2001 Minnesota Statutes

CHAPTER 61B. Life and health guaranty association

  61B.01 Repealed, 1993 c 319 s 20 

  61B.02 Repealed, 1993 c 319 s 20 

  61B.03 Repealed, 1993 c 319 s 20 

  61B.04 Repealed, 1993 c 319 s 20 

  61B.05 Repealed, 1993 c 319 s 20 

  61B.06 Repealed, 1993 c 319 s 20 

  61B.07 Repealed, 1993 c 319 s 20 

  61B.08 Repealed, 1993 c 319 s 20 

  61B.09 Repealed, 1993 c 319 s 20 

  61B.10 Repealed, 1993 c 319 s 20 

  61B.11 Repealed, 1993 c 319 s 20 

  61B.12 Repealed, 1993 c 319 s 20 

  61B.13 Repealed, 1993 c 319 s 20 

  61B.14 Repealed, 1993 c 319 s 20 

  61B.15 Repealed, 1993 c 319 s 20 

  61B.16 Repealed, 1993 c 319 s 20 

     61B.18 Citation. 

    Sections 61B.18 to 61B.32 may be cited as the Minnesota 
 Life and Health Insurance Guaranty Association Act. 

    HIST: 1993 c 319 s 3 

     61B.19 Purpose; scope; limitation of coverage; 
  limitation of benefits; construction. 

    Subdivision 1.    Purpose.  (a) The purpose of sections 
 61B.18 to 61B.32 is to protect, subject to certain limitations, 
 the persons specified in subdivision 2 against failure in the 
 performance of contractual obligations, under life insurance 
 policies, health insurance policies, annuity contracts, and 
 supplemental contracts specified in subdivision 2, because of 
 the impairment or insolvency of the member insurer that issued 
 the policies or contracts. 

    (b) To provide this protection, an association of insurers 
 has been created and exists to pay benefits and to continue 
 coverages, as limited in sections 61B.18 to 61B.32.  Members of 
 the association are subject to assessment to provide funds to 
 carry out the purpose of sections 61B.18 to 61B.32. 

    Subd. 2.    Scope.  (a) Sections 61B.18 to 61B.32 
 provide coverage for the policies and contracts specified in 
 paragraph (b) to: 

    (1) persons who are owners of or certificate holders under 
 these policies or contracts, or, (i) in the case of unallocated 
 annuity contracts, to the persons who are participants in a 
 covered retirement plan, or (ii) in the case of structured 
 settlement annuities, to persons who are payees in respect of 
 their liability claims (or beneficiaries of such payees who are 
 deceased) and who: 

    (A) are residents; or 

    (B) are not residents, but only under all of the following 
 conditions:  the insurers that issued the policies or contracts 
 are domiciled in the state of Minnesota; those insurers never 
 held a license or certificate of authority in the states in 
 which those persons reside; those states have associations 
 similar to the association created by sections 61B.18 to 61B.32; 
 and those persons are not eligible for coverage by those 
 associations; and 

    (2) persons who, regardless of where they reside, except 
 for nonresident certificate holders under group policies or 
 contracts, are the beneficiaries, assignees, or payees of the 
 persons covered under clause (1). 

    (b) Sections 61B.18 to 61B.32 provide coverage to the 
 persons specified in paragraph (a) for direct, nongroup life, 
 health, annuity, and supplemental policies or contracts, for 
 subscriber contracts issued by a nonprofit health service plan 
 corporation operating under chapter 62C, for certificates under 
 direct group policies and contracts, and for unallocated annuity 
 contracts issued by member insurers, except as limited by 
 sections 61B.18 to 61B.32.  Except as expressly excluded under 
 subdivision 3, annuity contracts and certificates under group 
 annuity contracts include, but are not limited to, 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.  Covered unallocated annuity 
 contracts include those that fund a qualified defined 
 contribution retirement plan under sections 401, 403(b), and 457 
 of the Internal Revenue Code of 1986, as amended through 
 December 31, 1992. 

    Subd. 3.    Limitation of coverage.  Sections 61B.18 to 
 61B.32 do not provide coverage for: 

    (1) a portion of a policy or contract not guaranteed by the 
 insurer, or under which the investment risk is borne by the 
 policy or contract holder; 

    (2) a policy or contract of reinsurance, unless assumption 
 certificates have been issued and the insured has consented to 
 the assumption as provided under section 60A.09, subdivision 4a; 

    (3) a policy or contract issued by an assessment benefit 
 association operating under section 61A.39, or a fraternal 
 benefit society operating under chapter 64B; 

    (4) any obligation to nonresident participants of a covered 
 retirement plan or to the plan sponsor, employer, trustee, or 
 other party who owns the contract; in these cases, the 
 association is obligated under this chapter only to participants 
 in a covered plan who are residents of the state of Minnesota on 
 the date of impairment or insolvency; 

    (5) a structured settlement annuity in situations where a 
 liability insurer remains liable to the payee; 

    (6) a portion of an 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 governmental 
 lottery, including but not limited to, a contract issued to, or 
 purchased at the direction of, any governmental bonding 
 authority, such as a municipal guaranteed investment contract; 

    (7) a portion of a policy or contract issued to a 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: 

    (i) a multiple employer welfare arrangement as defined in 
 the Employee Retirement Income Security Act of 1974, United 
 States Code, title 29, section 1002(40)(A), as amended; 

    (ii) a minimum premium group insurance plan; 

    (iii) a stop-loss group insurance plan; or 

    (iv) an administrative services only contract; 

    (8) any policy or contract issued by an 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; 

    (9) an 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; 

    (10) a portion of a policy or contract to the extent that 
 it provides for (i) dividends or experience rating credits 
 except to the extent the dividends or experience rating credits 
 have actually become due and payable or have been credited to 
 the policy or contract before the date of impairment or 
 insolvency, (ii) voting rights, or (iii) payment of any fees or 
 allowances to any person, including the policy or contract 
 holder, in connection with the service to, or administration of, 
 the policy or contract; 

    (11) 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; 

    (12) a portion of a policy or contract to the extent that 
 the rate of interest on which it is based, or the interest rate, 
 crediting rate, or similar factor determined by use of an index 
 or other external reference stated in the policy or contract, 
 employed in calculating returns or changes in value: 

    (i) averaged over the period of four years prior to the 
 date on which the member insurer becomes an impaired or 
 insolvent insurer under sections 61B.18 to 61B.32, whichever is 
 earlier, exceeds the 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 the lesser period 
 if the policy or contract was issued less than four years before 
 the member insurer becomes an impaired or insolvent insurer 
 under sections 61B.18 to 61B.32, whichever is earlier; and 

    (ii) 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; 

    (13) 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 have not been credited to the 
 policy or contract, or as to which the policy or contract 
 owner's rights are subject to forfeiture, as of the date the 
 member insurer becomes an impaired or insolvent insurer under 
 sections 61B.18 to 61B.32, 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 not subject to forfeiture 
 under this clause, 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 will not be subject to forfeiture; and 

    (14) a portion of a policy or contract to the extent that 
 the assessments required by section 61B.24 with respect to the 
 policy or contract are preempted by federal or state law.  

    Subd. 4.    Limitation of benefits.  The benefits for 
 which the association may become liable shall in no event exceed 
 the lesser of: 

    (1) the contractual obligations for which the insurer is 
 liable or would have been liable if it were not an impaired or 
 insolvent insurer; or 

    (2) subject to the limitation in clause (5), with respect 
 to any one life, regardless of the number of policies or 
 contracts: 

    (i) $300,000 in life insurance death benefits, but not more 
 than $100,000 in net cash surrender and net cash withdrawal 
 values for life insurance; 

    (ii) $300,000 in health insurance benefits, including any 
 net cash surrender and net cash withdrawal values; 

    (iii) $100,000 in annuity net cash surrender and net cash 
 withdrawal values; 

    (iv) $300,000 in present value of annuity benefits for 
 structured settlement annuities or for annuities in regard to 
 which periodic annuity benefits, for a period of not less than 
 the annuitant's lifetime or for a period certain of not less 
 than ten years, have begun to be paid, on or before the date of 
 impairment or insolvency; or 

    (3) subject to the limitations in clauses (5) and (6), with 
 respect to each individual resident participating in a 
 retirement plan, except a defined benefit plan, established 
 under section 401, 403(b), or 457 of the Internal Revenue Code 
 of 1986, as amended through December 31, 1992, covered by an 
 unallocated annuity contract, or the beneficiaries of each such 
 individual if deceased, in the aggregate, $100,000 in net cash 
 surrender and net cash withdrawal values; 

    (4) where no coverage limit has been specified for a 
 covered policy or benefit, the coverage limit shall be $300,000 
 in present value; 

    (5) in no event shall the association be liable to expend 
 more than $300,000 in the aggregate with respect to any one life 
 under clause (2), items (i), (ii), (iii), (iv), and clause (4), 
 and any one individual under clause (3); 

    (6) in no event shall the association be liable to expend 
 more than $7,500,000 with respect to all unallocated annuities 
 of a retirement plan, except a defined benefit plan, established 
 under section 401, 403(b), or 457 of the Internal Revenue Code 
 of 1986, as amended through December 31, 1992.  If total claims 
 from a plan exceed $7,500,000, the $7,500,000 shall be prorated 
 among the claimants; 

    (7) for purposes of applying clause (2)(ii) and clause (5), 
 with respect only to health insurance benefits, the term "any 
 one life" applies to each individual covered by a health 
 insurance policy; 

    (8) where covered contractual obligations are equal to or 
 less than the limits stated in this subdivision, the association 
 will pay the difference between the covered contractual 
 obligations and the amount credited by the estate of the 
 insolvent or impaired insurer, if that amount has been 
 determined or, if it has not, the covered contractual limit, 
 subject to the association's right of subrogation; 

    (9) where covered contractual obligations exceed the limits 
 stated in this subdivision, the amount payable by the 
 association will be determined as though the covered contractual 
 obligations were equal to those limits.  In making the 
 determination, the estate shall be deemed to have credited the 
 covered person the same amount as the estate would credit a 
 covered person with contractual obligations equal to those 
 limits; or 

    (10) the following illustrates how the principles stated in 
 clauses (8) and (9) apply.  The example illustrated concerns 
 hypothetical claims subject to the limit stated in clause 
 (2)(iii).  The principles stated in clauses (8) and (9), and 
 illustrated in this clause, apply to claims subject to any 
 limits stated in this subdivision. 

                   CONTRACTUAL OBLIGATIONS OF:

                          $50,000 
                                 Guaranty 
                    Estate      Association 
 0% recovery         $ 0          $ 50,000 
 from estate
 25% recovery      $ 12,500       $ 37,500 
 from estate
 50% recovery      $ 25,000       $ 25,000 
 from estate
 75% recovery      $ 37,500       $ 12,500 
 from estate
                         $100,000 
                                 Guaranty
                    Estate      Association
 0% recovery         $ 0          $100,000 
 from estate
 25% recovery      $ 25,000       $ 75,000 
 from estate
 50% recovery      $ 50,000       $ 50,000 
 from estate
 75% recovery      $ 75,000       $ 25,000 
 from estate
                         $200,000 
                                 Guaranty
                    Estate      Association
 0% recovery         $ 0          $100,000
 from estate
 25% recovery      $ 50,000       $ 75,000
 from estate
 50% recovery      $100,000       $ 50,000
 from estate
 75% recovery      $150,000       $ 25,000
 from estate 

    For purposes of this subdivision, the commissioner shall 
 determine the discount rate to be used in determining the 
 present value of annuity benefits. 

    Subd. 5.    Limited liability.  The liability of the 
 association is strictly limited by the express terms of the 
 covered policies and contracts and by the provisions of sections 
 61B.18 to 61B.32 and is not affected by the contents of any 
 brochures, illustrations, advertisements, or oral statements by 
 agents, brokers, or others used or made in connection with their 
 sale.  This limitation on liability does not prevent an insured 
 from proving liability that is greater than the express terms of 
 the covered policy or contract.  The insured must bring an 
 action to claim the greater liability no later than one year 
 after entry of an order of rehabilitation, conservation, or 
 liquidation.  The association is not liable for any 
 extra-contractual claims, such as claims relating to bad faith 
 in payment of claims and claims relating to marketing practices, 
 exemplary, or punitive damages.  The association is not liable 
 for attorney fees or interest other than as provided for by the 
 terms of the policies or contracts, subject to the other limits 
 of sections 61B.18 to 61B.32. 

    Subd. 6.    Adjustment of liability limits.  The dollar 
 amounts stated in subdivision 4 shall be adjusted for inflation 
 based upon the implicit price deflator for the gross domestic 
 product compiled by the United States Department of Commerce and 
 hereafter referred to as the index.  The dollar amounts stated 
 in subdivision 4 are based upon the value of the index for the 
 fourth quarter of 1992, which is the reference base index for 
 purposes of this subdivision.  The dollar amounts in subdivision 
 4 shall change on October 1 of each year after 1993 based upon 
 the percentage difference between the index for the fourth 
 quarter of the preceding year and the reference base index, 
 calculated to the nearest whole percentage point.  The 
 commissioner shall announce and publish, on or before April 30 
 of each year, the changes in the dollar amounts required by this 
 subdivision to take effect on October 1 of that year.  The 
 commissioner shall use the most recent revision of the relevant 
 gross domestic product implicit price deflators available as of 
 April 1.  If the United States Department of Commerce changes 
 the base year for the gross domestic product implicit price 
 deflator, the commissioner shall make the calculations necessary 
 to convert from the old to the new base year.  Changes must be 
 in increments of $10,000.  No adjustment may be made until the 
 change in the index results in at least a $10,000 increase. 

    Subd. 7.    Construction.  (a) Sections 61B.18 to 61B.32 
 shall be liberally construed to effect the purpose of sections 
 61B.18 to 61B.32.  Subdivision 1 is an aid and guide to 
 interpretation. 

    (b) Participants in an employer-sponsored plan, which is 
 funded in whole or in part by a covered policy, as specified in 
 subdivision 4, clause (3), shall only be required to verify 
 their status as residents and the amount of money in the 
 unallocated annuity that represents their funds.  Both these 
 matters may be verified by the employer sponsoring the plan from 
 plan records.  Payments made to a plan shall be deemed to be 
 made on behalf of the resident participant and are not the funds 
 of the plan, the plan trustee, or any nonresident plan 
 participant, and to the extent of such payments, discharge the 
 association's obligation. 

    HIST: 1993 c 319 s 4; 1994 c 426 s 11; 1999 c 177 s 36; 2001 c 
 142 s 1-4 

     61B.20 Definitions. 

    Subdivision 1.    Application.  The definitions in this 
 section apply to sections 61B.18 to 61B.32. 

    Subd. 2.    Account.  "Account" means either of the two 
 accounts created under section 61B.21, subdivision 1. 

    Subd. 3.    Annuity contracts.  "Annuity contracts" 
 means annuity contracts as described in section 60A.06, 
 subdivision 1, clause (4). 

    Subd. 4.    Association.  "Association" means the 
 Minnesota life and health insurance guaranty association. 

    Subd. 5.    Commissioner.  "Commissioner" means the 
 commissioner of commerce. 

    Subd. 6.    Contractual obligation.  "Contractual 
 obligation" means an obligation under a policy or contract or 
 certificate under a group policy or contract, or portion of the 
 policy or contract or certificate, for which coverage is 
 provided under section 61B.19, subdivision 2. 

    Subd. 7.    Covered policy.  "Covered policy" means a 
 policy or contract to which sections 61B.18 to 61B.32 apply, as 
 provided in section 61B.19, subdivision 2. 

    Subd. 8.    Current contractual obligation.  "Current 
 contractual obligation" means a contractual obligation which has 
 become due and owing for:  (1) death benefits; (2) health 
 insurance benefits; (3) periodic annuity benefit or supplemental 
 contract payments, provided the annuitant or payee elected the 
 commencement of the periodic annuity benefit or supplemental 
 contract payments before the date of impairment or insolvency, 
 or if the annuitant or payee elected the commencement of the 
 periodic annuity benefit or supplemental contract payments after 
 the date of impairment or insolvency, (i) the election was made 
 pursuant to a written plan, such as a retirement plan, which 
 existed before the impairment or insolvency, or (ii) 
 commencement of the periodic annuity benefit or supplemental 
 contract payments was elected at or after the annuitant's 
 attainment of age 65 and, in either case, was for a payment 
 period of not less than the annuitant's lifetime or a period 
 certain of not less than ten years; or (4) cash surrender or 
 loan values or endowment proceeds or any portion thereof, but 
 only if, and to the extent that, an emergency or hardship such 
 as, but not limited to, the funds being reasonably necessary to 
 pay education, medical, home purchase, or essential living 
 expenses, is established in accordance with standards proposed 
 by the association and approved by the commissioner.  The 
 hardship standards must also provide for an individual appeal to 
 the board of directors in those circumstances which, while not 
 meeting the standards approved by the commissioner, may truly be 
 a hardship. 

    Subd. 9.    Direct life insurance.  "Direct life 
 insurance" means life insurance as described in section 60A.06, 
 subdivision 1, clause (4), and does not include credit life 
 insurance regulated under chapter 62B. 

    Subd. 10.    Health insurance.  "Health insurance" means 
 accident and health insurance as described in section 60A.06, 
 subdivision 1, clause (5)(a), credit accident and health 
 insurance regulated under chapter 62B, and subscriber contracts 
 issued by a nonprofit health service plan corporation operating 
 under chapter 62C. 

    Subd. 11.    Impaired insurer.  "Impaired insurer" means 
 a member insurer that is not an insolvent insurer, and: 

    (1) is placed under an order of rehabilitation or 
 conservation by a court of competent jurisdiction.  The order of 
 rehabilitation or conservation referred to in this subdivision 
 is the initial order granting a petition, application, or other 
 request to begin a rehabilitation or conservatorship; or 

    (2) is determined by the commissioner to be potentially 
 unable to fulfill its contractual obligations and the 
 commissioner has notified the association of the determination. 

    Subd. 12.    Insolvent insurer.  "Insolvent insurer" 
 means a member insurer that is placed under an order of 
 liquidation by a court of competent jurisdiction with a finding 
 of insolvency.  The order of liquidation referred to in this 
 subdivision is the initial order granting a petition, 
 application, or other request to begin a liquidation. 

    Subd. 13.    Member insurer.  "Member insurer" means an 
 insurer licensed or holding a certificate of authority to 
 transact in this state any kind of insurance for which coverage 
 is provided under section 61B.19, subdivision 2, and includes an 
 insurer whose license or certificate of authority in this state 
 may have been suspended, revoked, not renewed, or voluntarily 
 withdrawn.  The term does not include: 

    (1) a nonprofit hospital or medical service organization, 
 other than a nonprofit health service plan corporation that 
 operates under chapter 62C; 

    (2) a health maintenance organization; 

    (3) a fraternal benefit society; 

    (4) a mandatory state pooling plan; 

    (5) a mutual assessment company or an entity that operates 
 on an assessment basis; 

    (6) an insurance exchange; 

    (7) a community integrated service network; or 

    (8) an entity similar to those listed in clauses (1) to (7).

    Subd. 13a.    Moody's Corporate Bond Yield Average.  
 "Moody's Corporate Bond Yield Average" means the Monthly Average 
 Corporates as published by Moody's Investors Service, Inc., or 
 any successor thereto.  

    Subd. 14.    Person.  "Person" means an individual, 
 corporation, partnership, unincorporated association, limited 
 liability company, governmental body or entity, or voluntary 
 organization. 

    Subd. 15.    Premiums.  "Premiums" means amounts or 
 considerations by whatever name called received on covered 
 policies or contracts less premiums, considerations, and 
 deposits returned, and less dividends and experience credits on 
 those covered policies or contracts to the extent not guaranteed 
 in advance.  The term does not include amounts received for 
 policies or contracts or for the portions of policies or 
 contracts for which coverage is not provided under section 
 61B.19, subdivision 3, except that assessable premium shall not 
 be reduced on account of section 61B.19, subdivision 4, relating 
 to limitations with respect to any one life, any one individual, 
 and any one contract holder.  Premiums subject to assessment 
 under section 61B.24, include all amounts received on any 
 unallocated annuity contract issued to a contract holder 
 resident in this state if the contract is not otherwise excluded 
 from coverage under section 61B.19, subdivision 3; provided that 
 "premiums" shall not include any premiums in excess of the 
 liability limit on any unallocated annuity contract specified in 
 section 61B.19, subdivision 4. 

    Subd. 16.    Resident.  "Resident" means a person who 
 resides in Minnesota at the time a member insurer is initially 
 determined by the commissioner or a court to be an impaired or 
 insolvent insurer and to whom a contractual obligation is owed.  
 A person may be a resident of only one state, which in the case 
 of a person other than a natural person is its principal place 
 of business, and which, in the case of a trust, is the principal 
 place of business of the settlor or entity which established the 
 trust.  Citizens of the United States who are either (i) 
 residents of foreign countries, or (ii) residents of United 
 States possessions, territories, or protectorates that do not 
 have an association similar to the association created by 
 sections 61B.19 to 61B.32, are considered residents of this 
 state if the insurer that issued the covered policies or 
 contracts was domiciled in this state.  

    Subd. 16a.    State.  "State" means a state, the 
 District of Columbia, Puerto Rico, and a United States 
 possession, territory, or protectorate.  

    Subd. 16b.    Structured settlement annuity.  
 "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.  

    Subd. 17.    Supplemental contract.  "Supplemental 
 contract" means a written agreement entered into for the 
 distribution of policy or contract proceeds. 

    Subd. 18.    Unallocated annuity contract.  "Unallocated 
 annuity contract" means an annuity contract, funding agreement, 
 or group annuity certificate that is not issued to and owned by 
 an individual, except to the extent of annuity benefits 
 guaranteed to an individual by an insurer under the contract or 
 certificate. 

    HIST: 1993 c 319 s 5; 1994 c 625 art 8 s 3; 1996 c 446 art 2 s 
 10; 1997 c 225 art 2 s 62; 2001 c 142 s 5-13 

     61B.21 Minnesota life and health insurance guaranty 
  association. 

    Subdivision 1.    Functions.  The Minnesota life and 
 health insurance guaranty association shall perform its 
 functions under the plan of operation established and approved 
 under section 61B.25, and shall exercise its powers through a 
 board of directors.  The association is not a state agency for 
 purposes of chapter 16A, 16B, 16C, or 43A.  For purposes of 
 administration and assessment, the association shall establish 
 and maintain two accounts: 

    (1) the life insurance and annuity account which includes 
 the following subaccounts: 

    (i) the life insurance account; 

    (ii) the annuity account; and 

    (iii) the unallocated annuity account; and 

    (2) the health insurance account. 

    Subd. 2.    Supervision by commissioner of commerce.  
 The association is under the immediate supervision of the 
 commissioner and is subject to the applicable provisions of the 
 insurance laws of this state. 

    HIST: 1993 c 319 s 6; 1997 c 187 art 3 s 15; 1998 c 386 art 2 
 s 23 

     61B.22 Board of directors. 

    Subdivision 1.    Members.  The board of directors of 
 the association consists of nine members serving terms as 
 established in the plan of operation under section 61B.25. 
 Members of the board must be elected by member insurers, subject 
 to the approval of the commissioner, for the terms of office 
 specified in their nominations.  Vacancies on the board shall be 
 filled for the remaining period of the term by a majority vote 
 of the remaining board members, subject to approval of the 
 commissioner.  In approving selections or in appointing members 
 to the board, the commissioner shall consider whether all member 
 insurers are fairly represented. 

    Subd. 2.    Expenses.  Members of the board may be 
 reimbursed from the assets of the association for reasonable and 
 necessary expenses incurred by them as members of the board, but 
 shall not otherwise be compensated by the association for their 
 services. 

    Subd. 3.    Committees and meetings.  Except as 
 otherwise required under the plan of operation: 

    (a) The board of directors may designate three or more 
 directors as an executive committee, which, to the extent 
 determined by unanimous affirmative action of the entire board, 
 has and shall exercise the authority of the board in the 
 management of the business of the association.  This executive 
 committee shall act only in the interval between meetings of the 
 board, and is subject at all times to the control and direction 
 of the board. 

    (b) The board of directors may create additional 
 committees, which have and shall exercise the specific authority 
 and responsibility as determined by the unanimous affirmative 
 action of the entire board. 

    (c) Any action that may be taken at a meeting of the board 
 of directors or of a lawfully constituted executive committee 
 may be taken without a meeting if authorized by a writing or 
 writings signed by all the directors or by all of the members of 
 the committee, as the case may be.  This action is effective on 
 the date on which the last signature is placed on the writing or 
 writings, or on an earlier effective date established in the 
 writing or writings. 

    (d) Members of the board of directors or of a lawfully 
 constituted executive committee may participate in a meeting of 
 the board or committee by means of conference telephone or 
 similar communications equipment through which all persons 
 participating in the meeting can hear each other.  Participation 
 in a meeting as provided in this paragraph constitutes presence 
 in person at the meeting. 

    Subd. 4.    Open meetings.  Board meetings are not 
 subject to chapter 13D. 

    HIST: 1993 c 319 s 7; 2001 c 142 s 14 

     61B.23 Powers and duties of the association. 

    Subdivision 1.    Impaired domestic insurer.  If a 
 member insurer is an impaired domestic 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, and that are, except in cases of court ordered 
 conservation or rehabilitation, also approved by the impaired 
 insurer: 

    (1) guarantee, assume, or reinsure, or cause to be 
 guaranteed, assumed, or reinsured, any or all of the policies or 
 contracts of the impaired insurer; 

    (2) provide money, pledges, notes, guarantees, or other 
 means as are proper to exercise the power granted in clause (1) 
 and assure payment of the contractual obligations of the 
 impaired insurer pending action under clause (1); or 

    (3) loan money to the impaired insurer. 

    Subd. 2.    Impaired insurer not paying claims.  (a) If 
 a member insurer is an impaired insurer, whether domestic, 
 foreign, or alien, and the insurer is not paying claims in a 
 timely manner as required under section 72A.201, based in whole 
 or in part on the insurer's financial inability to pay claims 
 then subject to the preconditions specified in paragraph (b), 
 the association shall, in its discretion, either: 

    (1) take any of the actions specified in subdivision 1, 
 subject to the conditions in that subdivision; or 

    (2) provide for prompt payment of current contractual 
 obligations. 

    (b) The association is subject to the requirements of 
 paragraph (a) only if the commissioner has begun a formal 
 administrative or judicial proceeding which seeks to suspend the 
 authority of the impaired insurer to write new business in this 
 state and to require the impaired insurer to cooperate with the 
 association in the administration of claims.  The suspension of 
 the impaired insurer's authority to write new business in this 
 state shall continue until all payments of or on account of the 
 impaired insurer's contractual obligations paid by the 
 association, along with all expenses thereof and interest on 
 these payments and expenses, shall have been repaid to the 
 association or a plan of repayment of the payments, expenses, 
 and interest by the impaired insurer shall have been approved by 
 the association.  If the commissioner ceases to seek an 
 administrative or judicial order suspending the impaired 
 insurer's authority to write new business in this state within 
 90 days, or is denied the order, the association shall not be 
 required to proceed under this subdivision unless: 

    (1) the impaired insurer has been placed under an order of 
 rehabilitation or conservation by a court of competent 
 jurisdiction; and 

    (2) the court has approved and entered an order providing 
 that the rehabilitation or conservation proceedings shall not be 
 dismissed, and neither the impaired insurer nor its assets shall 
 be returned to the control of its shareholders or private 
 management, and the impaired insurer is prohibited from 
 soliciting or accepting new business or having a suspended or 
 revoked license restored until at least one of the following 
 events has occurred: 

    (i) all payments of or on account of the impaired insurer's 
 contractual obligations paid by all the affected guaranty 
 associations, along with expenses thereof and interest on all of 
 those payments and expenses incurred by those guaranty 
 associations, have been repaid to them; or 

    (ii) a plan of repayment by the impaired insurer has been 
 approved by all the affected guaranty associations. 

    (c) The association shall endeavor to obtain access to 
 those records of the impaired insured as are needed for the 
 association to discharge its obligations and, if requested by 
 the association, the commissioner will assist the association in 
 obtaining access to those records.  If the association is not 
 given access to the necessary records, the association shall be 
 relieved of its responsibility to make benefit payments until 
 the time it is given access to those records. 

    (d) If the impaired insurer is subsequently determined to 
 be insolvent by a court of competent jurisdiction in its state 
 of domicile and is placed in liquidation, the association shall 
 then proceed as provided in subdivision 3. 

    Subd. 3.    Insolvent insurer.  If a member insurer is 
 an insolvent insurer then, subject to any conditions imposed by 
 the association and approved by the commissioner, the 
 association shall, in its discretion: 

    (1) guaranty, assume, or reinsure, or cause to be 
 guaranteed, assumed, or reinsured, the policies or contracts of 
 the insolvent insurer; 

    (2) assure payment of the contractual obligations of the 
 insolvent insurer which are due and owing; 

    (3) provide money, pledges, guarantees, or other means as 
 are reasonably necessary to discharge its duties; or 

    (4) provide benefits and coverages in accordance with 
 subdivision 4. 

    Subd. 4.    Payments; alternative policies.  When 
 proceeding under subdivision 2, paragraph (a), clause (2), or 
 subdivision 3, clause (4), the association shall, with respect 
 to life and health insurance policies and annuities: 

    (a) Assure payment of benefits for premiums identical to 
 the premiums and benefits, except for terms of conversion and 
 renewability, that would have been payable under the policies of 
 the impaired or insolvent insurer, for claims incurred: 

    (1) with respect to group policies, not later than the 
 earlier of the next renewal date under those policies or 
 contracts or 45 days, but in no event less than 30 days, after 
 the date on which the association becomes obligated with respect 
 to those policies; or 

    (2) with respect to individual policies, not later than the 
 earlier of the next renewal date, if any, under those policies 
 or one year, but in no event less than 30 days, from the date on 
 which the association becomes obligated with respect to those 
 policies. 

    (b) Make diligent efforts to provide all known insureds or 
 annuitants for individual policies or group policyowners with 
 respect to group policies 30 days' notice of the termination 
 pursuant to paragraph (a) of the benefits provided. 

    (c) With respect to individual policies, make available to 
 each known insured or annuitant, or owner if other than the 
 insured or annuitant, and with respect to an individual formerly 
 insured or formerly an annuitant under a group policy who is not 
 eligible for replacement group coverage, make available 
 substitute coverage on an individual basis in accordance with 
 paragraph (d), if the insureds or annuitants had a right under 
 law or the terminated policy or annuity to convert coverage to 
 individual coverage or to continue an individual policy or 
 annuity in force until a specified age or for a specified time, 
 during which the insurer had no right unilaterally to make 
 changes in any provision of the policy or annuity or had a right 
 only to make changes in premium by class. 

    (d)(1) In providing the substitute coverage required under 
 paragraph (c), the association may offer either to reissue the 
 terminated coverage or to issue an alternative policy. 

    (2) Alternative or reissued policies must be offered 
 without requiring evidence of insurability, and must not provide 
 for any waiting period or exclusion that would not have applied 
 under the terminated policy. 

    (3) The association may reinsure any alternative or 
 reissued policy. 

    (e)(1) Alternative policies adopted by the association are 
 subject to the approval of the commissioner.  The association 
 may adopt alternative policies of various types for future 
 issuance without regard to any particular impairment or 
 insolvency. 

    (2) Alternative policies 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 must not reflect any changes in the health 
 of the insured after the original policy was last underwritten. 

    (3) Any alternative policy issued by the association must 
 provide coverage of a type similar to that of the policy issued 
 by the impaired or insolvent insurer, as determined by the 
 association. 

    (f) If the association elects to reissue terminated 
 coverage at a premium rate different from that charged under the 
 terminated policy, the premium must be set by the association in 
 accordance with the amount of insurance provided and the age and 
 class of risk, subject to approval of the commissioner or by a 
 court of competent jurisdiction. 

    (g) The association's obligations with respect to coverage 
 under any policy of the impaired or insolvent insurer or under 
 any reissued or alternative policy ceases on the date the 
 coverage or policy is replaced by another similar policy by the 
 policyholder, the insurer, or the association and the 
 preexisting condition limitations have been satisfied. 

    (h) When proceeding under this subdivision with respect to 
 any policy carrying guaranteed minimum interest rates, the 
 association shall assure the payment or crediting of a rate of 
 interest consistent with section 61B.19, subdivision 3, clause 
 (12).  

    Subd. 4a.    Board discretion.  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 sections 61B.18 to 
 61B.32 in an economical and efficient manner.  

    Subd. 4b.    Benefits provided under a plan.  Where the 
 association has arranged or offered to provide the benefits of 
 sections 61B.18 to 61B.32 to a covered person under a plan or 
 arrangement that fulfills the association's obligations under 
 sections 61B.18 to 61B.32, the person is not entitled to 
 benefits from the association in addition to or other than those 
 provided under the plan or arrangement.  

    Subd. 4c.    Coverage of policies with indexed interest or 
 similar provisions.  In carrying out its duties in connection 
 with guaranteeing, assuming, or reinsuring policies or contracts 
 under sections 61B.18 to 61B.32, the association may, subject to 
 approval of the receivership court, issue substitute coverage 
 for a policy or contract that provides an interest rate, 
 crediting rate, or similar factor determined by use of an index, 
 or other external reference stated in the policy or contract 
 employed in calculating returns or changes in value by issuing 
 an alternative policy or contract in accordance with the 
 following provisions: 

    (1) in lieu of the index or other external reference 
 provided for in the original policy or contract, the alternative 
 policy or contract provides for (i) a fixed interest rate or 
 (ii) payment of dividends with minimum guarantees or (iii) a 
 different method for calculating interest or changes in value; 

    (2) there is no requirement for evidence of insurability, 
 waiting period or other exclusion that would not have applied 
 under the replaced policy or contract; and 

    (3) the alternative policy or contract is substantially 
 similar to the replaced policy or contract in all other material 
 terms.  

    Subd. 5.    Obligations terminated.  Nonpayment of all 
 unpaid premiums within 31 days after the date required under the 
 terms of a guaranteed, assumed, alternative, or reissued policy 
 or contract or substitute coverage terminates the association's 
 obligations under the policy, contract, or coverage under 
 sections 61B.18 to 61B.32 with respect to the policy, contract, 
 or coverage, except with respect to claims incurred or net cash 
 surrender value that may be due in accordance with sections 
 61B.18 to 61B.32.  The association will not terminate the policy 
 or contract for nonpayment of premium until 31 days after the 
 association sends a written cancellation notice by first class 
 mail to the insured's last known address. 

    Subd. 6.    Postliquidation premiums.  Premiums due for 
 coverage after entry of any order of liquidation of an insolvent 
 insurer belong to and are payable at the direction of the 
 association, and the association is liable for unearned premiums 
 due policy or contract owners arising after the entry of the 
 order. 

    Subd. 7.    Coverage by another state.  The association 
 has no liability under this section for a covered policy of a 
 foreign or alien insurer whose domiciliary jurisdiction or state 
 of entry provides protection, by statutes or rule, for residents 
 of this state, which protection is substantially similar to that 
 provided by sections 61B.18 to 61B.32, for residents of other 
 states.  Recovery provided for under sections 61B.18 to 61B.32 
 is reduced by the amount of recovery under the coverage provided 
 by another state or jurisdiction.  If another state or 
 jurisdiction providing substantially similar coverage as 
 provided by sections 61B.18 to 61B.32 denies coverage, the 
 association shall provide coverage if the policyholder or 
 contract holder is otherwise eligible, and the association is 
 then subrogated to the rights of the person receiving benefits 
 with respect to the other state or jurisdiction.  If a person 
 receiving benefits from the association has a claim remaining 
 against another state or jurisdiction, whether or not such state 
 or jurisdiction provides substantially similar protection within 
 the meaning of this section, then such person's remaining claim 
 has priority over any subrogation rights of the association with 
 respect to that other state or jurisdiction. 

    Subd. 8.    Liens and moratoriums.  (a) In carrying out 
 its duties under subdivision 2 or 3, the association may request 
 that there be imposed policy liens, contract liens, moratoriums 
 on payments, or other similar means.  The liens, moratoriums, or 
 similar means may be imposed if the commissioner: 

    (1) finds:  (i) that the amounts that can be assessed under 
 sections 61B.18 to 61B.32 are less than the amounts necessary to 
 assure full and prompt performance of the impaired insurer's 
 contractual obligations; (ii) that economic or financial 
 conditions as they affect member insurers are sufficiently 
 adverse to cause the imposition of policy or contract liens, 
 moratoriums, or similar means to be in the public interest; 
 (iii) that there is a reasonable likelihood that a plan of 
 rehabilitation will be developed or other appropriate 
 arrangements made for the orderly provision for covered 
 contractual obligations of the impaired or insolvent insurer, 
 and that the imposition of policy or contract liens, 
 moratoriums, or similar means is necessary and appropriate to 
 support the development of the plan of rehabilitation or other 
 appropriate arrangements; (iv) that the imposition of policy or 
 contract liens, moratoriums, or similar means is necessary and 
 appropriate to ensure the equitable treatment of all 
 policyholders of impaired or insolvent insurers protected by the 
 guaranty association; (v) that the imposition of policy or 
 contract liens, moratoriums, or similar means is necessary and 
 appropriate to encourage recovery of the maximum possible amount 
 from the remaining assets of the impaired or insolvent insurer's 
 estate; or (vi) that the imposition of policy or contract liens, 
 moratoriums, or similar means is necessary and appropriate in 
 order for the association to participate in any multistate plan 
 of rehabilitation, conservation, or liquidation of the impaired 
 or insolvent insurer, and the commissioner considers the plan to 
 be in the best interests of the impaired or insolvent insurer's 
 policyholders or the association's member insurers; 

    (2) finds, in the case of a moratorium, that current 
 contractual obligations are being, and will continue to be, 
 promptly paid; and 

    (3) approves the specific policy liens, contract liens, 
 moratoriums, or similar means to be used. 

    (b) Before being obligated under subdivision 2 or 3, the 
 association may request that there be imposed temporary 
 moratoriums or liens on payments of cash values and policy 
 loans.  The temporary moratoriums and liens may be imposed if 
 approved by the commissioner. 

    (c) A moratorium, lien, or other means imposed pursuant to 
 this subdivision may be for:  (i) a specific term; or (ii) an 
 indefinite term which shall continue in effect until the 
 commissioner, at the request of the association or, on the 
 commissioner's own motion after notice to the association, finds 
 that the reason or reasons for the moratorium, lien, or other 
 means no longer exists. 

    Subd. 8a.    Deposits in this state for insolvent or 
 impaired insurer.  A deposit in this state, held pursuant to 
 law or required by the commissioner for the benefit of 
 creditors, including policy owners, not turned over to the 
 domiciliary liquidator upon the entry of a final order of 
 liquidation or order approving a rehabilitation plan of an 
 insurer domiciled in this state or in a reciprocal state, 
 pursuant to section 60B.54, shall be promptly paid to the 
 association.  The association is entitled to retain a portion of 
 any amount so paid to it equal to the percentage determined by 
 dividing the aggregate amount of policy owners claims related to 
 that insolvency for which the association has provided statutory 
 benefits by the aggregate amount of all policy owners' claims in 
 this state related to that insolvency.  The association shall 
 remit to the domiciliary receiver the amount so paid to the 
 association and not retained pursuant to this subdivision.  Any 
 amount retained by the association shall be treated as a 
 distribution of estate assets pursuant to section 60B.46 or 
 similar provision of the state of domicile of the impaired or 
 insolvent insurer.  

    Subd. 9.    Failure to act.  If the association fails to 
 act within a reasonable period of time as provided in 
 subdivision 2, paragraph (a), clause (2); 3; or 4, the 
 commissioner has the powers and duties of the association with 
 respect to impaired or insolvent insurers including, but not 
 limited to, the power to make assessments. 

    Subd. 10.    Assistance to commissioner.  The 
 association may give assistance and advice to the commissioner, 
 upon request, concerning rehabilitation, payment of claims, 
 continuance of coverage, or the performance of other contractual 
 obligations of an impaired or insolvent insurer. 

    Subd. 11.    Standing in court.  The association has 
 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 sections 61B.18 to 61B.32 or with jurisdiction 
 over any person or property against whom the association may 
 have rights through subrogation or otherwise.  This standing 
 extends to all matters germane to the powers and duties of the 
 association, including proposals for reinsuring, 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 may 
 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, 
 provided, however, in the case of any such appearance or 
 intervention, the association shall not submit for adjudication 
 its obligations to provide coverage under the Minnesota Life and 
 Health Insurance Guaranty Association Act without the prior 
 approval of the commissioner. 

    Subd. 12.    Assignments; subrogation rights.  (a) A 
 person receiving benefits under sections 61B.18 to 61B.32 shall 
 be considered 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 sections 61B.18 to 61B.32, whether the benefits are payments 
 of or on account of contractual obligations, continuation of 
 coverage, or provision of substitute or alternative coverages. 
 The association may require an assignment to it of those rights 
 and causes of action by a payee, policy or contract owner, 
 beneficiary, insured, or annuitant as a condition precedent to 
 the receipt of rights or benefits conferred by sections 61B.18 
 to 61B.32 upon that person.  The assignment and subrogation 
 rights of the association include any rights that a person may 
 have as a beneficiary of a plan covered under the Employee 
 Retirement Income Security Act of 1974, United States Code, 
 title 29, section 1003, as amended. 

    (b) The subrogation rights of the association under this 
 subdivision against the assets of the impaired or insolvent 
 insurer have the same priority as those of a person entitled to 
 receive benefits under sections 61B.18 to 61B.32. 

    (c) In addition to paragraphs (a) and (b), the association 
 has all common law rights of subrogation and other equitable or 
 legal remedies that would have been available to the impaired or 
 insolvent insurer or person receiving benefits under sections 
 61B.18 to 61B.32 including without limitation, 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 pursuant to sections 61B.18 to 61B.32, against a person 
 originally or by succession responsible for the losses arising 
 from the personal injury relating to the annuity or payment 
 thereof, excepting 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 of 1986, as 
 amended. 

    (d) If the preceding provisions of this subdivision 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 shall be reduced by the 
 amount realized by any other person with respect to the person 
 or claim that is attributable to the policies or portion thereof 
 covered by the association.  

    (e) 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 subdivision, the person shall pay to the 
 association the portion of the recovery attributable to the 
 policies or portion thereof covered by the association.  

    Subd. 13.    Permissive powers.  The association may: 

    (1) enter into contracts as are necessary or proper to 
 carry out the provisions and purposes of sections 61B.18 to 
 61B.32; 

    (2) sue or be sued, including taking any legal actions 
 necessary or proper to recover any unpaid assessments under 
 section 61B.26 to settle claims or potential claims against it; 

    (3) borrow money to effect the purposes of sections 61B.18 
 to 61B.32 and any notes or other evidence of indebtedness of the 
 association not in default are legal investments for domestic 
 insurers and may be carried as admitted assets; 

    (4) employ or retain persons as are necessary or 
 appropriate to handle the financial transactions of the 
 association, and to perform other functions as the association 
 considers necessary or proper under sections 61B.18 to 61B.32; 

    (5) enter into arbitration or take legal action as may be 
 necessary or appropriate to avoid or recover payment of improper 
 claims; 

    (6) exercise, for the purposes of sections 61B.18 to 61B.32 
 and to the extent approved by the commissioner, the powers of a 
 domestic life or health insurer, but in no case may the 
 association issue insurance policies or annuity contracts other 
 than those issued to perform its obligations under sections 
 61B.18 to 61B.32; 

    (7) join an organization of one or more other state 
 associations of similar purposes, to further the purposes and 
 administer the powers and duties of the association; 

    (8) negotiate and contract with any liquidator, 
 rehabilitator, conservator, or ancillary receiver to carry out 
 the powers and duties of the association; 

    (9) participate in the organization of and/or own stock in 
 an entity which exists or was formed for the purpose of assuming 
 liability for contracts or policies issued by impaired or 
 insolvent insurers; and 

    (10) request information from a person seeking coverage 
 from the association in order to aid the association in 
 determining its obligations under sections 61B.18 to 61B.32 with 
 respect to the person, and the person shall promptly comply with 
 the request. 

    Subd. 14.    Association election to succeed to rights of 
 insolvent or impaired insurer under indemnity reinsurance 
 contracts.  (a) At any time within one year after the date on 
 which the association becomes responsible for the obligations of 
 a member insurer the coverage date, the association may elect to 
 succeed to the rights and obligations of the member insurer, 
 that accrue on or after the coverage date and that relate to 
 contracts covered in whole or in part by the association, under 
 any one or more indemnity reinsurance agreements entered into 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 has 
 previously and expressly disaffirmed the reinsurance agreement.  
 The election shall be effected by a notice to the receiver, 
 rehabilitator, or liquidator, and to the affected reinsurers.  
 If the association makes an election, clauses (1) through (4) 
 apply with respect to the agreements selected by the association:

    (1) 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 that relates to contracts covered in whole or in part 
 by the association and 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; 

    (2) 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 such 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: 

    (i) the amount received by the association, over 

    (ii) 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; 

    (3) within 30 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 all items paid by either 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 and (i) either 
 the association or indemnity reinsurer shall pay the net balance 
 due the other within five days of the completion of the 
 aforementioned calculation and (ii) if the receiver, 
 rehabilitator, or liquidator has received any amounts due the 
 association pursuant to paragraph (a), the receiver, 
 rehabilitator, or liquidator shall remit the same to the 
 association as promptly as practicable; and 

    (4) if the association, within 60 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 shall not be 
 entitled to terminate the reinsurance agreements insofar as the 
 agreements relate to contracts covered by the association in 
 whole or in part and shall not be entitled to set off any unpaid 
 premium due for periods prior to the coverage date against 
 amounts due the association.  

    (b) In the event 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 paragraph (a) effective as 
 of the date agreed upon by the association and the other insurer 
 and regardless of whether the association has made the election 
 referred to in paragraph (a) provided that: 

    (1) the indemnity reinsurance agreements shall 
 automatically terminate for new reinsurance unless the indemnity 
 reinsurer and the other insurer agree to the contrary; 

    (2) the obligations described in the proviso to paragraph 
 (a), clause (2), shall no longer apply on and after the date the 
 indemnity reinsurance agreement is transferred to the third 
 party insurer; and 

    (3) paragraph (b) does not apply if the association has 
 previously expressly determined in writing that it will not 
 exercise the election referred to in paragraph (a).  

    (c) The provisions of this subdivision shall supersede the 
 provisions of any law of this state or of any affected 
 reinsurance agreement 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, 
 liquidator, or rehabilitator of the insolvent member insurer.  
 The receiver, rehabilitator, or liquidator shall remain entitled 
 to any amounts payable by the reinsurer under the reinsurance 
 agreement with respect to losses or events that occur in periods 
 prior to the coverage date subject to applicable setoff 
 provisions.  

    (d) Except as otherwise expressly provided in this 
 subdivision, nothing in this subdivision alters or modifies the 
 terms and conditions of the indemnity reinsurance agreements of 
 the insolvent member insurer.  Nothing in this subdivision 
 abrogates or limits any rights of any reinsurer to claim that it 
 is entitled to rescind a reinsurance agreement.  Nothing in this 
 subdivision gives a policyowner or beneficiary an independent 
 cause of action against an indemnity reinsurer that is not 
 otherwise set forth in the indemnity reinsurance agreement. 

    Subd. 15.    Venue; appeal bond.  Except as otherwise 
 provided in section 61B.24, subdivision 10, or 61B.26, paragraph 
 (c), venue in a suit against the association arising under 
 sections 62B.18 to 62B.32 shall be in Ramsey county.  The 
 association shall not be required to give an appeal bond in an 
 appeal that relates to a cause of action arising under sections 
 61B.18 to 61B.32.  

    HIST: 1993 c 319 s 8; 2001 c 142 s 15-25 

     61B.24 Assessments. 

    Subdivision 1.    Purpose.  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 or subaccount, at the 
 times and for the amounts as the board finds necessary. 
 Assessments are due not less than 30 days after prior written 
 notice to the member insurers and accrue interest on and after 
 the due date at the then applicable rate determined under 
 section 549.09, subdivision 1, paragraph (c). 

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

    (1) class A assessments must be made for the purpose of 
 meeting administrative and legal costs and other expenses and 
 examinations conducted under the authority of section 61B.27. 
 Class A assessments may be made whether or not related to a 
 particular impaired or insolvent insurer; and 

    (2) class B assessments must be made to the extent 
 necessary to carry out the powers and duties of the association 
 under section 61B.23 with regard to an impaired or an insolvent 
 insurer. 

    Subd. 3.    Formula for determination.  (a) The amount 
 of a class A assessment shall be determined by the board and may 
 be made on a pro rata or nonpro rata basis.  If pro rata, the 
 board may provide that it be credited against future class B 
 assessments.  A nonpro rata assessment shall not exceed $500 per 
 member insurer in any one calendar year. 

    (b) The amount of any class B assessment must be allocated 
 for assessment purposes among the accounts or subaccounts 
 pursuant to an allocation formula which may be based on the 
 premiums or reserves of the impaired or insolvent insurer or any 
 other standard considered by the board in its sole discretion as 
 being fair and reasonable under the circumstances. 

    (c) Class B assessments against member insurers for each 
 subaccount or account must be in the proportion that the average 
 annual premiums received on business in this state by each 
 assessed member insurer on policies or contracts covered by each 
 subaccount or account for the three most recent calendar years 
 for which information is available preceding the calendar year 
 in which the insurer became impaired or insolvent, as the case 
 may be, bears to the average annual premiums received on 
 business in this state by all assessed member insurers on 
 policies or contracts covered by that subaccount or account for 
 those same calendar years.  If the impaired insurer becomes 
 insolvent, the date of impairment must be used to determine the 
 assessment.  Premiums for purposes of calculating average annual 
 premium for calendar years prior to 1993 shall be determined in 
 accordance with Minnesota Statutes 1992, sections 61B.01 to 
 61B.16.  

    (d) Assessments for funds to meet the requirements of the 
 association with respect to an impaired or insolvent insurer 
 must not be made until necessary to implement the purposes of 
 sections 61B.18 to 61B.32.  Classification of assessments under 
 subdivision 2 and computation of assessments under this 
 subdivision must be made with a reasonable degree of accuracy, 
 recognizing that exact determinations may not always be possible.

    Subd. 4.    Abatement or deferment.  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 the assessment is abated or deferred 
 may be assessed against the other member insurers in a manner 
 consistent with the basis for assessments as provided in this 
 section.  Once the conditions which caused a deferral have been 
 removed or rectified, the member insurer shall pay all 
 assessments that were deferred pursuant to a repayment plan 
 approved by the association.  

    Subd. 5.    Maximum assessment.  (a) The total of all 
 assessments upon a member insurer for each subaccount of the 
 life and annuity account and for the health account shall not in 
 any one calendar year exceed two percent of that member 
 insurer's average annual premiums as calculated in subdivision 
 3, paragraph (c), on policies or contracts covered by that 
 account or subaccount.  If two or more assessments are made with 
 respect to insurers that become impaired or insolvent in 
 different calendar years, average annual premiums for purposes 
 of the assessment percentage limitation are based upon the 
 higher of the three-year averages calculated under subdivision 
 3, paragraph (c).  If an impaired insurer becomes insolvent, the 
 date of impairment must be used to determine the assessment.  If 
 the maximum assessment for any subaccount of the life and 
 annuity account in any one calendar year will not provide an 
 amount sufficient to carry out the responsibilities of the 
 association, then pursuant to subdivision 3, the board of 
 directors shall assess based on the other subaccounts of the 
 life and annuity account for the necessary additional amount, 
 subject to the maximum of two percent stated above for each 
 subaccount. 

    (b) If the maximum assessment for an account, together with 
 the other assets of the association in that account, does not 
 provide in any one calendar year in that account an amount 
 sufficient to carry out the responsibilities of the association, 
 the necessary additional funds must be assessed as soon as 
 permitted by sections 61B.18 to 61B.32. 

    (c) The board may adopt general principles in the plan of 
 operation for 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. 

    (d) If assessments under this section are inadequate to pay 
 all obligations of the impaired insurer that are or become due 
 and owing, then the association shall prepare a plan approved by 
 the commissioner for prioritization of payments.  If the 
 association adopts general principles in the plan of operations, 
 the association shall use the general principles in preparing 
 the plan required under this paragraph.  No formerly impaired or 
 insolvent insurer may be reinstated until all payments of or on 
 account of the insurer's contractual obligations by the guaranty 
 association, along with all expenses thereof and interest on all 
 such payments and expenses, shall have been repaid to the 
 guaranty association or a plan of repayment by the insurer shall 
 have been approved by the commissioner. 

    Subd. 6.    Refund.  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 insurer to 
 that account or subaccount, the amount by which the assets of 
 the account or subaccount 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 or subaccount, 
 including assets accruing from assignment, subrogation, net 
 realized gains, and income from investments.  A reasonable 
 amount may be retained in any account or subaccount to provide 
 funds for the continuing expenses of the association and for 
 future losses. 

    Subd. 7.    Premium rates and dividends.  A member 
 insurer may, in determining its premium rates and policyowner 
 dividends as to any kind of insurance within the scope of 
 sections 61B.18 to 61B.32, consider the amount reasonably 
 necessary to meet its assessment obligations under sections 
 61B.18 to 61B.32. 

    Subd. 8.    Certificate of contribution.  The 
 association shall issue to each insurer paying an assessment 
 under sections 61B.18 to 61B.32, 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 insurer in its 
 financial statement as an asset in the form and for the amount, 
 if any, and period of time as the commissioner may approve. 

    Subd. 9.    Survival of obligation.  In the event a 
 member insurer engages in any reorganization, including any 
 merger, consolidation, restructuring, incorporation, or 
 reincorporation, the member's obligations under this chapter 
 shall survive the reorganization with respect to assessments for 
 impairments or insolvencies occurring before the date of the 
 reorganization. 

    Subd. 10.    Procedure for protests regarding assessments. 
  (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 is 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 setting forth a brief statement of the 
 grounds for the protest.  

    (b) Within 60 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 30 days after a final decision has been made, 
 the association shall notify the protesting member insurer in 
 writing of that final decision.  Within 60 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 the protest 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 shall be returned to the 
 member company.  Interest on a refund due a protesting member 
 shall be paid at the rate actually earned by the association.  

    Subd. 11.    Member insurers' duty to provide information 
 to association.  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 promptly comply 
 with a request. 

    HIST: 1993 c 319 s 9; 2001 c 142 s 26-29 

     61B.25 Plan of operation. 

    Subdivision 1.    Adoption and amendment.  The purpose 
 of the plan of operation is to assure the fair, reasonable, and 
 equitable administration of the association under sections 
 61B.18 to 61B.32.  Amendments to the plan of operation must be 
 submitted to the commissioner and become effective upon the 
 commissioner's written approval or 30 days after submission if 
 the commissioner has not disapproved.  If the association fails 
 to submit suitable amendments to the plan, the commissioner 
 shall, after notice and hearing, adopt reasonable rules 
 necessary or advisable to implement sections 61B.18 to 61B.32. 
 The rules shall continue in force until modified by the 
 commissioner or superseded by amendments submitted by the 
 association and approved by the commissioner. 

    Subd. 2.    Compliance.  All member insurers shall 
 comply with the plan of operation. 

    Subd. 3.    Contents.  The plan of operation must, in 
 addition to requirements specified in sections 61B.18 to 61B.32: 

    (1) establish procedures for handling the assets of the 
 association; 

    (2) establish the amount and method of reimbursing members 
 of the board of directors under section 61B.22; 

    (3) establish regular places and times for meetings 
 including telephone conference calls of the board of directors 
 or of the executive committee; 

    (4) establish procedures for records to be kept of all 
 financial transactions of the association, its agents, and the 
 board of directors; 

    (5) establish procedures for selecting the board of 
 directors; 

    (6) establish any additional procedures for assessments 
 under section 61B.24; and 

    (7) contain additional provisions necessary or proper for 
 the execution of the powers and duties of the association. 

    Subd. 4.    Delegation of powers and duties.  The plan 
 of operation may provide that any or all powers and duties of 
 the association, except those under sections 61B.23, subdivision 
 13, clause (3), and 61B.24, are delegated to a corporation, 
 association, or other organization which performs or will 
 perform functions similar to those of this association, or its 
 equivalent, in two or more states.  The corporation, 
 association, or organization shall be reimbursed for any 
 payments made on behalf of the association and shall be paid for 
 its performance of any function of the association.  A 
 delegation under this subdivision shall take effect only with 
 the approval of both the board of directors and the 
 commissioner, and may be made only to a corporation, 
 association, or organization which extends protection not 
 substantially less favorable and effective than that provided by 
 sections 61B.18 to 61B.32. 

    HIST: 1993 c 319 s 10 

     61B.26 Duties and powers of the commissioner. 

    (a) In addition to other duties and powers in sections 
 61B.18 to 61B.32, the commissioner shall: 

    (1) notify the board of directors of the existence of an 
 impaired or insolvent insurer within three days after a 
 determination of impairment or insolvency is made or the 
 commissioner receives notice of impairment or insolvency; 

    (2) upon request of the board of directors, provide the 
 association with a statement of the premiums in this and any 
 other appropriate states for each member insurer; 

    (3) 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 shall constitute notice to its 
 shareholders, if any; the failure of the insurer to promptly 
 comply with the commissioner's demand shall not excuse the 
 association from the performance of its powers and duties under 
 sections 61B.18 to 61B.32; and 

    (4) in a liquidation, conservation, or rehabilitation 
 proceeding involving a domestic insurer, be appointed as the 
 liquidator, conservator, or rehabilitator. 

    (b) The commissioner may suspend or revoke, after notice 
 and hearing, the certificate of authority to transact insurance 
 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.  A forfeiture shall not exceed five percent 
 of the unpaid assessment per month, but no forfeiture shall be 
 less than $100 per month. 

    (c) A final action of the board of directors or the 
 association may be appealed to the commissioner if the appeal is 
 taken within 60 days of the aggrieved party'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 the manner provided by chapter 14.  A 
 determination or decision by the commissioner under sections 
 61B.18 to 61B.32 is not subject to the contested case or 
 rulemaking provisions of chapter 14. 

    (d) The liquidator, rehabilitator, or conservator of an 
 impaired insurer may notify all interested persons of the effect 
 of sections 61B.18 to 61B.32. 

    (e) For the purposes of sections 61B.18 to 61B.32, the 
 commissioner may delegate any of the powers conferred by law. 

    (f) Nonperformance of any of the acts specified in this 
 section or failure to meet the specific time limits does not 
 affect the association, its members, or any other person as to 
 the person's duties and obligations. 

    HIST: 1993 c 319 s 11; 2001 c 142 s 30 

     61B.27 Prevention of insolvencies. 

    (a) To aid in the detection and prevention of insurer 
 insolvencies or impairments the commissioner shall notify the 
 commissioners of insurance of all the other states, territories 
 of the United States, and the District of Columbia when the 
 commissioner takes one of the following actions against a member 
 insurer: 

    (i) revocation of license; or 

    (ii) suspension of license.  

    The notice must be mailed to all commissioners within 30 
 days following the action. 

    (b) If the commissioner deems it appropriate, the 
 commissioner may: 

    (1) Report to the board of directors when the commissioner 
 has taken any of the actions specified in paragraph (a) or has 
 received a report from another commissioner indicating that an 
 action specified in paragraph (a) has been taken in another 
 state.  The report to the board of directors must contain all 
 significant details of the action taken or the report received 
 from another commissioner. 

    (2) Report to the board of directors when the commissioner 
 has reasonable cause to believe from an examination, whether 
 completed or in process, of a member company that the company 
 may be an impaired or insolvent insurer. 

    (3) 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 in carrying 
 out its duties and responsibilities under this section.  The 
 report and the information contained in it must be kept 
 confidential by the board of directors until it has been made 
 public by the commissioner or other lawful authority.  Nothing 
 in this provision supersedes other requirements of law.  

    (4) Notify the board if the commissioner makes a formal 
 order requiring the company to restrict its premium writing, 
 obtain additional contributions to surplus, withdraw from this 
 state, reinsure all or any part of its business, or increase 
 capital, surplus, or any other account for the security of 
 policyholders or creditors. 

    (c) 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 and of 
 companies seeking admission to transact insurance business in 
 this state. 

    (d) The board of directors may, upon majority vote, make 
 reports and recommendations to the commissioner upon matters 
 germane to the solvency, liquidation, rehabilitation, or 
 conservation of any member insurer or germane to the solvency of 
 a company seeking to do an insurance business in this state. 
 Those reports and recommendations shall not be considered public 
 documents. 

    (e) The board of directors, upon majority vote, may notify 
 the commissioner of information indicating that a member insurer 
 may be an impaired or insolvent insurer. 

    (f) The board of directors may, upon majority vote, make 
 recommendations to the commissioner for the detection and 
 prevention of insurer insolvencies. 

    (g) The board of directors may, at the conclusion of an 
 insurer insolvency in which the association was obligated to pay 
 covered claims, prepare a report to the commissioner containing 
 the information it may have in its possession bearing on the 
 history and causes of the insolvency.  The board shall cooperate 
 with the boards of directors of guaranty associations in other 
 states in preparing a report on the history and causes of 
 insolvency of a particular insurer, and may adopt by reference 
 any report prepared by those other associations. 

    (h) Nonperformance by the commissioner of any of the acts 
 specified in this section or failure to meet the specified time 
 limits does not affect the association, its members, or any 
 other person as to the person's duties and obligations. 

    Nothing in this section supersedes other requirements of 
 law. 

    HIST: 1993 c 319 s 12; 2001 c 142 s 31 

     61B.28 Miscellaneous provisions. 

    Subdivision 1.    Records.  Records must be kept of all 
 negotiations and meetings of the board of directors to discuss 
 the activities of the association in carrying out its powers and 
 duties under section 61B.23.  Records of the association with 
 respect to an impaired or insolvent insurer shall be made public 
 only upon the termination of a liquidation, rehabilitation, or 
 conservation proceeding involving the impaired or insolvent 
 insurer, upon the termination of the impairment or insolvency of 
 the insurer, or upon the order of a court of competent 
 jurisdiction.  Nothing in this subdivision limits the duty of 
 the association to report its activities under section 61B.27. 

    Subd. 2.    Reports.  (a) A report, recommendation, or 
 notification by the association, its board of directors, or 
 officers to the commissioner concerning a member insurer, 
 together with statements or documents furnished to the 
 commissioner with, or subsequent to, a report, recommendation, 
 or notification, is confidential and a privileged communication. 
 Reports, recommendations, notifications, statements, and 
 documents furnished to the commissioner are not admissible in 
 whole or in part for any purpose in an action or proceeding 
 against: 

    (1) the association or its member insurers, officers, 
 employees, or representatives submitting or providing the 
 report, recommendation, notification, statement, or document; or 

    (2) a person, firm, or entity who in good faith furnishes 
 to the association the information or document upon which the 
 association has relied in making its report, recommendation, or 
 notification to the commissioner. 

    (b) Notwithstanding the provisions of sections 13.711, 
 13.715, and 13.719, the commissioner may release to the 
 association's board of directors any or all nonpublic data 
 collected and maintained by the commissioner on a member insurer 
 or a potential member insurer. Information furnished to the 
 board of directors is private. 

    Subd. 3.    Association as creditor.  For the purpose of 
 carrying out its obligations under sections 61B.18 to 61B.32, 
 the association is considered to be a creditor of the impaired 
 or insolvent insurer to the extent of assets attributable to 
 covered policies, reduced by amounts which the association 
 recovers from the assets of the impaired or insolvent insurer as 
 subrogee under section 61B.23, subdivision 12.  Recoveries by 
 the association as subrogee under section 61B.23, subdivision 
 12, from assets other than from assets of the impaired or 
 insolvent insurer shall not reduce or act as an offset to the 
 association's claim as creditor of the impaired or insolvent 
 insurer.  Assets of the impaired or insolvent insurer 
 attributable to covered policies must be used to continue all 
 covered policies and pay all contractual obligations of the 
 impaired or insolvent insurer as required by sections 61B.18 to 
 61B.32.  Assets attributable to covered policies, as used in 
 this subdivision, are that proportion of the assets which the 
 reserves that should have been established for those policies 
 bear to the reserves that should have been established for all 
 policies of insurance written by the impaired or insolvent 
 insurer. 

    Subd. 3a.    Association access to insolvent insurer's 
 assets.  As a creditor of the impaired or insolvent insurer as 
 established in subdivision 3 of this section and consistent with 
 section 60B.46, the association and other similar associations 
 is entitled to receive a disbursement of assets out of the 
 marshalled assets, from time to time as the assets become 
 available to reimburse it, as a credit against contractual 
 obligations under sections 61B.18 to 61B.32.  If the liquidator 
 has not, within 120 days of a final determination of insolvency 
 of an insurer by the receivership court, made an application to 
 the court for the approval of a proposal to disburse assets out 
 of marshalled assets to guaranty associations having obligations 
 because of the insolvency, then the association shall be 
 entitled to make application to the receivership court for 
 approval of its own proposal to disburse these assets.  

    Subd. 4.    Prohibited sales practice.  No person, 
 including an insurer, agent, or affiliate of an insurer, shall 
 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, an 
 advertisement, announcement, or statement, written or oral, 
 which uses the existence of the Minnesota life and health 
 insurance guaranty association for the purpose of sales, 
 solicitation, or inducement to purchase any form of insurance 
 covered by sections 61B.18 to 61B.32.  The notice required by 
 subdivision 8 is not a violation of this subdivision.  This 
 subdivision does not apply to the Minnesota life and health 
 insurance guaranty association or an entity that does not sell 
 or solicit insurance.  A person violating this section is guilty 
 of a misdemeanor. 

    Subd. 5.    Distribution to stockholders.  No 
 distribution to stockholders of an impaired domiciliary insurer 
 shall be made until the total amount of assessments levied by 
 the association with respect to the insurer have been fully 
 recovered by the association. 

    Subd. 6.    Reinstatement.  No insurer may be reinstated 
 to do business in this state until all payments of or on account 
 of the impaired insurer's contractual obligations by the 
 guaranty association, along with all expenses thereof and 
 interest on all such payments and expenses, shall have been 
 repaid to the guaranty association or a plan of repayment by the 
 impaired insurer shall have been approved by the association. 

    Subd. 7.    Notice concerning limitations and exclusions. 
  (a) No person, including an insurer, agent, or affiliate of 
 an insurer or agent, shall offer for sale in this state a 
 covered life insurance, annuity, or health insurance policy or 
 contract without delivering at the time of application for that 
 policy or contract a notice in the form specified in subdivision 
 8, or in a form approved by the commissioner under paragraph 
 (b), relating to coverage provided by the Minnesota life and 
 health insurance guaranty association.  The notice may be part 
 of the application.  A copy of the notice must be given to the 
 applicant.  The notice must be delivered to the applicant at the 
 time of application for the policy or contract, except that if 
 the application is not taken from the applicant in person, the 
 notice must be sent to the applicant within 72 hours after the 
 application is taken.  The person offering the policy or 
 contract shall document the fact that the notice was given at 
 the time of application or was sent within the specified time. 
 This does not require that the receipt of the notice be 
 acknowledged by the applicant. 

    (b) The association may prepare, and file with the 
 commissioner for approval, a form of notice as an alternative to 
 the form of notice specified in subdivision 8 describing the 
 general purposes and limitations of this chapter.  The form of 
 notice shall: 

    (1) state the name, address, and telephone number of the 
 Minnesota life and health insurance guaranty association; 

    (2) prominently warn the policy or contract holder that the 
 Minnesota life and health insurance guaranty association may not 
 cover the policy or, if coverage is available, it will be 
 subject to substantial limitations and exclusions and 
 conditioned on continued residence in the state; 

    (3) state that the insurer and its agents are prohibited by 
 law from using the existence of the Minnesota life and health 
 insurance guaranty association for the purpose of sales, 
 solicitation, or inducement to purchase any form of insurance; 

    (4) emphasize that the policy or contract holder should not 
 rely on coverage under the Minnesota life and health insurance 
 guaranty association when selecting an insurer; 

    (5) provide other information as directed by the 
 commissioner.  The commissioner may approve any form of notice 
 proposed by the association and, as to the approved form of 
 notice, the association may notify all member insurers by mail 
 that the form of notice is available as an alternative to the 
 notice specified in subdivision 8.  

    (c) A policy or contract not covered by the Minnesota Life 
 and Health Insurance Guaranty Association or the Minnesota 
 Insurance Guaranty Association must contain the following notice 
 in ten-point type, stamped in red ink or contrasting type on the 
 policy or contract and the application: 

    "THIS POLICY OR CONTRACT IS NOT PROTECTED BY THE MINNESOTA 
    LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION OR THE 
    MINNESOTA INSURANCE GUARANTY ASSOCIATION.  IN THE CASE OF 
    INSOLVENCY, PAYMENT OF CLAIMS IS NOT GUARANTEED.  ONLY THE 
    ASSETS OF THIS INSURER WILL BE AVAILABLE TO PAY YOUR CLAIM."

    This section does not apply to fraternal benefit societies 
 regulated under chapter 64B. 

    Subd. 8.    Form.  The form of notice referred to in 
 subdivision 7, paragraph (a), is as follows: 

                      ".................... 

                       .................... 

                       .................... 

                (insert name, current address, and 

                   telephone number of insurer) 

           NOTICE CONCERNING POLICYHOLDER RIGHTS IN AN 

          INSOLVENCY UNDER THE MINNESOTA LIFE AND HEALTH 

                INSURANCE GUARANTY ASSOCIATION LAW

    If the insurer that issued your life, annuity, or health 
 insurance policy becomes impaired or insolvent, you are entitled 
 to compensation for your policy from the assets of that insurer. 
 The amount you recover will depend on the financial condition of 
 the insurer. 

    In addition, residents of Minnesota who purchase life 
 insurance, annuities, or health insurance from insurance 
 companies authorized to do business in Minnesota are protected, 
 SUBJECT TO LIMITS AND EXCLUSIONS, in the event the insurer 
 becomes financially impaired or insolvent.  This protection is 
 provided by the Minnesota Life and Health Insurance Guaranty 
 Association. 

     Minnesota Life and Health Insurance Guaranty Association
                         (insert current
                  address and telephone number)

    The maximum amount the guaranty association will pay for 
 all policies issued on one life by the same insurer is limited 
 to $300,000.  Subject to this $300,000 limit, the guaranty 
 association will pay up to $300,000 in life insurance death 
 benefits, $100,000 in net cash surrender and net cash withdrawal 
 values for life insurance, $300,000 in health insurance 
 benefits, including any net cash surrender and net cash 
 withdrawal values, $100,000 in annuity net cash surrender and 
 net cash withdrawal values, $300,000 in present value of annuity 
 benefits for annuities which are part of a structured settlement 
 or for annuities in regard to which periodic annuity benefits, 
 for a period of not less than the annuitant's lifetime or for a 
 period certain of not less than ten years, have begun to be paid 
 on or before the date of impairment or insolvency, or if no 
 coverage limit has been specified for a covered policy or 
 benefit, the coverage limit shall be $300,000 in present value.  
 Unallocated annuity contracts issued to retirement plans, other 
 than defined benefit plans, established under section 401, 
 403(b), or 457 of the Internal Revenue Code of 1986, as amended 
 through December 31, 1992, are covered up to $100,000 in net 
 cash surrender and net cash withdrawal values, for Minnesota 
 residents covered by the plan provided, however, that the 
 association shall not be responsible for more than $7,500,000 in 
 claims from all Minnesota residents covered by the plan.  If 
 total claims exceed $7,500,000, the $7,500,000 shall be prorated 
 among all claimants.  These are the maximum claim amounts.  
 Coverage by the guaranty association is also subject to other 
 substantial limitations and exclusions and requires continued 
 residency in Minnesota.  If your claim exceeds the guaranty 
 association's limits, you may still recover a part or all of 
 that amount from the proceeds of the liquidation of the 
 insolvent insurer, if any exist.  Funds to pay claims may not be 
 immediately available.  The guaranty association assesses 
 insurers licensed to sell life and health insurance in Minnesota 
 after the insolvency occurs.  Claims are paid from this 
 assessment. 

    THE COVERAGE PROVIDED BY THE GUARANTY ASSOCIATION IS NOT A 
 SUBSTITUTE FOR USING CARE IN SELECTING INSURANCE COMPANIES THAT 
 ARE WELL MANAGED AND FINANCIALLY STABLE.  IN SELECTING AN 
 INSURANCE COMPANY OR POLICY, YOU SHOULD NOT RELY ON COVERAGE BY 
 THE GUARANTY ASSOCIATION. 

    THIS NOTICE IS REQUIRED BY MINNESOTA STATE LAW TO ADVISE 
 POLICYHOLDERS OF LIFE, ANNUITY, OR HEALTH INSURANCE POLICIES OF 
 THEIR RIGHTS IN THE EVENT THEIR INSURANCE CARRIER BECOMES 
 FINANCIALLY INSOLVENT.  THIS NOTICE IN NO WAY IMPLIES THAT THE 
 COMPANY CURRENTLY HAS ANY TYPE OF FINANCIAL PROBLEMS.  ALL LIFE, 
 ANNUITY, AND HEALTH INSURANCE POLICIES ARE REQUIRED TO PROVIDE 
 THIS NOTICE." 

    Additional language may be added to the notice if approved 
 by the commissioner prior to its use in the form.  This section 
 does not apply to fraternal benefit societies regulated under 
 chapter 64B. 

    Subd. 9.    Combination fixed-variable policy.  The 
 notice required in subdivision 8 must clearly describe what 
 portions of a combination fixed-variable policy are not covered 
 by the Minnesota life and health insurance guaranty 
 association.  The notice requirements specified in subdivision 
 7, paragraph (c), do not apply to a combination fixed-variable 
 policy. 

    Subd. 10.    Effect of notices.  The distribution, 
 delivery, contents, or interpretation of the notices described 
 in subdivision 7, 8, or 9 shall not mean that either the policy 
 or contract, or the owner or holder thereof, would be covered in 
 the event of the impairment or insolvency of a member insurer if 
 coverage is not otherwise provided by sections 61B.18 to 61B.32. 
 Failure to receive the notice does not give the policyholder, 
 contract holder, certificate holder, insured, owner, 
 beneficiaries, assignees, or payees any greater rights than 
 those provided by sections 61B.18 to 61B.32. 

    HIST: 1993 c 319 s 13; 1995 c 258 s 19,20; 1996 c 446 art 1 s 
 21; 1999 c 227 s 22; 2001 c 142 s 32-34 

     61B.29 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 before May 1 each year, a financial report in a 
 form approved by the commissioner and a report of its activities 
 during the association's preceding fiscal year.  Upon request of 
 a member insurer, the association must provide the member 
 insurer with a copy of the report. 

    HIST: 1993 c 319 s 14; 2001 c 142 s 35 

     61B.30 Tax exemptions. 

    Subdivision 1.    State fees and taxes.  The association 
 is exempt from payment of all taxes imposed under chapter 297I 
 and all fees and all other taxes levied by this state or its 
 subdivisions, except taxes levied on real property. 

    Subd. 2.    Federal and foreign state taxes.  The 
 association may seek exemption from payment of all fees and 
 taxes levied by the federal or any other state government or its 
 subdivision. 

    HIST: 1993 c 319 s 15; 2000 c 394 art 2 s 12 

     61B.31 Indemnification. 

    The association has authority to indemnify certain persons 
 against certain expenses and liabilities as provided in section 
 300.083, including the power to purchase and maintain insurance 
 on behalf of these persons as provided by section 300.083, 
 subdivision 7.  In applying section 300.083 for this purpose, 
 the term "member insurers" shall be substituted for the terms 
 "shareholders" and "stockholders" and the term "association" 
 shall be substituted for the term "corporation." 

    HIST: 1993 c 319 s 16 

     61B.32 Stay of proceedings; reopening default judgments. 

    All proceedings in which the insolvent insurer is a party 
 in a court in this state must be stayed 60 days from the date an 
 order of liquidation, rehabilitation, or conservation is final 
 to permit proper legal action by the association on matters 
 germane to its powers or duties.  As to judgment under a 
 decision, order, verdict, or finding based on default, the 
 association may apply to have the judgment set aside by the same 
 court that made the judgment and may defend against the suit on 
 the merits. 

    HIST: 1993 c 319 s 17