2014 Kentucky Revised Statutes CHAPTER 304 - INSURANCE CODE Subtitle 42 - Kentucky Life and Health Insurance Guaranty Association 42.42-030 Scope of subtitle.
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304.42-030 Scope of subtitle.
(1)
This subtitle shall provide coverage for the policies and contracts specified in
subsection (2) of this section:
(a) To persons who, regardless of where they reside (except for nonresident
certificate holders under group policies or contracts), are the
beneficiaries, assignees, or payees of the persons covered under
paragraph (b) of this subsection.
(b) To persons who are the owners of or certificate holders under such
policies or contracts, other than structured settlement annuities, who:
1.
Are residents; or
2.
Are not residents, but only under the following conditions:
a.
The insurer which issued the policies or contracts is domiciled
in this state;
b.
The states in which the persons reside have associations
similar to the association created by this subtitle; and
c.
The persons are not eligible for coverage by an association in
any other state due to the fact that the insurer was not licensed
in the state at the time specified in the state's guaranty
association law.
(c) For structured settlement annuities covered in subsection (2) of this
section, paragraphs (a) and (b) of this subsection shall not apply and this
subtitle shall, except as provided in paragraphs (d) and (e) of this
subsection, provide coverage to a person who is a payee under a
structured settlement annuity, or beneficiary of a payee if the payee is
deceased, if the payee is a resident, regardless of where the contract
owner resides. If the payee is not a resident, this subtitle shall provide
coverage but only under both of the following conditions:
1. a.
The contract owner of the structured settlement annuity is a
resident; or
b.
The contract owner of the structured settlement annuity is not
a resident, but the insurer that issued the structured settlement
annuity is domiciled in this state and the state in which the
contract owner resides has an association similar to the
association created by this subtitle; and
2.
Neither the payee, the beneficiary, nor the contract owner is eligible
for coverage by the association of the state in which the payee or
contract owner resides.
(d) This subtitle shall not provide coverage to a person who is a payee or
beneficiary of a contract owner resident of this state, if the payee or
beneficiary is afforded any coverage by the association of another state.
(e) This subtitle is intended to provide coverage to a person who is a resident
of this state and, in special circumstances, to a nonresident. In order to
avoid duplicate coverage, if a person who would otherwise receive
coverage in this subtitle is provided coverage under the laws of any other
state, the person shall not be provided coverage under this subtitle. In
(2)
(a)
(b)
determining the application of the provisions of this paragraph in
situations where a person could be covered by the association of more
than one (1) state, whether as an owner, payee, beneficiary, or assignee,
this subtitle shall be construed in conjunction with other state laws to
result in coverage by only one (1) association.
This subtitle shall provide coverage to the persons specified in subsection
(1) of this section for direct, nongroup life, health, or annuity policies or
contracts and supplemental contracts to any of these and for certificates
issued under direct group policies and contracts.
This subtitle shall not provide coverage for:
1.
Any portion of a policy or contract not guaranteed by the insurer, or
under which the risk is borne by the policy or contract owner;
2.
Any policy or contract of reinsurance, unless assumption certificates
have been issued pursuant to the reinsurance policy or contract;
3.
Any portion of a policy or contract to the extent that the rate of
interest on which it is based:
a.
Averaged over the period of four (4) years prior to the date on
which the association becomes obligated with respect to such
policy or contract, exceeds a rate of interest determined by
subtracting two (2) percentage points from Moody's corporate
bond yield average averaged for that same four (4) year period
or for such lesser period if the policy or contract was issued
less than four (4) years before the association became
obligated; and
b.
On and after the date on which the association becomes
obligated with respect to the policy or contract, exceeds the
rate of interest determined by subtracting three (3) percentage
points from Moody's corporate bond yield average as most
recently available;
4.
Any portion of a policy or contract issued to a plan or program of an
employer, association, or other person to provide life, health, or
annuity benefits to its employees, members, or others to the extent
that such plan or program is self-funded or uninsured including, but
not limited to, benefits payable by an employer, association, or other
person under:
a.
A multiple employer welfare arrangement as defined in 29
U.S.C. sec. 1144;
b.
A minimum premium group insurance plan;
c.
A stop-loss group insurance plan; or
d.
An administrative services only contract;
5.
Any portion of a policy or contract to the extent that it provides for:
a.
Dividends or experience rating credits;
b.
Payment of any fees or allowances to any person, including
the policy or contract owner, in connection with the service to
or administration of such policy or contract; or
(3)
(a)
c.
Voting rights;
6.
Any policy or contract issued in this state by a member insurer at a
time when it did not have a certificate of authority to issue such
policy or contract in this state;
7.
Any unallocated annuity contract;
8.
A portion of a policy or contract to the extent that the assessments
required by KRS 304.42-090 with respect to the policy or contract
are preempted by federal or state law;
9.
An obligation that does not arise under the express written terms of
the policy or contract issued by the insurer to the contract owner or
policy owner, including without limitation:
a.
Claims based on marketing materials;
b.
Claims based on side letters, riders, or other documents that
were issued by the insurer without meeting applicable policy
form filing or approval requirements;
c.
Misrepresentations of or regarding policy benefits;
d.
Extracontractual claims; or
e.
A claim for penalties or consequential or incidental damages;
10. A contractual agreement that establishes the member insurer's
obligations to provide a book value accounting guaranty for defined
contribution benefit plan participants by reference to a portfolio of
assets that is owned by the benefit plan or its trustee which in each
case is not an affiliate of the member insurer; and
11. A policy or contract providing any hospital, medical, prescription
drug or other health care benefits pursuant to Medicare Part C or
Part D, 42 U.S.C. secs. 1395w-21 to w-152, or any regulations
issued pursuant thereto.
The benefits that the association may become obligated to cover shall in
no event exceed the lesser of the contractual obligations for which the
insurer is liable or would have been liable if it were not an impaired or
insolvent insurer, or with respect to any one (1) life, regardless of the
number of policies or contracts:
1.
In life insurance, three hundred thousand dollars ($300,000) in
death benefits, but not more than one hundred thousand dollars
($100,000) net cash surrender and net cash withdrawal values for
life insurance;
2.
In health insurance benefits:
a.
One hundred thousand dollars ($100,000) for coverages not
defined as disability insurance or basic hospital, medical, and
surgical insurance, major medical insurance, or long-term care
insurance, including any net cash surrender and net cash
withdrawal values;
b.
Three hundred thousand dollars ($300,000) for disability
insurance and three hundred thousand dollars ($300,000) for
long-term care insurance; and
c.
(4)
Five hundred thousand dollars ($500,000) for basic hospital,
medical, and surgical insurance or major medical insurance;
and
3.
In annuity benefits, two hundred fifty thousand dollars ($250,000) in
the present value of annuity benefits, including net cash surrender
and net cash withdrawal values; except with respect to each payee
of a structured settlement annuity or beneficiary or beneficiaries of
the payee if deceased, two hundred fifty thousand dollars
($250,000) in present value annuity benefits, in the aggregate,
including net cash surrender and net cash withdrawal values.
(b) In no event shall the association be obligated to cover more than:
1.
An aggregate of three hundred thousand dollars ($300,000) in
benefits with respect to any one (1) life under subparagraphs 2. and
3. of paragraph (a) of this subsection, except with respect to benefits
for basic hospital, medical, and surgical insurance and major
medical insurance as stated in paragraph (a) of this subsection, in
which case the aggregate liability of the association shall not exceed
five hundred thousand dollars ($500,000) with respect to any one (1)
individual; or
2.
With respect to one (1) owner of multiple nongroup policies of life
insurance, whether the policy owner is an individual, firm,
corporation, or other person, and whether the persons insured are
officers, managers, employees, or other persons, more than five
million dollars ($5,000,000) in benefits, regardless of the number of
policies and contracts held by the owner.
(c) The limitations set forth in this subsection are limitations on the benefits
for which the association is obligated before taking into account either its
subrogation and assignment rights or the extent to which those benefits
could be provided out of the assets of the impaired or insolvent insurer
attributable to covered policies. The costs of the association's obligations
under this subtitle may be met by the use of assets attributable to covered
policies or reimbursed to the association in accordance with its
subrogation and assignment rights.
In performing its obligations to provide coverage under KRS 304.42-080, the
association shall not be required to guarantee, assume, reinsure or perform, or
cause to be performed, assumed, reinsured or performed, the contractual
obligations of the insolvent or impaired insurer under a covered policy or
contract that do not materially affect the economic values or economic benefits
of the covered policy or contract.
Effective:July 15, 2010
History: Amended 2010 Ky. Acts ch. 49, sec. 1, effective July 15, 2010. -Amended 1998 Ky. Acts ch. 537, sec. 2, effective July 15, 1998. -- Amended
1988 Ky. Acts ch. 282, sec. 1, effective July 15, 1988. -- Amended 1982 Ky.
Acts ch. 123, sec. 17, effective July 15, 1982. -- Created 1978 Ky. Acts ch. 282,
sec. 3, effective June 17, 1978.
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