# Title 26.1 — Insurance

## Chapter 26.1-38.1 — Life and Health Insurance Guaranty Association

### § 26.1-38.1-01. Coverage and limitations.

1. This section provides coverage for the policies and contracts specified in subsection 2:
a. To persons, except for nonresident certificate holders under group policies or
contracts, who, regardless of where they reside, are the beneficiaries, assignees,
or payees, including health care providers rendering services covered under
health insurance policies or certificates, of the persons covered under
subdivision b.
b. To persons who are owners of or certificate holders or enrollees under such
policies or contracts other than unallocated annuity contracts and structured
settlement annuities, and in each case who:
(1) Are residents; or
(2) Are not residents, but only under all of the following conditions:
(a) The member insurer that issued such policies or contracts is domiciled
in this state;
(b) The states in which the persons reside have associations similar to
the association created under this chapter; and
(c) The persons are not eligible for coverage by an association in any
other state because the insurer or the health maintenance
organization was not licensed in the state at the time specified in the
state's guaranty association law.
c. For any unallocated annuity contract specified in subsection 2, subdivisions a and
b do not apply, and this chapter, except as provided in subdivisions e and f,
provides coverage to:
(1) Persons who are the owners of the unallocated annuity contracts if the
contracts are issued to or in connection with a specific benefit plan, the
sponsor of which has its principal place of business in this state; and
(2) Persons who are owners of unallocated annuity contracts issued to or in
connection with government lotteries if the owners are residents.
d. For structured settlement annuities specified in subsection 2, subdivisions a and
b do not apply, and this chapter, except as provided in subdivisions e and f,
provides 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:
(1) Is a resident, regardless of where the contract owner resides; or
(2) Is not a resident, and:
(a) The contract owner of the structured settlement annuity is a resident,
or 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 under
this chapter; and
(b) Neither the payee or beneficiary nor the contract owner is eligible for
coverage by the association of the state in which the payee or contract
owner resides.
e. This chapter does not provide coverage to:
(1) 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;
(2) A person covered under subdivision c, if any coverage is provided by the
association of another state to the person; or
(3) A person who acquires rights to receive payments through a structured
settlement factoring transaction as defined in section 5891(c)(3)(A) of title
26 of the United States Code, regardless of whether the transaction
occurred before or after this federal law became effective.

f. This chapter provides coverage to a person who is a resident of this state and, in
special circumstances, to a nonresident. In order to avoid duplicate coverage, if a
person who would otherwise receive coverage under this chapter is provided
coverage under the laws of any other state, the person may not be provided
coverage under this chapter. In determining the application of the provisions of
this subdivision in situations in which a person could be covered by the
association of more than one state, whether as an owner, payee, enrollee,
beneficiary, or assignee, this chapter must be construed in conjunction with other
state laws to result in coverage by only one association.
2. This chapter provides coverage to the persons specified in subsection 1 for policies or
contracts of direct, nongroup life insurance, health insurance, which for the purposes
of this chapter includes health maintenance organization subscriber contracts and
certificates, or annuities, and supplemental contracts to any of these, for certificates
under direct group policies and contracts, and supplemental contracts to any of these
and for unallocated annuity contracts issued by member insurers, except as limited by
this chapter. Annuity contracts and certificates under group annuity contracts include
guaranteed investment contracts, deposit administration contracts, unallocated funding
agreements, allocated funding agreements, structured settlement annuities, annuities
issued to or in connection with government lotteries, and any immediate or deferred
annuity contracts.
3. Except for the portion of a policy or contract, including a rider, which provides
long-term care or any other health insurance benefits, this chapter does not provide
coverage for:
a. Any portion of a policy or contract not guaranteed by the member insurer, or
under which the risk is borne by the policy owner or contract owner;
b. Any policy or contract of reinsurance, unless assumption certificates have been
issued pursuant to the reinsurance policy or contract;
c. Any portion of a policy or contract to the extent that the rate of interest on which
the portion of the policy or contract is based or to the extent that the rate of
interest, crediting of a rate of interest, or similar factor determined by using an
index or other external reference stated in the policy or contract which is
employed in calculating returns or changes in value:
(1) Averaged over the period of four years prior to the date on which the
member insurer becomes an impaired or insolvent insurer under this
chapter, whichever is earlier, exceeds 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 such lesser period if
the policy or contract was issued less than four years prior to the date on
which the member insurer becomes an impaired or insolvent insurer under
this chapter, whichever is earlier; and
(2) On and after the date on which the member insurer becomes an impaired or
insolvent insurer under this chapter, whichever is earlier, exceeds the rate of
interest determined by subtracting three percentage points from Moody's
corporate bond yield average as most recently available;
d. A portion of a policy or contract issued to a plan or program of an employer,
association, or other person to provide life, health, or annuity benefits to its
employees, members, or others, to the extent that such plan or program is
self-funded or uninsured, including benefits payable by an employer, association,
or other person under:
(1) A multiple employer welfare arrangement as defined in section 1144 of
title 29 of the United States Code;
(2) A minimum premium group insurance plan;
(3) A stop-loss group insurance plan; or
(4) An administrative services only contract;
e. Any portion of a policy or contract to the extent that it provides for dividends or
experience rating credits, voting rights, or payment of any fees or allowances to

any person, including the policy owner or contract owner, in connection with the
service to or administration of the policy or contract;
f. Any policy or contract issued in this state by a member insurer at a time when it
was not licensed or did not have a certificate of authority to issue the policy or
contract in this state;
g. Any unallocated annuity contract issued to or in connection with a benefit plan
protected under the federal pension benefit guaranty corporation regardless of
whether the federal pension benefit guaranty corporation has yet become liable to
make any payments with respect to the benefit plan;
h. Any portion of any unallocated annuity contract which is not issued to, or in
connection with, a specific employee, union, or association of natural persons
benefit plan or a government lottery;
i. A portion of a policy or contract to the extent that the assessments required by
section 26.1-38.1-06 with respect to the policy or contract are preempted or
otherwise not permitted by federal or state law;
j. An obligation that does not arise under the express written terms of the policy or
contract issued by the member insurer to the enrollee, certificate holder, contract
owner or policy owner, including:
(1) Claims based on marketing materials;
(2) Claims based on side letters, riders, or other documents that were issued by
the member insurer without meeting applicable policy or contract form filing
or approval requirements;
(3) Misrepresentations of or regarding policy or contract benefits;
(4) Extracontractual claims; or
(5) A claim for penalties or consequential or incidental damages;
k. 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;
l. A portion of a policy or contract to the extent it provides for interest or other
changes in value to be determined by the use of an index or other external
reference stated in the policy or contract, but which has not been credited to the
policy or contract, or as to which the policy owner's or contract owner's rights are
subject to forfeiture, as of the date the member insurer becomes an impaired or
insolvent insurer under this chapter, whichever is earlier. If a policy's or contract's
interest or changes in value are credited less frequently than annually, then for
purposes of determining the values that have been credited and are not subject
to forfeiture under this subdivision, the interest or changes in value determined by
using the procedures defined in the policy or contract will be credited as if the
contractual date of crediting interest or changing values was the date of
impairment or insolvency, whichever is earlier, and is not subject to forfeiture;
m. A policy or contract providing any hospital, medical, prescription drug, or other
health care benefits pursuant to part C or part D of subchapter XVIII of chapter 7
of title 42 of the United States Code, commonly known as Medicare part C and
part D, or subchapter XIX of chapter 7 of title 42 of the United States Code;
commonly known as Medicaid, or any regulations issued pursuant thereto; and
n. Structured settlement annuity benefits to which a payee or beneficiary has
transferred the payee's or beneficiary's rights in a structured settlement factoring
transactions, as defined in section 5891(c)(3)(A) of title 26 of the United States
Code, regardless of whether the transaction occurred before or after this federal
law became effective.
4. The benefits that the association may become obligated to cover may in no event
exceed the lesser of:
a. The contractual obligations for which the member insurer is liable or would have
been liable if it were not an impaired or insolvent insurer; or

b. (1) With any respect to one life, regardless of the number of policies, or
contracts:
(a) Three hundred thousand dollars in life insurance death benefits, but
not more than one hundred thousand dollars in net cash surrender
and net cash withdrawal values for life insurance;
(b) For health insurance benefits:
[1] One hundred thousand dollars for coverages not defined as
disability income insurance or health benefit plans or long-term
care insurance, including any net cash surrender and net cash
withdrawal values.
[2] Three hundred thousand dollars for disability income insurance,
and three hundred thousand dollars for long-term care insurance.
[3] Five hundred thousand dollars for health benefit plans.
(c) Two hundred fifty thousand dollars in the present value of annuity
benefits, including net cash surrender and net cash withdrawal values.
(2) With respect to each individual participating in a government retirement
benefit plan established under section 401(k), 403(b), or 457 of the United
States Internal Revenue Code covered by an unallocated annuity contract
or the beneficiaries of each such individual if deceased, in the aggregate,
two hundred fifty thousand dollars in present value annuity benefits,
including net cash surrender and net cash withdrawal values.
(3) With respect to each payee of a structured settlement annuity or beneficiary,
or beneficiaries of the payee if deceased, two hundred fifty thousand dollars
in present value annuity benefits, in the aggregate, including net cash
surrender and net cash withdrawal values, if any.
(4) However, in no event shall the association be obligated to cover more than:
(a) An aggregate of three hundred thousand dollars in benefits with
respect to any one life under paragraphs 1, 2, and 3 of subdivision b
except with respect to the benefits for health benefit plans under
subparagraph b of paragraph 1 of subdivision b, in which case the
aggregate liability of the association shall not exceed five hundred
thousand dollars with respect to any one individual; or
(b) With respect to one owner of multiple nongroup policies of life
insurance, whether the persons insured are officers, managers,
employees, or other persons, more than five million dollars in benefits,
regardless of the number of policies and contracts held by the owner.
(5) With respect to either one contract owner provided coverage under
paragraph 2 of subdivision c of subsection 1; or one plan sponsor whose
plans own directly or in trust one or more unallocated annuity contracts not
included in paragraph 2 of subdivision b, five million dollars in benefits,
irrespective of the number of contracts with respect to the contract owner or
plan sponsor. However, in the case in which one or more unallocated
annuity contracts are covered contracts under this chapter and are owned
by a trust or other entity for the benefit of two or more plan sponsors,
coverage must be afforded by the association if the largest interest in the
trust or entity owning the contract or contracts is held by a plan sponsor
whose principal place of business is in this state and in no event is the
association obligated to cover more than five million dollars in benefits with
respect to all these unallocated contracts.
(6) The limitations set forth in this subsection are limitations on the benefits for
which the association is obligated before taking into account either its
subrogation and assignment rights or the extent to which those benefits
could be provided out of the assets of the impaired or insolvent insurer
attributable to covered policies. The costs of the association's obligations
under this chapter may be met by the use of assets attributable to covered

policies or reimbursed to the association pursuant to its subrogation and
assignment rights.
5. In performing its obligations to provide coverage under this chapter, the association is
not required to guarantee, assume, reinsure, reissue, or perform, or cause to be
guaranteed, assumed, reinsured, reissued, 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.
6. For purposes of this chapter, benefits provided by a long-term care rider to a life
insurance policy or annuity contract must be considered the same type of benefits as
the related base life insurance policy or annuity contract.
### § 26.1-38.1-02. Definitions.

As used in this chapter:
1. "Account" means either of the two accounts created under section 26.1-38.1-03.
2. "Association" means the North Dakota life and health insurance guaranty association
created under section 26.1-38.1-03.
3. "Authorized assessment" or the term "authorized" when used in the context of
assessments means a resolution by the board of directors has been passed under
which an assessment will be called immediately or in the future from member insurers
for a specified amount. An assessment is authorized when the resolution is passed.
4. "Benefit plan" means a specific employee, union, or association of natural persons
benefit plan.
5. "Called assessment" or "called" when used in the context of assessments means that
a notice was issued by the association to member insurers requiring that an authorized
assessment be paid within the time frame set forth within the notice. An authorized
assessment becomes a called assessment when notice is mailed by the association to
member insurers.
6. "Commissioner" means the insurance commissioner of this state.
7. "Contractual obligation" means any obligation under a policy or contract or certificate
under a group policy or contract, or portion thereof for which coverage is provided
under section 26.1-38.1-01.
8. "Covered contract" or "covered policy" means any policy or contract or portion of a
policy or contract for which coverage is provided under this chapter.
9. "Extracontractual claims" include claims relating to bad faith in the payment of claims,
punitive or exemplary damages, or attorney's fees and costs.
10. "Health benefit plan" means any hospital or medical expense policy or certificate, any
health maintenance organization subscriber contract, or any other similar health
contract. The term does not include:
a. Accident only insurance;
b. Credit insurance;
c. Dental only insurance;
d. Vision only insurance;
e. Medicare supplement insurance;
f. Benefits for long-term care, home health care, community-based care, or any
combination of these benefits;
g. Disability income insurance;
h. Coverage for onsite medical clinics; or
i. Specified disease, hospital confinement indemnity, or limited health insurance, if
the types of coverage do not provide coordination of benefits and are provided
under separate policies or certificates.
11. "Impaired insurer" means a member insurer that, after July 1, 1989, is not an insolvent
insurer, and is placed under an order of rehabilitation or conservation by a court of
competent jurisdiction.
12. "Insolvent insurer" means a member insurer which, after July 1, 1989, is placed under
an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

13. "Member insurer" means any insurer or health maintenance organization licensed or
which holds a certificate of authority to transact in this state any kind of insurance or
health maintenance organization business for which coverage is provided under
section 26.1-38.1-01. The term includes any insurer or health maintenance
organization whose license or certificate of authority in this state may have been
suspended, revoked, not renewed, or voluntarily withdrawn, but does not include:
a. A fraternal benefit society;
b. A mandatory state pooling plan;
c. A mutual assessment company or other person that operates on an assessment
basis;
d. An insurance exchange;
e. An organization that has a certificate or license limited to the issuance of
charitable gift annuities under sections 26.1-34.1-01 through 26.1-34.1-07; or
f. Any entity similar to any of the above.
14. "Moody's corporate bond yield average" means the monthly average corporates as
published by Moody's investors service, incorporated, or any successor thereto.
15. "Owner" of a policy or contract and "policyholder", "policy owner", and "contract owner"
mean the person who is identified as the legal owner under the terms of the policy or
contract or who is otherwise vested with legal title to the policy or contract through a
valid assignment completed in accordance with the terms of the policy or contract and
properly recorded as the owner on the books of the member insurer. The terms owner,
contract owner, policyholder, and policy owner do not include persons with a mere
beneficial interest in a policy or contract.
16. "Person" means any individual, corporation, limited liability company, partnership,
association, governmental entity, or voluntary organization.
17. "Plan sponsor" means:
a. The employer in the case of a benefit plan established or maintained by a single
employer;
b. The employee organization in the case of a benefit plan established or
maintained by an employee organization; or
c. In the case of a benefit plan established or maintained by two or more employers
or jointly by one or more employers and one or more employee organizations, the
association, committee, joint board of trustees, or other similar group of
representatives of the parties who establish or maintain the benefit plan.
18. "Premiums" means amounts or considerations, by whatever name called, received on
covered policies or contracts less returned premiums, considerations, and deposits,
and less dividends and experience credits. "Premiums" do not include any amounts or
considerations received for any policies or contracts or for the portions of any policies
or contracts for which coverage is not provided under subsections 2 and 3 of section
subdivision c of subsection 3 of section 26.1-38.1-01, relating to interest limitations,
and subsection 3 of section 26.1-38.1-01, relating to limitations with respect to any one
individual, any one participant, and any one policy or contract owner. "Premiums" do
not include:
a. Premiums in excess of five million dollars on any unallocated annuity contract not
issued under a governmental retirement plan established under section 401(k),
403(b), or 457 of the United States Internal Revenue Code; or
b. With respect to multiple nongroup policies of life insurance owned by one owner,
whether the policy or contract owner is an individual, firm, corporation, or other
person, and whether the persons insured are officers, managers, employees, or
other persons, premiums in excess of five million dollars with respect to these
policies or contracts, regardless of the number of policies or contracts held by the
owner.
19. a. "Principal place of business" of a plan sponsor or a person other than a natural
person means the single state in which the natural persons who establish policy
for the direction, control, and coordination of the operations of the entity as a

whole primarily exercise that function, determined by the association in its
reasonable judgment by considering the following factors: the state in which the
primary executive and administrative headquarters of the entity is located; the
state in which the principal office of the chief executive officer of the entity is
located; the state in which the board of directors or similar governing person or
persons of the entity conducts the majority of its meetings; the state in which the
executive or management committee of the board of directors or similar
governing person or persons of the entity conducts the majority of its meetings;
the state from which the management of the overall operations of the entity is
directed; and in the case of a benefit plan sponsored by affiliated companies
comprising a consolidated corporation, the state in which the holding company or
controlling affiliate has its principal place of business as determined using the
above factors. However, in the case of a plan sponsor, if more than fifty percent of
the participants in the benefit plan are employed in a single state, that state is
deemed to be the principal place of business of the plan sponsor.
b. The principal place of business of a plan sponsor of a benefit plan described in
subdivision c of subsection 17 is deemed to be the principal place of business of
the association, committee, joint board of trustees, or other similar group of
representatives of the parties who establish or maintain the benefit plan that, in
lieu of a specific or clear designation of a principal place of business, is deemed
to be the principal place of business of the employer or employee organization
that has the largest investment in the benefit plan in question.
20. "Receivership court" means the court in the insolvent or impaired insurer's state having
jurisdiction over the conservation, rehabilitation, or liquidation of the member insurer.
21. "Resident" means any person to whom a contractual obligation is owed and who
resides in this state on the date of entry of a court order that determines a member
insurer to be an impaired insurer or a court order that determines a member insurer to
be an insolvent insurer, whichever occurs first. A person may be a resident of only one
state, which in the case of a person other than a natural person must be its principal
place of business. Citizens of the United States who are residents of foreign countries,
or residents of United States possessions, territories, or protectorates that do not have
an association similar to the association created under this chapter, are deemed
residents of the state of domicile of the member insurer that issued the policies or
contracts.
22. "State" means a state, the District of Columbia, Puerto Rico, and a United States
possession, territory, or protectorate.
23. "Structured settlement annuity" means an annuity purchased in order to fund periodic
payments for a plaintiff or other claimant in payment for or with respect to personal
injury suffered by the plaintiff or other claimant.
24. "Supplemental contract" means any written agreement entered into for the distribution
of proceeds under a life, health, or annuity policy or a life, health, or annuity contract.
25. "Unallocated annuity contract" means any annuity contract or group annuity certificate
which is not issued to and owned by an individual, except to the extent of any annuity
benefits guaranteed to an individual by an insurer under such contract or certificate.
### § 26.1-38.1-03. Creation of the association.

1. There is created a nonprofit legal entity to be known as the North Dakota life and
health insurance guaranty association. All member insurers must be and remain
members of the association as a condition of their authority to transact insurance or a
health maintenance organization business in this state. The association shall perform
its functions under the plan of operation established and approved under section
under section 26.1-38.1-04. For purposes of administration and assessment, the
association shall maintain two accounts:
a. The life insurance and annuity account that includes the following subaccounts:
(1) Life insurance account;

(2) Annuity account, which includes annuity contracts owned by a governmental
retirement plan or its trustee established under section 401, 403(b), or 457
of the United States Internal Revenue Code, but otherwise excludes
unallocated annuities; and
(3) Unallocated annuity account that excludes contracts owned by a
governmental retirement benefit plan or its trustee established under
section 401, 403(b), or 457 of the United States Internal Revenue Code.
b. The health account.
2. The association shall come under the immediate supervision of the commissioner and
is subject to the applicable provisions of the insurance laws of this state. Meetings or
records of the association may be opened to the public upon majority vote of the board
of directors of the association.
### § 26.1-38.1-04. Board of directors.

1. The board of directors of the association shall consist of not less than five nor more
than nine member insurers serving terms as established in the plan of operation. The
insurer members of the board must be selected by member insurers, subject to the
approval of the commissioner. Vacancies on the board must be filled for the remaining
period of the term by a majority vote of the remaining board members, for member
insurers, subject to the approval of the commissioner. To select the initial board of
directors, and initially organize the association, the commissioner shall give notice to
all member insurers of the time and place of the organizational meeting. In determining
voting rights of the organizational meeting, each member insurer is entitled to one vote
in person or by proxy. If the board of directors is not selected within sixty days after
notice of the organizational meeting, the commissioner may appoint the initial
members.
2. In approving selections or in appointing members to the board, the commissioner shall
consider, among other things, whether all member insurers are fairly represented.
3. Members of the board may be reimbursed from the assets of the association for
expenses incurred by them as members of the board of directors but members of the
board may not otherwise be compensated by the association for their services.
### § 26.1-38.1-05. Powers and duties of the association.

1. If a member insurer is an impaired insurer, the association may, in its discretion, and
subject to any conditions imposed by the association that do not impair the contractual
obligations of the impaired insurer, and that are approved by the commissioner:
a. Guarantee, assume, reissue, or reinsure, or cause to be guaranteed, assumed,
reissued, or reinsured, any or all of the policies or contracts of the impaired
insurer; or
b. Provide such moneys, pledges, loans, notes, guarantees, or other means as are
proper to effectuate subdivision a and assure payment of the contractual
obligations of the impaired insurer pending action under subdivision a.
2. If a member insurer is an insolvent insurer, the association, in its discretion, shall:
a. Guarantee, assume, reissue, or reinsure, or cause to be guaranteed, assumed,
reissued, or reinsured, the policies or contracts of the insolvent insurer;
b. Assure payment of the contractual obligations of the insolvent insurer;
c. Provide moneys, pledges, loans, notes, guarantees, or other means reasonably
necessary to discharge the association's duties; or
d. Provide benefits and coverage in accordance with the following provisions:
(1) With respect to policies and contracts, assure payment of benefits that
would have been payable under the policies or contracts of the insolvent
insurer, for claims incurred:
(a) With respect to group policies and contracts, not later than the earlier
of the next renewal date under those policies or contracts or forty-five
days, but in no event less than thirty days, after the date on which the

association becomes obligated with respect to the policies and
contracts.
(b) With respect to nongroup policies, contracts, and annuities, not later
than the earlier of the next renewal date, if any, under such policies or
contracts or one year, but in no event less than thirty days, from the
date on which the association becomes obligated with respect to the
policies or contracts.
(2) Make diligent efforts to provide all known insureds, enrollees, or annuitants
for nongroup policies and contracts, or group policy or contract owners with
respect to group policies and contracts, thirty days' notice of the termination
pursuant to paragraph 1 of the benefits provided.
(3) With respect to nongroup policies and contracts covered by the association,
make available to each known insured, enrollee, or annuitant, or owner if
other than the insured or annuitant, and with respect to an individual
formerly an insured, enrollee, or annuitant under a group policy or contract
who is not eligible for replacement group coverage, make available
substitute coverage on an individual basis in accordance with the provisions
of paragraph 4, if the insureds, enrollees, or annuitants had a right under
law or the terminated policy, contract, or annuity to convert coverage to
individual coverage or to continue an individual policy, contract, or annuity in
force until a specified age or for a specified time, during which the insurer or
health maintenance organization had no right unilaterally to make changes
in any provision of the policy, contract, or annuity or had a right only to make
changes in premium by class.
(a) In providing the substitute coverage required under this paragraph, the
association may offer either to reissue the terminated coverage or to
issue an alternative policy or contract at actuarially justified rates,
subject to the prior approval of the commissioner.
(b) Alternative or reissued policies or contracts shall be offered without
requiring evidence of insurability, and shall not provide for any waiting
period or exclusion that would not have applied under the terminated
policy or contract.
(c) The association may reinsure any alternative or reissued policy or
contract.
(4) Alternative policies or contracts adopted by the association shall be subject
to the approval of the commissioner. The association may adopt alternative
policies or contracts of various types for future issuance without regard to
any particular impairment or insolvency.
(5) Alternative policies or contracts must contain at least the minimum statutory
provisions required in this state and provide benefits that are not
unreasonable in relation to the premium charged. The association shall set
the premium in accordance with a table of rates which it shall adopt. The
premium must reflect the amount of insurance to be provided and the age
and class of risk of each insured, but may not reflect any changes in the
health of the insured after the original policy or contract was last
underwritten.
(6) Any alternative policy or contract issued by the association shall provide
coverage of a type similar to that of the policy or contract issued by the
impaired or insolvent insurer, as determined by the association.
(7) If the association elects to reissue terminated coverage at a premium rate
different from that charged under the terminated policy or contract, the
premium must be actuarially justified and set by the association in
accordance with the amount of insurance or coverage provided and the age
and class of risk, subject to prior approval of the commissioner.
(8) The association's obligations with respect to coverage under any policy or
contract of the impaired or insolvent insurer or under any reissued or

alternative policy or contract shall cease on the date the coverage or policy
or contract is replaced by another similar policy or contract by the policy or
contract owner, the insured, the enrollee, or the association.
3. When proceeding under subsection 2 with respect to any policy or contract carrying
guaranteed minimum interest rates, the association shall assure the payment or
crediting of a rate of interest consistent with subdivision c of subsection 3 of section
26.1-38.1-01.
4. Nonpayment of premiums within thirty-one days after the date required under the
terms of any guaranteed, assumed, alternative, or reissued policy or contract or
substitute coverage terminates the association's obligations under the policy, contract,
or coverage under this chapter with respect to the policy, contract, or coverage, except
with respect to any claims incurred or any net cash surrender value which may be due
in accordance with the provisions of this chapter.
5. Premiums due for coverage after entry of an order of liquidation of an insolvent insurer
belong to and are payable at the direction of the association. If the liquidator of an
insolvent insurer requests, the association shall provide a report to the liquidator
regarding the premium collected by the association. The association is liable for
unearned premiums due to policy or contract owners arising after the entry of the
order.
6. The protection provided by this chapter does not apply when any guaranty protection
is provided to residents of this state by the laws of the domiciliary state or jurisdiction
of the impaired or insolvent insurer other than this state.
7. In carrying out its duties under subsection 2, the association may:
a. Subject to approval by a court in this state, impose permanent policy or contract
liens in connection with any guarantee assumption or reinsurance agreement, if
the association finds that the amounts which can be assessed under this chapter
are less than the amounts needed to assure full and prompt performance of the
association's duties under this chapter, or that the economic or financial
conditions as they affect member insurers are sufficiently adverse to render the
imposition of such permanent policy or contract liens, to be in the public interest.
b. Subject to approval by a court in this state, impose temporary moratoriums or
liens on payments of cash values and policy loans, or any other right to withdraw
funds held in conjunction with policies or contracts, in addition to any contractual
provisions for deferral or cash or policy loan value. In addition, in the event of a
temporary moratorium or moratorium charge imposed by the receivership court
on payment of cash values or policy loans, or on any other right to withdraw funds
held in conjunction with policies or contracts, out of the assets of the impaired or
insolvent insurer, the association may defer the payment of cash values, policy
loans, or other rights by the association for the period of the moratorium or
moratorium charge imposed by the receivership court, except for claims covered
by the association to be paid in accordance with a hardship procedure
established by the liquidator or rehabilitator and approved by the receivership
court.
8. A deposit in this state, held according to law or as required by the commissioner for
the benefits of creditors, including policy or contract owners, not turned over to the
domiciliary liquidator upon the entry of a final order of liquidation or order approving a
rehabilitation plan of a member insurer domiciled in this state or in a reciprocal state,
under section 26.1-06.1-50, must be paid promptly to the association. The association
may retain a portion of any amount received equal to the percentage determined by
dividing the aggregate amount of policy or contract owners' claims related to that
insolvency for which the association has provided statutory benefits by the aggregate
amount of all policy or contract owners' claims in this state related to that insolvency
and shall remit to the domiciliary receiver the amount so paid to the association, less
the amount retained pursuant to this subsection. Any amount paid to the association
and retained by it is treated as a distribution of estate assets pursuant to section

insurer.
9. If the association fails to act within a reasonable period of time with respect to an
insolvent insurer, as provided in subsection 2, the commissioner shall have the powers
and duties of the association under this chapter with respect to insolvent insurers.
10. The association may render assistance and advice to the commissioner, upon request,
concerning rehabilitation, payment of claims, continuance of coverage, or the
performance of other contractual obligations of any impaired or insolvent insurer.
11. The association shall have standing to appear or intervene before any court or agency
in this state with jurisdiction over an impaired or insolvent insurer concerning which the
association is or may become obligated under this chapter or with jurisdiction over any
person or property against which the association may have rights through subrogation
or otherwise. Such standing extends to all matters germane to the powers and duties
of the association, including proposals for reinsuring, reissuing, modifying, or
guaranteeing the policies or contracts of the impaired or insolvent insurer and the
determination of the policies or contracts and contractual obligations. The association
shall also have the right to appear or intervene before a court or agency in another
state with jurisdiction over an impaired or insolvent insurer for which the association is
or may become obligated or with jurisdiction over any person or property against
whom the association may have rights through subrogation or otherwise.
12. Any person receiving benefits under this chapter must be deemed to have assigned
the rights under, and any causes of action against any person for losses arising under,
resulting from, or otherwise relating to, the covered policy or contract to the
association to the extent of the benefits received because of this chapter, whether the
benefits are payments of or on account of contractual obligations, continuation of
coverage, or provision of substitute or alternative policies, contracts, or coverages. The
association may require an assignment to it of such rights and causes of action by any
enrollee, payee, policy or contract owner, beneficiary, insured, or annuitant as a
condition precedent to the receipt of any right or benefits conferred by this chapter
upon such person.
13. The subrogation rights of the association under this section have the same priority
against the assets of the impaired or insolvent insurer as that possessed by the person
entitled to receive benefits under this chapter.
14. In addition to subsections 12 and 13, the association shall have all common-law rights
of subrogation and other equitable or legal remedy that would have been available to
the impaired or insolvent insurer or owner, beneficiary, enrollee, or payee of a policy or
contract with respect to such policy or contract, including, in the case of a structured
settlement annuity, any rights of the owner, beneficiary, or payee of the annuity, to the
extent of benefits received under this chapter, against a person originally or by
succession responsible for the losses arising from the personal injury relating to the
annuity or payment for the personal injury, except any such person responsible solely
by reason of serving as an assignee in respect of a qualified assignment under section
130 of the Internal Revenue Code.
15. If subsections 12, 13, and 14 are invalid or ineffective with respect to any person or
claim for any reason, the amount payable by the association with respect to the related
covered obligations must be reduced by the amount realized by any other person with
respect to the person or claim that is attributable to the policies or contracts or portion
of the policies or contracts covered by the association. If the association has provided
benefits with respect to a covered obligation and a person recovers amounts as to
which the association has rights as described in the preceding paragraphs of this
subsection, the person shall pay to the association the portion of the recovery
attributable to the policies or contracts or portion of the policies or contracts covered
by the association.
16. In addition to any other rights and powers under this chapter, the association may:
a. Enter into such contracts as are necessary or proper to carry out the provisions
and purposes of this chapter;

b. Sue or be sued, including taking any legal actions necessary or proper to recover
any unpaid assessments under section 26.1-38.1-06 and to settle claims or
potential claims against it;
c. Borrow money to effect the purposes of this chapter and any notes or other
evidences of indebtedness of the association not in default shall be legal
investments for domestic member insurers and may be carried as admitted
assets;
d. Employ or retain such persons as are necessary or appropriate to handle the
financial transactions of the association, and to perform such other functions as
become necessary or proper under this chapter;
e. Take such legal action as may be necessary or appropriate to avoid or recover
payment of improper claims;
f. Exercise, for the purposes of this chapter and to the extent approved by the
commissioner, the powers of a domestic life insurer, health insurer, or health
maintenance organization, but in no case may the association issue policies or
contracts other than those issued to perform its obligations under this chapter;
g. Organize itself as a corporation or in other legal form permitted by the laws of this
state;
h. Request information from a person seeking coverage from the association in
order to aid the association in determining its obligations under this chapter with
respect to the person, and the person promptly shall comply with the request;
i. Unless prohibited by law, in accordance with the terms and conditions of the
policy or contract, file for actuarially justified rate or premium increases for any
policy or contract for which the association provides coverage under this chapter;
and
j. Take other necessary or appropriate action to discharge its duties and obligations
under this chapter or to exercise its powers under this chapter.
17. The association may join an organization of one or more state associations of similar
purposes, to further the purposes and administer the powers and duties of the
association.
18. At any time within one year after the date on which the association becomes
responsible for the obligations of a member insurer, the association may elect to
succeed to the rights and obligations of the member insurer which accrue on or after
this coverage date and which relate to contracts covered in whole or in part by the
association under any indemnity reinsurance agreement entered by the member
insurer as a ceding insurer and selected by the association. However, the association
may not exercise an election with respect to a reinsurance agreement if the receiver,
rehabilitator, or liquidator of the member insurer previously and expressly has
disaffirmed the reinsurance agreement. The election is effected by a notice to the
receiver, rehabilitator, or liquidator and to the affected reinsurers. If the association
makes an election, subdivisions a through d apply with respect to the agreements
selected by the association.
a. The association is responsible for all unpaid premiums due under the
agreements, for periods both before and after the coverage date, and is
responsible for the performance of all other obligations to be performed after the
coverage date, in each case which relate to contracts covered, in whole or in part,
by the association. The association may charge contracts covered in part by the
association, through reasonable allocation methods, the costs for reinsurance in
excess of the obligations of the association.
b. The association is entitled to any amounts payable by the reinsurer under the
agreements with respect to losses or events that occur in periods after the
coverage date and that relate to contracts covered by the association, in whole or
in part, provided that, upon receipt of any of these amounts, the association is
obliged to pay to the beneficiary under the policy or contract on account of which
the amounts were paid a portion of the amount equal to the excess of the amount
received by the association, over the benefits paid by the association on account

of the policy or contract less the retention of the impaired or insolvent member
insurer applicable to the loss or event.
c. Within thirty days following the association's election, the association and each
indemnity reinsurer shall calculate the net balance due to or from the association
under each reinsurance agreement as of the date of the association's election,
giving full credit to every item paid by the member insurer or its receiver,
rehabilitator, or liquidator, or the indemnity reinsurer during the period between
the coverage date and the date of the association's election. The association or
indemnity reinsurer shall pay the net balance due the other within five days of the
completion of the aforementioned calculation. If the receiver, rehabilitator, or
liquidator received any amounts due the association pursuant to subdivision b,
the receiver, rehabilitator, or liquidator shall remit the amounts to the association
as promptly as practicable.
d. If the association, within sixty days of the election, pays the premiums due for
periods both before and after the coverage date that relate to contracts covered
by the association, in whole or in part, the reinsurer may not terminate the
reinsurance agreements, to the extent the agreements relate to contracts covered
by the association, in whole or in part, and may not set off any unpaid premium
due for periods before the coverage date against amounts due the association.
19. If the association transfers its obligations to another insurer, and if the association and
the other insurer agree, the other insurer shall succeed to the rights and obligations of
the association under subsection 18 effective as of the date agreed by the association
and the other insurer and regardless of whether the association made the election,
provided that:
a. The indemnity reinsurance agreements automatically terminate for new
reinsurance unless the indemnity reinsurer and the other insurer agree to the
contrary;
b. The obligations described in the proviso to subdivision b of subsection 18 no
longer apply on and after the date the indemnity reinsurance agreement is
transferred to the third-party insurer; and
c. This subsection does not apply if the association previously expressly determined
in writing that it will not exercise the election referred to in subsection 18.
20. Subsections 18 and 19 supersede the provisions of any law of this state or of any
affected reinsurance contract that provides for or requires any payment of reinsurance
proceeds, on account of losses or events that occur in periods after the coverage date,
to the receiver, rehabilitator, or liquidator, of the insolvent member insurer. The
receiver, rehabilitator, or liquidator remains entitled to any amounts payable by the
reinsurer under the reinsurance agreement with respect to losses or events that occur
in periods before the coverage date, subject to applicable setoff provisions.
21. Except as otherwise expressly provided in this section, this section does not alter or
modify the terms and conditions of the indemnity reinsurance agreements of the
insolvent member insurer. This section does not abrogate or limit any rights of any
reinsurer to claim that it is entitled to rescind a reinsurance agreement. This section
does not give a policy owner, contract owner, enrollee, certificate holder, or beneficiary
an independent claim for relief against an indemnity reinsurer which is not otherwise
set forth in the indemnity reinsurance agreement.
22. The board of directors of the association has discretion and may exercise reasonable
business judgment to determine the means by which the association is to provide the
benefits of this chapter in an economical and efficient manner.
23. If the association arranged or offered to provide the benefits of this chapter to a
covered person under a plan or arrangement that fulfills the association's obligations
under this chapter, the person is not entitled to benefits from the association in addition
to or other than those provided under the plan or arrangement.
24. Burleigh County is the venue in a course of action against the association arising
under this chapter. The association is not required to give an appeal bond in an appeal
that relates to a cause of action arising under this chapter.

25. The association, in carrying out association duties in connection with guaranteeing,
assuming, reissuing, or reinsuring policies or contracts under subsections 1 and 2,
may issue substitute coverage for a policy or contract that provides a rate of interest,
crediting of a rate of interest, or similar factor determined by using an index or other
external reference stated in the policy or contract which is employed in calculating
returns or changes in value by issuing an alternative policy or contract if:
a. Instead of the index or other external reference provided for in the original policy
or contract, the alternative policy or contract provides for a fixed interest rate,
payment of dividends with minimum guarantees, or different method for
calculating interest or changes in value;
b. There is no requirement for evidence of insurability, a waiting period, or other
exclusion that would not have applied under the replaced policy or contract; and
c. The alternative policy or contract is substantially similar to the replaced policy or
contract in all other material terms.
### § 26.1-38.1-06. Assessments.

1. For the purpose of providing the funds necessary to carry out the powers and duties of
the association, the board of directors shall assess the member insurers, separately
for each account, at such time and for such amounts as the board finds necessary.
Assessments must be due not less than thirty days after prior written notice to the
member insurers and must accrue interest at eighteen percent per annum on and after
the due date.
2. There must be two classes of assessment, as follows:
a. Class A assessments must be authorized and called for the purpose of meeting
administrative and legal costs and other expenses. Class A assessments may be
authorized and called whether or not related to a particular impaired or insolvent
insurer.
b. Class B assessments must be authorized and called to the extent necessary to
carry out the powers and duties of the association under section 26.1-38.1-05
with regard to an impaired or insolvent insurer.
3. The amount of any class A assessment must be determined at the discretion of the
board of directors and must be authorized and called on a non-pro rata basis.
4. The amount of any class B assessment, except for assessments related to long-term
care insurance, must be allocated for assessment purposes between the accounts and
among the subaccounts of the life insurance and annuity account, pursuant to an
allocation formula which may be based on the premiums or reserves of the impaired or
insolvent insurer or any other standard deemed by the board in its sole discretion as
being fair and reasonable under the circumstances.
5. The amount of the class B assessment for long-term care insurance written by the
impaired or insolvent insurer must be allocated according to a methodology included in
the plan of operation and approved by the commissioner. The methodology must
provide for fifty percent of the assessment to be allocated to accident and health
member insurers and fifty percent to be allocated to life and annuity member insurers.
6. Class B assessments against member insurers for each account and subaccount must
be in the proportion that the premiums received on business in this state by each
assessed member insurer on policies or contracts covered by each account for the
three most recent calendar years for which information is available preceding the year
in which the member insurer became insolvent or, in the case of an assessment with
respect to an impaired insurer, the three most recent calendar years for which
information is available preceding the year in which the member insurer became
impaired, bears to such premiums received on business in this state for such calendar
years by all assessed member insurers.
7. Assessments for funds to meet the requirements of the association with respect to an
impaired or insolvent insurer may not be authorized or called until necessary to
implement the purposes of this chapter. Classification of assessments under
subsection 2 and computation of assessments under this section must be made with a

reasonable degree of accuracy, recognizing that exact determinations may not always
be possible. The association shall notify each member insurer of its anticipated
pro rata share of an authorized assessment not yet called within one hundred eighty
days after the assessment is authorized.
8. The association may abate or defer, in whole or in part, the assessment of a member
insurer if, in the opinion of the board, payment of the assessment would endanger the
ability of the member insurer to fulfill its contractual obligations. In the event an
assessment against a member insurer is abated, or deferred in whole or in part, the
amount by which such assessment is abated or deferred may be assessed against the
other member insurers in a manner consistent with the basis for assessments set forth
in this section. Once the conditions that caused a deferral are removed or rectified, the
member insurer shall pay all assessments that were deferred pursuant to a repayment
plan approved by the association.
9. a. Subject to subdivision b, the total of all assessments authorized by the
association with respect to a member insurer for each subaccount of the life
insurance and annuity account and for the health account may not in any one
calendar year exceed two percent of that member insurer's average annual
premiums received in this state on the policies and contracts covered by the
subaccount or account during the three calendar years preceding the year in
which the member insurer became an impaired or insolvent insurer.
b. If two or more assessments are authorized in one calendar year with respect to
member insurers that become impaired or insolvent in different calendar years,
the average annual premiums for purposes of the aggregate assessment
percentage limitation referenced in subdivision a must be equal and limited to the
higher of the three-year average annual premiums for the applicable subaccount
or account as calculated pursuant to this section.
c. If the maximum assessment, together with the other assets of the association in
an account, does not provide in one year in either account an amount sufficient to
carry out the responsibilities of the association, the necessary additional funds
must be assessed as soon after as permitted under this chapter.
10. The board may provide in the plan of operation a method of allocating funds among
claims, whether relating to one or more impaired or insolvent insurers, when the
maximum assessment will be insufficient to cover anticipated claims.
11. If the maximum assessment for any subaccount of the life and annuity account in any
one year does not provide an amount sufficient to carry out the responsibilities of the
association, then pursuant to subsection 4, the board shall assess the other
subaccounts of the life and annuity account for the necessary additional amount,
subject to the maximum stated in subsection 9.
12. The board may, by an equitable method as established in the plan of operation, refund
to member insurers, in proportion to the contribution of each member insurer to that
account, the amount by which the assets of the account exceed the amount the board
finds is necessary to carry out during the coming year the obligations of the
association with regard to that account, including assets accruing from assignment,
subrogation, net realized gains, and income from investments. A reasonable amount
may be retained in any account to provide funds for the continuing expenses of the
association and for future claims.
13. It is proper for any member insurer, in determining its premium rates and policy owner
dividends as to any kind of insurance or health maintenance organization business
within the scope of this chapter, to consider the amount reasonably necessary to meet
its assessment obligations under this chapter.
14. The association shall issue to each member insurer paying an assessment under this
chapter, other than a class A assessment, a certificate of contribution, in a form
prescribed by the commissioner, for the amount of the assessment so paid. All
outstanding certificates must be of equal dignity and priority without reference to
amounts or dates of issue. A certificate of contribution may be shown by the member

insurer in its financial statement as an asset in such form and for such amount, if any,
and period of time as the commissioner may approve.
15. a. A member insurer that wishes to protest all or part of an assessment shall pay
when due the full amount of the assessment as set forth in the notice provided by
the association. The payment must be available to meet association obligations
during the pendency of the protest or any subsequent appeal. Payment must be
accompanied by a statement in writing that the payment is made under protest
and must set forth a brief statement of the grounds for the protest.
b. Within sixty days following the payment of an assessment under protest by a
member insurer, the association shall notify the member insurer in writing of its
determination with respect to the protest unless the association notifies the
member insurer that additional time is required to resolve the issues raised by the
protest.
c. Within thirty days after a final decision was made, the association shall notify the
protesting member insurer in writing of that final decision. Within sixty days of
receipt of notice of the final decision, the protesting member insurer may appeal
that final action to the commissioner.
d. In the alternative to rendering a final decision with respect to a protest based on a
question regarding the assessment base, the association may refer protests to
the commissioner for a final decision, with or without a recommendation from the
association.
e. If the protest or appeal on the assessment is upheld, the amount paid in error or
excess must be returned to the member insurer. Interest on a refund due a
protesting member insurer shall be paid at the rate actually earned by the
association.
16. The association may request information of member insurers in order to aid in the
exercise of its power under this section and member insurers shall comply promptly
with a request.
### § 26.1-38.1-07. Plan of operation.

1. The association shall submit to the commissioner a plan of operation and any
amendments thereto necessary or suitable to assure the fair, reasonable, and
equitable administration of the association. The plan of operation and any
amendments thereto become effective upon the commissioner's written approval or
after thirty days if the commissioner has not disapproved the plan of operation and any
amendments thereto.
2. If the association fails to submit a suitable plan of operation within one hundred twenty
days following July 1, 1989, or if at any time thereafter the association fails to submit
suitable amendments to the plan, the commissioner shall, after notice and hearing,
adopt such reasonable rules as are necessary or advisable to effectuate the provisions
of this chapter. Such rules must continue in force until modified by the commissioner or
superseded by a plan submitted by the association and approved by the
commissioner.
3. All member insurers shall comply with the plan of operation.
4. The plan of operation must, in addition to requirements enumerated elsewhere in this
chapter:
a. Establish procedures for handling the assets of the association;
b. Establish the amount and method of reimbursing members of the board of
directors under section 26.1-38.1-04;
c. Establish regular places and times for meetings, including telephone conference
calls of the board of directors;
d. Establish procedures for records to be kept of all financial transactions of the
association, its agents, and the board of directors;
e. Establish the procedures whereby selections for the board of directors will be
made and submitted to the commissioner;
f. Establish any additional procedures for assessments under section 26.1-38.1-06;

g. Contain additional provisions necessary or proper for the execution of the powers
and duties of the association;
h. Establish procedures whereby a director may be removed for cause, including if a
member insurer director becomes an impaired or insolvent insurer; and
i. Require the board of directors to establish a policy and procedures for addressing
conflicts of interest.
5. The plan of operation may provide that any or all powers and duties of the association,
except those under subdivision c of subsection 16 of section 26.1-38.1-05 and section
26.1-38.1-06, are delegated to a corporation, limited liability company, association, or
other organization which performs or will perform functions similar to those of this
association, or its equivalent, in two or more states. Such a corporation, limited liability
company, association, or organization must be reimbursed for any payments made on
behalf of the association and must be paid for its performance of any function of the
association. A delegation under this subsection shall take effect only with the approval
of both the board of directors and the commissioner, and may be made only to a
corporation, limited liability company, association, or organization which extends
protection not substantially less favorable and effective than that provided by this
chapter.
### § 26.1-38.1-08. Duties and powers of the commissioner.

In addition to the duties and powers enumerated elsewhere in this chapter:
1. The commissioner shall:
a. Upon request of the board of directors, provide the association with a statement
of premiums in this and any other appropriate states for each member insurer;
b. When an impairment is declared and the amount of the impairment is determined,
serve a demand upon the impaired insurer to make good the impairment within a
reasonable time; notice to the impaired insurer constitutes notice to its
shareholders, if any; and the failure of the impaired insurer to promptly comply
with such demand does not excuse the association from the performance of its
powers and duties under this chapter; and
c. In any liquidation or rehabilitation proceedings involving a domestic insurer, be
appointed as the liquidator or rehabilitator.
2. The commissioner may suspend or revoke, after notice and hearing, the certificate of
authority to transact business in this state of any member insurer which fails to pay an
assessment when due or fails to comply with the plan of operation. As an alternative,
the commissioner may levy a forfeiture on any member insurer which fails to pay an
assessment when due. Such forfeiture may not exceed five percent of the unpaid
assessment per month, but no forfeiture may be less than one hundred dollars per
month.
3. Any final action of the board of directors or the association may be appealed to the
commissioner by any member insurer if such appeal is taken within sixty days of the
member's receipt of notice of the final action being appealed. Any final action or order
of the commissioner is subject to judicial review in a court of competent jurisdiction in
accordance with the laws of this state which apply to the action or orders of the
commissioner.
4. The liquidator, rehabilitator, or conservator of any impaired or insolvent insurer may
notify any interested persons of the effect of this chapter.
### § 26.1-38.1-09. Prevention of insolvencies.

1. To aid in the detection and prevention of member insurer insolvencies or impairments,
it is the duty of the commissioner:
a. To notify the commissioners of all the other states, territories of the United States,
and the District of Columbia when the commissioner takes any of the following
actions against a member insurer:
(1) Revokes its license;
(2) Suspends its license; or

(3) Makes any formal order that the member insurer restrict its premium writing,
obtain additional contributions to surplus, withdraw from the state, reinsure
all or any part of its business, or increase capital, surplus, or any other
account for the security of policy owners, contract owners, certificate
holders, or creditors.
(4) Such notice must be mailed to all commissioners within thirty days following
the action taken or the date on which such action occurs.
b. To report to the board of directors when the commissioner has taken any of the
actions set forth in subdivision a or has received a report from any other
commissioner indicating that any such action has been taken in another state.
Such report to the board of directors must contain all significant details of the
action taken or the report received from another commissioner.
c. To report to the board of directors when the commissioner has reasonable cause
to believe from any examination, whether completed or in process, of any
member insurer that such insurer may be an impaired or insolvent insurer.
d. To furnish to the board of directors the national association of insurance
commissioners insurance regulatory information system ratios and listings of
companies not included in the ratios developed by the national association of
insurance commissioners and the board may use the information contained
therein in carrying out its duties and responsibilities under this section. Such
report and the information contained therein must be kept confidential by the
board of directors until such time as made public by the commissioner or other
lawful authority.
2. The commissioner may seek the advice and recommendations of the board of
directors concerning any matter affecting the commissioner's duties and
responsibilities regarding the financial condition of member insurers of insurers or
health maintenance organizations seeking admission to transact business in this state.
3. The board of directors, upon majority vote, may make reports and recommendations to
the commissioner upon any matter germane to the solvency, liquidation, rehabilitation,
or conservation of any member insurer or germane to the solvency of any insurer or
health maintenance organization seeking to do business in this state. Such reports
and recommendations may not be considered public documents.
4. The board of directors, upon majority vote, may notify the commissioner of any
information indicating any member insurer may be an impaired or insolvent insurer.
5. The board of directors, upon majority vote, may make recommendations to the
commissioner for the detection and prevention of member insurer insolvencies.
### § 26.1-38.1-10. Credits for assessments paid - Tax offsets.

1. A member insurer may offset against its premium tax liability to this state an
assessment described in section 26.1-38.1-06 to the extent of twenty percent of the
amount of such assessment for each of the five calendar years following the year in
which such assessment was paid. In the event a member insurer should cease doing
business, all uncredited assessments may be credited against its premium tax liability
for the year it ceases doing business.
2. A member insurer that is exempt from taxes referenced in subsection 1 may recoup
that member insurer's assessments by a surcharge on that member insurer's
premiums in a sum reasonably calculated to recoup the assessments over a
reasonable period of time, as approved by the commissioner. Amounts recouped may
not be considered premiums for any other purpose, including the computation of gross
premium tax, the medical loss ratio, or agent commission. If a member insurer collects
excess surcharges, the insurer shall remit the excess amount to the association, and
the excess amount must be applied to reduce future assessments in the appropriate
account.
3. Any sums that are acquired by refund, pursuant to section 26.1-38.1-06, from the
association by member insurers, and which have been offset against premium taxes
as provided in subsection 1, must be paid by the member insurers to this state in such

manner as the tax authorities may require. The association shall notify the
commissioner that such refunds have been made.
### § 26.1-38.1-11. Miscellaneous provisions.

1. This chapter does not reduce the liability for unpaid assessments of the insured of an
impaired or insolvent insurer operating under a plan with assessment liability.
2. Records must be kept of all meetings of the board of directors to discuss the activities
of the association in carrying out its powers and duties under section 26.1-38.1-05.
The records of the association with respect to an impaired or insolvent insurer may not
be disclosed before the termination of a liquidation, rehabilitation, or conservation
proceeding involving the impaired or insolvent insurer, except upon the termination of
the impairment or solvency of the member insurer, or upon the order of a court of
competent jurisdiction. Nothing in this subsection limits the duty of the association to
render a report of its activities under section 26.1-38.1-12.
3. For the purpose of carrying out its obligations under this chapter, the association must
be deemed to be a creditor of the impaired or insolvent insurer to the extent of assets
attributable to covered policies reduced by any amounts to which the association is
entitled as subrogee pursuant to subsections 12, 13, and 14 of section 26.1-38.1-05.
Assets of the impaired or insolvent insurer attributable to covered policies must be
used to continue as covered policies and pay all contractual obligations of the impaired
or insolvent insurer as required by this chapter. Assets attributable to covered policies
or contracts, as used in this subsection, are that proportion of the assets which the
reserves that should have been established for such policies or contracts bear to the
reserves that should have been established for all policies of insurance or health
benefit plans written by the impaired or insolvent insurer.
4. As a creditor of the impaired or insolvent insurer as established in subsection 3 and
consistent with chapter 26.1-06, the association and other similar associations are
entitled to receive a disbursement of assets out of the marshaled assets, from time to
time as the assets become available to reimburse it, as a credit against contractual
obligations under this chapter. If the liquidator, within one hundred twenty days of a
final determination of insolvency of a member insurer by the receivership court, does
not apply to the court for the approval of a proposal to disburse assets out of
marshaled assets to guaranty associations having obligations because of the
insolvency, the association is entitled to apply to the receivership court for approval of
its own proposal to disburse these assets.
5. Prior to the termination of any liquidation, rehabilitation, or conservation proceeding,
the court may take into consideration the contributions of the respective parties,
including the association, the shareholders, contract owners, certificate holders,
enrollees, and policy owners of the insolvent insurer, and any other party with a bona
fide interest, in making an equitable distribution of the ownership rights of such
insolvent insurer. In making such a determination, consideration must be given to the
welfare of the policy owners, contract owners, certificate holders, and enrollees of the
continuing or successor member insurer.
6. No distribution to stockholders, if any, of an impaired or insolvent insurer may be made
until and unless the total amount of valid claims of the association with interest thereon
for funds expended in carrying out its powers and duties under section 26.1-38.1-05
with respect to the member insurer have been fully recovered by the association.
7. a. If an order for liquidation or rehabilitation of a member insurer domiciled in this
state has been entered, the receiver appointed under the order has the right to
recover on behalf of the member insurer, from any affiliate that controlled its
capital stock, the amount of distributions, other than stock dividends paid by the
member insurer on its capital stock, made at any time during the five years
preceding the petition for liquidation or rehabilitation subject to the limitations of
subdivisions b, c, and d.
b. No such distribution is recoverable if the member insurer shows that when paid
the distribution was lawful and reasonable, and that the member insurer did not

know and could not reasonably have known that the distribution might adversely
affect the ability of the member insurer to fulfill its contractual obligations.
c. Any person who was an affiliate that controlled the member insurer at the time
the distributions were paid is liable up to the amount of distributions the person
received. Any person who was an affiliate that controlled the member insurer at
the time the distributions were declared is liable up to the amount of distributions
the person would have received if payment had been made immediately. If two or
more persons are liable with respect to the same distributions, they are jointly and
severally liable.
d. The maximum amount recoverable under this subsection is the amount needed in
excess of all other available assets of the insolvent insurer to pay the contractual
obligations of the insolvent insurer.
e. If any person liable under subdivision c is insolvent, all its affiliates that controlled
it at the time the distribution was paid, are jointly and severally liable for any
resulting deficiency in the amount recovered from the insolvent affiliate.
### § 26.1-38.1-12. Examination of the association - Annual report.

The association is subject to examination and regulation by the commissioner. The board of
directors shall submit to the commissioner each year, not later than one hundred twenty days
after the association's fiscal year, a financial report in a form approved by the commissioner and
a report of its activities during the preceding fiscal year. Upon the request of a member insurer,
the association shall provide the member insurer with a copy of the report.
### § 26.1-38.1-13. Tax exemptions.

The association is exempt from payment of all fees and all taxes levied by this state or any
of its subdivisions, except taxes levied on real property.
### § 26.1-38.1-14. Immunity.

There is no liability on the part of and no cause of action of any nature may arise against
any member insurer or its agents or employees, the association or its agents or employees,
members of the board of directors, or the commissioner or the commissioner's representatives,
for any action or omission by them in the performance of their powers and duties under this
chapter. This immunity extends to the participation of any organization of one or more other
state associations of similar purposes and to any such organization and its agents or
employees.
### § 26.1-38.1-15. Stay of proceedings - Reopening default judgments.

All proceedings in which the insolvent insurer is a party in any court in this state must be
stayed one hundred eighty days from the date an order of liquidation, rehabilitation, or
conservation is final to permit proper legal action by the association on any matters germane to
its powers or duties. As to judgment under any decision, order, verdict, or finding based on
default, the association may apply to have such judgment set aside by the same court that
made such judgment and must be permitted to defend against such suit on the merits.
### § 26.1-38.1-16. Prohibited advertisement of Insurance Guaranty Association Act in

insurance sales - Notice to policy owners.
1. No person, including a member insurer, insurance producer, or affiliate of a member
insurer, may make, publish, disseminate, circulate, or place before the public, or cause
directly or indirectly, to be made, published, disseminated, circulated, or placed before
the public, in any newspaper, magazine, or other publication, or in the form of a notice,
circular, pamphlet, letter, or poster, or over any radio station or television station, or in
any other way, any advertisement, announcement or statement, written or oral, which
uses the existence of the insurance guaranty association of this state for the purpose
of sales, solicitation, or inducement to purchase any form of insurance or other
coverage covered by chapter 26.1-38.1. However, this section does not apply to the

North Dakota life and health insurance guaranty association or any other entity that
does not sell or solicit insurance or coverage by a health maintenance organization.
2. Before January 1, 1990, the association shall prepare a summary document
describing the general purposes and current limitations of the chapter and complying
with subsection 3. This document should be submitted to the commissioner for
approval. Sixty days after receiving approval, no member insurer may deliver a policy
or contract to a policy owner, contract owner, certificate holder, or enrollee unless the
summary document is delivered to the policy owner, contract owner, certificate holder,
or enrollee at the time of delivery of the policy or contract. The document should also
be available upon request by a policy owner, contract owner, certificate holder, or
enrollee. The distribution, delivery, or contents or interpretation of this document does
not mean that either the policy or contract or the policy owner, contract owner,
certificate holder, or enrollee is covered in the event of the impairment or insolvency of
a member insurer. The description document must be revised by the association as
amendments to the chapter may require. Failure to receive this document does not
give the policy owner, contract owner, certificate holder, enrollee, or insured any
greater rights than those stated in this chapter.
3. The document prepared under subsection 2 must contain a clear and conspicuous
disclaimer on its face. The commissioner shall establish the form and content of the
disclaimer. The disclaimer must:
a. State the name and address of the life and health insurance guaranty association
and insurance department;
b. Prominently warn the policy owner, contract owner, certificate holder, or enrollee
that the North Dakota life and health insurance guaranty association may not
cover the policy or contract, or, if coverage is available, it will be subject to
substantial limitations and exclusions and be conditioned on continued residence
in this state;
c. State the types of policies or contracts for which guaranty funds will provide
coverage;
d. State that the member insurer and its insurance producers are prohibited by law
from using the existence of the North Dakota life and health insurance guaranty
association for the purpose of sales, solicitation, or inducement to purchase any
form of insurance or health maintenance organization coverage;
e. Emphasize that the policy owner, contract owner, certificate holder, or enrollee
should not rely on coverage under the North Dakota life and health insurance
guaranty association when selecting an insurer or health maintenance
organization coverage;
f. Explain rights available and procedures for filing a complaint to allege a violation
of any provisions of this chapter; and
g. Provide other information as directed by the commissioner, including sources for
information about the financial condition of insurers provided the information is
not proprietary and is subject to disclosure under the state's public records law.
4. A member insurer shall retain evidence of compliance with subsection 2 for so long as
the policy or contract for which the notice is given remains in effect.
### § 26.1-38.1-17. Prospective application.

Repealed by S.L. 2019, ch. 244, § 14.
