2005 Nevada Revised Statutes - Chapter 686C — Nevada Life and Health Insurance Guaranty Association

CHAPTER 686C - NEVADA LIFE AND HEALTHINSURANCE GUARANTY ASSOCIATION

GENERAL PROVISIONS

NRS 686C.010 Shorttitle.

NRS 686C.020 Purposeof chapter.

NRS 686C.030 Scopeof chapter: Coverage provided.

NRS 686C.035 Scopeof chapter: Coverage not provided.

NRS 686C.040 Definitions.

NRS 686C.045 Accountdefined.

NRS 686C.048 Annuitydefined.

NRS 686C.050 Associationdefined.

NRS 686C.055 Authorizedassessment defined.

NRS 686C.061 Benefitplan defined.

NRS 686C.065 Calledassessment defined.

NRS 686C.070 Contractualobligation defined.

NRS 686C.080 Coveredpolicy defined.

NRS 686C.084 Extra-contractualclaim defined.

NRS 686C.090 Impairedinsurer defined.

NRS 686C.095 Insolventinsurer defined.

NRS 686C.100 Memberinsurer defined.

NRS 686C.104 Ownerdefined.

NRS 686C.108 Persondefined.

NRS 686C.110 Premiumsdefined.

NRS 686C.115 Principalplace of business defined.

NRS 686C.120 Residentdefined.

NRS 686C.123 Statedefined.

NRS 686C.124 Structuredsettlement annuity defined.

NRS 686C.125 Supplementalcontract defined.

NRS 686C.128 Documentdescribing general purposes and current limitations of chapter: Preparation;distribution and revision; disclaimer.

ORGANIZATION; POWERS AND DUTIES

NRS 686C.130 Creation;membership; operation; accounts; supervision by Commissioner.

NRS 686C.140 Boardof Directors.

NRS 686C.150 Powersregarding impaired insurers.

NRS 686C.152 Dutiesregarding insolvent insurers.

NRS 686C.153 Provisionof substitute benefits and coverage with respect to life and health insurancepolicies and annuities.

NRS 686C.154 Alternativepolicies: Adoption; approval; contents; premium; coverage.

NRS 686C.155 Ensuringof payment or credit of guaranteed minimum interest rate.

NRS 686C.156 Issuanceof substitute coverage for policy or contract that uses external reference forcalculating returns or changes in value.

NRS 686C.158 Paymentof premiums; liability for unearned premiums.

NRS 686C.160 Impositionof restraints on insurers.

NRS 686C.170 Liabilityfor guaranty provided by laws of another state or jurisdiction.

NRS 686C.175 Receiptand disposition of deposit held pursuant to law or required by Commissioner forbenefit of creditors.

NRS 686C.180 Provisionof assistance to Commissioner.

NRS 686C.190 Legalstanding.

NRS 686C.200 Subrogation.

NRS 686C.210 Limitationson obligations.

NRS 686C.220 Generalpowers.

NRS 686C.221 Determinationof means to provide benefits; limitation on entitlement to benefits.

NRS 686C.222 Requestsfor information from member insurers.

NRS 686C.223 Electionto succeed to rights and obligations of member insurer; transfer of obligationsto another insurer.

NRS 686C.225 Terminationof obligations: Replacement of coverage or policy.

NRS 686C.226 Terminationof obligations: Failure to pay premiums.

ASSESSMENTS

NRS 686C.230 Imposition;classes.

NRS 686C.240 Computation;necessity; notification.

NRS 686C.250 Abatementor deferment; maximum amount; effect of insufficiency; allocation of fundsamong claims.

NRS 686C.260 Refundto member insurers.

NRS 686C.270 Ratesand dividends may reflect assessments.

NRS 686C.280 Issuance,effect and use of certificate of contribution; offset against liability forpremium tax.

NRS 686C.285 Protestby member insurer.

OPERATION

NRS 686C.290 Planof operation.

NRS 686C.300 Powersand duties of Commissioner; appeals to Commissioner; notification of effect ofchapter.

NRS 686C.303 Actionby Commissioner upon default of Association.

NRS 686C.306 Noticeof certain actions by Commissioner; reports by Commissioner of certaininformation to Board of Directors.

NRS 686C.310 Provisionof information and advice relating to financial condition of insurers.

NRS 686C.330 Impairedor insolvent insurers: Liability for unpaid assessments of insureds;maintenance and disclosure of records of Association; status of Association ascreditor; distribution of ownership by court.

NRS 686C.333 Recoveryof distributions made before petition for liquidation or rehabilitation ofinsurer.

NRS 686C.340 Impairedor insolvent insurers: Stay of proceedings; reopening of default judgments.

NRS 686C.350 Examinationof Association; annual financial report.

NRS 686C.360 Associationtax exempt; exception.

NRS 686C.370 Immunityfrom liability.

NRS 686C.380 Actionsarising under chapter: Venue; appeal bond.

NRS 686C.390 Unlawfuladvertisement regarding existence of Association.

_________

GENERAL PROVISIONS

NRS 686C.010 Shorttitle. This chapter may be cited as the NevadaLife and Health Insurance Guaranty Association Act.

(Added to NRS by 1973, 302)

NRS 686C.020 Purposeof chapter. The purpose of this chapter is toprotect, within certain limits, the persons specified in subsections 1 and 2 ofNRS 686C.030 against failure in theperformance of contractual obligations under life and health insurance policiesand contracts, and annuities, specified in subsection 4 of NRS 686C.030 because of the impairment orinsolvency of a member insurer issuing such policies or contracts.

(Added to NRS by 1973, 302; A 1991, 869; 2001, 1030)

NRS 686C.030 Scopeof chapter: Coverage provided.

1. This chapter provides coverage for the policies orcontracts described in subsection 4 to persons who are:

(a) Owners of or certificate holders under suchpolicies or contracts, other than structured settlement annuities, and who:

(1) Are residents of this state; or

(2) Are not residents, but only if:

(I) The insurer that issued the policiesor contracts is domiciled in this state;

(II) The states in which the personsreside have associations similar to the Association created by this chapter;and

(III) The persons are not eligible forcoverage by an association in another state because the insurer was notauthorized in the other state at the time specified in that states lawgoverning guaranty associations; and

(b) Beneficiaries, assignees or payees of the personscovered under paragraph (a), wherever they reside, except for nonresidentcertificate holders under group policies or contracts.

2. For structured settlement annuities, except asotherwise provided in subsection 3, this chapter provides coverage to a payeeunder the annuity, or beneficiary of a payee if the payee is deceased, if thepayee or beneficiary:

(a) Is a resident of this state, regardless of theresidence of the owner of the annuity; or

(b) Is not a resident of this state, but:

(1) The owner of the annuity is a resident ofthis state, or the issuer of the annuity is domiciled in this state and thestate in which the owner resides has an association similar to the Associationcreated by this chapter; and

(2) Neither the payee or beneficiary nor theowner of the annuity is eligible for coverage by the association of the statein which the payee, beneficiary or owner resides.

3. This chapter does not provide coverage for a payeeor beneficiary of a structured settlement annuity if the owner of the annuityis a resident of this state and the payee or beneficiary is afforded any coverageby the association of another state. In determining the application of theprovisions of this chapter to a situation where a person could be covered bythe association of more than one state, this chapter must be construed inconjunction with the laws of other states to result in coverage by only oneassociation.

4. This chapter provides coverage to the personsdescribed in subsections 1 and 2 for direct, nongroup life, health andsupplemental policies or contracts, and annuities, and certificates underdirect group policies and contracts, and annuities, except as limited by thischapter.

(Added to NRS by 1973, 302; A 1991, 869; 2001, 1030)

NRS 686C.035 Scopeof chapter: Coverage not provided.

1. This chapter does not provide coverage for:

(a) A portion of a policy or contract not guaranteed bythe insurer, or under which the risk is borne by the owner of the policy orcontract.

(b) A policy or contract of reinsurance unlessassumption certificates have been issued pursuant to that policy or contract.

(c) A portion of a policy or contract to the extentthat the rate of interest on which it is based, or the interest rate, creditingrate or similar factor determined by the use of an index or other externalreference stated in the policy or contract employed in calculating returns orchanges in value:

(1) Averaged over the period of 4 years beforethe date on which the association becomes obligated with respect to the policyor contract, exceeds the rate of interest determined by subtracting 2percentage points from Moodys Corporate Bond Yield Average averaged for thesame period, or for the period between the date of issuance of the policy orcontract and the date the association became obligated, whichever period isless; and

(2) On or after the date on which theassociation becomes obligated with respect to the policy or contract, exceedsthe rate of interest determined by subtracting 3 percentage points from MoodysCorporate Bond Yield Average as most recently available.

(d) A portion of a policy or contract issued to a planor program of an employer, association or other person to provide life, healthor annuity benefits to its employees, members or other persons to the extentthat the plan or program is self-funded or uninsured, including, but notlimited to, benefits payable by an employer, association or other person under:

(1) A multiple employer welfare arrangementdescribed in 29 U.S.C. 1144;

(2) A minimum-premium group insurance plan;

(3) A stop-loss group insurance plan; or

(4) A contract for administrative services only.

(e) A portion of a policy or contract to the extentthat it provides for dividends, credits for experience, voting rights or thepayment of any fee or allowance to any person, including the owner of a policyor contract, for services or administration connected with the policy orcontract.

(f) A policy or contract issued in this state by amember insurer at a time when the member insurer was not authorized to issuethe policy or contract in this state.

(g) A portion of a policy or contract to the extentthat the assessments required by NRS686C.230 with respect to the policy or contract are preempted by federallaw.

(h) An obligation that does not arise under the expresswritten terms of the policy or contract issued by the insurer, including:

(1) Claims based on marketing materials;

(2) Claims based on side letters or otherdocuments that were issued by the insurer without satisfying applicablerequirements for filing or approval of policy forms;

(3) Misrepresentations of or regarding policybenefits;

(4) Extra-contractual claims; or

(5) A claim for penalties or consequential orincidental damages.

(i) A contractual agreement that establishes the memberinsurers obligation to provide a guarantee based on accounting at book valuefor participants in a defined-contribution benefit plan by reference to aportfolio of assets owned by the benefit plan or its trustee, which in eachcase is not an affiliate of the member insurer.

(j) A portion of a policy or contract to the extentthat it provides for interest or other changes in value which are determined bythe use of an index or other external reference stated in the policy orcontract, but which have not been credited to the policy or contract, or as towhich the rights of the owner of the policy or contract are subject toforfeiture, determined on the date the member insurer becomes an impaired orinsolvent insurer, whichever occurs first. If the interest or changes in valueof a policy or contract are credited less frequently than annually, for thepurpose of determining the values that have been credited and are not subjectto forfeiture, the interest or change in value determined by using proceduresstated in the policy or contract must be credited as if the contractual datefor crediting interest or changing values was the date of the impairment orinsolvency of the insured member, whichever occurs first and is not subject toforfeiture.

(k) An unallocated annuity contract.

2. As used in this section, Moodys Corporate BondYield Average means the monthly average for corporate bonds published byMoodys Investors Service, Inc., or any successor average.

(Added to NRS by 1991, 864; A 1995, 1623; 1999, 2800; 2001, 1031)

NRS 686C.040 Definitions. As used in this chapter, unless the context otherwiserequires, the words and terms defined in NRS686C.045 to 686C.125, inclusive,have the meanings ascribed to them in those sections.

(Added to NRS by 1973, 302; A 1991, 870; 2001, 1033)

NRS 686C.045 Accountdefined. Account means one of the accountsmaintained pursuant to NRS 686C.130.

(Added to NRS by 1991, 863)

NRS 686C.048 Annuitydefined. Annuity includes an agreement forallocated funding, a structured settlement annuity and an immediate or deferredannuity.

(Added to NRS by 2001, 1026)

NRS 686C.050 Associationdefined. Association means the Nevada Lifeand Health Insurance Guaranty Association.

(Added to NRS by 1973, 303)

NRS 686C.055 Authorizedassessment defined. Authorized assessmentor authorized as used in the context of assessments means or describes anassessment authorized by a resolution of the Board of Directors of theAssociation to be imposed immediately or later on member insurers in aspecified amount.

(Added to NRS by 2001, 1026)

NRS 686C.061 Benefitplan defined. Benefit plan means a benefitplan for a specific employee, union or association of natural persons.

(Added to NRS by 2001, 1026)

NRS 686C.065 Calledassessment defined. Called assessment orcalled as used in the context of assessments means or describes an authorizedassessment required by a notice mailed by the Association to member insurers tobe paid within the time set forth in the notice.

(Added to NRS by 2001, 1026)

NRS 686C.070 Contractualobligation defined. Contractual obligationmeans any obligation under a policy or contract or a certificate under a grouppolicy or contract, or portion thereof, for which coverage is provided under NRS 686C.030.

(Added to NRS by 1973, 303; A 1989, 565; 1991, 870; 2001, 1033)

NRS 686C.080 Coveredpolicy defined. Covered policy means anypolicy or contract included within the scope of this chapter, as expressed in NRS 686C.030 and 686C.035.

(Added to NRS by 1973, 303; A 1991, 870)

NRS 686C.084 Extra-contractualclaim defined. Extra-contractual claimincludes a claim relating to bad faith in the payment of claims and a claim forpunitive or exemplary damages or for costs and attorneys fees.

(Added to NRS by 2001, 1026)

NRS 686C.090 Impairedinsurer defined. Impaired insurer means aninsurer which is not an insolvent insurer and is placed under an order ofrehabilitation or conservation by a court of competent jurisdiction.

(Added to NRS by 1973, 303; A 1991, 870; 2001, 1033)

NRS 686C.095 Insolventinsurer defined. Insolvent insurer means aninsurer which is ordered to liquidate by a court of competent jurisdictionafter a finding of insolvency.

(Added to NRS by 1991, 863)

NRS 686C.100 Memberinsurer defined. Member insurer means aninsurer which is licensed or holds a certificate of authority to transact inthis state any kind of insurance for which coverage is provided in this chapterand includes an insurer whose license or certificate of authority in this statehas been suspended, revoked, not renewed or voluntarily withdrawn. The termdoes not include:

1. A hospital or medical organization, whether or notfor profit;

2. A health maintenance organization;

3. A fraternal benefit society;

4. A mandatory state pooling plan;

5. A mutual assessment company or other person thatoperates on the basis of assessments;

6. An insurance exchange;

7. An organization that is authorized only to issuecharitable gift annuities under NRS688A.281 to 688A.285, inclusive;or

8. An organization similar to any of those listed insubsections 1 to 7, inclusive.

(Added to NRS by 1973, 303; A 1991, 870; 2001, 1033)

NRS 686C.104 Ownerdefined. Owner of a policy or contract meansthe person who is identified as the legal owner under the terms of the policyor contract or who is otherwise vested with legal title to the policy orcontract through a valid assignment completed in accordance with the terms ofthe policy or contract and properly recorded as the owner on the books of theissuer.

(Added to NRS by 2001, 1026)

NRS 686C.108 Persondefined. Person includes a government, governmentalagency or political subdivision of a government.

(Added to NRS by 2001, 1026)

NRS 686C.110 Premiumsdefined. Premiums means amounts received inany calendar year on covered policies or contracts less premiums,considerations and deposits returned thereon, and less dividends and creditsfor experience thereon. The term does not include:

1. Any amounts received for policies or contracts orfor the portions of policies or contracts for which coverage is not providedunder NRS 686C.030 except that theassessable premium is not reduced on account of paragraph (c) of subsection 1of NRS 686C.035 relating tolimitations on interest and subsection 2 or paragraph (b) of subsection 1 of NRS 686C.210 relating to limitations withrespect to any one life.

2. Premiums for an unallocated annuity contract.

3. Premiums that exceed $5,000,000 for severalnongroup policies of life insurance owned by one owner, regardless of:

(a) Whether the owner is a natural person, firm,corporation or other person;

(b) Whether any person insured under the policies is anofficer, manager, employee or other person; or

(c) The number of policies or contracts held by the owner.

(Added to NRS by 1973, 303; A 1991, 870; 2001, 1033)

NRS 686C.115 Principalplace of business defined.

1. Principal place of business of an organizationmeans the single state in which the natural persons who establish policy forthe direction, control and coordination of the operations of the organizationas a whole primarily perform that function, determined by the Association inits reasonable judgment by considering:

(a) The state in which the primary executive andadministrative headquarters of the organization is located;

(b) The state in which the principal office of thechief executive officer of the organization is located;

(c) The state in which the board of directors, orsimilar governing authority, of the organization conducts the majority of itsmeetings;

(d) The state in which the executive or managerialcommittee of the board of directors, or similar governing authority, of theorganization conducts the majority of its meetings; and

(e) The state from which the management of the overalloperations of the organization is directed.

2. Principal place of business of the sponsor of abenefit plan means the principal place of business of the association, committee,joint board of trustees or similar group of representatives of the parties whoestablish or maintain the plan or, if that cannot be ascertained, of theemployer or the employee organization that has the largest investment in theplan, except that in either case if more than half of the participants of theplan are employed in one state, it means that state. In the case of a benefitplan sponsored by affiliated companies comprising a consolidated corporation,it means the state in which the holding company or controlling affiliate hasits principal place of business as determined by using the factors set forth insubsection 1.

(Added to NRS by 2001, 1026)

NRS 686C.120 Residentdefined. Resident means any person to whom acontractual obligation is owed and who resides in this state on the date ofentry of a court order that determines a member insurer to be impaired orinsolvent, whichever determination is first made. A person may be a resident ofbut one state, which in the case of a person other than a natural person is itsprincipal place of business. A citizen of the United States who is a residentof a foreign country or of a territory or insular possession subject to thejurisdiction of the United States which does not have an association similar tothe Association created by this chapter shall be deemed to be a resident of thestate of domicile of the insurer that issued the policy or contract.

(Added to NRS by 1973, 303; A 1991, 871; 2001, 1034)

NRS 686C.123 Statedefined. State means a state of the UnitedStates, the District of Columbia, Puerto Rico, the United States Virgin Islandsor any territory or insular possession subject to the jurisdiction of theUnited States.

(Added to NRS by 2001, 1027)

NRS 686C.124 Structuredsettlement annuity defined. Structured settlementannuity means an annuity purchased to fund periodic payments to a plaintiff orother claimant in payment for or with respect to personal injury suffered byhim.

(Added to NRS by 2001, 1027)

NRS 686C.125 Supplementalcontract defined. Supplemental contractmeans a written agreement for the distribution of proceeds from a life orhealth insurance policy or an annuity.

(Added to NRS by 1991, 864; A 2001, 1034)

NRS 686C.128 Documentdescribing general purposes and current limitations of chapter: Preparation;distribution and revision; disclaimer.

1. The Association shall prepare, and submit to theCommissioner for approval, a summary document describing the general purposesand current limitations of this chapter. After the expiration of 60 days afterthe approval of the summary document by the Commissioner, an insurer may notdeliver a policy or contract to the owner of the policy or contract unless thesummary document is delivered to the owner at the time of delivery of thepolicy or contract. The document must also be available upon request by the ownerof a policy. The distribution, delivery, contents or interpretation of thisdocument does not guarantee that the policy or the contract or its owner iscovered in the event of the impairment or insolvency of a member insurer. The descriptivedocument must be revised by the Association as amendments to this chapter mayrequire. Failure to receive this document does not give the owner of a policyor contract, or an insured, any greater rights than those stated in thischapter.

2. The document prepared pursuant to subsection 1 mustcontain a clear and conspicuous disclaimer on its face. The Commissioner shallestablish the form and content of the disclaimer. The disclaimer must:

(a) State the name and address of the Association andof the Division;

(b) Prominently warn the owner of the policy orcontract that the Association may not cover the policy or, if coverage isavailable, it will be subject to substantial limitations and exclusions andconditioned on continued residence in this State;

(c) State the types of policies for which guarantyfunds will provide coverage;

(d) State that the insurer and its agents areprohibited by law from using the existence of the Association for the purposeof sales, solicitation or inducement to purchase any form of insurance;

(e) State that the owner of a policy or contract shouldnot rely on coverage under the Association when selecting an insurer;

(f) Explain the rights and procedures for filing acomplaint to allege a violation of any provision of this chapter; and

(g) Provide other information as directed by theCommissioner, including sources of information about the financial condition ofinsurers, if the information is not proprietary and is subject to disclosureunder the law of the state in which the insurer is domiciled.

3. A member insurer shall retain evidence ofcompliance with subsection 1 while the policy or contract for which the noticeis given remains in effect.

(Added to NRS by 1991, 868; A 2001, 1034)

ORGANIZATION; POWERS AND DUTIES

NRS 686C.130 Creation;membership; operation; accounts; supervision by Commissioner.

1. There is hereby created a nonprofit legal entity tobe known as the Nevada Life and Health Insurance Guaranty Association. Allmember insurers shall be and remain members of the Association as a conditionof their authority to transact insurance in this state. The Association shallperform its functions under the plan of operation established and approvedpursuant to NRS 686C.290 and shallexercise its powers through a Board of Directors established pursuant to NRS 686C.140.

2. For purposes of administration and assessment, theAssociation shall maintain two accounts:

(a) The Account for Health Insurance; and

(b) The Account for Life Insurance and Annuities, whichconsists of:

(1) The Subaccount for Life Insurance; and

(2) The Subaccount for Annuities, includingannuities owned by a governmental retirement plan, or its trustees, establishedunder section 401, 403(b) or 457 of the Internal Revenue Code, 26 U.S.C. 401, 403(b) and 457.

3. The Association is under the immediate supervisionof the Commissioner and is subject to the applicable provisions of the NevadaInsurance Code. Meetings or records of the Association may be opened to thepublic by majority vote of the Board of Directors.

(Added to NRS by 1973, 303; A 1991, 871; 2001, 1035)

NRS 686C.140 Boardof Directors.

1. The Board of Directors of the Association consistsof not less than five nor more than nine members, serving terms as establishedin the plan of operation.

2. The members of the Board who represent insurersmust be selected by member insurers subject to the approval of theCommissioner. If practicable, one of the members of the Board must be anofficer of a domestic insurer.

3. Two public representatives must be appointed to theBoard by the Commissioner. A public representative may not be an officer,director or employee of an insurer or engaged in the business of insurance.

4. Vacancies on the Board must be filled for theremaining period of the term by majority vote of the members of the Board,subject to the approval of the Commissioner, for members who representinsurers, and by the Commissioner for public representatives.

5. To select the initial Board of Directors, andinitially organize the Association, the Commissioner shall give notice to allmember insurers of the time and place of the organizational meeting. Indetermining voting rights at the organizational meeting, each member insurer isentitled to one vote in person or by proxy. If the Board of Directors is notselected within 60 days after notice of the organizational meeting, theCommissioner may appoint the initial members to represent insurers in additionto the public representatives.

6. In approving selections or in appointing members tothe Board, the Commissioner shall consider, among other things, whether allmember insurers are fairly represented.

7. Members of the Board may be reimbursed from theassets of the Association for expenses incurred by them as members of the Boardof Directors, but members of the Board may not otherwise be compensated by theAssociation for their services.

(Added to NRS by 1973, 303; A 2001, 1035; 2003, 2805)

NRS 686C.150 Powersregarding impaired insurers. If a memberinsurer is an impaired insurer, the Association may, subject to any conditionsit may impose which do not impair the contractual obligations of the impairedinsurer and which are approved by the Commissioner:

1. Guarantee, assume or reinsure, or cause to beguaranteed, assumed or reinsured, any or all of the covered policies orcontracts of the impaired insurer.

2. Provide such money, pledges, loans, notes,guarantees or other means as are proper to effectuate subsection 1, and assurepayment of the contractual obligations of the impaired insurer pending actionunder subsection 1.

(Added to NRS by 1973, 304; A 1991, 871; 2001, 1036)

NRS 686C.152 Dutiesregarding insolvent insurers. If a memberinsurer is an insolvent insurer, the Association shall:

1. Guarantee, assume or reinsure, or cause to beguaranteed, assumed or reinsured, the policies or contracts of the insolventinsurer; or

2. Ensure payment of the contractual obligations ofthe insolvent insurer and:

(a) Provide such money, pledges, loans, notes,guarantees or other means as are reasonably necessary to discharge its duties;or

(b) Provide benefits and coverages in accordance with NRS 686C.153 and 686C.154.

(Added to NRS by 1991, 865; A 2001, 1036)

NRS 686C.153 Provisionof substitute benefits and coverage with respect to life and health insurancepolicies and annuities. When proceedingpursuant to paragraph (b) of subsection 2 of NRS 686C.152, the Association shall:

1. With respect to life and health insurance policiesand annuities, ensure payment of benefits for premiums identical to thepremiums and benefits, except for terms of conversion and renewability, whichwould have been payable under policies or contracts of the insolvent insurer,for claims incurred with respect to:

(a) A group policy or contract, not later than theearlier of the next renewal date under the policy or contract or 45 days, butin no event less than 30 days, after the date when the Association becomesobligated with respect to that policy or contract.

(b) A nongroup policy, contract or annuity, not laterthan the earlier of the next renewal date, if any, under the policy, contractor annuity or 1 year, but in no event less than 30 days, after the date whenthe Association becomes obligated with respect to that policy, contract orannuity.

2. Make diligent efforts to provide all known insuredsor owners with respect to group policies or contracts, or annuitants withrespect to annuities, 30 days notice of termination of the benefits providedpursuant to subsection 1.

3. With respect to nongroup life and health insurancepolicies and annuities, make available substitute coverage on an individualbasis, in accordance with the provisions of subsection 4, to each known insuredor annuitant, or owner if other than the insured or annuitant, and to eachnatural person formerly insured, or formerly an annuitant, under a group policywho is not eligible for replacement group coverage, if the insured or annuitanthad a right under law or the terminated policy or annuity to convert coverageto individual coverage or to continue an individual policy or annuity in forceuntil a specified age or for a specified period, during which the insurer hadno right unilaterally to make changes in any provision of the policy or annuityor had a right only to make changes in premium by class.

4. In providing the substitute coverage required undersubsection 3, the Association may offer to reissue the terminated coverage orto issue an alternative policy that must be offered without requiring evidenceof insurability or a waiting period or exclusion that would not have appliedunder the terminated policy, and may reinsure any alternative or reinsuredpolicy.

(Added to NRS by 1991, 865; A 2001, 1036)

NRS 686C.154 Alternativepolicies: Adoption; approval; contents; premium; coverage.

1. Alternative policies adopted by the Association aresubject to the approval of the Commissioner and the court in the insolvent orimpaired insurers state which has jurisdiction over the conservation,rehabilitation or liquidation of the insurer. The Association may adoptalternative policies of various types for future issuance without regard to anyparticular impairment or insolvency.

2. An alternative policy must contain at least theminimum statutory provisions required in this state and provide benefits thatare not unreasonable in relation to the premium charged. The Association shallset the premium in accordance with a table of rates which it shall adopt. The premiummust reflect the amount of insurance to be provided and the age and class ofrisk of each insured, but must not reflect any changes in the health of theinsured after the original policy was last underwritten.

3. An alternative policy issued by the Associationmust provide coverage of a type similar to that of the policy issued by theimpaired or insolvent insurer, as determined by the Association.

4. If the Association elects to reissue terminatedcoverage at a rate of premium different from that charged under the terminatedpolicy, the premium must be set by the Association in accordance with theamount of insurance provided and the age and class of risk, subject to approvalby the Commissioner and the court described in subsection 1.

(Added to NRS by 1991, 866; A 2001, 1037)

NRS 686C.155 Ensuringof payment or credit of guaranteed minimum interest rate. When proceeding pursuant to paragraph (b) of subsection 2of NRS 686C.152 with respect to anypolicy or contract carrying guaranteed minimum interest rates, the Associationshall ensure the payment or crediting of a rate of interest consistent withparagraph (c) of subsection 1 of NRS686C.035.

(Added to NRS by 1991, 866; A 2001, 1038)

NRS 686C.156 Issuanceof substitute coverage for policy or contract that uses external reference forcalculating returns or changes in value. Incarrying out its duties in connection with guaranteeing, assuming or reinsuringa policy or contract under NRS 686C.150and 686C.152, the Association, subjectto the approval of the court in the insolvent or impaired insurers state whichhas jurisdiction over the conservation, rehabilitation or liquidation of theinsurer, may issue substitute coverage for a policy or contract that providesan interest rate, crediting rate or similar factor determined by use of anindex or other external reference stated in the policy or contract employed incalculating returns or changes in value by issuing an alternative policy orcontract if:

1. In lieu of the index or other external referencestated in the original policy or contract, the alternative policy or contractprovides for a fixed interest rate, payment of dividends guaranteed as tominimum amount, or a different method of calculating interest or changes invalue;

2. There is no requirement for evidence ofinsurability, waiting period or other exclusion that would not have appliedunder the replaced policy or contract; and

3. The alternative policy or contract is substantiallysimilar to the replaced policy or contract in all other material terms.

(Added to NRS by 2001, 1029)

NRS 686C.158 Paymentof premiums; liability for unearned premiums. Premiumsdue for coverage after entry of an order of liquidation of an insolvent insurerbelong to and are payable at the direction of the Association, and the Associationis liable for unearned premiums due to owners of policies or contracts arisingafter the entry of such an order.

(Added to NRS by 2001, 1027)

NRS 686C.160 Impositionof restraints on insurers. In carrying out itsresponsibilities under NRS 686C.152,the Association may, subject to approval by a court of this state:

1. Impose permanent liens on policies and contracts inconnection with any guarantee, assumption or reinsurance if the Associationfinds that the amounts which can be assessed under this chapter are less thanthe amounts needed to ensure full and prompt performance of the Associationsduties or that the economic or financial conditions as they affect memberinsurers are sufficiently adverse that the imposition of such permanent liensis in the public interest.

2. Impose temporary moratoriums or liens on paymentsof cash values and policy loans or any right to withdraw money held inconjunction with policies or contracts, in addition to any contractualprovisions for deferral of paying cash value or lending against the policy. Inaddition, in the event of a temporary moratorium or charge imposed by the courtin the insolvent or impaired insurers state which has jurisdiction over theconservation, rehabilitation or liquidation of the insurer on such payment orlending, or on any other right to withdraw money held in conjunction withpolicies or contracts, the Association may defer such payment, lending or withdrawalfor the period of the moratorium or charge, except for claims covered by theAssociation to be paid in accordance with a procedure for cases of hardshipestablished by the liquidator or rehabilitator and approved by the court.

(Added to NRS by 1973, 305; A 1991, 872; 2001, 1038)

NRS 686C.170 Liabilityfor guaranty provided by laws of another state or jurisdiction. The Association is not liable under NRS 686C.152 where a guaranty is providedto residents of this state by the laws of the domiciliary state or jurisdictionof the impaired or insolvent insurer other than this state.

(Added to NRS by 1973, 305; A 1991, 873; 2001, 1038)

NRS 686C.175 Receiptand disposition of deposit held pursuant to law or required by Commissioner forbenefit of creditors. A deposit in this state,held pursuant to law or required by the Commissioner for the benefit ofcreditors, including owners of policies, not turned over to the domiciliaryreceiver upon the entry of a final order of liquidation or order approving aplan of rehabilitation of an insurer domiciled in this state or a reciprocalstate pursuant to NRS 696B.290 or 696B.300 must be promptly paid to theAssociation. The Association is entitled to retain a portion of an amount sopaid to it that is equal to the percentage determined by dividing the aggregateamount of policy owners claims related to that insolvency for which theAssociation has provided statutory benefits by the aggregate amount of allpolicy owners claims in this state related to that insolvency, and shall remitthe remainder to the domiciliary receiver. The amount so remitted is adistribution of the assets of the insurer for the purposes of chapter 696B of NRS.

(Added to NRS by 2001, 1027)

NRS 686C.180 Provisionof assistance to Commissioner. The Associationmay render assistance and advice to the Commissioner upon his request,concerning rehabilitation, payment of claims, continuation of coverage or theperformance of other contractual obligations of an impaired or insolventinsurer.

(Added to NRS by 1973, 305; A 2001, 1038)

NRS 686C.190 Legalstanding. The Association has standing:

1. To appear or intervene before a court or agency inthis state which has jurisdiction over an impaired or insolvent insurerconcerning which the Association is or may become obligated under this chapteror over any person or property against whom or which the Association may haverights through subrogation or otherwise. Its standing extends to all mattersgermane to the powers and duties of the Association, including proposals forreinsuring, modifying or guaranteeing the policies or contracts of the impairedor insolvent insurer and the determination of the policies or contracts andcontractual obligations.

2. To appear or intervene before a court or agency inanother state which has jurisdiction over an impaired or insolvent insurer forwhich the Association is or may become obligated, or over any person orproperty against whom or which the Association may have rights throughsubrogation or otherwise.

(Added to NRS by 1973, 305; A 1991, 873; 2001, 1038)

NRS 686C.200 Subrogation.

1. A person receiving benefits under this chaptershall be deemed to have assigned his rights under, and any causes of actionagainst any person for losses arising under, resulting from or otherwiserelating to, the covered policy or contract to the Association to the extent ofthe benefits received because of this chapter, whether the benefits arepayments of or on account of contractual obligations, continuation of coverageor provision of substitute or alternative coverages. The Association mayrequire an assignment to it of those rights and causes of action by any payee,owner of a policy or contract, beneficiary, insured or annuitant as a conditionprecedent to the receipt of any rights or benefits conferred by this chapterupon that person.

2. The rights of the Association to subrogation underthis subsection have the same priority against the assets of the impaired orinsolvent insurer as that possessed by the person entitled to receive benefitsunder this chapter.

3. In addition to the rights provided undersubsections 1 and 2, the Association has all rights of subrogation at commonlaw and any other equitable or legal remedy which would have been available tothe impaired or insolvent insurer or the owner, beneficiary or payee of apolicy or contract with respect to the policy or contract, including, in thecase of a structured settlement annuity, any rights of the owner, beneficiaryor payee of the annuity, to the extent of benefits received under this chapter,against a person originally or by succession responsible for the losses arisingfrom the personal injury relating to the annuity or payment for it, except anysuch person responsible solely by reason of serving as an assignee undersection 130 of the Internal Revenue Code, 26 U.S.C. 130.

4. If the provisions of subsections 1, 2 and 3 areinvalid or ineffective with respect to any person or any claim for any reason,the amount payable to the Association with respect to the related coveredobligations is reduced by the amount realized by any other person with respectto the person or claim which is attributable to the policies or portionsthereof covered by the Association.

5. If the Association has provided benefits withrespect to a covered obligation and a person recovers amounts as to which theAssociation has rights under subsections 1 to 4, inclusive, he shall pay to theAssociation the portion of the recovery attributable to the policies orportions thereof covered by the Association.

(Added to NRS by 1973, 305; A 1991, 873; 2001, 1039)

NRS 686C.210 Limitationson obligations.

1. The benefits that the Association may becomeobligated to cover may not exceed the lesser of:

(a) The contractual obligations for which the insureris liable or would have been liable if it were not an impaired or insolventinsurer;

(b) With respect to one life, regardless of the numberof policies or contracts:

(1) Three hundred thousand dollars in deathbenefits from life insurance, but not more than $100,000 in net cash forsurrender and withdrawal for life insurance; or

(2) One hundred thousand dollars in the presentvalue of benefits from annuities, including net cash for surrender andwithdrawal;

(c) With respect to health insurance for any onenatural person:

(1) One hundred thousand dollars for coveragesother than disability insurance, basic hospital, medical and surgical insuranceor major medical insurance, including any net cash for surrender or withdrawal;

(2) Three hundred thousand dollars fordisability insurance; or

(3) Five hundred thousand dollars for basichospital, medical and surgical insurance or major medical insurance; or

(d) With respect to each payee of a structuredsettlement annuity, or beneficiary or beneficiaries of the payee if deceased,$100,000 in present value of benefits from the annuity in the aggregate,including any net cash for surrender or withdrawal.

2. In no event is the Association obligated to covermore than:

(a) With respect to any one life or person underparagraphs (b) and (c) of subsection 1:

(1) An aggregate of $300,000 in benefits,excluding benefits for basic hospital, medical and surgical insurance or majormedical insurance; or

(2) An aggregate of $500,000 in benefits,including benefits for basic hospital, medical and surgical insurance or majormedical insurance.

(b) With respect to one owner of several nongrouppolicies of life insurance, whether the owner is a natural person or anorganization and whether the persons insured are officers, managers, employeesor other persons, more than $5,000,000 in benefits, regardless of the number ofpolicies and contracts held by the owner.

3. The limitations set forth in this section arelimitations on the benefits for which the Association is obligated beforetaking into account its rights to subrogation or assignment or the extent towhich those benefits could be provided out of the assets of the impaired orinsolvent insurer attributable to covered policies. The cost of theAssociations obligations under this chapter may be met by the use of assetsattributable to covered policies, or reimbursed to the Association pursuant toits rights to subrogation or assignment.

4. In performing its obligation to provide coverageunder NRS 686C.150 and 686C.152, the Association need notguarantee, assume, reinsure or perform, or cause to be guaranteed, assumed,reinsured or performed, the contractual obligations of the impaired orinsolvent insurer under a covered policy or contract which do not materiallyaffect the economic value or economic benefits of the covered policy or contract.

(Added to NRS by 1973, 306; A 1979, 767; 1991, 874; 2001, 1039)

NRS 686C.220 Generalpowers. The Association may:

1. Enter into such contracts as are necessary orproper to carry out the provisions and purposes of this chapter.

2. Sue or be sued, including the taking of any legalaction necessary or proper for recovery of any unpaid assessments under NRS 686C.230 or to settle claims orpotential claims against it.

3. Borrow money to effect the purposes of thischapter. Any notes or other evidence of indebtedness of the Association not indefault are legal investments for domestic insurers and may be carried asadmitted assets.

4. Employ or retain such persons as are necessary orappropriate to handle the financial transactions of the Association, and toperform such other functions as become necessary or proper under this chapter.

5. Take such legal action as may be necessary orappropriate to avoid or recover payment of improper claims.

6. Exercise, for the purposes of this chapter and tothe extent approved by the Commissioner, the powers of a domestic life orhealth insurer, but in no case may the Association issue insurance policies orannuities other than those issued to perform its contractual obligations underthis chapter.

7. Join an organization of one or more other stateassociations having similar purposes, to further the purposes and administerthe powers and duties of the Association.

8. Organize itself as a corporation or in other legalform permitted by the laws of this state.

9. Request information from a person seeking coveragefrom the Association to aid the Association in determining its obligationsunder this chapter with respect to him, and the person shall promptly complywith the request.

10. Take other necessary or appropriate action toperform its duties and discharge its obligations under this chapter or toexercise its power under this chapter.

(Added to NRS by 1973, 306; A 1991, 874; 2001, 1040)

NRS 686C.221 Determinationof means to provide benefits; limitation on entitlement to benefits.

1. The Board of Directors of the Association mayexercise reasonable business judgment to determine the means by which theAssociation is to provide the benefits of this chapter in an economical andefficient manner.

2. Where the Association has arranged or offered toprovide the benefits of this chapter to a covered person under a plan orarrangement that satisfies the obligations of the Association under thischapter, the covered person is not entitled to benefits from the Association inaddition to or other than those provided under the plan or arrangement.

(Added to NRS by 2001, 1029)

NRS 686C.222 Requestsfor information from member insurers. TheAssociation may request information from member insurers to aid in the exerciseof its powers under this chapter, and each member shall promptly comply withsuch a request.

(Added to NRS by 2001, 1030)

NRS 686C.223 Electionto succeed to rights and obligations of member insurer; transfer of obligationsto another insurer.

1. As used in this section, coverage date means thedate on which the Association becomes liable for the obligations of a memberinsurer.

2. At any time after the coverage date, theAssociation may elect to succeed to the rights and obligations of the memberinsurer which accrue on or after the coverage date and relate to contractscovered, in whole or in part, by the Association under any one or moreagreements for indemnity reinsurance entered into by the member insurer asceding insurer and selected by the Association. However, the Association maynot exercise its right of election with respect to an agreement for reinsuranceif the receiver, rehabilitator or liquidator of the member insurer haspreviously expressly disaffirmed the agreement. The election must be effectedby a notice to the receiver, rehabilitator or liquidator and the affectedreinsurers. If the Association makes such an election:

(a) The Association is responsible for all unpaidpremiums due under each agreement for periods both before and after the coveragedate, and for the performance of all other obligations to be performed afterthe coverage date, in each case which relates to a contract covered in whole orin part by the Association. The Association may charge a contract covered inpart by it, through reasonable methods of allocation, for the costs ofreinsurance in excess of the obligations of the Association.

(b) The Association is entitled to any amount payableby the reinsurer under each agreement with respect to losses or events thatoccur in periods after the coverage date and relate to contracts covered inwhole or in part by the Association, but upon receipt of any such amount, theAssociation is obligated to pay, to the beneficiary under the contract onaccount of which the amount was paid, that portion of the amount received bythe Association that exceeds the benefits paid by the Association on account ofthe contract less the retention by the impaired or insolvent member insurerapplicable to the loss or event.

(c) The Association and each reinsurer shall, within 30days after the election, calculate the net balance due to or from theAssociation under each agreement as of the date of the election, giving fullcredit for all items paid by the member insurer or its receiver, rehabilitator orliquidator, or the reinsurer, between the coverage date and the date of theelection. The Association or the reinsurer shall pay the net balance within 5days after the completion of the calculation. If a receiver, rehabilitator orliquidator has received any amount due the Association pursuant to paragraph(b), the recipient shall remit the amount to the Association as promptly aspracticable.

(d) The reinsurer may not terminate an agreement forreinsurance insofar as it relates to contracts covered by the Association inwhole or in part, or set off any unpaid premium due for a period before thecoverage date against the amount due the Association, if the Association,within 60 days after the election, pays the premiums due for periods bothbefore and after the coverage date which relate to such contracts.

3. If the Association transfers its obligation toanother insurer, and the Association and the other insurer so agree, the otherinsurer succeeds to the rights and obligations of the Association undersubsection 2 effective as of the agreed date, whether or not the Associationhas made the election described in subsection 2, except that:

(a) An agreement for indemnity reinsuranceautomatically terminates as to new reinsurance unless the reinsurer and theother insurer agree to the contrary;

(b) The obligation of the Association to thebeneficiary under paragraph (b) of subsection 2 ceases on the date of thetransfer to the other insurer; and

(c) This subsection does not apply if the Associationhas previously expressly determined in writing that it will not exercise itsright of election under subsection 2.

4. The provisions of this section supersede anaffected agreement for reinsurance which provides for or requires payment ofproceeds of reinsurance, on account of a loss or event that occurs after thecoverage date, to the receiver, rehabilitator or liquidator of the insolventmember insurer. The receiver, rehabilitator or liquidator remains entitled toany amounts payable by the reinsurer under the agreement with respect to lossesor events that occur before the coverage date, subject to any applicablesetoff.

5. Except as otherwise expressly provided, thissection does not alter or modify the terms or conditions of any agreement ofthe insolvent insurer for reinsurance, abrogate or limit any right of areinsurer to rescind an agreement for reinsurance, or give an owner orbeneficiary of a policy an independent cause of action against a reinsurerunder an agreement for indemnity reinsurance that is not otherwise set forth inthe agreement.

(Added to NRS by 2001, 1027)

NRS 686C.225 Terminationof obligations: Replacement of coverage or policy. TheAssociations obligations with respect to coverage under any policy of theimpaired or insolvent insurer or under any reissued or alternative policyceases on the date the coverage or policy is replaced by another similar policyby the policyholder, the insured or the Association.

(Added to NRS by 1991, 866)

NRS 686C.226 Terminationof obligations: Failure to pay premiums. Failureto pay premiums within 31 days after the date required pursuant to the terms ofany guaranteed, assumed, alternative or reissued policy or contract orsubstitute coverage terminates the Associations obligations under the policy,contract or coverage, except with respect to any claims incurred or any netcash surrender value which may be due in accordance with the provisions of thischapter.

(Added to NRS by 1991, 866)

ASSESSMENTS

NRS 686C.230 Imposition;classes.

1. To provide the money necessary to carry out thepowers and duties of the Association, the Board of Directors shall assess themember insurers, separately for each account, at such times and for suchamounts as the Board finds necessary. An assessment is due upon at least 30days written notice to the member insurer and accrues interest after it is dueat the rate provided in NRS 99.040.

2. There are two classes of assessments, as follows:

(a) Assessments in Class A must be authorized andcalled for the purpose of meeting administrative and legal costs and otherexpenses. An assessment in Class A need not be related to a particular impairedor insolvent insurer.

(b) Assessments in Class B must be authorized andcalled to the extent necessary to carry out the powers and duties of theAssociation under NRS 686C.150 to 686C.220, inclusive, with regard to animpaired or insolvent insurer.

(Added to NRS by 1973, 306; A 1991, 875; 2001, 1041)

NRS 686C.240 Computation;necessity; notification.

1. The Board of Directors shall determine the amountof each assessment in Class A and may, but need not, prorate it. If anassessment is prorated, the Board may provide that any surplus be creditedagainst future assessments in Class B. An assessment which is not prorated mustnot exceed $150 for each member insurer for any one calendar year.

2. The Board may allocate any assessment in Class Bamong the accounts according to the premiums or reserves of the impaired orinsolvent insurer or any other standard which it considers fair and reasonableunder the circumstances.

3. Assessments in Class B against member insurers foreach account and subaccount must be in the proportion that the premiumsreceived on business in this State by each assessed member insurer on policiesor contracts covered by each account or subaccount for the 3 most recentcalendar years for which information is available preceding the year in whichthe insurer became impaired or insolvent bears to premiums received on businessin this State for those calendar years by all assessed member insurers.

4. Assessments for money to meet the requirements ofthe Association with respect to an impaired or insolvent insurer must not beauthorized or called until necessary to carry out the purposes of this chapter.Classification of assessments under subsection 2 of NRS 686C.230 and computation ofassessments under this section must be made with a reasonable degree ofaccuracy, recognizing that exact determinations may not always be possible. TheAssociation shall notify each member insurer of its anticipated prorated shareof an assessment authorized but not yet called within 180 days after it isauthorized.

(Added to NRS by 1973, 307; A 1979, 767; 1981, 579;1991, 875; 1995, 1070; 2001,1041)

NRS 686C.250 Abatementor deferment; maximum amount; effect of insufficiency; allocation of fundsamong claims.

1. The Association may abate or defer, in whole or inpart, the assessment of a member insurer if, in the opinion of the Board ofDirectors, payment of the assessment would endanger the ability of the memberinsurer to fulfill its contractual obligations. If an assessment against amember insurer is abated or deferred in whole or in part, the amount by whichthat assessment is abated or deferred may be assessed against the other memberinsurers in a manner consistent with the basis for assessments set forth inthis section. As soon as the conditions that caused a deferral have beenremoved or rectified, the member insurer shall pay all assessments that weredeferred pursuant to a plan of repayment approved by the Association.

2. Except as otherwise provided in subsection 3, thetotal of all assessments authorized by the Association with respect to a memberinsurer for:

(a) The Account for Life Insurance and Annuities andeach of its subaccounts; and

(b) The Account for Health Insurance,

respectivelymust not in any 1 calendar year exceed 2 percent of the insurers averageannual premiums received in this state on the policies and contracts covered bythe subaccount or account during the 3 calendar years preceding the year inwhich the insurer became impaired or insolvent.

3. If two or more assessments are authorized in 1calendar year with respect to insurers that became impaired or insolvent in differentcalendar years, the average annual premiums received for the purposes of thelimitation provided in subsection 2 are equal and limited to the higher of the3-year annual premiums for the applicable account or subaccount as calculatedpursuant to this section.

4. If the maximum assessment, together with the otherassets of the Association in an account, does not provide in any 1 year ineither account an amount sufficient to carry out the responsibilities of theAssociation, the necessary additional money must be assessed as soon thereafteras permitted by this chapter.

5. If the maximum assessment for a subaccount of theAccount for Life Insurance and Annuities in any 1 year does not provide anamount sufficient to carry out the responsibilities of the Association, thenpursuant to subsection 3 of NRS 686C.240,the Board shall assess the other subaccount for the necessary additionalamount, subject to the maximum stated in subsection 2.

6. The Board may provide in the plan of operation amethod of allocating funds among claims, whether relating to one or moreimpaired or insolvent insurers, when the maximum assessment is insufficient tocover anticipated claims.

(Added to NRS by 1973, 307; A 1991, 876; 2001, 1042)

NRS 686C.260 Refundto member insurers. The Board of Directorsmay, by an equitable method as established in the plan of operation, refund tomember insurers, in proportion to the contribution of each insurer to thataccount, the amount by which the assets of the account exceed the amount theBoard finds is necessary to carry out during the coming year the obligations ofthe Association with regard to that account, including assets accruing fromassignment, subrogation, net realized gains and income from investments. Areasonable amount may be retained in any account to provide funds for thecontinuing expenses of the Association and for future claims.

(Added to NRS by 1973, 307; A 1991, 877; 2001, 1043)

NRS 686C.270 Ratesand dividends may reflect assessments. It isproper for any member insurer, in determining its rates of premium anddividends to owners of policies as to any kind of insurance within the scope ofthis chapter, to consider the amount reasonably necessary to meet itsobligations for assessment under this chapter.

(Added to NRS by 1973, 308; A 1991, 877)

NRS 686C.280 Issuance,effect and use of certificate of contribution; offset against liability forpremium tax.

1. The Association shall issue to each insurer payingan assessment under this chapter, other than an assessment in Class A, acertificate of contribution, in a form prescribed by the Commissioner, for theamount of the assessment so paid. All outstanding certificates are of equaldignity and priority without reference to amounts or dates of issue. A memberinsurer may show a certificate of contribution as an asset in its financialstatement in such form, for such amount, if any, and for such period as theCommissioner may approve.

2. A member insurer may offset against its liabilityfor premium tax to this state, accrued with respect to business transacted in acalendar year, an amount equal to 20 percent of the amount certified pursuantto subsection 1 in each of the 5 calendar years following the year in which theassessment was paid. If an insurer ceases to transact business, it may offsetall uncredited assessments against its liability for premium tax for the yearin which it so ceases.

3. Any sum acquired by refund from the Associationpursuant to NRS 686C.260 whichpreviously had been written off by the contributing insurer and offset againstpremium taxes as provided in subsection 2 must be paid to the Department ofTaxation and deposited by it with the State Treasurer for credit to the StateGeneral Fund. The Association shall notify the Commissioner and the Departmentof Taxation of each refund made.

(Added to NRS by 1973, 308; A 1991, 877; 1995, 1103; 2001, 1043)

NRS 686C.285 Protestby member insurer.

1. A member insurer that wishes to protest all or partof an assessment shall pay the full amount of the assessment when due, as setforth in the notice from the Association. The payment may be used to meetobligations of the Association during the pendency of the assessment and anysubsequent appeal. Payment must be accompanied by a statement in writing thatthe payment is made under protest and setting forth briefly the grounds for theprotest.

2. Within 60 days after the payment of an assessmentunder protest, the Association shall notify the member insurer in writing ofthe determination of the Association with respect to the protest, unless theAssociation notifies the member insurer that additional time is required toresolve the issues raised by the protest.

3. Within 30 days after a final decision is made, theAssociation shall notify the protesting member insurer in writing of the finaldecision. Within 60 days after receipt of that notice, the protesting memberinsurer may appeal the decision to the Commissioner.

4. As an alternative to making a final decision withrespect to a protest concerning the basis of assessment, the Association mayrefer the protest to the Commissioner for a final decision, with or without arecommendation from the Association.

5. If a protest or appeal is upheld, the amount paidin error or excess must be returned to the member insurer. Interest must bepaid on the refund at the rate actually earned by the Association.

(Added to NRS by 2001, 1029)

OPERATION

NRS 686C.290 Planof operation.

1. The Association shall submit to the Commissioner aplan of operation and any amendments thereto necessary or suitable to ensurethe fair, reasonable and equitable administration of the Association. The planof operation and any amendments thereto become effective upon approval inwriting by the Commissioner, or 30 days after submission if he has not disapprovedthem. All member insurers shall comply with the plan of operation.

2. If at any time the Association fails to submitsuitable amendments to the plan, the Commissioner shall adopt, after notice andhearing, such reasonable regulations as are necessary or advisable toeffectuate the provisions of this chapter. The regulations continue in forceuntil modified by the Commissioner or superseded by a plan submitted by theAssociation and approved by the Commissioner.

3. In addition to satisfying the other requirements ofthis chapter, the plan of operation must:

(a) Establish procedures for handling the assets of theAssociation.

(b) Establish the amount and method of reimbursingmembers of the Board of Directors under NRS686C.140.

(c) Establish regular places and times for meetings ofthe Board.

(d) Establish procedures for records to be kept of allfinancial transactions of the Association, its agents and the Board.

(e) Establish the procedures whereby selections for theBoard will be made and submitted to the Commissioner.

(f) Establish any additional procedures for assessmentsunder NRS 686C.230 to 686C.270, inclusive.

(g) Contain additional provisions necessary or properfor the execution of the powers and duties of the Association.

4. The plan of operation may provide that any or allpowers and duties of the Association, except those under subsection 3 of NRS 686C.220 and NRS 686C.230 to 686C.285, inclusive, are delegated to acorporation, Association or other organization which performs or will performfunctions similar to those of this Association, or its equivalent, in two ormore states. Such an organization must be reimbursed for any payments made onbehalf of the Association and paid for its performance of any function of theAssociation. A delegation under this subsection takes effect only with theapproval of the Board of directors and the Commissioner, and may be made onlyto an organization that extends protection not substantially less favorable andeffective than that provided by this chapter.

(Added to NRS by 1973, 308; A 1981, 105; 1991, 878; 2001, 1043)

NRS 686C.300 Powersand duties of Commissioner; appeals to Commissioner; notification of effect ofchapter.

1. In addition to the duties and powers otherwiseprovided in this chapter, the Commissioner:

(a) Shall, upon request of the Board of Directors,provide the Association with a statement of the premiums in this and any otherappropriate states for each member insurer.

(b) Shall, when an impairment is declared and theamount of the impairment is determined, serve a demand upon the impairedinsurer to make good the impairment within a reasonable time. Notice to theinsurer is notice to its stockholders, if any. The failure of the insurer tocomply with such demand promptly does not excuse the Association from theperformance of its powers and duties under this chapter.

(c) Must, in any liquidation or rehabilitationinvolving a domestic insurer, be appointed as the liquidator or rehabilitator.

2. The Commissioner may suspend or revoke, after noticeand hearing, the certificate of authority to transact insurance in this stateof any member insurer which fails to pay an assessment when due or fails tocomply with the plan of operation. As an alternative, the Commissioner may levya forfeiture on any member insurer which fails to pay an assessment when due.The forfeiture may not exceed 5 percent of the unpaid assessment per month, butno forfeiture may be less than $100 per month.

3. A final action of the Board of Directors or theAssociation may be appealed to the Commissioner by any member insurer if theappeal is taken within 60 days after the insurer receives notice of the finalaction. A final action or order of the Commissioner is subject to judicialreview in a court of competent jurisdiction pursuant to the procedure providedin chapter 233B of NRS for contested cases.

4. The liquidator, rehabilitator or conservator of anyimpaired insurer may notify all interested persons of the effect of thischapter.

(Added to NRS by 1973, 309; A 1991, 879; 2001, 1044)

NRS 686C.303 Actionby Commissioner upon default of Association. Ifthe Association fails to act within a reasonable time with respect to aninsolvent insurer, as provided in NRS686C.150 to 686C.155, inclusive,the Commissioner may exercise the powers and perform the duties of theAssociation under this chapter with respect to the insolvent insurer.

(Added to NRS by 1991, 867; A 2001, 1045)

NRS 686C.306 Noticeof certain actions by Commissioner; reports by Commissioner of certaininformation to Board of Directors.

1. The Commissioner shall notify the commissioners ofinsurance of all the other states within 30 days after he takes any of thefollowing actions against a member insurer:

(a) Revokes a member insurers license;

(b) Suspends a member insurers license; or

(c) Makes any formal order that a member insurer is torestrict its premium writing, obtain additional contributions to surplus,withdraw from the state, reinsure all or any part of its business, or increasecapital, surplus, or any other account for the security of the owners of itspolicies or its creditors.

2. The Commissioner shall report to the Board of Directorswhen he has taken any of the actions set forth in subsection 1, or has receiveda report from any other Commissioner indicating that any such action has beentaken in another state. The report to the Board must contain all significantdetails of the action taken or the report received from another Commissioner.

3. The Commissioner shall report to the Board ofDirectors when he has reasonable cause to believe from an examination of amember insurer, whether completed or in process, that the insurer may beimpaired or insolvent.

4. The Commissioner shall furnish to the Board theratios of the Insurance Regulatory Information System developed by theNational Association of Insurance Commissioners and listings of companies notincluded in those ratios, and the Board may use the information containedtherein in carrying out its duties and responsibilities under this chapter.Such reports and the information contained therein must be kept confidential bythe Board until such time as made public by the Commissioner or other lawfulauthority.

(Added to NRS by 1991, 867; A 2001, 1045)

NRS 686C.310 Provisionof information and advice relating to financial condition of insurers.

1. The Board of Directors may, upon majority vote,notify the Commissioner of any information indicating any member insurer may beimpaired or insolvent.

2. The Board may, upon majority vote, make reports andrecommendations to the Commissioner upon any matter germane to the solvency,liquidation, rehabilitation or conservation of any member insurer or germane tothe solvency of any person seeking admission to transact insurance in thisstate. These reports and recommendations are not open to public inspection.

3. The Commissioner may seek the advice andrecommendations of the Board concerning any matter affecting his duties andresponsibilities regarding the financial condition of member insurers and ofpersons seeking admission to transact insurance in this state.

4. The Board may, upon majority vote, makerecommendations to the Commissioner for the detection and prevention of theinsolvency of insurers.

(Added to NRS by 1973, 310; A 1991, 880; 2001, 1046)

NRS 686C.330 Impairedor insolvent insurers: Liability for unpaid assessments of insureds;maintenance and disclosure of records of Association; status of Association ascreditor; distribution of ownership by court.

1. This chapter does not reduce the liability forunpaid assessments of the insureds of an impaired insurer operating under aplan with liability for assessments.

2. Records must be kept of all meetings of the Boardof Directors to discuss the activities of the Association in carrying out itspowers and duties under NRS 686C.150to 686C.220, inclusive. The records ofthe Association with respect to an impaired or insolvent insurer may not bedisclosed before the termination of a proceeding for liquidation,rehabilitation or conservation involving the impaired or insolvent insurer orthe termination of the impairment or insolvency of the insurer, except upon theorder of a court of competent jurisdiction. This subsection does not limit theduty of the Association to render a report of its activities under NRS 686C.350.

3. For the purpose of carrying out its obligationsunder this chapter, the Association shall be deemed to be a creditor of theimpaired or insolvent insurer to the extent of assets attributable to coveredpolicies reduced by any amounts to which the Association is entitled assubrogee pursuant to NRS 686C.200.Assets of the impaired or insolvent insurer attributable to covered policiesmust be used to continue all covered policies and pay all contractualobligations of the impaired or insolvent insurer as required by this chapter.Assets attributable to covered policies, as used in this subsection, are thatproportion of the assets which the reserves that should have been establishedfor covered policies bear to the reserves that should have been established forall policies of insurance written by the impaired or insolvent insurer.

4. As a creditor of the impaired or insolvent insurerunder subsection 3 and consistent with NRS696B.415, the Association and other similar associations are entitled toreceive a disbursement out of the marshaled assets, from time to time as theassets become available to reimburse it, as a credit against contractualobligations under this chapter. If the liquidator has not, within 120 daysafter a final determination of insolvency of an insurer by the court in theinsolvent or impaired insurers state which has jurisdiction over theconservation, rehabilitation or liquidation of the insurer, made an applicationto the court for the approval of a proposal to disburse assets out of marshaledassets to guaranty associations having obligations because of the insolvency,the Association is entitled to make application to the court for approval ofits own proposal to disburse those assets.

5. Before the termination of any proceeding forliquidation, rehabilitation or conservation, the court may take intoconsideration the contributions of the respective parties, including theAssociation, the shareholders and owners of policies and contracts of theimpaired or insolvent insurer, and any other party with a bona fide interest,in making an equitable distribution of the ownership of the impaired or insolventinsurer. In making such a determination, consideration must be given to thewelfare of the owners of policies issued by the continuing or successorinsurer. No distribution to stockholders, if any, of an impaired or insolventinsurer may be made until the total amount of valid claims of the Association,with interest thereon, for money expended in exercising its powers andperforming its duties under NRS 686C.150to 686C.155, inclusive, with respectto that insurer have been fully recovered by the Association.

(Added to NRS by 1973, 310; A 1991, 881; 2001, 1047)

NRS 686C.333 Recoveryof distributions made before petition for liquidation or rehabilitation ofinsurer.

1. If an order for liquidation or rehabilitation of aninsurer domiciled in this state has been entered, the receiver appointed undersuch order is entitled to recover on behalf of the insurer, from any affiliatethat controlled it, the amount of distributions, other than stock dividendspaid by the insurer on its capital stock, made at any time during the 5 yearspreceding the petition for liquidation or rehabilitation, subject to thelimitations of subsections 2, 3 and 4.

2. No distribution is recoverable if the insurer showsthat when paid the distribution was lawful and reasonable, and that the insurerdid not know and could not reasonably have known that the distribution mightadversely affect the ability of the insurer to fulfill its contractualobligations.

3. Any person who as an affiliate that controlled theinsurer at the time the distributions were paid is liable up to the amount ofdistributions he received. Any person who was an affiliate that controlled theinsurer at the time the distributions were declared, is liable up to the amountof distributions he would have received if they had been paid immediately. Iftwo or more persons are liable with respect to the same distributions, they arejointly and severally liable.

4. The maximum amount recoverable pursuant to thissubsection is the amount needed in excess of all other available assets of theimpaired or insolvent insurer to pay the contractual obligations of theimpaired or insolvent insurer.

5. If any person liable under subsection 3 isinsolvent, all its affiliates that controlled it at the time the dividend waspaid are jointly and severally liable for any resulting deficiency in theamount recovered from the insolvent affiliate.

(Added to NRS by 1991, 868)

NRS 686C.340 Impairedor insolvent insurers: Stay of proceedings; reopening of default judgments. All proceedings in which the impaired or insolvent insureris a party in any court in this state must be stayed for 60 days from the datean order of liquidation, rehabilitation or conservation is final to permitproper legal action by the Association on any matters germane to its powers orduties. If a judgment has been entered under any decision, order, verdict orfinding based on default, the Association may apply to have the judgment setaside by the same court that entered the judgment and is entitled to defendagainst the suit on the merits.

(Added to NRS by 1973, 312; A 1991, 882)

NRS 686C.350 Examinationof Association; annual financial report. TheAssociation is subject to examination and regulation by the Commissioner. TheBoard of Directors shall submit to the Commissioner, not later than 120 daysafter the end of its fiscal year, a financial report in a form approved by theCommissioner and a report of its activities during the preceding fiscal year.Upon the request of a member insurer, the Association shall provide the insurerwith a copy of the report.

(Added to NRS by 1973, 312; A 1991, 882; 2001, 1048)

NRS 686C.360 Associationtax exempt; exception. The Association is exemptfrom payment of all fees and all taxes levied by this state or any of itspolitical subdivisions, except taxes on property.

(Added to NRS by 1973, 312)

NRS 686C.370 Immunityfrom liability. There is no liability on thepart of and no cause of action of any nature arises against any member insureror its agents or employees, the Association or its agents or employees, membersof the Board or the Commissioner or his representatives for any act or omissionby them in the performance of their powers and duties under this chapter. Thisimmunity extends to participation in any organization of other stateassociations whose purposes are similar, and to any such organization and itsagents or employees.

(Added to NRS by 1973, 312; A 1991, 882)

NRS 686C.380 Actionsarising under chapter: Venue; appeal bond. Venuein an action against the Association arising under this chapter lies in WashoeCounty. No appeal bond may be required of the Association in an appeal thatrelates to a cause of action arising under this chapter.

(Added to NRS by 2001, 1029)

NRS 686C.390 Unlawfuladvertisement regarding existence of Association. Itis unlawful for an insurer, agent or affiliate of an insurer, or other personto make, publish, circulate or place before the public, or cause any otherperson to do so, in any publication, notice, circular, letter or poster, orover any radio or television station, any advertisement or statement, writtenor oral, which uses the existence of the Association for the sale, solicitationor inducement to purchase any form of insurance covered by the Association.This section does not apply to the association or any other person that doesnot sell or solicit insurance.

(Added to NRS by 2001, 1030)

 

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