5) Reciprocity. The commissioner may grant a license as a professional geologist to a individual who holds a like, unexpired license as a professional geologist issued by another state, territory, or possession of the United States, the District of Columbia, or any foreign country if such jurisdiction’s requirements for licensure are at least equivalent to the requirements for licensure in Tennessee. Such applicant shall file with the commissioner the required application form and fee, along with proof that the applicant holds a current, valid license as a professional geologist.

(6) A sole proprietorship, partnership, or corporation that provides geological services as its primary activity shall file with the commissioner, on a form prescribed by the commissioner, a list of the names and addresses of all resident principals or officers who are licensed as professional geologists in Tennessee and are in responsible charge of the services provided.

For the purposes of this rule, the term “geological services” means the same as provided in Tenn. Code Ann. §62-36-103 under the term “practice of geology”.

History

• Authority: Chapter 495 of the Public Acts of 2007, §§ 8, 10, 11, and 15 and T. C. A. §§ 62-36-107, 62- 36-109, 62-36-110, and 62-36-114 [effective January 1, 2008].
• Administrative History: Public necessity rule filed November 21, 2007; effective through May 10, 2008. Rule expired May 11, 2008; reverted back to its prior status. Original rule filed March 26, 2008; effective June 9, 2008.

Tenn. Comp. R. & Regs. 0780-05-07-.05 RENEWAL REQUIREMENTS

(1) A license issued to a licensed professional geologist pursuant to this chapter shall expire two (2) years from the date of its issuance and shall become invalid on such date unless renewed.

(2) In order to renew his or her license, a licensee shall submit a renewal application with the renewal fee and with any other prerequisites for renewal.

(3) A licensee who fails to pay the renewal fee, the applicable late penalty, or otherwise fails to comply with any of the prerequisites for renewal of a license before the expiration date of the license will have six (6) months after the expiration date of the license to renew the license upon payment of the renewal fee, payment of a late penalty of twenty five dollars ($25.00) for each month or fraction of a month that renewal is late, and submit proof of compliance with any other prerequisites to renewal. A licensee is ineligible to engage in the practice of geology during the six (6) month period that the licensee’s license is expired.

(4) Any person seeking renewal of a license more than six (6) months after the expiration date of the license is required to reapply for licensure and fulfill all of the requirements for initial licensure.

(5) A fee submitted by mail to the commissioner for purposes of renewal will be deemed to have been submitted on the date that the renewal fee is processed by the State of Tennessee.

History

• Authority: Chapter 495 of the Public Acts of 2007, §§ 10, 12, and 15 and T. C. A. §§ 62-36-109, 62-36- 111, and 62-36-114 [effective January 1, 2008].
• Administrative History: Public necessity rule filed November 21, 2007; effective through May 10, 2008. Rule expired May 11, 2008; reverted back to its prior status. Original rule filed March 26, 2008; effective June 9, 2008.

Tenn. Comp. R. & Regs. 0780-05-07-.06 RETIRED OR INACTIVE STATUS

(1) A licensee may request to place his license in inactive or retired status by:

(a) submitting a written request to place his or her license in inactive or retired status to the commissioner;

(b) paying an inactive or retirement fee; and (c) paying a biennial renewal fee for an inactive license.

(2) A licensee may request to have his or her license reinstated after it has been placed in inactive or retired status by:

(a) submitting a written request to have his or her license returned to active status; and (b) paying a reinstatement fee.

History

• Authority: Chapter 495 of the Public Acts of 2007, §§ 4, 8, and 12 and T. C. A. §§ 62-36-111 and 62-36- 114 [effective January 1, 2008].
• Administrative History: Public necessity rule filed November 21, 2007; effective through May 10, 2008. Rule expired May 11, 2008; reverted back to its prior status. Original rule filed March 26, 2008; effective June 9, 2008.

Tenn. Comp. R. & Regs. 0780-05-07-.07 FEES

(1) Nonrefundable application fee and initial license fee.................................$115.00 (2) The examination fee will be set by the entity designated by the State to administer the examination.

(3) Renewal fee for active license ..............................................................$100.00 (4) Renewal fee for inactive license..............................................................$35.00 (5) Inactive or Retirement fee.......................................................................$35.00 (6) Reinstatement fee.................................................................................$65.00 (7) The late renewal penalty fee is $25.00 per month for each month or fraction of a month that renewal is late.

(8) Duplicate license fee because license is lost, destroyed, or mutilated.............$10.00 (9) Roster fee..........................................................................................$10.00

History

• Authority: Chapter 495 of the Public Acts of 2007, §§ 9, 12, 15, and 17 and T. C. A. §§62-36-108, 62- 36-111, 62-36-114, and 62-36-116.
• Administrative History: Original rule filed December 14, 1992; effective January 29, 1993. Public necessity rule filed November 21, 2007; effective through May 10, 2008. Rule expired May 11, 2008; reverted back to its prior status. Repeal and new rule filed March 26, 2008; effective June 9, 2008.

Tenn. Comp. R. & Regs. 0780-05-07-.08 SEALS

(1) The design of a licensee’s seal required by T.C.A. §62-36-112 shall be as follows:

(2) Subject to the requirements of this rule, rubber-stamp, embossed, transparent self-adhesive or electronically-generated seals may be used by the licensee; however, such stamps or seals shall not include the licensee’s signature or date of signature.

(3) Subject to the requirements of this rule, the licensee may affix his or her electronicallygenerated signature and date of signature to plans, plats, drawings, reports, or other geologic papers or documents as long as the licensee utilizes a secure method of affixation, does not authorize any other person to affix his or her signature and date, and does not allow any other person to have access to his or her signature.

(4) The licensee shall stamp with his or her seal to all original sheets of any bound or unbound plans, plats, drawings, reports, or other geologic papers or documents involving geologic work developed by the licensee or under the licensee’s responsible charge of work.

(5) The licensee shall superimpose his or her signature (not a rubber stamp) and date of signature across the face and beyond the circumference of the seal on the documents listed above.

(6) Any portions of plans, plats, drawings, reports, or other geologic papers or documents involving geologic work prepared in part by a licensee functioning as a consultant on a project shall place his or her signature on the pages of the document for which the licensee is responsible.

(7) No licensee shall affix his or her seal or signature to plans, plats, drawings, reports, or other geologic papers or documents developed by others not under the licensee’s responsible charge of work as defined by T.C.A. §62-36-103.

(8) Responsible Charge of Work.

(a) Plans, plats, drawings, reports, or other geologic papers or documents involving geologic work prepared in part or in whole by a licensee or the licensee’s subordinate will be deemed to have been prepared under the responsible charge of work only when:

1. The client or employer requesting preparation of plans, plats, drawings, reports, or other geologic papers or documents makes the request directly to the licensee or to the licensee’s subordinate at the time initial client or employer contact is made, so long as the licensee has the right to control and direct the subordinate in the material details of how the work is to be performed;

2. The licensee supervises and is involved in the preparation and approval of the plans, plats, drawings, reports, or other geologic papers or documents and has input into and full knowledge of their preparation prior to their completion;

3. The licensee reviews the final plans, plats, drawings, reports, or other geologic papers or documents; and 4. The licensee has the authority to, and does, make any necessary and appropriate changes to the final plans, plats, drawings, reports, or other geologic papers or documents.

(b) Any changes made to the final plans, plats, drawings, reports or other geologic papers or documents after final revision and sealing by the licensee are prohibited by any person other than the licensee.

(c) The mere review of work prepared by another person, even if that person is the licensee’s subordinate, does not constitute responsible charge of work unless the licensee has met the criteria set out above.

History

• Authority: Chapter 495 of the Public Acts of 2007, §§ 13 and 15 and T. C. A. §§ 62-36-112 and 62-36- 114 [effective January 1, 2008].
• Administrative History: Public necessity rule filed November 21, 2007; effective through May 10, 2008. Rule expired May 11, 2008; reverted back to its prior status. Original rule filed March 26, 2008; effective June 9, 2008.

Tenn. Comp. R. & Regs. 0780-05-07-.09 CIVIL PENALTIES

(1) With respect to any licensed professional geologist, the commissioner may, in addition to or in lieu of any other lawful disciplinary action, assess a civil penalty against such licensee for each separate violation of a statute, rule or commissioner’s order pertaining to licensed professional geologists, in accordance with the following schedule:

Violation Penalty (a) T.C.A. § 62-36-119 $0 - $1,000 (b) Rule 0780-5-7-.08 $0 - $1,000 (c) Rule 0780-5-7-.10 $0 - $1,000 (d) Commissioner’s order $0 - $1,000 (2) With respect to any person required to be licensed in this state as a licensed professional geologist, the commissioner may assess a civil penalty against such person for each separate violation of a statute in accordance with the following schedule:

Violation Penalty (a) T.C.A. § 62-36-104 $0 - $1,000 (3) Each day of continued violation may constitute a separate violation.

(4) In determining the amount of any penalty to be assessed pursuant to this rule, the commissioner may consider such factors as the following:

(a) Whether the amount imposed will be a substantial economic deterrent to the violator;

(b) The circumstances leading to the violation;

(c) The severity of the violation and the risk of harm to the public;

(d) The economic benefits gained by the violator as a result of noncompliance;

(e) The interest of the public.

History

• Authority: Chapter 495 of the Public Acts of 2007, §§ 10, 11, and 15 and T. C. A. §§ 62-36-114 and 62- 36-122 [effective January 1, 2008] and T.C.A. § 56-1-308.
• Administrative History: Public necessity rule filed November 21, 2007; effective through May 10, 2008. Rule expired May 11, 2008; reverted back to its prior status. Original rule filed March 26, 2008; effective June 9, 2008.

Tenn. Comp. R. & Regs. 0780-05-07-.10 CODE OF PROFESSIONAL CONDUCT

(1) Licensees shall uphold the public health, safety, and welfare in the performance of professional services.

(2) Licensees shall observe and comply with all federal, state and local building, fire, safety, real estate, or mining codes, as well as other laws, codes, ordinances, or regulations pertaining to the practice of geology.

(3) Licensees shall not undertake any type of work that he or she is not competent to undertake unless the licensee discloses his or her lack of training, experience, or education in writing to all appropriate parties prior to undertaking the work.

(4) Licensees shall not affix their signatures and/or seal any plans, plats, drawings, reports, or other geologic papers or documents with subject matter in which they lack competence acquired through education or experience, nor shall licensees affix their signatures and/or seal plans, plats, drawings, reports, or other geologic papers or documents that were not prepared or reviewed by the licensee or the licensee’s subordinate and approved by the licensee.

(5) Opinions expressed by licensees shall only be based on their education, experience, and honest convictions.

(6) Licensees shall not disclose any information about the lawful business affairs or technical processes of a client or employer without the approval of the client or employer, or the client's/employer’s designated representative, unless required by subpoena or in response to a complaint filed with the commissioner.

(7) Licensees shall not knowingly participate in any illegal activities, or knowingly permit the publication of his or her plans, plats, drawings, reports, or other geologic papers or documents for illegal purpose.

(8) Licensees shall not issue false or misleading information or statements to a client.

(9) No licensee shall accept compensation or any other consideration from more than one (1) interested party for the same service without the consent of all interested parties.

(10) No licensee shall accept or offer commissions or allowances, directly or indirectly, from other parties dealing with the client or employer in connection with work for which the licensee is responsible.

(11) Before the execution of a contract to perform geology services, a licensee shall disclose to the client or employer any actual or potential conflicts of interest, which may affect the licensee’s ability to serve the client or employer.

(12) Licensees shall not engage in false or misleading advertising or otherwise misrepresent any matters to the public.

History

• Authority: Chapter 495 of the Public Acts of 2007, §§ 15 and 18 and T. C. A. §§ 62-36-114 and 62-36- 117 [effective January 1, 2008].
• Administrative History: Public necessity rule filed November 21, 2007; effective through May 10, 2008. Rule expired May 11, 2008; reverted back to its prior status. Original rule filed March 26, 2008; effective June 9, 2008.

Chapter 0780-05-08 Staff Leasing Companies

Tenn. Comp. R. & Regs. 0780-05-08-.01 PURPOSE

The purpose of this chapter is to provide for the administration and implementation of the Tennessee Employee Leasing Act.

History

• Authority: T.C.A., 62-43-104(a).
• Administrative History: Original rule filed April 17, 1996; effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-08-.02 DEFINITIONS

(1)As used in this chapter, unless the context otherwise requires, the definitions of terms contained in T.C.A., 63-43-103 are applicable. Additional definitions are listed as follows:

(a)Conviction shall mean the entry of a guilty plea of any kind, a plea of nollo contendre, or a verdict rendered in open court by a judge or jury.

(b)Act shall mean the Tennessee Employee Leasing Act.

History

• Authority: T.C.A., §§62-43-103 and 62-43-104(a).
• Administrative History: Original rule filed April 17, 1996; effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-08-.03 APPLICATIONS

(1)An applicant shall file with the commissioner a completed application on a form prescribed and furnished by the commissioner. An application shall be accompanied by such forms, materials and information that are necessary to enable the commissioner to ascertain if an applicant meets the requirements to obtain a license. An applicant shall also file with the completed application the application fee specified in rule 0780-5-8-.07 of these rules.

(2)An applicant shall disclose any criminal conviction, except for minor traffic and driving under the influence of a controlled substance convictions, on the application form. If an applicant is a corporation, partnership or limited liability corporation, any convictions of any controlling person shall be disclosed on the application. The required disclosure shall include a complete explanation of the circumstances surrounding the offense, the sentence imposed, and whether any imposed probation has been successfully completed. An applicant shall also provide any indictment or information and any resulting plea agreements and any other documentation related to any such conviction. An applicant must submit a notarized statement from the court(s) having jurisdiction of the conviction(s) that the aforementioned documentation is unavailable if this documentation cannot be provided.

(3)Failure to disclose a criminal conviction on the application shall be a basis for the denial of the application.

(4)An applicant shall submit the financial information required by T.C.A., ♣62-43-108(b)(3) at the time of application unless an applicant indicates on the application the desire to furnish such information upon being notified in writing that all other requirements to obtain a license have been met. An applicant who opts to provide the financial information upon such written notification by the commissioner shall provide the required information within fifteen (15) days of the date appearing on the written notification from the Commissioner. Failure to provide the information within the required period of time may result in the denial of the application for a license.

(5)A nonresident applicant for a license shall pay the same application fee as an applicant who is a resident of this state.

(6)A nonresident applicant for a license shall submit with an application either:

(a)a copy of a current license to engage in staff leasing issued by the applicant's state of residence or domicile and a notarized statement from the state which issued the applicant's license to the effect that the applicant is in good standing;

(b)a notarized statement by the applicant to the effect that no license is required by the applicant's state of domicile or residence to engage in staff leasing; or (c)a notarized statement by the applicant to the effect that the applicant is not licensed in its state of residence or domicile due to the fact that the applicant does not engage in staff leasing in that state.

(7)A nonresident applicant for a restricted license shall submit with the application:

(a)a notarized statement of the applicant to the effect that the applicant does not maintain an office in this state, and does not maintain a sales force or have a sales representative in this state, and has leased no more than one hundred (100) leased employees in this state and will lease no more than one hundred (100) employees in this state without obtaining an unrestricted license; and (b)either a copy of the applicant's current license to engage in staff leasing issued by the applicant's state of domicile or residence and a notarized statement from the applicant's state of domicile to the effect that the applicant is in good standing or a notarized statement by the applicant that no license is required by the applicant's state of domicile or residence to engage in staff leasing in that state.

(8)An applicant shall respond promptly to all requests of the commissioner for further information.

Failure to provide requested information within thirty (30) days of a request of the commissioner shall be grounds for the denial of an application.

History

• Authority: T.C.A., §§62-43-104(a), 62-43-108, 62-43-109, and 62-43-113(b)(3).
• Administrative History: Original rule filed April 17, 1996; effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-08-.04 RENEWAL

(1)A license issued under this part shall expire two (2) years from the date of issuance.

(2)At least thirty (30) days prior to the expiration of its license, a licensee shall submit an application for renewal of the license on a form prescribed by the commissioner and accompanied by a nonrefundable renewal fee. The application for renewal shall contain a sworn and notarized statement that the licensee is in compliance with all the requirements of T.C.A., §§62-43-108, 62-43-109 and 62-43-113 through 62-43-120 and the rules promulgated thereunder. The application shall be accompanied by the financial information required by T.C.A., §62-43-108 (except where such information was not required to obtain an initial license).

(3)A licensee shall provide all information requested by the commissioner to ascertain whether the licensee meets the qualifications to obtain a renewal. Failure to provide further information within thirty (30) days of a request by the commissioner shall be grounds for the denial of an application for renewal.

History

• Authority: T.C.A., 62-43-104(a), 62-43-108(a) and 62-43-110.
• Administrative History: Original rule filed April 17, 1996; effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-08-.05 DUTIES AND RESPONSIBILITIES

(1)A licensee shall abide by the dictates of T.C.A.,62-43-113.

(2)Prior to providing any employee to a client, a licensee shall provide to the commissioner a certificate(s) of insurance or other appropriate documentation from an insurance company showing that all employees leased by the licensee in this state are covered by worker's compensation in accordance with the laws of this state.

(3)A licensee shall notify the commissioner in writing within thirty (30) days of any conviction of the licensee or any of the licensee's controlling persons for any offense listed in T.C.A., 62-43-115(a)(1)-(5), and (13). The notification shall include certified copies of the indictment and/or the information, any plea agreements and any judgments rendered by a judge or jury.

(4)A licensee shall notify the commissioner in writing within thirty (30) days of a material final action by a state or federal regulatory agency for violations within the scope of control of the licensee. Such notification shall include certified copies of documentation evidencing the final action taken by the agency.

(5)A licensee shall notify the commissioner in writing within thirty (30) days of any determination by any court of competent jurisdiction, including federal courts, located in any state, that the licensee was found guilty of civil fraud. Such notification shall include copies of the complaint, the licensee's answer, and the final order rendered by a court.

History

• Authority: T.C.A., §§ 62-43-104(a), 62-43-112(a)(5), 62-43-113 and 62-43-115.
• Administrative History: Original rule filed April 17, 1996; effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-08-.06 DECEPTIVE PRACTICES

(1)No licensee shall engage in any of the deceptive practices set out in T.C.A., §§ 62-43-114.

(2)No licensee shall represent that the licensee's business or activity has been recommended or endorsed by the commissioner.

History

• Authority: T.C.A., §§62-43-104(a) and 62-43-114.
• Administrative History: Original rule filed April 17, 1996; effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-08-.07 FEES

(1)An applicant for a license shall submit with an application the appropriate application fee listed below:

(a)Staff leasing company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250.00 (b)Staff leasing group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250.00 (c)Restricted staff leasing company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100.00 (d)Restricted staff leasing group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250.00 (2)Unless otherwise provided by law, an applicant shall submit, upon being notified of the approval of his or her application by the commissioner, the appropriate license fee listed below:

(a)Staff leasing company license . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$2,000.00 (b)Staff leasing group license . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$4,000.00 (c)Restricted staff leasing company license . . . . . . . . . . . . . . . . . . . . . . . . . $ 500.00 (d)Restricted staff leasing group license . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000.00 (3)Unless otherwise provided by law, an applicant for renewal of a license shall submit with an application the appropriate fee listed below:

(a)Staff leasing company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000.00 (b)Staff leasing group . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . $4,000.00 (c)Restricted staff leasing company . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . $ 500.00 (d)Restricted staff leasing group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000.00 (4)To obtain a duplicate license, a licensee shall submit a fee of twenty-five dollars ($25.00) to the commissioner.

History

• Authority: T.C.A., §§62-43-104(a), 62-43-110 and 62-43-111.
• Administrative History: Original rule filed April 17, 1996; effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-08-.08 INVESTIGATIONS AND COMPLAINTS

(1)The commissioner may investigate any person engaged or suspected of engaging in any business activity regulated under the act.

(2)Upon receipt of any written complaint, the commissioner may transmit a copy of such complaint to the accused party. Such party shall, within fourteen (14) days of receiving the copy of the complaint, file a written response to the complaint with the commissioner.

History

• Authority: T.C.A., §§ 62-43-104(a) and 62-43-117(a).
• Administrative History: Original rule filed April 17, 1996; effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-08-.09 CIVIL PENALTIES

With respect to any person required to be licensed under the act, the commissioner may in addition to or in lieu of any other lawful disciplinary action assess a civil penalty in the amounts specified by T.C.A., ♣♣62-43-115(b)(3) and 62-43-116(a) against such person for each occurrence constituting a separate violation of the act or rules promulgated thereunder.

History

• Authority: T.C.A., §§ 62-43-104(a), 62-43-115(b), and 62-43-116(a).
• Administrative History: Original rule filed April 17, 1996; effective July 1, 1996.

Tenn. Comp. R. & Regs. 0780-05-08-.10 CONTESTED CASES

All contested cases arising under the Act and these rules shall be governed by T.C.A., ♣4-5-301, et seq. and Chapter 1360-4-1 of the Secretary of State's Rules, which is titled, Uniform Rules of Procedures for Hearing Contested Cases Before State Agencies.

History

• Authority: T.C.A., §§ 4-5-219 and 62-43-104(a).
• Administrative History: Original rule filed April 17, 1996; effective July 1, 1996.

Chapter 0780-05-09 Cemeteries

Tenn. Comp. R. & Regs. 0780-05-09-.01 APPLICABILITY

All duties incurred by a cemetery owner under this chapter apply with regard to each and every cemetery possessed by such owner in the State of Tennessee.

History

• Authority: T.C.A. §§ 46-1-101, 46-1-101(a), 46-1-108(a) and (b), and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.02 DEFINITIONS

All definitions contained in T.C.A. § 46-1-102 apply equally to the rules of this chapter, with the following additions and exceptions:

(1) “Cemetery owner” means any individual, association, partnership, corporation, limited liability company or other legally cognizable entity that owns or controls cemetery lands or property and conducts the business of a cemetery.

(2) “Commissioner” means the Commissioner of the Tennessee Department of Commerce and Insurance or the Commissioner’s designee.

(3) “Director” means the Executive Director of the Burial Services Section.

(4) “Master map” means a cemetery map showing each site for disposition of human remains, including sites for interment, inurnment and entombment.

(5) “Person” means, according to the context, any individual, association, partnership, corporation, or any other legally cognizable organization or entity.

History

• Authority: T.C.A. §§ 46-1-102 and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008. Repeal and new rule filed November 14, 2014; effective February 12, 2015.

Tenn. Comp. R. & Regs. 0780-05-09-.03 BUREAU OF LABOR STATISTICS CPI-U ANNUAL AVERAGES

(1) The Bureau of Labor Statistics CPI-U annual averages can be accessed at the website http://stats.bls.gov/cpi. The following tables contain the annual averages and percentage changes in annual averages for computation of consumer price index adjustments to the installation and memorial care fees:

Base Period 1967 = 100 Annual Percentage Change in Year Average Annual Average 1980 246.8 1981 272.4 10.4% 1982 289.1 6.1% 1983 298.4 3.2% 1984 311.1 4.3% 1985 322.2 3.6% 1986 328.4 1.9% 1987 340.4 3.7% Base Period 1982–84 = 100 1987 113.6 1988 118.3 4.1% 1989 124.0 4.8% 1990 130.7 5.4% 1991 136.2 4.2% 1992 140.3 3.0% 1993 144.5 3.0% 1994 148.2 2.6% 1995 152.4 2.8% 1996 156.9 3.0% 1997 160.5 2.3% 1998 163.0 1.6% 1999 166.6 2.2% 2000 172.2 3.4% 2001 177.1 2.8% 2002 179.9 1.6% 2003 184.0 2.3% 2004 188.9 2.7% 2005 195.3 3.4% 2006 201.6 3.2% (2) The following rules apply when a cemetery owner calculates either a commodity installation fee in accordance with T.C.A. § 46-2-101(b) or a fee for memorial care. Calculations shall be rounded to the nearest cent.

(a) If the commodity is an erect or flat marker and requires the use of a base, the calculation shall be based upon the ground covered by the base only.

(b) Beginning with the December 31, 1981 calculation, the annual calculations shall use the CPI-U table contained in this rule, with the base period of 1967=100. The initial fee of $0.10 shall be multiplied by the percentage change from the 1980 annual average to the 1981 annual average. That product shall be added to the initial fee of ten cents ($0.10) to obtain the fee for 1982. Each subsequent year’s calculation shall employ the same method, regardless of the base period of the table then in use.

(c) Beginning with the December 31, 1988 calculation, the annual calculations shall use the CPI-U table contained in this rule, with the base period of 1982-84=100. The values for both the 1988 annual average and the 1987 average shall come from this table.

(3) The methods of adjustment listed in subparagraphs (2)(b) and (c) above shall also be used by the Commissioner in adjusting procurement costs pursuant to T.C.A. § 46-1-207(e)(1).

These calculations shall be rounded to the nearest dollar.

History

• Authority: T.C.A. §§ 46-1-204(c), 46-1-206, 46-1-207(e)(1), 46-1-301(b), and 46-2-101(b)(2).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.04 REGISTRATION, RENEWAL AND REINSTATEMENT

(1) Every cemetery owner shall apply for a certificate of registration for each cemetery that an owner possesses or controls. Upon approval of the application and receipt of the appropriate nonrefundable filing fee, the Commissioner shall issue a certificate of registration to the applicant.

(2) Renewal of a certificate of registration may be effected at any time during the two (2) months preceding the date of expiration, upon submission of an application to the Commissioner on the prescribed form, accompanied by the appropriate renewal fee.

(3) An application for renewal shall be accompanied by a form, prescribed by the Commissioner, stating the number of preneed sales made during the preceding renewal period together with the appropriate consumer protection fee as set forth in T.C.A. § 46-1-105.

(4) A certificate of registration becomes invalid if not renewed by the expiration date. After a certificate of registration has expired and has become invalid, a cemetery shall only be permitted to fulfill its preneed obligations for burials, to perform at need burials, and to perform basic maintenance of the cemetery property until the late renewal or reinstatement of the certificate of registration is effected.

(5) An application for renewal received after the expiration date shall be accompanied by an additional fee for each month or fraction thereof that the application is late. Applications received later than nine (9) months after expiration shall not be renewed under this paragraph.

(6) After the expiration of the nine (9) month period in paragraph (5) of this rule, a certificate of registration may, upon proper application to the Commissioner, and upon payment of a reinstatement fee, be reinstated.

History

• Authority: T.C.A. §§ 46-1-103, 46-1-104, 46-1-105, and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.05 FEES

The following fees are hereby established by the Commissioner.

New registration ......................................................................................................... $1,000.00 Renewal of registration Cemeteries with improvement care trust fund(s) less than $200,000.00.............. $500.00 Cemeteries with improvement care trust fund(s) of $200,000.00 or greater .... $1,000.00 Additional fee for each month (or fraction thereof) after expiration ...................... $250.00 Reinstatement ............................................................................................................ $3,500.00 Change of ownership ................................................................................................. $1,000.00 Database update ........................................................................................................... .. $60.00 Duplicate registration certificate....................................................................................... $60.00 LexisNexis© Tennessee Funeral Laws ........................................................................... $20.00 Merchandise and services report late fee (for each month or fraction thereof that the report is late)................................................................................................................................ $100.00 Improvement care report late fee (for each month or fraction thereof that the report is late)................................................................................................................................ $100.00

History

• Authority: T.C.A. §§ 10-7-506; 46-1-103(c)(1); 46-1-104(b), (c), and (d); 46-1-214(c); 46-1-215(c); and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.06 REPORTS LACKING REQUIRED INFORMATION

(1) A report required to be filed with the Commissioner by T.C.A. § 46-1-214 or § 46-1-215 that fails to contain any required information shall not be accepted by the Commissioner for filing and shall not toll the deadline for filing.

(2) A report that is not accepted for filing shall be promptly returned to the person submitting such report, along with an indication of the required information that is lacking.

History

• Authority: T.C.A. §§ 46-1-214(e) and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.07 REPEALED

History

• Authority: T.C.A. §§ 46-1-103(c)(1), 46-1-107(a), and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-09-.08 MEMORIAL CARE REQUIRED

A cemetery owner is required to provide memorial care whether or not the cemetery owner charges a memorial care fee. Memorial care is to be considered improvement care within the meaning of T.C.A. § 46-1-102(12), and improvement care is an obligation of the cemetery owner to be paid from the earnings of the improvement care trust fund.

History

• Authority: T.C.A. §§ 46-1-102(12) and (18) and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.09 EXPLANATION FOR COMMODITY NOT INSTALLED WITHIN 30 DAYS

The cemetery company shall provide a written explanation to the lot owner, or the lot owner’s representative, agent, or heirs or assigns and the seller of the commodity if the commodity is not installed within thirty (30) days from the date on which the commodity is delivered to the cemetery.

History

• Authority: T.C.A. §§ 46-1-301(b) and 46-2-101(b)(2).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.10 SIGN REQUIRED AT CEMETERY

Each cemetery owner shall conspicuously post a sign within one hundred (100) feet of each public entrance to the cemetery grounds. The lettering shall not be less than two (2) inches in height. All signs shall contain the words:

This cemetery is registered by the Tennessee Department of Commerce and Insurance.

History

• Authority: T.C.A. § 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.11 MASTER MAP

(1) The master map shall be filed in the cemetery office and available for public inspection.

(2) The master map shall be updated no later than ten (10) days after the sale of an interment site, inurnment space or entombment space.

History

• Authority: T.C.A. §§ 46-1-103(b)(4), 46-1-111(d), and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.12 FAILURE TO MAINTAIN CEMETERY GROUNDS

(1) Any of the following conditions constitutes failure to maintain cemetery grounds:

(a) An accumulation of weeds, trash, junk, or filth;

(b) Any unsafe or unsanitary condition(s);

(c) Failure to perform any other maintenance obligation created by contract.

(2) In determining the amount of any civil penalty, the Commissioner, in addition to those factors in 0780-05-09-.24(3), may consider the following:

(a) The reason for the cemetery owner’s failure to maintain cemetery grounds;

(b) Prior instances of the cemetery owner’s failure to maintain cemetery grounds;

(c) The degree of any condition listed in paragraph (1).

History

• Authority: T.C.A. §§ 46-1-301(b), 46-1-304(a), and 46-1-306(f).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.13 NOTIFICATION OF CEMETERY RULE CHANGE

(1) The cemetery company shall conspicuously post notification in the cemetery office of a rule or regulation change no less than thirty (30) days prior to the rule or regulation taking effect, and the notification shall clearly state the effective date of the new rule or regulation.

(2) The cemetery company shall retain the rules and regulations for at least one (1) year from the date that it last posted or distributed them to customers.

(3) The rules shall conspicuously state the effective date.

(4) Rules and regulations shall not be contrary to Chapter 0780-05-09 or T.C.A. Title 46.

History

• Authority: T.C.A. §§ 46-1-301 and 46-2-101(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.14 COMMUNITY CEMETERIES – REQUEST FOR EXEMPTION

A cemetery may submit a written request for exemption as a community cemetery in typewritten form on 8½ x 11 inch paper which shall contain the following information:

(1) The name and address of the cemetery, or description of its location if it has no street address;

(2) The name, address, and telephone number of the person in responsible charge of the cemetery who is submitting the application on behalf of the cemetery;

(3) A description of the historic nature of the cemetery and/or its environs, if applicable;

(4) The area remaining for future use and (if different) the area remaining for future sales;

(5) The sale of lots, by number of lots sold per year, over the preceding ten (10) years and the price or prices at which the lots sold; and (6) The population of the community normally served by the cemetery.

History

• Authority: T.C.A. §§ 46-1-106(b) and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008. Repeal and new rule filed November 14, 2014; effective February 12, 2015.

Tenn. Comp. R. & Regs. 0780-05-09-.15 COMMUNITY CEMETERIES – GRANTING OF EXEMPTION

The Commissioner has the discretion to grant an exemption from the registration requirements of this

chapter to a community cemetery after taking into consideration the intent of T.C.A. Title 46, Chapter 1 and factors including, but not limited to, the following:

(1) The age of the cemetery;

(2) The remaining area for future use;

(3) The sale of lots over the preceding ten (10) years and the price at which sold;

(4) The population of the community normally served by the cemetery;

(5) Whether a community cemetery association has been formed and such association has been incorporated or has been granted tax exempt status;

(6) The historic nature of the cemetery and/or its environs;

(7) Whether a savings account or a trust fund in the name of the cemetery has been established at a financial institution for the maintenance and upkeep of the cemetery;

(8) The source or sources of funds used for the maintenance and upkeep of the cemetery; and (9) Whether the exemption is in the best interest of the citizens of the State of Tennessee.

History

• Authority: T.C.A. §§ 46-1-106(b) and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008. Repeal and new rule filed November 14, 2014; effective February 12, 2015.

Tenn. Comp. R. & Regs. 0780-05-09-.16 COMMUNITY CEMETERIES – NOTICE OF CHANGES

(1) With respect to an exempt community cemetery and/or its trust corporation, if applicable, the Commissioner shall be notified in writing within ten (10) days of the effective date of any change in:

(a) The corporate charter;

(b) The corporate by-laws;

(c) The officers and/or directors of the corporation;

(d) The tax exempt status;

(e) The corporate registration status with the Tennessee Secretary of State;

(f) The amount of land dedicated to cemetery purposes; or (g) The identity of the controlling party.

(2) Such notice of change shall be submitted in writing to the Burial Services Section of the Tennessee Department of Commerce and Insurance and shall include copies of all documents affected by such change.

History

• Authority: T.C.A. §§ 46-1-106(b) and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008. Repeal and new rule filed November 14, 2014; effective February 12, 2015.

Tenn. Comp. R. & Regs. 0780-05-09-.17 REPEALED

History

• Authority: T.C.A. §§ 46-1-106(b) and 46-1-301(b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Repeal and new rule filed November 2, 2007; effective January 16, 2008. Repeal filed November 14, 2014; effective February 12, 2015.

Tenn. Comp. R. & Regs. 0780-05-09-.18 COMMUNITY CEMETERIES – ACCESS TO BOOKS, RECORDS, AND PAPERS

The granting of an exemption notwithstanding, the Commissioner shall be allowed, upon demand, full and immediate access to the books, records, and papers of the cemetery and/or its trustee which pertain to the financial affairs of the cemetery.

History

• Authority: T.C.A. §§ 46-1-106(b) and 46-1-301(b).
• Administrative History: Original rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.19 COMMUNITY CEMETERIES – REVOCATION OF EXEMPTION

Pursuant to T.C.A. § 46-1-106(c), the Commissioner may at any time revoke any exemption granted to a community cemetery.

History

• Authority: T.C.A. §§ 46-1-106(c) and 46-1-301(b).
• Administrative History: Original rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.20 EXAMINATIONS AND AUDITS

(1) The necessary expense of any examination or audit made pursuant to T.C.A. Title 46,

Chapter 1, Parts 2 and 3 shall be paid by the cemetery owner at the rate of five hundred dollars ($500.00) per examiner/auditor, per day. The cemetery owner shall be billed in increments of not less than one-half day for each half-day or any portion thereof.

(2) The cemetery owner shall remit payment not later than fifteen (15) days after the invoice date.

History

• Authority: T.C.A. §§ 46-1-214(e) and (g), 46-1-301(b), and 46-1-303(b).
• Administrative History: Original rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.21 REQUIREMENTS FOR EXEMPTION FROM FIDELITY BOND COVERAGE

The cemetery company shall, in order to establish that each account or trust fund requires authorization from at least two individuals for withdrawal, submit satisfactory documentation which includes at least the following:

(1) For each cemetery account, a current voided blank check(s) that clearly establishes that dual signatures are required for execution;

(2) A copy of a certification letter from the trustee of the preneed merchandise and services trust fund that provides proof that dual signatures are required to request funds from the trust fund;

(3) At a minimum, a compilation report including a balance sheet prepared by an independent certified public accountant in accordance with Generally Accepted Accounting Principles (G.A.A.P.).

History

• Authority: T.C.A. §§ 46-1-202(c) and 46-1-301.
• Administrative History: Original rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.22 CRITERIA FOR INDEPENDENT AUDIT

(1) The Commissioner may require audited financial statements or other financial reports performed by an independent certified public accountant, approved by the Commissioner, licensed in the State of Tennessee of any cemetery company or its trust funds when there are:

(a) Deficiencies in any of the trust funds; or (b) Any violations of T.C.A. Title 46 or the Rules of the Departments of Commerce and if such violation of statute or rule relates to trust funds; or (c) Any other reasonable cause to believe that the trust funds are in danger of being lost or dissipated.

(2) The cost of the audit shall be paid by the cemetery company. The trust fund principal and the income earned from the trust funds shall not be used to pay for audit expenses.

History

• Authority: T.C.A. §§ 46-1-215(d), 46-1-301, and 46-1-306(d)(2).
• Administrative History: Original rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.23 TRUSTEE VIOLATIONS

The Commissioner may assess civil penalties against a trustee for violations including but not limited to:

(1) Improper distributions from the improvement care trust fund or the preneed merchandise and services trust fund;

(2) Late filing of trustee reports;

(3) Filing inaccurate or incomplete trustee reports;

(4) Investing trust funds directly or indirectly:

(a) With any officer, director or employee of the cemetery company or anyone related by blood, adoption, or marriage to any individuals included in the above;

(b) With the cemetery company itself;

(c) In any business entity of which a controlling interest is held directly or indirectly by any of the foregoing persons or legal entities;

(d) With any other cemetery company or funeral establishment;

(e) In assets, ventures, funds or investments that are high risk or highly speculative.

History

• Authority: T.C.A. §§ 46-1-301 and 46-1-306(c).
• Administrative History: Original rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.24 TRUSTEE CIVIL PENALTIES

(1) With respect to any trustee required to comply with the provisions of T.C.A. Title 46, or rules promulgated thereunder, the Commissioner may, in addition to or in lieu of any other lawful disciplinary action, assess civil penalties against such trustee for each separate violation of a statute, rule or order pertaining to such provisions in accordance with the following schedule:

Violation Penalty T.C.A. § 46-1-204(e)(4)(C) Not more than $10,000.00 nor less than $1000.00 T.C.A. § 46-1-207(d) Not more than $10,000.00 nor less than $1,000.00 T.C.A. § 46-1-208 Not more than $10,000.00 nor less than $1000.00 T.C.A. § 46-1-214(b) Not more than $10,000.00 nor less than $1,000.00 T.C.A. § 46-1-215(b) Not more than $10,000.00 nor less than $1,000.00 T.C.A. § 46-1-302(a) Not more than $10,000.00 nor less than $1,000.00 T.C.A. § 46-1-306(a)(10) Not more than $10,000.00 nor less than $1,000.00 T.C.A. § 46-1-306(c) Not more than $10,000.00 nor less than $1,000.00 T.C.A. § 46-1-306(e) Not more than $10,000.00 nor less than $1,000.00 (2) Each day of continued violation shall constitute a separate violation.

(3) In determining the amount of any civil penalty to be assessed pursuant to this rule, the Commissioner may consider such factors as the following:

(a) Whether the amount imposed will be a substantial economic deterrent to the violator;

(b) The circumstances leading to the violation;

(c) The severity of the violation and the risk of harm to the public;

(d) The economic benefits gained by the violator as a result of noncompliance; and (e) The interest of the public.

History

• Authority: T.C.A. §§ 46-1-301 and 46-1-306(c).
• Administrative History: Original rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.25 CIVIL PENALTIES

(1) With respect to any person required to comply with the provisions of T.C.A. Title 46, or rules promulgated thereunder, or granted an exemption under T.C.A. § 46-1-106(b), the Commissioner may, in addition to or in lieu of any other lawful disciplinary action, assess civil penalties against such person for each separate violation of a statute, rule or order pertaining to such provisions in accordance with the following schedule:

Violation Penalty T.C.A. § 46-1-103(a) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-107(a) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-108(b) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-108(c) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-109(b) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-110 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-111 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-202 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-203 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-204 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-205 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-206 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-207 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-208 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-209(a) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-209(c) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-212 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-213 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-214(a) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-214(f) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-215(a) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-216 Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-302(a) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-303(b) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-304(a) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-306(a) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-1-307(a) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-2-101(a)(3) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-2-101(b)(2) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-2-101(b)(3) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-2-101(b)(4) Not more than $1,000.00 nor less than $500.00 T.C.A. § 46-2-106(a) Not more than $1,000.00 nor less than $500.00 (2) Each day of continued violation shall constitute a separate violation.

(3) In determining the amount of any civil penalty to be assessed pursuant to this rule, the Commissioner may consider such factors as the following:

(a) Whether the amount imposed will be a substantial economic deterrent to the violator;

(b) The circumstances leading to the violation;

(c) The severity of the violation and the risk of harm to the public;

(d) The economic benefits gained by the violator as a result of noncompliance; and (e) The interest of the public.

History

• Authority: T.C.A. §§ 46-1-301(b), 46-1-306(b), and 56-1-308.
• Administrative History: Original rule filed November 2, 2007; effective January 16, 2008.

Tenn. Comp. R. & Regs. 0780-05-09-.26 REPEALED

History

• Authority: T.C.A. §§ 46-1-301(b).
• Administrative History: Original rule filed November 14, 2014; effective February 12, 2015. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-09-.27 CHANGES

In addition to any other requirement of the rules promulgated by the Commissioner or any statute pertaining to the operation of a cemetery company, the cemetery company shall report the following changes in writing to the Commissioner within ten (10) days of the effective date of the change:

(1) Change in the identity of person responsible for compliance with cemetery statutes;

(2) The conviction of any partnership, corporation, association, employee, owner, director, principal, manager, member, stockholder with a majority ownership interest, or other person who has any ownership interest in, or has any control over, the financial operations of a cemetery for a misdemeanor involving fraud, dishonesty or moral turpitude or a conviction of any felony.

History

• Authority: T.C.A. §§ 46-1-301(b) and 46-1-306(a)(8).
• Administrative History: Original rule filed November 14, 2014; effective February 12, 2015.

Tenn. Comp. R. & Regs. 0780-05-09-.28 PROFESSIONAL CONDUCT

The Commissioner may deem a cemetery company, or any cemetery operator, to have violated the rules of professional conduct for:

(1) Failing to perform legal obligations under any contract with a purchaser;

(2) Negligently failing to protect the safety, health and welfare of the public in the performance of the registrant’s professional duties;

(3) Providing any false or misleading statement on any reports submitted to the Commissioner;

(4) Selling or offering to sell any contract in violation of the Tennessee Pre-paid Funeral Benefits Act [Tenn. Code Ann. §§ 62-5-401 et seq.];

(5) Failing to submit payment within the time provided by a written notice from Burial Services assessing a fee pursuant to statute or rule;

(6) Failing to respond within the time specified in any notice from Burial Services, provided, however, that the director may grant a request for extension submitted within the period of time stated in the original notice; or (7) Treating members of the public in an unreasonable manner that, under the circumstances, falls below the standard of professional cemetery operators. Such treatment includes, but is not limited to:

(a) Abusive, aggressive, hostile, or disrespectful conduct; or (b) Being unresponsive to a member of the public for an unreasonable period of time without justification, such as: not returning phone calls, not answering inquiries, or leaving a member of the public unattended.

History

• Authority: T.C.A. §§ 46-1-206(c), 46-1-301(b), 46-1-306(a)(7), and 62-5-401, et seq.
• Administrative History: Original rule filed November 14, 2014; effective February 12, 2015.

Chapter 0780-05-10 Pre-Need Funeral Service Contracts

Tenn. Comp. R. & Regs. 0780-05-10-.01 DEFINITIONS

With respect to this chapter, unless the context requires otherwise:

(1) “Commissioner” means the Commissioner of the Tennessee Department of Commerce and Insurance or the Commissioner’s designee.

(2) “Board” means the Board of Funeral Directors and Embalmers for the State of Tennessee.

(3) “Contract Seller” means and shall include natural persons, partnerships, firms, associations, and corporations residing in or doing business in this state (which includes issuing or performing wholly or in part in this state any incident of a Pre-need Funeral Service Contract), who engage in the business of selling Pre-need Funeral Service Contracts.

(4) “Contract Buyer” means any person (such person may or may not be a Contract Beneficiary) who purchases a Pre-need Funeral Service Contract from a Contract Seller.

(5) “Contract Beneficiary” means any natural person specified or included in a Pre-need Funeral Service Contract, upon whose death funeral services and/or funeral merchandise shall be performed, provided or delivered.

(6) “Financial Institution” means a bank or trust company which is authorized to do business in this state, or a federally insured savings and loan association or a federally insured savings bank.

(7) “Funds” means money paid pursuant to a Pre-need Funeral Service Contract.

(8) “Person” means, according to the context, any individual, association, partnership, corporation, or any other organization or entity.

(9) “Pre-need Funeral Service Contract”, “Pre-need Funeral Contract”, or “Pre-need Contract” means any agreement, contract or plan which is described in Tenn. Code Ann. § 62-5-401.

(10) “Trust Funds” means funds deposited by a Contract Seller with a Trustee.

(11) “Trust Instrument” means the document or documents pursuant to which a Trustee receives, holds, invests and disburses Trust Funds.

(12) “Trustee” means any third person who holds funds pursuant to a Trust Instrument. The term “Trustee” shall not include:

(a) a Contract Seller; or (b) anyone employed by, or directly involved with, the Contract Seller in the business of selling Pre-need Funeral Service Contracts.

History

• Authority: T.C.A. §62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.02 PURPOSE

These rules are promulgated for the purpose of administering the provisions of Tenn. Code Ann. Title 62, Chapter 5, Part 4, relative to contracts for future funeral services.

History

• Authority: T.C.A. §62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.03 SCOPE

These rules shall apply to any agreement, contract, or plan requiring the payment of money in advance, whether in a lump sum or installments, which is made or entered into with any person, association, partnership, firm, or corporation for the final disposition of a dead human body, or for funeral or burial services, or for the furnishing of personal property or funeral or burial merchandise, wherein the use of the personal property or the funeral or burial merchandise or the furnishing of professional services by a funeral director or embalmer is not immediately required. Any financial institution which holds funds pursuant to Tenn. Code Ann. § 62-5-401 shall also be governed by these rules.

History

• Authority: T.C.A. §§62-5-401 and 62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.04 EXEMPTIONS

Nothing in these rules shall apply to cemetery lots or permanent grave or crypt markers, nor shall burial associations where the certificate for burial benefits does not exceed one hundred dollars ($100.00) be governed by such rules. Contracts of insurance subject to the

regulation of the Department of Commerce and Insurance of the State of Tennessee shall not be governed by these rules. Nothing in these rules shall be construed as in conflict with Tenn. Code Ann.

Title 46, as amended.

History

• Authority: T.C.A. §§62-5-401, 62-5-405(a) and (b), and 62-5-408.
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.05 RECORDS

(1) All contract sellers and trustees shall maintain, within the State of Tennessee, accurate accounts, books and records in this state concerning transactions regulated under these rules.

(2) (a) A contract seller’s accounts, books, and records shall include:

1. copies of all pre-need contracts, with each contract and its related documentation maintained in a separate file;

2. the dates and amounts of payments made and accepted thereon;

3. the name and address of each contract buyer;

4. the name of the contract beneficiary of each pre-need contract; and 5. the name of the trustee holding the trust funds received under each contract.

(b) A trustee’s accounts, books and records shall include:

1. the name of the contract seller;

2. the amount and date of receipt of all funds received from the contract seller; and 3. a record of all disbursements.

(3) A contract seller shall retain all required accounts, books, and records pertaining to each preneed contract for at least two (2) years after the date of performance or termination. Such accounts, books and records shall be available for inspection by contract buyers during normal business hours at the contract seller’s place of business.

History

• Authority: T.C.A. §62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.06 EXAMINATION OF RECORDS

All contract sellers and trustees shall make all accounts, books and records required to be kept under Rule 0780-05-10-.05 available to the Commissioner for the purpose of examination or audit. The Commissioner may examine or audit such accounts, books and records whenever the Commissioner deems necessary for the protection of contract buyers or beneficiaries.

History

• Authority: T.C.A. §62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.07 ANNUAL REPORTS

All contract sellers and trustees shall, no later than March 15 of each year, file an annual report with the Commissioner on such forms as the Commissioner may prescribe. Such report shall include a summary of the information contained in the accounts, books and records required to be kept under Rule 0780-05-10-.05, and such other information as the Commissioner may reasonably require.

History

• Authority: T.C.A. §62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.08 TRUST INSTRUMENTS

(1) Each trust instrument, and any amendments thereto, shall be filed with the Commissioner.

Each trust instrument shall specify:

(a) the name of the contract seller;

(b) the name of the trustee;

(c) the trustee’s duties in conformance with the provisions of these rules;

(d) the basis for determining the trustee’s fee (if any); and (e) any other appropriate terms of the trusteeship.

(2) Each trust instrument shall bind the trustee to make available at reasonable times and places, on request by a contract buyer, the trustee’s records of the trust account established pursuant to the contract buyer’s pre-need contract.

(3) The Commissioner may require alterations or additions to a trust instrument if the Commissioner finds that it is not in accord with the provisions of these rules.

History

• Authority: T.C.A. §62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.09 DEPOSIT OF FUNDS

(1) Contract sellers shall deposit all funds received on account of a pre-need contract as soon as possible after receipt, and in no event later than thirty (30) days after receipt.

(2) All deposits of funds with a trustee shall be in cash only pursuant to a trust instrument; provided, however, that, at any time, a contract seller may change the trustee of its trust funds. In the event of such change of trustee, the requirements of Rule 0780-05-10-.08 shall be complied with.

History

• Authority: T.C.A. §62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.10 INVESTMENT OF TRUST FUNDS

(1) A financial institution acting as trustee of trust funds under these rules shall invest such funds in accordance with applicable law. In so investing, such trustee shall exercise the judgement and care under the circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to the speculation, but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital.

(2) An individual acting as a trustee of trust funds under these rules shall not, after depositing such funds with a financial institution, withdraw the trust funds for any purpose other than payment for funeral merchandise or service and refund of any balance remaining as provided by law. However, such individual trustee may, upon proper written authority, transfer trust funds to another financial institution or successor trustee.

(3) Subject to contractual agreement between the parties, the trustee may receive a reasonable fee for services rendered as a trustee from the interest or earnings on the funds.

History

• Authority: T.C.A. §§62-5-401, 62-5-402, and 62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.11 REVOCATION OF TRUST ACCOUNT

A financial institution holding trust funds in a revocable trust account shall promptly notify the contract seller if a contract buyer exercises the right under Tenn. Code Ann. § 62-5-403(b) to withdraw any or all of such funds.

History

• Authority: T.C.A. §62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.12 OUTSTANDING CONTRACTS

The provisions of these rules relating to trustees and investment of trust funds shall apply to the disposition of all proceeds from pre-need contracts issued and outstanding from March 25, 1963 and thereafter.

History

• Authority: T.C.A. §62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.13 PRE-NEED CONTRACT PROVISIONS

(1) No contract seller shall use a pre-need contract form unless the contract seller has submitted the form to the Commissioner, and the Commissioner has approved the form.

(2) Every pre-need contract shall contain, at a minimum, the following:

(a) a statement as to whether the contract establishes a revocable trust account or an irrevocable trust account;

1. if such trust account is revocable, a statement that the purchaser of the merchandise and/or services under the contract shall be entitled to receive any or all of the payments made and any earnings or interest thereon upon demand on the trustee prior to the death of the contract beneficiary;

2. if such trust account is irrevocable, the contract shall state on its face and in boldface type and all uppercase letters the following:

“The trust account established by this contract is irrevocable, and the funds paid hereunder are not refundable. Accumulated trust principal and interest are freely transferable to satisfy funeral expenses at any licensed funeral establishment as provided by law.”

(b) a clear disclosure as to whether the funds identified as having been paid or are to be paid:

1. are to be applied to the price of funeral merchandise and services to be selected by a designated person at the time of death of the person for whom the funds were paid. In the event this condition applies, the contract shall state on its face in boldface type and uppercase letters, the following:

“_________________________ if the amount in the (Purchaser’s Signature) trust account exceeds the prevailing price (at the time of selection) of the funeral merchandise and services selected, the balance remaining shall be refunded to _________________________________________________________ (Name).”

2. fully pay for the funeral merchandise and services (or their equivalent) identified therein; or 3. fully pay for the funeral merchandise and services (or their equivalent) identified therein, if and only if the prevailing price thereof at the time of the death of the contract beneficiary does not exceed the amount in the trust account at that time.

(c) a means whereby the purchaser can indicate his or her choice of either paying or not paying any applicable sales or use tax for the related merchandise or services at the time the contract is entered into;

(d) a complete disclosure of the pricing arrangement and of any contingent liabilities or costs of the buyer;

(e) a disclosure that, upon the death of the contract beneficiary, the trustee shall release an amount equal to the agreed purchase price to the contract seller upon proof of death of the contract beneficiary and verification that all of the terms of the pre-need contract have been fully performed by the contract seller;

(f) a disclosure that the trustee shall pay any balance remaining in the trust fund after payment for the funeral merchandise and services in accordance with the pre-need contract:

1. to the contract buyer or his estate, if such merchandise and services are itemized in the contract; or 2. to the person designated by the contract buyer in the boldface disclosure required by part (2)(b)1. of this rule, if selection of such merchandise and services is deferred until the death of the contract beneficiary.

(g) a disclosure that the contract, books, records and accounts pertaining to the contract buyer’s contract shall be available for inspection by the contract buyer at the contract seller’s place of business during normal working hours;

(h) a disclosure of the identity and address of the trustee for the purchaser’s funds and that notification to purchasers need not be made upon change of trustees so long as this information is available upon request; and (i) a disclosure that if the buyer and seller agree upon a reasonable fee for the trustee, such fee will be paid in the manner prescribed by these rules.

(3) No pre-need contract form shall contain:

(a) a provision specifying any particular investment of trust funds; or (b) any provision not in compliance with Tenn. Code Ann. Title 62, Chapter 5, Part 4, or any of these rules.

(4) The contract seller shall give to the contract buyer a copy of the pre-need contract, and any amendment thereto, at the time of its execution.

(5) No approval of a pre-need contract form by the Commissioner shall be used for advertising or promotional purposes.

(6) As soon as possible after the submission of a proposed pre-need contract form pursuant to this rule, the Commissioner shall approve or disapprove the form in writing; provided, however, that a preneed contract form shall be deemed approved unless disapproved within sixty (60) days after its receipt. In the event that the Commissioner disapproves a preneed contract form, the Commissioner shall specify in what respect such form does not meet the requirements of law.

History

• Authority: T.C.A. §§62-5-403 and 62-5-405(a) and (b).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.14 REGISTRATION OF PRE-NEED SELLERS AND PRE-NEED SALES AGENTS; FEES

(1) No individual may offer or sell pre-need funeral contracts as defined in T.C.A. Title 62,

Chapter 5, Part 4 without first registering with the commissioner as a pre-need sales agent.

(2) No funeral establishment or other individual, firm, partnership, company, corporation, or association may offer or sell pre-need funeral contracts without first registering with the commissioner as a pre-need seller.

(3) An application for registration as a pre-need seller or pre-need sales agent shall be submitted on a form prescribed by the commissioner and shall be accompanied by a nonrefundable fee as follows:

(a) One thousand dollars ($1,000.00) for a pre-need seller;

(b) Two hundred fifty dollars ($250.00) for a pre-need sales agent.

(4) All registrations shall be valid for two (2) years and thereafter become invalid unless renewed. Failure to timely renew will require a new registration and payment of fees under subsection (3).

(5) The commissioner may renew a certificate of registration provided that an application for renewal, accompanied by the following nonrefundable fee, is received by the commissioner no later than the date of expiration:

(a) Seven hundred fifty dollars ($750.00) for a pre-need seller;

(b) One hundred fifty dollars ($150.00) for a pre-need sales agent.

(6) Any individual, funeral establishment, or other individual, firm, partnership, company, corporation or association that sells or offers to sell a pre-need funeral contract without a valid registration is subject to disciplinary action pursuant to Chapter 0780-05-10 of these rules and Tenn. Code Ann. Title 62, Chapter 5, Part 4.

History

• Authority: T.C.A. § 62-5-404, 62-5-405, 62-5-405(a), (b), and (d) and 62-5-413(b) through (e).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003. Public necessity rule filed December 13, 2007; effective through May 26, 2008. Public necessity rule filed December 13, 2007, expired effective May 27, 2008. Rule reverted to its previous status. Public necessity rule filed June 4, 2008; effective through November 16, 2008. Public necessity rule filed June 4, 2008 expired effective November 17, 2008 and reverted to its previous status. Amendment filed November 26, 2008; effective February 9, 2009.

Tenn. Comp. R. & Regs. 0780-05-10-.15 ANNUAL AUDITS; FEES

(1) The Commissioner shall require an annual audit to ensure that each contract seller will be able to perform its contract with the purchaser.

(2) The fee for the audit of pre-need trust accounts shall be three hundred dollars ($300.00) per auditor, per day. The contract seller shall be billed in increments of not less than one-half day for each half-day or any portion thereof.

(3) The contract seller shall remit payment to the Department not later than sixty (60) days after the invoice date.

History

• Authority: T.C.A. §62-5-405(a), (b), and (c).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Tenn. Comp. R. & Regs. 0780-05-10-.16 CIVIL PENALTIES

(1) With respect to any person, partnership, firm, association or corporation required to comply with the provisions of Tenn. Code Ann. Title 62, Chapter 5, Part 4, or rules promulgated thereunder, the Commissioner may, in addition to or in lieu of any other lawful disciplinary action, assess civil penalties against such person for each separate violation of a statute, rule or order pertaining to such provisions in accordance with the following schedule:

Violation Penalty Tenn. Code Ann. § 62-5-401 Not more than $1,000.00 nor less than $25.00 Tenn. Code Ann. § 62-5-402(a) Not more than $1,000.00 nor less than $25.00 Tenn. Code Ann. § 62-5-402(b) Not more than $1,000.00 nor less than $25.00 Tenn. Code Ann. § 62-5-402(c) Not more than $1,000.00 nor less than $25.00 Tenn. Code Ann. § 62-5-403 Not more than $1,000.00 nor less than $25.00 Tenn. Code Ann. § 62-5-404(b) Not more than $1,000.00 nor less than $25.00 Tenn. Code Ann. § 62-5-404(c) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.05(1) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.05(2)(a) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.05(2)(b) Not more than $1,000.00 nor lees than $25.00

Rule 0780-05-10-.05(3) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.06 Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.07 Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.08(2) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.09(1) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.09(2) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.10(1) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.10(2) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.11 Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.13(1) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.13(2) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.13(3) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.13(4) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.13(5) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.14(1) Not more than $1,000.00 nor less than $25.00

Rule 0780-05-10-.15(3) Not more than $1,000.00 nor less than $25.00 (2) Each day of continued violation shall constitute a separate violation.

(3) In determining the amount of any civil penalty to be assessed pursuant to this rule, the Commissioner may consider such factors as the following:

(a) whether the amount imposed will be a substantial economic deterrent to the violator;

(b) the circumstances leading to the violation;

(c) the severity of the violation and the risk of harm to the public;

(d) the economic benefits gained by the violator as a result of noncompliance; and (e) the interest of the public.

History

• Authority: T.C.A. §§56-1-308 and 62-5-405(a), (b), and (e).
• Administrative History: Original rule filed October 22, 2002; effective January 5, 2003.

Chapter 0780-05-11 General Provisions

Tenn. Comp. R. & Regs. 0780-05-11-.01 ASSESSMENT OF INVESTIGATORY AND HEARING COSTS

(1) The Division of Regulatory Boards (“Division”) or any board, commission or agency attached thereto is authorized to assess the actual and reasonable costs of the investigation, prosecution and hearing of any disciplinary action held in accordance with the contested case provisions of the Uniform Administrative Procedures Act, compiled in Tenn. Code Ann. Title 4, Chapter 5, Part 3 in which sanctions of any kind are imposed on any person or entity required to be licensed, permitted, registered or otherwise authorized by the Division or any board, commission or agency attached thereto.

(2) When the Division or any board, commission or agency attached thereto, in any final order requires the “payment of costs,” the requirement may include payment of any or all of the following:

(a) All costs attributed to and assessed against the Division, board, commission or agency by the Division’s, board’s, agency’s or commission’s investigations section in connection with the investigation and prosecution of the matter, including all investigator time, travel and lodging incurred during the investigation and prosecution of the matter. Costs for travel and lodging shall be assessed in accordance with the State of Tennessee Comprehensive Travel Regulations promulgated by the Department of Finance and Administration. Investigator time shall be assessed in accordance with the hourly rate per investigator and based on the formula used to calculate the same from the most recent fiscal year.

(b) All costs assessed against the Division, board, commission or agency for the use of the Division facilities and personnel for prosecution of the matter.

(c) All costs assessed against the Division, board, commission or agency for the appearance fees, transcripts, time, travel and lodging of administrative law judges, court reporters and witnesses required in the prosecution of the matter. Costs for travel and lodging shall be assessed in accordance with the State of Tennessee Comprehensive Travel Regulations promulgated by the Department of Finance and Administration.

(3) As soon as practicable after the conclusion of the disciplinary matter, the Division, board, commission or agency shall enter a final order. If the Division, board, commission or agency has ordered the assessment of costs, the Division, board, commission or agency shall incorporate an itemized account of the assessment in the final order. The person or entity disciplined shall pay all costs assessed pursuant to this rule within thirty (30) days after the effective date of the Division’s, board’s, commission’s or agency’s final order.

(4) If the person or entity disciplined has not paid the costs assessed within thirty (30) days, the Division, board, commission or agency may apply to the chancery court of Davidson County for a judgment to recover such costs.

History

• Authority: T.C.A. § 56-1-311.
• Administrative History: Original rule filed October 25, 2004; effective January 8, 2005.

Tenn. Comp. R. & Regs. 0780-05-11-.02 FEE WAIVER FOR LOW INCOME PERSONS

(1) This rule is applicable to any state board, agency, or commission attached to the Division of Regulatory Boards, as listed in T.C.A. § 4-3-1304(a). This rule shall be effective ninety (90) days from filing with the office of the Secretary of State.

(2) As used in this rule, unless context otherwise requires:

(a) The terms “licensing,” “licensing authority,” “licensure fee,” “low-income persons,” and “state agency” shall have the same meanings as set out in T.C.A. § 62-76-105.

(b) “Assistance agency” means any state or federal agency empowered to administer a state or federal public assistance program that forms the basis for a request for a waiver under this rule and T.C.A. § 62-76-105.

(c) “Commissioner” means the Commissioner of the Tennessee Department of Commerce and Insurance or the Commissioner’s designee.

(d) “Department” means the Tennessee Department of Commerce and Insurance.

(e) “Qualifying program” means temporary assistance for needy families (TANF), Medicaid, supplemental nutrition assistance program (SNAP), or any other similar state or federal public assistance program determined by the Commissioner to be issued based on substantially similar income guidelines as one or more of those programs.

(3) A request for a waiver of an initial licensure fee pursuant to T.C.A. § 62-76-105 shall be made in writing on a form prescribed by the Commissioner at the time of the initial application. The waiver request shall include:

(a) The full name, address, and phone number of the applicant requesting the waiver;

(b) The most recent document issued by the applicable assistance agency showing that the applicant requesting the waiver is enrolled in a qualifying program at the time that the waiver request is submitted to the Department. The Commissioner may request additional documentation to reasonably determine the applicant’s eligibility for the waiver;

(c) A statement that the applicant acknowledges that the Department may contact any assistance agency to verify the applicant’s enrollment in a qualifying program and that the Department is authorized to do so;

(d) A certification, under penalty of perjury, that the information contained in the request for the fee waiver is true and accurate to the best of the applicant’s knowledge. This certification shall not be required to be notarized;

(e) If the basis for the fee waiver request is any program other than temporary assistance for needy families (TANF), Medicaid, or supplemental nutrition assistance program (SNAP), a written explanation of the nature of the program that the applicant claims entitles them to a waiver of fees under these rules, a copy of the income guidelines for enrollment in the program issued by the assistance agency, and any other documentation that the applicant wishes to provide regarding the program having substantially similar income guidelines as one or more of TANF, Medicaid, or SNAP. A determination as to whether or not a program constitutes a substantially similar qualifying program shall be in the sole discretion of the Commissioner; and (f) Such other information as the Commissioner may reasonably request.

(4) The initial licensure fee for a business entity (including, but not necessarily limited to, a Limited Liability Company, Limited Liability Partnership, or Corporation) or for a general partnership shall be waived if the person that is requesting and is entitled to the fee waiver under this rule owns the majority (more than half) of the business entity or general partnership. The ownership interest of two (2) or more persons may be combined to meet this threshold so long as the applicants comprising the majority ownership provide sufficient documentation for a fee waiver under this rule.

History

• Authority: T.C.A. §§ 56-1-302(a)(5) and 62-76-105.
• Administrative History: Original rule filed August 5, 2019; effective November 3, 2019.

Tenn. Comp. R. & Regs. 0780-05-11-.03 MILITARY TRAINING EQUIVALENT CREDIT FOR OCCUPATIONAL LICENSURE

(1) This rule is applicable to any state board, agency, or commission attached to the Division of Regulatory Boards, as listed in T.C.A. § 4-3-1304(a). As used in this rule:

(a) The terms “honorably discharged veteran,” “licensing authority,” and “member of the armed forces,” shall have the same meaning as set out in T.C.A. § 62-76-106.

(b) “Commissioner” means the Commissioner of the Tennessee Department of Commerce and Insurance or the Commissioner’s designee.

(2) A request for equivalent credit towards requirements for licensure based upon training received while serving in the armed forces pursuant to T.C.A. § 62-76-106 shall be made in writing on a form prescribed by the Commissioner at the time of the initial application. The request shall include:

(a) The full name, address, and phone number of the applicant requesting equivalency;

(b) A certificate as evidence of training from the United States Department of Defense or United States Department of Veterans Affairs which states the course name of training conducted and length of or credit given for such training. An acceptable certificate of training includes but is not necessarily limited to any certificate accepted by the United States Department of Veterans Affairs to establish military service found at https://www.cem.va.gov/hmm/discharge_documents.asp. A licensing authority may request additional documentation or information to reasonably determine the applicant’s eligibility for the equivalent credit;

(c) A statement that the applicant acknowledges that the Department may contact any agency to verify the applicant’s military service and training certificate;

(d) A certification, under penalty of perjury, that the information contained in the request for equivalent training is true and accurate to the best of the applicant’s knowledge. This certification shall not be required to be notarized; and (e) Such other information as the licensing agency may reasonably request.

(3) Upon receipt of a certificate of training, a licensing authority must determine whether such training is sufficient for equivalency, and the amount of credit to be awarded to the applicant, utilizing the following factors:

(a) Whether the applicant qualifies as a member of the armed forces or who is an honorably discharged veteran.

(b) Whether the training was conducted while the applicant was a member of the armed forces.

(c) Whether the certificate or documents submitted indicate the training provided equivalent hours or measure of time equivalent to the licensing authority’s requirement for licensure.

(d) Whether the certificate or documents submitted indicate the training provided equivalent outcomes or objectives for licensure.

(e) Any other factor which the licensing authority determines is required to establish an equivalency between the training and licensure requirement.

(4) Upon determining if some or all the training is equivalent and how much credit will be awarded to the applicant, the licensing authority shall notify the applicant of its determination.

(5) Any appeal pursuant to T.C.A. § 62-76-106 by a person aggrieved by a decision of a licensing authority concerning the eligibility or whether the training meets the requirements for licensure must submit notice of the appeal to the licensing authority in the same manner as the initial licensure documents and in the form prescribed pursuant to Tenn. Comp. R. & Regs. 1360-04-01-.07. Review of the appeal will be conducted by the Commissioner or Commissioner’s designee and must be conducted in the same manner as provided in T.C.A. § 4-5-322. Pursuant to T.C.A. § 4-5-322(b)(1)(A)(iv), requests for appeal shall be filed within sixty (60) days after the entry of the licensing determination under paragraph (5) of this rule.

History

• Authority: T.C.A. § 62-76-106.
• Administrative History: New rule filed July 26, 2022; effective October 24, 2022.

Tenn. Comp. R. & Regs. 0780-05-11-.04 ADVISORY PRIVATE LETTER RULINGS

(1) The term “Program” means all state entities, programs, boards, and commissions that are administratively attached to the division of regulatory boards.

(2) Any person who is affected by any matter within the jurisdiction of any Program and who holds a license, certification, registration, or other like recognized designation issued, may submit a written request for an advisory opinion subject to the limitations imposed by T.C.A. § 62-76-107.

(3) The advisory private letter rulings shall only affect the person making the inquiry and have no precedential value for any other inquiry or contested case to come before any Program, nor serve as the basis for a complaint or grievance against any other licensee, person, or entity.

(4) Any dispute regarding an advisory private letter rulings may be resolved pursuant to the declaratory order provisions of T.C.A. § 4-5-223, within the Program’s discretion.

(5) Any person requesting an advisory private letter rulings to a Program shall submit the request to the Program on the prescribed form designated by the Department. The form shall be completed with all necessary information.

(6) Upon receipt of the request, the Program shall adhere to the following review process:

(a) Upon receipt, the request shall be referred to the Program’s administrative staff for research, review, and submission of a proposed recommendation to the Program for its consideration. The Program’s administrative staff may make such requests for clarification or additional information from the requester as it determines necessary to appropriately present the request to the Program;

(b) Once the initial review of the request is completed, the request and a draft recommendation will be presented to the Program. The timing of presentation of the request is dependent upon the complexity of the request as determined by the Program’s Executive Director;

(c) The Program shall review and discuss the request and proposed recommendation. The Program may then approve the proposed recommendation, approve the proposed recommendation with revisions, authorize the issuance of a different advisory opinion, or refer the request back to the administrative staff, executive director, or legal counsel for further research and drafting as requested by the Program. If further research is requested by the Program, the executive director shall re-present the request, and a draft recommendation as set out in subparagraph (6)(b) of this rule once such additional research has been completed; and (d) Upon adoption and approval by the Program, the advisory private letter rulings shall be transmitted to the requesting licensee. The ruling shall have only such effect as set forth in T.C.A. § 62-76-107(a).

History

• Authority: T.C.A. §§ 56-1-302 and 62-76-107.
• Administrative History: New rule filed October 15, 2025; effective January 13, 2026.

Chapter 0780-05-12 Home Inspectors

Tenn. Comp. R. & Regs. 0780-05-12-.01 PURPOSE

The rules in this chapter implement the Tennessee Home Inspector License Act of 2005, T.C.A. §§ 62-6- 301 et seq.

History

• Authority: T.C.A. §§ 62-6-301 and 62-6-303(a)(5) [effective July 1, 2006]; and Chapter 65 of the Public Acts of 2005, §§ 4, 11, and 12.
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006.

Tenn. Comp. R. & Regs. 0780-05-12-.02 DEFINITIONS

In addition to the definitions contained in T.C.A. § 62-6-302, the following definitions are applicable to this

chapter:

(1) “Commissioner” means the commissioner of commerce and insurance or the commissioner’s designee;

(2) “Continuing Education” means education that is creditable toward the education requirements that must be satisfied as a prerequisite for renewal of a license as a home inspector;

(3) “Home” or “Residence” means any structure consisting of one to four (1–4) dwelling units, intended to be or used principally for residential purposes;

(4) “Inactive Licensee” means an individual who is not engaged in the business of conducting home inspections and holds a valid, current inactive license issued by the commissioner;

(5) “Instructor” means an individual who presents course materials approved for qualifying education and continuing education credit hours that has the necessary experience, training or education in the course subject matter and has been approved by the commissioner;

(6) “Licensee” means an individual who holds a current, unexpired license as a home inspector issued by the commissioner;

(7) “Provider” means an individual or entity offering courses approved by the commissioner for qualifying education or continuing education credit hours;

(8) “Qualifying Education” means education that is creditable toward the education requirements required for initial licensure as a home inspector.

History

• Authority: T.C.A. §§ 62-6-302 and 62-6-303(a)(5) [effective July 1, 2006]; and Chapter 65 of the Public Acts of 2005, §§ 3, 4, 11, and 12.
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006. Repeal and new rule filed August 6, 2014; effective November 4, 2014.

Tenn. Comp. R. & Regs. 0780-05-12-.03 APPLICATION FOR LICENSE

(1) Any person who seeks to be licensed as a home inspector shall complete an application on a form prescribed by the commissioner and submit the completed application to the commissioner.

(2) Applications for licensure are available upon request from the commissioner.

(3) Any application submitted which lacks required information or reflects a failure to meet any requirement for licensure will be returned to the applicant with written notification of the information that is lacking or the reason(s) the application does not meet the requirements for licensure and will be held in “pending” status until satisfactorily completed within a reasonable period of time, not to exceed sixty (60) days from the date of application.

(4) Any application submitted may be withdrawn; provided, however, that the application fee will not be refunded.

History

• Authority: T.C.A. §§ 62-6-303(a)(5) and 62-6-305 [effective July 1, 2006]; and Chapter 65 of the Public Acts of 2005, §§ 4, 6, 11, and 12.
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006.

Tenn. Comp. R. & Regs. 0780-05-12-.04 APPLICATION REQUIREMENTS

(1) Any person who desires to obtain a license as a home inspector shall submit an application to the commissioner, along with the required application fee.

(2) An applicant for licensure shall furnish evidence satisfactory to the commissioner that the applicant:

(a) Is at least eighteen (18) years of age;

(b) Has graduated from high school or earned a high school equivalent credit;

(c) Has not been convicted of a felony offense that bears directly on the person’s fitness to practice competently, as determined by the commissioner, and comports with the provisions of T.C.A. § 62-76-104;

(d) Is not the subject of a disciplinary enforcement action by another state or a local jurisdiction in connection with the performance of home inspections or the licensing or certification of home inspectors;

(e) Has successfully completed ninety (90) hours of education approved by the commissioner in the performance of home inspections and the preparation of home inspection reports;

(f) Has passed the National Home Inspector Examination developed by the Examination Board of Professional Home Inspectors (EBPHI);

(g) Has a current certificate of general liability insurance in the amount of at least five hundred thousand dollars ($500,000.00); and (h) Has a current certificate of errors and omissions insurance to cover all home inspection activities contemplated under T.C.A. §§ 62-6-301 et seq. and these rules.

(3) Reciprocity. The commissioner may grant a license as a home inspector to an individual who holds a like, unexpired license in good standing as a home inspector in that state if the requirements for licensure are at least equivalent to the requirements for licensure in Tennessee. Such applicant shall file with the commissioner the required application form and fee, along with proof that the applicant holds a current, valid license as a home inspector in another state.

(4) Temporary Practice Permit. An applicant for licensure as a home inspector, who holds an active home inspector license in another state whose licensure requirements are not considered substantially equivalent for reciprocity and whose spouse is an active member of the armed forces of the United States, who is the subject of a military transfer to Tennessee may be granted a temporary practice permit for up to six (6) months to complete specific education and/or examination requirements where the state of original licensure is not deemed to be substantially equivalent to the licensure requirements in Tennessee as specified in 0780-05-12-.04(3).

(a) In addition to the requirements of 0780-05-12-.04(1) & (2) temporary practice permit applicants must provide:

(i) Evidence that applicant’s spouse is a member of the armed forces and is subject to a military transfer to Tennessee;

(b) The temporary practice permit will expire six (6) months from the date of issuance or upon issuance of a license as a home inspector in Tennessee which ever may occur first.

(c) No renewal of the temporary practice permit will be granted.

(d) If a temporary practice permit holder’s out-of-state license is revoked, suspended, denied renewal or restricted, then the commissioner may revoke, suspend, or restrict a permit holder’s temporary practice permit.

History

• Authority: T.C.A. §§ 62-6-303, 62-6-305, and 62-6-308.
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006. Repeal and new rule filed August 6, 2014; effective November 4, 2014. Amendments filed October 24, 2025; effective January 22, 2026.

Tenn. Comp. R. & Regs. 0780-05-12-.05 RENEWAL REQUIREMENTS

(1) A license issued to a home inspector pursuant to this chapter shall expire two (2) years from the date of its issuance and shall become invalid on such date unless renewed.

(2) A home inspector may renew a current, valid license by submitting an application form approved by the commissioner, the required renewal fee, proof of having completed thirtytwo (32) hours of commissioner-approved continuing education and any other information required for renewal, to the commissioner no earlier than one hundred twenty (120) days prior to the expiration date of the license.

(3) If a course has been taken more than once during the same renewal period the hourly educational credit will be counted once for purposes of satisfying the educational requirements for renewal.

(4) Credit shall not be granted for a repeated course within a three (3) year time period unless the course has undergone a significant update.

(5) A licensee who fails to pay the renewal fee, or otherwise fails to comply with any of the prerequisites for renewal of a license before the expiration date of the license will have sixty (60) days after the expiration date of the license to renew the license upon payment of the renewal fee, payment of a late penalty of $25.00, submittal of proof of compliance with any other prerequisites to renewal, and payment of an additional late penalty of $25.00 for each month or fraction of a month that renewal is late.

(6) Any person seeking renewal of a license more than sixty (60) days after the expiration date of the license is required to reapply for licensure and fulfill all of the requirements for initial licensure and submit proof of having completed thirty-two (32) hours of commissionerapproved continuing education within the previous two (2) years. In considering such reapplication, the commissioner has the discretion to:

(a) Waive reexamination if the exam presented at the time of initial licensure if the exam was completed within the previous five (5) years; or (b) Reinstate a license subject to the applicant’s compliance with such reasonable conditions as the commissioner may prescribe, including payment of a penalty fee.

(7) A fee submitted by mail to the commissioner for purposes of renewal will be deemed to have been submitted on the date of the official postmark.

History

• Authority: T.C.A. §§ 62-6-303 and 62-6-307.
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006. Repeal and new rule filed August 6, 2014; effective November 4, 2014. Amendments filed October 24, 2025; effective January 22, 2026.

Tenn. Comp. R. & Regs. 0780-05-12-.06 FEES

(1) Non-refundable application fee is one hundred dollars ($100.00).

(2) Initial license fee is two hundred dollars ($200.00).

(3) The examination fee shall be set by the Board pursuant to its contract with the entity it designated to administer the examination.

(4) Renewal fee is two hundred dollars ($200.00) for an active license.

(5) The late penalty fee is twenty-five dollars ($25.00) per month for each month that renewal is late.

(6) Application fee to place the license in inactive status is fifty dollars ($50.00).

(7) Renewal fee for license while in inactive status is fifty dollars ($50.00).

(8) Application fee for qualifying or continuing education course approval is fifty dollars ($50.00).

(9) Renewal fee for qualifying or continuing education course approval is fifty dollars ($50.00).

(10) Application for individual course approval is twenty-five dollars ($25.00) for each course that is not on the pre-approved course list.

History

• Authority: T.C.A. §§ 62-6-303 and 62-6-307.
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006. Repeal and new rule filed August 6, 2014; effective November 4, 2014. Amendments filed October 24, 2025; effective January 22, 2026.

Tenn. Comp. R. & Regs. 0780-05-12-.07 QUALIFYING AND CONTINUING EDUCATION

(1) Course approval requirements.

(a) Any person or entity seeking to conduct an approved course for qualifying or continuing education credits shall make application and submit to the commissioner any documents, statements and forms as the commissioner may require. The complete application shall be submitted to the commissioner no later than thirty (30) days prior to the scheduled date of the course. At a minimum, a person or entity seeking approval to conduct a course for qualifying or continuing education shall provide:

1. Name and address of the provider;

2. Contact person and his or her address, telephone number, fax number and email address;

3. Name of course as it will appear on course certificates;

4. The location of the courses or programs;

5. The number and type of education credit, qualifying or continuing, hours requested for each course;

6. A timed outline which lists the summarized topics covered in each course and upon request a copy of any course materials;

7. If a prior approved course has substantially changed, a summary of the changes; and 8. The names and qualifications of each instructor who is qualified in accordance with paragraph (2) of this rule.

(b) Acceptable topics include, but are not limited to:

1. Observing and identifying defects in structural components, foundations, roof coverings;

2. Insulation and ventilation;

3. Exterior and interior components;

4. Plumbing, heating, cooling and electrical systems;

5. Applicable state laws and rules;

6. Home Inspection business management;

7. Home Inspector Ethics;

8. Tennessee Standards of Home Inspector Practice;

9. Home Inspection Report Writing.

(c) “Course hour” is defined as fifty (50) minutes of teaching out of each sixty (60) minute segment.

(d) In addition to accepting courses approved as described in this rule, qualifying and continuing education credits may be granted on an individual basis to an applicant or licensee if the applicant or licensee provides documentation acceptable to the commissioner that shows that the courses meet applicable requirements for the category of credit applied for, including proof that the applicant or licensee attended and successfully completed the course. To be considered for credit, the prescribed form must be received along with a fee of twenty-five dollars ($25.00) per course.

(e) The commissioner may withhold or withdraw approval of any provider for violation of or failure to comply with any provision of this rule. Such withholding or withdrawal does not constitute a contested case proceeding pursuant to the Uniform Administrative Procedures Act compiled at T.C.A. Title 4, Chapter 5.

(f) No person or entity sponsoring or conducting a course shall advertise that it is endorsed, recommended, or accredited by the commissioner. Such person or entity may indicate that the commissioner has approved a course of study if that course of study has been pre-approved by the commissioner before it is advertised or held.

(g) Within five (5) working days after the completion of each course, each licensee successfully completing the course shall be furnished a certificate certifying completion.

(h) Providers shall maintain course records for at least five (5) years. The commissioner may at any time examine such records to ensure compliance with this rule.

(i) Approval of any course(s) may be withdrawn by the commissioner if:

1. The conduct of a provider, an instructor, or any other school representative in either the establishment or conduct of a course violates, or fails to meet the requirements of, the provisions of this chapter of other applicable law;

2. The course content is based on excluded conduct of a home inspector as identified in 0780-05-12-.10.

(j) The required fee from a course provider for approval of courses for qualifying or continuing education shall be fifty dollars ($50.00) for each course. The application fee is non-refundable.

(k) If granted, course approval shall be valid for a period of two (2) years from the date of approval.

(l) The provider of an approved course who wishes to renew such approval shall submit an application, on a form approved by the Commission, along with a renewal fee of fifty dollars ($50.00) for each course, within thirty (30) days prior to the approval’s expiration.

(m) If a provider fails to renew a course(s) prior to the expiration date, the provider may, upon payment of a twenty-five-dollar ($25.00) penalty, apply for a late renewal. No late renewals or course approval will be granted if over three (3) months have passed since expiration.

(n) State universities, colleges and junior colleges which provide courses for qualifying or continuing education shall be exempt from the fee.

(2) Instructor qualifications and requirements. A person seeking approval as an instructor shall submit an application on a form approved by the commissioner. If granted, the approval as an instructor shall be valid for a period of two (2) years from the date of the approval.

(a) An instructor shall have one of the following qualifications:

1. Three (3) years of recent experience in the subject matter being taught; or 2. A minimum of an associate’s degree in the subject area being taught; or 3. Two (2) years of recent experience in the subject area being taught and twelve (12) hours of college credit and/or vocational technical school technical credit hours in the subject being taught.

2. Other educational, teaching or professional qualifications determined by the commissioner which constitute an equivalent to (1) or more of the qualifications in parts (2)(a)1., 2., and 3. of this rule.

History

• Authority: T.C.A. §§ 62-6-303 and 62-6-307.
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006. Repeal and new rule filed August 6, 2014; effective November 4, 2014. Amendments filed October 24, 2025; effective January 22, 2026.

Tenn. Comp. R. & Regs. 0780-05-12-.08 CITATIONS

(1) The commissioner may issue citations against persons acting in the capacity of or engaging in the business of a home inspector without a license in violation of T.C.A. § 62-6-304. Each citation shall be in writing and describe with particularity the basis of the citation. Each citation shall contain an order to cease all violations of the applicable law, and an assessment of a civil penalty in accordance with the following schedule:

Violation Penalty (a) T.C.A. § 62-6-304 $50 - $1000 (b) In determining the amount of any penalty to be assessed pursuant to this rule, the commissioner may consider such factors as the following:

1. Whether the amount imposed will be a substantial economic deterrent to the violator;

2. The circumstances leading to the violation;

3. The severity of the violation and the risk of harm to the public;

4. The economic benefits gained by the violator as a result of noncompliance;

5. The interest of the public;

6. Willfulness of the violation.

History

• Authority: T.C.A. §§ 62-6-303(a)(5) and 62-6-308(b) [effective July 1, 2006]; and Chapter 65 of the Public Acts of 2005, §§ 4, 8, 9, 11, and 12.
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006.

Tenn. Comp. R. & Regs. 0780-05-12-.09 CIVIL PENALTIES

(1) With respect to any licensed home inspector, the commissioner may, in addition to or in lieu of any other lawful disciplinary action, assess a civil penalty against such licensee for each separate violation of a statute, rule or commissioner’s order pertaining to home inspectors, in accordance with the following schedule:

Violation Penalty (a) T.C.A. § 62-6-308 $50 - $1000 (b) Rule 0780-05-12-.10 $50 - $1000 (c) Commissioner’s order $50 - $1000 (2) With respect to any person required to be licensed in this state as a home inspector, the commissioner may assess a civil penalty against such person for each separate violation of a statute in accordance with the following schedule:

Violation Penalty (a) T.C.A. § 62-6-304 $50 - $1000 (3) Each day of continued violation may constitute a separate violation.

(4) In determining the amount of any penalty to be assessed pursuant to this rule, the commissioner may consider such factors as the following:

(a) Whether the amount imposed will be a substantial economic deterrent to the violator;

(b) The circumstances leading to the violation;

(c) The severity of the violation and the risk of harm to the public;

(d) The economic benefits gained by the violator as a result of noncompliance;

(e) The interest of the public;

(f) Willfulness of the violation.

History

• Authority: T.C.A. §§ 56-1-308, 62-6-303(a)(5), and 62-6-308 [effective July 1, 2006]; and Chapter 65 of the Public Acts of 2005, §§ 4, 5, 11, and 12.
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006.

Tenn. Comp. R. & Regs. 0780-05-12-.10 STANDARDS OF PRACTICE

(1) Standards of Practice. This rule sets forth the minimum standards of practice required of licensed home inspectors.

(2) Definitions. The following definitions apply to this rule:

(a) “Automatic safety controls” means devices designed and installed to protect systems and components from excessively high or low pressures and temperatures, excessive electrical current, loss of water, loss of ignition, fuel leaks, fire, freezing, or other unsafe conditions;

(b) “Central air conditioning” means a system that uses ducts to distribute cooled or dehumidified air to more than one room or uses pipes to distribute chilled water to heat exchangers in more than one room, and that is not plugged into an electrical convenience outlet;

(c) “Component” means a readily accessible and observable aspect of a system, such as a floor, or wall, but not individual pieces such as boards or nails where many similar pieces make up the component;

(d) “Cosmetic damage” means superficial blemishes or defects that do not interfere with the functionality of the component or system;

(e) “Cross connection” means any physical connection or arrangement between potable water and any source of contamination;

(f) “Dangerous or adverse situations” means situations that pose a threat of injury to the home inspector, or those situations that require the use of special protective clothing or safety equipment;

(g) “Describe” means report in writing a system or component by its type, or other inspected characteristics, to distinguish it from other systems or components used for the same purpose;

(h) “Dismantle” means to take apart or remove any component, device or piece of equipment that is bolted, screwed, or fastened by other means and that would not be dismantled by a homeowner in the course of normal household maintenance;

(i) “Enter” means to go into an area to inspect all visible components;

(j) “Functional drainage” means a drain is functional when it empties in a reasonable amount of time and does not overflow when another fixture is drained simultaneously;

(k) “Functional flow” means a reasonable flow at the highest fixture in a dwelling when another fixture is operated simultaneously;

(l) “Inspect” means the act of making a visual examination;

(m) “Installed” means attached or connected such that an item requires tools for removal;

(n) “Normal operating controls” means homeowner operated devices such as a thermostat, wall switch, or safety switch;

(o) “On-site water supply quality” means water quality is based on the bacterial, chemical, mineral, and solids content of the water;

(p) “On-site water supply quantity” means the rate of flow of on-site well water;

(q) “Operate” means to cause systems or equipment to function;

(r) “Readily accessible” means approachable or enterable for visual inspection without the risk of damage to any property or alteration of the accessible space, equipment, or opening;

(s) “Readily openable access panel” means a panel provided for homeowner inspection and maintenance that has removable or operable fasteners or latch devices in order to be lifted off, swung open, or otherwise removed by one person; and its edges and fasteners are not painted in place. This definition is limited to those panels within normal reach or from a four-foot stepladder, and that are not blocked by stored items, furniture, or building components;

(t) “Readily visible” means seen by using natural or artificial light without the use of equipment or tools other than a flashlight;

(u) “Representative number” means, for multiple identical components such as windows and electrical outlets, one such component per room; and, for multiple identical exterior components, one such component on each side of the building;

(v) “Roof drainage systems” means gutters, downspouts, leaders, splashblocks, and similar components used to carry water off a roof and away from a building;

(w) “Shut down” means a piece of equipment or a system which cannot be operated by the device or control that a homeowner should normally use to operate it. If its safety switch or circuit breaker is in the “off ” position, or its fuse is missing or blown, the home inspector is not required to reestablish the circuit for the purpose of operating the equipment or system;

(x) “Significantly deficient” means unsafe or not functioning;

(y) “Solid fuel heating device” means any wood, coal, or other similar organic fuel burning device, including but not limited to fireplaces whether masonry or factory built, fireplace inserts and stoves, woodstoves (room heaters), central furnaces, and combinations of these devices;

(z) “Structural component” means a component that supports non-variable forces or weights (dead loads) and variable forces or weights (live loads);

(aa) “System” means a combination of interacting or interdependent components, assembled to carry out one or more functions;

(bb) “Technically exhaustive” means an inspection involving the use of measurements, instruments, testing, calculations, and other means to develop scientific or engineering findings, conclusions, and recommendations;

(cc) “Underfloor crawl space” means the area within the confines of the foundation and between the ground and the underside of the lowest floor structural component.

(3) Purpose and Scope.

(a) Home inspections performed according to this rule shall provide the client with an understanding of the property conditions at the time of the home inspection.

(b) Home inspectors shall:

1. Provide a written contract, signed by the client or the client’s legal representative that shall:

(i) State that the home inspection will be in accordance with the Standards of Practice promulgated by the commissioner;

(ii) Describe what services shall be provided and their cost;

(iii) State that the home inspection report will not address the items set forth in parts (5)(a)4. and 5. of this rule; and (iv) State, when an inspection is for only one or a limited number of systems or components, that the inspection is limited to only those systems or components.

2. Inspect readily visible and readily accessible installed systems and components listed in this rule; and 3. Submit a written report to the client that shall at a minimum:

(i) Describe those systems and components required to be described in paragraphs (7) through (16) of this rule;

(ii) State which systems and components designated for inspection in this rule have been inspected, and state any systems or components designated for inspection that were not inspected, and the reason for not inspecting;

(iii) State any systems or components so inspected that do not function as intended, allowing for normal wear and tear, or adversely affect the habitability of the dwelling;

(iv) State whether the condition reported requires repair or subsequent observation, or warrants further investigation by a specialist; and (v) State the name, license number, and signature of the person conducting the inspection.

(c) This rule does not limit home inspectors from:

1. Reporting observations and conditions or rendering opinions of items in addition to those required in paragraphs (7) through (16) of this rule; or 2. Excluding systems and components from the inspection if requested by the client, and so stated in the written contract.

(4) General Limitations.

(a) This rule applies to structures that are intended to be or are in fact used as residences, consisting of from one to four (1–4) family dwelling units and their attached garages or carports.

(5) Required Reporting.

(a) The home inspection report shall include the following:

1. A report on any system or component inspected that, in the opinion of the home inspector, is significantly deficient;

2. A list of any systems or components that were designated for inspection in this

rule but that were not inspected, including underfloor crawl spaces, basements, and attic spaces;

3. The reason a system or component listed in accordance with part (5)(a)2. was not inspected;

4. A statement that the report does not address environmental hazards, including:

(i) Lead-based paint;

(ii) Radon;

(iii) Asbestos;

(iv) Cockroaches;

(v) Rodents;

(vi) Pesticides;

(vii) Treated lumber;

(viii) Fungus;

(ix) Mercury;

(x) Carbon monoxide; or (xi) Other similar environmental hazards.

5. A statement that the report does not address subterranean systems or system components (operational or nonoperational), including:

(i) Sewage disposal;

(ii) Water supply; or (iii) Fuel storage or delivery.

6. A statement explaining a home inspection is a visual analysis for the purpose of providing a professional opinion as defined in T.C.A. § 62-6-302(3)(A) and does not include the measures listed in T.C.A. § 62-6-302(3)(B).

(6) General Exclusions.

(a) Home inspectors are not required to report on:

1. Life expectancy of any component or system;

2. The cause(s) of the need for a repair;

3. The methods, materials, and costs of corrections;

4. The suitability of the property for any specialized use;

5. Compliance or noncompliance with adopted codes, ordinances, statutes, regulatory requirements or restrictions;

6. The market value of the property or its marketability;

7. The advisability or inadvisability of purchase of the property;

8. Any component or system that was not inspected;

9. The presence or absence of pests such as wood damaging organisms, rodents, or insects; or 10. Cosmetic damage, underground items, or items not permanently installed.

(b) Home inspectors are not required to:

1. Offer warranties or guarantees of any kind;

2. Calculate the strength, adequacy, or efficiency of any system or component;

3. Enter any area or perform any procedure that may damage the property or its components or be dangerous to or adversely affect the health or safety of the home inspector or other persons;

4. Operate any system or component that is shut down or otherwise inoperable;

5. Operate any system or component that does not respond to normal operating controls;

6. Move personal items, panels, furniture, equipment, plant life, soil, snow, ice, or debris that obstructs access or visibility;

7. Determine the effectiveness of any system installed to control or remove suspected hazardous substances;

8. Predict future condition, including but not limited to failure of components;

9. Project operating costs of components;

10. Evaluate acoustical characteristics of any system or component; or 11. Inspect special equipment or accessories that are not listed as components to be inspected in this rule.

(c) Home inspectors shall not:

1. Offer or perform any act or service contrary to law; or 2. Offer or perform engineering, architectural, plumbing, electrical or any other job function requiring a license in this state for the same client unless the client is advised thereof and consents thereto.

(7) Heating Systems.

(a) The home inspector shall inspect permanently installed heating systems including:

1. Heating equipment;

2. Normal operating controls;

3. Automatic safety controls;

4. Chimneys, flues, and vents, where readily visible;

5. Solid fuel heating devices;

6. Heat distribution systems including fans, pumps, ducts and piping, insulation, air filters, registers, radiators, fan coil units, convectors; and 7. The presence of an installed heat source in each room.

(b) The home inspector shall describe:

1. The energy source for the system; and 2. The heating equipment and distribution type.

(c) The home inspector shall operate the systems using normal operating controls.

(d) The home inspector shall open readily openable access panels provided by the manufacturer or installer for routine homeowner maintenance.

(e) The home inspector is not required to:

1. Operate heating systems when weather conditions or other circumstances may cause equipment damage;

2. Operate automatic safety controls;

3. Ignite or extinguish solid fuel fires; or 4. Inspect:

(i) The interior of flues;

(ii) Fireplace insert flue connections;

(iii) Humidifiers;

(iv) Electronic air filters; or (v) The uniformity or adequacy of heat supply to the various rooms.

(8) Cooling Systems.

(a) The home inspector shall inspect:

1. Central air conditioning and through-the-wall installed cooling systems including:

(i) Cooling and air handling equipment; and (ii) Normal operating controls.

2. Distribution systems including:

(i) Fans, pumps, ducts and piping, dampers, insulation, air filters, registers, fan-coil units; and (ii) The presence of an installed cooling source in each room.

(b) The home inspector shall describe:

1. The energy source for the system; and 2. The cooling equipment type.

(c) The home inspector shall operate the systems using normal operating controls.

(d) The home inspector shall open readily openable access panels provided by the manufacturer or installer for routine homeowner maintenance.

(e) The home inspector is not required to:

1. Operate cooling systems when weather conditions or other circumstances may cause equipment damage;

2. Inspect window air conditioners; or 3. Inspect the uniformity or adequacy of cool-air supply to the various rooms.

(9) Electrical Systems.

(a) The home inspector shall inspect:

1. Service entrance conductors;

2. Service equipment, ground equipment, main overcurrent device, and main distribution panels;

3. Amperage and voltage ratings of the service;

4. Branch circuit conductors, their overcurrent devices, and the compatibility of their ampacities and voltages;

5. The operation of a representative number of installed ceiling fans, lighting fixtures, switches and receptacles located inside the house, garage, and on the dwelling’s exterior walls;

6. The polarity and grounding of all receptacles within six feet of interior plumbing fixtures, and all receptacles in the garage or carport, and on the exterior of inspected structures; and 7. The operation of ground fault circuit interrupters.

(b) The home inspector shall describe:

1. Service amperage and voltage;

2. Service entry conductor materials;

3. The service type as being overhead or underground; and 4. The location of main and distribution panels.

(c) The home inspector shall report the presence of any readily accessible single strand aluminum branch circuit wiring.

(d) The home inspector shall report:

1. The presence or absence of smoke alarms;

2. The presence or absence of smoke alarms by location of the area and/or room;

3. If any area and/or room contain smoke alarms that appear to have been painted and/or obstructed by stickers or otherwise covered. If so, the home inspector shall recommend that any such smoke alarm be replaced with a device of the same type;

4. If any smoke alarms appear more than ten (10) years from the date of manufacture, and recommend that any such smoke alarm be replaced with a device of the same type;

5. If battery-powered smoke alarms appear more than ten (10) years from the date of manufacture, a request by the owner for that type of device shall be directed to the State Fire Marshal’s Office; and 6. All requirements as set forth in paragraph (9)(d) except when access is obstructed, could damage the property, or when dangerous or adverse situations are suspected.

(e) The home inspector is not required to:

1. Insert any tool, probe, or testing device inside the panels;

2. Test or operate any overcurrent device except ground fault circuit interrupters;

3. Dismantle any electrical device or control other than to remove the covers of the main and auxiliary distribution panels; or 4. Inspect:

(i) Low voltage systems;

(ii) Security system devices, heat detectors, or carbon monoxide detectors;

(iii) Telephone, security, cable TV, intercoms, or other ancillary wiring that is not a part of the primary electrical distribution system; or (iv) Built-in vacuum equipment.

(10) Plumbing Systems.

(a) The home inspector shall inspect:

1. Interior water supply and distribution system, including: piping materials, supports, and insulation; fixtures and faucets; functional flow; leaks; and cross connections;

2. Interior drain, waste, and vent system, including: traps; drain, waste, and vent piping; piping supports and pipe insulation; leaks; and functional drainage;

3. Hot water systems including: water heating equipment; normal operating controls; automatic safety controls; and chimneys, flues, and vents; and 4. Sump pumps.

(b) The home inspector shall describe:

1. Water supply and distribution piping materials;

2. Drain, waste, and vent piping materials;

3. Water heating equipment; and 4. The location of any main water supply shutoff device.

(c) The home inspector shall operate all plumbing fixtures, including their faucets and all exterior faucets attached to the house, except where the flow end of the faucet is connected to an appliance.

(d) The home inspector is not required to:

1. State the effectiveness of anti-siphon devices;

2. Determine whether water supply and waste disposal systems are public or private;

3. Operate automatic safety controls;

4. Operate any valve except water closet flush valves, fixture faucets, and hose faucets;

5. Inspect:

(i) Water conditioning systems;

(ii) Fire and lawn sprinkler systems;

(iii) On-site water supply quantity and quality;

(iv) On-site waste disposal systems;

(v) Foundation irrigation systems;

(vi) Bathroom spas, except as to functional flow and functional drainage;

(vii) Swimming pools;

(viii) Solar water heating equipment; or 6. Inspect the system for proper sizing, design, or use of proper materials.

(11) Structural Components and Foundations.

(a) The home inspector shall inspect structural components including:

1. Foundation;

2. Floors;

3. Walls;

4. Columns or piers;

5. Ceilings; and 6. Roofs.

(b) The home inspector shall describe the type of:

1. Foundation;

2. Floor structure;

3. Wall structure;

4. Columns or piers;

5. Ceiling structure; and 6. Roof structure.

(c) The home inspector shall:

1. Probe structural components where deterioration is suspected;

2. Enter underfloor crawl spaces, basements, and attic spaces except when access is obstructed, when entry could damage the property, or when dangerous or adverse situations are suspected;

3. Report the methods used to inspect underfloor crawl spaces and attics; and 4. Report signs of water penetration into the building or signs of condensation on building components.

(12) Roof Coverings.

(a) The home inspector shall inspect:

1. Roof coverings;

2. Roof drainage systems;

3. Flashings;

4. Skylights, chimneys, and roof penetrations; and 5. Signs of leaks or abnormal condensation on building components.

(b) The home inspector shall:

1. Describe the type of roof covering materials; and 2. Report the methods used to inspect the roofing.

(c) The home inspector is not required to:

1. Walk on the roofing; or 2. Inspect attached accessories including solar systems, antennae, and lightning arrestors.

(13) Exterior Components.

(a) The home inspector shall inspect:

1. Wall cladding, flashings, and trim;

2. Entryway doors and a representative number of windows;

3. Garage door operators;

4. Decks, balconies, stoops, steps, areaways, porches and applicable railings;

5. Eaves, soffits, and fascias; and 6. Vegetation, grading, drainage, driveways, patios, walkways, and retaining walls with respect to their effect on the condition of the building.

(b) The home inspector shall:

1. Describe wall cladding materials;

2. Operate all entryway doors and a representative number of windows;

3. Operate garage doors manually or by using permanently installed controls for any garage door operator;

4. Report whether or not any garage door operator will automatically reverse or stop when meeting reasonable resistance during closing; and 5. Probe exterior wood components where deterioration is suspected.

(c) The home inspector is not required to inspect:

1. Storm windows, storm doors, screening, shutters, awnings, and similar seasonal accessories;

2. Fences;

3. For the presence of safety glazing in doors and windows;

4. Garage door operator remote control transmitters;

5. Geological conditions;

6. Soil conditions;

7. Recreational facilities (including spas, saunas, steam baths, swimming pools, tennis courts, playground equipment, and other exercise, entertainment, or athletic facilities), except as otherwise provided in this rule;

8. Detached buildings or structures; or 9. For the presence or condition of buried fuel storage tanks.

(14) Interior Components.

(a) The home inspector shall inspect:

1. Walls, ceiling, and floors;

2. Steps, stairways, balconies, and railings;

3. Counters and a representative number of built-in cabinets; and 4. A representative number of doors and windows.

(b) The home inspector shall:

1. Operate a representative number of windows and interior doors; and 2. Report signs of water penetration into the building or signs of condensation on building components.

(c) The home inspector is not required to inspect:

1. Paint, wallpaper, and other finish treatments on the interior walls, ceilings, and floors;

2. Carpeting; or 3. Draperies, blinds, or other window treatments.

(15) Insulation and Ventilation.

(a) The home inspector shall inspect:

1. Insulation and vapor retarders in unfinished spaces;

2. Ventilation of attics and foundation areas;

3. Kitchen, bathroom, and laundry venting systems; and 4. The operation of any readily accessible attic ventilation fan, and, when temperature permits, the operation of any readily accessible thermostatic control.

(b) The home inspector shall describe:

1. Insulation in unfinished spaces; and 2. The absence of insulation in unfinished space at conditioned surfaces.

(c) The home inspector is not required to report on:

1. Concealed insulation and vapor retarders; or 2. Venting equipment that is integral with household appliances.

(16) Built-In Kitchen Appliances.

(a) The home inspector shall inspect and operate the basic functions of the following kitchen appliances:

1. Permanently installed, dishwasher(s) through a normal cycle;

2. Range(s), cook top(s), and permanently installed oven(s);

3. Trash compactor(s);

4. Garbage disposal(s);

5. Ventilation equipment or range hood(s); and 6. Permanently installed microwave oven(s).

(b) The home inspector is not required to inspect:

1. Clocks, timers, self-cleaning oven functions, or thermostats for calibration or automatic operation;

2. Non built-in appliances; or 3. Refrigeration units.

(c) The home inspector is not required to operate:

1. Appliances in use; or 2. Any appliance that is shut down or otherwise inoperable.

History

• Authority: T.C.A. § 62-6-303
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006. Amendments filed November 9, 2023; to have become effective February 7, 2024. However, the Government Operations Committee filed a 45-day stay of the effective date of the rules; new effective date March 23, 2024. Amendments filed October 24, 2025; effective January 22, 2026.

Tenn. Comp. R. & Regs. 0780-05-12-.11 CODE OF ETHICS

(1) Licensees shall discharge their duties with fidelity to the public, their clients, and with fairness and impartiality to all.

(2) Opinions expressed by licensees shall only be based on their education, experience, and honest convictions.

(3) A licensee shall not disclose any information about the results of an inspection without the approval of the client for whom the inspection was performed, or the client’s designated representative.

(4) No licensee shall accept compensation or any other consideration from more than one interested party for the same service without the consent of all interested parties.

(5) No licensee shall accept or offer commissions or allowances, directly or indirectly, from other parties dealing with the client in connection with work for which the licensee is responsible.

(6) No licensee shall express, within the context of an inspection, an appraisal or opinion of the market value of the inspected property.

(7) Before the execution of a contract to perform a home inspection, a licensee shall disclose to the client any interest in a business that may affect the client. No licensee shall allow his or her interest in any business to affect the quality or results of the inspection work that the licensee may be called upon to perform.

(8) Licensees shall not engage in false or misleading advertising or otherwise misrepresent any matters to the public.

History

• Authority: T.C.A. § 62-6-303(a)(5) and (6) [effective July 1, 2006]; and Chapter 65 of the Public Acts of 2005, §§ 4, 11, and 12.
• Administrative History: Public necessity rule filed April 7, 2006; effective through September 19, 2006. Original rule filed July 3, 2006; effective September 16, 2006.

Tenn. Comp. R. & Regs. 0780-05-12-.12 INACTIVE STATUS

(1) A licensee may request inactive license status by making application to the commissioner and paying the applicable fifty dollar ($50.00) fee. A licensee whose license is in inactive status may not directly or indirectly engage in conduct or advertise or claim to be engaging in or conducting the business or acting in the capacity of a home inspector as defined in T.C.A. § 62-6-302. No continuing education shall be required for renewal of an inactive license.

Licensees holding an inactive license are not required to maintain general liability or errors and omissions insurance.

(2) To reactivate an inactive license, licensee shall submit an application for reinstatement on a form as prescribed by the commissioner, accompanied by:

(a) A reactivation fee of two hundred dollars ($200.00); and (b) A certificate of general liability insurance in the amount of at least five hundred thousand dollars ($500,000.00) and errors and omissions insurance to cover all home inspection activities contemplated in T.C.A. §§ 62-6-301 et seq. and the rules promulgated thereunder; and (c) A sworn statement that the licensee has not violated any provisions of the Tennessee Home Inspector Licensing Act of 2005, (T.C.A. §§ 62-6-301, et seq.) or the rules promulgated thereunder while the applicant’s license was in inactive status; and (d) If more than two (2) years have passed since the license was placed in an inactive status, the applicant shall, in addition to the requirements set for in T.C.A. § 62-6- 307(f)(2)(A), also furnish evidence satisfactory to the commissioner that the applicant has completed thirty-two (32) hours of commissioner-approved continuing education during the twenty-four (24) months immediately preceding the date of application for reinstatement.

(3) The licensing period for an inactive license shall be identical to the licensing period for the originally issued active license. Inactive licenses shall be renewed biennially.

History

• Authority: T.C.A. § 62-6-307 [effective July 1, 2006]; Public Chapter No. 230 and Chapter 65 of the Public Acts of 2005, §§ 4, 6, 11, and 12.
• Administrative History: Original rule filed August 6, 2014; effective November 4, 2014.

Tenn. Comp. R. & Regs. 0780-05-12-.13 INSURANCE

(1) All licensees, except those in inactive status, are required to maintain and provide satisfactory proof of a current certificate of general liability insurance in the amount of at least five hundred thousand dollars ($500,000.00) and a current certificate of errors and omissions insurance to cover all home inspection activities contemplated under T.C.A. § 62-6-301. The State of Tennessee shall be named as the certificate holder on the insurance documentation provided by the insurance carrier.

(2) Licensees shall notify the Board within thirty (30) days of any change to the insurance policy, including but not limited to the expiration or termination of a policy, changes in insurance carrier, term of policy, or coverage dates.

History

• Authority: T.C.A. §§ 62-6-303 and 62-6-308 [effective July 1, 2006]; Public Chapter No. 230 and Chapter 65 of the Public Acts of 2005, §§ 4, 6, 11, and 12.
• Administrative History: Original rule filed August 6, 2014; effective November 4, 2014.

Tenn. Comp. R. & Regs. 0780-05-12-.14 RECORDS RETENTION

All licensed home inspectors shall retain original and true copies or electronic copies of all written contracts and agreements for home inspector services and all home inspection reports for a period of at least three (3) years commencing on the home inspection date.

History

• Authority: T.C.A. § 62-6-303 [effective July 1, 2006]; Public Chapter No. 230 and Chapter 65 of the Public Acts of 2005, §§ 4, 6, 11, and 12.
• Administrative History: Original rule filed August 6, 2014; effective November 4, 2014.

Tenn. Comp. R. & Regs. 0780-05-12-.15 CHANGE OF ADDRESS

All licensed home inspectors shall provide the commissioner with any address change in writing within thirty (30) days of any change.

History

• Authority: T.C.A. § 62-6-306 [effective July 1, 2006]; Public Chapter No. 230 and Chapter 65 of the Public Acts of 2005, §§ 4, 6, 11, and 12.
• Administrative History: Original rule filed August 6, 2014; effective November 4, 2014.

Chapter 0780-05-13 Repealed

Tenn. Comp. R. & Regs. 0780-05-13-.01 REPEALED

History

• Authority: T.C.A. §§ 62-11-101 and 62-11-106; Chapter 885 of the Public Acts of 2006, §§ 1 and 7; Chapter 526 of the Public Acts of 2007, §§ 21 and 22; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.16 REPEALED

History

• Authority: T.C.A. §§ 62-11-106 and 62-11-118 and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: New rule filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.02 REPEALED

History

• Authority: T.C.A. §§ 62-11-103 and 62-11-106; Chapter 885 of the Public Acts of 2006, §§ 4 and 7; Chapter 526 of the Public Acts of 2007, §§ 1 and 2; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.03 REPEALED

History

• Authority: T.C.A. §§ 62-11-104, 62-11-106, 62-11-108, 62-11-111, 62-11-112, and 62-11-114; Chapter 885 of the Public Acts of 2006, §§ 7, 9, 12, 13, and 15; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 11, 12, 13, 14, 15, 18, 19, 21, and 22; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments and new rules filed December 4, 2015; effective March 3, 2016. Amendments filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.04 REPEALED

History

• Authority: T.C.A. §§ 62-11-106, 62-11-111, 62-11-112, and 62-11-115; Chapter 885 of the Public Acts of 2006, §§ 7 and 16; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 11, 12, 13, 14, 15, 18, 19, 20, 21, and 22; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.05 REPEALED

History

• Authority: T.C.A. §§ 62-11-106, 62-11-111, and 62-11-112; Chapter 885 of the Public Acts of 2006, §§ 7, 12, and 13; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 11, 14, 16, 17, 18, 19, 21, and 22; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.06 REPEALED

History

• Authority: T.C.A. §§ 62-11-106, 62-11-111, 62-11-112, and 62-11-114; Chapter 885 of the Public Acts of 2006, §§ 7, 2, 13, and 15; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 11, 15, 16, 17, 19, 20, 21, and 22; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments and new rules filed December 4, 2015; effective March 3, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.07 REPEALED

History

• Authority: T.C.A. § 62-11-106; Chapter 885 of the Public Acts of 2006, § 7; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 11, 13, 19, and 22; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.08 REPEALED

History

• Authority: T.C.A. §§ 62-11-106 and 62-11-115; Chapter 885 of the Public Acts of 2006, §§ 7 and 16; Chapter 526 of the Public Acts of 2007, §§ 11, 13, 19, 21, and 22; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.09 REPEALED

History

• Authority: T.C.A. §§ 62-11-106, 62-11-111, and 62-11-111(i); Chapter 885 of the Public Acts of 2006, §§ 7 and 12; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 10, 11, 18, and 19; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.10 REPEALED

History

• Authority: T.C.A. § 62-11-106; Chapter 885 of the Public Acts of 2006, § 7; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 10, 11, 18, and 19; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.11 REPEALED

History

• Authority: T.C.A. §§ 56-1-308, 62-11-104, 62-11-106, 62-11-109, and 62-11-110; Chapter 885 of the Public Acts of 2006, §§ 5 and 10; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 10, 11, and 19; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.12 REPEALED

History

• Authority: T.C.A. § 62-11-106; Chapter 885 of the Public Acts of 2006, § 7; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 10, 11, and 19; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.13 REPEALED

History

• Authority: T.C.A. §§ 62-11-104, 62-11-106, 62-11-108, and 62-11-116; Chapter 885 of the Public Acts of 2006, § 7; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 10, 11, and 19; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Withdrawal filed March 27, 2008, for amendment 0780-05-13-.13(5)(f)(1) filed February 29, 2008, and to have become effective May 14, 2008. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.14 REPEALED

History

• Authority: T.C.A. §§ 62-11-104, 62-11-106, and 62-11-116; Chapter 885 of the Public Acts of 2006, § 7; Chapter 526 of the Public Acts of 2007, §§ 3, 4, 10, and 11; and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Original rule filed February 29, 2008; effective May 14, 2008. Amendments filed March 28, 2016; effective June 26, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Tenn. Comp. R. & Regs. 0780-05-13-.15 REPEALED

History

• Authority: T.C.A. §§ 62-11-106, 62-11-108, 62-11-111, 62-11-112, and 62-11-114 and Chapter 572 of the Public Acts of 2021, § 1 [effective May 27, 2021].
• Administrative History: Amendments and new rules filed December 4, 2015; effective March 3, 2016. Repeal filed September 23, 2024; effective December 22, 2024.

Chapter 0780-05-14 Scrap Metal Dealer Registration Program

Tenn. Comp. R. & Regs. 0780-05-14-.01 PURPOSE

The purpose of this Chapter is to provide for administration and implementation of the scrap metal dealer registration program, Tenn. Code Ann., Title 62, Chapter 9 (as amended by Public Acts of 2008, Chapter 690), herein referred to as the “Act.”

History

• Authority: T.C.A § 62-9-102.
• Administrative History: Public necessity rule filed August 29, 2008; effective through February 10, 2009. Public necessity rule filed August 29, 2008; expired effective February 11, 2009; rule reverted to its previous status. Public necessity rule filed February 18, 2009; effective through August 2, 2009. New rule filed February 10, 2009; effective April 26, 2009.

Tenn. Comp. R. & Regs. 0780-05-14-.02 DEFINITIONS

(1) As used in this Chapter, unless the context otherwise requires, the definitions of terms referenced in T.C.A. §§ 62-9-101 to 102 are applicable to these rules, including, without limitation, the term “member” as referenced in T.C.A. § 62-9-102(b).

(2) “Legally cognizable organization or entity” means, according to the context, any corporation, limited liability company, partnership, limited partnership, joint venture, or other business entity recognized under Tennessee law.

(3) “Person” means, according to the context, any individual, association, partnership, corporation, or any other legally cognizable organization or entity.

History

• Authority: T.C.A §§ 1-3-105, 62-9-101, and 62-9-102.
• Administrative History: Public necessity rule filed August 29, 2008; effective through February 10, 2009. Public necessity rule filed August 29, 2008; expired effective February 11, 2009; rule reverted to its previous status. Public necessity rule filed February 18, 2009; effective through August 2, 2009. New rule filed February 10, 2009; effective April 26, 2009. Amendments filed June 7, 2018; effective September 5, 2018.

Tenn. Comp. R. & Regs. 0780-05-14-.03 REGISTRATION

(1) Any person who buys, exchanges, or deals in scrap metal must register with the Department of Commerce and Insurance as a scrap metal dealer.

(2) Employees of a registered scrap metal dealer need not procure a separate scrap metal dealer registration, unless the employee is buying, exchanging or dealing in scrap metal outside the scope of such employment.

(3) All registrations issued under this part shall expire two (2) years from the date of issuance or renewal thereof.

(4) A change in address for a registrant or any business location shall be reported to the Department within thirty (30) days.

History

• Authority: T.C.A. § 62-9-102.
• Administrative History: Public necessity rule filed August 29, 2008; effective through February 10, 2009. Public necessity rule filed August 29, 2008; expired effective February 11, 2009; rule reverted to its previous status. Public necessity rule filed February 18, 2009; effective through August 2, 2009. New rule filed February 10, 2009; effective April 26, 2009. Amendments filed June 7, 2018; effective September 5, 2018. Amendments filed December 18, 2025; effective March 18, 2026.

Tenn. Comp. R. & Regs. 0780-05-14-.04 APPLICATIONS

(1) All applications for registration as a scrap metal dealer shall be made on a form provided by the Department of Commerce and Insurance and accompanied by a non-refundable application fee.

(2) All applications must include the name of the applicant, the social security number or taxpayer identification number of the applicant, the physical and mailing address of the scrap metal dealer and the telephone number of the scrap metal dealer. All applications must be signed by the individual applicant or by an authorized representative of an applicant that is a legally cognizable organization or entity.

(3) All scrap metal dealer applications must include the physical address of each business location in Tennessee that is used to purchase, exchange or deal in scrap metal or otherwise engage in the scrap metal business.

(4) An applicant shall disclose, under penalty of perjury, any criminal conviction of a violation of this Act and any conviction of the criminal offense of theft, burglary or vandalism where the offense involves scrap metal and the date of any such conviction. Any such conviction of a member of an applicant that is a legally cognizable organization or entity constitutes a conviction of the applicant and must be disclosed and shall be grounds to deny the application for registration pursuant to T.C.A. § 62-9-110(b) and prohibit registration of the applicant pursuant to T.C.A. § 62-9-102(c).

(5) Failure to disclose a criminal conviction on the application for registration shall be a basis for the denial of the application.

(6) Failure to submit a complete application for registration shall be a basis for the denial of the application.

History

• Authority: T.C.A §§ 62-9-102 and 62-9-110.
• Administrative History: Public necessity rule filed August 29, 2008; effective through February 10, 2009. Public necessity rule filed August 29, 2008; expired effective February 11, 2009; rule reverted to its previous status. Public necessity rule filed February 18, 2009; effective through August 2, 2009. New rule filed February 10, 2009; effective April 26, 2009. Amendments filed June 7, 2018; effective September 5, 2018.

Tenn. Comp. R. & Regs. 0780-05-14-.05 RENEWALS

(1) Prior to the expiration of their registration, a registrant shall submit an application for renewal of registration on the prescribed form and accompanied by a non-refundable renewal fee.

(2) All applications for renewal must include the name of the applicant, the social security number or taxpayer identification number of the applicant, the physical and mailing address of the scrap metal dealer and the telephone number of the scrap metal dealer. All applications for renewal must be signed by the individual applicant or by an authorized representative of an applicant that is a legally cognizable organization or entity.

(3) All scrap metal dealer applications for renewal must include the physical address of each business location in Tennessee that is used to purchase, exchange or deal in scrap metal or otherwise engage in the scrap metal business.

(4) The application for renewal shall disclose, under penalty of perjury, any criminal conviction of a violation of this Act and any conviction of the criminal offense of theft, burglary or vandalism where the offense involves scrap metal and the date of any such conviction. Any such conviction of a member of an applicant that is a legally cognizable organization or entity constitutes a conviction of the applicant and must be disclosed and shall result in automatic revocation, pursuant to T.C.A. § 62-9-110(a), if applicable, and shall be grounds for disciplinary action against the registrant pursuant to T.C.A. § 62-9-110(b).

(5) Failure to disclose a criminal conviction on the application for renewal shall be a basis for the denial of the renewal.

(6) Failure to submit a complete application for renewal shall be a basis for the denial of the renewal.

(7) A registrant who fails to pay the renewal fee, or otherwise fails to comply with any of the prerequisites for renewal of a registration before the expiration date, will have six (6) months after the expiration date of the registration to renew the registration upon payment of the renewal fee, payment of a late penalty fee for each month that renewal is late, and submittal of proof of compliance with any other prerequisites to renewal. Any person seeking renewal beyond six (6) months after the date of expiration must submit a new application.

History

• Authority: T.C.A §§ 62-9-102 and 62-9-110.
• Administrative History: Public necessity rule filed August 29, 2008; effective through February 10, 2009. Public necessity rule filed August 29, 2008; expired effective February 11, 2009; rule reverted to its previous status. Public necessity rule filed February 18, 2009; effective through August 2, 2009. New rule filed February 10, 2009; effective April 26, 2009. Amendments filed June 7, 2018; effective September 5, 2018. Amendments filed December 18, 2025; effective March 18, 2026.

Tenn. Comp. R. & Regs. 0780-05-14-.06 FEES

(1) All applications for registration under the Act shall be accompanied by a non-refundable fee of two hundred dollars ($200.00).

(2) All applications for renewal of registration under the Act shall be accompanied by a non-refundable fee of one hundred seventy-five dollars ($175.00).

(3) The late penalty fee is twenty-five dollars ($25.00) for each month that renewal is late.

History

• Authority: T.C.A § 62-9-102.
• Administrative History: Public necessity rule filed August 29, 2008; effective through February 10, 2009. Public necessity rule filed August 29, 2008; expired effective February 11, 2009; rule reverted to its previous status. Public necessity rule filed February 18, 2009; effective through August 2, 2009. New rule filed February 10, 2009; effective April 26, 2009. Amendments filed February 22, 2021; effective May 23, 2021. Amendments filed December 18, 2025; effective March 18, 2026.

Tenn. Comp. R. & Regs. 0780-05-14-.07 CHECK ISSUANCE FEE

A scrap metal dealer may charge the person selling scrap metal a check issuance fee of ten percent (10%) of the dollar value of the scrap for the dealer’s administrative costs of processing and issuing any check required by the Act. However, the fee, if charged, shall be a minimum of two dollars ($2.00) and shall not exceed five dollars ($5.00) per check.

History

• Authority: T.C.A. § 62-9-104.
• Administrative History: Public necessity rule filed August 29, 2008; effective through February 10, 2009. Public necessity rule filed August 29, 2008; expired effective February 11, 2009; rule reverted to its previous status. Public necessity rule filed February 18, 2009; effective through August 2, 2009. New rule filed February 10, 2009; effective April 26, 2009.

Tenn. Comp. R. & Regs. 0780-05-14-.08 VOUCHERS

(1) A voucher issued as payment for scrap metal as required by the Act shall expire six (6) months from the date of the transaction.

(2) Any unredeemed voucher funds shall be remitted to the Department of Commerce and Insurance, with a form provided by the Department, within one (1) year of the expiration of the voucher.

History

• Authority: T.C.A. § 62-9-104.
• Administrative History: Public necessity rule filed August 29, 2008; effective through February 10, 2009. Public necessity rule filed August 29, 2008; expired effective February 11, 2009; rule reverted to its previous status. Public necessity rule filed February 18, 2009; effective through August 2, 2009. New rule filed February 10, 2009; effective April 26, 2009.

Tenn. Comp. R. & Regs. 0780-05-14-.09 REVOCATION

(1) The registration of a person convicted of a violation of any provision of the Act, or the criminal offense of theft, burglary or vandalism if such offense involved scrap metal, shall be immediately revoked by operation of law upon such conviction.

(2) The law enforcement agency responsible for the conviction shall transmit to the Commissioner of Commerce and Insurance a copy of the judgment of conviction of a person registered as a scrap metal dealer.

History

• Authority: T.C.A § 62-9-110.
• Administrative History: Public necessity rule filed August 29, 2008; effective through February 10, 2009. Public necessity rule filed August 29, 2008; expired effective February 11, 2009; rule reverted to its previous status. Public necessity rule filed February 18, 2009; effective through August 2, 2009. New rule filed February 10, 2009; effective April 26, 2009.

Tenn. Comp. R. & Regs. 0780-05-14-.10 UNIFORM MARKING

In order to be considered marked under Tenn. Code Ann. § 62-9-102(a)(9), the scrap metal must be clearly and visibly embossed, engraved, etched, painted or otherwise marked with the name of the governmental entity, business, company, or the name of the owner of such metal.

History

• Authority: T.C.A. §§ 62-9-102 and 62-9-106.
• Administrative History: New rule filed February 10, 2009; effective April 26, 2009.

Tenn. Comp. R. & Regs. 0780-05-14-.11 UNIFORM TERMINOLOGY

The following terms are the uniform terminology describing the types of metals and objects most commonly sold as scrap to be used in the transaction records:

(1) Regulated Scrap Metal (a) #1 Copper (b) #2 Copper (c) #1 Insulated Copper (d) #2 Insulated Copper (e) Bare Bright Copper (f) Catalytic Converter (g) Aluminum and/or Copper Radiator (h) Motor Vehicle (i) Metal Beer Keg (2) Ferrous Scrap. This includes, but is not limited to, the following types of scrap: appliances, cast iron, sheet metal, steel and wrought iron.

(3) Non-Ferrous Scrap. This includes, but is not limited to, the following types of scrap: aluminum (all grades), aluminum cans, brass, lead, stainless steel and tin.

History

• Authority: T.C.A §§ 62-9-102, 62-9-104, and 62-9-113(b).
• Administrative History: New rule filed February 10, 2009; effective April 26, 2009. Amendments filed June 7, 2018; effective September 5, 2018.

Tenn. Comp. R. & Regs. 0780-05-14-.12 SEVERABILITY RULE

If any Rule or portion of a Rule of this Chapter or its applicability to any person or circumstance is held invalid by a court, the remainder of the Chapter or the applicability of the provision to other persons or circumstances shall not be affected. To this end, the provisions of this Chapter are declared severable.

History

• Authority: T.C.A § 62-9-102.
• Administrative History: Original rule filed June 7, 2018; effective September 5, 2018.

Chapter 0780-05-15 Repealed

Tenn. Comp. R. & Regs. 0780-05-15-.01 REPEALED

History

• Authority: T.C.A. §§ 47-18-204 and 47-18-208.
• Administrative History: Original rule filed August 12, 2016; effective November 10, 2016. Repealed by Chapter 834 of the 2018 Public Acts, effective April 27, 2018.

Tenn. Comp. R. & Regs. 0780-05-15-.08 REPEALED

History

• Authority: T.C.A. §§ 56-1-308, 47-18-204, and 47-18-206.
• Administrative History: Original rule filed August 12, 2016; effective November 10, 2016. Repealed by Chapter 834 of the 2018 Public Acts, effective April 27, 2018.

Tenn. Comp. R. & Regs. 0780-05-15-.02 REPEALED

History

• Authority: T.C.A. § 47-18-204.
• Administrative History: Original rule filed August 12, 2016; effective November 10, 2016. Repealed by Chapter 834 of the 2018 Public Acts, effective April 27, 2018.

Tenn. Comp. R. & Regs. 0780-05-15-.03 REPEALED

History

• Authority: T.C.A. §§ 47-18-202 and 47-18-204.
• Administrative History: Original rule filed August 12, 2016; effective November 10, 2016. Repealed by Chapter 834 of the 2018 Public Acts, effective April 27, 2018.

Tenn. Comp. R. & Regs. 0780-05-15-.04 REPEALED

History

• Authority: T.C.A. § 47-18-202.
• Administrative History: Original rule filed August 12, 2016; effective November 10, 2016. Repealed by Chapter 834 of the 2018 Public Acts, effective April 27, 2018.

Tenn. Comp. R. & Regs. 0780-05-15-.05 REPEALED

History

• Authority: T.C.A. § 47-18-204.
• Administrative History: Original rule filed August 12, 2016; effective November 10, 2016. Repealed by Chapter 834 of the 2018 Public Acts, effective April 27, 2018.

Tenn. Comp. R. & Regs. 0780-05-15-.06 REPEALED

History

• Authority: T.C.A. § 47-18-204.
• Administrative History: Original rule filed August 12, 2016; effective November 10, 2016. Repealed by Chapter 834 of the 2018 Public Acts, effective April 27, 2018.

Tenn. Comp. R. & Regs. 0780-05-15-.07 REPEALED

History

• Authority: T.C.A. §§ 47-18-204, 47-18-209, and 47-18-210.
• Administrative History: Original rule filed August 12, 2016; effective November 10, 2016. Repealed by Chapter 834 of the 2018 Public Acts, effective April 27, 2018.

Chapter 0780-05-17 Credit Services Businesses

Tenn. Comp. R. & Regs. 0780-05-17-.01 PURPOSE

The purpose of this chapter is to provide for administration and implementation of the credit services businesses bond posting program from the Tennessee Credit Services Businesses Act, Tenn. Code Ann., Title 47, Chapter 18, Part 10 (as amended by Public Acts of 2015, Chapter 339), herein referred to as the “Act”.

History

• Authority: T.C.A. §§ 56-1-302(5) and 47-18-1011.
• Administrative History: Original rule filed August 8, 2016; effective November 6, 2016.

Tenn. Comp. R. & Regs. 0780-05-17-.02 BOND REQUIREMENTS AND FILING FEE

(1) The bond required pursuant to § 47-18-1011 shall be issued by a corporate surety authorized to do business in Tennessee and shall be in an amount of not less than $100,000.00.

(2) The bond shall be maintained for two (2) years following the date on which the credit services business ceases to conduct business in this state.

(3) A credit services business shall post a separate bond for each location conducting business in this state and the bond shall state, on its face, the name and address of the credit services business location to which it applies.

(4) Prior to the expiration of a bond, a new bond shall be filed with the Department. Each renewed bond shall be filed pursuant to the procedure as set out in Paragraph (5).

Further, if a credit services business is required to file a new bond on behalf of a location for any reason, including a change of surety or change of ownership, such new bond shall be filed pursuant to the procedure as set out in Paragraph (5).

(5) Each bond shall be accompanied by a filing fee of fifty dollars ($50.00) and a registration form prescribed by the Commissioner containing:

(a) Name, address, and telephone number of the credit services business;

(b) Name, address, and telephone number of a primary contact person;

(c) If the business is a corporation, limited liability company, or other entity, proof that the entity is duly registered in the State of Tennessee;

(d) If the business is a sole-proprietorship or general partnership, the Social Security number of each proprietor or general partner; and November, 2016 2 (e) Any such other information as the Commissioner may require.

History

• Authority: T.C.A. § 47-18-1011.
• Administrative History: Original rule filed August 8, 2016; effective November 6, 2016.

Tenn. Comp. R. & Regs. 0780-05-17-.03 CIVIL PENALTIES

(1) The Commissioner may, in addition to or in lieu of any other disciplinary action, assess civil penalties for each separate violation of statutes, rules or orders enforceable by the Commissioner in accordance with the following schedule:

Violation Penalty T.C.A. § 47-18-1003 $0 - $1,000 T.C.A. § 47-18-1004 $0 - $1,000 T.C.A. § 47-18-1005 $0 - $1,000 T.C.A. § 47-18-1006 $0 - $1,000 T.C.A. § 47-18-1007 $0 - $1,000 T.C.A. § 47-18-1010 $0 - $1,000 T.C.A. § 47-18-1011 $0 - $1,000 Tenn. Comp. R. & Regs. § 0780-05-17 $0 - $1,000 (2) Each day of a continuing violation may constitute a separate violation.

(3) In assessing civil penalties, the following factors may be considered:

(a) Whether the amount imposed will be a substantial economic deterrent to the violator;

(b) The circumstances leading to the violation;

(c) The severity of the violation and the risk of harm to the public;

(d) The economic benefits gained by the violator as a result of noncompliance; and (e) The interest of the public.

History

• Authority: T.C.A. § 56-1-308.
• Administrative History: Original rule filed August 8, 2016; effective November 6, 2016.

Chapter 0780-05-18 Rules and Regulations for Debt Management Services (Transferred from 0780-08-01)

Tenn. Comp. R. & Regs. 0780-05-18-.01 PURPOSE OF RULES

The purpose of these rules is to institute the registration and regulation of providers of debt-management services and to protect the interests of consumers as required by the Uniform Debt-Management Services Act.

History

• Authority: T.C.A. §§ 47-18-5501 and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01.

Tenn. Comp. R. & Regs. 0780-05-18-.02 SHORT TITLE

These rules may be cited as the Tennessee Debt-Management Services Rules.

History

• Authority: T.C.A. § 47-18-5501.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01.

Tenn. Comp. R. & Regs. 0780-05-18-.03 RETAINED POWERS

It is the express intent of these rules that such powers as are herein delegated by the commissioner are also retained and may be exercised by the commissioner at the commissioner’s election.

History

• Authority: T.C.A. § 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.04 DEFINITIONS

(1) When used in these rules and in the Uniform Debt-Management Services Act, unless the context otherwise requires:

(a) “Act” shall mean the Uniform Debt-Management Services Act as set forth in T.C.A. §§ 47-18-5501, et seq.

(b) “Branch office” means any office of a provider within this state other than its principal place of business within this state.

(c) “Commissioner” shall mean the commissioner of the Department of Commerce and Insurance.

(d) “Assistant Commissioner” shall mean the assistant commissioner of the Division of Regulatory Boards of the Department of Commerce and Insurance of the State of Tennessee.

(e) “Division” shall mean the assistant commissioner, executive director, staff, employees, and agents of the Division of Regulatory Boards of the Department of Commerce and Insurance of the State of Tennessee or such other agency as shall administer the Act.

(f) “UAPA” shall mean the Uniform Administrative Procedures Act as set forth in T.C.A. §§ 4-5-101, et seq., and any rules promulgated pursuant thereto to the extent such rules are not inconsistent with the Act or these rules.

(2) Unless the context otherwise requires or a rule expressly provides otherwise, terms defined in the Act shall have the same meaning when used in these rules.

History

• Authority: T.C.A. §§ 47-18-5502 and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.05 ADMINISTRATION OF ACT

(1) General (a) The commissioner delegates to the assistant commissioner all of the power and duties granted to and imposed upon the commissioner by the Act except the power:

1. To issue orders and impose any sanction pursuant to T.C.A. §§ 47-18-5533 (a)(1), (2), (3) and (b), or 47-18-5534(b) and (c) in any contested case, as such term is defined in the UAPA; and 2. To adopt any rule as such term is defined in the UAPA.

(b) Without limiting the foregoing delegation, the assistant commissioner is expressly empowered to:

1. Conduct examinations and investigations as provided by T.C.A. § 47-18-5532(b);

2. Issue registrations; and 3. Accept on behalf of the commissioner settlement agreements reached between the Division and any person pursuant to T.C.A. § 4-5-105.

(c) Nothing herein limits the assistant commissioner’s authority, duties, or responsibilities set forth elsewhere in state law, regulation, or rule.

History

• Authority: T.C.A. §§ 47-18-5501, 47-18-5505, 47-18-5506, and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.06 APPLICABILITY

(1) A person forming an agreement to provide debt-management services and any person to whom the account is then transferred are providers subject to the provisions of the Act.

(2) Any person conducting business in this state as a provider must apply to the Division to become registered.

(3) Debt-management services do not include:

(a) Legal services provided by an attorney licensed and in good standing in Tennessee during the entire time services are provided and in an attorney-client relationship;

(b) Accounting services provided by a certified public accountant licensed and in good standing in Tennessee during the entire time services are provided and in an accountant-client relationship;

(c) Financial planning services provided in a financial planner-client relationship by a person who is either licensed as an insurance provider and in good standing or registered as an investment adviser representative and in good standing in this state and who holds one of the following professional designations during the entire time services are provided:

1. Certified Financial Planner (CFP), awarded by the Certified Financial Planner Board of Standards, Inc.;

2. Chartered Financial Consultant (ChFC), awarded by the American College of Financial Services, Bryn Mawr, PA;

3. Personal Financial Specialist (PFS), awarded by the American Institute of Certified Public Accountants;

4. Chartered Financial Analyst (CFA), awarded by the Institute of Chartered Financial Analysts; or 5. Chartered Investment Counselor (CIC), awarded by the Investment Counsel Association of America, Inc.

(d) Services provided within the scope of the business or profession of:

1. A judicial officer or person acting under court order or administrative order;

2. An assignee for the benefit of creditors;

3. A bank or government regulated bank affiliate;

4. A title insurer, escrow company, or person providing bill-paying services if the provision of debt-management services is incidental to the bill-paying services.

History

• Authority: T.C.A. §§ 47-18-5502, 47-18-5503, and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01.

Tenn. Comp. R. & Regs. 0780-05-18-.07 REGISTRATION APPLICATION

(1) Applications for registration shall be submitted on forms approved by the assistant commissioner.

(2) Any application submitted without required information or failing to meet any requirement for registration will be held by the program office, and written notification of the information that is lacking or the reason(s) the application does not meet the requirements for registration will be sent to the applicant. The application will be held in “pending” status for a reasonable period of time, but such period is not to exceed one hundred eighty (180) days from the date of application. If the applicant fails to timely and completely respond to the written notification, the application will be closed.

(3) Any application once submitted may be withdrawn, provided, however, that the application fee shall not be refunded.

(4) Applications must be complete before they are submitted for consideration. Applications shall at a minimum include:

(a) A complete and properly executed application form signed under penalty of perjury and before a notary by the person applying;

(b) A nonrefundable application fee;

(c) A surety bond as required by T.C.A. § 47-18-5513, or an acceptable surety alternative that complies with the provisions of T.C.A. § 47-18-5514;

(d) Evidence of insurance as required by T.C.A. § 47-18-5505(b)(4) in the amount of two hundred and fifty thousand dollars ($250,000);

1. Any insurance policy submitted by a provider as evidence of insurance required by the Act shall include the insurer’s written agreement to provide the commissioner with written notice of termination or reduction of the policy, which shall be sent by certified U.S. mail to the Division.

2. For purposes of administering the Act, the insurer’s termination or reduction of liability shall be effective from and after the expiration of sixty (60) days from the Division’s receipt of such written notice or on such later date as is stated in the written notice. The insurer’s termination or reduction of liability shall not affect, reduce, or release its liability for any acts or practices that occurred during the time the policy was in force and prior to the effective date of termination or reduction of the policy.

(e) The charter or articles of organization of the applicant;

(f) A description of any ownership interest of greater than ten percent (10%) by a director, owner, or employee of the applicant in:

1. Any affiliate of the applicant; or 2. Any entity that provides products or services to the applicant or any individual related to the applicant’s debt-management services.

(g) The name and address of each entity that owns an interest in or is otherwise affiliated with or controls, directs, or influences the operations of the applicant;

(h) The name and address of each entity in which the applicant owns an interest or is otherwise affiliated with or whose operations are controlled, directed, or influenced by the applicant;

(i) The names and addresses of all employers of each of the applicant’s directors during the immediately preceding ten (10) years;

(j) The names, addresses, and amounts of compensation for the five (5) most highly compensated employees of the applicant for each of the three (3) years immediately preceding the application, or the period of the applicant’s existence if less than three (3) years, if the applicant meets any of the criteria outlined in T.C.A. § 47-18-5506(17);

(k) The identity of each director who is an affiliate as defined by T.C.A. § 47-18-5502(2);

(l) Evidence of tax-exempt status under the Internal Revenue Code, 26 U.S.C. §501, if applicant is a not-for-profit corporation and exempt from taxation;

(m) Consent to jurisdiction of the State of Tennessee and venue in Davidson County, Tennessee;

(n) Disclosure of and identification information for all trust accounts;

(o) Irrevocable consent to the authority of the commissioner to review and examine all trust accounts;

(p) Applicant’s financial statements prepared in accordance with the provisions of T.C.A. § 47-18-5506(7);

(q) Evidence of the applicant’s accreditation by an independent accrediting organization approved by the assistant commissioner;

(r) Evidence of certification by an independent certifying program approved by the assistant commissioner of all counselors and debt specialists conducting business in this state on behalf of the applicant;

(s) Detailed descriptions of the three most common education programs provided by the applicant to Tennessee consumers and copies of all materials associated with the education programs;

(t) A description of the applicant’s financial analysis and initial budget plan, including any form or electronic model used by the applicant to evaluate the financial conditions of Tennessee consumers;

(u) Copies of each agreement form provided by the applicant to Tennessee consumers and any other documents or information required to be signed by or provided to a Tennessee consumer;

(v) A schedule of all fees and charges, including any recommended donations, provided by the applicant to Tennessee consumers;

(w) Sworn criminal history records checks, including fingerprints, conducted within the immediately preceding twelve (12) months for the purpose of providing debtmanagement services, for every officer of the applicant and every employee or agent who is authorized to have access to the applicant’s trust account(s). The sworn criminal

history records check must be submitted directly by the criminal history records check provider to the Division. Applicants who have had these sworn criminal history records checks performed for the purpose of providing debt-management services in another state within twelve (12) months prior to submitting the application may have the results of those records checks submitted directly by the other state to the Division as certified business records of the other state;

(x) Disclosure of any debt-management services agreements or plans entered into with Tennessee consumers since June 23, 2009; and (y) Any other information required to determine whether the application should be approved or denied.

(5) An applicant shall notify the Division within ten (10) days after a change occurs in any information originally reported in the initial registration application.

History

• Authority: T.C.A. §§ 47-18-5504, 47-18-5505, 47-18-5506, 47-18-5507, 47-18-5508, 47-18-5509, 47-18- 5510, 47-18-5513, 47-18-5514, and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.08 RENEWAL OF REGISTRATION

(1) Registrations shall expire on the last day of the twenty-fourth (24th) month following their issuance or renewal and shall become invalid on such date unless renewed prior to their expiration date.

(2) Renewal applications must be received by the Division not less than thirty (30) days or more than sixty (60) days prior to the expiration of a registration.

(3) Applications for the renewal of registrations shall be made on forms provided by the assistant commissioner.

(4) Applications for renewals will not be considered filed until the applicable fee prescribed in these rules and all other information required pursuant to the Act and these rules are received.

(5) Applicants are responsible for biennial renewal whether or not a notice of renewal is received from the commissioner.

(6) A provider’s application for renewal of its registration shall include at a minimum:

(a) A complete and properly executed renewal application form signed by the provider’s representative under penalty of perjury;

(b) The applicable nonrefundable renewal application fee as provided in Rule 0780-05-18- .09, below;

(c) A surety bond as required by T.C.A. § 47-18-5513, or an acceptable surety alternative that complies with the provisions of T.C.A. § 47-18-5514;

(d) Evidence of insurance as required by T.C.A. § 47-18-5505(b)(4) in the amount of two hundred and fifty thousand dollars ($250,000);

1. Any insurance policy submitted by a provider as evidence of insurance required by the Act shall include the insurer’s written agreement to provide the commissioner with written notice of termination or reduction of the policy, which shall be sent by certified U.S. mail to the Division.

2. For purposes of administering the Act, the insurer’s termination or reduction of liability shall be effective from and after the expiration of sixty (60) days from the Division’s receipt of such written notice or on such later date as is stated in the written notice. The insurer’s termination or reduction of liability shall not affect, reduce, or release its liability for any acts or practices that occurred during the time the policy was in force and prior to the effective date of termination or reduction of the policy.

(e) Disclosure of any changes of information reported in the initial registration application or the immediately previous renewal application, as applicable;

(f) The applicant’s financial statements prepared in accordance with the provisions of T.C.A. § 47-18-5506(7);

(g) Evidence of the applicant’s accreditation by an independent accrediting organization approved by the assistant commissioner;

(h) Evidence of certification, by an independent certifying program approved by the assistant commissioner, of all counselors and debt specialists conducting business in this state on behalf of the applicant;

(i) Sworn criminal history records checks for every employee or agent with access to the applicant’s trust account(s) are only conducted on initial applications for licensure; however, when an applicant submits a renewal application, the applicant shall attest in writing that every employee or agent with access to the applicant’s trust account(s) has not committed any felonies since their prior background check;

(j) Disclosure of the total amount of money received by the applicant from or on behalf of Tennessee consumers pursuant to debt-management services agreements and plans during the preceding twelve (12) month period and the total amount of money distributed to creditors of those Tennessee consumers during the same twelve (12) month period;

(k) Disclosure of the gross amount accumulated during the preceding twelve (12) month period pursuant to debt-management services plans by or on behalf of Tennessee consumers with whom the applicant has debt-management services agreements; and (l) Any other information required to determine whether the application should be approved or denied.

(7) An applicant shall notify the Division within ten (10) days after a change occurs in any of the information originally reported in the renewal application.

History

• Authority: T.C.A. §§ 47-18-5504, 47-18-5506, 47-18-5511, 47-18-5513, 47-18-5514, and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.09 FEES

(1) Nonrefundable debt-management services registration......................................... $4,000.00 (2) Nonrefundable renewal fee for debt-management services....................................... .$4,000.00

History

• Authority: T.C.A. §§ 47-18-5505, 47-18-5511, and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01.

Tenn. Comp. R. & Regs. 0780-05-18-.10 SUBMISSION OF INFORMATION

(1) An applicant or registrant shall inform the Division in writing of any change in business name or business structure at least ten (10) days before the change occurs. Registrations are nontransferable.

(2) An applicant or registrant shall inform the Division in writing within thirty (30) days of receipt of notice and provide a copy of:

(a) Any indictment or information filed in any court of competent jurisdiction naming the applicant or registrant, any affiliate, partner, officer, director, owner, or agent of the applicant or registrant, or any person occupying a similar status with or performing similar functions for the applicant or registrant, alleging the commission of any felony regardless of subject matter, or of any misdemeanor involving a security or any aspect of the debt-management services business;

(b) Any complaint filed in any court of competent jurisdiction naming the applicant or registrant, any affiliate, partner, officer, director, owner, or agent, or any person occupying a similar status with or performing similar functions for the applicant or registrant, seeking a permanent or temporary injunction enjoining any of such person’s conduct or practice involving any aspect of the debt-management services business;

(c) Any complaint or order filed by a federal or state agency naming the applicant or registrant, any affiliate, partner, officer, director, owner or agent, or any person occupying a similar status with or performing a similar function for the applicant or registrant, related to the debt-management services business.

(3) Within ten (10) days of filing, an applicant or registrant shall file with the Division a copy of any answer, response, or reply to any complaint, indictment, or information described in subparts (2)(a) through (2)(c) above.

(4) Within ten (10) days of receipt, an applicant or registrant shall file with the Division a copy of any decision, order, or sanction that is made, entered, or imposed with respect to any proceedings described in subparts (2)(a) through (2)(c) above.

(5) Nothing in paragraphs (2), (3), or (4) is intended to relieve the applicant or registrant from any duty to comply with the legal process or any reporting requirements elsewhere specified in these rules or in the Act.

(6) Trust Accounts (a) An applicant or registrant shall file with the Division a notice of any relocation of trust accounts from one bank to another bank thirty (30) days prior to the date on which the relocation of the trust accounts becomes effective.

(b) In the event of the relocation of trust accounts from one bank to another, the applicant or registrant shall provide the new trust account numbers to the Division no later than two (2) days after receiving the new trust account numbers.

(c) An applicant or registrant shall notify the Division of a theft from a trust account within five (5) days of discovery of the theft.

History

• Authority: T.C.A. §§ 47-18-5507, 47-18-5522, 47-18-5529, 47-18-5532, and 56-1-302.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08- 01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.11 STANDARDS OF PRACTICE

(1) Upon any request for additional information or upon receipt of notice of any written complaint against the provider, the provider shall, within ten (10) business days, file with the Division a written answer to the request for additional information or to the complaint.

(2) A provider shall immediately determine the state of residence of a potential client during the first contact with the potential client. If the potential client is a resident of the state of Tennessee, the provider shall notify the potential client in writing of its current registration status in the state of Tennessee.

(3) No later than thirty (30) days prior to the opening of a branch office, a provider shall notify the Division in writing of the opening of the branch office as well as the name of the person responsible for the branch office and the certified counselor(s) and certified debt specialist(s) working in the branch office.

(4) A provider shall comply with all applicable federal and state laws and rules in providing debtmanagement services and otherwise comply with all federal and state laws and rules applicable to the provider.

(5) A provider shall keep each client reasonably informed about the status of the debtmanagement services being performed for the client and shall promptly comply with the client’s reasonable requests for information.

(6) A provider shall not use improper or questionable methods of soliciting clients, including but not limited to misleading or deceiving clients or utilizing scare tactics or other improper tactics and shall not pay another person or accept payment from another person for engaging in improper methods.

(7) A provider shall not associate its business with any business or person that engages in or attempts to engage in unfair, deceptive, or misleading practices or acts in its dealings with clients.

(8) Unless responding to a request for information, subpoena, or order issued by a regulatory agency, law enforcement agency, or court of competent jurisdiction, a provider shall not disclose any client information obtained relative to a debt-management services agreement or plan to someone other than the client unless the disclosure is expressly authorized in writing by the client.

(9) A provider shall not misrepresent its debt-management services or the features of any service or make unwarranted claims about the merits of a service that the provider offers.

(10) A provider shall not accept or offer commissions or allowances, directly or indirectly, from other parties dealing with the client in connection with work for which the provider is responsible.

(11) Before the execution of an agreement for debt-management services, a provider shall clearly and conspicuously disclose to the client any interest the provider has in a business that may affect the client. No provider shall allow its interest in any business to affect the quality or results of the debt-management services that the provider may be called upon to perform.

(12) A provider shall fully comply with all Federal Trade Commission rules, regulations, and guidelines, including but not limited to the Guides Concerning Use of Endorsements and Testimonials in Advertising, 16 C.F.R. pt. 255.

(13) A provider shall not engage in false or misleading advertising.

(14) A provider shall not perform or recommend any debt-management services that would violate applicable federal or state laws.

(15) A provider shall not engage in deceptive or unfair trade practices. Examples of deceptive or unfair trade practices include but are not limited to:

(a) Proposing or communicating any alteration of a material term of a debt-management services agreement or plan to a client or a client’s creditor without first receiving explicit written instructions from the client directing the provider to make a specific alteration;

(b) Expressly or impliedly representing that any of its goods or services are “free” if the client will be asked to make any payment in connection with the goods or services, other than a payment that will be forwarded in its entirety to the client’s creditors. A provider may represent that a consultation or other initial contact is “free” if the consultation or contact is provided with no obligation on the part of the client to make any payment in connection with the consultation or contact;

(c) Expressly or impliedly representing that any payments made by clients in connection with providers are voluntary contributions or are payments to support a non-profit organization, unless more than fifty percent (50%) of the payment is paid to or for the benefit of the non-profit organization for purposes other than to pay the provider for services rendered to a non-profit organization;

(d) Expressly or impliedly misrepresenting the effects of a debt-management plan on a client’s ability to obtain credit;

(e) Enrolling a debtor in a debt-management plan unless, prior to enrollment, the debtor has received credit counseling from a credit counselor who has sufficient experience and training to counsel in financial literacy, money management, budgeting, and responsible use of credit and is advised of the various options available to the debtor for addressing the debtor’s financial problems;

(f) Enrolling a debtor in a debt-management plan if the debtor’s estimated monthly living expenses and estimated monthly provider payments exceed his or her income. A debtor in this situation may be enrolled in a debt-management plan if the debtor is specifically advised not to enroll in a debt-management plan because the debtor cannot afford the debt-management plan payment and the debtor independently states that he or she believes that he or she can afford the debt-management plan payment by reducing expenses, obtaining additional income or funds from another source, or otherwise adjusting the budget estimate to make the debt-management plan affordable;

(g) Disclosing or using any individual’s private financial and personal information that the provider receives in connection with providing debt-management services except in accordance with and as permitted by applicable law, including but not limited to the Gramm-Leach-Bliley Act, 15 U.S.C.A. §§ 6801, et seq.;

(h) Entering into any agreement with any person that contains any standards or criteria under which the person must enroll debtors into a debt-management plan;

(i) Entering into any agreement with any person that sets any minimum enrollment rate or other standard mandating the number of individuals who must be enrolled in debtmanagement plans or an amount that the person must collect from clients;

(j) Entering into any agreement with any person that sets any minimum revenues or other standards mandating the amount of revenue that must be generated through a debtmanagement plan;

(k) Using the name or mark of a person other than the provider when communicating with debtors or creditors in connection with the performance of debt-management services;

(l) Entering into any agreement with a third party that limits the use of any data reflecting either the provider’s or the third party’s performance of any debt-management services, including data reflecting the payments that either the provider or the third party has processed or is processing in connection with a debt-management plan;

(m) Expressly or impliedly misrepresenting the purpose of any fee or contribution that is paid by clients;

(n) Failing to clearly and conspicuously disclose the nature and types of services that will be provided under any agreement prior to the consumer’s agreeing to receive such services;

(o) Debiting, cashing, depositing, or otherwise collecting or attempting to collect monies from a client after a client has asserted a violation of state law, regulation, or rule in connection with the debt-management plan;

(p) Using logos, symbols, business names, or the like that might represent or imply to consumers an affiliation or association with any government entity;

(q) Failing to maintain and make available upon request to the Division full and complete substantiation for any and all claims and representations made to debtors and in any advertising or promotional materials;

(r) Submitting any false, misleading, or deceptive information to the Division relating to a registration application or renewal application; or (s) Failing to comply with all of the prerequisites for providing debt-management services outlined in T.C.A. § 47-18-5517 and any applicable federal laws, regulations, or rules.

History

• Authority: T.C.A. §§ 47-18-104, 47-18-5515, 47-18-5517, 47-18-5528, and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08- 01.

Tenn. Comp. R. & Regs. 0780-05-18-.12 EXAMINATIONS, RECORDS, AND REPORTS

(1) Recordkeeping Requirements (a) A registrant shall retain copies of all records for five (5) years from the date of completion or cancellation of an educational program, financial analysis, or debtmanagement services agreement. If the registrant has been notified in writing by the assistant commissioner to retain records for a longer period of time, the registrant shall retain records beyond this time period as requested.

(b) Every debt-management services provider registered in this state shall make and keep current the following books and records relating to its business, at a minimum:

1. Ledgers reflecting all assets and liabilities, income and expense, and capital accounts;

2. A record or ledger reflecting separately for each client the clearance dates of all money received from each client and all payments made on behalf of each client and in all cases the name of the client in which the money has been received or paid;

3. Copies of all communications, correspondence, and other records relating to debt-management services agreements and plans with, about, or on behalf of clients;

4. The personnel or contractor records for any employee, agent, or contractor of the provider about whom the provider has received complaints from clients regarding any conduct relative to the provider’s services;

5. A client information form for each client. If recommendations are to be made to the client, the form shall include such information as is necessary to determine suitability;

6. A record of the proof of money balances of all trust accounts. Such balances shall be prepared currently at least once a month; and 7. All partnership certificates and agreements or, in the case of a corporation, all articles of incorporation, by-laws, minute books, and stock certificate books of the provider.

(2) Every provider shall make and keep such accounts, correspondence, and other records as the commissioner prescribes by rule.

(3) All activities, books, accounts, and the records of a provider or a person to which a provider has delegated its obligations under an agreement are subject at any time and from time to time to such reasonable periodic, special, or other examinations, within or without this state, by representatives of the commissioner, as the commissioner deems necessary or appropriate in the public interest or for the protection of clients or to ensure compliance with the Act. The cost of such examination shall be borne by the person examined in the same manner as is provided for insurance companies, except that not more than two (2) such examinations shall be charged to such person in any twelve-month period.

History

• Authority: T.C.A. §§ 47-18-5506, 47-18-5512, 47-18-5522, and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.13 FINGERPRINTING

(1) Any person required to submit electronically scanned fingerprints pursuant to the Uniform Debt-Management Services Act shall comply with the TBI or FBI fingerprinting policies and procedures.

(2) Any person required to submit fingerprints by the Uniform Debt-Management Services Act shall make arrangements for the processing of his or her fingerprints pursuant the policies and procedures of the TBI or FBI and shall be responsible for the payment of any fees associated with processing of fingerprints by the TBI or FBI.

(3) In the event an applicant furnishes unclassifiable fingerprints or fingerprints that are unclassifiable by nature, the applicant shall submit new electronic fingerprints to the TBI or FBI, together with any additional fee(s) charged by the TBI and/or FBI for processing the new fingerprints. For the purposes of this rule, “unclassifiable prints” means that the electronic scan or the print of the person’s fingerprints cannot be read, and therefore cannot be used to identify the person.

(4) All sets of classifiable fingerprints required by this rule shall be furnished at the expense of the applicant.

(5) Applicants shall in all cases be responsible for paying application fees as established by the commissioner regardless of the manner of fingerprinting.

History

• Authority: T.C.A. §§ 47-18-5506 and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.14 INFLATIONARY ADJUSTMENT

(1) The dollar amounts in T.C.A. §§ 47-18-5502, 47-18-5505, 47-18-5509, 47-18-5513, 47-18- 5523, 47-18-5533 and 47-18-5535 shall be those specified in those sections, subject to adjustments made pursuant to this rule.

(2) Pursuant to T.C.A. § 47-18-5532(f), 2014 is adopted as the base year for the purposes of adjusting the dollar amounts to reflect inflation, as measured by the United States Bureau of Labor and Statistics consumer price index for all urban consumers.

(3) The commissioner shall on a yearly basis determine the change in the index from the base year as of December 31 of the preceding year. If such change is at least 10 percent, whether positive or negative, the dollar amounts of those specified in T.C.A. §§ 47-18-5502, 47-18- 5505, 47-18-5509, 47-18-5513, 47-18-5523, 47-18-5533 and 47-18-5535 shall be adjusted to reflect the change in index from the base year, rounded to the nearest one hundred dollars ($100.00), to be effective on July 1 of that year, except that the amounts in § 47-18-5523 shall be rounded to the nearest dollar.

(4) The year in which such adjustment takes place shall become the new base year for the purposes of adjusting the dollar amounts according to T.C.A. § 47-18-5532(f).

(5) The commissioner shall notify registered providers of any change in dollar amounts made pursuant to this rule, shall make that information available to the public, and shall update that information on all forms. The current base year and all fees, as adjusted, shall be listed on a web site chosen by the commissioner.

History

• Authority: T.C.A. § 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.15 ACCREDITATION

The assistant commissioner may approve an independent accrediting organization if the assistant commissioner finds, based on the totality of the information provided, that the independent accrediting organization provides accreditation that is substantially equivalent to the accreditation provided by the independent accrediting or certifying organizations approved by the commissioner. Approval by the assistant commissioner shall be valid for a period of two (2) years from the date of approval, at which time the independent accrediting organization shall make a new request for approval. An independent accrediting organization shall provide the following information on a form approved by the assistant commissioner in its request for approval:

(1) The name of the independent accrediting organization;

(2) The phone number, mailing address and e-mail address—if applicable—of the independent accrediting organization;

(3) A list of other states that have approved the independent accrediting organization to provide accreditation of debt-management companies or similar organizations;

(4) The number of years that the independent accrediting organization has offered accreditation for debt-management companies or similar organizations;

(5) A complete list of the standards that accredited companies must meet; and (6) Such other information as the assistant commissioner may request in order to determine that the independent accrediting organization is substantially equivalent to the accreditation provided by the independent accrediting or certifying organizations approved by the commissioner.

History

• Authority: T.C.A. §§ 47-18-5506 and 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.16 CERTIFICATION

(1) Certification by the National Foundation for Credit Counseling or the Financial Counseling Association of America shall meet the requirements of T.C.A. § 47-18-5506(9).

(2) Notwithstanding the previous paragraph, the assistant commissioner may approve a training program or certifying organization providing certification to be a certified counselor and/or certified debt specialist if the assistant commissioner finds, based on the totality of the information provided, that the training program or certifying organization meaningfully authenticates the competence of individuals providing services under the Act. Approval by the assistant commissioner shall be valid for a period of two (2) years from the date of approval, at which time the training program or certifying organization shall make a new request for approval. A training program of certifying organization shall provide the following information in its request for approval:

(a) The name of the certifying organization or entity providing the training program;

(b) The phone number, mailing address and e-mail address—if applicable—of the certifying organization or entity providing the training program;

(c) A list of other states that have approved the training program or certifying organizations to be approved;

(d) The number of years that the training program or certifying organization has offered certification for debt-management counseling;

(e) A complete list of the curriculum required to be completed, the topics covered, the number of hours to complete the program, and the number of persons currently certified; and (f) Such other information as the assistant commissioner may request in order to determine that the training program or certifying organization meaningfully authenticates the competence of individuals providing services under the Act.

History

• Authority: T.C.A. § 47-18-5532.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Amendments filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-18-.17 REPEALED

History

• Authority: T.C.A. §§ 47-18-5532, 47-18-5532(c), and 47-18-5541.
• Administrative History: Original rule filed October 28, 2016; effective January 26, 2017. Rule renumbered from 0780-08-01. Repeal filed September 23, 2024; effective December 22, 2024.

Chapter 0780-05-19 Rules and Regulations for Debt Resolution Services

Tenn. Comp. R. & Regs. 0780-05-19-.01 PURPOSE

The purpose of these rules is to institute the registration and regulation of providers of debt resolution services and to protect the interests of consumers as required by the Debt Resolution Services Act.

History

• Authority: T.C.A. §§ 47-18-5801 and 47-18-5808.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.02 DEFINITIONS

(1) When used in this chapter and in the Debt Resolution Services Act, unless the context otherwise requires:

(a) “Act” means the Debt Resolution Services Act, codified at T.C.A. Title 47, Chapter 18,

Part 58.

(b) “Commissioner” means the commissioner of the Department of Commerce and Insurance or the commissioner’s designee.

(2) Unless the context otherwise requires or a rule expressly provides otherwise, terms defined in the Act shall have the same meaning when used in these rules.

History

• Authority: T.C.A. §§ 47-18-5801, 47-18-5802, and 47-18-5808.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.03 FEES

(1) Nonrefundable fee for debt resolution services license....................................... $4,000.00 (2) Nonrefundable fee for debt resolution services license renewal.............................. $4,000.00

History

• Authority: T.C.A. §§ 47-18-5805 and 47-18-5808.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.04 APPLICATION FOR LICENSURE OR RENEWAL

(1) An application for licensure shall be submitted on a form prescribed by the commissioner; signed under penalty of perjury; and accompanied by the fee provided in Rule 0780-05-19- .03(1). The application shall contain:

(a) All of the information and documentation required by T.C.A. § 47-18-5805(b);

(b) Fingerprints required by T.C.A. § 47-18-5805(e) and in compliance with Rule 0780-05- 19-.06; and (c) Any other information necessary for the commissioner to determine whether the application should be approved or denied.

(2) An application for licensure renewal shall be submitted on a form prescribed by the commissioner; signed under penalty of perjury; and accompanied by the fee provided in Rule 0780-05-19-.03(2). In connection with the license renewal application, an applicant shall:

(a) Provide all of the information and documentation required by T.C.A. § 47-18-5805(b);

(b) Provide access to the applicant’s books and records with respect to consumers in Tennessee that are being or have been serviced by the applicant; and (c) Any other information necessary for the commissioner to determine whether the application should be approved or denied.

(3) A license to provide debt resolution services is valid for a period of two (2) years from the date of issuance.

(4) An applicant or licensee shall notify the commissioner within thirty (30) days after a material change in any of the information submitted in connection with an application for a license or license renewal.

(5) Upon a licensee’s submission of an application for license renewal and until such time as an application for license renewal is approved or denied, the licensee may continue to provide or offer to provide debt resolution services, but a suspension or denial of a license terminates any right to provide or offer to provide debt resolution services in this state unless continuation is approved by the commissioner.

History

• Authority: T.C.A. §§ 47-18-5805, 47-18-5806, 47-18-5807, and 47-18-5808.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.05 DENIAL OF APPLICATION FOR LICENSURE OR RENEWAL

(1) An application for licensure may be denied by the commissioner if:

(a) The applicant does not satisfy the requirements of T.C.A. § 47-18-5805;

(b) The applicant does not provide fingerprints in compliance with T.C.A. § 47-18-5805(e) or in compliance with Rule 0780-05-19-.06;

(c) The application contains information that is materially erroneous or materially incomplete;

(d) The applicant fails to provide in a timely manner such information as the commissioner reasonably requests;

(e) An executive officer or member of the board of directors, or equivalent leadership structure, of the applicant has been convicted of or pled nolo contendere to:

1. A felony; or 2. An act involving fraud, deceit, or dishonesty; or (f) An executive officer or member of the board of directors, or equivalent leadership structure, of the applicant has had a professional license revoked, suspended, or subjected to enforcement action in any state, and the license has not been reinstated.

(2) An application for licensure renewal may be denied by the commissioner if:

(a) The applicant licensee has violated the Act, any rule adopted pursuant to the Act, or another law applicable to the conduct of the applicant licensee’s business;

(b) A fact or condition exists that, if it had existed when the licensee applied for a license, would have warranted the commissioner refusing to issue the license;

(c) The applicant licensee does not satisfy the requirements of T.C.A. § 47-18-5805(b);

(d) The applicant licensee has refused to permit the commissioner to examine the licensee’s books and records, failed to comply with T.C.A. § 47-18-5812, or made a material misrepresentation or omission in complying with T.C.A. § 47-18-5812; or (e) The applicant licensee has not responded within a reasonable time and in an appropriate manner to the commissioner’s communications.

(3) The commissioner shall provide to the applicant a written decision and findings containing the reasons supporting a denial of a license issuance or renewal no later than twenty (20) days after the date of the denial. The applicant may appeal the denial to the chancery court of Davidson County no later than thirty (30) days after the applicant’s receipt of the written decision denying the license issuance or renewal.

History

• Authority: T.C.A. §§ 47-18-5805, 47-18-5806, 47-18-5807, 47-18-5808, and 47-18-5812.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.06 FINGERPRINTING

(1) Any person required to submit classifiable fingerprints by the Act or this chapter shall be deemed to have supplied the required sets of fingerprints if that applicant causes a private company contracted by the State to electronically transmit that applicant’s classifiable prints directly to the TBI and FBI to forward an electronic report based on that applicant’s fingerprints to the commissioner.

(2) Any person required to submit fingerprints by the Act or this chapter shall make the arrangements for the processing of his or her fingerprints with the company contracted by the State to provide electronic fingerprinting services directly and shall be responsible for the payment of any fees associated with the processing of fingerprints to the respective agent authorized by the TBI and FBI.

(3) In the event an applicant furnishes unclassifiable fingerprints or fingerprints that are unclassifiable by nature then the commissioner may require the applicant to submit new fingerprints together with any additional fee(s) charged by the TBI and/or FBI for processing the new fingerprints.

(4) In the event the State no longer contracts with any company to provide an electronic fingerprinting service, then the applicant shall submit three (3) classifiable TBI and FBI fingerprint cards with his or her application and shall pay the commissioner all processing fees established by the TBI and FBI.

(5) All sets of classifiable fingerprints required by this rule shall be furnished at the expense of the applicant.

(6) Applicants shall, in all cases, be responsible for paying application fees as established by the commissioner, regardless of the manner of fingerprinting.

History

• Authority: T.C.A. §§ 47-18-5805 and 47-18-5808.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.07 SUSPENSION, REVOCATION, OR SURRENDER OF LICENSE

(1) Suspension or Revocation of License (a) The commissioner may suspend or revoke a license if:

1. A licensee has violated the Act, any rule adopted pursuant to the Act, or another law applicable to the conduct of the applicant licensee’s business;

2. A fact or condition exists that, if it had existed when a licensee applied for a license, would have warranted the commissioner refusing to issue the license;

3. A licensee does not satisfy the requirements of T.C.A. § 47-18-5805(b);

4. A licensee has refused to permit the commissioner to examine the licensee’s books and records, failed to comply with T.C.A. § 47-18-5812, or made a material misrepresentation or omission in complying with T.C.A. § 47-18-5812; or 5. A licensee has not responded within a reasonable time and in an appropriate manner to the commissioner’s communications.

(b) If the commissioner finds that a delay in issuing an order pursuant to the UAPA will irreparably harm the public interest, then the commissioner may summarily suspend a license pursuant to T.C.A. § 4-5-320(d).

(2) Surrender of License (a) A licensee may surrender their license by issuing a written request to surrender their license to the commissioner.

(b) If a licensee surrenders their license, the licensee’s civil or criminal liability for acts committed before the surrender is not affected.

History

• Authority: T.C.A. §§ 47-18-5807 and 47-18-5808.
• Administrative History: New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.08 SUBMISSION OF INFORMATION

(1) An applicant or licensee shall inform the Division in writing of any change in business name or business structure within thirty (30) days of the change. Licenses are non-transferable.

(2) An applicant or licensee shall inform the Division in writing within thirty (30) days of receipt of notice and provide a copy of:

(a) Any indictment or information filed in any court of competent jurisdiction naming the applicant or licensee, any affiliate, partner, officer, director, owner, or agent of the applicant or licensee, or any person occupying a similar status with or performing similar functions for the applicant or licensee, alleging the commission of any felony regardless of subject matter, or of any misdemeanor involving a security or any aspect of the debtresolution services business;

(b) Any complaint filed in any court of competent jurisdiction naming the applicant or licensee, any affiliate, partner, officer, director, owner, or agent, or any person occupying a similar status with or performing similar functions for the applicant or licensee, seeking a permanent or temporary injunction enjoining any of such person’s conduct or practice involving any aspect of the debt-resolution services business; and (c) Any complaint or order filed by a federal or state agency naming the applicant or licensee, any affiliate, partner, officer, director, owner or agent, or any person occupying a similar status with or performing a similar function for the applicant or licensee, related to the debt-resolution services business.

(3) Within thirty (30) days of filing, an applicant or licensee shall file with the Division a copy of any answer, response, or reply to any complaint, indictment, or information described in subparts (2)(a) through (2)(c) above.

(4) Within thirty (30) days of receipt, an applicant or licensee shall file with the Division a copy of any decision, order, or sanction that is made, entered, or imposed with respect to any proceedings described in subparts (2)(a) through (2)(c) above.

(5) Nothing in paragraphs (2), (3), or (4) is intended to relieve the applicant or licensee from any duty to comply with the legal process or any reporting requirements elsewhere specified in these rules or in the Act.

History

• Authority: T.C.A. §§ 47-18-5803, 47-18-5805 and 47-18-5808.
• Administrative History: New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.09 STANDARDS OF PRACTICE

(1) Upon any request for additional information or upon receipt of notice of any written complaint against the provider, the provider shall, within ten (10) business days, file with the Division a written answer to the request for additional information or to the complaint.

(2) A provider shall immediately determine the state of residence of a potential client during the first contact with the potential client. If the potential client is a resident of the state of Tennessee, the provider shall notify the potential client in writing of its current registration status in the state of Tennessee.

(3) No later than thirty (30) days prior to the opening of a branch office, a provider shall notify the Division in writing of the opening of the branch office as well as the name of the person responsible for the branch office.

(4) A provider shall comply with all applicable federal and state laws and rules in providing debtresolution services and otherwise comply with all federal and state laws and rules applicable to the provider.

(5) A provider shall keep each client reasonably informed about the status of the debt-resolution services being performed for the client and shall promptly comply with the client’s reasonable requests for information.

(6) A provider shall not use improper or questionable methods of soliciting clients, including but not limited to misleading or deceiving clients or utilizing scare tactics or other improper tactics and shall not pay another person or accept payment from another person for engaging in improper methods.

(7) A provider shall not associate its business with any business or person that engages in or attempts to engage in unfair, deceptive, or misleading practices or acts in its dealings with clients.

(8) Unless responding to a request for information, subpoena, or order issued by a regulatory agency, law enforcement agency, or court of competent jurisdiction, a provider shall not disclose any client information obtained relative to a debt-resolution services agreement or plan to someone other than the client unless the disclosure is expressly authorized by the client.

(9) A provider shall not misrepresent its debt-resolution services or the features of any service or make unwarranted claims about the merits of a service that the provider offers.

(10) A provider shall not accept or offer commissions or allowances, directly or indirectly, from other parties dealing with the client in connection with work for which the provider is responsible.

(11) A provider shall fully comply with all Federal Trade Commission rules, regulations, and guidelines, including but not limited to the Guides Concerning Use of Endorsements and Testimonials in Advertising, 16 C.F.R. pt. 255.

(12) A provider shall not engage in false or misleading advertising.

(13) A provider shall not perform or recommend any debt-resolution services that would violate applicable federal or state laws.

(14) A provider shall not engage in deceptive or unfair trade practices. Examples of deceptive or unfair trade practices include but are not limited to:

(a) Proposing or communicating any alteration of a material term of a debt-resolution services agreement or plan to a client or a client’s creditor without first receiving explicit instructions from the client directing the provider to make a specific alteration;

(b) Expressly or impliedly representing that any of its goods or services are “free” if the client will be asked to make any payment in connection with the goods or services, other than a payment made entirely to the client’s creditors. A provider may represent that a consultation or other initial contact is “free” if the consultation or contact is provided with no obligation on the part of the client to make any payment in connection with the consultation or contact;

(c) Expressly or impliedly misrepresenting the effects of a debt-resolution plan on a client’s ability to obtain credit;

(d) Enrolling a debtor in a debt-resolution plan if the debtor’s estimated monthly living expenses and estimated monthly provider payments exceed his or her income. A debtor in this situation may be enrolled in a debt-resolution plan if the debtor is specifically advised not to enroll in a debt-resolution plan because the debtor cannot afford the debtresolution plan payment and the debtor independently states that he or she believes that he or she can afford the debt-resolution plan payment by reducing expenses, obtaining additional income or funds from another source, or otherwise adjusting the budget estimate to make the debt-resolution plan affordable;

(e) Disclosing or using any individual’s private financial and personal information that the provider receives in connection with providing debt-resolution services except in accordance with and as permitted by applicable law, including but not limited to the Gramm-Leach-Bliley Act, 15 U.S.C.A. §§ 6801, et seq.;

(f) Entering into any agreement with any person that contains any standards or criteria under which the person must enroll debtors into a debt-resolution plan;

(g) Using the name or mark of a person other than the provider when communicating with debtors or creditors in connection with the performance of debt-resolution services;

(h) Entering into any agreement with a third party that limits the use of any data reflecting either the provider’s or the third party’s performance of any debt-resolution services;

(i) Expressly or impliedly misrepresenting the purpose of any fee or contribution that is paid by clients;

(j) Failing to clearly and conspicuously disclose the nature and types of services that will be provided under any agreement prior to the consumer’s agreeing to receive such services;

(k) Using logos, symbols, business names, or the like that might represent or imply to consumers an affiliation or association with any government entity;

(l) Failing to maintain and make available upon request to the Division full and complete substantiation for any and all claims and representations made to debtors and in any advertising or promotional materials;

(m) Submitting any false, misleading, or deceptive information to the Division relating to a registration application or renewal application; or (n) Failing to comply with all of the prerequisites for providing debt-resolution services outlined in T.C.A. § 47-18-5809 and any applicable federal laws, regulations, or rules.

History

• Authority: T.C.A. §§ 47-18-5803, 47-18-5808, 47-18-5809, 47-18-5813, 47-18-5814, 47-18-5816, and 47- 18-5817.
• Administrative History: New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.10 EXAMINATIONS, RECORDS, AND REPORTS

(1) Recordkeeping Requirements (a) A licensee shall retain a copy of each signed agreement with any consumer and evidence supporting any amendments or alterations thereof for not less than five (5) years from the date that the consumer either graduates or terminates the debt resolution program.

(b) A licensee shall retain for a period of two (2) years from the date the record is produced, the following records:

1. All substantially different advertising, brochures, telemarketing scripts, promotional materials, and supportive data;

2. The name and last known address of each consumer, the goods or services purchased, the date the goods or services were first provided or the consumer signed an agreement for the provision of the goods or services, and the amount paid by the consumer for the goods or services; and 3. The name, any fictitious name used, the last known address and telephone number, and the job titles for all current and former employees directly involved in sales or solicitations; provided, however, that if the licensee permits fictitious names to be used by employees, each fictitious name must be traceable to only one (1) specific employee.

(c) A licensee shall make and keep current the following books and records relating to its business, at a minimum:

1. Ledgers reflecting all assets and liabilities, income and expense, and capital accounts;

2. Copies of all communications, correspondence, and other records relating to debtresolution services agreements and plans with, about, or on behalf of clients;

3. The personnel or contractor records for any employee, agent, or contractor of the licensee about whom the licensee has received complaints from clients regarding any conduct relative to the licensee’s services;

4. A client information form for each client. If recommendations are to be made to the client, the form shall include such information as is necessary to determine suitability; and 5. All partnership certificates and agreements or, in the case of a corporation, all articles of incorporation, by-laws, minute books, and stock certificate books of the licensee.

(d) Every licensee shall make and keep such accounts, correspondence, and other records as the commissioner prescribes by rule.

(2) All activities, books, accounts, and the records of a provider or a person to which a provider has delegated its obligations under an agreement are subject at any time and from time to time to such reasonable periodic, special, or other examinations, within or without this state, by representatives of the commissioner, as the commissioner deems necessary or appropriate in the public interest or for the protection of clients or to ensure compliance with the Act. The cost of such examination shall be borne by the person examined in the same manner as is provided for insurance companies, except that not more than two (2) such examinations shall be charged to such person in any twelve-month period.

(3) Annual Reports (a) A licensee shall file with the commissioner an annual report, under oath, that includes the following information for the calendar year reporting period:

1. Total number of active consumers in Tennessee;

2. Total number of enrolled consumers in Tennessee; and 3. The total fees collected in Tennessee.

(b) If a licensee does not file an annual report as required by T.C.A. § 47-18-5812 or does not amend a filed report within thirty (30) days after the commissioner provides notice to the licensee that the licensee’s filed annual report requires amendment, then the commissioner may assess civil penalties against the licensee and suspend, revoke, or refuse to renew the licensee’s license.

History

• Authority: T.C.A. §§ 47-18-5808, 47-18-5812, and 47-18-5817.
• Administrative History: New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.11 CIVIL PENALTIES

If the commissioner finds that a debt-resolution services provider has violated a provision of the Act, a rule adopted pursuant to the Act, or any other law applicable to the conduct of a licensee, then the commissioner may order or impose a penalty upon the provider, which must not exceed five thousand dollars ($5,000) per violation, up to a maximum of one hundred thousand dollars ($100,000), plus costs of investigation.

Each day a violation occurs may be considered a separate offense.

History

• Authority: T.C.A. §§ 47-18-5808 and 47-18-5818.
• Administrative History: New rules filed March 17, 2026; effective June 15, 2026.

Tenn. Comp. R. & Regs. 0780-05-19-.12 ACCREDITATION AND CERTIFICATION

(1) Accreditation and Certification: the assistant commissioner may approve an independent accrediting or certifying organization if the assistant commissioner finds, based on the totality of the information provided, that the independent accrediting or certifying organization provides accreditation or certification that is substantially equivalent to the accreditation or certification provided by the independent accrediting or certifying organizations approved by the commissioner. Approval by the assistant commissioner shall be valid for a period of two (2) years from the date of approval, at which time the independent accrediting or certifying organization shall make a new request for approval. An independent accrediting or certifying organization shall provide the following information on a form approved by the assistant commissioner in its request for approval:

(a) The name of the independent accrediting or certifying organization;

(b) The phone number, mailing address and e-mail address—if applicable—of the independent accrediting or certifying organization;

(c) A list of other states that have approved the independent accrediting or certifying organization to provide accreditation or certification of debt resolution services companies or similar organizations;

(d) The number of years that the independent accrediting or certifying organization has offered accreditation or certification for debt resolution services companies or similar organizations;

(e) A complete list of the standards that accredited or certified companies must meet; and (f) Such other information as the assistant commissioner may request in order to determine that the independent accrediting or certifying organization is substantially equivalent to the accreditation or certification provided by the independent accrediting or certifying organizations approved by the commissioner.

History

• Authority: T.C.A. §§ 47-18-5805 and 47-18-5808.
• Administrative History: New rules filed March 17, 2026; effective June 15, 2026.

Chapter 0780-05-20 Professional Bondsmen

Tenn. Comp. R. & Regs. 0780-05-20-.01 PURPOSE

The purpose of these rules is to set specific requirements that should be followed by professional bondsman companies and professional bondsmen engaged in the bail bond business in this state pursuant to Public

Chapter 491 of 2025, codified as Tennessee Code Annotated Section 4-3-1304, 40-11-321, 40-11-101 et seq., as amended.

History

• Authority: T.C.A. § 40-11-321.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 19, 2026; effective June 17, 2026.

Tenn. Comp. R. & Regs. 0780-05-20-.02 DEFINITIONS

For the purpose of these rules, the definitions, terms, and words set forth below shall apply and shall have the following meanings given:

(1) “Board” means the Board of Professional Bondsmen or its assigned designee.

(2) “Director” means the Executive Director of the Board.

(3) “Company,” “Professional Bonding Company” and “Professional Bondsman Company” mean a sole proprietor, partnership, corporation, or other entity engaged for profit in the business of furnishing bail, making bonds or entering into undertakings, as surety, in criminal proceedings, or for the appearance of persons charged with any criminal offense or violation of law or ordinance punishable by fine, imprisonment or death, before any of the courts of this state, including municipal courts or securing the payment of fines, judgments or damages imposed and of costs assessed by those courts upon preliminary or final disposition thereof.

(4) “Court” means any court in this state, including municipal courts, where the appearance of persons charged with any criminal offense or violation of law may be secured upon the issuance of bail.

(5) “Department” means the Tennessee Department of Commerce and Insurance.

(6) “Professional Bondsman” means any person, agent, representative, or employee of a company, or those acting for the company, whether with or without compensation or salary, if the individual engages in any of the undertakings listed in the definition of a company. An individual acting as a bounty hunter without providing any other services as a bail bondsman is not covered by this definition.

(7) “Licensee” means a professional bonding company or a professional bondsman.

History

• Authority: T.C.A. §§ 40-11-301 and 40-11-321.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 19, 2026; effective June 17, 2026.

Tenn. Comp. R. & Regs. 0780-05-20-.03 QUALIFICATIONS, APPLICATIONS, AND FEES

(1) No person, company, partnership, or other entity shall act as a professional bondsman or professional bonding company, directly or indirectly, in this state unless the person, company, partnership, or other entity is licensed by the Board. Any person, company, partnership, or other entity proposing to provide professional bondsman services or services as a professional bonding company in this state shall submit an application on a form provided by the Board. The application must include all information and documents required by the Board and must be truthful and accurate.

(2) The application for a professional bondsman must include:

(a) All information required on the application form provided by the Board;

(b) A completed background check;

(c) Company license number, written notice of company affiliation, or notice of operation as a sole proprietor, if the applicant is affiliated with such a company at the time of the application; and (d) An application fee for a professional bondsman license in the amount of two hundred fifty dollars ($250.00).

(3) The application for a professional bonding company must include:

(a) All information required on the application form provided by the Board;

(b) A completed background check for each owner of the professional bonding company;

(c) A list of all bonding agents or professional bondsmen working on behalf of or under the supervision of the company;

(d) Copies of relevant business filings, if applicable, to establish the professional bonding company’s corporate status; and (e) An application fee for a professional bonding company license set as follows:

1. A professional bonding company license application fee of five hundred dollars ($500.00);

2. Additionally, a fee of one hundred dollars ($100.00) per professional bondsman, professional surety bondsman, and/or bonding agent affiliated with the professional bonding company. This fee shall be non-prorated and non-refundable after thirty (30) days of application if no decision has been reached. Payment of this fee does not alleviate the requirement that each individual professional bondsman and professional surety bondsman be licensed under this chapter.

(4) All applicants for a professional bondsman license or owners of a professional bonding company must be at least eighteen (18) years of age or older at the time of application.

(5) Each background check submitted as part of an application must be completed by an entity approved by the Department to contract with applicants to provide background checks and submit background checks directly to the Board. Background checks must be dated within twelve (12) months of the date of the submitted application.

History

• Authority: T.C.A. §§ 40-11-301 and 40-11-321.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 19, 2026; effective June 17, 2026.

Tenn. Comp. R. & Regs. 0780-05-20-.04 REVIEW OF APPLICATIONS

(1) The Board may deny an application for initial licensure, any renewal thereof, or request to reinstate a license for any violation of Title 40, Chapter 11, or any rule promulgated thereunder.

(2) The Director may review and approve any application for a professional bondsman or professional bonding company license if the applicant meets all requirements for licensure and does not have any disqualifying factors.

(3) In addition to the other subsections in this rule, the Board or Board’s designee may deny an application for initial licensure, any renewal thereof, or request to reinstate a license for any of the following grounds:

(a) The submission of false, inaccurate, incomplete, or misleading information as part of an application for a license;

(b) The denial or removal of a professional bondsman or professional bonding company’s privileges from any court;

(c) The conviction of any felony or misdemeanor that makes a professional bondsman or the owner of a professional bonding company ineligible to engage in the profession as a professional bondsman; or (d) Any other misconduct or unprofessional act in the practice of acting as a professional bondsman.

History

• Authority: T.C.A. §§ 40-11-128, 40-11-301, and 40-11-321.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 19, 2026; effective June 17, 2026.

Tenn. Comp. R. & Regs. 0780-05-20-.05 CHANGE OF INFORMATION

(1) Every professional bondsman and professional bonding company must update the Board within seventy-two hours (72), as required by T.C.A. § 40-11-319, of the following information:

(a) Any known arrest or citation for any misdemeanor or felony charge of the professional bondsman, owner of a professional bonding company, or any bonding agent related to the professional bondsman or professional bonding company;

(b) Any known misdemeanor or felony conviction for the professional bondsman, owner of a professional bonding company, or any bonding agent related to the professional bondsman or professional bonding company;

(c) Any known change in mailing address or contact information of the licensee, changes in ownership of a licensee, or changes in the corporate structure of a licensee; or (d) Any known denial or revocation of bonding privileges of the professional bonding company or any professional bondsman in any court.

(2) A professional bonding company must notify the Board of any change in employment of any professional bondsman, professional surety bondsman, or bonding agent affiliated with the professional bonding company. This notice must be made within thirty (30) days of the change of employment. If a company is submitting notice of a change to its affiliated professional bondsmen, the notice must be accompanied by a one hundred dollar ($100.00) application fee if adding a professional bondsman. All information required by Rule 0780-05-20-.03 shall be provided with this application. The fee for this application shall be non-prorated and not refundable after thirty (30) days of application if no decision has been reached.

(3) Failure to timely notify the Board of any update required by this rule may result in disciplinary action by the Board. Address and name changes, as well as employer information, will be included in the information verified by the Board during an audit.

History

• Authority: T.C.A. §§ 40-11-301, 40-11-319, and 40-11-321.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 19, 2026; effective June 17, 2026.

Tenn. Comp. R. & Regs. 0780-05-20-.06 DISCIPLINARY ACTIONS

(1) The Board may revoke or suspend a license for any violation of Title 40, Chapter 11, or any rule promulgated thereunder.

(2) The Board may assess civil penalties of up to one thousand dollars ($1,000.00) per violation against any professional bondsman, professional bonding company, or any other person for any violation of Title 40, Chapter 11, or any rule promulgated thereunder.

History

• Authority: T.C.A. §§ 40-11-301 and 40-11-321.
• Administrative History: Emergency rules filed December 26, 2025; effective through June 24, 2026. New rules filed March 19, 2026; effective June 17, 2026.

0780-06 Emergency Communications Board

Chapter 0780-06-01 Emergency Communications Board

Tenn. Comp. R. & Regs. 0780-06-01-.01 DEFINITIONS

(1) Unless otherwise stated, as used in this chapter and each subsequent chapter of the Rules of the Emergency Communications Board:

(a) “Act” means T.C.A. title 7, chapter 86, part 3;

(b) “Board” means the emergency communications board created by T.C.A. § 7-86-302;

(c) “Producing party” means an individual or entity that created or is in actual physical possession of information which is provided to the board;

(d) “Proprietary information” means documents or information, in whatever form, which a producing party in good faith deems to contain or constitute trade secrets, confidential research, development, competitive, or commercial information, and which has been specifically designated in writing as such by the producing party. The term shall also include all supporting information such as summaries, notes, extracts, compilations or any other direct or indirect reproduction of such information.

History

• Authority: T.C.A. § 7-86-317.
• Administrative History: Original rule filed June 30, 1999; effective September 13, 1999.

Tenn. Comp. R. & Regs. 0780-06-01-.02 PURPOSE

(1) To assist in the completion of its duties mandated by the Act, the Board may receive operational, technical and financial information from commercial mobile radio service providers, 911 service providers, telecommunications service providers, and other persons or entities. Some of this information may be of a confidential nature, and the entities providing it may desire to protect it from unnecessary disclosure to third parties. The purpose of these rules is to ensure that protection from disclosure.

History

• Authority: T.C.A. § 7-86-317.
• Administrative History: Original rule filed June 30, 1999; effective September 13, 1999.

Tenn. Comp. R. & Regs. 0780-06-01-.03 SUBMISSION OF PROPRIETARY INFORMATION

(1) In order for information submitted to the board to be deemed proprietary information, a producing party must:

(a) Place the term “CONFIDENTIAL” on the cover of any document containing proprietary information and clearly and specifically mark all proprietary information contained within the document.

(b) Provide satisfactory proof that the information is competitive and sensitive and its disclosure could be harmful to the producing party. Such proof should be submitted in the form of an affidavit.

(2) Unless otherwise required by the board, subparagraph 1(b) of this rule shall not apply to a producing party if the information to be submitted concerns costs, revenue, technology, or market and customer data.

(3) For the purposes of rule 0780-06-01-.04(1) the Board shall treat all information submitted in accordance with paragraph (1)(a) of this rule as proprietary information. If after review however, the Board determines the submitted information fails to otherwise qualify under these rules as proprietary information, that information shall not be utilized by the Board but, instead, shall be returned immediately to the producing party.

History

• Authority: T.C.A. § 7-86-317.
• Administrative History: Original rule filed June 30, 1999; effective September 13, 1999.

Tenn. Comp. R. & Regs. 0780-06-01-.04 ACCESS TO PROPRIETARY INFORMATION

(1) Proprietary information shall not be open to the public for inspection, notwithstanding the provisions of Tennessee Code Annotated, Title 10, Chapter 7 or any other provision of law to the contrary.

(2) Proprietary information submitted to the board shall be disclosed only to the following individuals:

(a) Board members;

(b) Members of the board’s staff, legal counsel and the staff of such legal counsel; and (c) On a need to know basis as determined by the board:

1. Consultants and experts employed or engaged by the board; and 2. Members of committees appointed by the board under the authority of T.C.A. §§ 7-86-308 and 309.

(3) Prior to the disclosure of any proprietary information to any of the individuals listed in paragraph two (2) of this rule, such individuals shall execute and place on file with the board, a written acknowledgment that they:

(a) Have read these rules concerning proprietary information submitted to the board;

(b) Agree to be bound by these rules; and (c) Understand that the unauthorized disclosure of proprietary information submitted to the board constitutes a violation of these rules.

(4) All proprietary information submitted to the board shall be used for the sole purpose of implementing the provisions of the Act.

(5) Under no circumstance shall proprietary information be disclosed to or discussed with anyone associated with the marketing of products, goods or services which are in competition with the products, goods or services of a producing party.

History

• Authority: T.C.A. § 7-86-317.
• Administrative History: Original rule filed June 30, 1999; effective September 13, 1999.

Tenn. Comp. R. & Regs. 0780-06-01-.05 STORAGE OF PROPRIETARY INFORMATION

(1) All proprietary information in possession of the board shall be maintained in a secure area and in files marked “CONFIDENTIAL.”

(2) All proprietary information submitted to the board shall be returned to the producing party within sixty (60) days of the conclusion of the board’s use thereof, and the board shall certify that all summaries, notes, extracts, compilations or any direct or indirect reproductions of such information have been destroyed.

History

• Authority: T.C.A. § 7-86-317.
• Administrative History: Original rule filed June 30, 1999; effective September 13, 1999.

Chapter 0780-06-02 Dispatcher Training Regulations

Tenn. Comp. R. & Regs. 0780-06-02-.01 PURPOSE

The purpose of this chapter is to establish minimum requirements for the training of and course of study for each emergency call taker or public safety dispatcher who receives an initial or transferred 911 call from the public in Tennessee. Nothing in these regulations should be construed to limit or restrict any additional training that an agency may elect to provide. Existing public and private training programs are encouraged to establish new curricula and modify existing programs to incorporate these minimum requirements. Such programs are urged to develop meaningful methods for measuring the knowledge, skill and ability gained through their training programs and to offer continuing education programs.

History

• Authority: T.C.A. §§ 7-86-205 and 7-86-306(a)(1).
• Administrative History: Original rule filed October 11, 2005; effective December 25, 2005. Repeal and new rule filed February 1, 2013; effective May 2, 2013.

Tenn. Comp. R. & Regs. 0780-06-02-.02 DEFINITIONS

In this chapter, unless the context requires otherwise, the definitions in T.C.A. § 7-86-103 shall apply.

History

• Authority: T.C.A. §§ 7-86-103, 7-86-205, and 7-86-306(a)(1).
• Administrative History: Original rule filed October 11, 2005; effective December 25, 2005. Repeal and new rule filed February 1, 2013; effective May 2, 2013.

Tenn. Comp. R. & Regs. 0780-06-02-.03 MINIMUM TRAINING REQUIREMENTS

(1) Each emergency call taker or public safety dispatcher who receives an initial or transferred 911 call from the public in Tennessee shall be subject to the following minimum training requirements.

(a) No less than forty (40) hours of supervised on-the-job training; and (b) No less than forty-five (45) hours of public safety communications coursework which is administered or sponsored by an academy, agency, or post-secondary educational institution that:

1. Is capable of supporting a public safety communication student with practical experience on a communication console either through liaison with a Public Safety Communication Center or a fully functional communication console simulator; and 2. Maintains an accurate, comprehensive record system for all phases of the program which shall be available for inspection and shall include the following:

(i) Attendance records;

(ii) Course outlines; and (iii) Lesson plans.

(c) Continuing education of no less than ten (10) additional hours of public safety communications coursework every two (2) years after completion of the initial training.

Two (2) hours must be related to 911 calls involving missing or exploited children.

(2) All emergency call takers or public safety dispatchers subject to T.C.A. § 7-86-205 employed after July 1, 2006 shall have six (6) months from the date of their employment to comply with the provisions of this rule.

History

• Authority: T.C.A. §§ 7-86-205 and 7-86-306(a)(1).
• Administrative History: Original rule filed October 11, 2005; effective December 25, 2005. Repeal and new rule filed February 1, 2013; effective May 2, 2013. Amendments filed June 2, 2021; effective August 31, 2021.

Tenn. Comp. R. & Regs. 0780-06-02-.04 MINIMUM COURSE OF STUDY REQUIREMENTS

(1) The minimum course of study requirements for each emergency call taker or public safety dispatcher who receives an initial or transferred 911 call from the public in Tennessee shall include course work of:

(a) No less than four (4) hours in the roles and responsibilities of 911 or public safety dispatchers, including but not limited to the following subjects:

1. The mission, ethics, and values of emergency communications providers;

2. Professionalism; telecommunicators as part of a public safety team;

3. Basic policies and procedures for telecommunicators and their organizations;

4. Overview of communities and agencies served;

5. Rules and regulations governing emergency communications;

6. Service area geography;

7. Emergency communications disaster plans;

8. Risk management;

9. CPR;

10. News/media relations;

11. Responder safety.

(b) No less than two (2) hours in legal concepts and principles, including but not limited to liability, applicable to the operation of:

1. Law enforcement agencies;

2. Fire/rescue agencies;

3. Emergency medical services (“EMS”) agencies;

4. Public safety communications agencies.

(c) No less than five (5) hours in interpersonal communication skills, including but not limited to the following areas:

1. Communication techniques and information processing, such as listening, hearing, diction, empathy, perception, and intuitiveness;

2. Customer service, including but not limited to discrimination and harassment issues;

3. Diversity issues relating to effective emergency communications, including but not limited to race, nationality, age, speech/hearing impairment, non-English speaking callers, and demographics.

(d) No less than four (4) hours in emergency communications technology, including but not limited to the following areas:

1. Operation of telephones, including but not limited to wireline, portable, wireless (including cellular and personal communication service (“PCS”)), and text telephones for the speech/hearing impaired;

2. Basic and Enhanced 911;

3. Automatic Location Identification (“ALI”) and Automatic Number Identification (“ANI”);

4. Call tracing and records retrieval procedures;

5. Computerized mapping;

6. Logging recorders;

7. Computer aided dispatch (“CAD”) systems;

8. Wireless, Phase I and II;

9. Voice Over Internet Protocol.

(e) No less than eleven (11) hours in communication techniques and call processing, including but not limited to the following areas:

1. Public relations;

2. Call receipt;

3. Interviewing;

4. Controlling the call;

5. Managing high risk/difficult calls, including but not limited to domestic violence;

6. Managing differing call categories, including law enforcement, fire/rescue, EMS, HAZMAT, or acts of terrorism;

7. Managing differing call types and events, including in-progress, just-occurred, late, events requiring specific instructions, notifications;

8. The importance of obtaining proper information, including location, nature, injuries, weapons, chemicals, etc.;

9. Telematics;

10. Homeland Security issues, including but not limited to:

(i) Protocols and procedures (for example, call profiling, as in when to notify the FBI);

(ii) NIMS (“National Incident Management System”), if applicable; and (iii) NORAD (“North American Aerospace Defense”) call procedures and protocols (dealing with emergency calls from aircraft).

(f) No less than twelve (12) hours in radio communications and dispatch techniques, including but not limited to the following areas:

1. Procedures and protocols;

2. Radio discipline;

3. Rules of the Federal Communications Commission (“FCC”) related to radios;

4. Radio coverage;

5. Consoles;

6. Responder safety.

(g) No less than two (2) hours in stress management, including but not limited to the following areas:

1. Causes;

2. Strategies for dealing with stress;

3. Peer support;

4. Critical incident stress debriefing.

(h) No less than five (5) hours in 911 calls involving missing or exploited children.

(2) Course work shall include practical exercises duplicating communication center practices in which the student performs the subject matter being taught.

(3) Course work shall include testing.

History

• Authority: T.C.A. §§ 7-86-205 and 7-86-306(a)(1).
• Administrative History: Original rule filed October 11, 2005; effective December 25, 2005. Repeal and new rule filed February 1, 2013; effective May 2, 2013. Amendments filed June 2, 2021; effective August 31, 2021.

Tenn. Comp. R. & Regs. 0780-06-02-.05 MINIMUM SUPERVISED ON-THE-JOB TRAINING REQUIREMENTS

(1) The minimum on-the-job training/course of study requirements for each 911 or public safety dispatcher who receives an initial or transferred 911 call from the public in Tennessee shall include a period of supervised instruction of no less than forty (40) hours related to the following:

(a) Agency/department policies and procedures (including a written handbook containing such policies and procedures);

(b) Agency/department geographical area;

(c) Agency/department telephone system and equipment operations;

(d) Structure of local government and agencies being served;

(e) Local ordinances and requirements;

(f) Governmental and private resources;

(g) National Crime Information Center data and records, if applicable.

History

• Authority: T.C.A. §§ 7-86-205 and 7-86-306(a)(1).
• Administrative History: Original rule filed October 11, 2005; effective December 25, 2005. Repeal and new rule filed February 1, 2013; effective May 2, 2013.

Tenn. Comp. R. & Regs. 0780-06-02-.06 TELECOMMUNICATOR CARDIOPULMONARY RESUSCITATION

(1) Every emergency call taker or public safety dispatcher who receives an initial or transferred 911 call from the public in Tennessee shall have successfully completed a training course in emergency cardiovascular care guidelines for telecommunicator cardiopulmonary resuscitation (T-CPR) pursuant to T.C.A. § 7-86-205(a)(2).

(2) T-CPR training shall identify common barriers to assessing patient consciousness and breathing status during a call and provide strategies to overcome those barriers. Training shall define Out-of-Hospital Cardiac Arrest (OHCA), its signs and symptoms, and barriers to recognition. Training shall also ensure that telecommunicators can provide instructions for cardiac arrest victims via TTY/TDD and Next Generation 911 technologies, such as texting.

(3) Any hours of T-CPR training or course work may count towards satisfying the Minimum Training Requirements from Rule 0780-06-02-.03 or the Minimum Course of Study Requirements from Rule 0780-06-02-.04.

(4) (a) Every emergency communications district (ECD) shall establish and administer an ongoing quality assurance program to measure and improve T-CPR adherence by each emergency call taker or public safety dispatcher in the ECD who receives an initial or transferred 911 call from the public in Tennessee. At a minimum, the program shall:

1. Verify that each emergency call taker or public safety dispatcher in the ECD who receives an initial or transferred 911 call at any point has successfully completed a T-CPR program;

2. Monitor emergency call taker and public safety dispatcher adherence to and performance of T-CPR training requirements;

3. Provide any corrective measures or actions taken to improve the provision of OHCA protocols and T-CPR instructions; and 4. Include defined metrics being used to assess quality assurance of T-CPR, such as:

(i) The total number of recognizable OHCAs;

(ii) The median time interval between 911 call connect and OHCA recognition; and (iii) The median time interval between 911 call connect and the first telecommunicator directed compressions.

(b) By April 1 of each year, each ECD shall submit a copy of the current T-CPR quality assurance program and a report to the TECB on the results of the program from the previous calendar year.

History

• Authority: T.C.A. §§ 7-86-205 and 7-86-306(a)(1).
• Administrative History: New rule filed June 2, 2021; effective August 31, 2021.

Tenn. Comp. R. & Regs. 0780-06-02-.07 WAIVER

In the event of a natural or manmade disaster which renders local emergency communications unable to remain operational without the assistance of individuals who have not completed the requirements included herein, said requirements are waived.

History

• Authority: T.C.A. §§ 7-86-205 and 7-86-306(a)(1).
• Administrative History: Original rule filed October 11, 2005; effective December 25, 2005. Repeal and new rule filed February 1, 2013; effective May 2, 2013. Rule was originally numbered 0780-06-02-.06 but was renumbered 0780-06-02-.07 with the introduction of a new rule 0780-06-02-.06 filed June 2, 2021; effective August 31, 2021.

Chapter 0780-06-03 Service Provider Contact Information

Tenn. Comp. R. & Regs. 0780-06-03-.01 PURPOSE

The purpose of this chapter is to require all wireless telecommunications service providers authorized to do business in this state to submit contact information in order to facilitate requests from law enforcement agencies for call location information in accordance with T.C.A. § 38-1-602(b).

History

• Authority: T.C.A. §§ 38-1-602 and 38-1-604.
• Administrative History: Original rule filed September 29, 2015; effective December 28, 2015.

Tenn. Comp. R. & Regs. 0780-06-03-.02 DEFINITIONS

(1) Unless otherwise stated, as used in this chapter and each subsequent chapter of the Rules of the Emergency Communications Board:

(a) “Act” means T.C.A. title 38, chapter 1, part 6;

(b) “Board” means the Emergency Communications Board created by T.C.A. § 7-86-302;

(c) “Contact information” means a company’s:

1. Legal name;

2. Brand of wireless product;

3. National Emergency Number Association Identification Number; and 4. The telephone number to be used to obtain subscriber location information twentyfour (24) hours a day, seven (7) days a week.

(d) “Wireless telecommunications service provider" means a provider of “commercial mobile radio service” as that term is defined by 47 C.F.R. § 20.3;

(e) “Public safety answering point” means a facility that has been designated to receive 911 calls and route them to emergency services personnel pursuant to T.C.A. § 7-86-107.

History

• Authority: T.C.A. §§ 38-1-602 and 38-1-604.
• Administrative History: Original rule filed September 29, 2015; effective December 28, 2015. December, 2015 2

Tenn. Comp. R. & Regs. 0780-06-03-.03 WIRELESS TELECOMMUNICATIONS SERVICE PROVIDER CONTACT

INFORMATION.

(1) By no later than December 1, 2015, each wireless telecommunications service provider authorized to do business in this state shall submit its contact information to the board for the

purpose of facilitating requests from law enforcement agencies for call location information in accordance with T.C.A. § 38-1-602(b).

(2) Within thirty (30) days of being authorized to do business in Tennessee, a wireless telecommunications service provider shall submit its contact information to the board for the

purpose of facilitating requests from law enforcement agencies for call location information in accordance with T.C.A. § 38-1-602(b).

(3) Each wireless telecommunications service provider shall submit updated contact information to the board no later than seven (7) days following any changes in the contact information previously provided to the board pursuant to 0780-06-03-.03(1) or (2).

(4) The board shall maintain a listing of wireless telecommunications service provider contact information on its website and shall disseminate the listing to all public safety answering points on a quarterly basis.

History

• Authority: T.C.A. §§ 38-1-602 and 38-1-602.
• Administrative History: Original rule filed September 29, 2015; effective December 28, 2015.

Chapter 0780-06-04 Repealed

Tenn. Comp. R. & Regs. 0780-06-04-.01 REPEALED

History

• Authority: T.C.A. §§ 7-86-303 and 7-86-306.
• Administrative History: Original rules filed January 11, 2016; effective April 10, 2016. Repeal filed May 2, 2025; effective July 31, 2025.

Tenn. Comp. R. & Regs. 0780-06-04-.04 REPEALED

History

• Authority: T.C.A. §§ 7-86-303 and 7-86-306.
• Administrative History: Original rules filed January 11, 2016; effective April 10, 2016. Repeal filed May 2, 2025; effective July 31, 2025.

Tenn. Comp. R. & Regs. 0780-06-04-.02 REPEALED

History

• Authority: T.C.A. §§ 7-86-303 and 7-86-306.
• Administrative History: Original rules filed January 11, 2016; effective April 10, 2016. Repeal filed May 2, 2025; effective July 31, 2025.

Tenn. Comp. R. & Regs. 0780-06-04-.03 REPEALED

History

• Authority: T.C.A. §§ 7-86-303 and 7-86-306.
• Administrative History: Original rules filed January 11, 2016; effective April 10, 2016. Repeal filed May 2, 2025; effective July 31, 2025.

Chapter 0780-06-05 Board Meetings

Tenn. Comp. R. & Regs. 0780-06-05-.01 PURPOSE

The purpose of this chapter is to set forth the specific board meeting procedures to ensure transparency of board actions regarding special distributions of board funds.

History

• Authority: T.C.A. §§ 7-86-302, 7-86-303, and 7-86-306(a)(1).
• Administrative History: Original rules filed August 28, 2018; effective November 26, 2018.

Tenn. Comp. R. & Regs. 0780-06-05-.02 DEFINITIONS

(1) In this chapter, unless the context requires otherwise, the definitions in Tenn. Code Ann. § 7- 86-103 shall apply.

(2) Unless otherwise stated, as used in this chapter and each subsequent chapter of the Rules of the Emergency Communications Board, “special distribution” means a one-time, nonrecurring distribution of funds authorized by the board and made to all districts that is not a base amount distribution, a T.C.A. § 7-86-130 distribution, or a reimbursement for expenditures or payment of obligations incurred to implement, operate, maintain, or enhance statewide wireless enhanced 911 service.

History

• Authority: T.C.A. §§ 7-86-128, 7-86-130, 7-86-303, and 7-86-306(a)(1).
• Administrative History: Original rules filed August 28, 2018; effective November 26, 2018. Amendments filed May 2, 2025; effective July 31, 2025.

Tenn. Comp. R. & Regs. 0780-06-05-.03 SPECIAL DISTRIBUTIONS

(1) The board may authorize special distributions to all ECDs from the 911 Emergency Communications Fund.

(2) Any such special distributions authorized by the board, regardless of the total dollar amount, shall be allocated to the ECDs in the same manner as base amount distribution pursuant to Tenn. Code Ann. § 7-86-303(e) in that each district shall receive a proportionate share of the authorized special distribution in an amount equal to the district’s proportionate share of the annual base amount distribution. For example, if a district receives 1% of the total base funding, that district shall receive 1% of the special distribution.

(3) The board shall provide public notice indicating the board’s intent to authorize a special distribution. The public notice shall:

(a) Be provided to all ECDs and published on the board’s website no less than thirty (30) days prior to the next scheduled meeting of the board; and (b) Contain an appended table, for reference, containing the distributions each ECD would receive under three (3) different total amounts of special distributions.

History

• Authority: T.C.A. §§ 7-86-128, 7-86-130, 7-86-302, 7-86-303, and 7-86-306(a)(1).
• Administrative History: Original rules filed August 28, 2018; effective November 26, 2018.

0780-07 Office of the Commissioner

Chapter 0780-07-01 Office of the Commissioner

Tenn. Comp. R. & Regs. 0780-07-01-.01 INTERNET CONVENIENCE FEE

(1) If the Department of Commerce and Insurance or any board, commission or agency attached thereto offers the issuance or renewal of a license, registration or permit via the Internet, an applicant for licensure or renewal may pay the fee for issuance or renewal of such license, registration or permit via the Internet.

(2) In order to defray the additional costs associated with processing an application for the issuance or renewal of a license, registration or permit via the Internet, the applicant shall pay, in addition to the applicable licensure, registration, permit or renewal fee, a convenience fee in an amount not to exceed $3.50 plus an amount not to exceed two percent (2%) of the cost of the applicable license, registration, permit or renewal fee.

History

• Authority: T.C.A. § 56-1-213.
• Administrative History: Original rule filed January 19, 2006; effective April 4, 2006.

Chapter 0780-07-02 Rules and Regulations for Access to Public Records

Tenn. Comp. R. & Regs. 0780-07-02-.01 PURPOSE

(1) The purpose of this chapter is to establish a procedure for providing economical and efficient access to public records as required under the Tennessee Public Records Act (“TPRA”), T.C.A. §§ 10-7-501 et seq.

(2) The TPRA provides that all state, county and municipal records shall, at all times during business hours, be open for personal inspection by any citizen of the state of Tennessee.

Those in charge of the records shall not refuse such a right of inspection to any citizen of the state of Tennessee, unless otherwise provided by state law. Accordingly, the public records of the Tennessee Department of Commerce and Insurance (“TDCI”) are presumed to be open for inspection unless otherwise provided by law.

(3) Employees of the department, through the Public Records Request Coordinator (“PRRC”) identified in these rules, shall timely and efficiently provide access and assistance to persons requesting to inspect or receive copies of public records. No provisions of this rule shall be used to hinder access to non-confidential public records. However, the integrity and organization of public records as well as the efficient and safe operation of the department shall be protected as provided by law.

History

• Authority: T.C.A. §§ 10-7-501, et seq. and 2008 Public Chapter 1179.
• Administrative History: Original rule filed November 22, 2010; effective February 20, 2011. Amendments filed October 23, 2020; effective January 21, 2021.

Tenn. Comp. R. & Regs. 0780-07-02-.02 APPLICATION

These rules apply to all agencies, divisions, administrative offices, boards, commissions, programs, committees or other governmental entities within and administratively attached to TDCI.

History

• Authority: T.C.A. §§ 4-3-301, et seq. and 10-7-501, et seq.; and 2008 Public Chapter 1179.
• Administrative History: Original rule filed November 22, 2010; effective February 20, 2011. Amendments filed October 23, 2020; effective January 21, 2021.

Tenn. Comp. R. & Regs. 0780-07-02-.03 DEFINITIONS

As used in this chapter, unless the context otherwise requires:

(1) “Assistant Commissioner” means an assistant commissioner of TDCI, or an assistant commissioner’s designee.

(2) “Commissioner” means the commissioner of TDCI or the commissioner’s designee. If the commissioner or the commissioner’s designee is absent and unable to act or the office of the commissioner is vacant, a deputy commissioner.

(3) “Confidential Record” means any departmental record that is considered confidential or privileged under federal or state law, including, without limitation and without waiving any privilege or any right to confidentiality available under federal or state law, as follows:

(a) Any record or portion of any record that is not subject to public inspection or is defined as confidential under the TPRA;

(b) Any record or portion of any record that is otherwise protected as confidential or privileged under any federal or state law or regulation or pursuant to any court order;

(c) Any record that is protected under the attorney-client privilege;

(d) Any record that is protected under the attorney work product doctrine; and (e) Any record that is protected under any other statutory or common law privilege.

(4) “Department” means the Tennessee Department of Commerce and Insurance (“TDCI”).

(5) “Deputy Commissioner” means a deputy commissioner of TDCI, or a deputy commissioner’s designee.

(6) “Office of Open Records Counsel” or “OORC” means the office established by T.C.A. §§ 8-4- 601 et seq., within the Tennessee Comptroller of the Treasury.

(7) “Public records” means all documents, papers, letters, maps, books, photographs, microfilms, electronic data processing files and output, films, sound recordings, or other material, regardless of physical form or characteristics, made or received pursuant to law or in connection with the transaction of official business by the department. Public records do not include the device or equipment that may have been used to create or store a public record, including, but not limited to, a cell phone, computer, or other electronic or mechanical device or equipment. See T.C.A. § 10-7-503.

(8) “Public Records Request Coordinator” or “PRRC” means the individual who has, or individuals who have, the responsibility to ensure public records requests are routed to the appropriate records custodian and are fulfilled in accordance with the TPRA, or the designee of the PRRC. The PRRC shall be the individual(s) designated as Associate General Counsel for Administration.

(9) “Records Custodian” means the official or employee lawfully responsible for the direct custody and care of public records. The records custodian is not necessarily the original preparer or receiver of the record.

(10) “Redacted record” means a public record from which confidential information is removed or made obscure prior to release or inspection.

(11) “Request form” means the most current records request form developed by the OORC at the time of the request and may include the form as adopted by TDCI.

(12) “Requestor” means a Tennessee citizen requesting access to public records, whether it is for inspection or duplication.

(13) “Response form” means the most current records response form developed by the OORC at the time of the request and may include the form as adopted by TDCI.

(14) “TPRA” means the Tennessee Public Records Act, T.C.A. §§ 10-7-501 et seq.

History

• Authority: T.C.A. §§ 8-4-601; 10-7-501, et seq.; and 2008 Public Chapter 1179.
• Administrative History: Original rule filed November 22, 2010; effective February 20, 2011. Amendments filed October 23, 2020; effective January 21, 2021.

Tenn. Comp. R. & Regs. 0780-07-02-.04 MAKING A PUBLIC RECORDS REQUEST

(1) All public records requests shall be made to the PRRC in order to ensure public records requests made pursuant to the TPRA are routed to the records custodian and fulfilled in a timely manner. All public records requests by or on behalf of news media organizations shall be made to the department’s communications director.

(2) Proof of Tennessee citizenship is required as a condition to inspect or receive copies of public records as authorized by T.C.A. § 10-7-503.

(a) Proof of citizenship may be furnished by the presentation of a valid Tennessee driver’s license, other state-issued photographic identification, or an alternate form of identification acceptable to the PRRC that includes the requestor’s Tennessee address.

(b) Notwithstanding lack of Tennessee citizenship, records may be released or made available to any complainant or respondent seeking information contained within the complaint file(s) to which complainant or respondent is a party, any state or federal agency conducting official business, or any person to whom the release of the records is determined to be in the best interests of the state of Tennessee by the commissioner, deputy commissioner, or assistant commissioner.

(3) Requests for Inspection (a) Requests for inspection may be communicated to the PRRC in person or via telephone, mail, fax, or email. A written request for inspection shall not be required.

The PRRC may request written verification of a verbal request in order to facilitate recordkeeping and ensure accuracy in fulfilling the request; however, the PRRC shall not require written verification unless otherwise authorized by law. Requestors shall ensure the department has sufficient and accurate information to fulfill any request for inspection.

1. The Department’s contact information for making requests for inspection is as follows: 500 James Robertson Parkway Davy Crockett Tower Nashville, TN 37243 Telephone: (615) 741-3388 Fax: (615) 741-4000 Email: TDCIopen.Records@tn.gov (b) The PRRC may request a mailing and/or email address from the requestor for the

purpose of providing any responsive written communication required under the TPRA.

Requestors shall reasonably provide such contact information.

(c) Pursuant to T.C.A. § 10-7-503, if a requestor makes two (2) or more requests to inspect public records within a six (6) month period and, for each request, the requestor fai ls to inspect the public records within fifteen (15) business days of receiving notification that the record is available for inspection, then the department is not required to comply with any subsequent public records request from the requestor for a period of six (6) months from the date of the second request to view the public record unless the department determines the failure to inspect the public records was for good cause.

(4) Requests for Copies (a) Requests for copies, or requests for inspection and copies, shall be made in writing using the request form and submitted to the PRRC in person or via mail, fax, or email.

If the commissioner, deputy commissioner, or assistant commissioner determines that completion of the request form creates an undue burden on the requestor, then a clear, documented email or other substitute writing may be sufficient for the request.

1. The Department’s contact information for making requests for copies is as follows: 500 James Robertson Parkway Davy Crockett Tower Nashville, TN 37243 Telephone: (615) 741-3388 Fax: (615) 741-4000 Email: TDCIopen.Records@tn.gov (b) Requests for copies of records during or following an inspection of records shall be made in writing, and the department shall be notified of the number of copies that the requestor wishes to make. A requestor may not use the requestor’s personal equipment to make copies until a written request has been submitted and authorization granted by the PRRC.

(5) Standing public records requests shall not be permitted. Requestors shall submit a new request for inspection or copies of records each time the requestor would like to inspect or receive copies of responsive records.

History

• Authority: T.C.A. §§ 10-7-501, et seq.
• Administrative History: Original rule filed October 23, 2020; effective January 21, 2021.

Tenn. Comp. R. & Regs. 0780-07-02-.05 RESPONDING TO A PUBLIC RECORDS REQUEST

(1) Public Records Request Coordinator (a) Upon receipt of a public records request, the PRRC shall:

1. Review the request and make an initial determination of the following:

(i) Whether the requestor provided evidence of Tennessee citizenship;

(ii) Whether the records requested are described with sufficient specificity to identify them; and (iii) Whether the department is the custodian of the requested records.

2. Acknowledge receipt of the request and take any of the following actions as appropriate:

(i) Advise the requestor of the need for any of the following documentation that was not provided with the initial request:

(I) Proof of Tennessee citizenship; or (II) Request form(s) for copies.

(ii) Deny the request in writing, using the response form, if one of the following applies:

(I) Requestor is not, or did not present proof that requestor is, a Tennessee citizen;

(II) Request lacks sufficient detail or is too broad in scope to identify the specific records to be provided for inspection or copying. If appropriate, the PRRC should contact the requestor to see if the request can be narrowed;

(III) The record is not subject to disclosure under the TPRA. The PRRC must provide the specific reference in the denial;

(IV) The record does not exist; or (V) The department is not the custodian of the requested records. If the records relate to another governmental entity and the PRRC is aware of the correct entity, the PRRC should advise the requestor of the correct entity and the PRRC for that entity, if known.

(iii) Forward the request to the appropriate records custodian within TDCI.

(2) Records Custodian (a) Upon receiving a public records request from the PRRC, the records custodian shall promptly make the requested records available, if not specifically exempt from disclosure.

(b) If it is not practicable for the records custodian to promptly make the requested records available because additional time is necessary to determine whether the requested records exist; to search for, retrieve, or otherwise gain access to the records; to determine whether the records are open; to redact records; or for similar reasons, then the records custodian shall, within seven (7) business days from the records custodian’s receipt of the request, send the requestor a response form via email, fax or U.S. mail. The response form shall include a statement of the time reasonably necessary to produce the records. If the records still cannot be produced within the time frame provided in the initial response form, the records custodian should send another response form or letter, whichever is appropriate, indicating when the requestor can expect to receive the records.

(c) If the records custodian denies a public records request, he or she shall deny the request in writing.

(d) If the records custodian determines the production of records should be segmented because the records request is for a large volume of records or additional time is necessary to prepare the records for access, the records custodian shall notify the requestor that production of the records will be in segments and that a records production schedule will be provided as expeditiously as practicable. If appropriate, the records custodian should contact the requestor to see if the request can be narrowed.

(e) If the records custodian discovers that records responsive to a records request were omitted, the records custodian shall contact the requestor concerning the omission and produce the records as quickly as practicable.

(3) Redaction (a) If a record contains confidential information or information that is not open for public inspection, the records custodian shall redact the information prior to providing access for an inspection or copies. If questions arise concerning redaction, the records custodian should coordinate with counsel or other appropriate parties regarding review and redaction of records. The records custodian and the PRRC may also consult with the OORC or with the Office of Attorney General and Reporter.

(b) When a redacted record is provided, the records custodian shall provide the requestor with a general basis for redaction. The basis given for redaction shall not disclose confidential information. The records custodian is not required to produce a privilege log or similar document.

History

• Authority: T.C.A. §§ 10-7-501, et seq.
• Administrative History: Original rule filed October 23, 2020; effective January 21, 2021.

Tenn. Comp. R. & Regs. 0780-07-02-.06 INSPECTION OF RECORDS

(1) The records custodian shall promptly respond to a public records request for inspection in the most economic and efficient manner practicable.

(2) There is no charge for inspection of public records.

(3) Location and Time of Inspection (a) The records custodian shall specify the location for the inspection within the offices of the department.

(b) The records custodian may require an appointment for inspection or may require inspection of records at an alternative location under reasonable circumstances.

(4) The records custodian or a designated employee of the department shall remain with the responsive records at all times and take reasonable precautions to ensure that the integrity of public records is maintained during an inspection.

(5) If, after viewing the records, a requestor wishes to obtain copies, costs will be calculated based on the copy, labor, and other charges accrued for the entire request. If a requestor seeks only a portion of the documents produced, charges will be calculated by taking the total costs of the records requested for inspection and dividing that cost by the total number of pages produced to create a per page rate. Separate requests for copies of documents that were included in a single inspection request shall be aggregated, within a reasonable time frame, to determine the cost of those copies.

(a) A requestor may make copies of records with the requestor’s personal equipment.

However, prior to doing so, the requestor shall make a written request for copies as provided in Rule 0780-07-02-.04 and certify in writing that the department produced the records as initially requested. Any copies made with the requestor’s personal equipment, including any in excess of the originally requested amount, shall be identified by the requestor and charged to the requestor by invoice. A requestor who fails to pay for costs of records properly produced pursuant to a request may be referred for collection of the debt owed.

(b) Limitations on use of personal equipment:

1. Any video or images captured using a cell phone or other electronic recording shall be limited to the records requested for inspection.

2. The requestor shall not connect any personal equipment to a department computer or electronic device, including but not limited to, wireless technology or a portable storage device to make copies of public records.

(6) If a records request is determined by the PRRC or records custodian to be so large that production of all of the requested records cannot be provided for an inspection at a single time, then the records may be produced in segments. The requestor shall be notified in writing when the next segment of records is expected to be available. Written notice shall also be provided to the requestor if there is any change regarding the date of production.

Costs associated with any records produced as part of such a rolling production schedule shall be paid as set out in these rules for the segment of the records produced and no additional records will be produced until payment has been received for the copies received.

History

• Authority: T.C.A. §§ 10-7-501, et seq.
• Administrative History: Original rule filed October 23, 2020; effective January 21, 2021.

Tenn. Comp. R. & Regs. 0780-07-02-.07 COPIES OF RECORDS

(1) The records custodian shall promptly respond to a public records request for copies in the most economic and efficient manner practicable.

(2) Upon payment of costs, physical copies may be made available for pickup at a location specified by the records custodian or mailed to the requestor’s address.

(3) The records custodian may provide electronic copies via email, portable storage device, or other electronic medium upon payment for costs.

(4) A requestor may submit a written request as provided in Rule 0780-07-02-.04 to make copies of records with the requestor’s personal equipment, which may be granted if practicable. If the request is submitted as an amendment to a prior request for copies, the requestor shall certify in writing that the department produced the records as initially requested, if applicable.

All costs reasonably accrued for the production of the copies as originally requested shall be paid prior to the requestor making copies of records under this paragraph; such costs shall include, but not be limited to any costs for labor, paper copies, or other costs accrued.

(a) Limitations on use of personal equipment:

1. Any video or images captured using a cell phone or other electronic recording shall be limited to the records requested for copying.

2. The requestor shall not connect any personal equipment to a department computer or electronic device, including but not limited to, wireless technology or a portable storage device to make copies of public records.

(5) A requestor who fails to pay for costs associated with records properly produced pursuant to a request may be referred for collection of the debt owed.

(6) If a records request is determined by the PRRC or records custodian to be so large that production of all of the requested records cannot be produced as copies at a single time, then the records may be produced in segments. The requestor shall be notified in writing when the next segment of the records is expected to be available. Written notice shall also be provided to the requestor if there is any change regarding the date of production. Costs for copies produced as part of such a rolling production schedule shall be paid as set out in these rules for the segment of the records produced and no additional records will be produced until payment has been made for the copies received.

History

• Authority: T.C.A. §§ 10-7-501, et seq.
• Administrative History: Original rule filed October 23, 2020; effective January 21, 2021.

Tenn. Comp. R. & Regs. 0780-07-02-.08 FEES AND PAYMENTS

(1) General (a) Fees and charges for copies of public records should not be used to hinder access to public records.

(b) Prior to producing copies of records, the records custodian shall provide the requestor with an estimate of the charges to be assessed for production and labor. The estimate shall include the job title, hourly rate, and time estimate for each of the individuals expected to be involved in producing the records. The records custodian shall not be required to identify the specific tasks to be performed by the individuals for the estimate or invoice.

(c) Waiver 1. When the total costs of production, including the cost for copies, labor, and delivery, do not exceed fifty dollars ($50.00), the fees shall be waived, unless otherwise required by statute.

2. Requests for fee waivers exceeding fifty dollars ($50.00) or fee reductions shall be presented to the commissioner. Any waiver or reduction in fees is in the sole discretion of the commissioner, is not subject to judicial review, and does not establish any precedent.

3. Fees associated with aggregated records requests shall not be waived unless the fees collectively amount to less than fifty dollars ($50.00).

(2) Production costs for copies are determined by the Schedule of Reasonable Charges established by the OORC.

(a) Other costs reasonably necessary to produce the records include, but are not limited to:

1. Archive retrieval costs;

2. Delivery cost of records;

3. Computer programs; or 4. If an outside vendor is used, the actual costs assessed by the vendor.

(3) Labor Costs (a) The requestor shall pay labor costs for the production of copies at the hourly wage of the employee(s) reasonably necessary to produce the requested information after one (1) hour of work has been done by the employees in identifying, producing, reviewing, and redacting the requested material. The first hour of labor costs shall not be deducted for purposes of calculating fee waivers for costs that do not exceed fifty dolla rs ($50.00).

(b) The one (1) hour waiver applies to the highest paid employee. If the highest paid employee spends less than one (1) hour on the request, then the balance of the hour shall roll to the next highest paid employee involved in the request until one (1) full hour of credit has been given.

(4) Payment of Costs (a) Copies of records will not be released until such time as payment has been made, except as approved by the commissioner.

(b) Forms of payment include any form of payment accepted by the department at the time of any request. The department has the discretion to determine the acceptable forms of payment for costs.

(c) Checks must be made payable to the department and presented to the records custodian or PRRC.

(5) Pursuant to T. C.A. § 10-7-503, if the department receives a request for copies of a public record and the requestor fails to pay to the department the cost for the production of such copies after copies have been produced, the department is not required to comply with any public records request from the requestor until payment for such copies has been received provided that the requestor was given an estimated cost for producing the copies prior to the production of the copies and agreed to pay the estimated cost for such copies.

(6) If the costs for copies exceeds fifty dollars ($50.00), the requestor shall pay the estimated amount in advance of processing and shall be invoiced for or refunded the difference between the estimated and actual costs, as appropriate.

(7) If the records are to be produced as part of a rolling production as set out in Rule 0780-07- 02-.07, then the costs for purposes of this paragraph shall be the costs of each segment of records. The requestor shall pay for each segment of records produced prior to the department being obligated to produce the next segment of records. If the costs for requested copies exceed fifty dollars ($50.00), the requestor shall pay the estimated amount in advance and shall be invoiced for or refunded the difference of the estimated and actual costs, as appropriate.

(8) Aggregation of Frequent and Multiple Requests (a) The department will aggregate record requests in accordance with the Frequent and Multiple Request Policy promulgated by the OORC when more than (4) requests are received within a calendar month either from a single individual or a group of individuals determined to be working in concert.

(b) Records requests will be aggregated at the department level.

(c) The PRRC is responsible for making the determination that a group of individuals is working in concert. The PRRC or the records custodian must inform the individuals that they have been deemed to be working in concert and that they have the right to appeal the decision to the OORC.

History

• Authority: T.C.A. §§ 10-7-501, et seq.
• Administrative History: Original rule filed October 23, 2020; effective January 21, 2021.

0780-08 Division of Consumer Affairs

Chapter 0780-08-01 Repealed (Transferred to 0780-05-18)

Tenn. Comp. R. & Regs. 0780-08-01-.01 REPEALED

History

• Authority: T.C.A. §§ 47-18-5501, 47-18-5532, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.02 REPEALED

History

• Authority: T.C.A. § 47-18-5501 and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.03 REPEALED

History

• Authority: T.C.A. § 47-18-5532 and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.04 REPEALED

History

• Authority: T.C.A. §§ 47-18-5502, 47-18-5532, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.05 REPEALED

History

• Authority: T.C.A. §§ 47-18-5501, 47-18-5505, 47-18-5506, 47-18-5532, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.06 REPEALED

History

• Authority: T.C.A. §§ 47-18-5502, 47-18-5503, 47-18-5532, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.07 REPEALED

History

• Authority: T.C.A. §§ 47-18-5504, 47-18-5505, 47-18-5506, 47-18-5507, 47-18-5508, 47-18-5509, 47-18- 5510, 47-18-5513, 47-18-5514, 47-18-5532, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.08 REPEALED

History

• Authority: T.C.A. §§ 47-18-5504, 47-18-5506, 47-18-5511, 47-18-5513, 47-18-5514, 47-18-5532, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.09 REPEALED

History

• Authority: T.C.A. §§ 47-18-5505, 47-18-5511, 47-18-5532, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.10 REPEALED

History

• Authority: T.C.A. §§ 47-18-5507, 47-18-5522, 47-18-5529, 47-18-5532, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.11 REPEALED

History

• Authority: T.C.A. §§ 47-18-104, 47-18-5515, 47-18-5517, 47-18-5528, 47-18-5532, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.12 REPEALED

History

• Authority: T.C.A. §§ 47-18-5506, 47-18-5512, 47-18-5522, 47-18-5532, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Tenn. Comp. R. & Regs. 0780-08-01-.13 REPEALED

History

• Authority: T.C.A. §§ 47-18-5532, 47-18-5541, and Public Chapter 339 (2015).
• Administrative History: Original rule filed May 16, 2014; effective August 14, 2014. Repeal filed October 28, 2016; effective January 26, 2017. Rule renumbered 0780-05-18.

Chapter 0780-08-02 Rules and Regulations for Lighters

Tenn. Comp. R. & Regs. 0780-08-02-.01 DEFINITION

(1) Collectable lighter means a lighter that has vintage, antique, collector, or limited edition quality in accordance with the production guidelines of a brand name lighter manufacturer. A collectable lighter is not prohibited for sale if it is made before January 1, 1980 or is considered vintage, antique, collector, or limited edition in accordance with the production guidelines of a brand name lighter manufacturer.

History

• Authority: T.C.A. §§ 4-5-201, et seq., and 47-18-129(e).
• Administrative History: Original rule filed October 28, 2010; effective January 26, 2011. Amendments filed February 19, 2025; effective May 20, 2025.