2005 North Carolina Code - General Statutes § 58-62-21. Coverage and limitations.

§ 58‑62‑21.  Coverage and limitations.

(a)       This Article provides coverage for the policies and contracts specified in subsection (b) of this section:

(1)       To persons who, regardless of where they reside (except for nonresident certificate holders under group policies), are the beneficiaries, assignees, or payees of the persons covered under subdivision (2) of this subsection, and

(2)       To persons who are owners or certificate holders under the policies, or in the case of unallocated annuity contracts to the persons who are the contract holders, and who are residents of this State, or who are not residents of this State, but only under all of the following conditions:  (i) the insurers that issued the policies are domiciled in this State; (ii) the insurers never held a license in the states in which the persons reside; (iii) the states have associations similar to the association created by this Article; and (iv) the persons are not eligible for coverage by the associations.

(b)       This Article provides coverage to the persons specified in subsection (a) of this section for direct, nongroup life, health, annuity, and supplemental policies, for certificates under direct group policies and contracts, and for unallocated annuity contracts issued by member insurers, except as limited by this Article.  Annuity contracts and certificates under group annuity contracts include guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement agreements, lottery contracts, and any immediate or deferred annuity contracts.

(c)       This Article does not provide coverage for:

(1)       Any part of a policy not guaranteed by the insurer, or under which the risk is borne by the policyholder;

(2)       Any policy or contract of reinsurance, unless assumption certificates have been issued;

(3)       Any part of a policy to the extent that the rate of interest on which it is based:

a.         Averaged over the period of four years before the date on which the Association becomes obligated with respect to the policy, exceeds a rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four‑year period or for a lesser period if the policy was issued less than four years before the Association became obligated; and

b.         On and after the date on which the Association becomes obligated with respect to the policy, exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available;

(4)       Any plan or program of an employer, association, or similar entity to provide life, health, or annuity benefits to its employees or members to the extent that the plan or program is self‑funded or uninsured, including benefits payable by an employer, association, or similar entity under:

a.         A multiple employer welfare arrangement as defined in section 514 of the Employee Retirement Income Security Act of 1974, as amended;

b.         A minimum premium group insurance plan;

c.         A stop‑loss group insurance plan; or

d.         An administrative services only contract;

(5)       Any part of a policy to the extent that it provides dividends or experience‑rating credits, or provides that any fees or allowances be paid to any person, including the policyholder, in connection with the service to or administration of the policy;

(6)       Any policy issued in this State by a member insurer at a time when it was not licensed to issue the policy in this State;

(7)       Any unallocated annuity contract issued to an employee benefit plan protected under the federal Pension Benefit Guaranty Corporation; and

(8)       Any part of any unallocated annuity contract that is not issued to or in connection with a specific employee, union, or association of natural persons benefit plan or a government lottery.

(d)       The benefits for which the Association is liable do not, in any event, exceed the lesser of:

(1)       The contractual obligations for which the insurer is liable or would have been liable if it were not a delinquent insurer; or

(2)       With respect to any one individual, regardless of the number of policies, three hundred thousand dollars ($300,000) for all benefits, including cash values; or

(3)       With respect to each individual participating in a governmental retirement plan established under section 401, 403(b), or 457 of the Internal Revenue Code covered by an unallocated annuity contract, or the beneficiaries of each individual if deceased, in the aggregate, three hundred thousand dollars ($300,000) in present value annuity benefits, including net cash surrender and net cash withdrawal values; or

(4)       With respect to any one contract holder covered by any unallocated annuity contract not included in subdivision (3) of this subsection, five million dollars ($5,000,000) in benefits, regardless of the number of such contracts held by that contract holder.

(e)       In no event is the Association liable to expend more than three hundred thousand dollars ($300,000) in the aggregate with respect to any one individual under this section. (1991, c. 681, s. 56, c. 720, s. 93; 1993, c. 452, s. 61.)