CHAPTER 26.1-01 Insurance Commissioner

26.1-01-01. Commissioner defined.

Unless the context or subject matter otherwise requires, in this title the word “commissioner” means the insurance commissioner.

Source:

S.L. 1983, ch. 332, § 1.

Derivation:

N.D.C.C. §§ 26-16.1-01, 26-21.2-01, 26-23-01, 26-24-01, 26-27.3-02, 26-38-01, 26-40-02.

26.1-01-02. Commissioner — Seal — Employment of deputy and assistants.

The commissioner shall have an official seal and shall keep an impression of the seal on file in the office of the secretary of state. The commissioner shall employ a deputy and other competent officials and clerks to discharge the duties assigned by the commissioner. When the commissioner is absent temporarily from the office, the deputy commissioner may sign the commissioner’s name and perform any other statutory duties pertaining to the office.

Source:

S.L. 1983, ch. 332, § 1.

Derivation:

N.D.C.C. § 26-01-01.

26.1-01-03. Duties of commissioner.

The commissioner shall:

  1. See that all the laws of this state respecting insurance companies and benevolent societies are executed faithfully.
  2. Report in detail to the attorney general any violation of law relative to insurance companies and their officers or agents.
  3. File the articles of incorporation of all insurance companies organized or doing business in this state, and on application furnish a certified copy thereof.
  4. Furnish the insurance companies required to make reports to the commissioner and the benevolent societies the necessary blank forms for required statements and reports. The commissioner is not required to send blank forms to those insurance companies which submit their reports on printed forms conforming to those furnished by the commissioner.
  5. Preserve in permanent form a full record of the commissioner’s proceedings and a concise statement of each company or agency visited or examined.
  6. Furnish at the request of any person, upon the payment of the required fee, certified copies of any record or paper in the commissioner’s office, if the commissioner deems it not prejudicial to the public interests to do so, and give such other certificates as may be provided by law.
  7. Submit a biennial report as prescribed by section 54-06-04 to the governor and the secretary of state. In addition to the requirements of section 54-06-04, the report must contain an abstract only of the reports of the various insurance companies doing business in this state showing the condition of the companies.
  8. Upon request, send a copy of the commissioner’s annual report to the insurance commissioner, or other similar officer, of every other state and to each company doing business in this state.
  9. Communicate, on request, to the insurance commissioner of any other state any facts that by law it is the commissioner’s duty to ascertain respecting companies of this state doing business within that state.
  10. Manage, control, and supervise the state bonding fund.
  11. Manage, control, and supervise the state fire and tornado fund and the insurance of public buildings in that fund.

Source:

S.L. 1983, ch. 332, § 1; 1995, ch. 350, § 19; 2001, ch. 261, § 1.

Derivation:

N.D.C.C. § 26-01-02.

DECISIONS UNDER PRIOR LAW

Authority of Commissioner.

Commissioner’s power to borrow for the hail insurance fund implied a power to use all proper means to carry out the purpose. State ex rel. Bauer v. Nestos, 48 N.D. 894, 187 N.W. 233, 1922 N.D. LEXIS 112 (N.D. 1922).

Duty of Life Insurance Company.

A life insurance company that has solicited and received a completed application for insurance and collected the first premium thereon is under a legal duty to take prompt action on the application. Mann v. Policyholders' Nat'l Life Ins. Co., 78 N.D. 724, 51 N.W.2d 853, 1952 N.D. LEXIS 72 (N.D. 1952).

Management of State Bonding Fund.

The State Bonding Fund Act does not confer unconstitutional judicial powers on the state examiner and insurance commissioner. State ex rel. Linde v. Taylor, 33 N.D. 76, 156 N.W. 561, 1916 N.D. LEXIS 71 (N.D. 1916), writ of error dismissed, 245 U.S. 627, 38 S. Ct. 60, 62 L. Ed. 518, 1917 U.S. LEXIS 1797 (U.S. 1917).

Regulation of Insurance Generally.

The business of life insurance is affected with the public interest and subject to legislative regulation designed to protect the public. Mann v. Policyholders' Nat'l Life Ins. Co., 78 N.D. 724, 51 N.W.2d 853, 1952 N.D. LEXIS 72 (N.D. 1952).

26.1-01-03.1. Cease and desist authority — Hearing — Failure to appear.

The commissioner may issue an order to cease and desist and notice of opportunity for hearing when it appears that any person is engaged in an act or practice which violates or may lead to a violation of this title. Any party aggrieved by the commissioner’s order may make written application for a hearing on the order within thirty days of the date of the order. The application for a hearing must briefly state the respects in which the applicant is aggrieved by the order and the grounds for relief to be relied upon at the hearing. A hearing must be held not later than ten days after an application for hearing is received unless a delay is requested by all persons named in the order. The commissioner, within thirty days after the hearing, shall issue an order vacating the cease and desist order or making the cease and desist order permanent, as the facts require. The failure of any named person to appear at any proper hearing under this section after receiving notice of the hearing will cause that person to be in default and the allegations contained in the cease and desist order may be deemed to be true and may be used against the person at the hearing. If no hearing is requested by written application, the commissioner’s order becomes permanent.

Source:

S.L. 1985, ch. 316, § 1; 1989, ch. 342, § 1; 1993, ch. 287, § 1; 1999, ch. 251, § 1.

26.1-01-03.2. Injunctive authority.

The commissioner may bring an action in the district court of Burleigh County to enjoin any acts or practices which are prohibited under this title, upon not less than eight days’ notice to the defendants named in the action.

Source:

S.L. 1985, ch. 316, § 2.

26.1-01-03.3. Penalty for violation of title.

Unless otherwise provided by law, a person who violates this title is subject, after hearing by the commissioner, to payment of an administrative monetary penalty of up to ten thousand dollars.

Source:

S.L. 1999, ch. 251, § 2.

26.1-01-04. Service of process upon commissioner — Procedure.

When a consent to service of any process, notice, order, or demand upon the commissioner is provided under this title, the service is to be in duplicate. The commissioner immediately shall forward one copy by registered mail to the person against whom the process, notice, order, or demand is directed at that person’s last reasonably ascertainable address and shall file the other copy in the office of the commissioner. The commissioner shall keep a record of the date and hour of service.

Source:

S.L. 1983, ch. 332, § 1; 2017, ch. 211, § 1, eff July 1, 2017.

Derivation:

N.D.C.C. §§ 26-09-06, 26-09-08, 26-12-30, 26-16-05, 26-21.1-10, 26-21.2-03.

26.1-01-05. Reporting and review of medical malpractice claims, settlements, and judgments.

  1. A health care provider or the insurer of a health care provider, if any, shall report all claims, settlements of claims, or final judgments against the health care provider to the commissioner. The report must be made in the manner prescribed by the commissioner and must provide those facts the commissioner deems necessary to gather adequate information regarding claims, settlements of claims, and final judgments against health care providers. For the purposes of this section, a “health care provider” includes any person, corporation, facility, or institution licensed by this state to provide health care or professional services as a physician, hospital, dentist, professional or practical nurse, physician’s aide, optometrist, podiatrist, chiropractor, physical therapist, or psychologist, or an officer, employee, or agent thereof acting in the course and scope of employment.
  2. The commissioner shall forward copies of all reports required by this section to the appropriate board of professional registration, examination, or licensure. That board shall review all reports which it receives and may take any necessary disciplinary action against a health care provider when the action is appropriate, including censure, imposition of probation, or suspension or revocation of the health care provider’s license. The board shall conduct the review as an administrative hearing in the manner provided in chapter 28-32, including the giving of appropriate notice.

Source:

S.L. 1983, ch. 332, § 1.

Derivation:

N.D.C.C. § 26-01-02.1.

Collateral References.

Event triggering liability insurance coverage as occurring within period of time covered by liability insurance policy where injury or damage is delayed—modern cases, 14 A.L.R.5th 695.

26.1-01-06. Reporting of statistical data regarding legal malpractice claims, settlements, and judgments. [Repealed]

Repealed by S.L. 2003, ch. 245, § 4.

26.1-01-07. Fees chargeable by commissioner.

  1. The commissioner shall charge and collect the following fees:
    1. For filing articles of incorporation, or copies, or amendments thereof, twenty-five dollars.
    2. For each original certificate of authority issued upon admittance and for each annual renewal thereof, one hundred dollars and for amendment to certificate of authority, or certified copy thereof, fifty dollars.
    3. For issuing an annual reciprocal exchange license, the same fees as those applicable to the issuance of a certificate of authority in subsection 2.
    4. For filing an annual report of a fraternal benefit society, and issuing a license or permit to the society, and for each renewal thereof, one hundred dollars.
    5. For filing of articles of merger, or copies thereof, thirty dollars.
    6. For filing an annual statement, twenty-five dollars.
    7. For filing the abstract of the annual statement of an insurance company for publication, thirty dollars.
    8. For an official examination, the expenses of the examination at the rate adopted by the department. The rates must be reasonably related to the direct and indirect costs of the examination, including actual travel expenses, including hotel and other living expenses, compensation of the examiner and other persons making the examination, and necessary attendant administrative costs of the department directly related to the examination and must be paid by the examined insurer together with compensation upon presentation by the department to the insurer of a detailed account of the charges and expenses after a detailed statement has been filed by the examiner and approved by the department.
    9. For issuing a certificate to a domestic insurance company showing a compliance with the compulsory reserve provisions of this title and the maintenance of proper security deposits and for any renewal of the certificate, twenty-five dollars.
    10. For a written licensee’s examination not administered by the office of the commissioner under a contract with a testing service, the actual cost of the examination, subject to approval of the commissioner, which must be paid to the testing service.
    11. For issuing a surplus lines insurance producer’s or insurance consultant’s license, one hundred dollars. For each annual renewal of a surplus lines insurance producer’s or insurance consultant’s license, twenty-five dollars.
    12. For issuing an insurance producer’s license, one hundred dollars.
    13. For issuing a duplicate of any license or registration issued under this title, ten dollars.
    14. For each insurance company appointment and renewal of an appointment of an insurance producer, ten dollars.
    15. For each company application for admission, five hundred dollars, except applications for admission for county mutual, fraternal benefit, and surplus lines companies must be one hundred dollars.
    16. For issuing a license and each annual renewal of a license to an insurance premium finance company, one hundred dollars.
    17. For examining or investigating an insurance premium finance company, the actual expense and per diem incurred; but the per diem charge may not exceed fifty dollars.
    18. For issuing and each annual renewal of a license to an advisory organization, fifty dollars.
    19. For filing an individual insurance producer licensing continuation, twenty-five dollars.
  2. Nonprofit health service corporations and health maintenance organizations are subject to the same fees as any other insurance company. County mutual insurance companies and benevolent societies are liable only for the fees mentioned in subdivisions b, f, g, and h of subsection 1.
  3. However, the commissioner may, after public notice and hearing, increase the fees authorized by this section for any year if it is determined necessary to generate the revenue appropriated by the legislative assembly from the insurance regulatory trust fund to fund budgeted operations for the insurance department. The insurance commissioner may not implement a fee increase pursuant to this section to enhance or in any manner add funds to the legislative appropriation for the insurance department.

Source:

S.L 1983, ch. 332, § 1; 1985, ch. 324, § 2; 1987, ch. 58, §§ 9, 10; 1989, ch. 343, § 1; 1989, ch. 344, § 1; 1991, ch. 301, § 1; 1995, ch. 276, § 1; 1995, ch. 277, § 1; 1999, ch. 252, § 1; 2001, ch. 262, § 2; 2009, ch. 242, § 1; 2009, ch. 243, § 1; 2009, ch. 252, § 1; 2017, ch. 211, § 2, eff July 1, 2017; 2019, ch. 35, § 5, eff July 1, 2019.

Derivation:

N.D.C.C. § 26-01-04.

26.1-01-07.1. Insurance regulatory trust fund established.

  1. There is hereby created a trust fund designated “insurance regulatory trust fund”. The following amounts must be deposited in the insurance regulatory trust fund:
    1. All sums received under section 26.1-01-07.
    2. All sums received under section 26.1-01-07.2 from the insurance regulatory trust fund investments.
    3. All retaliatory fees imposed upon persons by the insurance department as authorized by law.
    4. All administrative penalties, fines, and fees collected by the commissioner from any person subject to this title.
    5. Any other amounts provided by legislative appropriation.
  2. The moneys so received and deposited in the insurance regulatory trust fund are reserved for use by the insurance department to defray the expenses of the department in the discharge of its administrative and regulatory powers and duties as prescribed by law subject to the applicable laws relating to the appropriations of state funds and to the deposit and expenditure of state moneys. The insurance department is responsible for the proper expenditure of these moneys as provided by law.
  3. Except as otherwise provided by law, after the fiscal year has been closed and all expenses relating to the fiscal year have been accounted for, the office of management and budget shall transfer any fund balance remaining in the insurance regulatory trust fund that exceeds one million dollars to the general fund.

Source:

S.L. 1987, ch. 58, § 6; 1989, ch. 343, § 2; 1993, ch. 1, § 28; 1995, ch. 278, § 1; 1999, ch. 32, § 8; 2009, ch. 248, § 1.

26.1-01-07.2. Insurance regulatory trust fund investment.

  1. It is the responsibility of the insurance department, charged with the administration of the insurance regulatory trust fund, to make such moneys available for investment as fully as is consistent with the cash requirements of the fund and to authorize investment of such moneys by the state investment board.
  2. The insurance department shall monthly notify the state investment board of the amount available for investment, and the moneys must be invested by the investing authority according to the laws relating to state investments. Such notification must include the name and number of the fund for which the investments are to be made and the life of the investment if the principal sum is to be required for meeting obligations.
  3. All earnings derived from such investments must be paid into the insurance regulatory trust fund.

Source:

S.L. 1987, ch. 58, § 7.

26.1-01-07.3. Cash flow financing.

In order to effectively meet the cyclical cash flow needs of the insurance regulatory trust fund, the office of management and budget upon approval of the emergency commission is hereby authorized to issue certificates in anticipation of revenue, notes, or bonds, to funds on deposit in the state treasury. Any issue of such certificates, notes, or bonds must be approved by the emergency commission and are to be used for cash flow financing only and not to offset projected deficits in the insurance regulatory trust fund. The terms of any specific issue of such certificates, notes, or bonds may not exceed one hundred eighty days from the date of issuance whereupon the principal and interest on the certificates, notes, or bonds must be paid in full from the insurance regulatory trust fund or from another issue of a similar nature. All principal and interest on such issues made during a biennial period must be repaid in full at the close of the biennial period from the insurance regulatory trust fund. When certificates, notes, or bonds are issued for cash flow purposes to funds which otherwise would be invested, with the investment income accruing to the fund, the certificate shall bear an investment rate of return which must be agreed upon by the state investment board and must be at a level commensurate with the yield to be reasonably expected by such fund if invested in alternate securities.

Source:

S.L. 1987, ch. 58, § 8.

26.1-01-07.4. Group health care coverage — Cooperative agreement allowed.

The insurance commissioner shall adopt rules to enable groups to form a cooperative that would allow those groups to purchase group health insurance coverage or to self-insure as one entity.

Source:

S.L. 1993, ch. 311, § 13; 2005, ch. 253, § 1.

26.1-01-07.5. Fire district maps — Insurance applications to show fire district in which property is located — Penalty.

Before December first of each year, the insurance commissioner shall publish maps of the fire districts of the state for use by insurers under this section for the following calendar year. The state firefighter’s association and the state fire marshal shall assist the insurance commissioner in preparing the maps. After December 31, 1993, no insurer may issue or renew a policy for fire, allied lines, homeowner’s multiple peril, farmowner’s multiple peril, commercial multiple peril, or crop hail insurance coverage for property in this state unless the application identifies each fire district in which the insured property is located. The application must identify the property and insured value of the property located within each fire district if the policy provides coverage for property that is not all within a single district. For purposes of this section, “fire district” means rural fire protection district, city, or area served by a certified rural fire department. An insurer that is found by the commissioner to be in violation of this section is subject to a penalty of one hundred dollars for each violation to be deposited in the fire insurance tax distribution fund. The insurance commissioner may adopt rules necessary for administration of this section, including rules governing preparation, charges for, and use of maps under this section.

Source:

S.L. 1993, ch. 288, § 1; 1995, ch. 276, § 2; 2001, ch. 210, § 12; 2013, ch. 178, § 4.

26.1-01-07.6. Medicare provider-sponsored organizations.

The insurance commissioner shall adopt rules relating to provider-sponsored organizations as defined in section 4001 of the Balanced Budget Act of 1997 [Pub. L. 105-33; 111 Stat. 312; 42 U.S.C. 1395 et seq.].

Source:

S.L. 1999, ch. 253, § 1.

26.1-01-08. Rulemaking — Administrative procedure — Appeal from commissioner’s decision.

Any rulemaking or any administrative proceeding conducted by the commissioner is subject to chapter 28-32, and any order or decision of the commissioner, unless otherwise specifically provided for by law, is subject to review or appeal in the manner provided by chapter 28-32.

Source:

S.L. 1983, ch. 332, § 1.

Derivation:

N.D.C.C. §§ 26-01-16, 26-07-14.1, 26-10-13.1, 26-12-32, 26-12-41, 26-21.2-12, 26-21.2-13, 26-26-21, 26-27-22, 26-27.1-26, 26-27.2-25, 26-28-18, 26-30-04.1, 26-38-27, 26-38-28.

26.1-01-08.1. Electronic filings allowed.

  1. Notwithstanding any other provision of this title, the commissioner may adopt rules that allow either an applicant or a licensee to file documents electronically with the commissioner or the commissioner’s designee. The rules may contain procedures for the electronic filing of the following:
    1. Any document required as part of an application for a license under this title;
    2. Any document required to be filed by an applicant or licensee to maintain the license in good standing;
    3. Any fee required under this title; and
    4. Any other document required or permitted to be filed.
  2. This section may not be interpreted to supersede any other provision of law that requires the electronic filing of a document or to require an applicant or licensee to make any other filing electronically. The commissioner or the commissioner’s designee may charge a processing fee for electronic filing. A fee charged for the processing of an electronic filing is in addition to any other fee imposed for the filing. Processing fees charged for an electronic filing are limited to the lesser of twenty dollars per transaction or the actual cost of the electronic transaction charged by the designee processing the filing. If the actual cost of processing an electronic filing exceeds twenty dollars per transaction, the commissioner may adopt rules to increase an electronic processing fee not to exceed the actual cost charged by the designee.

Source:

S.L. 1999, ch. 254, § 1; 2009, ch. 242, § 2.

26.1-01-09. Salary of commissioner.

The annual salary of the commissioner is one hundred twelve thousand two hundred forty-one dollars through June 30, 2022, and one hundred fourteen thousand four hundred eighty-six dollars thereafter.

Source:

S.L. 1983, ch. 332, § 1; S.L. 1983, ch. 44, § 10; S.L. 1985, ch. 560, § 3; S.L. 1989, ch. 1, § 18; S.L. 1991, ch. 28, § 15; S.L. 1995, ch. 32, § 7; S.L. 1997, ch. 10, § 13; S.L. 1999, ch. 32, § 9; S.L. 2001, ch. 10, § 8; S.L. 2005, ch. 10, § 13; S.L. 2005, ch. 15, § 13; S.L. 2007, ch. 37, § 11; S.L. 2009, ch. 10, § 9; S.L. 2011, ch. 36, § 8; S.L. 2013, ch. 10, § 6; 2015, ch. 44, § 7, eff July 1, 2015; 2019, ch. 35, § 6, eff July 1, 2019; 2021, ch. 10, § 6, eff July 1, 2021.

Derivation:

N.D.C.C. § 26-01-03.

26.1-01-10. General penalty.

For a violation of any provision of this title, when no penalty is provided specifically, the offender is guilty of an infraction.

Source:

S.L. 1983, ch. 332, § 1.

Derivation:

N.D.C.C. § 26-07-17.

26.1-01-11. Prescription drug assistance.

The insurance commissioner shall create and implement a program to assist individuals of low income to gain access to prescription medications through prescription drug assistance programs offered by pharmaceutical manufacturers, including free discount and coverage programs. The commissioner shall use available computer software programs that link an eligible individual with the appropriate pharmaceutical company patient assistance program relating to the individual’s medically necessary drugs. The commissioner shall provide education to individuals and providers to promote the program and to expand enrollment and access to necessary medications for low-income individuals qualifying for the programs.

Source:

S.L. 2003, ch. 232, § 1.

CHAPTER 26.1-02 General Provisions

26.1-02-01. Definitions.

In chapters 26.1-02 through 26.1-04, unless the context or subject matter otherwise requires:

  1. “Domestic” means incorporated or formed in this state.
  2. “Foreign”, when used without limitation, means formed by the authority of any state or government other than this state.
  3. “Foreign decree” means any decree or order in equity of a court located in a reciprocal state, including a court of the United States, against any insurer incorporated or authorized to do business in this state.
  4. “Insurance company” includes any corporation, association, benefit society, exchange, partnership, or individual engaged as principal in the business of insurance.
  5. “Qualified party” means a state regulatory agency acting in its capacity to enforce the insurance laws of its state.
  6. “Reciprocal state” means any state the laws of which contain procedures substantially similar to those specified in this chapter for the enforcement of decrees or orders in equity issued by courts located in other states, against any insurance company incorporated or authorized to do business in that state.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. §§ 26-07-01, 26-37-02, 26-37-11.

26.1-02-01.1. Definition of limited benefit policy — Application.

In this title, “limited benefit policy” means a policy or certificate issued under a group insurance policy that provides coverage for accident-only, credit, dental, vision, Medicare supplement, long-term care, or disability income insurance; coverage issued as a supplement to liability insurance, or automobile medical payment or no-fault insurance; or a policy or certificate of specified disease, hospital confinement indemnity, or any other type of limited benefit health insurance. Any statute that becomes effective after January 1, 1997, and affects accident and health insurance, or any hospital, medical, or major medical policy, whether issued on a group or individual basis, does not apply to a limited benefit policy unless the statute specifically identifies application to a limited benefit policy.

Source:

S.L. 1997, ch. 246, § 1.

26.1-02-02. Duty of commissioner before granting or renewing certificate of authority.

The commissioner must be satisfied by examination and evidence that an insurance company is legally qualified to transact business in this state, including compliance with section 26.1-03-11, before granting a certificate of authority to the company to issue policies or make insurance contracts. A certificate of authority issued under this title remains in force in perpetuity if the required renewal fee is paid by April thirtieth of each year and the commissioner is satisfied that the documents required by section 26.1-03-11 have been filed, the statements and evidences of investment required of the company have been furnished, the required capital or surplus or both, securities, and investments remain secure, and all other requirements of law are met. Any company which neglects to pay the renewal fee by April thirtieth forfeits twenty-five dollars for each day’s neglect.

Source:

S.L. 1983, ch. 332, § 2; 1985, ch. 317, § 4; 1993, ch. 289, § 1.

Derivation:

N.D.C.C. § 26-01-06.

DECISIONS UNDER PRIOR LAW

Analysis

Act of Commissioner Not Reviewable by Mandamus.

In granting or revoking a certificate authorizing an insurance company to transact business within this state, the insurance commissioner acts within the limits of a discretion not subject to control or review by mandamus. State ex rel. Dakota Hail Ass'n v. Carey, 2 N.D. 36, 49 N.W. 164, 1891 N.D. LEXIS 22 (N.D. 1891), explained, Dean v. Dimmick, 18 N.D. 397, 122 N.W. 245, 1908 N.D. LEXIS 119 (N.D. 1908), distinguished, Chandler v. Starlin, 19 N.D. 144, 121 N.W. 198. LEXIS 73 (N.D. 1909).

Power to Pass on Security of Company’s Investments.

The power of the commissioner to pass upon the security of an insurance company’s investments must be exercised in the light of evidence and not upon speculation. National Farmers Union Life Ass'n v. Krueger, 76 N.D. 619, 38 N.W.2d 563, 1949 N.D. LEXIS 82 (N.D. 1949).

26.1-02-03. Inquiry into condition of company — Information supplied to commissioner — Penalty.

The commissioner may address to any insurance company doing or applying for permission to do business in this state any inquiries in relation to the company’s activities, condition, or any other matter connected with the company’s transactions. The company shall reply in writing to such an inquiry within twenty days of receipt of the inquiry unless within that twenty days the company requests and the commissioner grants an extension of time. It is a violation of this title for a person to knowingly supply the commissioner with false, misleading, or incomplete information.

Source:

S.L. 1983, ch. 332, § 2; 2003, ch. 233, § 1.

Derivation:

N.D.C.C. § 26-07-10.

26.1-02-04. Company controlled by foreign government prohibited — Penalty.

An insurance company or other insurance entity financially owned or financially controlled by any foreign government outside the United States may not do any insurance business in this state. The commissioner may not grant a license or issue a certificate of authority to any insurance company or other insurance entity financially owned or financially controlled by any foreign government outside the United States to transact any insurance business in this state. This section does not affect any insurance company qualified to do business in this state before January 2, 1955.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. §§ 26-01-13, 26-01-14.

26.1-02-05. Unauthorized insurance prohibited — Exceptions.

An insurance company may not transact insurance business in this state, as set forth in section 26.1-02-06, without a certificate of authority from the commissioner. This section does not apply to:

  1. The lawful transaction of surplus lines insurance.
  2. The lawful transaction of reinsurance by insurers.
  3. Transactions involving a policy lawfully solicited, written, and delivered outside of this state covering only subjects of insurance not resident, located, or expressly to be performed in this state at the time of issuance, and which transactions are subsequent to the issuance of such policy.
  4. Transactions involving life insurance, health insurance, or annuities provided to educational or religious or charitable institutions organized and operated without profit to any private shareholder or individual, for the benefit of the institutions and individuals engaged in the service of the institutions.
  5. Attorneys acting in the ordinary relation of attorney and client in the adjustment of claims or losses.
  6. Transactions involving group life, accident, and health, or blanket accident and health insurance, or group annuities if the master policy of the group was lawfully issued and delivered in and pursuant to the laws of a state in which the insurance company was authorized to do an insurance business, to a group organized for purposes other than the procurement of insurance, and where the policyholder is domiciled or otherwise has a bona fide situs.
  7. Transactions involving any insurance policy or annuity contract issued before July 1, 1973.
  8. Transactions relative to a policy issued or to be issued outside this state involving insurance on vessels, craft or hulls, cargoes, marine builder’s risk, marine protection and indemnity or other risk, including strikes and war risks commonly insured under ocean or wet marine forms of policy.
  9. Transactions involving insurance contracts issued to one or more industrial insureds; provided, that this does not relieve an industrial insured from taxation imposed upon independently procured insurance. An industrial insured is an insured:
    1. Which procures the insurance of any risk or risks other than life and annuity contracts by use of the services of a full-time employee acting as an insurance manager or buyer or the services of a regularly and continuously retained qualified insurance consultant;
    2. Whose aggregate annual premiums for insurance on all risks total at least twenty-five thousand dollars; and
    3. Which has at least twenty-five full-time employees.

Source:

S.L. 1983, ch. 332, § 2; 1985, ch. 317, § 5.

Derivation:

N.D.C.C. § 26-37-01.

DECISIONS UNDER PRIOR LAW

Agent’s Failure to Procure Certificate a Crime.

A violation of the provisions forbidding any agent to act for an insurance company without procuring a certificate of authority is a crime under the laws of this state. In re Hogan, 8 N.D. 301, 78 N.W. 1051, 1899 N.D. LEXIS 7 (N.D. 1899).

26.1-02-05.1. Group life and health insurance trust filing — Exemption requirements.

Any insurance company claiming an exemption under subsection 6 of section 26.1-02-05 from a requirement that the company have a certificate of authority to do business in this state or comply with the insurance laws of this state shall provide the following information to the insurance commissioner for the commissioner’s approval of the exemption:

  1. A copy of the trust agreement for the group.
  2. A full copy of the master contract.
  3. A copy of the certificate of insurance to be issued or sold in this state.
  4. A copy of the application for the certificate of insurance.
  5. A copy of a disclosure statement used in the solicitation of the insurance indicating that the protection of North Dakota’s insurance laws will not be provided to the holders of certificates of insurance issued by the group.
  6. An assurance that only one type of insurance coverage may be included in each mailing or mass market solicitation.
  7. Such other information as the commissioner deems necessary to assure that the group is organized for purposes other than the procurement of insurance or otherwise meets the requirements of subsection 6 of section 26.1-02-05.

No company may issue or deliver a policy of insurance or issue or deliver for issue a certificate of insurance in this state without a certificate of authority unless it has first been granted approval in writing to do so by the commissioner under this section.

Source:

S.L. 1987, ch. 331, § 1.

26.1-02-06. Insurance transactions defined — Venue.

Any of the following acts in this state effected by mail or otherwise by or on behalf of an unauthorized insurance company constitutes the transaction of an insurance business in this state:

  1. Making or proposing to make, as an insurance company, an insurance contract.
  2. Making or proposing to make, as guarantor or surety, any contract of guaranty or suretyship as a vocation and not merely incidental to any other legitimate business or activity of the guarantor or surety.
  3. Taking or receiving of any application for insurance.
  4. Receiving or collecting any premium, commission, membership fees, assessments, dues, or other consideration for any insurance or any part thereof.
  5. Issuing or delivering an insurance contract to residents of this state or to persons authorized to do business in this state.
  6. Directly or indirectly acting as an insurance producer for or otherwise representing or aiding on behalf of another, any person or insurance company in the solicitation, negotiation, procurement, or effectuation of insurance or renewals thereof or in the dissemination of information as to coverage or rates, or forwarding of applications, or delivery of policies or contracts, or inspection of risks, or fixing of rates, or investigation or adjustment of claims or losses, or in the transaction of matters subsequent to effectuation of the contract and arising out of it, or in any other manner representing or assisting a person or insurance company in the transaction of insurance with respect to subjects of insurance resident, located, or to be performed, in this state. This subsection does not prohibit full-time salaried employees of a corporate insured from acting in the capacity of an insurance manager or buyer in placing insurance on behalf of the employer.
  7. Transacting any kind of insurance business specifically recognized as transacting an insurance business within the meaning of the statutes relating to insurance.
  8. Transacting or proposing to transact any insurance business in substance equivalent to any of the foregoing in a manner designed to evade these statutes.

The venue of an act committed by mail is at the point where the matter transmitted by mail is delivered and takes effect.

Source:

S.L. 1983, ch. 332, § 2; 1985, ch. 317, § 6; 2001, ch. 262, § 3.

Derivation:

N.D.C.C. § 26-37-02.

Notes to Decisions

Evidence of Insurance Contract.

There was ample evidentiary support for the trial court’s finding that claimant and insurance company intended to enter into a contract of insurance. The conduct of the parties, both before and after occurrence of losses, was indicative of a typical insurance transaction as, at the inception of the transaction insurance company issued a standard insurance binder and then issued a policy which had all of the indicia of a standard insurance policy and the policy listed claimant as the “insured,” specified payment of “premiums,” and provided dates of coverage, policy limits, deductibles, loss payable, coverage, and exclusions and also included provisions governing subrogation, notice of loss, and proof of loss. North Dakota Ins. Guar. Ass'n v. Agway, Inc., 462 N.W.2d 142, 1990 N.D. LEXIS 220 (N.D. 1990).

26.1-02-07. Unauthorized contracts valid.

The failure of an insurance company transacting insurance business in this state to obtain a certificate of authority does not impair the validity of any act or contract of the company and does not prevent the company from defending any civil action in any court of this state, but a company transacting insurance business in this state without a certificate of authority may not maintain a civil action in any court of this state to enforce any right, claim, or demand arising out of the transaction of insurance business until the company has obtained a certificate of authority.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-03.

26.1-02-08. Liability of unauthorized company.

If any unauthorized insurance company fails to pay any claim or loss within the provisions of its insurance contract, any person who assisted or in any manner aided, directly or indirectly, in the procurement of the insurance contract is liable to the insured for the full amount of the claim or loss in the manner provided by the contract.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-04.

26.1-02-09. Restraint of violations — Jurisdiction.

Whenever the commissioner believes that any insurance company is violating or is about to violate this chapter, the commissioner, through the attorney general of this state, may cause a complaint to be filed in the district court of Burleigh County to enjoin and restrain the company from continuing or engaging in any violation or doing any act in furtherance thereof. The court may make and enter an order or judgment awarding preliminary or final injunctive relief as in its judgment is proper.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-05.

26.1-02-10. Agent for service of process — Unauthorized company.

Any act of transacting insurance business as set forth in this chapter by any unauthorized insurance company is an irrevocable appointment by the company, binding upon the company, its executor or administrator, or successor in interest if a corporation, of the secretary of state or the secretary’s successor in office, as the attorney of the company upon whom may be served all lawful process in any action or proceeding in any court by the commissioner or by the state and upon whom may be served any notice, order, pleading, or process in any proceeding before the commissioner and which arises out of transacting insurance business in this state by the company. Any act of transacting insurance business in this state by any unauthorized company signifies its agreement that any lawful process in any court action or proceeding and any notice, order, pleading, or process in any administrative proceeding before the commissioner so served is of the same legal force and validity as personal service of process in this state upon the company.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-06.

26.1-02-11. Service of process — How made.

Service of process is made by delivering to the secretary of state, or some person in apparent charge of the secretary of state’s office, two copies thereof and by payment to the secretary of state of the fee prescribed by law. The secretary of state immediately shall forward by registered mail one copy to the defendant in a court proceeding, or to whom the process is addressed or directed in an administrative proceeding, at its last reasonably ascertainable address. The secretary of state shall keep a record of the date and hour of service. This service is sufficient if notice of the service and a copy of the process is mailed within ten days thereafter by certified mail to the defendant by the plaintiff or the plaintiff’s attorney in a court proceeding, or to whom the process is addressed or directed by the commissioner in an administrative proceeding, at its last reasonably ascertainable address, and the defendant’s receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person or insurer to whom the letter is addressed, and an affidavit of mailing showing compliance herewith is filed with the clerk of the court in which the proceeding is pending, or with the commissioner in an administrative proceeding. No judgment or determination by default may be entered in any proceeding until the expiration of forty-five days from the date of filing of the affidavit of compliance.

This section does not limit or affect the right to serve any process upon any person or insurer in any other manner permitted by law.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-07.

26.1-02-12. Pleading by unauthorized insurance company — When permitted.

Before any unauthorized insurance company files or causes to be filed any pleading in any court proceeding instituted against the company by service made as provided in section 26.1-02-11, the company shall either:

  1. File with the clerk of the court in which the proceeding is pending a cash or other bond with good and sufficient sureties, to be approved by the clerk, in an amount fixed by the court sufficient to secure payment of any final judgment which may be rendered in the action; or
  2. Procure a certificate of authority to transact the business of insurance in this state. In considering the application for a certificate of authority, for the purposes of this subsection, the commissioner need not assert section 26.1-11-06 against the company with respect to its application if the commissioner determines that the company would otherwise comply with the requirements for the certificate of authority.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-08.

26.1-02-13. Enforcement of decisions or orders.

The attorney general upon request of the commissioner may proceed in the court of this state or any reciprocal state to enforce an order or decision in any court proceeding or in any administrative proceeding before the commissioner.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-10.

26.1-02-14. List of reciprocal states.

The commissioner shall determine which states qualify as reciprocal states and shall maintain at all times an up-to-date list of reciprocal states.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-12.

26.1-02-15. Filing and status of foreign decrees.

A certified copy of any foreign decree may be filed in the office of the clerk of any district court of this state and concurrently in the office of the commissioner with information showing which district court is being used. The clerk, upon receiving verification from the commissioner, shall treat the foreign decree in the same manner as a decree of the district court. A filed foreign decree has the same effect as a decree of a district court of this state, and is subject to the same procedures, defenses, and proceedings for reopening, vacating, or staying as a decree of a district court and may be enforced or satisfied in like manner.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-13.

26.1-02-16. Verification — Notice of filing.

At the time a foreign decree is filed in this state, the commissioner shall make and file with the clerk of the appropriate district court an affidavit setting forth the name and last-known post-office address of the defendant and verifying that the decree or order is a foreign decree. Promptly upon receipt of the affidavit, the clerk shall mail notice of the filing of the foreign decree to the defendant at the address contained in the affidavit and to the commissioner and shall make a note of the mailing in the docket.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-14.

26.1-02-17. Enforcement of foreign decrees — Time limit.

No execution or other process for enforcement of a foreign decree may issue until thirty days after the date the decree is filed.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-15.

26.1-02-18. Stay of enforcement.

If the defendant shows the district court that an appeal from the foreign decree is pending or will be taken, or that a stay of execution has been granted, the court shall stay enforcement of the foreign decree until the appeal is concluded, the time for appeal expires, or the stay of execution expires or is vacated, upon proof that the defendant has furnished the security for the satisfaction of the decree required by the state in which it was rendered. If the defendant shows the district court any ground upon which enforcement of a decree of any district court of this state would be stayed, the court shall stay enforcement of the foreign decree for an appropriate period, upon requiring the same security for satisfaction of the decree as would be required in this state.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-37-16.

26.1-02-19. Fees.

Any person filing a foreign decree shall pay a filing fee as prescribed in subdivision d of subsection 1 of section 27-05.2-03 to the clerk of court. Fees for docketing, transcriptions, or other enforcement proceedings are as provided for decrees of the district court.

Source:

S.L. 1983, ch. 332, § 2; 1985, ch. 336, § 4; 1999, ch. 107, § 3; 1999, ch. 278, § 43.

Derivation:

N.D.C.C. § 26-37-17.

26.1-02-20. Reinsurance permitted — Limitations.

Except as otherwise provided by this section and section 26.1-02-22, any insurance company organized or admitted to transact business in this state, including a mutual company, may reinsure any part or all of any risk taken by it in any insurance company or insurer licensed in any state or any insurance company or insurer not so licensed or any nonprofit health service corporation whether or not licensed in this state provided it was approved or accepted by the commissioner, if that company or insurer or nonprofit health service corporation conforms to the same standards of solvency which would be required if, at the time the reinsurance is effected, it was licensed in this state. A county mutual insurance company also may reinsure with any other county mutual insurance company. No reinsurance, however, may be effected with any company disapproved therefor by written order of the commissioner filed in the commissioner’s office. A domestic insurance company organized to engage in the business of life, accident, or health insurance may not reinsure its risks or any part thereof without complying with chapter 26.1-07.

Source:

S.L. 1983, ch. 332, § 2; 1983, ch. 320, § 3; 1993, ch. 290, § 1.

Derivation:

N.D.C.C. § 26-05-03.

DECISIONS UNDER PRIOR LAW

Exemption from Prior Approval.

By expressly limiting compliance with former N.D.C.C. ch. 26-20 (see now N.D.C.C. ch. 26.1-07) to domestic companies, this section impliedly exempted foreign companies from the prior approval requirement. Sierra Life Ins. Co. v. Wigen, 286 N.W.2d 296, 1979 N.D. LEXIS 326 (N.D. 1979).

Collateral References.

Who may enforce liability of reinsurer, 87 A.L.R.6th 319.

26.1-02-21. Reinsurance — Treatment upon insolvency, liquidation, or dissolution.

  1. Credit may not be allowed, as an admitted asset or as a deduction from liability, to any ceding insurer for reinsurance unless the reinsurance contract provides, in substance, that in the event of the insolvency of the ceding insurer, the reinsurance must be payable under one or more contracts reinsured by the assuming insurer on the basis of reported claims allowed by the liquidation court or proof of payment of the claim by a guaranty association without diminution because of the insolvency of the ceding insurer. The payments must be made directly to the ceding insurer or to the ceding insurer’s domiciliary liquidator except if:
    1. The contract or other written agreement specifically provides another payee of such reinsurance in the event of the insolvency of the ceding insurer; or
    2. The assuming insurer, with the consent of the direct insured, has assumed such policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under the policies and in substitution for the obligations of the ceding insurer to the payees.
  2. Notwithstanding subsection 1, if a life and health insurance guaranty association has elected to succeed to the rights and obligations of the insolvent insurer under the contract of reinsurance, the reinsurer’s liability to pay covered reinsured claims continues under the contract of reinsurance, subject to the payment to the reinsurer of the reinsurance premiums for such coverage. Payment for such reinsured claims may only be made by the reinsurer pursuant to the direction of the guaranty association or the guaranty association’s designated successor. Any payment made at the direction of the guaranty association or the guaranty association’s designated successor by the reinsurer will discharge the reinsurer of all further liability to any other party for the claim payment.
  3. The reinsurance agreement may provide that the domiciliary liquidator of an insolvent ceding insurer shall give written notice to the assuming insurer of the pendency of a claim against such ceding insurer on the contract reinsured within a reasonable time after the claim is filed in the liquidation proceeding. During the pendency of the claim, any assuming insurer may investigate the claim and interpose, at the assuming insurer’s own expense, in the proceeding in which the claim is to be adjudicated any defenses the assuming insurer determines available to the ceding insurer, or the ceding insurer’s liquidator. The expense may be filed as a claim against the insolvent ceding insurer as a class 7 claim under section 26.1-06.1-41 to the extent of a proportionate share of the benefit which may accrue to the ceding insurer solely as a result of the defense undertaken by the assuming insurer. If two or more assuming insurers are involved in the same claim and a majority in interest elect to interpose one or more defenses to the claim, the expense must be apportioned in accordance with the terms of the reinsurance agreement as though the expense had been incurred by the ceding insurer.

Source:

S.L. 1983, ch. 332, § 2; 2005, ch. 254, § 1.

26.1-02-22. Accepting reinsurance of unauthorized company prohibited.

An insurance or surety company may not assume the whole or any part of any risk covering property located in this state, as a reinsurance company or in any other manner, insured by any insurance company not authorized to transact business in this state.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-07-15.

26.1-02-23. Revocation of company’s authority to do business in this state.

The commissioner shall revoke the certificate of authority of an insurance, bonding, surety, or indemnity company immediately if, at any time after examination, the commissioner has reason to believe that:

  1. Any annual statement or other report required to be submitted by an officer or agent of the company pursuant to this title is false; or
  2. The company is practicing discrimination against individual risks in the issue or cancellation of policies, bonds, or other insurance contracts or corporate suretyship.

Source:

S.L. 1983, ch. 332, § 2; 1985, ch. 317, § 7.

Derivation:

N.D.C.C. § 26-07-11.

26.1-02-24. Copy of revocation to be mailed to company — Company to discontinue business — Setting aside of revocation.

If the certificate of authority of an insurance, bonding, surety, or indemnity company is revoked pursuant to section 26.1-02-23, the commissioner shall mail a copy of the revocation to the company or to the agents thereof in this state. Thereafter, the company and its agents may not issue any new policy, bond, or surety contract nor renew any policy, bond, or surety contract previously issued. The revocation may not be set aside, nor may a new certificate of authority be issued, until satisfactory evidence has been submitted to the commissioner showing that the company is in the condition set forth in its annual statement or other report, or that the discrimination alleged has not been practiced, or that the practice of discrimination will cease immediately, as the case may be, and that this title has been complied with by the company.

Source:

S.L. 1983, ch. 332, § 2.

Derivation:

N.D.C.C. § 26-07-13.

26.1-02-24.1. Definition.

For the purpose of this section and section 26.1-02-24.2, “fraudulent insurance act” means an act committed by any person who, knowingly and with intent to defraud, presents, causes to be presented, or prepares with knowledge or belief that it will be presented to or by an insurer, purported insurer, insurance producer, or any agent thereof, any written statement as part of, or in support of, an application for the issuance of, or the rating of an insurance policy for commercial insurance, or a claim for payment or other benefit pursuant to an insurance policy for commercial or personal insurance which the person knows to contain materially false information concerning any fact material thereto; or conceals, for the purpose of misleading, information concerning any fact material thereto.

Source:

S.L. 1987, ch. 330, § 1; 2001, ch. 262, § 4.

Collateral References.

Filing of false insurance claims for medical services as ground for disciplinary action against dentist, physician, or other medical practitioner, 70 A.L.R.4th 132.

26.1-02-24.2. Immunity from liability.

In the absence of fraud or bad faith, no person is subject to civil liability of any kind, including for libel and slander, by virtue of filing reports, without malice, or furnishing other information, without malice, required by the insurance laws of this state or required by the commissioner, and no civil cause of action of any nature may arise against such person for any of the following:

  1. Any information relating to suspected fraudulent insurance acts furnished to or received from law enforcement officials, their agents and employees.
  2. Any information relating to suspected fraudulent insurance acts furnished to or received from other persons subject to the provisions of section 26.1-02-24.1 and this section.
  3. Any such information furnished in reports to the insurance fraud bureau, national association of insurance commissioners, or any organization established to detect and prevent fraudulent insurance acts, their agents, employees or designees, nor is the commissioner or any employee of the insurance fraud bureau, in the absence of fraud or bad faith, subject to civil liability and no civil cause of actions of any nature may arise against such person by virtue of the publication of any report or bulletin related to the official activities of the insurance fraud bureau. Nothing herein is intended to abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person.

Source:

S.L. 1987, ch. 330, § 2.

26.1-02-24.3. Insurance counseling programs — Volunteers — Immunity from liability.

A person who, on a volunteer basis, provides services or performs duties on behalf of the insurance commissioner for an insurance counseling program is immune from civil liability for any act or omission resulting in damage or injury if at the time of the act or omission the person who caused the damage or injury was acting in good faith, in the exercise of reasonable and ordinary care, and in the scope of that person’s duties as a volunteer and the act or omission did not constitute willful misconduct or gross negligence. This section does not grant immunity to a person causing damage as a result of the negligent operation of a motor vehicle.

Source:

S.L. 1993, ch. 310, § 7.

26.1-02-25. Penalty.

Any unauthorized insurance company or other insurance entity or any representative or agent of the company or entity that transacts any unauthorized act of insurance business as provided by this chapter is guilty of a class C felony.

Source:

S.L. 1983, ch. 332, § 2; 2005, ch. 255, § 1.

Derivation:

N.D.C.C. §§ 26-01-15, 26-37-18.

26.1-02-26. Accounting practices and procedures manual.

The commissioner shall adopt by rule the accounting practices and procedures manual published by the national association of insurance commissioners. The provisions of the accounting practices and procedures manual adopted by the commissioner govern the statutory accounting practices of all insurance companies, including health maintenance organizations, licensed to do business in this state. Any reference to the accounting practices and procedures manual in this title means the manual the commissioner adopts by rule, unless specifically stated otherwise.

Source:

S.L. 1999, ch. 255, § 1.

26.1-02-27. Disclosing nonpublic personal information.

  1. An insurance company, nonprofit health service corporation, or health maintenance organization may not disclose to a nonaffiliated third party a customer’s nonpublic personal information contrary to the provisions of title V of the Gramm-Leach-Bliley Act [Pub. L. 106-102; 113 Stat. 1436] or contrary to the rules adopted by the commissioner under this section.
  2. The commissioner shall adopt rules necessary to carry out this section.
    1. The rules must be consistent with and not more restrictive than the model regulation adopted by the national association of insurance commissioners entitled “Privacy of Consumer Financial and Health Information Regulation”.
    2. Notwithstanding subdivision a and subject to the exceptions, including the affiliate sharing exception provided for in the national association of insurance commissioners’ model regulation, the rules may prohibit the disclosure of nonpublic personal health and financial information concerning an individual unless an authorization is obtained from the individual whose nonpublic personal health and financial information is sought to be disclosed.
    3. The rules may not require an insurance company, nonprofit health service corporation, or health maintenance organization to provide an annual privacy notice if the insurance company, nonprofit health service corporation, or health maintenance organization:
      1. Complies with nonaffiliated third party sharing rules adopted by the commissioner; and
      2. Has not changed the insurance company’s, nonprofit health service corporation’s, or health maintenance organization’s policies and practices with regard to disclosing nonpublic personal information from the policies and practices that were disclosed in the most recent notice sent to consumers.
  3. This section does not create a private right of action.

Source:

S.L. 2001, ch. 263, § 1; 2003, ch. 234, § 1; 2019, ch. 230, § 1, eff August 1, 2019.

Note.

Title V of the Gramm-Leach-Bliley Act referenced herein is classified to 15 USCS §§ 1681s and 6801 et seq.

26.1-02-28. Child support insurance data match. [Effective through August 31, 2022]

  1. As used in this section:
    1. “Claimant” means a resident of this state over fourteen years of age who:
      1. Is a beneficiary under a life insurance policy;
      2. Is an individual who brings a third-party claim against an insured or under an insurance policy for compensation under insurance coverage for bodily injury or workers’ compensation; or
      3. Is an individual who brings a first-party claim under an insurance policy for uninsured or underinsured motorist benefits.
    2. “Department” means the department of human services and any designee of the department.
    3. “Insurer” includes a government self-insurance pool and any designee of an insurer or government self-insurance pool, but does not include any health insurer participating in a data match under section 50-09-37.
    4. “Personal information” means the name, address, and date of birth of a person; the person’s social security number, current motor vehicle operator’s license number issued to the claimant by the department of transportation under title 39, or the last four digits of the person’s social security number; and any other relevant and available information regarding the person that is requested by the department.
  2. Before paying a claim to a claimant for a claim occurring in this state under a contract of insurance issued in this state, an insurer may exchange personal information about the claimant with the department, but a government self-insurance pool shall exchange personal information about the claimant with the department. The information must be exchanged as soon as reasonably possible after the first submission of the claim, but not less than ten days prior to making a payment to a claimant. This section applies notwithstanding any provision of law making the information confidential.
  3. Any personal information that is exchanged under this section is confidential and may only be used to establish or enforce a child support or medical support obligation, or as otherwise permitted or required by law. To the extent feasible, the department shall provide secure electronic processes for exchanging personal information under this section. An insurer shall not be assessed any fee by the department for exchanging claim information under this section.
  4. An insurer that exchanges personal information with the department under subsection 2 also shall provide the telephone number of a facsimile machine or electronic mail address to which a lien or demand may be sent to the insurer by the department under chapter 35-34.
  5. Notwithstanding anything to the contrary in section 35-34-06, upon agreement of the insurer and the department, if the department files a lien against a claim that is identified under this section:
    1. The department may delay sending the claimant a copy of the notice of the lien until requested by the insurer or until a payment to the claimant is delayed as a result of the lien, whichever occurs first; or
    2. The insurer may provide the claimant with the copy of the notice of lien that is required under section 35-34-06 no later than the date a payment to the claimant is delayed as a result of the lien.
  6. A person is immune from suit or any liability under any federal or state law, including chapter 12.1-13 or 44-04, for acting in good faith under this section. The court shall award reasonable attorney’s fees and costs against any person that commences an action that is subsequently dismissed by reason of the immunity granted by this section.
  7. A government self-insurance pool that complies with this section is not subject to subsection 1 of section 50-09-08.2.
  8. Nothing in this section shall require an insurer to make a payment that is not otherwise required under the contract of insurance.
  9. A claimant who refuses to provide to an insurer the personal information that the insurer is required to exchange with the department under this section may not receive payment on the claim and may not pursue a suit against the insured or the insurer in this state for the amount of the claim until the information is provided.
  10. An individual who willfully fails to comply with this section is subject to the same liabilities as an income payer under section 14-09-09.3 unless the context indicates otherwise.

If a claimant’s receipt of notice of a lien is delayed under this subsection, the time for seeking a review of the lien under section 50-09-14 does not begin until the date the notice is mailed or otherwise provided to the claimant.

Source:

S.L. 2009, ch. 419, § 8; 2011, ch. 251, §§ 2-4.

Notes to Decisions

Voluntary Disclosure.

Under N.D.C.C. § 1-02-07, statutes that were not in irreconcilable conflict had to be harmonized if possible. That could be done in a case where the trial court incorrectly determined that N.D.C.C. § 50-09-08.2, regarding the state human services agency’s power to subpoena documents from the state insurance reserve fund, as the power to subpoena the documents did not mean that the state insurance fund could not voluntarily disclose those documents, as it had the authority to do under N.D.C.C. § 26.1-02-28State v N.D. Ins. Reserve Fund, 2012 ND 216, 822 N.W.2d 38.State v. N.D. Ins. Reserve Fund, 2012 ND 216, 822 N.W.2d 38, 2012 N.D. LEXIS 230 (N.D. 2012).

26.1-02-28. Child support insurance data match. [Effective September 1, 2022]

  1. As used in this section:
    1. “Claimant” means a resident of this state over fourteen years of age who:
      1. Is a beneficiary under a life insurance policy;
      2. Is an individual who brings a third-party claim against an insured or under an insurance policy for compensation under insurance coverage for bodily injury or workers’ compensation; or
      3. Is an individual who brings a first-party claim under an insurance policy for uninsured or underinsured motorist benefits.
    2. “Department” means the department of health and human services and any designee of the department.
    3. “Insurer” includes a government self-insurance pool and any designee of an insurer or government self-insurance pool, but does not include any health insurer participating in a data match under section 50-09-37.
    4. “Personal information” means the name, address, and date of birth of a person; the person’s social security number, current motor vehicle operator’s license number issued to the claimant by the department of transportation under title 39, or the last four digits of the person’s social security number; and any other relevant and available information regarding the person that is requested by the department.
  2. Before paying a claim to a claimant for a claim occurring in this state under a contract of insurance issued in this state, an insurer may exchange personal information about the claimant with the department, but a government self-insurance pool shall exchange personal information about the claimant with the department. The information must be exchanged as soon as reasonably possible after the first submission of the claim, but not less than ten days prior to making a payment to a claimant. This section applies notwithstanding any provision of law making the information confidential.
  3. Any personal information that is exchanged under this section is confidential and may only be used to establish or enforce a child support or medical support obligation, or as otherwise permitted or required by law. To the extent feasible, the department shall provide secure electronic processes for exchanging personal information under this section. An insurer shall not be assessed any fee by the department for exchanging claim information under this section.
  4. An insurer that exchanges personal information with the department under subsection 2 also shall provide the telephone number of a facsimile machine or electronic mail address to which a lien or demand may be sent to the insurer by the department under chapter 35-34.
  5. Notwithstanding anything to the contrary in section 35-34-06, upon agreement of the insurer and the department, if the department files a lien against a claim that is identified under this section:
    1. The department may delay sending the claimant a copy of the notice of the lien until requested by the insurer or until a payment to the claimant is delayed as a result of the lien, whichever occurs first; or
    2. The insurer may provide the claimant with the copy of the notice of lien that is required under section 35-34-06 no later than the date a payment to the claimant is delayed as a result of the lien.
  6. A person is immune from suit or any liability under any federal or state law, including chapter 12.1-13 or 44-04, for acting in good faith under this section. The court shall award reasonable attorney’s fees and costs against any person that commences an action that is subsequently dismissed by reason of the immunity granted by this section.
  7. A government self-insurance pool that complies with this section is not subject to subsection 1 of section 50-09-08.2.
  8. Nothing in this section shall require an insurer to make a payment that is not otherwise required under the contract of insurance.
  9. A claimant who refuses to provide to an insurer the personal information that the insurer is required to exchange with the department under this section may not receive payment on the claim and may not pursue a suit against the insured or the insurer in this state for the amount of the claim until the information is provided.
  10. An individual who willfully fails to comply with this section is subject to the same liabilities as an income payer under section 14-09-09.3 unless the context indicates otherwise.

If a claimant’s receipt of notice of a lien is delayed under this subsection, the time for seeking a review of the lien under section 50-09-14 does not begin until the date the notice is mailed or otherwise provided to the claimant.

Source:

S.L. 2009, ch. 419, § 8; 2011, ch. 251, §§ 2-4; 2021, ch. 352, § 313, eff September 1, 2022.

26.1-02-29. Compliance with federal law.

The commissioner shall administer and enforce the provisions of the Patient Protection and Affordable Care Act [Pub. L. 111-148] and the provisions of the Health Care and Education Reconciliation Act of 2010 [Pub. L. 111-152] to the extent that the provisions apply to insurance companies subject to the commissioner’s jurisdiction and to the extent that the provisions are not under the exclusive jurisdiction of any federal agency.

Source:

S.L. 2011, ch. 211, § 1.

26.1-02-30. Consumer assistance records — Confidential.

  1. Personal, financial, or health information related to requests for consumer assistance received by the commissioner is a confidential record as defined in section 44-04-17.1.
  2. As used in this section, “personal, financial, or health information” means information that would reveal:
    1. An individual’s personal health condition, disease, or injury;
    2. The existence, nature, source, or amount of an individual’s personal income;
    3. The existence, nature, source, or amount of an individual’s personal expenses;
    4. Records of or relating to an individual’s personal financial transactions of any kind;
    5. The existence, identification, nature, or value of an individual’s personal assets, liabilities, or net worth;
    6. A history of an individual’s personal medical diagnosis or treatment;
    7. The existence, identification, nature, value, or content of an individual’s coverage or status under any insurance policy;
    8. An individual’s personal contractual rights or obligations; or
    9. Any social security number, date of birth, file number, bank account number, or other number used for identification of an individual or any account in which an individual has a personal financial interest.
  3. The name of a regulated entity that is the subject of a complaint or inquiry is not “personal, financial, or health information” and is not subject to the restrictions in this section.

Source:

S.L. 2013, ch. 228, § 1; 2017, ch. 217, § 2, eff August 1, 2017; 2019, ch. 231, § 1, eff August 1, 2019.

26.1-02-31. Confidentiality of complaint information — Exceptions.

  1. A document, material, or other information, including the contents of a claim file, which is provided to, obtained by, created by, or disclosed to the commissioner in response to a consumer assistance request or a complaint is confidential and not subject to section 44-04-18, a subpoena to the department, or discovery request or admissible as evidence in a private civil action. However, the commissioner may disclose the subject matter of the assistance request or complaint, provide a general description of the disposition of the request or complaint, and use the document, material, or other information for a regulatory or legal action brought as a part of the official duties of the commissioner.
  2. A privilege or claim of confidentiality in the document, material, or information is not waived as a result of disclosure to the commissioner under this section or as a result of providing or disclosing information to the commissioner.

Source:

S.L. 2019, ch. 231, § 2, eff August 1, 2019.

Note.

Section 26.1-02-31 was enacted 2 times by the 2019 Legislative Assembly. Pursuant to Section 1-02-09.1, the section is printed above to give effect to the enactments made in Section 2 of Chapter 231, Session Laws 2019, House Bill 1139 over Section 1 of Chapter 232, Session Laws 2019, House Bill 1137.

26.1-02-32. Electronic notices and documents.

  1. As used in this section:
    1. “Delivered by electronic means” includes:
      1. Delivery to an electronic mail address at which a party has consented to receive notices or documents; or
      2. Posting on an electronic network or site accessible via the internet, mobile application, computer, mobile device, tablet, or other electronic device, together with separate notice to a party directed to the electronic mail address at which the party has consented to receive notice of the posting.
    2. “Party” means a recipient of a notice or document required as part of an insurance transaction, including an applicant, insured, or policyholder.
  2. Subject to the requirements of this section, any notice to a party or any other document required under applicable law in an insurance transaction or any other document that is to serve as evidence of insurance coverage may be delivered, stored, and presented by electronic means if the notice or document meets the requirements of chapter 9-16.
  3. Delivery of a notice or document in accordance with this section is equivalent to any delivery method required under applicable law, including delivery by first class mail; first class mail, postage prepaid; or registered mail.
  4. A notice or document may be delivered by electronic means by an insurer to a party under this section if the following requirements are met:
    1. The party has affirmatively consented to the electronic method of delivery and has not withdrawn the consent.
    2. The party, before giving consent, is provided with a clear and conspicuous statement informing the party of the following:
      1. The right of the party at any time to withdraw consent to have a notice or document delivered by electronic means and any conditions or consequences imposed if consent is withdrawn.
      2. The means, after consent is given, by which a party may obtain a paper copy of a notice or document delivered by electronic means.
      3. The procedure a party shall follow to withdraw consent to have a notice or document delivered by electronic means and to update the party’s electronic mail address.
    3. The party:
      1. Before giving consent, is provided with a statement of the hardware and software requirements for access to and retention of a notice or document delivered by electronic means; and
      2. Consents electronically, or confirms consent electronically, in a manner that demonstrates the party can access information in the electronic form that will be used for notices or documents delivered by electronic means as to which the party has given consent.
    4. After the party has given consent, if a change in the hardware or software requirements needed to access or retain a notice or document delivered by electronic means creates a material risk that the party will not be able to access or retain a subsequent notice or document to which the consent applies, the insurer shall provide the party with a statement of the revised hardware and software requirements which complies with subdivision b.
    5. The insurer has provided a copy of the notice or document to the party’s insurance producer by electronic means or regular mail.
  5. This section does not affect requirements related to content or timing of any notice or document required under applicable law.
  6. If a provision of this title or applicable law requiring a notice or document to be provided to a party expressly requires verification or acknowledgment of receipt of the notice or document, the notice or document may be delivered by electronic means only if the electronic method used provides for verification or acknowledgment of receipt.
  7. The legal effectiveness, validity, or enforceability of any insurance contract or policy executed by a party may not be denied solely because of the failure to obtain electronic consent or confirmation of consent of the party in accordance with paragraph 2 of subdivision c of subsection 4.
  8. A withdrawal of consent by a party does not affect the legal effectiveness, validity, or enforceability of a notice or document delivered by electronic means to the party before the withdrawal of consent is effective.
  9. A withdrawal of consent by a party is effective within a reasonable time, not to exceed five days, after receipt of the withdrawal by the insurer.
  10. This section does not apply to a notice or document delivered before August 1, 2019, by an insurer in an electronic form to a party that, before that date, has consented to receive notices or documents in an electronic form otherwise allowed by law.
  11. If the consent of a party to receive certain notices or documents in an electronic form is on file with an insurer before August 1, 2019, and pursuant to this section, an insurer intends to deliver additional notices or documents to the party in an electronic form, then before delivering those additional notices or documents electronically, the insurer shall provide the insured with a statement describing:
    1. The notices or documents that must be delivered by electronic means under this section which were not previously delivered electronically; and
    2. The party’s right to withdraw consent to have notices or documents delivered by electronic means.
  12. Except as otherwise provided by law, if an oral communication or a recording of an oral communication from a party can be reliably stored and reproduced by an insurer, the oral communication or recording may qualify as a notice or document delivered by electronic means for purposes of this section.
  13. If a provision of this title or applicable law requires a signature, notice, or document to be notarized, acknowledged, verified, or made under oath, the requirement is satisfied if the electronic signature of the individual authorized to perform those acts, together with all other information required to be included by the provision, is attached to or logically associated with the signature, notice, or document.
  14. This section may not be construed to modify, limit, or supersede the provisions of the federal Electronic Signatures in Global and National Commerce Act [15 U.S.C. ch. 7001 et seq.].

Source:

S.L. 2019, ch. 232, § 1, eff August 1, 2019.

Note.

Section 26.1-02-31 was enacted 2 times by the 2019 Legislative Assembly. Pursuant to Section 1-02-09.1, the section is printed above to give effect to the enactments made in Section 2 of Chapter 231, Session Laws 2019, House Bill 1139 over Section 1 of Chapter 232, Session Laws 2019, House Bill 1137.

26.1-02-33. Posting policy on internet.

  1. An insurance policy and an endorsement that does not contain personally identifiable information may be mailed, delivered, or posted on the insurer’s website. If the insurer elects to post an insurance policy and an endorsement on the insurer’s website in lieu of mailing or delivering the policy and endorsement to the insured, the insurer shall comply with the following conditions:
    1. The policy and an endorsement must be accessible to the insured and producer of record and remain that way while the policy is in force;
    2. After the expiration of the policy, the insurer shall archive the expired policy and endorsement for a period of five years or other period required by law, and make the policy and endorsement available upon request;
    3. The policy and endorsement must be posted in a manner that enables the insured and producer of record to print and save the policy and endorsement using a program or application that is widely available on the internet and free to use;
    4. The insurer shall provide the following information in, or simultaneous with, each declaration page provided at the time of issuance of the initial policy and any renewals of the policy:
      1. A description of the exact policy and endorsement form purchased by the insured;
      2. A description of the insured’s right to receive, upon request and without charge, a paper copy of the policy and endorsement by mail; and
      3. The internet address at which the policy and endorsement are posted;
    5. The insurer, upon an insured’s request and without charge, shall mail a paper copy of the policy and endorsement to the insured; and
    6. The insurer shall provide notice, in the format preferred by the insured, of any change to the forms or endorsement; the insured’s right to obtain, upon request and without charge, a paper copy of the forms or endorsement; and the internet address at which the forms or endorsement are posted.
  2. This section does not affect the timing or content of any disclosure or document required to be provided or made available to any insured under applicable law.

Source:

S.L. 2019, ch. 232, § 2, eff August 1, 2019.

26.1-02-34. Rules of interpretation.

In addition to the rules of interpretation under chapters 1-01 and 1-02, in interpreting this title, a person, including the courts of this state, shall apply the Constitution of the United States of America and the Constitution of North Dakota, this code, and the common law of this state. A person may not apply, give weight to, or afford recognition to, the American Law Institute’s “Restatement of the Law, Liability Insurance” as an authoritative reference regarding interpretation of North Dakota laws, rules, and principles of insurance law.

Source:

S.L. 2019, ch. 233, § 1, eff August 1, 2019.

CHAPTER 26.1-02.1 Insurance Fraud

26.1-02.1-01. Definitions.

As used in this chapter:

  1. “Breach of trust” means any criminal act or an element of a criminal act by a person, including an act that constitutes or involves misuse, misapplication, or misappropriation of the following:
    1. Anything of value held as a fiduciary, in which “fiduciary” includes a trustee, administrator, executor, conservator, receiver, guardian, agent, employee, partner, officer, director, or public service; or
    2. Anything of value of any public, private, or charitable organization.
  2. “Business of insurance” means the writing of insurance or the reinsuring of risks by an insurer, including acts necessary or incidental to writing insurance or reinsuring risks and the activities of persons who act as or who are officers, directors, agents, producers, or employees of insurers, or who are other persons authorized to act on their behalf. The term does not include the activities of the North Dakota life and health insurance guaranty association or the North Dakota insurance guaranty association.
  3. “Dishonesty” means a criminal act, including an offense constituting or involving perjury, bribery, arson, knowingly receiving or possession of stolen property, forgery or falsification of documents, counterfeiting, knowingly issuing a bad check, false or misleading oral or written statements, false pretenses, deception, fraud, schemes or artifices to deceive or defraud, material misrepresentations, or the failure to disclose material facts.
  4. “Financial loss” includes loss of earnings, out-of-pocket and other expenses, repair and replacement costs, and claims payments.
  5. “Fraudulent insurance act” includes the following acts or omissions committed by a person knowingly and with intent to defraud:
    1. Presenting, causing to be presented, or preparing with knowledge or belief that it will be presented to or by an insurer, reinsurer, insurance producer, or any agent thereof, false or misleading information as part of, in support of, or concerning a fact material to one or more of the following:
      1. An application for the issuance or renewal of an insurance policy or reinsurance contract;
      2. The rating of an insurance policy or reinsurance contract;
      3. A claim for payment or benefit pursuant to an insurance policy or reinsurance contract;
      4. Premiums paid on an insurance policy or reinsurance contract;
      5. Payments made in accordance with the terms of an insurance policy or reinsurance contract;
      6. A document filed with the commissioner or the chief insurance regulatory official of another jurisdiction;
      7. The financial condition of an insurer or reinsurer;
      8. The formation, acquisition, merger, reconsolidation, dissolution, or withdrawal from one or more lines of insurance or reinsurance in all or part of this state by an insurer or reinsurer;
      9. The issuance of written evidence of insurance;
      10. The reinstatement of an insurance policy; or
      11. The formation of an agency, brokerage, or insurance producer contract.
    2. Solicitation or acceptance of new or renewal insurance risks on behalf of an insurer, reinsurer, or other person engaged in the business of insurance by a person who knows or should know that the insurer or other person responsible for the risk is insolvent at the time of the transaction.
    3. Removal, concealment, alteration, or destruction of the assets or records of an insurer, reinsurer, or other person engaged in the business of insurance.
    4. Theft by deception or otherwise, or embezzlement, abstracting, purloining, or conversion of moneys, funds, premiums, credits, or other property of an insurer, reinsurer, or person engaged in the business of insurance.
    5. Attempting to commit, aiding or abetting in the commission of, or conspiring to commit the acts or omissions specified in this section.
  6. “Insurance” means a contract or arrangement in which one undertakes to pay or indemnify another as to loss from certain contingencies called “risks”, including through reinsurance; pay or grant a specified amount or determinable benefit to another in connection with ascertainable risk contingencies; pay an annuity to another; or act as surety. The term does not include a debt cancellation contract between a bank and debtor, between a credit union and debtor, or between a savings association and debtor and does not include a debt suspension contract between a bank and debtor, between a credit union and debtor, or between a savings association and debtor.
  7. “Insurer” means a person entering into arrangements or contracts of insurance or reinsurance and who agrees to perform any of the acts set forth in subsection 4, whether the person has or is required to have a certificate of authority or denies being an insurer. The term does not include the North Dakota life and health insurance guaranty association, the risk management fund, a bank, credit union, or savings association as a party to a debt cancellation contract or debt suspension contract, or the North Dakota insurance guaranty association.
  8. “Person” means an individual, corporation, partnership, association, joint stock company, trust, unincorporated organization, or any similar entity or any combination of the foregoing.
  9. “Policy” means an individual or group policy, group certificate, contract, or arrangement of insurance or reinsurance affecting the rights of a resident of this state or bearing a reasonable relation to this state, regardless of whether delivered or issued for delivery in this state.
  10. “Practitioner” means a licensee of this state authorized to practice medicine and surgery, psychology, chiropractic, or law or any other licensee of the state whose services are compensated, directly or indirectly, by insurance proceeds, or a licensee similarly licensed in other states and nations or the practitioner of any nonmedical treatment rendered in accordance with a recognized religious method of healing.
  11. “Reinsurance” means a contract, binder of coverage including placement slip, or arrangement under which an insurer procures insurance for itself in another insurer as to all or part of an insurance risk of the originating insurer.

Source:

S.L. 1993, ch. 291, § 1; 2001, ch. 262, § 5; 2003, ch. 235, § 1; 2017, ch. 212, § 1, eff March 3, 2017; 2021, ch. 227, § 1, eff August 1, 2021.

26.1-02.1-02. Insurance fraud. [Repealed]

Repealed by S.L. 2003, ch. 235, § 11.

26.1-02.1-02.1. Fraudulent insurance acts, interference, participation, and licensure of convicted felons prohibited.

  1. A person may not commit a fraudulent insurance act.
  2. A person may not knowingly or intentionally interfere with the enforcement of the provisions of this chapter or investigations of suspected or actual violations of this chapter.
    1. A person convicted of a felony involving dishonesty or breach of trust may not participate in the business of insurance. The commissioner shall deny an application for license under chapter 26.1-26, or shall revoke or shall refuse to renew a license issued under chapter 26.1-26, if the commissioner finds the applicant or licensee has been convicted of a felony involving dishonesty or breach of trust.
    2. A person in the business of insurance may not knowingly or intentionally permit a person convicted of a felony involving dishonesty or breach of trust to participate in the business of insurance.

Source:

S.L. 2003, ch. 235, § 2; 2017, ch. 212, § 2, eff March 3, 2017.

26.1-02.1-03. Disclosure of information. [Repealed]

Repealed by S.L. 2003, ch. 235, § 11.

26.1-02.1-04. Immunity.

  1. A person when acting without malice is not subject to liability by virtue of filing reports, or furnishing orally or in writing other information concerning any suspected, anticipated, or completed fraudulent insurance act, when the reports or information are provided to or received from the commissioner; federal, state, or local law enforcement or regulatory officials; the national association of insurance commissioners; or any other not-for-profit organization established to detect and prevent insurance fraud and any employee or agent of any of these entities.
  2. Except in prosecution for perjury or insurance fraud, and in the absence of malice, an insurer, or any officer, employee, or agent thereof, or any licensed insurance producer or private person who cooperates with, furnishes evidence, or provides or receives information regarding any suspected fraudulent insurance act to or from the commissioner; federal, state, or local law enforcement or regulatory officials; the national association of insurance commissioners; or any not-for-profit organization established to detect and prevent fraudulent insurance acts and any employee or agent of any of these entities who complies with an order issued by a court of competent jurisdiction acting in response to a request by any of these entities to provide evidence or testimony is not subject to a criminal proceeding or to a civil penalty with respect to any act concerning which the person testifies to or produces relevant matter.
  3. In the absence of malice, an insurer, or any officer, employee, or agent thereof, or any licensed insurance producer or private person who cooperates with, furnishes evidence, or provides information regarding any suspected fraudulent insurance act to the commissioner; federal, state, or local law enforcement or regulatory officials; the national association of insurance commissioners; or any not-for-profit organization established to detect and prevent fraudulent insurance acts and any employee or agent of any of these entities who complies with an order issued by a court of competent jurisdiction acting in response to a request by any of these entities to furnish evidence or provide testimony, is not subject to civil liability for libel, slander, or any other relevant tort, and no civil cause of action of any nature exists against the person, for filing reports, providing information, or otherwise cooperating with an investigation or examination of any of these entities.
  4. The commissioner; federal, state, or local law enforcement or regulatory officials; the national association of insurance commissioners; or any not-for-profit organization established to detect and prevent fraudulent insurance acts and any employee or agent of any of these entities, when acting without malice is not subject to civil liability for libel, slander, or any other relevant tort, and no civil cause of action of any nature will lie against the person by virtue of the execution of official activities or duties of the entity by virtue of the publication of any report or bulletin related to the official activities or duties of the entity.
  5. This section does not abrogate or modify in any way common law or statutory privilege or immunity heretofore enjoyed by any person or entity.

Source:

S.L. 1993, ch. 291, § 4; 2001, ch. 262, § 7; 2003, ch. 235, § 3.

26.1-02.1-05. Penalties — Restitution.

    1. A violation of section 26.1-02.1-02.1 is:
      1. A class A felony if the value of any property or services retained exceeds fifty thousand dollars;
      2. A class B felony if the value of the act associated with the fraud or directly related to the fraud exceeds fifty thousand dollars;
      3. A class B felony if the value of any property or services retained exceeds ten thousand dollars but does not exceed fifty thousand dollars;
      4. A class C felony if the value of the act associated with the fraud or directly related to the fraud exceeds ten thousand dollars but does not exceed fifty thousand dollars;
      5. A class C felony if the value of any property or services retained exceeds one thousand dollars but does not exceed ten thousand dollars; and
      6. A class A misdemeanor in all other cases.
    2. For purposes of this section, the value of any property and services must be determined in accordance with section 12.1-23-05.
  1. If a practitioner is adjudicated guilty of a violation of section 26.1-02.1-02.1, the court shall notify the appropriate licensing authority of this state of the adjudication. The appropriate licensing authority shall hold an administrative hearing to consider the imposition of administrative sanctions as provided by law against the practitioner.
  2. In addition to any other punishment, a person that violates section 26.1-02.1-02.1 must be ordered to make restitution to the insurer or to any other person for any financial loss sustained as a result of the violation of section 26.1-02.1-02.1. The court shall determine the extent and method of restitution.
  3. A prosecution for any felony offense under chapter 26.1-02.1 must be commenced within three years after the date of discovery of the fraud.
  4. A prosecution for any misdemeanor or infraction offense under chapter 26.1-02.1 must be commenced within two years after the date of discovery of the fraud.

Source:

S.L. 1993, ch. 291, § 5; 2003, ch. 235, § 4; 2013, ch. 104, § 13; 2013, ch. 229, § 1; 2019, ch. 234, § 1, eff August 1, 2019.

26.1-02.1-05.1. Administrative penalty and enforcement.

  1. Upon a showing by a preponderance of evidence that a violation of this chapter occurred, and with the consent of the county state’s attorney, the commissioner may impose an administrative penalty not to exceed ten thousand dollars for each fraudulent insurance act. Assessment of the administrative penalty must be determined by the nature, circumstances, extent, and gravity of the fraudulent insurance act or acts, any prior history of such act or acts, the degree of culpability, and such other matters as justice may require. The commissioner shall determine the administrative penalty, such as fines, restitution, or both.
  2. In the event of nonpayment of the administrative penalty after all rights of appeal have been waived or exhausted, the commissioner may bring a civil action in district court for the collection of the administrative penalty and any other expenses incurred, including interest, attorney’s fees, and costs, in the following manner:
    1. A summons and complaint must be filed in the district court of Burleigh County setting forth that administrative action was taken against the defendant in accordance with this chapter, that the defendant either voluntarily entered a consent order that called for the payment of a specified monetary penalty, or in the alternative, that after proper notice and hearing, the defendant was determined to be in violation of this chapter and that by order of the commissioner a specified monetary penalty had been assessed against the defendant, that all rights of appeal have been waived or exhausted, and that payment in full has not been made in accordance with the terms of the consent order or other order of the commissioner. The insurance department shall attach to the complaint a certified copy of that consent order or other order of the commissioner.
    2. The court shall enter judgment in favor of the department for the amount specified in the complaint if the department establishes:
      1. The defendant is the same person against which the consent order or other order of the commissioner applies; and
      2. Payment in full has not been made by or on behalf of the defendant according to the terms of the consent or other order of the commissioner.
    3. Except as otherwise provided in this section the North Dakota Rules of Civil Procedure govern the civil proceedings.
  3. A person that is found to have committed a fraudulent insurance act and assessed an administrative penalty or a person that violated an order of the commissioner pursuant to a hearing or consent order in relation to an administrative penalty associated with a fraudulent insurance act, may be liable for expenses incurred by the insurance department at the discretion of the commissioner. The assessment for costs may not exceed fifteen percent of each penalty assessed under this section.
  4. The commissioner may order restitution to the insurer or self-insured employer of any insurance proceeds paid pursuant to a fraudulent insurance act.Restitution ordered must be paid by the owing party to the insurance regulatory trust fund under section 26.1-01-07.1 and from that fund be paid to the victim insurer or self-insured employee.
  5. The expenses or administrative penalties collected by the commissioner under this chapter are appropriated to the insurance department in accordance with this section and section 26.1-01-07.1. All such moneys that are deposited in the insurance regulatory trust fund under this chapter may be appropriated for use in the education and enforcement of insurance fraud, except funds ordered as restitution to a victim. Restitution funds must be reallocated to the victim. In the discretion of the department, the department may pay a reward drawn from the assessed administrative penalty to an individual who reports to the insurance department an incident of fraudulent insurance act that results in either an admission or finding of fraud. The reward may not exceed the lesser of the assessed administrative penalty or twenty-five thousand dollars. In order to be eligible to receive a reward under this subsection, a reporting individual shall sign a written complaint that subjects the person to the sanctions of section 26.1-02.1. Persons required to report fraudulent insurance acts under subsection 1 of section 26.1-02.1-06 are not eligible to receive a reward pursuant to this subsection.
  6. The insurance department may collect moneys for use by the department for fraud education and enforcement purposes.
    1. The following amounts must be deposited in the insurance regulatory trust fund for use by the department for fraud education and enforcement purposes, all sums received from:
      1. Fines assessed in accordance with this chapter; and
      2. Assessment of department costs under subsection 3.
    2. The moneys received under this subsection are reserved for the use by the insurance department to defray the expenses of the department in the performance of the various functions and duties associated with fraud enforcement, fund specialized training of department personnel tasked with working within fraud enforcement, and provide the funding for specialized equipment, specialized technology, and insurance fraud public service and prevention campaigns and rewards.
    3. The moneys deposited for this purpose are subject to the provisions of section 26.1-01-07.1.

Source:

S.L. 2021, ch. 175, § 1, eff August 1, 2021.

26.1-02.1-05.2. Consent orders.

A person may enter a consent order by which such person, without admitting the conduct alleged, consents to the imposition of an administrative penalty and when so requested agrees to cease and desist the acts or omissions alleged in the complaint.

Source:

S.L. 2021, ch. 175, § 2, eff August 1, 2021.

26.1-02.1-05.3. Criminal prosecution.

The imposition of a fine or other sanction under this chapter does not preclude prosecution for a violation of a criminal law of the state.

Source:

S.L. 2021, ch. 175, § 3, eff August 1, 2021.

26.1-02.1-06. Mandatory reporting of fraudulent insurance acts.

  1. A person engaged in the business of insurance having knowledge or a reasonable belief that a fraudulent insurance act is being, will be, or has been committed shall provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.
  2. Any other person having knowledge or a reasonable belief that a fraudulent insurance act is being, will be, or has been committed may provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.
  3. A person who provides nonpublic personal information to the commissioner pursuant to this section does not violate the insurance privacy law under section 26.1-02-27.

Source:

S.L. 2003, ch. 235, § 5.

26.1-02.1-07. Confidentiality.

  1. Any documents, materials, or other information in the possession or control of the commissioner which are provided pursuant to section 26.1-02.1-06 or obtained by the commissioner in an investigation of suspected or actual fraudulent insurance acts are confidential by law and privileged, not subject to subpoena, and not subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s official duties.
  2. Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner may be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection 1.
  3. In order to assist in the performance of the commissioner’s duties, the commissioner may:
    1. Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection 1 with other state, federal, and international regulatory agencies, with the national association of insurance commissioners and its affiliates and subsidiaries, and with local, state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information;
    2. Receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information from the national association of insurance commissioners and its affiliates and subsidiaries and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; and
    3. Enter into agreements governing sharing and use of information consistent with this subsection.
  4. A privilege or claim of confidentiality in the documents, materials, or information is not waived as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection 3.
  5. Any investigative information gathered under section 26.1-02.1-06 or 26.1-02.1-08 is criminal investigative information and may not be disclosed except as provided under section 44-04-18.7.

Source:

S.L. 2003, ch. 235, § 6.

26.1-02.1-08. Creation and purpose of the insurance fraud unit.

  1. The North Dakota insurance fraud unit is established within the insurance department. The commissioner may appoint the full-time supervisory and investigative personnel of the insurance fraud unit, who must be qualified by training and experience to perform the duties of their positions. The commissioner may also appoint clerical and other staff necessary for the insurance fraud unit to carry out its duties and responsibilities under this chapter.
  2. The insurance fraud unit shall:
    1. Initiate independent inquiries and conduct independent investigations when the insurance fraud unit has cause to believe that a fraudulent insurance act may be, is being, or has been committed;
    2. Review reports or complaints of alleged fraudulent insurance activities from federal, state, and local law enforcement and regulatory agencies, persons engaged in the business of insurance, and the public to determine whether the reports require further investigation and to conduct these investigations; and
    3. Conduct independent examinations of alleged fraudulent insurance acts and undertake independent studies to determine the extent of fraudulent insurance acts.
  3. The insurance fraud unit may:
    1. Inspect, copy, or collect records and evidence;
    2. Serve subpoenas;
    3. Administer oaths and affirmations;
    4. Share records and evidence with federal, state, or local law enforcement or regulatory agencies;
    5. Execute search warrants and arrest warrants for criminal violations of this chapter;
    6. Arrest upon probable cause without warrant a person found in the act of violating or attempting to violate a provision of this chapter;
    7. Make criminal referrals to prosecuting authorities; and
    8. Conduct investigations outside of this state. If the information the insurance fraud unit seeks to obtain is located outside this state, the person from whom the information is sought may make the information available to the insurance fraud unit to examine at the place where the information is located. The insurance fraud unit may designate a representative, including an official of the state in which the matter is located, to inspect the information on behalf of the insurance fraud unit, and the insurance fraud unit may respond to a similar request from an official of another state.

Source:

S.L. 2003, ch. 235, § 7.

26.1-02.1-09. Peace officer status.

A fraud unit investigator has all the powers conferred by law upon any peace officer of this state when making arrests for criminal violations established as a result of an investigation pursuant to this chapter. The general laws applicable to arrests by a peace officer of the state also apply to a fraud unit investigator. A fraud unit investigator may execute an arrest warrant and search warrant for the same criminal violation; serve subpoenas issued for the examination, investigation, and trial of all offenses identified through an investigation; and arrest upon probable cause without warrant a person found in the act of committing a violation of the provisions of this chapter.

Source:

S.L. 2003, ch. 235, § 8.

26.1-02.1-10. Other law enforcement or regulatory authority.

This chapter does not:

  1. Preempt the authority or relieve the duty of other law enforcement or regulatory agencies to investigate, examine, and prosecute suspected violations of law;
  2. Prevent or prohibit a person from disclosing voluntarily information concerning insurance fraud to a law enforcement or regulatory agency other than the insurance fraud unit; or
  3. Limit the powers granted elsewhere by the laws of this state to the commissioner or the insurance fraud unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers.

Source:

S.L. 2003, ch. 235, § 9.

26.1-02.1-11. Rules.

The commissioner may adopt rules determined necessary by the commissioner for the administration of this chapter.

Source:

S.L. 2003, ch. 235, § 10.

CHAPTER 26.1-02.2 Insurance Data Security

Source:

S.L. 2021, SB2075, § 1, eff August 1, 2021.

26.1-02.2-01. Definitions.

As used in this chapter:

  1. “Authorized individual” means an individual known to and screened by the licensee and determined to be necessary and appropriate to have access to the nonpublic information held by the licensee and the licensee’s information systems.
  2. “Commissioner” means the insurance commissioner.
  3. “Consumer” means an individual, including an applicant, policyholder, insured, beneficiary, claimant, and certificate holder, who is a resident of this state and whose nonpublic information is in a licensee’s possession, custody, or control.
  4. “Cybersecurity event” means an event resulting in unauthorized access to, disruption, or misuse of, an information system or nonpublic information stored on the information system. The term does not include:
    1. The unauthorized acquisition of encrypted nonpublic information if the encryption, process, or key is not also acquired, released, or used without authorization; or
    2. An event the licensee has determined that the nonpublic information accessed by an unauthorized person has not been used or released and has been returned or destroyed.
  5. “Department” means the insurance department.
  6. “Encrypted” means the transformation of data into a form that results in a low probability of assigning meaning without the use of a protective process or key.
  7. “Information security program” means the administrative, technical, and physical safeguards a licensee uses to access, collect, distribute, process, protect, store, use, transmit, dispose of, or otherwise handle nonpublic information.
  8. “Information system” means a discrete set of electronic information resources organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of electronic nonpublic information, as well as any specialized system, including industrial or process controls systems, telephone switching, private branch exchange systems, and environmental control systems.
  9. “Licensee” means any person licensed, authorized to operate, registered, or required to be licensed, authorized, or registered pursuant to the insurance laws of this state. The term does not include a purchasing group or a risk retention group chartered and licensed in another state or a licensee that is acting as an assuming insurer that is domiciled in another state or jurisdiction.
  10. “Multi-factor authentication” means authentication through verification of at least two of the following types of authentication factors:
    1. Knowledge factors, including a password;
    2. Possession factors, including a token or text message on a mobile phone; or
    3. Inherence factors, including a biometric characteristic.
  11. “Nonpublic information” means electronic information that is not publicly available information and is:
    1. Any information concerning a consumer which can be used to identify the consumer because of name, number, personal mark, or other identifier in combination with any one or more of the following data elements:
      1. Social security number;
      2. Driver’s license number or nondriver identification card number;
      3. Financial account number or credit or debit card number;
      4. Any security code, access code, or password that would permit access to a consumer’s financial account; or
      5. Biometric records.
    2. Any information or data, except age or gender, in any form or medium created by or derived from a health care provider or a consumer which can be used to identify a particular consumer and relates to:
      1. The past, present, or future physical, mental, or behavioral health or condition of any consumer or a member of the consumer’s family;
      2. The provision of health care to any consumer; or
      3. Payment for the provision of health care to any consumer.
  12. “Person” means any individual or any nongovernmental entity, including any nongovernmental partnership, corporation, branch, agency, or association.
  13. “Publicly available information” means any information a licensee has a reasonable basis to believe is lawfully made available to the general public from: federal, state, or local government records; widely distributed media; or disclosures to the general public which are required to be made by federal, state, or local law. A licensee has a reasonable basis to believe that information is lawfully made available to the general public if the licensee has taken steps to determine:
    1. The information is of the type available to the general public; and
    2. Whether a consumer can direct the information not be made available to the general public and, if so, that the consumer has not done so.
  14. “Risk assessment” means the risk assessment that each licensee is required to conduct under section 26.1-02.2-03.
  15. “Third-party service provider” means a person, not otherwise defined as a licensee, that contracts with a licensee to maintain, process, store, or otherwise is permitted access to nonpublic information through its provision of services to the licensee.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

26.1-02.2-02. Exclusive regulation.

Notwithstanding any other provision of law, this chapter establishes the exclusive state standards applicable to licensees for data security, the investigation of a cybersecurity event, and notification to the commissioner.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

26.1-02.2-03. Information security program.

  1. Commensurate with the size and complexity of the licensee, the nature and scope of the licensee’s activities, including the licensee’s use of third-party service providers, and the sensitivity of the nonpublic information used by the licensee or in the licensee’s possession, custody, or control, each licensee shall develop, implement, and maintain a comprehensive written information security program based on the licensee’s risk assessment that contains administrative, technical, and physical safeguards for the protection of nonpublic information and the licensee’s information system.
  2. A licensee’s information security program must be designed to:
    1. Protect the security and confidentiality of nonpublic information and the security of the information system;
    2. Protect against any threats or hazards to the security or integrity of nonpublic information and the information system;
    3. Protect against unauthorized access to or use of nonpublic information, and minimize the likelihood of harm to any consumer; and
    4. Define and periodically re-evaluate a schedule for retention of nonpublic information and a mechanism for destruction if no longer needed.
  3. The licensee shall:
    1. Designate one or more employees, an affiliate, or an outside vendor designated to act on behalf of the licensee which is responsible for the information security program;
    2. Identify reasonably foreseeable internal or external threats that could result in unauthorized access, transmission, disclosure, misuse, alteration, or destruction of nonpublic information, including the security of information systems and nonpublic information accessible to, or held by, third-party service providers;
    3. Assess the likelihood and potential damage of any threats, taking into consideration the sensitivity of the nonpublic information;
    4. Assess the sufficiency of policies, procedures, information systems, and other safeguards in place to manage any threats, including consideration of threats in each relevant area of the licensee’s operations, including:
      1. Employee training and management;
      2. Information systems, including network and software design, as well as information classification, governance, processing, storage, transmission, and disposal; and
      3. Detecting, preventing, and responding to attacks, intrusions, or other systems failures; and
    5. Implement information safeguards to manage the threats identified in the licensee’s ongoing assessment and assess the effectiveness of the safeguards’ key controls, systems, and procedures on an annual basis.
  4. Based on the licensee’s risk assessment, the licensee shall:
    1. Design the information security program to mitigate the identified risks, commensurate with the size and complexity of the licensee, the nature and scope of the licensee’s activities, including the licensee’s use of third-party service providers, and the sensitivity of the nonpublic information used by the licensee or in the licensee’s possession, custody, or control.
    2. Determine which security measures as provided under this subdivision are appropriate and implement the security measures:
      1. Place access controls on information systems, including controls to authenticate and permit access only to an authorized individual to protect against the unauthorized acquisition of nonpublic information;
      2. Identify and manage the data, personnel, devices, systems, and facilities that enable the organization to achieve business purposes in accordance with the business’ relative importance to business objectives and the organization’s risk strategy;
      3. Restrict physical access to nonpublic information only to an authorized individual;
      4. Protect by encryption or other appropriate means, all nonpublic information while being transmitted over an external network and all nonpublic information stored on a laptop computer or other portable computing or storage device or media;
      5. Adopt secure development practices for in-house developed applications utilized by the licensee;
      6. Modify the information system in accordance with the licensee’s information security program;
      7. Utilize effective controls, which may include multi-factor authentication procedures for employees accessing nonpublic information;
      8. Regularly test and monitor systems and procedures to detect actual and attempted attacks on, or intrusions into, information systems;
      9. Include audit trails within the information security program designed to detect and respond to cybersecurity events and designed to reconstruct material financial transactions sufficient to support normal operations and obligations of the licensee;
      10. Implement measures to protect against destruction, loss, or damage of nonpublic information due to environmental hazards, including fire and water damage or other catastrophes or technological failures; and
      11. Develop, implement, and maintain procedures for the secure disposal of nonpublic information in any format.
    3. Include cybersecurity risks in the licensee’s enterprise risk management process.
    4. Stay informed regarding emerging threats or vulnerabilities and use reasonable security measures if sharing information relative to the character of the sharing and the type of information shared.
    5. Provide cybersecurity awareness training to the licensee’s personnel which is updated as necessary to reflect risks identified by the licensee in the risk assessment.
  5. If the licensee has a board of directors, the board or an appropriate committee of the board at a minimum shall:
    1. Require the licensee’s executive management or the licensee’s delegates to develop, implement, and maintain the licensee’s information security program.
    2. Require the licensee’s executive management or the licensee’s delegates to report the following information in writing on an annual basis:
      1. The overall status of the information security program and the licensee’s compliance with the provisions of this chapter; and
      2. Material matters related to the information security program, addressing issues, including risk assessment, risk management and control decisions, third-party service provider arrangements, results of testing, cybersecurity events, or violations, and management’s responses and recommendations for changes in the information security program.
    3. If executive management delegates any responsibilities under this section, the executive management delegates shall oversee the development, implementation, and maintenance of the licensee’s information security program prepared by the delegate and shall receive a report from the delegate complying with the requirements of the report to the board of directors.
      1. The internal process for responding to a cybersecurity event;
      2. The goals of the incident response plan;
      3. The definition of clear roles, responsibilities, and levels of decisionmaking authority;
      4. External and internal communications and information sharing;
      5. Identification of requirements for the remediation of any identified weaknesses in information systems and associated controls;
      6. Documentation and reporting regarding cybersecurity events and related incident response activities; and
      7. The evaluation and revision as necessary of the incident response plan following a cybersecurity event.
  6. A licensee shall exercise due diligence in selecting its third-party service provider; and a licensee shall require a third-party service provider to implement appropriate administrative, technical, and physical measures to protect and secure the information systems and nonpublic information accessible to, or held by, the third-party service provider.
  7. The licensee shall monitor, evaluate, and adjust, as appropriate, the information security program consistent with any relevant changes in technology, the sensitivity of its nonpublic information, internal or external threats to information, and the licensee’s own changing business arrangements, including mergers and acquisitions, alliances and joint ventures, outsourcing arrangements, and changes to information systems.
  8. As part of the licensee’s information security program, a licensee shall establish a written incident response plan designed to promptly respond to, and recover from, any cybersecurity event that compromises the confidentiality, integrity, or availability of nonpublic information in the licensee’s possession. The incident response plan must include the licensee’s plan to recover the licensee’s information systems and restore continuous functionality of any aspect of the licensee’s business or operations.
  9. A licensee’s incident response plan must address:
  10. Annually, an insurer domiciled in this state shall submit to the commissioner, a written statement by April fifteenth, certifying the insurer is in compliance with the requirements set forth in this section. An insurer shall maintain for examination by the department all records, schedules, and data supporting this certificate for a period of five years. To the extent an insurer has identified areas, systems, or processes that require material improvement, updating, or redesign, the insurer shall document the identification and the remedial efforts planned and underway to address the areas, systems, or processes. The documentation must be available for inspection by the commissioner.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

26.1-02.2-04. Investigation of a cybersecurity event.

  1. If a licensee learns a cybersecurity event has or may have occurred, the licensee, an outside vendor, or service provider designated to act on behalf of the licensee, shall conduct a prompt investigation.
  2. During the investigation, the licensee or an outside vendor or service provider designated to act on behalf of the licensee, at a minimum shall:
    1. Determine whether a cybersecurity event has occurred;
    2. Assess the nature and scope of the cybersecurity event;
    3. Identify any nonpublic information that may have been involved in the cybersecurity event; and
    4. Perform or oversee reasonable measures to restore the security of the information systems compromised in the cybersecurity event in order to prevent further unauthorized acquisition, release, or use of nonpublic information in the licensee’s possession, custody, or control.
  3. If a licensee learns a cybersecurity event has or may have occurred in a system maintained by a third-party service provider, the licensee shall complete the requirements provided under subsection 2 or confirm and document that the third-party service provider has completed the requirements.
  4. The licensee shall maintain records concerning all cybersecurity events for a period of at least five years from the date of the cybersecurity event and shall produce the records upon demand of the commissioner.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

26.1-02.2-05. Notification of a cybersecurity event.

  1. A licensee shall notify the commissioner as promptly as possible, but no later than three business days from a determination that a cybersecurity event involving nonpublic information that is in the possession of a licensee has occurred if:
    1. This state is the licensee’s state of domicile, in the case of an insurer, or this state is the licensee’s home state, in the case of a producer as defined in chapter 26.1-26, and the cybersecurity event has a reasonable likelihood of materially harming a consumer residing in this state or reasonable likelihood of materially harming any material part of the normal operations of the licensee; or
    2. The licensee reasonably believes the nonpublic information involved is of two hundred fifty or more consumers residing in this state and is:
      1. A cybersecurity event impacting the licensee for which notice is required to be provided to any government body, self-regulatory agency, or any other supervisory body pursuant to any state or federal law; or
      2. A cybersecurity event that has a reasonable likelihood of materially harming any consumer residing in this state or materially harming any part of the normal operations of the licensee.
  2. The licensee shall provide the notice required under this section in electronic form as directed by the commissioner. The licensee shall update and supplement the initial and any subsequent notifications to the commissioner regarding material changes to previously provided information relating to the cybersecurity event. The licensee’s notice required under this section must include:
    1. The date of the cybersecurity event;
    2. Description of how the information was exposed, lost, stolen, or breached, including the specific roles and responsibilities of third-party service providers, if any;
    3. How the cybersecurity event was discovered;
    4. Whether any lost, stolen, or breached information has been recovered and if so, how;
    5. The identity of the source of the cybersecurity event;
    6. Whether the licensee has filed a police report or has notified any regulatory, government, or law enforcement agencies and, if so, when the notification was provided;
    7. Description of the specific types of information acquired without authorization. Specific types of information means particular data elements, including medical information, financial information, or any other information allowing identification of the consumer;
    8. The period during which the information system was compromised by the cybersecurity event;
    9. The total number of consumers in this state affected by the cybersecurity event. The licensee shall provide the best estimate in the initial report to the commissioner and update the estimate with a subsequent report to the commissioner pursuant to this section;
    10. The results of any internal review identifying a lapse in either automated controls or internal procedures, or confirming that all automated controls or internal procedures were followed;
    11. Description of efforts being undertaken to remediate the situation that permitted the cybersecurity event to occur;
    12. A copy of the licensee’s privacy policy and a statement outlining the steps the licensee will take to investigate and notify consumers affected by the cybersecurity event; and
    13. Name of a contact person that is both familiar with the cybersecurity event and authorized to act for the licensee.
  3. The licensee shall comply with chapter 51-30, as applicable, and provide a copy of the notice sent to consumers to the commissioner, when a licensee is required to notify the commissioner under subsection 1.
  4. In the case of a cybersecurity event in a system maintained by a third-party service provider, of which the licensee has become aware, the licensee shall treat the event in accordance with subsection 1 unless the third-party service provider provides the notice required under chapter 26.1-02.2 to the commissioner.
    1. The computation of licensee’s deadlines under this subsection begin on the day after the third-party service provider notifies the licensee of the cybersecurity event or the licensee otherwise has actual knowledge of the cybersecurity event, whichever is sooner.
    2. Nothing in this chapter prevents or abrogates an agreement between a licensee and another licensee, a third-party service provider, or any other party to fulfill any of the investigation requirements imposed under section 26.1-02.2-04 or notice requirements imposed under subsection 1.
  5. If a cybersecurity event involving nonpublic information that is used by a licensee that is acting as an assuming insurer or in the possession, custody, or control of a licensee that is acting as an assuming insurer and that does not have a direct contractual relationship with the affected consumers, the assuming insurer shall notify the insurer’s affected ceding insurers and the commissioner of the insurer’s state of domicile within three business days of making the determination that a cybersecurity event has occurred. The ceding insurer that has a direct contractual relationship with affected consumers shall fulfill the consumer notification requirements imposed under chapter 51-30 and any other notification requirements relating to a cybersecurity event imposed under subsection 1.
  6. If a cybersecurity event involving nonpublic information that is in the possession, custody, or control of a third-party service provider of a licensee that is an assuming insurer, the assuming insurer shall notify the insurer’s affected ceding insurers and the commissioner of the insurer’s state of domicile within three business days of receiving notice from its third-party service provider that a cybersecurity event has occurred. The ceding insurers that have a direct contractual relationship with affected consumers shall fulfill the consumer notification requirements imposed under chapter 51-30 and any other notification requirements relating to a cybersecurity event imposed under subsection 1.
  7. Any licensee acting as assuming insurer does not have any other notice obligations relating to a cybersecurity event or other data breach under this section or any other law of this state.
  8. If a cybersecurity event involving nonpublic information that is in the possession, custody, or control of a licensee that is an insurer or the insurer’s third-party service provider for which a consumer accessed the insurer’s services through an independent insurance producer, and for which consumer notice is required by chapter 51-30, the insurer shall notify the producers of record of all affected consumers of the cybersecurity event no later than the time at which notice is provided to the affected consumers. The insurer is excused from the obligation imposed under this subsection for any producers that are not authorized by law or contract to sell, solicit, or negotiate on behalf of the insurer, and those instances in which the insurer does not have the current producer of record information for an individual consumer.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

26.1-02.2-06. Power of commissioner.

  1. The commissioner may examine and investigate the affairs of any licensee to determine whether the licensee has been or is engaged in any conduct in violation of this chapter. This power is in addition to the powers the commissioner has under chapter 26.1-03. Any investigation or examination must be conducted pursuant to chapter 26.1-03.
  2. If the commissioner has reason to believe a licensee has been or is engaged in conduct in this state which violates this chapter, the commissioner may take action that is necessary or appropriate to enforce the provisions of this chapter.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

26.1-02.2-07. Confidentiality.

  1. Any documents, materials, or other information in the control or possession of the department which are furnished by a licensee, or an employee or agent thereof acting on behalf of a licensee pursuant to this chapter, or that are obtained by the commissioner in an investigation or examination pursuant to section 26.1-02.2-06 are confidential, not subject to chapter 44-04, not subject to subpoena, and are not subject to discovery or admissible in evidence in any private civil action. The commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s duties. The commissioner may not otherwise make the documents, materials, or other information public without the prior written consent of the licensee.
  2. The commissioner or any person that received documents, materials, or other information while acting under the authority of the commissioner may not be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection 1.
  3. In order to assist in the performance of the commissioner’s duties the commissioner:
    1. May share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection 1, with other state, federal, and international regulatory agencies, with the national association of insurance commissioners, its affiliates or subsidiaries, and with state, federal, and international law enforcement authorities, provided the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information;
    2. May receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the national association of insurance commissioners, its affiliates or subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information;
    3. May share documents, materials, or other information subject to this section, with a third- party consultant or vendor provided the consultant agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information; and
    4. May enter agreements governing sharing and use of information consistent with this subsection.
  4. A waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information does not occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection 3.
  5. Documents, materials, or other information in the possession or control of the national association of insurance commissioners or a third-party consultant or vendor pursuant to this chapter are confidential, not subject to chapter 44-04, not subject to subpoena, and not subject to discovery or admissible in evidence in any private civil action.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

26.1-02.2-08. Exceptions.

  1. The following exceptions apply to this chapter:
    1. A licensee with less than five million dollars in gross revenue or less than ten million dollars in year-end assets is exempt from section 26.1-02.2-03.
    2. During the period beginning on August 1, 2021, and ending on July 31, 2023, a licensee with fewer than fifty employees, including independent contractors and employees of affiliated companies having access to nonpublic information used by the licensee or in the licensee’s possession, custody, or control, is exempt from section 26.1-02.2-03.
    3. After July 31, 2023, a licensee with fewer than twenty-five employees, including independent contractors and employees of affiliated companies having access to nonpublic information used by the licensee or in the licensee’s possession, custody, or control is exempt from section 26.1-02.2-03.
    4. A licensee that is subject to and governed by the privacy, security, and breach notification rules issued by the United States department of health and human services, title 45, Code of Federal Regulations, parts 160 and 164, established pursuant to the federal Health Insurance Portability and Accountability Act of 1996 [Pub. L. 104-191], and the federal Health Information Technology for Economic and Clinical Health Act [Pub. L. 111- 5], and which maintains nonpublic information concerning a consumer in the same manner as protected health information is deemed to comply with the requirements of this chapter except for the commissioner notification requirements under subsections 1 and 2 of section 26.1-02.2-05.
    5. An employee, agent, representative, or designee of a licensee, that also is a licensee, is exempt from section 26.1-02.2-03 and is not required to develop an information security program to the extent the employee, agent, representative, or designee is covered by the information security program of the other licensee.
  2. If a licensee ceases to qualify for an exception, the licensee has one hundred eighty days to comply with this chapter.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

26.1-02.2-09. Penalties.

In the case of a violation of this chapter, a licensee may be penalized in accordance with section 26.1-01-03.3.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

26.1-02.2-10. Rules and regulations.

The commissioner may adopt reasonable rules necessary for the implementation of this chapter.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

26.1-02.2-11. Implementation dates.

A licensee shall implement:

  1. Subsections 1, 2, 3, 4, 5, 8, and 9 of section 26.1-02.2-03 no later than August 1, 2022; and
  2. Subsections 6 and 7 of section 26.1-02.2-03 no later than August 1, 2023.

Source:

S.L. 2021, ch. 229, § 1, eff August 1, 2021.

CHAPTER 26.1-03 Examinations, Reports, and Tax

26.1-03-01. Limitation on risks acceptable by company.

An insurance company transacting an insurance business in this state may not expose itself to loss on any one risk or hazard to an amount exceeding ten percent of its paid-up capital and surplus if a stock company, or ten percent of its surplus if a mutual company, unless the excess is reinsured. An insurance company offering group or individual insurance that is subject to the lifetime or annual benefit limit restrictions of the Patient Protection and Affordable Care Act [Pub. L. 111-148], as amended by the Health Care and Education Reconciliation Act of 2010 [Pub. L. 111-152], is not subject to this section.

Source:

S.L. 1983, ch. 332, § 3; 2011, ch. 218, § 1.

Derivation:

N.D.C.C. § 26-07-03.

26.1-03-02. Valuation of securities held by company. [Repealed]

Repealed by S.L. 1993, ch. 292, § 49.

26.1-03-02.1. Valuation of securities and other investments.

  1. All securities and investments of insurance companies must be valued in accordance with published valuation standards of the national association of insurance commissioners including the accounting practices and procedure manuals and publications by the valuation of securities office of the national association of insurance commissioners.
  2. All investments of insurance companies authorized to do business in this state, for which no method of valuation has been otherwise provided, must be valued in the discretion of the commissioner at their fair market value, appraised value, or at amounts determined by the commissioner as their fair market value. If any valuation of an investment by an insurer appears to be an unreasonable estimate of its true value, the commissioner has the authority to cause the investment to be appraised, and the appraised value must be substituted as the true value. The appraisal must be made by two disinterested and competent persons, one to be appointed by the commissioner and one to be appointed by the insurer. In the event these two persons fail to agree, they shall appoint a third disinterested and competent person, and the estimate of the value of the investment, as arrived at by these three persons, must be substituted as the true value.

Source:

S.L. 1993, ch. 292, § 1.

DECISIONS UNDER PRIOR LAW

Valuation Provisions.

Valuation provisions applied to bonds which were acquired by an exchange of assets; purpose of law was to protect policyholders from the potential adverse consequences of inflated asset valuations by an insurance company, whether its bonds were acquired by exchange of assets or by money purchase. Sierra Life Ins. Co. v. Wigen, 286 N.W.2d 296, 1979 N.D. LEXIS 326 (N.D. 1979).

26.1-03-03. Cooperative and assessment life associations — Valuation of policies.

Cooperative or assessment life associations must be admitted to transact business in this state upon compliance with the provisions of this title relating to the licensing and admission of life insurance companies without being required to value their policies in conformity with chapter 26.1-35. These associations shall value their policies in the same manner as yearly renewable term policies are valued, according to the standard of valuation of life insurance policies prescribed by this title.

Source:

S.L. 1983, ch. 332, § 3; 1987, ch. 73, § 8.

Derivation:

N.D.C.C. § 26-10-02.

26.1-03-04. Assets required of cooperative and assessment life associations.

Every cooperative or assessment life association authorized to do business in this state shall accumulate and maintain assets in excess of actual liabilities for death losses sustained and expenses incurred equal to two percent of all insurance which the association has in force. The assets must be cash, money on deposit in banks, and securities eligible for investment by insurance companies under this title.

Source:

S.L. 1983, ch. 332, § 3.

Derivation:

N.D.C.C. § 26-10-03.

26.1-03-05. Surplus of life insurance company doing business on mutual plan apportioned annually.

Every life insurance company conducted on the mutual plan, or upon any other plan in which the policyholders are entitled to share in the profits or surplus of the company, doing business in this state shall make an annual apportionment and accounting of divisible surplus to each policyholder beginning not later than the end of the third policy year. Each policyholder is entitled to, and must be credited with or paid in the manner provided in this chapter, the portion of the entire divisible surplus as has been contributed thereto by the policyholder’s policy. Every life insurance company, upon policies other than industrial policies, issued before July 1, 1907, under the conditions of which the distribution of surplus was deferred to a fixed or specified time and made contingent upon the policy being in force and the insured living at that time, shall ascertain annually the amount of surplus to which all of the policies as a separate class are entitled, and shall apportion to the policies as a class the amount of surplus so ascertained and must carry the amount of the apportioned surplus, and the actual interest earnings and accretions of the fund, as a distinct and separate liability to the class of policies on and for which the same was accumulated. Neither the company nor any of its officers may use any part of the apportioned surplus for any purpose whatsoever other than for the express purpose for which the apportioned surplus was accumulated.

Source:

S.L. 1983, ch. 332, § 3.

Derivation:

N.D.C.C. § 26-10-04.

26.1-03-06. Life insurance company may maintain contingency reserve — Limitations.

Any life insurance company doing business in this state may accumulate and maintain, in addition to the capital and surplus contributed by its stockholders and in addition to an amount equal to the net values of its policies computed according to the laws of the jurisdiction under which it is organized, a contingency reserve not exceeding the following respective percentages of the net values:

  1. When the net values are less than one hundred thousand dollars, twenty percent thereof or the sum of ten thousand dollars, whichever is the greater.
  2. When the net values are greater than one hundred thousand dollars, the percentage thereof measuring the contingency reserve decreases one-half of one percent for each one hundred thousand dollars of the net values up to one million dollars and may include one-half of one percent for each additional one million dollars up to ten million dollars.
  3. If the net values equal or exceed the last mentioned amount, the contingency reserve may not exceed ten percent thereof.

As the net values of the policies increase and the maximum percentage measuring the contingency reserve decreases, the company may maintain the contingency reserve already accumulated, although for the time being, it may exceed the maximum percentage herein prescribed. The company, however, may not add to the contingency reserve when the addition will bring it beyond the maximum percentage prescribed in this section. For cause shown, the commissioner may permit a company to accumulate and maintain a contingency reserve in excess of the limit specified in this section for a prescribed period, not exceeding one year under any one permission, by filing in the commissioner’s office a decision stating the reasons therefor and causing the same to be published in the commissioner’s next annual report. This section does not apply to any company doing exclusively a nonparticipating business.

Source:

S.L. 1983, ch. 332, § 3.

Derivation:

N.D.C.C. § 26-10-05.

26.1-03-07. Annual statement to be filed.

Every insurance company doing business in this state shall transmit to the commissioner, not later than March first of each year, a statement of its condition and business for the year ending on the preceding December thirty-first. If March first falls on a Saturday or legal holiday, the statement is due on the next succeeding business day. A company organized under the law of any foreign country or province shall include in the statement only business transacted within the United States, and shall file a supplemental statement of business transacted without the United States not later than December first. The commissioner shall stamp the date of receipt on every statement. The commissioner may not accept the annual statement from any company if the statement was transmitted after the date designated in this section unless the statement is accompanied by the penalty prescribed by section 26.1-03-16. The commissioner may designate the national association of insurance commissioners as the repository for the filing.

Source:

S.L. 1983, ch. 332, § 3; 1993, ch. 293, § 1; 2003, ch. 236, § 1.

Derivation:

N.D.C.C. § 26-07-05.

26.1-03-08. Statements of receiver of company.

A receiver of an insurance company doing business in this state, on or before June thirtieth of each year, and at any other time, when required to do so by the commissioner, shall make and file a statement of the assets and liabilities of the company and of the income and expenditures during the receivership in the same manner and form as is required by this chapter from the officers of insurance companies. A receiver is subject to the same penalty for the failure or refusal to make and file the statement.

Source:

S.L. 1983, ch. 332, § 3.

Derivation:

N.D.C.C. § 26-07-07.

26.1-03-09. Statements to be verified by specified officers — Duty of commissioner to distribute information.

The annual statement must be verified by the signature and oath of the president or the vice president and of the secretary, the actuary, if a life insurance company, and the treasurer or corresponding person having charge of the accounts and finances of the insurance company, or by a majority of the members of the board of directors of the company. The commissioner shall arrange the information in the statements in a tabular form and annually print and distribute the information to the companies doing business in this state and to the legislative assembly.

Source:

S.L. 1983, ch. 332, § 3.

Derivation:

N.D.C.C. § 27-07-06.

26.1-03-10. Publication of abstract of annual statement and certificate of authority.

An insurance company, at the time it submits its annual statement for filing, shall submit an abstract of the annual statement for publication upon the form prescribed by the commissioner. The abstract of the annual statement of each company, other than a state or county mutual insurance company, must be published at least three times in one newspaper of general circulation, designated by the commissioner, printed and published in each judicial district in this state in which the company has an agency. The abstract of the annual statement of each state or county mutual insurance company must be published once in a newspaper published in the county in which the company has its principal place of business, the newspaper to be designated by the members of the company at their annual meeting. The certificate of authority issued by the commissioner to authorize the company to do business within this state must be published in connection with the publication of the abstract of its annual statement. The fees for publication are those provided under section 46-05-03. Proof of publication must be filed with the commissioner within four months after the filing of the annual statement. The commissioner shall provide abstracts, in a convenient form, on the commissioner’s website.

Source:

S.L. 1983, ch. 332, § 3; 2021, ch. 230, § 1, eff August 1, 2021.

Derivation:

N.D.C.C. § 26-07-08.

26.1-03-11. Fire companies to report statistical data — Failure to report — Exceptions to reporting requirements — Penalty.

Each insurance company issuing fire insurance policies covering property in this state annually shall report information setting forth the amount of earned premiums in this state for policies covering insured property located in this state and the amount of claims incurred. This information is not to include personal lines or farm property insurance. This information must be reported on a form prescribed by the commissioner. The company shall file the form with the commissioner or shall certify to the commissioner that the information has been reported directly to an advisory organization upon whose filings the majority of the fire insurance rates for North Dakota are based. The form or certification must accompany the annual statement required under section 26.1-03-07. An insurance company that fails to furnish the form on or before March first is subject to a penalty of one hundred dollars per day. The commissioner may revoke or suspend the certificate of authority of an insurance company that fails to file the form required in this section. If satisfied the delay was excusable, the insurance commissioner may waive, and if paid, issue a premium tax credit in an amount up to fifty percent of the penalty and interest. The insurance commissioner shall deposit in the insurance tax distribution fund monetary penalties collected under this section.

Source:

S.L. 1983, ch. 332, § 3; 1991, ch. 302, § 1; 2021, ch. 231, § 2, eff July 1, 2021.

26.1-03-11.1. Insurance company annual statements — Filed with national association of insurance commissioners.

  1. Every domestic, foreign, and alien insurance company in this state shall transmit to the national association of insurance commissioners, not later than March first of each year, a copy of its annual statement, along with any additional filings as described by the commissioner for the preceding year. The information filed with the national association of insurance commissioners must be in the same format and scope as that required by the commissioner and must include the signed jurat page and the actuarial certification. Any amendments and addenda to the annual statement filing subsequently filed with the commissioner must also be filed with the national association of insurance commissioners. The insurance commissioner may exempt any domestic company or category or class of domestic companies from the filing requirement.
  2. Foreign insurance companies domiciled in a state which has a law substantially similar to subsection 1 are deemed to be in compliance with this section.
    1. Documents, materials, or other information in the possession or control of the commissioner which are an actuarial report, workpapers, or actuarial opinion summary provided in support of the actuarial certification commonly known as the statement of actuarial opinion, and any other material provided by the insurance company to the commissioner in connection with the actuarial report, workpapers, or actuarial opinion summary, is confidential and privileged and is not subject to section 44-04-18. This subsection may not be construed to limit the authority to subpoena or otherwise discover the documents, materials, or other information or to limit use of the documents, materials, or other information in criminal investigations or proceedings.
    2. This subsection may not be construed to limit the commissioner’s authority to release the documents to the actuarial board for counseling and discipline so long as the material is required for the purpose of professional disciplinary proceedings and the actuarial board for counseling and discipline establishes procedures satisfactory to the commissioner for preserving the confidentiality of the documents. This section may not be construed to limit the commissioner’s authority to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as part of the commissioner’s official duties.
    3. This subsection does not apply to actuarial opinions required under chapter 26.1-35.

Source:

S.L. 1987, ch. 332, § 1; 2011, ch. 212, § 1.

26.1-03-11.2. Immunity of national association of insurance commissioners’ employees.

In the absence of actual malice, members of the national association of insurance commissioners and their employees and all others charged with the responsibility of collecting, reviewing, analyzing, and disseminating the information developed from the filing of the annual statement act as agents of the commissioner under the authority of sections 26.1-03-11.1 through 26.1-03-11.3 and are not subject to civil liability for libel, slander, or any other cause of action by virtue of their collection, review, and analysis or dissemination of the data and information collected from the filings required by sections 26.1-03-11.1 through 26.1-03-11.3.

Source:

S.L. 1987, ch. 332, § 2.

26.1-03-11.3. Confidentiality.

The commissioner shall maintain, as confidential, any confidential documents or information received from the national association of insurance commissioners or state, federal, or international regulatory or law enforcement officials of this state and other states or jurisdictions. The information may not be disclosed by the department and is exempt from section 44-04-18. The commissioner may share information that is confidential under the laws of this state with the national association of insurance commissioners and with state, federal, or international regulatory or law enforcement officials from this state and other states or jurisdictions providing that the officials are required, under their law, to maintain its confidentiality.

Source:

S.L. 1987, ch. 332, § 3; 1995, ch. 279, § 1; 2001, ch. 263, § 2; 2007, ch. 259, § 1.

26.1-03-12. Definition of product liability insurance. [Repealed]

Repealed by S.L. 2003, ch. 245, § 4.

26.1-03-13. Reporting of product liability information. [Repealed]

Repealed by S.L. 2003, ch. 245, § 4.

26.1-03-14. Confidentiality of product liability information reports. [Repealed]

Repealed by S.L. 2003, ch. 245, § 4.

26.1-03-15. Limitation of liability. [Repealed]

Repealed by S.L. 2003, ch. 245, § 4.

26.1-03-16. Penalty for not making statement.

Any insurance company doing business in this state which neglects to make and file any statement in the manner and within the time prescribed in this chapter forfeits one hundred dollars for each day’s neglect, and upon notice by the commissioner to that effect, its authority to do new business ceases during the default. Any new business done by an insurance company after it has neglected to make a required statement is in violation of law. The commissioner may grant an insurance company an extension beyond the date designated in this section and may waive or reduce any penalty during the extension, upon a showing of good cause by the insurance company.

Source:

S.L. 1983, ch. 332, § 3; 2003, ch. 237, § 1.

Derivation:

N.D.C.C. § 26-07-09.

26.1-03-17. Commissioner to collect premium tax — Insurance companies generally — Computation — Credits — Penalty — Estimated tax.

  1. Before issuing the annual certificate required by law, the commissioner shall collect from every stock and mutual insurance company, nonprofit health service corporation, health maintenance organization, and prepaid legal service organization, except fraternal benefit and benevolent societies, doing business in this state, a tax on the gross amount of premiums, assessments, membership fees, subscriber fees, policy fees, service fees collected by any third-party administrator providing administrative services to a group that is self-insured for health care benefits, and finance and service charges received in this state during the preceding calendar year, at the rate of two percent with respect to life insurance, one and three-fourths percent with respect to accident and health insurance, and one and three-fourths percent with respect to all other lines of insurance. This tax does not apply to considerations for annuities. The total tax is payable on or before March first following the year for which the tax is assessable. If the due date falls on a Saturday or legal holiday, the tax is payable on the next succeeding business day. Collections from this tax must be deposited in the insurance tax distribution fund under section 18-04-04.1 but not in an amount exceeding one-half of the biennial amount appropriated for distribution under section 18-04-05 and chapter 23-46 in any fiscal year. Collections from this tax exceeding the sum of the amount deposited in the insurance tax distribution fund must be deposited in the general fund in the state treasury.
  2. An insurance company, nonprofit health service corporation, health maintenance organization, or prepaid legal service organization subject to the tax imposed by subsection 1 is entitled to a credit against the tax due for the amount of any assessment paid as a member of a comprehensive health association under subsection 3 of section 26.1-08-09 for which the member may be liable for the year in which the assessment was paid, a credit against the tax due for the amount of any assessment paid as a member of the reinsurance association of North Dakota under section 26.1-36.7-06 for which the member may be liable for the year in which the assessment is paid, a credit as provided under section 26.1-38.1-10, a credit against the tax due for an amount equal to the examination fees paid to the commissioner under sections 26.1-01-07, 26.1-02-02, 26.1-03-19.6, 26.1-03-22, 26.1-17-32, and 26.1-18.1-18, and a credit against the tax due for an amount equal to the ad valorem taxes, whether direct or in the form of rent, on that proportion of premises occupied as the principal office in this state for over one-half of the year for which the tax is paid. The credits under this subsection must be prorated on a quarterly basis and may not exceed the total tax liability under subsection 1.
  3. Any company failing to pay the tax imposed by subsection 1, within the time required, is subject to a penalty of one hundred dollars plus twenty-five dollars per day, excepting the first day after the tax became due. Any company failing to file the appropriate tax statement required by rule if the tax is zero is subject to a penalty of twenty-five dollars per day for each day’s neglect not to exceed five hundred dollars. The commissioner, if satisfied that the delay was excusable, may waive, and if paid, issue a premium tax credit for all or any part of the penalty and interest.
  4. Every stock and mutual insurance company, nonprofit health service corporation, health maintenance organization, and prepaid legal service organization, except fraternal benefit or benevolent societies, doing business in this state required to pay premium taxes in this state shall make and file a statement of estimated premium taxes. The statement and payment must be made on a quarterly basis as prescribed by the commissioner. Failure of a company to make payments of at least one-fourth of the total tax paid during the previous calendar year, or eighty percent of the actual tax for the quarter being reported of the current calendar year, shall subject the company to the penalty and interest provided in subsection 3.
  5. If an amount of tax, penalty, or interest has been paid which was not due under the provisions of this section, a refund may be issued to the taxpayer who made the erroneous payment. The refund is allowed as a credit against any tax due or to become due under this section or as a cash refund, at the discretion of the commissioner. The taxpayer who made the erroneous payment shall present a claim for refund to the commissioner not later than two years after the due date of the return for the period for which the erroneous payment was made.
  6. In lieu of the tax required by subsection 1, the commissioner shall collect from each entity subject to this section an annual filing fee in the amount of two hundred dollars, provided the total tax liability of the entity pursuant to subsection 1 is less than two hundred dollars. No annual filing fee is due or may be collected from an entity if its total tax liability pursuant to subsection 1 is in excess of two hundred dollars. The annual filing fee may be reduced by any credits available pursuant to subsections 2 and 5. Failure of a company to pay the two hundred dollar filing fee subjects the company to the penalty as provided in subsection 3.

Source:

S.L. 1983, ch. 332, § 3; 1983, ch. 333, § 7; 1983, ch. 340, § 12; 1985, ch. 317, § 10; 1985, ch. 318, §§ 1, 2; 1987, ch. 333, § 1; 1987, ch. 334, § 1; 1989, ch. 261, § 3; 1989, ch. 345, § 1; 1989, ch. 346, § 1; 1991, ch. 54, § 11; 1991, ch. 301, §§ 3, 4; 1991, ch. 303, § 1; 1993, ch. 217, § 2; 1993, ch. 289, § 2; 1995, ch. 54, § 17; 1995, ch. 213, § 2; 1997, ch. 247, § 1; 1999, ch. 251, § 3; 2003, ch. 239, § 1; 2007, ch. 250, § 3; 2007, ch. 206, § 2; 2013, ch. 178, § 5; 2019, ch. 243, § 1, eff April 19, 2019; 2021, ch. 232, § 1, eff April 1, 2021.

Derivation:

N.D.C.C. § 26-01-11.

Cross-References.

Exemption from insurance premium tax, see N.D.C.C. § 50-06-19.

DECISIONS UNDER PRIOR LAW

Analysis

Constitutionality.

The supreme court of the United States upheld the validity of a similar South Carolina statute which was under attack as unconstitutional on various grounds in Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 66 S. Ct. 1142, 90 L. Ed. 1342, 1946 U.S. LEXIS 3068 (U.S. 1946).

North Dakota’s pre-1983 gross insurance premiums tax under former N.D.C.C. § 26-01-11(1) bore no rational relationship to a legitimate state purpose and therefore violated the Equal Protection Clauses of the federal and state constitutions. Purely prospective application of this ruling was upheld. Metropolitan Life Ins. Co. v. Commissioner of Dep't of Ins., 373 N.W.2d 399, 1985 N.D. LEXIS 378 (N.D. 1985).

Departmental Construction.

In construing former similar section some weight would be given to the departmental construction put upon the section by the several commissioners of insurance through the years the statute had been in effect. State v. Equitable Life Assurance Soc'y, 68 N.D. 641, 282 N.W. 411, 1938 N.D. LEXIS 154, 1938 N.D. LEXIS 155 (N.D. 1938).

Taxability.

Under former similar section a life insurance company was not, prior to the 1939 amendment thereto, taxable on considerations received for granting annuities. State v. Equitable Life Assurance Soc'y, 68 N.D. 641, 282 N.W. 411, 1938 N.D. LEXIS 154, 1938 N.D. LEXIS 155 (N.D. 1938).

26.1-03-18. Insurance or surety company to file statement of business done before authorization and to pay tax.

Before a surety company or an insurance company, other than a life insurance company, may be authorized to transact business in this state, the commissioner may require it to file with the commissioner a sworn statement and other proof that it has not written, or caused to be written, any surety bond or insurance contract on any person, firm, or corporation, or on property in this state, at any time prior to filing its application for a certificate of authority to do business in this state. If it appears that the company has written, or caused to be written, any such surety bond or insurance contract while it was not authorized to do business in this state, it shall file a statement of all such bonds and contracts written by it, and the company shall pay the premium tax due thereon before a certificate of authority is issued to it.

Source:

S.L. 1983, ch. 332, § 3.

Derivation:

N.D.C.C. § 26-01-12.

26.1-03-19. Examination of companies — Times — Expense. [Repealed]

Repealed by S.L. 1993, ch. 292, § 49.

26.1-03-19.1. Examination of companies — Definitions.

In sections 26.1-03-19.1 through 26.1-03-19.7, unless the context otherwise requires:

  1. “Company” means any foreign or domestic insurance company as defined in section 26.1-02-01.
  2. “Examiner” means any individual or firm having been authorized by the commissioner to conduct an examination under this chapter.
  3. “Person” means any individual, aggregation of individuals, trust, association, partnership, or corporation, or any affiliate thereof.

Source:

S.L. 1993, ch. 292, § 2.

26.1-03-19.2. Authority, scope, and scheduling of examinations.

  1. The commissioner or any of the commissioner’s examiners may conduct an examination under this chapter of any company whenever the commissioner in the commissioner’s sole discretion deems appropriate but shall at a minimum, conduct an examination of every insurer licensed in this state not less frequently than once every five years. In scheduling and determining the nature, scope, and frequency of the examinations, the commissioner shall consider the matters as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants, and other criteria as set forth in the examiners’ financial condition and market conduct handbook adopted by the national association of insurance commissioners and in effect when the commissioner exercises discretion under this section.
  2. For purposes of completing an examination of any company under this chapter, the commissioner may examine or investigate any person, or the business of any person, insofar as the examination or investigation is, in the sole discretion of the commissioner, necessary or material to the examination of the company.
  3. In lieu of an examination under this chapter of any foreign insurer licensed in this state, the commissioner may accept an examination report on the company as prepared by the insurance department for the company’s state of domicile or port-of-entry state until January 1, 1994. Thereafter, the reports may only be accepted if the insurance department was at the time of the examination accredited under the national association of insurance commissioners’ financial regulation standards and accreditation program, or the examination is performed under the supervision of an accredited insurance department or with the participation of one or more examiners who are employed by an accredited state insurance department and who, after a review of the examination workpapers and report, state under oath that the examination was performed in a manner consistent with the standards and procedures required by their insurance department, or the commissioner finds that the examination was performed by the insurance department of a state that was previously accredited under the national association of insurance commissioners but has lost its accreditation, provided that state’s consumer protection laws are no less protective than those present under North Dakota law.

Source:

S.L. 1993, ch. 292, § 3; 2003, ch. 238, § 1.

26.1-03-19.3. Conduct of examinations.

  1. Upon determining that an examination should be conducted, the commissioner or the commissioner’s designee shall issue a letter appointing one or more examiners to perform the examination and instructing them as to the scope of the examination. In conducting the examination, the examiner shall observe those guidelines and procedures set forth in the examiners’ handbook adopted by the national association of insurance commissioners. The commissioner may also employ other guidelines or procedures as the commissioner may deem appropriate.
  2. For the purposes of making any examination required or authorized by law, every company or person from whom information is sought, its officers, directors, trustees, and agents must provide to the examiners appointed under subsection 1, in any examination required or authorized by law, timely, convenient, and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, and any or all computer or other recordings relating to the property, assets, business, and affairs of the company being examined. The officers, directors, employees, trustees, and agents of the company or person must facilitate the examination and aid in the examination so far as it is in their power to do so. The refusal of any company, by its officers, directors, employees, trustees, or agents to submit to examination or to comply with any reasonable request of the examiners is grounds for suspension or refusal of, or nonrenewal of, any license or authority held by the company to engage in an insurance or other business subject to the commissioner’s jurisdiction. Any proceedings for suspension, revocation, or refusal of any license or authority must be conducted pursuant to sections 26.1-01-03.1 and 26.1-11-09.
  3. The commissioner or any of the commissioner’s examiners have the power to issue subpoenas, to administer oaths, and to examine under oath any person as to any matter pertinent to the examination. Upon the failure or refusal of any person to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order is punishable as contempt of court.
  4. Qualified regular employees of the commissioner, or the commissioner’s designated representatives acting as independent contract examiners under the direction of regular employees of the commissioner, shall conduct all examinations of an insurance company required or permitted by law to be conducted by the commissioner, whether or not the examinations are convention examinations called in accordance with rules promulgated by the national association of insurance commissioners. The commissioner may contract for and procure the services of financial and market conduct examiners and other or additional specialized technical or professional assistants, as independent contractors. None of the persons providing those services or assistance on a contract or fee basis may be in the classified service of the state.
  5. Nothing contained in this chapter may be construed to limit the commissioner’s authority to terminate or suspend any examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions made pursuant to any examination will be prima facie evidence in any legal or regulatory action by and before the insurance commissioner.
  6. Except as provided in subsections 5 and 6 of section 26.1-03-19.4, nothing contained in this chapter may be construed to limit the commissioner’s authority to use and, if appropriate, to make public any final or preliminary examination report, any examiner or company workpapers or other documents, or any other information discovered or developed during the course of any examination in the furtherance of any legal or regulatory action which the commissioner may, in the commissioner’s sole discretion, deem appropriate.

Source:

S.L. 1993, ch. 292, § 4.

26.1-03-19.4. Examination reports.

  1. All examination reports must be comprised of only facts appearing upon the books, records, or other documents of the company, its agents, or other persons examined, or as ascertained from the testimony of its officers or agents or other persons examined concerning its affairs, and the conclusions and recommendations as the examiners find reasonably warranted from the facts.
  2. No later than sixty days following completion of the examination, the examiner in charge shall file with the department a verified written report of examination under oath. Upon receipt of the verified report, the department shall transmit the report to the company examined, together with a notice which must afford the company examined a reasonable opportunity of not more than thirty days to make a written submission or rebuttal with respect to any matters contained in the examination report.
  3. Within thirty days of the end of the period allowed for the receipt of written submissions or rebuttals, the commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner’s workpapers, and enter an order:
    1. Adopting the examination report as filed or with modification or corrections. If the examination report reveals that the company is operating in violation of any law, regulation, or prior order of the commissioner, the commissioner may order the company to take any action the commissioner considers necessary and appropriate to cure the violation;
    2. Rejecting the examination report with directions to the examiners to reopen the examination for purposes of obtaining additional data, documentation, or information and refiling pursuant to subsection 1; or
    3. Calling for an investigatory hearing with no less than twenty days’ notice to the company for purposes of obtaining additional documentation, data, information, and testimony.
    1. All orders entered pursuant to subdivision a of subsection 3, except those entered pursuant to section 26.1-01-03.1 or 26.1-11-09, must be accompanied by findings and conclusions resulting from the commissioner’s consideration and review of the examination report, relevant examiner workpapers, and any written submissions or rebuttals. The company may, within thirty days of the entry of any such order, request a hearing to vacate or amend the order. This hearing must be conducted in compliance with chapter 28-32. The order must be served upon the company, together with a copy of the adopted examination report. Within thirty days of the issuance of the adopted report, the company shall acknowledge receipt of the adopted report and related orders.
    2. Any hearing conducted under subdivision c of subsection 3 by the commissioner or authorized representative must be conducted as a nonadversarial confidential investigatory proceeding as necessary for the resolution of any inconsistencies, discrepancies, or disputed issues apparent upon the face of the filed examination report or raised by or as a result of the commissioner’s review of relevant workpapers or by the written submission or rebuttal of the company. Within twenty days of the conclusion of any hearing, the commissioner shall enter an order pursuant to subdivision a of subsection 3.
    1. Upon the adoption of an examination report under subdivision a of subsection 3, the commissioner shall continue to hold the content of the examination report as private and confidential information for a period of fifteen days except to the extent provided in subsection 2. Thereafter, the commissioner may open the report for public inspection so long as no court of competent jurisdiction has stayed its publication.
    2. Nothing contained in this code prevents or may be construed as prohibiting the commissioner from disclosing the content of an examination report, preliminary examination report, or results, or any matter relating thereto, to the insurance department of this or any other state or country, or to law enforcement officials of this or any other state or agency of the federal government at any time, so long as the agency or office receiving the report or matters relating thereto agrees in writing to hold it confidential and in a manner consistent with this chapter.
    3. In the event the commissioner determines that regulatory action is appropriate as a result of any examination, the commissioner may initiate any proceedings or actions as provided by law.
  4. All working papers, recorded information, documents, and copies thereof produced by, obtained by, or disclosed to the commissioner or any other person in the course of an examination made under this chapter, or in the course of analysis by the commissioner of the financial condition or market conduct of the company, must be given confidential treatment and are not subject to subpoena and may not be made public by the commissioner or any other person, except to the extent provided in subsection 5. Access also may be granted to the national association of insurance commissioners. The parties must agree in writing prior to receiving the information to provide to it the same confidential treatment as required by this section, unless the prior written consent of the company to which it pertains has been obtained.

Source:

S.L. 1993, ch. 292, § 5; 2021, ch. 230, § 2, § 3, eff August 1, 2021.

Note.

Section 26.1-03-19.4 was amended 2 times by the 2021 Legislative Assembly. Pursuant to Section 1-02-09.1, the section is printed above to harmonize and give effect to the changes made in Section 3 of Chapter 230, Session Laws 2021, House Bill 1062; and Section 2 of Chapter 230, Session Laws 2021, House Bill 1062.

26.1-03-19.5. Conflict of interest.

No examiner may be appointed by the commissioner if the examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this chapter. This section must not be construed to automatically preclude an examiner from being:

  1. A policyholder or claimant under an insurance policy.
  2. A grantor of a mortgage or similar instrument on the examiner’s residence to a regulated entity if done under customary terms and in the ordinary course of business.
  3. An investment owner in shares of regulated diversified investment companies.
  4. A settlor or beneficiary of a “blind trust” into which any otherwise impermissible holdings have been placed.

Notwithstanding the requirements of this section, the commissioner may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though said persons may from time to time be similarly employed or retained by persons subject to examination under this chapter.

Source:

S.L. 1993, ch. 292, § 6.

26.1-03-19.6. Cost of examinations.

For purposes of any examination authorized or required by law, the company being examined shall pay the same charge for the examination as is provided in section 26.1-01-07 for an official examination. The compensation to be paid to the employees of the commissioner is to be paid out of the appropriation for the commissioner’s office. Any sum paid to the employees or to the commissioner by the company examined, as an examination fee or otherwise, is state money, and forthwith must be paid into the insurance regulatory trust fund. Any sum paid to the employee or the commissioner as expense money for the examiner may be paid directly to the employee, and no employee may charge or collect from the state any expenses incurred in connection with any examination for or during which expenses or any part thereof have been paid by any other person, firm, or corporation. However, the compensation and expenses paid for independent contract examiners must be paid directly by the company examined after approval by the commissioner.

Source:

S.L. 1993, ch. 292, § 7.

26.1-03-19.7. Immunity from liability.

  1. No cause of action arises, nor may any liability be imposed, against the commissioner, the commissioner’s authorized representatives, or any examiner appointed by the commissioner for any statements made or conduct performed in good faith while carrying out the provisions of this chapter.
  2. No cause of action arises, nor may any liability be imposed, against any person for the act of communicating or delivering information or data to the commissioner or the commissioner’s authorized representative or examiner pursuant to an examination made under this chapter, if the act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive.
  3. This section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subsection 1.
  4. A person identified in subsection 1 is entitled to an award of attorney’s fees and costs if that person is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this chapter and the party bringing the action was not substantially justified in doing so. For purposes of this section, a proceeding is “substantially justified” if it had a reasonable basis in law or fact at the time that it was initiated.

Source:

S.L. 1993, ch. 292, § 8.

26.1-03-20. Examinations — By whom conducted — Compensation to be paid into insurance regulatory trust fund. [Repealed]

Repealed by S.L. 1993, ch. 292, § 49.

26.1-03-21. Powers of commissioner or person making an examination. [Repealed]

Repealed by S.L. 1993, ch. 292, § 49.

26.1-03-22. State auditor to make examination when commissioner is disqualified.

If the commissioner is a director, officer, agent, attorney, or stockholder of, or is interested directly in, any insurance company except as an insured, the state auditor or a person appointed by the state auditor shall examine the company. No officer or agent of any insurance company doing business in this state may be appointed to examine the affairs of the company.

Source:

S.L. 1983, ch. 332, § 3.

Derivation:

N.D.C.C. § 26-01-10.

CHAPTER 26.1-03.1 Risk-based Capital Reports

26.1-03.1-01. Definitions.

As used in this chapter:

  1. “Adjusted risk-based capital report” means a risk-based capital report that has been adjusted by the commissioner in accordance with subsection 5 of section 26.1-03.1-02.
  2. “Corrective order” means an order issued by the commissioner specifying corrective actions that the commissioner has determined are required.
  3. “Domestic insurer” means any insurer domiciled in this state, except a county mutual insurance company.
  4. “Foreign insurer” means any insurer that is licensed to do business in this state under chapter 26.1-11 but is not domiciled in this state.
  5. “Fraternal benefit society” means any insurer licensed under chapter 26.1-15.1.
  6. “Life or health insurer” means any licensed life or health insurer or a licensed property and casualty insurer writing only accident and health insurance.
  7. “Negative trend” means, with respect to a life or health insurer or a fraternal benefit society, negative trend over a period of time, as determined in accordance with the trend test calculation included in the life or fraternal risk-based capital instructions.
  8. “Property and casualty insurer” means any insurer licensed under chapter 26.1-05 or 26.1-11 but does not include monoline mortgage guaranty insurers, financial guaranty insurers, and title insurers.
  9. “Risk-based capital instructions” means the risk-based capital report, including risk-based capital instructions adopted by the national association of insurance commissioners, as such risk-based capital instructions may be amended by the national association of insurance commissioners from time to time in accordance with the procedures adopted by the national association of insurance commissioners.
  10. “Risk-based capital level” means an insurer’s company action level risk-based capital, regulatory action level risk-based capital, authorized control level risk-based capital, or mandatory control level risk-based capital where:
    1. “Authorized control level risk-based capital” means the number determined under the risk-based capital formula in accordance with the risk-based capital instructions.
    2. “Company action level risk-based capital” means, with respect to any insurer, the product of two and its authorized control level risk-based capital.
    3. “Mandatory control level risk-based capital” means the product of seventy hundredths and the authorized control level risk-based capital.
    4. “Regulatory action level risk-based capital” means the product of one and one-half and its authorized control level risk-based capital.
  11. “Risk-based capital plan” means a comprehensive financial plan containing the elements specified in subsection 2 of section 26.1-03.1-03. If the commissioner rejects the risk-based capital plan, and it is revised by the insurer, with or without the commissioner’s recommendation, the plan must be called the “revised risk-based capital plan”.
  12. “Risk-based capital report” means the report required in section 26.1-03.1-02.
  13. “Total adjusted capital” means the sum of:
    1. An insurer’s statutory capital and surplus as determined in accordance with statutory accounting applicable to the annual financial statements required to be filed under section 26.1-03-07; and
    2. Such other items, if any, as the risk-based capital instructions may provide.

Source:

S.L. 1995, ch. 279, § 2; 2015, ch. 205, § 1, eff August 1, 2015.

26.1-03.1-02. Risk-based capital reports.

  1. On or prior to each March first, every domestic insurer shall prepare and submit to the commissioner a report of its risk-based capital levels as of the end of the calendar year just ended, in a form and containing any information required by the risk-based capital instructions. In addition, every domestic insurer shall file its risk-based capital report:
    1. With the national association of insurance commissioners in accordance with the risk-based capital instructions; and
    2. With the insurance commissioner in any state in which the insurer is authorized to do business, if the insurance commissioner has notified the insurer of its request in writing, in which case the insurer shall file its risk-based capital report not later than the later of:
      1. Fifteen days from the receipt of notice to file its risk-based capital report with that state; or
      2. The filing date.
  2. A life and health insurer’s or fraternal benefit society’s risk-based capital must be determined in accordance with the formula set forth in the risk-based capital instructions. The formula must take into account, and may adjust for the covariance between, the following factors determined in each case by applying the factors in the manner set forth in the risk-based capital instructions:
    1. The risk with respect to the insurer’s assets;
    2. The risk of adverse insurance experience with respect to the insurer’s liabilities and obligations;
    3. The interest rate risk with respect to the insurer’s business; and
    4. All other business risks and any other relevant risks as are set forth in the risk-based capital instructions.
  3. A property and casualty insurer’s risk-based capital must be determined in accordance with the formula set forth in the risk-based capital instructions. The formula must take into account, and may adjust for the covariance between, the following factors determined in each case by applying the factors in the manner set forth in the risk-based capital instructions:
    1. Asset risk;
    2. Credit risk;
    3. Underwriting risk; and
    4. All other business risks and any other relevant risks as are set forth in the risk-based instructions.
  4. An excess of capital over the amount produced by the risk-based capital requirements contained in this chapter and the formulas, schedules, and instructions referenced in this chapter is desirable in the business of insurance. Accordingly, insurers should seek to maintain capital above the risk-based capital levels required by this chapter. Additional capital is used and is useful in the insurance business and helps to secure an insurer against various risks inherent in, or affecting, the business of insurance and not accounted for or only partially measured by the risk-based capital requirements contained in this chapter.
  5. If a domestic insurer files a risk-based capital report that in the judgment of the commissioner is inaccurate, then the commissioner shall adjust the risk-based capital report to correct the inaccuracy and notify the insurer of the adjustment. The notice must contain a statement of the reason for the adjustment. A risk-based capital report so adjusted is referred to as an adjusted risk-based capital report.

Source:

S.L. 1995, ch. 279, § 2; 2015, ch. 205, § 2, eff August 1, 2015.

26.1-03.1-03. Company action level event.

  1. “Company action level event” means any of the following events:
    1. The filing of a risk-based capital report by an insurer which indicates that:
      1. The insurer’s total adjusted capital is greater than or equal to its regulatory action level risk-based capital but less than its company action level risk-based capital;
      2. If a life or health insurer or a fraternal benefit society, the insurer has total adjusted capital that is greater than or equal to its company action level risk-based capital but less than the product of its authorized control level risk-based capital and three and has a negative trend; or
      3. If a property and casualty insurer, the insurer has total adjusted capital which is greater than or equal to its company action level risk-based capital but less than the product of its authorized control level risk-based capital and three and triggers the trend test determined in accordance with the trend test calculation included in the property and casualty risk-based capital instructions;
    2. The notification by the commissioner to the insurer of an adjusted risk-based capital report that indicates an event in subdivision a, provided the insurer does not challenge the adjusted risk-based capital report under section 26.1-03.1-07; or
    3. If, under section 26.1-03.1-07, an insurer challenges an adjusted risk-based capital report that indicates the event in subdivision a, the notification by the commissioner to the insurer that the commissioner, after a hearing, has rejected the insurer’s challenge.
  2. In the event of a company action level event, the insurer shall prepare and submit to the commissioner a risk-based capital plan that must:
    1. Identify the conditions that contribute to the company action level event;
    2. Contain proposals of corrective actions that the insurer intends to take and would be expected to result in the elimination of the company action level event;
    3. Provide projections of the insurer’s financial results in the current year and at least the four succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory operating income, net income, capital, and surplus. The projections for both new and renewal business may include separate projections for each major line of business and separately identify each significant income, expense, and benefit component;
    4. Identify the key assumptions impacting the insurer’s projections and the sensitivity of the projections to the assumptions; and
    5. Identify the quality of, and problems associated with, the insurer’s business, including its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business, and use of reinsurance, if any, in each case.
  3. The risk-based capital plan must be submitted:
    1. Within forty-five days of the company action level event; or
    2. If the insurer challenges an adjusted risk-based capital report under section 26.1-03.1-07, within forty-five days after notification to the insurer that, after a hearing, the commissioner has rejected the insurer’s challenge.
  4. Within sixty days after the submission by an insurer of a risk-based capital plan to the commissioner, the commissioner shall notify the insurer whether the risk-based capital plan may be implemented or is, in the judgment of the commissioner, unsatisfactory. If the commissioner determines the risk-based capital plan is unsatisfactory, the notification to the insurer must set forth the reasons for the determination, and may set forth proposed revisions that will render the risk-based capital plan satisfactory, in the judgment of the commissioner. Upon notification from the commissioner, the insurer shall prepare a revised risk-based capital plan, which may incorporate by reference any revisions proposed by the commissioner, and shall submit the revised risk-based capital plan to the commissioner:
    1. Within forty-five days after the notification from the commissioner; or
    2. If the insurer challenges the notification from the commissioner under section 26.1-03.1-07, within forty-five days after a notification to the insurer that, after a hearing, the commissioner has rejected the insurer’s challenge.
  5. In the event of a notification by the commissioner to an insurer that the insurer’s risk-based capital plan or revised risk-based capital plan is unsatisfactory, the commissioner may, subject to the insurer’s right to a hearing under section 26.1-03.1-07, specify in the notification that the notification constitutes a regulatory action level event.
  6. Every domestic insurer that files a risk-based capital plan or revised risk-based capital plan with the commissioner shall file a copy of the risk-based capital plan or revised risk-based capital plan with the insurance commissioner in any state in which the insurer is authorized to do business if:
    1. The state has a risk-based capital provision substantially similar to subsection 1 of section 26.1-03.1-08; and
    2. The insurance commissioner of that state has notified the insurer of its request for the filing in writing, in which case the insurer shall file a copy of the risk-based capital plan or revised risk-based capital plan in that state no later than the later of:
      1. Fifteen days after the receipt of notice to file a copy of its risk-based capital plan or revised risk-based capital plan with the state; or
      2. The date on which the risk-based capital plan or revised risk-based capital plan is filed under subsections 3 and 4.

Source:

S.L. 1995, ch. 279, § 2; 2011, ch. 213, § 1; 2015, ch. 205, § 3, eff August 1, 2015.

26.1-03.1-04. Regulatory action level event.

  1. “Regulatory action level event” means, with respect to any insurer, any of the following events:
    1. The filing of a risk-based capital report by the insurer that indicates that the insurer’s total adjusted capital is greater than or equal to its authorized control level risk-based capital but less than its regulatory action level risk-based capital;
    2. The notification by the commissioner to an insurer of an adjusted risk-based capital report that indicates the event in subdivision a, provided the insurer does not challenge the adjusted risk-based capital report under section 26.1-03.1-07;
    3. If, under section 26.1-03.1-07, the insurer challenges an adjusted risk-based capital report that indicates the event in subdivision a, the notification by the commissioner to the insurer that the commissioner, after a hearing, has rejected the insurer’s challenge;
    4. The failure of the insurer to file a risk-based capital report by the filing date, unless the insurer has provided an explanation for the failure that is satisfactory to the commissioner and has cured the failure within ten days after the filing date;
    5. The failure of the insurer to submit a risk-based capital plan to the commissioner within the time period set forth in subsection 3 of section 26.1-03.1-03;
    6. Notification by the commissioner to the insurer that:
      1. The risk-based capital plan or revised risk-based capital plan submitted by the insurer, in the judgment of the commissioner, is unsatisfactory; and
      2. The notification constitutes a regulatory action level event with respect to the insurer, provided the insurer has not challenged the determination under section 26.1-03.1-07;
    7. If, under section 26.1-03.1-07, the insurer challenges a determination by the commissioner under subdivision f, the notification by the commissioner to the insurer that, after a hearing, the commissioner has rejected the challenge;
    8. Notification by the commissioner to the insurer that the insurer has failed to adhere to its risk-based capital plan or revised risk-based capital plan, but only if the failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event in accordance with its risk-based capital plan or revised risk-based capital plan and the commissioner has so stated in the notification, provided the insurer has not challenged the determination under section 26.1-03.1-07; or
    9. If, under section 26.1-03.1-07, the insurer challenges a determination by the commissioner under subdivision h, the notification by the commissioner to the insurer that, after a hearing, the commissioner has rejected the challenge.
  2. In the event of a regulatory action level event the commissioner shall:
    1. Require the insurer to prepare and submit a risk-based capital plan or, if applicable, a revised risk-based capital plan;
    2. Perform such examination or analysis as the commissioner deems necessary of the assets, liabilities, and operations of the insurer, including a review of its risk-based capital plan or revised risk-based capital plan; and
    3. Subsequent to the examination or analysis, issue an order specifying the corrective actions as the commissioner determines are required in a corrective order.
  3. In determining corrective actions, the commissioner may take into account any factors deemed relevant with respect to the insurer based upon the commissioner’s examination or analysis of the assets, liabilities, and operations of the insurer, including the results of any sensitivity tests undertaken pursuant to the risk-based capital instructions. The risk-based capital plan or revised risk-based capital plan must be submitted:
    1. Within forty-five days after the occurrence of the regulatory action level event;
    2. If the insurer challenges an adjusted risk-based capital report under section 26.1-03.1-07 and the challenge is not judged to be frivolous by the commissioner, within forty-five days after the notification to the insurer that, after a hearing, the commissioner has rejected the insurer’s challenge; or
    3. If the insurer challenges a revised risk-based capital plan under section 26.1-03.1-07 and the challenge is not judged to be frivolous by the commissioner, within forty-five days after the notification to the insurer that, after a hearing, the commissioner has rejected the insurer’s challenge.
  4. The commissioner may retain actuaries and investment experts and other consultants as the commissioner judges to be necessary to review the insurer’s risk-based capital plan or revised risk-based capital plan, examine or analyze the assets, liabilities, and operations of the insurer and formulate the corrective order with respect to the insurer. The fees, costs, and expenses relating to consultants must be borne by the affected insurer or such other party as directed by the commissioner.

Source:

S.L. 1995, ch. 279, § 2; 2015, ch. 205, § 4, eff August 1, 2015.

26.1-03.1-05. Authorized control level event.

  1. “Authorized control level event” means any of the following events:
    1. The filing of a risk-based capital report by the insurer that indicates that the insurer’s total adjusted capital is greater than or equal to its mandatory control level risk-based capital but less than its authorized control level risk-based capital;
    2. The notification by the commissioner to the insurer of an adjusted risk-based capital report that indicates the event in subdivision a, provided the insurer does not challenge the adjusted risk-based capital report under section 26.1-03.1-07;
    3. If, under section 26.1-03.1-07, the insurer challenges an adjusted risk-based capital report that indicates the event in subdivision a, notification by the commissioner to the insurer that, after a hearing, the commissioner has rejected the insurer’s challenge;
    4. The failure of the insurer to respond, in a manner satisfactory to the commissioner, to a corrective order provided the insurer has not challenged the corrective order under section 26.1-03.1-07; or
    5. If the insurer has challenged a corrective order under section 26.1-03.1-07 and, after a hearing, the commissioner has rejected the challenge or modified the corrective order, the failure of the insurer to respond, in a manner satisfactory to the commissioner, to the corrective order subsequent to rejection or modification by the commissioner.
  2. In the event of an authorized control level event with respect to an insurer, the commissioner shall:
    1. Take such actions as are required under section 26.1-03.1-04 regarding an insurer with respect to which a regulatory action level event has occurred; or
    2. Take necessary action to cause the insurer to be placed under regulatory control under chapter 26.1-06.1 if the commissioner deems it to be in the best interests of the policyholders, creditors of the insurer, and the public. If the commissioner takes such actions, the authorized control level event must be deemed sufficient grounds for the commissioner to take action under chapter 26.1-06.1, and the commissioner has the rights, powers, and duties with respect to the insurer in chapter 26.1-06.1. If the commissioner takes action under this subdivision pursuant to an adjusted risk-based capital report, the insurer is entitled to any protection afforded to insurers under chapter 26.1-06.1 pertaining to summary proceedings.

Source:

S.L. 1995, ch. 279, § 2.

26.1-03.1-06. Mandatory control level event.

  1. “Mandatory control level event” means any of the following events:
    1. The filing of a risk-based capital report that indicates that the insurer’s total adjusted capital is less than its mandatory control level risk-based capital;
    2. Notification by the commissioner to the insurer of an adjusted risk-based capital report that indicates the event in subdivision a, provided the insurer does not challenge the adjusted risk-based capital report under section 26.1-03.1-07; or
    3. If, under section 26.1-03.1-07, the insurer challenges an adjusted risk-based capital report that indicates the event in subdivision a, notification by the commissioner to the insurer that, after a hearing, the commissioner has rejected the insurer’s challenge.
  2. In the event of a mandatory control level event:
    1. With respect to a life insurer or fraternal benefit society, the commissioner shall take actions as are necessary to place the insurer under regulatory control under chapter 26.1-06.1. In that event, the mandatory control level event must be deemed sufficient grounds for the commissioner to take action under chapter 26.1-06.1, and the commissioner has the rights, powers, and duties in chapter 26.1-06.1 with respect to the insurer. If the commissioner takes action pursuant to an adjusted risk-based capital report, the insurer is entitled to the protection of chapter 26.1-06.1 pertaining to summary proceedings. Notwithstanding any of the foregoing, the commissioner may forego action for up to ninety days after the mandatory control level event if the commissioner finds there is a reasonable expectation that the mandatory control level event may be eliminated within the ninety-day period.
    2. With respect to a property and casualty insurer, the commissioner may take such actions as are necessary to place the insurer under regulatory control under chapter 26.1-06.1, or, in the case of an insurer that is not writing business and that is running off its existing business, may allow the insurer to continue its runoff under the supervision of the commissioner. In either event, the mandatory control level event must be deemed sufficient grounds for the commissioner to take action under chapter 26.1-06.1 and the commissioner has the rights, powers, and duties in chapter 26.1-06.1 with respect to the insurer. If the commissioner takes action pursuant to an adjusted risk-based capital report, the insurer is entitled to the protection of chapter 26.1-06.1 pertaining to summary proceedings. Notwithstanding any of the foregoing, the commissioner may forego action for up to ninety days after the mandatory control level event if the commissioner finds there is a reasonable expectation that the mandatory control level events may be eliminated within the ninety-day period.

Source:

S.L. 1995, ch. 279, § 2; 2015, ch. 205, § 5, eff August 1, 2015.

26.1-03.1-07. Hearings.

Upon any of the following, the insurer has the right to a confidential departmental hearing, on a record, at which the insurer may challenge any determination or action by the commissioner. The insurer shall notify the commissioner of the request for a hearing within five days after the notification by the commissioner under subsection 1, 2, 3, or 4. Upon receipt of the insurer’s request for a hearing, the commissioner shall set a date for the hearing, which date may be no less than ten nor more than thirty days after the date of the insurer’s request.

  1. Notification to an insurer by the commissioner of an adjusted risk-based capital report;
  2. Notification to an insurer by the commissioner that:
    1. The insurer’s risk-based capital plan or revised risk-based capital plan is unsatisfactory; and
    2. Such notification constitutes a regulatory action level event with respect to the insurer;
  3. Notification to any insurer by the commissioner that the insurer has failed to adhere to its risk-based capital plan or revised risk-based capital plan and that the failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event with respect to the insurer in accordance with its risk-based capital plan or revised risk-based capital plan; or
  4. Notification to an insurer by the commissioner of a corrective order with respect to the insurer.

Source:

S.L. 1995, ch. 279, § 2; 2015, ch. 205, § 6, eff August 1, 2015.

26.1-03.1-08. Confidentiality — Prohibition on announcements — Prohibition on use in ratemaking.

  1. All risk-based capital reports, to the extent the information therein is not required to be set forth in a publicly available annual statement schedule, and risk-based capital plans, including the results or report of any examination or analysis of an insurer performed under this chapter and any corrective order issued by the commissioner pursuant to examination or analysis, with respect to any domestic insurer or foreign insurer that are in the possession or control of the insurance department are confidential and privileged, not subject to section 44-04-18, not subject to subpoena, and not subject to discovery and are not admissible in evidence in any private civil action. However, the commissioner may use any document, material, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s official duties.
  2. Neither the commissioner nor any person that received any document, material, or other information while acting under the authority of the commissioner may be permitted or required to testify in any private civil action concerning any confidential document, material, or information subject to subsection 1.
  3. To assist in the performance of the commissioner’s duties, the commissioner:
    1. May share any document, material, or other information, including any confidential and privileged document, material, or information subject to subsection 1, with any other state, federal, or international regulatory agency; the national association of insurance commissioners and its affiliates and subsidiaries; and any state, federal, and international law enforcement authority, provided the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information.
    2. May receive any document, material, or information, including any otherwise confidential and privileged document, material, or information, from the national association of insurance commissioners and its affiliates and subsidiaries and from any regulatory and law enforcement official of any other foreign or domestic jurisdiction, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
    3. May enter any agreement governing sharing and use of information consistent with this subsection.
  4. Waiver of any applicable privilege or claim of confidentiality in any document, material, or information does not occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection 3.
  5. It is the judgment of the legislative assembly that the comparison of an insurer’s total adjusted capital to any of its risk-based capital levels is a regulatory tool that may indicate the need for possible corrective action with respect to the insurer, and is not intended as a means to rank insurers generally. Therefore, except as otherwise required under this chapter, the making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio or television station, or in any other way, an advertisement, announcement, or statement containing an assertion, representation, or statement with regard to the risk-based capital levels of any insurer, or of any component derived in the calculation, by any insurer, insurance producer, broker, or other person engaged in any manner in the insurance business would be misleading and is therefore prohibited. However, if any materially false statement with respect to the comparison regarding an insurer’s total adjusted capital to its risk-based capital levels, or any of them, or an inappropriate comparison of any other amount to the insurer’s risk-based capital levels is published in any written publication and the insurer is able to demonstrate to the commissioner with substantial proof the falsity of the statement, or the inappropriateness, as the case may be, then the insurer may publish an announcement in a written publication if the sole purpose of the announcement is to rebut the materially false statement.
  6. It is the further judgment of the legislative assembly that the risk-based capital instructions, risk-based capital reports, adjusted risk-based capital reports, risk-based capital plans, and revised risk-based capital plans are intended solely for use by the commissioner in monitoring the solvency of insurers and the need for possible corrective action with respect to insurers and may not be used by the commissioner for ratemaking nor considered or introduced as evidence in any rate proceeding nor used by the commissioner to calculate or derive any elements of an appropriate premium level or rate of return for any line of insurance that an insurer or any affiliate is authorized to write.

Source:

S.L. 1995, ch. 279, § 2; 2001, ch. 262, § 8; 2015, ch. 205, § 7, eff August 1, 2015.

26.1-03.1-09. Supplemental provisions — Rules — Exemption.

  1. This chapter is supplemental to any other laws of this state, and does not preclude or limit any other powers or duties of the commissioner under these laws, including chapters 26.1-06.1 and 26.1-06.2.
  2. The commissioner may adopt rules necessary for the implementation of this chapter.
  3. The commissioner may exempt from the application of this chapter any domestic property and casualty insurer that:
    1. Writes direct business only in this state;
    2. Writes direct annual premiums less than an amount determined by the commissioner; and
    3. Assumes no reinsurance in excess of five percent of direct premium written.

Source:

S.L. 1995, ch. 279, § 2.

26.1-03.1-10. Foreign insurers.

  1. Upon the written request of the commissioner, any foreign insurer shall submit to the commissioner a risk-based capital report as of the end of the calendar year just ended, the later of:
    1. The date a risk-based capital report would be required to be filed by a domestic insurer under this chapter; or
    2. Fifteen days after the request is received by the foreign insurer.
  2. In the event of a company action level event, regulatory action level event, or authorized control level event, with respect to any foreign insurer as determined under the risk-based capital statute applicable in the state of domicile of the insurer, or, if no risk-based capital provision is in force in that state, under the provisions of this chapter, if the insurance commissioner of the state of domicile of the foreign insurer fails to require the foreign insurer to file a risk-based capital plan in the manner specified under that state’s risk-based capital statute, or, if no risk-based capital provision is in force in the state, the commissioner may require the foreign insurer to file a risk-based capital plan with the commissioner under section 26.1-03.1-03. In such event, the failure of the foreign insurer to file a risk-based capital plan with the commissioner is grounds to order the insurer to cease and desist from writing new insurance business in this state.
  3. In the event of a mandatory control level event with respect to any foreign insurer, if no domiciliary receiver has been appointed with respect to the foreign insurer under the rehabilitation and liquidation statute applicable in the state of domicile of the foreign insurer, the commissioner may make application to the district court permitted under section 26.1-06.1-04 with respect to the liquidation of property of foreign insurers found in this state, and the occurrence of the mandatory control level event is adequate grounds for the application.

At the written request of the commissioner, any foreign insurer shall promptly submit to the commissioner a copy of any risk-based capital plan that is filed with the insurance commissioner of another state.

Source:

S.L. 1995, ch. 279, § 2.

26.1-03.1-11. Immunity.

There is no liability on the part of, and no cause of action may arise against, the commissioner or the insurance department or its employees or agents for any action taken by them in the performance of their powers and duties under this chapter.

Source:

S.L. 1995, ch. 279, § 2.

26.1-03.1-12. Notices.

All notices by the commissioner to an insurer that may result in regulatory action hereunder are effective upon dispatch if transmitted by registered mail, or in the case of any other transmission is effective upon the insurer’s receipt of the notice.

Source:

S.L. 1995, ch. 279, § 2.

26.1-03.1-13. Phasein provision.

  1. For risk-based capital reports required to be filed by life insurers with respect to 1993, the following requirements apply in lieu of the provisions of sections 26.1-03.1-03, 26.1-03.1-04, 26.1-03.1-05, and 26.1-03.1-06:
    1. In the event of a company action level event with respect to a domestic insurer, the commissioner may take no regulatory action hereunder.
    2. In the event of a regulatory action level event under subdivision a, b, or c of subsection 1 of section 26.1-03.1-04, the commissioner shall take the actions required under section 26.1-03.1-03.
    3. In the event of a regulatory action level event under subdivision d, e, f, g, h, or i of subsection 1 of section 26.1-03.1-04 or an authorized control level event, the commissioner shall take the actions required under section 26.1-03.1-04 with respect to the insurer.
    4. In the event of a mandatory control level event with respect to an insurer, the commissioner shall take the actions required under section 26.1-03.1-05 with respect to the insurer.
  2. For risk-based capital reports required to be filed by property and casualty insurers with respect to 1994, the following requirements apply in lieu of the provisions of sections 26.1-03.1-03, 26.1-03.1-04, 26.1-03.1-05, and 26.1-03.1-06:
    1. In the event of a company action level event with respect to a domestic insurer, the commissioner shall take no regulatory action hereunder.
    2. In the event of a regulatory action level event under subdivision a, b, or c of subsection 1 of section 26.1-03.1-04, the commissioner shall take the actions required under section 26.1-03.1-03.
    3. In the event of a regulatory action level event under subdivision d, e, f, g, h, or i of subsection 1 of section 26.1-03.1-04 or an authorized control level event, the commissioner shall take the action required under section 26.1-03.1-04 with respect to the insurer.
    4. In the event of a mandatory control level event with respect to an insurer, the commissioner shall take the actions required under section 26.1-03.1-05 with respect to the insurer.

Source:

S.L. 1995, ch. 279, § 2; 2015, ch. 205, § 8, eff August 1, 2015.

CHAPTER 26.1-03.2 Risk-Based Capital for Health Organizations

26.1-03.2-01. Definitions.

In this chapter, unless the context or subject matter otherwise requires:

  1. “Adjusted risk-based capital report” means a risk-based capital report which has been adjusted by the commissioner in accordance with section 26.1-03.2-02.
  2. “Corrective order” means an order issued by the commissioner specifying corrective actions which the commissioner has determined are required.
  3. “Domestic health organization” means a health organization domiciled in this state.
  4. “Foreign health organization” means a health organization that is licensed to do business in this state but is not domiciled in this state.
  5. “Health organization” means a health maintenance organization, prepaid limited health service organization, nonprofit health service corporation, or other managed care organization licensed by the commissioner to do business in this state. “Health organization” does not include an organization that is licensed as either a life and health insurer or a property and casualty insurer that is otherwise subject to either the life or property and casualty risk-based capital requirements.
  6. “Risk-based capital instructions” means the risk-based capital report including risk-based capital instructions adopted by the national association of insurance commissioners, as these risk-based capital instructions may be amended by the national association of insurance commissioners from time to time in accordance with the procedures adopted by the national association of insurance commissioners.
  7. “Risk-based capital level” means a health organization’s company action level risk-based capital, regulatory action level risk-based capital, authorized control level risk-based capital, or mandatory control level risk-based capital and:
    1. “Authorized control level risk-based capital” means the number determined under the risk-based capital formula in accordance with the risk-based capital instructions.
    2. “Company action level risk-based capital” means, with respect to any health organization, the product of 2.0 and its authorized control level risk-based capital.
    3. “Mandatory control level risk-based capital” means the product of .70 and the authorized control level risk-based capital.
    4. “Regulatory action level risk-based capital” means the product of 1.5 and its authorized control level risk-based capital.
  8. “Risk-based capital plan” means a comprehensive financial plan containing the elements specified in subsection 2 of section 26.1-03.2-03. If the commissioner rejects the risk-based capital plan, and it is revised by the health organization, with or without the commissioner’s recommendation, the plan must be called the “revised risk-based capital plan”.
  9. “Risk-based capital report” means the report required in section 26.1-03.2-02.
  10. “Total adjusted capital” means the sum of:
    1. A health organization’s statutory capital and surplus, net worth, as determined in accordance with the statutory accounting applicable to the annual financial statements required to be filed under section 26.1-03-07 or, in the case of a health maintenance organization, section 26.1-18.1-08; and
    2. Such other items, if any, as the risk-based capital instructions may provide.

Source:

S.L. 1999, ch. 256, § 1.

26.1-03.2-02. Risk-based capital reports.

  1. On or before each March first, a domestic health organization shall prepare and submit to the commissioner a report of its risk-based capital levels as of the end of the calendar year just ended, in a form and containing such information as is required by the risk-based capital instructions. In addition, a domestic health organization shall file its risk-based capital report:
    1. With the national association of insurance commissioners in accordance with the risk-based capital instructions; and
    2. With the insurance commissioner in any state in which the health organization is authorized to do business, if the insurance commissioner has notified the health organization of its request in writing, in which case the health organization shall file its risk-based capital report not later than the later of:
      1. Fifteen days from the receipt of notice to file its risk-based capital report with that state; or
      2. The filing date.
  2. A health organization’s risk-based capital must be determined in accordance with the formula set forth in the risk-based capital instructions. The formula must take the following into account, and may adjust for the covariance between, as determined in each case by applying the factors in the manner set forth in the risk-based capital instructions:
    1. Asset risk;
    2. Credit risk;
    3. Underwriting risk; and
    4. All other business risks and such other relevant risks as are set forth in the risk-based capital instructions.
  3. Net worth over the amount produced by the risk-based capital requirements contained in this chapter and the formulas, schedules, and instructions referenced in this chapter is desirable in the business of health insurance. Accordingly, health organizations should seek to maintain capital above the risk-based capital levels required by this chapter. Additional capital is used and useful in the insurance business and helps to secure a health organization against various risks inherent in, or affecting, the business of insurance and not accounted for or only partially measured by the risk-based capital requirements contained in this chapter.
  4. If a domestic health organization files a risk-based capital report that in the judgment of the commissioner is inaccurate, then the commissioner shall adjust the risk-based capital report to correct the inaccuracy and shall notify the health organization of the adjustment. The notice must contain a statement of the reason for the adjustment. A risk-based capital report as so adjusted is referred to as an “adjusted risk-based capital report”.

Source:

S.L. 1999, ch. 256, § 1.

26.1-03.2-03. Company action level event.

  1. “Company action level event” means any of the following events:
    1. The filing of a risk-based capital report by a health organization which indicates that:
      1. The health organization’s total adjusted capital is greater than or equal to its regulatory action level risk-based capital but less than its company action level risk-based capital; or
      2. If a health organization has total adjusted capital that is greater than or equal to its company action level risk-based capital but less than the product of its authorized control level risk-based capital and three and triggers the trend test determined in accordance with the trend test calculation included in the health risk-based capital instructions;
    2. Notification by the commissioner to the health organization of an adjusted risk-based capital report that indicates an event in subdivision a, provided the health organization does not challenge the adjusted risk-based capital report under section 26.1-03.2-07; or
    3. If, pursuant to section 26.1-03.2-07, a health organization challenges an adjusted risk-based capital report that indicates the event in subdivision a, the notification by the commissioner to the health organization that the commissioner, after a hearing, has rejected the health organization’s challenge.
  2. In the event of a company action level event, the health organization shall prepare and submit to the commissioner a risk-based capital plan that:
    1. Identifies the conditions that contribute to the company action level event;
    2. Contains proposals of corrective actions which the health organization intends to take and which would be expected to result in the elimination of the company action level event;
    3. Provides projections of the health organization’s financial results in the current year and at least the two succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory balance sheets, operating income, net income, capital and surplus, and risk-based capital levels. The projections for both new and renewal business may include separate projections for each major line of business and separately identify each significant income, expense, and benefit component;
    4. Identifies the key assumptions impacting the health organization’s projections and the sensitivity of the projections to the assumptions; and
    5. Identifies the quality of, and problems associated with, the health organization’s business, including its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business, and use of reinsurance, if any, in each case.
  3. The risk-based capital plan must be submitted:
    1. Within forty-five days of the company action level event; or
    2. If the health organization challenges an adjusted risk-based capital report pursuant to section 26.1-03.2-07, within forty-five days after notification to the health organization that the commissioner, after a hearing, has rejected the health organization’s challenge.
  4. Within sixty days after the submission by a health organization of a risk-based capital plan to the commissioner, the commissioner shall notify the health organization whether the risk-based capital plan shall be implemented or is, in the judgment of the commissioner, unsatisfactory. If the commissioner determines the risk-based capital plan is unsatisfactory, the notification to the health organization must set forth the reasons for the determination and may set forth proposed revisions that will render the risk-based capital plan satisfactory in the judgment of the commissioner. Upon notification from the commissioner, the health organization shall prepare a revised risk-based capital plan, which may incorporate by reference any revisions proposed by the commissioner, and shall submit the revised risk-based capital plan to the commissioner:
    1. Within forty-five days after the notification from the commissioner; or
    2. If the health organization challenges the notification from the commissioner under section 26.1-03.2-07, within forty-five days after a notification to the health organization that the commissioner has, after a hearing, rejected the health organization’s challenge.
  5. In the event of a notification by the commissioner to a health organization that the health organization’s risk-based capital plan or revised risk-based capital plan is unsatisfactory, the commissioner, subject to the health organization’s right to a hearing under section 26.1-03.2-07, may specify in the notification that the notification constitutes a regulatory action level event.
  6. Every domestic health organization that files a risk-based capital plan or revised risk-based capital plan with the commissioner shall file a copy of the risk-based capital plan or revised risk-based capital plan with the insurance commissioner in any state in which the health organization is authorized to do business if:
    1. The state has a risk-based capital provision substantially similar to subsection 1 of section 26.1-03.2-08; and
    2. The insurance commissioner of that state has notified the health organization of its request for the filing in writing, in which case the health organization shall file a copy of the risk-based capital plan or revised risk-based capital plan in that state no later than the later of:
      1. Fifteen days after the receipt of notice to file a copy of its risk-based capital plan or revised risk-based capital plan with the state; or
      2. The date on which the risk-based capital plan or revised risk-based capital plan is filed under subsections 3 and 4.

Source:

S.L. 1999, ch. 256, § 1; 2011, ch. 213, § 2.

26.1-03.2-04. Regulatory action level event.

  1. “Regulatory action level event” means, with respect to a health organization, any of the following events:
    1. The filing of a risk-based capital report by the health organization which indicates that the health organization’s total adjusted capital is greater than or equal to its authorized control level risk-based capital but less than its regulatory action level risk-based capital;
    2. Notification by the commissioner to a health organization of an adjusted risk-based capital report that indicates the event in subdivision a, provided the health organization does not challenge the adjusted risk-based capital report under section 26.1-03.2-07;
    3. If, pursuant to section 26.1-03.2-07, the health organization challenges an adjusted risk-based capital report that indicates the event in subdivision a, the notification by the commissioner to the health organization that the commissioner, after a hearing, has rejected the health organization’s challenge;
    4. The failure of the health organization to file a risk-based capital report by the filing date, unless the health organization has provided an explanation for the failure which is satisfactory to the commissioner and has cured the failure within ten days after the filing date;
    5. The failure of the health organization to submit a risk-based capital plan to the commissioner within the time period set forth in subsection 3 of section 26.1-03.2-03;
    6. Notification by the commissioner to the health organization that:
      1. The risk-based capital plan or revised risk-based capital plan submitted by the health organization is, in the judgment of the commissioner, unsatisfactory; and
      2. Notification constitutes a regulatory action level event with respect to the health organization, provided the health organization has not challenged the determination under section 26.1-03.2-07;
    7. If, pursuant to section 26.1-03.2-07, the health organization challenges a determination by the commissioner under subdivision f, the notification by the commissioner to the health organization that the commissioner, after a hearing, has rejected the challenge;
    8. Notification by the commissioner to the health organization that the health organization has failed to adhere to its risk-based capital plan or revised risk-based capital plan, but only if the failure has a substantial adverse effect on the ability of the health organization to eliminate the company action level event in accordance with its risk-based capital plan or revised risk-based capital plan and the commissioner has so stated in the notification, provided the health organization has not challenged the determination under section 26.1-03.2-07; or
    9. If, pursuant to section 26.1-03.2-07, the health organization challenges a determination by the commissioner under subdivision h, the notification by the commissioner to the health organization that the commissioner, after a hearing, has rejected the challenge.
  2. In the event of a regulatory action level event the commissioner shall:
    1. Require the health organization to prepare and submit a risk-based capital plan or, if applicable, a revised risk-based capital plan;
    2. Perform such examination or analysis as the commissioner deems necessary of the assets, liabilities, and operations of the health organization, including a review of its risk-based capital plan or revised risk-based capital plan; and
    3. Subsequent to the examination or analysis, issue an order specifying such corrective actions as the commissioner determines are required.
  3. In determining corrective actions, the commissioner may take into account factors the commissioner deems relevant with respect to the health organization risk based upon the commissioner’s examination or analysis of the assets, liabilities, and operations of the health organization, including the results of any sensitivity tests undertaken pursuant to the risk-based capital instructions. The risk-based capital plan or revised risk-based capital plan must be submitted:
    1. Within forty-five days after the occurrence of the regulatory action level event;
    2. If the health organization challenges an adjusted risk-based capital report pursuant to section 26.1-03.2-07 and the challenge is not frivolous in the judgment of the commissioner, within forty-five days after the notification to the health organization that the commissioner has, after a hearing, rejected the health organization’s challenge; or
    3. If the health organization challenges a revised risk-based capital plan pursuant to section 26.1-03.2-07 and the challenge is not frivolous in the judgment of the commissioner, within forty-five days after the notification to the health organization that the commissioner has, after a hearing, rejected the health organization’s challenge.
  4. The commissioner may retain actuaries and investment experts and other consultants as may be necessary in the judgment of the commissioner to review the health organization’s risk-based capital plan or revised risk-based capital plan, examine or analyze the assets, liabilities, and operations, including contractual relationships, of the health organization and formulate the corrective order with respect to the health organization. The fees, costs, and expenses relating to consultants must be borne by the affected health organization or such other party as directed by the commissioner.

Source:

S.L. 1999, ch. 256, § 1.

26.1-03.2-05. Authorized control level event.

  1. “Authorized control level event” means any of the following events:
    1. The filing of a risk-based capital report by the health organization which indicates that the health organization’s total adjusted capital is greater than or equal to its mandatory control level risk-based capital but less than its authorized control level risk-based capital;
    2. The notification by the commissioner to the health organization of an adjusted risk-based capital report that indicates the event in subdivision a, provided the health organization does not challenge the adjusted risk-based capital report under section 26.1-03.2-07;
    3. If, pursuant to section 26.1-03.2-07, the health organization challenges an adjusted risk-based capital report that indicates the event in subdivision a, notification by the commissioner to the health organization that the commissioner, after a hearing, has rejected the health organization’s challenge;
    4. The failure of the health organization to respond, in a manner satisfactory to the commissioner, to a corrective order, provided the health organization has not challenged the corrective order under section 26.1-03.2-07; or
    5. If the health organization has challenged a corrective order under section 26.1-03.2-07 and the commissioner, after a hearing, has rejected the challenge or modified the corrective order, the failure of the health organization to respond, in a manner satisfactory to the commissioner, to the corrective order subsequent to rejection or modification by the commissioner.
  2. In the event of an authorized control level event with respect to a health organization, the commissioner shall:
    1. Take such actions as are required under section 26.1-03.2-04 regarding a health organization with respect to which a regulatory action level event has occurred; or
    2. If the commissioner deems it to be in the best interests of the policyholders and creditors of the health organization and of the public, take such actions as are necessary to cause the health organization to be placed under regulatory control under chapter 26.1-06.1. If the commissioner takes such actions, the authorized control level event must be deemed sufficient grounds for the commissioner to take action under chapter 26.1-06.1 and the commissioner shall have the rights, powers, and duties with respect to the health organization as are set forth in chapter 26.1-06.1. If the commissioner takes actions under this subdivision pursuant to an adjusted risk-based capital report, the health organization is entitled to such protections as are afforded to health organizations under the provisions of chapter 26.1-06.1 pertaining to summary proceedings.

Source:

S.L. 1999, ch. 256, § 1.

26.1-03.2-06. Mandatory control level event.

  1. “Mandatory control level event” means any of the following events:
    1. The filing of a risk-based capital report that indicates that the health organization’s total adjusted capital is less than its mandatory control level risk-based capital;
    2. Notification by the commissioner to the health organization of an adjusted risk-based capital report that indicates the event in subdivision a, provided the health organization does not challenge the adjusted risk-based capital report under section 26.1-03.2-07; or
    3. If, pursuant to section 26.1-03.2-07, the health organization challenges an adjusted risk-based capital report that indicates the event in subdivision a, notification by the commissioner to the health organization that the commissioner, after a hearing, has rejected the health organization’s challenge.
  2. In the event of a mandatory control level event, the commissioner shall take such actions as are necessary to place the health organization under regulatory control under chapter 26.1-06.1. In that event, the mandatory control level event must be deemed sufficient grounds for the commissioner to take action under chapter 26.1-06.1, and the commissioner shall have the rights, powers, and duties with respect to the health organization as are set forth in chapter 26.1-06.1. If the commissioner takes actions pursuant to an adjusted risk-based capital report, the health organization is entitled to the protections of chapter 26.1-06.1 pertaining to summary proceedings. Notwithstanding any of the foregoing, the commissioner may forego action for up to ninety days after the mandatory control level event if the commissioner finds there is a reasonable expectation that the mandatory control level event may be eliminated within the ninety-day period.

Source:

S.L. 1999, ch. 256, § 1.

26.1-03.2-07. Hearings.

Upon the occurrence of any of the following events, the health organization shall have the right to a confidential departmental hearing, on a record, at which the health organization may challenge any determination or action by the commissioner. The health organization shall notify the commissioner of its request for a hearing within five days after the notification by the commissioner under subsection 1, 2, 3, or 4. Upon receipt of the health organization’s request for a hearing, the commissioner shall set a date for the hearing, which may not be less than ten nor more than thirty days after the date of the health organization’s request. The events include:

  1. Notification to a health organization by the commissioner of an adjusted risk-based capital report;
  2. Notification to a health organization by the commissioner that:
    1. The health organization’s risk-based capital plan or revised risk-based capital plan is unsatisfactory; and
    2. Notification constitutes a regulatory action level event with respect to the health organization;
  3. Notification to a health organization by the commissioner that the health organization has failed to adhere to its risk-based capital plan or revised risk-based capital plan and that the failure has a substantial adverse effect on the ability of the health organization to eliminate the company action level event with respect to the health organization in accordance with its risk-based capital plan or revised risk-based capital plan; or
  4. Notification to a health organization by the commissioner of a corrective order with respect to the health organization.

Source:

S.L. 1999, ch. 256, § 1.

26.1-03.2-08. Confidentiality — Prohibition on announcements — Prohibition on use in ratemaking.

  1. All risk-based capital reports, to the extent the information is not required to be set forth in a publicly available annual statement schedule, and risk-based capital plans, including the results or report of any examination or analysis of a health organization performed pursuant to this chapter, and any corrective order issued by the commissioner pursuant to examination or analysis, with respect to a domestic health organization or foreign health organization, which are filed with the commissioner constitute information that might be damaging to the health organization if made available to its competitors, and therefore shall be kept confidential by the commissioner. This information may not be made public or be subject to subpoena, other than by the commissioner and then only for the purpose of enforcement actions taken by the commissioner pursuant to this chapter or any other provision of the insurance laws of this state.
  2. Neither the commissioner nor any person that received documents, materials, or other information while acting under the authority of the commissioner is permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection 1.
  3. To assist in the performance of the commissioner’s duties, the commissioner may:
    1. Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection 1, with other state, federal, and international regulatory agencies; with the national association of insurance commissioners and its affiliates and subsidiaries; and with state, federal, and international law enforcement authorities, if the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information.
    2. Receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information from the national association of insurance commissioners and its affiliates and subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding documents, materials, or information is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or other information; and
    3. Enter agreements governing sharing and use of information consistent with this subsection.
  4. A waiver of an applicable privilege or claim of confidentiality in the documents, materials, or information does not occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subdivision c of subsection 3.
  5. It is the judgment of the legislature that the comparison of a health organization’s total adjusted capital to any of its risk-based capital levels is a regulatory tool that may indicate the need for corrective action with respect to the health organization and is not intended as a means to rank health organizations generally. Therefore, except as otherwise required under the provisions of this chapter, the making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over a radio or television station, or in any other way, an advertisement, announcement, or statement containing an assertion, representation, or statement with regard to the risk-based capital levels of any health organization, or of any component derived in the calculation, by any health organization, insurance producer, or other person engaged in any manner in the insurance business would be misleading and is therefore prohibited. However, if any materially false statement with respect to the comparison regarding a health organization’s total adjusted capital to its risk-based capital levels, or any of them, or an inappropriate comparison of any other amount to the health organization’s risk-based capital levels is published in any written publication and the health organization is able to demonstrate to the commissioner with substantial proof the falsity of the statement, or the inappropriateness, as the case may be, then the health organization may publish an announcement in a written publication if the sole purpose of the announcement is to rebut the materially false statement.
  6. It is the further judgment of the legislature that the risk-based capital instructions, risk-based capital reports, adjusted risk-based capital reports, risk-based capital plans, and revised risk-based capital plans are intended solely for use by the commissioner in monitoring the solvency of health organizations and the need for possible corrective action with respect to health organizations and may not be used by the commissioner for ratemaking nor considered or introduced as evidence in any rate proceeding nor used by the commissioner to calculate or derive any elements of an appropriate premium level or rate of return for any line of insurance that a health organization or any affiliate is authorized to write.

Source:

S.L. 1999, ch. 256, § 1; 2001, ch. 262, § 9; 2017, ch. 213, § 1, eff March 9, 2017.

26.1-03.2-09. Supplemental provisions — Rules — Exemption.

  1. The provisions of this chapter are supplemental to any other provisions of the laws of this state, and do not preclude or limit any other powers or duties of the commissioner under such laws, including chapter 26.1-06.1.
  2. The commissioner may adopt reasonable rules necessary for the implementation of this chapter.
  3. The commissioner may exempt from the application of this chapter a domestic health organization that:
    1. Writes direct business only in this state;
    2. Assumes no reinsurance in excess of five percent of direct premium written; and
    3. Writes direct annual premiums for comprehensive medical business of less than an amount determined by the commissioner; or
    4. Is a limited health service organization that covers less than a number of lives determined by the commissioner.

Source:

S.L. 1999, ch. 256, § 1.

26.1-03.2-10. Foreign health organizations.

    1. A foreign health organization, upon the written request of the commissioner, shall submit to the commissioner a risk-based capital report for the calendar year just ended, the later of:
      1. The date a risk-based capital report would be required to be filed by a domestic health organization under this chapter; or
      2. Fifteen days after the request is received by the foreign health organization.
    2. A foreign health organization, at the written request of the commissioner, shall promptly submit to the commissioner a copy of any risk-based capital plan that is filed with the insurance commissioner of any other state.
  1. In the event of a company action level event, regulatory action level event, or authorized control level event with respect to a foreign health organization as determined under the risk-based capital statute applicable in the state of domicile of the health organization or, if no risk-based capital statute is in force in that state, under the provisions of this chapter, if the insurance commissioner of the state of domicile of the foreign health organization fails to require the foreign health organization to file a risk-based capital plan in the manner specified under that state’s risk-based capital statute or, if no risk-based capital statute is in force in that state, under section 26.1-03.2-03, the commissioner may require the foreign health organization to file a risk-based capital plan with the commissioner. In such event, the failure of the foreign health organization to file a risk-based capital plan with the commissioner is grounds to order the health organization to cease and desist from writing new insurance business in this state.
  2. In the event of a mandatory control level event with respect to a foreign health organization, if no domiciliary receiver has been appointed with respect to the foreign health organization under the rehabilitation and liquidation statute applicable in the state of domicile of the foreign health organization, the commissioner may make application to the district court permitted under section 26.1-06.1-04 with respect to the liquidation of property of foreign health organizations found in this state, and the occurrence of the mandatory control level event shall be considered adequate grounds for the application.

Source:

S.L. 1999, ch. 256, § 1.

26.1-03.2-11. Immunity.

There is no liability on the part of, and no cause of action shall arise against, the commissioner or the insurance department or its employees or agents for any action taken by them in the performance of their powers and duties under this chapter.

Source:

S.L. 1999, ch. 256, § 1.

26.1-03.2-12. Notices.

All notices by the commissioner to a health organization which may result in regulatory action under this chapter are effective upon dispatch if transmitted by registered or certified mail, or in the case of any other transmission, are effective upon the health organization’s receipt of notice.

Source:

S.L. 1999, ch. 256, § 1.

26.1-03.2-13. Phasein provision.

For risk-based capital reports required to be filed by health organizations with respect to 1999, the following requirements apply in lieu of the provisions of sections 26.1-03.2-03, 26.1-03.2-04, 26.1-03.2-05, and 26.1-03.2-06:

  1. In the event of a company action level event with respect to a domestic health organization, the commissioner shall take no regulatory action under this chapter.
  2. In the event of a regulatory action level event under subdivision a, b, or c of subsection 1 of section 26.1-03.2-04, the commissioner shall take the actions required under section 26.1-03.2-03.
  3. In the event of a regulatory action level event under subdivision d, e, f, g, h, or i of subsection 1 of section 26.1-03.2-04 or an authorized control level event, the commissioner shall take the actions required under section 26.1-03.2-04 with respect to the health organization.
  4. In the event of a mandatory control level event with respect to a health organization, the commissioner shall take the actions required under section 26.1-03.2-05 with respect to the health organization.

Source:

S.L. 1999, ch. 256, § 1.

CHAPTER 26.1-04 Prohibited Practices in Insurance Business

26.1-04-01. Limitation on right to engage in trade.

An insurance company organized under this title may not deal or trade, directly or indirectly, in the buying or selling of any goods, wares, merchandise, or other commodities whatsoever, except such as may have been insured by the company and are claimed to be damaged by reason of the risk insured against or as allowed under this chapter.

Source:

S.L. 1983, ch. 332, § 4; 2021, ch. 233, § 1, eff August 1, 2021.

Derivation:

N.D.C.C. § 26-08-09.

Notes to Decisions

Private Cause of Action.

This state did not intend to create a private cause of action in its Unfair Insurance Practices Act. Farmer's Union Cent. Exchange, Inc. v. Reliance Ins. Co., 675 F. Supp. 1534, 1987 U.S. Dist. LEXIS 13385 (D.N.D. 1987), disapproved, Bilden v. United Equitable Ins. Co., 921 F.2d 822, 1990 U.S. App. LEXIS 22172 (8th Cir. N.D. 1990).

Collateral References.

What constitutes bad faith on part of insurer rendering it liable for statutory penalty imposed for bad faith in failure to pay, or delay in paying, insured’s claim-Particular grounds for denial of claim: risks, causes, and extent of loss, injury, disability, or death, 123 A.L.R.5th 259.

26.1-04-02. Unfair methods of competition or unfair and deceptive acts or practices prohibited.

A person may not engage in this state in any trade practice defined in this chapter as, or determined pursuant to this chapter to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.

Source:

S.L. 1983, ch. 332, § 4.

Derivation:

N.D.C.C. § 26-30-03.

Notes to Decisions

Purpose.

This statute was enacted to protect persons filing claims against insurers. Farmer's Union Cent. Exchange, Inc. v. Reliance Ins. Co., 626 F. Supp. 583, 1985 U.S. Dist. LEXIS 15712 (D.N.D. 1985).

Tort.

The duties imposed by this section may be the basis for an action sounding in tort. Farmer's Union Cent. Exchange, Inc. v. Reliance Ins. Co., 626 F. Supp. 583, 1985 U.S. Dist. LEXIS 15712 (D.N.D. 1985).

Collateral References.

Liability of insurance agent or broker to insured for misrepresentation of cash surrender value or accumulated value benefits of life insurance policy, 44 A.L.R.4th 1030.

Liability insurance: third party’s right of action for insurer’s bad-faith tactics designed to delay payment of claim, 62 A.L.R.4th 1113.

What constitutes bad faith on part of insurer rendering it liable for statutory penalty imposed for bad faith in failure to pay, or delay in paying, insured’s claim — Particular grounds for denial of claim: matters relating to policy, 123 A.L.R.5th 259.

26.1-04-03. Unfair methods of competition and unfair or deceptive acts or practices defined.

The following are unfair methods of competition and unfair and deceptive acts or practices in the business of insurance:

  1. Misrepresentations and false advertising of policy contracts. Making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon, or making any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policies, or making any misleading representation or any misrepresentation as to the financial condition of any person, or as to the legal reserve system upon which any life insurance company operates, or using any name or title of any policy or class of policies misrepresenting the true nature thereof, or making any misrepresentation tending to induce the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy or for the purpose of effecting a pledge or assignment of or effecting a loan against any insurance.
  2. False information and advertising generally. Making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio station, or in any other way, an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance or with respect to any person in the conduct of that person’s insurance business, which is untrue, deceptive, or misleading.
  3. Defamation. Making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting, or encouraging the making, publishing, disseminating, or circulating of any oral or written statement or any pamphlet, circular, article, or literature which is false, or maliciously critical of or derogatory to the financial condition of any person, and which is calculated to injure any person engaged in the business of insurance.
  4. Boycott, coercion, and intimidation. Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion, or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance.
  5. False financial statements. Filing with any supervisory or other public official, or making, publishing, disseminating, circulating, or delivering to any person, or placing before the public, or causing directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of financial condition of any person with intent to deceive.
  6. Stock operations and advisory board contracts. Issuing or delivering or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insurance.
  7. Unfair discrimination.
    1. Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contract.
    2. Making or permitting any unfair discrimination, including consideration of an individual’s history or status as a subject of domestic abuse, between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the benefits payable thereunder, or in any of the terms or conditions of such contract, or in any other manner whatsoever.
    3. Refusing to insure, or refusing to continue to insure, or limiting the amount, extent, or kind of life insurance, accident and sickness insurance, health services, or health care protection insurance available to an individual, or charging an individual a different rate for the same coverage solely because of blindness or partial blindness. Refusal to insure includes denial by an insurer of disability insurance coverage on the grounds that the policy defines “disability” as being presumed in the event that the insured loses the insured’s eyesight; however, an insurer may exclude from coverage disabilities consisting solely of blindness or partial blindness when such condition existed at the time the policy was issued. With respect to all other conditions, including the underlying cause of the blindness or partial blindness, persons who are blind or partially blind shall be subject to the same standards of sound actuarial principles or actual or reasonably anticipated experience as are sighted persons.
    4. Making or permitting any unfair discrimination between individuals or risks of the same class and of essentially the same hazard by refusing to insure, refusing to renew, canceling, or limiting the amount of insurance coverage on a property or casualty risk solely because of the geographic location of the risk, unless the action is the result of the application of sound underwriting and actuarial principles related to actual or reasonably anticipated loss experience.
  8. Rebates.
    1. Except as otherwise expressly provided by law, knowingly permitting or offering to make or making any contract of life insurance, life annuity, or accident and health insurance, or agreement as to such contract other than as plainly expressed in the contract issued thereon, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to the insurance or annuity any rebate of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatsoever not specified in the contract; or giving, selling, or purchasing, or offering to give, sell, or purchase as inducement to the insurance or annuity or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the contract.
    2. Subsection 7 or subdivision a of this subsection do not prohibit the following practices:
      1. In the case of any contract of life insurance or life annuity, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance, provided that any such bonuses or abatement of premiums are fair and equitable to policyholders and for the best interests of the company and its policyholders;
      2. In the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount which fairly represents the saving in collection expenses; and
      3. Readjusting the rate of premium for a group insurance policy based on the loss or expense experience thereunder, at the end of the first or any subsequent policy year of insurance thereunder, which may be made retroactive only for the policy year.
    3. Notwithstanding any other provision in this subsection, if the cost does not exceed an aggregate retail value of one hundred dollars per person per year, an insurance producer may give a gift, prize, promotional article, logo merchandise, meal, or entertainment activity directly or indirectly to a person in connection with marketing, promoting, or advertising the business. As used in this subdivision, “person” means the named insured, policy owner, or prospective client or the spouse of any of these individuals, but the term does not include a certificate holder, child, or employee of the named insured, policy owner, or prospective client. Subject to the limits of this subdivision, an insurance producer may give a gift card for specific merchandise or services such as a meal, gasoline, or car wash but may not give cash, a cash card, any form of currency, or any refund or discount in premium. An insurance producer may not condition the giving of a gift, prize, promotion article, logo merchandise, meal, or entertainment activity on obtaining a quote or a contract of insurance. Notwithstanding the limitation in this subdivision, an insurance producer may conduct raffles or drawings, if there is no financial cost to an entrant to participate, the drawing or raffle does not obligate a participant to purchase insurance, the prizes are not valued in excess of a reasonable amount determined by the commissioner, and the drawing or raffle is open to the public. The raffle or drawing must be offered in a manner that is not unfairly discriminatory and may not be contingent on the purchase, continued purchase, or renewal of a policy.  Notwithstanding the limitation in this subdivision, an insurance producer may make a donation to a nonprofit organization that is exempt from federal taxation under Internal Revenue Code section 501(c)(3) [26 U.S.C. 501(c)(3)] in any amount as long as the donation is not given as an inducement to obtain a contract of insurance.
    4. The provisions in this subsection may not be construed as including within the definition of discrimination or rebates any of the following practices:
      1. The offer or provision by an insurer or producer, by or through an employee, an affiliate, or a third-party representative, of value-added products or services at no or reduced cost if such products or services are not specified in the policy of insurance if the product or service:
        1. Relates to the insurance coverage and is designed to satisfy one or more of the following:
          1. Provide loss mitigation or loss control;
          2. Reduce claims costs or claim settlement costs;
          3. Provide education about liability risk or risk of loss to persons or property;
          4. Monitor or assess risk, identify sources of risk, or develop strategies for eliminating or reducing risk;
          5. Enhance health;
          6. Enhance financial wellness through items such as education of financial planning services;
          7. Provide post-loss services;
          8. Incent behavioral changes to improve the health or reduce the risk of death or disability of an individual defined as policyholder, potential policyholder, certificate holder, potential certificate holder, insured, potential insured, or applicant; or
          9. Assist in the administration of the employee or retiree benefit insurance coverage.
        2. If offered by the insurer or producer, the insurer or producer, upon request, shall ensure the person is provided with contact information to assist the person with questions regarding the product or service.
        3. Is based on documented objective criteria and offered in a manner not unfairly discriminatory. The documented criteria must be maintained by the insurer or producer and produced at the request of the commissioner.
        4. Is reasonable in comparison to that person’s premiums or insurance coverage for the policy class.
      2. If an insurer or producer does not have sufficient evidence, but has a good-faith belief the product or service meets the criteria in paragraph 1 of subdivision d of subsection 8, the insurer or producer may provide the product or service in a manner that is not unfairly discriminatory as part of a pilot or testing program for no longer than one year. An insurer or producer shall notify the department of the pilot or testing program offered to consumers in this state before launching and may proceed with the program unless the department objects within twenty-one days of notice.
    5. An insurer, producer, or representative of an insurer or producer may not offer or provide insurance as an inducement to the purchase of another policy or otherwise use of the words “free” or “no cost” or words of similar import in an advertisement.
    6. The commissioner may adopt regulations when implementing the permitted practices set forth in this subsection to ensure consumer protection. Consistent with applicable law, the topics addressed by the regulations may include consumer data protections and privacy, consumer disclosure, and unfair discrimination.
  9. Unfair claim settlement practices. Committing any of the following acts, if done without just cause and if performed with a frequency indicating a general business practice:
    1. Knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverages at issue.
    2. Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under insurance policies.
    3. Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies.
    4. Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims submitted in which liability has become reasonably clear.
    5. Compelling insureds to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered.
    6. Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.
    7. Attempting settlement or compromise of claims on the basis of applications which were altered without notice to, or knowledge or consent of, insureds.
    8. Attempting to settle a claim for less than the amount to which a reasonable person would have believed one was entitled by reference to written or printed advertising material accompanying or made a part of an application.
    9. Attempting to delay the investigation or payment of claims by requiring an insured and the insured’s physician to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.
    10. Failing to affirm or deny coverage of claims within a reasonable time after proof of loss has been completed.
    11. Refusing payment of claims solely on the basis of the insured’s request to do so without making an independent evaluation of the insured’s liability based upon all available information.
    12. Providing coverage under a policy issued under chapter 26.1-45 or 26.1-36.1 for confinement to a nursing home and refusing to pay a claim when a person is covered by such a policy and the person’s physician ordered confinement pursuant to the terms of the policy for care other than custodial care. Custodial care means care which is primarily for the purpose of meeting personal needs without supervision by a registered nurse or a licensed practical nurse.
    13. Failure to use the standard health insurance proof of loss and claim form or failure to pay a health insurance claim as required by section 26.1-36-37.1.
  10. Unfair handling of communications by insurance company. Failing to adopt and implement reasonable standards for the prompt handling of written communications, primarily expressing grievances, received by the insurance company from insureds or claimants.
  11. Refusing to insure risks. Refusing to insure risks solely because of race, color, creed, sex, or national origin, or refusing to continue to insure risks solely because an employer chooses to offer a health maintenance organization option to employees in its health benefit plan.
  12. Misrepresentation in insurance applications. Making false or fraudulent statements or representations on or relative to an application for an insurance policy, for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, insurance producer, or individual.
  13. Failure to refund unearned premiums. Failing to refund within thirty days of the cancellation of an insured’s policy the unearned premium paid for that insurance policy. However, for commercial lines of insurance policies which are audited by the insurer to determine premium, the refund of premium must be made within thirty days from the date the insurer receives from the insured that information which is reasonably necessary for the insurer to audit the insured’s business to determine the premium due to the insurer.
  14. As used in subsections 15, 16, 17, 18, and 19, unless the context otherwise requires:
    1. “Entity” includes a third-party administrator, an insurance company as defined in section 26.1-02-01, a health maintenance organization, or any other entity providing a plan of health insurance subject to state insurance regulation.
    2. “Health care provider” means a person that delivers, administers, or supervises health care products or services, for profit or otherwise, in the ordinary course of business or professional practice.
    3. “Health plan” means any public or private plan or arrangement that provides or pays the cost of health benefits, including any organization of health care providers that furnishes health services under a contract or agreement with this type of plan.
    4. “Medical communication” means any communication, other than a knowing and willful misrepresentation, made by a health care provider to a patient regarding the health care needs or treatment options of the patient and the applicability of the health plan to the patient’s needs or treatment. The term includes communications concerning:
      1. Tests, consultations, and treatment options;
      2. Risks or benefits associated with tests, consultations, and options;
      3. Variation in experience, quality, or outcome among any health care providers or health care facilities providing any medical service;
      4. The process, basis, or standard used by an entity to determine whether to authorize or deny health care services or benefits; and
      5. Financial incentives or disincentives based on service utilization provided by an entity to a health care provider.
    5. “Patient” includes a former, current, or prospective patient or the guardian or legal representative of any former, current, or prospective patient.
    1. Interference with certain medical communications. An entity offering a health plan may not restrict or interfere with any medical communication and may not take any of the following actions against a health care provider solely on the basis of a medical communication:
      1. Refusal to contract with the health care provider;
      2. Termination of or refusal to renew a contract with the health care provider;
      3. Refusal to refer patients to or allow others to refer patients to the health care provider; or
      4. Refusal to compensate the health care provider for covered services that are medically necessary.
    2. This subsection does not prohibit an entity from enforcing, as part of a contract or agreement to which a health care provider is a party, any mutually agreed-upon terms and conditions, including terms and conditions requiring a health care provider to participate in and cooperate with all programs, policies, and procedures developed or operated by a health plan to assure, review, or improve the quality and effective utilization of health care services, if the utilization is according to guidelines or protocols that are based on clinical or scientific evidence and only if the guidelines or protocols under the utilization do not prohibit or restrict medical communications between providers and their patients.
  15. Unfair indemnification. A contract between an entity and a health care provider may not require the health care provider to indemnify the entity for the entity’s negligence, willful misconduct, or breach of contract, and may not require a health care provider as a condition of participation to waive any right to seek legal redress against the entity. In addition to the proceedings and penalties provided in this chapter, a contract provision violating this subsection is void.
  16. Incentives to withhold medically necessary care. An entity may not offer a health care provider, and a contract with a health care provider under a health plan may not contain, an incentive plan that includes a specific payment made to, or withheld from, the provider as an inducement to deny, reduce, limit, or delay medically necessary care covered by the health plan and provided with respect to a patient. This subsection does not prohibit incentive plans, including capitation payments or shared-risk arrangements, that are not tied to specific medical decisions with respect to a patient. In addition to the proceedings and penalties provided in this chapter, a contract provision violating this subsection is void. As used in this subsection, “medically necessary care” means health care services, supplies, or treatments that a reasonably prudent physician or other health care provider would provide to a patient for the prevention, diagnosis, or treatment of illness, injury, disease, or its symptoms which are in accordance with generally accepted standards of medical practice, clinically appropriate in terms of type, frequency, extent, site, and duration, and not primarily for the convenience of the patient, physician, or other health care provider. This definition does not preclude an entity from establishing a definition of “medically necessary care” for determining which services are covered by the health plan.
  17. Retaliation for patient advocacy. An entity may not take any of the following actions against a health care provider solely because the provider, in good faith, reports to state or federal authorities an act or practice by the entity that jeopardizes patient health or welfare, or advocates on behalf of a patient in a utilization review program or grievance procedure:
    1. Refusal to contract with the health care provider;
    2. Termination of or refusal to renew a contract with the health care provider;
    3. Refusal to refer patients to or allow others to refer patients to the health care provider; or
    4. Refusal to compensate the health care provider for covered services that are medically necessary.
  18. Unfair reimbursement. An entity may not require that a health care provider receive under a health plan, pursuant to policies of the entity or a contract with the health care provider, the lowest payment for services and items that the health care provider charges or receives from any other entity. In addition to the proceedings and penalties provided in this chapter, a contract provision violating this subsection is void.
  19. Unfair referral. An insurer, insurance producer, or third-party administrator referring an individual employee to the association, or arranging for an individual employee to apply to the association for the purpose of separating that employee from group health insurance coverage provided in connection with the employee’s employment.
  20. Unfair compensation. Basing the compensation, including performance bonuses or incentives, of claims employees or contracted claims personnel on the following:
    1. The number of policies canceled.
    2. The number of times coverage is denied.
    3. Use of a quota limiting or restricting the number or volume of claims.
    4. Use of an arbitrary quota or cap limiting or restricting the amount of claims payments without due consideration to the merits of the claim.

Making any false entry in any book, report, or statement of any person with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public official to whom the person is required by law to report, or who has authority by law to examine into its condition or into any of its affairs, or, with like intent, willfully omitting to make a true entry of any material fact pertaining to the business of the person in any book, report, or statement of the person.

It is not a prohibited practice for a health insurance company with participating provider agreements to require that a subscriber or member using a nonparticipating provider be responsible for providing the insurer a copy of medical records used for claims processing.

Source:

S.L. 1983, ch. 332, § 4; 1983, ch. 334, § 2; 1985, ch. 327, § 2; 1987, ch. 336, § 1; 1987, ch. 337, § 1; 1989, ch. 348, § 1; 1991, ch. 304, § 1; 1997, ch. 248, §§ 1 to 3; 1999, ch. 251, § 4; 1999, ch. 257, §§ 1, 2; 2001, ch. 262, § 10; 2003, ch. 211, § 17; 2003, ch. 239, § 2; 2009, ch. 244, § 1; 2011, ch. 215, § 1; 2011, ch. 214, § 1; 2017, ch. 214, § 1, eff August 1, 2017; 2019, ch. 35, § 7, eff July 1, 2019; 2021, ch. 233, § 2, eff August 1, 2021.

Derivation:

N.D.C.C. § 26-30-04.

Notes to Decisions

Authorization by Insurance Commissioner.

A foreign corporation which had been authorized by the North Dakota Insurance Commissioner to transact insurance and bonding business in the state was in the business of insurance as to which the provisions of this section apply. Szarkowski v. Reliance Ins. Co., 404 N.W.2d 502, 1987 N.D. LEXIS 302 (N.D. 1987).

Duty to Negotiate.

An insurer’s duty to its policyholders to negotiate a settlement of a potential claim in good faith and with fair dealing does not extend to injured third parties with potential claims against insureds. Dvorak v. American Family Mut. Ins. Co., 508 N.W.2d 329, 1993 N.D. LEXIS 212 (N.D. 1993).

Evidence.

Evidence was sufficient for jury to find unfair settlement practices by insurer performed as a general business practice, where independent insurance claims consultant testified insured’s acts, including requirement field representatives finalize a certain percentage of claims and threats to sue insured if he did not agree with insurer’s position or sought help from an attorney, constituted bad faith in claims handling. Ingalls v. Paul Revere Life Ins. Group, 1997 ND 43, 561 N.W.2d 273, 1997 N.D. LEXIS 61 (N.D. 1997).

Frequency Requirement.

Subsection (9) of this section specifically requires that the proscribed acts be “performed with a frequency indicating a general business practice” to constitute an unfair claim settlement practice. Volk v. Wisconsin Mortgage Assurance Co., 474 N.W.2d 40, 1991 N.D. LEXIS 146 (N.D. 1991).

An assertion that an insurer’s initial settlement offer constituted a failure to act in good faith, without evidence that the insurer engaged in the prohibited conduct “with a frequency indicating a general business practice,” which alleged nothing more than a single act of misconduct, did not as a matter of law raise an actionable claim under this chapter. Dvorak v. American Family Mut. Ins. Co., 508 N.W.2d 329, 1993 N.D. LEXIS 212 (N.D. 1993).

Rebates.

Where the president of insurance agency engaged in a rebating scheme and solicited the participation of one who was not a licensed insurance agent, such conduct contributed to the findings that the agency president would be personally liable for the agency’s debts, that he would be liable for losses sustained by the insurance company which issued policies sold under the scheme, and that the debt would not be dischargeable in bankruptcy. ITT Life Ins. Corp. v. Haakenson (In re Haakenson), 159 B.R. 875, 1993 Bankr. LEXIS 1463 (Bankr. D.N.D. 1993).

Standing to Sue.

Only insureds or intended third-party beneficiaries are allowed to sue under the theory of breach of insurer’s duty to act in good faith. Volk v. Wisconsin Mortgage Assurance Co., 474 N.W.2d 40, 1991 N.D. LEXIS 146 (N.D. 1991).

Statute of Limitations.

An affirmative duty to inform of the statute of limitations period is not imposed by this statute’s prohibition on “knowingly misrepresenting to claimants pertinent facts of policy provisions relating to coverages at issue”. Farmer's Union Cent. Exchange, Inc. v. Reliance Ins. Co., 626 F. Supp. 583, 1985 U.S. Dist. LEXIS 15712 (D.N.D. 1985).

Collateral References.

Value of insured's assets as limitation, in action by insured or insured's assignee for liability insurer's wrongful failure to defend, on recovery of amount of judgment against insured in excess of policy amount, 36 A.L.R.4th 922.

Provisions of insurance company’s contract with independent insurance agent restricting competitive placements by agent as illegal restraint of trade under state law, 42 A.L.R.4th 1072.

Liability of insurance agent or broker to insured for misrepresentation of cash surrender value or accumulated value benefits of life insurance policy, 44 A.L.R.4th 1030.

Liability insurance: third party’s right of action for insurer’s bad-faith tactics designed to delay payment of claim, 62 A.L.R.4th 1113.

Liability of third-party health-care payor for injury resulting from failure to authorize required treatment, 56 A.L.R.5th 737.

What constitutes bad faith on part of insurer rendering it liable for statutory penalty imposed for bad faith in failure to pay, or delay in paying, insured’s claim - Particular conduct of insurer, 115 A.L.R.5th 589.

What constitutes bad faith on part of insurer rendering it liable for statutory penalty imposed for bad faith in failure to pay, or delay in paying, insured’s claim - Particular grounds for denial of claim: matters relating to policy, 116 A.L.R.5th 247.

26.1-04-04. Coercing purchaser or borrower to insure with particular company or insurance producer prohibited.

  1. No person, engaged in selling property or in the business of financing the purchase of property or of lending money on the security of property and no trustee, director, officer, agent, or other employee of the person may require, as a condition precedent, concurrent, or subsequent to the sale or financing the purchase of the property or to lending money upon the security of a mortgage thereon or for the renewal or extension of any such loan or mortgage or for the performance of any other act in connection therewith, that the person purchasing the property or for whom the purchase is to be financed or to whom the money is to be loaned or for whom the extension, renewal, or other act is to be granted, or performed, negotiate any insurance policy or renewal thereof covering the property through a particular insurance company or insurance producer.
  2. This section does not prevent the exercise by any person of the right to designate reasonable financial requirements as to the insurance company, the terms and provisions of the policy, and the adequacy of the coverage with respect to insurance on property pledged or mortgaged to the person; nor does this section prohibit the right of any person from voluntarily negotiating or soliciting the placing of such insurance; nor does this section forbid the securing of insurance or renewal thereof at the request of the purchaser or borrower or because of the failure of the purchaser or borrower to furnish the necessary insurance or renewal thereof.
  3. Violation of this section constitutes an unfair insurance practice. The person violating this section must be proceeded against under this chapter.

Source:

S.L. 1983, ch. 332, § 4; 1985, ch. 317, § 11; 2001, ch. 262, § 11.

Derivation:

N.D.C.C. § 26-30-14.

26.1-04-05. Discrimination by life insurance companies and rebates and inducements by insurance producers prohibited.

A life insurance company doing business in this state may not make or permit any distinction or discrimination between insureds of the same class and with equal expectation of life in the amount or payment of premiums or rate charges for policies of life or endowment insurance, or in the dividends or other benefits payable thereon, or in any other of the terms or conditions of the contracts which it makes. No life insurance company, and no insurance producer therefor, either personally or by any other person, may:

  1. Make any insurance contract, or agreement with reference thereto, other than such as is expressed plainly in the policy issued thereon.
  2. Offer, promise, allow, give, set off, or pay any rebate of the whole or any part of the premium payable on the policy or the insurance producer’s commission thereon, or any special favor or advantage in the dividends, earnings, profits, or other benefit founded, arising, accruing, or to accrue thereon or therefrom.
  3. Offer, promise, allow, or give any special advantage in the date of the policy or the age at which the same is issued.
  4. Offer, promise, allow, or give any paid employment or contract for services of any kind, or any other valuable inducement or consideration whatsoever not specified in the insurance policy or contract.
  5. Offer, promise, give, option, sell, or purchase, or offer to give, sell, or purchase, as inducement to insurance or in connection therewith, any stocks, bonds, securities, or property, or any dividends or profits accruing or to accrue thereon, or other thing of value whatsoever not specified in the policy.

This section does not prevent the taking of a bona fide obligation, with legal interest, in payment of any premium.

Source:

S.L. 1983, ch. 332, § 4; 1985, ch. 317, § 12; 2001, ch. 262, § 12.

Derivation:

N.D.C.C. § 26-10-09.

Notes to Decisions

Rebates.

Where the president of an insurance agency engaged in a rebating scheme and solicited the participation of one who was not a licensed insurance agent, such conduct contributed to the findings that the agency president would be personally liable for the agency’s debts, that he would be liable for losses sustained by insurance company which issued policies sold under the scheme, and that the debt would not be dischargeable in bankruptcy. ITT Life Ins. Corp. v. Haakenson (In re Haakenson), 159 B.R. 875, 1993 Bankr. LEXIS 1463 (Bankr. D.N.D. 1993).

Collateral References.

Insured-insurer communications as privileged, 55 A.L.R.4th 336.

26.1-04-05.1. Visual acuity prohibited as factor in life or accident and sickness contracts.

No insurance company, benevolent society, nonprofit health service corporation, or health maintenance organization may issue any policy, certificate, or contract on life, accident and sickness, health services, or health care protection for which visual acuity is used as a criteria for accepting or rejecting risks or for setting of rates charged for that coverage.

Source:

S.L. 1983, ch. 335, § 2; 1987, ch. 336, § 2.

26.1-04-06. Insured persons and applicants for insurance prohibited from accepting rebates — Exception.

  1. An insurance producer or agent of any insurance or surety company, reciprocal, benevolent society, or any other insurance organization or association, however constituted or entitled, may not grant, and an insured person or party or applicant for insurance, either directly or indirectly, may not receive or accept, or agree to receive or accept, any rebate of premium or of any part thereof, or all or any part of any insurance producer’s commission thereon, or any favor or advantage, or any share in any benefit to accrue under any insurance policy, or any other valuable consideration or inducement other than such as may be specified in the policy, except as provided in an applicable filing which is in effect under the provisions of the laws regulating insurance rates or except as provided under subsection 2.
  2. Notwithstanding any other provision in this section, if the cost does not exceed an aggregate retail value of one hundred dollars per person per year, an insurance producer may give a gift, prize, promotional article, logo merchandise, meal, or entertainment activity directly or indirectly to a person in connection with marketing, promoting, or advertising the business. As used in this subsection, “person” means the named insured, policy owner, or prospective client or the spouse of any of these individuals, but the term does not include a certificate holder, child, or employee of the named insured, policy owner, or prospective client. Subject to the limits of this subsection, an insurance producer may give a gift card for specific merchandise or services such as a meal, gasoline, or car wash but may not give cash, a cash card, any form of currency, or any refund or discount in premium. An insurance producer may not condition the giving of a gift, prize, promotional article, logo merchandise, meal, or entertainment activity on obtaining a quote or a contract of insurance. Notwithstanding the limitation in this subsection, an insurance producer may make a donation to a nonprofit organization that is exempt from federal taxation under Internal Revenue Code section 501(c) (3) [26 U.S.C. 501(c)(3)] in any amount as long as the donation is not given as an inducement to obtain a contract of insurance.

Source:

S.L. 1983, ch. 332, § 4; 1985, ch. 317, § 13; 2001, ch. 262, § 13; 2011, ch. 215, § 2; 2017, ch. 214, § 2, eff August 1, 2017; 2019, ch. 35, § 8, eff July 1, 2019.

Derivation:

N.D.C.C. § 26-10-10.

26.1-04-07. Misrepresentation of terms of policy and future dividends prohibited.

An insurance or surety company, reciprocal, benevolent society, or any other insurance organization or association, however constituted or entitled, doing business in this state, and an officer, director, agent, or solicitor of the company, society, or organization, and an insurance producer, may not issue, circulate, or use, or cause or permit to be issued, circulated, or used, any written or oral statement or circular misrepresenting the terms of any policy issued or to be issued by the company, society, or organization, or the benefits or advantages, promised thereby, or make an estimate, with intent to deceive, of the future dividends or shares of surplus payable under the policy, or use any name or title of any policy or class of policies misrepresenting the true nature thereof.

Source:

S.L. 1983, ch. 332, § 4; 2001, ch. 262, § 14.

Derivation:

N.D.C.C. § 26-10-11.

Collateral References.

Liability of insurance agent or broker to insured for misrepresentation of cash surrender value or accumulated value benefits of life insurance policy, 44 A.L.R.4th 1030.

26.1-04-08. Rulemaking.

The commissioner may adopt reasonable rules necessary to identify specific methods of competition and acts or practices prohibited by section 26.1-04-03. The rules may not enlarge upon nor extend the provisions of section 26.1-04-03.

Source:

S.L. 1983, ch. 332, § 4.

Derivation:

N.D.C.C. § 26-30-04.1.

26.1-04-09. Authority of commissioner.

The commissioner may examine and investigate the affairs of every person engaged in the business of insurance in this state to determine whether the person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by section 26.1-04-02.

Source:

S.L. 1983, ch. 332, § 4.

Derivation:

N.D.C.C. § 26-30-05.

26.1-04-10. State’s attorney to prosecute for discrimination or misrepresentation.

Upon evidence satisfactory to the commissioner that section 26.1-04-05, 26.1-04-06, 26.1-04-07, or 26.1-04-17 has been violated by any person, the commissioner shall certify to the state’s attorney of the county in which the violation occurred all evidence of the violation in the commissioner’s possession, and the state’s attorney shall prosecute the case.

Source:

S.L. 1983, ch. 332, § 4.

Derivation:

N.D.C.C. § 26-10-16.

26.1-04-11. Immunity from prosecution.

If any person asks to be excused from attending and testifying or from producing any evidence at any trial or hearing on the ground that the testimony or evidence required may tend to incriminate that person or subject that person to a penalty or forfeiture, but is directed to give the testimony or produce the evidence, that person shall comply with the direction; but no testimony or evidence compelled from an individual after a valid claim of the privilege against self-incrimination has been made may be used against the individual in any criminal proceeding, or in any proceeding to subject the individual to a penalty or forfeiture. However, no individual so testifying is exempt from prosecution or punishment for any perjury or false statements committed while testifying and the testimony or evidence given or produced is admissible upon any criminal action, investigation, or proceeding concerning the perjury or false statements, nor is the individual exempt from the refusal, revocation, or suspension of any license, permission, or authority conferred, or to be conferred, pursuant to the insurance laws of this state.

Source:

S.L. 1983, ch. 332, § 4; 1991, ch. 301, § 5.

Derivation:

N.D.C.C. §§ 26-10-15, 26-30-13.

26.1-04-12. Hearing.

Whenever the commissioner has reason to believe that any person has been engaged or is engaging in this state in any unfair method of competition or any unfair or deceptive act or practice defined in section 26.1-04-03, and that a proceeding would be to the interest of the public, the commissioner shall conduct a hearing.

Source:

S.L. 1983, ch. 332, § 4.

Derivation:

N.D.C.C. § 26-30-06.

26.1-04-13. Orders and modifications.

  1. If, after hearing, the commissioner determines that the person charged has engaged in an unfair method of competition or an unfair or deceptive act or practice, the commissioner shall order the person to cease and desist from engaging in the method of competition, act, or practice. If the person charged is found to have willfully engaged in a method of competition, act, or practice in violation of section 26.1-04-03, the commissioner may order any one or more of the following:
    1. Payment of a monetary penalty of not more than one thousand dollars for each and every act or violation but not to exceed an aggregate penalty of ten thousand dollars unless the person knew or reasonably should have known that person was in violation of section 26.1-04-03, in which case the penalty must be not more than five thousand dollars for each and every act or violation but not to exceed an aggregate penalty of fifty thousand dollars in any six-month period.
    2. Suspension or revocation of the person’s license if the person knew or reasonably should have known that person was in violation of section 26.1-04-03.
  2. Until the expiration of the time allowed for an appeal if no appeal has been duly filed or, if an appeal has been filed, then until the transcript of the record in the proceeding has been filed in the district court, the commissioner may modify or set aside in whole or in part any order issued under this section.
  3. After the expiration of the time allowed for filing an appeal if no appeal has been duly filed, the commissioner may, after notice and opportunity for hearing, reopen and alter, modify, or set aside, in whole or in part, any order issued under this section, whenever in the commissioner’s opinion conditions of fact or of law have so changed as to require the action or if the public interest shall so require.

Source:

S.L. 1983, ch. 332, § 4.

Derivation:

N.D.C.C. § 26-30-07.

Collateral References.

Emotional or mental distress as element of damages for liability insurer’s wrongful refusal to settle, 57 A.L.R.4th 801.

26.1-04-14. Penalty.

Any person who violates a cease and desist order of the commissioner under section 26.1-04-13, after it has become final, and while it is in effect, shall, upon proof thereof to the satisfaction of the court, forfeit and pay to the state of North Dakota a sum not to exceed a monetary penalty of not more than ten thousand dollars for each and every act or violation.

Source:

S.L. 1983, ch. 332, § 4.

Derivation:

N.D.C.C. § 26-30-11.

26.1-04-15. Judicial review by intervenor.

If the commissioner does not charge a violation of this chapter, then any intervenor in the proceedings may within ten days after the service of the report, cause a notice of appeal to be filed in the district court of Burleigh County for a review of the report. The court may issue appropriate orders and decrees in connection therewith, including, if the court finds that it is to the interest of the public, orders enjoining and restraining the continuance of any method of competition, act, or practice which it finds, notwithstanding the report of the commissioner, violates this chapter.

Source:

S.L. 1983, ch. 332, § 4.

Derivation:

N.D.C.C. § 26-30-10.

26.1-04-16. Penalty for violating provisions relating to misrepresentation and discrimination.

Any officer, agent, insurance producer, or representative of any insurance or surety company, reciprocal, benevolent society, or any other insurance organization, or association, or any other person, who violates section 26.1-04-05, 26.1-04-06, 26.1-04-07, or 26.1-04-17 is guilty of a class A misdemeanor. The commissioner may, after a hearing upon fifteen days’ notice, revoke the license to transact business in this state of any insurance organization violating section 26.1-04-05 or 26.1-04-06.

Source:

S.L. 1983, ch. 332, § 4; 2001, ch. 262, § 15.

Derivation:

N.D.C.C. § 26-10-14.

26.1-04-17. Revocation or suspension of insurance producer’s license for misrepresentation or discrimination.

Upon satisfactory evidence of the violation of any provision of this chapter relating to misrepresentation or discrimination by any insurance producer of any insurance or surety company, reciprocal, benevolent society, or any other insurance organization or association, however constituted or entitled, the commissioner may suspend or revoke the license of the offending insurance producer.

Source:

S.L. 1983, ch. 332, § 4; 2001, ch. 262, § 16.

Derivation:

N.D.C.C. § 26-10-13.1.

26.1-04-18. Order does not relieve from other liability.

An order of the commissioner under this chapter or order of a court affirming the commissioner’s order does not relieve or absolve any person affected by the order from any liability under any other law of this state.

Source:

S.L. 1983, ch. 332, § 4.

Derivation:

N.D.C.C. § 26-30-08.

Notes to Decisions

Private Cause of Action.

This state did not intend to create a private cause of action in its Farmer's Union Cent. Exchange, Inc. v. Reliance Ins. Co., 675 F. Supp. 1534, 1987 U.S. Dist. LEXIS 13385 (D.N.D. 1987), disapproved, Bilden v. United Equitable Ins. Co., 921 F.2d 822, 1990 U.S. App. LEXIS 22172 (8th Cir. N.D. 1990).

Law Reviews.

“The Filed Rate Doctrine and Insurance Fraud Litigation,” 76 N.D. L. Rev. 1 (2000).

26.1-04-19. Chapter additional to existing law.

The powers vested in the commissioner by this chapter are additional to any other powers to enforce any penalties, fines, or forfeitures authorized by law with respect to the methods, acts, and practices declared to be unfair or deceptive by this chapter.

Source:

S.L. 1983, ch. 332, § 4.

Derivation:

N.D.C.C. § 26-30-12.

CHAPTER 26.1-05 Organization and Operation of Domestic Companies

26.1-05-01. General powers and duties of domestic company.

Every insurance company incorporated or formed by authority of any law of this state, except when otherwise expressly provided, may exercise the powers and is subject to the duties and liabilities provided by this title. The general law governing profit corporations applies to an incorporated domestic insurance company so far as the provisions are pertinent and not in conflict with provisions contained in this title relating to the company.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-08-01.

26.1-05-02. Organization of domestic stock company — Number of persons required — Authorized lines.

Any number of persons not less than seven may form a corporation on the stock plan to carry on one or more of the following lines of insurance:

  1. Life and annuity means insurance coverage on human lives, including benefits of endowment, annuities, and credit life.
  2. Accident and health means insurance coverage for sickness, disease, injury, accidental death, and disability.
  3. Property means insurance coverage for direct and consequential loss of or damage to property of every kind.
  4. Casualty means insurance coverage against legal liability, including that for death, injury, or disability or damage to real or personal property.
  5. Variable life and annuity means insurance coverage provided under variable life insurance contracts, variable annuities, or any other life insurance or annuity that reflects the investment experience of a separate account.

A stock insurance company incorporated under this chapter may carry the lines of insurance mentioned in this section which have been expressed in its articles of incorporation.

Source:

S.L. 1983, ch. 332, § 5; 1999, ch. 254, § 2.

Derivation:

N.D.C.C. § 26-08-02.

26.1-05-02.1. Authority to define products.

The commissioner may adopt rules that define and set forth the specific insurance products found under each line of insurance set forth in section 26.1-05-02.

Source:

S.L. 1999, ch. 254, § 3.

26.1-05-03. Organization of domestic mutual life company — Number of organizers required. [Repealed]

Repealed by S.L. 1999, ch. 254, § 13.

26.1-05-04. Capital stock and surplus requirements of domestic stock company — Exceptions.

A stock insurance company may not be incorporated under this chapter unless it has an authorized capital stock of at least five hundred thousand dollars and a surplus of at least five hundred thousand dollars. A domestic stock insurance company may not issue any insurance policy until at least fifty percent of the required capital stock, and all of the required surplus, has been paid in, the residue of capital stock to be paid in within twelve months from the time of filing the articles of incorporation. The commissioner, for good cause shown, may extend the time of payment of the residue for the further period of one year. If the minimum capital stock and surplus requirements at the time a stock insurance company incorporated under this chapter were less than the minimum requirements provided by this section, the stock insurance company shall increase its authorized and paid-in capital stock and surplus to the minimum requirements under this section according to the following schedule:

  1. Capital of two hundred fifty thousand dollars and surplus of two hundred fifty thousand dollars by December 31, 1994.
  2. Capital of three hundred seventy-five thousand dollars and surplus of three hundred seventy-five thousand dollars by December 31, 1995.
  3. Capital of five hundred thousand dollars and surplus of five hundred thousand dollars by December 31, 1996.

Except as otherwise provided in this section, the total value of paid-in capital stock and surplus of a stock insurance company organized under the laws of this state may not at any time be depleted to an amount totaling less than one million dollars.

Source:

S.L. 1983, ch. 332, § 5; 1985, ch. 317, § 14; 1987, ch. 338, § 1; 1989, ch. 349, § 1; 1993, ch. 292, § 9.

Derivation:

N.D.C.C. § 26-08-04.

26.1-05-05. Qualification of directors — Residence requirements of directors and executive officers. [Repealed]

Repealed by S.L. 1989, ch. 349, § 4.

26.1-05-06. Articles of incorporation — Contents — Filing — Company name.

The articles of incorporation of a corporation organized under this chapter must set forth, in addition to what is required to be set forth under the general law governing profit corporations:

  1. The kind of insurance proposed to be issued.
  2. That the company will operate on the stock plan unless it is organized to engage in the life insurance business, in which case the articles must specify whether the company will operate on the stock or mutual plan.
  3. The period for the commencement and termination of the company’s fiscal year.
  4. The period of its existence which may be perpetual.
  5. The name of the company, which may be any name not previously in use by an existing corporation authorized to do business in this state, but the words “insurance company”, or, if the business specified in the articles is that of life insurance and the business is to be conducted upon the mutual plan, the words “mutual life insurance company” must constitute a part of such name.

The articles must be filed in the office of the secretary of state and a certified copy must be filed with the commissioner. The commissioner may not issue a certificate to the company if, in the commissioner’s judgment, the company’s name too closely resembles the name of an existing corporation or is liable to mislead the public.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-08-05.

26.1-05-07. Examination of articles by commissioner — Certificate — Filing.

The commissioner shall examine the articles of incorporation and any amendments to determine if the articles and any amendments are consistent with the constitution and laws of this state. The commissioner shall examine the company to ascertain whether it has complied with the requirements of law according to the nature of the business proposed to be transacted by it. If the commissioner is satisfied by the examination that the corporation has complied with the law, the commissioner shall deliver to it a certified copy of the articles of incorporation or amendments to the articles of incorporation and a certificate stating the corporation has complied with all requirements of law. The certified copy of the articles of incorporation or amendments to the articles of incorporation and of the certificate may be used for or against the company with the same effect as the originals and are conclusive evidence of the fact of organization of the company as of the date of the certificate.

Source:

S.L. 1983, ch. 332, § 5; 2005, ch. 256, § 1.

Derivation:

N.D.C.C. § 26-08-07.

DECISIONS UNDER PRIOR LAW

Analysis

Issuance of Certificate.

Where an insurance company complies with all the laws of the state with respect to organization and qualification, it is the statutory duty of the commissioner to issue a certificate to that effect, and if he refuses to issue the certificate, mandamus will lie to compel performance of his statutory duty. Dakota Nat'l Ins. Co. v. Commissioner of Ins., 79 N.D. 97, 54 N.W.2d 745, 1952 N.D. LEXIS 101 (N.D. 1952), decided prior to the 1981 amendment to N.D.C.C. § 28-32-01(1).

Mutual Insurance Companies.

The taking of applications for insurance in a mutual insurance company is a step requisite in forming such company and must be taken before a certificate to commence business can be issued. Montgomery v. Harker, 9 N.D. 527, 84 N.W. 369, 1900 N.D. LEXIS 266 (N.D. 1900).

26.1-05-07.1. Approval of the domestic insurer — Premium waiver.

  1. An insurer organized under the laws of another state which is admitted to do business in this state for the purpose of writing insurance may be a domestic insurer by complying with the requirements of law relative to the organization and licensing of a domestic insurer of the same type in this state and by designating its principal place of business at a place in this state. For purposes of this section, a company is deemed to have designated its principal place of business at a place in this state if the company locates its home office in this state. If an insurer seeks to become a domestic insurer but is unable to designate its principal place of business in this state, the insurer may place on deposit with the Bank of North Dakota, upon the approval of the commissioner, a sum established by the commissioner, which may not be withdrawn without the approval of the commissioner. An insurer that complies with this subsection is entitled to the certificates and licenses to transact the business of a domestic insurer in this state and is subject to the authority and jurisdiction of this state.
  2. After an insurance company has redomesticated to this state and located and maintained its home office in this state, the insurance company is allowed a credit against the premium tax imposed and due under section 26.1-03-17 for an amount equal to the premium tax paid in this state during the first two years as a domestic company in this state. This credit must be used in the third and fourth years following the company’s redomestication to this state and may not be carried over beyond the fourth year.

Source:

S.L. 1993, ch. 295, § 1.

26.1-05-07.2. Effects of redomestication.

In the discretion of the commissioner, the certificate of authority, insurance producer appointments and licenses, rates, and other items in existence at the time an insurer licensed to transact the business of insurance in this state transfers its corporate domicile to this state or another state by merger, consolidation, or any other lawful method, continue in effect upon the transfer if the insurer remains duly qualified to transact the business of insurance in this state. An outstanding policy of a transferring insurer remains in effect and does not need to be endorsed as to the new name of the company or its new location unless so ordered by the commissioner. A transferring insurer shall file new policy forms with the commissioner on or before the effective date of the transfer, but may use existing forms with appropriate endorsements as approved by the commissioner. A transferring insurer shall notify the commissioner of the details of the proposed transfer and shall file promptly any resulting amendments to corporate documents filed or required to be filed with the commissioner.

Source:

S.L. 1993, ch. 295, § 1; 2001, ch. 262, § 17.

26.1-05-07.3. Conversion to foreign insurer.

A domestic insurer, upon the approval of the commissioner, may transfer its domicile to another state in which it is admitted to transact the business of insurance. Upon transfer, the insurer ceases to be a domestic insurer and, if qualified, may be admitted to this state as a foreign insurer. The commissioner shall approve a proposed transfer unless the commissioner determines the transfer is not in the interests of the policyholders of the state.

Source:

S.L. 1993, ch. 295, § 1.

26.1-05-08. Stock subscriptions.

The individuals associated for the purpose of organizing a stock insurance company under this chapter, after having filed the articles of incorporation as required by section 26.1-05-06, may open books for subscriptions to the capital stock of the company and keep the books open until the full amount specified in the articles of incorporation is subscribed.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-08-08.

26.1-05-09. Commissioner authorized to regulate solicitation of proxies.

A person, in contravention of any rules the commissioner may adopt as necessary or appropriate in the public interest or for the protection of investors, may not solicit or permit the use of the person’s name to solicit any proxy, consent, or authorization in respect of any equity security of a domestic stock insurance company not listed on a national securities exchange and registered as such with the federal securities and exchange commission. This section applies to every domestic stock insurance company having one hundred or more stockholders of record. However, this section does not apply to any insurance company if ninety-five percent or more of its stock is owned or controlled by a parent or an affiliated insurance company and the remaining shares are held by less than five hundred stockholders. A domestic stock insurance company which files with the federal securities and exchange commission forms of proxies, consents, and authorizations which comply with the requirements of the Securities and Exchange Act of 1934, as amended, is exempt from this section.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-08-02.1.

26.1-05-10. Equity security defined.

“Equity security” as used in sections 26.1-05-11 through 26.1-05-15 means any stock or similar security; any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; any such warrant or right; or any other security which the commissioner deems to be of similar nature and considers necessary or appropriate to treat as an equity security, by any rules the commissioner adopts in the public interest or for the protection of investors.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-30-20.

26.1-05-11. Statement of ownership required.

Every person who is directly or indirectly the beneficial owner of more than ten percent of any class of any equity security of a domestic stock insurance company, or who is a director or an officer of the company, shall file in the office of the commissioner within ten days after becoming beneficial owner, director, or officer a statement, in the form the commissioner prescribes, of the amount of all equity securities of the company of which the person is the beneficial owner. Within ten days after the close of each month when there has been a change in ownership during the month, the person shall file in the office of the commissioner a statement, in the form the commissioner prescribes, indicating the person’s ownership at the close of the month and any changes in the person’s ownership which occurred during the month.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-30-15.

26.1-05-12. Gains to benefit company — Suit to recover.

For the purpose of preventing the unfair use of information which may have been obtained by a beneficial owner, director, or officer by reason of the relationship to a domestic stock insurance company, any profit realized by that person from any purchase and sale, or any sale and purchase, of any equity security of the company within any period of less than six months, unless the security was acquired in good faith in connection with a debt previously contracted, inures to and is recoverable by the company, irrespective of any intention on the part of the beneficial owner, director, or officer in entering into the transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Suit to recover the profit may be instituted at law or in equity in any court of competent jurisdiction by the company, or by the owner of any security of the company in the name and in behalf of the company if the company fails or refuses to bring suit within sixty days after request or fails diligently to prosecute the suit; but no suit may be brought more than two years after the date the profit was realized. This section does not cover any transaction if the beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the commissioner by rule exempts as not comprehended within the purpose of this section.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-30-16.

26.1-05-13. Conditions of sale.

A beneficial owner, director, or officer, directly or indirectly, may not sell any equity security of a domestic stock insurance company if the person selling the security or the person’s principal does not own the security sold, or if owning the security, does not deliver it against such sale within twenty days thereafter, or does not within five days after the sale deposit it in the mails or other usual channels of transportation. A person does not violate this section if the person proves that notwithstanding the exercise of good faith the person was unable to make such delivery or deposit within such time, or that to do so would cause undue inconvenience or expense.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-30-17.

26.1-05-14. Exceptions.

Sections 26.1-05-11 through 26.1-05-13 do not apply to equity securities of a domestic stock insurance company if the securities are registered, or are required to be registered, pursuant to section 12 of the Securities Exchange Act of 1934, as amended, or if the company does not have any class of its equity securities held of record by one hundred or more persons on the last business day of the year preceding the year in which equity securities of the company would be subject to sections 26.1-05-11 through 26.1-05-13 except for this exception. Sections 26.1-05-11 through 26.1-05-13 do not apply to foreign or domestic arbitrage transactions unless made in contravention of any rules the commissioner adopts to carry out the purposes of sections 26.1-05-11 through 26.1-05-15. Section 26.1-05-12 does not apply to any purchase and sale or sale and purchase, and section 26.1-05-13 does not apply to any sale, of an equity security of a domestic stock insurance company not held by the dealer in an investment account, by a dealer in the ordinary course of business and incident to the establishment or maintenance by the dealer of a primary or secondary market, otherwise than on an exchange as defined in the Securities Exchange Act of 1934, for the security.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. §§ 26-30-18, 26-30-19, 26-30-21.

26.1-05-15. Rulemaking authority — Liability.

The commissioner may adopt any rules necessary to administer sections 26.1-05-11 through 26.1-05-14. The commissioner may classify domestic stock insurance companies, securities, and other persons or matters within the commissioner’s jurisdiction and define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market. Sections 26.1-05-11 through 26.1-05-13 do not impose any liability for any act done or omitted in good faith in conformity with any rule of the commissioner, notwithstanding that the rule may, after the act or omission, be amended or rescinded or determined by judicial or other authority to be invalid for any reason.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. §§ 26-30-18, 26-30-22.

26.1-05-16. Capital stock reduced — Examination and certificate of commissioner.

When the capital stock of an insurance company is impaired, the company, upon a vote of a majority of the stock represented at a meeting legally called for that purpose, may reduce its capital stock, and the number of shares thereof, to an amount not less than the minimum required by law. No part of its assets and property, however, may be distributed to its stockholders. Within ten days after the meeting, the company shall submit to the commissioner a certificate setting forth the proceedings, the amount of the reduction, and the assets and liabilities of the company, signed and sworn to by its president, secretary, and a majority of its directors. The commissioner shall examine the facts in the case. If the facts conform to law and in the commissioner’s judgment the proposed reduction may be made without prejudice to the public, the commissioner shall endorse the commissioner’s approval upon the certificate. Upon the filing of the certificate so endorsed, the company’s articles of incorporation are deemed to be amended to conform to the certificate, the commissioner’s certificate must be issued to that effect, and the company may transact business upon the basis of such reduced capital as though the same were its original capital. The company, by a majority vote of its directors after the reduction, may require the return of the original certificates of stock held by each stockholder in exchange for new certificates in lieu thereof for the number of shares each stockholder is entitled to in the proportion that the reduced capital bears to the original capital.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-08-16.

DECISIONS UNDER PRIOR LAW

Assessment As Subject of Contract.

The authority to levy an assessment on stock of a domestic stock insurance company under former N.D.C.C. §§ 26-08-14 and 26-08-15 was a proper subject of contract between a company and its stockholders; such assessment was not mandatory, and where the company had contracted that its stock be nonassessable, no assessments could be levied. Porter v. Northern Fire & Marine Ins. Co., 36 N.D. 199, 161 N.W. 1012, 1917 N.D. LEXIS 174 (N.D. 1917).

26.1-05-17. Transfer of stock pending examination — Liability.

A transfer of the stock of any domestic insurance company made during the pendency of any examination does not release the party making the transfer from the party’s liability for loss which may have occurred previous to the transfer.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-08-17.

26.1-05-18. Investment of funds must be authorized by directors — Prohibited investment practices.

An investment or loan, except a policy loan, may not be made by any domestic insurance company unless the investment or loan first has been authorized by the board of directors of the company or by an investment committee appointed by the board of directors of the company charged with the duty of supervising the making of loans or investments by the company. A domestic insurance company may not:

  1. Subscribe to or participate in any underwriting of the purchase or sale of securities or property.
  2. Enter into any transaction for the purchase or sale of any securities or property on account of the company jointly with any other person, firm, or corporation, except for authorized real estate joint ventures, partnerships, and limited liability companies.
  3. Enter into any agreement to withhold any of its property from sale, but the disposition of its property at all times is within the control of its board of directors, except for authorized real estate joint ventures, partnerships, and limited liability companies.
  4. Invest any of its funds in, or loan the funds upon, the shares of stock of any corporation except as otherwise provided in this chapter.
  5. Invest any of its funds in, or loan the funds upon, any bonds or obligations, except government, state, or municipal securities, which are not secured by adequate collateral security, except as otherwise provided in this chapter.
  6. Invest its capital, surplus funds, or other assets in, or loan the same upon, any property owned by any officer or director of the company, or by any of the immediate members of the family of any such officer or director, nor in any manner which will permit any such officer or director to gain through the investment of funds of the company.

Source:

S.L. 1983, ch. 332, § 5; 1983, ch. 336, § 2; 2001, ch. 264, § 1.

Derivation:

N.D.C.C. § 26-08-10.

26.1-05-19. Authorized investment of funds of insurance companies.

A domestic insurance company may invest any of its funds and accumulations in:

  1. Securities or obligations made specifically eligible for such investment by law.
  2. Bonds or other evidences of indebtedness issued, assumed, or guaranteed by the United States, the District of Columbia, or by any state, territory, or insular possession of the United States or by any county, city, township, school district, or other civil division of a state, including loan-backed securities, those payable from special revenues or earnings specifically pledged for the payment thereof, and those payable from special assessments, including rights to purchase or sell these securities or obligations if these rights are traded upon a contract market designated and regulated by a federal agency and purchased for legitimate hedging, nonspeculative purposes.
  3. Bonds or other evidences of indebtedness issued, assumed, or guaranteed by any instrumentality or agency of the United States, including rights to purchase or sell these securities or obligations if these rights are traded upon a contract market designated and regulated by a federal agency and purchased for legitimate hedging, nonspeculative purposes.
  4. Notes or bonds secured by mortgage or deed of trust insured by the federal housing administrator, debentures issued by the federal housing administrator, and securities issued by national mortgage associations.
  5. Bonds guaranteed under former chapter 6-09.2.
  6. Bonds issued by the public finance authority pursuant to chapter 6-09.4.
  7. Bonds issued by the state board of higher education under chapter 15-55.
  8. Revenue bonds issued by the state water commission.
  9. Interim financing notes issued by the state water commission pursuant to chapter 61-02.
  10. Warrants issued by a city under chapter 40-24.
  11. Bonds or notes issued pursuant to chapter 40-33.2.
  12. Bonds or other obligations issued pursuant to chapter 40-58.
  13. Bonds issued under chapter 40-61.
  14. Bonds issued under chapter 54-30.
  15. Notes or other evidences of indebtedness of the North Dakota life and health insurance guaranty association not in default.
  16. Notes or other interest-bearing obligations of any state development corporation of which the company is a member, issued in accordance with chapter 10-30.
  17. Bonds or other evidences of indebtedness issued, assumed, or guaranteed by Canada or any province thereof, or by any municipality or district therein, provided that the obligations are valid and legally authorized and issued.
  18. Mortgage bonds and debentures of any solvent railway company duly incorporated and authorized under the laws of this state or of any other state or insular possession of the United States or of Canada or of any province thereof.
  19. Obligations, including bonds or evidences of indebtedness, or participation in those bonds or evidences of indebtedness, or loan-backed securities, which are issued, assumed, guaranteed, or insured by any solvent legal entity duly incorporated and authorized under the laws of the United States or of any state or insular possession thereof, or of Canada or of any province thereof, including rights to purchase or sell these securities or obligations if these rights are traded upon a contract market designated and regulated by a federal agency and purchased for legitimate hedging, nonspeculative purposes.
  20. Preferred stock, of, or common or preferred stock guaranteed as to dividends by, and common stock of, any corporation organized under the laws of the United States, any state or possession of the United States, Canada or any province of Canada, including rights to purchase or sell these securities or obligations if these rights are traded upon a contract market designated and regulated by a federal agency and purchased for legitimate hedging, nonspeculative purposes, subject to the following restrictions and limitations:
    1. Investments in preferred, guaranteed, and common stocks issued or guaranteed by a single person may not exceed three percent of the insurance company’s admitted assets.
    2. Investments in preferred, guaranteed, and common stocks may not exceed in the aggregate the greater of twenty-five percent of admitted assets or one hundred percent of the capital and surplus of a nonlife insurance company.
    3. Investments in preferred, guaranteed, and common stocks may not exceed in the aggregate twenty percent of the life insurance company’s admitted assets.
  21. Savings accounts, under certificates of deposit or in any other form, in solvent banks and trust companies which have qualified for federal deposit insurance corporation protection, shares and savings accounts, under certificates of deposit, investment certificates, or in any other form, in solvent savings and loan associations organized under federal law or state law of any state which have qualified for federal savings and loan insurance corporation protection, and shares and deposit accounts, under certificates of deposit or in any other form, in solvent state or federally chartered credit unions which are insured by the national credit union administration. Investments in the shares and accounts are not limited to, or by, the amount of any such insurance protection. Short-term or liquidity investments such as certificates of deposit, repurchase agreements, bankers’ acceptances, commercial paper, money market mutual funds, or current interest accounts in solvent banks and trust companies, savings and loan associations, state or federally chartered credit unions, investment brokerage houses which are regulated by a federal agency, and such other types of investments as may be deemed appropriate and authorized by rule by the commissioner.
  22. Loans made upon the security of its own policies, if a life insurance company, but no loan on any policy may exceed the reserve value thereof.
  23. Notes secured by mortgages on unencumbered real estate, including construction loans and leaseholds substantially having and furnishing the rights and protection of a first real estate mortgage, within the United States or any province of Canada. An investment in a construction loan covering any single parcel of real estate may not exceed one quarter of one percent of the admitted assets of the company. Investments in construction loans in the aggregate may not exceed two percent of the admitted assets of the company. No loan may be made under this subsection unless at the date of acquisition the total indebtedness secured by such lien does not exceed eighty percent of the value of the property upon which it is a lien, provided that the loan requires immediate scheduled payment in periodic installments of principal and interest and periodic payments are made no less frequently than annually. A loan that does not meet these requirements may not exceed seventy-five percent of the value of the property. A loan may be made in an amount exceeding these percentage limitations if the value of the property mortgaged in excess of the limitation is guaranteed or insured by the federal housing administration or guaranteed by the administrator of veterans’ affairs or is insured by private mortgage insurance through an insurance company authorized to do business in this state. Loans may be amortized on the basis of a final maturity not exceeding thirty years from the date of the loan with an actual maturity date of the loan at any time less than thirty years. A loan on a single-family dwelling, when the loan is amortized on the basis of a final maturity twenty-five years or less from the date of the loan, may be made in an amount not exceeding eighty percent of the value of the property mortgaged. The loan on a single-family dwelling may be made in an amount exceeding eighty percent so long as any amount over eighty percent of the value of the property mortgaged is insured by private mortgage insurance through an insurance company authorized to do business in this state. Buildings may not be included in the valuation of such property unless they are insured and the policies are made payable to the company as its interest may appear. A loan may not be made in excess of the amount of insurance carried on the buildings plus the value of the land. No insurance company may hold less than the entire loan represented by the bonds or notes described in this subsection except that a company may own part of an aggregate obligation if all other participants in the investment are insurance companies authorized to do business in North Dakota or banks whose depositors are insured by the federal deposit insurance corporation or savings and loan associations whose members are insured by the federal savings and loan insurance corporation or unless the security of the bonds or notes, as well as all collateral papers, including insurance policies, executed in connection therewith, are made to and held by a trustee which is a solvent bank or trust company having a paid-in capital of not less than two hundred fifty thousand dollars, except in case of banks or trust companies incorporated under the laws of the state of North Dakota, wherein a paid-in capital of not less than one hundred thousand dollars is required. In case of proper notification of default, the trustee, upon request of at least twenty-five percent of the holders of the bonds outstanding, and proper indemnification, shall proceed to protect the rights of the bondholders under the provisions of the trust indentures. An insurance company may acquire such an interest in real estate directly or as a joint venture, limited liability company, or through a limited or general partnership in which the insurance company is a partner. An insurance company acquiring such an interest in real estate on the basis of a joint venture, limited liability company, or through a limited or general partnership may acquire such an interest so long as the company’s interest does not exceed seventy-five percent of the value of the property.
  24. First mortgage bonds on improved city real estate in any state, issued by a corporation duly incorporated under the laws of any state of the United States, if the loans on the real estate are made in accordance with the requirements as to first mortgage loans in subsection 24.
  25. Real estate for the production of income or for improvement or development for the production of income subject to the following provisions and limitations:
    1. Real estate used primarily for farming or agriculture may not be acquired under this subsection.
    2. Investments made by any company under this subsection may not at any time exceed ten percent of the admitted assets of the company.
    3. An investment in any single parcel of real estate acquired under this subsection may not exceed two percent of the admitted assets of the company.
    4. The real estate, including the cost of improvements, must be valued at cost and the improvements may be depreciated annually at an average rate of not less than two percent of the original cost.
    5. An insurance company may acquire such real estate or an interest in such real estate directly or as a joint venture, limited liability company, or through a limited or general partnership in which the insurance company is a partner.
  26. Land and buildings used as home or regional offices, subject to the following provisions and limitations:
    1. Land and buildings thereon owned by the company in which the square footage of the property is more than fifty percent occupied by the company and its affiliates.
    2. Investments or total commitment in the land and buildings may not aggregate more than ten percent of the company’s admitted assets without the consent of the commissioner.
    3. The real estate, including the cost of improvements, must be valued at cost and the improvements must be depreciated annually at an average rate of not less than two percent of the original cost.
  27. Investments by loans or otherwise, in the purchase of electric or mechanical machines, including software, constituting a data processing system. The company may hold the system as an admitted asset for use in connection with the business of the company if its aggregate cost does not exceed three percent of the company’s capital and surplus and the cost of the components constituting the system is fully amortized over a period of not to exceed five years. If a data processing system consists of separate components acquired at different times, then the cost of each component must be amortized over a period not to exceed five years commencing with the date of acquisition of each component.
  28. Promissory notes amply secured by the pledge of bonds or other evidences of indebtedness in which the company is authorized to invest its funds by the provisions of this section.
  29. Ownership of, or loans secured by first liens upon:
    1. Production payments or interests therein payable from oil, gas, other hydrocarbons, or other minerals in producing properties located in areas of established and continuing production within the United States or the adjacent continental shelf areas, which production payments are dischargeable from property interests appraised by independent petroleum engineers at the time of the acquisition or loan, based on current market prices, to have a current market value of at least one hundred fifty percent of the purchase price of, or the amount loaned upon the security of, such production payments. The term “production payments” means rights to oil, gas, other hydrocarbons, or other minerals in place or as produced which entitle the owner thereof to a specified fraction or percentage of production or the proceeds thereof, until a specified or determinable sum of money has been received, and which have investment qualities and characteristics in which the speculative elements are not predominant.
    2. Royalty interests, overriding royalty interests, net profit interests, leasehold interests, working interests, or other interests or rights in oil, gas, other hydrocarbons, or other minerals in place or as produced, which interests or rights may be subject to production payments of the nature described in subdivision a.
  30. Obligations secured by a pledge of personal property, as follows:
    1. Tangible personal property, or equipment trust certificates or other instruments evidencing an interest in or debt secured by tangible personal property, if there is a right to receive determined portions of rental, purchase, or other fixed obligatory payments for the use or purchase of such tangible personal property.
    2. Bonds, notes, or other evidences of indebtedness secured wholly or partially by tangible personal property, provided that at the date of acquisition the amount of such indebtedness does not exceed sixty-six and two-thirds percent of the value of such tangible personal property.
  31. Loans, securities, or investments issued by a small business investment company created by the Myron G. Nelson Fund, Incorporated, and licensed by the small business administration under the Small Business Investment Company Act of 1958 [Pub. L. 85-699; 72 Stat. 689; 15 U.S.C. 661 et seq.] or the Small Business Equity Enhancement Act of 1992 [Pub. L. 102-366; 106 Stat. 1007-1020; 15 U.S.C. 661 et seq.].
  32. Loans, securities, or investments in addition to those permitted in this section, whether or not the loans, securities, or investments qualify or are permitted as legal investments under its charter or under other provisions of this section or under other provisions of the laws of this state. The aggregate admitted value of the company’s investments under this section may not at any one time exceed either seven percent of the company’s admitted assets, or the amount equal to the company’s capital and surplus in excess of the minimum capital and surplus required by law, whichever is less.
  33. Loans, securities, or investments in a North Dakota low-risk incentive fund organized under chapter 26.1-50. The aggregate admitted value of the company’s investment under this subsection may not at any time exceed the lesser of five percent of the company’s admitted assets or the amount equal to the company’s capital and surplus in excess of the minimum capital and surplus required by law. A company making an investment under this subsection may value at par any investment purchased at par.
  34. Foreign investments of substantially the same types as those permitted under subsections 20 and 21, subject to the following restrictions and limitations:
    1. Foreign investments issued, assumed, guaranteed, or insured by a single person may not exceed three percent of the insurance company’s admitted assets.
    2. Foreign investments in a single foreign jurisdiction may not exceed in the aggregate ten percent of the insurance company’s admitted assets as to a foreign jurisdiction that has a sovereign debt rating of one as determined by the securities valuation office of the national association of insurance commissioners or three percent of the insurance company’s admitted assets as to any other foreign jurisdiction.
    3. Foreign investments may not exceed in the aggregate twenty percent of the insurance company’s admitted assets.

For purposes of this section, preferred stock includes mandatory sinking fund preferred stock. Common stock includes shares of mutual funds, master limited partnerships trading as common stock, and American deposit receipts that are traded on a nationally recognized securities exchange or on the national association of securities dealers automated quotations system.

No domestic insurance company may invest more than five percent of its admitted assets in the ownership of such interests or rights. In determining the amount invested in such interests or rights at any given time, each insurance company may evaluate such interests or rights in such manner as will permit it to amortize the interests or rights over a period of time during which not more than seventy-five percent of the dollar value of the recoverable production accruing to such interests or rights will be produced, as determined by independent petroleum engineers at the time of investment.

The aggregate outstanding investment made under subdivisions a and b may not exceed five percent of the admitted assets of the life insurance company.

Investments acquired under this subsection shall be aggregated with investments of the same type made under subsection 21 for purposes of determining compliance with the limitations contained in that subsection. For purposes of this subsection, a foreign investment means an investment in a foreign jurisdiction or an investment in a legal entity domiciled in a foreign jurisdiction. A foreign jurisdiction is any jurisdiction other than the United States, any state or possession of the United States, Canada, or any province of Canada.

The commissioner may adopt rules as to investments which are permissible for any domestic insurance company which may waive or increase any limitation on investments or authorize companies to invest their funds in investments which are not specifically mentioned in statutes relating to investments if the commissioner finds, after notice and hearing, that such funds would be well invested and available for the payment of losses. The commissioner, in adopting such rules, may not be any more restrictive, or place any greater limitations on, any type of investment in which companies are authorized by statute to invest their funds.

This section does not prohibit a company from taking any action deemed necessary or expedient for the protection of investments made by it or from accepting in good faith, to protect its interests, securities, or property not mentioned in this section in payment or to secure debts due to it.

Source:

S.L. 1983, ch. 332, § 5; 1983, ch. 337, § 2; 1983, ch. 338, § 2; 1985, ch. 317, § 15; 1987, ch. 141, § 31; 1989, ch. 350, § 1; 1991, ch. 95, § 32; 1993, ch. 45, § 10; 1995, ch. 107, § 12; 1997, ch. 247, § 2; 1999, ch. 258, § 1; 2001, ch. 264, § 2; 2003, ch. 48, § 21; 2005, ch. 89, § 28.

Derivation:

N.D.C.C. §§ 26-08-11, 26-08-11.1.

Note.

Chapter 6-09.2, referred to in subsection 6, has been repealed.

Cross-References.

Investment of assets by government self-insurance pool, see N.D.C.C. § 26.1-23.1-05.

DECISIONS UNDER PRIOR LAW

Improved Property Defined.

To be improved within context of former section, real property must have been, at the very least, in the process of development with improvements thereon such that it was readily marketable and had an ascertainable market value, exclusive of any value based on contingent future events; property which was a bare tract of land covered with trees, grass, and shrubs, zoned for agricultural purposes, containing no buildings, and not under cultivation, was unimproved. Sierra Life Ins. Co. v. Wigen, 286 N.W.2d 296, 1979 N.D. LEXIS 326 (N.D. 1979).

Former section did not authorize an insurance company to invest in unimproved real estate in order to allow it to lie idle or to speculate on possible capital gains derived from appreciation; property which insurance company purchased and left alone to appreciate, which had banana groves on it and was otherwise overgrown with brush, and on which there were no buildings, was unimproved and was being held for speculative purposes. Sierra Life Ins. Co. v. Wigen, 286 N.W.2d 296, 1979 N.D. LEXIS 326 (N.D. 1979).

26.1-05-19.1. Call options — Financial futures contracts.

The purchase and sale of put options or call options or financial futures contracts are subject to this section.

  1. As used in this section:
    1. “Call option” means an exchange-traded option contract under which the holder has the right to buy, or to make a cash settlement in lieu of buying, a fixed number of shares of stock, a fixed amount of an underlying security, or an index of underlying securities at a stated price on or before a fixed expiration date.
    2. “Commodity futures trading commission” means the trading regulatory agency charged and empowered under the Commodity Futures Trading Commission Act of 1974, as amended, with the regulation of futures trading in commodities.
    3. “Financial futures contract” means an exchange-traded agreement to make or take delivery of, or to make cash settlement in lieu of delivery of, a fixed amount of an underlying security, or an index of underlying securities, on a specified date or during a specified period of time, or a call or put option on such an agreement, made through a registered futures commission merchant on a board of trade that has been designated by the commodity futures trading commission as a contract market. “Financial futures contract” includes a contract involving United States treasury bills, bonds, or notes; securities or pools of securities issued by the government national mortgage association; bank certificates of deposit; Standard and Poor’s 500 stock price index; New York stock exchange composite index; or any other agreement that has been approved by and which is governed by the rules and regulations of the commodity futures trading commission and the respective contract markets on which such financial futures contracts are traded.
    4. “Margin” means any type of deposit or settlement made or required to be made with a futures commission merchant, clearinghouse, or safekeeping agent to ensure performance of the terms of the financial futures contract. For the purposes of this section, “margin” includes initial, maintenance, and variation margins as those terms are commonly and customarily employed in the futures industry.
    5. “Put option” means an exchange-traded option contract under which the holder has the right to sell, or to make a cash settlement in lieu of sale of, a fixed number of shares of stock, fixed amount of an underlying security, or an index of underlying securities at a stated price on or before a fixed expiration date.
    6. “Securities and exchange commission” means the federal regulatory agency charged and empowered under the Securities Exchange Act of 1934, as amended, with the regulation of trading in securities.
    7. “Underlying security” means the security subject to being purchased or sold upon exercise of a call option or put option, or the security subject to delivery under a financial futures contract.
  2. The purchase and sale of put options or call options may take place under the following conditions:
    1. An insurance company may purchase put options or sell call options with regard to underlying securities owned by the insurance company, underlying securities that the insurance company may reasonably expect to obtain through exercise of warrants or conversion rights owned by the insurance company at the time the put option is purchased or the call option is sold, or to reduce the economic risk associated with an insurance company asset or liability, group of such assets or liabilities, or assets, liabilities or groups of assets or liabilities reasonably expected to be acquired or incurred by the insurance company in the normal course of business. Such assets or liabilities must be subject to an economic risk, such as changing interest rates or prices.
    2. An insurance company may sell put options or purchase call options to reduce the economic risk associated with an insurance company asset or liability group of such assets or liabilities, or assets, liabilities or groups of assets or liabilities reasonably expected to be acquired or incurred by the insurance company in the normal course of business, or to offset obligations and rights of the insurance company under other options held by the insurance company pertaining to the same underlying securities or index of underlying securities.
    3. An insurance company may purchase or sell put options or call options only on underlying securities, or an index of underlying securities, which are eligible for investment by a life insurance company under the laws of this state.
    4. An insurance company may purchase or sell put or call options only through an exchange that is registered with the securities and exchange commission as a national securities exchange pursuant to the provisions of the Securities Exchange Act of 1934, as amended.
    5. An insurance company may not purchase call options or sell put options, if the purchase or sale could result in the acquisition of an amount of underlying securities which, when aggregated with current holdings, exceeds applicable limitations imposed under the laws of this state for investment in those particular underlying securities.
    6. The net amount of premiums paid for all option contracts purchased minus the premiums received for all option contracts sold, plus the net amount of financial futures contracts purchased minus financial futures contracts sold, may not at any time exceed in the aggregate five percent of the insurance company’s admitted assets.
  3. The purchase and sale of financial futures contracts may take place under the following conditions:
    1. An insurance company may purchase or sell financial futures contracts for the purpose of hedging against the economic risk associated with an insurance company asset or liability, group of such assets or liabilities, or assets, liabilities or groups of assets or liabilities reasonably expected to be acquired or incurred by the insurance company in its normal course of business. Such assets or liabilities must be subject to an economic risk, such as changing interest rates or prices.
    2. An insurance company may not purchase or sell financial futures contracts or options on such contracts, if the purchase or sale could result in the acquisition of an amount of underlying securities which, when aggregated with current holdings, exceeds applicable limitations imposed under laws of this state for investment in those particular underlying securities.
    3. The net amount of financial futures contracts purchased minus financial futures contracts sold, plus the net amount of premiums paid for all option contracts purchased minus the premiums received for all option contracts sold, may not at any time exceed in the aggregate five percent of the insurance company’s admitted assets. For the purposes of transactions in financial futures contracts, the admitted assets limitation is calculated by taking the net asset value of the property used to margin the financial futures contract positions, plus option premiums paid on financial futures contracts, less option premiums received on financial futures contracts.
  4. This section may not be utilized by a domestic insurance company without the prior approval of the commissioner.

Source:

S.L. 1989, ch. 351, § 1.

26.1-05-20. Limitation on purchase and conveyance of real property.

A domestic insurance company may acquire, hold, and convey only the real property that has been:

  1. Mortgaged to it in good faith by way of security for loans previously contracted or for moneys due to it.
  2. Conveyed to it in satisfaction of debts previously contracted in the course of its dealings.
  3. Purchased at sales on judgments, decrees, or mortgages obtained or made for debts previously contracted in the course of its dealings.
  4. Acquired as an investment for the production of income or has been acquired to be improved or developed for an investment for the production of income as provided by law.

Any company may improve real property so acquired or remodel existing improvements and exchange the real property for other real property or securities, and real property acquired by the exchange may be improved or the improvements remodeled.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-08-12.

26.1-05-21. Real property acquired by domestic company — When sale required.

All property acquired by a domestic insurance company in any manner specified in subsections 1, 2, and 3 of section 26.1-05-20 which is not necessary for the accommodation of the company or for the convenient transaction of its business must be sold and disposed of within two years after the company has acquired title, and as to any property so acquired which was necessary for the accommodation of the company or for the convenient transaction of its business, within two years after the property has ceased to be necessary for the accommodation of business. A company may not hold any of such property for a period longer than is specified in this section unless it procures a certificate from the commissioner stating that the company’s interests will suffer materially by the forced sale of the property. If the certificate is obtained, the time for the sale may be extended to the time the commissioner directs in the certificate. A company may select real property acquired under subsections 1, 2, and 3 of section 26.1-05-20 other than real property used primarily for farming and agriculture, and hold the property as an investment for income, not exceeding the total amount permitted by law for such purpose, and the property is not subject to the limitations of this section.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-08-13.

DECISIONS UNDER PRIOR LAW

Improved.

There was no requirement that real property must be “improved” in order for the company to retain it for the two-year period. Sierra Life Ins. Co. v. Wigen, 286 N.W.2d 296, 1979 N.D. LEXIS 326 (N.D. 1979).

26.1-05-22. Liabilities of officers and directors of domestic company.

Any officer or director of a domestic insurance company who makes or authorizes an investment or loan in violation of section 26.1-05-19 or 26.1-05-20 is liable personally to the stockholders of a stock insurance company, or to the policyholders of a mutual insurance company, for any loss occasioned thereby. If a company is under liability for losses equal to its net assets and the president or directors, knowing of the liability, make or assent to further insurance, they are liable personally for any loss under the insurance. If the directors allow to be insured on a single risk a larger sum than that permitted under section 26.1-03-01, they are liable for any loss thereon above the amount the company might insure lawfully, unless the excess is reinsured as required by that section.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-08-18.

26.1-05-23. Domestic life insurance company to deposit securities with commissioner.

A domestic life insurance company must physically deposit with the commissioner, on the date on which the company files its annual statement, securities of a value equivalent to the net value of all policies the company has in force. The securities must be of a kind specified in section 26.1-05-19. The company, in lieu of the physical deposit, may file, and the commissioner shall accept, a detailed, verified statement setting forth with sufficient particularity a list of the items of security held by the company in an amount equivalent to the net value of all policies in force. The securities specified in the list, although retained by the company, must be kept separate and distinct from the other securities of the company and must be held as a deposit for the policyholders of the company under this section. This section does not prevent or prohibit a domestic life insurance company from depositing with the commissioner securities in an amount to exceed the cash value of its policies.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-11-03.

26.1-05-24. Commissioner may examine books and securities of domestic life insurance company.

The commissioner may examine the books, papers, securities, and business of any domestic life insurance company at any time, or may authorize any other suitable person to make the examination. The commissioner, or person authorized to make an examination, may examine under oath any officer or agent of the company, or any other person, relative to the business and management of the company. If upon the examination the commissioner is of the opinion that the company is insolvent or that its condition is such as to render a further continuance of its business hazardous, the commissioner may require the company to deposit in the commissioner’s office all securities specified in any list filed pursuant to section 26.1-05-23 and not deposited.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-11-06.

26.1-05-25. Securities may be exchanged — Withdrawal of securities.

A domestic life insurance company, at any time, may change the securities on physical deposit or designated on the statement of securities held by the company in lieu of a deposit by substituting a like amount of the character required in the first instance. If the annual valuation of the policies in force shows them to be less than the amount of the security deposited, the company may withdraw the excess, but at least twenty-five thousand dollars worth of securities must remain on deposit at all times.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-11-04.

26.1-05-26. Dividends on securities property of company.

A domestic life insurance company having bonds or other securities on deposit with the commissioner may collect the dividends or interest thereon upon delivering to its authorized agent the coupons or other evidence of interest as the same becomes due. If any company, however, fails to deposit additional securities when and as called for by the commissioner, or pending any proceedings to close up or enjoin the operations of the company, the commissioner shall collect the dividends or interest and add the same to the securities on deposit.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-11-05.

26.1-05-27. Certificate of compliance with security deposit law — Issuance — Renewal — Attachment to policies.

The commissioner shall issue a certificate to a domestic life insurance company to the effect that the company does business under the compulsory reserve deposit law of North Dakota and maintains in the office of the commissioner a deposit of an amount in excess of the net value of all outstanding policies in stipulated and first-class securities deposited for the protection of the policyholders of the company when the company has:

  1. Filed its annual statement; and
  2. Deposited securities with the commissioner or filed a detailed list of securities held by the company in lieu of the deposit with the commissioner, the deposit and list to be renewed annually on or before March first.

The certificate expires on March thirty-first of the ensuing year and may be renewed annually upon the filing of a statement of renewal along with any additional physical deposit or additions to the statement of securities held by the company in lieu of a deposit and upon compliance with the other provisions of this section. A copy of the certificate may be attached to any insurance policy issued by any domestic life insurance company after the certificate has been issued to it.

Source:

S.L. 1983, ch. 332, § 5; 1985, ch. 317, § 16.

Derivation:

N.D.C.C. § 26-11-07.

26.1-05-28. Securities vest in policyholders on default of domestic life insurance company.

The securities of a defaulting or insolvent domestic life insurance company, or of a company against which proceedings for dissolution are pending, which are on deposit with the commissioner, vest in the state for the benefit of the policies on account of which the deposit was made, and the proceeds, by order of the court upon final hearing, must be divided among the policyholders proportionately to the last annual valuation of the policies, or, at any time, must be applied to the purchase of reinsurance for their benefit.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-11-08.

26.1-05-29. Nonapplicability of reserve deposit provisions to fraternal benefit societies.

Sections 26.1-05-23 through 26.1-05-28 do not apply to fraternal benefit societies.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-11-12.

26.1-05-30. Disbursements by domestic life insurance company to be made on voucher — Requirements.

No domestic life insurance company may make any disbursement of one hundred dollars or more unless evidenced by a voucher signed by or on behalf of the person receiving the money and correctly describing the consideration for the payment. If the expenditure is for both services and disbursements, the voucher must set forth the services rendered and an itemized statement of the disbursements made. If the expenditure is in connection with any matter pending before any legislative or public body or before any department or officer of any state or government, the voucher, in addition, must describe correctly the nature of the matter and of the interest of the company therein. When a voucher cannot be obtained, the expenditure must be evidenced by an affidavit describing the character and object of the expenditure and stating the reason for not obtaining the voucher.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-11-09.

26.1-05-31. Salaries and expenses of officers and agents of domestic life insurance company — Restrictions.

A domestic life insurance company may not:

  1. Pay any salary, compensation, or emolument to any senior officer, trustee, or director thereof, amounting in any one year to more than one hundred thousand dollars, unless the payment thereof first is authorized by the board of directors of the company.
  2. Grant any pension to any officer, director, or trustee thereof, or to any member of the officer’s, director’s, or trustee’s family after death, except that it may provide a pension in pursuance of the terms of a retirement plan adopted by the board of directors and approved by the commissioner for any person who is or has been a salaried officer or employee of the corporation and who may retire by reason of age or disability.

Source:

S.L. 1983, ch. 332, § 5; 1985, ch. 319, § 2; 2001, ch. 264, § 3.

Derivation:

N.D.C.C. § 26-11-10.

26.1-05-32. Impairment of capital or surplus of domestic life insurance company — Determination of deficiency — Notice not to issue policies.

If a domestic stock life insurance company’s minimum basic paid-in capital or surplus required by section 26.1-05-04 or the minimum basic surplus of a domestic mutual insurance company required by section 26.1-12-10 becomes impaired, the commissioner shall prohibit the company and its agents from issuing new policies until the deficiency is cured. The commissioner shall determine the amount of the deficiency, notify the company of the deficiency and require the company to cure the deficiency, and require the company to file proof thereof with the commissioner within a period specified in the notice. The period may not be less than thirty days nor more than ninety days from the date of issuance of the notice.

Source:

S.L. 1983, ch. 332, § 5; 1987, ch. 338, § 2.

Derivation:

N.D.C.C. § 26-11-11.

26.1-05-33. Dividends to be paid by domestic fire insurance company from surplus profits only — Compensation.

A domestic fire insurance company may not declare any dividend except from the surplus profits arising from its business. In estimating the surplus profits, there must be reserved as unearned premiums a sum equal to forty percent of the amount of premiums on all unexpired risks and policies, and there also must be reserved all sums due the company on bonds, mortgages, stocks, and book accounts upon which no part of the principal or accrued interest has been paid during the year preceding the estimate of the profits and upon which suit for foreclosure or collection has been commenced, or a judgment upon which has remained unsatisfied for more than one year.

Source:

S.L. 1983, ch. 332, § 5.

Derivation:

N.D.C.C. § 26-18-02.

26.1-05-34. Reciprocal states — Restrictions on domestic companies — Exceptions.

As used in this section, “reciprocal state” means a state the laws of which prohibit an insurance company domiciled therein from insuring the lives or persons of residents of, or property or operations located in, the state of North Dakota unless it holds a valid and subsisting certificate of authority issued by the insurance commissioner of this state. The prohibition may be subject to the exceptions to this section.

A domestic insurance company may not enter into an insurance contract upon the life or person of a resident of, or property or operations located in, a reciprocal state unless it is authorized pursuant to the laws of that state to transact such insurance therein. The commissioner shall annually mail notice to every domestic insurance company, specifying the reciprocal states.

The exceptions to this section are:

  1. Contracts entered into when the prospective insurant is personally present in the state in which the insurance company is authorized to transact insurance when the insurant signs the application.
  2. The issuance of certificates under a lawfully transacted group life or group disability policy, when the master policy was entered into a state in which the insurance company was then authorized to transact insurance.
  3. The removal or continuance in force, with or without modification, of contracts otherwise lawful and which were not originally executed in violation of this section.

Source:

S.L. 1983, ch. 332, § 5; 1985, ch. 317, § 17.

Derivation:

N.D.C.C. § 26-07-19.

26.1-05-35. Participation in clearing corporations and book entry systems — Rulemaking authority.

A domestic insurance company may participate, subject to a written agreement with a custodian and subject to rules adopted by the commissioner regarding such participation, in clearing corporations and the federal reserve book entry system.

Source:

S.L. 1987, ch. 339, § 1.

CHAPTER 26.1-06 Takeover Bids for Domestic Companies

26.1-06-01. Definitions.

As used in this chapter, unless the context or subject matter otherwise requires:

  1. “Equity security” means any shares or similar securities, or voting trust certificates, or any securities convertible into such securities.
  2. “Horizontal combination” means two or more corporations each of which has a majority of its equity securities owned by the same other corporation.
  3. “Offeree” means the beneficial or record owner of equity securities which an offeror acquires or offers to acquire in connection with a takeover bid.
  4. “Offeror” means a person who makes or in any way participates or aids in making a takeover bid, and includes persons acting jointly or in concert, or who intend to exercise jointly or in concert any voting rights attached to the equity securities for which the takeover bid is made.
  5. “Takeover bid” means the acquisition of, or offer to acquire, pursuant to a tender offer or request or invitation for tenders, any equity security of a North Dakota domestic insurance company, if after acquisition thereof the offeror would, directly or indirectly, be a record or beneficial owner of more than five percent of any class of the issued and outstanding equity securities of such corporation. A takeover bid does not include:
    1. A bid made by a dealer for the dealer’s own account in the ordinary course of the dealer’s business of buying and selling the security.
    2. Any offer to acquire or acquisition of an equity security pursuant to the offer, for the sole account of the offeror, from not more than twenty persons, in good faith and not for the purpose of avoiding this chapter.
    3. Any tender offer or request or invitation for tenders to which the target company consents, by action of its board of directors, if the board has recommended acceptance to shareholders and the terms, including notice of any inducements to officers or directors which are not made available to all shareholders, have been furnished to shareholders.
  6. “Target company” means a corporation whose equity securities are or are to be the subject of a takeover bid.
  7. “Vertical combination” means a chain of ownership in which one corporation has a majority of its equity securities owned by another corporation and which chain of corporate ownership may or may not continue through other corporations in which a majority of the equity securities of one corporation are owned by another.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-01.

26.1-06-02. Takeover bid — Restrictions.

  1. No offeror may make a takeover bid unless at least twenty days prior thereto the offeror files with the commissioner and the target company copies of all information required by subsection 2 and either within ten days following the filing no hearing is ordered by the commissioner or requested by the target company, or a hearing is requested by the target company within that time but the commissioner finds that no cause for hearing exists, or a hearing is ordered within that time and upon the hearing the commissioner adjudicates that the proposed takeover bid and the materials being or to be distributed are not a violation of this title and that the offeror proposed to make fair, full, and effective disclosure to offerees of all information material to a decision to accept or reject the offer. No offeror may make a takeover bid if the offeror owns five percent or more of the issued and outstanding equity securities of any class of the target company, any of which were purchased within one year before the proposed takeover bid, and the offeror, before making any such purchase, or before July 31, 1971, whichever is later, failed to publicly announce the offeror’s intention to gain control of the target company, and failed to make fair, full, and effective disclosure of the intention to the persons from whom the offeror acquired the securities.
  2. The information to be filed with the commissioner and the target company pursuant to subsection 1 must include:
    1. Copies of all prospectuses, brochures, advertisements, circulars, letters, or other matter by means of which the offeror proposes to disclose to offerees all information material to a decision to accept or reject the offer.
    2. The identity and background of all persons on whose behalf the acquisition of any equity security of the target company has been or is to be effected.
    3. The names of all insurance companies doing business in North Dakota in which the offeror has ownership or debt interests, setting forth the ownership or debt interests, or management functions, setting forth the management functions.
    4. The source and amount of funds or other consideration used or to be used in acquiring any equity security, including a statement describing any securities, other than the existing capital stock or long-term debt of the offeror, which are being offered in exchange for the equity securities of the target company.
    5. If the offeror has ownership or debt interests, or management functions in other insurance companies doing business in the state of North Dakota, what plans exist for consolidation of any functions whatsoever of the target company with the offeror’s other companies, including ratemaking, investment policies, or consolidation of sales functions.
    6. A statement of any plans or proposals which the offeror, upon gaining control, may have to liquidate the target company, sell its assets, effect a merger or formal consolidation of it, or make any other major change in its business, corporate structure, management personnel, or policies of employment; or to assume any portion of the risks of the target company or to have the target company assume any portion of the risks, or to reinsure any of the risks of the offeror.
    7. The number of shares of any equity security of the target company of which each offeror is beneficial or record owner or has a right to acquire, directly or indirectly, together with the name and address of each offeror.
    8. Particulars as to any contracts, arrangements, or understandings to which an offeror is party with respect to any equity security of the target company, including without limitation transfers of any equity security, joint ventures, loan or option arrangements, puts and calls, guarantees of loan, guarantees against loss, guarantees of profits, division of losses or profits, or the giving or withholding of proxies, naming the parties to the contracts, arrangements, or understandings.
    9. Complete information on the organization and operations of the offeror, including without limitation the year of organization, form of organization, the jurisdiction in which it is organized, a description of each class of the offeror’s capital stock and of its long-term debt, financial statements for the current period and for the three most recent annual accounting periods, a brief description of the location and general character of the principal assets of the offeror and its subsidiaries, a description of pending legal proceedings other than routine litigation to which the offeror or any of its subsidiaries is a party or of which any of their property is the subject, a brief description of the business done and projected by the offeror and its subsidiaries and the general development of such business over the past five years, the names of all directors and executive officers together with biographical summaries of each for the preceding five years to date, and the approximate amount of any material interest, direct or indirect, of any of the directors or officers in any material transaction during the past three years, or in any proposed material transactions, to which the offeror or any of its subsidiaries was or is to be a party.
    10. If the offeror is a member of a horizontal combination or a vertical combination, then the same information must be furnished and filed for each member corporation or limited liability company of the horizontal combination or vertical combination.

Source:

S.L. 1983, ch. 332, § 6; 1993, ch. 54, § 106.

Derivation:

N.D.C.C. § 26-21.1-02.

26.1-06-03. Takeover — Offer — Terms.

No offeror may make a takeover bid not made to all resident holders of the equity security that is the subject of the takeover bid, or not made to the holders on the same terms as the takeover bid is made to nonresident holders of the equity security. If an offeror makes a tender offer or request or invitation for tenders for less than all the outstanding equity securities of a class, and if a greater number of securities is deposited pursuant thereto within ten days after copies of the offer or request or invitation for tenders are first published or sent or given to securityholders than the offeror is bound or willing to take up and pay for, the securities taken up must be taken up as nearly as may be pro rata, disregarding fractions, according to the number of securities deposited by each offeree. If the terms of a takeover bid are changed before its expiration by increasing the consideration offered to offerees, the offeror shall pay the increased consideration for all equity securities taken up, whether or not the securities are deposited or taken up before or after the change in the terms of the takeover bid. The pro rata requirement applies to securities deposited within ten days after notice of an increase in the consideration offered to securityholders is first published or sent or given to securityholders.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-04.

26.1-06-04. Deceptive practices.

It is unlawful for any person to misstate any material fact or omit to state any material fact, necessary to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any takeover bid, or any solicitation of offerees in opposition to or in favor of any takeover bid.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-05.

26.1-06-05. Hearing.

Any hearing pursuant to this chapter must be held within forty days of the date a filing is made pursuant to section 26.1-06-02. Adjudications made pursuant to this chapter must be made within sixty days after the filing. Upon filing an application with the commissioner for a hearing under this section, the target company shall deposit with the commissioner the sum the commissioner requires to defray the costs of the hearing and any investigation which the commissioner makes in connection therewith. If the commissioner finds that the takeover bid is in violation of chapters 26.1-05 and 26.1-07 or that effective provision is not made for fair and full disclosure to offerees of all information material to a decision to accept or reject the offer, or that the takeover bid would comply with this section if amended in certain respects, or that the takeover bid is not in violation of chapters 26.1-04, 26.1-05, and 26.1-07 and that effective provision is made for fair and full disclosure to offerees of all information material to a decision to accept or reject the offer, the commissioner shall so adjudicate.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-03.

26.1-06-06. Offenses punishable by the commissioner — Penalty.

The commissioner, by order entered after a hearing on notice duly served on the defendant not less than thirty days before the date of the hearing, if it is proved that the defendant has knowingly made any misrepresentation of a material fact for the purpose of inducing the commissioner to take any action or to refrain from taking action, or has violated this chapter, or any order of the commissioner issued pursuant to this chapter, may impose a penalty not exceeding five thousand dollars.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-07.

26.1-06-07. Separate offenses.

Each takeover bid made in violation of the provisions of this chapter constitutes a separate offense. The commissioner may request the offeror to rescind the bid and to make restitution to the offeree, and if the offeror complies with the request no penalty may be imposed on the offeror on account of that illegal takeover bid.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-08.

26.1-06-08. Civil liabilities.

  1. Any offeror who makes a takeover bid which does not comply with this chapter, or makes a takeover bid by means of an untrue statement of a material fact or any omission to state a material fact necessary in order to make the statement made, in the light of the circumstances under which they were made, not misleading (the offeree not knowing of such untruth or omission), and who does not sustain the burden of proof that the offeror did not know, and in the exercise of reasonable care could not have known, of the untruth or omission, is liable to any offeree whose shares are taken up pursuant to the takeover bid who may sue to recover the shares, together with all dividends received thereon, costs, and reasonable attorney’s fees, upon the tender of the consideration received from the offeror, or may sue for the substantial equivalent in damages if the offeror no longer owns the shares.
  2. Every person who materially participates or aids in a takeover bid made by an offeror liable under subsection 1, or who directly or indirectly controls any offeror so liable, is also liable jointly and severally with and to the same extent as the offeror so liable, unless the person who so participates, aids, or controls, sustains the burden of proof that the person did not know, and in the exercise of reasonable care could not have known, of the existence of facts by reason of which the liability is alleged to exist. The contribution is as in cases of contract among the several persons so liable.
  3. Any tender specified in this section may be made at any time before entry of judgment.
  4. No suit may be maintained to enforce any liability created under this section unless brought within two years after the transaction upon which it is based; provided, that if any person liable by reason of subsections 1 and 3 makes a written offer, before suit is brought, to return the shares taken up pursuant to the takeover bid, together with all dividends received thereon, upon the tender of the consideration received from the offeror, or to pay damages if the offeror no longer owns the shares, no offeree may maintain a suit under this section who has refused or failed to accept the offer within thirty days of its receipt.
  5. Any condition, stipulation, or provision binding any offeree to waive compliance with this chapter or of any rule or order pursuant to this chapter is void.
  6. The rights and remedies provided by this chapter are in addition to any and all other rights and remedies that may exist at law or in equity.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-09.

26.1-06-09. Consent to service of process.

Every nonresident offeror who makes a takeover bid is deemed to have appointed the commissioner as agent upon whom may be served, in any matter arising under this chapter, any process, notice, order, or demand except one issued by the commissioner. The commissioner or a designated person in the commissioner’s office shall serve any process, notice, order, or demand issued by the commissioner by registered mail addressed to the offeror at the offeror’s latest address on file. A foreign corporation which has a duly appointed agent for service of process need not comply with this section.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-10.

26.1-06-10. Enforcement — Enjoining violations.

If at a hearing before the commissioner, the commissioner determines that the offeror has violated this chapter, or the commissioner’s rules administering this chapter, the commissioner shall issue and cause to be served on the offeror an order requiring the offeror to cease and desist from the violation and may issue and cause to be served on the offeror an order preventing the offeror from making any further tender offers, and may take any affirmative action as will effectuate the policies of this chapter.

The commissioner may petition any district court of this state for the enforcement of the order and for appropriate temporary relief or restraining order and shall file in the court the record of the proceedings. Upon the filing of the petition, the court must serve notice upon the offeror and thereupon has jurisdiction of the proceeding and of the question determined therein and may grant the temporary relief or restraining order as it deems just and proper, and to make and enter a decree enforcing, modifying, and enforcing as so modified, or for setting aside in whole or in part the order. The court must enforce the order unless it finds that the order was not in accordance with law, that it was in violation of the constitutional rights of the offeror, that the commissioner’s rules or procedure did not afford the offeror a fair hearing, that the commissioner’s findings of fact were not supported by the evidence, or that the order was not supported by the findings of fact.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-12.

26.1-06-11. Rulemaking.

The commissioner may adopt reasonable rules:

  1. Defining fraudulent, evasive, deceptive, or grossly unfair practices in connection with takeover bids and the terms used in this chapter.
  2. Exempting from this chapter takeover bids not made for the purpose of, and not having the effect of, changing or influencing the control of a target company.
  3. Covering such other matters as are necessary to give effect to this chapter.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-11.

26.1-06-12. Securities laws.

This chapter does not limit or modify in any way any responsibility, authority, power, or jurisdiction of the securities commissioner or of the securities laws of this state.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-13.

26.1-06-13. Offenses — Penalties — Statute of limitation.

Any person who knowingly makes or causes to be made any false statement with respect to any matter subject to this chapter or commits any act declared unlawful by this chapter and any offeror who makes a takeover bid which does not comply with this section and sections 26.1-06-02, 26.1-06-03, and 26.1-06-04 is guilty of a class A misdemeanor. Prosecutions under this section must be instituted within two years from the date of the offense.

Source:

S.L. 1983, ch. 332, § 6.

Derivation:

N.D.C.C. § 26-21.1-06.

CHAPTER 26.1-06.1 Insurance Company Rehabilitation and Liquidation

26.1-06.1-01. Construction and purpose.

  1. This chapter may not be interpreted to limit the powers granted the commissioner by other provisions of the law.
  2. This chapter must be liberally construed to effect the purpose stated in subsection 3.
  3. The purpose of this chapter is the protection of the interests of insureds, claimants, creditors, and the public generally; with minimum interference with the normal prerogatives of the owners and managers of insurers, through:
    1. Early detection of any potentially dangerous condition in an insurer, and prompt application of appropriate corrective measures;
    2. Improved methods for rehabilitating insurers, involving the cooperation and management expertise of the insurance industry;
    3. Enhanced efficiency and economy of liquidation, through clarification of the law, to minimize legal uncertainty and litigation;
    4. Equitable apportionment of any unavoidable loss;
    5. Lessening the problems of interstate rehabilitation and liquidation by facilitating cooperation between states in the liquidation process, and by extending the scope of personal jurisdiction over debtors of the insurer outside this state;
    6. Regulation of the insurance business by the impact of the law relating to delinquency procedures and substantive rules on the entire insurance business; and
    7. Providing for a comprehensive scheme for the rehabilitation and liquidation of insurance companies and those subject to this chapter as part of the regulation of the business of insurance, insurance industry, and insurers in this state. Proceedings in cases of insurer insolvency and delinquency are deemed an integral aspect of the business of insurance and are of vital public interest and concern.

Source:

S.L. 1991, ch. 305, § 1.

Collateral References.

Validity, construction, and application of Uniform Insurers Liquidation Act, 44 A.L.R.5th 683.

26.1-06.1-02. Persons covered.

The proceedings authorized by this chapter may be applied to:

  1. All insurers who are doing, or have done, an insurance business in this state, and against whom claims arising from that business may exist now or in the future.
  2. All insurers who purport to do an insurance business in this state.
  3. All insurers who have insureds residing in this state.
  4. All persons subject to examination by the commissioner.
  5. All other persons organized or in the process of organizing with the intent to do an insurance business in this state.
  6. All nonprofit health service corporations subject to chapter 26.1-17.
  7. All fraternal benefit societies subject to chapter 26.1-15.1.
  8. All title insurance companies subject to chapter 26.1-20.
  9. All health maintenance organizations subject to chapter 26.1-18.1.
  10. All prepaid legal service companies subject to chapter 26.1-19.

Source:

S.L. 1991, ch. 305, § 1; 2003, ch. 48, § 22.

26.1-06.1-03. Definitions.

For the purposes of this chapter:

  1. “Ancillary state” means any state other than a domiciliary state.
  2. “Creditor” is a person having any claim, whether matured or unmatured, liquidated or unliquidated, secured or unsecured, absolute, fixed, or contingent.
  3. “Delinquency proceeding” means any proceeding instituted against an insurer for the purpose of liquidating, rehabilitating, reorganizing, or conserving such insurer, and any summary proceeding under section 26.1-06.1-09. “Formal delinquency proceeding” means any liquidation or rehabilitation proceeding.
  4. “Doing business” includes any of the following acts, whether effected by mail or otherwise:
    1. The issuance or delivery of contracts of insurance to residents of this state;
    2. The solicitation of applications for such contracts, or other negotiations preliminary to the execution of such contracts;
    3. The collection of premiums, membership fees, assessments, or other consideration for such contracts;
    4. The transaction of matters subsequent to execution of such contracts and arising out of them;
    5. Operating under a license or certificate of authority, as an insurer, issued by the commissioner; or
    6. Any other act specified in section 26.1-02-06 as the transaction of an insurance business.
  5. “Domiciliary state” means the state in which an insurer is incorporated or organized or, in the case of an alien insurer, its state of entry.
  6. “Fair consideration” is given for property or obligation:
    1. When in exchange for property or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or services are rendered or an obligation is incurred or an antecedent debt is satisfied; or
    2. When property or obligation is received in good faith to secure a present advance or antecedent debt in an amount not disproportionately small as compared to the value of the property or obligation obtained.
  7. “Foreign country” means any other jurisdiction not in any state.
  8. “General assets” means all property, real, personal, or otherwise, not specifically mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or classes of persons. As to specifically encumbered property, “general assets” includes all property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and on deposit for the security or benefit of all policyholders or all policyholders and creditors, in more than a single state, shall be treated as general assets.
  9. “Guaranty association” means the North Dakota insurance guaranty association created by chapter 26.1-42.1 or the North Dakota life and health insurance guaranty association created by chapter 26.1-38.1, and any other similar entity now or hereafter created by the legislative assembly for the payment of claims of insolvent insurers. “Foreign guaranty association” means any similar entity now in existence in or hereafter created by the legislature of any other state.
  10. “Insolvency” or “insolvent” means:
    1. For an insurer issuing only assessable fire insurance policies:
      1. The inability to pay any obligation within thirty days after it becomes payable; or
      2. If an assessment be made within thirty days after such date, the inability to pay the obligation thirty days following the date specified in the first assessment notice issued after the date of loss.
    2. For any other insurer, that it is unable to pay its obligations when they are due, or when its admitted assets do not exceed its liabilities plus the greater of:
      1. Any capital and surplus required by law for its organization; or
      2. The total par or stated value of its authorized and issued capital stock.
    3. As to any insurer licensed to do business in this state as of July 7, 1991, which does not meet the standard established under subdivision b, the term “insolvency” or “insolvent” means, for a period not to exceed three years from July 7, 1991, that it is unable to pay its obligations when they are due or that its admitted assets do not exceed its liabilities plus any required capital contribution ordered by the commissioner under provisions of the insurance law.
    4. For purposes of this subsection, “liabilities” includes reserves required by statute, by rule, or by specific requirements imposed by the commissioner upon a subject company at the time of admission or a later time.
  11. “Insurer” means any person who has done, purports to do, is doing, or is licensed to do an insurance business, and is or has been subject to the authority of, or to liquidation, rehabilitation, reorganization, supervision, or conservation by any other state. For purposes of this chapter, any other persons included under section 26.1-06.1-02 shall be deemed to be insurers.
  12. “Policyholder” includes a certificate holder.
  13. “Preferred claim” means any claim with respect to which the terms of this chapter accord priority of payment from the general assets of the insurer.
  14. “Receiver” means receiver, liquidator, rehabilitator, or conservator as the context requires.
  15. “Reciprocal state” means any state other than this state in which in substance and effect subsection 1 of section 26.1-06.1-17 and sections 26.1-06.1-51, 26.1-06.1-52, 26.1-06.1-54, 26.1-06.1-55, and 26.1-06.1-56 are in force, and in which provisions are in force requiring that the commissioner or equivalent official be the receiver of a delinquent insurer, and in which some provision exists for the avoidance of fraudulent conveyances and preferential transfers.
  16. “Secured claim” means any claim secured by mortgage, trust deed, pledge, deposit as security, escrow, or otherwise, but not including special deposit claims or claims against general assets. The term also includes claims which have become liens upon specific assets by reason of judicial process.
  17. “Special deposit claim” means any claim secured by a deposit made pursuant to statute for the security or benefit of a limited class or classes of persons, but not including any claim secured by general assets.
  18. “State” means any state, district, or territory of the United States and the Panama Canal Zone.
  19. “Transfer” includes the sale and every other and different mode, direct or indirect, of disposing of or of parting with property or with an interest therein, or with the possession thereof or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily, by or without judicial proceedings. The retention of a security title to property delivered to a debtor shall be deemed a transfer suffered by the debtor.

Source:

S.L. 1991, ch. 305, § 1; 1999, ch. 259, § 1.

26.1-06.1-04. Jurisdiction and venue.

  1. No delinquency proceeding may be commenced under this chapter by anyone other than the commissioner and no court has jurisdiction to entertain, hear, or determine any proceeding commenced by any other person.
  2. No court of this state has jurisdiction to entertain, hear, or determine any complaint praying for the dissolution, liquidation, rehabilitation, sequestration, conservation, or receivership of any insurer, or praying for an injunction or restraining order or other relief preliminary to, incidental to, or relating to such proceedings other than in accordance with this chapter.
  3. In addition to other grounds for jurisdiction provided by the law of this state, a court of this state having jurisdiction of the subject matter has jurisdiction over a person served pursuant to the North Dakota Rules of Civil Procedure or other applicable provisions of law in an action brought by the receiver of a domestic insurer or an alien insurer domiciled in this state:
    1. If the person served is an insurance producer or other person who has at any time written policies of insurance for or has acted in any manner whatsoever on behalf of an insurer against which a delinquency proceeding has been instituted, in any action resulting from or incident to such a relationship with the insurer;
    2. If the person served is a reinsurer who has at any time entered into a contract of reinsurance with an insurer against which a delinquency proceeding has been instituted, or is an insurance producer of or for the reinsurer, in any action on or incident to the reinsurance contract;
    3. If the person served is or has been an officer, director, manager, trustee, organizer, promoter, or other person in a position of comparable authority or influence over an insurer against which a delinquency proceeding has been instituted, in any action resulting from or incident to such a relationship with the insurer;
    4. If the person served is or was at the time of the institution of the delinquency proceeding against the insurer holding assets in which the receiver claims an interest on behalf of the insurer, in any action concerning the assets; or
    5. If the person served is obligated to the insurer in any way whatsoever in any action on, or incident to, the obligation.
  4. If the court on motion of any party finds that any action should as a matter of substantial justice be tried in a forum outside this state, the court may enter an appropriate order to stay further proceedings on the action in this state.
  5. All action herein authorized must be brought in the district court in Burleigh County, North Dakota.

Source:

S.L. 1991, ch. 305, § 1; 2001, ch. 262, § 18.

26.1-06.1-05. Injunctions and orders.

  1. Any receiver appointed in a proceeding under this chapter may at any time apply for, and any district court may grant, such restraining orders, preliminary and permanent injunctions, and other orders as may be deemed necessary and proper to prevent:
    1. The transaction of further business;
    2. The transfer of property;
    3. Interference with the receiver or with a proceeding under this chapter;
    4. Waste of the insurer’s assets;
    5. Dissipation and transfer of bank accounts;
    6. The institution or further prosecution of any actions or proceedings;
    7. The obtaining of preferences, judgments, attachments, garnishments, or liens against the insurer, its assets, or its policyholders;
    8. The levying of execution against the insurer, its assets, or its policyholders;
    9. The making of any sale or deed for nonpayment of taxes or assessments that would lessen the value of the assets of the insurer;
    10. The withholding from the receiver of books, accounts, documents, or other records including all written, printed, computer-stored, visual, and audiovisual materials relating to the business of the insurer; or
    11. Any other threatened or contemplated action that might lessen the value of the insurer’s assets or prejudice the rights of policyholders, creditors, or shareholders, or the administration of any proceeding under this chapter.
  2. The receiver may apply to any court outside of the state for the relief described in subsection 1.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-06. Cooperation of officers, owners, and employees — Penalty.

  1. Any officer, manager, director, trustee, owner, employee, or agent of any insurer, or any other persons with authority over or in charge of any segment of the insurer’s affairs, shall cooperate with the commissioner in any proceeding under this chapter, or any investigation preliminary to the proceeding. The term “person” as used in this section includes any person who exercises control directly or indirectly over activities of the insurer through any holding company or other affiliate of the insurer. “To cooperate” includes the following:
    1. To reply promptly in writing to any inquiry from the commissioner requesting a reply;
    2. To make available to the commissioner any books, accounts, documents, or other records or information or property of or pertaining to the insurer and in possession, custody, or control of that person; and
    3. To be available for oral statements and interviews by the commissioner if so requested.
  2. No person may obstruct or interfere with the commissioner in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto.
  3. Any person included within subsection 1 who fails to cooperate with the commissioner, or any person who obstructs or interferes with the commissioner in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto, or who violates any valid order issued by the commissioner under this chapter is guilty of a class A misdemeanor and, after a hearing, may be subject to the imposition by the commissioner of a civil penalty not to exceed ten thousand dollars and may be subject further to the revocation or suspension of any insurance licenses issued by the commissioner.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-07. Continuation of delinquency proceedings.

Every proceeding heretofore commenced under the laws in effect before the enactment of this chapter must be deemed to have commenced under this chapter for the purpose of conducting the proceeding henceforth, except that in the discretion of the commissioner the proceeding may be continued, in whole or in part, as it would have been continued had this chapter not been enacted.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-08. Condition on release from delinquency proceedings.

No insurer subject to any delinquency proceedings, whether administrative or judicial, may, until all payments of or on account of the insurer’s contractual obligations by all guaranty associations, along with all expenses thereof and interest on all such payments and expenses, have been repaid to the guaranty associations, or until a plan of repayment by the insurer has been approved by the guaranty associations:

  1. Be released from the proceeding, unless the proceeding is converted into a judicial rehabilitation or liquidation proceeding;
  2. Be permitted to solicit or accept new business or request or accept the restoration of any suspended or revoked license or certificate of authority;
  3. Be returned to the control of its shareholders or private management; or
  4. Have any of its assets returned to the control of its shareholders or private management.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-09. Court’s seizure order.

  1. The commissioner may file in the district court of this state a petition alleging, with respect to a domestic insurer:
    1. That grounds exist which justify a court order for a formal delinquency proceeding against an insurer under this chapter;
    2. That the interests of policyholders, creditors, or the public will be endangered by delay; and
    3. The contents of an order deemed necessary by the commissioner.
  2. Upon a filing under subsection 1, the court may issue forthwith, ex parte, and without a hearing the requested order which shall direct the commissioner to take possession and control of all or a part of the property, books, accounts, documents, and other records of an insurer, and of the premises occupied by it for transaction of its business; and, until further order of the court, enjoin the insurer and its officers, managers, agents, and employees from disposition of its property and from the transaction of its business except with the written consent of the commissioner.
  3. The court shall specify in the order the duration of the order which shall be such time as the court deems necessary for the commissioner to ascertain the condition of the insurer. On motion of either party or on its own motion, the court may from time to time hold such hearings as it deems necessary after such notice as it deems appropriate, and may modify the terms or duration of the seizure order. The court shall vacate the seizure order if the commissioner fails to commence a formal proceeding under this chapter after having had a reasonable opportunity to do so. An order of the court pursuant to a formal proceeding under this chapter shall ipso facto vacate the seizure order.
  4. Entry of a seizure order under this section does not constitute an anticipatory breach of any contract of the insurer.
  5. An insurer subject to an ex parte order under this section may petition the court at any time after the issuance of the order for a hearing and review of the order. The court shall hold a hearing and review not more than fifteen days after the request. A hearing under this subsection may be held privately in chambers and it must be so held if the insurer proceeded against so requests.
  6. If, at any time after the issuance of a seizure order under this section, it appears to the court that any person whose interest is or will be substantially affected by the order did not appear at the hearing and has not been served, the court may order that notice be given. An order that notice be given does not stay the effect of any order previously issued by the court.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-10. Confidentiality of hearings.

In all proceedings and judicial reviews thereof under section 26.1-06.1-09, all records of the insurer, other documents, and all insurance department files and court records and papers, so far as they pertain to or are a part of the record of the proceedings, must be and remain confidential except as is necessary to obtain compliance therewith, unless and until the district court, after hearing arguments from the parties in chambers, orders otherwise or unless the insurer requests that the matter be made public. Until such court order, all papers filed with the clerk of the district court must be held by the clerk in a confidential file.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-11. Grounds for rehabilitation.

The commissioner may apply by petition to the district court for an order authorizing the rehabilitation of a domestic insurer or an alien insurer domiciled in this state on any one or more of the following grounds:

  1. The insurer is in such condition that the further transaction of business would be hazardous financially to its policyholders, creditors, or the public.
  2. There is reasonable cause to believe that there has been embezzlement from the insurer, wrongful sequestration, or diversion of the insurer’s assets, forgery, or fraud affecting the insurer, or other illegal conduct in, by, or with respect to the insurer that if established would endanger assets in an amount threatening the solvency of the insurer.
  3. The insurer has failed to remove any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, employee, or other person, if the person has been found after notice and hearing by the commissioner to be dishonest or untrustworthy in a way affecting the insurer’s business.
  4. Control of the insurer, whether by stock ownership or otherwise, and whether direct or indirect, is in a person or persons found after notice and hearing to be untrustworthy.
  5. Any person, whether an officer, manager, general agent, director, trustee, employee, or other person, who in fact has executive authority in the insurer, has refused to be examined under oath by the commissioner concerning its affairs, whether in this state or elsewhere.
  6. After demand by the commissioner pursuant to sections 26.1-03-19.1 through 26.1-03-19.7, or pursuant to this chapter, the insurer has failed to promptly make available for examination any of its own property, books, accounts, documents, or other records, or those of any subsidiary or related company within the control of the insurer, or those of any person having executive authority in the insurer so far as they pertain to the insurer.
  7. Without first obtaining the written consent of the commissioner, the insurer has transferred, or attempted to transfer, in a manner contrary to chapter 26.1-10 or 26.1-07, substantially its entire property or business, or has entered into any other transaction the effect of which is to merge, consolidate, or reinsure substantially its entire property or business in or with the property or business of any other person.
  8. The insurer or its property has been or is the subject of an application for the appointment of a receiver, trustee, custodian, conservator, or sequestrator or similar fiduciary of the insurer or its property otherwise than as authorized under the insurance laws of this state, and the appointment has been made or is imminent, and the appointment might remove the insurer or its property from the jurisdiction of this state, or might prejudice orderly delinquency proceedings under this chapter.
  9. Within the previous four years the insurer has willfully violated its charter or articles of incorporation, its bylaws, any insurance law of this state, or any valid order of the commissioner.
  10. The insurer has failed to pay within sixty days after due date any obligation to any state or any subdivision thereof or any judgment entered in any state, if the court in which the judgment was entered had jurisdiction over the subject matter except that the nonpayment is not a ground until sixty days after any good-faith effort by the insurer to contest the obligation has been terminated, whether it is before the commissioner or in the courts, or the insurer has systematically attempted to compromise or renegotiate previously agreed settlements with its creditors on the ground that it is financially unable to pay its obligations in full.
  11. The insurer has failed to file its annual report or other financial report required by statute within the time allowed by law and, after written demand by the commissioner, has failed to immediately respond with an adequate explanation.
  12. The board of directors or the holders of a majority of the shares entitled to vote, or a majority of those individuals entitled to the control of those entities, request or consent to rehabilitation under this chapter.
  13. Has been found after examination that, in the case of a stock insurance company, its minimum basic paid-in capital required by section 26.1-05-04 is impaired, or that, in the case of a domestic mutual insurance company, its surplus required by sections 26.1-12-08 and 26.1-12-10 is impaired.

Source:

S.L. 1991, ch. 305, § 1; 1995, ch. 54, § 18.

26.1-06.1-12. Rehabilitation orders.

  1. An order to rehabilitate the business of a domestic insurer, or an alien insurer domiciled in this state, shall appoint the commissioner and successor commissioners in office the rehabilitator, and shall direct the rehabilitator forthwith to take possession of the assets of the insurer and to administer them under the general supervision of the court. The filing or recording of the order with the recorder, unless the board of county commissioners designates a different official, of the county in which the principal business of the company is conducted, or the county in which its principal office or place of business is located, imparts the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that recorder or designated official. The order to rehabilitate the insurer shall by operation of law vest title to all assets of the insurer in the rehabilitator.
  2. Any order issued under this section must require accounting to the court by the rehabilitator. Accounting must be at such intervals as the court specifies in its order, but no less frequently than semiannually. Each accounting must include a report concerning the rehabilitator’s opinion as to the likelihood that a plan under subsection 4 of section 26.1-06.1-13 will be prepared by the rehabilitator and the timetable for doing so.
  3. Entry of an order of rehabilitation does not constitute an anticipatory breach of any contracts of the insurer nor is it grounds for retroactive revocation or retroactive cancellation of any contracts of the insurer, unless such revocation or cancellation is done by the rehabilitator pursuant to section 26.1-06.1-13.

Source:

S.L. 1991, ch. 305, § 1; 1999, ch. 278, § 44; 2001, ch. 120, § 1.

26.1-06.1-13. Powers and duties of the rehabilitator.

  1. The commissioner as rehabilitator may appoint one or more special deputies, who shall have all the powers and responsibilities of the rehabilitator granted under this section, and the commissioner may employ such counsel, clerks, and assistants as deemed necessary. The compensation of the special deputy, counsel, clerks, and assistants and all expenses of taking possession of the insurer and of conducting the proceedings must be fixed by the commissioner, with the approval of the court and must be paid out of the funds or assets of the insurer. The commissioner, as rehabilitator, may, with the approval of the court, appoint an advisory committee of policyholders, claimants, or other creditors, including guaranty associations, should such a committee be deemed necessary. The committee shall serve at the pleasure of the commissioner and shall serve without compensation other than reimbursement for reasonable travel and per diem living expenses. No other committee of any nature may be appointed by the commissioner or the court in rehabilitation proceedings conducted under this chapter.
  2. In the event that the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the commissioner may advance the costs so incurred out of any appropriation for the maintenance of the insurance department. Any amounts so advanced for expenses of administration must be repaid to the commissioner for the use of the insurance department out of the first available money of the insurer.
  3. The rehabilitator may take such action deemed necessary or appropriate to reform and revitalize the insurer. The rehabilitator shall have all the powers of the directors, officers, and managers, whose authority must be suspended, except as they are redelegated by the rehabilitator. The rehabilitator shall have full power to direct and manage, to hire, and discharge employees subject to any contract rights they may have, and to deal with the property and business of the insurer.
  4. If it appears to the rehabilitator that there has been criminal or tortious conduct, or breach of any contractual or fiduciary obligation detrimental to the insurer by any officer, manager, insurance producer, employee, or other person, the rehabilitator may pursue all appropriate legal remedies on behalf of the insurer.
  5. If it is determined that reorganization, consolidation, conversion, reinsurance, merger, or other transformation of the insurer is appropriate, the rehabilitator shall prepare a plan to effect such changes. Upon application of the rehabilitator for approval of the plan, and after such notice and hearings as the court may prescribe, the court may either approve or disapprove the plan proposed, or may modify it and approve it as modified. Any plan approved under this section must be, in the judgment of the court, fair and equitable to all parties concerned. If the plan is approved, the rehabilitator shall carry out the plan. In the case of a life insurer, the plan proposed may include the imposition of liens upon the policies of the company, if all rights of shareholders are first relinquished. A plan for a life insurer may also propose imposition of a moratorium upon loan and cash surrender rights under policies, for such period, and to such an extent as may be necessary.
  6. The rehabilitator shall have the power under sections 26.1-06.1-25 and 26.1-06.1-26 to avoid fraudulent transfers.

Source:

S.L. 1991, ch. 305, § 1; 2001, ch. 262, § 19.

26.1-06.1-14. Actions by and against rehabilitator.

  1. Whenever any action or proceeding in which the insurer is a party, or is obligated to defend a party, is pending at the time a rehabilitation order against the insurer is entered, the court before which the action or proceeding is pending shall stay the action or proceeding for ninety days and such additional time as is necessary for the rehabilitator to obtain proper representation and prepare for further proceedings. The rehabilitator shall take such action respecting the pending litigation as deemed necessary in the interests of justice and for the protection of creditors, policyholders, and the public. The rehabilitator shall immediately consider all litigation pending outside this state and shall petition the courts having jurisdiction over that litigation for stays whenever necessary to protect the estate of the insurer.
  2. No statute of limitations or defense of laches runs with respect to any action by or against an insurer between the filing of a petition for appointment of a rehabilitator for that insurer and the order granting or denying that petition. Any action against the insurer that might have been commenced when the petition was filed may be commenced for at least sixty days after the order of rehabilitation is entered or the petition is denied. The rehabilitator may, upon an order for rehabilitation, within one year or such other longer time as applicable law may permit, institute an action or proceeding on behalf of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which such order is entered.
  3. Any guaranty association or foreign guaranty association covering life or health insurance or annuities shall have standing to appear in any court proceeding concerning the rehabilitation of a life or health insurer if such association is or may become liable to act as a result of the rehabilitation.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-15. Termination of rehabilitation.

  1. Whenever the commissioner believes further attempts to rehabilitate an insurer would substantially increase the risk of loss to creditors, policyholders, or the public, or would be futile, the commissioner may petition the district court for an order of liquidation. A petition under this subsection has the same effect as a petition under section 26.1-06.1-16. The district court shall permit the directors of the insurer to take such actions as are reasonably necessary to defend against the petition and may order payment from the estate of the insurer of such costs and other expenses of defense as justice may require.
  2. The protection of the interests of insureds, claimants, and the public requires the timely performance of all insurance policy obligations. If the payment of policy obligations is suspended in substantial part for a period of six months at any time after the appointment of the rehabilitator and the rehabilitator has not filed an application for approval of a plan under subsection 4 of section 26.1-06.1-13, the rehabilitator shall petition the court for an order of liquidation on grounds of insolvency.
  3. The rehabilitator may at any time petition the district court for an order terminating rehabilitation of an insurer. The court shall also permit the directors of the insurer to petition the court for an order terminating rehabilitation of the insurer and may order payment from the estate of the insurer of such costs and other expenses of such petition as justice may require. If the district court finds that rehabilitation has been accomplished and that grounds for rehabilitation under section 26.1-06.1-11 no longer exist, it shall order that the insurer be restored to possession of its property and the control of the business. The district court may also make that finding and issue that order at any time upon its own motion.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-16. Grounds for liquidation.

The commissioner may petition the district court for an order directing the liquidation of a domestic insurer or an alien insurer domiciled in this state on the basis:

  1. Of any ground for an order of rehabilitation as specified in section 26.1-06.1-11, whether or not there has been a prior order directing the rehabilitation of the insurer;
  2. That the insurer is insolvent; or
  3. That the insurer is in such condition that the further transaction of business would be hazardous, financially or otherwise, to its policyholders, its creditors, or the public.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-17. Liquidation orders.

  1. An order to liquidate the business of a domestic insurer must appoint the commissioner and successor commissioners in office as liquidator and must direct the liquidator forthwith to take possession of the assets of the insurer and to administer them under the general supervision of the court. The liquidator must be vested by operation of law with the title to all of the property, contracts, and rights of action, and all of the books and records of the insurer, wherever located, as of the entry of the final order of liquidation. The filing or recording of the order with the recorder, unless the board of county commissioners designates a different official, of the county in which its principal office or place of business is located or, in the case of real estate, with the recorder of the county where the property is located, imparts the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that recorder or designated official.
  2. Upon issuance of the order, the rights and liabilities of any such insurer and of its creditors, policyholders, shareholders, members, and all other persons interested in its estate become fixed as of the date of entry of the order of liquidation, except as provided in sections 26.1-06.1-18 and 26.1-06.1-36.
  3. An order to liquidate the business of an alien insurer domiciled in this state must be in the same terms and have the same legal effect as an order to liquidate a domestic insurer, except that the assets and the business in the United States must be the only assets and business included therein.
  4. At the time of petitioning for an order of liquidation, or at any time thereafter, the commissioner, after making appropriate findings of an insurer’s insolvency, may petition the court for a judicial declaration of such insolvency. After providing such notice and hearing as it deems proper, the court may make the declaration.
  5. Any order issued under this section must require financial reports to the court by the liquidator. Financial reports must include the assets and liabilities of the insurer and all funds received or disbursed by the liquidator during the current period. Financial reports must be filed within one year of the liquidation order and at least annually thereafter.
    1. Within five days of July 7, 1991, or, if later, within five days after the initiation of an appeal of an order of liquidation, which order has not been stayed, the commissioner shall present for the court’s approval a plan for the continued performance of the defendant company’s policy claims obligations, including the duty to defend insureds under liability insurance policies, during the pendency of an appeal. Such plan must provide for the continued performance and payment of policy claims obligations in the normal course of events, notwithstanding the grounds alleged in support of the order of liquidation, including the ground of insolvency. In the event the defendant company’s financial condition will not, in the judgment of the commissioner, support the full performance of all policy claims obligations during the appeal pendency period, the plan may prefer the claims of certain policyholders and claimants over creditors and interested parties as well as other policyholders and claimants, as the commissioner finds to be fair and equitable considering the relative circumstances of such policyholders and claimants. The court shall examine the plan submitted by the commissioner and if it finds the plan to be in the best interests of the parties, the court shall approve the plan. No action may lie against the commissioner, or any deputies, agents, clerks, assistants, or attorneys employed or appointed by the commissioner by any party based on preference in an appeal pendency plan approved by the court.
    2. The appeal pendency plan does not supersede or affect the obligations of any insurance guaranty association.
    3. Any such plans must provide for equitable adjustments to be made by the liquidator to any distributions of assets to guaranty associations, in the event that the liquidator pays claims from assets of the estate, which would otherwise be the obligations of any particular guaranty association but for the appeal of the order of liquidation, such that all guaranty associations equally benefit on a pro rata basis from the assets of the estate. Further, in the event an order of liquidation is set aside upon any appeal, the company may not be released from delinquency proceedings unless and until all funds advanced by any guaranty association, including reasonable administrative expenses in connection therewith relating to obligations of the company, are repaid in full, together with interest at the judgment rate of interest or unless an arrangement for repayment thereof has been made with the consent of all applicable guaranty associations.

Source:

S.L. 1991, ch. 305, § 1; 1999, ch. 278, § 45; 2001, ch. 120, § 1.

26.1-06.1-18. Continuance of coverage.

  1. All policies, including bonds and other noncancelable business, other than life or health insurance or annuities, in effect at the time of issuance of an order of liquidation continue in force only until the earlier of:
    1. Thirty days from the date of entry of the liquidation orders;
    2. The expiration of the policy coverage;
    3. The date when the insured has replaced the insurance coverage with equivalent insurance in another insurer or otherwise terminated the policy;
    4. The liquidator has effected a transfer of the policy obligation pursuant to subdivision i of subsection 1 of section 26.1-06.1-20; or
    5. The date proposed by the liquidator and approved by the court to cancel coverage.
  2. An order of liquidation under section 26.1-06.1-17 terminates coverages at the time specified in subsection 1 for purposes of any other statute.
  3. Policies of life or health insurance or annuities continue in force for such period and under such terms as provided for by any applicable guaranty association or foreign guaranty association.
  4. Policies of life or health insurance or annuities, or any period or coverage of such policies, not covered by a guaranty association or foreign guaranty association terminate under subsections 1 and 2.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-19. Dissolution of insurer.

The commissioner may petition for an order dissolving the corporate existence of a domestic insurer or the United States branch of an alien insurer domiciled in this state at the time of application for a liquidation order. The court shall order dissolution of the corporation upon petition by the commissioner upon or after the granting of a liquidation order. If the dissolution has not previously been ordered, it shall be effected by operation of law upon the discharge of the liquidator if the insurer is insolvent but may be ordered by the court upon the discharge of the liquidator if the insurer is under a liquidation order for some other reason.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-20. Powers of liquidator.

  1. The liquidator shall have the power:
    1. To appoint a special deputy or deputies and to determine their reasonable compensation. The special deputy shall have all powers of the liquidator granted by this section.
    2. To employ employees and agents, legal counsel, actuaries, accountants, appraisers, consultants, and such other personnel as the liquidator may deem necessary to assist in the liquidation.
    3. To appoint, with the approval of the court, an advisory committee of policyholders, claimants, or other creditors including guaranty associations should such a committee be deemed necessary. The committee shall serve without compensation other than reimbursement for reasonable travel and per diem living expenses. No other committee of any nature may be appointed by the commissioner or the court in liquidation proceedings conducted under this chapter.
    4. To fix the reasonable compensation of employees and agents, legal counsel, actuaries, accountants, appraisers, and consultants with the approval of the court.
    5. To pay reasonable compensation to persons appointed and to defray from the funds or assets of the insurer all expenses of taking possession of, conserving, conducting, liquidating, disposing of, or otherwise dealing with the business and property of the insurer. In the event that the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the commissioner may advance the costs so incurred out of any appropriation for the maintenance of the insurance department. Any amounts so advanced for expenses of administration must be repaid to the commissioner for the use of the insurance department out of the first available moneys of the insurer.
    6. To hold hearings, to subpoena witnesses to compel their attendance, to administer oaths, to examine any person under oath, and to compel any person to subscribe to their testimony after it has been correctly reduced to writing; and in connection therewith to require the production of any books, papers, records, or other documents the liquidator deems relevant to the inquiry.
    7. To audit the books and records of all agents of the insurer insofar as those records relate to the business activities of the insurer.
    8. To collect all debts and moneys due and claims belonging to the insurer, wherever located, and for the following purposes:
      1. To institute timely action in other jurisdictions, in order to forestall garnishment and attachment proceedings against such debts;
      2. To do such other acts as are necessary or expedient to collect, conserve, or protect its assets or property, including the power to sell, compound, compromise, or assign debts for purposes of collection upon such terms and conditions as deemed best; and
      3. To pursue any creditor’s remedies available to enforce the liquidator’s claims.
    9. To conduct public and private sales of the property of the insurer.
    10. To use assets of the estate of an insurer under a liquidation order to transfer policy obligations to a solvent assuming insurer, if the transfer can be arranged without prejudice to applicable priorities under section 26.1-06.1-41.
    11. To acquire, hypothecate, encumber, lease, improve, sell, transfer, abandon, or otherwise dispose of or deal with, any property of the insurer at its market value or upon such terms and conditions as are fair and reasonable. The liquidator shall also have power to execute, acknowledge, and deliver any and all deeds, assignments, releases, and other instruments necessary or proper to effectuate any sale of property or other transaction in connection with the liquidation.
    12. To borrow money on the security of the insurer’s assets or without security and to execute and deliver all documents necessary to that transaction for the purpose of facilitating the liquidation. Any such funds borrowed may be repaid as an administrative expense and have priority over any other claims in class one under the priority of distribution.
    13. To enter into such contracts as are necessary to carry out the order to liquidate, and to affirm or disavow any contracts to which the insurer is a party.
    14. To continue to prosecute and to institute in the name of the insurer or in the name of the liquidator, any and all suits and other legal proceedings, in this state or elsewhere, and to abandon the prosecution of claims the liquidator deems unprofitable to pursue further. If the insurer is dissolved under section 26.1-06.1-19, the liquidator shall have the power to apply to any court in this state or elsewhere for leave to substitute the liquidator for the insurer as plaintiff.
    15. To prosecute any action which may exist in behalf of the creditors, members, policyholders, or shareholders of the insurer against any officer of the insurer, or any other person.
    16. To remove any or all records and property of the insurer to the offices of the commissioner or to another place as may be convenient for the purposes of efficient and orderly execution of the liquidation. Guaranty associations and foreign guaranty associations shall have such reasonable access to the records of the insurer as is necessary for them to carry out their statutory obligations.
    17. To deposit in one or more banks in this state any amounts of money required for meeting current administration expenses and dividend distributions.
    18. To invest all moneys not currently needed, unless the court orders otherwise.
    19. To file any necessary documents for record in the office of any recorder or record office in this state or elsewhere where property of the insurer is located.
    20. To assert all defenses available to the insurer as against third persons, including statutes of limitation, statutes of fraud, and the defense of usury. A waiver of any defense by the insurer after a petition in liquidation has been filed shall not bind the liquidator. Whenever a guaranty association or foreign guaranty association has an obligation to defend any suit, the liquidator shall give precedence to such obligation and may defend only in the absence of a defense by such guaranty associations.
    21. To exercise and enforce all the rights, remedies, and powers of any creditor, shareholder, policyholder, or member, including any power to avoid any transfer or lien that may be given by the general law and that is not included in section 26.1-06.1-25, 26.1-06.1-26, or 26.1-06.1-27.
    22. To intervene in any proceeding, wherever instituted, that might lead to the appointment of a receiver or trustee, and to act as the receiver or trustee whenever the appointment is offered.
    23. To enter into agreements with any receiver or commissioner of any other state relating to the rehabilitation, liquidation, conservation, or dissolution of an insurer doing business in both states.
    24. To exercise all powers now held or hereafter conferred upon receivers by the laws of this state not inconsistent with the provisions of this chapter.
    1. If a company placed in liquidation issued liability policies on a claims-made basis, which provided an option to purchase an extended period to report claims, then the liquidator may make available to holders of such policies, for a charge, an extended period to report claims as stated herein. The extended reporting period may be made available only to those insureds who have not secured substitute coverage. The extended period made available by the liquidator begins upon termination of any extended period to report claims in the basic policy and ends at the earlier of the final date for filing of claims in the liquidation proceeding or eighteen months from the order of liquidation.
    2. The extended period to report claims made available by the liquidator is subject to the terms of the policy to which it relates. The liquidator shall make available such extended period within sixty days after the order of liquidation at a charge to be determined by the liquidator subject to approval of the court. The offer must be deemed rejected unless the offer is accepted in writing and the charge is paid within ninety days after the order of liquidation. No commissions, premium taxes, assessments, or other fees may be due on the charge pertaining to the extended period to report claims.
  2. The enumeration of the powers and authority of the liquidator in this section may not be construed as a limitation upon the liquidator, nor does it exclude in any manner the liquidator’s right to do such other acts not herein specifically enumerated or otherwise provided for, as may be necessary or appropriate for the accomplishment of or in aid of the purpose of liquidation.
  3. Notwithstanding the powers of the liquidator as stated in subsections 1 and 2, the liquidator shall have no obligation to defend claims or to continue to defend claims subsequent to the entry of a liquidation order.

Source:

S.L. 1991, ch. 305, § 1; 2001, ch. 120, § 1.

26.1-06.1-21. Notice to creditors and others.

  1. Unless the court otherwise directs, the liquidator shall give or cause to be given notice of the liquidation order as soon as possible:
    1. By first-class mail and either by telegram or telephone to the insurance commissioner of each jurisdiction in which the insurer is doing business;
    2. By first-class mail to any guaranty association or foreign guaranty association which is or may become obligated as a result of the liquidation;
    3. By first-class mail to all insurance producers of the insurer;
    4. By first-class mail to all persons known or reasonably expected to have claims against the insurer including all policyholders, at their last-known address as indicated by the records of the insurer; and
    5. By publication in a newspaper of general circulation in the county in which the insurer has its principal place of business and in such other locations as the liquidator deems appropriate.
  2. Except as otherwise established by the liquidator with approval of the court, notice to potential claimants under subsection 1 shall require claimants to file with the liquidator their claims together with proper proofs thereof under section 26.1-06.1-35, on or before a date the liquidator shall specify in the notice. The liquidator need not require persons claiming cash surrender values or other investment values in life insurance and annuities to file a claim. All claimants shall have a duty to keep the liquidator informed of any changes of address.
    1. Notice under subsection 1 to insurance producers of the insurer and to potential claimants who are policyholders must include, when applicable, notice that coverage by state guaranty associations may be available for all or part of policy benefits in accordance with applicable state guaranty laws.
    2. The liquidator shall promptly provide to the guaranty associations any information concerning the identities and addresses of the policyholders and their policy coverages in the liquidator’s possession or control, and otherwise cooperate with guaranty associations to assist them in providing to the policyholders timely notice of the guaranty associations’ coverage of policy benefits, including, as applicable, coverage of claims and continuation or termination of coverages.
  3. If notice is given in accordance with this section, the distribution of assets of the insurer under this chapter shall be conclusive with respect to all claimants, whether or not they received notice.

Source:

S.L. 1991, ch. 305, § 1; 2001, ch. 262, §§ 20, 21.

26.1-06.1-22. Duties of agents.

  1. Every agent who receives notice in the form prescribed in section 26.1-06.1-21 that an insurer represented by that agent is the subject of a liquidation order, within thirty days of such notice, shall provide to the liquidator, in addition to the information the agent may be required to provide pursuant to section 26.1-06.1-06, the information in the agent’s records related to any policy issued by the insurer through the agent, and, if the agent is a general agent, the information in the general agent’s records related to any policy issued by the insurer through a subagent under contract with the agent, including the name and address of the subagent. A policy must be deemed issued through an agent if the agent has a property interest in the expiration of the policy, or if the agent has had possession of a copy of the declarations of the policy at any time during the life of the policy, except when the ownership of the expiration of the policy has been transferred to another.
  2. Any agent failing to provide information to the liquidator as required in subsection 1, following a hearing held by the commissioner, may be subject to license suspension and payment of a penalty of not more than one thousand dollars.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-23. Actions by and against liquidator.

  1. Upon issuance of an order appointing a liquidator of a domestic insurer or of an alien insurer domiciled in this state, no action at law or equity or in arbitration may be brought against the insurer or liquidator, whether in this state or elsewhere, nor may any existing actions be maintained or further presented after issuance of the order. The courts of this state shall give full faith and credit to injunctions against the liquidator or the company or the continuation of existing actions against the liquidator or the company, when the injunctions are included in an order to liquidate an insurer issued pursuant to corresponding provisions in other states. Whenever, in the liquidator’s judgment, protection of the estate of the insurer necessitates intervention in an action against the insurer that is pending outside this state, the liquidator may intervene in the action. In any action in which the liquidator intervenes under this section, the liquidator may defend the action at the expense of the estate of the insurer.
  2. The liquidator may, upon or after an order for liquidation, within two years or such other longer time as applicable law may permit, institute an action or proceeding on behalf of the estate of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which such order is entered. If, by any agreement, a period of limitation is fixed for instituting a suit or proceeding upon any claim, or for filing any claim, proof of claim, proof of loss, demand, notice, or the like, or if in any proceeding, judicial or otherwise, a period of limitation is fixed, either in the proceeding or by applicable law, for taking any action, filing any claim or pleading, or doing any act, and if in any such case the period had not expired at the date of the filing of the petition, the liquidator may, for the benefit of the estate, take any action or do any act, required of or permitted to the insurer, within a period of one hundred eighty days subsequent to the entry of an order for liquidation, or within such further period as is shown to the satisfaction of the court not to be unfairly prejudicial to the other party.
  3. No statute of limitation or defense of laches runs with respect to any action against an insurer between the filing of a petition for liquidation against an insurer and the denial of the petition. Any action against the insurer that might have been commenced when the petition was filed may be commenced for at least sixty days after the petition is denied.
  4. Any guaranty association or foreign guaranty association shall have standing to appear in any court proceeding concerning the liquidation of an insurer if the association is or may become liable to act as a result of the liquidation.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-24. Collection and list of assets.

  1. As soon as practicable after the liquidation order, but not later than one hundred twenty days thereafter, unless extended by order of the court, the liquidator shall prepare in duplicate a list of the insurer’s assets. The list must be amended or supplemented from time to time as the liquidator may determine. One copy must be filed in the office of the recorder, unless the board of county commissioners designates a different official, and one copy must be retained for the liquidator’s files. All amendments and supplements must be similarly filed.
  2. The liquidator shall reduce the assets to a degree of liquidity that is consistent with the effective execution of the liquidation.
  3. A submission to the court for disbursement of assets in accordance with section 26.1-06.1-33 fulfills the requirements of subsection 1 of this section.

Source:

S.L. 1991, ch. 305, § 1; 1999, ch. 278, § 46; 2001, ch. 120, § 1.

26.1-06.1-25. Fraudulent transfers prior to petition.

  1. Every transfer made or suffered and every obligation incurred by an insurer within one year prior to the filing of a successful petition for rehabilitation or liquidation under this chapter is fraudulent as to then existing and future creditors if made or incurred without fair consideration, or with actual intent to hinder, delay, or defraud either existing or future creditors. A transfer made or an obligation incurred by an insurer ordered to be rehabilitated or liquidated under this chapter, which is fraudulent under this section, may be avoided by the receiver, except as to a person who in good faith is a purchaser, lienor, or obligee for a present fair equivalent value, and except that any purchaser, lienor, or obligee, who in good faith has given a consideration less than fair for such transfer, lien, or obligation, may retain the property, lien, or obligation as security for repayment. The court may, on due notice, order any such transfer or obligation to be preserved for the benefit of the estate, and in that event, the receiver shall succeed to and may enforce the rights of the purchaser, lienor, or obligee.
    1. A transfer of property other than real property must be deemed to be made or suffered when it becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee under subsection 3 of section 26.1-06.1-27.
    2. A transfer of real property must be deemed to be made or suffered when it becomes so far perfected that no subsequent bona fide purchaser from the insurer could obtain rights superior to the rights of the transferee.
    3. A transfer which creates an equitable lien may not be deemed to be perfected if there are available means by which a legal lien could be created.
    4. Any transfer not perfected prior to the filing of a petition for liquidation must be deemed to be made immediately before the filing of the successful petition.
    5. The provisions of this subsection apply whether or not there are or were creditors who might have obtained any liens or persons who might have become bona fide purchasers.
  2. Any transaction of the insurer with a reinsurer must be deemed fraudulent and may be avoided by the receiver under subsection 1 if:
    1. The transaction consists of the termination, adjustment, or settlement of a reinsurance contract in which the reinsurer is released from any part of its duty to pay the originally specified share of losses that had occurred prior to the time of the transactions, unless the reinsurer gives a present fair equivalent value for the release; and
    2. Any part of the transaction took place within one year prior to the date of filing of the petition through which the receivership was commenced.
  3. Every person receiving any property from the insurer or any benefit thereof which is a fraudulent transfer under subsection 1 is personally liable therefor and is bound to account to the liquidator.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-26. Fraudulent transfer after petition.

  1. After a petition for rehabilitation or liquidation has been filed, a transfer of any of the real property of the insurer made to a person acting in good faith is valid against the receiver if made for a present fair equivalent value. If the transfer is not made for a present fair equivalent value, then the transfer is valid to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred. The commencement of a proceeding in rehabilitation or liquidation is constructive notice upon the recording of a copy of the petition for or order of rehabilitation or liquidation with the recorder in the county where any real property in question is located. The exercise by a court of the United States or any state or jurisdiction to authorize or effect a judicial sale of real property of the insurer within any county in any state may not be impaired by the pendency of such a proceeding unless the copy is recorded in the county prior to the consummation of the judicial sale.
  2. After a petition for rehabilitation or liquidation has been filed and before either the receiver takes possession of the property of the insurer or an order of rehabilitation or liquidation is granted:
    1. A transfer of any of the property of the insurer, other than real property, made to a person acting in good faith is valid against the receiver if made for a present fair equivalent value. If the transfer is not made for a present fair equivalent value, then the transfer is valid to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred.
    2. A person indebted to the insurer or holding property of the insurer may, if acting in good faith, pay the indebtedness or deliver the property, or any part thereof, to the insurer or upon the insurer’s order, with the same effect as if the petition were not pending.
    3. A person having actual knowledge of the pending rehabilitation or liquidation must be deemed not to act in good faith.
    4. A person asserting the validity of a transfer under this section shall have the burden of proof. Except as elsewhere provided in this section, no transfer by or on behalf of the insurer after the date of the petition for liquidation by any person other than the liquidator is valid against the liquidator.
  3. Every person receiving any property from the insurer or any benefit thereof which is a fraudulent transfer under subsection 1 is personally liable therefor and is bound to account to the liquidator.
  4. Nothing in this chapter impairs the negotiability of currency or negotiable instruments.

Source:

S.L. 1991, ch. 305, § 1; 2001, ch. 120, § 1.

26.1-06.1-27. Voidable preferences and liens.

    1. A preference is a transfer of any of the property of an insurer to or for the benefit of a creditor, for or on account of an antecedent debt, made or suffered by the insurer within one year before the filing of a successful petition for liquidation under this chapter, the effect of which transfer may be to enable the creditor to obtain a greater percentage of this debt than another creditor of the same class would receive. If a liquidation order is entered while the insurer is already subject to a rehabilitation order, then such transfers must be deemed preferences if made or suffered within one year before the filing of the successful petition for rehabilitation, or within two years before the filing of the successful petition for liquidation, whichever time is shorter.
    2. Any preference may be avoided by the liquidator if:
      1. The insurer was insolvent at the time of the transfer;
      2. The transfer was made within four months before the filing of the petition;
      3. The creditor receiving it or to be benefited thereby or the creditor’s agent acting with reference thereto had, at the time when the transfer was made, reasonable cause to believe that the insurer was insolvent or was about to become insolvent; or
      4. The creditor receiving it was an officer, or any employee or attorney or other person who was in fact in a position of comparable influence in the insurer to an officer, whether or not that person held such position, or any shareholder holding directly or indirectly more than five percent of any class of any equity security issued by the insurer, or any other person, firm, corporation, limited liability company, association, or aggregation of persons with whom the insurer did not deal at arm’s length.
    3. When the preference is voidable, the liquidator may recover the property or, if it has been converted, the liquidator may recover its value from any person who has received or converted the property; except when a bona fide purchaser or lienor has given less than fair equivalent value, the bona fide purchaser or lienor shall have a lien upon the property to the extent of the consideration actually given by the bona fide purchaser or lienor. If a preference by way of lien or security title is voidable, the court may on due notice order the lien or title to be preserved for the benefit of the estate, in which event the lien or title shall pass to the liquidator.
    1. A transfer of property other than real property must be deemed to be made or suffered when it becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee.
    2. A transfer of real property must be deemed to be made or suffered when it becomes so far perfected that no subsequent bona fide purchaser from the insurer could obtain rights superior to the rights of the transferee.
    3. A transfer which creates an equitable lien may not be deemed to be perfected if there are available means by which a legal lien could be created.
    4. A transfer not perfected prior to the filing of a petition for liquidation must be deemed to be made immediately before the filing of the successful petition.
    5. The provisions of this subsection apply whether or not there are or were creditors who might have obtained liens or persons who might have become bona fide purchasers.
    1. A lien obtainable by legal or equitable proceedings upon a simple contract is one arising in the ordinary course of such proceedings upon the entry or docketing of a judgment or decree, or upon attachment, garnishment, execution, or like process, whether before, upon, or after judgment or decree and whether before or upon levy. It does not include liens which under applicable law are given a special priority over other liens which are prior in time.
    2. A lien obtainable by legal or equitable proceedings could become superior to the rights of a transferee, or a purchaser could obtain rights superior to the rights of a transferee within the meaning of subsection 2, if such consequences would follow only from the lien or purchase itself, or from the lien or purchase followed by any step wholly within the control of the respective lienholder or purchaser, with or without the aid of ministerial action by public officials. Such a lien could not, however, become superior and such a purchase could not create superior rights for the purpose of subsection 2 through any acts subsequent to the obtaining of such a lien or subsequent to such a purchase which require the agreement or concurrence of any third party or which require any further judicial action or ruling.
  1. A transfer of property for or on account of a new and contemporaneous consideration, which is deemed under subsection 2 to be made or suffered after the transfer because of delay in perfecting it, does not thereby become a transfer for or on account of an antecedent debt if any acts required by the applicable law to be performed in order to perfect the transfer as against liens or bona fide purchasers’ rights are performed within twenty-one days or any period expressly allowed by the law, whichever is less. A transfer to secure a future loan, if such a loan is actually made, or a transfer which becomes security for a future loan, has the same effect as a transfer for or on account of a new and contemporaneous consideration.
  2. If any lien deemed voidable under subdivision b of subsection 1 has been dissolved by the furnishing of a bond or other obligation, the surety on which has been indemnified directly or indirectly by the transfer of or the creation of a lien upon any property of an insurer before the filing of a petition under this chapter which results in a liquidation order, the indemnifying transfer or lien must also be deemed voidable.
  3. The property affected by any lien deemed voidable under subsections 1 and 5 must be discharged from the lien, and that property and any of the indemnifying property transferred to or for the benefit of a surety passes to the liquidator, except that the court may on due notice order any such lien to be preserved for the benefit of the estate and the court may direct that such conveyance be executed as may be proper or adequate to evidence the title of the liquidator.
  4. The district court shall have summary jurisdiction of any proceeding by the liquidator to hear and determine the rights of any parties under this section. Reasonable notice of any hearing in the proceeding must be given to all parties in interest, including the obligee of a releasing bond or other like obligation. When an order is entered for the recovery of indemnifying property in kind or for the avoidance of an indemnifying lien, the court, upon application of any party in interest, shall in the same proceeding ascertain the value of the property or lien, and if the value is less than the amount for which the property is indemnity or less than the amount of the lien, the transferee or lienholder may elect to retain the property or lien upon payment to the liquidator of its value, as ascertained by the court, within such reasonable times as the court shall fix.
  5. The liability of the surety under a releasing bond or other like obligation must be discharged to the extent of the value of the indemnifying property recovered or the indemnifying lien nullified and avoided by the liquidator, or, when the property is retained under subsection 7, to the extent of the amount paid to the liquidator.
  6. If a creditor has been preferred, and afterward in good faith gives the insurer further credit, without security of any kind, for property which becomes a part of the insurer’s estate, the amount of the new credit remaining unpaid at the time of the petition may be set off against the preference which would otherwise be recoverable from the creditor.
  7. If an insurer, directly or indirectly, within four months before the filing of a successful petition for liquidation under this chapter, or at any time in contemplation of a proceeding to liquidate it, pays money or transfers property to an attorney at law for services rendered or to be rendered, the transactions may be examined by the court on its own motion or must be examined by the court on petition of the liquidator and must be held valid only to the extent of the reasonable amount to be determined by the court, and the excess may be recovered by the liquidator for the benefits of the estate provided that when the attorney is in a position of influence in the insurer or an affiliate thereof, payment of any money or the transfer of any property to the attorney at law for services rendered or to be rendered must be governed by the provision of paragraph 4 of subdivision b of subsection 1.
    1. Every officer, manager, employee, shareholder, member, subscriber, attorney, or any other person acting on behalf of the insurer who knowingly participates in giving any preference when that person has reasonable cause to believe the insurer is insolvent or is about to become insolvent at the time of the preference is personally liable to the liquidator for the amount of the preference. It is permissible to infer that there is a reasonable cause to believe the insurer is insolvent or is about to become insolvent if the transfer was made within four months prior to the date of filing of the successful petition for liquidation.
    2. Every person receiving any property from the insurer or the benefit thereof as a preference voidable under subsection 1 is personally liable therefor and is bound to account to the liquidator.
    3. Nothing in this subsection prejudices any other claim by the liquidator against any person.

Source:

S.L. 1991, ch. 305, § 1; 1993, ch. 54, § 106.

26.1-06.1-28. Claims of holders of void or voidable rights.

  1. No claims of a creditor who has received or acquired a preference, lien, conveyance, transfer, assignment, or encumbrance voidable under this chapter may be allowed unless the creditor surrenders the preference, lien, conveyance, transfer, assignment, or encumbrance. If the avoidance is effected by a proceeding in which a final judgment has been entered, the claim may not be allowed unless the money is paid or the property is delivered to the liquidator within thirty days from the date of the entering of the final judgment, except that the court having jurisdiction over the liquidation may allow further time if there is an appeal or other continuation of the proceeding.
  2. A claim allowable under subsection 1 by reason of the avoidance, whether voluntary or involuntary, or a preference, lien, conveyance, transfer, assignment, or encumbrance, may be filed as an excused last filing under section 26.1-06.1-34 if filed within thirty days from the date of the avoidance, or within the further time allowed by the court under subsection 1.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-29. Setoffs.

  1. Mutual debts or mutual credits, whether arising out of one or more contracts between the insurer and another person in connection with any action or proceeding under this chapter, must be set off and the balance only may be allowed or paid, except as provided in subsection 2 and section 26.1-06.1-32.
  2. No setoff may be allowed in favor of any person when:
    1. The obligation of the insurer to the person would not at the date of filing of a petition for receivership entitle the person to share as a claimant in the assets of the insurer;
    2. The obligation of the insurer to the person was purchased by or transferred to the person with a view to its being used as a setoff;
    3. The obligation of the insurer is owed to an affiliate of the person, or any other entity or association other than the person;
    4. The obligation of the person is owed to an affiliate of the insurer, or any other entity or association other than the insurer;
    5. The obligation of the person is to pay an assessment levied against the members or subscribers of the insurer, or is to pay a balance upon a subscription to the capital stock of the insurer, or is in any other way in the nature of a capital contribution; or
    6. The obligations between the person and the insurer arise from business when either the person or the insurer has assumed risks and obligations from the other party and has ceded back to that party substantially the same risks and obligations.
  3. These amendments become effective from the date of enactment and apply to all contracts entered into, renewed, extended, or amended on or after that date, and to debts or credits arising from any business written or transactions occurring after the effective date pursuant to any such contract. For purposes of this section, any change in the terms of, or consideration for, any such contract is deemed an amendment.

Source:

S.L. 1991, ch. 305, § 1; 1997, ch. 249, § 1.

26.1-06.1-30. Assessments.

  1. As soon as practicable but not more than two years from the date of an order of liquidation under section 26.1-06.1-17 of an insurer issuing assessable policies, the liquidator shall make a report to the court setting forth:
    1. The reasonable value of the assets of the insurer;
    2. The insurer’s probable total liabilities;
    3. The probable aggregate amount of the assessment necessary to pay all claims of creditors and expenses in full, including expenses of administration and costs of collecting the assessment; and
    4. A recommendation as to whether or not an assessment should be made and in what amount.
    1. Upon the basis of the report provided in subsection 1, including any supplements and amendments thereto, the district court may levy one or more assessments against all members of the insurer who are subject to assessment.
    2. Subject to any applicable legal limits on assessability, the aggregate assessment must be for the amount that the sum of the probable liabilities, the expenses of administration, and the estimated cost of collection of the assessment, exceeds the value of existing assets, with due regard being given to assessments that cannot be collected economically.
  2. After levy of assessment under subsection 2, the liquidator shall issue an order directing each member who has not paid the assessment pursuant to the order, to show cause why the liquidator should not pursue a judgment therefor.
  3. The liquidator shall give notice of the order to show cause by publication and by first-class mail to each member liable thereunder mailed to the member’s last-known address as it appears on the insurer’s records, at least twenty days before the return day of the order to show cause.
    1. If a member does not appear and serve duly verified objections upon the liquidator on or before the return day of the order to show cause under subsection 3, the court shall make an order adjudging the member liable for the amount of the assessment against the member pursuant to subsection 3, together with costs, and the liquidator shall have a judgment against the member therefor.
    2. If, on or before the return day, the member appears and serves duly verified objections upon the liquidator, the commissioner may hear and determine the matter or may appoint a referee to hear it and make such order as the facts warrant. In the event that the commissioner determines that such objections do not warrant relief from assessment, the member may request the court to review the matter and vacate the order to show cause.
  4. The liquidator may enforce any order or collect any judgment under subsection 5 by any lawful means.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-31. Reinsurer’s liability.

  1. The amount recoverable by the liquidator from reinsurers may not be reduced as a result of the delinquency proceedings unless the reinsurance contract provides, in substance, that in the event of the insolvency of the ceding insurer, the reinsurance must be payable under one or more contracts reinsured by the assuming insurer on the basis of reported claims allowed by the liquidation court or proof of payment of the claim by a guaranty association without diminution because of the insolvency of the ceding insurer. The payments must be made directly to the ceding insurer or to the ceding insurer’s domiciliary liquidator except if:
    1. The contract or other written agreement specifically provides another payee of such reinsurance in the event of the insolvency of the ceding insurer; or
    2. The assuming insurer, with the consent of the direct insured, has assumed such policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under the policies and in substitution for the obligations of the ceding insurer to such payees.
  2. Notwithstanding subsection 1, if a life and health insurance guaranty association has elected to succeed to the rights and obligations of the insolvent insurer under the contract of reinsurance, the reinsurer’s liability to pay covered reinsured claims continues under the contract of reinsurance, subject to the payment to the reinsurer of the reinsurance premiums for such coverage. Payment for such reinsured claims may only be made by the reinsurer pursuant to the direction of the guaranty association or the guaranty association’s designated successor. Any payment made at the direction of the guaranty association or the guaranty association’s designated successor by the reinsurer will discharge the reinsurer of all further liability to any other party for the claim payment.

Source:

S.L. 1991, ch. 305, § 1; 2005, ch. 254, § 2; 2009, ch. 245, § 1.

26.1-06.1-32. Recovery of premiums owed.

    1. An insurance producer, premium finance company, or any other person, other than the insured, responsible for the payment of a premium is obligated to pay any unpaid premium for the full policy term due the insurer at the time of the declaration of insolvency, whether earned or unearned, as shown on the records of the insurer. The liquidator shall also have the right to recover from such person any part of an unearned premium that represents commission of such person. Credits or setoffs, or both, may not be allowed to an insurance producer or premium finance company for any amounts advanced to the insurer by the insurance producer or premium finance company on behalf of, but in the absence of a payment by, the insured.
    2. An insured is obligated to pay any unpaid earned premium due the insurer at the time of the declaration of insolvency, as shown on the records of the insurer.
  1. Upon satisfactory evidence of a violation of this section, the commissioner may pursue either one or both of the following courses of action:
    1. Suspend or revoke or refuse to renew the licenses of such offending party or parties.
    2. Impose a penalty of not more than one thousand dollars for each and every act in violation of this section by said party or parties.
  2. Before taking any action as set forth in subsection 2, the commissioner shall give written notice to the person, company, association, or exchange accused of violating the law, stating specifically the nature of the alleged violation and fixing a time and place, at least ten days thereafter, when a hearing on the matter must be held. After the hearing, or upon failure of the accused to appear at the hearing, if a violation is found to have been made, the commissioner shall impose any of the penalties under subsection 2 as deemed advisable.
  3. When the commissioner takes action in any or all of the ways set out in subsection 2, the party aggrieved may appeal from said action to the district court.

Source:

S.L. 1991, ch. 305, § 1; 2001, ch. 262, § 22.

26.1-06.1-33. Domiciliary liquidator’s proposal to distribute assets.

  1. Within one hundred twenty days of a final determination of insolvency of an insurer by the district court, the liquidator shall make application to the court for approval of a proposal to disburse assets out of marshalled assets, from time to time as the assets become available, to a guaranty association or foreign guaranty association having obligations because of the insolvency. If the liquidator determines that there are insufficient assets to disburse, the application required by this section must be considered satisfied by a filing by the liquidator stating the reasons for this determination.
  2. The proposal to disburse assets referred to in subsection 1 must at least include provisions for:
    1. Reserving amounts for the payment of expenses of administration and the payment of claims of secured creditors, to the extent of the value of the security held, and the payment of claims falling within the priorities established in section 26.1-06.1-41, classes one and two;
    2. Disbursement of the assets marshalled to date and subsequent disbursement of assets as they become available;
    3. Equitable allocation of disbursements to each of the guaranty associations and foreign guaranty associations entitled thereto;
    4. The securing by the liquidator from each of the associations entitled to disbursements pursuant to this section of an agreement to return to the liquidator such assets, together with income earned on assets previously disbursed, as may be required to pay claims of secured creditors and claims falling within the priorities established in section 26.1-06.1-41 in accordance with such priorities. No bond may be required of any such association; and
    5. A full report to be made by each association to the liquidator accounting for all assets so disbursed to the association, all disbursements made therefrom, any interest earned by the association on such assets, and any other matter as the court may direct.
  3. The liquidator’s proposal shall provide for disbursements to the associations in amounts estimated at least equal to the claim payments made or to be made thereby for which such associations could assert a claim against the liquidator, and shall further provide that if the assets available for disbursement from time to time do not equal or exceed the amount of such claim payments made or to be made by the association, then disbursements must be in the amount of available assets.
  4. The liquidator’s proposal shall, with respect to an insolvent insurer writing life or health insurance or annuities, provide for disbursements of assets to any guaranty association or any foreign guaranty association covering life or health insurance or annuities or to any other entity or organization reinsuring, assuming, or guaranteeing policies or contracts of insurance under the acts creating such associations.
  5. Notice of such application must be given to the association in and to the commissioners of insurance of each of the states. Any such notice must be deemed to have been given when deposited in the United States certified mail, first-class postage prepaid, at least thirty days prior to submission of the application to the court. Action on the application may be taken by the court provided the above-required notice has been given and provided further that the liquidator’s proposal complies with subdivisions a and b of subsection 2.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-34. Filing of claims.

  1. Proof of all claims must be filed with the liquidator in the form required by section 26.1-06.1-35 on or before the last day for filing specified in the notice required under section 26.1-06.1-21, except that proof of claims for cash surrender values or other investment values in life insurance and annuities need not be filed unless the liquidator expressly so requires.
  2. The liquidator may permit a claimant making a late filing to share in distributions, whether past or future, as if the claimant did not file late, to the extent that any such payment will not prejudice the orderly administration of the liquidation, under any of the following circumstances:
    1. The existence of the claim was not known to the claimant and the claim was filed promptly once the claim became known to the claimant.
    2. A transfer to a creditor was avoided under sections 26.1-06.1-25, 26.1-06.1-26, and 26.1-06.1-27, or was voluntarily surrendered under section 26.1-06.1-28, and the filing satisfies the conditions of section 26.1-06.1-28.
    3. The valuation under section 26.1-06.1-40, of security held by a secured creditor shows a deficiency, which is filed within thirty days after the valuation.
  3. The liquidator shall permit late filing claims to share in distribution, whether past or future, as if the claims were not filed late, if the claims are claims of a guaranty association or foreign guaranty association for reimbursement of covered claims paid or expenses incurred, or both, subsequent to the last day for filing when such payments were made and expenses incurred as provided by law.
  4. The liquidator may consider any claim filed late which is not covered by subsection 2, and permit it to receive distributions which are subsequently declared on any claims of the same or lower priority if the payment does not prejudice the orderly administration of the liquidation. The late filing claimant shall receive, at each distribution, the same percentage of the amount allowed on the late filed claim as is then being paid to claimants of any lower priority. This must continue until the late filed claim has been paid in full.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-35. Proof of claim.

  1. Proof of claim must consist of a statement signed by the claimant that includes all of the following that are applicable:
    1. The particulars of the claim including the consideration given for it;
    2. The identity and amount of the security on the claim;
    3. The payments made on the debt, if any;
    4. That the sum claimed is justly owing and that there is no setoff, counterclaim, or defense to the claim;
    5. Any right of priority of payment or other specific right asserted by the claimants;
    6. A copy of the written instrument which is the foundation of the claim; and
    7. The name and address of the claimant and the attorney who represents the claimant, if any.
  2. No claim need be considered or allowed if it does not contain all the information in subsection 1 which may be applicable. The liquidator may require that a prescribed form be used, and may require that other information and documents be included.
  3. At any time the liquidator may request the claimant to present information or evidence supplementary to that required under subsection 1 and may take testimony under oath, require production of affidavits or depositions, or otherwise obtain additional information or evidence.
  4. No judgment or order against an insured or the insurer entered after the date of filing of a successful petition for liquidation, and no judgment or order against an insured or the insurer entered at any time by default or by collusion need be considered as evidence of liability or of the amount of damages. No judgment or order against an insured or the insurer entered within four months before the filing of the petition need be considered as evidence of liability or of the amount of damages.
  5. All claims of a guaranty association or foreign guaranty association must be in such form and contain such substantiation as may be agreed to by the association and the liquidator.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-36. Special claims.

  1. The claim of a third party which is contingent only on first obtaining a judgment against the insured must be considered and allowed as if there were no such contingency.
  2. A claim may be allowed even if contingent, if it is filed in accordance with section 26.1-06.1-34. It may be allowed and may participate in all distributions declared after it is filed to the extent that it does not prejudice the orderly administration of the liquidation.
  3. Claims that are due except for the passage of time must be treated as absolute claims are treated, except that such claims may be discounted at the legal rate of interest.
  4. Claims made under employment contracts by directors, principal officers, or persons in fact performing similar functions or having similar powers are limited to payment for services rendered prior to the issuance of any order of rehabilitation or liquidation under section 26.1-06.1-12 or 26.1-06.1-17.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-37. Special provisions for third-party claims.

  1. Whenever any third party asserts a cause of action against an insured of an insurer in liquidation, the third party may file a claim with the liquidator.
  2. Whether or not the third party files a claim, the insured may file a claim in the liquidation. If the insured fails to file a claim by the date for filing claims specified in the order of liquidation or within sixty days after mailing of the notice required by section 26.1-06.1-21, whichever is later, the insured is an unexcused late filer.
  3. The liquidator shall make recommendations to the court under section 26.1-06.1-41, for the allowance of an insured’s claim under subsection 2 after consideration of the probable outcome of any pending action against the insured on which the claim is based, the probable damages recoverable in the action, and the probable costs and expenses of defense. After allowance by the court, the liquidator shall withhold any dividends payable on the claim, pending the outcome of litigation and negotiation with the insured. Whenever it seems appropriate, the liquidator shall reconsider the claim on the basis of additional information and amend recommendations made to the court. The insured must be afforded the same notice and opportunity to be heard on all changes in the recommendation as in its initial determination. The court may amend its allowance as it deems appropriate. As claims against the insured are settled or barred, the insured must be paid from the amount withheld the same percentage dividend as was paid on other claims of like property, based on the lesser of:
    1. The amount actually recovered from the insured by action or paid by agreement plus the reasonable costs and expenses of defense; or
    2. The amount allowed on the claims by the court.
  4. If several claims founded upon one policy are filed, whether by third parties or as claims by the insured under this section, and the aggregate allowed amount of the claims to which the same limit of liability in the policy is applicable exceeds that limit, each claim as allowed must be reduced in the same proportion so that the total equals the policy limit. Claims by the insured must be evaluated as in subsection 3. If any insured’s claim is subsequently reduced under subsection 3, the amount thus freed must be apportioned ratably among the claims which have been reduced under this subsection.
  5. No claim may be presented under this section if it is or may be covered by any guaranty association or foreign guaranty association.

After all claims are settled or barred, any sum remaining from the amount withheld must revert to the undistributed assets of the insurer. Delay in final payment under this subsection is not a reason for unreasonable delay of final distribution and discharge of the liquidator.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-38. Disputed claims.

  1. When a claim is denied in whole or in part by the liquidator, written notice of the determination must be given to the claimant or the claimant’s attorney by first-class mail at the address shown in the proof of claim. Within sixty days from the mailing of the notice, the claimant may file objections to the determination with the liquidator. If no such filing is made, the claimant may not further object to the determination.
  2. Whenever objections are filed with the liquidator and the liquidator does not alter the denial of the claim as a result of the objections, the liquidator shall ask the court for a hearing as soon as practicable and give notice of the hearing by first-class mail to the claimant or the claimant’s attorney and to any other persons directly affected, not less than ten nor more than thirty days before the date of the hearing. The matter may be heard by the court or by a court-appointed referee who shall submit findings of fact along with a recommendation.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-39. Claims of surety.

Whenever a creditor whose claim against an insurer is secured, in whole or in part, by the undertaking of another person, fails to prove and file that claim, the other person may do so in the creditor’s name, and must be subrogated to the rights of the creditor, whether the claim has been filed by the creditor or by the other person in the creditor’s name, to the extent that the other person discharges the undertaking. In the absence of an agreement with the creditor to the contrary, the other person is not entitled to any distribution; however, until the amount paid to the creditor on the undertaking plus the distributions paid on the claim from the insurer’s estate to the creditor equals the amount of the entire claim of the creditor. Any excess received by the creditor must be held by the creditor in trust for such other person. The term “other person” as used in this section is not intended to apply to a guaranty association or foreign guaranty association.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-40. Secured creditor’s claims.

  1. The value of any security held by a secured creditor must be determined in one of the following ways, as the court may direct:
    1. By converting the same into money according to the terms of the agreement pursuant to which the security was delivered to such creditors; or
    2. By agreement, arbitration, compromise, or litigation between the creditor and the liquidator.
  2. The determination must be under the supervision and control of the court with due regard for the recommendation of the liquidator. The amount so determined must be credited upon the secured claim, and any deficiency must be treated as an unsecured claim. If the claimant surrenders the security to the liquidator, the entire claim must be allowed as if unsecured.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-41. Priority of distribution.

The priority of distribution of claims from the insurer’s estate must be in accordance with the order in which each class of claims is herein set forth. Every claim in each class must be paid in full or adequate funds retained for such payment before the members of the next class receive any payment. No subclasses may be established within any class. The order of distribution of claims must be:

  1. Class 1. The costs and expenses of administration during rehabilitation and liquidation, including the following:
    1. The actual and necessary costs of preserving or recovering the assets of the insurer;
    2. Compensation for all authorized services rendered in the rehabilitation and liquidation;
    3. Any necessary filing fees;
    4. The fees and mileage payable to witnesses;
    5. Authorized reasonable attorney’s fees and other professional services rendered in the rehabilitation and liquidation; and
    6. The reasonable expenses of a guaranty association or foreign guaranty association for unallocated loss adjustment expenses.
  2. Class 2. All claims under policies including such claims of the federal or any state or local government for losses incurred, (“loss claims”) including third-party claims and all claims of a guaranty association or foreign guaranty association. All claims under life insurance and annuity policies, whether for death proceeds, annuity proceeds, or investment values must be treated as loss claims. That portion of any loss, indemnification for which is provided by other benefits, or advantages recovered by the claimant, may not be included in this class, other than benefits or advantages recovered or recoverable in discharge of familial obligation of support or by way of succession at death or as proceeds of life insurance, or as gratuities. No payment by an employer to employees may be treated as a gratuity.
  3. Class 3. Claims of the federal government not included in class 2.
  4. Class 4. Reasonable compensation to employees for services performed to the extent that they do not exceed two months of monetary compensation and represent payment for services performed within one year before the filing of the petition for liquidation or if rehabilitation preceded liquidation, within one year before the filing of the petition for rehabilitation. Principal officers and directors are not entitled to the benefit of this priority except as otherwise approved by the liquidator and the court. Such priority must be in lieu of any other similar priority which may be authorized by law as to wages or compensation of employees.
  5. Class 5. Claims under nonassessable policies for unearned premium or other premium refunds and claims of general creditors, including claims of ceding and assuming companies in their capacity as such.
  6. Class 6. Claims of any state or local government except those paid under class 2. Claims, including those of any state or local governmental body for a penalty or forfeiture, may be allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby. The remainder of the claims must be postponed to the class of claims under subsection 9.
  7. Class 7. Claims filed late or any other claims other than claims under subsections 8 and 9.
  8. Class 8. Surplus or contribution notes, or similar obligations, and premium funds on assessable policies. Payment to members of domestic mutual insurance companies must be limited in accordance with law.
  9. Class 9. The claims of shareholders or other owners in their capacity as shareholders.

If any provision of this section or the application of any provision of this section to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this section, and to this end the provisions are severable.

Source:

S.L. 1991, ch. 305, § 1; 1997, ch. 250, § 1.

26.1-06.1-42. Liquidator’s recommendations to the court.

  1. The liquidator shall review all claims duly filed in the liquidation and shall make such further investigation as deemed necessary. The liquidator may compound, compromise, or in any other manner negotiate the amount for which claims will be recommended to the court except when the liquidator is required by law to accept claims as settled by any person or organization, including any guaranty association or foreign guaranty association. Unresolved disputes must be determined under section 26.1-06.1-38. As soon as practicable, the liquidator shall present to the court a report of the claims against the insurer along with the recommendations of the liquidator. The report must include the name and address of each claimant and the amount of the claim finally recommended, if any. If the insurer has issued annuities or life insurance policies, the liquidator shall report the persons to whom, according to the records of the insurer, amounts are owed as cash surrender values or other investment value and the amounts owed.
  2. The court may approve, disapprove, or modify the report on claims by the liquidator. The reports which are not modified by the court within a period of sixty days following submission by the liquidator must be treated by the liquidator as allowed claims, subject thereafter to later modification or to rulings made by the court pursuant to section 26.1-06.1-38. No claim under a policy of insurance may be allowed for an amount in excess of the applicable policy limits.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-43. Distribution of assets.

Under the direction of the court, the liquidator shall pay distributions in a manner that will assure the proper recognition of priorities and a reasonable balance between the expeditious completion of the liquidation and the protection of unliquidated and undetermined claims, including third-party claims. Distribution of assets in kind may be made at valuations set by agreement between the liquidator and the creditor and approved by the court.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-44. Unclaimed and withheld funds.

  1. All unclaimed funds subject to distribution remaining under the liquidator’s control when the liquidator is ready to apply to the court for discharge, including the amount distributable to any creditor, shareholder, member, or other person who is unknown or cannot be found, must be deposited with the state treasurer, and must be paid without interest except in accordance with section 26.1-06.1-41 to the person entitled thereto or the person’s legal representative upon proof satisfactory to the state treasurer of the person’s right thereto. Any amount on deposit not claimed within six years from the discharge of the liquidator must be deemed to have been abandoned and must be escheated without formal escheat proceedings and be deposited with the general fund.
  2. All funds withheld under section 26.1-06.1-36 and not distributed must, upon discharge of the liquidator, be deposited with the state treasurer and paid out in accordance with section 26.1-06.1-41. Any sums remaining which under section 26.1-06.1-41 would revert to the undistributed assets of the insurer must be transferred to the state treasurer and become the property of the state under subsection 1, unless the commissioner petitions the court to reopen the liquidation under section 26.1-06.1-46.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-45. Termination of proceedings.

  1. When all assets justifying the expense of collection and distribution have been collected and distributed under this chapter, the liquidator shall apply to the court for discharge. The court may grant the discharge and make any other orders, including an order to transfer any remaining funds that are uneconomic to distribute, as may be deemed appropriate.
  2. Any other person may apply to the court at any time for an order under subsection 1. If the application is denied, the applicant shall pay the costs and expenses of the liquidator in resisting the application, including a reasonable attorney’s fee.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-46. Reopening liquidation.

After the liquidation proceeding has been terminated and the liquidator discharged, the commissioner or other interested party may at any time petition the district court to reopen the proceedings for good cause, including the discovery of additional assets. If the court is satisfied that there is justification for reopening, it shall so order.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-47. Disposition of records during and after termination of liquidation.

Whenever it appears to the commissioner that the records of any liquidated insurer or any insurer in the process of liquidation are no longer useful, the commissioner may recommend to the court and the court direct which records should be retained for future reference and which records should be destroyed.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-48. External audit of the receiver’s books.

The district court may, as it deems necessary, cause audits to be made of the books of the commissioner relating to any receivership established under this chapter, and a report of each audit must be filed with the commissioner and with the court. The books, records, and other documents of the receivership must be made available to the auditor at any time without notice. The expense of each audit must be considered a cost of administration of the receivership.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-49. Conservation of property of foreign or alien insurers found in this state.

  1. If a domiciliary liquidator has not been appointed, the commissioner may apply to the district court by verified petition for an order directing the commissioner to act as conservator to conserve the property of an alien insurer not domiciled in this state or a foreign insurer on any one or more of the following grounds:
    1. Any of the grounds in section 26.1-06.1-11;
    2. That any of its property has been sequestered by official action in its domiciliary state, or in any other state;
    3. That enough of its property has been sequestered in a foreign country to give reasonable cause to fear that the insurer is or may become insolvent; and
      1. That its certificate of authority to do business in this state has been revoked or that none was ever issued; and
      2. That there are residents of this state with outstanding claims or outstanding policies.
  2. When an order is sought under subsection 1, the court shall cause the insurer to be given such notice and time to respond thereto as is reasonable under the circumstances.
  3. The court may issue the order in whatever terms it deems appropriate. The filing or recording of the order with the recorder, unless the board of county commissioners designates a different official, of the county in which the principal business of the company is located, imparts the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that recorder, or designated official.
  4. The conservator may at any time petition for and the court may grant an order under section 26.1-06.1-50 to liquidate assets of a foreign or alien insurer under conservation, or, if appropriate, an order to be appointed ancillary receiver under section 26.1-06.1-52.
  5. The conservator may at any time petition the court for an order terminating conservation of an insurer. If the court finds that the conservation is no longer necessary, it shall order that the insurer be restored to possession of its property and the control of its business. The court may also make such finding and issue such order at any time upon motion of any interested party, but if the motion is denied, all costs must be assessed against the moving party.

Source:

S.L. 1991, ch. 305, § 1; 1999, ch. 278, § 47; 2001, ch. 120, § 1.

26.1-06.1-50. Liquidation of property of foreign or alien insurers found in this state.

  1. If no domiciliary receiver has been appointed, the commissioner may apply to the district court by verified petition for an order directing the commissioner to liquidate the assets found in this state of a foreign insurer or an alien insurer not domiciled in this state, on any of the following grounds:
    1. Any of the grounds in section 26.1-06.1-11 or 26.1-06.1-16; or
    2. Any of the grounds specified in subdivisions b, c, and d of subsection 1 of section 26.1-06.1-49.
  2. When an order is sought under subsection 1, the court shall cause the insurer to be given such notice and time to respond thereto as is reasonable under the circumstances.
  3. If it appears to the court that the best interests of creditors, policyholders, and the public require, the court may issue an order to liquidate in whatever terms it deems appropriate. The filing or recording of the order with the recorder, unless the board of county commissioners designates a different official, of the county in which the principal business of the company is located or the county in which its principal office or place of business is located, imparts the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that recorder, or designated official.
  4. If a domiciliary liquidator is appointed in a reciprocal state while a liquidation is proceeding under this section, the liquidator under this section shall thereafter act as ancillary receiver under section 26.1-06.1-52. If a domiciliary liquidator is appointed in a nonreciprocal state while a liquidation is proceeding under this section, the liquidator under this section may petition the court for permission to act as ancillary receiver under section 26.1-06.1-52.
  5. On the same grounds as are specified in subsection 1, the commissioner may petition any appropriate federal district court to be appointed receiver to liquidate that portion of the insurer’s assets and business over which the court will exercise jurisdiction, or any lesser part thereof that the commissioner deems desirable for the protection of the policyholders and creditors in this state.
  6. Once the assets of a foreign or alien insurer have been liquidated by the commissioner under this section, the court may order the commissioner to pay claims of residents of this state against the insurer under such rules as to the liquidation of insurers under this chapter as are otherwise compatible with the provisions of this section.

Source:

S.L. 1991, ch. 305, § 1; 1999, ch. 278, § 48; 2001, ch. 120, § 1.

26.1-06.1-51. Domiciliary liquidators in other states.

  1. The domiciliary liquidator of an insurer domiciled in a reciprocal state, except as to special deposits and security on secured claims under subsection 3 of section 26.1-06.1-52, is vested by operation of law with the title to all of the assets, property, contracts and rights of action, insurance producers’ balances, and all of the books, accounts, and other records of the insurer located in this state. The date of vesting must be the date of the filing of the petition, if that date is specified by the domiciliary law for the vesting of property in the domiciliary state. Otherwise, the date of vesting must be the date of entry of the order directing possession to be taken. The domiciliary liquidator shall have the immediate right to recover balances due from insurance producers and to obtain possession of the books, accounts, and other records of the insurer located in this state. The domiciliary liquidator shall also have the right to recover all other assets of the insurer located in this state, subject to section 26.1-06.1-52.
  2. If a domiciliary liquidator is appointed for an insurer not domiciled in a reciprocal state, the commissioner of this state is vested by operation of law with the title to all of the property, contracts and right of action, and all of the books, accounts, and other records of the insurer located in this state, at the same time that the domiciliary liquidator is vested with title in the domicile. The commissioner of this state may petition for a conservation or liquidation order under section 26.1-06.1-49 or 26.1-06.1-50, or for an ancillary receivership under section 26.1-06.1-52, or after approval by the district court may transfer title to the domiciliary liquidator, as the interests of justice and the equitable distribution of the assets require.
  3. Claimants residing in this state may file claims with the liquidator or ancillary receiver, if any, in this state or with the domiciliary liquidator, if the domiciliary law permits. The claims must be filed on or before the last date fixed for the filing of claims in the domiciliary liquidation proceedings.

Source:

S.L. 1991, ch. 305, § 1; 2001, ch. 262, § 23.

26.1-06.1-52. Ancillary formal proceedings.

  1. If a domiciliary liquidator has been appointed for an insurer not domiciled in this state, the commissioner may file a petition with the district court requesting appointment as ancillary receiver in this state:
    1. If the commissioner finds that there are sufficient assets of the insurer located in this state to justify the appointment of an ancillary receiver; or
    2. If the protection of creditors or policyholders in this state so requires.
  2. The court may issue an order appointing an ancillary receiver in whatever terms it shall deem appropriate. The filing or recording of the order with the recorder in this state imparts that same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that recorder.
  3. When a domiciliary liquidator has been appointed in a reciprocal state, the ancillary receiver appointed in this state may, whenever necessary, aid and assist the domiciliary liquidator in recovering assets of the insurer located in this state. The ancillary receiver shall, as soon as practicable, liquidate from their respective securities those special deposit claims and secured claims which are proved and allowed in the ancillary proceedings in this state, and shall pay the necessary expenses of the proceedings. The ancillary receiver shall promptly transfer all remaining assets, books, accounts, and records to the domiciliary liquidator. Subject to this section, the ancillary receiver and deputies of the ancillary receiver shall have the same powers and be subject to the same duties with respect to the administration of assets as a liquidator of an insurer domiciled in this state.
  4. When a domiciliary liquidator has been appointed in this state, ancillary receivers appointed in reciprocal states shall have, as to assets and books, accounts, and other records in their respective states, corresponding rights, duties, and powers to those provided in subsection 3 for ancillary receivers appointed in this state.

Source:

S.L. 1991, ch. 305, § 1; 2001, ch. 120, § 1.

26.1-06.1-53. Ancillary summary proceedings.

The commissioner has sole discretion to institute proceedings under sections 26.1-06.1-09 and 26.1-06.1-10 at the request of the commissioner or other appropriate insurance official of the domiciliary state of any foreign or alien insurer having property located in this state.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-54. Claims of nonresidents against insurers domiciled in this state.

  1. In a liquidation proceeding begun in this state against an insurer domiciled in this state, claimants residing in foreign countries or in states not reciprocal states must file claims in this state, and claimants residing in reciprocal states may file claims either with the ancillary receivers, if any, in their respective states, or with the domiciliary liquidator. Claims must be filed on or before the last date fixed for the filing of claims in the domiciliary liquidation proceeding.
  2. Claims belonging to claimants residing in reciprocal states may be proved either in the liquidation proceeding in this state as provided in this chapter, or in ancillary proceedings, if any, in the reciprocal states. If notice of the claims and opportunity to appear and be heard is afforded the domiciliary liquidator of this state as provided in subsection 2 of section 26.1-06.1-55 with respect to ancillary proceedings, the final allowance of claims by the courts in ancillary proceedings in reciprocal states is conclusive as to amount and as to priority against special deposits or other security located in such ancillary states, but is not conclusive with respect to priorities against general assets under section 26.1-06.1-41.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-55. Claims of residents against insurers domiciled in reciprocal states.

  1. In a liquidation proceeding in a reciprocal state against an insurer domiciled in that state, claimants against the insurer who reside within this state may file claims either with the ancillary receiver, if any, in this state, or with the domiciliary liquidator. Claims must be filed on or before the last dates fixed for the filing of claims in the domiciliary liquidation proceeding.
  2. Claims belonging to claimants residing in this state may be proved either in the domiciliary state under the law of that state, or in ancillary proceedings, if any, in this state. If a claimant elects to prove a claim in this state, the claimant shall file the claim with the liquidator in the manner provided in sections 26.1-06.1-34 and 26.1-06.1-35. The ancillary receiver shall make a recommendation to the court as under section 26.1-06.1-42. The ancillary receiver shall also arrange a date for hearing if necessary under section 26.1-06.1-38 and shall give notice to the liquidator in the domiciliary state, either by certified mail or by personal service at least forty days prior to the date set for hearing. If the domiciliary liquidator, within thirty days after the giving of such notice, gives notice in writing to the ancillary receiver and to the claimant, either by certified mail or by personal service, of intention to contest the claim, the domiciliary liquidator is entitled to appear or to be represented in any proceeding in this state involving the adjudication of the claim.
  3. The final allowance of the claim by the courts of this state must be accepted as conclusive as to amount and as to priority against special deposits or other security located in this state.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-56. Attachment, garnishment, and levy of execution.

During the pendency of a liquidation proceeding in this or any other state, whether the liquidation proceeding is identified as such or not, no action or proceeding in the nature of an attachment, garnishment, or levy of execution may be commenced or maintained in this state against the delinquent insurer or its assets.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-57. Interstate priorities.

  1. In a liquidation proceeding in this state involving one or more reciprocal states, the order of distribution of the domiciliary state shall control as to all claims of residents of this and reciprocal states. All claims of residents of reciprocal states must be given equal priority of payment from general assets regardless of where such assets are located.
  2. The owners of special deposit claims against an insurer for which a liquidator is appointed in this or any other state must be given priority against the special deposits in accordance with the statutes governing the creation and maintenance of the deposits. If there is a deficiency in any deposit, so that the claims secured by it are not fully discharged from it, the claimants may share in the general assets, but the sharing must be deferred until general creditors, and claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from the special deposit.
  3. The owner of a secured claim against an insurer for which a liquidator has been appointed in this or any other state may surrender the security and file a claim as a general creditor, or the claim may be discharged by resort to the security in accordance with section 26.1-06.1-40, in which case the deficiency, if any, must be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-58. Subordination of claims for noncooperation.

If an ancillary receiver in another state or foreign country, whether called by that name or not, fails to transfer to the domiciliary liquidator in this state any assets within the control of the ancillary receiver, other than special deposits, diminished only by the expenses of the ancillary receivership, if any, the claims filed in the ancillary receivership, other than special deposit claims or secured claims, must be placed in the class of claims under subsection 7 of section 26.1-06.1-41.

Source:

S.L. 1991, ch. 305, § 1.

26.1-06.1-59. Separability.

If any provision of this chapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the chapter and the application of such provision to other persons or circumstances may not be affected thereby.

Source:

S.L. 1991, ch. 305, § 1.

CHAPTER 26.1-06.2 Administrative Supervision

26.1-06.2-01. Definitions.

As used in this chapter:

  1. “Consent” means agreement to administrative supervision by the insurer.
  2. “Exceeded its powers” means any of the following conditions:
    1. The insurer has refused to permit examination of its books, papers, accounts, records, or affairs by the commissioner, the commissioner’s deputies, employees, or duly commissioned examiners.
    2. A domestic insurer has unlawfully removed from this state books, papers, accounts, or records necessary for an examination of the insurer.
    3. The insurer has failed to promptly comply with the applicable financial reporting statutes or rules and departmental requests relating thereto.
    4. The insurer has neglected or refused to observe an order of the commissioner to make good, within the time prescribed by law, any prohibited deficiency in its capital, capital stock, or surplus.
    5. The insurer is continuing to transact insurance or write business after its license has been revoked or suspended by the commissioner.
    6. The insurer, by contract or otherwise, has unlawfully or has in violation of an order of the commissioner or has without first having obtained written approval of the commissioner, if approval is required by law, totally reinsured its entire outstanding business, or merged or consolidated substantially its entire property or business with another insurer.
    7. The insurer engaged in any transaction in which it is not authorized to engage under the laws of this state.
    8. The insurer refused to comply with a lawful order of the commissioner.
  3. “Insurer” means and includes every person engaged as indemnity, surety, or contractor in the business of insurance or of annuities. For purposes of this chapter, any other persons included under section 26.1-06.1-02 must be deemed to be insurers.

Source:

S.L. 1993, ch. 292, § 10.

26.1-06.2-02. Scope.

The provisions of this chapter apply to:

  1. All domestic insurers.
  2. Any other insurer doing business in this state whose state of domicile has asked the commissioner to apply the provisions of this chapter as regards such insurer.

Source:

S.L. 1993, ch. 292, § 10.

26.1-06.2-03. Notice to comply with written requirements of commissioner — Noncompliance — Administrative supervision.

  1. An insurer may be subject to administrative supervision by the commissioner if upon examination or at any other time it appears in the commissioner’s discretion that:
    1. The insurer’s condition renders the continuance of its business hazardous to the public or to its insureds.
    2. The insurer appears to have exceeded its powers granted under its certificate of authority and applicable law.
    3. The insurer has failed to comply with the applicable provisions of this title.
    4. The business of the insurer is being conducted fraudulently.
    5. The insurer gives its consent.
  2. If the commissioner determines that the conditions set forth in subsection 1 exist, the commissioner shall:
    1. Notify the insurer of the commissioner’s determination.
    2. Furnish to the insurer a written list of the requirements to abate this determination.
    3. Notify the insurer that it is under the supervision of the commissioner and that the commissioner is applying and effectuating the provisions of the chapter. The action by the commissioner is subject to review pursuant to chapter 28-32.
  3. If placed under administrative supervision, the insurer has sixty days, or another period of time as designated by the commissioner, to comply with the requirements of the commissioner subject to the provisions of this chapter.
  4. If it is determined after notice and hearing that the conditions giving rise to the supervision still exist at the end of the supervision period specified above, the commissioner may extend the supervision period.
  5. If it is determined that none of the conditions giving rise to the supervision exist, the commissioner shall release the insurer from supervision.

Source:

S.L. 1993, ch. 292, § 10.

26.1-06.2-04. Confidentiality of certain proceedings and records.

  1. Notwithstanding any other provision of law and except as set forth in this section, proceedings, hearings, notices, correspondence, reports, records, and other information in the possession of the commissioner or the department relating to the supervision of any insurer are confidential.
  2. The personnel of the department shall have access to these proceedings, hearings, notices, correspondence, reports, records, or information as permitted by the commissioner.
  3. The commissioner may open the proceedings or hearings or disclose the notices, correspondence, reports, records, or information to a department, agency, or instrumentality of this or another state or the United States if the commissioner determines that the disclosure is necessary or proper for the enforcement of the laws of this or another state or the United States.
  4. The commissioner may open the proceedings or hearings or make public the notices, correspondence, reports, records, or other information if the commissioner deems that it is in the best interest of the public or in the best interest of the insurer, its insureds, creditors, or the general public.
  5. This section does not apply to hearings, notices, correspondence, reports, records, or other information obtained upon the appointment of a receiver for the insurer by a court of competent jurisdiction.

Source:

S.L. 1993, ch. 292, § 10.

26.1-06.2-05. Prohibited acts during supervision.

During the period of supervision, the commissioner or the commissioner’s designated appointee shall serve as the administrative supervisor. The commissioner may provide that the insurer may not do any of the following things during the period of supervision, without the prior approval of the commissioner or the commissioner’s appointed supervisor:

  1. Dispose of, convey, or encumber any of its assets or its business in force.
  2. Withdraw any of its bank accounts.
  3. Lend any of its funds.
  4. Invest any of its funds.
  5. Transfer any of its property.
  6. Incur any debt, obligation, or liability.
  7. Merge or consolidate with another company.
  8. Approve new premiums or renew any policies.
  9. Enter into any new reinsurance contract or treaty.
  10. Terminate, surrender, forfeit, convert, or lapse any insurance policy, certificate, or contract, except for nonpayment of premiums due.
  11. Release, pay, or refund premium deposits, accrued cash or loan values, unearned premiums, or other reserves on any insurance policy, certificate, or contract.
  12. Make any material change in management.
  13. Increase salaries and benefits of officers or directors or the preferential payment of bonuses, dividends, or other payments deemed preferential.

Source:

S.L. 1993, ch. 292, § 10.

26.1-06.2-06. Review and stay of action.

During the period of supervision the insurer may contest an action taken or proposed to be taken by the supervisor specifying the manner wherein the action being complained of would not result in improving the condition of the insurer. Denial of the insurer’s request upon reconsideration entitles the insurer to request a proceeding under chapter 28-32.

Source:

S.L. 1993, ch. 292, § 10.

26.1-06.2-07. Administrative election of proceedings.

Nothing contained in this chapter precludes the commissioner from initiating judicial proceedings to place an insurer in conservation, rehabilitation, or liquidation proceedings or other delinquency proceedings, however designated under the laws of this state, regardless of whether the commissioner has previously initiated administrative supervision proceedings under this chapter against the insurer.

Source:

S.L. 1993, ch. 292, § 10.

26.1-06.2-08. Rules.

The commissioner may adopt reasonable rules necessary for the implementation of this chapter.

Source:

S.L. 1993, ch. 292, § 10.

26.1-06.2-09. Other laws — Conflicts — Meetings between the commissioner and the supervisor.

Notwithstanding any other provision of law, the commissioner may meet with a supervisor appointed under this chapter and with the attorney or other representative of the supervisor, without the presence of any other person, at the time of any proceeding or during the pendency of any proceeding held under authority of this chapter to carry out the commissioner’s duties under this chapter or for the supervisor to carry out the duties under this chapter.

Source:

S.L. 1993, ch. 292, § 10.

26.1-06.2-10. Immunity.

There is no liability on the part of, and no cause of action of any nature may arise against, the commissioner or the department or its employees or agents for any action taken by them in the performance of their powers and duties under this chapter.

Source:

S.L. 1993, ch. 292, § 10.

CHAPTER 26.1-07 Consolidation or Reinsurance of Domestic Companies

26.1-07-01. Domestic companies — Consolidation — Reinsurance.

As used in this chapter, “consolidate” includes consolidation and merger and “reinsurance” includes only those obligations ceded or assumed by an assumption agreement. An “assumption agreement” is one that transfers all of the direct insurer’s obligations under policies of insurance to another insurer and relieves the transferring insurer of any obligations under the policies. A domestic insurance company organized on the stock, mutual, stipulated premium, or assessment plan may not consolidate with any other company, or reinsure its risks or any part thereof with any other company, or assume or reinsure the whole or any portion of the risks of any other company, except in the manner provided by this chapter.

Source:

S.L. 1983, ch. 332, § 7; 1995, ch. 280, § 1.

Derivation:

N.D.C.C. § 26-20-01.

26.1-07-02. Petition for allowance of consolidation or reinsurance.

When any company described in section 26.1-07-01 proposes to consolidate with any other company, or to enter into any contract of reinsurance, it must file its petition with the commissioner setting forth the terms and conditions of the proposed consolidation or reinsurance contract and asking for approval or modification as provided by this chapter. The company shall file as an exhibit to the petition the proposed consolidation or reinsurance contract.

Source:

S.L. 1983, ch. 332, § 7; 1995, ch. 280, § 2.

Derivation:

N.D.C.C. § 26-20-02.

26.1-07-03. Profit by officer or employee prohibited.

An officer of a company petitioning for the right to consolidate or to reinsure and an officer or employee of the state may not receive any compensation or gratuity, either directly or indirectly, for aiding, promoting, or in any manner assisting in the consolidation or reinsurance.

Source:

S.L. 1983, ch. 332, § 7.

Derivation:

N.D.C.C. § 26-20-07.

26.1-07-04. Notice of petition for consolidation or reinsurance.

When a petition is filed, the commissioner, within thirty days after filing of the petition, shall issue an order requiring notice by mail to each policyholder of the domestic company if any of its policyholders are being reinsured or it is proposing to consolidate with another company, of the pendency of the petition and of the time when and place where a hearing on the petition will be held. The hearing must be scheduled not more than ninety days from the date of the order. The commissioner shall publish the order of notice and the petition in five newspapers, one of which must be a daily newspaper published at the state capital, at least two weeks before the hearing upon the petition. By mutual agreement between the petitioning company and the commissioner, the time frame set forth in this section may be modified, changed, or extended.

Source:

S.L. 1983, ch. 332, § 7; 1991, ch. 301, § 6; 1995, ch. 280, § 3.

Derivation:

N.D.C.C. § 26-20-03.

26.1-07-05. Commissioner to hear petition — General duties. [Repealed]

Repealed by S.L. 1995, ch. 280, § 5.

26.1-07-05.1. Hearing on petition — General duties of commissioner.

The commissioner shall hold a hearing on the petition and determine whether the consolidation or reinsurance will be allowed. The hearing must be conducted under chapter 28-32. Within sixty days of the close of the hearing, the commissioner shall enter findings of fact, conclusions of law, and an order either approving or disapproving any petition. The commissioner in making the determination shall consider the following:

  1. Whether the proposed consolidation or reinsurance contract is inequitable to the policyholders of any domestic insurance company involved;
  2. Whether the proposed consolidation or reinsurance contract would materially reduce the financial security of policyholders of the domestic insurer in this state or elsewhere; and
  3. Whether the competence, experience, and integrity of the persons of a foreign insurance company who would control the operation of the consolidated insurance company or the reinsuring company are such that it would not be in the interest of the policyholders of the company to permit the consolidation or reinsurance contract.

The findings of fact, conclusions of law, and order entered by the commissioner are subject to appeal under chapter 28-32. The commissioner may waive the hearing if the companies involved and all the policyholders of the domestic companies involved consent to waiving the hearing.

Source:

S.L. 1995, ch. 280, § 4; 2005, ch. 257, § 1.

26.1-07-06. Commissioner may compel attendance of witnesses — Policyholders and stockholders may appear.

The commissioner may summon and compel the attendance and testimony of witnesses and the production of evidence. Any policyholder or stockholder of a company petitioning for consolidation or for the right to reinsure may appear before the commissioner and be heard with reference thereto.

Source:

S.L. 1983, ch. 332, § 7.

Derivation:

N.D.C.C. § 26-20-05.

26.1-07-07. Expenses paid by petitioner.

All actual expenses and costs incident to proceedings under this chapter must be paid by the company filing the petition. An itemized statement of the expenses and costs must be filed with the commissioner with a certified copy of the decision of the commissioner.

Source:

S.L. 1983, ch. 332, § 7.

Derivation:

N.D.C.C. § 26-20-06.

26.1-07-08. Insurance companies subject to dissolution provisions. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-09. Grounds upon which commissioner may petition for dissolution of company — Representation by attorney general. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-10. Petition for dissolution of company when officer refuses to give information. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-11. Preliminary hearing on petition — Transfer of proceedings — Bond. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-12. Injunction against transaction of business — Procedure — Operation of company. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-13. Commissioner to be appointed receiver. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-14. Court may order liquidation of company — Commissioner to direct liquidation — Procedure. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-15. Commissioner may appoint special deputies and employ counsel in receivership proceedings — Compensation — Powers. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-16. Offset — Limitations. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-17. Priority of distribution of assets. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-18. Powers and duties of commissioner and deputies in receivership proceedings — Assessments — Actions. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-19. Receiver may not increase liabilities of company — Exception. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-20. Report of dissolutions and receivership made by commissioner. [Repealed]

Repealed by S.L. 1991, ch. 305, § 14.

26.1-07-21. Penalty.

Any officer, director, or stockholder of any company, or any officer or employee of the state, who violates, or consents to the violation of, this chapter is guilty of a class A misdemeanor.

Source:

S.L. 1983, ch. 332, § 7.

Derivation:

N.D.C.C. § 26-20-08.

CHAPTER 26.1-07.1 Jurisdiction Over Providers of Health Care Benefits

26.1-07.1-01. Jurisdiction over providers of health care benefits.

Notwithstanding any other provision of law, and except as provided under this section, any person, other than an insurance company duly licensed in this or another state which provides coverage in this state for medical, surgical, chiropractic, physical therapy, speech pathology, audiology, professional mental health, dental, hospital, or optometric expenses, whether such coverage is by direct payment, reimbursement, or otherwise, is presumed to be subject to the jurisdiction of the commissioner unless the person shows that while providing such services the person is subject to the jurisdiction of another agency of this state, any subdivisions thereof, or the federal government. A self-insurance health plan formed under chapter 54-52.1 is not subject to this section but is subject to the jurisdiction of the commissioner under chapter 26.1-36.6.

Source:

S.L. 1983, ch. 339, § 1; 2019, ch. 462, § 2, eff March 7, 2019.

26.1-07.1-02. How to show jurisdiction.

A person or entity may show that it is subject to the jurisdiction of another agency of this state, any subdivision thereof, or the federal government by providing to the commissioner the appropriate certificate, license, or other document issued by the other governmental agency which permits or qualifies it to provide those services.

Source:

S.L. 1983, ch. 339, § 2.

26.1-07.1-03. Examination.

Any person or entity which is unable to show that it is subject to the jurisdiction of another agency of this state, any subdivision thereof, or the federal government shall submit to an examination by the commissioner to determine the organization and solvency of the person or the entity, and to determine whether or not such person or entity is in compliance with the applicable provisions of state law.

Source:

S.L. 1983, ch. 339, § 3.

26.1-07.1-04. Subject to state laws.

Any person or entity unable to show that it is subject to the jurisdiction of another agency of this state, any subdivision thereof, or the federal government is subject to all appropriate provisions of state law regarding the conduct of its business.

Source:

S.L. 1983, ch. 339, § 4.

26.1-07.1-05. Disclosure.

Any production agency or administrator which advertises, sells, transacts, or administers coverage in this state described in section 26.1-07.1-01 which is provided by any person or entity described in section 26.1-07.1-03 shall, if that coverage is not fully insured or otherwise fully covered by an admitted life or disability insurer, nonprofit hospital service plan, or nonprofit health care plan, advise any purchaser, prospective purchaser, and covered person of such lack of insurance or other coverage.

Any administrator which advertises or administers coverage in this state, described in section 26.1-07.1-01, which is provided by any person or entity described in section 26.1-07.1-03, shall advise any production agency of the elements of the coverage, including the amount of “stop-loss” insurance in effect.

Source:

S.L. 1983, ch. 339, § 5.

CHAPTER 26.1-08 Comprehensive Health Association

26.1-08-01. Definitions.

In this chapter, unless the context otherwise requires:

  1. “Association” means the comprehensive health association of North Dakota.
  2. “Benefit plan” means insurance policy coverage offered by the association through the lead carrier.
  3. “Benefit plan premium” means the charge for the benefit plan based on the benefits provided in section 26.1-08-06 and determined pursuant to section 26.1-08-08.
  4. “Board” means the association board of directors.
  5. “Church plan” means a plan as defined under section 3(33) of the federal Employee Retirement Income Security Act of 1974.
  6. “Creditable coverage” has the same meaning as “qualifying previous coverage” as defined under section 26.1-36.3-01.
  7. “Eligible individual” means an individual eligible for association benefit plan coverage as specified under section 26.1-08-12.
  8. “Governmental plan” has the same meaning as provided under section 3(32) of the federal Employee Retirement Income Security Act of 1974 [Pub. L. 93-406; 88 Stat. 833; 29 U.S.C. 1002] and as may be provided under any federal governmental plan.
  9. “Group health plan” has the same meaning as employee welfare benefit plan as provided under section 3(1) of the federal Employee Retirement Income Security Act of 1974 [Pub. L. 93-406; 88 Stat. 833; 29 U.S.C. 1002] to the extent that the plan provides medical care, and including items and service paid for as medical care to employees or the employees’ dependents as defined under the terms of the plan directly or through insurance, reimbursement, or otherwise.
  10. “Health insurance coverage” means any hospital and medical expense-incurred policy, nonprofit health care service plan contract, health maintenance organization subscriber contract, or any other health care plan or arrangement that pays for or furnishes benefits that pay the costs of or provide medical, surgical, or hospital care or, if selected by the eligible individual, chiropractic care.
    1. Health insurance coverage does not include any one or more of the following:
      1. Coverage only for accident, disability income insurance, or any combination of the two;
      2. Coverage issued as a supplement to liability insurance;
      3. Liability insurance, including general liability insurance and automobile liability insurance;
      4. Workforce safety and insurance or similar insurance;
      5. Automobile medical payment insurance;
      6. Credit-only insurance;
      7. Coverage for onsite medical clinics; and
      8. Other similar insurance coverage, specified in federal regulations, under which benefits for medical care are secondary or incidental to other insurance benefits.
    2. Health insurance coverage does not include the following benefits if they are provided under a separate policy, certificate, or contract of insurance or are otherwise not an integral part of the plan:
      1. Limited scope dental or vision benefits;
      2. Benefits for long-term care, nursing home care, home health care, community-based care, or any combination of this care; and
      3. Other similar limited benefits specified under federal regulations issued under the Health Insurance Portability and Accountability Act of 1996 [Pub. L. 104-191; 110 Stat. 1936; 29 U.S.C. 1181 et seq.].
    3. Health insurance coverage does not include any of the following benefits if the benefits are provided under a separate policy, certificate, or contract of insurance; there is no coordination between the provision of the benefits; any exclusion of benefits under any group health insurance coverage maintained by the same plan sponsor; and the benefits are paid with respect to an event without regard to whether benefits are provided with respect to such an event under any group health plan maintained by the same sponsor:
      1. Coverage only for specified disease or illness; and
      2. Hospital indemnity or other fixed indemnity insurance.
    4. Health insurance coverage does not include the following if offered as a separate policy, certificate, or contract of insurance:
      1. Coverage supplemental to the coverage provided under chapter 55 of United States Code title 10 [10 U.S.C. 1071 et seq.] relating to armed forces medical and dental care; and
      2. Similar supplemental coverage provided under a group health plan.
  11. “Insurer” means any insurance company, nonprofit health service organization, fraternal benefit society, health maintenance organization, and any other entity providing or selling health insurance coverage or health benefits that are subject to state insurance regulation.
  12. “Lead carrier” means the insurance company selected by the board to administer the association benefit plans.
  13. “Medicare” means coverage under both parts A and B of title XVIII of the federal Social Security Act [Pub. L. 89-97; 79 Stat. 291; 42 U.S.C. 1395 et seq.].
  14. “Participating member” means any insurer that is licensed in this state which has an annual earned premium volume of health insurance coverage, including Medicare supplemental health insurances as defined under section 1882(g)(1) of the federal Social Security Act [42 U.S.C. 1395ss(g)(1)], derived from or on behalf of residents in the previous calendar year of at least one hundred thousand dollars.
  15. “Resident” means an individual who has been a legal resident of this state for a minimum of one hundred eighty-three days, determined by applying section 54-01-26. However, for a federally defined eligible individual as defined under subdivision b of subsection 5 of section 26.1-08-12, there is no minimum residency requirement. The board may waive the residency requirement upon a showing of good cause.
  16. “Significant break in coverage” means a period of sixty-three or more consecutive days during all of which the individual does not have creditable coverage. Neither a waiting period nor an affiliation period is taken into account in determining a significant break in coverage.
  17. “Trade adjustment assistance, pension benefit guarantee corporation individual” means an individual who is certified as eligible for federal trade adjustment assistance or federal pension benefit guarantee corporation assistance as provided by the federal Trade Adjustment Assistance Reform Act of 2002 [Pub. L. 107-210; 116 Stat. 933], the spouse of such an individual, or a dependent of such an individual as provided under the federal Internal Revenue Code.

Source:

S.L. 1983, ch. 332, § 8; 1983, ch. 340, § 13; 1985, ch. 317, § 20; 1985, ch. 322, § 1; 1987, ch. 340, § 1; 1989, ch. 352, § 1; 1997, ch. 51, § 17; 1997, ch. 251, § 1; 2003, ch. 239, § 3; 2003, ch. 240, § 1; 2005, ch. 258, § 1; 2007, ch. 260, § 1.

Derivation:

N.D.C.C. § 26-16.1-01.

26.1-08-02. Duties of commissioner. [Repealed]

Repealed by S.L. 2003, ch. 239, § 18.

26.1-08-02.1. Board of directors.

  1. The board consists of the commissioner; the state health officer; the director of the office of management and budget; one senator appointed by the majority leader of the senate of the legislative assembly; one representative appointed by the speaker of the house of representatives of the legislative assembly; and one individual from each of the three participating member insurance companies of the association with the highest annual premium volumes of health insurance coverage as provided by the commissioner, verified by the lead carrier, and approved by the board.
  2. Members of the board may be reimbursed from the moneys of the association for expenses incurred by the members due to their service as board members, but may not otherwise be compensated by the association for board services.
  3. The costs of conducting the meetings of the association and the board are borne by the association.
  4. The commissioner shall fill vacancies and, for cause, may remove any board member representing one of the three participating member insurance companies.

Source:

S.L. 2003, ch. 239, § 4; 2007, ch. 260, § 2.

26.1-08-02.2. Powers and duties of commissioner and board — Fees.

  1. The lead carrier shall operate the association subject to the supervision and control of the board.
  2. The board shall:
    1. Formulate general policies to advance the purposes of this chapter;
    2. Approve the association’s contract with the lead carrier;
    3. Approve the benefit plans;
    4. Approve the benefit plan premiums;
    5. Establish and modify from time to time, as appropriate, agents’ referral fees;
    6. Approve the annual operating budget and any assessments to the participating members;
    7. Approve independent annual audits to assure the general accuracy of the financial data submitted by the lead carrier for the association;
    8. Develop and implement a program to publicize the existence of the association, the eligibility requirements, and procedures for enrollment and to maintain public awareness of the association;
    9. Approve bylaws and operating rules;
    10. Exempt, by a two-thirds majority vote, an applicant from the pre-existing condition provisions of subsection 13 of section 26.1-08-12 when required under emergency circumstances to allow the applicant access to medical procedures determined to be necessary to preserve life; and
    11. Provide for other matters as may be necessary and proper for the execution of the commissioner’s and board’s powers, duties, and obligations.
  3. The commissioner, board, and lead carrier employees are not liable for any obligations of the association.
  4. The commissioner may establish additional powers and duties of the board and may adopt rules necessary and proper for the association and to implement this chapter.

Source:

S.L. 2003, ch. 239, § 5; 2007, ch. 260, § 3.

26.1-08-03. Comprehensive health association. [Repealed]

Repealed by S.L. 2003, ch. 239, § 18.

26.1-08-03.1. Operation of the association.

The association may:

  1. Exercise the powers granted to insurance companies under the laws of this state.
  2. Sue or be sued, including taking any legal actions necessary or proper to recover or collect assessment due the association.
  3. Take such legal action as necessary:
    1. To avoid the payment of improper claims against the association or the coverage provided by or through the association;
    2. To recover any amounts erroneously or improperly paid by the association;
    3. To recover any amounts paid by the association as a result of mistake of fact or law; or
    4. To recover other amounts due the association.
  4. Enter contracts with the insurance companies, similar associations in other states, or other persons for the performance of administrative functions.
  5. Establish administrative and accounting procedures for the operation of the association.
  6. Provide for the reinsuring of risks incurred as a result of issuing the coverages required by individuals covered by the association benefit plans.
  7. Provide for the administration by the association of policies, which are reinsured pursuant to subsection 6.
  8. Issue benefit plans for coverage in accordance with the requirements of sections 26.1-08-06 and 26.1-08-06.1.
  9. Design, utilize, contract, or otherwise arrange for the delivery of cost-effective health care services, including establishing or contracting with preferred provider organizations, health maintenance organizations, and other limited network provider arrangements.

Source:

S.L. 2003, ch. 239, § 6.

26.1-08-04. Association plan. [Repealed]

Repealed by S.L. 2003, ch. 239, § 18.

26.1-08-05. Minimum benefits of a qualified plan A. [Repealed]

Repealed by S.L. 1997, ch. 251, § 18.

26.1-08-06. Comprehensive benefit plan.

  1. The benefit plan must offer comprehensive health care coverage to every eligible individual. The coverage to be issued by the association, its schedule of benefits, exclusions, and other limitations must be established by the lead carrier and subject to the approval of the board.
  2. In establishing the benefit plan coverage, the board shall take into consideration the levels of health insurance coverage provided in the state and medical economic factors as may be deemed appropriate. Benefit levels, deductibles, coinsurance factors, copayments, exclusions, and limitations may be applied as determined to be generally reflective of health insurance coverage provided in the state.
  3. The coverage may include deductibles of not less than five hundred dollars per individual per benefit period.
  4. The coverage must include a limitation of not less than three thousand dollars per individual on the total annual out-of-pocket expenses for services covered under this section.
  5. Any coverage or combination of coverages through the association may not exceed a lifetime maximum benefit of one million dollars for an individual.
  6. The coverage may include cost-containment measures and requirements, including preadmission screening, second surgical opinion, concurrent utilization review, and individual case management for the purpose of making the benefit plan more cost-effective.
  7. The coverage may include preferred provider organizations, health maintenance organizations, and other limited network provider arrangements.
  8. Coverage must include oral surgery for partially or completely unerupted impacted teeth, a tooth root without the extraction of the entire tooth, or the gums and tissues of the mouth when not performed in connection with the extraction or repair of teeth.
  9. Coverage must include substance abuse and mental disorders as outlined in sections 26.1-36-08 and 26.1-36-09.
  10. Covered expenses must include, at the option of the eligible individual, professional services rendered by a chiropractor and for services and articles prescribed by a chiropractor for which an additional premium may be charged.
  11. The coverage must include organ transplants as approved by the board.
  12. The association must be payer of last resort of benefits whenever any other benefit or source of third-party payment is available. Benefits otherwise payable under an association benefit plan must be reduced by all amounts paid or payable through any other health insurance coverage and by all hospital and medical expense benefits paid or payable under any workforce safety and insurance coverage, automobile medical payment or liability insurance whether provided on the basis of fault or no fault, and by any hospital or medical benefits paid or payable under or provided pursuant to any state or federal law or program. The association must have a cause of action against an eligible individual for the recovery of the amount of benefits paid that are not for covered expenses. Benefits due from the association may be reduced or refused as a setoff against any amount recoverable under this subsection.

Source:

S.L. 1983, ch. 332, § 8; 1983, ch. 340, § 17; 1985, ch. 317, § 23; 1989, ch. 353, § 5; 1993, ch. 296, §§ 3, 4; 1995, ch. 246, §§ 16, 17; 1997, ch. 251, § 3; 2001, ch. 265, § 1; 2003, ch. 239, § 7; 2003, ch. 561, § 3; 2007, ch. 260, § 4; 2015, ch. 206, § 1.

Note.

Section 3 of chapter 206, S.L. 2015 provides, “CONTINGENT EFFECTIVE DATE. This Act becomes effective on the date the insurance commissioner certifies to the secretary of state and the legislative council that the United States department of health and human services does not provide a minimum essential coverage designation to state high-risk pools which qualifies the state high-risk pool as minimum essential coverage under the provisions and rules of the federal Patient Protection and Affordable Care Act [Pub.L. 111-148].”

Section 4 of chapter 206, S.L. 2015 provides, “EXPIRATION DATE. This Act is effective through July 31, 2017, and after that date is ineffective.

Derivation:

N.D.C.C. § 26-16.1-04.

26.1-08-06.1. Age sixty-five and over and disabled supplement plans.

A basic supplement plan and standard supplemental plan must be offered to individuals who are eligible for Medicare by reason of age or disability. Supplemental plans issued by the association must be developed by the lead carrier and approved by the board. Any coverage or combination of coverages through the association may not exceed a maximum benefit of one million dollars for an individual.

Source:

S.L. 1983, ch. 340, § 18; 1997, ch. 251, § 4; 2001, ch. 265, § 2; 2003, ch. 239, § 8.

26.1-08-07. Approval and filing of benefit plans.

The lead carrier shall file with the commissioner all benefit plans and other forms required to be approved. The commissioner shall approve or disapprove any form within sixty days of receipt.

Source:

S.L. 1983, ch. 332, § 8; 1989, ch. 353, § 6; 1997, ch. 251, § 5; 2003, ch. 239, § 9; 2007, ch. 260, § 5.

Derivation:

N.D.C.C. § 26-16.1-02.

26.1-08-08. Benefit plan premium.

The schedule of premiums to be charged eligible individuals for a benefit plan must be established by the lead carrier and approved by the board, but may not exceed one hundred thirty-five percent of the individual premium rates charged for similar coverage throughout the state. If similar coverage is not offered by other insurance carriers, premium rates for actuarial equivalent benefit plans offered by other insurers in the state must be provided by the commissioner and utilized by the lead carrier to determine association rates for the benefit plans.

Source:

S.L. 1983, ch. 332, § 8; 1983, ch. 340, § 19; 2003, ch. 239, § 10.

Derivation:

N.D.C.C. § 26-16.1-05.

26.1-08-09. Participating members.

  1. There is established a comprehensive health association with participating members.
  2. All participating members shall maintain their membership in the association, as a condition for writing policies in this state.
  3. Each participating member of the association shall share the losses due to claims and administrative expenses of the association. The difference between the total claims expense of the association and the benefit plan premiums received is the liability of the participating members. Such participating members shall share in the excess costs of the association in an amount equal to the ratio of a participating member’s total annual premium volume for health insurance received from or on behalf of state residents, to the total health insurance premium volume received by all of the participating members as determined by the lead carrier and approved by the board. For determining the liability of participating members, health insurance coverage includes Medicare supplemental health insurance as defined under section 1882(g)(1) of the federal Social Security Act [42 U.S.C. 1395ss(g)(1)] but does not include federal employees health benefits plans or Medicare part C plans.
  4. Each member’s liability may be determined retroactively and payment of the assessment is due within thirty days after notice of the assessment is given. Failure by a member to tender to the lead carrier on behalf of the association the full amount assessed within thirty days of notification by the lead carrier is grounds for termination of membership.

Source:

S.L. 1983, ch. 332, § 8; 1983, ch. 340, § 20; 1985, ch. 317, § 24; 2003, ch. 239, § 11; 2007, ch. 260, § 6.

Derivation:

N.D.C.C. § 26-16.1-08.

26.1-08-10. Administration of the association.

  1. Not less than eighty-seven and one-half percent of the association plan premium paid to the lead carrier may be used to pay claims.
  2. Any income in excess of the costs incurred by the association in providing reinsurance or administrative services must be held at interest and used by the association to offset past and future losses due to claims expenses of the association or be allocated to reduce benefit plan premiums.
  3. The lead carrier agreement must continue for a period of at least three years, unless a request to terminate is approved by the board. The board shall approve or deny a request to terminate within ninety days of its receipt. A failure to make a final decision on a request to terminate within the specified period is deemed an approval. The agreement will be automatically renewed until either party terminates the agreement.
  4. The lead carrier must be reimbursed from the association plan premiums received for its direct and indirect expenses. Direct and indirect expenses include a prorated reimbursement for the portion of the lead carrier’s administrative, printing, claims administration, management, and building overhead expenses which are assignable to the maintenance and administration of the association. Direct and indirect expenses may not include costs directly related to the original submission of policy forms prior to selection as the lead carrier.
  5. The lead carrier is, when carrying out its duties under this chapter, an agent of the association and the board, and is civilly liable for its actions, subject to the laws of this state.
  6. The lead carrier shall:
    1. Perform all administrative and claims payment functions required under this chapter.
    2. Determine eligibility of individuals requesting coverage through the association.
    3. Provide all eligible individuals involved in the association an individual certificate setting forth a statement as to the insurance protection to which the individual is entitled, the method and place of filing claims, and to whom benefits are payable. The certificate must indicate that coverage was obtained through the association.
    4. Pay all claims under this chapter and indicate that the association paid the claims. Each claim payment must include information specifying the procedure involved in the event a dispute over the amount of payment arises.
    5. Establish a premium billing procedure for collection of premium from individuals covered by the association.
    6. Obtain approval from the board for all benefit plan premiums and benefit plans issued.
    7. Submit regular reports to the board regarding the operation of the association.
    8. Submit to the participating companies and board, on a semiannual basis, a report of the operation of the association.
    9. Verify premium volumes of all health insurers in the state.
    10. Determine and collect assessments.
    11. Perform such functions relating to the association as may be assigned to it.

Source:

S.L. 1983, ch. 332, § 8; 1985, ch. 317, § 25; 2003, ch. 239, § 12; 2007, ch. 260, § 7.

Derivation:

N.D.C.C. § 26-16.1-10.

26.1-08-11. Solicitation of eligible individuals.

  1. The association, pursuant to a plan approved by the board, shall disseminate appropriate information to the residents of this state regarding the existence of the association, the benefit plans, and the means of enrollment. Means of communication may include use of the press, radio, electronic mail, internet, and television, as well as publication in appropriate state offices and publications.
  2. The association and board shall devise and implement means of maintaining public awareness of the association and shall administer this chapter in a manner that facilitates public participation.
  3. All licensed accident and health insurance producers may engage in the selling or marketing of association benefit plans. The lead carrier shall pay a referral fee to each licensed accident and health insurance producer who refers an applicant to the association plan, if the applicant is accepted. The referral fees must be paid to the lead carrier from moneys received as premiums for the association benefit plan.
  4. Every insurance company that rejects or applies underwriting restrictions to an applicant for health insurance shall notify the applicant of the existence of the association, requirements for being accepted in it, and the procedure for applying to it.

Source:

S.L. 1983, ch. 332, § 8; 1985, ch. 317, § 26; 2001, ch. 262, § 24; 2003, ch. 239, § 13; 2007, ch. 260, § 8.

Derivation:

N.D.C.C. § 26-16.1-12.

26.1-08-12. Eligibility.

  1. The association must be open for enrollment by eligible individuals. Eligible individuals shall apply for enrollment in the association by submitting an application to the lead carrier. The application must be completed fully and accompanied by premium and evidence to prove eligibility.
  2. Within thirty days of receipt of the application, the lead carrier shall either reject the application for failing to comply with the requirements of this section or forward the eligible individual a notice of acceptance and billing information.
  3. At the option of the eligible individual, association coverage is effective:
    1. For an eligible individual applying under subsection 10 or 11, on the signature date of the application.
    2. For an eligible individual applying under subparagraph a of paragraph 1 of subdivision a of subsection 5 or under subparagraph a of paragraph 1 of subdivision c of subsection 5:
      1. On the day following the date shown on the written evidence;
      2. On the signature date of the application, if it is at least one day and less than one hundred eighty days following the date shown on the written evidence; or
      3. On any date after the signature date of the application if the date is at least one day and less than one hundred eighty days following the date shown on the written evidence.
    3. For an eligible individual applying under subparagraph b or c of paragraph 1 of subdivision a of subsection 5 or under subparagraph b or c of paragraph 1 of subdivision c of subsection 5:
      1. On the signature date of the application; or
      2. On any date after the signature date of the application but less than one hundred eighty days following the date shown on the written evidence.
    4. For an eligible individual applying under subparagraph d of paragraph 1 of subdivision a of subsection 5, on the date the lifetime maximum occurred if the application:
      1. Is submitted within ninety days after the date that lifetime maximum occurred; and
      2. Is accompanied with premium for coverage retroactive to the date that lifetime maximum occurred.
    5. For an eligible individual applying under subdivision b or d of subsection 5:
      1. On the signature date of the application; or
      2. On any date after the signature date of the application, but less than sixty-four days following termination of previous coverage.
    6. For an eligible individual applying under subsection 6:
      1. On the signature date of the application; or
      2. On any date after the signature date of the application, but less than one hundred eighty days following the date shown on the written evidence from a medical professional.
  4. An eligible individual may not purchase more than one policy from the association.
  5. An individual may qualify to enroll in the association for benefit plan coverage as:
    1. A traditional applicant:
      1. An individual who has been a resident of this state and continues to be a resident of the state who has received from at least one insurance carrier within one hundred eighty days of the date of application, one of the following:
        1. Written evidence of rejection or refusal to issue substantially similar insurance for health reasons by one insurer.
        2. Written evidence that a restrictive rider or a pre-existing condition limitation, the effect of which is to reduce substantially, coverage from that received by an individual considered a standard risk, has been placed on the individual’s policy.
        3. Written evidence that an insurer has offered to issue comparable insurance at a rate exceeding the association benefit rate.
        4. Written evidence that the applicant has reached the lifetime maximum coverage amount on the most recent health insurance coverage.
      2. Is not enrolled in health benefits with the state’s medical assistance program.
    2. A Health Insurance Portability and Accountability Act of 1996 applicant:
      1. An individual who meets the federally defined eligibility guidelines as follows:
        1. Has had eighteen months of qualifying previous coverage as defined in section 26.1-36.3-01;
        2. Has applied for coverage under this chapter within sixty-three days of the termination of the qualifying previous coverage;
        3. Is not eligible for coverage under Medicare or a group health benefit plan as the term is defined in section 26.1-36.3-01;
        4. Does not have any other health insurance coverage;
        5. Has not had the most recent qualifying previous coverage described in subparagraph a terminated for nonpayment of premiums or fraud; and
        6. If offered under the option, has elected continuation coverage under the federal Consolidated Omnibus Budget Reconciliation Act [Pub. L. 99-272; 100 Stat. 82], or under a similar state program, and that coverage has exhausted.
      2. Is and continues to be a resident of the state.
      3. Is not enrolled in health benefits with the state’s medical assistance program.
    3. An applicant age sixty-five and over or disabled:
      1. An individual who is eligible for Medicare by reason of age or disability and has been a resident of this state and continues to be a resident of this state who has received from at least one insurance carrier within one hundred eighty days of the date of application, one of the following:
        1. Written evidence of rejection or refusal to issue substantially similar insurance for health reasons by one insurer.
        2. Written evidence that a restrictive rider or a pre-existing condition limitation, the effect of which is to reduce substantially, coverage from that received by an individual considered a standard risk, has been placed on the individual’s policy.
        3. Written evidence that an insurer has offered to issue comparable insurance at a rate exceeding the association benefit rate.
      2. Is not enrolled in health benefits with the state’s medical assistance program.
    4. A Trade Adjustment Assistance Reform Act of 2002 applicant:
      1. A trade adjustment assistance, pension benefit guarantee corporation individual applicant who:
        1. Has three or more months of qualifying previous health insurance coverage at the time of application;
        2. Has applied for coverage within sixty-three days of the termination of the individual’s previous health insurance coverage;
        3. Is and continues to be a resident of the state;
        4. Is not enrolled in the state’s medical assistance program;
        5. Is not imprisoned under federal, state, or local authority; and
        6. Does not have health insurance coverage through:
          1. The applicant’s or spouse’s employer if the coverage provides for employer contribution of fifty percent or more of the cost of coverage of the spouse, the eligible individual, and the dependents or the coverage is in lieu of an employer’s cash or other benefit under a cafeteria plan.
          2. A state’s children’s health insurance program, as defined under section 50-29-01.
          3. A government plan.
          4. Chapter 55 of United States Code title 10 [10 U.S.C. 1071 et seq.] relating to armed forces medical and dental care.
          5. Part A or part B of title XVIII of the federal Social Security Act [42 U.S.C. 1395 et seq.] relating to health insurance for the aged and disabled.
      2. Coverage under this subdivision may be provided to an individual who is eligible for health insurance coverage through the federal Consolidated Omnibus Budget Reconciliation Act of 1985 [Pub. L. 99-272; 100 Stat. 82]; a spouse’s employer plan in which the employer contribution is less than fifty percent; or the individual marketplace, including continuation or guaranteed issue, but who elects to obtain coverage under this subdivision.
  6. The board and lead carrier shall develop a list of medical or health conditions for which an individual must be eligible for association coverage without applying for health insurance coverage under subdivisions a and c of subsection 5. Individuals with written evidence of the existence or history of any medical or health conditions on the approved list may not be required to provide written evidence of rejection or refusal, a rate that exceeds the association rates, substantially reduced coverage, or the lifetime maximum amount being reached.
  7. A rejection or refusal by an insurer offering only stop-loss, excess of loss, or reinsurance coverage with respect to an applicant under subdivisions a and c of subsection 5 is not sufficient evidence to qualify.
  8. A traditional applicant, as specified under subdivision a of subsection 5, may have insurance coverage, other than the state’s medical assistance program, with an additional commercial insurer; however, the association will reimburse eligible claim costs as payer of last resort.
  9. An individual who is eligible for association coverage as specified under subdivision c of subsection 5 may not have more than one policy that is a supplement to part A or part B of Medicare relating to health insurance for the aged and disabled. The individual may obtain association coverage as a traditional applicant as specified under subdivision a of subsection 5 which is concurrent with a supplement policy offered by a commercial carrier. However, the association will reimburse eligible claims as payer of last resort.
  10. If an individual is enrolled in association coverage, that individual’s resident dependent is also eligible for association coverage.
  11. If an individual is enrolled in association coverage, that individual’s resident spouse is also eligible for association coverage.
  12. A newly born child without health insurance coverage is covered through the mother’s association benefit plan for the first thirty-one days following birth. Continued coverage through the association for the child will be provided if the association receives an application and the appropriate premium within thirty-one days following the birth. This coverage is not available to an applicant under subdivision c of subsection 5.
  13. Pre-existing conditions.
    1. Association coverage must exclude charges or expenses incurred during the first one hundred eighty days following the effective date of coverage for any condition for which medical advice, diagnosis, care, or treatment was recommended or received during the one hundred eighty days immediately preceding the signature date of the application.
    2. Association coverage must exclude charges or expenses incurred for maternity during the first two hundred seventy days following the effective date of coverage.
    3. Any individual with coverage through the association due to a catastrophic condition or major illness who is also pregnant at the time of application is eligible for maternity benefits after the first one hundred eighty days of coverage.
    4. A pre-existing condition may not be imposed on an individual who is eligible under subparagraph d of paragraph 1 of subdivision a of subsection 5 or subdivision b or d of subsection 5.
  14. Waiting periods do not apply:
    1. To nonelective treatment or procedures for a congenital or genetic disease.
    2. To an individual who has obtained coverage as a federally eligible individual as defined in subdivision b of subsection 5.
    3. To an individual who has obtained coverage as an eligible person under subdivision a or c of subsection 5, allowing for a reduction in waiting period days by the aggregate period of qualifying previous coverage in the same manner as provided in subsection 3 of section 26.1-36.3-06 and provided the association application is made within sixty-three days of termination of the qualifying previous coverage.
    4. To an individual who has obtained coverage as an eligible individual under subdivision d of subsection 5.
    5. To an individual who has obtained coverage as an eligible individual under subparagraph d of paragraph 1 of subdivision a of subsection 5.
  15. An individual is not eligible for coverage through the association if:
    1. The individual is enrolled in health benefits with the state’s medical assistance program.
    2. The individual has previously terminated association coverage unless twelve months have lapsed since such termination. This limitation does not apply to an applicant who is a federally defined eligible individual as defined under subparagraph d of paragraph 1 of subdivision a of subsection 5 or subdivision b of subsection 5.
    3. The association has paid out one million dollars in benefits on behalf of the individual.
    4. The individual is imprisoned under federal, state, or local authority. This limitation does not apply to an applicant who is a federally defined eligible individual as defined under subdivision b of subsection 5.
    5. The individual’s premiums are paid for or reimbursed under any government-sponsored program, government agency, health care provider, nonprofit charitable organization, or the individual’s employer. However, this subdivision does not apply if the individual’s premiums are paid for or reimbursed under a program established under the federal Trade Adjustment Assistance Reform Act of 2002 [Pub. L. 107-210; 116 Stat. 933].
  16. A period of creditable coverage is not counted with respect to the enrollment of an individual who seeks coverage under this chapter if after such period and before the enrollment date, the individual experiences a significant break in coverage which is more than sixty-three days.

Source:

S.L. 1983, ch. 332, § 8; 1983, ch. 340, § 21; 1985, ch. 317, § 27; 1985, ch. 322, § 2; 1987, ch. 341, § 1; 1989, ch. 353, § 7; 1993, ch. 296, § 5; 1997, ch. 251, § 6; 2003, ch. 239, § 14; 2003, ch. 240, §§ 2 to 5; 2005, ch. 258, § 2; 2007, ch. 260, § 9; 2009, ch. 246, § 1.

Derivation:

N.D.C.C. § 26-16.1-11.

26.1-08-13. Termination of coverage.

The coverage of an individual who ceases to meet the eligibility requirements of this chapter may be terminated at the end of the policy period for which the necessary premiums have been paid. Coverage under this chapter terminates:

  1. Upon request of the covered individual.
  2. For failure to pay the required premium subject to a thirty-one-day grace period.
  3. When the one million dollar lifetime maximum benefit amount has been reached.
  4. If the covered individual is enrolled in health benefits under the state’s medical assistance program.
  5. If the covered individual is no longer a legal resident of this state, except for an individual who is absent from the state for a verifiable medical or other reason as determined by the board.
  6. At the option of the plan, thirty days after the plan makes an inquiry concerning the individual’s eligibility or place of residence to which the individual does not reply.

Source:

S.L. 1991, ch. 301, § 7; 1997, ch. 251, § 7; 2001, ch. 266, § 1; 2003, ch. 239, § 15; 2005, ch. 258, § 3; 2007, ch. 260, § 10.

26.1-08-14. Exempt from premium tax.

The association is exempt from the insurance premium tax imposed under section 26.1-03-17.

Source:

S.L. 2003, ch. 239, § 16.

CHAPTER 26.1-09 Reciprocal or Interinsurance Exchanges

26.1-09-01. Reciprocal or interinsurance exchange authorized.

Individuals, partnerships, and corporations of this state, in this chapter referred to as subscribers, may exchange reciprocal or interinsurance contracts other than life insurance, with each other or with individuals, partnerships, and corporations of other states and countries to provide indemnity among themselves against any loss which may be insured against under authority of law.

Source:

S.L. 1983, ch. 332, § 9.

Derivation:

N.D.C.C. § 26-16-01.

26.1-09-02. Domestic corporations have right to exchange contracts.

Any domestic corporation, in addition to the rights, powers, and franchises specified in its articles of incorporation, as a subscriber, may exchange insurance contracts of the kind and character mentioned in this chapter. The right to exchange the contracts is incidental to the purposes for which the corporation was organized and is granted as fully as the rights and powers expressly conferred upon the corporation.

Source:

S.L. 1983, ch. 332, § 9.

Derivation:

N.D.C.C. § 26-16-09.

26.1-09-03. Reciprocal or interinsurance contracts — Execution.

Reciprocal or interinsurance contracts may be executed by an attorney, insurance producer, or other representative, in this chapter designated as an attorney, duly authorized and acting for the subscribers. The attorney may be a corporation. The office of the attorney may be maintained at the place designated by the subscribers in the power of attorney.

Source:

S.L. 1983, ch. 332, § 9; 2001, ch. 262, § 25.

Derivation:

N.D.C.C. § 26-16-02.

26.1-09-04. Subscribers to file verified declaration with commissioner — Contents.

The subscribers contracting among themselves to conduct a reciprocal or interinsurance exchange through their attorney, shall file with the commissioner a declaration verified by the oath of the attorney, or when the attorney is a corporation, by the oath of a chief officer thereof, setting forth:

  1. The name of the attorney and the name or designation under which contracts are issued. The name or designation may not be so similar to any name or designation adopted by any attorney or any insurance organization in the United States which was writing the same class of insurance prior to the adoption of the name or designation as to confuse or deceive.
  2. The kind or kinds of insurance to be effected or exchanged.
  3. A copy of the form of policy, contract, or agreement under or by which such insurance is to be effected or exchanged.
  4. A copy of the form of the power of attorney or other authority of the attorney under which the insurance is to be effected or exchanged.
  5. The location of the office from which the contracts or agreements are to be issued.
  6. That applications have been made for indemnity upon at least one hundred separate risks aggregating not less than one million five hundred thousand dollars as represented by executed contracts or bona fide applications to become concurrently effective.
  7. That assets conforming to section 26.1-09-08 are in the possession of the attorney and are available for payment of losses.

Source:

S.L. 1983, ch. 332, § 9.

Derivation:

N.D.C.C. § 26-16-03.

26.1-09-05. Attorney to file statement authorizing suit and consenting to service.

Concurrently with the filing of the declaration provided for by section 26.1-09-04, the attorney shall file with the commissioner a written statement executed by the attorney for the subscribers conditioned that upon the issuance of the certificate of authority:

  1. Civil actions may be brought in connection with the policies, contracts, or agreements entered into under this chapter in the county in which any property insured in the policies, contracts, or agreements is located or in which any accident insured against occurs.
  2. Service of process may be made upon the commissioner in all civil actions arising in this state out of the policies, contracts, or agreements entered into under this chapter.

Source:

S.L. 1983, ch. 332, § 9.

Derivation:

N.D.C.C. § 26-16-04.

26.1-09-06. Consent to service of process — Judgment — Satisfaction.

Service of process made upon the commissioner is valid and binding upon all subscribers at any time exchanging reciprocal or interinsurance contracts through the attorney filing the statement required under section 26.1-09-05. A judgment rendered in any case of the nature described in section 26.1-09-05 is valid and binding upon all subscribers as their liability may appear and may be satisfied out of any funds in the possession of the attorney belonging to the subscribers.

Source:

S.L. 1983, ch. 332, § 9.

Derivation:

N.D.C.C. § 26-16-05.

26.1-09-07. Maximum indemnity on fire risk — Statement of maximum liability on single risk.

A subscriber to a reciprocal or interinsurance contract may not assume on any single fire insurance risk an amount greater than ten percent of the net worth of the subscriber. Whenever required so to do by the commissioner, the attorney shall furnish to the commissioner a statement under oath of the attorney showing the maximum amount of indemnity carried upon any single fire insurance risk.

Source:

S.L. 1983, ch. 332, § 9.

Derivation:

N.D.C.C. § 26-16-06.

26.1-09-08. Required assets — Reserve fund.

As used in this section, “net premiums or deposits” means the advance payments by subscribers after deducting the amounts specifically provided for expenses in subscribers’ agreements. Assets in cash or in securities authorized for investment of funds of insurance companies doing the same kind of business by the laws of the state in which the principal office of the exchange is located must be maintained at all times in an amount equal to fifty percent of the net annual advance premiums or deposits collected and credited to the accounts of subscribers on policies having one year or less to run and pro rata on those for longer periods, or in lieu thereof, one hundred percent of the net unearned premiums or deposits collected and credited to the accounts of subscribers. In addition to those assets, there must be maintained a reserve in the case of all classes of liability or similar kinds of insurance, in cash or in approved or authorized securities, sufficient to discharge all liabilities on all outstanding losses arising under policies issued, calculated on the basis of net premiums or deposits, and in accordance with the laws relating to reserves for companies insuring similar risks. Whenever the assets are less than the amount required by this section or less than one hundred thousand dollars, whichever is the greater, the subscribers, or their attorney for them, shall make up the deficiency.

Source:

S.L. 1983, ch. 332, § 9.

Derivation:

N.D.C.C. § 26-16-07.

26.1-09-09. Annual report — Publication of annual statement — Examination.

The attorney, within the time limited for filing the annual report by insurance companies transacting the same kind of business, shall make a report to the commissioner for each calendar year showing the financial condition at the office where the contracts are issued, and shall furnish any additional information and reports the commissioner requires to show the total premiums or deposits collected, the total losses paid, the total amounts returned to subscribers, and the amounts retained for expenses. The attorney may not be required to furnish the names and addresses of any subscribers. The attorney shall publish an abstract of annual statement as required by section 26.1-03-10. The business affairs and assets of the attorney are subject to visitation and examination by the commissioner at the expense of the office examined. If the principal office of the attorney is located in another state, the commissioner, in lieu of an examination conducted by the commissioner’s office as provided for in this section, may accept a certified copy of the report of examination made by the insurance office of the state where the principal office is located or by the insurance department of any other state.

Source:

S.L. 1983, ch. 332, § 9; 1989, ch. 69, § 27.

Derivation:

N.D.C.C. § 26-16-08.

26.1-09-10. Attorney’s license fee and gross premium tax in lieu of other taxes.

The attorney, in lieu of all other state, county, or municipal fees and taxes of any and every character in this state, shall pay annually to the state, on account of the transaction of the reciprocal or interinsurance exchange business in this state, a license fee of fifteen dollars and a tax as provided by section 26.1-03-17 on the gross premiums or deposits collected from subscribers in this state after deducting therefrom all sums returned to the subscribers or credited to their accounts other than for losses.

Source:

S.L. 1983, ch. 332, § 9; 1983, ch. 333, § 8.

Derivation:

N.D.C.C. § 26-16-10.

26.1-09-11. Appointment of insurance producers by attorney — Insurance producer’s license fee.

The attorney may appoint insurance producers to represent the attorney in this state, but the insurance producers, before writing or soliciting any of the insurance provided for under this chapter, must receive a certificate of authority from the commissioner. The fee for the certificate is that specified in section 26.1-01-07.

Source:

S.L. 1983, ch. 332, § 9; 2001, ch. 262, § 26.

Derivation:

N.D.C.C. § 26-16-11.

26.1-09-12. Certificate of authority — Issuance — Renewal — Suspension and revocation.

Upon compliance with this chapter and the payment of the required fees and taxes, the commissioner shall issue a certificate of authority to the attorney in the name and title mentioned in section 26.1-09-04, to expire on the succeeding April thirtieth. The commissioner may suspend or revoke any certificate in case of a breach of any of the conditions imposed by the chapter after a reasonable notice in writing has been given to the attorney to appear and show cause why the action should not be taken. Any attorney who procures a certificate under this chapter may have the certificate renewed annually thereafter at the time provided for the issuance of renewal certificates to insurance companies. A certificate continues in force and effect until a new certificate is issued or is specifically refused.

Source:

S.L. 1983, ch. 332, § 9.

Derivation:

N.D.C.C. § 26-16-12.

26.1-09-13. Solicitation without certificate of authority — Limitation.

For the purpose of organization, and upon the issuance of a permit by the commissioner, powers of attorney may be solicited without a license or certificate of authority, but an attorney, insurance producer, or other person may not effect any insurance contract under this chapter until in compliance with this chapter.

Source:

S.L. 1983, ch. 332, § 9; 1985, ch. 317, § 28; 2001, ch. 262, § 27.

Derivation:

N.D.C.C. § 26-16-13.

26.1-09-14. General insurance laws not applicable.

Except as otherwise provided in this chapter, no insurance law of this state applies to the exchange of indemnity contracts under this chapter unless the law specifically applies to the contracts.

Source:

S.L. 1983, ch. 332, § 9.

Derivation:

N.D.C.C. § 26-16-15.

26.1-09-15. Penalty.

Any attorney who exchanges any contract of indemnity of the kind and character specified in this chapter, and any attorney or representative of the attorney who solicits or negotiates any application for such contract without complying with this chapter, is guilty of a class B misdemeanor.

Source:

S.L. 1983, ch. 332, § 9.

Derivation:

N.D.C.C. § 26-16-14.

CHAPTER 26.1-10 Insurance Holding Company Systems

26.1-10-01. Definitions.

As used in this chapter, unless the context or subject matter otherwise requires:

  1. “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is under the control of, or is under common control with, the person specified.
  2. “Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing ten percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided for in subsection 9 of section 26.1-10-04, that control does not exist in fact. The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.
  3. “Enterprise risk” means any activity, circumstance, event, or series of events involving one or more affiliates of an insurer which, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or the insurer’s insurance holding company system as a whole including anything that would cause the insurer’s risk-based capital to fall into company action level as set forth in section 26.1-03.1-03 or would cause the insurer to be in hazardous financial condition as set forth in North Dakota Administrative Code section 45-03-13-01.
  4. “Groupwide supervisor” means the regulatory official authorized to engage in conducting and coordinating groupwide supervision activities who is determined or acknowledged by the commissioner under section 26.1-10-06.2 to have sufficient significant contacts with the internationally active insurance group.
  5. “Insurance holding company system” means two or more affiliated persons, one or more of which is an insurer.
  6. “Insurer” has the same definition as provided in section 26.1-29-02, except the term does not include an agency, authority, or instrumentality of the United States or its possessions or a state or political subdivision of a state.
  7. “Internationally active insurance group” means an insurance holding company system that includes an insurer registered under section 26.1-10-04, and meets the following criteria:
    1. Premiums written in at least three countries;
    2. The percentage of gross premiums written outside the United States is at least ten percent of the insurance holding company system’s total gross written premiums; and
    3. Based on a three-year rolling average, the total assets of the insurance holding company system are at least fifty billion dollars or the total gross written premiums of the insurance holding company system are at least ten billion dollars.
  8. “Person” means an individual, a corporation, a limited liability company, a partnership, an association, a joint stock company, a trust, or an unincorporated organization or any similar entity or any combination of the foregoing acting in concert. The term does not include any joint venture partnership exclusively engaged in owning, managing, leasing, or developing real or tangible personal property.
  9. “Securityholder” of a specified person means the owner of any security of the person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing.
  10. “Subsidiary” of a specified person means an affiliate under the control of the person directly, or indirectly through one or more intermediaries.
  11. “Voting security” includes any security convertible into or evidencing a right to acquire a voting security.

Source:

S.L. 1983, ch. 332, § 10; 1985, ch. 317, § 29; 2015, ch. 207, § 1, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-01.

26.1-10-02. Subsidiaries of insurers.

  1. Any domestic insurer, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries. A subsidiary may conduct any kind of business and its authority to do so is not limited because it is a subsidiary of a domestic insurer.
  2. In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under all other sections of this chapter, a domestic insurer may also:
    1. Invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of ten percent of the insurer’s assets or fifty percent of the insurer’s surplus as regards policyholders; provided, that after the investments the insurer’s surplus as regards policyholders will be reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs. In calculating the amount of the investments, investments in domestic or foreign insurance subsidiaries and health maintenance organizations shall be excluded, and there must be included:
      1. Total net moneys or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of such subsidiary whether or not represented by the purchase of capital stock or issuance of other securities; and
      2. All amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities, and all contributions to the capital or surplus of a subsidiary subsequent to its acquisition or formation.
    2. Invest any amount in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer, provided that each subsidiary agrees to limit its investments in any asset so that the investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in subdivision a. “The total investment of the insurer” includes:
      1. Any direct investment by the insurer in an asset; and
      2. The insurer’s proportionate share of any investment in an asset by any subsidiary of the insurer which must be calculated by multiplying the amount of the subsidiary’s investment by the percentage of the ownership of the subsidiary.
    3. With the approval of the commissioner, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries; provided, that after the investment the insurer’s surplus as regards policyholders will be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs.
  3. Investments in common stock, preferred stock, debt obligations, or other securities of subsidiaries made pursuant to subsection 2 are not subject to any of the otherwise applicable restrictions or prohibitions applicable to such investments of an insurer.
  4. Whether any investment pursuant to subsection 2 meets the applicable requirements thereof is to be determined before the investment is made, by calculating the applicable investment limitations as though the investment had already been made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the date they were made net of any return of capital invested, not including dividends.
  5. If an insurer ceases to control a subsidiary, it shall dispose of any investment therein made pursuant to this section within three years from the time of the cessation of control or within such further time as the commissioner prescribes, unless at any time after the investment has been made, the investment has met the requirements for investment under any other section, and the insurer has so notified the commissioner.

Source:

S.L. 1983, ch. 332. § 10; 1991, ch. 301, § 8; 1991, ch. 305, § 2; 2001, ch. 262, § 28; 2001, ch. 264, § 4; 2015, ch. 207, § 2, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-02.

26.1-10-03. Acquisition of control of or merger with domestic insurer — Penalties.

    1. A person other than the issuer may not make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after consummation, the person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of the insurer, and a person may not enter an agreement to merge with or otherwise to acquire control of a domestic insurer or any person controlling a domestic insurer unless, at the time the offer, request, or invitation is made or the agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, the person has filed with the commissioner and has sent to the insurer, a statement containing the information required by this section and the offer, request, invitation, agreement, or acquisition has been approved by the commissioner in the manner prescribed in this chapter.
    2. For purposes of this section, any controlling person of a domestic insurer seeking to divest the person’s controlling interest in the domestic insurer, in any manner, shall file with the commissioner, with a copy to the insurer, confidential notice of the person’s proposed divestiture at least thirty days before the cessation of control. The commissioner shall determine those instances in which a party seeking to divest or to acquire a controlling interest in an insurer, will be required to file for and obtain approval of the transaction. The information remains confidential until the conclusion of the transaction unless the commissioner determines confidential treatment will interfere with enforcement of this section. If the statement referred to in subdivision a is otherwise filed, this subdivision does not apply.
    3. With respect to a transaction subject to this section, the acquiring person shall file a preacquisition notification with the commissioner which must contain the information set forth in subdivision a of subsection 3 of section 26.1-10-03.1. Failure to file the notification may result in penalties specified in subdivision e of subsection 5 of section 26.1-10-03.1.
    4. For purposes of this section, a domestic insurer includes any other person in control of a domestic insurer unless the other person, as determined by the commissioner, is either directly or through its affiliates primarily engaged in business other than the business of insurance. For purposes of this section, the term “person” does not include a securities broker holding, in the usual and customary broker’s function, less than twenty percent of the voting securities of an insurer or of any person that controls an insurer.
  1. The statement to be filed with the commissioner must be made under oath or affirmation and must contain the following:
    1. The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection 1 is to be effected, hereinafter called the “acquiring party”:
      1. If the person is an individual, the individual’s principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past ten years.
      2. If the person is not an individual, a report of the nature of its business operations during the past five years or for any lesser period as the person and any predecessors thereof have been in existence; an informative description of the business intended to be done by the person and the person’s subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of the person, or who perform or will perform functions appropriate to these positions. The list must include for each individual the information required by this subsection.
    2. The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction that funds were or are to be obtained for any such purpose, including any pledge of the insurer’s stock, or the stock of any of the insurer’s subsidiaries or controlling affiliates, and the identity of persons furnishing the consideration; provided, however, that if a source of the consideration is a loan made in the lender’s ordinary course of business, the identity of the lender must remain confidential, if the person filing the statement so requests.
    3. Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each acquiring party, or for any lesser period as the acquiring party and any predecessors thereof have been in existence, and similar unaudited information as of a date not earlier than ninety days prior to the filing of the statement.
    4. Any plans or proposals which each acquiring party may have to liquidate the insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management.
    5. The number of shares of any security referred to in subsection 1 which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection 1, and a statement as to the method used to arrive at the fairness of the proposal.
    6. The amount of each class of any security referred to in subsection 1 which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.
    7. A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsection 1 in which any acquiring party is involved, including transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. The description must identify the persons who have entered into the contracts, arrangements, or understandings.
    8. A description of the purchase of any security referred to in subsection 1 during the twelve calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid.
    9. A description of any recommendations to purchase any security referred to in subsection 1 made during the twelve calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of the acquiring party.
    10. Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection 1, and, if distributed, of additional soliciting material relating thereto.
    11. The term of any agreement, contract, or understanding made with or proposed to be made with any broker-dealer as to solicitation of securities referred to in subsection 1 for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto.
    12. An agreement by the person required to file the statement referred to in subsection 1 to provide the annual report, specified in subsection 12 of section 26.1-10-04, for so long as control exists.
    13. An acknowledgment by the person required to file the statement referred to in subsection 1, that the person and all subsidiaries within the person’s control in the insurance holding company system will provide information to the commissioner upon request as necessary to evaluate enterprise risk to the insurer.
    14. Any additional information the commissioner by rule prescribes as necessary or appropriate for the protection of policyholders of the insurer or in the public interest.
  2. If any offer, request, invitation, agreement, or acquisition referred to in subsection 1 is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection 1 may utilize those documents in furnishing the information called for by that statement.
    1. The commissioner shall approve any merger or other acquisition of control referred to in subsection 1 unless, after a public hearing, the commissioner finds that:
      1. After the change of control, the domestic insurer referred to in subsection 1 would not be able to satisfy the requirements for the issuance of a certificate of authority to write the lines of insurance for which it is presently licensed.
      2. The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or tend to create a monopoly. In applying the competitive standard in this subdivision:
        1. The information requirements of subdivision a of subsection 3 of section 26.1-10-03.1 and the standards of subdivision b of subsection 4 of section 26.1-10-03.1;
        2. The merger or other acquisition may not be disapproved if the commissioner finds that any of the situations meeting the criteria provided by subdivision c of subsection 4 of section 26.1-10-03.1 exist; and
        3. The commissioner may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time.
      3. The financial condition of any acquiring party might jeopardize the financial stability of the insurer or prejudice the interest of its policyholders.
      4. The plans or proposals which the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management, are unfair and unreasonable to policyholders of the insurer and not in the public interest.
      5. The competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control.
      6. The acquisition is likely to be hazardous or prejudicial to the insurance buying public.
    2. The public hearing referred to in subdivision a must be held within thirty days after the statement required by subsection 1 is filed and at least twenty days’ notice must be given by the commissioner to the person filing the statement. Not less than seven days’ notice of the hearing must be given by the person filing the statement to the insurer and to other persons designated by the commissioner. The commissioner shall make a determination within the sixty-day period preceding the effective date of the proposed transaction. At the hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interests may be affected have the right to present evidence, examine and cross-examine witnesses, and offer oral and written arguments and in connection therewith are entitled to conduct discovery proceedings in the same manner allowed in district court of this state. All discovery proceedings must be concluded not later than three days prior to the hearing.
    3. If the proposed acquisition of control will require the approval of more than one commissioner, the public hearing referred to in subdivision b may be held on a consolidated basis upon request of the person filing the statement referred to in subsection 1. Within five days of making the request for a public hearing, the person shall file the statement referred to in subsection 1 with the national association of insurance commissioners. A commissioner may opt out of a consolidated hearing and shall provide notice to the applicant of the opt out within ten days of the receipt of the statement referred to in subsection 1. A hearing conducted on a consolidated basis is public and must be held within the United States before the commissioners of the states in which the insurers are domiciled. The commissioners shall hear and receive evidence. A commissioner may attend the hearing in person or by telecommunication.
    4. In connection with a change of control of a domestic insurer, any determination by the commissioner that the person acquiring control of the insurer must be required to maintain or restore the capital of the insurer to the level required by the laws and rules of this state must be made not later than sixty days after the date of notification of the change in control submitted pursuant to subdivision a of subsection 1.
    5. The commissioner may retain at the acquiring person’s expense any attorneys, actuaries, accountants, and other experts not otherwise a part of the commissioner’s staff as may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of control.
  3. This section does not apply to:
    1. Any transaction which is subject to the provisions of chapter 26.1-07, dealing with the merger or consolidation of two or more insurers.
    2. Any offer, request, invitation, agreement, or acquisition which the commissioner by order exempts as not having been made or entered for the purpose and not having the effect of changing or influencing the control of a domestic insurer or as otherwise not comprehended within the purposes of this section.
  4. The following is a violation of this section:
    1. The failure to file any statement, amendment, or other material required to be filed pursuant to subsection 1 or 2.
    2. The effectuation or any attempt to effectuate an acquisition of control of, divestiture of, or merger with, a domestic insurer without the approval of the commissioner.
  5. The courts of this state have jurisdiction over every person not resident, domiciled, or authorized to do business in this state who files a statement with the commissioner under this section, and over all actions involving the person arising out of violations of this section, and each person is deemed to have performed acts equivalent to and constituting appointment of the commissioner as the person’s attorney upon whom may be served all lawful process in any action, suit, or proceeding arising out of violations of this section. Copies of all lawful process must be served on the commissioner and transmitted by registered mail by the commissioner to the person at the person’s last-known address.

If the person required to file the statement referred to in subsection 1 is a partnership, limited partnership, syndicate, or other group, the commissioner may require that the information called for by subdivisions a through n must be given with respect to each partner of the partnership or limited partnership, each member of the syndicate or group, and each person who controls the partner or member. If any partner, member, or person is a corporation or the person required to file the statement referred to in subsection 1 is a corporation, the commissioner may require that the information called for by subdivisions a through n must be given with respect to the corporation, each officer and director of the corporation, and each person who is directly or indirectly the beneficial owner of more than ten percent of the outstanding voting securities of the corporation.

If any material change occurs in the facts set forth in the statement filed with the commissioner and sent to the insurer pursuant to this section, an amendment setting forth the change, together with copies of all documents and other material relevant to the change, must be filed with the commissioner and sent to the insurer within two business days after the person learns of the change.

Source:

S.L. 1983, ch. 332, § 10; 1991, ch. 305, § 3; 1993, ch. 292, § 12; 2005, ch. 257, § 2; 2015, ch. 207, § 3, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-03.

26.1-10-03.1. Acquisitions involving insurers not otherwise covered.

  1. For the purpose of this section:
    1. “Acquisition” means any agreement, arrangement, or activity the consummation of which results in a person acquiring directly or indirectly the control of another person, and includes the acquisition of voting securities, the acquisition of assets, bulk reinsurance, and mergers.
    2. An “involved insurer” includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger.
    1. Except as exempted in subdivision b, this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this state.
    2. This section does not apply to:
      1. A purchase of securities solely for investment purposes so long as the securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this state. If a purchase of securities results in a presumption of control under subsection 2 of section 26.1-10-01, it is not solely for investment purposes unless the commissioner of the insurer’s state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the commissioner of this state.
      2. The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if preacquisition notification is filed with the commissioner in accordance with subdivision a of subsection 3 thirty days prior to the proposed effective date of the acquisition. However, the preacquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by any other paragraph of this subdivision.
      3. The acquisition of already affiliated persons.
      4. An acquisition if, as an immediate result of the acquisition:
        1. In no market would the combined market share of the involved insurers exceed five percent of the total market;
        2. There would be no increase in any market share; or
        3. In no market would the combined market share of the involved insurers exceed twelve percent of the total market, and in no market would the market share increase by more than two percent of the total market.
      5. An acquisition for which a preacquisition notification would be required pursuant to this section due solely to the resulting effect on the ocean marine insurance line of business.
      6. An acquisition of an insurer whose domiciliary commissioner affirmatively finds that the insurer is in failing condition, there is a lack of feasible alternative to improving the insurer’s condition, the public benefits of improving the insurer’s condition through the acquisition exceed the public benefits that would arise from not lessening competition, and the findings are communicated by the domiciliary commissioner to the commissioner of this state.
  2. An acquisition covered by subsection 2 may be subject to an order pursuant to subsection 5 unless the acquiring person files a preacquisition notification and the waiting period has expired. The acquired person may file a preacquisition notification. The commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in section 26.1-10-07.
    1. The preacquisition notification must be in the form and contain the information prescribed by the national association of insurance commissioners relating to those markets which, under paragraph 4 of subdivision b of subsection 2, cause the acquisition not to be exempted from the provisions of this section. The commissioner may require additional material and information as the commissioner deems necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection 4. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this state accompanied by a summary of the education and experience of such person indicating that person’s ability to render an informed opinion.
    2. The waiting period required begins on the date of receipt of the commissioner of a preacquisition notification and ends on the earlier of the thirtieth day after the date of its receipt, or termination of the waiting period by the commissioner. Prior to the end of the waiting period, the commissioner on a one-time basis may require the submission of additional needed information relevant to the proposed acquisition, in the event the waiting period ends on the earlier of the thirtieth day after receipt of the additional information by the commissioner or termination of the waiting period by the commissioner.
    1. The commissioner may enter an order under subdivision a of subsection 5 with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this state or tend to create a monopoly therein or if the insurer fails to file adequate information in compliance with subsection 3.
    2. In determining whether a proposed acquisition would violate the competitive standard of subdivision a, the commissioner shall consider the following:
      1. Any acquisition covered under subsection 2 involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standards:
        1. If the market is highly concentrated and the involved insurers possess the following shares of the market:
        2. Or, if the market is not highly concentrated and the involved insurers possess the following shares of the market:
      2. There is a significant trend toward increased concentration when the aggregate market share of any grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven percent or more of the market over a period of time extending from any base year five to ten years prior to the acquisition up to the time of the acquisition. Any acquisition or merger covered under subsection 2 involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in subdivision a if:
        1. There is a significant trend toward increased concentration in the market;
        2. One of the insurers involved is one of the insurance companies in a grouping of large insurers showing the requisite increase in the market share; and
        3. Another involved insurer’s market is two percent or more.
      3. For the purposes of this subdivision:
        1. The term “insurer” includes any company or group of companies under common management, ownership, or control.
        2. The term “market” means the relevant product and geographical markets. In determining the relevant product and geographical markets, the commissioner shall give due consideration to, among other things, the definitions or guidelines, if any, promulgated by the national association of insurance commissioners and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, such line being that used in the annual statement required to be filed by insurers doing business in this state, and the relevant geographical market is assumed to be this state.
        3. The burden of showing prima facie evidence of violation of the competitive standard rests upon the commissioner.
      4. Even though an acquisition is not prima facie violative of the competitive standard under paragraphs 1 and 2, the commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under paragraphs 1 and 2, a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this paragraph include the following: market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry into and exit from the market.
    3. An order may not be entered under subdivision a of subsection 5 if:
      1. The acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the public benefits which would arise from such economies exceed the public benefits which would arise from not lessening competition; or
      2. The acquisition will substantially increase the availability of insurance, and the public benefits of such increase exceed the public benefits which would arise from not lessening competition.
    1. If an acquisition violates the standards of this section, the commissioner may enter an order:
      1. Requiring an involved insurer to cease and desist from doing business in this state with respect to the line or lines of insurance involved in the violation; or
      2. Denying the application of an acquired or acquiring insurer for a license to do business in this state.
    2. The order may not be entered unless:
      1. There is a hearing;
      2. Notice of the hearing is issued prior to the end of the waiting period and not less than fifteen days prior to the hearing; and
      3. The hearing is concluded and the order is issued no later than sixty days after the date of the filing of the preacquisition notification with the commissioner. Every order must be accompanied by a written decision of the commissioner setting forth findings of fact and conclusions of law.
    3. An order pursuant to this subsection does not apply if the acquisition is not consummated.
    4. Any person who violates a cease and desist order of the commissioner under this subsection and while the order is in effect, after notice and hearing and upon order of the commissioner, may be subject at the discretion of the commissioner to any one or both of the following:
      1. A monetary penalty of not more than ten thousand dollars for every day of violation.
      2. Suspension or revocation of the person’s license.
    5. Any insurer or other person who fails to make any filing required by this section and who also fails to demonstrate a good-faith effort to comply with any such filing requirement is subject to a fine of not more than fifty thousand dollars.
    6. Subsections 2 and 3 of section 26.1-10-10 and section 26.1-10-12 do not apply to acquisitions covered under subsection 2.

For the purpose of this paragraph, a “market” means direct written insurance premium in this state for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this state.

Insurer A Insurer B 4% 4% or more 10% 2% or more 15% 1% or more

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Insurer A Insurer B 5% 5% or more 10% 4% or more 15% 3% or more 19% 1% or more

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A highly concentrated market is one in which the share of the four largest insurers is seventy-five percent or more of the market. Percentages not shown in the tables are interpolated proportionately to the percentages that are shown. If more than two insurers are involved, exceeding the total of the two columns in the table is prima facie evidence of violation of the competitive standard in subdivision a. For the purpose of this paragraph, the insurer with the largest share of the market must be deemed to be insurer A.

Source:

S.L. 1991, ch. 305, § 4; 1993, ch. 45, § 11; 2015, ch. 207, § 4, eff August 1, 2015.

26.1-10-04. Registration of insurers.

  1. Every insurer that is authorized to do business in this state and which is a member of an insurance holding company system shall register with the commissioner, except a foreign insurer subject to registration requirements and standards adopted by statute or rule in the jurisdiction of its domicile which are substantially similar to those contained in this section and section 26.1-10-05. Any insurer subject to registration under this section shall register within fifteen days after it becomes subject to registration, and annually thereafter by March first of each year for the previous calendar year unless the commissioner for good cause shown extends the time for registration, and then within the extended time. The commissioner may require any insurer authorized to do business in the state which is a member of an insurance holding company system not subject to registration under this section to furnish a copy of the registration statement, the summary specified in subsection 10 of section 26.1-10-04, or other information filed by the insurer with the insurance regulatory authority of the domiciliary jurisdiction.
  2. Every insurer subject to registration shall file a registration statement with the commissioner on a form approved by the commissioner, which must contain current information about:
    1. The capital structure, general financial condition, ownership, and management of the insurer and any person in control of the insurer.
    2. The identity and relationship of every member of the insurance holding company system.
    3. The following agreements in force and transactions currently outstanding or which have occurred during the last calendar year between the insurer and its affiliates:
      1. Loans, other investments, or purchases, sales, or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates.
      2. Purchases, sales, or exchange of assets.
      3. Transactions not in the ordinary course of business.
      4. Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurer’s assets to liability, other than insurance contracts entered into in the ordinary course of the insurer’s business.
      5. All management agreements, service contracts, and all cost-sharing arrangements.
      6. Reinsurance agreements.
      7. Dividends and other distributions to shareholders.
      8. Consolidated tax allocation agreements.
    4. Any pledge of the insurer’s stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system.
    5. If requested by the commissioner, the insurer shall include financial statements of or within an insurance holding company system, including all affiliates. A financial statement may include an annual audited financial statement filed with the United States securities and exchange commission pursuant to the federal Securities Act of 1933, as amended, [15 U.S.C. 77a et seq.] or the federal Securities Exchange Act of 1934, as amended, [15 U.S.C. 78a et seq.] or the financial statement pursuant to this subdivision may satisfy the request by providing the commissioner with the most recently filed parent corporation financial statements that have been filed with the United Sates securities and exchange commission.
    6. Other matters concerning transactions between registered insurers and any affiliates as may be included from time to time in any registration forms adopted or approved by the commissioner.
    7. Statements that the insurer’s board of directors is responsible for and supervises, relating to corporate governance and internal controls that the insurer’s officers or senior management have approved, implemented, and continue to maintain and monitor.
    8. Any other information required by the commissioner by rule.
  3. No information need be disclosed on the registration statement filed pursuant to subsection 2 if the information is not material for the purposes of this section. Unless the commissioner by rule or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, or investments, or guarantees involving one-half of one percent or less of an insurer’s admitted assets as of December thirty-first next preceding are not material for purposes of this section.
  4. In addition to the annual filing requirement under subsection 1, each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on amendment forms approved by the commissioner within fifteen days after the end of the month in which it learns of each change or addition; provided, however, that subject to subsections 7, 8, and 9 of section 26.1-10-05, each registered insurer shall report all dividends and other distributions to shareholders within five business days following the declaration and no less than ten business days prior to payment thereof.
  5. The commissioner shall terminate the registration of any insurer that demonstrates it no longer is a member of an insurance holding company system.
  6. The commissioner may require or allow two or more affiliated insurers subject to registration to file a consolidated registration statement.
  7. The commissioner may allow an insurer which is authorized to do business in this state and which is part of an insurance holding company system to register on behalf of any affiliated insurer which is required to register under subsection 1 to file all information and material required to be filed under this section.
  8. This section does not apply to any insurer, information, or transaction if and to the extent excepted by the commissioner by rule or order.
  9. Any person may file with the commissioner a disclaimer of affiliation with any authorized insurer or a disclaimer may be filed by the insurer or any member of an insurance holding company system. The disclaimer must fully disclose all material relationships and bases for affiliation between the person and the insurer as well as the basis for disclaiming the affiliation. A disclaimer of affiliation is deemed to have been granted unless the commissioner, within thirty days following receipt of a complete disclaimer, notifies the filing party the disclaimer is disallowed. In the event of disallowance, the disclaiming party may request an administrative hearing, which must be granted. The disclaiming party is relieved of its duty to register under this section if approval of the disclaimer has been granted by the commissioner or if the disclaimer is deemed to have been approved.
  10. All registration statements must contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.
  11. Any person within an insurance holding company system subject to registration must provide complete and accurate information to an insurer, when the information is reasonably necessary to enable the insurer to comply with the provisions of this chapter.
  12. The ultimate controlling person of every insurer subject to registration shall file an annual enterprise risk report. To the best of the ultimate controlling person’s knowledge and belief, the report must identify the material risks within the insurance holding company system which could pose enterprise risk to the insurer. The report must be filed with the lead state commissioner of the insurance holding company system as determined by the procedures within the financial analysis handbook adopted by the national association of insurance commissioners.
  13. The failure to file a registration statement or any summary of the registration statement or enterprise risk filing required by this section within the time specified for the filing is a violation of this section.

Source:

S.L. 1983, ch. 332, § 10; 1991, ch. 305, § 5; 1993, ch. 292, § 13; 2015, ch. 207, § 5, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-04.

26.1-10-05. Standards and management of an insurer with an insurance holding company system.

  1. Transactions within an insurance holding company system to which an insurer subject to registration is a party are subject to the following standards:
    1. The terms must be fair and reasonable.
    2. Agreements for cost-sharing services and management must include provisions as required by rules adopted by the commissioner.
    3. The books, accounts, and records of each party must clearly and accurately disclose the precise nature and details of the transactions, including that accounting information that is necessary to support the reasonableness of the charges or fees to the respective parties.
    4. The insurer’s surplus as regards to policyholders following any dividends or distributions to shareholder affiliates must be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs.
    5. Charges or fees for services performed must be reasonable.
    6. Expenses incurred and payment received must be allocated to the insurer in conformity with statutory accounting practices consistently applied.
  2. The following transactions involving a domestic insurer and any person in its insurance holding company system, including an amendment or modification of an affiliate agreement previously filed pursuant to this section, which is subject to any materiality standards contained in subdivisions a through g, may not be entered unless the insurer has notified the commissioner in writing of its intention to enter into the transaction at least thirty days prior thereto, or a shorter period as the commissioner may permit, and the commissioner has not disapproved it within that period. The notice for an amendment or modification must include the reason for the change and the financial impact on the domestic insurer. Within thirty days after a termination of a previously filed agreement, informal notice must be reported to the commissioner for determination of the type of filing required, if any.
    1. Sales, purchases, exchanges, loans, or extensions of credit, or investments provided the transactions are equal to or exceed:
      1. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or twenty-five percent of surplus as regards policyholders as of December thirty-first next preceding.
      2. With respect to life insurers, three percent of the insurer’s admitted assets as of December thirty-first next preceding.
    2. Loans or extensions of credit to any person that is not an affiliate, if the insurer makes loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in any affiliate of the insurer making the loans or extensions of credit provided the transactions are equal to or exceed:
      1. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or twenty-five percent of surplus as regards policyholders as of December thirty-first next preceding.
      2. With respect to life insurers, three percent of the insurer’s admitted assets as of December thirty-first next preceding.
    3. Reinsurance agreements or modifications thereto, including:
      1. All reinsurance pooling agreements.
      2. Agreements in which the reinsurance premium or a change in the insurer’s liabilities, or the projected reinsurance premium or a change in the insurer’s liabilities in any of the next three years, equals or exceeds five percent of the insurer’s surplus as regards policyholders, as of December thirty-first next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurer.
    4. All management agreements, service contracts, tax allocation agreements, guarantees, and cost-sharing arrangements.
    5. Any guarantee made by a domestic insurer; however, a guarantee that is quantifiable as to amount is not subject to the notice requirements of this subsection unless the guarantee exceeds the lesser of one-half of one percent of the insurer’s admitted assets or ten percent of surplus as regards policyholders as of December thirty-first next preceding. Additionally, all guarantees that are not quantifiable as to amount are subject to the notice requirements of this subsection.
    6. Any direct or indirect acquisition or investment in a person that controls the insurer or in an affiliate of the insurer in an amount that, together with its present holdings in such investments, exceeds two and one-half percent of the insurer’s surplus to policyholders. A direct or indirect acquisition or investment in a subsidiary acquired pursuant to section 26.1-10-02, or authorized under any other section of this chapter, or in a nonsubsidiary insurance affiliate that is subject to this chapter, is exempt from this requirement.
    7. Any material transactions, specified by rule, which the commissioner determines may adversely affect the interests of the insurer’s policyholders.
  3. A domestic insurer may not enter transactions that are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the commissioner determines that the separate transactions were entered over any twelve-month period for that purpose, the commissioner may exercise the commissioner’s authority under the penalty sections of this chapter.
  4. The commissioner, in reviewing transactions pursuant to subsection 2, shall consider whether the transactions comply with the standards set forth in subsection 1 and whether they may adversely affect the interests of the policyholders.
  5. The commissioner must be notified within thirty days of any investment of the domestic insurer in any one corporation if the total investment in that corporation by the insurance holding company system exceeds ten percent of the corporation’s voting securities.
  6. For purposes of this chapter, in determining whether an insurer’s surplus as regards policyholders is reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs, the following factors, among others, must be considered:
    1. The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria.
    2. The extent to which the insurer’s business is diversified among the several lines of insurance.
    3. The number and size of risks insured in each line of business.
    4. The extent of the geographical dispersion of the insurer’s insured risks.
    5. The nature and extent of the insurer’s reinsurance program.
    6. The quality, diversification, and liquidity of the insurer’s investment portfolio.
    7. The recent past and projected future trend in the size of the insurer’s investment portfolio.
    8. The surplus as regards policyholders maintained by other comparable insurers.
    9. The adequacy of the insurer’s reserves.
    10. The quality and liquidity of investments in affiliates. The commissioner may treat the investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in the commissioner’s judgment the investment so warrants.
  7. A domestic insurer may not pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until thirty days after the commissioner has received notice of the declaration thereof and has not within that period disapproved the payment, or until the commissioner has approved the payment within the thirty-day period.
  8. For purposes of this section, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property, when the fair market value together with that of other dividends or distributions made within the preceding twelve months exceeds the lesser of:
    1. Ten percent of the insurer’s surplus as regards policyholders as of December thirty-first next preceding; or
    2. The net gain from operations of the insurer, if the insurer is a life insurer, or the net income, if the company is not a life insurer, not including realized capital gains, for the twelve-month period ending December thirty-first next preceding, but shall not include pro rata distributions of any class of the insurer’s own securities.
  9. In determining whether a dividend or distribution is extraordinary under subsection 8, an insurer other than a life insurer may carry forward net income from the previous two calendar years which has not already been paid out as dividends. This carry-forward must be computed by taking the net income from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years.
  10. Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner’s approval, and the declaration confers no rights upon shareholders until:
    1. The commissioner has approved the payment of the dividend or distribution; or
    2. The commissioner has not disapproved the payment within the thirty-day period referred to in subsection 7.

Nothing in this subsection may be deemed to authorize or permit any transactions which, in the case of an insurer which is not a member of the same insurance holding company system, would be otherwise contrary to law.

Source:

S.L. 1983, ch. 332, § 10; 1991, ch. 305, § 6; 1993, ch. 292, §§ 14, 15; 1993, ch. 293, § 2; 2001, ch. 264, § 5; 2015, ch. 207, § 6, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-05.

26.1-10-05.1. Dividends and other distribution.

  1. The board of directors of any company subject to this chapter may declare and the company may pay dividends and other distributions on its outstanding shares and cash, property, or its own shares and on its treasury stock in its own shares, subject to the following provisions:
    1. No dividend or other distribution may be declared or paid at any time except out of earned, as distinguished from contributed, surplus, nor when the surplus of the company is less than the surplus required by law for the kind or kinds of business authorized to be transacted by the insurer, nor when the payment of a dividend or other distribution would reduce its surplus to less than such amount.
    2. Except in the case of share dividends, surplus for determining whether dividends or other distributions may be declared may not include surplus arising from unrealized appreciation in value, or revaluation of assets, or from unrealized profits upon investments.
    3. No dividend or other distribution may be declared or paid contrary to any restriction contained in the articles of incorporation.
    4. No dividend or other distribution may be declared or paid contrary to section 26.1-10-05.
  2. No payment may be made to policyholders by way of dividends unless the insurer possesses admitted assets in the amount of such payment in excess of its capital, minimum required surplus, and all liabilities.

Source:

S.L. 1993, ch. 292, § 11; 2015, ch. 207, § 7, eff August 1, 2015.

26.1-10-06. Examination.

  1. Subject to the limitations contained in this section and in addition to the powers which the commissioner has relating to the examination of insurers, the commissioner may examine any insurer registered under section 26.1-10-04 and the insurer’s affiliates to ascertain the financial condition of the insurer, including the enterprise risk to the insurer by the ultimate controlling party, or by any entity or combination of entities within the insurance holding company system, or by the insurance holding company system on a consolidated basis.
  2. The commissioner may order any insurer registered under section 26.1-10-04 to produce any record, book, or other information paper in the possession of the insurer or its affiliates necessary to determine compliance with this chapter.
  3. To determine compliance with this chapter, the commissioner may order any insurer registered under section 26.1-10-04 to produce information not in the possession of the insurer if the insurer can obtain access to such information pursuant to a contractual relationship, statutory obligation, or other method. If the insurer cannot obtain the information requested by the commissioner, the insurer shall provide the commissioner a detailed explanation of the reason the insurer cannot obtain the information and the identity of the holder of the information. If the commissioner determines the detailed explanation is without merit, the commissioner may require, after notice and hearing, the insurer to pay a penalty of one thousand dollars for each day’s delay, or may suspend or revoke the insurer’s license.
  4. The commissioner may retain at the registered insurer’s expense any attorneys, actuaries, accountants, and other experts, not otherwise a part of the commissioner’s staff, as are reasonably necessary to assist in the conduct of the examination under subsection 1. Any persons so retained are under the direction and control of the commissioner and shall act in a purely advisory capacity.
  5. Each registered insurer producing any record, book, or other information paper for examination pursuant to subsection 1 is liable for and shall pay the expense of the examination.
  6. If the insurer fails to comply with an order, the commissioner may examine the affiliates to obtain the information. The commissioner may issue a subpoena, administer oaths, and examine under oath any person for purposes of determining compliance with this section. Upon the failure or refusal of any person to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order is punishable as contempt of court. When subpoenaed, a person shall attend as a witness at the place specified in the subpoena, anywhere within the state. The witness is entitled to receive the same fees and mileage as a witness in an administrative hearing or in district court, which fees, mileage, and actual expense, if any, necessarily incurred in securing the attendance of witnesses, and their testimony, must be itemized and charged against, and be paid by, the insurer being examined.

Source:

S.L. 1983, ch. 332, § 10; 2015, ch. 207, § 8, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-06.

26.1-10-06.1. Supervisory colleges.

  1. With respect to any insurer registered under section 26.1-10-04, and in accordance with subsection 3, the commissioner may participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations to determine compliance by the insurer with this chapter. The powers of the commissioner with respect to a supervisory college include:
    1. Initiating the establishment of a supervisory college;
    2. Clarifying the membership and participation of other supervisors in the supervisory college;
    3. Clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a groupwide supervisor;
    4. Coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and establishing processes for information sharing; and
    5. Establishing a crisis management plan.
  2. Each registered insurer subject to this section shall pay the reasonable expenses of the commissioner’s participation in a supervisory college in accordance with subsection 3, including reasonable travel expenses. For purposes of this section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the insurer or the insurer’s affiliates, and the commissioner may establish a regular assessment to the insurer for the payment of expenses.
  3. To assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management, and governance processes, and as part of the examination of an individual insurer in accordance with section 26.1-10-06, the commissioner may participate in a supervisory college with other regulators charged with supervision of the insurer or the insurer’s affiliates, including other state, federal, and international regulatory agencies. The commissioner may enter an agreement in accordance with subsection 3 of section 26.1-10-07 providing the basis for cooperation between the commissioner and the other regulatory agencies, and the activities of the supervisory college. This section does not delegate to the supervisory college the authority of the commissioner to regulate or supervise the insurer or the insurer’s affiliates within the commissioner’s jurisdiction.

History. S.L. 2015, ch. 207, § 9, eff August 1, 2015.

26.1-10-06.2. Groupwide supervision of internationally active insurance groups.

    1. The commissioner may act as the groupwide supervisor for any internationally active insurance group in accordance with this section. However, the commissioner may otherwise acknowledge another regulatory official as the groupwide supervisor if the internationally active insurance group:
      1. Does not have substantial insurance operations in the United States;
      2. Has substantial insurance operations in the United States but not in this state; or
      3. Has substantial insurance operations in the United States and this state, but the commissioner has determined under the factors set forth in subsections 2 and 6 the other regulatory official is the appropriate groupwide supervisor.
    2. An insurance holding company system that does not otherwise qualify as an internationally active insurance group may request the commissioner make a determination or acknowledgment as to a groupwide supervisor under this section.
  1. In cooperation with other state, federal, and international regulatory agencies, the commissioner shall identify a single groupwide supervisor for an internationally active insurance group and may determine the commissioner is the appropriate groupwide supervisor for an internationally active insurance group that conducts substantial insurance operations concentrated in this state. However, the commissioner may acknowledge a regulatory official from another jurisdiction is the appropriate groupwide supervisor for the internationally active insurance group. The commissioner shall consider the following factors when making a determination or acknowledgment under this subsection:
    1. The place of domicile of the insurers within the internationally active insurance group which hold the largest share of the group’s premiums, assets, or liabilities;
    2. The place of domicile of the top-tiered insurers in the insurance holding company system of the internationally active insurance group;
    3. The location of the executive offices or largest operational offices of the internationally active insurance group;
    4. Whether another regulatory official is acting or is seeking to act as the groupwide supervisor under a regulatory system the commissioner determines to be:
      1. Substantially similar to the system of regulation provided under the laws of this state; or
      2. Otherwise sufficient in terms of providing for groupwide supervision, enterprise risk analysis, and cooperation with other regulatory officials; and
    5. Whether another regulatory official acting or seeking to act as the groupwide supervisor provides the commissioner with reasonably reciprocal recognition and cooperation. However, a commissioner identified under this section as the groupwide supervisor may determine it is appropriate to acknowledge another supervisor to serve as the groupwide supervisor. The acknowledgment of the groupwide supervisor must be made after the consideration of the factors listed in subdivisions a through e, and must be made in cooperation with and subject to the acknowledgment of other regulatory officials involved with supervision of members of the internationally active insurance group, and in consultation with the internationally active insurance group.
    1. Notwithstanding any other provision of law, when another regulatory official is acting as the groupwide supervisor of an internationally active insurance group, the commissioner shall acknowledge that regulatory official as the groupwide supervisor unless the commissioner determines there has been a significant material change in the internationally active insurance group that results in:
      1. The internationally active insurance group’s insurers domiciled in this state holding the largest share of the group’s premiums, assets, or liabilities; or
      2. This state being the place of domicile of the top-tiered insurers in the insurance holding company system of the internationally active insurance group.
    2. If such a material change has occurred, the commissioner shall make a determination or acknowledgment as to the appropriate groupwide supervisor under subsection 2.
  2. Under section 26.1-10-06, the commissioner may collect from any insurer registered under section 26.1-10-04 all information necessary to determine whether the commissioner may act as the groupwide supervisor of an internationally active insurance group or if the commissioner may acknowledge another regulatory official to act as the groupwide supervisor. Before issuing a determination that an internationally active insurance group is subject to groupwide supervision by the commissioner, the commissioner shall notify the insurer registered under section 26.1-10-04 and the ultimate controlling person within the internationally active insurance group. The internationally active insurance group must be provided not less than thirty days to provide the commissioner with additional information pertinent to the pending determination. The commissioner shall publish on the commissioner’s internet website the identity of internationally active insurance groups the commissioner has determined are subject to groupwide supervision by the commissioner.
  3. If the commissioner is the groupwide supervisor for an internationally active insurance group, the commissioner may engage in any of the following groupwide supervision activities:
    1. Assess the enterprise risks within the internationally active insurance group to ensure:
      1. The material financial condition and liquidity risks to the members of the internationally active insurance group which are engaged in the business of insurance are identified by management; and
      2. Reasonable and effective mitigation measures are in place.
    2. Request, from any member of an internationally active insurance group subject to the commissioner’s supervision, information necessary and appropriate to assess enterprise risk, including information about the members of the internationally active insurance group regarding:
      1. Governance, risk assessment, and management;
      2. Capital adequacy; and
      3. Material intercompany transactions.
    3. Coordinate and, through the authority of the regulatory officials of the jurisdictions where members of the internationally active insurance group are domiciled, compel development and implementation of reasonable measures designed to ensure the internationally active insurance group is able to timely recognize and mitigate enterprise risks to members of that internationally active insurance groups which are engaged in the business of insurance.
    4. Communicate with other state, federal, and international regulatory agencies for members within the internationally active insurance group and share relevant information subject to the confidentiality provisions of section 26.1-10-07 through supervisory colleges as set forth in section 26.1-10-06.1 or otherwise.
    5. Enter agreements with or obtain documentation from any insurer registered under section 26.1-10-04; any member of the internationally active insurance group; and any other state, federal, and international regulatory agency for members of the internationally active insurance group, providing the basis for or otherwise clarifying the commissioner’s role as groupwide supervisor, including provisions for resolving disputes with other regulatory officials. The agreement or documentation may not serve as evidence in any proceeding any insurer or person within an insurance holding company system not domiciled or incorporated in this state is doing business in this state or is otherwise subject to jurisdiction in this state.
    6. Other groupwide supervision activities, consistent with the authorities and purposes enumerated in this section, as considered necessary by the commissioner.
  4. If the commissioner acknowledges another regulatory official from a jurisdiction that is not accredited by the national association of insurance commissioners is the groupwide supervisor, the commissioner may cooperate reasonably, through supervisory colleges or otherwise, with groupwide supervision undertaken by the groupwide supervisor, provided:
    1. The commissioner’s cooperation is in compliance with the laws of this state; and
    2. The regulatory official acknowledged as the groupwide supervisor also recognizes and cooperates with the commissioner’s activities as a groupwide supervisor for other internationally active insurance groups as applicable. If such recognition and cooperation is not reasonably reciprocal, the commissioner may refuse recognition and cooperation.
  5. The commissioner may enter an agreement with or obtain documentation from any insurer registered under section 26.1-10-04; any affiliate of the insurer; and other state, federal, and international regulatory agency for members of the internationally active insurance group which provide the basis for or otherwise clarify a regulatory official’s role as groupwide supervisor.
  6. The commissioner may adopt rules necessary for the administration of this section.
  7. A registered insurer subject to this section is liable for and shall pay the reasonable expenses of the commissioner’s participation in the administration of this section, including the engagement of an attorney, actuary, and any other professional and all reasonable travel expenses.

History. S.L. 2015, ch. 207, § 10, eff August 1, 2015.

26.1-10-07. Confidential treatment.

  1. Any document, material, or other information in the possession or control of the North Dakota insurance department which is obtained by or disclosed to the commissioner or any other person in the course of an examination or investigation made pursuant to section 26.1-10-06 and all information reported pursuant to subdivisions l and m of subsection 2 of section 26.1-10-03 and sections 26.1-10-04 and 26.1-10-05 is confidential and privileged, not subject to section 44-04-18, not subject to subpoena, and not subject to discovery or admissible in evidence in any private civil action. However, the commissioner may use the document, material, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s official duties. The commissioner may not otherwise make the document, material, or other information public without the prior written consent of the insurer to which it pertains unless the commissioner, after giving the insurer and its affiliates that would be affected thereby, notice and opportunity to be heard, determines that the interests of policyholders, shareholders, or the public will be served by the publication thereof, in which event the commissioner may publish all or any part thereof in any manner the commissioner deems appropriate.
  2. Neither the commissioner nor any person that received any document, material, or other information while acting under the authority of the commissioner or with whom such document, material, or other information is shared under this chapter is permitted or required to testify in any private civil action concerning any confidential document, material, or information subject to subsection 1.
  3. To assist in the performance of the commissioner’s duties:
    1. If the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information, and has verified in writing the legal authority to maintain confidentiality, the commissioner may share any document, material, or other information, including the confidential and privileged document, material, or information subject to subsection 1, with any other state, federal, and international regulatory agency, the national association of insurance commissioners and its affiliates and subsidiaries, and any state, federal, or international law enforcement authority, including members of any supervisory college described in section 26.1-10-06.1;
    2. Notwithstanding subdivision a, the commissioner may share a confidential and privileged document, material, or information reported under subsection 12 of section 26.1-10-04 only with a commissioner of a state having statutes or regulations substantially similar to subsection 1 and who has agreed in writing not to disclose the information;
    3. The commissioner may receive any document, material, or information, including any otherwise confidential and privileged document, material, or information from the national association of insurance commissioners and its affiliates and subsidiaries and from any regulatory and law enforcement official of other foreign or domestic jurisdiction, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding the document, material, or information is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; and
    4. The commissioner shall enter a written agreement with the national association of insurance commissioners governing sharing and use of information provided under this chapter consistent with this subsection and which must:
      1. Specify procedures and protocols regarding the confidentiality and security of information shared with the national association of insurance commissioners and its affiliates and subsidiaries under this chapter, including procedures and protocols for sharing by the national association of insurance commissioners with any other state, federal, or international regulator;
      2. Specify ownership of information shared with the national association of insurance commissioners and its affiliates and subsidiaries under this chapter remains with the commissioner, and the national association of insurance commissioner’s use of the information is subject to the direction of the commissioner;
      3. Require prompt notice to be given to an insurer if the insurer’s confidential information in the possession of the national association of insurance commissioners under this chapter is subject to a request or subpoena to the national association of insurance commissioners for disclosure or production; and
      4. Require the national association of insurance commissioners and its affiliates and subsidiaries to consent to intervention by an insurer in any judicial or administrative action in which the national association of insurance commissioners and its affiliates and subsidiaries may be required to disclose confidential information about the insurer shared with the national association of insurance commissioners and its affiliates and subsidiaries under this chapter.
  4. The sharing of information by the commissioner under this chapter does not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution, and enforcement of this chapter.
  5. Waiver of any applicable privilege or claim of confidentiality in any document, material, or information may not occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection 3.
  6. Any document, material, or other information in the possession or control of the national association of insurance commissioners under this chapter is confidential and privileged, not subject to section 44-04-18, not subject to subpoena, and not subject to discovery or admissible in evidence in any private civil action.

Source:

S.L. 1983, ch. 332, § 10; 2015, ch. 207, § 11, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-07.

26.1-10-08. Injunctions — Prohibitions against voting securities — Sequestration of voting securities.

  1. Whenever it appears to the commissioner that any insurer or any director, officer, employee, or agent thereof has committed or is about to commit a violation of this chapter or of any rule or order issued by the commissioner under this chapter, the commissioner may apply to the district court for the county in which the principal office of the insurer is located or if the insurer has no principal office in this state then to the district court of Burleigh County for an order enjoining the insurer or the director, officer, employee, or agent thereof from violating or continuing to violate this chapter or any rule or order, and for any other equitable relief as the nature of the case and the interests of the insurer’s policyholders, creditors, and shareholders or the public may require.
  2. A security which is the subject of any agreement or arrangement regarding acquisition, or which is acquired or to be acquired, in contravention of this chapter or any rule or order issued by the commissioner hereunder may not be voted at any shareholders’ meeting or counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though the securities were not issued and outstanding, but any action taken at the meeting is not invalidated by the voting of those securities, unless the action would materially affect control of the insurer or unless the courts of this state have so ordered. If an insurer or the commissioner has reason to believe that any security of the insurer has been or is about to be acquired in contravention of this chapter or any rule or order issued by the commissioner hereunder, the insurer or the commissioner may apply to the district court of Burleigh County or to the district court of the county in which the insurer has its principal place of business to enjoin any offer, request, invitation, agreement, or acquisition made in contravention of section 26.1-10-03 or any rule or order issued by the commissioner thereunder to enjoin the voting of any security so acquired, to void any vote of the security already cast at any meeting of shareholders, and for any other equitable relief as the nature of the case and the interests of the insurer’s policyholders, creditors, and shareholders or the public may require.
  3. When a person has acquired or is proposing to acquire any voting securities in violation of this chapter or any rule or order issued by the commissioner hereunder, the district court of Burleigh County or the district court of the county in which the insurer has its principal place of business may, on the notice the court deems appropriate and upon the application of the insurer or the commissioner, seize or sequester any voting securities of the insurer owned directly or indirectly by the person and issue any orders with respect as may be appropriate to effectuate this chapter.
  4. Notwithstanding any other provision of law, for the purpose of this chapter the site of the ownership of the securities of domestic insurers is deemed to be in this state.

Source:

S.L. 1983, ch. 332, § 10; 2015, ch. 207, § 12, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-09.

26.1-10-09. Revocation, suspension, and nonrenewal of license.

Whenever it appears to the commissioner that any person has committed a violation of this chapter which makes the continued operation of an insurer contrary to the interests of policyholders or the public, the commissioner, after giving notice and an opportunity to be heard, may suspend, revoke, or refuse to renew the insurer’s license or authority to do business in this state for any period the commissioner finds is required for the protection of policyholders or the public. Any determination must be accompanied by specific findings of fact and conclusions of law.

Source:

S.L. 1983, ch. 332, § 10; 2015, ch. 207, § 13, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-12.

26.1-10-10. Receivership.

Whenever it appears to the commissioner that any person has committed a violation of this chapter which so impairs the financial condition of a domestic insurer as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders, or the public, then the commissioner may proceed as provided in chapter 26.1-06.1 to take possession of the property of the insurer and to carry on its business.

Source:

S.L. 1983, ch. 332, § 10; 1991, ch. 305, § 7; 2015, ch. 207, § 14, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-11.

26.1-10-10.1. Recovery.

  1. If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under the order may recover on behalf of the insurer:
    1. From any parent corporation or holding company or person or affiliate that otherwise controlled the insurer, the amount of distributions other than distributions of shares of the same class of stock, paid by the insurer on its capital stock; or
    2. Any payment in the form of a bonus, termination settlement, or extraordinary lump sum salary adjustment made by the insurer or its subsidiaries to a director, officer, or employee, if the distribution or payment under this subsection is made at any time during the one year preceding the petition for liquidation, conservation, or rehabilitation subject to the limitations of subsections 2, 3, and 4.
  2. A distribution may not be recovered if the parent or affiliate shows that, when paid, the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
  3. Any person that was a parent corporation or holding company or a person that otherwise controlled the insurer or affiliate at the time the distributions were paid is liable up to the amount of distributions or payments under subsection 1 the person received. Any person that otherwise controlled the insurer at the time the distributions were declared is liable up to the amount of distributions the person would have received if the person had been paid immediately. If two or more persons are liable with respect to the same distributions, they are jointly and severally liable.
  4. The maximum amount recoverable under this section is the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty funds.
  5. To the extent that any person liable under subsection 3 is insolvent or otherwise fails to pay claims due from it, its parent corporation or holding company or person that otherwise controlled it at the time the distribution was paid must be jointly and severally liable for any resulting deficiency in the amount recovered from the parent corporation or holding company or person that otherwise controlled it.

Source:

S.L. 1991, ch. 305, § 8; 1993, ch. 54, § 106; 2015, ch. 207, § 15, eff August 1, 2015.

26.1-10-11. Penalty.

  1. Any insurer failing, without just cause, to file any registration statement as required in this chapter must be required, after notice and hearing, to pay a penalty of one hundred dollars for each day’s delay. The commissioner may reduce the penalty if the insurer demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.
  2. Every director or officer of an insurance holding company system who knowingly violates, participates in, or assents to, or who knowingly permits any of the officers or agents of the insurer to engage in transactions or make investments which have not been properly reported or submitted pursuant to sections 26.1-10-04 and 26.1-10-05, or which violate this chapter, shall pay, in their individual capacity, a civil penalty of not more than one thousand dollars per violation, after notice and hearing before the commissioner. In determining the amount of the civil penalty, the commissioner shall take into account the appropriateness of the penalty with respect to the gravity of the violation, the history of previous violations, and such other matters as justice may require.
  3. Whenever it appears to the commissioner that any insurer subject to this chapter or any director, officer, employee, or agent thereof has engaged in any transaction or entered a contract which is subject to section 26.1-10-05 and which would not have been approved had the approval been requested, the commissioner may order the insurer to cease and desist immediately any further activity under that transaction or contract. After notice and hearing, the commissioner may also order the insurer to void any contracts and restore the status quo if it is in the best interest of the policyholders, creditors, or the public.
  4. Whenever it appears to the commissioner that any insurer or any director, officer, employee, or agent thereof has committed a willful violation of this chapter, the commissioner may institute criminal proceedings in the district court of the county in which the principal office of the insurer is located or if the insurer has no principal office in the state, then in the district court of Burleigh County against the insurer or the responsible director, officer, employee, or agent of the company. Any insurer that willfully violates this chapter may be fined not more than fifty thousand dollars. Any individual who willfully violates this chapter may be fined in the individual’s capacity not more than ten thousand dollars.
  5. Any officer, director, or employee of an insurance holding company system, who willfully and knowingly subscribes to or makes or causes to be made any false statements or false reports or false filings with the intent to deceive the commissioner in the performance of the commissioner’s duties under this chapter may be fined not more than fifty thousand dollars. Any fines imposed must be paid by the officer, director, or employee in the person’s individual capacity.
  6. If it appears to the commissioner any person has committed a violation of section 26.1-10-03 which prevents the full understanding of the enterprise risk to the insurer by affiliates or by the insurance holding company system, the violation may serve as an independent basis for disapproving dividends or distributions and for placing the insurer under an order of supervision in accordance with chapter 26.1-06.2.

Source:

S.L. 1983, ch. 332, § 10; 1991, ch. 305, § 9; 2015, ch. 207, § 16, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-21.2-10.

26.1-10-12. Rulemaking.

The commissioner may adopt rules and issue orders necessary to carry out this chapter.

Source:

S.L. 1983, ch. 332, § 10.

Derivation:

N.D.C.C. § 26-21.2-08.

26.1-10-13. Judicial review — Mandamus.

  1. Any person aggrieved by any act, determination, rule, order, or any other action of the commissioner under this chapter may appeal to the district court for Burleigh County. The court shall conduct the review without a jury and by trial de novo, except if all parties, including the commissioner, so stipulate, the review must be confined to the record. Portions of the record may be introduced into evidence by stipulation in a trial de novo as to those parties so stipulating.
  2. The filing of an appeal under this section stays the application of any rule, order, or other action of the commissioner to the appealing party unless the court, after giving the party notice and an opportunity to be heard, determines a stay would be detrimental to the interest of policyholders, shareholders, creditors, or the public.
  3. Any person aggrieved by any failure of the commissioner to act or make a determination required by this chapter may petition the district court for Burleigh County for a writ in the nature of a mandamus or a peremptory mandamus directing the commissioner to act or make a determination.

History. S.L. 2015, ch. 207, § 17, eff August 1, 2015.

CHAPTER 26.1-10.1 Asset and Agreement Reports

26.1-10.1-01. Report.

  1. Every insurer domiciled in this state shall file a report with the commissioner disclosing material acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements or material new ceded reinsurance agreements unless the acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements or material new ceded reinsurance agreements have been submitted to the commissioner for review, approval, or information purposes pursuant to other provisions of the insurance code, laws, rules, or other requirements.
  2. The report required in subsection 1 is due within fifteen days after the end of the calendar month in which any of the foregoing transactions occur.
  3. One complete copy of the report, including any exhibits or other attachments, must be filed with:
    1. The insurance department of the insurer’s state of domicile; and
    2. The national association of insurance commissioners.
  4. All reports obtained by or disclosed to the commissioner under this chapter must be given confidential treatment and are not subject to subpoena and must not be made public by the commissioner, the national association of insurance commissioners, or any other person, except to insurance departments of other states, without the prior written consent of the insurer to which it pertains unless the commissioner, after giving the insurer who would be affected notice and an opportunity to be heard, determines that the interest of policyholders, shareholders, or the public will be served by publication, in which event the commissioner may publish all or any part in the manner the commissioner deems appropriate.

Source:

S.L. 1995, ch. 279, § 3; 2003, ch. 241, § 1.

26.1-10.1-02. Acquisitions and dispositions of assets.

  1. Materiality. Acquisitions or dispositions of assets need not be reported under section 26.1-10.1-01 if the acquisitions or dispositions are not material. For purposes of this chapter, a material acquisition, or the aggregate of any series of related acquisitions during any thirty-day period, or disposition, or the aggregate of any series of related dispositions during any thirty-day period, is one that is nonrecurring and not in the ordinary course of business and involves more than five percent of the reporting insurer’s total admitted assets as reported in its most recent statutory statement filed with the insurance department of the insurer’s state of domicile.
  2. Scope.
    1. Asset acquisitions subject to this chapter include every purchase, lease, exchange, merger, consolidation, succession, or other acquisition other than the construction or development of real property by or for the reporting insurer or the acquisition of materials for this purpose.
    2. Asset dispositions subject to this chapter include every sale, lease, exchange, merger, consolidation, mortgage, hypothecation, assignment whether for the benefit of creditors or otherwise, abandonment, destruction, or other disposition.
  3. Information to be reported.
    1. The following information is required to be disclosed in any report of a material acquisition or disposition of assets:
      1. Date of the transaction;
      2. Manner of acquisition or disposition;
      3. Description of the assets involved;
      4. Nature and amount of the consideration given or received;
      5. Purpose of, or reason for, the transaction;
      6. Manner by which the amount of consideration was determined;
      7. Gain or loss recognized or realized as a result of the transaction; and
      8. Names of the persons from whom the assets were acquired or to whom they were disposed.
    2. Insurers are required to report material acquisitions and dispositions on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers that utilizes a pooling arrangement or one hundred percent reinsurance agreement that affects the solvency and integrity of the insurer’s reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer’s capital and surplus.

Source:

S.L. 1995, ch. 279, § 3.

26.1-10.1-03. Nonrenewals, cancellations, or revisions of ceded reinsurance agreements.

  1. Materiality and scope.
    1. Nonrenewals, cancellations, or revisions of ceded reinsurance agreements or new ceded reinsurance agreements need not be reported under section 26.1-10.1-01 if the nonrenewals, cancellations, or revisions of ceded reinsurance agreements or new ceded reinsurance agreements are not material. For purposes of this chapter, a material nonrenewal, cancellation, or revision of a ceded reinsurance agreement or a material new ceded reinsurance agreement is one that affects:
      1. As respects property and casualty business, including accident and health business written by a property and casualty insurer:
        1. More than fifty percent of the insurer’s total ceded written premium; or
        2. More than fifty percent of the insurer’s total ceded indemnity and loss adjustment reserves.
      2. As respects life, annuity, and accident and health business, more than fifty percent of the total reserve credit taken for business ceded, on an annualized basis, as indicated in the insurer’s most recent annual statement.
      3. As respects either property and casualty or life, annuity, and accident and health business, either of the following events constitutes a material revision that must be reported:
        1. An authorized reinsurer representing more than ten percent of a total cession is replaced by one or more unauthorized reinsurers; or
        2. Previously established collateral requirements have been reduced or waived as respects one or more unauthorized reinsurers representing collectively more than ten percent of a total cession.
    2. However, filing is not required if:
      1. As respects property and casualty business, including accident and health business written by a property and casualty insurer, the insurer’s total ceded written premium represents, on an annualized basis, less than ten percent of its total written premium for direct and assumed business; or
      2. As respects life, annuity, and accident and health business, the total reserve credit taken for business ceded represents, on an annualized basis, less than ten percent of the statutory reserve requirement prior to any cession.
  2. Information to be reported.
    1. The following information is required to be disclosed in any report of a material nonrenewal, cancellation, or revision of ceded reinsurance agreements or material new ceded reinsurance agreements:
      1. Effective date of the nonrenewal, cancellation, revision, or new agreement;
      2. The description of the transaction with an identification of the initiator of the transaction;
      3. Purpose of, or reason for, the transaction; and
      4. If applicable, the identity of the replacement reinsurers.
    2. Insurers are required to report all material nonrenewals, cancellations, or revisions of ceded reinsurance agreements or material new ceded reinsurance agreements on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers that utilizes a pooling arrangement or one hundred percent reinsurance agreement that affects the solvency and integrity of the insurer’s reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars total direct plus assumed written premiums during a calendar year which are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer’s capital and surplus.

Source:

S.L. 1995, ch. 279, § 3; 2003, ch. 241, § 2.

CHAPTER 26.1-10.2 Own Risk and Solvency Assessments

26.1-10.2-01. Definitions.

  1. “Insurance group” means those insurers and affiliates included within an insurance holding company system as defined in chapter 26.1-10.
  2. “Insurer” has the same meaning as set forth in section 26.1-29-02, except the term does not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.
  3. “Own risk and solvency assessment” means a confidential internal assessment, appropriate to the nature, scale, and complexity of an insurer or insurance group, conducted by that insurer or insurance group of the material and relevant risks associated with the insurer or insurance group’s current business plan, and the sufficiency of capital resources to support those risks.
  4. “Own risk and solvency assessment guidance manual” means the current version of the own risk and solvency assessment guidance manual developed and adopted by the national association of insurance commissioners and adopted by the commissioner and as amended from time to time. A change in the own risk and solvency assessment guidance manual is effective on the January first following the calendar year in which the changes have been adopted by the national association of insurance commissioners and the commissioner.
  5. “Own risk and solvency assessment summary report” means a confidential high-level summary of an insurer or insurance group’s own risk and solvency assessment.

History. S.L. 2015, ch. 208, § 1, eff August 1, 2015.

26.1-10.2-02. Risk management framework.

An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting on the material and relevant risks of the insurer. This requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer.

History. S.L. 2015, ch. 208, § 1, eff August 1, 2015.

26.1-10.2-03. Own risk and solvency assessment requirement.

Subject to section 26.1-10.2-05, an insurer, or the insurance group of which the insurer is a member, regularly shall conduct an own risk and solvency assessment consistent with a process comparable to the own risk and solvency assessment guidance manual. The own risk and solvency assessment must be conducted no less than annually but also at any time there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member.

History. S.L. 2015, ch. 208, § 1, eff August 1, 2015.

26.1-10.2-04. Own risk and solvency assessment summary report.

  1. Upon the commissioner’s request, and no more than once each year, an insurer shall submit to the commissioner an own risk and solvency assessment summary report or any combination of reports that together contain the information described in the own risk and solvency assessment guidance manual, applicable to the insurer or the insurance group of which it is a member. Notwithstanding any request from the commissioner, if the insurer is a member of an insurance group, the insurer shall submit the reports required by this subsection if the commissioner is the lead state commissioner of the insurance group as determined by the procedures within the financial analysis handbook adopted by the national association of insurance commissioners.
  2. The report must include a signature of the insurer or insurance group’s chief risk officer or other executive having responsibility for the oversight of the insurer’s enterprise risk management process attesting to the best of the individual’s belief and knowledge that the insurer applies the enterprise risk management process described in the own risk and solvency assessment summary report and that a copy of the report has been provided to the insurer’s board of directors or the appropriate committee of the board.
  3. An insurer may comply with subsection 1 by providing the most recent and substantially similar report provided by the insurer or another member of an insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction, if that report provides information that is comparable to the information described in the own risk and solvency assessment guidance manual. Any report in a language other than English must be accompanied by a translation of that report into the English language.

History. S.L. 2015, ch. 208, § 1, eff August 1, 2015.

26.1-10.2-05. Exemption.

  1. An insurer is exempt from the requirements of this chapter if:
    1. The insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premiums reinsured with the federal crop insurance corporation and federal flood program, less than five hundred million dollars; and
    2. The insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premium, including international direct and assumed premium, but excluding premiums reinsured with the federal crop insurance corporation and federal flood program, less than one billion dollars.
  2. If an insurer qualifies for exemption under subdivision a of subsection 1, but the insurance group of which the insurer is a member does not qualify for exemption under subdivision b of subsection 1, then the own risk and solvency assessment summary report that may be required under section 26.1-10.2-04 must include every insurer within the insurance group. This requirement may be satisfied by the submission of more than one own risk and solvency assessment summary report for any combination of insurers provided any combination of reports includes every insurer within the insurance group.
  3. If an insurer does not qualify for exemption under subdivision a of subsection 1, but the insurance group of which the insurer is a member qualifies for exemption under subdivision b of subsection 1, then the only own risk and solvency assessment summary report that may be required under section 26.1-10.2-04 must be the report applicable to that insurer.
  4. An insurer that does not qualify for exemption under subsection 1 may apply to the commissioner for a waiver from the requirements of this chapter based upon unique circumstances. In deciding whether to grant the request for waiver, the commissioner may consider the type and volume of business written, the ownership and organizational structure of the insurer, and any other factor the commissioner considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the commissioner shall coordinate with the lead state commissioner and with the other domiciliary commissioners in considering whether to grant the insurer’s request for a waiver.
  5. Notwithstanding the exemptions stated in this section:
    1. The commissioner may require an insurer maintain a risk management framework, conduct an own risk and solvency assessment, and file an own risk and solvency assessment summary report based on unique circumstances, including the type and volume of business written, the ownership and organizational structure of the insurer, a federal agency request, or an international supervisor request.
    2. The commissioner may require an insurer maintain a risk management framework, conduct an own risk and solvency assessment, and file an own risk and solvency assessment summary report if the insurer has risk-based capital for company action level event as set forth in section 26.1-03.1-03; meets one or more of the standards of an insurer deemed to be in hazardous financial condition as defined in section 26.1-06.1-11; or otherwise exhibits qualities of a troubled insurer as determined by the commissioner.
  6. If an insurer that qualifies for an exemption under subsection 1 subsequently no longer qualifies for that exemption due to changes in premium as reflected in the insurer’s most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer has one year following the year the threshold is exceeded to comply with the requirements of this chapter.

History. S.L. 2015, ch. 208, § 1, eff August 1, 2015.

26.1-10.2-06. Contents of an own risk and solvency assessment summary report.

  1. The own risk and solvency assessment summary report must be prepared consistent with the own risk and solvency assessment guidance manual subject to the requirements of subsection 2. Documentation and supporting information must be maintained and made available upon examination or upon request of the commissioner.
  2. The review of the own risk and solvency assessment summary report and any additional request for information must be made using similar procedures used in the analysis and examination of multi-state or global insurers and insurance groups.

History. S.L. 2015, ch. 208, § 1, eff August 1, 2015.

26.1-10.2-07. Confidentiality.

  1. Any document, material, or other information, including the own risk and solvency assessment summary report, in the possession of or control of the insurance department which is obtained by, created by, or disclosed to the commissioner or any other person under this chapter, is recognized by this state as being proprietary and to contain trade secrets. Any such document, material, or other information is confidential and privileged, not subject to section 44-04-18, not subject to subpoena, and not subject to discovery and not admissible in evidence in any private civil action. However, the commissioner may use any document, material, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s official duties. The commissioner may not otherwise make the document, material, or other information public without the prior written consent of the insurer.
  2. Neither the commissioner nor any person that received any document, material, or other own risk and solvency assessment-related information, through examination or otherwise, while acting under the authority of the commissioner or with whom such document, material, or other information is shared under this chapter may be permitted or required to testify in any private civil action concerning any confidential document, material, or information subject to subsection 1.
  3. To assist in the performance of the commissioner’s regulatory duties, the commissioner:
    1. Upon request, may share any document, material, or other own risk and solvency assessment-related information, including any confidential and privileged document, material, or information subject to subsection 1 and any proprietary and trade secret document and material with any other state, federal, or international financial regulatory agency, including a member of any supervisory college as defined in section 26.1-10-06.1, the national association of insurance commissioners, or any third-party consultant designated by the commissioner, provided the recipient agrees in writing to maintain the confidentiality and privileged status of the own risk and solvency assessment-related document, material, or other information and has verified in writing the legal authority to maintain confidentiality.
    2. May receive any document, material, or other own risk and solvency assessment-related information, including any otherwise confidential and privileged document, material, or information, and any proprietary and trade-secret information or document, from regulatory officials of other foreign or domestic jurisdictions, including a member of any supervisory college as defined in section 26.1-10-06.1 or from the national association of insurance commissioners, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
    3. Shall enter a written agreement with the national association of insurance commissioners or a third-party consultant governing sharing and use of information provided under this chapter, consistent with this subsection which must:
      1. Specify procedures and protocols regarding the confidentiality and security of information shared with the national association of insurance commissioners or a third-party consultant under this chapter, including procedures and protocols for sharing by the national association of insurance commissioners with other state regulators from states in which the insurance group has domiciled insurers. The agreement must provide the recipient agrees in writing to maintain the confidentiality and privileged status of any own risk and solvency assessment-related document, material, or other information and has verified in writing the legal authority to maintain confidentiality;
      2. Specify ownership of information shared with the national association of insurance commissioners or a third-party consultant under this chapter remains with the commissioner and the national association of insurance commissioner’s or a third-party consultant’s use of the information is subject to the direction of the commissioner;
      3. Prohibit the national association of insurance commissioners or third-party consultant from storing the information shared under this chapter in a permanent database after the underlying analysis is completed;
      4. Require prompt notice to be given to an insurer for which confidential information in the possession of the national association of insurance commissioners or a third-party consultant under this chapter is subject to a request or subpoena to the national association of insurance commissioners or a third-party consultant for disclosure or production;
      5. Require the national association of insurance commissioners or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the national association of insurance commissioners or a third-party consultant may be required to disclose confidential information about the insurer shared with the national association of insurance commissioners or a third-party consultant under this chapter; and
      6. In the case of an agreement involving a third-party consultant, provide for the insurer’s written consent.
  4. The sharing of any information or document by the commissioner under this chapter does not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution, and enforcement of this chapter.
  5. A waiver of any applicable privilege or claim of confidentiality in any document, proprietary and trade-secret material, or other own risk and solvency assessment-related information does not occur as a result of disclosure of the own risk and solvency assessment-related information or document to the commissioner under this section or as a result of sharing as authorized in this chapter.
  6. Any document, material, or other information in the possession or control of the national association of insurance commissioners or a third-party consultant under this chapter is confidential and privileged, not subject to section 44-04-18, not subject to subpoena, and not subject to discovery and not admissible in evidence in any private civil action.

History. S.L. 2015, ch. 208, § 1, eff August 1, 2015.

26.1-10.2-08. Sanctions — Penalty.

Any insurer failing, without just cause, to timely file the own risk and solvency assessment summary report as required in this chapter, after notice and hearing, shall pay a penalty of one thousand dollars for each day’s delay. The commissioner may reduce the penalty if the insurer demonstrates to the commissioner the imposition of the penalty would constitute a financial hardship to the insurer.

History. S.L. 2015, ch. 208, § 1, eff August 1, 2015.

CHAPTER 26.1-10.3 Corporate Governance Annual Disclosure

Source:

S.L. 2019, SB2076, § 1, eff August 1, 2019.

26.1-10.3-01. Definitions.

As used in this chapter:

  1. “Corporate governance annual disclosure” means a confidential report filed by the insurer or insurance group made in accordance with the requirements of this chapter.
  2. “Insurance group” means those insurers and affiliates included within an insurance holding company system as defined in chapter 26.1-10.
  3. “Insurer” has the meaning provided in section 26.1-10-01.
  4. “Own risk and solvency assessment summary report” means the report filed in accordance with chapter 26.1-10.2.

Source:

S.L. 2019, ch. 235, § 1, eff August 1, 2019.

26.1-10.3-02. Disclosure requirement.

  1. An insurer, or the insurance group of which the insurer is a member, no later than June first of each calendar year, shall submit to the commissioner a corporate governance annual disclosure that contains the information described in subsection 2 of section 26.1-10.3-04. Notwithstanding any request from the commissioner made pursuant to subsection 3, if the insurer is a member of an insurance group, the insurer shall submit the report required by this section to the commissioner of the lead state for the insurance group, in accordance with the laws of the lead state, as determined by the procedures outlined in the most recent financial analysis handbook adopted by the national association of insurance commissioners.
  2. The corporate governance annual disclosure must include a signature of the insurer or insurance group’s chief executive officer or corporate secretary attesting to the best of that individual’s belief and knowledge that the insurer has implemented the corporate governance practices and that a copy of the disclosure has been provided to the insurer’s board of directors or the appropriate committee of the board of directors.
  3. An insurer not required to submit a corporate governance annual disclosure under this section shall do so upon the commissioner’s request.
  4. For purposes of completing the corporate governance annual disclosure, the insurer or insurance group may provide information regarding corporate governance at the ultimate controlling parent level, an intermediate holding company level, or the individual legal entity level, depending upon how the insurer or insurance group has structured the system of corporate governance of the insurer or insurance group. The insurer or insurance group is encouraged to make the corporate governance annual disclosure disclosures at the level at which the insurer’s or insurance group’s risk appetite is determined, or at which the earnings, capital, liquidity, operations, and reputation of the insurer are overseen collectively and at which the supervision of those factors are coordinated and exercised, or the level at which legal liability for failure of general corporate governance duties would be placed. If the insurer or insurance group determines the level of reporting based on these criteria, the insurer or insurance group shall indicate which of the three criteria was used to determine the level of reporting and explain any subsequent changes in level of reporting.
  5. The review of the corporate governance annual disclosure and any additional requests for information must be made through the lead state as determined by the procedures within the most recent financial analysis handbook referenced in subsection 1.
  6. An insurer providing information substantially similar to the information required by this chapter in other documents provided to the commissioner, including proxy statements filed in conjunction with form b requirements, or other state or federal filings provided to the commissioner are not required to duplicate that information in the corporate governance annual disclosure, but shall cross-reference the document in which the information is included.

Source:

S.L. 2019, ch. 235, § 1, eff August 1, 2019.

26.1-10.3-03. Rules and regulations.

The commissioner may adopt reasonable rules necessary for the implementation of this chapter.

Source:

S.L. 2019, ch. 235, § 1, eff August 1, 2019.

26.1-10.3-04. Contents of corporate governance annual disclosure.

  1. The insurer or insurance group has discretion over the responses to the corporate governance annual disclosure inquiries, if the corporate governance annual disclosure contains the material information necessary to permit the commissioner to gain an understanding of the insurer’s or group’s corporate governance structure, policies, and practices. The commissioner may request additional information the commissioner deems material and necessary to provide the commissioner with a clear understanding of the corporate governance policies, the reporting or information system or controls implementing those policies.
  2. Notwithstanding subsection 1, the corporate governance annual disclosure must be prepared according to rules adopted by the commissioner. Documentation and supporting information must be maintained and made available upon examination or upon request of the commissioner.

Source:

S.L. 2019, ch. 235, § 1, eff August 1, 2019.

26.1-10.3-05. Confidentiality.

  1. Documents, materials, or other information, including the corporate governance annual disclosure, in the possession or control of the insurance department which are obtained by, created by, or disclosed to the commissioner or any other person under this chapter, are recognized by this state as being proprietary and to contain trade secrets. All documents, materials, or other information is confidential by law and privileged, is not subject to section 44-04-18, is not subject to subpoena, and is not subject to discovery or admissible in evidence in any private civil action. However, the commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s official duties. The commissioner may not otherwise make the documents, materials, or other information public without the prior written consent of the insurer. This section may not be construed to require written consent of the insurer before the commissioner may share or receive confidential documents, materials, or other corporate governance annual disclosure-related information pursuant to subsection 3 to assist in the performance of the commissioner’s regular duties.
  2. Neither the commissioner nor any person that received documents, materials, or other corporate governance annual disclosure-related information, through examination or otherwise, while acting under the authority of the commissioner, or with which documents, materials, or other information are shared pursuant to this chapter may be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection 1.
  3. In order to assist in the performance of the commissioner’s regulatory duties, the commissioner:
    1. May, upon request, share documents, materials, or other corporate governance annual disclosure-related information, including the confidential and privileged documents, materials, or information subject to subsection 1, including proprietary and trade secret documents and materials, with other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in section 26.1-10-06.1, with the national association of insurance commissioners, and with third-party consultants pursuant to section 26.1-10.3-06, if the recipient agrees in writing to maintain the confidentiality and privileged status of the corporate governance annual disclosure-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality; and
    2. May receive documents, materials, or other corporate governance annual disclosure-related information, including otherwise confidential and privileged documents, materials, or information, including proprietary and trade secret information or documents, from regulatory officials of other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in chapter 26.1-10, and from the national association of insurance commissioners, and shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
  4. The sharing of information and documents by the commissioner pursuant to this chapter does not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution, and enforcement of the provisions of this chapter.
  5. A waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade secret materials, or other corporate governance annual disclosure-related information does not occur as a result of disclosure of corporate governance annual disclosure-related information or documents to the commissioner under this section or as a result of sharing as authorized in this chapter.

Source:

S.L. 2019, ch. 235, § 1, eff August 1, 2019.

26.1-10.3-06. National association of insurance commissioners and third-party consultants.

  1. The commissioner may retain, at the insurer’s expense, third-party consultants, including attorneys, actuaries, accountants, and other experts not otherwise a part of the commissioner’s staff as may be reasonably necessary to assist the commissioner in reviewing the corporate governance annual disclosure and related information or the insurer’s compliance with this chapter.
  2. Any persons retained under subsection 1 are under the direction and control of the commissioner and shall act in a purely advisory capacity.
  3. The national association of insurance commissioners and third-party consultants are subject to the same confidentiality standards and requirements as the commissioner.
  4. As part of the retention process, a third-party consultant shall verify to the commissioner, with notice to the insurer, that the consultant is free of a conflict of interest and has internal procedures in place to monitor compliance with a conflict and to comply with the confidentiality standards and requirements of this chapter.
  5. A written agreement with the national association of insurance commissioners or a third-party consultant, or both, governing sharing and use of information provided pursuant to this chapter must contain the following provisions and expressly require the written consent of the insurer before making public information provided under this chapter:
    1. Specific procedures and protocols for maintaining the confidentiality and security of corporate governance annual disclosure-related information shared with the national association of insurance commissioners or a third-party consultant pursuant to this chapter.
    2. Procedures and protocols for sharing by the national association of insurance commissioners only with other state regulators from states in which the insurance group has domiciled insurers. The agreement must provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the corporate governance annual disclosure-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality.
    3. A provision specifying that ownership of the corporate governance annual disclosure-related information shared with the national association of insurance commissioners or a third-party consultant remains with the insurance department and the national association of insurance commissioner’s or third-party consultant’s use of the information is subject to the direction of the commissioner.
    4. A provision that prohibits the national association of insurance commissioners or a third-party consultant from storing the information shared pursuant to this chapter in a permanent database after the underlying analysis is completed.
    5. A provision requiring the national association of insurance commissioners or third-party consultant to provide prompt notice to the commissioner and to the insurer or insurance group regarding any subpoena, request for disclosure, or request for production of the insurer’s corporate governance annual disclosure-related information.
    6. A requirement that the national association of insurance commissioners or a third-party consultant consent to intervention by an insurer in any judicial or administrative action in which the national association of insurance commissioners or a third-party consultant may be required to disclose confidential information about the insurer shared with the national association of insurance commissioners or a third-party consultant pursuant to this chapter.

Source:

S.L. 2019, ch. 235, § 1, eff August 1, 2019.

26.1-10.3-07. Sanctions.

Any insurer failing, without just cause, to timely file the corporate governance annual disclosure as required in this chapter is required, after notice and hearing, to pay a penalty of five hundred dollars for each day’s delay, to be recovered by the commissioner and the penalty so recovered shall be paid into the general fund. The maximum penalty under this section is one hundred thousand dollars. The commissioner may reduce the penalty if the insurer demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.

Source:

S.L. 2019, ch. 235, § 1, eff August 1, 2019.

CHAPTER 26.1-11 Foreign Insurance Companies

26.1-11-01. Conditions to be complied with by foreign company before transacting insurance business in state.

A foreign insurance company may not take any risk or transact insurance business in this state, either directly or indirectly, until it has:

  1. Deposited with the commissioner a certified copy of its articles of incorporation.
  2. Deposited with the commissioner a statement of its financial condition and business in the form and detail the commissioner requires, signed and sworn to by its president and secretary or other similar officers.
  3. Satisfied the commissioner that it is fully and legally organized under the laws of its state or government to do the business which it proposes to transact.
  4. Satisfied the commissioner, if it is a stock company, that it has a fully paid-up capital stock and surplus at least equal to the stock and surplus required of domestic companies transacting the same classes of insurance.
  5. Satisfied the commissioner, if it is a mutual company, that it has complied with subsection 7 of section 26.1-12-27.
  6. Satisfied the commissioner that its assets are well invested and immediately available for the payment of losses in this state and in making this determination the commissioner may rely upon the provisions pertaining to authorized investments of domestic insurance companies.
  7. Satisfied the commissioner that it does not insure any single hazard for a sum larger than one-tenth of its net assets.
  8. Appointed the commissioner and the commissioner’s successors, by a duly executed instrument filed in the commissioner’s office, its attorney upon whom all process in any action or proceeding against it may be served and has agreed in the instrument that any process that may be served upon its attorney is of the same force and validity as if the process were served on the company and that the authority thereof continues in force irrevocable so long as any liability of the company remains outstanding in this state.
  9. Agreed to appoint, and will appoint, as its insurance producers in this state only residents of this state except as otherwise provided in chapter 26.1-26.
  10. Adopted a name which is not so similar to a name already in use by an existing company organized or licensed in this state as to be confusing or misleading.

Source:

S.L. 1983, ch. 332, § 11; 1985, ch. 317, § 30; 2001, ch. 262, § 29.

Derivation:

N.D.C.C. § 26-09-01.

DECISIONS UNDER PRIOR LAW

Unauthorized Insurer.

Foreign unincorporated beneficial association formed of railroad workers to carry on mutual protection and relief of its members in misfortune was conducting business in the nature of insurance, and service could be effectuated upon it as an unauthorized insurer. Bloom v. Northern Pac. Beneficial Ass'n, 193 N.W.2d 244, 1971 N.D. LEXIS 139 (N.D. 1971).

An unincorporated beneficial association doing business in the nature of insurance in North Dakota must submit to the jurisdiction of North Dakota where service has properly been perfected upon the insurance commissioner, because such an association is an unauthorized insurer. Bloom v. Northern Pac. Beneficial Ass'n, 193 N.W.2d 244, 1971 N.D. LEXIS 139 (N.D. 1971).

26.1-11-02. Liability of officers, agents, and stockholders of noncomplying foreign company — Penalty.

Any failure to comply with section 26.1-11-01 renders each officer, agent, and stockholder of any foreign insurance company failing to comply therewith jointly and severally liable on all contracts of the company made within this state during the time the company is in default. Each officer and agent of the noncomplying company is guilty of a class A misdemeanor.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-09-03.

26.1-11-03. Failure to comply with conditions renders contracts void on behalf of company — Enforcement against company.

A contract made by or on behalf of any foreign insurance company doing business in this state without first complying with section 26.1-11-01 or 26.1-11-04 is void and unenforceable on behalf of the company and its assigns, but the contract may be enforced against the company.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-09-02.

DECISIONS UNDER PRIOR LAW

Doing Business in State.

Generally, a single business transaction in this state by a foreign corporation does not constitute “doing business” or “transacting business”, but this rule does not apply in the case of insurance companies. State ex rel. Hart-Parr Co. v. Robb-Lawrence Co., 15 N.D. 55, 106 N.W. 406, 1906 N.D. LEXIS 13 (N.D. 1906).

Enforcement of Negotiable Promissory Note.

A negotiable promissory note, void in the hands of the payee because it is a foreign corporation doing business in the state without having complied with the laws, may be enforced by a bona fide purchaser and endorsee for value, before maturity, without notice of the facts rendering it void in the hands of the payee. Mooney v. Williams, 9 N.D. 329, 83 N.W. 237, 1900 N.D. LEXIS 240 (N.D. 1900); National Bank of Commerce v. Pick, 13 N.D. 74, 99 N.W. 63, 1904 N.D. LEXIS 16 (N.D. 1904).

Meaning of “Assigns”.

The word “assigns” does not include the holder in due course of a negotiable instrument. National Bank of Commerce v. Pick, 13 N.D. 74, 99 N.W. 63, 1904 N.D. LEXIS 16 (N.D. 1904).

26.1-11-04. Foreign life company required to maintain funds or stop writing business — Penalty.

When the actual funds of any foreign life insurance company authorized to do business in this state are not of a net value equal to the net value of its policies according to the combined experience or actuaries’ rate of mortality, with interest at four percent per annum, or by such higher standard as the company may have adopted, the commissioner shall give notice to the company and its agents to discontinue the issuance of new policies in this state until its funds have become equal to its liabilities when its policies are valued as provided in this section. Any officer or agent who, after notice has been given, issues or delivers a new policy from and in behalf of the company before its funds have become equal to its liabilities as provided by this section is guilty of a class A misdemeanor. This section does not apply to a cooperative or assessment life association licensed to transact business in this state.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-09-04.

26.1-11-05. Deposit required of foreign accident and health insurance company doing business on assessment plan.

Each foreign accident and health insurance company doing business on the assessment plan in this state shall keep deposited at all times with the commissioner one regular assessment sufficient in amount to pay the average loss or losses occurring among its members in this state during the time allowed by it for the collection of assessments and payment of losses. No such company may be licensed by the commissioner unless it keeps and maintains with the commissioner for the protection of persons to whom it may become obligated at least ten thousand dollars in bonds of the United States, of the state of North Dakota, or of political subdivisions within this state, or in mortgages on improved and unencumbered real estate within this state worth double the sum loaned thereon and approved by the commissioner.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-09-05.

26.1-11-06. Reciprocal penalties — Retaliatory charges.

Whenever the laws of any other state, or of any foreign country, or of any province or territory thereof, or when the rules of the insurance department of that state, country, province, or territory, require any insurance company, corporation, limited liability company, association, or society organized under the laws of this state to deposit securities in that state, country, province, or territory for the protection of policyholders or others, or any payment for taxes, fines, penalties, certificates of authority, licenses, or fees, or the performance of any duties or acts other than and exceeding those required by the laws of this state of a like insurance company, corporation, limited liability company, association, or society organized under the laws of that state, country, territory, or province, while transacting business in this state, then and in every such case, an insurance company, corporation, limited liability company, association, or society organized in that state, country, province, or territory which establishes an agency or transacts business in this state, is required to make deposits and to pay to the commissioner charges, licenses, fees, taxes, fines, or penalties in the amounts respectively, and to do all other acts which that other state, country, province, or territory, by the laws or the rules of the insurance department thereof, requires of a like insurance company, corporation, limited liability company, or society organized under the laws of this state when doing business in that other state, country, province, or territory. This section applies regardless of the plan of assessment or collection of premiums, contributions, or assessments adopted by the foreign company, corporation, limited liability company, association, or society.

Source:

S.L. 1983, ch. 332, § 11; 1993, ch. 54, § 106; 1999, ch. 252, § 2.

Derivation:

N.D.C.C. § 26-01-05.

26.1-11-07. Countersignature requirement — Commissions — Reciprocity.

Notwithstanding any other provision of this title or policy forms to the contrary, there may not be any requirement that an insurance producer resident in this state sign or countersign an insurance policy covering a subject of insurance resident, located, or to be performed in this state. However, if the laws or rules of another state require a signature or countersignature by an insurance producer resident in that state on an insurance policy written by a nonresident insurance producer of that state, then any insurance policy written by an insurance producer resident of that state licensed as a nonresident insurance producer in this state covering a subject of insurance resident, located, or to be performed in this state must be signed or countersigned in writing by an insurance producer resident in this state. An insurance policy may not be deemed invalid because of the absence of the required signature or countersignature. If the laws or rules of another state require an insurance producer resident in that state to retain a portion of the commission paid on a like insurance policy written, countersigned, or delivered by the insurance producer in that state at the request of a nonresident insurance producer of that state, then the insurance producer resident in this state who signed or countersigned an insurance policy written by a resident of that state licensed as a nonresident insurance producer in this state covering a subject of insurance resident, located, or to be performed in this state shall retain an equal pro rata portion of any commission on the insurance policy.

Source:

S.L. 1983, ch. 332, § 11; 1985, ch. 317, § 31; 1987, ch. 342, § 1; 1999, ch. 252, § 3; 2001, ch. 262, § 30.

Derivation:

N.D.C.C. §§ 26-17.1-51, 26-17.1-52, 26-17.1-53.

DECISIONS UNDER PRIOR LAW

Injunction Against Enforcement of Commissioner’s Order.

In a suit to enjoin commissioner’s enforcement of an order forbidding complainant and other union companies from withdrawing their agents from certain agencies, complainant’s alleged violations of state antitrust laws did not preclude relief on the ground that he did not come with clean hands. Olsness v. Home Ins. Co., 14 F.2d 907, 1926 U.S. App. LEXIS 2129 (8th Cir. N.D. 1926).

26.1-11-08. Grounds for revocation of authority of foreign company.

The commissioner shall revoke or suspend all certificates of authority granted to a foreign insurance company or to its agents if, upon examination or other evidence, the commissioner is of the opinion that:

  1. The company is in an unsound condition.
  2. The company has failed to comply with any provision of the applicable laws of this state.
  3. The company, or any officer or agent thereof, has refused to submit to examination or to perform any other legal obligation.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-07-14.

DECISIONS UNDER PRIOR LAW

Determination of Soundness.

It was proper for commissioner to use the specific investment sections of former N.D.C.C. ch. 26-08 (see now N.D.C.C. ch. 26.1-05) as guidelines for determining admissibility of various assets of foreign company and in determining soundness of its financial condition; commissioner was not required to accept the determinations or valuations of the foreign company’s state of incorporation. Sierra Life Ins. Co. v. Wigen, 286 N.W.2d 296, 1979 N.D. LEXIS 326 (N.D. 1979).

Company need not be insolvent to be in an “unsound condition”; company with total assets of $ 11,459,913, total liabilities of $ 9,740,614, and paid-up capital and surplus of only $ 66,359, was substantially impaired to the extent of supporting the commissioner’s determination that it was in an unsound condition. Sierra Life Ins. Co. v. Wigen, 286 N.W.2d 296, 1979 N.D. LEXIS 326 (N.D. 1979).

26.1-11-09. Procedure for suspension or revocation of foreign company’s authority — Effect.

Whenever it appears to the commissioner, either upon complaint or otherwise, that any foreign insurance company is in violation of section 26.1-02-23 or 26.1-11-08, the commissioner may issue a temporary order suspending the certificate of authority granted to a foreign insurance company if the commissioner deems it necessary or appropriate to the public interest to do so. Any company aggrieved by a temporary order may request a hearing before the commissioner within ten days after the company receives the order. If the commissioner revokes the certificate of authority granted to a foreign insurance company, the commissioner shall publish a notice of revocation once each week for three successive weeks in a newspaper published at the state capital. Thereafter, no new business may be done by the company, or by its agents, in this state until its certificate of authority is restored by the commissioner. The commissioner, after a hearing and for good cause, may cancel the revocation and restore the certificate.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. §§ 26-07-14, 26-07-14.1.

26.1-11-10. Consent to service of process.

Service of process upon the commissioner as attorney for a foreign insurance company doing business in this state is sufficient service upon the company.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-09-06.

26.1-11-11. Consent to service of process — Unauthorized insurance company.

Any of the following acts in this state, effected by mail or otherwise, by any unauthorized foreign or alien insurance company is equivalent to and constitutes an appointment by the company of the commissioner as its attorney upon whom may be served all lawful process in any action, suit, or proceeding instituted by or on behalf of an insured or beneficiary arising out of any insurance contract, and any such act signifies its agreement that the service of process is of the same legal force and validity as personal service in this state, upon such insurer:

  1. The issuance or delivery of insurance contracts to residents of this state or to corporations or limited liability companies authorized to do business in this state.
  2. The solicitation of applications for such contracts.
  3. The collection of premiums, membership fees, assessments, or other considerations for such contracts.
  4. Any other transaction of insurance business.

Source:

S.L. 1983, ch. 332, § 11; 1985, ch. 317, § 32; 1993, ch. 54, § 106.

Derivation:

N.D.C.C. § 26-09-07.

DECISIONS UNDER PRIOR LAW

Analysis

Doing Business in the Nature of Insurance.

Unincorporated beneficial associations formed to carry on mutual protection and relief of its members in misfortune, which admit to membership only persons engaged in one or more hazardous occupations in the same or similar lines of business, including in-state residents, are engaged in doing business in the nature of insurance. Bloom v. Northern Pac. Beneficial Ass'n, 193 N.W.2d 244, 1971 N.D. LEXIS 139 (N.D. 1971).

Jurisdiction.

Service upon the commissioner did not effect jurisdiction over an out-of-state hospital corporation with no registered in-state agent where the corporation’s business consisted wholly in treating persons brought to its facilities located out of state, and there was no evidence the corporation had done any type of business in state. Bloom v. Northern Pac. Beneficial Ass'n, 193 N.W.2d 244, 1971 N.D. LEXIS 139 (N.D. 1971).

Service upon Commissioner.

Where foreign unincorporated beneficial association formed to carry on mutual protection and relief of its members in misfortune, admitting to membership only persons engaged in one or more hazardous occupations in the same or similar lines of business, did business with residents of the state in the nature of insurance, it could be deemed an unauthorized insurer for the purpose of service, so that process was properly given to the insurance commissioner to secure jurisdiction. Bloom v. Northern Pac. Beneficial Ass'n, 193 N.W.2d 244, 1971 N.D. LEXIS 139 (N.D. 1971).

26.1-11-12. Additional means of service.

  1. Service in any action, suit, or proceeding is, in addition to the manner provided in section 26.1-01-04, valid if served upon any person within this state who on behalf of the insurance company is:
    1. Soliciting insurance;
    2. Making, issuing, or delivering any insurance contract; or
    3. Collecting or receiving any premium membership fee, assessment, or other consideration for insurance.
  2. A copy of the process must be sent within ten days thereafter by registered mail by the plaintiff or the plaintiff’s attorney, to the defendant at the defendant’s last-known principal place of business.
  3. The defendant’s receipt, or the receipt issued by the post office with which the letter is registered or certified, showing the name of the sender of the letter, the name and address of the person to whom the letter is addressed, and the affidavit of the person mailing the letter showing a compliance herewith must be filed with the clerk of the court in which the action is pending on or before the date the defendant is required to appear or within such further time as the court allows.

Source:

S.L. 1983, ch. 332, § 11; 1985, ch. 317, § 33.

Derivation:

N.D.C.C. § 26-09-09.

26.1-11-13. Right of service not abridged.

This chapter does not limit or abridge the right to serve any process, notice, or demand upon any insurance company in any other manner permitted by law.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-09-11.

26.1-11-14. Judgment by default — Time of entry.

A judgment by default under this chapter may not be entered until the expiration of thirty days from the date of the filing of the affidavit of compliance.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-09-10.

26.1-11-15. Defense of action by unauthorized company.

Before any unauthorized foreign or alien insurance company may file or cause to be filed any pleading in any action, suit, or proceeding instituted against it, the company shall deposit with the clerk of the court in which the action, suit, or proceeding is pending, cash or securities, or file with the clerk a bond with good and sufficient sureties approved by the court in an amount fixed by the court sufficient to secure the payment of any final judgment which may be rendered in the action. The court may, in its discretion, dispense with the deposit or bond if the company makes a showing satisfactory to the court that it maintains in the United States funds or securities, in trust or otherwise, sufficient and available to satisfy any final judgment which may be entered in the action, suit, or proceeding, and that the company will pay any final judgment rendered without requiring suit to be brought on the judgment in the state where the securities are located, or procure a certificate of authority to transact insurance business in this state.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-09-12.

26.1-11-16. Court may order postponement.

The court, in any action, suit, or proceeding in which service is made in the manner provided in section 26.1-01-04 or 26.1-11-12, may order any postponement necessary to afford the defendant reasonable opportunity to comply with this chapter and to defend the action.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-09-13.

26.1-11-17. Construction.

Section 26.1-11-16 does not prevent an unauthorized foreign or alien insurance company from filing a motion to quash a writ or to set aside service thereof made in the manner provided in this chapter on the ground that the company has not done any of the acts enumerated in this chapter or that the person on whom service was made pursuant to section 26.1-11-12 was not doing any of the acts therein enumerated.

Source:

S.L. 1983, ch. 332, § 11.

Derivation:

N.D.C.C. § 26-09-14.

26.1-11-18. Attorney’s fees.

In any action against an unauthorized foreign or alien insurance company upon an insurance contract issued or delivered in this state to a resident of this state or to a corporation or limited liability company authorized to do business in this state, if the insurance company has failed for thirty days after demand prior to the commencement of the action to make payment in accordance with the terms of the contract, and it appears to the court that refusal was vexatious and without reasonable cause, the court may allow to the plaintiff a reasonable attorney’s fee and include the fee in any judgment that may be rendered in the action. The fee may not exceed twelve and one-half percent of the amount which the court or jury finds the plaintiff is entitled to recover against the insurance company, but the fee awarded may not be less than twenty-five dollars. Failure of an insurance company to defend any action is prima facie evidence that its failure to make payment was vexatious and without reasonable cause.

Source:

S.L. 1983, ch. 332, § 11; 1985, ch. 317, § 34; 1993, ch. 54, § 106.

Derivation:

N.D.C.C. § 26-09-15.

DECISIONS UNDER PRIOR LAW

Vexatious Refusal.

Where there was an open question whether a foreign unincorporated beneficial association which was engaged in a business in the nature of insurance was liable for certain payments to the claimant, the association’s refusal to make such payments could not be held to be vexatious absent a showing that its actions had been without justification and with the intent to harass. Bloom v. Northern Pac. Beneficial Ass'n, 193 N.W.2d 244, 1971 N.D. LEXIS 139 (N.D. 1971).

26.1-11-19. Application.

This chapter does not apply to any action, suit, or proceeding against any unauthorized foreign or alien insurance company arising out of any reinsurance, ocean marine, aircraft, or railway insurance contract, insurance against legal liability arising out of the ownership, operation, or maintenance of any property having a permanent situs outside this state, or insurance against loss of or damage to any property having a permanent situs outside this state, when the insurance contract designates the commissioner or a bona fide resident of this state the attorney of the unauthorized insurance company upon whom may be served all lawful process in any action, suit, or proceeding instituted by or on behalf of an insured or beneficiary arising out of the contract or when the insurance company enters a general appearance in the suit, action, or proceeding.

Source:

S.L. 1983, ch. 332, § 11; 1985, ch. 317, § 35.

Derivation:

N.D.C.C. § 26-09-16.

CHAPTER 26.1-12 Incorporated Mutual Insurance Companies

26.1-12-01. Organization of mutual insurance company — Minimum number of members.

Any number of persons, not less than twenty, a majority of whom must be bona fide residents of this state, may become, together with others who thereafter may be associated with them or their successors, a body corporate for the purpose of carrying on the business of mutual insurance as provided in this chapter by complying with this chapter. Any number of persons, not less than seven, may form a mutual life insurance company and, with others who may become associated with them or their successors, may become a body corporate for the purpose of carrying on the business of a mutual life insurance company. A mutual life insurance company organized under this chapter may carry insurance upon the lives of persons, including every kind of insurance pertaining thereto.

Source:

S.L. 1983, ch. 332, § 12; 1999, ch. 254, § 4.

Derivation:

N.D.C.C. § 26-14-01.

DECISIONS UNDER PRIOR LAW

Contract of Insurance.

The statutes under which a domestic mutual insurance company is organized, its articles of incorporation and bylaws, and the application for membership in the company all enter into the contract of insurance and are binding not only upon the company but upon each member thereof. Godfrey v. North Dakota Farmers' Mut. Tornado & Cyclone Co., 63 N.D. 418, 248 N.W. 527, 1933 N.D. LEXIS 195 (N.D. 1933).

26.1-12-02. Corporate name — Restrictions.

The name of a mutual insurance company organized under this chapter must contain the word “mutual”. A name which is so similar to any name already in use by any existing corporation, limited liability company, company, or association organized or doing business in this state as to be confusing or misleading is not permitted.

Source:

S.L. 1983, ch. 332, § 12; 1993, ch. 54, § 106.

Derivation:

N.D.C.C. § 26-14-04.

26.1-12-03. Articles of incorporation — Contents.

Persons proposing to form a mutual insurance company under this chapter shall subscribe and acknowledge articles of incorporation specifying:

  1. The name of the company and the purpose for which it is to be formed.
  2. The location of its principal or home office, which must be within this state.
  3. The names and addresses of those composing the board of directors in which the management is vested until the first meeting of the members.
  4. The names and places of residence of the incorporators.
  5. The term of existence of the company, which may be perpetual.

Source:

S.L. 1983, ch. 332, § 12; 2003, ch. 238, § 2.

Derivation:

N.D.C.C. § 26-14-02.

26.1-12-04. Articles of incorporation — Filing — Issuance of certificate.

The articles of incorporation or amendments thereto of a mutual insurance company organized under this chapter must be submitted to the commissioner. If the commissioner determines the articles or amendments comply with this chapter, the commissioner shall approve the same. The articles or amendments must be filed in the office of the secretary of state and a certified copy must be filed with the commissioner. The commissioner shall deliver a certificate to the company indicating that it has complied with this chapter.

Source:

S.L. 1983, ch. 332, § 12; 2003, ch. 238, § 3.

Derivation:

N.D.C.C. § 26-14-03.

26.1-12-05. Legal existence — Adoption of bylaws — Transaction of business.

The mutual insurance company has legal existence as of the date of the certificate. The board of directors named in the articles thereafter may adopt bylaws which must be filed with the commissioner, accept applications for insurance, and proceed to transact company business. Insurance may not be put into force, however, until the company has been licensed to transact an insurance business as provided by this chapter.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-05.

26.1-12-06. Bylaws of mutual company — Meetings — Notice — Quorum.

The bylaws of any mutual insurance company organized under this chapter must prescribe the manner of notification to members of all corporation meetings of members and must prescribe what constitutes a quorum of members. A quorum is those members present in person or represented by written proxies. A majority of those voting is sufficient to approve or reject any proposal submitted at any annual or special meeting. Every member of the company is entitled to one vote only. Every member must be notified of the time and place of the holding of the meetings of the company by a written notice or by an imprint on each policy, receipt, or certificate of renewal. In addition, a notice of any annual or special meeting must be published in the official newspaper of the county in which the principal office of the company is located. The notice must be published at least twice, the first publication to be made at least sixty days before the meeting. If a special meeting of members is called, a notice of the time, place, and object of the meeting must be mailed to all members at least sixty days before the meeting.

Source:

S.L. 1983, ch. 332, § 12; 1999, ch. 254, § 5; 1999, ch. 260, § 1.

Derivation:

N.D.C.C. § 26-08-19.

26.1-12-07. Amendment of articles of incorporation — Amendment of bylaws — Extension of corporate existence.

The articles of incorporation of a mutual insurance company organized under this chapter may be amended, its term of corporate existence extended, and its bylaws adopted, amended, or repealed at any annual meeting of the company, or at any special meeting called for that purpose, by the affirmative vote of two-thirds of the members voting on the proposition.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-06.

26.1-12-08. License required — Prerequisites to issuance of license.

A mutual insurance company organized under this chapter may not issue policies or transact any insurance business unless it holds a license from the commissioner authorizing the transaction of insurance business. The license may not be issued unless and until the company complies with the following conditions:

  1. It must hold bona fide applications for insurance upon which it will issue simultaneously at least twenty policies to at least twenty members for the same kind of insurance upon not less than two hundred separate risks, each within the maximum single risk.
  2. It must have collected a premium upon each application. All premiums must be held in cash or in securities in which insurance companies may invest, and in the case of fire insurance, must be equal to not less than twice the maximum single risk assumed subject to one fire nor less than ten thousand dollars, and in any other kind of insurance as listed in section 26.1-12-11, to not less than five times the maximum single risk assumed nor less than ten thousand dollars.
  3. It must maintain a surplus of at least one million dollars. However, for any company doing business only in this state, if the minimum assets and surplus requirements required by this subsection are more than the minimum requirements at the time the company was issued its original certificate of authority to do business, the company may maintain assets and surplus which satisfy the requirements in effect at that time. For all other companies, if the minimum assets and surplus requirements required by this subsection are more than the minimum requirements required at the time the company was issued its original certificate of authority, the company shall increase its surplus of assets over all liabilities according to the following schedule:
    1. Two hundred fifty thousand dollars by December 31, 1994.
    2. Five hundred thousand dollars by December 31, 1995.
    3. Seven hundred fifty thousand dollars by December 31, 1996.
    4. One million dollars by December 31, 1997.

Source:

S.L. 1983, ch. 332, § 12; 1987, ch. 338, § 3; 1993, ch. 292, § 16.

Derivation:

N.D.C.C. § 26-14-08.

26.1-12-09. Temporary capital on organization of mutual life insurance company — Retirement.

A mutual life insurance company may be organized with, and an existing mutual life insurance company may establish, a temporary capital of not less than one hundred thousand dollars which must be invested in the manner provided for the investment of its other funds. Out of the net surplus of the company, the holders of the temporary capital stock may receive a dividend of not more than eight percent per annum, and the dividend may be cumulative. The capital stock may not be a liability of the company except that it must be retired as soon as, but not before, the surplus of the company remaining after its retirement will equal at least the amount of the temporary capital. At the time for the retirement of the capital stock, the holders must receive from the company the par value thereof and any dividends thereon due and unpaid, and the stock must be surrendered and canceled, and the right to vote thereon ceases.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-11-01.

26.1-12-10. Mutual life insurance company — Amount of subscribed insurance required — Surplus required.

A mutual life insurance company may not issue a policy until not less than two hundred thousand dollars of insurance in not less than two hundred separate risks have been subscribed for and entered on its books. The commissioner may not issue a certificate of authority for the transaction of business to the company unless it has a surplus of assets over all liabilities of at least one million dollars. A domestic mutual life insurance company shall maintain surplus of at least this amount. However, for any company doing business only in this state, if the minimum asset and surplus requirements required by this section are more than the minimum requirements required at the time a company was issued its original certificate of authority, the company shall increase its assets and surplus to a minimum of one hundred thousand dollars. All other companies shall increase their surplus of assets over all liabilities according to the schedule set out in subsection 4 of section 26.1-12-08.

Source:

S.L. 1983, ch. 332, § 12; 1987, ch. 338, § 4; 1989, ch. 349, § 2; 1993, ch. 292, § 17.

Derivation:

N.D.C.C. § 26-11-02.

DECISIONS UNDER PRIOR LAW

Analysis

Applications for Membership.

The taking of applications for membership and insurance is a necessary step in the formation of the corporation and is not in violation of provisions prohibiting the doing of insurance business without a certificate. Montgomery v. Harker, 9 N.D. 527, 84 N.W. 369, 1900 N.D. LEXIS 266 (N.D. 1900).

Authority of Promoters.

Even though the promoters of a mutual insurance company are authorized and required to take applications for insurance before the company is organized, they do not have authority to bind the corporation by any kind of contract before it is organized and authorized to do business. Montgomery v. Whitbeck, 12 N.D. 385, 96 N.W. 327, 1903 N.D. LEXIS 34 (N.D. 1903), distinguished, Walker v. Rein, 14 N.D. 608, 106 N.W. 405, 1905 N.D. LEXIS 100 (N.D. 1905), following Montgomery v. Tucker, 12 N.D. 504, 96 N.W. 1134, 1903 N.D. LEXIS 44 (N.D. 1903), distinguished, Walker v. Rein, 14 N.D. 608, 106 N.W. 405, 1905 N.D. LEXIS 100 (N.D. 1905).

26.1-12-11. Authority to insure or reinsure — Types of insurance open to mutual insurance company.

Any mutual insurance company organized under this chapter may make insurance contracts, and may reinsure or accept reinsurance on any portion thereof, to the extent specified in its articles of incorporation, for the following lines of insurance:

  1. Life and annuity means insurance coverage on human lives, including benefits of endowment, annuities, and credit life.
  2. Accident and health means insurance coverage for sickness, disease, injury, accidental death, and disability.
  3. Property means insurance coverage for direct and consequential loss of or damage to property of every kind.
  4. Casualty means insurance coverage against legal liability, including that for death, injury, or disability or damage to real or personal property.
  5. Variable life and annuity means insurance coverage provided under variable life insurance contracts, variable annuities, or any other life insurance or annuity that reflects the investment experience of a separate account.

Source:

S.L. 1983, ch. 332, § 12; 1985, ch. 317, § 36; 1999, ch. 254, § 6.

Derivation:

N.D.C.C. § 26-14-07.

Collateral References.

Business interruption insurance, 37 A.L.R.5th 41.

26.1-12-11.1. Authority to define products.

The product types found under each of the above lines of insurance are those adopted pursuant to section 26.1-05-02.1.

Source:

S.L. 1999, ch. 254, § 7.

26.1-12-12. Compliance with general insurance laws — Provisions or conditions in policy.

A mutual insurance company organized under this chapter shall comply with the provisions of any law applicable to a stock insurance company effecting the same kind of insurance. A company may insert in any form of policy prescribed by the law of this state any provisions or conditions required by its plan of insurance which are not inconsistent or in conflict with the law of this state. The policy may conform to the form prescribed by the law, if the policy includes a provision or endorsement reciting that the policy is to be construed as if it were in the form prescribed by the law.

Source:

S.L. 1983, ch. 332, § 12; 1985, ch. 317, § 37.

Derivation:

N.D.C.C. § 26-14-22.

26.1-12-13. Applicability of general insurance laws to mutual companies.

In all respects not specifically provided for in this chapter, mutual insurance companies organized under this chapter are subject to the provisions of this title relating to insurance companies generally.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-27.

26.1-12-14. Membership in domestic mutual insurance company — Votes of members — Notice of meetings.

Every member of a domestic mutual insurance company organized under this chapter is a member of the company while the policy is in force. A member may be an insured or owner of a policy as provided in the bylaws of the company. Every member of the company is entitled to one vote. Every member must be notified of the time and place of the holding of the meetings of the company by a written notice or by an imprint on each policy, receipt, or certificate of renewal as follows:

The member is hereby notified that by virtue of this policy you are a member of mutual insurance company, and that the annual meetings of such company are held at its home office on the day of in each year at o’clock.

Click to view

When the blanks in the notice are properly filled, the notice is sufficient.

Source:

S.L. 1983, ch. 332, § 12; 1999, ch. 260, § 2.

Derivation:

N.D.C.C. § 26-14-09.

DECISIONS UNDER PRIOR LAW

Rights of Members.

A member of a mutual insurance company cannot contract with the company in such a manner as to vest in third parties rights against the company that such member himself is precluded under the statute from acquiring or enjoying. Bach v. North Dakota Mut. Fire Ins. Co., 56 N.D. 319, 217 N.W. 273, 1928 N.D. LEXIS 219 (N.D. 1928).

26.1-12-15. Corporations, limited liability companies, associations, boards, and estates may become member of mutual insurance company — Rights and liabilities.

Any public or private corporation, limited liability company, board, or association in this state or elsewhere may make applications and enter into agreements for, and hold, policies in any mutual insurance company organized under this chapter. Any officer, stockholder, trustee, manager, member, governor, or legal representative of the corporation, limited liability company, board, association, or the representative of an estate may be recognized as acting for or on its behalf for the purpose of the membership but is not liable personally upon the insurance contract by reason of acting in the representative capacity. The right of any corporation or limited liability company organized under the laws of this state to participate as a member of any mutual insurance company is declared to be incidental to the purpose for which the corporation or limited liability company is organized and granted as fully as the rights and powers expressly conferred upon it.

Source:

S.L. 1983, ch. 332, § 12; 1985, ch. 317, § 38; 1993, ch. 54, § 106.

Derivation:

N.D.C.C. § 26-14-11.

26.1-12-16. Vote by proxy permitted — Manner of voting by proxy.

Members of a mutual insurance company may vote by proxy dated and executed within three months prior to the meeting at which the proxy is to be used when returned and recorded on the books of the company three days or more before the meeting. A person may not as proxy or otherwise cast more than fifty votes, and an officer, personally or by another, may not ask for, receive, procure to be obtained, or use, a proxy vote. This section does not apply to a proxy committee duly established by the bylaws comprised of no less than three members appointed by the board of directors whose duty is to cast the vote by proxy of members at any duly called annual or special meeting of the mutual insurance company.

Source:

S.L. 1983, ch. 332, § 12; 1999, ch. 260, § 3.

Derivation:

N.D.C.C. § 26-14-10.

26.1-12-17. Members of mutual company entitled to share of net profits. [Repealed]

Repealed by S.L. 1993, ch. 292, § 49.

26.1-12-18. Premiums and contingent liabilities to be stated in bylaws and on policy — Collection of premiums.

A mutual insurance company, other than a mutual life insurance company, shall charge and collect the full mutual premium upon its policies in cash or in the form of a note. It may fix in its bylaws the contingent mutual liability of its members for the payment of losses and expenses not provided for by the cash funds of the company, but the contingent liability of a member, if any, may not be less than a sum equal, and in addition to, the cash premium written in the policy. The total amount of the liability of a policyholder must be stated clearly and legibly upon the face of each policy. A policy may not be issued for a cash premium without an additional contingent premium unless the company has a surplus which is not less in amount than the surplus required of domestic stock insurance companies transacting the same kinds of insurance.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-12.

DECISIONS UNDER PRIOR LAW

Analysis

Assessments.

Assessments paid in advance, or in excess of those legally levied, shall be credited on assessments subsequently made. Montgomery v. Harker, 9 N.D. 527, 84 N.W. 369, 1900 N.D. LEXIS 266 (N.D. 1900).

Effect of Disregard of Requirements.

A total disregard of the requirements of former similar section in the issuance of policies rendered them void, and no assessment for losses could be made or enforced thereunder. Montgomery v. Whitbeck, 12 N.D. 385, 96 N.W. 327 (1903), followed, Montgomery v. Tucker, 12 N.D. 504, 96 N.W. 1134 (1903), distinguished, Walker v. Rein, 14 N.D. 608, 106 N.W. 405 (1905), followed Montgomery v. Tucker, 12 N.D. 504, 96 N.W. 1134 (1903), distinguished, 14 N.D. 608, 106 N.W. 405 (1905); J. P. Lamb & Co. v. Merchants' Nat'l Mut. Fire Ins. Co., 18 N.D. 253, 119 N.W. 1048, 1908 N.D. LEXIS 116 (N.D. 1908).

Foreign Corporations.

A foreign insurance company, although licensed to do business in this state, will not be permitted to recover on a contract of insurance made with a resident of this state in another state where such contract is forbidden, if the contract is one which a domestic corporation is forbidden to make under the laws of this state. Walker v. Rein, 14 N.D. 608, 106 N.W. 405, 1905 N.D. LEXIS 100 (N.D. 1905).

Payment of Premium in Cash.

Where there were no provisions in the bylaws of the company and where the members had taken no action regarding the payment of premiums by note, the board of directors had authority to require the entire premium, or any part thereof, to be paid in cash. Godfrey v. North Dakota Farmers' Mut. Tornado & Cyclone Co., 63 N.D. 418, 248 N.W. 527, 1933 N.D. LEXIS 195 (N.D. 1933).

26.1-12-19. Nonpayment of premiums and contingent liabilities — Effect — Continuation of liability on mortgage clause policy.

If the premium on a policy issued by a mutual insurance company is not paid in cash or in an unconditional note within sixty days after the date of issue of the policy, the policy becomes void and remains void during the period of nonpayment of premium. Upon the payment of the premium, the policy reattaches if no loss has occurred thereunder while the policy was void. If, however, the company has issued a policy with a mortgage clause making loss, if any, payable to the mortgagee to the extent of the mortgagee’s interest and not exceeding the amount of the policy, the company, notwithstanding the nonpayment of premium or contingent mutual liability, is liable on the policy to the mortgagee until the secretary of the company has notified the mortgagee in writing that the premium or contingent mutual liability has not been paid and the mortgagee has twenty days from the date of the notice in which to pay the same, and in default of the payment, the liability of the company to the mortgagee ceases.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-13.

DECISIONS UNDER PRIOR LAW

Effect of Nonpayment on Mortgagee.

A mutual fire insurance policy on which a full premium had not been paid by cash or note was void during the period of nonpayment, and this provision was applicable to a mortgagee as well as to an owner. Bach v. North Dakota Mut. Fire Ins. Co., 56 N.D. 319, 217 N.W. 273, 1928 N.D. LEXIS 219 (N.D. 1928).

Failure to Bill Insured.

Former similar section did not operate to void fire insurance bound by agent for his mutual company where the policy was not issued or rejected during the time and evidence disclosed that the insured, relying on agent’s promises, did not procure insurance elsewhere, and within the sixty-day period insured had approached agent, inquired about payment of the premium and why he had not been billed for it, but was told by agent to wait as agent was too busy and that he would bill him later. Reishus v. Implement Dealers Mut. Ins. Co., 118 N.W.2d 673, 1962 N.D. LEXIS 104 (N.D. 1962).

Preliminary Oral Contract.

A preliminary contract for temporary insurance pending issuance of a written policy is valid in North Dakota and remains in force until it is superseded by the issuance of a regular policy, or until the risk is rejected by the insurer, and the insurer is liable for any loss in the meantime. Reishus v. Implement Dealers Mut. Ins. Co., 118 N.W.2d 673, 1962 N.D. LEXIS 104 (N.D. 1962).

26.1-12-20. Separate reserves to be maintained for each kind of insurance written by mutual insurance company.

Every mutual insurance company organized under this chapter shall maintain unearned premium and other reserves separately for each kind of insurance written by it upon the same basis as is required of a domestic stock insurance company transacting the same kind of insurance business. Any reserve for losses or claims based upon the premium income, however, must be computed upon the net premium income after deducting any so-called dividend or premium returned or credited to the member.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-15.

26.1-12-21. Reserve fund may be established — Limitation — Use.

Any mutual insurance company, at a meeting called for that purpose, may provide for the accumulation of a permanent fund, in an amount determined from time to time by the board of directors, by reserving a portion of the net profits for investment as a reserve for the security of the policyholders. When the fund amounts to five percent of the sum insured by all policies in force, the whole of the net profits thereafter must be divided among the insureds in cash as provided in the bylaws of the company. The fund must be used for the payment of losses and expenses whenever the cash funds of the company in excess of an amount equal to its liabilities are exhausted.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-16.

26.1-12-22. Investments.

A mutual insurance company organized under this chapter may invest its assets only in accordance with the provisions of the laws of this state relating to the investment of the assets of domestic stock companies transacting the same kind or kinds of insurance business.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-17.

26.1-12-23. Deficiency in assets — Assessments required.

A mutual insurance company not possessed of assets at least equal to its unearned premium reserve and other liabilities shall make an assessment upon its members liable to assessment to provide for the deficiency. The assessment must be made against each such member in proportion to the member’s liability as expressed in the member’s policy. The commissioner, however, may relieve the company, by written order, from any assessment or other proceedings to restore the assets during the time fixed in the order. The company shall record in a book kept for that purpose the order for the assessment and a statement setting forth the condition of the company at the date of the order, the amount of its cash assets and of the notes of its policyholders or of other contingent funds liable to the assessment, the amount of the assessment, and the particular losses or other liabilities for which the assessment is made. The record must be made and signed by the directors who voted for the order before any part of the assessment is collected, and any person liable for the assessment may inspect and take a copy of the record.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-18.

26.1-12-24. Making premium reserve good — Assessments — Cancellation of policies — Reinsurance.

When, by reason of depreciation or loss of its funds or otherwise, the cash assets of a mutual insurance company, after providing for its other debts, are less than the required premium reserve upon its policies, it shall make good the deficiency by assessment in the mode provided in section 26.1-12-23. If the directors are of the opinion that the company is likely to become insolvent, the board of directors, instead of the assessment, may make two assessments, the first determining what each policyholder must equitably pay or receive in case of withdrawal from the company and having the policy canceled and the second determining what further sum each must pay in order to reinsure the unexpired term of the policy at the rate at which the whole was insured at first. Each policyholder subject to assessment shall pay or receive according to the first assessment, and the policy then must be canceled unless the policyholder pays the further sum determined by the second assessment, in which case the policy continues in force. In neither case, however, may a policyholder receive or have credited more than the policyholder would have received on having the policy canceled by a vote of the board of directors under the bylaws. If, within two months after the alternative assessments have become collectible, the amount of the policies whose holders have settled for both assessments is less than two hundred thousand dollars, the company shall stop issuing policies. All policies the holders of which have not settled for both assessments are void, and the company may continue only for the purpose of adjusting the deficiency or excess of premiums among the members and settling outstanding claims. No assessment is valid against a person who has not been notified thereof within two years after the expiration or cancellation of the policy.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-19.

26.1-12-25. Directors and treasurer of mutual insurance company personally liable for not making and collecting assessments.

If the directors of any mutual insurance company neglect or omit for the space of six months to lay, or to use reasonable diligence to collect, any assessment which the board of directors is required to make, they are liable personally for all debts and claims then outstanding against the company or that may accrue until the assessment is laid and put in process of collection. If the treasurer of the company unreasonably neglects to collect an assessment made by order of the board of directors and to apply the assessment to the payment of the claims for which it was made, the treasurer is liable personally to the parties having the claims for the amount of the assessment. The treasurer may repay oneself out of any money afterwards received for the company on account of the assessment.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-20.

26.1-12-26. Advance to mutual insurance company — Repayment — Reporting — Commission or promotion expense.

Any director, officer, or member of a mutual insurance company, or any other person, may advance to the company any sum of money necessary for the purpose of its business or to enable it to comply with any of the requirements of the law, and such moneys, together with any interest agreed upon, but not exceeding the maximum contract rate, is not a liability or claim against the company or any of its assets and may be repaid only out of the surplus earnings of the company. A commission or promotional expense may not be paid in connection with the advance to the company. The amount of any advance must be reported in each annual statement.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-21.

26.1-12-27. Licensing foreign mutual insurance company — Prerequisites.

Any mutual insurance company organized outside of this state and authorized to transact insurance business on the mutual plan in any state, district, or territory must be admitted and licensed to transact the kinds of insurance authorized by its charter or articles, to the extent and with the powers and privileges specified in this chapter and subject to all the provisions of law relating to information to, and examinations by, the commissioner, the making of annual reports, the payment of taxes, and the renewal of licenses applicable to stock insurance companies transacting the same kinds of insurance business except as otherwise provided in this chapter, when it is solvent under this chapter and when it has:

  1. Filed with the commissioner a certified copy of its charter or articles of association;
  2. Filed with the commissioner a copy of its bylaws certified by its secretary;
  3. Appointed the commissioner its agent for the service of process in any action, suit, or proceeding in any court of this state, for as long as any liability remains outstanding in this state;
  4. Filed a financial statement under oath, in the form required by the commissioner, and complied with other provisions of law applicable to the filing of papers and furnishing information by stock companies on application for authority to transact the same kind of insurance business;
  5. Made and maintained, if organized without the United States, the deposit required of stock insurance companies formed without the United States transacting the same kinds of insurance business;
  6. Adopted a name which is not so similar to a name already in use by an existing corporation, limited liability company, company, or association organized or licensed in this state as to be confusing or misleading; and
  7. Accumulated assets in excess of all of its liabilities in an amount not less than five hundred thousand dollars, except if the minimum surplus requirement for the company is more than the minimum requirement provided by this subsection at the time the company was originally issued a license to do business, the company may maintain surplus which satisfies the requirements in effect at that time.

Source:

S.L. 1983, ch. 332, § 12; 1993, ch. 54, § 106.

Derivation:

N.D.C.C. § 26-14-23.

26.1-12-28. Annual statements and examinations of mutual insurance companies.

Every mutual insurance company doing business in this state shall make its annual statement and report in the form and submit to the examinations and furnish the information required by the commissioner. As far as practicable, examinations of foreign mutual insurance companies must be made in cooperation with the insurance departments of other states, and the forms of annual reports must be such as are in general use throughout the United States.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-24.

26.1-12-29. Dividends payable by mutual insurance company.

Any mutual insurance company writing fire, accident, or other forms of insurance protection on its own motion or at the request of policyholders may pay dividends to the different classes of policyholders based upon the losses sustained as compared with the income received from those engaged in a particular trade, occupation, or profession.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-25.

26.1-12-30. Determination of dividends.

In determining the rate of dividend due a given trade, occupation, or profession, if the dividend is allowed, the income received and losses sustained must be tabulated for a period of not less than five years immediately preceding the determination of the dividend rate, and the return dividend to policyholders must be based upon the experience of such period after deduction for expenses and allowances for reserves as required by law.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-26.

26.1-12-31. Taxable premiums of mutual insurance company.

For the purposes of taxation under the laws of this state, the taxable premiums or premium receipts of a mutual insurance company organized or admitted to do business in this state are the gross premiums received for direct insurance upon property or risks in this state less:

  1. Any amount paid for reinsurance upon which a tax has been, or is to be, paid to this state.
  2. Premiums upon policies not accepted.
  3. Premiums returned on canceled policies.
  4. Any refund or return made to the policyholder other than for losses.

Source:

S.L. 1983, ch. 332, § 12.

Derivation:

N.D.C.C. § 26-14-28.

26.1-12-32. Demutualization of domestic mutual insurance companies — Rules. [Repealed]

Source:

S.L. 1987, ch. 343, § 1; Repealed by 2015, ch. 209, § 4, eff July 1, 2015.

CHAPTER 26.1-12.1 Mutual Insurance Company Reorganization

26.1-12.1-01. Definitions.

As used in this chapter, unless the context or subject matter otherwise requires:

  1. “Commissioner” means the insurance commissioner.
  2. “Domestic mutual insurance company” or “mutual insurance company” means a mutual insurance company incorporated under the laws of this state pursuant to chapter 26.1-12 or other prior provisions of this title.
  3. “Domestic mutual insurance holding company” or “mutual insurance holding company” means a company formed under section 26.1-12.1-02.
  4. “Eligible member” means a policyholder whose policy is in force as of the record date or member as defined under the bylaws or articles of incorporation of the reorganizing insurer. Unless otherwise provided in the reorganization plan, a person insured under a certificate issued under a group policy is not an eligible member.
  5. “Foreign mutual insurance company” means a mutual insurance company incorporated under the laws of another state.
  6. “Foreign mutual insurance holding company” means a company formed under provisions of the laws of another state similar to those contained in this chapter.
  7. “Membership interest” means all interests of eligible members of the reorganizing insurer, including rights to vote and to participate in any distribution of surplus, whether or not incident to the company’s liquidation. It does not include the contractual rights remaining with the reorganized insurance company.
  8. “Plan of reorganization” means a plan to engage or participate in a reorganization subject to this chapter.
  9. “Policy” means a policy or contract of insurance issued by a mutual insurance company, including an annuity contract.
  10. “Record date” means the date the reorganizing insurer’s board of directors adopts a plan of reorganization or some other date specified as the record date in the plan of reorganization and approved by the commissioner.
  11. “Reorganization” means any plan or transaction described in section 26.1-12.1-02, 26.1-12.1-03, 26.1-12.1-15, 26.1-12.1-16, or 26.1-12.1-17, or any change in the reorganized insurer’s articles of incorporation or bylaws which is a material change to the plan of reorganization filed and approved by the commissioner affecting the ability of the reorganizing insurer to meet the standards described in section 26.1-12.1-06.
  12. “Reorganized insurance company” means a mutual insurance company that has completed a reorganization to a stock company that is subject to this chapter. A domestic or foreign mutual insurance company that has completed a reorganization to a stock company may retain the word “mutual” in its name so long as it is clearly identified with its name that it is a stock insurance subsidiary of a domestic or foreign mutual insurance holding company.
  13. “Reorganizing insurer” means a mutual insurance company, whether domestic or foreign, seeking to participate, or participating, in a merger or other reorganization as defined in this chapter.

Source:

S.L. 1997, ch. 252, § 1; 1999, ch. 261, § 1.

26.1-12.1-02. Mutual insurance holding company — Formation.

A domestic mutual insurance company, upon approval of the commissioner, may reorganize by forming an insurance holding company based upon a mutual plan and continuing the corporate existence of the reorganizing insurer as a stock insurance company. The commissioner, if satisfied the reorganization meets the standards set forth in section 26.1-12.1-06, may approve the proposed plan of reorganization or may require as a condition of approval the modification of the proposed plan of reorganization as the commissioner finds necessary for the plan to meet the standards of section 26.1-12.1-06. The commissioner shall retain jurisdiction over the mutual insurance holding company and the reorganized insurer according to this section and chapter 26.1-10 to assure that policyholders’ and members’ interests are protected.

All of the initial shares of the capital stock of the reorganized insurer must be issued to the mutual insurance holding company or to an intermediate stock holding company that is wholly owned by the mutual insurance holding company. The membership interests of the policyholders of the reorganized insurer must be converted into membership interests in the mutual insurance holding company. Policyholders of the reorganizing insurance company must become members of the mutual insurance holding company in accordance with the articles of incorporation and bylaws of the mutual insurance holding company and the articles of incorporation and bylaws of the reorganized insurance company as approved by the commissioner. The mutual insurance holding company, directly or indirectly through an intermediate stock holding company, must control at all times a majority of the voting shares of the capital stock of the reorganized insurance company but this does not prohibit any future demutualization or other conversion.

Source:

S.L. 1997, ch. 252, § 1.

26.1-12.1-03. Mutual insurance holding company — Merger.

A domestic mutual insurance company, upon the approval of the commissioner, may reorganize by merging its policyholders’ member interests into a mutual insurance holding company formed according to section 26.1-12.1-02 and continuing the corporate existence of the reorganizing insurer as a stock insurance company subsidiary of the mutual insurance holding company. The commissioner, if satisfied that the reorganization meets the standards in section 26.1-12.1-06, may approve the proposed merger or may require as a condition of approval the modification of the proposed merger as the commissioner finds necessary for the merger to meet the standards in section 26.1-12.1-06. The commissioner shall retain jurisdiction over the mutual insurance holding company and the reorganized insurer organized according to this section to assure that the policyholders’ and members’ interests are protected.

All of the initial shares of the capital stock of the reorganized insurance company must be issued to the mutual insurance holding company, or to an intermediate stock holding company that is wholly owned by the mutual insurance holding company. The membership interests of the policyholders of the reorganizing insurer must be converted into membership interests in the mutual insurance holding company. Policyholders of the reorganized insurance company must become members of the mutual insurance holding company according to the articles of incorporation and bylaws of the mutual insurance holding company. A merger as contemplated by this section is not subject to chapter 26.1-07.

Source:

S.L. 1997, ch. 252, § 1.

26.1-12.1-04. Plan of reorganization — Contents.

No insurer authorized to do business in this state may take part in a reorganization unless the reorganization has first been approved by the commissioner in accordance with this chapter. A reorganizing insurer shall file a plan of reorganization consistent with the requirements of this section, approved by the affirmative vote of a majority of its board of directors, for review and approval by the commissioner. The plan must include:

  1. A description of the nature and content, or a copy, of the annual report and financial statement to be sent to each eligible member.
  2. An analysis of the benefits and risks attendant to the proposed reorganization, including the rationale for the reorganization and analysis of the comparative benefits and risks to the reorganizing insurer of the reorganization.
  3. Information sufficient to demonstrate the financial condition of the reorganizing insurer will not be affected adversely upon reorganization.
  4. Information demonstrating that the reorganization will:
    1. Establish a mutual insurance holding company with at least one stock insurance company subsidiary, the majority of whose shares must be owned, either directly or through an intermediate stock holding company, by the mutual insurance holding company;
    2. Ensure immediate membership in the mutual insurance holding company of all existing eligible members of the reorganizing mutual insurance company;
    3. Describe a plan providing for membership interest of future policyholders;
    4. Include a copy of the proposed mutual insurance holding company’s articles of incorporation and bylaws specifying all membership rights;
    5. Include a copy of the articles of incorporation and bylaws of the reorganizing insurer, any proposed insurance company subsidiary, or intermediate holding company subsidiary; and
    6. Describe the number of members of the board of directors of the mutual insurance holding company required to be policyholders.
  5. Information demonstrating that upon an insolvency involving a stock insurance company subsidiary of the mutual insurance holding company that resulted from the reorganization, the assets of the mutual holding company will be available to satisfy the policyholder obligations of the stock insurance company.
  6. Information describing the mutual insurance holding company’s general plans regarding whether any accumulation or prospective accumulation of earnings by the mutual insurance holding company which is or would be in excess of that determined by the board of directors of the mutual insurance holding company to be necessary will inure to the exclusive benefit of the policyholders of its insurance company subsidiaries who are members.

Source:

S.L. 1997, ch. 252, § 1.

26.1-12.1-05. Retention of experts.

The commissioner may retain, at the reorganizing insurer’s reasonable expense, any qualified experts if the commissioner determines that staff not otherwise a part of the commissioner’s staff is necessary to assist in reviewing the plan.

Source:

S.L. 1997, ch. 252, § 1.

26.1-12.1-06. Hearing by commissioner — General duties.

The commissioner shall conduct a public hearing regarding a proposed reorganization plan within sixty days after submission of a completed plan of reorganization to the commissioner, unless the commissioner and reorganizing insurer agree to extend the sixty days or unless the commissioner and the reorganizing insurer, based upon the facts and circumstances of the transaction, agree that a hearing may be waived. If a hearing is held, the commissioner shall give the reorganizing insurer at least twenty days’ notice of the hearing. At the hearing, the reorganizing insurer, its policyholders, and any other person whose interests may be affected by the proposed reorganization may present evidence, examine and cross-examine witnesses, and offer oral and written arguments and comments according to the procedure for contested cases under chapter 28-32. The commissioner, in making the determination as to a plan of reorganization under this chapter, shall consider whether:

  1. The reorganizing insurer’s surplus in regard to policyholders following a plan of reorganization is reasonable in relation to the reorganizing insurer’s outstanding liabilities and adequate to its financial needs;
  2. Under a plan of reorganization that materially affects the membership interest of eligible members in the reorganizing insurer, the eligible members will receive a membership interest in a mutual holding company commensurate with an equitable share of the value of the reorganizing insurer;
  3. After the reorganization, the reorganized insurance company will be able to satisfy the requirements for the issuance of a certificate of authority to write the lines of insurance for which it was licensed before the reorganization; and
  4. The plan of the reorganization is fair, reasonable, and equitable to the policyholders of the reorganizing insurer.

Source:

S.L. 1997, ch. 252, § 1.

26.1-12.1-07. Action by commissioner.

Within sixty days after the conclusion of the public hearing, or within the sixty days after filing the plan of reorganization if by mutual agreement the hearing is waived, unless there is a mutual agreement by the commissioner and the reorganizing insurer to extend such time, the commissioner shall enter findings of fact, conclusions of law, and an order either approving, conditionally approving, or disapproving the plan. An approval or conditional approval of a plan of reorganization expires if the reorganization is not completed within one hundred eighty days after the approval or conditional approval, unless the time period is extended by the commissioner upon a showing of good cause.

Source:

S.L. 1997, ch. 252, § 1.

26.1-12.1-08. Notice to eligible members.

Following approval or conditional approval of the plan by the commissioner, all eligible members shall be given notice of a regular or special meeting of the policyholders called for the purpose of considering the plan and any corporate action that is a part of, or is reasonably attendant to, the accomplishment of the plan. A copy of the plan or a summary of the plan must accompany the notice. A notice approved by the commissioner must be mailed to each eligible member’s last-known address, as shown on the reorganizing insurer’s records, within forty-five days of the commissioner’s approval of the plan, unless the commissioner directs an earlier date for mailing. The meeting to vote upon a plan of reorganization must be set for a date no less than forty-five days after the date when the notice of the meeting is mailed by the reorganizing insurer, unless the commissioner directs an earlier date for the meeting. If the meeting to vote upon the plan of reorganization is held coincident with the reorganizing insurer’s annual meeting of policyholders or members, only one combined notice of meeting is required. If the reorganizing insurer complies substantially and in good faith with the notice requirements of this section, the reorganizing insurer’s failure to give any member or members any required notice does not impair the validity of any action taken under this section.

Source:

S.L. 1997, ch. 252, § 1.

26.1-12.1-09. Approval by eligible members.

The plan of reorganization must be adopted upon receiving the affirmative vote of a majority of the votes cast by eligible members. Eligible members may vote in person or by proxy. The form of any proxy along with a copy or summary of the plan which accompanied the notice to eligible members must be filed with and approved by the commissioner. The number of votes each eligible member may cast must be determined by the reorganizing domestic mutual insurance company’s bylaws. If the bylaws are silent, each eligible member may cast one vote. The plan must be approved as follows:

  1. In the case of formation of a mutual insurance holding company under section 26.1-12.1-02, the reorganization plan must be approved by the affirmative vote of a majority of the votes cast by no less than ten percent of the eligible members of the reorganizing domestic mutual insurance company; and
  2. In the case of a merger under section 26.1-12.1-03, the reorganization plan must be approved by an affirmative vote of a majority of the votes cast by no less than ten percent of the eligible members of the reorganizing domestic mutual insurance company and by an affirmative vote of a majority of the votes cast by no less than ten percent of the eligible members of the mutual insurance holding company into which the policyholders’ membership interests are to be merged, provided that the vote of the eligible members of the mutual insurance holding company may not be required if the commissioner determines that the merger would not be material to the financial condition of the mutual insurance holding company.

Source:

S.L. 1997, ch. 252, § 1; 1999, ch. 261, § 2.

26.1-12.1-10. Applicability of certain provisions.

A mutual insurance holding company is deemed to be an insurer subject to chapter 26.1-06.1 and is automatically a mandatory party to any proceeding under that chapter involving an insurance company that, as a result of a reorganization according to section 26.1-12.1-02 or 26.1-12.1-03, is a subsidiary of the mutual insurance holding company. In any proceeding under chapter 26.1-06.1 involving the reorganized insurance company, the assets of the mutual insurance holding company are considered to be the assets of the estate of the reorganized insurance company for purposes of satisfying the claims of the reorganized insurance company’s policyholders. A mutual insurance holding company may not dissolve or liquidate without the approval of the commissioner or as ordered by the district court according to chapter 26.1-06.1. Chapter 26.1-12.2 is not applicable to a reorganization or merger accomplished under this chapter.

Source:

S.L. 1997, ch. 252, § 1; 2015, ch. 209, § 1, eff August 1, 2015.

26.1-12.1-11. Membership interest.

A membership interest in a domestic mutual insurance holding company does not constitute a security as defined in section 10-04-02. No member of a mutual insurance holding company may transfer or pledge membership in the mutual insurance holding company or any right arising from the membership except as attendant to the valid transfer or assignment of the member’s policy in any reorganized insurer which gave rise to the member’s membership interest. A member of a mutual insurance holding company is not, as a member, personally liable for the acts, debts, liabilities, or obligations of the reorganized insurer. No assessment of any kind may be imposed upon the members of a mutual insurance holding company by the directors or members, or because of any liability of any company owned or controlled by the mutual insurance holding company, or because of any act, debt, or liability of the reorganized company. A member’s interest in the mutual insurance holding company automatically terminates upon cancellation, nonrenewal, expiration, or termination of the member’s policy in any reorganized company which gave rise to the member’s membership interest.

Source:

S.L. 1997, ch. 252, § 1.

26.1-12.1-12. Sale of stock and payment of dividends.

No solicitation for the sale of any of the stock of the reorganized insurer, or of an intermediate stock holding company of the mutual insurance holding company, may be made without the commissioner’s prior written approval. Dividends and other distributions to the shareholders or members of the reorganized mutual insurance company or of an intermediate stock holding company may not be made except in compliance with sections 26.1-10-05 and 26.1-10-05.1.

Source:

S.L. 1997, ch. 252, § 1.

26.1-12.1-13. Incorporation.

A mutual insurance holding company resulting from the reorganization of a domestic mutual insurance company must be incorporated under chapter 10-33. The articles of incorporation of the mutual insurance holding company are subject to approval of the commissioner in the same manner as those of an insurance company.

Source:

S.L. 1997, ch. 252, § 1; 2021, ch. 85, § 17, eff August 1, 2021.

26.1-12.1-14. Applicability.

This chapter does not apply to any mutual insurance company that was formerly organized as a nonprofit health service corporation.

Source:

S.L. 1997, ch. 252, § 1.

26.1-12.1-15. Foreign mutual insurance holding company — Reorganization.

A domestic mutual insurance company may reorganize with a foreign mutual insurance holding company that is created or exists under the laws of another state by complying with chapter 26.1-12.1. The commissioner may waive any provision of chapter 26.1-12.1 if the commissioner determines the provision to be unnecessary for the protection of eligible members.

A plan of reorganization under this section must comply with the requirements and standards of section 26.1-12.1-06 and be approved by the eligible members of the domestic mutual insurance company as a reorganizing insurer in accordance with subsection 1 of section 26.1-12.1-09. A domestic mutual insurance company seeking to reorganize under this section may at the same time redomesticate to another state by complying with section 26.1-05-07.3 and the applicable requirements of the state to which it seeks to transfer domicile.

Source:

S.L. 1999, ch. 261, § 3.

26.1-12.1-16. Existing domestic mutual insurance holding company — Reorganization.

An existing domestic mutual insurance holding company, with the prior approval of the commissioner pursuant to, and under the provisions of section 26.1-12.1-06, may:

  1. Acquire direct or indirect ownership of a foreign mutual insurance company as a reorganizing insurer in compliance with the laws of its state of domicile; and
  2. Grant membership interest and equity rights in the domestic mutual insurance holding company to eligible members of a foreign mutual insurance company as a reorganizing insurer that merges with a direct or indirect domestic or foreign subsidiary of the domestic mutual insurance holding company, or is otherwise acquired by the domestic mutual insurance holding company.

The commissioner shall consider the fairness of the terms and conditions of the transaction, whether the interests of the eligible members of the domestic mutual insurance holding company that is a party to the transaction are protected in accordance with this chapter. A plan of reorganization under this section must be approved by the eligible members of the domestic mutual insurance holding company in accordance with subsection 2 of section 26.1-12.1-09.

Source:

S.L. 1999, ch. 261, § 3.

26.1-12.1-17. Concurrent reorganization — Domestic or foreign.

The concurrent reorganization of a domestic mutual insurance company with one or more mutual insurance companies, whether domestic or foreign, into a single mutual insurance holding company structure, whether domestic or foreign, may be accomplished by a joint application and a joint plan of reorganization and may be approved by complying with the requirements and standards of section 26.1-12.1-06 by the commissioner following a hearing as provided for in this chapter. The commissioner may allow such other procedures to avoid unnecessary or duplicative costs and efforts in satisfying the requirements of this chapter and effectuating the reorganization.

Source:

S.L. 1999, ch. 261, § 3.

CHAPTER 26.1-12.2 Mutual Property and Casualty Insurance Company Conversion

26.1-12.2-10 Corporate existence.

26.1-12.2-01. Definitions.

As used in this chapter:

  1. “Capital stock” means common or preferred stock or any hybrid security or other equity security issued by a converted stock company or other company or entity pursuant to the exercise of subscription rights granted pursuant to the provisions of subdivision c of subsection 1 of section 26.1-12.2-03.
  2. “Converted stock company” means a mutual company or mutual holding company that has converted to a stock company under this chapter.
  3. “Converting mutual company” means a mutual company or mutual holding company that has adopted a plan of conversion under this chapter.
  4. “Eligible member” means a member of a converting mutual company whose policy is in force on the date the governing body of the converting mutual company adopts a plan of conversion or such earlier date as the converting mutual company may establish with the consent of the commissioner. A person insured under a group policy is not an eligible member. A person whose policy becomes effective after the governing body adopts the plan of conversion but before the effective date of the plan of conversion is not an eligible member but has those rights established under section 26.1-12.2-09.
  5. “Issued minority shares” means the number of shares issued by a subsidiary insurance company or subsidiary holding company of a mutual holding company in all minority stock offerings.
  6. “Minority stock offering” means an offering of capital stock by a subsidiary insurance company or subsidiary holding company controlled by a mutual holding company in which less than fifty percent of the voting stock of the subsidiary insurance company or subsidiary holding company is offered and sold under this chapter or chapter 26.1-12.1.
  7. “Mutual company” means a mutual property and casualty insurance company domiciled in this state.
  8. “Mutual holding company” means:
    1. A corporation resulting from a reorganization of a mutual company under chapter 26.1-12.1; or
    2. A domestic corporation surviving or resulting from a merger or consolidation with a corporation that resulted from a reorganization of a mutual insurer under the laws of any other jurisdiction as provided by section 26.1-12.1-03.
  9. “Participating policy” means a policy that grants a holder the right to receive dividends if, as, and when declared by the mutual company.
  10. “Plan of conversion” or “plan” means a plan adopted by the governing body of a mutual company or mutual holding company to convert into a stock company or stock insurance holding company in accordance with the requirements of this chapter.
  11. “Policy” means an insurance policy.
  12. “Standby investor” means any person that has agreed in writing to purchase all or a portion of the capital stock to be sold in a conversion which is not subscribed by eligible members.
  13. “Subscription right” means the nontransferable right to purchase, for a period of not less than forty-five days, the stock of the converted stock company, its proposed subsidiary holding company, or an unaffiliated stock insurance company or other corporation or entity that will acquire the stock of the converted stock company.
  14. “Voting member” means a member who is an eligible member and is also a member of the converting mutual company as of a date not more than ninety days before the date of the meeting at which the plan of conversion must be voted upon by members.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-02. Adoption of plan of conversion.

  1. A plan of conversion does not become effective unless the converting mutual company seeking to become a converted stock company adopted, by the affirmative vote of not less than two-thirds of its governing body, a plan of conversion consistent with the requirements of sections 26.1-12.2-03 and 26.1-12.2-04, or of section 26.1-12.2-05. At any time before approval of a plan of conversion by the commissioner, the converting mutual company, by the affirmative vote of not less than two-thirds of its governing body, may amend or withdraw the plan.
  2. Before the eligible members of a converting mutual company may vote on approval of a plan of conversion, a converting mutual company whose governing body has adopted a plan shall file all of the following documents with the commissioner within ninety days after adoption of the plan of conversion together with the application fee:
    1. The plan of conversion, including the independent evaluation required by subsection 4 of section 26.1-12.2-03.
    2. The form of notice and proxy required by subsection 7 of section 26.1-12.2-02.
    3. The form of notice required by section 26.1-12.2-09 to persons whose policies are issued after adoption of the plan of conversion but before the plan of conversion’s effective date.
    4. The proposed certificate of incorporation and bylaws of the converted stock company.
    5. The acquisition of control statement, as required by section 26.1-10-03.
    6. The application fee, equal to the greater of ten thousand dollars or an amount equal to one-tenth of one percent of the estimated pro forma market value of the converted stock company as determined in accordance with subsection 4 of section 26.1-12.2-03. If such value is expressed as a range of values, the application fee must be based upon the midpoint of the range. The application fee is in addition to other direct costs incurred by the commissioner in reviewing the proposed plan of conversion. For good cause shown, the commissioner may waive the application fee in whole or in part, or permit a portion of the application fee to be deferred until completion of the conversion.
    7. Such other information as the commissioner may request.
  3. Upon filing with the commissioner the documents required under subsection 2, the converting mutual company shall send to eligible members a notice advising eligible members of the adoption and filing of the plan of conversion, the ability of the eligible members to provide the commissioner and the converting mutual company with comments on the plan of conversion within thirty days of the date of such notice, and the procedure of providing such comments.
  4. The commissioner shall approve the plan if the commissioner finds:
    1. The plan complies with this chapter;
    2. The plan is fair and equitable to the converting mutual company, the members of the converting mutual company, and the eligible members of the converting mutual company;
    3. The plan’s method of allocating subscription rights is fair and equitable;
    4. The plan will not otherwise prejudice the interests of the members; and
    5. The converted stock company will have the amount of capital and surplus deemed by the commissioner to be reasonable for its future solvency.
  5. At the expense of the converting mutual company, the commissioner may retain any qualified expert not otherwise a part of the commissioner’s staff, including counsel and financial advisors, to assist in reviewing the plan of conversion and the independent valuation required under subsection 4 of section 26.1-12.2-03.
  6. The commissioner shall order a hearing on whether the terms of the plan of conversion comply with this chapter after giving written notice by mail or publication to the converting mutual company and other interested persons, all of whom have the right to appear at the hearing.
  7. The commissioner shall give written notice of any decision to the converting mutual company and, in the event of disapproval, a detailed statement of the reasons for the decision.
  8. All voting members must be sent notice of the members’ meeting to vote on the plan of conversion no later than forty-five days before the meeting. The notice must describe the proposed plan of conversion, must inform the member how the proposed plan of conversion will affect the member’s membership rights, must inform the voting member of the voting member’s right to vote upon the plan of conversion, and must be sent to each voting member’s last-known address, as shown on the records of the converting mutual company. The notice must provide instructions on how the member can obtain, either by mail or electronically, a full copy of the proposed plan of conversion. If the meeting to vote upon the plan of conversion is held during the annual meeting of policyholders, only a combined notice of meeting is required.
  9. The plan of conversion must be voted upon by voting members and must be adopted upon receiving the affirmative vote of at least two-thirds of the votes cast by voting members at the meeting. Voting members entitled to vote upon the proposed plan of conversion may vote in person or by proxy. The number of votes each voting member may cast must be determined by the bylaws of the converting mutual company. If the bylaws are silent, each voting member may cast one vote.
  10. The certificate of incorporation of the converted stock company must be considered at the meeting of the voting members called for the purpose of adopting the plan of conversion and must require for adoption the affirmative vote of at least two-thirds of the votes cast by voting members.
  11. Within thirty days after the voting members have approved the plan of conversion in accordance with the requirements of this section, the converted stock company shall file with the commissioner:
    1. The minutes of the meeting of the voting members at which the plan of conversion was approved, which must include the record of total votes cast in favor of the plan; and
    2. The certificate of incorporation and bylaws of the converted stock company.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-03. Required provisions of plan of conversion.

  1. The following provisions must be included in the plan of conversion:
    1. The reasons for proposed conversion.
    2. The effect of conversion on existing policies, including all of the following:
      1. A provision that all policies in force on the effective date of conversion continue to remain in force under the terms of the policies, except that the following rights, to the extent the rights existed in the converting mutual company, must be extinguished on the effective date of the conversion:
        1. Any voting rights of the policyholders provided under the policies.
        2. Except as provided under paragraph 2, any right to share in the surplus of the converting mutual company, unless such right is expressly provided for under the provisions of the existing policy.
        3. Any assessment provisions provided for under certain types of policies.
      2. A provision that holders of participating policies in effect on the date of conversion continue to have a right to receive dividends as provided in the participating policies, if any.
    3. The grant of subscription rights to eligible members.
      1. For purposes of any plan, the transfer of subscription rights from any of the following may not be deemed an unpermitted transfer for purposes of this chapter:
        1. An individual to such individual and the individual’s spouse or children or to a trust or other estate or wealth planning entity established for the benefit of such individual or the individual’s spouse or children;
        2. An individual to such individual’s individual or joint individual retirement account or other tax-qualified retirement plan;
        3. An entity to the shareholders, partners, or members of such entity; or
        4. The holder of such rights back to the converting mutual company, its proposed subsidiary holding company, or an unaffiliated corporation or entity that will purchase the stock of the converted stock company as provided in item 3 of subparagraph a of paragraph 2 of subdivision c of subsection 1.
      2. The grant of subscription rights to eligible members must include:
        1. A provision that each eligible member is to receive, without payment, nontransferable subscription rights to purchase the capital stock of the converted stock company and that, in the aggregate, all eligible members have the right, before the right of any other party, to purchase one hundred percent of the capital stock of the converted stock company, exclusive of any shares of capital stock required to be sold or distributed to the holders of surplus notes, if any, and any capital stock purchased by the company’s tax-qualified employee stock benefit plan which is in excess of the pro forma market value of the capital stock established under subsection 4, as permitted by subsection 3 of section 26.1-12.2-04. As an alternative to subscription rights in the converting mutual company, the plan of conversion may provide each eligible member is to receive, without payment, nontransferable subscription rights to purchase a portion of the capital stock of one of the following:
          1. A corporation or entity organized for the purpose of becoming a holding company for the converted stock company;
          2. A stock insurance company owned by the mutual company into which the mutual company will be merged; or
          3. An unaffiliated stock insurer or other corporation or entity that will purchase the stock of the converted stock company.
        2. A provision that subscription rights must be allocated in whole shares among the eligible members using a fair and equitable formula. The formula need not allocate subscription rights to eligible members on a pro rata basis based on premium payments or contributions to surplus, but may take into account how the different classes of policies of the eligible members contributed to the surplus of the mutual company or any other factors that may be fair or equitable. Allocation of subscription rights on a per capita basis are entitled to a presumption that such method is fair, subject to a rebuttal of fairness by clear and convincing evidence. In accordance with subsection 5 of section 26.1-12.2-02, the commissioner may retain an independent consultant to assist in the determination that the allocation of subscription rights is fair and equitable.
  2. The plan must provide a fair and equitable means for allocating shares of capital stock in the event of an oversubscription to shares by eligible members exercising subscription rights received under subdivision c of subsection 1.
  3. The plan must provide any shares of capital stock not subscribed to by eligible members exercising subscription rights received under subdivision c of subsection 1 or any other individuals or entities granted subscription rights pursuant to section 26.1-12.2-04 must be sold:
    1. In a public offering; however, if the number of shares of capital stock not subscribed by eligible members is so small in number or other factors exist that do not warrant the time or expense of a public offering, the plan of conversion may provide for sale of the unsubscribed shares through a private placement or other alternative method approved by the commissioner which is fair and equitable to eligible members; or
    2. To a standby investor or to another corporation or entity that is participating in the plan of conversion, as provided in paragraph 2 of subdivision c of subsection 1.
  4. The plan must provide for the preparation of a valuation by a qualified independent expert which establishes the dollar value of the capital stock for which subscription rights must be granted pursuant to subdivision c of subsection 1 which must be equal to the estimated pro forma market value of the converted stock company. The qualified independent expert may, to the extent feasible, determine the pro forma market value by reference to a peer group of stock companies and the application of generally accepted valuation techniques; state the pro forma market value of the converted stock company as a range of value; and establish the value as the value estimated to be necessary to attract full subscription for the shares.
  5. The dollar value of a subscription right based upon the application of the Black-Scholes option pricing model or another generally accepted option pricing model. In connection with the determination of stock price volatility or other valuation inputs used in option pricing models, the qualified independent expert may assume that the attributes of the converted stock company will be substantially similar to the attributes of the stock of the peer companies used to determine the estimated pro forma market value of the converted stock company. The term of a subscription right is a minimum of ninety days for the sole purpose of determining the value of a subscription right.
  6. The plan must provide that each eligible member has the right to require the mutual company to redeem such subscription rights, in lieu of exercising the subscription rights allocated to each eligible member, at a price equal to the number of subscription rights allocated to each eligible member multiplied by the dollar value of the subscription right as determined by the qualified independent expert pursuant to subsection 4. The obligation of the mutual company to redeem subscription rights arises only upon the effective date of the plan. The redemption price payable to each eligible member must be paid to the member within thirty days of the effective date of the plan. Alternatively, the converted stock company may offer each eligible member the option of receiving the redemption amount in cash or having the redemption amount credited against future premium payments. An eligible member that does not exercise the member’s subscription rights, and which also fails to affirmatively request redemption of the member’s subscription rights before the expiration of the subscription offering, nevertheless is deemed to have requested redemption of the member’s subscription rights and shall receive the redemption amount in cash in the manner otherwise provided in this subsection.
  7. The plan must set the purchase price per share of capital stock equal to any reasonable amount. However, the minimum subscription amount required of any eligible member may not exceed five hundred dollars, but the plan may provide that the minimum number of shares any person may purchase pursuant to the plan is twenty-five shares. The purchase price per share at which capital stock is offered to persons that are not eligible members may be greater than but not less than the purchase price per share at which capital stock is offered to eligible members.
  8. The plan must provide that any person or group of persons acting in concert may not acquire, in the public offering or pursuant to the exercise of subscription rights, more than five percent of the capital stock of the converted stock company or the stock of another corporation that is participating in the plan of conversion, as provided in item 3 of subparagraph a of paragraph 2 of subdivision c of subsection 1, except with the approval of the commissioner. This limitation does not apply to any entity that is to purchase one hundred percent of the capital stock of the converted stock company as part of the plan of conversion approved by the commissioner or to any person that acts as a standby investor for the capital stock of the converted stock company for an amount equal to ten percent or more of the capital stock of the converted stock company, if in each case such purchase is approved by the commissioner in accordance with the provisions of North Dakota law following the filing of an acquisition of control statement under section 26.1-10-03.
  9. The plan must provide that a director or officer or person acting in concert with a director or officer of the mutual company may not acquire any capital stock of the converted stock company or the stock of another corporation that is participating in the plan of conversion, as provided in item 3 of subparagraph a of paragraph 2 of subdivision c of subsection 1, for three years after the effective date of the plan of conversion, except through a broker-dealer, without the permission of the commissioner. This provision does not prohibit the directors and officers from:
    1. Making block purchases of one percent or more of the outstanding common stock other than through a broker-dealer if approved in writing by the insurance department;
    2. Exercising subscription rights received under the plan; or
    3. Participating in a stock benefit plan permitted by subsection 3 of section 26.1-12.2-04 or approved by shareholders pursuant to subsection 2 of section 26.1-12.2-11.
  10. The plan must provide that a director or officer may not sell stock purchased pursuant to this section or subsection 1 of section 26.1-12.2-04 within one year after the effective date of the conversion, except that nothing contained in this section may be deemed to restrict a transfer of stock by such director or officer if the stock is the stock of an unaffiliated corporation that is participating in the plan of conversion as provided in item 3 of subparagraph a of paragraph 2 of subdivision c of subsection 1 and has a class of stock registered under the federal Securities Exchange Act of 1934 [15 U.S.C. 78a et seq.], or if the transfer is to the spouse or minor children of such director or officer, or to a trust or other estate or wealth planning entity established for the benefit of such director or officer, or the spouse or minor children of such director or officer.
  11. The plan of conversion must provide the rights, if any, of a holder of a surplus note to participate in the conversion are governed by the terms of the surplus note.
  12. The plan of conversion must provide that without the prior approval of the commissioner, for a period of two years from the date of the completion of the conversion, a converted stock company or any corporation participating in the plan of conversion pursuant to item 1 of subparagraph a of paragraph 2 of subdivision c of subsection 1 or item 2 of subparagraph a of paragraph 2 of subdivision c of subsection 1, may not repurchase any of its capital stock from any person. However, this restriction does not apply to a:
    1. Repurchase on a pro rata basis pursuant to an offer made to all shareholders of the converted stock company or any corporation participating in the plan of conversion pursuant to, or item 1 of subparagraph a of paragraph 2 of subdivision c of subsection 1, or item 2 of subparagraph a of paragraph 2 of subdivision c of subsection 1; or
    2. Purchase in the open market by a tax-qualified or nontax-qualified employee stock benefit plan in an amount reasonable and appropriate to fund the plan.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-04. Optional provisions of plan of conversion.

  1. The plan of conversion may allocate to a tax-qualified employee benefit plan nontransferable subscription rights to purchase up to ten percent of the capital stock of the converting mutual company or the stock of another corporation that is participating in the plan of conversion, as provided in item 3 of subparagraph a of paragraph 2 of subdivision c of subsection 1 of section 26.1-12.2-03. A tax-qualified employee benefit plan may exercise subscription rights granted under this subsection regardless of the total number of shares purchased by eligible members. If eligible members purchase shares sufficient to yield gross proceeds equal to the maximum of the valuation range established by subsection 4 of section 26.1-12.2-03, then the tax-qualified employee benefit plan may purchase additional shares of capital stock of the converting mutual company or the stock of another corporation that is participating in the plan of conversion, as provided in item 3 of subparagraph a of paragraph 2 of subdivision c of subsection 1 of section 26.1-12.2-03 in an amount sufficient to equal ten percent of the total shares of capital stock of the converted stock company outstanding.
  2. The plan may provide that other classes of subscribers approved by the commissioner shall receive nontransferable subscription rights to purchase capital stock of the converting stock company or the stock of another corporation that is participating in the plan of conversion, as provided in item 3 of subparagraph a of paragraph 2 of subdivision c of subsection 1 of section 26.1-12.2-03 provided that such subscription rights are subordinate to the subscription rights of eligible members. Other classes of subscribers that may be approved by the commissioner include:
    1. Members of the converting mutual company which became members after the date fixed for establishing eligible members;
    2. The shareholders of another corporation that is participating in the plan of conversion, as provided in item 3 of subparagraph a of paragraph 2 of subdivision c of subsection 1 of section 26.1-12.2-03; or
    3. The shareholders of another corporation that is a party to an acquisition, merger, consolidation, or other similar transaction with the converting mutual company.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-05. Alternative plan of conversion.

The governing body of the converting mutual company may adopt a plan of conversion that does not rely in whole or in part upon issuing nontransferable subscription rights to members to purchase stock of the converting stock company if the commissioner finds the plan of conversion does not prejudice the interests of the members, is fair and equitable, and is not inconsistent with the purpose and intent of this chapter. Subject to a finding of the commissioner that an alternative plan of conversion is fair and equitable and is not inconsistent with the purpose and intent of this chapter, an alternative plan of conversion may:

  1. Include the merger of a domestic mutual insurance company into a domestic or foreign stock insurance company.
  2. Provide for the issuance of transferable or redeemable subscription rights.
  3. Provide for issuing stock, cash, policyholder credits, or other consideration, or any combination of the foregoing, to policyholders instead of subscription rights.
  4. Set forth another plan of conversion containing any other provisions approved by the commissioner.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-06. Minority stock offering by a mutual holding company.

A mutual holding company may make a minority stock offering in accordance with the provisions of chapter 26.1-12.1 or this chapter. A minority stock offering pursuant to chapter 26.1-12.1 may not include the grant of subscription rights to policyholders. Except as otherwise provided in section 26.1-12.2-05 concerning an alternative plan of conversion, a minority stock offering pursuant to this chapter must include the grant of subscription rights to policyholders.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-07. Conversion of a mutual holding company.

  1. If a mutual holding company converts from a mutual to stock form, the conversion must comply with the provisions of this chapter.
  2. If a mutual holding company seeks to convert to stock form under this chapter and it has previously completed one or more minority stock offerings in which policyholders were granted subscription rights pursuant to this chapter, the valuation required by subsection 4 of section 26.1-12.2-03 must take into account the existence of this minority interest as provided in this section. The amount of capital stock required to be offered by the mutual holding company or another corporation that is participating in the plan of conversion as provided in item 3 of subparagraph a of paragraph 2 of subdivision c of subsection 1 of section 26.1-12.2-03 may be expressed as a range of value and must equal: the pro forma fair market value of the mutual holding company, multiplied by one minus a quotient equal to the number of issued minority shares, divided by the sum of the issued minority shares and the number of shares held by the mutual holding company.
  3. The plan of conversion of a mutual holding company must provide that any outstanding issued minority shares must be exchanged for stock issued by the converting mutual company or the stock of any corporation participating in the conversion of the mutual holding company pursuant to subparagraph a of paragraph 2 of subdivision c of subsection 1 of section 26.1-12.2-03. The mutual holding company shall demonstrate to the satisfaction of the commissioner that the basis for the exchange is fair and reasonable. An exchange in which the holders of outstanding issued minority shares retain approximately the same percentage ownership in the resulting company as the quotient of the number of issued minority shares, divided by the sum of issued minority shares and the number of shares held by the mutual holding company, is presumed to be fair and reasonable.
  4. If a mutual holding company seeking to convert under this chapter previously completed one or more minority stock offerings, the conversion of the mutual holding company to stock form may not be consummated unless a majority of the shares issued and outstanding to persons other than the mutual holding company vote in favor of the conversion. This vote requirement is in addition to the required policyholder vote.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-08. Effective date of plan of conversion.

A plan of conversion is effective when the commissioner has approved the plan of conversion, the voting members have approved the plan of conversion and adopted the certificate of incorporation of the converted stock company, and the certificate of incorporation is filed in the office of the secretary of state of this state.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-09. Rights of members whose policies are issued after adoption of the plan of conversion and before effective date.

  1. All members whose policies are issued after the proposed plan of conversion has been adopted by the governing body and before the effective date of the plan of conversion must be sent a written notice regarding the plan of conversion upon issuance of such policy.
  2. Except as provided in subsection 3, each member of a property or casualty insurance company entitled to receive the notice provided for in subsection 1 must be advised of the member’s right of cancellation and to a pro rata refund of unearned premiums.
  3. A member of a property or casualty insurance company who has made or filed a claim under such member’s insurance policy is not entitled to any right to receive any refund under subsection 2. A person that has exercised the rights provided by subsection 2 is not entitled to make or file any claim under such person’s insurance policy.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-10 Corporate existence.

1. On the effective date of the conversion, the corporate existence of the converting mutual company continues in the converted stock company. On the effective date of the conversion, all the assets, rights, franchises, and interests of the converting mutual company in and to every species of property, real, personal, and mixed, and any accompanying things in action, are vested in the converted stock company without any deed or transfer and the converted stock company assumes all the obligations and liabilities of the converting mutual company.

2. Unless otherwise specified in the plan of conversion, the individuals who are directors and officers of the converting mutual company on the effective date of the conversion shall serve as directors and officers of the converted stock company until new directors and officers of the converted stock company are elected pursuant to the certificate of incorporation and bylaws of the converted stock company.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-11. Conflict of interest.

  1. A director, officer, agent, or employee of the converting mutual company may not receive any fee, commission, or other valuable consideration, other than such person’s usual regular salary or compensation, for aiding, promoting, or assisting in a conversion under this chapter. This provision does not prohibit the payment of reasonable fees and compensation to attorneys, accountants, financial advisors, and actuaries for services performed in the independent practice of their professions, even if the attorney, accountant, financial advisor, or actuary is also a director or officer of the converting mutual company.
  2. For a period of two years after the effective date of the conversion, a converted stock company may not implement any nontax-qualified stock benefit plan unless the plan is approved by a majority of votes cast at a duly convened meeting of shareholders held not less than six months after the effective date of the conversion.
  3. All the costs and expenses connected with a plan of conversion must be paid for or reimbursed by the converting mutual company or the converted stock company. However, if the plan of conversion provides for participation by another entity in the plan pursuant to subparagraph a of paragraph 2 of subdivision c of subsection 1 of section 26.1-12.2-03, such entity may pay for or reimburse all or a portion of the costs and expenses connected with the plan of conversion.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-12. Failure to give notice.

If the converting mutual company complies substantially and in good faith with the notice requirements of this chapter, the failure of the converting mutual company to send a member the required notice does not impair the validity of any action taken under this chapter.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-13. Limitation on actions.

Any action challenging the validity of or arising out of acts taken or proposed to be taken under this chapter must be commenced on or before the later of:

  1. Sixty days after the approval of the plan of conversion by the commissioner; or
  2. Thirty days after notice of the meeting of voting members to approve the plan of conversion is first mailed or delivered to voting members or posted on the website of the converting mutual company.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-14. Converting mutual company insolvent or in hazardous financial condition.

  1. If a converting mutual company seeking to convert under this chapter is insolvent or is in hazardous financial condition according to information supplied in the mutual company’s most recent annual or quarterly statement filed with the insurance department or as determined by a financial examination performed by the insurance department, the requirements of this chapter, including notice to and policyholder approval of the plan of conversion, may be waived at the discretion of the commissioner. If a waiver under this section is ordered by the commissioner, the converting mutual company shall specify in the mutual company’s plan of conversion:
    1. The method and basis for the issuance of the converted stock company’s shares of its capital stock to an independent party in connection with an investment by the independent party in an amount sufficient to restore the converted stock company to a sound financial condition.
    2. That the conversion must be accomplished without granting subscription rights or other consideration to policyholders.
  2. This section does not alter or limit the authority of the commissioner under any other provisions of law, including receivership and liquidation provisions applicable to insurance companies.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-15. Rules.

The commissioner may adopt rules to administer and enforce this chapter.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-16. Laws applicable to converted stock company.

  1. A converting mutual company is not permitted to convert under this chapter if, as a direct result of the conversion, any person or any affiliate thereof acquires control of the converted stock company, unless that person and such person’s affiliates comply with the provisions of North Dakota law regarding the acquisition of control of an insurance company.
  2. Except as otherwise specified in this chapter, a converted stock company has and may exercise all the rights and privileges and is subject to all of the requirements and regulations imposed on stock insurance companies under the laws of North Dakota relating to the regulation and supervision of insurance companies, but the converting stock company may not exercise rights or privileges that other stock insurance companies may not exercise.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-17. Commencement of business as a stock insurance company.

A converting mutual company may not engage in the business of insurance as a stock company until the converting stock company complies with all provisions of this chapter.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-18. Amendment of policies.

A mutual company, by endorsement or rider approved by the commissioner and sent to the policyholder, may simultaneously with or at any time after the effective date of the conversion amend any outstanding insurance policy for the purpose of extinguishing the membership rights of such policyholder.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

26.1-12.2-19. Prohibition on acquisitions of control.

Except as otherwise specifically provided in section 26.1-12.2-03, from the date a plan of conversion is adopted by the governing body of a converting mutual company until three years after the effective date of the plan of conversion, a person may not directly or indirectly offer to acquire, make any announcement to acquire, or acquire in any manner, including making a filing with the insurance department for such acquisition under a statute or regulation of this state, the beneficial ownership of ten percent or more of a class of a voting security of the converted stock company or of a person that controls the voting securities of the converted stock company, unless the converted stock company or a person that controls the voting securities of the converted stock company consents to such acquisition and such acquisition is otherwise approved by the commissioner.

History. S.L. 2015, ch. 209, § 2, eff July 1, 2015.

CHAPTER 26.1-13 County Mutual Insurance Companies

26.1-13-01. County mutual insurance company — Organization.

A corporation for mutual insurance may be formed in accordance with this chapter by any number of persons, not less than fifty, residing in not more than forty counties in this state, which collectively own property of not less than four hundred thousand dollars in value which the persons desire to insure; or any number of persons, not less than twenty-five, residing in any one county in this state, which collectively own property of not less than one hundred thousand dollars in value which the persons desire to insure. A county mutual insurance company organized under this chapter shall maintain a surplus of at least two hundred thousand dollars.

Source:

S.L. 1983, ch. 332, § 13; 1987, ch. 344, § 1; 1991, ch. 306, § 1; 2001, ch. 267, § 1; 2019, ch. 236, § 1, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-01.

26.1-13-02. Articles of incorporation — Territory of operation — Insurance applications required.

Persons desiring to form a county mutual insurance company shall submit to the commissioner a description of the territory of operation and shall submit to the commissioner the articles of incorporation of the proposed company. The territory of operation is subject to the review and approval of the commissioner. An existing county mutual insurance company that desires to expand its territory of operation shall submit a description of the current territory of operation and proposed territory of operation to the commissioner for review and approval. If merger of two or more county mutual insurance companies is proposed, the commissioner shall determine the territory of operation of the merged company. Upon a showing of good cause, the territory of operations of the merged company may exceed thirty counties. If the articles are found to comply with this chapter, the commissioner shall approve the articles and the articles must be filed in the office of the secretary of state and a certified copy must be filed with the commissioner. The articles must be signed by the number of persons required to incorporate the company and must be accompanied by sufficient evidence of the execution of bona fide applications for insurance to the number and in the amount stated in section 26.1-13-01. The articles of incorporation must set forth:

  1. The name of the company.
  2. The name of the city in or near which the business office of the company is to be located.
  3. The intended duration of the company, which is perpetual.

Source:

S.L. 1983, ch. 332, § 13; 1991, ch. 306, § 2; 2001, ch. 267, § 2; 2005, ch. 256, § 2.

Derivation:

N.D.C.C. § 26-15-03.

26.1-13-03. County mutual company has perpetual existence.

Every county mutual insurance company has perpetual existence. If the articles of incorporation of any company show that the existence of the company is other than perpetual, the articles may be amended in the manner provided by law so as to extend the term of existence of the corporation to show that it is perpetual.

Source:

S.L. 1983, ch. 332, § 13.

Derivation:

N.D.C.C. § 26-15-23.

26.1-13-04. Certificate of compliance.

After articles of incorporation have been approved and filed, the commissioner shall deliver to the persons filing the articles a certificate to the effect that the county mutual insurance company has complied with all of the requirements of law. The certificate constitutes the authority of the company to commence business and issue policies. A certified copy of the articles and the certificate may be used for or against the company with the same effect as the original and are conclusive evidence of the fact of the organization of the company as of the date of the certificate.

Source:

S.L. 1983, ch. 332, § 13.

Derivation:

N.D.C.C. § 26-15-04.

26.1-13-05. Bylaws — Contents.

A county mutual insurance company may make bylaws, not inconsistent with the constitution or laws of this state, necessary to provide for the management of the company’s affairs in accordance with this chapter and to prescribe the duties of the company’s officers. Bylaws may be repealed or amended in the manner provided in this chapter.

Source:

S.L. 1983, ch. 332, § 13; 2019, ch. 236, § 2, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-06.

26.1-13-06. Amendment of articles or bylaws.

The articles of incorporation of a county mutual insurance company may be amended, and its bylaws adopted, amended, or repealed, at any annual meeting of the company, or at any special meeting called for that purpose, by the affirmative vote of two-thirds of the members voting on the proposition.

Source:

S.L. 1983, ch. 332, § 13.

Derivation:

N.D.C.C. § 26-15-07.

26.1-13-07. Directors — Number — Election — Powers and duties.

The general management of the business of a county mutual insurance company must be vested in a board of directors consisting of no fewer than five members nor more than fifteen members. The members of the board must be elected by the members of the company at the annual meeting in the manner provided by the bylaws of the company. As nearly as may be, one-third of the members of the first board must be elected for one year, one-third for two years, and one-third for three years, and in all future elections, except in the case of elections to fill vacancies on the board, members must be elected for terms of three years. Each director holds office until a successor is elected and qualified. In the election of the members of the first board, each incorporator is entitled to one vote, and at every subsequent election each member of the company is entitled to one vote per policy. The board may exercise the usual powers and shall perform the usual duties of a board of directors of a corporation generally.

Source:

S.L. 1983, ch. 332, § 13; 2019, ch. 236, § 3, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-11.

26.1-13-08. Officers — Election — Bond.

The board of directors shall elect a president and a vice president from the board and shall select a secretary and a treasurer who may or may not be members of the company. The offices of secretary and of treasurer may be held by one person. The secretary and the treasurer shall give bonds to the company for the faithful performance of their respective duties in any amounts prescribed by the board. Each officer holds office for one year and until a successor is elected and qualified.

Source:

S.L. 1983, ch. 332, § 13.

Derivation:

N.D.C.C. § 26-15-12.

26.1-13-09. Membership in county mutual company — Limitation on right to be director.

Any person owning property within the limits of the territory within which a county mutual insurance company is authorized to transact business may become a member of the company and entitled to all of the rights and privileges appertaining thereto by insuring therein. A person who does not reside within the territorial limits may not become a director of the company.

Source:

S.L. 1983, ch. 332, § 13.

Derivation:

N.D.C.C. § 26-15-10.

26.1-13-10. Members of county mutual company — Policyholders — Notice of meetings.

Every person insured by a county mutual insurance company is a member while the policy is in force. The member is entitled to one vote per policy only and must be notified of the time and place of the holding of the meetings of the company by written notice or by an imprint on the face of each policy, receipt, or certificate of renewal, as follows:

The assured is hereby notified that by virtue of this policy the assured is a member of the ____________ mutual insurance company, and that the annual meetings of the company are held at its home office or designated location on the __________ day of __________ in each year at __________ o’clock.

If the blanks in the notice are properly filled, the notice is sufficient.

Source:

S.L. 1983, ch. 332, § 13; 2019, ch. 236, § 4, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-08.

26.1-13-11. Annual meeting — Quorum.

The annual meeting of a county mutual insurance company must be held following notice of a prescribed date, time, and place unless notice is provided otherwise in the bylaws of the company. Twenty members constitute a quorum for the transaction of business at an annual meeting.

Source:

S.L. 1983, ch. 332, § 13; 2019, ch. 236, § 5, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-05.

26.1-13-12. General powers, liabilities, and duties of county mutual company — Office — Name — Limitations.

A county mutual insurance company has the powers and is subject to the liabilities and duties of other insurance companies, except:

  1. If the company is organized by the residents of a single county, the name of the county together with the word “county” must be embraced in the corporate name of the company.
  2. Notwithstanding contrary territorial limitations in this chapter, a county mutual insurance company may operate and issue the following policies in all the counties of the state:
    1. Protection against loss or damage by any covered hazard to a seasonal dwelling if the primary residence is insured by the company in an authorized county.
    2. Protection against loss or damage by tornadoes;
    3. Protection against loss or damage by windstorms;
    4. Protection against loss or damage by cyclones;
    5. Protection against loss or damage by hail, except upon growing crops; and
    6. Protection against loss or damage by any hazard upon any risk upon livestock.

Source:

S.L. 1983, ch. 332, § 13; 2007, ch. 261, § 1; 2013, ch. 230, § 1; 2019, ch. 236, § 6, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-02.

26.1-13-13. Applicability of general insurance laws.

In all respects not specifically provided for in this chapter, county mutual insurance companies are subject to the provisions of this title relating to insurance companies generally.

Source:

S.L. 1983, ch. 332, § 13.

Derivation:

N.D.C.C. § 26-15-28.

26.1-13-14. County mutual company — Insurance authority.

A county mutual insurance company may insure against loss or damage by fire; lightning; cyclone; windstorm; tornado; hail, except upon growing crops; any insured hazard upon livestock; explosion, except the explosion of steam boilers and flywheels; riot; riot attending a strike; civil commotion; aircraft; vehicles; smoke to the property of the insured; theft; vandalism; malicious mischief; water damage and freezing; collision and overturn of farm machinery; collapse of buildings; glass breakage; the additional living expenses incurred over and above normal living costs in cases of damage; the removal of debris; the cost of repairing or replacing homes or living residences; or all such forms of insurance.

Source:

S.L. 1983, ch. 332, § 13; 2019, ch. 236, § 7, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-01.

26.1-13-15. Territorial limits of county mutual company’s operations — Terms of policies — Property insurable.

  1. A county mutual insurance company may not insure any property beyond the company’s authorized territory of operation except as provided in subsection 2 of section 26.1-13-12 and except that this territorial limitation does not apply to reinsurance contracts.
  2. A policy may not be issued to exceed five years.
  3. A policy may not be issued covering property located within the platted limits of an incorporated city in this state, except the policy may provide coverage as specified under sections 26.1-13-14 and 26.1-13-16 within the platted limits of the incorporated city on:
    1. The place of residence;
    2. A rental property that is no larger than a four residential rental unit;
    3. A nonresidential property that is not used by the general public; or
    4. A nonresidential property that is part of an existing policy.
  4. The company may insure all property located outside of incorporated cities within the limits of the company’s territory, as provided under section 26.1-13-02.
  5. Policies issued under subsection 3 on property located within the platted limits of an incorporated city with a population over ten thousand must conform to rules adopted by the commissioner establishing requirements for underwriting risks and safeguarding financial solvency. A company’s net written premiums of the current year in cities with a population over ten thousand may not exceed thirty-five percent of the gross written premiums of the previous year.
  6. A policy issued by the company, if the policy so provides, may cover loss or damage to livestock, personal property, vehicles, and farm machinery while temporarily removed from the premises of the insured to other locations.

Source:

S.L. 1983, ch. 332, § 13; 1987, ch. 345, § 1; 1991, ch. 306, § 3; 2005, ch. 259, § 1; 2013, ch. 230, § 2; 2015, ch. 210, § 1, eff August 1, 2015; 2017, ch. 215, § 1, eff August 1, 2017; 2019, ch. 236, § 8, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-13.

26.1-13-16. Liability insurance contracts — Limitations.

Any county mutual insurance company may make insurance contracts against loss, expense, or liability by reason of bodily injury or death by accident, disability, sickness, or disease suffered by others for which the insured may be liable or may have assumed liability, except no liability insurance contracts against any or all loss or expense resulting from the ownership, maintenance, or use of any motor vehicle normally operated, intended to be operated, or designed for use, upon any highway, road, or street in this state, may be made.

Source:

S.L. 1983, ch. 332, § 13; 1985, ch. 317, § 39.

Derivation:

N.D.C.C. § 26-15-01.1.

Notes to Decisions

Applicability.

There is no specific statute that removes a county mutual insurance company from the application of N.D.C.C. §§ 26.1-13-12, 26.1-13-13, 26.1-05-01 and 10-19.1-28; therefore, an insurance company cannot claim that the terms of its insurance policy covering liability for motor vehicles on the premises or ways immediately adjoining the premises are invalid. Dundee Mut. Ins. Co. v. Balvitsch, 540 N.W.2d 609, 1995 N.D. LEXIS 219 (N.D. 1995).

Motor Vehicles.

The provisions of this chapter do not preclude a farm liability policy from covering loss or damage by vehicles incidental to a farming operation. Dundee Mut. Ins. Co. v. Balvitsch, 540 N.W.2d 609, 1995 N.D. LEXIS 219 (N.D. 1995).

26.1-13-17. Classification of property for insurance purposes.

A county mutual insurance company may classify the property insured by the policies at the time of issuance under different rates corresponding, as nearly as may be, to the greater or lesser risk from fire or lightning and loss which may attach to each of the buildings insured.

Source:

S.L. 1983, ch. 332, § 13.

Derivation:

N.D.C.C. § 26-15-14.

26.1-13-18. Maximum amount of insurance on single risk.

The maximum amount of insurance which a county mutual insurance company may retain on a single risk other than under a liability insurance contract, after deduction of applicable reinsurance, may not exceed ten percent of the admitted assets of the company or thirty thousand dollars, whichever is the larger amount. The maximum amount of insurance which a county mutual insurance company may retain on a single risk under a liability insurance contract may not exceed one percent of the surplus maintained by the company.

Source:

S.L. 1983, ch. 332, § 13.

Derivation:

N.D.C.C. § 26-15-02.1.

26.1-13-19. Reinsurance of excessive losses.

Upon approval by the commissioner, any county mutual insurance company may reinsure in a single contract, with other county mutual insurance companies, against excessive losses on all insurance contracts written.

Source:

S.L. 1983, ch. 332, § 13; 1985, ch. 317, § 40; 2019, ch. 236, § 9, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-29.

Collateral References.

Who may enforce liability of reinsurer, 87 A.L.R.6th 319.

26.1-13-20. Designation of attorney in fact — Assessments. [Repealed]

Source:

S.L. 1983, ch. 332, § 13; Repealed by 2019, ch. 236, § 16, eff August 1, 2019.

26.1-13-21. Supervision by commissioner.

The commissioner has full power of supervision over all reinsurance contracts executed under section 26.1-13-19.

Source:

S.L. 1983, ch. 332, § 13; 2019, ch. 236, § 10, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-31.

26.1-13-22. Insured to give undertaking to pay pro rata share of losses — Cash payment or premium required. [Repealed]

Source:

S.L. 1983, ch. 332, § 13; Repealed by 2019, ch. 236, § 16, eff August 1, 2019.

26.1-13-23. Loss — Notice — Adjustment — Arbitration — Finality of determination of board of adjustment — Powers of board.

Every member of a county mutual insurance company which sustains loss shall notify the company immediately after the loss is sustained. The company shall assign the loss to be adjusted in the manner provided in the insurance policy of the company. If the parties are unable to agree upon the amount of the damage, the claimant and the company each shall choose a disinterested party to constitute a board of arbitration to settle the loss. If the parties cannot agree, the parties shall choose a third party to act with the parties. The board of arbitration may examine witnesses and shall determine all matters in dispute, and the decision of the arbitration board is final.

Source:

S.L. 1983, ch. 332, § 13; 2019, ch. 236, § 11, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-16.

26.1-13-24. Assessments for payment of losses and expenses. [Repealed]

Source:

S.L. 1983, ch. 332, § 13; Repealed by 2019, ch. 236, § 16, eff August 1, 2019.

26.1-13-25. Permanent expense and loss fund — Assessment or premiums — Delinquent loss assessments credited. [Repealed]

Source:

S.L. 1983, ch. 332, § 13; 1987, ch. 346, § 1; Repealed by 2019, ch. 236, § 16, eff August 1, 2019.

26.1-13-26. Notice of assessment — Extension of time of payment of assessment. [Repealed]

Source:

S.L. 1983, ch. 332, § 13; Repealed by 2019, ch. 236, § 16, eff August 1, 2019.

26.1-13-27. Collection of assessments — Suits against directors — Suits against company to recover losses. [Repealed]

Source:

S.L. 1983, ch. 332, § 13; Repealed by 2019, ch. 236, § 16, eff August 1, 2019.

26.1-13-28. Borrowing of money authorized.

The board of directors of a county mutual insurance company, in the board’s discretion, may borrow money for the payment of unpaid losses.

Source:

S.L. 1983, ch. 332, § 13; 2019, ch. 236, § 12, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-21.

26.1-13-29. Withdrawal from membership.

Any member of a county mutual insurance company may withdraw from membership at any time while the company continues to transact the business for which the company was organized if, by withdrawal, the number of members remaining in the company will not be reduced below the original number of incorporators, or the assets of the company will not be reduced below the amount at the time of incorporation. In order to withdraw, a member shall surrender the policy for cancellation and give written notice of withdrawal to the secretary or designated employee of the company.

Source:

S.L. 1983, ch. 332, § 13; 2019, ch. 236, § 13, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-22.

26.1-13-30. Cancellation of policies.

A county mutual insurance company at any time may terminate or cancel any policy issued by it by giving the insured not less than five days’ written notice of the termination or cancellation of the policy and returning to the insured pro rata any unearned premium which the insured may have paid to the company.

Source:

S.L. 1983, ch. 332, § 13.

Derivation:

N.D.C.C. § 26-15-09.

26.1-13-31. County mutual fire and lightning companies may form reinsurance company. [Repealed]

Source:

S.L. 1983, ch. 332, § 13; Repealed by 2019, ch. 236, § 16, eff August 1, 2019.

26.1-13-32. Articles of incorporation and bylaws of mutual reinsurance company — Contents. [Repealed]

Source:

S.L. 1983, ch. 332, § 13; Repealed by 2019, ch. 236, § 16, eff August 1, 2019.

26.1-13-33. Articles and bylaws of mutual reinsurance company — Certificate of authority — Right to do business. [Repealed]

Source:

S.L. 1983, ch. 332, § 13; 2005, ch. 256, § 3; Repealed by 2019, ch. 236, § 16, eff August 1, 2019.

26.1-13-34. Annual statement to be furnished to members of county mutual company.

The secretary of each county mutual insurance company formed under this chapter shall prepare and submit to the members of the company, at each annual meeting, a copy of the annual statement required to be filed with the commissioner under section 26.1-03-07.

Source:

S.L. 1983, ch. 332, § 13; 2019, ch. 236, § 14, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-15-27.

26.1-13-35. County mutual insurance company — Reports to commissioner.

Each county mutual insurance company shall file an annual report with the commissioner no later than March first of each year which must be verified by at least two principal officers of the company and which must cover the preceding calendar year. The commissioner may require additional reports as are deemed necessary and appropriate to enable the commissioner to carry out the commissioner’s duties under this chapter. The reports must be on forms prescribed by the commissioner. The commissioner may also require a company that operates in more than twenty counties to file audited financial statements as deemed necessary.

Source:

S.L. 2001, ch. 267, § 3.

CHAPTER 26.1-14 Medical Malpractice Insurance

26.1-14-01. Purpose.

There is a nationwide crisis in the field of medical malpractice insurance and physicians practicing medicine within the state of North Dakota are finding, or will find, it increasingly difficult, if not impossible, to obtain medical malpractice insurance. The purpose of this chapter is to provide for the payment of indemnities to persons suffering injury arising out of the rendering of or the failure to render professional services by physicians and to provide means whereby physicians may obtain insurance against liability therefor, subject to the limitations and immunities provided in this chapter.

Source:

S.L. 1983, ch. 332, § 14.

Derivation:

N.D.C.C. § 26-40-01.

Collateral References.

Medical malpractice: liability based on misrepresentation of the nature and hazards of treatment, 42 A.L.R.4th 543.

Medical malpractice: hospital’s liability for injury allegedly caused by failure to have properly qualified staff, 62 A.L.R.4th 692.

Propriety and prejudicial effect of trial counsel’s reference or suggestion in medical malpractice case that defendant is insured, 71 A.L.R.4th 1025.

Medical malpractice: drug manufacturer’s package insert recommendations as evidence of standard of care, 82 A.L.R.4th 166.

Medical malpractice: who are “health care providers,” or the like, whose actions fall within statutes specifically governing actions and damages for medical malpractice, 12 A.L.R.5th 1.

Medical malpractice liability of sports medicine care providers for injury to, or death of, athlete, 33 A.L.R.5th 619.

Allowance of punitive damages in medical malpractice action, 35 A.L.R.5th 145.

Hospital liability as to diagnosis and care of patients in emergency room, 58 A.L.R.5th 613.

Coverage of professional-liability or -indemnity policy for sexual contact with patients by physicians, surgeons, and other healers, 60 A.L.R.5th 239.

Medical-malpractice countersuits, 61 A.L.R.5th 307.

Discovery, in medical malpractice action, of names and medical records of other patients to whom defendant has given treatment similar to that allegedly injuring plaintiff, 66 A.L.R.5th 591.

26.1-14-02. Definitions.

As used in this chapter, unless the context or subject matter otherwise requires:

  1. “Company” means the North Dakota medical malpractice mutual insurance company.
  2. “Physician” means physician and surgeon (M.D.) and osteopathic physician and surgeon (D.O.).
  3. “Practice of medicine” means the practice of medicine, surgery, and obstetrics and has the same meaning specified in section 43-17-01.

Source:

S.L. 1983, ch. 332, § 14.

Derivation:

N.D.C.C. § 26-40-02.

26.1-14-03. Authority.

An incorporated mutual insurance company is authorized to be known as the North Dakota medical malpractice mutual insurance company. The company is subject to and governed by this chapter and is not subject to the laws of this state relating to insurance and insurance companies except as specifically provided in this chapter. The company has all the powers, privileges, and immunities granted by and is subject to all the obligations imposed upon a mutual insurance company under chapters 26.1-12 and 10-33. If a provision of chapter 26.1-12 or 10-33 and a provision of this chapter are both by their terms applicable, the provision of this chapter controls.

Source:

S.L. 1983, ch. 332, § 14; 1997, ch. 105, § 6.

Derivation:

N.D.C.C. § 26-40-03.

Collateral References.

Medical malpractice: “loss of chance” casualty, 54 A.L.R.4th 10.

26.1-14-04. Board of directors — Articles of incorporation — Bylaws — Insuring powers.

  1. The company will be governed by a board of directors consisting of eleven members. The commissioner shall appoint the initial board within thirty days of notification by the North Dakota board of medicine of its decision for implementation of this chapter from fifteen nominees proposed by that board. The initial board shall serve for an initial term of seven months. Thereafter, the directors must be elected by the members of the company in accordance with the articles of incorporation and bylaws.
  2. At least seven members of the board of directors must be licensed physicians and at least two members of the board must have had insurance underwriting or claims handling experience.
  3. Within thirty days after appointment by the commissioner, the initial board of directors shall prepare and file articles of incorporation and bylaws in accordance with this chapter and chapter 26.1-12.
  4. Upon filing the articles of incorporation and bylaws with the commissioner, the articles and bylaws are operative and the commissioner shall issue a certificate of authority subject only to verification by the commissioner that the required initial surplus of the company has been paid and all deposits have been completed.
  5. The certificate of authority authorizes the company to issue policies of casualty insurance as follows:
    1. Insurance against liability of physicians for injury arising out of the rendering of or failure to render professional services by the insured.
    2. Insurance against the liability of any person for whose act or omissions a physician is responsible under subdivision a, or with whom the physician is associated, including partners, employees, employers, associates, consultants, a professional service corporation whose stock is owned by an insured, or a professional service limited liability company whose membership interests are owned by the insured.
    3. Insurance against other liabilities for injury by persons employed in, by property used in, or by activities incidental to, the practice of medicine by the named insured, when issued as incidental coverage with or supplemental to insurance specified in subdivision a.

Source:

S.L. 1983, ch. 332, § 14; 1993, ch. 54, § 106; 2015, ch. 297, § 10, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-40-04.

26.1-14-05. Initial policyholders surplus — Tax — Membership fee.

  1. If physicians practicing medicine within North Dakota find it difficult to obtain medical malpractice insurance, the North Dakota board of medicine, by a majority vote of its membership, may elect to initiate and implement this chapter. Before fifteen days from the date the election to implement this chapter is made, the board shall certify to the state treasurer a list of all licensed physicians as shown in the latest record of the board.
  2. A special one-time tax for the privilege of practicing medicine in North Dakota will be levied on licensed physicians listed by the state treasurer in accordance with subsection 1 in the amount of five hundred dollars per licensed physician, to be levied, assessed, and collected by the state treasurer. The tax does not apply to any physician who submits a statement, sworn to under penalties of perjury, stating that the physician has permanently terminated the practice of medicine in the state of North Dakota. The state treasurer shall prescribe the form of the statement.
  3. The legislative assembly appropriates and dedicates the entire proceeds of the tax provided by this chapter as the initial policyholders surplus of the company, and the treasurer and director of the office of management and budget shall promptly pay over the proceeds of the tax to the company.
  4. The board of directors of the company may establish membership fees in amounts as it deems reasonable to be paid by members of the company. Any physician who has paid the tax specified in subsection 2 must be credited the amount of the tax paid against the liability for any membership fee.
  5. Upon payment of the specified membership fee, a physician may be insured by the company for any and all hazards customarily insured by the company, subject to any limitation of coverage specified by the company in accordance with policy limitations, exclusions, conditions, deductibles, and loss-sharing requirements.

Source:

S.L. 1983, ch. 332, § 14; 2015, ch. 297, § 11, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-40-05.

26.1-14-06. Minimum surplus.

The minimum surplus to be maintained by the company must be three hundred thousand dollars.

Source:

S.L. 1983, ch. 332, § 14.

Derivation:

N.D.C.C. § 26-40-06.

26.1-14-07. Management and administration of the company.

  1. If, in the judgment of the board of directors, the affairs of the company thereby may be administered suitably and efficiently, the company may enter into a contract, not to exceed five years in duration, whereby the affairs of the company may be administered by a licensed insurer or a licensed nonprofit health service plan, subject to any continuing direction by the board of directors as specified in the articles of incorporation, the bylaws, and the contract.
  2. The basis of compensation to the administering licensed insurer or plan in any contract described in this section must be reimbursement of expenses reasonably allocable to the business of the company plus an appropriate and reasonable additional allowance as specified in the contract. Any additional allowance, if based upon premium volume or size of membership, must contain a reasonable aggregate dollar maximum. The amount of the fee may not be made dependent on the underwriting or investment profits of the company.
  3. Upon the execution of any contract, the company shall promptly file a copy with the commissioner. The contract becomes effective thirty days from the date of the filing unless the commissioner, prior to the effective date, disapproves the contract as illegal, unduly onerous, or not in the best interest of the company and states the reasons for the findings.

Source:

S.L. 1983, ch. 332, § 14.

Derivation:

N.D.C.C. § 26-40-07.

Collateral References.

“Dual capacity doctrine” as basis for employee’s recovery for medical malpractice from company medical personnel, 73 A.L.R.4th 115.

26.1-14-08. Rates and rate filing.

The rates and premiums to be charged for insurance by the company are subject to chapter 26.1-25 except that the commissioner may not disapprove or terminate the effectiveness of any rate filing made by or on behalf of the company on the grounds that the rates or premiums are excessive.

Source:

S.L. 1983, ch. 332, § 14.

Derivation:

N.D.C.C. § 26-40-08.

26.1-14-09. Reserves for malpractice claims.

  1. The reserve maintained by the company for outstanding losses under insurance against injury arising out of the rendering of or the failure to render professional services by an insured for all policies written during the eight years immediately preceding the date of the reserve determination must be seventy percent of the earned premiums of each of the eight years less all losses and loss expense payments made under policies written in the corresponding years.
  2. In any event, the reserves for each of the eight years may not be less than the aggregate of estimated unpaid losses and loss expenses for claims incurred under liability policies written in the corresponding year computed on an individual case basis as to cases known and reported, plus reserves in an amount estimated in the aggregate to provide for the payment of all losses or claims incurred on or prior to the date of valuation but not previously reported, including an amount estimated to provide for the expenses of adjustment, settlement, or litigation of the losses or claims.

Source:

S.L. 1983, ch. 332, § 14.

Derivation:

N.D.C.C. § 26-40-09.

26.1-14-10. Dividends to policyholders.

Every policy issued by the company must include a provision that the company periodically will ascertain and apportion any divisible surplus under the policy which may accrue on policy anniversaries or other dividend dates specified in the contract. This provision must provide that no apportionment or payment of any divisible surplus may take place until the expiration of at least eight years from the termination of the policy period for which the dividend applies. This provision also must provide that the dividends may be paid only as directed by the board of directors from divisible surplus after due consideration of the financial condition and operating needs of the company.

Source:

S.L. 1983, ch. 332, § 14.

Derivation:

N.D.C.C. § 26-40-10.

26.1-14-11. Limited liability of insureds.

  1. Any person insured by the company for liability because of injury arising out of the rendering of or the failure to render professional services in limits equal to or greater than five hundred thousand dollars for each claim or suit covered, subject to an aggregate limit of liability for all claims insured in a single policy period equal to or in excess of one million dollars, is immune from all liability in excess of these limits, and further is immune from any liability for sums owing by the company under the terms of the policy regardless of whether or not the company has paid the sums. The immunity established by this section applies to an insured individual, professional service corporations, or professional service limited liability companies notwithstanding any other provision of the law.
  2. This section does not relieve an insured from the insured’s personal share of liability not in excess of the five hundred thousand dollar and one million dollar limitations specified in subsection 1 for a loss, expense, or damage not insured by the company by reason of noncoverage, exclusions, deductibles, loss-sharing provisions, or conditions in the applicable policy of the company.

Source:

S.L. 1983, ch. 332, § 14; 1993, ch. 54, § 106.

Derivation:

N.D.C.C. § 26-40-11.

Collateral References.

Medical malpractice: “loss of chance” casualty, 54 A.L.R.4th 10.

Medical practitioner’s liability for treatment given child without parent’s consent, 67 A.L.R.4th 511.

Applicability of res ipsa loquitur in case of multiple medical defendants — modern status, 67 A.L.R.4th 544.

Liability of hospital, physician, or other medical personnel for death or injury from use of drugs to stimulate labor, 1 A.L.R.5th 243.

Liability of hospital, physician, or other medical personnel for death or injury to mother or child caused by improper administration of, or failure to administer, anesthesia or tranquilizers, or similar drugs, during labor and delivery, 1 A.L.R.5th 269.

Liability for incorrectly diagnosing existence or nature of pregnancy, 2 A.L.R.5th 769.

Liability of hospital, physician, or other medical personnel for death or injury to child caused by improper postdelivery diagnosis, care, and representations, 2 A.L.R.5th 811.

Liability of physician, nurse, or hospital for failure to contact physician or to keep physician sufficiently informed concerning status of mother during pregnancy, labor, and childbirth, 3 A.L.R.5th 123.

Liability of hospital, physician, or other medical personnel for death or injury to mother or child caused by inadequate attendance or monitoring of patient during and after pregnancy, labor, and delivery, 3 A.L.R.5th 146.

Liability of doctor or other health practitioner to third party contracting contagious disease from doctor’s patient, 3 A.L.R.5th 370.

Hospital liability as to diagnosis and care of patients in emergency room, 58 A.L.R.5th 613.

26.1-14-12. Terms of coverage — Classifications.

  1. The terms and conditions of all policies issued by the company to physicians must be essentially uniform in terms and coverage.
  2. Notwithstanding subsection 1, the company may prescribe reasonable classifications of physicians’ and insureds’ activities and exposures based on good-faith determination of relative exposures and hazards among classifications and may vary the limits, coverages, exclusions, conditions, and loss-sharing provisions among classifications. Additionally, the company may describe, in the case of an individual physician within a class, reasonable variations in the terms of coverage including deductibles in loss-sharing provisions, based upon the insured’s prior loss experience and current professional training and capability.

Source:

S.L. 1983, ch. 332, § 14.

Derivation:

N.D.C.C. § 26-40-13.

Collateral References.

Event triggering liability insurance coverage as occurring within period of time covered by liability insurance policy where injury or damage is delayed, 14 A.L.R.5th 695.

26.1-14-13. Exemption from taxation.

The property, income, premiums, and activities of the company are exempt from all taxes and assessments and from any fees specified for licenses and certifications of the insurance laws except for the tax imposed by section 26.1-03-17 and any assessment made by the insurance guaranty association in the event that an affirmative election is held in accordance with section 26.1-14-15.

Source:

S.L. 1983, ch. 332, § 14; 1983, ch. 333, § 9.

Derivation:

N.D.C.C. § 26-40-14.

26.1-14-14. Services to the company.

Any licensed nonprofit health service plan by appropriate action of the board of directors or board of trustees may enter into a contract with the company in accordance with section 26.1-14-07 for the furnishing of services to the company. In the performance of the services under any contract, the contracting health service plan is subject to the provisions of this chapter applying to the company.

Source:

S.L. 1983, ch. 332, § 14.

Derivation:

N.D.C.C. § 26-40-15.

26.1-14-15. Optional membership in insurance guaranty association.

The company may not be a member insurer under chapter 26.1-42.1 unless the board of directors by appropriate resolution, certified to and filed with the commissioner on or before December thirty-first following the issuance of its certificate of authority, elects to become a member. If there is an affirmative election, the company becomes a member of the insurance guaranty association effective July first of the following year. The election is irrevocable. In absence of a timely election, no policyholder, claimant, or creditor of the company may receive any payment by the insurance guaranty association.

Source:

S.L. 1983, ch. 332, § 14; 1985, ch. 317, § 41; 1999, ch. 259, § 2.

Derivation:

N.D.C.C. § 26-40-12.

CHAPTER 26.1-15 Fraternal Benefit Societies [Repealed]

[Repealed by S.L. 1987, ch. 347, § 4]

CHAPTER 26.1-15.1 Fraternal Benefit Societies

26.1-15.1-01. Definitions.

Whenever used in this chapter:

  1. “Benefit contract” means the agreement for provision of benefits authorized by section 26.1-15.1-16, as that agreement is described in section 26.1-15.1-19.
  2. “Benefit member” means an adult member designated by the laws or rules of the society as a benefit member under a benefit contract.
  3. “Certificate” means the document issued as written evidence of the benefit contract.
  4. “Laws” means the society’s articles of incorporation, constitution, and bylaws, however designated, of the society.
  5. “Lodge” means subordinate member units of the society, whether known as camps, courts, councils, branches, or by any other designation.
  6. “Premiums” means premiums, rates, dues, or other required contributions by whatever name known, which are payable under the certificate.
  7. “Rules” means all rules, regulations, or resolutions adopted by the supreme governing body or board of directors which are intended to have general application to the members of the society.
  8. “Society” means fraternal benefit society, unless otherwise indicated.

Source:

S.L. 1987, ch. 347, § 1.

DECISIONS UNDER PRIOR LAW

Judicial Notice.

The court will judicially notice that fraternal associations serve a peculiar purpose in affording insurance for those of moderate means. Brown v. Steckler, 40 N.D. 113, 168 N.W. 670, 1918 N.D. LEXIS 80 (N.D. 1918).

26.1-15.1-02. Fraternal benefit societies.

Any incorporated society, order, or supreme lodge without capital stock, including one exempted under subdivision b of subsection 1 of section 26.1-15.1-37 whether incorporated or not, conducted solely for the benefit of its members and their beneficiaries and not for profit, operated on a lodge system with ritualistic form of work, having a representative form of government, and which provides benefits in accordance with this chapter, is a fraternal benefit society.

Source:

S.L. 1987, ch. 347, § 1; 1991, ch. 54, § 12.

DECISIONS UNDER PRIOR LAW

Limitations on Power of Societies.

Fraternal benefit associations do not have the power to enact bylaws to vary the terms of the law relative to limitation of actions on contracts. Dinnie v. United Commercial Travelers, 41 N.D. 42, 169 N.W. 811, 1918 N.D. LEXIS 133 (N.D. 1918).

A fraternal benefit society may govern itself so long as its acts, constitution, and bylaws do not conflict with statutes regulating such societies operating in the state. Huffman v. Brotherhood of R.R. Trainmen, 65 N.D. 446, 259 N.W. 663 (1935), following Wasson v. Brotherhood of R.R. Trainmen, 65 N.D. 461, 259 N.W. 670, 1935 N.D. LEXIS 130 (N.D. 1935).

Insofar as adults are concerned, a fraternal benefit society may write insurance upon the lives of initiated members only. National Farmers Union Life Ass'n v. Krueger, 76 N.D. 619, 38 N.W.2d 563, 1949 N.D. LEXIS 82 (N.D. 1949).

Lodge System.

Foreign unincorporated beneficial association formed to carry on mutual protection and relief of its members in misfortune, admitting to membership only persons engaged in one or more hazardous occupations in the same or similar lines of business, was subject to the insurance laws generally, because it did not have a lodge system which would otherwise qualify it for an exemption as a statutory fraternal benefit society. Bloom v. Northern Pac. Beneficial Ass'n, 193 N.W.2d 244, 1971 N.D. LEXIS 139 (N.D. 1971).

26.1-15.1-03. Lodge system defined.

  1. A society operates on the lodge system if it has a supreme governing body and subordinate lodges into which members are elected, initiated, or admitted under its laws, rules, and ritual. Subordinate lodges shall hold regular or stated meetings at least once each month in furtherance of the purposes of the society.
  2. A society may organize and operate lodges for children under the minimum age for adult membership. Membership and initiation in local lodges may not be required of such children, nor may they have a voice or vote in the management of the society.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-04. Representative form of government defined.

A society has a representative form of government when:

  1. It has a supreme governing body constituted in one of the following ways:
    1. The supreme governing body is an assembly composed of delegates elected directly by the members or at intermediate assemblies or conventions of members of their representatives, together with other delegates as may be prescribed in the society’s laws. A society may provide for election of delegates by mail. The elected delegates must constitute a majority in number and have not less than two-thirds of the votes and not less than the number of votes required to amend the laws of the society. The assembly must be elected and meet at least once every four years and shall elect a board of directors to conduct the business of the society between meetings of the assembly. Vacancies on the board of directors between elections may be filled in the manner prescribed by the constitution and laws of the society.
    2. The supreme governing body is a board composed of persons elected by the members, either directly or by their representatives in intermediate assemblies, and any other persons prescribed in the constitution or laws of the society. A society may provide for election of the board by mail. Each term of a board member may not exceed four years. Vacancies on the board between elections may be filled in the manner prescribed by the constitution or laws of the society. A person filling the unexpired term of an elected board member is considered to be an elected member. Those persons elected to the board must constitute a majority in number and not less than the number of votes required to amend the laws of the society. The board shall meet at least quarterly to conduct the business of the society.
  2. The officers of the society may be elected by either the supreme governing body or the board of directors.
  3. Only benefit members are eligible for election to the supreme governing body and the board of directors.
  4. Each voting member has one vote.
  5. No vote may be cast by proxy.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-05. Purposes and owners.

  1. A society shall operate for the benefit of members and their beneficiaries by:
    1. Providing benefits as specified in section 26.1-15.1-16.
    2. Operating for one or more social, intellectual, educational, charitable, benevolent, moral, fraternal, patriotic, or religious purposes for the benefit of its members, which may also be extended to others. Such purposes may be carried out directly by the society or indirectly through subsidiary corporations, limited liability companies, or affiliated organizations.
  2. Every society has the power to adopt laws and rules for the government of the society, the admission of its members, and the management of its affairs. It has the power to change, alter, add to, or amend such laws and rules and such other powers as are necessary and incidental to carrying into effect the objects and purposes of the society.

Source:

S.L. 1987, ch. 347, § 1; 1993, ch. 54, § 106.

26.1-15.1-06. Qualifications for membership.

  1. A society shall specify in its laws or rules:
    1. Eligibility standards for each class of membership, provided that if benefits are provided on the lives of children, the minimum age for adult membership must be set at not less than age fifteen and not greater than age twenty-one.
    2. The process for admission to membership for each membership class.
    3. The rights and privileges of each membership class, provided that only benefit members may vote on the management of the insurance affairs of the society.
  2. A society may also admit social members who have no voice or vote in the management of the insurance affairs of the society.
  3. Membership rights in the society are personal to the member and are not assignable.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-07. Location of office — Meetings — Communications to members — Grievance procedures.

  1. The principal office of any domestic society must be located in this state. The meetings of its supreme governing body may be held in any state, district, province, or territory in which the society has at least one subordinate lodge, or in any other location as determined by the supreme governing body, and all business transacted at the meetings is valid in all respects. The minutes of the proceedings of the supreme governing body and of the board of directors must be in the English language.
    1. A society may provide in its laws for an official publication in which any notice, report, or statement required by law to be given to members, including notice of election, may be published. Required reports, notices, and statements must be printed conspicuously in the publication. If the records of a society show that two or more members have the same mailing address, an official publication mailed to one member is deemed to be mailed to all members at the same address unless a member requests a separate copy.
    2. Not later than June first of each year, a synopsis of the annual statement of the society providing an explanation of the facts concerning the condition of the society must be printed and mailed to each benefit member of the society or, in lieu thereof, the synopsis may be published in the official publication of the society.
  2. A society may provide in its laws or rules for grievance or complaint procedures for members.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-08. Officers and members not personally liable for benefit contracts.

  1. The officers and members of the supreme governing body or any subordinate body of a society are not personally liable for any benefits provided by the society.
  2. Any society may indemnify and reimburse any person for expenses reasonably incurred by, and liabilities imposed upon, that person in connection with or arising out of any action or proceeding, whether civil, criminal, administrative, or investigative, or threat thereof, in which the person may be involved by reason of the fact that the person is or was a director, officer, employee, or agent of the society or of any firm, corporation, limited liability company, or organization which that person served in any capacity at the request of the society. A person may not be so indemnified or reimbursed in relation to any matter as to which the person is adjudged to be or has been guilty of breach of a duty as a director, officer, employee, or agent of the society unless the person acted in good faith for a purpose the person reasonably believed to be in the best interests of the society and, in a criminal action or proceeding, had no reasonable cause to believe that the conduct was unlawful. The determination whether the conduct of such person met the standard required in order to justify indemnification and reimbursement in relation to any matter may only be made by the supreme governing body or board of directors by a majority vote of a quorum consisting of persons who were not parties to the matter or by a court of competent jurisdiction. The termination of any action or proceeding by judgment, order, settlement, conviction, or upon a plea of no contest, does not in itself create a presumption that the person did not meet the standard of conduct required in order to justify indemnification and reimbursement. The foregoing right of indemnification and reimbursement is not exclusive of other rights to which the person may be entitled as a matter of law and inures to the benefit of that person’s heirs, executors, and administrators.
  3. A society may purchase and maintain insurance on behalf of any director, officer, employee, or agent of the society who is or was serving at the request of the society as a director, officer, employee, or agent of any other firm, corporation, limited liability company, or organization against any liability asserted against or incurred by that person in any such capacity or arising out of that person’s status as such, regardless of whether the society has the power to indemnify the person against such liability under this section.

Source:

S.L. 1987, ch. 347, § 1; 1993, ch. 54, § 106.

26.1-15.1-09. Waiver.

The laws of the society may provide that no subordinate body nor any of its subordinate officers or members has the power or authority to waive any of the provisions of the laws of the society. The provision is binding on the society and every member and beneficiary of a member.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-10. Organization.

A domestic society organized after December 31, 1987, must be formed as follows:

  1. Seven or more citizens of the United States, a majority of whom are citizens of this state, who desire to form a fraternal benefit society, may make, sign, and acknowledge before some officer competent to take acknowledgment of deeds, articles of incorporation, which must contain:
    1. The proposed corporate name of the society, which must not so closely resemble the name of any society or insurance company as to be misleading or confusing.
    2. The purposes for which it is being formed and the mode in which its corporate powers are to be exercised, within the powers granted by this chapter.
    3. The names and residences of the incorporators and the names, residences, and official titles of all the officers, trustees, directors, or other persons who are to exercise the general management of the affairs and funds of the society for the first year or until election of officers by the supreme governing body to be held not later than one year from the date of issuance of the permanent certificate of authority.
  2. The articles of incorporation, duly certified copies of the bylaws and rules, copies of all proposed forms of certificates, applications therefor, circulars to be issued by the society, and a bond conditioned upon the return to applicants of the advanced payments if the organization is not completed within one year must be filed with the commissioner, who may require further information as the commissioner deems necessary. The bond with sureties approved by the commissioner must be in an amount of not less than three hundred thousand dollars nor more than one million five hundred thousand dollars, as required by the commissioner. All documents filed must be in the English language. If the purposes of the society conform to the requirements of this chapter and all provisions of the law have been complied with, the commissioner shall so certify, retain and file the articles of incorporation, and furnish the incorporators a preliminary certificate of authority authorizing the society to solicit members as hereinafter provided.
  3. No preliminary certificate of authority granted under this section is valid after one year from its issuance, except as may be authorized by the commissioner upon cause shown for not more than one additional year, unless the five hundred applicants required under subsection 4 have been secured and the organization has been completed as herein provided. The articles of incorporation and all other proceedings under this chapter become void one year from the date of the preliminary certificate of authority, or at the expiration of the extended period, unless the society has completed its organization and received a certificate of authority to do business as hereinafter provided.
  4. Upon receipt of a preliminary certificate of authority from the commissioner, the society may solicit members for the purpose of completing its organization, shall collect from each applicant the amount of not less than one regular monthly premium in accordance with its table of rates, and shall issue to each such applicant a receipt for the amount so collected. No society may incur any liability other than for the return of such advance premium, nor issue any certificate, nor pay, allow, offer, or promise to pay any benefit to any person until:
    1. Actual bona fide applications for benefits have been secured from not fewer than five hundred applicants and any necessary evidence of insurability has been furnished to and approved by the society.
    2. At least ten subordinate lodges have been established into which the five hundred applicants have been admitted.
    3. There has been submitted to the commissioner, under oath of the president or secretary, or corresponding officer of the society, a list of the applicants, containing their names, addresses, date each was admitted, name and number of the subordinate lodge of which each applicant is a member, and amount of benefits to be granted and premiums thereof.
    4. It has been shown to the commissioner, by sworn statement of the treasurer, or corresponding officer of such society, that at least five hundred applicants have each paid in cash at least one regular monthly premium, which premiums in the aggregate must amount to at least one hundred fifty thousand dollars. The advance premiums must be held in trust during the period of organization and if the society does not qualify for a certificate of authority, the premiums must be returned to the applicants.
  5. The commissioner may make such examination and require such further information as the commissioner deems advisable. Upon presentation of satisfactory evidence that the society has complied with all the provisions of law, the commissioner shall issue to the society a certificate of authority allowing the society to transact business under this chapter. The certificate of authority is prima facie evidence of the existence of the society at the date of the certificate. A certified copy of the certificate may be given in evidence with like effect as the original certificate of authority.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-11. Amendments to laws.

  1. A domestic society may amend its laws by action of its supreme governing body at any regular or special meeting or, if its laws so provide, by referendum. A referendum may be held in accordance with the provisions of its laws by the vote of the voting members of the society, by the vote of delegates or representatives of voting members, or by the vote of local lodges. A society may provide for voting by mail. No amendment submitted for adoption by referendum may be adopted unless, within six months from the date of submission thereof, a majority of the members voting shall have signified their consent to the amendment by one of the methods herein specified.
  2. No amendment to the laws of any domestic society may take effect until approved by the commissioner who shall approve the amendment if the commissioner finds that it has been duly adopted and is not inconsistent with any requirement of the laws of this state or with the character, objects, and purposes of the society. Unless the commissioner disapproves an amendment within sixty days after filing, the amendment is considered approved. The approval or disapproval of the commissioner must be in writing and mailed to the secretary or corresponding officer of the society at its principal office. If the commissioner disapproves an amendment, the reasons for disapproval must be stated in the written notice of denial.
  3. Within ninety days after approval by the commissioner of an amendment or a synopsis of it, the society shall furnish a copy of the amendment to all members of the society either by mail or by publication in the official publication of the society. The affidavit of any officer of the society or of anyone authorized by it to mail any amendments or synopses, stating facts that show the same have been duly addressed and mailed, is prima facie evidence that the amendments or synopses have been furnished to the addressees.
  4. Every foreign society authorized to do business in this state shall file with the commissioner a duly certified copy of all amendments to its laws within ninety days after enactment.
  5. Printed copies of the laws, certified by the secretary or corresponding officer of the society, are prima facie evidence of the legal adoption thereof.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-12. Institutions.

  1. A society may create, maintain, and operate, or may establish organizations to operate, not-for-profit institutions to further the purposes permitted by section 26.1-15.1-05. The institutions may furnish services free or at a reasonable charge. Any property owned, held, or leased by the society for these purposes must be reported in every annual statement.
  2. No society may own or operate funeral homes or undertaking establishments.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-13. Reinsurance.

  1. A domestic society may by reinsurance agreement cede any individual risk or risks in whole or in part to an insurer, other than another fraternal benefit society, having the power to make reinsurance and authorized to do business in this state, or if not so authorized, one which is approved by the commissioner, but no society may reinsure substantially all of its insurance in force without first obtaining the written permission of the commissioner. A society may take credit for the reserves on such ceded risks to the extent reinsured, but no credit may be allowed as an admitted asset or as a deduction from liability to a ceding society for reinsurance made, ceded, renewed, or otherwise becoming effective after December 31, 1987, unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding society under the contract or contracts reinsured without diminution because of the insolvency of the ceding society.
  2. Notwithstanding the limitation in subsection 1, a society may reinsure the risks of another society in a consolidation or merger approved by the commissioner under section 26.1-15.1-14.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-14. Consolidations and mergers.

  1. A domestic society may consolidate or merge with any other society by complying with this section. It shall file with the commissioner:
    1. A certified copy of the contract containing in full the terms and conditions of the consolidation or merger.
    2. A sworn statement by the president and secretary or corresponding officers of each society showing the financial condition of the society on a date fixed by the commissioner but not earlier than December thirty-first next preceding the date of the contract.
    3. A certificate of such officers, duly verified by their respective oaths, that the consolidation or merger has been approved by a two-thirds vote of the supreme governing body of each society conducted at a regular or special meeting of each or, if the laws of the society permit, by mail.
    4. Evidence that at least sixty days prior to the action of the supreme governing body of each society, the text of the contract has been furnished to all members of each society either by mail or by publication in full in the official publication of each society.
  2. If the commissioner finds that the contract conforms to this section, that the financial statements are correct, and that the consolidation of merger is just and equitable to the members of each society, the commissioner shall approve the contract and issue a certificate to that effect. Upon approval, the contract is in effect unless any society that is a party to the contract is incorporated under the laws of any other state or territory. A consolidation or merger involving a society from another state or territory is not effective until it has been approved as provided by the laws of the other state or territory and a certificate of that approval has been filed with the commissioner.
  3. Upon the consolidation or merger becoming effective, all the rights, franchises, and interests of the consolidated or merged societies in and to every species of property are vested in the resulting society without any other instrument, except that conveyances of real property may be evidenced by proper deeds, and the title to any real property vested under the laws of this state in any of the societies consolidated or merged does not revert nor is it in any way impaired by reason of the consolidation or merger, but vests absolutely in the society resulting from the consolidation or merger.
  4. The affidavit of any officer of the society or of anyone authorized by it to mail any notice or document, stating that such notice or document has been duly addressed and mailed, is prima facie evidence that the notice or document has been furnished to the addressees.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-15. Conversion of fraternal benefit society into mutual life insurance company.

Any domestic society may be converted and licensed as a mutual life insurance company by compliance with all the requirements of the insurance laws of this state for mutual life insurance companies. A plan of conversion must be prepared in writing by the board of directors setting forth in full the terms and conditions of conversion. The affirmative vote of two-thirds of all members of the supreme governing body at a regular or special meeting is necessary for the approval of the conversion plan. No conversion may take effect until approved by the commissioner who may approve the conversion if the commissioner finds that the proposed change conforms to the requirements of law and is not prejudicial to the certificate holders of the society.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-16. Benefits.

  1. A society may provide the following contractual benefits in any form:
    1. Death benefits.
    2. Endowment benefits.
    3. Annuity benefits.
    4. Temporary or permanent disability benefits.
    5. Hospital, medical, or nursing benefits.
    6. Monument or tombstone benefits to the memory of deceased members.
    7. Other benefits authorized for life insurers which are not inconsistent with this chapter.
  2. A society shall specify in its rules those persons who may be covered by the contractual benefits in subsection 1, consistent with providing benefits to members and their dependents. A society may provide benefits on the lives of children under the minimum age for adult membership upon application of an adult member.

Source:

S.L. 1987, ch. 347, § 1.

DECISIONS UNDER PRIOR LAW

Initiation Requirement.

Insofar as adults are concerned, a fraternal benefit society may write insurance upon the lives of initiated members only. National Farmers Union Life Ass'n v. Krueger, 76 N.D. 619, 38 N.W.2d 563, 1949 N.D. LEXIS 82 (N.D. 1949).

26.1-15.1-17. Beneficiaries.

  1. The owner of a benefit contract has the right to change the beneficiary or beneficiaries in accordance with the laws or rules of the society unless the owner waives this right by specifically requesting in writing that the beneficiary designation be irrevocable. A society may, through its laws or rules, limit the scope of beneficiary designations and shall provide that no revocable beneficiary has or obtains any vested interest in the proceeds of any certificate until the certificate has become due and payable in conformity with the provisions of the benefit contract.
  2. A society may make provision for the payment of funeral benefits to the extent of incurred expense occasioned by the burial of the member, not to exceed the sum of one thousand dollars.
  3. If, at the death of any person insured under a benefit contract, there is no lawful beneficiary to whom the proceeds are payable, the amount of the benefit, except to the extent that funeral benefits may be paid as provided in subsection 2, is payable to the personal representative of the deceased insured, except that the proceeds are payable to the owner of the certificate if the owner was not the insured.

Source:

S.L. 1987, ch. 347, § 1.

DECISIONS UNDER PRIOR LAW

Analysis

Prohibition of Change in Beneficiary.

Prior to the 1955 amendment to former section, an insurance contract issued by a fraternal benefit society which made a part of the proceeds payable directly to the United States government as security for a loan and prohibited a change of beneficiary without the consent of the government was violative of this section. National Farmers Union Life Ass'n v. Krueger, 76 N.D. 619, 38 N.W.2d 563, 1949 N.D. LEXIS 82 (N.D. 1949).

Right to Change Beneficiary.

Notwithstanding that the acts done by an insured to effect a change of beneficiary were not in full compliance with the constitution, bylaws, or regulations of the society, where he has done all that he could do, a court of equity will carry out the intentions of the insured. Taylor v. Grand Lodge, A. O. U. W., 45 N.D. 468, 178 N.W. 130, 1920 N.D. LEXIS 137 (N.D. 1920).

26.1-15.1-18. Benefits not attachable.

All money or other benefit, charity, relief, or aid to be paid, provided, or rendered by any society is exempt from liability for debts of the person to or on account of whom the items are paid, provided, or rendered, and are not subject to seizure upon execution or other process.

Source:

S.L. 1987, ch. 347, § 1.

DECISIONS UNDER PRIOR LAW

Constitutionality.

Former similar section did not violate sections 2, 11 or 208 of the state constitution or the 14th amendment to the U.S. constitution.Brown v. Steckler, 40 N.D. 113, 168 N.W. 670, 1918 N.D. LEXIS 80 (N.D. 1918).

26.1-15.1-19. The benefit contract.

  1. Every society authorized to do business in this state shall issue to each owner of a benefit contract a certificate specifying the amount of benefits provided. The certificate, together with any riders or endorsements attached thereto, the laws of the society, the application for membership, the application for insurance and declaration of insurability, if any, signed by the applicant, and all amendments to each, constitute the benefit contract, as of the date of issuance, between the society and the owner, and the certificate must so state. A copy of the application for insurance and declaration of insurability, if any, must be endorsed upon or attached to the certificate. All statements on the application must be representations and not warranties. Any waiver of this provision is void.
  2. Any changes, additions, or amendments to the laws of the society duly made or enacted subsequent to the issuance of the certificate are binding upon the owner and the beneficiaries and govern and control the benefit contract in all respects the same as though the changes, additions, or amendments had been made prior to and were in force at the time of the application for insurance, except that no change, addition, or amendment destroys or diminishes benefits that the society contracted to give the owner as of the date of issuance.
  3. Any person upon whose life a benefit contract is issued prior to attaining the age of majority is bound by the terms of the application and certificate and by all the laws and rules of the society to the same extent as though the age of majority had been attained at the time of application.
  4. A society shall provide in its laws that if its reserves as to all or any class of certificates become impaired its board of directors or corresponding body may require that there must be paid by the owner to the society the amount of the owner’s equitable proportion of the deficiency as ascertained by its board. If the payment is not made, either the proportionate amount must stand as an indebtedness against the certificate and draw interest not to exceed the rate specified for certificate loans under the certificates or the owner may accept a proportionate reduction in benefits under the certificate, either alone or in combination with an indebtedness against the certificate. The society may specify the manner of the election and which alternative is to be presumed if the member makes no election.
  5. Copies of any of the documents mentioned in this section, certified by the secretary or corresponding officer of the society, are prima facie evidence of their terms and conditions.
  6. No certificate may be delivered or issued for delivery in this state unless a copy of the form has been filed with and approved by the commissioner in the manner provided for like policies issued by life insurers in this state. Every life, accident, health, or disability insurance certificate and every annuity certificate issued after December 31, 1988, must meet the standard contract provision requirements not inconsistent with this chapter for like policies issued by life insurers in this state, except that a society may provide for a grace period for payment of premiums of one full month in its certificates. The certificates must also contain a provision stating the amount of premiums which is payable under the certificate and a provision reciting or setting forth the substance of any sections of the laws or rules of the society in force at the time of issuance of the certificate which, if violated, will result in the termination or reduction of benefits payable under the certificate. If the laws of the society provide for expulsion or suspension of a member, the certificate must also contain a provision that any member so expelled or suspended, except for nonpayment of a premium or within the contestable period for material misrepresentation in the application for membership or insurance, has the privilege of maintaining the certificate in force by continuing payment of the required premium.
  7. Benefit contracts issued on the lives of persons below the minimum age for adult membership may provide for transfer of control or ownership to the insured at an age specified in the certificate. A society may require approval of an application for membership in order to effect this transfer and may provide in all other respects for the regulation, government, and control of the certificates and all rights, obligations, and liabilities incident thereto. Ownership rights prior to transfer of control or ownership must be specified in the certificate.
  8. A society may specify the terms and conditions on which benefit contracts may be assigned.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-20. Nonforfeiture benefits, cash surrender values, certificate loans, and other options.

  1. For certificates issued before January 1, 1989, the value of every paid-up nonforfeiture benefit and the amount of any cash surrender value, loan, or other option granted must comply with the provisions of law applicable immediately before January 1, 1988.
  2. For certificates issued after December 31, 1988, for which reserves are computed on the commissioners’ 1958 standard ordinary mortality table or the commissioners’ 1980 standard ordinary mortality table, or any more recent table made applicable to life insurers, every paid-up nonforfeiture benefit and the amount of any cash surrender value, loan, or other option granted must not be less than the corresponding amount ascertained in accordance with the laws of this state applicable to life insurers issuing policies containing like benefits based upon those tables.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-21. Investments.

A society may invest its funds only in investments authorized by the laws of this state for the investment of assets of life insurers and subject to the limitations thereon. Any foreign society permitted or seeking to do business in this state which invests its funds in accordance with the laws of the state, district, territory, country, or province in which it is incorporated, meets the requirements of this section for the investment of funds.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-22. Funds.

  1. All assets must be held, invested, and disbursed for the use and benefit of the society and no member or beneficiary has or acquires individual rights therein or becomes entitled to any apportionment on the surrender of any part thereof except as provided in the benefit contract.
  2. A society may create, maintain, invest, disburse, and apply any special fund or funds necessary to carry out any purpose permitted by the laws of the society.
  3. A society may, pursuant to resolution of its supreme governing body, establish and operate one or more separate accounts and issue contracts on a variable basis, subject to the provisions of law regulating life insurers establishing such accounts and issuing such contracts. To the extent the society determines it to be necessary in order to comply with any applicable federal or state laws or rules, the society may adopt special procedures for the conduct of the business and affairs of a separate account, may provide special voting and other rights for persons having beneficial interests in those accounts, including special rights and procedures relating to investment policy, investment advisory services, selection of certified public accountants, and selection of a committee to manage the business and affairs of the account, and may issue contracts on a variable basis to which subsections 2 and 4 of section 26.1-15.1-19 do not apply.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-23. Exemption from insurance laws.

Societies are governed by this chapter and are exempt from all other provisions of the insurance laws of this state, except as expressly designated therein or as specifically made applicable by this chapter.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-24. Taxation.

Every society organized or licensed under this chapter is hereby declared to be a charitable and benevolent institution, and all of its funds are exempt from all and every state, county, district, municipal, and school tax, other than taxes on real estate and office equipment.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-25. Valuation.

  1. Standards of valuation for certificates issued before January 1, 1989, are those provided by the laws applicable immediately before January 1, 1988.
  2. The minimum standards of valuation for certificates issued after December 31, 1988, are based on the following tables:
    1. For certificates of life insurance — the commissioners’ 1958 standard ordinary mortality table, the commissioners’ 1980 standard ordinary mortality table, or any more recent table made applicable to life insurers.
    2. For annuity and pure endowment certificates, for total and permanent disability benefits, for accidental death benefits, and for noncancelable accident and health benefits — tables authorized for use by life insurers in this state.
  3. The commissioner may accept other standards for valuation if the commissioner finds that the reserves produced thereby will not be less in the aggregate than reserves computed in accordance with the minimum valuation standard prescribed in this section. The commissioner may vary the standards of mortality applicable to all benefit contracts on substandard lives or other extra hazardous lives by any society authorized to do business in this state.
  4. Any society, with the consent of the insurance department of the state of domicile of the society and under conditions, if any, which the commissioner may impose, may establish and maintain reserves on its certificates in excess of the reserves required thereunder, but the contractual rights of any benefit member may not be affected thereby.

All of the above must be under valuation methods and standards, including interest assumptions, in accordance with chapter 26.1-35.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-26. Reports.

Reports must be filed in accordance with this section.

  1. Every society transacting business in this state shall annually on or before the first day of March file with the commissioner a true statement of its financial condition, transactions, and affairs for the preceding calendar year and pay the fee prescribed by section 26.1-01-07. The statement must be in general form and context as approved by the national association of insurance commissioners for fraternal benefit societies and as supplemented by the commissioner.
  2. As part of the annual statement, each society shall on or before the first day of March file with the commissioner a valuation of its certificates in force on the preceding December thirty-first. The commissioner may for cause shown extend the time for filing the valuation report for not more than two calendar months. The valuation must be done in accordance with the standards specified in section 26.1-15.1-25. The valuation and underlying data must be certified by a qualified actuary or, at the expense of the society, verified by the actuary of the insurance department of the state of domicile of the society.
  3. A society neglecting to file the annual statement in the form and within the time provided by this section shall forfeit one hundred dollars for each day during which the neglect continues and, upon notice by the commissioner to that effect, its authority to do business in this state ceases while the default continues.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-27. Annual license.

The authority of every society annually terminates on April thirtieth and may be renewed. A license continues in full force and effect until the new license is issued or specifically refused. For each license or renewal the society shall before April first pay the commissioner the fee established under section 26.1-01-07. A duly certified copy or duplicate of the license is prima facie evidence that the licensee is a fraternal benefit society.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-28. Examination of societies.

  1. The commissioner may examine any domestic, foreign, or alien society transacting or applying for admission to transact business in this state in the same manner as authorized for examination of domestic, foreign, or alien insurers. Requirements of notice and an opportunity to respond before findings are made public as provided in the laws regulating insurers are applicable to the examination of societies.
  2. The expense of each examination and of each valuation, including compensation and actual expense of examiners, must be paid by the society examined or whose certificates are valued, upon statements furnished by the commissioner.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-29. Foreign or alien society — Admission.

No foreign society may transact business in this state without a license issued by the commissioner. Any foreign society desiring admission to this state shall comply with the requirements and limitations of this chapter applicable to domestic societies. Any foreign society may be licensed to transact business in this state upon filing with the commissioner:

  1. A duly certified copy of its articles of incorporation;
  2. A copy of its bylaws, certified by its secretary or corresponding officer;
  3. A power of attorney to the commissioner as required under section 26.1-15.1-35;
  4. A statement of its business under oath of its president and secretary or corresponding officers in a form prescribed by the commissioner, duly verified by an examination made by the supervising insurance official of its home state or other state, territory, province, or country, satisfactory to the commissioner;
  5. Certification from the proper official of its home state, territory, province, or country that the society is legally incorporated and licensed to transact business therein;
  6. Copies of its certificate forms; and
  7. Such other information as the commissioner may deem necessary.

The foreign society shall also show that its assets are invested in accordance with this chapter.

Source:

S.L. 1987, ch. 347, § 1.

DECISIONS UNDER PRIOR LAW

Applicability of State Laws to Foreign Societies.

A foreign fraternal benefit society doing business in this state must conform to all the laws regulating domestic societies except that it may invest its assets, according to the laws of the state in which it is organized. National Farmers Union Life Ass'n v. Krueger, 76 N.D. 619, 38 N.W.2d 563, 1949 N.D. LEXIS 82 (N.D. 1949).

26.1-15.1-30. Injunction — Liquidation — Receivership of domestic society.

  1. The commissioner shall notify the society of the deficiency or deficiencies stating in writing the reasons for the commissioner’s dissatisfaction and requiring that the deficiency or deficiencies be corrected, if the commissioner upon investigation finds that a domestic society has committed any of the following acts:
    1. Exceeded its powers.
    2. Failed to comply with any provision of this chapter.
    3. Not fulfilled any of its contracts in good faith.
    4. Has a membership of less than four hundred after an existence of one year or more.
    5. Conducted business fraudulently or in a manner hazardous to its members, creditors, the public, or the business.
  2. If the society does not present good and sufficient reasons why it should not be so enjoined or why an action in quo warranto should not be commenced, the commissioner may present the facts to the attorney general who may commence an action to enjoin the society from transacting business or in quo warranto.
  3. The attorney general shall thereupon notify the officers of the society of a hearing. If after a full hearing it appears that the society should be so enjoined or liquidated or a receiver appointed, the court shall enter the necessary order. No society so enjoined may do business until:
    1. The commissioner finds that the violation complained of has been corrected;
    2. The costs of the action have been paid by the society if the court finds that the society was in default as charged;
    3. The court has dissolved its injunction; and
    4. The commissioner has reinstated the certificate of authority.
  4. If the court orders the society liquidated, it must be enjoined from carrying on any further business, whereupon the receiver of the society shall proceed at once to take possession of the books, papers, money, and other assets of the society and, under the direction of the court, proceed forthwith to close the affairs of the society and to distribute its funds to those entitled thereto.
  5. No action under this section may be recognized in any court of this state unless brought by the attorney general upon request of the commissioner. Whenever a receiver is to be appointed for a domestic society, the court shall appoint the commissioner or the commissioner’s designee as receiver.
  6. The provisions of this section relating to hearing by the commissioner, action by the attorney general at the request of the commissioner, hearing by the court, injunction, and receivership are applicable to a society that voluntarily determines to discontinue business.

After notice the society has a thirty-day period in which to comply with the commissioner’s request for correction. If the society fails to comply, the commissioner shall notify the society of noncompliance and require the society to show cause on a date specified why it should not be enjoined from carrying on any business until the violations complained of have been corrected or why an action in quo warranto should not be commenced against the society.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-31. Suspension, revocation, or refusal of license of foreign society.

  1. If the commissioner upon investigation finds that a foreign society transacting or applying to transact business in this state has committed any of the acts set forth in subdivision a, b, c, or e of subsection 1 of section 26.1-15.1-30, the commissioner shall notify the society of the deficiency or deficiencies stating in writing the reasons for the commissioner’s dissatisfaction and requiring that the deficiency or deficiencies be corrected. After the notice the society has a thirty-day period in which to comply with the commissioner’s request for correction. If the society fails to comply, the commissioner shall notify the society of noncompliance and require the society to show cause on a date specified why its license should not be suspended, revoked, or refused. If the society does not present good and sufficient reason why its authority to do business in this state should not be suspended, revoked, or refused, the commissioner may suspend or refuse the license of the society to do business in this state until satisfactory evidence is furnished to the commissioner that the suspension or refusal should be withdrawn or the commissioner may revoke the authority of the society to do business in this state.
  2. This section does not prevent any society from continuing in good faith all contracts made in this state during the time the society was legally authorized to transact business in this state.

Source:

S.L. 1987, ch. 347, § 1.

DECISIONS UNDER PRIOR LAW

Power of Insurance Commissioner.

The commissioner’s power to regulate does not include the power to manage, and he may not substitute his judgment as to what a proper salary would be for that of the directors of an association, but if salaries are excessive to the extent that their payment by an association constitutes fraud, it is the commissioner’s duty to intervene. National Farmers Union Life Ass'n v. Krueger, 76 N.D. 619, 38 N.W.2d 563, 1949 N.D. LEXIS 82 (N.D. 1949).

26.1-15.1-32. Injunction.

No application or petition for injunction against any domestic, foreign, or alien society, or lodge thereof, may be recognized in any court of this state unless made by the attorney general upon request of the commissioner.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-33. Licensing of agents.

Insurance producers of societies must be licensed under chapter 26.1-26.

Source:

S.L. 1987, ch. 347, § 1; 2001, ch. 262, § 31.

26.1-15.1-34. Unfair methods of competition and unfair and deceptive acts and practices.

Every society authorized to do business in this state is subject to the provisions of chapter 26.1-04 relating to unfair trade practices, except that nothing in those provisions may be construed as applying to or affecting the right of any society to determine eligibility requirements for membership or be construed as applying to or affecting the offering of benefits exclusively to members or persons eligible for membership in the society by a subsidiary corporation, limited liability company, or affiliated organization of the society.

Source:

S.L. 1987, ch. 347, § 1; 1993, ch. 54, § 106.

26.1-15.1-35. Service of process.

  1. Every society authorized to do business in this state shall appoint in writing the commissioner and each successor in office to be its true and lawful attorney upon whom all lawful process in any action or proceeding against it may be served and agrees that any lawful process against it which is served on the commissioner is of the same legal force and validity as if served upon the society. The authority continues in force so long as any liability of the society remains outstanding in this state. Copies of the appointment, certified by the commissioner, are sufficient evidence thereof and must be admitted in evidence with the same force and effect as the original.
  2. Service may be made only upon the commissioner or upon any person in charge of the commissioner’s office. It must be made in duplicate and constitutes sufficient service upon the society. When legal process against a society is served upon the commissioner, the commissioner shall forthwith forward one of the duplicate copies by registered mail, postage prepaid, directed to the secretary or corresponding officer. No service may require a society to file its answer, pleading, or defense in less than twenty days from the date of mailing the copy of the service to a society. Legal process may not be served upon a society except in the manner herein provided.

Source:

S.L. 1987, ch. 347, § 1; 2017, ch. 211, § 3, eff July 1, 2017.

26.1-15.1-36. Penalties.

  1. Any person who willfully makes a false or fraudulent statement in or relating to an application for membership or for the purpose of obtaining money from or a benefit in any society is guilty of a class A misdemeanor.
  2. Any person who willfully makes a false or fraudulent statement in any verified report or declaration under oath required or authorized by this chapter or of any material fact or thing contained in a sworn statement concerning the death or disability of an insured for the purpose of procuring payment of a benefit named in the certificate is guilty of a class C felony.
  3. Any person who solicits membership for or in any manner assists in procuring membership in any society not licensed to do business in this state is guilty of an infraction.

Source:

S.L. 1987, ch. 347, § 1.

26.1-15.1-37. Exemption of certain societies.

  1. Except as otherwise provided, this chapter does not affect or apply to:
    1. Grand or subordinate lodges of societies, orders, or associations now doing business in this state which provide benefits exclusively through local or subordinate lodges.
    2. Orders, societies, or associations that admit to membership only persons engaged in one or more crafts or hazardous occupations, in the same or similar lines of business, insuring only their own members and their families, and auxiliaries to such orders, societies, or associations.
    3. Domestic societies that limit their membership to employees of a particular city, designated firm, business house, or corporation which provide for a death benefit of not more than four hundred dollars or disability benefits of not more than three hundred fifty dollars to any person in any one year, or both.
    4. Domestic societies or associations of a purely religious, charitable, or benevolent description which provide for a death benefit of not more than four hundred dollars or for disability benefits of not more than three hundred fifty dollars to any one person in any one year, or both.
  2. Any society or association described in subdivision c or d of subsection 1 which provides for death or disability benefits for which benefit certificates are issued, and any such society or association included in subdivision d of subsection 1 which has more than one thousand members, is not exempt from this chapter but shall comply with all requirements thereof.
  3. No society that, by this section, is exempt from the requirements of this chapter, except any society described in subdivision d of subsection 1, may give, allow, or promise to give or allow to any person any compensation for procuring new members.
  4. Every society that provides for benefits in case of death or disability resulting solely from accident and which does not obligate itself to pay natural death or sick benefits has all of the privileges and is subject to all the applicable provisions of this chapter, except that the provisions relating to medical examination, valuations of benefit certificates, and incontestability, do not apply to such society.
  5. The commissioner may require from any society or association, by examination or otherwise, information to enable the commissioner to determine whether such society or association is exempt from this chapter.
  6. Societies exempted under this section are also exempt from all other provisions of the insurance laws of this state.

Source:

S.L. 1987, ch. 347, § 1.

DECISIONS UNDER PRIOR LAW

Hazardous Occupation.

Foreign unincorporated beneficial association formed for railroad workers was a society admitting only persons engaged in a hazardous occupation. Bloom v. Northern Pac. Beneficial Ass'n, 193 N.W.2d 244, 1971 N.D. LEXIS 139 (N.D. 1971).

CHAPTER 26.1-16 Benevolent Societies

26.1-16-01. Benevolent society defined.

A “benevolent society” is a domestic corporation, association, or society which operates on the voluntary assessment or contribution plan for the sole purpose of providing, through assessments of its members, for the payment of a death benefit to the beneficiary of a deceased member.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-02.

DECISIONS UNDER PRIOR LAW

Contracts Prohibited.

A member of a benevolent protective association cannot agree to so use his voting powers as to benefit another party at the expense of the association, nor can an official bargain with a member so as to obtain an official appointment through the influence of the member, and use the trust funds to pay for that purpose. Luedke v. Oleen, 72 N.D. 1, 4 N.W.2d 201, 1942 N.D. LEXIS 104 (N.D. 1942).

26.1-16-02. Chapter not applicable to fraternal benefit society.

This chapter does not apply to a fraternal benefit society as defined in chapter 26.1-15.1 nor to a benefit society organized within and limited to members of a fraternal benefit society.

Source:

S.L. 1983, ch. 332, § 16; 1987, ch. 347, § 2.

Derivation:

N.D.C.C. § 26-25-26.

26.1-16-03. Jurisdiction of commissioner.

A benevolent society is under the jurisdiction of the commissioner and is subject to all the laws and rules applicable to insurance companies transacting business within this state, except as specifically provided.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-01.

26.1-16-04. Organization of society — Minimum number of members.

Any number of persons, not less than five, all of whom are residents of this state, may form a benevolent society by complying with the applicable provisions of this chapter.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-04.

26.1-16-05. Articles of incorporation — Contents.

Persons proposing to form a benevolent society under this chapter shall subscribe and acknowledge articles of incorporation specifying:

  1. The name of the society, which must include the words “benevolent society”.
  2. The purpose for which the society is to be formed.
  3. A full and clear definition of the plan under which the society proposes to do business.
  4. The time and place of holding meetings of the members of the society.
  5. The location of the society’s principal office, which must be within this state.
  6. The date for the commencement and for the termination of the fiscal year of the society.
  7. The term for which the society is to be incorporated, which term may not exceed thirty years.
  8. The number of directors, not less than five nor more than nine, all of whom must be residents of this state.
  9. The names and addresses of the directors selected to serve until the first meeting of the members of the society.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-05.

26.1-16-06. Society doing business on July 1, 1937, need not change name — Requirements.

Any benevolent society organized and doing business on July 1, 1937, which has a name which does not include the words “benevolent society” is not required to change its name to comply with section 26.1-16-05, but its membership certificate, stationery, and literature must state clearly that it is a benevolent society.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-06.

26.1-16-07. Articles of incorporation — Filing — Approval — Deposit required — Authority to solicit.

The articles of incorporation must be submitted to the commissioner who shall examine the articles to ascertain whether they comply with all applicable requirements of the law. After the articles have been approved by the commissioner, they must be filed in the office of the secretary of state, and a certified copy must be filed with the commissioner. The society shall deposit with the commissioner United States government bonds, United States treasury certificates, bonds of the state of North Dakota, or certificates of deposit of the Bank of North Dakota in the amount of at least two hundred fifty dollars. Upon filing the certified copy of its articles and making the deposit, the society may solicit and secure the necessary preliminary members as the basis for the issuance to it of a certificate of authority. The solicitation of such members, however, must be conducted in accordance with any applicable rules adopted by the commissioner.

Source:

S.L. 1983, ch. 332, § 16; 2005, ch. 256, § 4.

Derivation:

N.D.C.C. § 26-25-07.

26.1-16-08. Deposit maintained by society.

Before the commissioner may issue a certificate of authority to a benevolent society, the commissioner shall ascertain that the deposit required by section 26.1-16-07 has been made. The society shall maintain the deposit until the membership of the society reaches one thousand. Thereafter, the deposit maintained with the commissioner must be equal in amount to at least twenty-five cents per member in good standing.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-14.

26.1-16-09. Bylaws required.

Each benevolent society shall adopt bylaws which conform to its articles of incorporation or to this chapter.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-08.

26.1-16-10. Amendment of articles and adoption, amendment, and repeal of bylaws.

The articles of incorporation of a benevolent society may be amended, and its bylaws adopted, amended, or repealed, at any annual meeting or at any special meeting called for that purpose. A two-thirds affirmative vote of the members of the society is required to take any of the actions specified in this section.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-09.

26.1-16-11. Bonds of officers and agents.

After a benevolent society has been licensed by the commissioner, the bonding of its officers and agents is discretionary with its board of directors. During the period between the filing of articles of incorporation and the issuing of a certificate of authority, however, the commissioner shall set the amounts of the bonds sufficient to guarantee return of membership fees collected in case the organization is not completed, and the bonds must be filed with the commissioner.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-10.

26.1-16-12. Territorial restrictions on society — Voluntary contribution plan benefits regulated by chapter.

Any society organized under this chapter shall confine its activities, insofar as solicitation by insurance producers is concerned, to this state. No benefits on the voluntary contribution plan may be provided by any society except as provided in this chapter.

Source:

S.L. 1983, ch. 332, § 16; 2001, ch. 262, § 32.

Derivation:

N.D.C.C. § 26-25-03.

26.1-16-13. Licensing of insurance producers.

All insurance producers of a benevolent society must be licensed in the same manner as insurance producers for insurance companies generally are licensed.

Source:

S.L. 1983, ch. 332, § 16; 2001, ch. 262, § 33.

Derivation:

N.D.C.C. § 26-25-11.

26.1-16-14. Classification of membership — Units.

A benevolent society may provide for the classification of its membership by one or more units based on the age of individual members, or by the adoption of a maximum limit of one group or unit. Before the organization of a new group or unit, the society shall notify the commissioner of its proposal to organize the group or unit, and the organization must be conducted in accordance with any applicable rules adopted by the commissioner. The number of members in a unit may not be less than is required for the organization of a society. If the membership of any group or unit of any society falls below two hundred, the group or unit must be consolidated with another group or unit of the society unless within sixty days the group or unit has restored its membership to the minimum required by this section. An age group composed of members over age sixty-five, however, may be established and maintained at not less than one hundred members.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-12.

DECISIONS UNDER PRIOR LAW

Classification of Membership.

The grant of the right to classify membership on the basis of age and the statutory declaration as to the grounds of incontestability prohibit the classification of membership on any basis other than that of age and forbid an incontestable clause which either omits grounds stated in the statute or adds grounds not stated. All Am. Benevolent Soc'y v. Erickson, 71 N.D. 557, 3 N.W.2d 820, 1942 N.D. LEXIS 90 (N.D. 1942).

26.1-16-15. Preliminary applications required before issuance of certificate of authority — Bank certificate — Issuance of certificate of authority.

Before a benevolent society may issue a certificate of membership, it must have actual applications for certificates from at least three hundred persons upon which certificates may be issued simultaneously. The applications, together with a certificate from a solvent bank stating that there has been deposited to the account of the society an amount which is determined by the preliminary applications presented as constituting the entire proceeds of membership fees collected, must be submitted to the commissioner. Upon submission to the commissioner of the preliminary applications, the bank certificate, and any evidence of compliance with this chapter which the commissioner requires, the commissioner may issue to the society a certificate of authority to expire on the thirtieth day of April following the date thereof.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-13.

26.1-16-16. Application for and certificate of membership — Contents — Approval — Maximum benefits — Expense deductions.

The certificate of membership issued by a benevolent society must state fully the conditions on which the benefit is paid. The certificate of membership and the application for the certificate constitute the entire contract between the society and the member. Every certificate and application must have printed or stamped thereon in red ink and in ten-point boldfaced type “This is not an insurance policy. The society maintains no reserve. All benefits are dependent upon voluntary assessments from members.” The insurance commissioner shall approve the form of the certificate and application prior to their issuance or use. The benefits under any certificate must be confined to a death benefit to the beneficiary of the deceased member in an amount not to exceed two thousand dollars, and the certificate must provide for an assessment on the membership in an amount not exceeding four dollars to be paid by the members after notice and proof of death. The proceeds of the assessment, less an amount not exceeding ten percent thereof as an allowance for expenses, must be paid to the beneficiary of the deceased member. A death benefit may not exceed the maximum amount stated in the certificate.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-15.

26.1-16-17. Notice of annual meeting — Voting rights of members.

Each member of a benevolent society organized under this chapter must be notified of the time and place of the annual meetings of the society by a notice incorporated in the certificate of membership issued by the society. Each member of the society is entitled to one vote and may vote in person or by proxy.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-16.

26.1-16-18. Incontestability of certificate — Responsibility upon suicide.

A certificate of membership is incontestable after one year from its date of issue except for fraud, nonpayment of assessments, or naval or military service in time of war. Death from acute or chronic disease occurring more than one year after the date of issue of a certificate may not be a ground for nonpayment of the benefits thereunder regardless of any provision or statement contained in the application or certificate, and full payment may not be refused under any certificate when the member’s death occurs from an acute, subacute, or chronic disease more than one year after the date of issue of the certificate. If a member commits suicide within one year from the date of issue of the certificate, the liability of the society is limited to an amount equal to all membership fees and assessments paid by the member.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-17.

26.1-16-19. Expense fund and mortuary fund maintained as separate funds.

A benevolent society shall maintain and keep two separate funds:

  1. An expense fund.
  2. A mortuary fund.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-18.

26.1-16-20. Expense fund — Credits — Levies.

The membership fee of the society, which may be not less than one dollar nor more than five dollars, may be used for expenses. The certificate of membership must state the percentage of death assessments, not exceeding ten percent, that may be used for expenses, and moneys received on the assessments, within the limitations of this section, must be credited to the expense fund. Expense fund assessments may be levied in accordance with the applicable provisions in the membership certificate in amounts not exceeding three dollars in any one calendar year.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-19.

26.1-16-21. Mortuary fund — Credits to and use.

A benevolent society shall credit to its mortuary fund that part of any postmortem assessment in excess of the amount required to pay the death claim for which the assessment was levied. If the society has more than one unit of membership, the mortuary fund must be kept separately by units. The fund must be used toward the payment of claims for deaths occurring within the unit from which the fund arose, and no assessment levy may be made unless the balance in the fund is insufficient to pay a claim on which notice and proof of death has been received. No expenses may be paid from the mortuary fund.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-20.

26.1-16-22. Notice of assessment — Contents — Cancellation of certificate — Reinstatement.

The notice of assessment in each case must provide that if the member to whom the notice is directed does not make payment within the time specified therein, which may be not less than fifteen days nor more than forty-five days after the date of the notice, the member’s certificate will be canceled. If payment is not made within that time, a notice of cancellation must be mailed to the member informing the member that if the assessment is not paid within ten days from the mailing of the notice of cancellation, the member’s certificate will be canceled. The notice of cancellation must be mailed to the member at the member’s last-known address immediately after the expiration of the time specified in the notice of assessment, and proof of the mailing must be established on forms provided for that purpose by the United States postal service. If payment is not made within the time specified in the notice of cancellation, the certificate must be canceled. If payment of an assessment is made to the society subsequent to the date of cancellation of the certificate, the payment may be considered as a reinstatement fee and placed in the expense fund of the society.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-21.

26.1-16-23. Secretary of society to levy assessments — Notice to members — Distribution of proceeds of assessments.

Upon approval of a claim arising from the death of a member, the secretary of the society, if the mortuary fund is insufficient to pay the claim, shall levy an assessment upon the membership in accordance with the provisions of the membership certificate of the deceased member. Notice of the assessment must be mailed to each member at the member’s last post-office address as given to the secretary. The notice must state:

  1. The name and address of the deceased member.
  2. The maximum benefit payable upon the member’s certificate.
  3. The amount of the assessment.
  4. The date upon which the assessment shall become delinquent.

Upon the expiration of the period within which payment of the assessment may be made and the further period specified in the notice of cancellation required under section 26.1-16-22, the secretary shall pay to the beneficiary of the deceased member the proceeds of the assessment in the secretary’s possession and available for that purpose.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-22.

26.1-16-24. Annual statement required — Renewal of certificate of authority.

Every benevolent society shall transmit to the commissioner, not later than March first of each year, an annual statement as of the previous December thirty-first. The statement must be on any forms required by the commissioner and must show:

  1. All income of the society by sources.
  2. All disbursements of the society detailed as to nature.
  3. A listing of the assets of the society.
  4. The liabilities of the society.
  5. The number of members in the society.
  6. Any other information required by the commissioner.

If it appears from the statement that the society has a membership at least equal in number to that required as a condition precedent to authorization and that it is otherwise qualified under the requirements of this chapter, a renewal certificate of authority must be issued on the succeeding April thirtieth. The fees for the filing of the statement and the issuance of the certificate are those specified in section 26.1-01-07.

Source:

S.L. 1983, ch. 332, § 16; 1991, ch. 301, § 9.

Derivation:

N.D.C.C. § 26-25-23.

26.1-16-25. Examination.

The commissioner has the same power and authority as to visitation and examination over all benevolent societies subject to this chapter as are given to the commissioner by this title over domestic insurance companies. The society examined shall pay the expenses of any examination. The commissioner may require a deposit in advance of an examination to guarantee payment of the estimated necessary expense to be incurred.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-24.

26.1-16-26. Transfer of membership.

A benevolent society organized or operating under this chapter, by a two-thirds vote of its members present or voting by proxy at any annual meeting or special meeting called for that purpose, may transfer its membership to any other society or organization. Notice of the contemplated action must be mailed to each member in good standing, at the member’s last-known post-office address, at least fifteen days prior to the date of the meeting, and any transfer of membership, and the conditions thereof, must have the approval of the commissioner.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-25.

26.1-16-27. Penalty.

Any officer or agent of a benevolent society violating this chapter is guilty of a class A misdemeanor.

Source:

S.L. 1983, ch. 332, § 16.

Derivation:

N.D.C.C. § 26-25-27.

CHAPTER 26.1-17 Nonprofit Health Service Corporations

26.1-17-01. Definitions.

As used in this chapter, unless the context requires otherwise:

  1. “Dental service” means the general and usual service rendered and the care administered by licensed dentists.
  2. “Health service” means service performed for and rendered to persons to restore, maintain, and promote personal health, to treat injuries and cure diseases, both physical and mental, by any lawful means, and includes hospital service, medical service, dental service, or optometric service, or any combination of these services. However, health service is limited to those services rendered by physicians, surgeons, practitioners, nurses, hospitals, nursing homes, or any other provider of health service who is licensed or registered under the laws of this state.
  3. “Health service contract” means a contract which provides for the furnishing of one or more kinds of health service to a subscriber.
  4. “Health service corporation” means a nonprofit corporation organized for the purposes of establishing a health service plan whereby one or more kinds of health service is provided to subscribers under a prepaid health service contract entitling each subscriber to certain specified health services, but does not include a health maintenance organization organized under chapter 26.1-18.1.
  5. “Hospital service” includes bed and board, general nursing care, use of the operating room, use of the delivery room, ordinary medications and dressings, and other customary routine care, and nursing home services and health care and related services furnished by vendors of the services, but does not include the practice of medicine.
  6. “Medical service” means the general and usual services rendered and care administered by physicians and oral surgeons.
  7. “Optometric service” means the general and usual services rendered and care administered by practitioners.
  8. “Oral surgeon” means a dentist who has met all of the formal requirements to be certified by the American board of oral surgery.
  9. “Practitioner” includes an optometrist, a physician, a chiropractor, or an advanced registered nurse practitioner duly licensed to practice one’s profession under North Dakota law.

Source:

S.L. 1983, ch. 332, § 17; 1989, ch. 354, § 1; 1995, ch. 246, § 18; 2003, ch. 48, § 23.

Derivation:

N.D.C.C. §§ 26-26-07, 26-27-01, 26-27.2-03.

Collateral References.

Liability for injury or death allegedly caused by activities of hospital “rescue team,” 64 A.L.R.4th 1200.

What constitutes practice of “optometry,” 82 A.L.R.4th 816.

26.1-17-02. Nonprofit health service corporations authorized.

A health service corporation must be organized under this chapter and, to the extent applicable, under chapter 10-33 for the purposes of establishing and putting into effect a health service plan whereby one or more kinds of health service is provided to subscribers under a contract entitling each subscriber to certain specified health service. Any corporation subject to this chapter is not subject to the laws of this state relating to insurance and insurance companies, except as specifically provided in such laws. This chapter applies only to corporations organized pursuant to its provisions, except as specifically provided otherwise.

Source:

S.L. 1983, ch. 332, § 17; 1999, ch. 50, § 42.

Derivation:

N.D.C.C. §§ 26-26-01, 26-27-02, 26-27.1-02, 26-27.2-02.

26.1-17-03. Articles of incorporation and bylaws — Filing.

The articles of incorporation of a health service corporation, and all amendments, are to be filed with the secretary of state. A certified copy of the articles of incorporation and the bylaws, and all amendments, is to be filed with the commissioner.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-26-03, 26-27-04, 26-27.1-04, 26-27.2-04.

26.1-17-04. Directors — Responsibilities.

A board of directors shall manage the business and affairs of a health service corporation and has the power to amend bylaws. The board is to consist of at least nine members. At least a majority of the directors of a health service corporation writing hospital or medical service contracts under this chapter must be at all times subscribers.

A subscriber director is a director who is a subscriber and who is not a provider of health care, a person who has a material financial or fiduciary interest in the delivery of health care services or a related industry, an employee of an institution that provides health care services, or a spouse or a member of the immediate family of such a person. Nominations for and election of the subscriber directors must be made by the existing directors.

A director may serve on the board of only one corporation subject to this chapter at a time.

Population factors, representation of different geographic regions, and the demography of the service area of the corporation subject to this chapter must be considered when making nominations for the board of directors of a corporation subject to this chapter.

A health service corporation may not reimburse or compensate a director for more than necessary and actual expenses for service as a member of the board of directors.

Source:

S.L. 1983, ch. 332, § 17; 1987, ch. 348, § 1; 1991, ch. 307, § 1; 1993, ch. 297, § 1.

Derivation:

N.D.C.C. §§ 26-26-04, 26-27-05, 26-27.1-05, 26-27.2-05.

26.1-17-05. Authority of corporation writing hospital service contracts.

In addition to any other powers granted by law, a health service corporation writing hospital service contracts may:

  1. Enter into contracts for the rendering of hospital service to any of its subscribers with hospitals maintained and operated by the state or any of its political subdivisions, or by any corporation, limited liability company, association, or individual. The hospital service plan operated by the corporation may provide for hospital service and other related health services, excluding the practice of medicine, as advancements in health care and treatment warrant the extension and providing of such services and in case of emergency or expediency. All hospital and related health services provided are subject to the approval of the health service corporation.
  2. Make and enter into mutual agreements with hospitals or groups of hospitals, nursing homes, and other vendors and furnishers of health care services and other related facilities, excluding the practice of medicine.
  3. Make and enter into mutual agreements with state, federal, or other governmental agencies to provide hospital services, nursing home care, and other related health services, excluding the practice of medicine, including health care services for the needy and other persons.
  4. Make and enter into mutual agreements with any other health care corporation or with any state or local government or agency thereof to provide health care administrative services, to act as administrator of any other health care service plan, or to act as a marketing agency or as a fiscal intermediary of any health care plan or of any other health care organization or of any state or local government or agency.
  5. Enter into contracts with other corporations, including insurance companies but only with prior approval of the commissioner, or other entities in this state or in other states or possessions of the United States, or of Canada or other foreign countries so that:
    1. Reciprocity of benefits may be provided to subscribers.
    2. Transfer of subscribers from one entity to another may be effected to conform to the subscriber’s place of residence.
    3. Uniform benefits may be provided for all employees and dependents of such employees of entities and other organizations transacting business in this state and elsewhere and a rate representing the composite experience of the areas involved may be charged for such employees and their dependents.
    4. Health services may be provided for subscribers or policyholders of this or other corporations, including insurers, or entities for the purpose of ceding or accepting reinsurance or of jointly providing benefits, underwriting, pooling, mutualization, equalization, and other joint undertakings which the governing board may from time to time approve.

Source:

S.L. 1983, ch. 332, § 17; 1993, ch. 54, § 106; 1993, ch. 290, § 2.

Derivation:

N.D.C.C. §§ 26-26-01, 26-26-02, 26-26-07.

26.1-17-05.1. Authority of corporation writing medical service contracts.

A health service corporation writing medical service contracts may:

  1. Enter into contracts with subscribers whereby each subscriber, subscriber member, officer, or employee is entitled to certain specified health services as provided in the subscriber’s contract.
  2. Enter into contracts with similar corporations within or without the state for the interchange of services to those included in subscription or other similar contracts, and may provide subscription contracts for the substitution of such services in lieu of those therein recited.
  3. Enter into contracts with physicians for the rendering of medical service to subscribers in accordance with the terms of the subscriber contract.
  4. Enter into contracts with laboratories and vendors of health appliances and prostheses to provide material and services pursuant to contracts with subscribers.

Source:

S.L. 1983, ch. 332, § 17.

26.1-17-06. Authority of corporation writing optometric service contracts.

A health service corporation writing optometric service contracts may:

  1. Enter into contracts with subscribers whereby each subscriber, subscriber member, officer, or employee is entitled to certain specified health services as provided in the subscriber’s contract.
  2. Enter into contracts with similar corporations within or without the state for the interchange of services to those included in subscription or other similar contracts, and may provide subscription contracts for the substitution of such services in lieu of those therein recited.
  3. Enter into contracts with practitioners for the rendering of optometric service to subscribers in accordance with the terms of the subscriber contract.
  4. Enter into contracts with optical laboratories to provide material pursuant to contracts with subscribers.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. § 26-27.2-06.

26.1-17-07. Authority of corporation writing certain health service contracts.

A health service corporation writing health service contracts other than hospital service, medical service, and optometric service contracts may:

  1. Enter into contracts with subscribers whereby each subscriber, subscriber member, officer, or employee is entitled to certain specified health services as provided in the subscriber’s contract.
  2. Enter into contracts with similar corporations within or without the state for the interchange of services to those included in subscription or other similar contracts, and may provide subscription contracts for the substitution of such services in lieu of those therein recited.
  3. Enter into contracts with health service providers for the rendering of health services to subscribers in accordance with the terms of the subscriber contract.
  4. Enter into contracts with laboratories and vendors of health appliances and prostheses to provide material and services pursuant to contracts with subscribers.

Source:

S.L. 1983, ch. 332, § 17.

26.1-17-08. Corporation not authorized to practice a profession.

This chapter does not authorize a health service corporation to engage in the practice of medicine, dentistry, optometry, or any other profession for which a license or registration is required.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-27.1-15, 26-27.2-15.

26.1-17-09. Capital — Repayment.

A health service corporation writing hospital service contracts or medical service contracts may not commence business and enter into any contracts with subscribers, nor secure any application therefor, unless the corporation has a contributed surplus of not less than one hundred thousand dollars. A health service corporation writing health service contracts other than hospital service or medical service contracts may not enter into any contracts with any subscribers, nor secure any application therefor, unless the corporation has a contributed surplus of not less than twenty-five thousand dollars. The contributed surplus is repayable when the unassigned earned surplus exceeds the amount required to be initially paid in as contributed surplus, only if the payment does not impair the working capital of the health service corporation.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. § 26-27.1-06.

26.1-17-10. Nonprofit corporation tax exempt — Insurance premium tax — Law governing charitable organizations applicable.

Every nonprofit health service corporation is a charitable and benevolent organization and is exempt from taxation by the state or any political subdivision thereof, except that the tax imposed by section 26.1-03-17 is applicable to a corporation subject to this chapter and the real property of a nonprofit health service corporation is subject to ad valorem taxes and special assessments for special improvements. Except as otherwise provided in this chapter, the laws of this state relating to and affecting nonprofit charitable and benevolent corporations are applicable to all nonprofit health service corporations writing health service contracts.

Source:

S.L. 1983, ch. 332, § 17; 1983, ch. 333, § 10.

Derivation:

N.D.C.C. § 26-27-13.

26.1-17-11. Applicability of portion of Nonprofit Corporation Act.

Unless in conflict with this chapter, chapter 10-33 applies to the incorporation, operation, and control of any nonprofit health service corporation.

Source:

S.L. 1983, ch. 332, § 17; 1997, ch. 105, § 7.

Derivation:

N.D.C.C. §§ 26-27.1-19, 26-27.2-19.

26.1-17-12. Contract limitations.

  1. Except as provided in this section, every physician, oral surgeon, dentist, or practitioner licensed and registered in this state has the right to contract with any health service corporation for furnishing general or special medical care, dental care, or optometric care, as the case may be. A corporation may not impose any restriction as to the methods of diagnosis or treatment. The private relationship of physician and patient, dentist and patient, or practitioner and patient is to be maintained at all times and the subscriber has the right of free choice in selecting any physician, oral surgeon, dentist, or practitioner.
  2. The governing board of a health service corporation that writes hospital or medical service contracts may terminate a practitioner’s participating contract, designate a practitioner as nonpayable, or otherwise impose reasonable sanctions on any practitioner who continues to engage in a practice pattern that is excessive or inappropriate as compared to the practice pattern for the practitioner’s specialty after having been informed by the corporation, in writing, as to the manner in which the practitioner’s practice pattern is excessive or inappropriate. The corporation shall consult with the practitioner and provide a reasonable time period of not less than six months within which to modify the practitioner’s practice pattern. If, after terminating a practitioner’s participating contract with the corporation, the practitioner’s practice pattern continues to be excessive or inappropriate, the corporation’s central professional services committee may consider recommending to the board that the practitioner be designated nonpayable. The affected practitioner must be given the right to be present and to be heard by the committee which must include representation of the practitioner’s specialty. The board may not designate a practitioner as nonpayable in the absence of the committee’s recommendation to do so. All reports, data, and proceedings of the corporation relative to a practitioner who is considered for designation as nonpayable is confidential, and may not be disclosed or be subject to subpoena or other legal process. The corporation may not pay or reimburse claims of its members relating to a treatment or service that is provided by a practitioner who is designated nonpayable. Nonpayable status under this section may not commence until after appropriate notification to the corporation’s subscribers and the affected practitioner.
  3. All practitioners in a group practice shall elect participating or nonparticipating status, as a group, with the health service corporation. If a practitioner is designated as nonparticipating or nonpayable under this section, the participating or nonparticipating status of the group is not affected. “Group practice” means a group of two or more health care providers legally organized as a partnership, professional corporation, or similar association.
  4. A health service corporation may, in its discretion, by its articles of incorporation, articles of association, or bylaws, and in its contract with its subscribers, limit the benefits that the corporation will furnish, and may provide for a division of benefits it agrees to furnish into classes or kinds. In the absence of any limitation or division of services, a corporation may provide both general and special medical and surgical, dental, or optometric care benefits, including such service as may necessarily be incident to such care. A corporation may, in its discretion, limit the issuance of contracts as specified in its bylaws.
  5. A dental or optometric service contract by a health service corporation may not provide the payment of any cash indemnification by the corporation to the subscriber or the subscriber’s estate on account of death, illness, or other injury.

Source:

S.L. 1983, ch. 332, § 17; 1991, ch. 308, § 1; 1993, ch. 298, § 1.

Derivation:

N.D.C.C. §§ 26-27-08, 26-27.1-09, 26-27.2-09.

26.1-17-12.1. Services of registered nurses — Denial of benefits prohibited. [Repealed]

Repealed by S.L. 1995, ch. 246, § 32.

26.1-17-13. Group medical service contracts — Options required. [Repealed]

Repealed by S.L. 1985, ch. 316, § 22.

26.1-17-14. Prisoner’s coverage to continue — Conditions. [Repealed]

Repealed by S.L. 1985, ch. 316, § 22.

26.1-17-15. Juvenile’s coverage to continue — Conditions. [Repealed]

Repealed by S.L. 1985, ch. 316, § 22.

26.1-17-16. Services of physicians, oral surgeons, dentists, and practitioners not participating under health service plan.

A medical service plan may provide for medical services to subscribers by physicians and oral surgeons not participating under the plan, subject to the approval of the board of directors of the health service corporation. A dental service plan may provide for dental services to subscribers by dentists not participating under the plan, subject to the approval of the board of directors of the health service corporation. An optometric service plan may provide for optometric services to subscribers by practitioners not participating under the plan, subject to the approval of the board of directors of the health service corporation.

When a subscriber patient is referred by a participating physician to a nonparticipating physician, the health service corporation is to pay, without the approval of the board of directors of the corporation, to the subscriber, upon proper filing of the claim, an amount equal to ninety percent of the maximum amount which the corporation would be obligated to pay to a participating physician for identical service. If a participating physician refers a patient to a nonparticipating physician, the referring physician shall inform the patient that the physician to whom the referral is being made is nonparticipating and this may result in the patient being subject to charges greater than those to which the patient would be subject if the patient were being treated by a participating provider. The health service corporation shall provide a listing of all participating physicians to all participating physicians annually. The corporation shall provide monthly updates of the listing of the nonparticipating providers.

Source:

S.L. 1983, ch. 332, § 17; 1993, ch. 299, § 1.

Derivation:

N.D.C.C. §§ 26-27-03, 26-27.1-03, 26-27.2-03.

26.1-17-17. Coordination of benefit provisions. [Repealed]

Repealed by S.L. 1985, ch. 316, § 22.

26.1-17-18. Health service corporation contracts — Approval by commissioner.

Contracts between a health service corporation and health service providers at all times are subject to the approval of the commissioner. Contracts between health service corporations and subscribers for health service are subject to the applicable provisions of chapter 26.1-36 and are subject to the filing and approval requirements of chapter 26.1-30.

Source:

S.L. 1983, ch. 332, § 17; 1985, ch. 317, § 42.

Derivation:

N.D.C.C. §§ 26-26-08, 26-26-09, 26-27-16, 26-27.1-13, 26-27.2-13.

26.1-17-19. Effects of health service contracts.

The issuance of a health service contract by a health service corporation to a subscriber does not create the relationship of hospital and patient, physician and patient, dentist and patient, practitioner and patient, or any other similar relationship between the corporation and the subscriber. The subscriber at all times has the right to select any participating hospital, physician, oral surgeon, dentist, practitioner, or health service provider, subject to the terms and conditions of the contract. An employee, agent, officer, or member of the board of directors of any such corporation may not influence or attempt to influence any subscriber in the choosing and selecting of the hospital, physician, oral surgeon, dentist, practitioner, or other health service provider who is to care for or treat the subscriber. A civil action arising out of the relationship of hospital and patient, physician and patient, dentist and patient, practitioner and patient, or health service provider and patient may not be maintained against any health service corporation governed by this chapter. A participating practitioner has the right to engage in other practice.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-27-10, 26-27.1-11, 26-27.2-11.

26.1-17-20. Dental and optometric service in accordance with prevailing practice — Emergency service.

All dental or optometric care rendered to a subscriber under the subscriber’s contract must be in accordance with the accepted standards of dental or optometric practice prevailing in the community in which the service is rendered.

All service must be rendered by dentists and practitioners duly licensed and registered to practice their profession in this state, except that in case of emergency, and subject to the approval of the board of directors of the health service corporation, the benefits to which a subscriber is entitled under the subscriber’s contract may be rendered in another state, provided the services are rendered by a duly licensed dentist or duly licensed practitioner in the other state.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-27.1-14, 26-27.2-14.

26.1-17-21. Limitations on dental and optometric service contracts.

Every subscriber under a dental or optometric service plan must receive a copy of the contract. The contract must clearly state the care, appliances, materials, and supplies to be provided under the contract and the rate charged the subscriber. Every subscriber must have, at all times, free choice of the dentist or practitioner who is to treat the subscriber, and this right must be prominently printed in the contract. Every optometric service contract must provide that a subscriber has the freedom of choice to have the materials and supplies furnished by any practitioner or optician, the cost for which is to be covered in accordance with the terms of the contract.

Source:

S.L. 1983, ch. 332, § 17; 1991, ch. 309, § 1.

Derivation:

N.D.C.C. §§ 26-27.1-12, 26-27.2-12.

26.1-17-22. Health service for needy persons — Payments.

A health service corporation may contract with state, federal, or other governmental agencies, private agencies, corporations, associations, groups, or individuals to provide health services for needy or other persons. A health service corporation may receive from these entities payments covering the cost of all or any part of the contracts.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-26-13, 26-27-12, 26-27.1-17, 26-27.2-17.

26.1-17-23. Licensing of sales representatives.

The sales representatives of any health service corporation are subject to the laws pertaining to insurance producers as defined in chapter 26.1-26. The license for a sales representative must be issued on a form prescribed by the commissioner, and the fee for a license or renewal is prescribed in section 26.1-01-07.

Source:

S.L. 1983, ch. 332, § 17; 1985, ch. 317, § 43; 1991, ch. 301, § 10; 2001, ch. 262, § 34.

Derivation:

N.D.C.C. §§ 26-26-14, 26-27-14, 26-27.1-18, 26-27.2-18.

26.1-17-24. Unfair insurance practices.

Chapter 26.1-04 applies to health service corporations and contracts with hospitals, doctors of medicine and oral surgeons, dentists, practitioners, health service providers, and subscribers, except to the extent that the commissioner determines that the nature of health service corporations, or of any contracts issued or entered into by those corporations, renders chapter 26.1-04 clearly inappropriate.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-26-01.1, 26-27-02.1, 26-27.1-02.1, 26-27.2-02.1.

26.1-17-25. Rate requirements.

Rates must cover reasonably anticipated claims, cover reasonable costs of operation and overhead expenses, and maintain contingency reserves at a proper level of not less than the sum of incurred claims and operating and overhead expenses for at least two months, but not more than four months. Rates may not be excessive, inadequate, or unfairly discriminatory.

Source:

S.L. 1983, ch. 332, § 17; 1985, ch. 317, § 44.

Derivation:

N.D.C.C. §§ 26-26-16, 26-27-17, 26-27.1-21, 26-27.2-20.

26.1-17-26. Procedure for submitting rate filings.

  1. Each health service corporation shall file with the commissioner every manual of classifications, rates, rating formulas, rating systems, and rules applicable thereto, and any modification of the foregoing which it proposes to use. Each filing must state the proposed effective date thereof and must indicate the character and extent of the coverage contemplated. When a filing is not accompanied by supporting information, and the commissioner does not have sufficient information to determine whether the filing meets the requirements of this chapter, the commissioner shall require the corporation to furnish supporting information, and the waiting period will commence on the date the information is furnished. The information furnished in support of a filing must include the:
    1. Contract of benefits;
    2. Current rate structure;
    3. Claims experience for the most recent period up to three years;
    4. Claims experience projection for the next eighteen months;
    5. Letter of opinion from the corporation actuary; and
    6. Judgment of the corporation and its interpretation of the supporting data.
  2. The commissioner shall review the filings pursuant to sections 26.1-30-19 through 26.1-30-21 to determine whether they meet the requirements of this chapter.
  3. Under the rules the commissioner has adopted, the commissioner may, by written order, suspend or modify the requirements of filing as to any kind of contract for health services, subdivision thereof, or combination thereof, or as to any class of risks, the rates for which cannot practically be filed before they are used. The orders and rules must be made known to the health service corporation affected. The commissioner may make an examination as the commissioner deems advisable to ascertain whether any rates affected by an order meet the standards set forth in section 26.1-17-25.

A filing and any supporting information is open to public inspection after the filing becomes effective.

Upon written application by the corporation, the commissioner may authorize a filing which the commissioner has reviewed to become effective before the expiration of the waiting period or any extension thereof.

Source:

S.L. 1983, ch. 332, § 17; 1985, ch. 317, § 45.

Derivation:

N.D.C.C. §§ 26-26-17, 26-27-18, 26-27.1-22, 26-27.2-21.

26.1-17-27. Disapproval of rate filings.

  1. If the commissioner finds that a rate filing does not meet the requirements of this chapter, the commissioner shall disapprove the rate filing pursuant to section 26.1-30-21.
  2. If at any time subsequent to the applicable waiting period or extension thereof the commissioner finds that a rate filing does not meet the requirements of this chapter, the commissioner shall issue, pursuant to section 26.1-30-21, an order to that effect after a hearing. Copies of the order must be sent to the corporation.
  3. Any person or organization aggrieved with respect to any filing which is in effect, except the health service corporation which made the filing, may make written application to the commissioner for a hearing thereon. The application must specify the grounds relied upon by the applicant. If the commissioner finds that the application is made in good faith, that the applicant would be so aggrieved if the applicant’s grounds were established, and that the grounds otherwise justify holding a hearing, the commissioner shall hold, within thirty days after receipt of the application, a hearing upon not less than ten days’ written notice to the applicant and to each corporation which made the filing. If after a hearing the commissioner finds that the filing does not meet the requirements of this chapter, the commissioner shall issue an order pursuant to section 26.1-30-21. Copies of this order must be sent to the applicant and to each corporation.
  4. A manual of classifications, rules, rating plans, rating formulas, or modifications of any of the foregoing which establish standards for measuring variations in hazards or expense provisions, or both, and which has been filed pursuant to the requirements of section 26.1-17-26, may not be disapproved if the rates thereby produced meet the requirements of this chapter.

Source:

S.L. 1983, ch. 332, § 17; 1985, ch. 317, § 46.

Derivation:

N.D.C.C. §§ 26-26-18, 26-27-19, 26-27.1-23, 26-27.2-22.

26.1-17-28. Information to be furnished subscribers — Hearings and appeals of subscribers.

Each health service corporation, within a reasonable time after receiving a written request therefor, shall furnish to any subscriber with whom it has a contract and who is affected by a rate made by it, or to the authorized representative of the subscriber, all pertinent information as to the rate.

Each corporation must provide reasonable means whereby any person aggrieved by the application of its rating system, rating formula, or rate may be heard in person or through that person’s authorized representative on that person’s written request to review the manner in which the rating system, rating formula, or rate has been applied in connection with the contract issued to that person. If the corporation fails to grant or reject the request within thirty days after it is made, the applicant may proceed in the same manner as if the application has been rejected. Any party affected by the action of a corporation on such request may appeal, within thirty days after written notice of the action, to the commissioner who, after hearing held upon not less than ten days’ written notice to the appellant and to the corporation, may affirm or reverse the action.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-26-19, 26-27-20, 26-27.1-24, 26-27.2-23.

26.1-17-29. False or misleading information — Penalty.

A subscriber under a health service contract or a health service corporation may not willfully withhold information from, or give false or misleading information to, the commissioner or any statistical agency designated by the commissioner, when the information given or withheld will affect the rates or premiums chargeable under this chapter. Any subscriber or corporation who violates this section is guilty of an infraction.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-26-20, 26-27-21, 26-27.1-25, 26-27.2-24.

26.1-17-30. Investment of funds.

The funds of any health service corporation may be invested only in those investments authorized to be made by domestic insurance companies of this state. Investments made prior to July 1, 1983, are subject to the requirements for authorized investments prior to July 1, 1983, and not to the requirements for authorized investments after July 1, 1983.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-26-12, 26-27-11, 26-27.1-16, 26-27.2-16.

26.1-17-31. Annual statement.

Every health service corporation shall transmit to the commissioner, not later than March first of each year, a statement of its condition and business for the year ending on the preceding December thirty-first. The statement must be in the form and must contain the information prescribed by the commissioner.

Source:

S.L. 1983, ch. 332, § 17; 1991, ch. 301, § 11.

Derivation:

N.D.C.C. §§ 26-26-05, 26-27-06, 26-27.1-07, 26-27.2-07.

26.1-17-32. Investigation and examination.

The commissioner, or any deputy or examiner designated by the commissioner, has the right, at all reasonable times, to free access to all books and records of a health service corporation, and may summon and examine, under oath, the officers and employees of the corporation in all matters pertaining to its financial condition. The corporation must bear the expense of any examination of its books and financial condition.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-26-06, 26-27-07, 26-27.1-08, 26-27.2-08.

26.1-17-33. Liquidation — Dissolution — Merger — Consolidation.

Any involuntary liquidation and dissolution of a health service corporation is governed by chapter 26.1-07. Any voluntary liquidation and dissolution is governed by chapter 10-33. Any merger or consolidation of a health service corporation is subject to the approval of the commissioner in accordance with the procedures set forth in chapter 26.1-07, but the consolidation or merger must be accomplished under chapter 10-33.

Source:

S.L. 1983, ch. 332, § 17; 1999, ch. 50, § 43.

Derivation:

N.D.C.C. §§ 26-26-11, 26-27-09, 26-27.1-10, 26-27.2-10.

26.1-17-33.1. Nonprofit health service corporation — Conversion to nonprofit mutual insurance company — Application of law.

  1. Any nonprofit health service corporation organized under chapter 26.1-17, having admitted assets in excess of all liabilities at least equal to the original surplus required of a mutual insurance company by section 26.1-12-10, without reincorporation, and upon adoption of a resolution by its board of directors, may petition the insurance commissioner for an order to become a nonprofit mutual insurance company subject to chapter 26.1-12. For the purpose of obtaining approval from the insurance commissioner, conversion to a nonprofit mutual insurance company under this section is deemed a consolidation pursuant to chapter 26.1-07 and the procedure described therein must be followed.
  2. Upon becoming subject to chapter 26.1-12, the company may continue to provide health care and related services to its present or future members and subscribers by health care contracts and may make provision for the payment of health care services directly to hospitals and other agencies or institutions or persons rendering health care services or related services or may make direct payment to the member or subscriber. The conversion of a nonprofit health service corporation into a mutual insurance company must not impair the rights or obligations or any existing contractual rights of a health care service corporation or its members. Except as provided in this section, the laws that apply to mutual insurance companies, and insurance companies generally, apply to a nonprofit mutual insurance company converted from a nonprofit health service corporation pursuant to this section.
  3. The nonprofit corporation laws apply to the operation and control of a nonprofit mutual insurance company converted from a nonprofit health service corporation under this section and supersede any conflicting provisions in title 26.1 unless title 26.1 is more restrictive.
  4. The funds of a nonprofit mutual insurance company may be invested in those investments authorized to be made by domestic insurance companies under section 26.1-05-19, as limited by section 26.1-05-18.
  5. A nonprofit mutual insurance company may form a wholly owned company for the purpose of administering Medicare claims and engaging in other business activities that do not accept insurance risk. A company established under this subsection may form a joint venture or subsidiary to conduct one or more of the functions the nonprofit mutual insurance company could conduct directly. An officer, a director, or a management employee of the nonprofit mutual insurance company may not directly or indirectly own an interest in a subsidiary.
  6. Except as authorized under subsection 12, a nonprofit mutual insurance company may not demutualize. A nonprofit mutual insurance company may not be converted to a for-profit mutual company or to a for-profit stock company.
  7. A nonprofit mutual insurance company may avail itself of the additional investment authority under chapter 26.1-10. Upon approval by the commissioner after a showing of good cause by the nonprofit mutual insurance company, aggregate investments in all subsidiaries of the company under subsection 21 of section 26.1-05-19 and under chapter 26.1-10 may exceed an amount equal to twenty-five percent of the company’s admitted assets.
  8. A conversion of a nonprofit health service corporation to a nonprofit mutual insurance company under this section or the restructuring of a nonprofit mutual insurance company under subsection 12, to the extent that any assets of the nonprofit health service corporation or the restructured nonprofit mutual insurance company and the restructured nonprofit mutual insurance company’s nonprofit holding corporation parent formed pursuant to subsection 12 are impressed with a charitable trust immediately before the conversion or restructuring, does not give rise to a breach of the charitable trust or violate any fiduciary duty laws, and does not constitute grounds for disapproval of the petition to convert to a nonprofit mutual insurance company, the articles of incorporation of the company under section 26.1-12-04, or application for restructuring of a nonprofit mutual insurance company under subsection 12. A conversion or restructuring authorized by this section does not diminish the application of charitable trust or fiduciary duty laws that may apply to the converted or restructured company immediately before the conversion.
  9. A nonprofit mutual insurance company may not engage in the practice of medicine, dentistry, optometry, or any other profession for which a license or registration is required.
  10. Each nonprofit mutual insurance company and each nonprofit mutual insurance company and its nonprofit holding corporation parent are charitable and benevolent organizations and the laws of this state relating to and affecting nonprofit charitable and benevolent corporations are applicable to all nonprofit mutual insurance companies and restructured nonprofit mutual insurance companies and their nonprofit holding corporation parents.
  11. Except as authorized under subsection 12, a nonprofit mutual insurance company may not form a mutual insurance holding company.
  12. Upon approval of the nonprofit mutual insurance company’s board of directors, the approval of the commissioner pursuant to this subsection, and any necessary approval of the nonprofit mutual insurance company’s members, a nonprofit mutual insurance company may restructure, while remaining a nonprofit corporation, by forming a nonprofit holding corporation that will be the sole member of the restructured company.
    1. The restructured company shall retain any additional authority granted to the restructured company as a nonprofit mutual insurance company under this section and the restructured company shall remain subject to subsections 3, 4, 5, 6, 7, 8, 9, and 10, except to the extent inconsistent with this subsection and chapter 10-33.
    2. The restructured company must be treated as a mutual insurance company subject to the provisions of chapter 26.1-12, except for sections 26.1-12-01, 26.1-12-02, 26.1-12-03, 26.1-12-05, 26.1-12-06, 26.1-12-07, 26.1-12-08, 26.1-12-09, 26.1-12-10, 26.1-12-14, 26.1-12-16, 26.1-12-18, 26.1-12-19, 26.1-12-23, 26.1-12-24, 26.1-12-25, 26.1-12-26, 26.1-12-29, and 26.1-12-30.
    3. The restructured company may elect to use the term “mutual” in the company’s name, marketing materials, and other communications.
    4. The nonprofit holding corporation is subject to the provisions of sections 26.1-12-06, 26.1-12-07, 26.1-12-14, and 26.1-12-16. After restructuring under this subsection, chapter 26.1-12.1 does not apply to the restructured company or the restructured company’s nonprofit holding corporation parent.
    5. The membership interests of the members of the restructuring company must be converted into membership interests in the nonprofit holding corporation; however, notwithstanding section 26.1-12-14, upon the effective date of the restructuring, such membership interests may be weighted or otherwise adjusted to reflect the number of subscribers covered under a particular policy. Concomitantly with the restructuring, and without complying with sections 26.1-10-05 and 26.1-10-05.1, the restructuring company may transfer or assign the restructuring company’s shares, membership units, or other incidents of ownership in one or more of the restructuring company’s subsidiaries and affiliates, as well as the restructuring company’s workforce, to the nonprofit holding corporation.
    6. The restructuring company shall submit an application for restructuring, consisting of revised articles and bylaws, the articles and bylaws of the nonprofit holding company, any share or membership interest transfer documents, authorizing resolutions and other materials the restructuring company deems pertinent to the restructuring to the commissioner. The commissioner shall approve the restructuring unless, after a public hearing, the commissioner finds:
      1. After the change of control, the domestic insurance company referenced in subsection 1 would not be able to satisfy the requirements for the issuance of a certificate of authority to write the lines of insurance for which the domestic insurance company is presently licensed;
      2. The effect of the merger or other acquisition of control would be to substantially lessen competition in insurance in this state or tend to create a monopoly in this state;
      3. The financial condition of any acquiring party might jeopardize the financial stability of the insurance company or prejudice the interest of the insurance company’s policyholders;
      4. The acquiring party’s plans or proposals to liquidate the insurance company, to sell the insurance company’s assets, to consolidate or merge with any person, or to make any other material change in the insurance company’s business or corporate structure or management are unfair and unreasonable to policyholders of the company and are not in the public interest;
      5. The competence, experience, and integrity of those persons that would control the operation of the insurance company are such that it would not be in the interest of policyholders of the company and of the public to permit the merger or other acquisition of control; or
      6. The acquisition is likely to be hazardous or prejudicial to the insurance-buying public.
    7. Within thirty days of submission of the application to the commissioner under this subsection, the commissioner shall make written findings, conclusions, and a determination on the application.
  13. A merger or consolidation of a nonprofit mutual insurance company that has been restructured under subsection 12, merger or consolidation of the restructured nonprofit mutual insurance company’s nonprofit holding corporation parent, acquisition of control of either, or acquisition of another insurer by the restructured company or the restructured company’s nonprofit holding corporation parent is subject to the provisions of sections 26.1-10-03 and 26.1-10-03.1 and chapter 26.1-07 which would be applicable to the type of transaction involved.
  14. This section does not supersede or impair the rights, powers, or authority of the attorney general or courts of this state established by statute, case law, or common law with respect to charitable or benevolent corporations.

Source:

S.L. 1987, ch. 349, § 1; 1997, ch. 253, §§ 1, 2; 1999, ch. 262, § 1; 2003, ch. 242, § 1; 2007, ch. 262, § 1; 2013, ch. 231, § 1; 2015, ch. 209, § 3, eff July 1, 2015.

26.1-17-34. Hearing procedure and judicial review.

  1. Any health service corporation aggrieved by any order or decision of the commissioner made without a hearing, within thirty days after notice of the order to the corporation, may make written request to the commissioner for a hearing thereon. The commissioner shall hear the party within twenty days after receipt of the request and shall give not less than ten days’ written notice of the time and place of the hearing. Within fifteen days after the hearing, the commissioner shall affirm, reverse, or modify the previous action specifying the reasons therefor. Pending a hearing and decision thereon, the commissioner may suspend or postpone the effective date of the previous action.
  2. This chapter does not require the observance at any hearing of formal rules of pleading or evidence.

Source:

S.L. 1983, ch. 332, § 17.

Derivation:

N.D.C.C. §§ 26-26-21, 26-27-22, 26-27.1-26, 26-27.2-25.

CHAPTER 26.1-17.1 Prepaid Limited Health Service Organizations

26.1-17.1-01. Definitions.

As used in this chapter, unless otherwise defined in this chapter:

  1. “Enrollee” means an individual, including dependents, who is entitled to limited health services pursuant to a contract with an entity authorized to provide or arrange for such services under this chapter.
  2. “Evidence of coverage” means the certificate, agreement, or contract issued pursuant to section 26.1-17.1-08 setting forth the coverage to which an enrollee is entitled.
  3. “Limited health service” means dental care services, vision care services, mental health services, substance abuse services, pharmaceutical services, podiatric care services, and such other services as may be determined by the commissioner to be limited health services. Limited health service may not include hospital, medical, surgical, or emergency services except as such services are provided incident to the limited health services set forth in the preceding sentence.
  4. “Net equity” means the excess of total assets over total liabilities, excluding liabilities which have been subordinated in a manner acceptable to the commissioner.
  5. “Prepaid limited health service organization” means any corporation, partnership, or other entity which, in return for a prepayment, undertakes to provide or arrange for the provision of one or more limited health services to enrollees. Prepaid limited health service organization does not include:
    1. An entity otherwise authorized pursuant to the laws of this state either to provide any limited health service on a prepayment or other basis or to indemnify for any limited health service;
    2. An entity that meets the requirements of section 26.1-17.1-06; or
    3. A provider or entity when providing or arranging for the provision of limited health services pursuant to a contract with a prepaid limited health service organization or with an entity described in subdivision a or b.
  6. “Provider” means any physician, dentist, health facility, or other person or institution which is duly licensed or otherwise authorized to deliver or furnish limited health services.
  7. “Subscriber” means the person whose employment or other status, except for family dependency, is the basis for entitlement to limited health services pursuant to a contract with an entity authorized to provide or arrange for such services under this chapter.
  8. “Tangible net equity” means net equity reduced by the value assigned to intangible assets including goodwill; going-concern value; organizational expense; startup costs; long-term prepayments of deferred charges; nonreturnable deposits; and obligations of officers, directors, owners, or affiliates, except short-term obligations of affiliates for goods or services arising in the normal course of business which are payable on the same terms as equivalent transactions with nonaffiliates and which are not past-due.
  9. “Uncovered expense” means the cost of health care services that are the obligation of a prepaid limited health services organization for which an enrollee may be liable in the event of the insolvency of the organization and for which alternative arrangements acceptable to the commissioner have not been made to cover the costs. Costs incurred by a provider who has agreed in writing not to bill enrollees, except for permissible supplemental charges, must be considered a covered expense.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-02. Certificate of authority required.

A person, corporation, partnership, or other entity may not operate a prepaid limited health service organization in this state without obtaining and maintaining a certificate of authority from the commissioner pursuant to this chapter.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-03. Application for certificate of authority.

An application for a certificate of authority to operate a prepaid limited health service organization must be filed with the commissioner on a form prescribed by the commissioner. Such application must be verified by an officer or authorized representative of the applicant and must set forth, or be accompanied by, the following:

  1. A copy of the applicant’s basic organizational document, such as the articles of incorporation, articles of association, partnership agreement, trust agreement, or other applicable documents and all amendments to such documents.
  2. A copy of all bylaws, rules and regulations, or similar documents, if any, regulating the conduct of the applicant’s internal affairs.
  3. A list of the names, addresses, official positions, and biographical information of the individuals who are responsible for conducting the applicant’s affairs, including all members of the board of directors, board of trustees, executive committee, or other governing board or committee, the principal officers, and any person or entity owning or having the right to acquire ten percent or more of the voting securities of the applicant, and the partners or members in the case of a partnership or association.
  4. A statement generally describing the applicant, its facilities, personnel, and the limited health service or services to be offered.
  5. A copy of the form of any contract made or to be made between the applicant and any providers regarding the provision of limited health services to enrollees.
  6. A copy of the form of any contract made or to be made between the applicant and any person listed in subsection 3.
  7. A copy of the form of any contract made or to be made between the applicant and any person, corporation, partnership, or other entity for the performance on the applicant’s behalf of any functions, including the following:
    1. Marketing and enrollment.
    2. Administration.
    3. Investment management.
    4. Subcontracting for the provision of the limited health service to enrollees.
  8. A copy of the form of any contract which is to be issued to employers, unions, trustees, or other organizations or individuals and a copy of any form of evidence of coverage to be issued to subscribers or enrollees.
  9. A copy of the applicant’s most recent financial statements audited by independent certified public accountants. If the financial affairs of the applicant’s parent company are audited by independent certified public accountants but those of the applicant are not, then a copy of the most recent audited financial statement of the applicant’s parent company, certified by an independent certified public accountant, attached to which will be consolidating financial statements of the applicant, satisfies this requirement unless the commissioner determines that additional or more recent financial information is required for the proper administration of this chapter.
  10. A copy of the applicant’s financial plan, including a three-year projection of anticipated operating results, a statement of the sources of working capital, and any other sources of funding and provisions for contingencies.
  11. A schedule of rates and charges.
  12. A description of the proposed method of marketing.
  13. A statement acknowledging that all lawful process in any legal action or proceeding against the applicant on a cause of action arising in this state is valid if served upon the commissioner.
  14. A description of the complaint procedures to be established and maintained as required under section 26.1-17.1-12.
  15. A description of the quality assessment and utilization review procedures to be utilized by the applicant.
  16. A description of how the applicant will comply with section 26.1-17.1-17.
  17. The fee for issuance of a certificate of authority provided in section 26.1-17.1-23.
  18. Such other information as the commissioner may reasonably require to make the determinations required by this chapter.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-04. Issuance of certificate of authority — Denial.

  1. Following receipt of an application filed pursuant to section 26.1-17.1-03, the commissioner shall review such application and notify the applicant of any deficiencies. The commissioner shall issue a certificate of authority to an applicant provided that the following conditions are met:
    1. The requirements of section 26.1-17.1-03 have been fulfilled.
    2. The individuals responsible for conducting the applicant’s affairs are competent, trustworthy, and possess good reputations, and have had appropriate experience, training, or education.
    3. The applicant is financially responsible and may reasonably be expected to meet its obligations to enrollees and to prospective enrollees. In making this determination, the commissioner may consider:
      1. The financial soundness of the applicant’s arrangements for limited health services and the minimum standard rates, deductibles, copayments, and other patient charges used in connection therewith.
      2. The adequacy of working capital, other sources of funding, and provisions for contingencies.
      3. Any agreement for paying the cost of the limited health services or for alternative coverage in the event of insolvency of the prepaid limited health service organization.
      4. The manner in which the requirements of section 26.1-17.1-17 have been fulfilled.
    4. The agreements with providers for the provision of limited health services contain the provisions required by section 26.1-17.1-16.
    5. Any deficiencies identified by the commissioner have been corrected.
  2. If the certificate of authority is denied, the commissioner shall notify the applicant and shall specify the reasons for denial in the notice. The applicant has thirty days from the date of receipt of the notice to request a hearing before the commissioner pursuant to chapter 28-32.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-05. Effect on organizations operating on effective date of this chapter.

Within ninety days after August 1, 1993, every prepaid limited health service organization operating in this state without a certificate of authority shall submit an application for a certificate of authority to the commissioner. Each such organization may continue to operate during the pendency of its application. In the event an application is denied under this section, the applicant will then be treated as a prepaid limited health service organization whose certificate of authority has been revoked.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-06. Filing requirements for authorized entities.

  1. Any entity authorized pursuant to the laws of this state to operate a health maintenance organization, an accident and health insurance company, a nonprofit health, hospital, or medical service corporation, or a fraternal benefit society and which is not otherwise authorized pursuant to the laws of this state to offer limited health services on a per capita or fixed prepayment basis may do so by filing for approval with the commissioner the information requested by subsections 4, 5, 7, 8, 10, 11, 12, and 15 of section 26.1-17.1-03 and any subsequent material modification or addition thereto.
  2. Following approval by the commissioner of the filing in subsection 1, and upon application by the entity and surrender of its original certificate of authority, the commissioner may issue a new certificate of authority under this chapter. The entity will be subject to the capitalization requirements under its original certificate of authority and the net equity and deposit provisions of section 26.1-17.1-17 do not apply.
  3. If the commissioner disapproves the filing, the procedures set forth in subsection 2 of section 26.1-17.1-04 must be followed.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-07. Changes in rates and benefits and material modifications — Addition of limited health services.

  1. A prepaid limited health service organization shall file with the commissioner, prior to use, a notice of any change in rates, charges, or benefits and of any material modification of any matter or document furnished pursuant to section 26.1-17.1-03, together with such supporting documents as are necessary to fully explain the change or modification.
  2. If a prepaid limited health service organization desires to add one or more limited health services, it shall file a notice with the commissioner and, at the same time, shall submit the information required by section 26.1-17.1-03 and shall demonstrate compliance with sections 26.1-17.1-16, 26.1-17.1-17, and 26.1-17.1-23.
  3. A change or modification filed with the commissioner pursuant to subsections 1 and 2 may be used by the prepaid limited health service organization only after approval by the commissioner or upon the expiration of sixty days from the date of filing.
  4. If such filings are disapproved, the commissioner shall notify the prepaid limited health service organization and shall specify the reasons for disapproval in the notice. The prepaid limited health service organization has thirty days from the date of receipt of notice to request a hearing before the commissioner pursuant to chapter 28-32.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-08. Evidence of coverage.

  1. Every subscriber must be issued an evidence of coverage, which must contain a clear and complete statement of:
    1. The limited health services to which each enrollee is entitled.
    2. Any limitation of the services, kinds of services or benefits to be provided, and exclusions, including any deductible, copayment, or other charges.
    3. Where and in what manner information is available as to where and how services may be obtained.
    4. The method for resolving complaints.
  2. Any amendment to the evidence of coverage may be provided to the subscriber in a separate document.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-09. Rates and charges.

The rates and charges must be reasonable in relation to the services provided. The commissioner may request information from the prepaid limited health service organization supporting the appropriateness of the rates and charges.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-10. Construction with other laws.

    1. A prepaid limited health service organization organized under the laws of this state must be deemed to be a domestic insurer for purposes of chapter 26.1-10 unless specifically exempted in writing from one or more of the provisions of such act by the commissioner.
    2. A prepaid limited health service organization is subject to chapter 26.1-04.
    3. No other provision of the insurance code applies to a prepaid limited health service organization unless such an organization is specifically mentioned therein, or unless otherwise provided in this chapter.
  1. The provision of limited health services by a prepaid limited health service organization or other entity pursuant to this chapter may not be deemed to be the practice of medicine or other healing arts.
  2. Solicitation to arrange for or provide limited health services in accordance with this chapter may not be construed to violate any provision of law relating to solicitation or advertising by health professionals.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-11. Nonduplication of coverage.

Notwithstanding any other law of this state, a prepaid limited health service organization, health maintenance organization, accident and health insurance company, nonprofit health or hospital or medical service corporation, or fraternal benefit society may exclude, in any contract or policy issued to a group, any coverage that would duplicate the coverage for limited health services, whether in the form of services, supplies, or reimbursement, insofar as the coverage or service is provided in accordance with this chapter under a contract or policy issued to the same group or to a part of that group by a prepaid limited health service organization, a health maintenance organization, an accident and health insurance company, a nonprofit health or hospital or medical service corporation, or a fraternal benefit society.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-12. Complaint system.

Every prepaid limited health service organization shall establish and maintain a complaint system providing reasonable procedures for resolving written complaints initiated by enrollees and providers. Nothing herein may be construed to preclude an enrollee or a provider from filing a complaint with the commissioner or as limiting the commissioner’s ability to investigate such complaints.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-13. Examination of organization.

  1. For purposes of examination, expenses of examination, and tax credits therefor, each prepaid limited health service organization is subject to the laws applicable to insurance companies.
  2. In lieu of such examination, the commissioner may accept the report of an examination made by the commissioner of another state.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-14. Investments.

The funds of a prepaid limited health service organization may be invested only in accordance with the laws and rules applicable to insurance companies.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-15. Insurance producers.

No individual may apply, procure, negotiate, or place for others any policy or contract of a prepaid limited health service organization unless that individual holds a license or is otherwise duly authorized to sell accident and health insurance policies, health, hospital or medical service contracts, or health maintenance organization contracts.

Source:

S.L. 1993, ch. 300, § 1; 2001, ch. 262, § 35.

26.1-17.1-16. Contracts with providers.

All contracts with providers or with entities subcontracting for the provision of limited health services to enrollees on a prepayment or other basis must contain or must be construed to contain the following terms and conditions:

  1. In the event the prepaid limited health service organization fails to pay for limited health services for any reason whatsoever, including insolvency or breach of this contract, the enrollees are not liable to the provider for any sums owed to the provider under this contract.
  2. No provider, agent, trustee, or assignee thereof may maintain an action at law or attempt to collect from the enrollee sums owed to the provider by the prepaid limited health service organization.
  3. These provisions do not prohibit collection of uncovered charges consented to by enrollees or collection of copayments from enrollees.
  4. These provisions survive the termination of this contract, regardless of the reason giving rise to termination.
  5. Termination of this contract does not release the provider from completing procedures in progress on enrollees then receiving treatment for a specific condition for a period not to exceed sixty days, at the same schedule of copayment or other applicable charge in effect upon the effective date of termination of this contract.
  6. Any amendment to these foregoing provisions of this contract must be submitted to and be approved by the commissioner prior to becoming effective.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-17. Protection against insolvency — Deposit.

    1. Except as approved in accordance with subsection 3, each prepaid limited health service organization shall, at all times, have and maintain tangible net equity equal to the greater of:
      1. Fifty thousand dollars; or
      2. Two percent of the organization’s annual gross premium income, up to a maximum of the required capital and surplus of an accident and health insurer.
    2. A prepaid limited health service organization that has uncovered expenses in excess of fifty thousand dollars, as reported on the most recent annual financial statement filed with the commissioner, shall maintain tangible net equity equal to twenty-five percent of the uncovered expense in excess of fifty thousand dollars in addition to the tangible net equity required by subdivision a of subsection 1.
    1. Each prepaid limited health service organization shall deposit with the commissioner or with any organization or trustee acceptable to the commissioner through which a custodial or controlled account is utilized, cash, securities, or any combination of these or other measures that is acceptable to the commissioner in an amount equal to twenty-five thousand dollars plus twenty-five percent of the tangible net equity required in subsection 1; provided, however, that the deposit may not be required to exceed one hundred thousand dollars.
    2. The deposit shall be an admitted asset of the prepaid limited health service organization in the determination of tangible net equity.
    3. All income from deposits shall be an asset of the prepaid limited health service organization. A prepaid limited health service organization may withdraw a deposit or any part thereof after making a substitute deposit of equal amount and value. Any securities must be approved by the commissioner before being substituted.
    4. The deposit must be used to protect the interests of the prepaid limited health service organization’s enrollees and to assure continuation of limited health care services to enrollees of a prepaid limited health service organization that is in rehabilitation or conservation. If a prepaid limited health service organization is placed in receivership or liquidation, the deposit shall be an asset subject to provisions of the liquidation act.
    5. The commissioner may reduce or eliminate the deposit requirement if the prepaid limited health service organization has made an acceptable deposit with the state or jurisdiction of domicile for the protection of all enrollees, wherever located, and delivers to the commissioner a certificate to such effect, duly authenticated by the appropriate state official holding the deposit.
  1. The commissioner may waive the requirements of subsections 1 and 2 upon a finding that:
    1. The prepaid limited health service organization has a net equity of at least five million dollars; or
    2. An entity having a net equity of at least five million dollars furnishes to the commissioner a written commitment, which is acceptable to the commissioner, to provide for the uncovered expenses of the prepaid limited health service organization.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-18. Officers and employees fidelity bond.

  1. A prepaid limited health service organization shall maintain in force a fidelity bond in its own name on its officers and employees in an amount not less than fifty thousand dollars or in any other amount prescribed by the commissioner. Except as otherwise provided by this subsection, the bond must be issued by an insurance company that is licensed to do business in this state or, if the fidelity bond required by this subsection is not available from an insurance company that holds a certificate of authority in this state, a fidelity bond procured by a licensed surplus lines insurance producer in this state shall satisfy the requirements of this subsection.
  2. In lieu of the bond specified in subsection 1, a prepaid limited health service organization may deposit with the commissioner cash or securities or other investments of the types set forth in section 26.1-17.1-14. Such a deposit must be maintained in joint custody with the commissioner in the amount and subject to the same conditions required for a bond under this subsection.

Source:

S.L. 1993, ch. 300, § 1; 2001, ch. 262, § 36.

26.1-17.1-19. Reports.

  1. Every prepaid limited health service organization shall file with the commissioner annually, on or before March first, a report verified by at least two principal officers covering the preceding calendar year.
  2. Such report must be on forms prescribed by the commissioner and must include:
    1. A financial statement of the organization, including its balance sheet, income statement, and statement of changes in financial position for the preceding year, certified by an independent public accountant or a consolidated audited financial statement of its parent company certified by an independent public accountant, attached to which must be consolidating financial statements of the prepaid limited health service organization.
    2. The number of subscribers at the beginning of the year, the number of subscribers as of the end of the year, and the number of enrollments terminated during the year.
    3. Such other information relating to the performance of the organization as is necessary to enable the commissioner to carry out the duties under this chapter.
  3. The commissioner may require more frequent reports containing such information as is necessary to enable the commissioner to carry out the duties under this chapter.
  4. The commissioner may assess a fine of up to one hundred dollars per day for each day any required report is late, and the commissioner may suspend the organization’s certificate of authority pending the proper filing of the required report by the organization.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-20. Suspension or revocation of certificate of authority.

  1. The commissioner may suspend or revoke the certificate of authority issued to a prepaid limited health service organization pursuant to this chapter upon determining that any of the following conditions exist:
    1. The prepaid limited health service organization is operating significantly in contravention of its basic organizational document or in a manner contrary to that described in and reasonably inferred from any other information submitted pursuant to section 26.1-17.1-03, unless amendments to such submissions have been filed and authorized pursuant to section 26.1-17.1-07.
    2. The prepaid limited health service organization issues an evidence of coverage or uses rates or charges which do not comply with the requirements of sections 26.1-17.1-08 and 26.1-17.1-09.
    3. The prepaid limited health service organization is unable to fulfill its obligations to furnish limited health services.
    4. The prepaid limited health service organization is not financially responsible and may reasonably be expected to be unable to meet its obligations to enrollees or prospective enrollees.
    5. The tangible net equity of the prepaid limited health service organization is less than that required by section 26.1-17.1-17 or the prepaid limited health service organization has failed to correct any deficiency in its tangible net equity as required by the commissioner.
    6. The prepaid limited health service organization has failed to implement in a reasonable manner the complaint system required by section 26.1-17.1-12.
    7. The continued operation of the prepaid limited health service organization would be hazardous to its enrollees.
    8. The prepaid limited health service organization has otherwise failed to comply with this chapter.
  2. If the commissioner has cause to believe that grounds for the suspension or revocation of a certificate of authority exist, the commissioner shall notify the prepaid limited health service organization in writing specifically stating the grounds for suspension or revocation and fixing a time not more than sixty days thereafter for a hearing on the matter in accordance with chapter 28-32.
  3. When the certificate of authority of a prepaid limited health service organization is revoked, such organization shall proceed, immediately following the effective date of the order of revocation, to wind up its affairs, and shall conduct no further business except as may be essential to the orderly conclusion of the affairs of such organization. It shall engage in no further advertising or solicitation whatsoever. The commissioner may, by written order, permit such further operation of the organization as the commissioner may find to be in the best interest of the enrollees, to the end that the enrollees will be afforded the greatest practical opportunity to obtain continuing limited health services.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-21. Penalties.

In lieu of any penalty specified elsewhere in this chapter, or when no penalty is specifically provided, whenever any prepaid limited health service organization or other person, corporation, partnership, or entity subject to this chapter has been found after hearing to have violated any provision of this chapter, the commissioner may:

  1. Issue and cause to be served upon the organization, person, or entity charged with the violation a copy of such findings and an order requiring such organization, person, or entity to cease and desist from engaging in the act or practice which constitutes the violation.
  2. Impose a monetary penalty of not more than one thousand dollars for each violation, but not to exceed an aggregate penalty of ten thousand dollars.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-22. Rehabilitation, conservation, or liquidation.

  1. Any rehabilitation, conservation, or liquidation of a prepaid limited health service organization must be deemed to be the rehabilitation, conservation, or liquidation of an insurance company and must be conducted pursuant to chapter 26.1-06.1.
  2. Prepaid limited health service organizations are not subject to chapter 26.1-38.1, nor do the protections provided by chapter 26.1-38.1 apply to any individuals entitled to receive limited health services from a prepaid limited health service organization.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-23. Fees.

Every prepaid limited health service organization is subject to the fees set out in section 26.1-01-07.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-24. Confidentiality.

  1. Any information pertaining to the diagnosis, treatment, or health of any enrollee obtained from such person or from any provider by any prepaid limited health service organization and any contract with providers submitted pursuant to the requirements of this chapter must be held in confidence and may not be disclosed to any person except:
    1. To the extent that it may be necessary to carry out the purposes of this chapter;
    2. Upon the express consent of the enrollee or applicant, provider, or prepaid limited health service organization, as appropriate;
    3. Pursuant to statute or court order for the production of evidence or the discovery thereof; or
    4. In the event of claim or litigation wherein such data or information is relevant.
  2. With respect to any information pertaining to the diagnosis, treatment, or health of any enrollee or applicant, a prepaid limited health service organization is entitled to claim any statutory privileges against disclosure which the provider who furnished such information to the prepaid limited health service organization is entitled to claim.
  3. In addition, any information provided to the commissioner that constitutes a trade secret, is privileged information, or is part of a department investigation or examination must be held in confidence.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-25. Taxes.

Every prepaid limited health service organization is subject to the tax provided in section 26.1-03-17 as it pertains to health maintenance organizations, and each prepaid limited health service organization is entitled to the same tax deductions, reductions, abatements, and credits that health maintenance organizations are entitled to receive.

Source:

S.L. 1993, ch. 300, § 1.

26.1-17.1-26. Rulemaking.

The commissioner may adopt reasonable rules necessary in the implementation of this chapter.

Source:

S.L. 1993, ch. 300, § 1.

CHAPTER 26.1-18 Health Maintenance Organizations [Repealed]

[Repealed by S.L. 1993, ch. 292, § 49]

CHAPTER 26.1-18.1 Health Maintenance Organizations

26.1-18.1-01. Definitions.

  1. “Basic health care services” means the following medically necessary services: preventive care, emergency care, inpatient and outpatient hospital and physician care, diagnostic laboratory, and diagnostic and therapeutic radiological services.
  2. “Capitated basis” means fixed per member per month payment or percentage of premium payment wherein the provider assumes the full risk for the cost of contracted services without regard to the type, value, or frequency of services provided. For purposes of this definition, capitated basis includes the cost associated with operating staff model facilities.
  3. “Carrier” means a health maintenance organization, an insurer, a nonprofit hospital and medical service corporation, or other entity responsible for the payment of benefits or provision of services under a group contract.
  4. “Copayment” means an amount an enrollee must pay in order to receive a specific service which is not fully prepaid.
  5. “Deductible” means the amount an enrollee is responsible to pay out of pocket before the health maintenance organization begins to pay the costs associated with treatment.
  6. “Enrollee” means an individual who is covered by a health maintenance organization.
  7. “Evidence of coverage” means a statement of the essential features and services of the health maintenance organization coverage which is given to the subscriber by the health maintenance organization or by the group contractholder.
  8. “Extension of benefits” means the continuation of coverage under a particular benefit provided under a contract following termination with respect to an enrollee who is totally disabled on the date of termination.
  9. “Grievance” means a written complaint submitted in accordance with the health maintenance organization’s formal grievance procedure by or on behalf of the enrollee regarding any aspect of the health maintenance organization relative to the enrollee.
  10. “Group contract” means a contract for health care services which by its terms limits eligibility to members of a specified group. The group contract may include coverage for dependents.
  11. “Group contractholder” means the person to which a group contract has been issued.
  12. “Health maintenance organization” means any person that undertakes to provide or arrange for the delivery of basic health care services to enrollees on a prepaid basis, except for enrollee responsibility for copayments or deductibles or both. However, a qualified program of all-inclusive care for the elderly is not a health maintenance organization.
  13. “Health maintenance organization producer” means an insurance producer, as defined in section 26.1-26-02, who solicits, negotiates, effects, procures, delivers, renews, or continues a policy or contract for health maintenance organization membership, or who takes or transmits a membership fee or premium for such a policy or contract, other than for that person, or a person who advertises or otherwise holds out to the public as such.
  14. “Individual contract” means a contract for health care services issued to and covering an individual. The individual contract may include dependents of the subscriber.
  15. “Insolvent” or “insolvency” means that the organization has been declared insolvent and placed under an order of liquidation by a court of competent jurisdiction.
  16. “Managed hospital payment basis” means agreements wherein the financial risk is primarily related to the degree of utilization rather than to the cost of services.
  17. “Net worth” means the excess of total admitted assets over total liabilities, but the liabilities do not include fully subordinated debt.
  18. “Participating provider” means a provider as defined in subsection 19 who, under an express or implied contract with the health maintenance organization or with its contractor or subcontractor, has agreed to provide health care services to enrollees with an expectation of receiving payment, other than copayment or deductible, directly or indirectly from the health maintenance organization.
  19. “Provider” means any physician, hospital, or other person licensed or otherwise authorized to furnish health care services.
  20. “Qualified program of all-inclusive care for the elderly” means a program that:
    1. Is sponsored by a religious or charitable organization that is itself or is controlled by an entity organized under section 501(c)(3) of the Internal Revenue Code [26 U.S.C. 501(c)(3)];
    2. Has been approved by the centers for Medicare and Medicaid services of the United States department of health and human services to operate, and is currently operating as, a program of all-inclusive care for the elderly; and
    3. Has revenues from private pay sources which do not exceed ten percent of the program’s total revenues.
  21. “Replacement coverage” means the benefits provided by a succeeding carrier.
  22. “Subscriber” means an individual whose employment or other status, except family dependency, is the basis for eligibility for enrollment in the health maintenance organization, or in the case of an individual contract, the person in whose name the contract is issued.
  23. “Uncovered expenditures” means the costs to the health maintenance organization for health care services that are the obligation of the health maintenance organization, for which an enrollee may also be liable in the event of the health maintenance organization’s insolvency and for which no alternative arrangements have been made that are acceptable to the commissioner.

Source:

S.L. 1993, ch. 292, § 18; 2001, ch. 262, § 37; 2009, ch. 247, § 1.

Collateral References.

Liability of health maintenance organizations (HMOs) for negligence of member physicians, 51 A.L.R.5th 271.

26.1-18.1-02. Establishment of health maintenance organizations.

  1. Notwithstanding any law of this state to the contrary, any person may apply to the commissioner for a certificate of authority to establish and operate a health maintenance organization in compliance with this chapter. No person may establish or operate a health maintenance organization in this state without obtaining a certificate of authority under this chapter. A foreign corporation may qualify under this chapter, subject to obtaining a certificate of authority as a foreign corporation under section 10-19.1-136 and compliance with all provisions of this chapter and other applicable state laws.
  2. Any health maintenance organization that has not previously received a certificate of authority to operate as a health maintenance organization as of August 1, 1993, shall submit an application for a certificate of authority under subsection 3 within thirty days of August 1, 1993. Each applicant may continue to operate until the commissioner acts upon the application. In the event that an application is denied under section 26.1-18.1-03, the applicant must thereafter be treated as a health maintenance organization whose certificate of authority has been revoked.
  3. Each application for a certificate of authority must be verified by an officer or authorized representative of the applicant, must be in a form prescribed by the commissioner, and must set forth or be accompanied by the following:
    1. A copy of the organizational documents of the applicant, such as the articles of incorporation, articles of association, partnership agreement, trust agreement, or other applicable documents, and all amendments thereto.
    2. A copy of the bylaws, rules, and regulations, or similar document, if any, regulating the conduct of the internal affairs of the applicant.
    3. A list of the names, addresses, and official positions and biographical information on forms acceptable to the commissioner of the persons who are to be responsible for the conduct of the affairs and day-to-day operations of the applicant, including all members of the board of directors, board of trustees, executive committee, or other governing board or committee and the principal officers in the case of a corporation, or the partners or members in the case of a partnership or association.
    4. A copy of any contract form made or to be made between any class of providers and the health maintenance organization and a copy of any contract made or to be made between third-party administrators, marketing consultants, or persons listed in subdivision c and the health maintenance organization.
    5. A copy of the form of evidence of coverage to be issued to the enrollees.
    6. A copy of the form of group contract, if any, which is to be issued to employers, unions, trustees, or other organizations.
    7. Financial statements showing the applicant’s assets, liabilities, and sources of financial support, including both a copy of the applicant’s most recent and regular certified financial statement and an unaudited current financial statement.
    8. A financial feasibility plan that includes detailed enrollment projections, the methodology for determining premium rates to be charged during the first twelve months of operations certified by an actuary or other qualified person, a projection of balance sheets, cash flow statements showing any capital expenditures, purchase and sale of investments and deposits with the state, and income and expense statements anticipated from the start of operations until the organization has had net income for at least one year, and a statement as to the sources of working capital as well as any other sources of funding.
    9. A power of attorney duly executed by the applicant, if not domiciled in this state, appointing the commissioner and the commissioner’s successors in office, and duly authorized deputies, as the true and lawful attorney of the applicant in and for this state upon whom all lawful process in any legal action or proceeding against the health maintenance organization on a cause of action arising in this state may be served.
    10. A statement or map reasonably describing the geographic area or areas to be served.
    11. A description of the internal grievance procedures to be utilized for the investigation and resolution of enrollee complaints and grievances.
    12. A description of the proposed quality assurance program, including the formal organizational structure, methods for developing criteria, procedures for comprehensive evaluation of the quality of care rendered to enrollees, and processes to initiate corrective action and re-evaluation when deficiencies in provider or organizational performance are identified.
    13. A description of the procedures to be implemented to meet the protection against insolvency requirements in section 26.1-18.1-12.
    14. A list of the names, addresses, and license numbers of all providers with which the health maintenance organization has agreements.
    15. Such other information as the commissioner may require to make the determinations required in section 26.1-18.1-03.
    1. The commissioner may adopt rules as the commissioner deems necessary to the proper administration of this chapter to require a health maintenance organization, subsequent to receiving its certificate of authority, to submit the information, modifications, or amendments to the items described in subsection 3 to the commissioner, either for the commissioner’s approval or for information only, prior to the effectuation of the modification or amendment, or to require the health maintenance organization to indicate the modifications to the commissioner at the time of the next succeeding site visit or examination.
    2. Any modification or amendment for which the commissioner’s approval is required is deemed approved unless disapproved within thirty days, provided that the commissioner may postpone the action for such further time, not exceeding an additional thirty days, as necessary for proper consideration.

Source:

S.L. 1993, ch. 292, § 18; 1999, ch. 50, § 44.

26.1-18.1-03. Issuance of certificate of authority.

  1. Upon receipt of an application for issuance of a certificate of authority, the commissioner shall issue a certificate of authority to any person filing a completed application upon receiving the prescribed fees and upon the commissioner being satisfied that:
    1. The persons responsible for the conduct of the affairs of the applicant are competent, trustworthy, and possess good reputations.
    2. The health maintenance organization’s proposed plan of operation meets the requirements of section 26.1-18.1-06.
    3. The health maintenance organization will effectively provide or arrange for the provision of basic health care services on a prepaid basis, through insurance or otherwise, except to the extent of reasonable requirements for copayments or deductibles.
    4. The health maintenance organization is in compliance with sections 26.1-18.1-12 and 26.1-18.1-14.
  2. A certificate of authority may be denied only after the commissioner complies with the requirements of section 26.1-18.1-19.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-03.1. Bond or insurance requirement.

A qualified program of all-inclusive care for the elderly that operates in this state shall maintain a surety bond, in the amount of two hundred fifty thousand dollars. Any surety bond issued under this section must authorize recovery by the commissioner on behalf of any person in this state that sustained damages as the result of unfair practices, conviction of fraud, or failure by a qualified program of all-inclusive care for the elderly to perform a contractual obligation owed to the person.

Source:

S.L. 2009, ch. 247, § 2.

26.1-18.1-04. Powers of health maintenance organizations.

  1. The powers of a health maintenance organization include the following:
    1. The purchase, lease, construction, renovation, operation, or maintenance of hospitals, medical facilities, or both, and their ancillary equipment, and such property as may reasonably be required for its principal office or for such purposes as may be necessary in the transaction of the business of the organization.
    2. Transactions between affiliated entities, including loans and the transfer of responsibility under all contracts between affiliates or between the health maintenance organization and its parent.
    3. The furnishing of health care services through providers, provider associations, or agents for providers which are under contract with or employed by the health maintenance organization.
    4. The contracting with any person for the performance on its behalf of certain functions such as marketing, enrollment, and administration.
    5. The contracting with an insurance company licensed in this state, or with a hospital or medical service corporation authorized to do business in this state, for the provision of insurance, indemnity, or reimbursement against the cost of health care services provided by the health maintenance organization.
    6. The offering of other health care services, in addition to basic health care services. Nonbasic health care services may be offered by a health maintenance organization on a prepaid basis without offering basic health care services to any group or individual.
    7. The joint marketing of products with an insurance company licensed in this state or with a hospital or medical service corporation authorized to do business in this state as long as the company that is offering each product is clearly identified.
    1. A health maintenance organization shall file notice, with adequate supporting information, with the commissioner prior to the exercise of any power granted in subdivisions a, b, and d of subsection 1 which may affect the financial soundness of the health maintenance organization. The commissioner shall disapprove the exercise of power only if in the commissioner’s opinion it would substantially and adversely affect the financial soundness of the health maintenance organization and endanger its ability to meet its obligations.
    2. The commissioner may adopt rules exempting from the filing requirement of subdivision a those activities having a de minimis effect.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-05. Fiduciary responsibilities.

  1. Any director, officer, employee, or partner of a health maintenance organization who receives, collects, disburses, or invests funds in connection with the activities of the organization is responsible for the funds in a fiduciary relationship to the organization.
  2. If the commissioner deems it necessary for the security of the funds of a health maintenance organization, the commissioner may require an official bond of each officer and each employee of the organization in an amount not to exceed the sum of money for which each is accountable.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-06. Quality assurance program.

  1. The health maintenance organization shall establish procedures to assure that the health care services provided to enrollees will be rendered under reasonable standards of quality of care consistent with prevailing professionally recognized standards of medical practice. The procedures must include mechanisms to assure availability, accessibility, and continuity of care.
  2. The health maintenance organization must have an ongoing internal quality assurance program to monitor and evaluate its health care services, including primary and specialist physician services, and ancillary and preventive health care services, across all institutional and noninstitutional settings. The program must include, at a minimum, the following:
    1. A written statement of goals and objectives which emphasizes improved health status in evaluating the quality of care rendered to enrollees.
    2. A written quality assurance plan which describes the following:
      1. The health maintenance organization’s scope and purpose in quality assurance.
      2. The organizational structure responsible for quality assurance activities.
      3. Contractual arrangements, when appropriate, for delegation of quality assurance activities.
      4. Confidentiality policies and procedures.
      5. A system of ongoing evaluation activities.
      6. A system of focused evaluation activities.
      7. A system for credentialing providers and performing peer review activities.
      8. Duties and responsibilities of the designated physician responsible for the quality assurance activities.
    3. A written statement describing the system of ongoing quality assurance activities, including:
      1. Problem assessment, identification, selection, and study.
      2. Corrective action, monitoring, evaluation, and reassessment.
      3. Interpretation and analysis of patterns of care rendered to individual patients by individual providers.
    4. A written statement describing the system of focused quality assurance activities based on representative samples of the enrolled population which identifies method of topic selection, study, data collection, analysis, interpretation, and report format.
    5. Written plans for taking appropriate corrective action whenever, as determined by the quality assurance program, inappropriate or substandard services have been provided or services which should have been furnished have not been provided.
  3. The organization shall record proceedings of formal quality assurance program activities and maintain documentation in a confidential manner. Quality assurance program minutes must be available to the commissioner.
  4. The organization shall ensure the use and maintenance of an adequate patient record system which will facilitate documentation and retrieval of clinical information for the purpose of the health maintenance organization evaluating continuity and coordination of patient care and assessing the quality of health and medical care provided to enrollees.
  5. Enrollee clinical records must be available to the commissioner or an authorized designee for examination and review to ascertain compliance with this section, or as deemed necessary by the commissioner. The clinical records are confidential and are not subject to section 44-04-18, except upon written consent for disclosure by the enrollee or the enrollee’s authorized representative.
  6. The organization shall establish a mechanism for periodic reporting of quality assurance program activities to the governing body, providers, and appropriate organization staff.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-07. Requirements for group contract, individual contract, and evidence of coverage.

    1. Every group and individual contractholder is entitled to a group or individual contract.
    2. The contract may not contain provisions or statements which are unjust, unfair, inequitable, misleading, deceptive, or which encourage misrepresentation as defined by chapter 26.1-04.
    3. The contract must contain a clear statement of the following:
      1. Name and address of the health maintenance organization.
      2. Eligibility requirements.
      3. Benefits and services within the service area.
      4. Emergency care benefits and services.
      5. Out-of-area benefits and services, if any.
      6. Copayments, deductibles, or other out-of-pocket expenses.
      7. Limitations and exclusions.
      8. Enrollee termination.
      9. Enrollee reinstatement, if any.
      10. Claims procedures.
      11. Enrollee grievance procedures.
      12. Continuation of coverage.
      13. Conversion.
      14. Extension of benefits, if any.
      15. Coordination of benefits, if applicable.
      16. Subrogation, if any.
      17. Description of the service area.
      18. Entire contract provision.
      19. Term of coverage.
      20. Cancellation of group or individual contractholder.
      21. Renewal.
      22. Reinstatement of group or individual contractholder, if any.
      23. Grace period.
      24. Conformity with state law.
  1. In addition to those provisions required in subdivision c of subsection 1, an individual contract must provide for a ten-day period to examine and return the contract and have the premium refunded. If services were received during the ten-day period, and the person returns the contract to receive a refund of the premium paid, the person must pay for the services.
    1. Every subscriber shall receive an evidence of coverage from the group contractholder or the health maintenance organization.
    2. The evidence of coverage may not contain provisions or statements which are unfair, unjust, inequitable, misleading, deceptive, or which encourage misrepresentation as defined by chapter 26.1-04.
    3. The evidence of coverage must contain a clear statement of the provisions required in subdivision c of subsection 1.
  2. The commissioner may adopt rules establishing readability standards for individual contract, group contract, and evidence of coverage forms.
  3. No group or individual contract, evidence of coverage, or amendment thereto may be delivered or issued for delivery in this state, unless its form has been filed with and approved by the commissioner, as provided by sections 26.1-30-19 and 26.1-30-20.
  4. The provisions set forth in sections 26.1-30-20 and 26.1-30-21 govern the approval and disapproval of forms required to be filed under this section.
  5. The commissioner may require the submission of whatever relevant information the commissioner deems necessary in determining whether to approve or disapprove a filing made pursuant to this section.

An evidence of coverage may be filed as part of the group contract to describe the provisions required in this subdivision.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-08. Annual report.

  1. Every domestic health maintenance organization shall annually, on or before March first, and every foreign health maintenance organization shall annually, on or before the date that its annual report is due in its domestic state, file a report verified by at least two principal officers with the commissioner, covering the preceding calendar year. The report must be on forms prescribed by the commissioner. In addition, the domestic health maintenance organization shall file by March first, and every foreign health maintenance organization shall file annually, on or before the date that its annual report is due in its domestic state, unless otherwise stated:
    1. Audited financial statements on or before June first.
    2. A list of the providers who have executed a contract that complies with subdivision a of subsection 4 of section 26.1-18.1-12.
      1. A description of the grievance procedures.
      2. The total number of grievances handled through the procedures, a compilation of the causes underlying those grievances, and a summary of the final disposition of those grievances.
  2. The commissioner may require additional reports as are deemed necessary and appropriate to enable the commissioner to carry out the commissioner’s duties under this chapter. The commissioner may waive the filing of the annual report and other information for a health maintenance organization that has discontinued its operation in this state.
  3. The commissioner may designate the national association of insurance commissioners as the repository for the filing of the annual report.

Source:

S.L. 1993, ch. 292, § 18; 2003, ch. 238, § 4; 2005, ch. 260, § 1.

26.1-18.1-09. Information to enrollees or subscribers.

  1. The health maintenance organization shall provide to its subscribers a list of providers upon enrollment and re-enrollment.
  2. Every health maintenance organization shall provide within thirty days to its subscribers notice of any material change in the operation of the organization that will affect them directly.
  3. An enrollee must be notified in writing by the health maintenance organization of the termination of the primary care provider who provided health care services to that enrollee. The health maintenance organization shall provide assistance to the enrollee in transferring to another participating primary care provider.
  4. The health maintenance organization shall provide to subscribers information on how services may be obtained, where additional information on access to services can be obtained, and a telephone number where the enrollee can contact the health maintenance organization, at no cost to the enrollee.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-10. Grievance procedures.

  1. Every health maintenance organization shall establish and maintain a grievance procedure which has been approved by the commissioner to provide procedures for the resolution of grievances initiated by enrollees. The health maintenance organization shall maintain records regarding grievances received since the date of its last examination of the grievances.
  2. The commissioner may examine the grievance procedures.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-11. Investments.

With the exception of investments made in accordance with subdivision a of subsection 1 of section 26.1-18.1-04, the funds of a health maintenance organization may be invested only in those investments authorized to be made by domestic insurance companies of this state.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-12. Protection against insolvency.

  1. Net worth requirements.
    1. Before issuing any certificate of authority, the commissioner shall require that the health maintenance organization have an initial net worth of one million dollars and shall thereafter maintain the minimum net worth required under subdivision b.
    2. Except as provided in subdivisions c and d, every health maintenance organization must maintain a minimum net worth equal to the greater of:
      1. One million dollars;
      2. Two percent of annual premium revenues as reported on the most recent annual financial statement filed with the commissioner on the first one hundred fifty million dollars of premium and one percent of annual premium on the premium in excess of one hundred fifty million dollars;
      3. An amount equal to the sum of three months uncovered health care expenditures as reported on the most recent financial statement filed with the commissioner; or
      4. An amount equal to the sum of:
        1. Eight percent of annual health care expenditures except those paid on a capitated basis or managed hospital payment basis as reported on the most recent financial statement filed with the commissioner; and
        2. Four percent of annual hospital expenditures paid on a managed hospital payment basis as reported on the most recent financial statement filed with the commissioner.
    3. A health maintenance organization licensed before August 1, 1993, and licensed only in this state must maintain the minimum requirements which are in effect at the time this chapter became law.
      1. In determining net worth, no debt may be considered fully subordinated unless the subordination clause is in a form acceptable to the commissioner. Any interest obligation relating to the repayment of any subordinated debt must be similarly subordinated.
      2. The interest expenses relating to the repayment of any fully subordinated debt must be considered covered expenses.
      3. Any debt incurred by a note meeting the requirements of this section, and otherwise acceptable to the commissioner, may not be considered a liability and must be recorded as equity.
  2. Deposit requirements.
    1. Unless otherwise provided below, each health maintenance organization shall deposit with the commissioner or, at the discretion of the commissioner, with any organization or trustee acceptable to the commissioner through which a custodial or controlled account is utilized, cash, securities, or any combination of these or other measures that are acceptable to the commissioner which at all times shall have a value of not less than three hundred thousand dollars.
    2. A health maintenance organization that is licensed only in this state and is in operation on August 1, 1993, shall make a deposit equal to one hundred thousand dollars.
    3. The deposit shall be an admitted asset of the health maintenance organization in the determination of net worth.
    4. All income from deposits is an asset of the organization. A health maintenance organization that has made a securities deposit may withdraw that deposit or any part thereof after making a substitute deposit of cash, securities, or any combination of these or other measures of equal amount and value. Any securities must be approved by the commissioner before being deposited or substituted.
    5. The deposit must be used to protect the interests of the health maintenance organization’s enrollees and to assure continuation of health care services to enrollees of a health maintenance organization that is in rehabilitation or conservation. The commissioner may use the deposit for administrative costs directly attributable to a receivership or liquidation. If the health maintenance organization is placed in receivership or liquidation, the deposit is an asset subject to the provisions of the liquidation act.
    6. The commissioner may reduce or eliminate the deposit requirement if the health maintenance organization deposits with the state treasurer, insurance commissioner, or other official body of the state or jurisdiction of domicile for the protection of all subscribers and enrollees, wherever located, of the health maintenance organization, cash, acceptable securities or surety, and delivers to the commissioner a certificate to the effect, duly authenticated by the appropriate state official holding the deposit.
  3. Liabilities. Every health maintenance organization shall, when determining liabilities, include an amount estimated in the aggregate to provide for any unearned premium and for the payment of all claims for health care expenditures which have been incurred, whether reported or unreported, which are unpaid and for which the organization is or may be liable, and to provide for the expense of adjustment or settlement of the claims. The liabilities must be computed in accordance with rules adopted by the commissioner upon reasonable consideration of the ascertained experience and character of the health maintenance organization.
  4. Hold harmless.
    1. Every contract between a health maintenance organization and a participating provider of health care services must be in writing and must set forth that in the event the health maintenance organization fails to pay for health care services as set forth in the contract, the subscriber or enrollee is not liable to the provider for any sums owed by the health maintenance organization.
    2. In the event that the participating provider contract has not been reduced to writing as required by this subsection or that the contract fails to contain the required prohibition, the participating provider may not collect or attempt to collect from the subscriber or enrollee sums owed by the health maintenance organization.
    3. No participating provider, or agent, trustee, or assignee thereof, may maintain any action at law against a subscriber or enrollee to collect sums owed by the health maintenance organization.
  5. Continuation of benefits. The commissioner shall require that each health maintenance organization have a plan for handling insolvency which allows for continuation of benefits for the duration of the contract period for which premiums have been paid and continuation of benefits to members who are confined on the date of insolvency in an inpatient facility until their discharge or expiration of benefits. In considering a plan, the commissioner may require:
    1. Insurance to cover the expenses to be paid for continued benefits after an insolvency.
    2. Provisions in provider contracts that obligate the provider to provide services for the duration of the period after the health maintenance organization’s insolvency for which premium payment has been made and until the enrollee’s discharge from inpatient facilities.
    3. Insolvency reserves.
    4. Acceptable letters of credit.
    5. Any other arrangements to assure that benefits are continued as specified above.
  6. Notice of termination. An agreement to provide health care services between a provider and a health maintenance organization must require that if the provider terminates the agreement, the provider shall give the organization at least sixty days’ advance notice of termination.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-13. Uncovered expenditures insolvency deposit.

  1. If at any time uncovered expenditures exceed ten percent of total health care expenditures, a health maintenance organization shall place an uncovered expenditures insolvency deposit with the commissioner, with any organization or trustee acceptable to the commissioner through which a custodial or controlled account is maintained, cash or securities that are acceptable to the commissioner. The deposit must at all times have a fair market value in an amount of one hundred twenty percent of the health maintenance organization’s outstanding liability for uncovered expenditures for enrollees in this state, including incurred but not reported claims, and must be calculated as of the first day of the month and maintained for the remainder of the month. If a health maintenance organization is not otherwise required to file a quarterly report, it shall file a report within forty-five days of the end of the calendar quarter with information sufficient to demonstrate compliance with this section.
  2. The deposit required under this section is in addition to the deposit required under section 26.1-18.1-12 and is an admitted asset of the health maintenance organization in the determination of net worth. All income from the deposits or trust accounts is an asset of the health maintenance organization and may be withdrawn from the deposit or account quarterly with the approval of the commissioner.
  3. A health maintenance organization that has made a deposit may withdraw that deposit or any part of the deposit if a substitute deposit of cash or securities of equal amount and value is made, the fair market value exceeds the amount of the required deposit, or the required deposit under subsection 1 is reduced or eliminated. Deposits, substitutions, or withdrawals may be made only with the prior written approval of the commissioner.
  4. The deposit required under this section is in trust and may be used only as provided under this section. The commissioner may use the deposit of an insolvent health maintenance organization for administrative costs associated with administering the deposit and payment of claims of enrollees of this state for uncovered expenditures in this state. Claims for uncovered expenditures must be paid on a pro rata basis based on assets available to pay such ultimate liability for incurred expenditures. Partial distribution may be made pending final distribution. Any amount of the deposit remaining must be paid into the liquidation or receivership of the health maintenance organization.
  5. The commissioner may by regulation prescribe the time, manner, and form for filing claims under subsection 4.
  6. The commissioner may by rule or order require health maintenance organizations to file annual, quarterly, or more frequent reports as the commissioner deems necessary to demonstrate compliance with this section. The commissioner may require that the reports include liability for uncovered expenditures as well as an audit opinion.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-14. Enrollment period and replacement coverage in the event of insolvency.

  1. Enrollment period.
    1. In the event of an insolvency of a health maintenance organization, upon order of the commissioner all other carriers that participated in the enrollment process with the insolvent health maintenance organization at a group’s last regular enrollment period shall offer the group’s enrollees of the insolvent health maintenance organization a thirty-day enrollment period commencing upon the date of insolvency. Each carrier shall offer the enrollees of the insolvent health maintenance organization the same coverages and rates that it had offered to the enrollees of the group at its last regular enrollment period.
    2. If no other carrier had been offered to some groups enrolled in the insolvent health maintenance organization, or if the commissioner determines that the other health benefit plans lack sufficient health care delivery resources to assure that health care services will be available and accessible to all of the group enrollees of the insolvent health maintenance organization, then the commissioner shall allocate equitably the insolvent health maintenance organization’s group contracts for the groups among all health maintenance organizations which operate within a portion of the insolvent health maintenance organization’s service area, taking into consideration the health care delivery resources of each health maintenance organization. Each health maintenance organization to which a group or groups are so allocated shall offer the group or groups the health maintenance organization’s existing coverage which is most similar to each group’s coverage with the insolvent health maintenance organization at rates determined in accordance with the successor health maintenance organization’s existing rating methodology.
    3. The commissioner shall also allocate equitably the insolvent health maintenance organization’s nongroup enrollees which are unable to obtain other coverage among all health maintenance organizations which operate within a portion of the insolvent health maintenance organization’s service area, taking into consideration the health care delivery resources of each health maintenance organization. Each health maintenance organization to which nongroup enrollees are allocated shall offer nongroup enrollees the health maintenance organization’s existing coverage for individual or conversion coverage as determined by the type of coverage in the insolvent health maintenance organization at rates determined in accordance with the successor health maintenance organization’s existing rating methodology. Successor health maintenance organizations which do not offer direct nongroup enrollment may aggregate all of the allocated nongroup enrollees into one group for rating and coverage purposes.
  2. Replacement coverage.
    1. “Discontinuance” means the termination of the contract between the group contractholder and a health maintenance organization due to the insolvency of the health maintenance organization, and does not refer to the termination of any agreement between any individual enrollee and the health maintenance organization.
    2. Any carrier providing replacement coverage with respect to group hospital, medical, or surgical expense or service benefits within a period of sixty days from the date of discontinuance of a prior health maintenance organization contract or policy providing hospital, medical, or surgical expense or service benefits shall immediately cover all enrollees who were validly covered under the previous health maintenance organization contract or policy at the date of discontinuance and who would otherwise be eligible for coverage under the succeeding carrier’s contract, regardless of any provisions of the contract relating to active employment or hospital confinement or pregnancy.
    3. Except to the extent benefits for the condition would have been reduced or excluded under the prior carrier’s contract or policy, no provision in a succeeding carrier’s contract of replacement coverage which would operate to reduce or exclude benefits on the basis that the condition giving rise to benefits pre-existed the effective date of the succeeding carrier’s contract may be applied with respect to those enrollees validly covered under the prior carrier’s contract or policy on the date of discontinuance.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-15. Filing requirements for rating information.

  1. No premium rate may be used until either a schedule of premium rates or methodology for determining premium rates has been filed with and approved by the commissioner.
  2. Either a specific schedule of premium rates, or a methodology for determining premium rates, must be established in accordance with actuarial principles for various categories of enrollees, provided that the premium applicable to an enrollee may not be individually determined based on the status of the enrollee’s health. However, the premium rates may not be excessive, inadequate, or unfairly discriminatory. A certification by a qualified actuary or other qualified person acceptable to the commissioner as to the appropriateness of the use of the methodology, based on reasonable assumptions, shall accompany the filing along with adequate supporting information.
  3. The commissioner shall approve the schedule of premium rates or methodology for determining premium rates if the requirements of subsection 2 are met. The procedures set forth in sections 26.1-30-20 and 26.1-30-21 govern the approval and disapproval of rating information required to be filed under this section.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-16. Regulation of health maintenance organization producers.

  1. The commissioner may adopt rules necessary to provide for the licensing of health maintenance organization producers. The rules must establish:
    1. The requirements for licensure of resident health maintenance organization producers.
    2. The conditions for entering into reciprocal agreements with other jurisdictions for the licensure of nonresident health maintenance organization producers.
    3. Any examination, prelicensing, or continuing education requirements.
    4. The requirements for registering and terminating the appointment of health maintenance organization producers.
    5. Any requirements for registering any assumed names or office locations in which a health maintenance organization producer does business.
    6. The conditions for health maintenance organization producer license renewal.
    7. The grounds for denial, refusal, suspension, or revocation of a health maintenance organization producer’s license.
    8. Any required fees for the licensing activities of health maintenance organization producers.
    9. Any other requirement or procedure and any form as may be reasonably necessary to provide for the effective administration of the licensing of health maintenance organization producers under this section.
  2. None of the following may be required to hold a health maintenance organization producer license:
    1. Any regular salaried officer or employee of a health maintenance organization who devotes substantially all of the person’s time to activities other than the taking or transmitting of applications or membership fees or premiums for health maintenance organization membership, or who receives no commission or other compensation directly dependent upon the business obtained and who does not solicit or accept from the public applications for health maintenance organization membership;
    2. Employers or their officers or employees or the trustees of any employee benefit plan to the extent that the employers, officers, employees, or trustees are engaged in the administration or operation of any program of employee benefits involving the use of health maintenance organization memberships, provided that the employers, officers, employees, or trustees are not in any manner compensated directly or indirectly by the health maintenance organization issuing the health maintenance organization memberships;
    3. Banks or their officers and employees to the extent that the banks, officers, and employees collect and remit charges by charging same against accounts of depositors on the orders of the depositor; or
    4. Any person or the employee of any person who has contracted to provide administrative, management, or health care services to a health maintenance organization and who is compensated for those services by the payment of an amount calculated as a percentage of the revenues, net income, or profit of the health maintenance organization, if that method of compensation is the sole basis for subjecting that person or the employee of the person to this chapter.
  3. The commissioner may by rule exempt certain classes of persons from the requirement of obtaining a license:
    1. If the functions they perform do not require special competence, trustworthiness, or the regulatory surveillance made possible by licensing; or
    2. If other existing safeguards make regulation unnecessary.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-17. Powers of insurers.

  1. An insurance company licensed in this state, or a hospital or medical service corporation authorized to do business in this state, may either directly or through a subsidiary or affiliate, organize and operate a health maintenance organization under the provisions of this chapter. Notwithstanding any other law which may be inconsistent, any two or more insurance companies, hospital or medical service corporations, or subsidiaries or affiliates thereof, may jointly organize and operate a health maintenance organization. The business of insurance is deemed to include the providing of health care by a health maintenance organization owned or operated by an insurer or a subsidiary thereof.
  2. Notwithstanding any provision of insurance and hospital or medical service corporation laws, an insurer or a hospital or medical service corporation may contract with a health maintenance organization to provide insurance or similar protection against the cost of care provided through health maintenance organizations and to provide coverage in the event of the failure of the health maintenance organization to meet its obligations. The enrollees of a health maintenance organization constitute a permissible group under the laws. Among other things, under the contracts, the insurer or hospital or medical service corporation may make benefit payments to health maintenance organizations for health care services rendered by providers.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-18. Examinations.

  1. The commissioner may make an examination of the affairs of any health maintenance organization and providers with whom the organization has contracts, agreements, or other arrangements as often as is reasonably necessary for the protection of the interests of the people of this state but not less frequently than once every five years.
  2. Every health maintenance organization and provider shall submit its books and records for the examinations and in every way facilitate the completion of the examination. For the purpose of examinations, the commissioner may administer oaths to, and examine the officers and insurance producers of, the health maintenance organization and the principals of the providers concerning their business.
  3. The expenses of examinations under this section must be assessed against the health maintenance organization being examined and remitted to the commissioner.
  4. In lieu of the examination, the commissioner may accept the report of an examination made by the commissioner of another state.

Source:

S.L. 1993, ch. 292, § 18; 2001, ch. 262, § 38.

26.1-18.1-19. Suspension or revocation of certificate of authority.

  1. Any certificate of authority issued under this chapter may be suspended or revoked, and any application for a certificate of authority may be denied, if the commissioner finds that any of these conditions exist:
    1. The health maintenance organization is operating significantly in contravention of its basic organizational document or in a manner contrary to that described in any other information submitted under section 26.1-18.1-02, unless amendments to the submissions have been filed with and approved by the commissioner.
    2. The health maintenance organization issues an evidence of coverage or uses a schedule of charges for health care services which do not comply with the requirements of sections 26.1-18.1-07 and 26.1-18.1-15.
    3. The health maintenance organization does not provide or arrange for basic health care services.
      1. The health maintenance organization does not meet the requirements of section 26.1-18.1-06; or
      2. The health maintenance organization is unable to fulfill its obligations to furnish health care services.
    4. The health maintenance organization is no longer financially responsible and may reasonably be expected to be unable to meet its obligations to enrollees or prospective enrollees.
    5. The health maintenance organization has failed to correct, within the time prescribed by subsection 3, any deficiency occurring due to the health maintenance organization’s prescribed minimum net worth being impaired.
    6. The health maintenance organization has failed to implement the grievance procedures required by section 26.1-18.1-10 in a reasonable manner to resolve valid complaints.
    7. The health maintenance organization, or any person on its behalf, has advertised or merchandised its services in an untrue, misrepresentative, misleading, deceptive, or unfair manner.
    8. The continued operation of the health maintenance organization would be hazardous to its enrollees.
    9. The health maintenance organization has otherwise failed substantially to comply with this chapter.
  2. In addition to or in lieu of suspension or revocation of a certificate of authority pursuant to this section, the applicant or health maintenance organization may be subjected to an administrative penalty of up to ten thousand dollars for each cause for suspension or revocation.
  3. The following pertains when insufficient net worth is maintained:
    1. Whenever the commissioner finds that the net worth maintained by any health maintenance organization subject to the provisions of this chapter is less than the minimum net worth required to be maintained by section 26.1-18.1-12, the commissioner shall give written notice to the health maintenance organization of the amount of the deficiency and require filing with the commissioner a plan for correction of the deficiency acceptable to the commissioner, and correction of the deficiency within a reasonable time, not to exceed sixty days, unless an extension of time, not to exceed sixty additional days, is granted by the commissioner. Such a deficiency must be deemed an impairment, and failure to correct the impairment in the prescribed time is grounds for suspension or revocation of the certificate of authority or for placing the health maintenance organization in conservation, rehabilitation, or liquidation.
    2. Unless allowed by the commissioner, no health maintenance organization or person acting on its behalf may, directly or indirectly, renew, issue, or deliver any certificate, agreement, or contract of coverage in this state, for which a premium is charged or collected, when the health maintenance organization writing the coverage is impaired, and the fact of the impairment is known to the health maintenance organization or to the person. However, the existence of an impairment does not prevent the issuance or renewal of a certificate, agreement, or contract when the enrollee exercises an option granted under the plan to obtain a new, renewed, or converted coverage.
  4. A certificate of authority must be suspended or revoked or an application or a certificate of authority denied or an administrative penalty imposed only after compliance with the requirements of this section.
    1. Suspension or revocation of a certificate of authority or the denial of an application or the imposition of an administrative penalty pursuant to this section must be by written order and must be sent to the health maintenance organization or applicant by certified mail. The written order must state the grounds, charges, or conduct on which suspension, revocation, or denial or administrative penalty is based. The health maintenance organization or applicant may in writing request a hearing within thirty days from the date of mailing of the order. If no written request is made, the order is final upon the expiration of said thirty days.
    2. If the health maintenance organization or applicant requests a hearing pursuant to this section, the commissioner shall issue a written notice of hearing and send it to the health maintenance organization or applicant by certified or registered mail stating:
      1. A specific time for the hearing, which may not be less than twenty nor more than thirty days after mailing of the notice of hearing; and
      2. A specific place for the hearing, which may be either in Bismarck, North Dakota, or in the county where the health maintenance organization’s or applicant’s principal place of business is located.
  5. The provisions of chapter 28-32 apply to proceedings under this section to the extent they are not in conflict with subdivision b of subsection 4.
  6. When the certificate of authority of a health maintenance organization is suspended, the health maintenance organization may not, during the period of the suspension, enroll any additional enrollees except newborn children or other newly acquired dependents of existing enrollees, and may not engage in any advertising or solicitation whatsoever.
  7. When the certificate of authority of a health maintenance organization is revoked, the organization shall proceed, immediately following the effective date of the order of revocation, to wind up its affairs, and shall conduct no further business except as may be essential to the orderly conclusion of the affairs of the organization. It may engage in no further advertising or solicitation whatsoever. The commissioner may, by written order, permit the further operation of the organization as the commissioner may find to be in the best interest of enrollees to the end that enrollees will be afforded the greatest practical opportunity to obtain continuing health care coverage.

After the hearing, or upon failure of the health maintenance organization to appear at the hearing, the commissioner shall take whatever action the commissioner deems necessary based on written findings and shall mail the decision to the health maintenance organization or applicant. The action of the commissioner is subject to review under chapter 28-32, or other applicable statutory review process.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-20. Rehabilitation, liquidation, or conservation of health maintenance organizations.

  1. Any rehabilitation, liquidation, or conservation of a health maintenance organization must be deemed to be the rehabilitation, liquidation, or conservation of an insurance company and must be conducted under the supervision of the commissioner pursuant to the law governing the rehabilitation, liquidation, or conservation of insurance companies. The commissioner may apply for an order directing the commissioner to rehabilitate, liquidate, or conserve a health maintenance organization upon any one or more grounds set out in chapter 26.1-06; or when in the commissioner’s opinion the continued operation of the health maintenance organization would be hazardous either to the enrollees or to the people of this state. Enrollees have the same priority in the event of liquidation or rehabilitation as the law provides to policyholders of an insurer.
  2. For purposes of determining the priority of distribution of general assets, claims of enrollees and enrollees’ beneficiaries have the same priority as established by chapter 26.1-06.1 for policyholders and beneficiaries of insureds of insurance companies. If an enrollee is liable to any provider for services provided pursuant to and covered by the health care plan, that liability has the status of an enrollee claim for distribution of general assets. Any provider who is obligated by statute or agreement to hold enrollees harmless from liability for services provided pursuant to and covered by a health care plan has a priority of distribution of the general assets immediately following that of enrollees and enrollees’ beneficiaries as described herein, and immediately preceding the priority of distribution described in chapter 26.1-06.1.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-21. Summary orders and supervision.

  1. Whenever the commissioner determines that the financial condition of any health maintenance organization is such that its continued operation might be hazardous to its enrollees, creditors, or the general public, or that it has violated any provision of this chapter, the commissioner may, after notice and hearing, order the health maintenance organization to take action as may be reasonably necessary to rectify the condition or violation, including one or more of the following:
    1. Reduce the total amount of present and potential liability for benefits by reinsurance or other method acceptable to the commissioner.
    2. Reduce the volume of new business being accepted.
    3. Reduce expenses by specified methods.
    4. Suspend or limit the writing of new business for a period of time.
    5. Increase the health maintenance organization’s capital and surplus by contribution.
    6. Take other steps as the commissioner may deem appropriate under the circumstances.
  2. For purposes of this section, the violation by a health maintenance organization of any law of this state to which the health maintenance organization is subject must be deemed a violation of this chapter.
  3. The commissioner may set uniform standards and criteria by rule for early warning that the continued operation of any health maintenance organization might be hazardous to its enrollees, creditors, or the general public and to set standards for evaluating the financial condition of any health maintenance organization, which standards must be consistent with the purposes expressed in subsection 1.
  4. The remedies and measures available to the commissioner under this section are in addition to, and not in lieu of, the remedies and measures available to the commissioner under the provisions of section 26.1-06.1-09.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-22. Rulemaking authority.

The commissioner may adopt reasonable rules necessary and proper to carry out the provisions of this chapter.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-23. Confidentiality of medical information and limitation of liability.

  1. Any data or information pertaining to the diagnosis, treatment, or health of any enrollee or applicant obtained from the person or from any provider by any health maintenance organization must be held in confidence and may not be disclosed to any person except to the extent that it may be necessary to carry out the purposes of this chapter, or upon the express consent of the enrollee or applicant, or pursuant to statute or court order for the production of evidence or the discovery thereof, or in the event of claim or litigation between the person and the health maintenance organization wherein the data or information is pertinent. A health maintenance organization is entitled to claim any statutory privileges against the disclosure which the provider who furnished the information to the health maintenance organization is entitled to claim.
  2. A person who, in good faith and without malice, takes any action or makes any decision or recommendation as a member, agent, or employee of a health care review committee or who furnishes any records, information, or assistance to such a committee is not subject to liability for civil damages or any legal action in consequence of the action, nor is the health maintenance organization which established the committee or the officers, directors, employees, or agents of the health maintenance organization liable for the activities of any person. This section may not be construed to relieve any person of liability arising from treatment of a patient.
    1. The information considered by a health care review committee and the records of their actions and proceedings are confidential and not subject to subpoena or order to produce except in proceedings before the appropriate state licensing or certifying agency, or in an appeal, if permitted, from the committee’s findings or recommendations. No member of a health care review committee, or officer, director, or other member of a health maintenance organization or its staff engaged in assisting the committee, or any person assisting or furnishing information to the committee may be subpoenaed to testify in any judicial or quasi-judicial proceeding if the subpoena is based solely on the activities.
    2. Information considered by a health care review committee and the records of its actions and proceedings which are used pursuant to subdivision a by a state licensing or certifying agency or in an appeal must be kept confidential and is subject to the same provision concerning discovery and use in legal actions as are the original information and records in the possession and control of a health care review committee.
  3. To fulfill its obligations under section 26.1-18.1-06, the health maintenance organization shall have access to treatment records and other information pertaining to the diagnosis, treatment, or health status of any enrollee.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-24. Acquisition of control of or merger of a health maintenance organization.

No person may make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market or otherwise, any voting security of a health maintenance organization or enter into any other agreement if, after the consummation thereof, that person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of the health maintenance organization, and no person may enter into an agreement to merge or consolidate with or otherwise to acquire control of a health maintenance organization, unless, at the time any offer, request, or invitation is made or any agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, the person has filed with the commissioner and has sent to the health maintenance organization information required by section 26.1-10-03 and the offer, request, invitation, agreement, or acquisition has been approved by the commissioner. Approval by the commissioner must be governed by section 26.1-10-03.

Source:

S.L. 1993, ch. 292, § 18.

26.1-18.1-25. Coordination of benefits.

  1. Health maintenance organizations are permitted, but not required, to adopt coordination of benefits provisions to avoid overinsurance and to provide for the orderly payment of claims when a person is covered by two or more group health insurance or health care plans.
  2. If health maintenance organizations adopt coordination of benefits, the provisions must be consistent with the coordination of benefits provisions that are in general use in the state for coordinating coverage between two or more group health insurance or health care plans.
  3. To the extent necessary for health maintenance organizations to meet their obligations as secondary carriers under the rules for coordination, health maintenance organizations shall make payments for services that are received from nonparticipating providers, provided outside their service areas, or not covered under the terms of their group contracts or evidence of coverage.

Source:

S.L. 1993, ch. 292, § 18.

CHAPTER 26.1-19 Prepaid Legal Services

26.1-19-01. Interpretation.

This chapter must be interpreted liberally to achieve the following purposes:

  1. To encourage development of effective and economic methods of making legal services available to the public in this state.
  2. To allow development of legal service plans and encourage experimentation with innovative methods of organizing and administering those plans.
  3. To encourage competition among the various entities organized under this statute.
  4. To ensure maintenance of a high level of competence and adherence to professional standards.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-01.

26.1-19-02. Definitions.

As used in this chapter:

  1. “Evidence of coverage” means any certificate, agreement, or contract issued to a participant setting out the coverage to which the participant is entitled.
  2. “Legal services” means any services normally provided by or at the direction of an attorney.
  3. “Participant” means an individual who is enrolled in a prepaid legal services plan.
  4. “Prepaid legal services organization” means any person who undertakes to provide an arrangement for one or more legal service plans.
  5. “Prepaid legal services plan” means any arrangement whereby any person undertakes to provide, arrange for, pay for, reimburse, or indemnify on a prepaid basis all or part of the cost of legal services and related expenses and court costs incurred in the exercise of any legal right, but not including payment of fines, penalties, judgments, or assessments.
  6. “Provider” means any attorney licensed or otherwise authorized to practice law in this state.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-02.

26.1-19-03. Exceptions.

This chapter does not apply to:

  1. Commercial insurers licensed or authorized to do business in this state or to any nonadmitted insurers.
  2. Retainer contracts made by attorneys with individual clients with fees based upon an estimate of the nature and amount of services to be provided to a specific client and similar contracts made with a group of clients involved in the same or closely related legal matters.
  3. Plans providing no benefits other than consultation with and advice by an attorney in connection or combination with referral services.
  4. The furnishing of legal services on an informal basis, involving neither an express contractual obligation nor reasonable expectations, in the context of an employment, membership, educational, or similar relationship.
  5. Employee welfare benefit plans as defined by the Employee Retirement Income Security Act of 1974 [Pub. L. 93-406; 88 Stat. 829].

Source:

S.L. 1983, ch. 332, § 19; 1995, ch. 54, § 19.

Derivation:

N.D.C.C. § 26-27.3-03.

26.1-19-04. Establishment of a prepaid legal services organization.

  1. Notwithstanding any law of this state to the contrary, any person may apply to the commissioner for and obtain a certificate of authority to establish and operate a prepaid legal services organization in compliance with this chapter. A person may not establish or operate a prepaid legal services organization in this state, or sell, offer to sell, or solicit offers to purchase or receive advance or periodic considerations in conjunction with a prepaid legal services plan without obtaining a certificate of authority under this chapter. A foreign corporation may similarly apply for a certificate of authority under this chapter, subject to obtaining a certificate of authority as a foreign corporation under section 10-19.1-136.
  2. Every prepaid legal services organization as of July 1, 1981, shall submit an application for a certificate of authority under subsection 3. The applicant may continue to operate until the commissioner acts upon the application. If the application is denied under section 26.1-19-06, the applicant must be treated as a prepaid legal services organization whose certificate of authority has been revoked.
  3. The application for a certificate of authority must be made in a form prescribed by the commissioner and be verified by an officer or authorized representative of the applicant and must set forth or be accompanied by:
    1. A copy of the basic organizational documents of the applicant, if any, including articles of incorporation, articles of organization, partnership agreements, trust agreements, or other applicable documents.
    2. A copy of the bylaws, regulations, or similar documents, if any, regulating the conduct of the internal affairs of the applicant.
    3. A list of the names, addresses, and official capacities within the organization of all persons who are responsible for the conduct of the affairs of the applicant, including all members of the governing body, the officers and directors in the case of a corporation, the managers and governors in the case of a limited liability company, the partners under a partnership, the trustees under a trust agreement, and the members or owners under any other organizational form.
    4. A statement generally describing the organization, its enrollment process, its administrative operations, any cost and quality control assurance mechanisms, its internal grievance procedure, the method it proposes to use to enroll members, the geographic area or areas to be served, the location of its office or offices, the number of providers to be utilized, and the recordkeeping system which will provide documentation of the utilization of plan benefits by enrolled participants.
    5. A power of attorney duly executed by the applicant, if not domiciled in the state, appointing the commissioner and the commissioner’s successors in office and duly authorized deputies as the true and lawful attorneys of the applicant in and for this state upon whom all lawful process may be served in any legal action or proceeding against the organization on a claim for relief arising in this state.
    6. Copies of all contract forms the organization proposes to furnish to enrolled participants.
    7. Copies of all contract forms the organization proposes to enter into with providers.
    8. Copies of the forms evidencing coverage to be issued to enrolled participants.
    9. Copies of the forms of group contracts, if any, which are to be issued to employers, unions, trustees, or other organizations.
    10. A statement of the financial condition of the organization, including income statement, balance sheet, and sources of funds.
    11. A description of the proposed marketing techniques and copies of any proposed advertising materials.
    12. A schedule of rates with any available actuarial and other data.
    13. Any other information the commissioner requires to make the determinations required under section 26.1-19-06.

Source:

S.L. 1983, ch. 332, § 19; 1985, ch. 317, § 50; 1993, ch. 54, § 106; 1999, ch. 50, § 45.

Derivation:

N.D.C.C. § 26-27.3-04.

26.1-19-05. State bar association — Advisory committee.

  1. Upon receipt of an application for issuance of a certificate of authority, the commissioner shall transmit copies of the application and accompanying documents to the state bar association of North Dakota.
  2. An advisory committee to assist the commissioner in the development of rules governing the conduct or organizations authorized under this chapter is created. The committee consists of seven members appointed by the board of governors of the state bar association of North Dakota. Members of the committee are allowed expenses for travel, board, and lodging in the performance of their duties as provided in sections 44-08-04 and 54-06-09. Members of the committee have the right to participate in any hearing held under this chapter and must receive notice of any order or decision of the commissioner.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-14.

26.1-19-06. Issuance of a certificate of authority.

The commissioner shall issue a certificate of authority to any person filing an application within sixty days after the filing unless the commissioner notifies the applicant during that time that the application is not complete or sufficient and the reasons therefor, that payment of the fees required by section 26.1-19-15 has not been made, or that the commissioner is not satisfied that:

  1. The basic organizational documents of the applicant, when combined with the powers enumerated in section 26.1-19-07, permit the applicant to conduct business as a legal services organization.
  2. The organization has demonstrated the intent and ability to provide the services in a manner which ensures their availability and accessibility.
  3. The organization is financially responsible and may be reasonably expected to meet its obligations to its enrolled participants. In making this determination the commissioner shall consider:
    1. Any agreement with an insurer or any other organization paying, contracting to pay for, or in any way guaranteeing the provision of legal services under the plan.
    2. Any agreement with the providers for the furnishing of legal services under the plan.
    3. The adequacy of working capital.
    4. Any surety bond or deposit of cash or securities as a guaranty that plan services will be performed.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-05.

26.1-19-07. Powers of organization.

The powers of a holder of a certificate of authority issued pursuant to section 26.1-19-04, in addition to any other powers conferred by law, include the following:

  1. The purchase, lease, construction, renovation, operation, or maintenance of facilities and property reasonably required for the delivery of services or for such purposes as may be reasonably necessary to the operation of the organization.
  2. The furnishing of legal services on a prepaid basis under agreements of indemnity with plan enrollees or under service contracts with providers who are under contract with, employed by, or otherwise associated with the prepaid legal services organization.
  3. The marketing and administration of prepaid legal services plans or contracting with any person for the performance of these functions on its behalf.
  4. Contracting with an insurance company licensed or authorized to do business in this state for the provision of insurance, indemnity, or reimbursement against the cost of legal services provided by a prepaid legal services organization.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-06.

26.1-19-08. Contract forms.

  1. All contracts or other documents evidencing coverage issued by the prepaid legal services organization to participants and marketing documents purporting to describe the organization’s prepaid legal services plan must contain:
    1. A complete description of the legal services to which the participant is entitled.
    2. The predetermined periodic rate of payment for legal services, if any, which the participant is obligated to pay.
    3. All exclusions and limitations on services to be provided, including any deductible or copayment feature and all restrictions relating to pre-existing conditions.
    4. All criteria by which a participant may be disenrolled or denied re-enrollment.
  2. A contract between a legal services organization authorized to do business under this chapter and any provider or any participant may not contain any provisions which require participants to guaranty payment, other than copayments and deductibles, to the provider in the event of nonpayment by the legal services organization for any covered services which have been performed under contracts between the participant and the legal services organization.

Source:

S.L. 1983, ch. 332, § 19; 1985, ch. 317, § 51.

Derivation:

N.D.C.C. § 26-27.3-07.

26.1-19-09. Control prohibited.

A prepaid legal services organization may not attempt to control any attorney in the exercise of the attorney’s professional judgment.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-18.

26.1-19-10. Licensing of sales representatives.

The sales representatives of a prepaid legal services organization are subject to the laws pertaining to insurance producers as defined in chapter 26.1-26. The license for a sales representative must be issued on a form prescribed by the commissioner, and the fee for a license or renewal thereof shall be prescribed in section 26.1-01-07.

Source:

S.L. 1983, ch. 332, § 19; 1985, ch. 317, § 52; 1991, ch. 301, § 12; 2001, ch. 262, § 39.

Derivation:

N.D.C.C. § 26-27.3-11.

26.1-19-11. Prohibited practices.

  1. A prepaid legal services organization, or representative thereof, may not cause or knowingly permit the use of advertising, solicitation, or any form of coverage which is false, fraudulent, misleading, or deceptive. For the purposes of this section:
    1. A statement or item of information is false if it does not conform to fact in any respect which is or may be significant to a participant, or a person considering participating in a legal services plan.
    2. A statement or item of information is misleading, whether or not it may be literally untrue, if, in the context in which the statement is made or the item of information is communicated, the statement or item of information may be reasonably understood by a reasonable person, not possessing special knowledge regarding legal services coverage, as indicating any benefit or advantage or the absence of any exclusion, limitation, or disadvantage of possible significance to a participant, or person considering participating in a legal services plan, if that benefit or advantage or absence of limitation, exclusion, or disadvantage does not in fact exist.
    3. An evidence of coverage is deceptive if the evidence of coverage taken as a whole and with consideration given to typography and format and language is such as to cause a reasonable person, not possessing special knowledge regarding legal services plans and evidence of coverage thereof, to expect benefits, services, or changes which the evidence of coverage does not provide or which the legal services plan issuing such evidence of coverage does not regularly make available for participants covered under the evidence of coverage.
  2. A participant’s coverage may not be canceled or nonrenewed except for the failure to pay the charge for that coverage, or for other reasons as may be set out in a rule adopted by the commissioner.
  3. A prepaid legal services organization may not use in its name, contracts, or literature the words “insurance”, “casualty”, “surety”, or “mutual”, or any other words descriptive of the insurance, casualty, or surety business or similar to the name or description of any insurance or surety corporation doing business in this state.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-10.

26.1-19-12. Complaint system.

  1. A prepaid legal services organization shall establish and maintain a complaint system which has been approved by the commissioner to provide reasonable procedures for the resolution of complaints initiated by participants concerning any aspect of the prepaid legal services plans operated by the organization.
  2. A prepaid legal services organization shall submit to the commissioner an annual report in a form prescribed by the commissioner which must include:
    1. A description of the procedure used under the complaint system.
    2. The total number of complaints by type handled through the complaint system.
    3. The disposition of all complaints filed under the system.
  3. A prepaid legal services organization shall maintain records of complaints, shall retain those records for a period of three years, and shall make those records available for inspection by the commissioner; provided, however, that no information regarding a participant or an attorney considered protected by the confidential nature of the attorney-client relationship may be divulged without written consent of the participant or upon appropriate court order.
  4. Complaints alleging misfeasance, malfeasance, or nonfeasance on the part of the attorneys or complaints alleging violations of the code of professional responsibility must be submitted to the disciplinary board of the supreme court for disposition.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-09.

26.1-19-13. Reports to the commissioner.

Every prepaid legal services organization annually, on or before March first, shall file a report with the commissioner, verified by an appropriate official of the organization, showing its financial condition on the last day of the preceding calendar or fiscal year. The report must include:

  1. A financial statement of the organization, including its balance sheet and statement of income and expenditures for the preceding year prepared by an independent certified public accountant.
  2. Any changes in the information submitted initially upon application for a certificate of authority under section 26.1-19-04.
  3. Any other information relating to the performance of the organization which the commissioner may require to carry out the commissioner’s duties under this chapter.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-08.

26.1-19-14. Examinations.

  1. The commissioner shall make an examination of the operations of any prepaid legal services organization holding a certificate of authority under this chapter. The examination must include all contracts, agreements, and arrangements for the delivery of services under the plan as often as the commissioner deems necessary, but not less frequently than once every three years.
  2. The commissioner shall make an examination concerning the delivery of legal services of any prepaid legal services organization by reviewing any complaints made by participants brought against the organization or against providers with whom the organization has contracts or other agreements as often as the commissioner deems necessary, but not less frequently than once every three years.
  3. Every prepaid legal services organization shall make its books and records relating to its operations available to the commissioner to facilitate the examination.
  4. The commissioner may not undertake an examination which would violate the attorney-client privilege except with the written consent of the participant.
  5. For the purpose of examination, the commissioner may issue subpoenas, administer oaths to, and examine the officers and insurance producers of the prepaid legal services organization, as well as any providers of services.

Source:

S.L. 1983, ch. 332, § 19; 2001, ch. 262, § 40.

Derivation:

N.D.C.C. § 26-27.3-12.

26.1-19-15. Fees.

A prepaid legal services organization shall pay to the commissioner:

  1. For filing a copy of its application for a certificate of authority or amendment thereto, the amount provided by section 26.1-01-07.
  2. For filing an annual report, the amount provided by section 26.1-01-07.
  3. The expenses of any examinations conducted pursuant to section 26.1-19-14.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-15.

26.1-19-16. Administrative findings and sanctions.

  1. The commissioner, consistent with chapter 28-32, may initiate proceedings to determine if a prepaid legal services organization has:
    1. Operated in a manner that materially violates its organizational documents;
    2. Materially breached its obligations to furnish the legal services specified in its contracts with enrolled participants;
    3. Violated this chapter, or any rule adopted under this chapter;
    4. Made any false statement with respect to any report or statement required by this chapter or by the commissioner under this chapter;
    5. Advertised, marketed, or attempted to market its services in a manner which misrepresents its services or its capacity to deliver services, or engaged in deceptive, misleading, or unfair practices with respect to advertising or marketing; or
    6. Attempted to prevent the commissioner from the performance of any duty imposed by this chapter or by other laws of this state.
  2. After providing written notice and an opportunity for a hearing pursuant to chapter 28-32, the commissioner shall make administrative findings and, as appropriate, may:
    1. Impose a penalty of not more than five thousand dollars for each unlawful act committed under this chapter;
    2. Issue an administrative order requiring the prepaid legal services organization to cease or modify inappropriate conduct or practices by it or any of the personnel employed by or associated with it, to fulfill its contractual obligations, to provide a service which has been improperly denied, or to take steps to provide or arrange for any services which it has agreed to make available; or
    3. Suspend or revoke the certificate of authority of the prepaid legal services organization.
  3. If its certificate of authority is suspended, the prepaid legal services organization may not, during the period of suspension, enroll any additional participants and may not engage in any advertising or solicitation.
  4. If its certificate of authority is revoked, the prepaid legal services organization shall proceed under the supervision of the commissioner, immediately following the effective date of the revocation, to wind up its affairs, and may conduct no further business except as may be essential to the orderly conclusion of those affairs. The commissioner, by written order, may permit further operation of the organization if it is in the best interest of the participants and will allow the participants the greatest practical opportunity to obtain continued legal services coverage.
  5. The commissioner may apply to any court for the legal or equitable relief deemed necessary to carry out the purposes of this chapter.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-13.

26.1-19-17. Statutory construction and relationship to other laws.

Except as otherwise provided in this chapter, other provisions of the insurance laws of this state are not applicable to any legal services organization issued a certificate of authority under this chapter.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-16.

26.1-19-18. Rulemaking authority of commissioner.

The commissioner may adopt reasonable rules necessary and proper to carry out this chapter. This chapter does not prohibit the commissioner from requiring changes in procedure previously approved.

Source:

S.L. 1983, ch. 332, § 19.

Derivation:

N.D.C.C. § 26-27.3-17.

CHAPTER 26.1-20 Title Insurance Companies

26.1-20-01. Title insurance company subject to insurance company requirements.

Every domestic or foreign corporation organized for the purpose of insuring titles to real property in this state or of insuring against loss by reason of defective titles thereto, or encumbrances thereon, is subject to and shall comply with all the requirements of the laws of this state made applicable to insurance companies generally and the rules of the commissioner, except as provided in this chapter or when the laws and rules are inconsistent with this chapter.

Source:

S.L. 1983, ch. 332, § 20.

Derivation:

N.D.C.C. § 26-32-01.

26.1-20-02. Capital stock and surplus requirement.

A domestic corporation organized for the purpose of insuring titles to real property in this state or of insuring against loss by reason of defective titles to real property, or encumbrances on real property, may not be incorporated unless it has an authorized capital of not less than five hundred thousand dollars and a surplus of not less than five hundred thousand dollars if a stock company, and a surplus of not less than five hundred thousand dollars if a mutual company. If the capital or surplus requirements at the time the company was incorporated under this chapter were less than the minimum requirements provided by this section, the company may maintain authorized capital or surplus which satisfies the capital stock or surplus requirements in effect at that time. It may issue no policy or insurance until at least fifty percent of the minimum capital stock required by this section, and all the surplus required, have been paid in, the residue of capital stock to be paid in within twelve months from the time of filing the articles of incorporation, but the commissioner, for good cause shown, may extend the time of payment of the residue for the further period of one year.

Source:

S.L. 1983, ch. 332, § 20.

Derivation:

N.D.C.C. § 26-32-02.

26.1-20-03. Surplus to constitute guaranty fund — Deposit.

The surplus provided for in section 26.1-20-02 constitutes a guaranty fund, which must be invested in securities as provided by section 26.1-05-19, and be duly deposited with the commissioner, and the commissioner’s certification of that deposit must be procured, as provided by law. This deposit must be maintained unimpaired and the principal of the fund may be applied only to the payment of losses and expenses by reason of its guaranty and insurance contracts, but the corporation has the right to collect the income from the deposit and to substitute other like securities of equal amount and value from time to time.

Source:

S.L. 1983, ch. 332, § 20.

Derivation:

N.D.C.C. § 26-32-03.

26.1-20-04. Limitation on risks.

  1. Except as provided in subsection 2, a title insurance company may issue a title insurance policy on property located in this state involving a potential policy liability up to ninety percent of the sum of the company’s surplus as regards policyholders and statutory premium reserves as stated in the most recent annual statement of the company.
  2. A title insurance company may exceed the limit established in subsection 1 if the excess liability is reinsured in due course with an authorized title insurance company or in compliance with subsection 3 or 4.
  3. Notwithstanding contrary provisions of this section, a title insurance company may acquire reinsurance on an individual policy or facultative basis from a title insurance company not authorized to engage in the business of title insurance in this state if the title insurance company from which the reinsurance is acquired:
    1. Has a combined capital and surplus of at least twenty million dollars as stated in the company’s most recent annual statement preceding the acceptance of reinsurance; and
    2. Is domiciled in another state and is authorized to engage in the business of title insurance in one or more states.
  4. Notwithstanding contrary provisions in this section, a title insurance company may obtain reinsurance by a reinsurance treaty or other reinsurance agreement from an assuming insurer with a financial strength rating of B+ or better from the A.M. Best Company, Inc., or with an alternative rating the commissioner may approve which the commissioner determines is an equivalent rating by another recognized rating organization.

Source:

S.L. 1983, ch. 332, § 20; 2015, ch. 211, § 1, eff August 1, 2015.

26.1-20-05. Title evidence — Examination.

A domestic corporation organized for the purpose of insuring title to real property in this state or of insuring against loss by reason of defective titles to real property, or encumbrances on real property, or a foreign corporation authorized to do business in this state, may not issue any policy, binder, or certificate unless it has secured from a person, firm, or corporation holding a certificate of authority under chapter 43-01 the record title evidence of the title to be insured, and the title evidence has been examined by a person duly admitted to the practice of law as provided by chapter 27-11. The certificate of authority of any corporation violating this section must be revoked as provided by chapter 26.1-02 or 26.1-11.

Source:

S.L. 1983, ch. 332, § 20.

Derivation:

N.D.C.C. § 26-32-06.

26.1-20-06. Judgment against corporation — Enforcement.

If a corporation fails to satisfy any judgment against it arising out of its liability under any title insurance policy, issued, insured, or assumed by it, within thirty days after the finality of the judgment becomes fixed, the judgment may be enforced against its guaranty fund deposit through the following procedure:

  1. The judgment creditor shall petition the court wherein the judgment is entered and as part of the same cause, truthfully setting forth the facts regarding the failure to satisfy the judgment as required by this section.
  2. Upon the petition the court shall direct the issuance of a special execution directed to the sheriff of Burleigh County, requiring that the sheriff sell so much of the securities on deposit as may be required to satisfy the judgment and pay the costs of the levy.
  3. The special execution must be executed by the sheriff by delivering to the state treasurer and to the commissioner a certified copy of the writ of execution together with a certified copy of the judgment and of the petition and order, and within ten days thereafter there must be delivered to the sheriff sufficient securities to satisfy the judgment in full. The sheriff shall sell the securities upon execution as in the case of sales of personal property upon execution generally.

Source:

S.L. 1983, ch. 332, § 20.

Derivation:

N.D.C.C. § 26-32-05.

CHAPTER 26.1-20.1 Insurance Premium Finance Companies

26.1-20.1-01. Definitions.

In this chapter, unless the context otherwise requires:

  1. “Insurance premium finance company” means a person engaged in the business of entering into or acquiring insurance premium finance agreements.
  2. “Licensee” means a person holding a license issued under this chapter.
  3. “Premium finance agreement” means an agreement by which an insured or prospective insured promises to pay an insurance premium finance company the amount advanced or to be advanced under the agreement to an insurer or to an insurance producer in payment of premiums on an insurance policy together with a finance charge. The term does not include an agreement to finance premiums when a life or disability insurance policy is made the security or collateral for the repayment of a debt.

Source:

S.L. 1989, ch. 344, § 2; 2001, ch. 262, § 41.

26.1-20.1-02. License required — Renewal — Application.

  1. No person may finance insurance premiums in this state without a license issued by the commissioner. Licenses may be renewed each year upon payment of the required fee.
  2. The commissioner shall issue or renew a license if the commissioner finds that the person to be licensed:
    1. Is competent and trustworthy and intends to act in good faith in the financing of insurance premiums;
    2. Has a good business reputation and has had experience, training, or education qualifying the person to finance insurance premiums; and
    3. If a corporation, is incorporated under the laws of this state or is a foreign corporation authorized to transact business in this state or if a limited liability company, is organized under the laws of this state or is a foreign limited liability company authorized to transact business in this state.
  3. This chapter does not apply to insurance producers; insurers who finance their own premiums; banks; savings and loan associations; credit unions; annuity, safe deposit, and trust companies; subsidiary trust companies; small loan companies; licensed money brokers; or other financial institutions licensed to do business in this state.

Source:

S.L. 1989, ch. 344, § 2; 1993, ch. 54, § 78; 2001, ch. 262, § 42.

26.1-20.1-03. License suspension, revocation, or refusal — Grounds.

The commissioner may, after notice to the licensee and a hearing, suspend, revoke, or refuse to continue or refuse to issue any license issued under this chapter if the commissioner finds any of the following conditions:

  1. The licensee acquired or attempted to acquire a license through misrepresentation or fraud.
  2. The licensee, in the conduct of affairs under the license, used fraudulent, coercive, or dishonest practices, or has shown oneself to be incompetent, untrustworthy, or financially irresponsible.
  3. An officer, employee, stockholder, or partner of an applicant, who may materially influence the applicant’s conduct, does not meet the standards required by this chapter.
  4. The licensee violated or did not comply with this chapter or a lawful rule or order of the commissioner.

Source:

S.L. 1989, ch. 344, § 2.

26.1-20.1-04. Interrogatories.

A person who applies for a license or the renewal of a license shall file sworn answers to interrogatories if requested by the commissioner. The commissioner may, at any time, require the applicant to fully disclose the identity of all stockholders, partners, officers, and employees.

Source:

S.L. 1989, ch. 344, § 2.

26.1-20.1-05. Books and records.

Every licensee shall maintain books and records, satisfactory to the commissioner, of the licensee’s premium finance agreements. The records must be maintained for a period of three years after making the final entry with respect to a premium finance agreement. The records may be preserved in photographic form. The records must be available for inspection by the commissioner during ordinary business hours. The commissioner may require any licensee to bring the licensee’s records to the commissioner’s office for examination.

Source:

S.L. 1989, ch. 344, § 2.

26.1-20.1-06. Contents of insurance premium finance agreement.

  1. A premium finance agreement must:
    1. Be dated and signed by or on behalf of the insured, and the printed portion of the agreement must be in at least eight-point type;
    2. Contain the name and place of business of the insurance producer negotiating the related insurance policy, the name and residence or the place of business of the insured as specified by the insured, the name and place of business of the insurance premium finance company to which installments or other payments are to be made, a description of the insurance policies financed, including the term and type of policy; and
    3. Include the following items:
      1. The total amount of the premiums.
      2. The amount of the downpayment.
      3. The amount financed, which is the difference between paragraphs 1 and 2.
      4. The amount of the finance charge and the flat service fee, if any.
      5. The total of the payments, which is the sum of paragraphs 3 and 4.
      6. The number of installments.
  2. If additional or subsequent premiums are proposed to be added to an existing premium finance agreement by an insured resulting from additional premiums required under policies presently being financed, from a renewal of a policy, or from other policies owned or purchased by the insured, the premium finance company shall provide the insured with the proposed revisions to the items in subdivision c of subsection 1 in writing along with a written invoice or copy of the invoice received from the insurer or licensed insurance producer which describes the additional premium proposed to be added to the original contract. The insured shall affirm the proposed revisions by paying the revised installment or may disaffirm the add-on revisions by continuing to make the payment called for in the original contract. The premium finance company may not charge a higher annual percentage rate of interest for the additional amount than that charged in the original premium finance agreement.

Source:

S.L. 1989, ch. 344, § 2; 2001, ch. 262, §§ 43, 44.

26.1-20.1-07. Maximum finance charge.

  1. No insurance premium finance company may charge, contract for, receive, or collect a finance charge plus a flat service fee with respect to a premium finance agreement other than as permitted by this section.
  2. The finance charge must be computed on the premiums due after subtracting the downpayment made by the insured in accordance with the premium finance agreement, from the effective date of the insurance coverage for which the premiums are being advanced, to and including the date when the final installment under the premium finance agreement is payable.
  3. The annual percentage rate charged under a premium finance agreement made to finance an insurance policy for agricultural, personal, family, or household use may not exceed the annual percentage rate permitted under section 47-14-09. In addition, an insurance premium finance company may contract for a flat rate service or application fee not exceeding the greater of one percent of the amount financed or twenty dollars per premium finance agreement for expenses incurred in servicing the loan. The finance rate and flat rate service or application fee charged under a premium finance agreement made to finance an insurance policy for business, corporate, or other purposes may be agreed to by the parties to the agreement.
  4. The finance charge must be computed in advance on the principal balance of a premium finance agreement according to the actuarial method on terms payable in substantially equal successive monthly installments.
  5. Notwithstanding the provisions of any premium finance agreement, any insured may prepay the obligation in full at any time. If the insured prepays the obligation, the insured must receive a refund credit if the amount of the refund is one dollar or more. The amount of the refund credit must represent at least as great a proportion of the finance charge as the sum of the periodic balances after the month in which prepayment is made bears to the sum of all periodic balances under the schedule of installments in the agreement. If, in addition to the finance charge, an additional flat service fee was imposed, the flat service fee need not be refunded nor taken into consideration in computing the refund credit.

Source:

S.L. 1989, ch. 344, § 2.

26.1-20.1-08. Delinquency and cancellation charges.

A premium finance agreement may provide for the payment by the insured of a delinquency charge for any payment that is in default for a period of ten days or more. The amount of the delinquency charge may not exceed five dollars. If the default results in the cancellation of any insurance policy listed in the premium finance agreement, the premium finance agreement may provide for a cancellation charge of ten dollars in addition to the delinquency charge.

Source:

S.L. 1989, ch. 344, § 2.

26.1-20.1-09. Cancellation of insurance contract upon default.

If a premium finance agreement contains a power of attorney or other authority enabling the insurance premium finance company to cancel any insurance policy listed in the premium finance agreement, an insurance policy may be canceled by the insurance premium finance company as follows:

  1. The insurance premium finance company shall mail to the insured and to the insurance producer indicated on the premium finance agreement at least ten days’ written notice of the insurance premium finance company’s intent to cancel the insurance policy unless the default is cured prior to the date stated in the notice. If the default is not cured by the date specified in the notice, the insurance premium finance company may cancel on behalf of the insured by mailing to the insurer written notice of the cancellation. The insurance policy must be canceled as if the notice of cancellation had been submitted by the insured, but without requiring the return of the insurance policy. The notice may be mailed by the insurance premium finance company to the insurer at the address on the premium finance agreement or on file with the commissioner. The insurance premium finance company shall also mail a notice of cancellation to the insured at the insured’s last-known address and to the insurance producer indicated on the premium finance agreement.
  2. If statutory, regulatory, or contractual restrictions provide that an insurance policy may not be canceled unless notice is given to a governmental agency, mortgagee, or other third party, the insurer shall give the prescribed notice on behalf of itself or the insured to the governmental agency, mortgagee, or other third party within a reasonable time after the insurer receives the notice of cancellation from the insurance premium finance company. The insurance policy must be continued beyond the date of cancellation requested by the premium finance company until the date specified by the insurance company in the prescribed notice.

Source:

S.L. 1989, ch. 344, § 2; 2001, ch. 262, § 45.

26.1-20.1-10. Application of unearned premiums.

  1. Whenever a financed insurance policy or assigned risk policy is canceled, the insurer shall return whatever gross unearned premiums, computed on a pro rata basis, are due under the insurance policy or assigned risk policy to the insurance premium finance company for the account of the insured. The unearned premiums must be returned within thirty days after the date of cancellation. This action by the insurer satisfies the insurer’s obligation under the insurance policy or assigned risk policy to return unearned premiums.
  2. If a premium is subject to an audit to determine the final premium amount, the gross unearned premium must be calculated upon the premium deposited and the insurer shall return whatever gross unearned premiums are due based upon the deposit rather than the actual unearned premium to the insurance premium finance company for the account of the insured or insureds.
  3. If the crediting of returned premiums to the account of the insured results in a surplus over the amount due from the insured, the insurance premium finance company must refund any amount of one dollar or more to the insured within thirty days after receipt of the returned premium.

Source:

S.L. 1989, ch. 344, § 2.

26.1-20.1-11. Exemption from filing.

No filing or recording of an insurance premium finance agreement is necessary to perfect the validity of the agreement as a secured transaction against creditors, subsequent purchasers, pledgees, encumbrances, successors, or assigns.

Source:

S.L. 1989, ch. 344, § 2.

26.1-20.1-12. Application to premium finance agreements.

This chapter applies to premium finance agreements and amendments to existing premium finance agreements executed after July 1, 1989.

Source:

S.L. 1989, ch. 344, § 2.

CHAPTER 26.1-21 State Bonding Fund

26.1-21-01. Definitions.

In this chapter, unless the context otherwise requires:

  1. “Blanket bond” means a bond that covers collectively all public employees and public officials without the necessity of scheduling names or positions as a part of the bond, and a bond whereby new public employees and new public officials entering employment or office during the period of the bond are automatically included without notice to the fund.
  2. “Fund” means the state bonding fund.
  3. “International peace garden” means an entity located upon the international boundary line between the United States and Canada used and maintained as a memorial to commemorate the long-existing relationship of peace and good will between the people and the governments of the United States and Canada and to further international peace among the nations of the world.
  4. “Political subdivision” means a county, township, park district, school district, city, and any other unit of local government which is created either by statute or by the Constitution of North Dakota for local government or other public purposes.
  5. “Public employee” means an individual employed by a state agency or any political subdivision, an officer or employee eligible under section 57-15-56, an employee under section 61-16.1-05, and an officer or employee of an international peace garden. “Public employee” does not include an individual employed by an occupational and professional board or commission under title 43 or by the state bar association.
  6. “Public official” means an elected or appointed officer or deputy of a state agency or a political subdivision, except for an officer of an occupational and professional board or commission under title 43 or of the state bar association.
  7. “State agency” means a state board, bureau, commission, department, agency, industry, and institution and the international peace garden.

Source:

S.L. 1983, ch. 341, § 1; 1985, ch. 82, § 39; 1989, ch. 356, § 1; 1993, ch. 285, § 2; 2005, ch. 261, § 6.

Derivation:

N.D.C.C. § 26-23-01.

26.1-21-02. State bonding fund — Management by commissioner.

A fund must be maintained as a fund for the bonding of public employees and public officials. All assessments, interest, profits on investments, and all other income collected under this chapter must be paid into the fund. The commissioner shall manage the fund.

Source:

S.L. 1983, ch. 341, § 2; 2005, ch. 261, § 7; 2015, ch. 197, § 2, eff July 1, 2015.

Derivation:

N.D.C.C. § 26-23-02.

DECISIONS UNDER PRIOR LAW

Analysis

Constitutionality.

The constitutionality of chapter 62, S.L. 1915, establishing a state bonding fund, was upheld in State ex rel. Linde v. Taylor, 33 N.D. 76, 156 N.W. 561, 1916 N.D. LEXIS 71 (N.D. 1916), writ of error dismissed, 245 U.S. 627, 38 S. Ct. 60, 62 L. Ed. 518, 1917 U.S. LEXIS 1797 (U.S. 1917).

Liability of the Surety.

The enactment of state bonding fund measures changed the source of surety liability as to public officers, but did not change the substantive law with reference to the liability of the surety. McHenry County v. Howe, 64 N.D. 507, 253 N.W. 851, 1934 N.D. LEXIS 228 (N.D. 1934).

Purpose of Fund.

The moneys in the state bonding fund are not state moneys, but are held in trust by the state treasurer for the benefit and protection of those who, under the terms of the act, may become claimants against the state. State v. Bonzer, 68 N.D. 311, 279 N.W. 769, 1938 N.D. LEXIS 114 (N.D. 1938).

26.1-21-03. Commissioner may employ or contract for assistants — Continuing appropriation.

The commissioner may employ assistants or contract for the services of assistants from the North Dakota insurance reserve fund as may be necessary to operate the state bonding fund. Moneys in the reserve fund of the state bonding fund are appropriated to the commissioner on a continuing basis for the purpose of employing or contracting for services as provided under this section.

Source:

S.L. 1983, ch. 341, § 3; 2005, ch. 261, § 8; 2019, ch. 35, § 9, eff May 2, 2019.

Derivation:

N.D.C.C. § 26-23-04.

DECISIONS UNDER PRIOR LAW

Auditing Accounts of Public Employees.

The state bonding department has no implied authority to employ private individuals for checking or auditing the accounts of a public employee required to be audited by the commissioner of the bonding department or public examiner. Burchard v. State, 58 N.D. 841, 227 N.W. 564, 1929 N.D. LEXIS 288 (N.D. 1929).

26.1-21-04. Attorney general is attorney for fund.

The attorney general shall act as attorney for the commissioner in any proceeding to which the commissioner is a party on behalf of the fund.

Source:

S.L. 1983, ch. 341, § 4; 2005, ch. 261, § 9.

Derivation:

N.D.C.C. § 26-23-23.

26.1-21-05. Investment of fund.

Investment of the fund is under the supervision of the state investment board in accordance with chapter 21-10.

Source:

S.L. 1983, ch. 341, § 5.

Derivation:

N.D.C.C. § 26-23-03.

26.1-21-06. Condition of bond created by chapter — Limitation.

Unless otherwise provided, the bond provided under this chapter is a blanket bond. The blanket bond is a fidelity bond. The blanket bond is conditioned on the public employee or public official, as principal, rendering a true account of all moneys and property possessed as a public employee or public official, and delivering the money or the property as required by law. The provisions of this chapter and of any statute requiring a bond constitute the bond of each public official and public employee for the purposes of any law of this state requiring the bond and constitute the entire contract between the fund and a state agency or a political subdivision as the obligee for the bond.

Source:

S.L. 1983, ch. 341, § 6; 2005, ch. 261, § 10.

Derivation:

N.D.C.C. § 26-23-09.

Notes to Decisions

Violation of Constitutional or Civil Rights.

The State Bonding Fund provides a source for payment of claims against public employees or officials for embezzlement of funds entrusted to them; the fund is not intended to pay damages for the violation of constitutional or civil rights. Jensen v. Zuern, 517 N.W.2d 118, 1994 N.D. App. LEXIS 9 (N.D. Ct. App.), aff'd, 523 N.W.2d 388, 1994 N.D. LEXIS 226 (N.D. 1994).

Where an inmate did not allege that any individual state defendants embezzled money entrusted to them, nor did he allege that the State Bonding Fund had deprived him of any constitutional or civil rights, his complaint failed to state a claim against the State Bonding Fund. Jensen v. Zuern, 517 N.W.2d 118, 1994 N.D. App. LEXIS 9 (N.D. Ct. App.), aff'd, 523 N.W.2d 388, 1994 N.D. LEXIS 226 (N.D. 1994).

26.1-21-07. Coverage.

The amount of coverage afforded to each state agency or political subdivision must be determined by the commissioner based upon the amount of money or property handled and the opportunity for defalcation but the amount must at least equal the amount of money or property actually handled or ten thousand dollars, whichever is less. The coverage may be greater than but not less than the amount required by law or determined under law for a position. The coverage for a state legislative or judicial branch agency, however, may be determined by the legislative council or supreme court, respectively. Notwithstanding any other provision of law, the commissioner may issue bonds in such amounts as the commissioner determines necessary to carry out the purposes of the fund and, in determining the amount of coverage to be offered, the commissioner may consider the reserves necessary to pay the bonds and for all other necessary costs or expenses to carry out the purposes of the fund.

Source:

S.L. 1983, ch. 341, § 7; 2005, ch. 261, § 11; 2009, ch. 248, § 2; 2009, ch. 249, § 1.

Derivation:

N.D.C.C. § 26-23-02.1.

26.1-21-08. Review of coverage by auditor.

When conducting an audit examination of a state agency or political subdivision, the auditor may evaluate the blanket bond coverage and, if necessary, the auditor may include recommendations for changes in the amount of that coverage in the auditor’s report.

Source:

S.L. 1983, ch. 341, § 8; 2005, ch. 261, § 12; 2021, ch. 234, § 1, eff August 1, 2021.

Derivation:

N.D.C.C. § 26-23-02.2.

26.1-21-09. Premiums — Amount to whom paid — Minimum.

The commissioner shall determine the premium for a blanket bond. Each state agency and political subdivision shall pay the premium in advance to the fund and the premiums collected must be kept in the fund. The minimum premium for each bond must be two dollars and fifty cents per public employee per year. Payments must be made for one year or for a longer term as prescribed by the commissioner. The premiums referred to in this section must be waived until the reserve fund of the state bonding fund has been depleted below the sum of two million dollars. The collection of premiums must be resumed on the bonds, at the rates provided under this section, whenever the reserve fund is depleted below the sum of two million dollars. The premiums must continue to be collected until the reserve fund reaches a total of three million dollars, at which time all premiums must again be waived until the reserve fund has been depleted below the sum of two million dollars.

Source:

S.L. 1983, ch. 341, § 9; 1999, ch. 106, § 7; 2003, ch. 36, § 16; 2005, ch. 261, § 13; 2009, ch. 248, § 3.

Derivation:

N.D.C.C. § 26-23-06.

26.1-21-09.1. Bonds of agents appointed to distribute hunting and fishing licenses or stamps — Premiums — Determination of eligibility.

The annual premium for a bond of an agent appointed by the director of the game and fish department to distribute hunting and fishing licenses or stamps pursuant to section 20.1-03-17 is ten dollars. The premium must be paid to the fund pursuant to rules adopted by the commissioner. The commissioner shall deposit the premiums with the state treasurer to the credit of the fund. The commissioner may reduce or waive the premium if it is determined that funds received pursuant to this section are sufficient to cover potential claims on the bonds of agents appointed to distribute hunting and fishing licenses or stamps. The commissioner shall determine the conditions and qualifications of agents bonded under this section. The amount of coverage afforded under this section is fifteen thousand dollars per agent per year.

Source:

S.L. 1989, ch. 285, § 3; 1991, ch. 311, § 1; 2003, ch. 243, § 1; 2005, ch. 262, § 1; 2015, ch. 177, § 5, eff April 1, 2016.

26.1-21-10. Automatic insurance of state and political subdivisions.

  1. Each state agency and each political subdivision shall apply to be bonded in the fund no less often than on a biennial basis or when a change in coverage is requested, whichever occurs first. Unless an application is denied within sixty days from the date it is received by the commissioner, the application will be deemed approved and bond coverage in force. If a bond is in the discretion of the state agency or political subdivision and a bond is not requested, the state agency or political subdivision is exempt from this section.
  2. The application must include a requested amount of bond coverage based on the amount of money and property handled and the opportunity for defalcation and any other condition imposed by law and list twenty-five percent of the money in control of the public officials or employees for which the bond is requested for the preceding year based on the total monthly balances. In addition, the application must include any information requested by the commissioner to determine the amount of money and property handled and the opportunity for defalcation, including the procedure used to determine the amount of bond requested, revenues for the last budget period by type, expenditures for the last budget period by type, the number of people that handle money, any portion of the last audit, and any financial procedures.

Source:

S.L. 1983, ch. 341, § 10; 2005, ch. 261, § 14; 2009, ch. 248, § 4.

Derivation:

N.D.C.C. § 26-23-08.

26.1-21-10.1. State employee — Defense. [Repealed]

Repealed by S.L. 1997, ch. 286, § 11.

26.1-21-10.2. State employee defense — Expenses withdrawn by attorney general. [Repealed]

Repealed by S.L. 1997, ch. 286, § 11.

26.1-21-11. Default of public employees or public officials — Limitation on filing of claims against fund.

Within sixty days after the discovery of any default or wrongful act on the part of any public employee or public official for which the fund is or may become liable, the state auditor, county auditor, city auditor, township clerk, or business manager of the school district; the treasurer of the state or state agency or political subdivision if the defaulting officer is the auditor or clerk of the state or state agency or political subdivision; and any other officer having supervision of a defaulting public employee or public official shall file a claim with the commissioner against the fund. Any person injured by a default or wrongful act may present the claim to the commissioner within sixty days after the discovery of such default or wrongful act. If a claim is not filed within the time limited by this section, the claim is waived. A claim filed under this section must contain an abstract of the facts upon which the claim is based and must be verified by the claimant or by someone in the claimant’s behalf. The claim and all papers relating to the claim must remain on file with the commissioner.

Source:

S.L. 1983, ch. 341, § 11; 2005, ch. 261, § 15.

Derivation:

N.D.C.C. § 26-23-10.

DECISIONS UNDER PRIOR LAW

Duty of Public Officer.

A county auditor need not join in the execution of a claim against the state bonding fund on the bond of the county treasurer. Bowman County v. McIntyre, 55 N.D. 623, 214 N.W. 916, 1927 N.D. LEXIS 134 (N.D. 1927).

Exclusiveness of Statutory Provisions.

Insofar as former similar statute provided conditions and limitations for the filing of claims and bringing of actions against the state bonding fund, it was complete within itself, and the conditions and limitations were exclusive as against the provisions of general statutes of limitations. Morton County v. Tavis, 66 N.W.2d 201, 1954 N.D. LEXIS 102 (N.D. 1954).

Liability for Statutory Penalty.

The state bonding fund, as surety on sheriff’s official bond, may be held liable with the sheriff in an amercement proceeding to the same extent as a private or corporate surety. Farmers' State Bank v. Crandell, 60 N.D. 619, 236 N.W. 264, 1931 N.D. LEXIS 211 (N.D. 1931).

Provisions Limited to State Bonding Fund.

The provision limiting actions brought upon bonds is limited strictly to the state bonding fund and does not apply to an action on a surety bond not issued by the fund. Storing v. National Sur. Co., 56 N.D. 14, 215 N.W. 875, 1927 N.D. LEXIS 67 (N.D. 1927).

Provisions Mandatory.

The provisions of former similar section relating to the time for filing a claim were mandatory and created a condition precedent to a claimant’s right of recovery. Madden v. Dunbar, 52 N.D. 65, 201 N.W. 988, 1924 N.D. LEXIS 114 (N.D. 1924); Bowman County v. McIntyre, 52 N.D. 225, 202 N.W. 651, 1925 N.D. LEXIS 24 (N.D. 1925); Felch v. Olsness, 53 N.D. 18, 204 N.W. 848, 1925 N.D. LEXIS 48 (N.D. 1925); Burke County v. Enget, 54 N.D. 131, 209 N.W. 362, 1926 N.D. LEXIS 124 (N.D. 1926); Ward County v. Balerud, 72 N.D. 173, 5 N.W.2d 425, 1942 N.D. LEXIS 127 (N.D. 1942); Morton County v. Tavis, 66 N.W.2d 201, 1954 N.D. LEXIS 102 (N.D. 1954).

Public Administrator’s Bond.

The official bond of public administrator, ex officio appointed general administrator of an estate, covers defaults as such general administrator, and suit may be brought thereon by the proper representative of the distributees of the estate. Kelsey v. Olsness, 63 N.D. 758, 249 N.W. 919, 1933 N.D. LEXIS 232 (N.D. 1933).

Sufficiency of Complaint.

A complaint setting out a breach of an official bond is good as against a demurrer, even though there is no express allegation of damages on account of the breach. The law implies damages. Bowman County v. McIntyre, 52 N.D. 225, 202 N.W. 651, 1925 N.D. LEXIS 24 (N.D. 1925).

Taxpayer Cannot File Claim.

Taxpayer has no power to file a claim on behalf of a county against the state bonding fund on account of the breach of an official bond by a county officer or employee. Ward County v. Balerud, 72 N.D. 173, 5 N.W.2d 425, 1942 N.D. LEXIS 127 (N.D. 1942); Ward County v. Pringle, 72 N.D. 185, 5 N.W.2d 432, 1942 N.D. LEXIS 128 (N.D. 1942).

26.1-21-12. Commissioner to notify state auditor of default of public employee or public official — Duty of state auditor.

If any public employee or public official defaults or creates a liability against the fund, the commissioner shall notify the state auditor. The state auditor shall investigate, or cause to be investigated, the accounts of the public employee or public official and file a report with the commissioner stating any amount due from the fund because of the default or wrongful act. For these services, the auditor or investigating firm must be paid out of the fund all reasonable costs incurred.

Source:

S.L. 1983, ch. 341, § 12; 2005, ch. 261, § 16; 2009, ch. 250, § 1.

Derivation:

N.D.C.C. § 26-23-11.

DECISIONS UNDER PRIOR LAW

Auditing Accounts of Public Employees.

The state bonding department has no implied authority to employ private individuals for checking or auditing the accounts of a public employee required to be audited by the commissioner of the bonding department or public examiner. Burchard v. State, 58 N.D. 841, 227 N.W. 564, 1929 N.D. LEXIS 288 (N.D. 1929).

26.1-21-13. Audit of claims against state bonding fund — Register of claims.

All liability claims against the fund must be audited by the commissioner, and such audit must be approved by the attorney general. The commissioner has the authority to prescribe the forms upon which claims must be presented and may administer oaths and examine witnesses in connection with claims presented to the commissioner. If the commissioner, with the approval of the attorney general, finds a claim or any part thereof to be a valid, just, and proper charge against the fund, the commissioner shall make and file an order to that effect and state therein the amount allowed upon the claim. A brief description of every claim filed against the fund must be entered by the commissioner in a register provided for that purpose showing the name of the claimant, the amount and character of the claim, the action taken upon the claim, and the date when such action was taken.

Source:

S.L. 1983, ch. 341, § 13.

Derivation:

N.D.C.C. § 26-23-12.

26.1-21-14. Filing claim is condition precedent to bringing action — Failure to act is disallowance.

An action may not be maintained against the fund upon a claim until the claim has been presented for allowance as provided in this chapter and the commissioner has refused to allow the claim. A claim that has not been allowed within sixty days after presentation for allowance is disallowed. The filing and disallowance of the claim must be alleged in the complaint in any action brought against the fund.

Source:

S.L. 1983, ch. 341, § 14; 2005, ch. 261, § 17.

Derivation:

N.D.C.C. § 26-23-13.

26.1-21-15. Limitation of time for bringing action against the fund — Interest — Limitation on time for fund liability.

An action may not be maintained against the fund upon any claim unless the action is commenced within one year after filing of the claim with the commissioner. Interest on the claim runs from the date of filing the claim with the commissioner. The liability of the fund is limited to a breach of a condition of the bond which occurred within two years before the date of filing the claim with the commissioner.

Source:

S.L. 1983, ch. 341, § 15; 2005, ch. 261, § 18.

Derivation:

N.D.C.C. § 26-23-14.

26.1-21-16. Suit by party injured by default of public employee or public official — Subrogation — Right of appeal.

A person injured by the default or wrongful act of any public employee or public official may sue the public employee or public official. To effect recovery from the fund, that person must join the fund as codefendant. A judgment must be obtained against the public employee or public official to create liability upon the bond. If the judgment is obtained against the public employee or public official, the judgment must specify that to the extent to which the fund is liable upon the bond of the public employee or public official, the judgment must be paid out of any money in the fund or that which may accrue to the fund. If the judgment is paid out of the fund, the fund has a right to recover and is subrogated to the right of the judgment creditor to recover against the public employee or public official. The commissioner may act for the fund in all proceedings to enforce the right of subrogation and may appeal from an order or judgment against the fund the same as other parties to civil actions.

Source:

S.L. 1983, ch. 341, § 16; 1993, ch. 54, § 106; 2005, ch. 261, § 19.

Derivation:

N.D.C.C. § 26-23-15.

DECISIONS UNDER PRIOR LAW

Liability for Statutory Penalty.

The state bonding fund, as surety on sheriff’s official bond, may be held liable with the sheriff in an amercement proceeding to the same extent as a private or corporate surety. Farmers' State Bank v. Crandell, 60 N.D. 619, 236 N.W. 264, 1931 N.D. LEXIS 211 (N.D. 1931).

Punitive Damages.

Former similar statute creating the state bonding department for the bonding of public officers and employees did not authorize the recovery of punitive damages from the state bonding fund. Yesel v. Watson, 58 N.D. 524, 226 N.W. 624, 1929 N.D. LEXIS 246 (N.D. 1929).

Where one injured by the act of an officer sues the officer and joins the fund, and where the pleadings do not seek to differentiate between the liability of the individual defendant and the fund for any recovery above that necessary to compensate the injured party, he waives, for the purpose of that suit, his claim for punitive or exemplary damages. Yesel v. Watson, 58 N.D. 524, 226 N.W. 624, 1929 N.D. LEXIS 246 (N.D. 1929).

Subrogation.

Former similar section did not amount to a contract giving to the bonding fund a right of subrogation in competition with a creditor, where the creditor’s claim was only partially satisfied. Olsness v. Baird, 52 N.D. 1, 201 N.W. 993 (1924), following Olsness v. Baird, 52 N.D. 64, 201 N.W. 996, 1924 N.D. LEXIS 117 (N.D. 1924).

26.1-21-17. Allowed liability claims payable from fund — Administrative expenses — Methods of payment.

A claim allowed against the fund must be paid upon warrants drawn upon the state treasurer against the fund. The warrant must be prepared by the office of management and budget pursuant to the directions of the commissioner. Payments for administrative expenses of the state bonding fund must be made from the reserve fund of the state bonding fund or must be made within the limitations of legislative appropriations upon warrant-checks prepared by the office of management and budget after the approval of vouchers by the commissioner.

Source:

S.L. 1983, ch. 341, § 17; 2005, ch. 261, § 20; 2019, ch. 35, § 10, eff May 2, 2019.

Derivation:

N.D.C.C. § 26-23-16.

26.1-21-18. Commissioner may make examinations — Request for accounting — Reporting defaulting official to governor.

If the commissioner determines that the interests of the fund are jeopardized by the misconduct or inefficiency of any public official, the commissioner shall request the state auditor to make an examination, and, if necessary, shall cause an action for an accounting to be instituted against the public official for the purpose of requiring a complete disclosure of the business of the office of which the public official is an incumbent. The action must be brought in the name of the commissioner as plaintiff, and the court in the action may interplead all concerned parties. The commissioner may make a complaint to the governor requesting the governor to institute an investigation with the purpose of removing from the office any defaulting public official or any public official who so conducts the affairs of the public official’s office as to endanger the fund.

Source:

S.L. 1983, ch. 341, § 18; 2005, ch. 261, § 21.

Derivation:

N.D.C.C. § 26-23-17.

DECISIONS UNDER PRIOR LAW

Auditing Accounts of Public Employees.

The state bonding department has no implied authority to employ private individuals for checking or auditing the accounts of a public employee required to be audited by the commissioner of the bonding department or public examiner. Burchard v. State, 58 N.D. 841, 227 N.W. 564, 1929 N.D. LEXIS 288 (N.D. 1929).

26.1-21-19. Cancellation of liability of fund — When permitted — Effect.

After due investigation, the commissioner may cancel the liability of the fund for the acts of any public employee or public official. The cancellation takes effect thirty days after written notice. If a public official’s or public employee’s bond is canceled, the public official or public employee may secure at personal expense a bond executed by a duly authorized surety company in an amount determined by the commissioner. Evidence of a surety bond purchased under this section must be filed with the commissioner.

Source:

S.L. 1983, ch. 341, § 19; 2005, ch. 261, § 22.

Derivation:

N.D.C.C. § 26-23-18.

26.1-21-20. Notice of cancellation — Right to appeal from cancellation — Procedure.

The commissioner shall notify the public employee or public official immediately by registered or certified mail when the public employee’s or public official’s bond, or coverage under a blanket bond, is ordered canceled, and the public employee or public official shall have twenty days after the receipt of such notice within which to take an appeal from the decision of the commissioner to the district court of the judicial district in which the public employee or public official resides. The court shall hear such appeal at a day to be fixed by the judge thereof not less than ten days nor more than thirty days after the filing of the appeal with the clerk. Notice of such appeal must be served by the appellant upon the commissioner. The case must be tried by the court without a jury.

Source:

S.L. 1983, ch. 341, § 20.

Derivation:

N.D.C.C. § 26-23-19.

26.1-21-21. Fund may reinsure risks — Premium on reinsurance.

The commissioner may reinsure any part of any liability in excess of twenty-five thousand dollars upon any one public official, or group of public officials and public employees under a blanket bond, at a cost not exceeding the rate of premium provided for in this chapter, and the expense of such reinsurance must be paid out of the fund.

Source:

S.L. 1983, ch. 341, § 21.

Derivation:

N.D.C.C. § 26-23-20.

26.1-21-22. Publication of statement of fund — Biennial report.

The commissioner, on or about December first in each odd-numbered year, shall publish in four newspapers of general circulation within the state a copy of the statement of the commissioner’s work and of the condition of the fund during the two preceding fiscal years. The commissioner shall include this statement in the biennial report submitted in accordance with section 54-06-04.

Source:

S.L. 1983, ch. 341, § 22; 1987, ch. 73, § 10; 1995, ch. 350, § 20; 2003, ch. 459, § 2.

Derivation:

N.D.C.C. § 26-23-21.

26.1-21-23. Public official may furnish private bond — Premiums payable from public moneys only to fund.

In lieu of the bond provided for in this chapter, a public officer or public employee may furnish a bond issued by a duly authorized surety company in an amount determined by the commissioner, but an officer or board of the state or of any political subdivision may not pay for the surety bond out of any public funds. Evidence of a bond purchased under this section must be filed with the commissioner.

Source:

S.L. 1983, ch. 341, § 23; 2005, ch. 261, § 23.

Derivation:

N.D.C.C. § 26-23-22.

26.1-21-24. State agency or political subdivision may purchase bond in addition to fund bond.

Nothing in this chapter prohibits a state agency or political subdivision from purchasing a bond issued by a duly authorized surety company in addition to the bond provided by the fund. A state agency or political subdivision that purchases an additional bond shall file evidence of that bond with the commissioner.

Source:

S.L. 2009, ch. 248, § 5.

CHAPTER 26.1-22 State Fire and Tornado Fund

26.1-22-01. Definitions.

In this chapter, unless the context otherwise requires:

  1. “Fund” means the state fire and tornado fund.
  2. “Indirect loss” means a loss in income or the additional expenses incurred because of a property loss.
  3. “International peace garden” means an entity located upon the international boundary line between the United States and Canada used and maintained as a memorial to commemorate the long-existing relationship of peace and good will between the people and the governments of the United States and Canada and to further international peace among the nations of the world.
  4. “Permanent contents” refers only to such public property, either owned or leased, usually kept or used in or about public buildings insured in the fund, and to all public personal property usually kept or used in or about all buildings used for public purposes, or within one hundred feet [30.48 meters] of all such buildings, or while on sidewalks, streets, alleys, yards, detached platforms, and in or on railway cars. The term includes similar property owned by an international peace garden or a winter show. The term does not include automobiles, trucks, tractors, road machinery, or similar property used principally outside such buildings.
  5. “Political subdivision” means all counties, townships, park districts, school districts, cities, and any other units of local government which are created either by statute or by the Constitution of North Dakota for local government or other public purposes.
  6. “Replacement cost” is the cost to replace a building or its permanent contents with a similar structure of like materials or a similar product at current prices.
  7. “Winter show” means an agricultural exhibition sponsored each year in March by a nonprofit corporation.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 1; 1989, ch. 356, § 2; 1989, ch. 357, § 1; 1991, ch. 312, § 1; 1991, ch. 313, § 1; 1993, ch. 285, § 3.

Derivation:

N.D.C.C. § 26-24-01.

26.1-22-02. State fire and tornado fund under management of commissioner — Purpose of fund.

The commissioner shall manage the fund. The fund must be maintained as a fund to insure the various state industries, the various political subdivisions, any international peace garden, and any winter show against loss to the public buildings, or buildings owned by an international peace garden or a winter show, and fixtures and permanent contents therein, and against indirect loss, through fire, lightning, inherent explosion, windstorm, cyclone, tornado and hail, explosion, riot attending a strike, aircraft, smoke, and vehicles. At the option of the insured, the fund may insure against other risks of direct physical loss and indirect loss from those risks. All moneys collected under this chapter must be paid into the fund for use only for the purposes provided for in this chapter.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 2; 1989, ch. 356, § 3; 1991, ch. 313, § 2.

Derivation:

N.D.C.C. § 26-24-02.

DECISIONS UNDER PRIOR LAW

Constitutionality.

The constitutionality of chapter 159, S.L. 1919, as amended by chapter 154, S.L. 1925, establishing the state fire and tornado insurance fund, was upheld in Minot Special Sch. Dist. v. Olsness, 53 N.D. 683, 208 N.W. 968, 1926 N.D. LEXIS 41 (N.D. 1926).

26.1-22-02.1. Insurance against indirect losses.

The commissioner shall provide, upon request of an entity insured with the fund, coverage by the fund for an indirect loss incurred because of a loss arising out of a peril insured against by the fund. The coverage provided by the fund shall be an amount that is subject to the underwriting guidelines adopted by the commissioner.

Source:

S.L. 1991, ch. 313, § 3; 2021, ch. 235, § 1, eff July 1, 2021.

26.1-22-03. Employment of assistants — Expenditures from fund — Continuing appropriation.

To carry out this chapter, the commissioner may utilize any information on file in the state fire marshal’s department and any of the employees of the commissioner and the commissioner may employ necessary assistants or contract for services of assistants from the North Dakota insurance reserve fund and may incur necessary expenses. All expenditures made for these purposes, other than services contracted and paid for by moneys from the fund and any necessary expenses paid from moneys from the reserve balance within the fund, must remain within the limits of legislative appropriations and must be paid out of the fund upon warrants prepared by the office of management and budget drawn upon the state treasurer after the approval of vouchers by the office of the budget. Moneys from the reserve balance within the fund are appropriated to the commissioner on a continuing basis for the purposes of this section.

Source:

S.L. 1983, ch. 332, § 22; 2019, ch. 35, § 11, eff May 2, 2019.

Derivation:

N.D.C.C. § 26-24-03.

26.1-22-03.1. North Dakota insurance reserve fund — Producers — Commission.

The North Dakota insurance reserve fund may use the services of producers licensed under this title to assist policyholders. Any commission paid to a producer under this section must be paid out of the premium income of the fund and must be assessed against the policyholders that benefit from the producer.

Source:

S.L. 2019, ch. 35, § 12, eff May 2, 2019.

26.1-22-04. Investment of fund.

Investment of the fund is under the supervision of the state investment board in accordance with chapter 21-10.

Source:

S.L. 1983, ch. 332, § 22.

Derivation:

N.D.C.C. § 26-24-07.

26.1-22-05. Public, international peace garden, and winter show buildings insurable in fund.

The public buildings and fixtures and permanent contents therein belonging to the state, the various state industries except the state mill and elevator association if the association exercises the option provided in section 26.1-22-10, and the political subdivisions must, and the buildings and fixtures and the permanent contents therein belonging to an international peace garden or a winter show may, be insured under this chapter. No officer or agent of the state or of any political subdivision, and no person having charge of any public buildings belonging to the state, any state industry, or any political subdivision, may pay out any public moneys or funds on account of any insurance against loss by fire, lightning, inherent explosion, windstorm, cyclone, tornado and hail, explosion, riot attending a strike, aircraft, smoke, vehicles, or any other risks of direct physical loss, or contract in any manner for, or incur any indebtedness against, the state or any political subdivision on account of any such insurance upon any of the buildings or fixtures and permanent contents therein belonging to the state or any political subdivision, except in the manner provided in this chapter.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 3; 1989, ch. 356, § 4; 1993, ch. 293, § 3; 2003, ch. 244, § 1.

Derivation:

N.D.C.C. § 26-24-04.

DECISIONS UNDER PRIOR LAW

Remodeling of Public Building.

Where a city executes a contract for remodeling a community hall into a fire hall, builder’s risk insurance, including fire insurance, may be carried in a private solvent company in an amount sufficient to protect the contractor. Reishus v. Implement Dealers Mut. Ins. Co., 118 N.W.2d 673, 1962 N.D. LEXIS 104 (N.D. 1962).

26.1-22-06. Commissioner to adopt guidelines on insurable values.

The commissioner shall adopt guidelines to be used by state agencies, departments, offices, officers, boards, commissions, international peace gardens, and winter shows for the purpose of determining insurable values of state-owned property and property belonging to an international peace garden or a winter show for insurance coverage as authorized by law. The commissioner shall adopt guidelines in determining insurable values to assist state agencies and institutions and political subdivisions in determining whether to select indirect loss coverage. Notwithstanding any other provision of this chapter, the expenses for necessary loss prevention inspections and rating inspections for the purpose of determining the proper premium rate to be applied to the property insured by the fund must be paid out of the fund.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 4; 1989, ch. 356, § 5; 1991, ch. 311, § 2; 1991, ch. 313, § 4; 1993, ch. 285, § 4.

Derivation:

N.D.C.C. § 26-24-08.1.

26.1-22-06.1. Replacement cost appraisal required on state-owned property.

Once every six years each state agency and institution shall obtain from the fund a replacement cost appraisal on all buildings and fixtures and permanent contents under its control which are insured at replacement cost. The fund shall determine the manner of conducting the appraisal. Annually, except for any year an appraisal is conducted, the agency or institution shall adjust the appraisal amount in the manner authorized by the fund.

Source:

S.L. 1991, ch. 312, § 2; 2021, ch. 235, § 2, eff July 1, 2021.

26.1-22-07. Certain property of state and of Bank of North Dakota excepted. [Repealed]

Repealed by S.L. 1989, ch. 357, § 3.

26.1-22-08. Townships and school districts have option as to insurance on certain property.

This chapter does not apply to the property of any township or school district located outside of the incorporated limits of a city unless the clerk of the township or business manager of the school district, at the direction of the board of township supervisors or the school board, files with the commissioner a written application for insurance and a request that the township or school district come under this chapter. To be effective, the application must be approved in writing by the commissioner.

Source:

S.L. 1983, ch. 332, § 22.

Derivation:

N.D.C.C. § 26-24-06.

26.1-22-09. Buildings to be reported to commissioner.

In each odd-numbered year, or upon application for insurance, the state board of higher education, and each officer, department, or agent of the state and of any industry thereof having in charge any public building belonging to the state, each county auditor, city auditor, township clerk, and school district business manager, as the case may be, the agent for an international peace garden, and the agent for a winter show, if applicable, shall report to the commissioner the insurable value of each public building, or of each building owned by an international peace garden or a winter show with the exception of buildings insured by private insurance companies, and of the fixtures and permanent contents therein, with the exception of fixtures and permanent contents insured by private insurance companies, belonging to the state, political subdivision, an international peace garden, or a winter show, and shall supply such other information as may be required by the commissioner on forms provided by the commissioner.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 5; 1989, ch. 356, § 6.

Derivation:

N.D.C.C. § 26-24-08.

26.1-22-10. Commissioner to provide insurance on buildings and personal property.

  1. Upon application the commissioner shall provide for insurance against loss by fire, lightning, inherent explosion, windstorm, cyclone, tornado and hail, explosions, riot attending a strike, aircraft, smoke, vehicles, or may insure any other risks of direct physical loss, subject to the restrictions and exclusions deemed necessary by the commissioner, on all buildings owned by the state, state industries, political subdivisions, international peace gardens, and winter shows, and the fixtures and permanent contents in such buildings, to the extent of not to exceed the insurable value of such property, as the value is agreed to between the commissioner and the officer or board having control of such property, or, in case of disagreement, by approval through arbitration. The commissioner may allow property to be insured on a blanket basis.
  2. All buildings and the contents of the buildings owned by the state mill and elevator association, in lieu of coverage under this chapter, may, at the option of the industrial commission, be insured by private insurance companies licensed to do business in this state, against at least all the types of hazards insured against by the fund. If the industrial commission exercises the option provided in this section, the commission shall seek competitive sealed bids, shall invite the fund to submit a bid, and may reject any or all bids received.
  3. All public buildings owned by a political subdivision, in lieu of coverage provided for in this section, may at the option of the governing body of the political subdivision be insured on the basis of competitive sealed bids, through the fund which must be invited to submit a sealed bid or private insurance companies licensed to do business in this state, against damage resulting from hazards, which include those types of hazards that may be insured against by the fund. The governing body may reject any or all such bids.
  4. All public libraries owned by the state or political subdivisions may, in addition to the coverage provided for in this section, be covered against damage through vandalism. If this coverage cannot be extended to the public libraries situated within this state, the libraries may contract for this coverage with private insurance companies; provided, that this coverage meets the recommendations of the insurance code of the American library association.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 5; 1989, ch. 356, § 7; 1989, ch. 357, § 2; 2003, ch. 244, § 2; 2007, ch. 37, § 12; 2021, ch. 235, § 3, eff July 1, 2021.

Derivation:

N.D.C.C. § 26-24-09.

26.1-22-10.1. State-owned property — Insured at replacement cost.

State-owned buildings constructed after 1939 and fixtures and permanent contents insured under this chapter must be insured at replacement cost or for another value in accordance with underwriting guidelines adopted by the commissioner.

Source:

S.L. 1991, ch. 312, § 2.

26.1-22-10.2. School district — Leased property — Insurability. [Expired]

History. S.L. 2015, ch. 155, § 4, eff April 28, 2015; Expired by 2015, ch. 155, § 6, eff July 1, 2017.

26.1-22-11. Arbitration.

In case the commissioner and the board or officer having charge of any property are unable to agree upon the insurable value of the property, the value must be determined by a recognized appraisal company at the expense of the state industry, political subdivision, an international peace garden, or a winter show owning the property, if the appraisal company arbitrator meets with the approval of both the commissioner and the board or officer concerned. If they are unable to agree on an arbitrator, then the matter must be submitted to arbitration by a board of arbitration selected as provided by this section. The commissioner and the board or officer in charge of the property each shall select one competent, disinterested contractor, architect, experienced appraiser, appraisal company, or one of the members of such board, and the two so chosen shall select a third person of similar qualification. The three arbitrators shall proceed to determine the insurable value of the property, and the decision of the arbitrators, or a majority of them, must be given in writing to the commissioner and the board or officials concerned and is binding upon both parties. Each party to the dispute shall pay the expense and charges of the arbitrator chosen by the party, and the expense and the charges of the third arbitrator must be borne equally by both parties to the dispute. The decision by the board of arbitration must be made within thirty days from the time the matter is submitted to it. Until the commissioner and board or officer in charge have agreed, or in case of dispute, until the decision of the appraisal company or arbitrators, the property must continue to be valued in the same amount as previously, or in case of new buildings or property, in the amount fixed by the commissioner. The same procedure must be followed in case of new construction or in any increase or decrease in values.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 7; 1989, ch. 356, § 8.

Derivation:

N.D.C.C. § 26-24-10.

26.1-22-12. Policy fee. [Repealed]

Repealed by S.L. 1989, ch. 357, § 3.

26.1-22-13. Reserve balance — Payment of loss.

All assessments, interest, and profits on investments and all other income of the fund must be added to a reserve balance within the fund. All losses incurred, including loss adjustment expenses and operating expenses appropriated by the legislative assembly, must be paid from the reserve balance in the manner provided by law.

Source:

S.L. 1983, ch. 332, § 22; 1991, ch. 311, § 3.

Derivation:

N.D.C.C. § 26-24-12.

26.1-22-14. Assessments and reporting of premiums and losses.

  1. If the reserve balance is less than twelve million dollars, the commissioner shall determine the amount of money necessary to bring the reserve balance up to twelve million dollars. The commissioner then shall levy an assessment against every policy in force with the fund.
  2. The assessment must be computed as follows:
    1. The eighty percent or ninety percent coinsurance rate established for each insured property for which that rate may be applicable, and the full rate established for policies providing coverage against indirect losses and for properties to which the eighty percent or ninety percent coinsurance rate is not applicable, must be applied to the amount of insurance provided in each policy and the result of the application of the rate to the amount of insurance sets the tentative assessment to be made against the policy.
    2. The total of all tentative assessments must then be ascertained.
    3. The percentage of the assessment necessary to restore the reserve balance to the sum of twelve million dollars must then be computed and collected on each policy; provided, that until the reserve balance reaches twelve million dollars, the assessment must be in an amount determined by the commissioner but may not exceed sixty percent of the rates set by the insurance services office for insured property unless the reserve balance is depleted below three million dollars.
    4. In case of a fractional percentage the next higher whole percent must be used in such computation.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 8; 1989, ch. 356, § 9; 1991, ch. 313, § 5; 2017, ch. 216, § 1, eff August 1, 2017; 2021, ch. 235, § 4, eff July 1, 2021.

Derivation:

N.D.C.C. § 26-24-13.

26.1-22-15. Collection of premiums and assessments.

The commissioner, as soon as possible after providing for insurance coverage against any indirect loss or loss of property belonging to the state, a political subdivision, an international peace garden, or a winter show, shall certify to the insured the amount of premium or assessment due. The certificate must give the name of the insured, the amount of insurance written thereon, and the amount of the premium or assessment, and if applicable, the location and description of the insured property. The proper officer shall remit to the commissioner the amount of the premium or assessment within sixty days after the date of the certification. The commissioner shall deposit the premiums and assessments with the state treasurer to the credit of the fund. If the premiums or assessments are not paid within sixty days after the date on which they are certified, collection thereof may be enforced by appropriate action. The attorney general and the state’s attorney of the relevant county shall bring appropriate actions to enforce the collections of the premium and assessment upon request of the commissioner. An enforcement judgment obtained under this section must include a rate of six percent interest per annum. Payment of the premiums or assessments certified pursuant to this section may be made by any state department, officer, board, institution, or agency and by any political subdivision, out of any available funds, notwithstanding that no specific appropriation or tax levy has been made therefor.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 9; 1989, ch. 356, § 10; 1991, ch. 313, § 6; 2021, ch. 235, § 5, eff July 1, 2021.

Derivation:

N.D.C.C. § 26-24-15.

26.1-22-16. Rejection of certain risks.

If the commissioner finds that any risk is unreasonably hazardous, the commissioner may require the board or officer having control of the risk to make any improvements or changes necessary to remove the extra hazard. If the board or agency fails to make the improvements or changes within six months after the demand by the commissioner, the commissioner may cancel the insurance on the renewal upon thirty days’ notice. No cancellation may be made by the commissioner without the approval of the industrial commission. If a dispute arises between the commissioner and the board or official having control of the risk, either as to the insurability thereof or as to the compliance by the board or officer with the requirements of the commissioner, the dispute must be submitted to a board of arbitration as provided in section 26.1-22-11 and the decision of the board of arbitration is binding on both parties. If the insurance on any risk is canceled as provided in this section, the board or officer in charge of the risk may procure insurance from any authorized insurance company, and the premium is a proper charge against the state, state industry, or political subdivision owning the property.

Source:

S.L. 1983, ch. 332, § 22.

Derivation:

N.D.C.C. § 26-24-16.

26.1-22-17. Loss — How paid.

All losses occasioned by the perils insured against under this chapter must be paid out of the fund in an amount not exceeding the amount of the insurance upon any particular risk. The loss upon any building or property insured in the fund, whether totally destroyed or partially damaged by reason of the perils, must be adjusted by the commissioner or a duly authorized adjuster or adjusting company. All necessary loss adjustment expenses must be included as a component of the loss and be paid out of the fund. Immediately upon the happening or occasion of any such loss or damage, the insured shall notify the commissioner. The notification must be in the manner required by the commissioner and must provide a description of the property, the amount of insurance carried, the probable amount of loss or damage, and the probable cause of loss or damage. The insured may not disturb the property except as provided in the policy until the commissioner or the commissioner’s agent has adjusted the loss or has given notice that the information on which the adjustment is to be made has been secured. Allowances for loss and damage must be paid out of the fund upon warrants drawn by the office of management and budget upon the state treasurer against the fund after the submission of a voucher prepared by the commissioner to the office of management and budget specifying the amount to be paid and the payee to whom the warrants must be drawn. However, if at any time due to a catastrophe or disaster, or a succession of catastrophes or disasters, the reserve balance has been depleted below two million dollars, the commissioner may, with the approval of the industrial commission, issue premium anticipation certificates in an amount sufficient to bring the reserve balance up to two million dollars. The premium anticipation certificates must be issued for a period of from ten to twenty years, as determined by the commissioner with the approval of the industrial commission, and the interest and principal must be paid and retired by assessments levied on all policies in force with the fund. To retire these premium anticipation certificates, the commissioner shall levy a special assessment on every policy in force with the fund; however, the total of all assessments and premiums provided for in section 26.1-22-14 may not exceed the full rate as developed by an advisory organization at the direction of the commissioner. Any state department may invest its funds in the purchase of the premium anticipation certificates.

Source:

S.L. 1983, ch. 332, § 22; 1991, ch. 311, § 4; 1991, ch. 313, § 7.

Derivation:

N.D.C.C. § 26-24-17.

26.1-22-18. Arbitration of loss.

In case an agreement as to the amount of loss insured against under this chapter cannot be arrived at between the commissioner or the commissioner’s representative and the person or board representing the state, political subdivision, an international peace garden, or a winter show owning the building or property, the loss may be arbitrated as provided by law.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 10; 1989, ch. 356, § 11; 1991, ch. 313, § 8.

Derivation:

N.D.C.C. § 26-24-18.

26.1-22-19. Repair or replacement of destroyed buildings.

If the commissioner and the insured agree that the fund shall repair or replace the building destroyed or damaged, no repairs, rebuilding, or replacement may be undertaken by the commissioner or any employees of the commissioner. The cost of any repairs, rebuilding, or replacements may not exceed the amount of the insurance carried upon the particular risk.

Source:

S.L. 1983, ch. 332, § 22; 2021, ch. 235, § 6, eff July 1, 2021.

Derivation:

N.D.C.C. § 26-24-19.

26.1-22-20. Replacement of policies. [Repealed]

Repealed by S.L. 1989, ch. 357, § 3.

26.1-22-21. Insurance required — Excess loss reinsurance.

The commissioner shall procure and shall keep in force excess loss reinsurance naming the fund as the reinsured. The excess loss reinsurance must be in an amount and for a period determined by the commissioner to be sufficient for the fund. The reinsurance contract must reimburse the fund for losses incurred by the fund under policies issued by the fund and arising out of each occurrence of a covered cause of loss and include at least a sixty-day cancellation notice.

The cost of the excess loss reinsurance must be paid out of the premium income of the fund and must be assessed against the policyholders that benefit from the reinsurance. Excess loss reinsurance must be written only by a company or companies authorized to do business within this state. The contract must be countersigned by a licensed North Dakota resident insurance producer. On the last Monday in June prior to the expiration of the contract, the commissioner, with the approval of the industrial commission, shall contract for the excess loss reinsurance with the company or group of companies submitting the lowest and best bid for the period commencing on the ensuing first day of August. The commissioner, with the approval of the industrial commission, may disregard this section after the commissioner and the commission have studied the available bids for the reinsurance required by this section.

Source:

S.L. 1983, ch. 332, § 22; 1993, ch. 285, § 5; 2001, ch. 262, § 46; 2003, ch. 244, § 3.

Derivation:

N.D.C.C. § 26-24-22.

26.1-22-21.1. Insurance broker of record.

The fund may contract for insurance broker of record services to assist in procuring excess loss reinsurance by soliciting bids. The fund may award a contract to an insurance broker licensed by, and in good standing with, the state to serve the interests of the fund and its policyholders under this title. The contract must be for the period of a biennium. The fund may renew, renegotiate, or rebid a contract based upon contract performance, cost, and the best interests of the fund and policyholders.

Source:

S.L. 2003, ch. 244, § 4.

26.1-22-22. Commissioner may waive subrogation rights during construction.

The commissioner may, in the commissioner’s discretion, waive any right of the fund to recover for damage sustained by any structure as a result of fire or explosion caused by a contractor, its employees or agents, in the performance of a contract for the alteration of, or the construction of an addition to, a building insured in the fund.

Source:

S.L. 1983, ch. 332, § 22; 1987, ch. 352, § 11.

Derivation:

N.D.C.C. § 26-24-26.

CHAPTER 26.1-22.1 Boiler Inspection [Repealed]

Source:

Repealed by S.L. 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-01. Definition. [Repealed]

Source:

S.L. 1993, ch. 301, § 1; 2011, ch. 216, § 1; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-02. Chief boiler inspector, deputy inspectors — Appointment — Jurisdiction. [Repealed]

Source:

S.L. 1993, ch. 301, § 2; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-03. Qualifications of chief boiler inspector — Deputy inspectors. [Repealed]

Source:

S.L. 1993, ch. 301, § 3; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-04. Powers and duties of chief boiler inspector. [Repealed]

Source:

S.L. 1993, ch. 301, § 4; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-05. General requirement. [Repealed]

Source:

S.L. 1993, ch. 301, § 5; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-06. Exempt boilers — Inspection of exempt boilers. [Repealed]

Source:

S.L. 1993, ch. 301, § 6; 1995, ch. 276, § 3; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-07. Inspection of boilers. [Repealed]

Source:

S.L. 1993, ch. 301, § 7; 1995, ch. 283, § 1; 2001, ch. 268, § 1; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-08. Special inspector. [Repealed]

Source:

S.L. 1993, ch. 301, § 8; 2001, ch. 268, § 2; 2005, ch. 263, § 1; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-09. Inspection and certificate fees. [Repealed]

Source:

S.L. 1993, ch. 301, § 9; 1995, ch. 276, § 4; 2001, ch. 268, § 3; 2007, ch. 263, § 1; 2011, ch. 216, § 2; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-10. Certificate of inspection — Certificate to be posted. [Repealed]

Source:

S.L. 1993, ch. 301, § 10; 1995, ch. 283, § 2; 2001, ch. 268, § 4; 2005, ch. 263, § 2; 2011, ch. 216, § 3; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-11. Certificate of inspection required — Penalty. [Repealed]

Source:

S.L. 1993, ch. 301, § 11; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-12. Manufacturer’s data report. [Repealed]

Source:

S.L. 1993, ch. 301, § 12; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-13. Disposition of funds. [Repealed]

Source:

S.L. 1993, ch. 301, § 13; 1995, ch. 276, § 5; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

26.1-22.1-14. Rules — Penalty for violation — Hearing. [Repealed]

Source:

S.L. 1993, ch. 301, § 14; 2007, ch. 263, § 2; Repealed by 2019, ch. 24, § 31, eff July 1, 2019.

CHAPTER 26.1-23 Unsatisfied Judgment Fund

26.1-23-01. Unsatisfied judgment fund — Administration of the fund by commissioner — Appropriation.

The commissioner shall administer the unsatisfied judgment fund. The commissioner shall perform all duties and responsibilities in regard to the fund not otherwise delegated to the attorney general or the state treasurer under this chapter. Judgments recovered under this chapter must be paid from moneys deposited in the fund and the moneys are hereby appropriated for such purpose. The expenses arising from administration of the fund must be paid from the fund within the limits of legislative appropriation.

Source:

S.L. 1983, ch. 332, § 23.

Derivation:

N.D.C.C. § 39-17-02.

26.1-23-01.1. Collection of amounts owed the unsatisfied judgment fund — Costs paid.

Payments from the unsatisfied judgment fund may be made, without court order, to pay contingent professional fees and costs incurred in connection with the recovery of amounts owed to the fund by any person on whose behalf the fund has previously paid a full or partial judgment.

Source:

S.L. 1989, ch. 358, § 1.

26.1-23-02. Attorney general — Appointment of counsel.

The attorney general shall appoint a special assistant attorney general as legal counsel for the fund pursuant to section 54-12-08 and the special assistant attorney general may perform all the duties and responsibilities in regard to the fund delegated to the attorney general under this chapter. The attorney general at the attorney general’s discretion may appoint special counsel to defend the fund. The trial judge of the district court shall fix the amount of the special counsel’s fees and expenditures, and certify the amount to the attorney general who, after approving, shall certify the amount to the commissioner.

Source:

S.L. 1983, ch. 332, § 23.

Derivation:

N.D.C.C. §§ 39-17-02, 39-17-04.1.

26.1-23-03. Additional registration fee — Deposit in fund — Suspension of fee.

At the time of registering a motor vehicle, the owner shall pay to the director of the department of transportation, in addition to the registration fees, a fee of one dollar for each motor vehicle registered. The fees must be deposited with the state treasurer who shall credit the fees to the unsatisfied judgment fund. If on June first of any year the amount of uncommitted money in the fund is one hundred fifty thousand dollars or more, the requirement for the payment of the fee is suspended during the succeeding year and until the year in which the fee is reimposed. The fee must be reimposed for any year whenever on June first of the previous year the uncommitted amount of the fund is less than one hundred fifty thousand dollars.

Source:

S.L. 1983, ch. 332, § 23; 1999, ch. 32, § 10.

Derivation:

N.D.C.C. §§ 39-17-01, 39-17-02.

26.1-23-04. Recovery from fund.

When any person, who is a resident of this state, recovers in any court in this state a judgment for an amount exceeding three hundred dollars in an action for damages resulting from bodily injury to, or the death of, any person occasioned by, or arising out of, the ownership, maintenance, operation, or use of a motor vehicle by the judgment debtor in this state, upon the judgment becoming final, the judgment creditor may, in accordance with this chapter, apply to the judge of the district court in which the judgment was rendered, upon notice to the attorney general, for an order directing payment of the judgment out of the fund. Upon the hearing of the application, the judgment creditor shall show:

  1. That the creditor has obtained judgment as set out in this section, stating the amount thereof and the amount owing thereon at the time of the application;
  2. That the creditor has caused an execution to be issued thereon and that:
    1. The sheriff has made a return thereon showing that no property of the judgment debtor liable to be seized in satisfaction of the judgment debt could be found; or
    2. The amount realized on the sale of property seized, or otherwise realized under the execution, was insufficient to satisfy the judgment, stating the amount so realized and the balance remaining due thereon;
  3. That the creditor has caused the judgment debtor, when the debtor is available, to be examined pursuant to law for that purpose, touching the debtor’s property, and in particular as to whether the debtor is insured under a policy of automobile insurance against loss occasioned by the debtor’s legal liability for bodily injury to, or the death of, another person;
  4. That the creditor has made an exhaustive search and inquiry to ascertain whether the judgment debtor is possessed of property, real or personal, liable to be sold or applied in satisfaction of the judgment; and
  5. That as a result of the search, inquiry, and examination, the creditor has learned of no property possessed by the judgment debtor and liable to be sold or applied in satisfaction of the judgment debt, or that the creditor has learned of certain property, describing it, owned by the judgment debtor and liable to be seized or applied in satisfaction of the judgment, and has taken all necessary proceedings for the realization thereof, and that the amount thereby realized was insufficient to satisfy the judgment, stating the amount so realized and the amount remaining due thereon.

Source:

S.L. 1983, ch. 332, § 23.

Derivation:

N.D.C.C. § 39-17-03.

Notes to Decisions

Constitutionality.

The requirement that all applicants to the fund for payments must be North Dakota residents does not violate the privileges and immunities clause or equal protection of the laws under the federal constitution. Law v. Maercklein, 292 N.W.2d 86, 1980 N.D. LEXIS 233 (N.D. 1980).

DECISIONS UNDER PRIOR LAW

Constitutionality.

The fact that the right to payment from the fund is confined to residents of North Dakota is not, as to nonresidents who have not contributed to the fund, violative of the provisions of the federal constitution providing that citizens of each state shall be entitled to the privileges and immunities of citizens in the several states or the equal protection of the laws requirement. Benson v. Schneider, 68 N.W.2d 665, 1955 N.D. LEXIS 91 (N.D. 1955).

Provision limiting recovery from unsatisfied judgment fund to a lesser amount in the case of injuries inflicted by an unknown defendant than in the case of a known defendant is not an unconstitutional denial of equal protection of the laws; payment to an injured party from the unsatisfied judgment fund does not involve any fundamental right, and since there is a reasonable basis for the differing liability limits, the distinction is valid. Tharaldson v. Unsatisfied Judgment Fund, 225 N.W.2d 39, 1974 N.D. LEXIS 140 (N.D. 1974).

Burden of Proof.

In a proceeding to recover against unsatisfied judgment fund, burden of proof is on the judgment creditor making application. Pearson v. State Unsatisfied Jud. Fund, 114 N.W.2d 257 (N.D. 1962), decided prior to the amendment of N.D.C.C. § 39-17-07; Tschider v. Burtts, 149 N.W.2d 710, 1967 N.D. LEXIS 144 (N.D. 1967).

Disclosure of Coverage Not Required.

In a proceeding to recover against unsatisfied judgment fund, the applicant, who was the judgment creditor, was not required to disclose his worth, his property or his insurance coverage. Pearson v. State Unsatisfied Judgment Fund, 114 N.W.2d 257, 1962 N.D. LEXIS 66 (N.D. 1962), decided prior to the amendment of N.D.C.C. § 39-17-07.

Recovery for Subrogated Insurer.

Subrogated insurer which has paid claims for bodily injuries under uninsured motorist clause and secured final judgment against uninsured financially irresponsible wrongdoer cannot recover amount of its judgment from the unsatisfied judgment fund. Tschider v. Burtts, 149 N.W.2d 710, 1967 N.D. LEXIS 144 (N.D. 1967).

Residency.

“Recovers…a judgment”, as used in prior section, is synonymous with entry of a judgment; it relates back to time that cause of action arose but not forward to time when application for payment from fund is made; judgment creditor who was not resident at time cause of action arose but who was resident at time he applied for payment could not recover such payment. Geller v. Sather, 147 N.W.2d 661, 1966 N.D. LEXIS 151 (N.D. 1966).

Tribal Court Judgment.

Indian tribal court on Fort Totten Reservation was not a “court in this state” within meaning of this section, and successful litigant, who obtained judgment in tribal court for injuries sustained in reservation automobile accident but was unable to collect upon it, was not entitled to payment from unsatisfied judgment fund. Lohnes v. Cloud, 254 N.W.2d 430, 1977 N.D. LEXIS 281 (N.D. 1977).

26.1-23-05. Recovery from fund when liability cannot be determined.

When bodily injury to, or the death of, any person who is a resident of this state is occasioned by or arises out of an accident caused by the operation, maintenance, or use of a motor vehicle in this state and the identity of the person against whom an action might be brought for the recovery of damages for the bodily injury or death resulting from the accident cannot be ascertained, any person who would be entitled to bring the action to recover damages may bring an action in the district court of the county in which the accident occurred within six months from the date of the accident against the unsatisfied judgment fund, by service upon the commissioner and the attorney general, for the recovery of the damages from the fund, provided notice of the accident was given to some police officer immediately after the accident occurred and the name of the officer is alleged in the complaint. A payment may not be made from the fund in satisfaction of any judgment obtained in the action in excess of five thousand dollars, exclusive of costs, for bodily injury to, or the death of, any one person, nor in excess of ten thousand dollars for any one accident.

This section does not limit the liabilities or remedies of any person on the claim for relief growing out of the accident for which suit was brought against the fund, but the fund is subrogated to the rights of any person who has obtained judgment under this section, to the extent that the fund has made payment in satisfaction thereof.

Source:

S.L. 1983, ch. 332, § 23; 1985, ch. 317, § 54.

Derivation:

N.D.C.C. § 39-17-03.1.

DECISIONS UNDER PRIOR LAW

Analysis

Constitutionality.

Provision limiting recovery from unsatisfied judgment fund to a lesser amount in the case of injuries inflicted by an unknown defendant than would be available in the case of a known defendant is not an unconstitutional denial of equal protection of the laws; payment to an injured party from the unsatisfied judgment fund does not involve any fundamental right, and since there is a reasonable basis for differing liability limits, the distinction is valid. Tharaldson v. Unsatisfied Judgment Fund, 225 N.W.2d 39, 1974 N.D. LEXIS 140 (N.D. 1974).

Exclusive of Costs.

The phrase “exclusive of costs”, in former section, meant only that the legislature intended to allow statutory costs as a supplement to the maximum amount recoverable from the fund. Tharaldson v. Unsatisfied Judgment Fund, 225 N.W.2d 39, 1974 N.D. LEXIS 140 (N.D. 1974).

Medical and Attorney Fees.

Medical expenses and attorney fees were not allowable costs under former section. Tharaldson v. Unsatisfied Judgment Fund, 225 N.W.2d 39, 1974 N.D. LEXIS 140 (N.D. 1974).

26.1-23-06. Attorney general may appear.

Section 26.1-23-04 does not apply in the case of any judgment entered by default, unless the commissioner and the attorney general have been given at least thirty days’ notice prior to hearing, to which notice shall be attached a copy of the summons and complaint. Upon receipt of the notice, the attorney general may enter an appearance, file a defense, appear by counsel at the trial, or take any other action the attorney general deems appropriate on behalf of the fund and in the name of the defendant, and may thereupon, on behalf of the fund and in the name of the defendant, conduct a defense, and all acts done in accordance therewith shall be deemed to be acts of the defendant. The attorney general may appear and be heard on any application for payment from the fund and may show cause, if any, why the order applied for should not be made.

Source:

S.L. 1983, ch. 332, § 23; 1985, ch. 323, § 1; 1999, ch. 251, § 5.

Derivation:

N.D.C.C. § 39-17-04.

DECISIONS UNDER PRIOR LAW

Analysis

Appearance of Attorney General.

The provision for the appearance of the attorney general is only for the protection of the unsatisfied judgment fund and he has no authority to appear for any other purpose. King v. Menz, 75 N.W.2d 516, 1956 N.D. LEXIS 103 (N.D. 1956).

Before a judgment creditor becomes entitled to an order directing payment of the judgment or a part thereof out of the unsatisfied judgment fund he is required to meet rigid requirements and the attorney general, or special counsel representing the fund, may appear in resistance. Pearson v. State Unsatisfied Judgment Fund, 114 N.W.2d 257, 1962 N.D. LEXIS 66 (N.D. 1962), decided prior to the amendment of N.D.C.C. § 39-17-07.

State As Party to the Action.

Where the plaintiff brings an action for declaration that a policy of insurance is void because of misrepresentations in the application against both an insured and a prospective claimant against such insured, and where, if such policy is found to be void, the unsatisfied judgment fund may be exposed to liability, the state should be made a party to such action. Farmers Ins. Exch. v. Nagle, 190 N.W.2d 758, 1971 N.D. LEXIS 116 (N.D. 1971).

Waiver of Notice After Default Judgment.

After the entry of a judgment by default neither the attorney general nor the state highway commissioner can effectively waive the notice prescribed. Bonniwell v. Flanders, 62 N.W.2d 25, 1953 N.D. LEXIS 96 (N.D. 1953).

26.1-23-07. Appeal from order.

An order made under section 26.1-23-04 is subject to appeal to the supreme court by the judgment creditor, or by the attorney general, in the manner provided by law for the taking of appeals from final orders in a civil action.

Source:

S.L. 1983, ch. 332, § 23.

Derivation:

N.D.C.C. § 39-17-06.

26.1-23-08. Limitation on amount payable from fund — Nonassignable.

  1. Recovery from the fund is limited to payment of the following, exclusive of costs:
    1. Ten thousand dollars for bodily injury, including death, of one person in any one accident.
    2. Twenty thousand dollars for bodily injury, including death, of two or more persons in any one accident.
  2. The amount authorized to be paid must be within the limits provided by this section, and must be determined as follows:
    1. If the judgment creditor has effected collection of a portion of the judgment from any source, except as provided for in subdivisions b and c, the fund is authorized to pay the creditor the difference between the amount collected and the amount of the judgment, or ten thousand dollars, whichever is smaller. If the judgment creditor has collected an amount equal to the limits payable from the fund from the insurance or nonexempt assets of the judgment debtor, then the creditor is precluded from recovery from the fund.
    2. If the judgment creditor has effected collection of a portion of the judgment from payment from workforce safety and insurance, then the amount collected from that source must be subtracted from the judgment before the procedure outlined in subdivision a is followed.
    3. If the judgment creditor was covered by an uninsured motorist insurance policy at the time of the accident, then the maximum liability limit of that policy must first be subtracted from the judgment before the procedure outlined in subdivision a is followed. If the maximum liability limit of the policy is equal to the limits payable from the fund, then no recovery from the fund is allowed.
  3. The right of any person to recover from the unsatisfied judgment fund is not assignable and subrogation of the right is not allowed.

Source:

S.L. 1983, ch. 332, § 23; 2003, ch. 561, § 3.

Derivation:

N.D.C.C. § 39-17-07.

DECISIONS UNDER PRIOR LAW

State As Party to the Action.

Where an injured minor had already recovered the full amount allowable for injuries to one person, her father could not later recover medical expenses from the fund. Rall v. Schmidt, 104 N.W.2d 305, 1960 N.D. LEXIS 77 (N.D. 1960).

26.1-23-09. Order on state treasurer to pay judgment.

If the court is satisfied of the truth of the matters shown by the judgment creditor as required by section 26.1-23-04, and if the applicant has taken all reasonable steps to enforce the collection of the judgment, and if there is good reason for believing that the judgment debtor has no property liable to be or applied in satisfaction of the judgment or of the balance owing thereon and is not insured under a policy of automobile insurance by the terms of which the insurer is liable to pay, in whole or in part, the amount of the judgment, the court shall make an order directed to the state treasurer requiring the treasurer, subject to section 26.1-23-08, to pay from the unsatisfied judgment fund the amount of the judgment or the balance owing thereon, and the state treasurer shall comply with the order.

Source:

S.L. 1983, ch. 332, § 23.

Derivation:

N.D.C.C. § 39-17-05.

26.1-23-10. Judgment assigned to state.

Before making any payment from the unsatisfied judgment fund on any judgment in compliance with an order, the state treasurer shall require the judgment creditor to assign the judgment to the state treasurer for the use and benefit of the fund.

Source:

S.L. 1983, ch. 332, § 23.

Derivation:

N.D.C.C. § 39-17-08.

26.1-23-11. Order of payment from fund — Prorate distribution.

If, at the time of the filing of the order, there is not sufficient moneys in the unsatisfied judgment fund to satisfy the order, the order must be registered by the state treasurer and must be paid when the moneys are available in the fund and subsequent orders must be paid in the order of registration. If more than two judgments are obtained against a judgment debtor upon claims for relief arising out of one accident and the aggregate amount due, after crediting any collections, exceeds twenty thousand dollars, the court in making its order shall direct that the state treasurer shall prorate the distribution from the fund in the proportion which each judgment or the balance unpaid thereon bears to the sum of twenty thousand dollars.

Source:

S.L. 1983, ch. 332, § 23; 1985, ch. 317, § 55.

Derivation:

N.D.C.C. § 39-17-09.

26.1-23-12. Amount to be repaid before privileges restored — Interest — Installment payments — Compromise of amount due.

When the operator’s license or driving privileges of any person, or the registration of a motor vehicle registered in the person’s name, has been suspended or revoked pursuant to the laws of this state, and the state treasurer has paid from the fund any amount toward the satisfaction of a judgment and costs recovered against the person, the suspension or revocation may not be removed, nor the operator’s license or driving privileges or registration restored, nor any new license or driving privilege issued or granted to or registration be permitted to be made by the person until the person has repaid in full to the state treasurer the amount paid from the fund, together with interest thereon at the rate of six percent per annum from the date of payment, and has furnished proof of financial responsibility as required by the laws of this state. The court in which the judgment was rendered, upon ten days’ notice to the attorney general, may make an order permitting payment of the amount in installments, and in this case, the person’s operator’s license, driving privileges, or registration privileges, if the same have been suspended or revoked, or have expired, may be restored and shall remain in effect unless the person defaults in making any installment payment specified in the order. In the event of any default, the commissioner shall, upon notice of default, suspend the person’s operator’s license, driving privileges, or registration privileges until the amount of default has been paid in full and the additional sum of two hundred dollars has been paid to the fund to be applied to the judgment. The judgment debtor may petition the court in which the judgment was rendered for a compromise of the judgment. The court in its discretion, upon notice to the attorney general, may order a compromise if the court is satisfied that a compromise would be in the interests of justice and that the fund would benefit therefrom. Upon payment in full of the compromised amount, the attorney general shall issue a satisfaction of judgment to the judgment debtor. A compromise may not be ordered which is less than five hundred dollars or twenty percent of the judgment, whichever amount is greater.

Source:

S.L. 1983, ch. 332, § 23.

Derivation:

N.D.C.C. § 39-17-10.

CHAPTER 26.1-23.1 Government Self-Insurance Pools

26.1-23.1-01. Government self-insurance pools — Regulation — Reinsurance.

  1. Any two or more entities that have united to self-insure against their legal liability under chapter 32-12.1 or any state agency that unites with another state agency or political subdivision, or both, to self-insure against their legal liabilities are subject to the provisions of this chapter with the exception of a city and its park district established pursuant to chapter 40-49. Government self-insurance pools may only provide coverage of the following types for pool members, their officers, employees, and agents:
    1. Casualty insurance, including general, public officials, and professional liability coverages.
    2. Automobile insurance, including motor vehicle liability insurance coverage, security for motor vehicles owned or operated as required by chapter 26.1-41, and protection against other liability and laws associated with the ownership of motor vehicles and automobile physical damage coverages.
    3. Property insurance, including inland marine coverage, money and securities coverage, and extra expense coverage. However, this subdivision does not authorize government self-insurance pools to write those types of insurance coverages offered by the state fire and tornado fund under the provisions of chapter 26.1-22 as they existed on December 31, 1988, unless a government self-insurance pool enters a contract with the commissioner to provide services for the state fire and tornado fund under section 26.1-22-03.
    4. Other coverages authorized by the commissioner and necessary to a pool’s membership.
  2. A government self-insurance pool may not expose itself to loss on any single risk or hazard in an amount exceeding ten percent of the amount of its admitted assets unless the pool obtains excess insurance or reinsurance with insurance companies approved for such business by the insurance commissioner.

Source:

S.L. 1989, ch. 359, § 1; 2019, ch. 35, § 13, eff May 2, 2019.

26.1-23.1-02. Government self-insurance pools not insurers.

Any government self-insurance pool organized under chapter 32-12.1 is not an insurance company or insurer. The coverages provided by such pools and the administration of such pools do not constitute the transaction of insurance business. Participation in a self-insurance pool under this chapter does not constitute a waiver of any existing immunities otherwise provided by the constitution or laws of this state.

Source:

S.L. 1989, ch. 359, § 2.

Notes to Decisions

Sovereign Immunity.

Participation in the North Dakota Insurance Reserve Fund did not waive the state’s sovereign immunity. Burr v. Kulas, 532 N.W.2d 388, 1995 N.D. LEXIS 100 (N.D. 1995).

The University of North Dakota did not waive its sovereign immunity, for actions arising prior to the abolition of sovereign immunity, by participating in the Insurance Reserve Fund, when it engaged in a proprietary function. Stratton v. Medical Ctr. Rehabilitation Hosp., 547 N.W.2d 748, 1996 N.D. LEXIS 133 (N.D. 1996).

26.1-23.1-03. Government self-insurance pool approval from the commissioner.

Before the insurance commissioner authorizes the operation of a government self-insurance pool, the pool shall provide the following:

  1. A financial plan setting forth:
    1. The insurance coverages to be offered by the pool, applicable deductible levels, and the maximum level of claims to be self-insured against.
    2. The amount of cash reserves to be set aside for the payment of claims.
    3. The amount of aggregate excess insurance or reinsurance coverage to be purchased in the event that the pool’s resources are exhausted in a given fiscal period.
  2. A plan of management which must provide the following:
    1. The means of establishing the governing authority of the pool and, if the governing authority of the pool is set forth in articles of incorporation, the articles must be filed in the office of the secretary of state and a certified copy must be filed with the commissioner. The commissioner may not issue a certificate to the pool if, in the commissioner’s judgment, the company’s name too closely resembles the name of an existing corporation or is liable to mislead the public.
    2. The responsibility of the governing authority with regard to fixing contributions to the pool by participating government political subdivisions, maintaining reserves, levying and collecting assessments for deficiencies, disposing of surplus, and administering the pool in the event of termination or insolvency.
    3. The basis upon which new members may be admitted to, and existing members may leave or have membership terminated by, the pool.
    4. The identification of funds and reserves by exposure areas.
    5. Other provisions necessary or desirable for the operation of the pool.
  3. A plan for the election by pool members of a governing authority, which must be a board of directors for the pool.

Source:

S.L. 1989, ch. 359, § 3.

26.1-23.1-04. Annual financial statements required — Confidentiality.

  1. Every government self-insurance pool authorized by the insurance commissioner shall file with the commissioner on or before March thirty-first of each year an audited statement of its financial condition and business for the year ending on the preceding December thirty-first. The financial statement must be audited by an independent certified public accountant and the financial statement must be in a form prescribed or approved by the commissioner. The financial statement must be verified by the signature and oath of the pool’s authorized representative. If a self-insurance pool fails to provide for the audited financial statement required by this section, the insurance commissioner shall have the audit performed at the expense of the pool. All working papers of the commissioner’s staff are confidential and not open for public inspection until the report is final unless the commissioner declares that the material or any part of the material is not confidential. If a self-insured pool is found to be in a deficit condition, the pool shall file a financial plan acceptable to the commissioner to correct the deficit condition.
  2. At least triennially, and at such other times as the insurance commissioner deems necessary, the commissioner shall inspect and examine the affairs of every government self-insurance pool. The commissioner shall conduct examinations of each self-insured government pool and all expenses and costs relating to the examination must be paid by the pool.
  3. The insurance commissioner shall monitor the financial solvency of government self-insurance pools to ensure that a pool’s liabilities for claims, present and contingent, and other expenses are at no time greater than the pool’s assets. The commissioner may enjoin a self-insured government pool from conducting further business or take other appropriate regulatory action whenever in the commissioner’s judgment a pool is insolvent or otherwise financially impaired.

Source:

S.L. 1989, ch. 359, § 4.

26.1-23.1-05. Investment of assets — Subsidiary insurance company coverage.

A government self-insurance pool may only invest its funds and accumulations in those investments described in sections 26.1-05-19 and 26.1-10-02. If a government self-insurance pool investment is made under section 26.1-10-02, a resulting subsidiary insurance company may not write insurance coverage for:

  1. North Dakota governmental entities, which competes with coverage offered by the fire and tornado fund under chapter 26.1-22 as that chapter existed on December 31, 1988;
  2. Individuals;
  3. For-profit organizations;
  4. Nonprofit hospitals, clinics, nursing homes, churches, fraternal organizations, or organizations not performing quasi-governmental functions; or
  5. Agricultural business cooperatives.

Source:

S.L. 1989, ch. 359, § 5; 1997, ch. 15, § 30.

26.1-23.1-06. Pool reserve records confidential.

Information regarding that portion of the funds or liability reserves of a self-insured government pool established for purposes of satisfying a specific claim or cause of action is confidential. A person is not entitled to discover that portion of the funds or liability reserves established for purposes of satisfying a claim or cause of action, except that the reserve is discoverable in any supplementary or ancillary proceeding to enforce a judgment against the pool or a governmental entity participating in the pool.

Source:

S.L. 1989, ch. 359, § 6.

26.1-23.1-07. Self-insurance contracts — Approval of rates and forms.

No insurance policy, certificate, contract, agreement, or evidence of participation may be issued or delivered by a self-insured government pool nor may any application, rider, or endorsement be used in connection therewith until the rate and form thereof have been filed and approved by the insurance commissioner under sections 26.1-30-19 through 26.1-30-21.

Source:

S.L. 1989, ch. 359, § 7.

CHAPTER 26.1-24 The Insurance Premium

26.1-24-01. When premium payable.

An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against.

Source:

S.L. 1983, ch. 332, § 24.

Derivation:

N.D.C.C. § 26-04-01.

DECISIONS UNDER PRIOR LAW

Waiver of Forfeiture.

When a premium is earned and forfeitures occur before the loss, the taking and retaining of the premium is not inconsistent with a defense based upon such forfeiture, and is not evidence tending to show a waiver thereof. Smith v. Continental Ins. Co., 43 N.W. 810, 6 Dakota 433, 1889 Dakota LEXIS 30 (Dakota 1889).

26.1-24-02. Receipt for premium in policy — Effect.

An acknowledgment in a policy of the receipt of premium is conclusive evidence of its payment so far as to make the policy binding, notwithstanding any stipulation in the policy that it is not binding until the premium actually is paid.

Source:

S.L. 1983, ch. 332, § 24.

Derivation:

N.D.C.C. § 26-04-02.

Notes to Decisions

Full Premium Amount Not Actually Paid.

This section is designed to protect the policyholder where the insurance company argues that the policy coverage never commenced due to nonpayment of premium or where the company argues that the policy has terminated for nonpayment of premium but has never given the insured notice that the premium or a balance thereof was due; this section did not estop insurance company from denying that it received full premium payment, despite policy statement that the premium was paid in full, where the premium actually paid was based upon the mistaken assumption that insured was twenty years of age when in fact he was nineteen years of age, the insurance company gave the insured three notices that a balance was due to keep the policy in force until the stated expiration date, such notices were sufficient under the totality of the facts to indicate to insured that some problem existed with his premium payment, and insured ignored the notices; and where insurance company reserved broad cancellation rights in the policy for nonpayment of premiums, the company, rather than exercise its right to cancel the policy for failure to pay the balance on the premium, was within its rights to modify the policy by changing the expiration date to conform to the amount of premium actually paid, and such modification of the policy resulted where insured by his silence acquiesced in the modification. Anderson v. American Standard Ins. Co., 293 N.W.2d 878, 1980 N.D. LEXIS 254 (N.D. 1980).

DECISIONS UNDER PRIOR LAW

Date of Policy.

Where the policy acknowledges the receipt of the premium, an insurance company cannot show that the actual date of issuance of the policy was later than the date recited in the policy. Harrington v. Mutual Life Ins. Co., 21 N.D. 447, 131 N.W. 246, 1911 N.D. LEXIS 107 (N.D. 1911); Donahue v. Mutual Life Ins. Co., 37 N.D. 203, 164 N.W. 50, 1917 N.D. LEXIS 118 (N.D. 1917).

26.1-24-03. When insured entitled to return of premium.

A person insured is entitled to a return of premium, including all policy fees in excess of two dollars, on any one policy, and all other sums of money paid in consideration of the insurance policy, as follows:

  1. To the whole premium, fee, or other sums if no part of the insured’s interest in the thing insured is exposed to any of the perils insured against.
  2. To the whole of the premium when the contract is voidable on account of the fraud or misrepresentation of the insurer or on account of facts of the existence of which the insured was ignorant without the insured’s fault, or when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy.
  3. Except as provided for in a policy form filed with and approved by the commissioner, when insurance other than life is made for a definite period of time and the insured surrenders the policy, to such proportion of the premium, fee, or other sum as corresponds with the unexpired time upon the amount of the policy remaining after deducting therefrom any claim for loss or damage under the policy which has accrued previously.

Source:

S.L. 1983, ch. 332, § 24; 1983, ch. 342, § 2; 1985, ch. 317, § 56.

Derivation:

N.D.C.C. § 26-04-03.

DECISIONS UNDER PRIOR LAW

Premium Note.

A contract providing that the insurer should be relieved from liability on default in the payments on an installment note for the premium and that the insured should remain liable on the note was not unreasonable, nor against public policy, nor prohibited by statute. St. Paul Fire & Marine Ins. Co. v. Coleman, 43 N.W. 693, 6 Dakota 458, 1889 Dakota LEXIS 21 (Dakota 1889).

Where a policy provided that it should be void if the insured made any false representations or concealment material to the risk, it was no defense, in a suit on a premium note, that the maker had misrepresented the condition of his title to the property insured, and that the policy was therefore void, and the note without consideration. St. Paul Fire & Marine Ins. Co. v. Neidecken, 43 N.W. 696, 6 Dakota 494, 1889 Dakota LEXIS 22 (Dakota 1889).

Time Subject Exposed to Peril.

The words “so far as that particular risk is concerned” in former section did not refer to the time in which the subject was exposed to the peril; but where a premium was applicable to risks on two or more distinct subjects of insurance, and no risk had ever been incurred upon one subject, the proportionate premium could be recovered. St. Paul Fire & Marine Ins. Co. v. Coleman, 43 N.W. 693, 6 Dakota 458, 1889 Dakota LEXIS 21 (Dakota 1889).

26.1-24-04. Premium return in cases of overinsurance.

In cases of overinsurance, the insured is entitled to a return of the premium as follows:

  1. In overinsurance by several insurers, to a ratable return of premium proportioned to the amount by which the aggregate sum insured in all the policies exceeds the value of the thing at risk.
  2. In overinsurance effected by simultaneous policies, the insurers contribute to the premium to be returned in proportion to the amount insured by their respective policies.
  3. In overinsurance effected by successive policies, those only contribute to a return of the premium who are exonerated by prior insurance from the liability assumed by them and in proportion as the sum for which the premium was paid exceeds the amount for which, on account of prior insurance, they could be made liable.

Source:

S.L. 1983, ch. 332, § 24.

Derivation:

N.D.C.C. § 26-04-04.

26.1-24-05. Surrender of fire policy for cancellation — Return of premium — Short-term rates.

The holder of any insurance policy against loss or damage to property by fire or other casualty, notwithstanding any provision of the policy or contract to the contrary, may surrender the policy for cancellation at any time. Upon surrender, the company issuing the policy shall retain or receive such proportion, and not more, of the premium paid or agreed to be paid, including policy fees in excess of two dollars on any one policy and other sums of money paid or agreed to be paid in consideration of the insurance policy, as corresponds with the usual short rates upon term policies as adopted and maintained by the organization which promulgates rates for fire insurance on property situated in this state for the time the policy remained in force.

Source:

S.L. 1983, ch. 332, § 24; 1985, ch. 317, § 57.

Derivation:

N.D.C.C. § 26-04-05.

DECISIONS UNDER PRIOR LAW

Analysis

Cancellation Because of Inability to Pay Premium.

Former similar section was not limited to policies where the premiums had been paid, and where an insured canceled a policy because of inability to pay the premium, the fact that the premium note was not delivered to him did not prevent effective cancellation. Halpern v. National Fire Ins. Co., 56 N.D. 116, 216 N.W. 209, 1927 N.D. LEXIS 79 (N.D. 1927).

Notice of Cancellation.

An insurance company may waive any objection on account of deficiencies in the form or substance of the notice given or on account of any irregularities in the surrender of polices for cancellation. State v. Hartford Steam Boiler Inspection & Ins. Co., 71 N.D. 329, 1 N.W.2d 52, 1941 N.D. LEXIS 174 (N.D. 1941).

26.1-24-06. Earned premium.

If a peril insured against has existed and the insurer has been liable for any period, however short, the insured is not entitled to a return of premium so far as that particular risk is concerned unless the insurance was for a definite period of time, in which case the insured is entitled to a proportionate return under sections 26.1-24-03 and 26.1-24-05.

Source:

S.L. 1983, ch. 332, § 24.

Derivation:

N.D.C.C. § 26-04-06.

26.1-24-07. Forfeiture of policy for nonpayment of premium — Notice required.

An insurance policy may not be forfeited, suspended, or impaired, by virtue of any condition or provision of the policy, for nonpayment of any note or obligation taken for the premium, or any part of the premium, unless the insurer, not less than thirty days prior to the maturity of the premium, note, or obligation, mails, postage prepaid, to the insured at the insured’s usual post-office address, a notice stating:

  1. The date when the note or obligation will become due.
  2. The amount of principal and interest that then will be due.
  3. The effect of nonpayment upon the policy.
  4. The right of the insured, at the insured’s election, either to pay the premium in full and keep the policy in full force or to terminate the insurance by surrendering the policy and paying such part of the whole premium as it shall have earned.
  5. The amount which the insured lawfully is required to pay or which, on account of previous payment, may be due the insured, in case of the insured’s election to terminate the insurance on the day of the maturity of the premium, note, or obligation.

Source:

S.L. 1983, ch. 332, § 24; 1985, ch. 317, § 58.

Derivation:

N.D.C.C. § 26-04-07.

DECISIONS UNDER PRIOR LAW

Extension of Time for Payment.

Where, at the request of the insured, the time of payment of a premium note was extended for a period of less than thirty days so that the insurer could not give the required thirty days’ notice, the insured waived the benefit of former similar statute. Meyer v. National Fire Ins. Co., 67 N.D. 77, 269 N.W. 845, 1936 N.D. LEXIS 154 (N.D. 1936).

Where the agent of a company had the ostensible authority to extend the time of payment of a premium note, the fact that the insurer was ignorant of an extension given did not relieve it from the effect of noncompliance with the requirements of former similar section. Meyer v. National Fire Ins. Co., 67 N.D. 77, 269 N.W. 845, 1936 N.D. LEXIS 154 (N.D. 1936).

Life Policies.

Former statute requiring a premium notice before an insurer could declare a forfeiture did not apply to life policies. Lincoln Nat'l Life Ins. Co. v. Hammer, 41 F.2d 12, 1930 U.S. App. LEXIS 2706 (8th Cir. N.D. 1930).

Notice to Mortgagee of Insured Property.

Where there was no special contract with the mortgagee of insured property, the insured’s cancellation of the policy prevents recovery by mortgagee regardless of failure to make proof of notice of cancellation. Halpern v. National Fire Ins. Co., 56 N.D. 116, 216 N.W. 209, 1927 N.D. LEXIS 79 (N.D. 1927).

Collateral References.

Actual receipt of cancellation notice mailed by insurer as prerequisite to cancellation of insurance, 40 A.L.R.4th 867.

26.1-24-08. Security agreement to secure premium payment must be in separate instrument — Penalty.

It is unlawful for any insurance company, or any insurance producer therefor within this state, to take or procure to be taken upon the property to be insured, or upon any other property, a security agreement securing the payment of the premium due or to become due, including policy fees, or any part thereof, unless the security agreement is printed or written upon a paper which is separate and distinct from the application. Any security agreement given in violation of this section is void. Any insurance company violating this section is guilty of a class A misdemeanor and forfeits its right to do business in this state.

Source:

S.L. 1983, ch. 332, § 24; 2001, ch. 262, § 47.

Derivation:

N.D.C.C. § 26-04-08.

26.1-24-09. Sale or negotiation of premium note prohibited — Penalty.

A promissory note taken in settlement of the first premium on any life, health, or accident insurance policy may not be sold or negotiated in any manner prior to the applicant’s medical examination, when one is required, nor a binding receipt for the premium signed by an authorized insurance producer of the insurance company has been delivered to the applicant, nor until the insurance company has received the application and medical examination. Any person violating this section is guilty of a class B misdemeanor.

Source:

S.L. 1983, ch. 332, § 24; 2001, ch. 262, § 48.

Derivation:

N.D.C.C. § 26-04-09.

26.1-24-10. Insurer’s audit to determine premium — Time limitation.

An insurer providing commercial insurance may conduct an audit to determine the premium due or to be refunded only within one hundred eighty days after the expiration date of the policy unless the insured agrees in writing to extend that period of time.

Source:

S.L. 1989, ch. 360, § 1; 1991, ch. 314, § 1; 2001, ch. 264, § 6.

CHAPTER 26.1-25 Fire, Property, and Casualty Insurance Rates

26.1-25-01. Purpose of chapter — Construction.

The purpose of this chapter is to promote the public welfare by regulating insurance rates so that they are not excessive, inadequate, or unfairly discriminatory, and to authorize and regulate limited cooperative action among insurers in ratemaking-related activities and in other matters within the scope of this chapter. Nothing in this chapter is intended to prohibit or discourage reasonable competition, or to prohibit, or encourage except to the extent necessary to accomplish the aforementioned purpose, uniformity in rating systems, rating plans, or practices. This chapter must be liberally interpreted to carry into effect this section.

Source:

S.L. 1983, ch. 332, § 25; 1991, ch. 302, § 2.

Derivation:

N.D.C.C. §§ 26-28-01, 26-29-01.

Collateral References.

What constitutes “vandalism” or “malicious mischief” within meaning of insurance policy specifically extending overage to losses from such causes, 56 A.L.R.5th 407.

26.1-25-02. Scope of chapter.

  1. This chapter applies to fire, marine, inland marine, hail, windstorm, cyclone, tornado, explosion, water damage, and all other forms of insurance on property, and the loss of use and occupancy thereof, and to casualty insurance, including fidelity, surety, and guaranty bonds, and all other forms of motor vehicle insurance, as defined and set forth in subsections 1, 2, 4, 5, 6, and 7 of section 26.1-12-11 and in subsections 1, 2, 5, 6, and 7 of section 26.1-05-02, except as hereinafter excluded. Inland marine insurance is deemed to include insurance now or hereafter defined by statute, or by interpretation thereof, or if not so defined or interpreted, by ruling of the commissioner or as established by general custom of the business, as inland marine insurance. This chapter does not apply to:
    1. Reinsurance other than joint reinsurance to the extent stated in section 26.1-25-10.5.
    2. Accident and health insurance.
    3. Insurance of vessels or craft, their cargoes, marine builders’ risks, marine protection and indemnity, or other risks commonly insured under marine, as distinguished from inland marine, insurance policies.
    4. Insurance against loss or damage to aircraft or against liability, other than workforce safety and insurance and employers’ liability, arising out of ownership, maintenance, or use of aircraft.
  2. This chapter applies to every insurer, including every stock or mutual company, reciprocal or interinsurance exchange, authorized by any provision of the laws of this state to transact any of the kinds of insurance. However, except with respect to policies issued pursuant to section 26.1-13-15 in any incorporated city with a population over ten thousand, this chapter does not apply to county mutual insurance companies organized under chapter 26.1-13.
  3. If any kind of insurance, subdivision, or combination thereof, or type of coverage, subject to this chapter, is also subject to regulation by another rate regulatory act of this state, an insurer to which both acts are otherwise applicable shall file with the commissioner a designation as to which rate regulatory act is applicable to it with respect to the kind of insurance, subdivision, or combination thereof, or type of coverage.

Source:

S.L. 1983, ch. 332, § 25; 1987, ch. 345, § 2; 1989, ch. 69, § 28; 1993, ch. 45, § 13; 1993, ch. 293, § 4; 2003, ch. 561, § 3; 2005, ch. 259, § 2.

Derivation:

N.D.C.C. §§ 26-28-02, 26-29-02.

26.1-25-02.1. Definitions.

  1. “Advisory organization” means any entity, including its affiliates or subsidiaries, which either has two or more member insurers or is controlled either directly or indirectly by two or more insurers, and which assists insurers in ratemaking-related activities as enumerated in this chapter. Two or more insurers having a common ownership or operating in this state under common management or control constitute a single insurer for purposes of this definition.
  2. “Commercial risk” means any kind of risk which is not a personal risk.
  3. “Competitive market” means a commercial risk market that has not been found to be noncompetitive as provided for in section 26.1-25-04. All commercial risk markets except crop hail, farmowners, and medical malpractice insurance are presumed to be competitive.
  4. “Developed losses” means losses including loss adjustment expenses, adjusted, using standard actuarial techniques, to eliminate the effect of differences between current payment or reserve estimates and those needed to provide actual ultimate loss including loss adjustment expense payments.
  5. “Expenses” means that portion of a rate attributable to acquisition, field supervision, collection expenses, general expenses, taxes, licenses, and fees.
  6. “Joint underwriting” means a voluntary arrangement established to provide insurance coverage for a commercial risk pursuant to which two or more insurers jointly contract with the insured at a price and under policy terms agreed upon between the insurers.
  7. “Loss trending” means any procedure for projecting developed losses to the average date of loss for the period during which the policies are to be effective.
  8. “Noncompetitive market” means the crop hail, farmowners, and medical malpractice insurance markets together with any other line of commercial risk insurance that has not been found by the commissioner to have a reasonable degree of competitiveness within the market considering:
    1. Market concentration and changes in market concentration determined through the use of the Herfindahl-Hirschman index and the United States department of justice merger guidelines for an unconcentrated market;
    2. The existence of financial and other barriers that prevent a company from entering the market;
    3. The number of insurers or groups of affiliated insurers providing coverage in the market;
    4. The extent to which any insurer or group of affiliated insurers controls the market;
    5. Whether the total number of companies writing the line of insurance in this state is sufficient to provide multiple insurance options in the market;
    6. The availability of insurance coverage to consumers in the markets by specific geographic area, by line of insurance, and by class of risk; and
    7. The opportunities available in the market to acquire pricing and other consumer information.
  9. “Personal risk” means homeowners, tenants, private passenger nonfleet automobiles, mobile homes, and other property and casualty insurance for personal, family, or household needs.
  10. “Pool” means a voluntary arrangement, established on an ongoing basis, pursuant to which two or more insurers participate in the sharing of risks on a predetermined basis. The pool may operate through an association, syndicate, or other pooling agreement.
  11. “Prospective loss costs” means that portion of a rate that does not include provisions for expenses other than loss adjustment expenses, or profit, and are based on historical aggregate losses and loss adjustment expenses adjusted through development to their ultimate value and projected through trending to a future point in time.
  12. “Rate” means that cost of insurance per exposure unit whether expressed as a single member or as a prospective loss cost with an adjustment to account for the treatment of expenses, profit, and individual insurer variation in loss experience, prior to any application of individual risk variations based on loss or expense considerations, and does not include minimum premium.
  13. “Residual market mechanism” means an arrangement, either voluntary or mandated by law, involving participation by insurers in the equitable apportionment among them of insurance which may be afforded applicants who are unable to obtain insurance through ordinary methods.
  14. “Supplementary rating information” includes any manual or plan of rates, classification, rating schedule, minimum premium, policy fee, rating rule, underwriting rule, statistical plan, and any other similar information needed to determine the applicable rate in effect or to be in effect.
  15. “Supporting information” means:
    1. The experience and judgment of the filer and the experience or date of other insurers or advisory organizations relied upon by the filer;
    2. The interpretation of any other data relied upon by the filer; and
    3. Descriptions of methods used in making the rates and any other information required by the commissioner to be filed.

A determination that a market is noncompetitive may not be based solely on the consideration of any one factor.

Source:

S.L. 1991, ch. 302, § 3; 2007, ch. 264, § 1.

Collateral References.

What constitutes “vandalism” or “malicious mischief” within meaning of insurance policy specifically extending overage to losses from such causes, 56 A.L.R.5th 407.

26.1-25-03. Making of rates.

  1. Rates must be made in accordance with the following provisions:
    1. Due consideration must be given to past and prospective loss experience within this state and outside this state to the extent that the consideration is given to areas the commissioner determines are representative of this state, to any conflagration and catastrophe hazards, to a reasonable margin for profit and contingencies, to dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers, to past and prospective expenses both countrywide, as determined by the commissioner, and those specially applicable to this state, and to all other relevant factors within and outside this state. In the case of fire insurance rates, consideration must be given to the experience of the fire insurance business during a period of not less than the most recent five-year period for which the experience is available. In determining the reasonableness of the profit, consideration may be given to investment income.
    2. The systems of expense provisions included in the rates for use by any insurer or group of insurers may differ from those of other insurers or group of insurers to reflect the requirements of the operating methods of any such insurer or group with respect to any kind of insurance, or with respect to any subdivision or combination thereof for which subdivision or combination separate expense provisions are applicable.
    3. Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations in hazards or expense provisions, or both. The standards may measure any differences among risks that can be demonstrated to have a probable effect upon losses or expense. No risk classification, however, may be based upon race, creed, national origin, or the religion of the insured.
    4. Rates may not be excessive, inadequate, or unfairly discriminatory.
  2. Except to the extent necessary to meet subdivision d of subsection 1, uniformity among insurers in any matters within the scope of this section is neither required nor prohibited.
  3. Rates made in accordance with this section may be used subject to this chapter.

Source:

S.L. 1983, ch. 332, § 25; 1983, ch. 343, § 3; 1989, ch. 361, § 1; 1991, ch. 302, § 4.

Derivation:

N.D.C.C. §§ 26-28-03, 26-29-03.

Notes to Decisions

Discretion of Commissioner.

Commissioner abused his discretion in rejecting “trending” as a means of projecting future rate level requirements based upon past experiences where commissioner failed to introduce a substitute means of projecting future losses based upon past experience. Insurance Servs. Office v. Knutson, 283 N.W.2d 395, 1979 N.D. LEXIS 293 (N.D. 1979).

Granting of Rate Increase.

Rate increase should have been granted where applicant made a prima facie showing that such increase was necessary and commissioner failed to establish credible evidence to justify a conclusion that the proposed increase was excessive or specifically demonstrate the evidence submitted by the applicant was in some manner deficient. Insurance Servs. Office v. Knutson, 283 N.W.2d 395, 1979 N.D. LEXIS 293 (N.D. 1979).

26.1-25-04. Rate filings.

  1. Every insurer shall file with the commissioner, except as to inland marine risks which by general custom of the business are not written according to manual rates or rating plans, every manual, minimum class rate, rating schedule or rating plan, and every other rating rule, and every modification of any of the foregoing which it proposes to use. Every filing must state the proposed effective date thereof and must indicate the character and extent of the coverage contemplated. When a filing is not accompanied by the information upon which the insurer supports the filing, and the commissioner does not have sufficient information to determine whether the filing meets the requirements of this chapter, the commissioner shall require the insurer to furnish the information upon which it supports the filing and the waiting period commences as of the date the information is furnished. Every insurer shall file or incorporate by reference to material which has been approved by the commissioner, at the same time as the filing of the rate, all supplementary rating and supporting information to be used in support of or in conjunction with a rate. The information furnished in support of a filing may include:
    1. The experience or judgment of the insurer or advisory organization making the filing.
    2. Its interpretation of any statistical data upon which it relies.
    3. The experience of other insurers or advisory organizations.
    4. Any other relevant factors.
  2. After reviewing an insurer’s filing, the commissioner may require that the insurer’s rates be based upon the insurer’s own loss and expense information. If the insurer’s loss or allocated loss adjustment expense information is not actuarially credible, as determined by the commissioner, the insurer may use or supplement its experience with information filed with the commissioner by an advisory organization. Insurers utilizing the services of an advisory organization must provide with their rate filing, at the request of the commissioner, a description of the rationale for such use, including its own information and method of utilization of the advisory organization’s information. This chapter does not require any insurer to become a member of or a subscriber to any advisory organization.
  3. The commissioner shall review filings as soon as reasonably possible after they have been made in order to determine whether they meet the requirements of this chapter.
  4. Subject to the exceptions specified in subsections 5 and 6, each filing must be on file for a waiting period of sixty days before it becomes effective. The period may be extended by the commissioner for an additional period not to exceed fifteen days if the commissioner gives written notice within the waiting period to the insurer or advisory organization which made the filing that the commissioner needs the additional time for the consideration of the filing. Upon written application by the insurer or advisory organization, the commissioner may authorize a filing which the commissioner has reviewed to become effective before the expiration of the waiting period or any extension thereof. A filing is deemed to meet the requirements of this chapter unless disapproved by the commissioner within the waiting period or any extension thereof.
  5. A filing with respect to a competitive market commercial risk rate filing, a private passenger automobile rate filing in which the average rate change is less than five percent, or a homeowner rate filing in which the average rate change is less than five percent is deemed to meet the requirements of this chapter until such time as the commissioner reviews the filing and so long thereafter as the filing remains in effect. Specific inland marine rates on risks specially rated by an advisory organization become effective when filed and are deemed to meet the requirements of this chapter until such time as the commissioner reviews the filing and so long thereafter as the filing remains in effect.
  6. An insurer must file notice of a rate change for either a competitive market commercial risk product, a private passenger automobile rate filing in which the average rate change is less than five percent, or a homeowner rate filing in which the average rate change is less than five percent with the commissioner within thirty days after implementing the rate change. The exemption provided in subsection 5 for a private passenger automobile or homeowner rate change filing is limited to no more than one filing per calendar year.
  7. The commissioner after notice and hearing may determine by order that a commercial risk market is noncompetitive. A rate filing for a product in a noncompetitive commercial risk market is subject to the provisions of this chapter. The commissioner’s order finding that a commercial risk market is noncompetitive expires after two years.
  8. Under any rules the commissioner may adopt, the commissioner may, by written order, suspend or modify the requirement of filing as to any kind of insurance, subdivision, or combination thereof, or as to classes of risks, the rates for which cannot practicably be filed before they are used. The orders and rules must be made known to insurers and advisory organizations affected thereby. The commissioner may make any examination the commissioner deems advisable to ascertain whether any rates affected by the order meet the standards set forth in subdivision e of subsection 1 of section 26.1-25-03.
  9. Upon the written application of the insured, stating the insured’s reasons therefor, filed with and approved by the commissioner, a rate in excess of that provided by a filing otherwise applicable may be used on any specific risk.
  10. No insurer may make or issue a contract or policy except in accordance with the filings that have been approved and are in effect for the insurer as provided in this chapter or in accordance with subsection 8 or 9.
  11. Nothing in this chapter may be construed to require an advisory organization or its members or its subscribers to immediately refile final rates or premium charges previously approved by the commissioner. Members or subscribers of an advisory organization are authorized to continue to use insurance rates or premium charges approved before July 1, 1991, or decreases from those rates or premium charges filed by the advisory organization and subsequently approved after July 1, 1991.

A filing and any supporting information is open to public inspection after the filing becomes effective. Specific inland marine rates on risks specially rated, made by an advisory organization, must be filed with the commissioner.

Source:

S.L. 1983, ch. 332, § 25; 1983, ch. 343, § 3; 1987, ch. 350, § 2; 1991, ch. 302, § 5; 2007, ch. 264, § 2.

Derivation:

N.D.C.C. §§ 26-28-04, 26-29-04.

Notes to Decisions

Approval of Filings.

The filing should be approved unless the technique employed by the applicant in determining the costs results in rates which are excessive, or inadequate, or unfairly discriminatory, or unless the commissioner has established rules after appropriate notice and hearing, which rules appear to have been violated by the applicant in its filing. Allstate Ins. Co. v. Knutson, 278 N.W.2d 383, 1979 N.D. LEXIS 180 (N.D. 1979).

26.1-25-04.1. Motor vehicle insurance rate filings — Premium reduction for accident prevention course completion.

All rate filings with the commissioner for motor vehicle liability and physical damage insurance must provide for an appropriate reduction in premium charges for the principal operators of motor vehicles for at least a two-year period following their successful completion of a motor vehicle accident prevention course. The reduction in premium charges must be separately disclosed. The premium billing must disclose the reduction in premium charges with respect to the person eligible for the reduction. The reduction in premium charges does not apply to an operator who is subject to an experience rating or a driver education premium reduction. If a policy insures two or more motor vehicles, the premium reduction applies only to the motor vehicle principally operated by the person who has satisfactorily completed the motor vehicle accident prevention course. The course must be approved by the superintendent of the state highway patrol. The course sponsor shall provide each successful participant a certificate that is the basis for the insurance discount. A driver fifty-five years of age or older who successfully completes an approved motor vehicle accident prevention course is entitled to a three-year insurance premium reduction. The reduction may be applied only to a private passenger motor vehicle or a pickup truck or van that has a gross vehicle weight of less than ten thousand pounds [4535.92 kilograms] and which is not used for delivering or transporting goods or materials unless the delivery and transport is incidental to an operator’s business.

Source:

S.L. 1983, ch. 344, § 1; 1987, ch. 353, § 1; 1989, ch. 362, § 1; 1993, ch. 302, § 1.

26.1-25-04.2. Motor vehicle accident surcharge.

Concerning motor vehicle accidents occurring after August 1, 1993:

  1. An insurer may not assess an accident surcharge on the policy of any insured as a result of a comprehensive coverage claim or when the insured’s unattended vehicle was legally parked when the damage occurred.
  2. An insurer may not assess an accident surcharge on the policy of any insured when a claim has been paid pursuant to section 26.1-40-17.1 unless the insurer is not entitled to recover damages from the party at fault.

Source:

S.L. 1993, ch. 303, § 1.

26.1-25-04.3. Disclosure of accident surcharge and loss of discount.

Before, or at the time of issuance of a policy, an insurer insuring a motor vehicle must notify the insured in writing of the insurer’s underwriting and rating procedures applicable to accident surcharges and loss of discounts.

Source:

S.L. 1993, ch. 303, § 1.

26.1-25-04.4. Notice of withdrawal.

An insurer must provide the commissioner notice in writing of its plan to cease writing and renewing a property and casualty insurance product before the notification of agents and policyholders. The notice must contain the effective date of the plan, the number of policies affected, and the reason therefor.

Source:

S.L. 2003, ch. 245, § 1.

26.1-25-05. Disapproval of filings.

  1. If within the waiting period or any extension thereof as provided in subsection 4 of section 26.1-25-04 the commissioner finds that a filing does not meet the requirements of this chapter, the commissioner shall send to the insurer or advisory organization which made the filing written notice of disapproval of the filing specifying therein in what respects the commissioner finds the filing fails to meet the requirements of this chapter and stating that the filing will not become effective.
  2. If within thirty days after a filing subject to subsection 5 of section 26.1-25-04 has become effective the commissioner finds that the filing does not meet the requirements of this chapter, the commissioner shall send to the insurer or advisory organization that made the filing written notice of disapproval of the filing specifying therein in what respects the commissioner finds that the filing fails to meet the requirements of this chapter and stating when, within a reasonable period thereafter, the filing will be deemed no longer effective. The disapproval may not affect any contract made or issued prior to the expiration of the period set forth in the notice.
  3. If at any time subsequent to the applicable review period provided for in subsection 1 or 2 the commissioner finds that a filing does not meet the requirements of this chapter, the commissioner shall, after a hearing held upon not less than ten days’ written notice, specifying the matters to be considered at the hearing, to every insurer and advisory organization which made the filing, issue an order specifying in what respects the commissioner finds that the filing fails to meet the requirements of this chapter, and stating when, within a reasonable period thereafter, the filing will be deemed no longer effective. Copies of the order must be sent to every such insurer and advisory organization. The order may not affect any contract or policy made or issued prior to the expiration of the period set forth in the order.
  4. Any person or organization aggrieved with respect to any filing which is in effect may make written application to the commissioner for a hearing thereon. However, the insurer or advisory organization that made the filing may not proceed under this subsection. The application must specify the grounds to be relied upon by the applicant. If the commissioner finds that the application is made in good faith, that the applicant would be so aggrieved if the grounds are established, and that the grounds otherwise justify holding such a hearing, the commissioner shall, within thirty days after receipt of the application, hold a hearing upon not less than ten days’ written notice to the applicant and to every insurer and advisory organization which made the filing. If, after the hearing, the commissioner finds that the filing does not meet the requirements of this chapter, the commissioner shall issue an order specifying in what respects the filing fails to meet the requirements of this chapter, and stating when, within a reasonable period thereafter, the filing will be deemed no longer effective. Copies of the order must be sent to the applicant and to every such insurer and advisory organization. The order may not affect any contract or policy made or issued prior to the expiration of the period set forth in the order.
  5. A manual, minimum class rate, rating schedule, rating plan, or rating rule, or any modification of any of the foregoing, which has been filed pursuant to the requirements of section 26.1-25-04, may not be disapproved if the rates thereby produced meet the requirements of this chapter.

Source:

S.L. 1983, ch. 332, § 25; 1991, ch. 302, § 6.

Derivation:

N.D.C.C. §§ 26-28-05, 26-29-05.

Notes to Decisions

Approval of Filings.

The filing should be approved unless the technique employed by the applicant in determining the costs results in rates which are excessive, or inadequate, or unfairly discriminatory, or unless the commissioner has established rules after appropriate notice and hearing, which rules appear to have been violated by the applicant in its filing. Allstate Ins. Co. v. Knutson, 278 N.W.2d 383, 1979 N.D. LEXIS 180 (N.D. 1979).

26.1-25-06. Rating organizations. [Repealed]

Repealed by S.L. 1991, ch. 302, § 26.

26.1-25-07. Deviations. [Repealed]

Repealed by S.L. 1991, ch. 302, § 26.

26.1-25-08. Appeal by minority. [Repealed]

Repealed by S.L. 1991, ch. 302, § 26.

26.1-25-09. Information to be furnished insureds — Hearings and appeals of insureds.

Every insurer which files rates shall, within a reasonable time after receiving written request therefor and upon payment of such reasonable charge as it may make, furnish to any insured affected by a rate made by it, or to the authorized representative of such insured, all pertinent information as to the rate. Every insurer which files rates shall provide within this state reasonable means whereby any person aggrieved by the application of its rating system may be heard, in person or by an authorized representative, on the person’s written request to review the manner in which the rating system has been applied in connection with the insurance afforded the person. If the insurer fails to grant or reject the request within thirty days after it is made, the applicant may proceed in the same manner as if the application had been rejected. Any party affected by the action of the insurer on the request may, within thirty days after written notice of the action, appeal to the commissioner, who, after a hearing held upon not less than ten days’ written notice to the appellant and to the insurer, may affirm or reverse the action.

Source:

S.L. 1983, ch. 332, § 25; 1991, ch. 302, § 7.

Derivation:

N.D.C.C. §§ 26-28-09, 26-29-09.

26.1-25-10. Advisory organizations. [Repealed]

Repealed by S.L. 1991, ch. 302, § 26.

26.1-25-10.1. Licensing advisory organizations.

  1. No advisory organization may provide any service relating to the rates of any insurance subject to this chapter, and no insurer may utilize the services of such organization for such purposes unless the organization has obtained a license under subsection 3.
  2. No advisory organization may refuse to supply any services for which it is licensed in this state to any insurer authorized to do business in this state and offering to pay the fair and usual compensation for the services.
    1. An advisory organization applying for a license shall include with its application:
      1. A copy of its constitution, charter, articles of organization, agreement, association or incorporation, and a copy of its bylaws, plan of operation, and any other rules or regulations governing the conduct of its business;
      2. A list of its members and subscribers;
      3. The name and address of one or more residents of this state upon whom notices, process affecting it, or orders of the commissioner may be served;
      4. A statement showing its technical qualifications for acting in the capacity for which it seeks a license;
      5. A biography of the ownership and management of the organization; and
      6. Any other relevant information and documents that the commissioner may require.
    2. Every organization that has applied for a license shall notify the commissioner of every material change in the facts or in the documents on which its application was based. Any amendment to a document filed under this section must be filed at least thirty days before it becomes effective.
    3. If the commissioner finds that the applicant and the natural persons through whom it acts are competent, trustworthy, and technically qualified to provide the services proposed, and that all requirements of the law are met, the commissioner shall issue a license specifying the authorized activity of the applicant. The commissioner may not issue a license if the proposed activity would tend to create a monopoly or to substantially lessen the competition in any market.
    4. Licenses issued pursuant to this section are perpetual in duration unless the license is suspended or revoked. The fee for the license is fifty dollars per year. The commissioner may at any time, after hearing, revoke or suspend the license of an advisory organization that does not comply with the requirements and standards of this chapter.

Source:

S.L. 1991, ch. 302, § 8.

26.1-25-10.2. Insurers and advisory organizations — Prohibited activity.

  1. No insurer or advisory organization may:
    1. Attempt to monopolize or combine or conspire with any other person to monopolize an insurance market.
    2. Engage in a boycott, on a concerted basis, of an insurance market.
    1. No insurer may agree with any other insurer or with an advisory organization to mandate adherence to or to mandate use of any rate, rating plan, rating schedule, rating rule, policy or bond form, rate classification, rate territory, underwriting rule, survey, inspection or similar material, except as needed to develop statistical plans permitted by subsection 1. The fact that two or more insurers, whether or not members or subscribers of an advisory organization, use consistently or intermittently the same rates, rating plans, rating schedules, rating rules, policy or bond forms, rate classifications, rate territories, underwriting rules, surveys or inspections, or similar materials is not sufficient in itself to support a finding that an agreement exists.
    2. Two or more insurers having a common ownership or operating in this state under common management or control may act in concert between or among themselves with respect to any matters pertaining to those activities authorized in this chapter as if they constituted a single insurer.
  2. No insurer or advisory organization may make any arrangement with any other insurer, advisory organization, or other person which has the purpose or effect of restraining trade unreasonably or of substantially lessening competition in the business of insurance.
  3. In addition to the other prohibitions contained in this chapter, except as specifically permitted under this section, no advisory organization may compile or distribute recommendations relating to rates that include expenses other than loss adjustment expenses, or profit.

Source:

S.L. 1991, ch. 302, § 9.

26.1-25-10.3. Advisory organizations — Permitted activity.

Any advisory organization in addition to other activities not prohibited, is authorized, on behalf of its members and subscribers, to:

  1. Develop statistical plans, including territorial and class definitions.
  2. Collect statistical data from members, subscribers, or any other sources.
  3. Prepare and distribute prospective loss costs.
  4. Prepare and distribute factors, calculations, or formulas pertaining to classification, territory, increased limits, and other variables.
  5. Prepare and distribute manuals of rating rules and rating schedules that do not include final rates, expense provisions, profit provisions, or minimum premiums.
  6. Distribute information that is required or directed to be filed with the commissioner.
  7. Conduct research and onsite inspections in order to prepare classifications of public fire defenses.
  8. Consult with public officials regarding public fire protection as it would affect members, subscribers, and others.
  9. Conduct research and collect statistics in order to discover, identify, and classify information relating to causes or prevention of losses.
  10. Prepare policy forms and endorsements and consult with members, subscribers, and others relative to their use and application.
  11. Conduct research and onsite inspections for the purpose of providing risk information relating to individual structures.
  12. Collect, compile, and distribute past and current prices of individual insurers and publish such information.
  13. File final rates, at the direction of the commissioner, for residual market mechanisms.
  14. Furnish any other services, as approved or directed by the commissioner, related to those enumerated in this section.

Source:

S.L. 1991, ch. 302, § 10.

26.1-25-10.4. Advisory organizations — Filing requirements.

Every advisory organization shall file with the commissioner for approval all prospective loss costs and all supplementary rating information and every change or amendment or modification of any of the foregoing proposed for use in this state. The filings are subject to the provisions of this chapter relating to filings made by insurers.

Source:

S.L. 1991, ch. 302, § 11.

26.1-25-10.5. Joint underwriting, joint reinsurance pool, and residual market activities.

  1. Notwithstanding subdivision a of subsection 2 of section 26.1-25-10.2, insurers participating in joint underwriting, joint reinsurance pools, or residual market mechanisms may in connection with such activity act in cooperation with each other in the making of rates, rating systems, policy forms, underwriting rules, surveys, inspections and investigations, the furnishing of loss and expense statistics or other information, or carrying on research. Joint underwriting, joint reinsurance pools, and residual market mechanisms may not be deemed an advisory organization.
  2. Regulation.
    1. Except to the extent modified by this section, insurers, joint underwriting, joint reinsurance pool, and residual market mechanism activities are subject to the other provisions of this chapter.
    2. If, after hearing, the commissioner finds that any activity or practice of an insurer participating in joint underwriting or a pool is unfair, is unreasonable, will tend to lessen competition in any market, or is otherwise inconsistent with the provisions or purposes of this chapter, the commissioner may issue a written order and require the discontinuance of such activity or practice.
    3. Every pool shall file with the commissioner a copy of its constitution; its articles of incorporation, agreement, or association; its bylaws, rules, and regulations governing its activities; its members; the name and address of a resident of this state upon whom notices or orders of the commissioner or process may be served; and any changes in amendments or changes in the foregoing.
    4. Any residual market mechanism, plan, or agreement to implement such a mechanism, and any changes or amendments thereto, must be submitted in writing to the commissioner for consideration and approval, together with such information as may be reasonably required. The commissioner may approve only such agreements as are found to contemplate:
      1. The use of rates that meet the standards prescribed by this chapter; and
      2. Activities and practices that are not unfair, unreasonable, or otherwise inconsistent with the provisions of this chapter.

At any time after such agreements are in effect, the commissioner may review the practices and activities of the adherents to such agreements and if, after a hearing, the commissioner finds that any such practice or activity is unfair or unreasonable, or is otherwise inconsistent with the provisions of this chapter, the commissioner may issue a written order to the parties and either require the discontinuance of such acts or revoke approval of any such agreement.

Source:

S.L. 1991, ch. 302, § 12; 1993, ch. 45, § 14.

26.1-25-11. Joint underwriting or joint reinsurance. [Repealed]

Repealed by S.L. 1991, ch. 302, § 26.

26.1-25-12. Examinations.

The commissioner may, as often as the commissioner deems expedient, make or cause to be made an examination of each advisory organization referred to in section 26.1-25-10.1 and of each group, association, or other organization referred to in section 26.1-25-10.5. The reasonable costs of any examination must be paid by the advisory organization, or group, association, or other organization examined upon presentation to it of a detailed account of the costs. The officer, manager, agents, and employees of the advisory organization, or group, association, or other organization may be examined at any time under oath and shall exhibit all books, records, accounts, documents, or agreements governing its method of operation.

The commissioner shall furnish two copies of the examination report to the organization, group, or association examined and shall notify the organization, group, or association that it may, within twenty days thereafter, request a hearing on the report or on any facts or recommendations therein. Before filing any report for public inspection, the commissioner shall grant a hearing to the organization, group, or association examined. The report of any examination, when filed for public inspection, is admissible in evidence in any action or proceeding brought by the commissioner against the organization, group, or association examined, or its officers or agents, and is prima facie evidence of the facts stated therein. The commissioner may withhold the report of any examination from public inspection for the time as the commissioner deems proper.

In lieu of any such examination the commissioner may accept the report of an examination made by the insurance supervisory official of another state, pursuant to the laws of that state.

Source:

S.L. 1983, ch. 332, § 25; 1991, ch. 302, § 13.

26.1-25-13. Rate administration.

  1. The commissioner shall adopt reasonable rules and statistical plans, reasonably adopted to each of the rating systems on file with the commissioner, which may be modified from time to time and which must be used thereafter by each insurer in the recording and reporting of its loss and countrywide expense experience, in order that the experience of all insurers may be made available at least annually in such form and detail as may be necessary to aid the commissioner in determining whether rating systems comply with the standards set forth in section 26.1-25-03. The rules and plans may also provide for the recording and reporting of expense experience items which are specially applicable to this state and are not susceptible of determination by a prorating of countrywide expense experience. In adopting the rules and plans, the commissioner shall give due consideration to the rating systems on file with the commissioner and, in order that the rules and plans may be as uniform as is practicable among the several states, to the rules and to the form of the plans used for the rating systems in other states. No insurer may be required to record or report its loss experience on a classification basis that is inconsistent with the rating system filed by it. The commissioner may designate one or more advisory organizations or other agencies to assist the commissioner in gathering such experience and making compilations thereof, and the compilations must be made available, subject to reasonable rules adopted by the commissioner, to insurers and advisory organizations.
  2. Reasonable rules and plans may be adopted by the commissioner for the interchange of data necessary for the application of rating plans.
  3. In order to further uniform administration of rate regulatory laws, the commissioner and every insurer and advisory organization may exchange information and experience data with insurance supervisory officials, insurers, and advisory organizations in other states and may consult with them with respect to ratemaking and the application of rating systems.
  4. The commissioner may adopt reasonable rules necessary to effect the purposes of this chapter.

Source:

S.L. 1983, ch. 332, § 25; 1991, ch. 302, § 14.

Derivation:

N.D.C.C. §§ 26-28-13, 26-29-13.

26.1-25-14. False or misleading information.

No person or organization may willfully withhold information from, or knowingly give false or misleading information to, the commissioner, any statistical agency designated by the commissioner, any advisory organization, or any insurer, which will affect the rates or premiums chargeable under this chapter. A violation of this section subjects the offender to the penalties provided in section 26.1-25-18.

Source:

S.L. 1983, ch. 332, § 25; 1991, ch. 302, § 15.

Derivation:

N.D.C.C. §§ 26-28-14, 26-29-14.

26.1-25-15. Assigned risks.

Agreements may be made among insurers with respect to the equitable apportionment among them of insurance which may be afforded applicants who are in good faith entitled to but who are unable to procure such insurance through ordinary methods and the insurers may agree among themselves on the use of reasonable rate modifications for such insurance. These agreements and rate modifications are subject to the approval of the commissioner.

Source:

S.L. 1983, ch. 332, § 25.

Derivation:

N.D.C.C. § 26-28-15.

26.1-25-16. Rebates prohibited — Exception.

  1. No insurance producer may knowingly charge, demand, or receive a premium for any insurance policy except in accordance with this chapter. No insurer or employee of an insurer, and no broker or agent may pay, allow, or give, or offer to pay, allow, or give, directly or indirectly, as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit, or reduction of the premium named in an insurance policy, or any special favor or advantage in the dividends or other benefits to accrue on the policy, or any valuable consideration or inducement whatever, not specified in the insurance policy, except to the extent provided for in applicable filing. No insured named in an insurance policy, nor any employee of the insured, may knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement, credit, or reduction of premium, or any such special favor or advantage or valuable consideration or inducement. This section does not prohibit the payment of commissions or other compensation to licensed insurance producers, nor any insurer from allowing or returning to its participating policyholders, members, or subscribers dividends, savings, or unabsorbed premium deposits. As used in this section, “insurance” includes suretyship and “policy” includes bond.
  2. Notwithstanding any other provision in this section, if the cost does not exceed an aggregate retail value of one hundred dollars per person per year, an insurance producer may give a gift, prize, promotional article, logo merchandise, meal, or entertainment activity directly or indirectly to a person in connection with marketing, promoting, or advertising the business. As used in this subsection, “person” means the named insured, policy owner, or prospective client or the spouse of any of these individuals, but the term does not include a certificate holder, child, or employee of the named insured, policy owner, or prospective client. Subject to the limits of this subsection, an insurance producer may give a gift card for specific merchandise or services such as a meal, gasoline, or car wash but may not give cash, a cash card, any form of currency, or any refund or discount in premium. An insurance producer may not condition the giving of a gift, prize, promotional article, logo merchandise, meal, or entertainment activity on obtaining a quote or a contract of insurance. Notwithstanding the limitation in this subsection, an insurance producer may conduct raffles or drawings, if there is no financial cost to an entrant to participate, the drawing or raffle does not obligate a participant to purchase insurance, the prizes are not valued in excess of a reasonable amount determined by the commissioner, and the drawing or raffle is open to the public. The raffle or drawing must be offered in a manner that is not unfairly discriminatory and may not be contingent on the purchase, continued purchase, or renewal of a policy. Notwithstanding the limitation in this subsection, an insurance producer may make a donation to a nonprofit organization that is exempt from federal taxation under Internal Revenue Code section 501(c) (3) [26 U.S.C. 501(c)(3)] in any amount as long as the donation is not given as an inducement to obtain a contract of insurance.
  3. The provisions in this section may not be construed as including within the definition of discrimination or rebates any of the following practices:
    1. The offer or provision by an insurer or producer, by or through an employee, an affiliate, or a third-party representative, of value-added products or services at no or reduced cost if the products or services are not specified in the policy of insurance if the product or service:
      1. Relates to the insurance coverage and is designed to satisfy one or more of the following:
        1. Provide loss mitigation or loss control;
        2. Reduce claims costs or claim settlement costs;
        3. Provide education about liability risk or risk of loss to persons or property;
        4. Monitor or assess risk, identify sources of risk, or develop strategies for eliminating or reducing risk;
        5. Enhance health;
        6. Enhance financial wellness through items such as education of financial planning services;
        7. Provide post-loss services;
        8. Incent behavioral changes to improve the health or reduce the risk of death or disability of an individual defined as policyholder, potential policyholder, certificate holder, potential certificate holder, insured, potential insured, or applicant; or
        9. Assist in the administration of the employee or retiree benefit insurance coverage.
      2. If offered by the insurer or producer, the insurer or producer, upon request, shall ensure the person is provided with contact information to assist the person with questions regarding the product or service.
      3. Is based on fair documented criteria and offered in a manner not unfairly discriminatory. The documented criteria must be maintained by the insurer or producer and produced at the request of the commissioner.
      4. Is reasonable in comparison to that person’s premiums or insurance coverage for the policy class.
    2. If an insurer or producer does not have sufficient evidence, but has a good-faith belief the product or service meets the criteria in subdivision a, the provision by the insurer or producer of a product or service in a manner that is not unfairly discriminatory as part of a pilot or testing program no longer than one year. An insurer or producer shall notify the department of the pilot or testing program offered to consumers in this state before launching and may proceed with the program unless the department objects within twenty-one days of notice.
  4. An insurer, producer, or representative of an insurer or producer may not offer or provide insurance as an inducement to the purchase of another policy or otherwise use of the words " free " or " no cost " or words of similar import in an advertisement.
  5. The commissioner may adopt regulations when implementing the permitted practices set forth in this regulation to ensure consumer protection. Consistent with applicable law, the topics addressed by the regulations may include consumer data protections and privacy, consumer disclosure, and unfair discrimination.

Source:

S.L. 1983, ch. 332, § 25; 1985, ch. 317, § 59; 2001, ch. 262, § 49; 2011, ch. 215, § 3; 2017, ch. 214, § 3, eff August 1, 2017; 2019, ch. 35, § 14, eff July 1, 2019; 2021, ch. 233, § 3, eff August 1, 2021.

Derivation:

N.D.C.C. §§ 26-28-16, 26-29-15.

Notes to Decisions

Bankruptcy.

Where the president of an insurance agency engaged in a rebating scheme and solicited the participation of one who was not a licensed insurance agent, such conduct contributed to the findings that the agency president would be personally liable for the agency’s debts, that he would be liable for losses sustained by the insurance company which issued policies sold under the scheme, and that the debt would not be dischargeable in bankruptcy. ITT Life Ins. Corp. v. Haakenson (In re Haakenson), 159 B.R. 875, 1993 Bankr. LEXIS 1463 (Bankr. D.N.D. 1993).

26.1-25-17. Hearing procedure and judicial review.

Any insurer or advisory organization aggrieved by any order or decision of the commissioner made without a hearing, within thirty days after notice of the order to the insurer or organization, may make written request to the commissioner for a hearing thereon. The commissioner shall hear the party within twenty days after receipt of the request and shall give not less than ten days’ written notice of the time and place of the hearing. Within fifteen days after the hearing, the commissioner shall affirm, reverse, or modify the previous action, specifying the reasons therefor. Pending the hearing and decision thereon the commissioner may suspend or postpone the effective date of the previous action. This chapter does not require the observance at any hearing of formal rules of pleading or evidence.

Source:

S.L. 1983, ch. 332, § 25; 1991, ch. 302, § 16.

Derivation:

N.D.C.C. §§ 26-28-18, 26-29-17.

26.1-25-18. Penalties.

Any person who violates this chapter shall be guilty of a class B misdemeanor.

The commissioner may suspend the license of any advisory organization or insurer which fails to comply with the order of the commissioner with the time limited by the order or any extension thereof which the commissioner may grant. However, no right to suspend any license exists until after the time for appeal from the order has expired, or if an appeal has been taken, until the order has been affirmed, and no right of suspension exists if prompt compliance with the order is made following the expiration of the time for appeal or the entry of a final order or judgment of affirmance upon appeal. The commissioner may determine when a suspension becomes effective and it remains in effect for the period fixed by the commissioner, unless the commissioner modifies or rescinds the suspension, or until the order upon which the suspension is based is modified, rescinded, or reversed.

A license may not be suspended or revoked except upon a written order of the commissioner, stating the findings, made after a hearing held upon not less than ten days’ written notice to the person or organization specifying the alleged violation.

Source:

S.L. 1983, ch. 332, § 25; 1991, ch. 302, § 17.

26.1-25-19. Exemptions.

The commissioner may, by rule, exempt any market from any or all of the provisions of this chapter, if and to the extent that the exemption is necessary to achieve the purposes of this chapter.

Source:

S.L. 1991, ch. 302, § 18.

CHAPTER 26.1-25.1 Personal Insurance Credit Information

26.1-25.1-01. Scope.

This chapter applies to personal insurance and does not apply to commercial insurance.

Source:

S.L. 2003, ch. 246, § 1.

26.1-25.1-02. Definitions.

As used in this chapter, unless the context otherwise requires:

  1. “Adverse action” means a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of personal insurance.
  2. “Affiliate” means any company that controls, is controlled by, or is under common control with another company.
  3. “Applicant” means an individual who has applied to be covered by a personal insurance policy with an insurer.
  4. “Consumer” means an insured whose credit information is used or whose insurance score is calculated in the underwriting or rating of a personal insurance policy or an applicant for such a policy.
  5. “Consumer reporting agency” means any person that for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties.
  6. “Credit information” means any credit-related information derived from a credit report, found on a credit report itself, or provided on an application for personal insurance. The term does not include information that is not credit-related, regardless of whether the information is contained in a credit report or in an application or is used to calculate an insurance score.
  7. “Credit report” means any written, oral, or other communication of information by a consumer reporting agency bearing on a consumer’s creditworthiness, credit standing, or credit capacity which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor to determine personal insurance premiums, eligibility for coverage, or tier placement.
  8. “Insurance score” means a number or rating that is derived from an algorithm, a computer application, a model, or other process that is based in whole or in part on credit information for the purposes of predicting the future insurance loss exposure of an individual applicant or insured.
  9. “Personal insurance” means private passenger automobile, homeowners, motorcycle, mobile homeowners, and noncommercial dwelling fire insurance policies. Such policies must be individually underwritten for personal, family, or household use. No other type of insurance is included as personal insurance for the purpose of this chapter.

Source:

S.L. 2003, ch. 246, § 1.

26.1-25.1-03. Use of credit information.

An insurer authorized to do business in this state which uses credit information to underwrite or rate risks may not:

  1. Use an insurance score that is calculated using income, gender, address, zip code, ethnic group, religion, marital status, or nationality of the consumer as a factor.
  2. Deny, cancel, or nonrenew a policy of personal insurance solely on the basis of credit information, without consideration of any other applicable underwriting factor independent of credit information and not expressly prohibited by this section.
  3. Take an adverse action against a consumer solely because the consumer does not have a credit card account without consideration of any other applicable factor independent of credit information.
  4. Consider an absence of credit information or an inability to calculate an insurance score in underwriting or rating personal insurance unless the insurer does one of the following:
    1. Treats the consumer as otherwise approved by the insurance commissioner if the insurer presents information that such an absence or inability relates to the risk for the insurer.
    2. Treats the consumer as if the applicant or insured had neutral credit information, as defined by the insurer.
    3. Excludes the use of credit information as a factor and use only other underwriting criteria.
  5. Take an adverse action against a consumer based on credit information, unless an insurer obtains and uses a credit report issued or an insurance score calculated within one hundred twenty days from the date the policy is first written or renewal is issued.
  6. Use credit information unless not later than every thirty-six months following the last time that the insurer obtained current credit information for the insured, the insurer recalculates the insurance score, or obtains an updated credit report. Notwithstanding this section:
    1. At annual renewal, upon the request of a consumer or the consumer’s agent, the insurer shall reunderwrite and rerate the policy based upon a current credit report or insurance score. An insurer need not recalculate the insurance score or obtain the updated credit report of a consumer more frequently than once in a twelve-month period.
    2. The insurer may obtain current credit information upon any renewal before the thirty-six months if consistent with the insurer’s underwriting guidelines.
    3. An insurer need not obtain current credit information for an insured, despite the requirements of subdivision a, if one of the following applies:
      1. The insurer is treating the consumer as otherwise approved by the commissioner.
      2. The insured is in the most favorably priced tier of the insurer, within a group of affiliated insurers. However, the insurer may order such report if consistent with the insurer’s underwriting guidelines.
      3. Credit was not used for underwriting or rating such insured when the policy was initially written. However, the insurer may use credit for underwriting or rating such insured upon renewal if consistent with the insurer’s underwriting guidelines.
      4. The insurer re-evaluates the insured beginning no later than thirty-six months after inception and thereafter based upon other underwriting or rating factors, excluding credit information.
  7. Use the following as a negative factor in any insurance scoring methodology or in reviewing credit information for the purpose of underwriting or rating a policy of personal insurance:
    1. Credit inquiries not initiated by the consumer or inquiries requested by the consumer for the consumer’s own credit information.
    2. Inquiries relating to insurance coverage if so identified on a consumer’s credit report.
    3. Collection accounts with a medical industry code if so identified on the consumer’s credit report.
    4. Multiple lender inquiries, if coded by the consumer reporting agency on the consumer’s credit report as being from the home mortgage industry and made within thirty days of one another, unless only one inquiry is considered.
    5. Multiple lender inquiries, if coded by the consumer reporting agency on the consumer’s credit report as being from the automobile lending industry and made within thirty days of one another, unless only one inquiry is considered.

Source:

S.L. 2003, ch. 246, § 1.

26.1-25.1-04. Dispute resolution and error correction.

If it is determined through the dispute resolution process set forth in the federal Fair Credit Reporting Act [Pub. L. 90-321; 15 U.S.C. 1681i(a)(5)] that the credit information of a current insured was incorrect or incomplete and if the insurer receives notice of such determination from either the consumer reporting agency or from the insured, the insurer shall reunderwrite and rerate the consumer within thirty days of receiving the notice. After reunderwriting or rerating the insured, the insurer shall make any adjustments necessary, consistent with the insurer’s underwriting and rating guidelines. If an insurer determines that the insured has overpaid premium, the insurer shall refund to the insured the amount of overpayment calculated back to the shorter of either the last twelve months of coverage or the actual policy period.

Source:

S.L. 2003, ch. 246, § 1.

26.1-25.1-05. Initial notification.

  1. If an insurer writing personal insurance uses credit information in underwriting or rating a consumer, the insurer or the insurer’s agent shall disclose, either on the insurance application or at the time the insurance application is taken, that the insurer or the insurer’s agent may obtain credit information in connection with such application. Such disclosure must be either written or provided to an applicant in the same medium as the application for insurance. The insurer or the insurer’s agent need not provide the disclosure statement required under this section to any insured on a renewal policy if such consumer has previously been provided a disclosure statement.
  2. Use of the following example disclosure statement constitutes compliance with this section: “In connection with this application for insurance, we may review your credit report or obtain or use a credit-based insurance score based on the information contained in that credit report. We may use a third party in connection with the development of your insurance score.”

Source:

S.L. 2003, ch. 246, § 1.

26.1-25.1-06. Adverse action notification.

If an insurer takes an adverse action based upon credit information, the insurer must meet the notice requirements of this section. The insurer shall:

  1. Provide notification to the consumer that an adverse action has been taken, in accordance with the requirements of the federal Fair Credit Reporting Act [Pub. L. 90-321; 15 U.S.C. 1681m(a)]; and
  2. Provide notification to the consumer explaining the reason for the adverse action. The reasons must be provided in sufficiently clear and specific language so that a person can identify the basis for the insurer’s decision to take an adverse action. The notification must include a description of up to four factors that were the primary influences of the adverse action. The use of generalized terms such as “poor credit history”, “poor credit rating”, or “poor insurance score” does not meet the explanation requirements of this subsection. Standardized credit explanations provided by consumer reporting agencies or other third-party vendors are deemed to comply with this section.

Source:

S.L. 2003, ch. 246, § 1.

26.1-25.1-07. Filing.

  1. An insurer that uses insurance scores to underwrite or rate risks shall file the insurer’s scoring models or other scoring processes with the insurance department. A third party may file scoring models on behalf of an insurer. A filing that includes insurance scoring must include loss experience justifying the use of credit information.
  2. Any scoring models, scoring processes, and information related to scoring models or processes filed by or on behalf of an insurer pursuant to subsection 1 is considered a trade secret.

Source:

S.L. 2003, ch. 246, § 1; 2009, ch. 251, § 1.

26.1-25.1-08. Indemnification.

An insurer shall indemnify, defend, and hold agents harmless from and against all liability, fees, and costs arising out of or relating to the actions, errors, or omissions of a producer who obtains or uses credit information or insurance scores for an insurer, provided the producer follows the instructions of or procedures established by the insurer and complies with any applicable law or rule. This section does not provide a consumer or other insured with a cause of action that does not exist in the absence of this section.

Source:

S.L. 2003, ch. 246, § 1.

26.1-25.1-09. Sale of policy term information by consumer reporting agency.

  1. A consumer reporting agency may not provide or sell data or lists that include any information that in whole or in part was submitted in conjunction with an insurance inquiry about a consumer’s credit information or a request for a credit report or insurance score. Such information includes the expiration dates of an insurance policy or any other information that may identify time periods during which a consumer’s insurance may expire and the terms and conditions of the consumer’s insurance coverage.
  2. Subsection 1 does not apply to data or lists the consumer reporting agency supplies to the insurance producer from whom information was received, the insurer on whose behalf such producer acted, or such insurer’s affiliates or holding companies.
  3. This section does not restrict any insurer from being able to obtain a claims history report or a motor vehicle report.

Source:

S.L. 2003, ch. 246, § 1.

26.1-25.1-10. Severability.

If any provision of this chapter is declared invalid due to an interpretation of or a future change in the federal Fair Credit Reporting Act [Pub. L. 90-321; 15 U.S.C. 1681 et seq.], the remaining provisions of this chapter are not affected and remain in effect.

Source:

S.L. 2003, ch. 246, § 1.

26.1-25.1-11. Application.

This chapter applies to personal insurance policies either written to be effective or renewed after April 30, 2004.

Source:

S.L. 2003, ch. 246, § 1.

CHAPTER 26.1-25.2 Personal Insurance Claims History

26.1-25.2-01. Scope.

This chapter applies to only personal insurance.

Source:

S.L. 2005, ch. 264, § 1.

26.1-25.2-02. Definitions.

As used in this chapter:

  1. “Deceptive practices” means any misstatement or omission of any material fact, or submission of a false statement, in light of the circumstances under which it was made, by a person acting with the intent to defraud in filing an insurance claim.
  2. “Insurance support organization” means:
      1. A person who regularly engages, in whole or in part, in the practice of assembling or collecting information about an individual for the primary purpose of providing the information to an insurance institution or insurance producer for an insurance transaction.
      2. The term includes the furnishing of consumer reports or investigative consumer reports to an insurance institution or insurance producer for use in connection with an insurance transaction.
      3. The term also includes the collection of personal information from an insurance institution, insurance producer, or insurance support organization for the purpose of detecting or preventing fraud, material misrepresentation, or material nondisclosure in connection with insurance underwriting or insurance claim activity.
    1. The following persons are not insurance support organizations:
      1. Insurance producers.
      2. Government institutions.
      3. Insurance institutions.
      4. Medical care institutions.
      5. Medical professionals.
  3. “Personal insurance” means private passenger automobile, homeowner, motorcycle, mobile homeowner, and owner-occupied dwelling fire insurance policies.

Source:

S.L. 2005, ch. 264, § 1.

26.1-25.2-03. Prohibited claims usage.

An insurer may not consider the following events for purposes of surcharging, declining, nonrenewing, or canceling either personal insurance coverage or a binder for personal insurance coverage. The events include:

  1. An insured’s inquiry into the type or level of coverage or an inquiry into whether a policy will cover a loss;
  2. An insured’s inquiry regarding coverage for a loss if the insured files no claim;
  3. A claim if the insurer conducts no investigation of a claim or initiates no other claim activity and the claim does not involve deceptive practices on the part of the insured;
  4. A claim if the insurer makes no payment to or on behalf of the insured and the claim does not involve deceptive practices on the part of the insured;
  5. A first-party property claim resulting from wind or hail if the insured had no previous wind or hail claim on that property within the previous five years regardless of the insurer unless the insurer can provide evidence that the insured unreasonably failed to maintain the property and the failure to maintain the property contributed to the loss; or
  6. A claim if the claim is over ten years old, unless the insurer can provide evidence that the insured unreasonably failed to maintain the property and the failure to maintain the property contributed to the loss.

Source:

S.L. 2005, ch. 264, § 1.

26.1-25.2-04. Prohibited use of prior owner’s history.

An insurer may not decline to insure a property not previously owned by an applicant based solely upon the loss history of a previous owner of the property, unless the insurer can provide evidence that the previous owner did not repair the damage.

Source:

S.L. 2005, ch. 264, § 1.

26.1-25.2-05. Disclosure requirements.

An insurer writing personal insurance must inform the applicant in writing or in the same medium as the application at the time of an application for personal insurance that the insurer will consider the insured’s claims history in determining whether to decline, cancel, nonrenew, or surcharge a policy and that a claim incurred by the insured will be reported to an insurance support organization.

Source:

S.L. 2005, ch. 264, § 1.

CHAPTER 26.1-26 Insurance Producers and Consultants

26.1-26-01. Scope.

This chapter governs the qualifications and procedures for the licensing of insurance producers, insurance consultants, and surplus lines insurance producers. This chapter applies to all lines of insurance and types of insurers, including prepaid legal services organizations and health maintenance organizations.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 4; 1999, ch. 254, § 8; 2001, ch. 262, § 50.

Derivation:

N.D.C.C. § 26-17.1-01.

Collateral References.

Insured-insurer communications as privileged, 55 A.L.R.4th 336.

26.1-26-02. Definitions.

As used in this chapter, unless the context requires otherwise:

  1. “Active participation” means:
    1. Attendance at a formal meeting of a professional insurance association at which a formal business program is presented;
    2. Service on the board of directors or a formal committee of a professional insurance association and involvement in the activities of the board or committee; or
    3. Participation in industry, regulatory, or legislative meetings held by or on behalf of a professional insurance association.
  2. “Business entity” means a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity.
  3. “Home state” means the District of Columbia and any state or territory of the United States in which an insurance producer maintains the producer’s principal place of residence or principal place of business and is licensed to act as an insurance producer.
  4. “Insurance” means any of the lines of authority in section 26.1-26-11.
  5. “Insurance consultant” means a person that, for a fee, holds oneself or itself out to the public as engaged in the business of offering any advice, counsel, opinion, or service with respect to the benefits, advantages, or disadvantages promised under any insurance policy that could be issued in this state.
  6. “Insurance producer” means a person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance.
  7. “Insurer” means all types of insurance companies as well as prepaid legal services organizations and health maintenance organizations.
  8. “License” means a document issued by the commissioner authorizing a person to act as an insurance producer for the lines of authority specified in the document. The license itself does not create any authority, actual, apparent, or inherent, in the holder to represent or commit an insurance carrier.
  9. “Negotiate” means the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers.
  10. “Person” means an individual or a business entity.
  11. “Professional insurance association” means a state or national membership organization that offers courses, lectures, seminars, or other instructional programs certified by the commissioner as approved continuing education activities pursuant to section 26.1-26-31.3; is organized as an association or corporation for the express purpose of promoting the interests of insurance licensees in this state or nationally; and is based on paid membership renewable annually or biennially for a membership fee.
  12. “Sell” means to exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurance company.
  13. “Solicit” means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company.
  14. “Surplus lines insurance producer” means a person that sells, solicits, negotiates, or procures an insurance policy from an insurer not licensed to transact business in this state which cannot be procured from an insurer licensed to do business in this state.
  15. “Terminate” means the cancellation of the relationship between an insurance producer and the insurer or the termination of a producer’s authority to transact insurance.
  16. “Uniform application” means the current version of the national association of insurance commissioners uniform application for resident and nonresident insurance producer licensing.
  17. “Uniform business entity application” means the current version of the national association of insurance commissioners uniform business entity application for resident and nonresident business entities.

Source:

S.L. 1985, ch. 316, § 3; 1993, ch. 54, § 106; 1999, ch. 252, § 5; 2001, ch. 262, § 51; 2019, ch. 237, § 1, eff August 1, 2019.

Derivation:

N.D.C.C. §§ 26-17.1-01, 26-17.1-02.

Notes to Decisions

Jury Instructions.

District court did not err in instructing the jury on the issue of “insurance broker” where the evidence at trial clearly established the propriety of an insurance broker instruction. Gallinger v. Vaaler Ins., 62 F.3d 250, 1995 U.S. App. LEXIS 20676 (8th Cir. N.D. 1995).

26.1-26-03. License required — Acting as insurance producer or consultant without license prohibited — Penalty.

No person may act as or hold oneself out to be an insurance producer, insurance consultant, or surplus lines insurance producer unless licensed under this chapter. A person may not sell, solicit, or negotiate insurance in this state for any class of insurance unless the person is licensed for that line of authority in accordance with this chapter. Any person willfully violating this section is guilty of a class C felony.

Source:

S.L. 1985, ch. 316, § 3; 1991, ch. 301, § 13; 1999, ch. 252, § 6; 2001, ch. 262, § 52.

Derivation:

N.D.C.C. §§ 26-17.1-06, 26-17.1-36.

Notes to Decisions

Bankruptcy.

Where the president of insurance agency engaged in a rebating scheme and solicited the participation of one who was not a licensed insurance agent, such conduct contributed to the findings that the agency president would be personally liable for the agency’s debts, that he would be liable for losses sustained by the insurance company which issued policies sold under the scheme, and that the debt would not be dischargeable in bankruptcy. ITT Life Ins. Corp. v. Haakenson (In re Haakenson), 159 B.R. 875, 1993 Bankr. LEXIS 1463 (Bankr. D.N.D. 1993).

DECISIONS UNDER PRIOR LAW

Power of State to License.

A state may require all agents of insurance companies to be licensed, and make it a criminal offense for any person to act as an agent who is not so licensed. In re Hogan, 8 N.D. 301, 78 N.W. 1051, 1899 N.D. LEXIS 7 (N.D. 1899); Bekken v. Equitable Life Assurance Soc'y, 70 N.D. 122, 293 N.W. 200, 1940 N.D. LEXIS 154 (N.D. 1940).

Solicitation Prior to Organization.

Soliciting applications for insurance preliminary to the organization of a mutual insurance company was not a violation of former provision forbidding an agent to act for an insurance company in transacting insurance business without a certificate of authority. Montgomery v. Harker, 9 N.D. 527, 84 N.W. 369, 1900 N.D. LEXIS 266 (N.D. 1900).

26.1-26-04. Commissions.

  1. An insurance company or insurance producer may not pay a commission, service fee, brokerage, or other valuable consideration to a person for selling, soliciting, or negotiating insurance in this state if that person is required to be licensed under this chapter and is not licensed.
  2. A person may not accept a commission, service fee, brokerage, or other valuable consideration for selling, soliciting, or negotiating insurance in this state if that person is required to be licensed under this chapter and is not licensed.
  3. Renewal or other deferred compensation may be paid to a person for selling, soliciting, or negotiating insurance in this state if that person was required to be licensed under this chapter at the time of the sale, solicitation, or negotiation and was licensed at that time.
  4. An insurer or insurance producer may pay or assign commissions, service fees, brokerages, or other valuable consideration to an insurance agency or to persons that do not sell, solicit, or negotiate insurance in this state, unless the payment violates section 26.1-04-06.

Source:

S.L. 1985, ch. 316, § 3; 1993, ch. 54, § 106; 1999, ch. 252, § 7; 2001, ch. 262, § 53.

Derivation:

N.D.C.C. § 26-17.1-11.

26.1-26-04.1. Fees for services — Rules.

  1. Notwithstanding any other provision of this title, an insurance producer may charge a fee for any services rendered in connection with the sale, solicitation, negotiation, placement, or servicing of an insurance contract, if the following conditions are met:
    1. The fees may not be charged on a personal lines account, such as personal homeowners and automobile, personal life, and health insurance.
    2. Before rendering the services and accepting any payment, a written disclosure must be provided to the party to be charged on a form approved by the commissioner disclosing:
      1. The nature of the services for which the fees will be charged along with a separate itemization of the amount of the fees;
      2. That the fees are charged in addition to any premiums paid;
      3. That if the insurance producer is also an appointed agent of an insurer with which coverage is being considered for placement, a statement that the insurance producer also represents the insurer in the transaction and owes a duty of loyalty to the insurer; and
      4. That if the insurance producer is to receive a commission from the sale of an insurance policy related to the services rendered, a statement clearly and completely disclosing that the:
        1. Insurance producer will receive a commission from the insurer which is paid from the premiums owed for the insurance; and
        2. Amount of commission received by the insurance producer may differ depending on the product sold and the insurer.
    3. The disclosure required by this section must be signed and dated by both the producer and the party to be charged.
    4. The producer shall retain the signed disclosure required by this section for not less than five years following the completion of the service. A copy of the signed disclosure must be available to the commissioner for inspection upon request.
    5. The insurance producer may not pay or return, or offer to pay or return, all or part of a fee charged as an inducement to purchase a specific policy, or coverage within a policy, or coverage from a particular insurer.
    6. Any fee charged under this section must bear a reasonable relationship to the services provided and may not be discriminatory.
  2. An insurance producer charging a fee for services rendered for risk management services under this section owes the person to be charged a higher standard of care than the ordinary standard of care otherwise owed by an insurance producer to fully advise the party to be charged as to the party’s insurance needs, including the duty to inform the person to be charged as to a potential source of risk and to recommend, if available, insurance coverage for that risk.
  3. An insurance producer may charge an individual, for personal or commercial lines, a fee for paying agency-billed premiums and fees by credit card or other electronic means, if the fee is disclosed to the client in writing and agreed to by the client in writing.
  4. The commissioner may adopt rules determined necessary by the commissioner for the administration of this section.

Source:

S.L. 2019, ch. 238, § 1, eff July 1, 2019.

26.1-26-05. Unlicensed person — Effect — Agent for insurer.

A person not licensed as an insurance producer or surplus lines insurance producer who sells, solicits, or negotiates an insurance policy on behalf of an insurer is an insurance producer within the intent of this chapter and is liable for all the duties, requirements, liabilities, and penalties to which an insurance producer of the insurer is subject. An insurer accepting business from an unlicensed person through any of its officers, insurance producers, or employees thereby acknowledges that person as an insurance producer acting on its behalf in the transaction.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 8; 2001, ch. 262, § 54.

Derivation:

N.D.C.C. § 26-17.1-03.

Notes to Decisions

Common Law Duties.

For a case setting forth common-law duty of insurance agents, see Rawlings v. Fruhwirth, 455 N.W.2d 574, 1990 N.D. LEXIS 99 (N.D. 1990).

26.1-26-06. Insurance producer — Agent of insurer.

An insurance producer who sells, solicits, or negotiates an application for insurance of any kind is, in any controversy between the insured or the insured’s beneficiary and the insurer, regarded as representing the insurer and not the insured or the insured’s beneficiary. An insurance producer may not act as an agent of an insurer unless the insurance producer becomes an appointed insurance producer of that insurer. This section does not affect the apparent authority of an agent.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 9; 2001, ch. 262, § 55.

Derivation:

N.D.C.C. § 26-17.1-04.

Notes to Decisions

Agent of Company.

Under this section, insurance agent was agent of insurer in the sale of policy to insured as a matter of law. Ingalls v. Paul Revere Life Ins. Group, 1997 ND 43, 561 N.W.2d 273, 1997 N.D. LEXIS 61 (N.D. 1997).

DECISIONS UNDER PRIOR LAW

Agent of Company.

An agent of the insurance company with authority to solicit an application for insurance was the agent of the company, and not the agent of the insured, while soliciting an application for reinstatement. Lechler v. Montana Life Ins. Co., 48 N.D. 644, 186 N.W. 271, 1921 N.D. LEXIS 141 (N.D. 1921).

A bank cashier who also was an agent of an insurance company in transmitting an application for insurance on buildings on which the bank held a mortgage acted as agent for the insurance company. Michelsen v. North Am. Nat'l Ins. Co., 53 N.D. 391, 206 N.W. 225, 1925 N.D. LEXIS 92 (N.D. 1925).

Agent who took application for automobile liability insurance made on behalf of deceased was the agent for the insurance company, and not the agent of deceased or her mother who made application on her behalf. National Farmers Union Property & Casualty Co. v. Michaelson, 110 N.W.2d 431, 1961 N.D. LEXIS 90 (N.D. 1961).

Controlling Effect of Statute.

Where there was proof of the acts enumerated in former statute making person handling insurance an agent of insurer, an agency could be established, and the statute would control, regardless of contrary stipulations in the policy. Anderson v. Northwestern F. & M. Ins. Co., 51 N.D. 917, 201 N.W. 514, 1924 N.D. LEXIS 93 (N.D. 1924).

Estoppel Against Insurer.

In case decided under former N.D.C.C. § 26-10-08, bank vice president who took out credit life insurance policy on behalf of borrower acted as agent of the insurer, and because agent’s knowledge was imputable to principal, insurer was estopped to assert as a defense against payment of the policy that it was unaware of insured’s terminal illness, which was known to vice president. Schock v. Ocker Ins. Corp., 248 N.W.2d 786, 1976 N.D. LEXIS 167 (N.D. 1976).

Preliminary Oral Contract.

A preliminary oral contract for temporary insurance pending issuance of a written policy was valid in North Dakota and remained in force until superseded by the issuance of a regular policy, or until the risk was rejected by the insurer, and the insurer was liable for any loss in the meantime. Reishus v. Implement Dealers Mut. Ins. Co., 118 N.W.2d 673, 1962 N.D. LEXIS 104 (N.D. 1962).

Purpose.

The purpose of statutes such as this one was not primarily to punish the agent but rather to protect the public against various devices used by insurance companies in an attempt to restrict the authority of agents. Anderson v. Northwestern F. & M. Ins. Co., 51 N.D. 917, 201 N.W. 514, 1924 N.D. LEXIS 93 (N.D. 1924).

Scope of Agent’s Authority.

Even though statute made insurance solicitor the agent of the insurance company, that did not define the extent of the agent’s power or the scope of the agent’s authority. Kopald Elec. Co. v. Ocean Accident & Guarantee Corp., 64 N.D. 213, 251 N.W. 852, 1933 N.D. LEXIS 267 (N.D. 1933), but see Fargo Nat. Bank v. Agric. Ins. Co., 184 F.2d 676, 1950 U.S. App. LEXIS 3810 (8th Cir. N.D. 1950); Meyer v. National Fire Ins. Co., 67 N.D. 77, 269 N.W. 845, 1936 N.D. LEXIS 154 (N.D. 1936).

One who undertook the acts enumerated in former similar statute had the authority as an agent to enter into an oral agreement insuring fire insurance applicant during the time elapsing between the placing of the insurance and the issuing of the policy. Ulledalen v. United States Fire Ins. Co., 74 N.D. 589, 23 N.W.2d 856, 1946 N.D. LEXIS 87 (N.D. 1946).

A licensed agent of a foreign fire insurance company who performed the acts enumerated in former similar statute had the power to enter into a parol agreement for the company to renew a policy after it had expired, to waive provisions of the policy, including stipulations of nonwaiver, and to make a preliminary parol contract of insurance pending the issuance of a written policy. Ulledalen v. United States Fire Ins. Co., 74 N.D. 589, 23 N.W.2d 856, 1946 N.D. LEXIS 87 (N.D. 1946).

26.1-26-07. Insurance producer — Agent of insured.

An insurance producer or surplus lines insurance producer, who is not an appointed insurance producer of the insurer with which an insurance policy is placed and who acts or aids in any manner in negotiating insurance contracts or placing risks of effecting insurance for a party other than oneself or itself, is regarded as representing the insured or the insured’s beneficiary and not the insurer.

Source:

S.L. 1985, ch. 316, § 3; 2001, ch. 262, § 56.

Derivation:

N.D.C.C. § 26-17.1-05.

26.1-26-08. Licensing of partnership, limited liability partnership, corporation, or limited liability company — Notice of change of individuals. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-09. Exceptions to licensing requirements.

  1. Nothing in this chapter may be construed to require an insurer to obtain an insurance producer license. In this section, the term “insurer” does not include an insurer’s officers, directors, employees, subsidiaries, or affiliates.
  2. A license as an insurance producer is not required of the following:
    1. An officer, director, or employee of an insurer or of an insurance producer, provided that the officer, director, or employee does not receive any commission on policies written or sold to insure risks residing, located, or to be performed in this state and:
      1. The officer, director, or employee’s activities are executive, administrative, managerial, clerical, or a combination of these, and are only indirectly related to the sale, solicitation, or negotiation of insurance;
      2. The officer, director, or employee’s function relates to underwriting, loss control, inspection, or the processing, adjusting, investigating, or settling of a claim on a contract of insurance; or
      3. The officer, director, or employee is acting in the capacity of a special agent or agency supervisor assisting insurance producers when the person’s activities are limited to providing technical advice and assistance to licensed insurance producers and do not include the sale, solicitation, or negotiation of insurance.
    2. A person who secures and furnishes information for the purpose of group life insurance, group property and casualty insurance, group annuities, group or blanket accident and health insurance, or for the purpose of enrolling individuals under plans or otherwise assisting in administering plans, or performs administrative services related to mass-marketed property and casualty insurance, when no commission is paid to the person for the service.
    3. An employer or association or its officers, directors, employees, or the trustees of an employee trust plan, to the extent that the employers, officers, employees, directors, or trustees are engaged in the administration or operation of a program of employee benefits for the employer’s or association’s own employees or the employees of its subsidiaries or affiliates, which program involves the use of insurance issued by an insurer, as long as the employers, associations, officers, directors, employees, or trustees are not in any manner compensated, directly or indirectly, by the company issuing the contracts.
    4. An employee of an insurer or an organization employed by an insurer or an organization who inspects, rates, or classifies risks or supervises the training of insurance producers and who is not individually engaged in the sales, solicitation, or negotiation of insurance.
    5. A person whose activities in this state are limited to advertising without the intent to solicit insurance in this state through communications in printed publications or other forms of electronic mass media whose distribution is not limited to residents of the state, provided that the person does not sell, solicit, or negotiate insurance that would insure risks residing, located, or to be performed in this state.
    6. A person who is not a resident of this state who sells, solicits, or negotiates a contract of insurance for commercial property and casualty risks to an insured with risks located in more than one state insured under that contract, provided that that person is otherwise licensed as an insurance producer to sell, solicit, or negotiate that insurance in the state where the insured maintains its principal place of business and the contract of insurance insures risks located in that state.
    7. A salaried full-time employee who counsels or advises that person’s employer relative to the insurance interests of the employer or of the subsidiaries or business affiliates of the employer provided that the employee does not sell or solicit insurance or receive a commission.
    8. An employee of an insurer or of an insurance producer who responds to requests from existing policyholders on existing policies provided that employee is not directly compensated based on the volume of premiums that may result from these services and provided that employee does not sell, solicit, or negotiate insurance.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 11; 2001, ch. 262, § 57.

Derivation:

N.D.C.C. § 26-17.1-14.

26.1-26-10. Consultant — Exceptions to licensing requirement.

A person may not act as an insurance consultant until licensed as such by the commissioner. However, a license as an insurance consultant is not required of:

  1. An attorney licensed to practice law in this state acting in the attorney’s professional capacity.
  2. A licensed insurance producer or surplus lines insurance producer.
  3. A trust officer of a bank acting in the normal course of the trust officer’s employment.
  4. An actuary or a certified public accountant who provides information, recommendations, advice, or services in the actuary’s or the certified public accountant’s professional capacity.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 12; 2001, ch. 262, § 58.

Derivation:

N.D.C.C. § 26-17.1-36.

26.1-26-11. License of insurance producer — Lines of insurance.

An insurance producer or surplus lines insurance producer may receive a license to market products under one or more of the following lines:

  1. Life and annuity means insurance coverage on human lives, including benefits of endowment, annuities, and credit life.
  2. Accident and health means insurance coverage for sickness, disease, injury, accidental death, and disability.
  3. Property means insurance coverage for direct and consequential loss of or damage to property of every kind.
  4. Casualty means insurance coverage against legal liability, including that for death, injury, or disability or damage to real or personal property.
  5. Variable life and annuity means insurance coverage provided under variable life insurance contracts and variable annuities.

The product types found under each of the above lines of insurance are those adopted pursuant to section 26.1-05-02.1.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 254, § 9; 2001, ch. 55, § 8; 2001, ch. 262, § 59.

Derivation:

N.D.C.C. § 26-17.1-07.

26.1-26-11.1. Authority to define procedures and requirements.

The commissioner may adopt rules to implement licensing procedures and requirements specific to each line of insurance and each product type within each line of insurance.

Source:

S.L. 1999, ch. 254, § 10.

26.1-26-12. License application — Accompanied by fees. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-13. Insurance agent — Application — Age — Appointment by insurer. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-13.1. Appointments.

  1. An insurance producer may not act as an agent of an insurer unless the insurance producer becomes an appointed agent of that insurer. An insurance producer who is not acting as an agent of an insurer is not required to become appointed.
  2. To appoint an insurance producer as its agent, the appointing insurer shall file a notice of appointment within thirty days from the later of the date the agency contract is executed or the first insurance application is submitted. The notice must be in a format approved by the insurance commissioner. An insurer may also appoint an insurance producer to all or some insurers within the insurer’s holding company system or group by the filing of a single appointment request.
  3. An insurer shall pay an appointment fee for each insurance producer appointed by the insurer in the amount and method of payment set forth in section 26.1-01-07.
  4. An insurer shall remit, in a manner prescribed by the commissioner, a renewal appointment fee in the amount set forth in section 26.1-01-07.

Source:

S.L. 2001, ch. 262, § 60.

26.1-26-13.2. Application for examination.

  1. A resident individual applying for an insurance producer license or an insurance consultant license must pass a written examination unless exempt under section 26.1-26-25. The examination must test the knowledge of the individual concerning the lines of authority for which application is made, the duties and responsibilities of an insurance producer or consultant, and the insurance laws and regulations of this state. The individual must pass the examination with a grade determined by the commissioner to indicate satisfactory knowledge and understanding of the area of insurance for which the individual seeks qualification.
  2. The commissioner may make arrangements, including contracting with an outside testing service, for administering examinations and collecting the nonrefundable fee set forth in section 26.1-01-07.
  3. An individual applying for an examination must remit a nonrefundable fee as prescribed by the commissioner as set forth in section 26.1-01-07.
  4. An individual who fails to appear for the examination as scheduled or fails to pass the examination may reapply for an examination provided the individual remits all required fees and forms before being rescheduled for another examination.

Source:

S.L. 2001, ch. 262, § 61.

26.1-26-13.3. Application for license.

  1. An individual applying for a resident insurance producer license shall make application to the commissioner on the uniform application and declare under penalty of refusal, suspension, or revocation of the license that the statements made in the application are true, correct, and complete to the best of the individual’s knowledge and belief. Before approving the application, the commissioner must find that the individual:
    1. Is at least eighteen years of age;
    2. Has not committed any act that is a ground for denial, suspension, or revocation set forth in section 26.1-26-42;
    3. Has paid to the commissioner or the commissioner’s designee the fees set forth in section 26.1-01-07; and
    4. Has successfully passed the examinations for the lines of authority for which the individual has applied.
  2. An individual applying for a resident producer license shall complete a criminal history record check as provided in section 12-60-24. All costs associated with the criminal history record check are the responsibility of the applicant. This subsection does not apply to license continuation under section 26.1-26-13.4 or individuals who apply for an insurance producer license within twelve months following the cancellation or expiration of a valid resident insurance producer license issued by the North Dakota insurance department, unless the license was suspended or revoked.
  3. The commissioner may make arrangements, including contracting with an outside service, for the collection and transmission of fingerprints for conducting criminal history record checks.
  4. A business entity acting as an insurance producer must obtain an insurance producer license. Application must be made using the uniform business entity application. Before approving the application, the commissioner must find that:
    1. The business entity has paid the fee set forth in section 26.1-01-07;
    2. The business entity has designated a licensed individual principal insurance producer responsible for the business entity’s compliance with the insurance laws, rules, and regulations of this state; and
    3. The individual designated as the licensed principal insurance producer of the business entity has taken the examination required by section 26.1-26-13.2. The business entity may only be licensed for those lines of insurance for which one or more of its principal insurance producers is licensed. The business entity shall inform the commissioner within ten working days of any change in the status of its principal insurance producer or producers.
    4. The commissioner may require any documents reasonably necessary to verify the information contained in an application.

Source:

S.L. 2001, ch. 262, § 62; 2007, ch. 265, § 1; 2013, ch. 232, § 2; 2021, ch. 227, § 2, eff August 1, 2021.

DECISIONS UNDER PRIOR LAW

Perjury.

Where an applicant for an insurance agent’s license knowingly gave a false answer to a question on the application form for such license, it was proper that he be charged with perjury. State v. Davis, 138 N.W.2d 595, 1965 N.D. LEXIS 106 (N.D. 1965).

26.1-26-13.4. Biennial license continuation.

A licensed individual insurance producer shall file a biennial license continuation in the form and manner prescribed by the commissioner and pay a fee of twenty-five dollars. The commissioner shall give a licensee not less than sixty days’ notice of the biennial license continuation filing deadline.

Source:

S.L. 2009, ch. 252, § 2.

26.1-26-14. Investigation by commissioner.

Within a reasonable time after receipt of a properly completed application for a license under this chapter, the commissioner may conduct investigations and propound interrogatories concerning the applicant’s qualifications, residence, business affiliations, and any other matter which the commissioner believes necessary or advisable to determine compliance with this chapter or for the protection of the public.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 14.

Derivation:

N.D.C.C. § 26-17.1-37.

26.1-26-15. License requirement — Character.

An applicant for any license under this chapter must be deemed by the commissioner to be competent, trustworthy, financially responsible, and of good personal and business reputation. If the commissioner does not deem an applicant to be competent, trustworthy, financially responsible, of good personal reputation, or of good business reputation, the commissioner may deny the application for licensure.

Source:

S.L. 1985, ch. 316, § 3; 2017, ch. 212, § 3, eff March 3, 2017.

Derivation:

N.D.C.C. § 26-17.1-26.

26.1-26-15.1. Prelicensure education. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-16. License requirement — Insurance broker — Experience. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-16.1. Errors and omissions insurance — License requirement for insurance brokers. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-16.2. Payment of commissions by brokers — Limitations. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-17. License requirement — Surplus lines insurance producer.

An applicant for a license as a surplus lines insurance producer must be licensed in this state as an insurance producer qualified as to the line or lines to be written.

Source:

S.L. 1985, ch. 316, § 3; 2001, ch. 262, § 63.

Derivation:

N.D.C.C. § 26-17.1-19.

26.1-26-18. License requirement — Brokers — Bond. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-19. Determination of residency for license issuance — Election of residency — When void.

An applicant may qualify as a resident if the applicant resides in this state or maintains the applicant’s principal place of business in this state. A license issued pursuant to an application claiming residency for licensing purposes constitutes an election of residency in this state. A license is void if the licensee, while holding a resident license in this state, also holds or applies for a resident license from, or thereafter claims to be a resident of, any other state or other jurisdiction or ceases to be a resident of this state.

Source:

S.L. 1985, ch. 316, § 3.

Derivation:

N.D.C.C. § 26-17.1-20.

26.1-26-20. Nonresident licensing.

  1. Unless denied licensure pursuant to this chapter, the commissioner shall issue a nonresident person a nonresident insurance producer license if:
    1. The person is currently licensed as a resident and is in good standing in the person’s home state;
    2. The person has submitted the proper request for licensure and has paid the fees required by section 26.1-01-07;
    3. The person has submitted or transmitted to the commissioner either the person’s home state application for licensure or a completed uniform application; and
    4. The person’s home state awards nonresident insurance producer licenses to residents of this state on the same basis.
  2. The commissioner may verify the insurance producer’s licensing status through the insurance producer database maintained by the national association of insurance commissioners, its affiliates, or subsidiaries.
  3. A nonresident insurance producer who moves from one state to another state or a resident insurance producer who moves from this state to another state shall file a change of address and provide certification from the new resident state within thirty days of the change of legal residence. A fee or license application is not required.
  4. Notwithstanding any other provision of this chapter, a person licensed as a surplus lines insurance producer in the person’s home state is entitled to receive a nonresident surplus lines insurance producer license pursuant to subsection 1. Except as to subsection 1, nothing in this section otherwise amends or supersedes any provision of chapter 26.1-44.
  5. Notwithstanding any other provision of this chapter, a person licensed as a limited lines credit insurance or other type of limited lines insurance producer in the person’s home state is entitled to receive a nonresident insurance producer license, pursuant to subsection 1, granting the same scope of authority as granted under the license issued by the insurance producer’s home state. For the purpose of this subsection, limited lines insurance is any authority granted by the home state which restricts the authority of the license to less than the total authority prescribed in the associated major lines pursuant to section 26.1-26-11.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 15; 2001, ch. 262, § 64; 2009, ch. 252, § 3.

Derivation:

N.D.C.C. § 26-17.1-21.

26.1-26-21. Agents to designate commissioner as attorney for service of process — Fee.

The commissioner may not issue a license to any applicant until the applicant files with the commissioner a designation of the commissioner and the commissioner’s successors in office, as the applicant’s true and lawful attorney, upon whom may be served all lawful process in any action or proceeding instituted by or on behalf of any interested person arising out of the applicant’s insurance business in this state. The designation constitutes an agreement that the service of process is of the same legal force and validity as personal service of process in this state upon the person.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 16.

Derivation:

N.D.C.C. § 26-17.1-22.

26.1-26-22. Nonresident proceeding by commissioner — Service of process — Procedure.

The commissioner shall serve process upon any nonresident licensee in any action or proceeding instituted by the commissioner under this chapter by mailing the process by registered mail return receipt requested to the licensee at the licensee’s last-known address of record or principal place of business. Service of process under this section is complete upon mailing.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 17.

Derivation:

N.D.C.C. § 26-17.1-23.

26.1-26-23. Examination of individuals. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-24. Examination when partnership, limited liability partnership, corporation, or limited liability company is applicant. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-25. Exceptions from examination.

The requirement for a written examination is subject to the following exceptions:

  1. An individual who applies for an insurance producer license in this state who was previously licensed for the same lines of authority in another state may not be required to complete any prelicensing education or examination. This exemption is only available if the person is currently licensed in that state or if the application is received within ninety days of the cancellation of the applicant’s previous license and if the prior state issues a certification that, at the time of cancellation, the applicant was in good standing in that state or the state’s insurance producer database records, maintained by the national association of insurance commissioners, its affiliates, or subsidiaries, indicate that the insurance producer is or was licensed in good standing for the line of authority requested.
  2. A person licensed as an insurance producer in another state who moves to this state shall make application within ninety days of establishing legal residence in this state to become a resident licensee pursuant to section 26.1-26-13.2. A prelicensing education or examination may not be required of that person to obtain any line of authority previously held in the prior state unless the commissioner determines otherwise by rule.
  3. An applicant may be licensed without examination to market a specific product type if the commissioner finds by rule the specific product type does not require the same professional competency demanded for other product types.
  4. An applicant for a license to write only a specific product type may be licensed subject to reduced examination requirements if the commissioner finds by rule that the requirements for licensure would otherwise be too burdensome and unrelated to that specific product type.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 20; 1999, ch. 254, § 11; 2001, ch. 262, § 65.

Derivation:

N.D.C.C. §§ 26-17.1-08, 26-17.1-25, 26-17.1-35.

26.1-26-25.1. Assumed names.

An insurance producer doing business under any name other than the insurance producer’s legal name is required to notify the commissioner before using the assumed name.

Source:

S.L. 2001, ch. 262, § 66.

26.1-26-26. Temporary license as an insurance producer.

The commissioner may issue a temporary license as an insurance producer for a period not to exceed one hundred eighty days without requiring an examination if the commissioner determines that the temporary license is necessary for the servicing of an insurance business in the following cases:

  1. To the surviving spouse, next of kin, administrator, executor, or employee of a licensed insurance producer who died, or to the spouse, next of kin, employee, or legal guardian of a licensed insurance producer who became disabled.
  2. To a member or employee of a business entity, licensed as an insurance producer, upon the death or disability of an individual designated as the principal insurance producer in the business entity application or the license.
  3. To the designee of a licensed insurance producer entering upon active service in the armed forces of the United States.
  4. In any other circumstance when the commissioner determines that the public interest will best be served by the issuance of the license.

Source:

S.L. 1985, ch. 316, § 3; 1993, ch. 54, § 106; 2001, ch. 262, § 67.

Derivation:

N.D.C.C. § 26-17.1-54.

26.1-26-27. Approval of examination by commissioner — Contents.

Each examination must be approved for use by the commissioner and must reasonably test the applicant’s knowledge as to the lines of insurance, policies, and transactions to be handled under the license applied for, the duties and responsibilities of the licensee, and the pertinent insurance laws of this state.

Source:

S.L. 1985, ch. 316, § 3.

Derivation:

N.D.C.C. § 26-17.1-30.

26.1-26-28. Time and place of examination — Grading of examination — Notice of results. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-29. Failure to pass examination — Reexamination. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-30. Contents of license.

The license shall state the name, address, social security number, personal identification number, or internal revenue service identification number of the licensee, date of issue, and the line or lines of insurance covered by the license, and any other information the commissioner determines to be proper for inclusion in the license.

Source:

S.L. 1985, ch. 316, § 3; 2001, ch. 262, § 68.

Derivation:

N.D.C.C. § 26-17.1-12.

26.1-26-30.1. Vendor authority.

In order to assist in the performance of the commissioner’s duties, the commissioner may contract with nongovernmental entities, including the national association of insurance commissioners or any affiliates or subsidiaries that the national association of insurance commissioners oversees, to perform any ministerial functions, including the collection of fees, related to insurance producer licensing that the commissioner and the nongovernmental entity may deem appropriate.

Source:

S.L. 2001, ch. 262, § 69.

26.1-26-31. Term of license.

A license issued under this chapter continues in force in perpetuity unless:

  1. The license is suspended, revoked, or refused by the commissioner;
  2. The licensee voluntarily consents to the suspension, revocation, or refusal of the license;
  3. The licensee dies or in the case of a business entity, the licensee is dissolved, consolidated, merged, or otherwise has ceased to exist;
  4. The licensee no longer meets the residence requirements of section 26.1-26-19;
  5. The individual resident licensee fails to comply with continuing education requirements of this chapter;
  6. The individual licensee fails to file the biennial continuation and pay the fee;
  7. The surplus lines insurance producer has failed to maintain a resident or nonresident license as an insurance producer as required by section 26.1-26-17, or has failed to pay the annual renewal fee to the commissioner; or
  8. The insurance consultant has failed to pay the annual renewal fee to the commissioner.

Source:

S.L. 1985, ch. 316, § 3; 1993, ch. 54, § 106; 1999, ch. 252, § 21; 2001, ch. 262, § 70; 2009, ch. 252, § 4.

Derivation:

N.D.C.C. §§ 26-17.1-13, 26-17.1-32, 26-17.1-41.

26.1-26-31.1. Continuing education required — Exceptions.

  1. Except as otherwise provided in this chapter, any individual licensed as a resident insurance producer or resident insurance consultant shall provide the commissioner evidence, as required by the commissioner, that the individual attended or participated in continuing education of not less than twenty-four hours of approved coursework, of which three hours must be in ethics. The commissioner may reduce or waive the minimum number of hours per year of approved coursework for any individual having a license limited to a specific product type. Credits for courses attended in any one year over the minimum number of hours of coursework required, not to exceed twelve hours, may be credited to the year next preceding the year in which they were earned or to the year next following the year in which they were earned. Reports of continuing education must be made at the end of a two-year period. The commissioner may provide a one-time extension of the two-year reporting requirement, not to exceed thirty-six months, if additional time is necessary in order to implement the transition to reporting continuing education by birth month. No continuing education is required of an insurance producer who, as of January 1, 2010, is at least sixty-two years of age and who has a combined total years of continuous licensure as an insurance producer and years of age which equals eighty-five.
  2. The commissioner shall by rule provide for reporting by birth month of compliance with the continuing education requirements of this section.

Source:

S.L. 1985, ch. 321, § 11; 1987, ch. 354, § 1; 1989, ch. 363, § 1; 1993, ch. 304, § 1; 1999, ch. 254, § 12; 2001, ch. 262, § 71; 2005, ch. 265, § 1; 2009, ch. 253, § 1; 2009, ch. 252, § 5.

26.1-26-31.2. Continuing education advisory task force.

The commissioner shall appoint a continuing education advisory task force consisting of nine members. The members must be representative, to the extent possible, of the various members of the insurance industry and of the several classes of insurance. Before making appointments to the advisory task force, the commissioner shall solicit nominations from the several professional organizations representing persons selling insurance in this state and from the organizations representing companies authorized to do business in this state. Members are entitled to expenses pursuant to sections 44-08-04 and 54-06-09. The advisory task force may recommend any rules to the commissioner which are necessary to fulfill its duties and powers.

Source:

S.L. 1985, ch. 321, § 12.

26.1-26-31.3. Accreditation of courses.

The commissioner shall adopt by rule criteria for the accreditation of courses for continuing or prelicensure education. Applications for accreditation of any course offered in this state for continuing or prelicensure education must be submitted to the commissioner within the time prescribed by rule and on forms prescribed by rule and with a fee of fifty dollars. The advisory task force shall recommend to the commissioner whether any course satisfies the criteria for accreditation and the number of credit hours to be assigned to the course. The commissioner shall make a final determination as to accreditation and assignment of credit hours for courses.

Source:

S.L. 1985, ch. 321, § 13; 1993, ch. 293, § 5.

26.1-26-31.4. Report of compliance. [Repealed]

Repealed by S.L. 2009, ch. 252, § 7.

26.1-26-31.5. Extension.

The commissioner may grant an extension of time, not to exceed one year, for completion of the requirements imposed by section 26.1-26-31.1.

Source:

S.L. 1985, ch. 321, § 15.

26.1-26-31.6. Credit for teaching.

Any person teaching or lecturing at any approved continuing education course, seminar, or program qualifies for the same number of hours granted to a person enrolled in the approved course, seminar, or program.

Source:

S.L. 1985, ch. 321, § 16.

26.1-26-31.7. Credit for out-of-state courses.

The commissioner may approve credit earned at any seminar, course, or program offered for prelicensure or continuing education in another state.

Source:

S.L. 1985, ch. 321, § 17.

26.1-26-31.8. License revocation. [Repealed]

Repealed by S.L. 2009, ch. 252, § 7.

26.1-26-31.9. Credit for active participation.

  1. For each two-year reporting period, the commissioner may approve up to four hours of continuing education credit earned through active participation, with no more than two hours accepted for each calendar year. One hour of active participation equates to one hour of continuing education credit. A licensee may not use continuing education granted for active participation to satisfy other continuing education requirements or ethics hours required under section 26.1-26-31.1.
  2. If an insurance producer or consultant claims continuing education hours through active participation, the professional insurance association shall verify the claimed active participation. The professional insurance association shall inform the commissioner of participation by the insurance producer or consultant. Upon receipt of participation confirmation the commissioner may accept the claimed continuing education hours.

Source:

S.L. 2019, ch. 237, § 2, eff August 1, 2019.

26.1-26-32. Renewal of appointments and licenses — Annual fee.

An appointment of an insurance producer and the license of a surplus lines insurance producer or insurance consultant terminates upon failure to pay the prescribed annual renewal fees before May first.

Source:

S.L. 1985, ch. 316, § 3; 1985, ch. 324, § 3; 1999, ch. 252, § 22; 2001, ch. 262, § 73.

Derivation:

N.D.C.C. §§ 26-17.1-13.1, 26-17.1-16, 26-17.1-41.

26.1-26-33. Notification of address change — Duty of licensee.

Every licensee shall notify the commissioner of any change in the licensee’s residential or business address or legal name within thirty days of the change. Notification may occur through the insurance producer database maintained by the national association of insurance producers, its affiliates, or subsidiaries. Any licensee who ceases to maintain residency in this state shall deliver the insurance license to the commissioner by personal delivery or by mail within thirty days after terminating residency.

Source:

S.L. 1985, ch. 316, § 3; 2001, ch. 262, § 74; 2021, ch. 227, § 3, eff August 1, 2021.

Derivation:

N.D.C.C. §§ 26-17.1-34, 26-17.1-47.

26.1-26-34. Notification to commissioner of termination.

  1. Termination for cause. An insurer or authorized representative of the insurer that terminates the appointment, employment, contract, or other insurance business relationship with an insurance producer shall notify the commissioner within thirty days following the effective date of the termination, using a format prescribed by the commissioner, if the reason for termination is one of the reasons set forth in section 26.1-26-42 or the insurer has knowledge the insurance producer was found by a court, government body, or self-regulatory organization authorized by law to have engaged in any of the activities in section 26.1-26-42. Upon the written request of the commissioner, the insurer shall provide additional information, documents, records, or other data pertaining to the termination or activity of the insurance producer.
  2. Termination without cause. An insurer or authorized representative of the insurer that terminates the appointment, employment, or contract with an insurance producer for any reason not set forth in section 26.1-26-42 shall notify the commissioner within thirty days following the effective date of the termination, using a format prescribed by the commissioner. Upon written request of the commissioner, the insurer shall provide additional information, documents, records, or other data pertaining to the termination.
  3. Ongoing notification requirement. The insurer or the authorized representative of the insurer shall promptly notify the commissioner in a format acceptable to the commissioner if, upon further review or investigation, the insurer discovers additional information that would have been reportable to the commissioner in accordance with subsection 1 had the insurer then known of the information’s existence.
  4. Copy of notification to be provided to insurance producer.
    1. Within fifteen days after making the notification required by subsections 1, 2, and 3, the insurer shall mail a copy of the notification to the insurance producer at the insurance producer’s last-known address. If the insurance producer is terminated for cause for any of the reasons listed in section 26.1-26-42, the insurer shall provide a copy of the notification to the insurance producer at the insurance producer’s last-known address by certified mail, return receipt requested, postage prepaid or by overnight delivery using a nationally recognized carrier.
    2. Within thirty days after the insurance producer has received the original or additional notification, the insurance producer may file written comments concerning the substance of the notification with the commissioner. The insurance producer shall, by the same means, simultaneously send a copy of the comments to the reporting insurer, and the comments become a part of the commissioner’s file and must accompany every copy of a report distributed or disclosed for any reason about the insurance producer as permitted under subsection 6.
  5. Immunities.
    1. In the absence of actual malice, an insurer, the authorized representative of the insurer, an insurance producer, the commissioner, or an organization of which the commissioner is a member and that compiles the information and makes it available to other insurance commissioners or regulatory or law enforcement agencies is not subject to civil liability, and a civil cause of action of any nature does not arise against these entities or their respective agents or employees, as a result of any statement or information required by or provided pursuant to this section or any information relating to any statement that may be requested in writing by the commissioner, from an insurer or insurance producer; or a statement by a terminating insurer or insurance producer to an insurer or insurance producer limited solely and exclusively to whether a termination for cause under subsection 1 was reported to the commissioner, provided that the propriety of any termination for cause under subsection 1 is certified in writing by an officer or authorized representative of the insurer or insurance producer terminating the relationship.
    2. In any action brought against a person who may have immunity under subdivision a for making any statement required by this section or providing any information relating to any statement that may be requested by the commissioner, the party bringing the action shall plead specifically in any allegation that subdivision a does not apply because the person making the statement or providing the information did so with actual malice.
    3. Subdivision a or b does not abrogate or modify any existing statutory or common-law privileges or immunities.
  6. Confidentiality.
    1. Any documents, materials, or other information in the control or possession of the insurance department that is furnished by an insurer, insurance producer, or an employee or agent thereof acting on behalf of the insurer or insurance producer, or obtained by the commissioner, in an investigation pursuant to this section is confidential and privileged, is not subject to subpoena, and is not subject to discovery or admissible in evidence in any private civil action. However, the commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s duties.
    2. Neither the commissioner nor any person who receives documents, materials, or other information while acting under the authority of the commissioner may be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subdivision a.
    3. In order to assist in the performance of the commissioner’s duties under this chapter, the commissioner:
      1. May share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subdivision a, with other state, federal, and international regulatory agencies, with the national association of insurance commissioners, its affiliates or subsidiaries, and with state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information;
      2. May receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information from the national association of insurance commissioners, its affiliates or subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; and
      3. May enter into agreements governing sharing and use of information consistent with this subsection.
      4. A privilege or claim of confidentiality in the documents, materials, or information shall not be waived as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in paragraph 3.
      5. Nothing in this chapter prohibits the commissioner from releasing final, adjudicated actions, including for-cause terminations that are open to public inspection to a database or other clearinghouse service maintained by the national association of insurance commissioners, its affiliates, or subsidiaries of the national association of insurance commissioners.
  7. Penalties for failing to report. An insurer, the authorized representative of the insurer, or insurance producer that fails to report as required under the provisions of this section or that is found to have reported with actual malice by a court of competent jurisdiction may, after notice and hearing, have its license or certificate of authority suspended or revoked and may be fined in accordance with sections 26.1-26-42, 26.1-26-43, and 26.1-26-50.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 23; 2001, ch. 262, § 75.

Derivation:

N.D.C.C. § 26-17.1-49.

26.1-26-35. Duties of consultant — Agreements.

An insurance consultant shall serve with objectivity and complete loyalty the interests of the consultant’s client alone and to render the client such information, counsel, and service as within the knowledge, understanding, and opinion, in good faith of the licensee, best serves the client’s insurance needs and interests. Before rendering services as an insurance consultant, an insurance consultant shall prepare a written agreement on a form approved by the commissioner. The agreement must outline the nature of the work to be performed by the consultant and must state the fee for the work. The consultant and the client shall sign the agreement. The consultant shall retain a copy of the agreement for not less than two years after completion of the services. This copy must be available to the commissioner.

Source:

S.L. 1985, ch. 316, § 3; 2019, ch. 237, § 3, eff August 1, 2019.

Derivation:

N.D.C.C. §§ 26-17.1-38, 26-17.1-41.

26.1-26-36. Surplus lines insurance producer’s authority.

A surplus lines insurance producer may act as a surplus lines insurance producer in this state for any foreign company or insurer not authorized to transact business in this state in securing, issuing, or placing insurance policies, indemnity contracts, or surety bonds on property located in, or undertakings to be carried out in, this state for the company or insurer. A surplus lines insurance producer may accept business from any licensed insurance producer for a nonadmitted company and may compensate the insurance producer for the business, provided the insurance is written in conformity with this title.

Source:

S.L. 1985, ch. 316, § 3; 2001, ch. 262, § 76; 2005, ch. 266, § 1.

Derivation:

N.D.C.C. §§ 26-09.2-02, 26-09.2-12.

26.1-26-37. Lost, stolen, or destroyed license — Issuance of duplicate.

Upon payment of the fee for a duplicate license under section 26.1-01-07, the commissioner may issue a duplicate license for any lost, stolen, or destroyed license issued pursuant to this chapter upon an affidavit of the licensee, as prescribed by the commissioner, concerning the facts of the loss, theft, or destruction.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 24.

Derivation:

N.D.C.C. § 26-17.1-48.

26.1-26-38. Controlled business prohibited — Definition — Formula for determination. [Repealed]

Repealed by S.L. 2001, ch. 262, § 136.

26.1-26-39. Refusal of license — Notification of applicant — No refund of fees.

If the commissioner finds the applicant has not met the requirements for licensing or license renewal, the commissioner shall refuse to issue or renew the license. The commissioner shall, in writing, promptly notify the applicant of the refusal, stating the grounds for the refusal. All fees accompanying the application for license are not refundable.

Source:

S.L. 1985, ch. 316, § 3; 2017, ch. 212, § 4, eff March 3, 2017.

Derivation:

N.D.C.C. §§ 26-17.1-33, 26-17.1-41.

26.1-26-40. Refusal of initial license — Notice — Hearing.

If the commissioner refuses to issue a license to an applicant, the notice to the applicant as provided in section 26.1-26-39 must state that the applicant may request a hearing within thirty days from the date of issuance of the notice. The commissioner shall hold a hearing, if requested by the applicant, within thirty days of the receipt of the request for a hearing and upon ten days’ written notice to the applicant.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 26.

26.1-26-41. Prohibited activities by consultants.

No licensed consultant may employ, be employed by, or be in partnership, limited liability partnership, or limited liability company with nor receive any remuneration whatsoever from any licensed insurance producer, surplus lines insurance producer, or insurer arising out of activities as a consultant. No person may concurrently hold a consultant’s license and a license as an insurance producer or surplus lines insurance producer in any line.

Source:

S.L. 1985, ch. 316, § 3; 1993, ch. 54, § 106; 1999, ch. 252, § 27; 2001, ch. 262, § 77.

Derivation:

N.D.C.C. §§ 26-17.1-39, 26-17.1-40.

26.1-26-42. License suspension, revocation, or refusal — Grounds.

The commissioner may suspend, revoke, place on probation, or refuse to continue or refuse to issue any license issued under this chapter if, after notice to the licensee and hearing, the commissioner finds as to the licensee any of the following conditions:

  1. A materially untrue statement in the license application.
  2. An acquisition or attempt to acquire a license through misrepresentation or fraud.
  3. The applicant has been found to have been cheating on an examination for an insurance license.
  4. Any cause for which issuance of the license could have been refused had it then existed and been known to the commissioner at the time of issuance.
  5. The applicant or licensee has been convicted of a felony or convicted of an offense, as defined by section 12.1-01-04, determined by the commissioner to have a direct bearing upon a person’s ability to serve the public as an insurance producer, insurance consultant, or surplus lines insurance producer, or the commissioner finds, after conviction of an offense, that the person is not sufficiently rehabilitated under section 12.1-33-02.1.
  6. In the conduct of affairs under the license, the licensee has used fraudulent, coercive, or dishonest practices, or has shown oneself to be incompetent, untrustworthy, or financially irresponsible.
  7. A misrepresentation of the terms of any actual or proposed insurance contract.
  8. The licensee has been found to have knowingly solicited, procured, or sold unnecessary or excessive insurance coverage to any person.
  9. The licensee has forged another’s name to an application for insurance.
  10. An improper withholding of, misappropriating of, or converting to one’s own use any moneys belonging to policyholders, insurers, beneficiaries, or others received in the course of one’s insurance business.
  11. The licensee has been found guilty of any unfair trade practice defined in this title or fraud.
  12. A violation of or noncompliance with any insurance laws of this state or a violation of or noncompliance with any lawful rules or orders of the commissioner or of a commissioner of another state.
  13. The licensee’s license has been suspended or revoked in any other state, province, district, or territory for any reason or purpose other than noncompliance with continuing education programs, or noncompliance with mandatory filing requirements imposed upon a licensee by the state, province, district, or territory provided the filing does not directly affect the public interest, safety, or welfare.
  14. The applicant or licensee has refused to respond within twenty days to a written request by the commissioner for information regarding any potential violation of this section.
  15. Without express prior written approval from the commissioner, the licensee communicates with a person who the licensee knows has contacted the department regarding an alleged violation committed by the licensee in an attempt to have the complainant dismiss the complaint.
  16. The licensee knowingly accepts insurance business from an individual who is not licensed.
  17. The applicant or licensee knowingly fails to comply with a court order imposing child support obligation.
  18. The applicant or licensee fails to file the required returns or pay the taxes due under chapter 57-38 or comply with a court order directing payment of any income tax or employer income tax withholding imposed by chapter 57-38.

Source:

S.L. 1985, ch. 316, § 3; 1987, ch. 355, § 1; 1991, ch. 315, § 1; 1999, ch. 252, § 28; 2001, ch. 262, § 78; 2013, ch. 455, § 1.

Derivation:

N.D.C.C. §§ 26-17.1-41, 26-17.1-42.

Notes to Decisions

Duplicate Coverage.

Where insurance agent sold two insurance policies providing medicare supplemental coverage and nursing home coverage to insured at time when agent knew that insured had unnecessary duplicate coverage with nonrefundable annual premiums, evidence supported finding agent violated statute. Gust v. Pomeroy, 466 N.W.2d 137, 1991 N.D. LEXIS 24 (N.D. 1991).

Excessive Insurance Coverage.

If the general public is held to understand the meaning of the phrase “excessive or unusual noise” in a criminal statute certainly insurance professionals can be held to understand the phrase “unnecessary or excessive insurance coverage” in a regulatory statute. Gust v. Pomeroy, 466 N.W.2d 137, 1991 N.D. LEXIS 24 (N.D. 1991).

Requisite Knowledge of Insurance Agent.

As a licensed insurance agent, agent is required to know the laws and rules and regulations governing the sale of insurance, for his license may be revoked for a violation of, or noncompliance with, an insurance law or lawful rules or orders of the insurance commissioner. Gust v. Pomeroy, 466 N.W.2d 137, 1991 N.D. LEXIS 24 (N.D. 1991).

Revoked License.

Where nonresident insurance agent’s license was previously revoked in Minnesota and insurance agent later indicated on applications for licenses in eleven other states, all made after the Minnesota revocation, that he had not had any insurance agent licenses revoked, such practices warranted revocation of his nonresident license. McCarter v. Pomeroy, 466 N.W.2d 562, 1991 N.D. LEXIS 10 (N.D. 1991).

DECISIONS UNDER PRIOR LAW

Failure of Agent to Appear.

Failure of an agent to appear at a hearing on the revocation of his license did not relieve the insurance commissioner from making findings of fact and separate conclusions of law and rendering his decision as based upon such findings and conclusions. Evanson v. Wigen, 221 N.W.2d 648, 1974 N.D. LEXIS 179 (N.D. 1974).

26.1-26-42.1. Revocation of nonresident license.

Notwithstanding the provisions of subsection 13 of section 26.1-26-42, any nonresident license issued pursuant to this chapter may be suspended or revoked without notice and hearing to the licensee and without proceeding in conformity with chapter 28-32, upon evidence that the resident license of the North Dakota nonresident licensee has been revoked or suspended. This evidence may be in the form of a certified copy or through the insurance producer database maintained by the national association of insurance producers, its affiliates, or subsidiaries.

Source:

S.L. 1993, ch. 287, § 3; 2021, ch. 227, § 4, eff August 1, 2021.

26.1-26-43. License suspension, revocation, or refusal — Business entity — Additional ground.

The license of a business entity may be suspended, revoked, or refused if the commissioner finds, after hearing, that an individual licensee’s violation was known or should have been known by one or more of the partners, officers, or managers acting on behalf of the business entity and the violation was not reported to the commissioner nor corrective action taken in relation to the violation.

Source:

S.L. 1985, ch. 316, § 3; 1993, ch. 54, § 106; 2001, ch. 262, § 79.

Derivation:

N.D.C.C. § 26-17.1-43.

26.1-26-44. Notification of suspension, revocation, or refusal — Duty of commissioner.

The commissioner shall promptly notify all appointing insurers, when applicable, and the licensee regarding any suspension, revocation, or refusal of a license by the commissioner.

Upon suspension, revocation, or refusal of the license of a resident of this state, the commissioner shall notify the central office of the national association of insurance commissioners.

Source:

S.L. 1985, ch. 316, § 3; 1993, ch. 293, § 6.

Derivation:

N.D.C.C. § 26-17.1-46.

26.1-26-45. Notification of suspension or revocation of nonresident license.

If the commissioner suspends or revokes any nonresident’s license through a formal proceeding under this chapter, the commissioner shall promptly notify the appropriate commissioner of the licensee’s residence of the action and of the particulars of the action.

Source:

S.L. 1985, ch. 316, § 3.

Derivation:

N.D.C.C. § 26-17.1-24.

26.1-26-45.1. Reporting of actions.

  1. An insurance producer shall report to the commissioner any administrative action taken against the insurance producer’s license in another jurisdiction or by another governmental agency in this state within thirty days of the final disposition of the matter. This report must include a copy of the order, consent to order, or other relevant legal documents.
  2. Within thirty days after a criminal conviction, an insurance producer shall report to the commissioner any criminal conviction of the insurance producer taken in any jurisdiction. The report must include a copy of the initial complaint, the order issued by the court, and any other relevant legal documents.

Source:

S.L. 2001, ch. 262, § 80.

26.1-26-46. License suspension or revocation — Duty of licensee.

Upon suspension or revocation of a license, the licensee shall forthwith deliver it to the commissioner by personal delivery or by mail.

Source:

S.L. 1985, ch. 316, § 3; 1999, ch. 252, § 29.

Derivation:

N.D.C.C. § 26-17.1-47.

26.1-26-47. Reciprocal provision — Retaliatory action. [Repealed]

Repealed by S.L. 1999, ch. 252, § 31.

26.1-26-47.1. Reciprocity.

  1. The commissioner shall waive any requirements for a nonresident license applicant with a valid license from the insurance producer’s home state, except the requirements imposed by section 26.1-26-20, if the applicant’s home state awards nonresident licenses to residents of this state on the same basis.
  2. A nonresident insurance producer’s satisfaction of the insurance producer’s home state’s continuing education requirements for licensed insurance producers constitutes satisfaction of this state’s continuing education requirements if the nonresident insurance producer’s home state recognizes the satisfaction of its continuing education requirements imposed upon insurance producers from this state on the same basis.

Source:

S.L. 2001, ch. 262, § 81.

26.1-26-48. Commissioner may make examinations and investigations.

Whenever the commissioner believes that this chapter has been violated, the commissioner, at the expense of the insurer involved, may examine, at the offices of the insurer or insurance producer, whether located within or without this state, all books, records, and papers of the insurer or insurance producer and any books, records, and papers of any insured within this state, and may examine under oath, the officers, managers, and insurance producers of the insurer, or the insured, as to the violation.

Source:

S.L. 1985, ch. 316, § 3; 2001, ch. 262, § 82.

Derivation:

N.D.C.C. § 26-17.1-56.

26.1-26-49. Rulemaking authority.

The commissioner may adopt reasonable rules for the implementation and administration of this chapter.

Source:

S.L. 1985, ch. 316, § 3.

Derivation:

N.D.C.C. § 26-17.1-55.

26.1-26-50. Civil penalty for violation of chapter.

In addition to or in lieu of any applicable denial, suspension, or revocation of a license, any person violating this chapter may, after hearing, be subject to a civil fine not to exceed ten thousand dollars for each violation. The fine may be collected and recovered in an action brought in the name of the state.

Source:

S.L. 1985, ch. 316, § 3; 2009, ch. 252, § 6.

Derivation:

N.D.C.C. § 26-17.1-44.

26.1-26-51. Statute of limitations.

A civil action for the recovery of damages resulting from negligence or breach of contract brought against any person licensed under this chapter by any person claiming to have been injured as a result of the providing of insurance services or the failure to provide insurance services by a licensee may not be commenced in this state after July 31, 1995, unless the action is commenced on or before the earlier of:

  1. Two years from the date the alleged act, omission, or neglect is discovered or should have been discovered by the exercise of reasonable diligence; or
  2. Six years after performance of the service for which the claim for relief arises, unless discovery was prevented by the fraudulent conduct of the licensee.

Source:

S.L. 1995, ch. 282, § 1.

Notes to Decisions

Retroactive.

Because farmer brought his negligence claim on April 23, 1997, against his insurer and its agent for their failure to provide him with multi-peril crop insurance for crops in the years 1992 and 1994, his claim was time barred by this section given that, by its plain language, it is retroactive and no exception is included for causes of action accruing before July 31, 1995. Overboe v. Farm Credit Servs., 2001 ND 58, 623 N.W.2d 372, 2001 N.D. LEXIS 74 (N.D. 2001).

26.1-26-52. Insurance license for automobile rental agencies — Exception.

A license as an insurance producer is not required for the counter sales personnel of an automobile rental company or its franchisee if:

  1. The automobile rental company is appropriately licensed in this state under subsection 2 of section 26.1-26-13.3 or is affiliated with an appropriately licensed North Dakota insurance producer.
  2. The coverage offered by the counter sales personnel is limited to the following:
    1. Personal accident insurance covering the risks of travel, including accident and health insurance that provides coverage to renters and other rental vehicle occupants for accidental death or dismemberment and for medical expenses resulting from an accident that occurs during the rental period;
    2. Supplemental liability insurance that must include uninsured and underinsured motorist coverage, either offered separately or in combination with other liability insurance, and that provides coverage to renters and other authorized drivers for liability arising from the operation of the rental vehicle;
    3. Personal effects insurance that provides coverage to renters and other vehicle occupants for the loss of, or damage to, personal effects that occurs during the rental period;
    4. Roadside assistance and emergency sickness protection programs; and
    5. Any other coverage that a rental company offers in connection with and incidental to the rental of vehicles.
  3. The rental period is ninety days or less.
  4. The automobile rental company files an acknowledgement with the commissioner that its counter sales personnel act on its behalf and that it is responsible for any representations made by the counter sales personnel relating to insurance products offered through the automobile rental company or its franchisee. The acknowledgement must state that the commissioner has the right to take any administrative action contemplated in this title, including revocation or suspension of the license required under subsection 1.
  5. The automobile rental company provides basic training to counter sales personnel in the insurance products offered under this section. The training must require counter sales personnel to refer all customers with questions regarding the insurance products offered under this section to appropriately licensed insurance producers employed by the automobile rental company or to written brochures or other materials that:
    1. Summarize the material terms of the coverage, including the identity of the insurer;
    2. Disclose that the policies offered by the automobile rental company may duplicate coverage already provided by other insurance the renter may have;
    3. State that the purchase of insurance is not required to rent the vehicle; and
    4. Describe the process of filing a claim.
  6. The counter sales personnel are not directly paid by an insurance company, a commission, or any other compensation for the sale of insurance. Nothing in this section prevents the automobile rental company from including the insurance products in an overall employee performance compensation incentive program.

Source:

S.L. 1999, ch. 263, § 1; 2001, ch. 262, § 83.

26.1-26-53. Controlled business prohibited — Definition — Formula for determination.

  1. As used in this section, unless the context otherwise requires, “controlled business” means insurance written on the interests of the licensee, licensee’s immediate family, or licensee’s employer; or insurance covering the licensee, the members of the licensee’s immediate family, a business entity, or the officers, directors, substantial stockholders, partners, or employees of such a business entity of which the licensee or a member of the licensee’s immediate family is an officer, a director, a substantial stockholder, a partner, an associate, or an employee. “Controlled business” does not include crop insurance business sold by a business entity licensed as an insurance producer for crop insurance between August 1, 2001, and December 31, 2002.
  2. The commissioner may not grant, renew, continue, or permit to continue any license if the commissioner determines that the license is being or will be used by the applicant or licensee for the purpose of writing controlled business. A license is deemed to have been or intended to be used for the purpose of writing controlled business if the commissioner determines that during any twelve-month period the aggregate commissions earned from the controlled business exceeded thirty-five percent of the aggregate commissions earned on all business written by the licensee during the same period.
  3. This section does not apply to insurance written in connection with credit transactions, including title insurance.

Source:

S.L. 2003, ch. 247, § 1.

26.1-26-54. Insurance licenses for limited lines travel insurance producers.

  1. Travel insurance, as that term is defined in this section, is a limited line of insurance.
  2. As used in this section:
    1. “Limited lines travel insurance producer” means a:
      1. Licensed managing general agent or third-party administrator; or
      2. Licensed insurance producer, including a limited lines producer, designated by an insurer as the travel insurance supervising entity as set forth under subsection 9.
    2. “Offer and disseminate” means to provide general information, including a description of the coverage and price, as well as to process the application, collect premiums, and perform other nonlicensable activities permitted by the state.
    3. “Travel insurance” means insurance coverage for personal risks incident to planned travel, including interruption or cancellation of a trip or event, loss of baggage or personal effects, damages to accommodations or rental vehicles, or sickness, accident, disability, or death occurring during travel. The term does not include a major medical plan that provides comprehensive medical protection for an individual on a trip lasting at least six months.
    4. “Travel retailer” means a business entity that makes, arranges, or offers travel services and which may offer and disseminate travel insurance as a service to customers on behalf of and under the direction of a limited lines travel insurance producer.
  3. Notwithstanding any other provision of law:
    1. The commissioner may issue a limited lines travel insurance producer license to an individual or business entity that files an application with the commissioner in a form and manner prescribed by the commissioner. A licensed limited lines travel insurance producer may sell, solicit, or negotiate travel insurance through a licensed insurer.
    2. A travel retailer may offer and disseminate travel insurance, if:
      1. The limited lines travel insurance producer or travel retailer provide:
        1. The actual material terms of the insurance coverage;
        2. A description of the claim filing process;
        3. A description of the policy review or cancellation process; and
        4. The identity and contact information of the insurer and limited lines producer.
      2. At the time of licensure, the limited lines travel insurance producer establishes and maintains a register of each travel retailer that offers insurance on the behalf of the producer. The register must be on a form prescribed by the commissioner. Annually, the register must be updated by the limited lines travel insurance producer. The register must include the name, address, and contact information of the travel retailer and a person that controls the travel retailer’s operations. The register must include the travel retailer’s federal tax identification number. Upon request, the limited lines travel insurance producer shall submit the register to the insurance department. The limited lines producer shall certify that the travel retailer complies with the Violent Crime and Law Enforcement Act of 1994 [Pub. L. 103-322; 108 Stat. 1796; 18 U.S.C. 1033 et seq.].
      3. The limited lines travel insurance producer designates one of the producer’s licensed insurance employees as the individual responsible for the compliance with the state’s travel insurance laws, rules, and regulations.
      4. The designated employee, president, secretary, treasurer, or any other individual who controls the producer’s insurance operations complies with the fingerprinting requirements applicable to insurance producers in the resident state of the limited lines travel insurance producer.
      5. The limited lines travel insurance producer pays all applicable licensing fees as set forth in state law.
      6. The limited lines travel insurance producer requires each employee and authorized representative of the travel retailer, who offer and disseminate travel insurance, to receive training. The commissioner may review the training procedures. The training material must contain instructions on the type of insurance offered, ethical sales practices, and required disclosures to prospective customers, and upon request must be provided to the commissioner for inspection.
  4. The limited lines travel insurance producer and any travel retailer and the travel retailer’s employees offering and disseminating travel insurance under the limited lines travel insurance producer license shall be subject to the provisions of chapters 26.1-04 and 26.1-26.
  5. The travel retailer and its employees act on behalf of the limited lines producer and the producer is responsible for any representations made by the employees of the travel retailer relating to insurance products offered or disseminated through the travel retailer.
  6. If the insurance commissioner determines that a travel retailer, or a travel retailer’s employee has violated any provision of this chapter or any other provision of this title, the commissioner may:
    1. Direct the limited lines travel insurance producer to implement a corrective action plan with the travel retailer; or
    2. Revoke the authorization of the travel retailer to transact travel insurance on behalf of the limited lines travel insurance producer under its license and direct the limited lines travel insurance producer to remove the travel retailer’s name from its register.
  7. If the insurance commissioner determines that a travel retailer, or a travel retailer’s employee, has violated any provision in this chapter or any other provision of this title, the commissioner may:
    1. Suspend or revoke the license of the limited lines travel insurance producer;
    2. Issue a cease and desist order against the license of the limited lines travel insurance producer; and
    3. Impose a monetary fine on the limited lines travel insurance producer.
  8. Limited lines travel insurance producers, and those registered under the producer’s license, are exempt from continuing education requirements.
  9. A travel retailer shall make brochures or other written materials available to prospective purchasers which:
    1. Provide the identity and contact information of the insurer and the limited lines travel insurance producer;
    2. Explain purchase of travel insurance is not required in order to purchase any other product or service from the travel retailer; and
    3. Explain an unlicensed travel retailer may provide general information about the insurance offered by the travel retailer, including a description of the coverage and price. An unlicensed travel retailer may not answer technical questions about the terms and conditions of the insurance offered by the travel retailer or evaluate the adequacy of existing insurance coverage.
  10. An unlicensed employee or authorized representative of a travel retailer may not:
    1. Evaluate or interpret the technical terms, benefits, or conditions of the offered travel insurance coverage;
    2. Evaluate or advise a prospective purchaser regarding existing insurance coverage;
    3. Be held out as a licensed insurer, licensed producer, or insurance expert; or
    4. Be directly paid a commission or any other compensation by an insurer for the sale of insurance.
  11. Notwithstanding any other provision of law, a travel retailer who is in compliance with all requirements of this section may receive fair compensation for offering and disseminating travel insurance.
  12. Travel insurance may be provided under an individual policy or under a group or master policy.
  13. The limited lines travel insurance producer is responsible for the acts of the travel retailer. The limited lines travel insurance producer shall ensure the travel retailer complies with this chapter.

History. S.L. 2015, ch. 212, § 1, eff August 1, 2015.

26.1-26-55. Rulemaking.

The commissioner may adopt rules for the implementation and administration of this chapter.

History. S.L. 2015, ch. 212, § 2, eff August 1, 2015.

26.1-26-56. Insurance producer records — Exempt record.

The home address of any licensed insurance producer or insurance consultant received by the commissioner is an exempt record as defined in section 44-04-17.1.

History. S.L. 2017, ch. 217, § 3, eff August 1, 2017.

CHAPTER 26.1-26.1 Independent Insurance Agent Contract Termination

26.1-26.1-01. Definitions.

For the purposes of this chapter, an “independent insurance producer” means any licensed property and casualty insurance producer representing a property and casualty insurance company on an independent contractor basis and not as an employee. This term includes only those producers not obligated by contract to place property and casualty insurance accounts with any insurance company or group of companies. This chapter only applies to contracts which have been in effect for more than one year between an independent insurance producer and a property and casualty insurance company.

Source:

S.L. 1987, ch. 356, § 1; 2001, ch. 262, § 84.

26.1-26.1-02. Producer and company rehabilitation.

In an effort to avoid termination, a property and casualty insurance company and an independent insurance producer may endeavor to reach mutual agreement on a written plan for rehabilitation for a period of time agreed upon by them. Any written plan agreed upon must identify the problem areas and specify what the insurance producer must do in order to avoid termination.

Source:

S.L. 1987, ch. 356, § 2; 2001, ch. 262, § 85.

26.1-26.1-03. Notice of termination.

Contracts between an independent insurance producer and any property and casualty insurance company may not be terminated or amended by the company except by mutual agreement or unless ninety-day prior written notice has been provided to the independent insurance producer. The rate of commission and renewal terms must be in accordance with those in effect immediately prior to the termination.

Source:

S.L. 1987, ch. 356, § 3; 2001, ch. 262, § 86.

26.1-26.1-04. Termination of insurance producers for cause — Exceptions.

This chapter does not apply to terminations for abandonment, insolvency of the terminating company, gross and willful misconduct, refusal, suspension, revocation, or termination of the insurance producer’s license by the insurance commissioner, sale or material change or ownership of agency, fraud, material misrepresentation or failure to pay an independent insurance producer’s account less the independent insurance producer’s commission and any disputed items within thirty days after written demand by the company.

Source:

S.L. 1987, ch. 356, § 4; 2001, ch. 262, § 87.

CHAPTER 26.1-26.2 Insurance Broker Controlled Companies [Repealed]

[Repealed by S.L. 1993, ch. 292, § 49]

CHAPTER 26.1-26.3 Managing General Agents

26.1-26.3-01. Definitions.

As used in this chapter:

  1. “Actuary” means a person who is a member in good standing of the American academy of actuaries.
  2. “Insurer” means any person, firm, association, or corporation duly licensed in this state as an insurance company pursuant to this title.
  3. “Managing general agent” means any individual, partnership, corporation, or limited liability company which:
    1. Manages all or part of the insurance business of an insurer, including the management of a separate division, department, or underwriting office.
    2. Acts as an insurance producer for the insurer whether known as a managing general agent, manager, or other similar term, who, with or without the authority, either separately or together with affiliates, produces, directly or indirectly, and underwrites an amount of gross direct written premium equal to or more than five percent of the policyholder surplus as reported in the last annual statement of the insurer in any one quarter or year together with one or more of the following activities related to the business produced:
      1. Adjusts or pays claims in excess of an amount determined by the commissioner; or
      2. Negotiates reinsurance on behalf of the insurer.
    3. Notwithstanding the above, the following persons will not be considered as managing general agents for the purposes of this chapter:
      1. An employee of the insurer.
      2. A United States manager of the United States branch of an alien insurer.
      3. An underwriting manager which, pursuant to contract, manages all or part of the insurance operations of the insurer, is under common control with the insurer, subject to chapter 26.1-10, and whose compensation is not based on the volume of premiums written.
      4. The attorney in fact authorized by and acting for the subscribers of a reciprocal insurer or interinsurance exchange under powers of attorney.
  4. “Underwrite” means the authority to accept or reject risk on behalf of the insurer.

Source:

S.L. 1991, ch. 305, § 11; 1993, ch. 54, § 106; 1993, ch. 292, § 19; 2001, ch. 262, § 88.

26.1-26.3-02. Licensure.

  1. No individual, partnership, corporation, or limited liability company may act in the capacity of a managing general agent with respect to risks located in this state for an insurer licensed in this state unless the individual, partnership, corporation, or limited liability company is licensed as an insurance producer in this state.
  2. An individual, partnership, corporation, or limited liability company may not act in the capacity of a managing general agent representing an insurer domiciled in this state with respect to risks located outside this state unless the individual, partnership, corporation, or limited liability company is licensed as either a resident or nonresident insurance producer in this state pursuant to the provisions of this title.
  3. The commissioner may require a bond in an amount acceptable to the commissioner for the protection of the insurer.
  4. The commissioner may require the managing general agent to maintain an adequate errors and omissions policy.

Source:

S.L. 1991, ch. 305, § 11; 1993, ch. 54, § 106; 2001, ch. 262, § 89.

26.1-26.3-03. Required contract provisions.

No individual, partnership, corporation, or limited liability company acting in the capacity of a managing general agent may place business with an insurer unless there is in force a written contract between the parties which sets forth the responsibilities of each party and when both parties share responsibility for a particular function, specifies the division of the responsibilities, and which contains the following minimum provisions:

  1. The insurer may terminate the contract for cause upon written notice to the managing general agent. The insurer may suspend the underwriting authority of the managing general agent during the pendency of any dispute regarding the cause for termination.
  2. The managing general agent will render accounts to the insurer detailing all transactions and remit all funds due under the contract to the insurer on not less than a monthly basis.
  3. All funds collected for the account of an insurer will be held by the managing general agent in a fiduciary capacity in a bank which is a member of the federal reserve system. This account must be used for all payments on behalf of the insurer. The managing general agent may retain no more than three months estimated claims payments and allocated loss adjustment expenses.
  4. Separate records of business written by the managing general agent will be maintained. The insurer shall have access and right to copy all accounts and records related to its business in a form usable by the insurer and the commissioner shall have access to all books, bank accounts, and records of the managing general agent in a form usable to the commissioner.
  5. The contract may not be assigned in whole or in part by the managing general agent.
  6. Appropriate underwriting guidelines, including:
    1. The maximum annual premium volume;
    2. The basis of the rates to be charged;
    3. The types of risks which may be written;
    4. Maximum limits of liability;
    5. Applicable exclusions;
    6. Territorial limitations;
    7. Policy cancellation provisions; and
    8. The maximum policy period.
  7. If the contract permits the managing general agent to settle claims on behalf of the insurer:
    1. All claims must be reported to the company in a timely manner.
    2. A copy of the claim file must be sent to the insurer at its request or as soon as it becomes known that the claim:
      1. Has the potential to exceed an amount determined by the commissioner or exceeds the limit set by the company, whichever is less;
      2. Involves a coverage dispute;
      3. May exceed the managing general agent’s claims settlement authority;
      4. Is open for more than six months; or
      5. Is closed by payment of an amount set by the commissioner or an amount set by the company, whichever is less.
    3. All claims files will be the joint property of the insurer and managing general agent. However, upon an order of liquidation of the insurer, the files become the sole property of the insurer or its estate. The managing general agent shall have reasonable access to and the right to copy the files on a timely basis.
    4. Any settlement authority granted to the managing general agent may be terminated for cause upon the insurer’s written notice to the managing general agent or upon the termination of the contract. The insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination.
  8. If electronic claims files are in existence, the contract must address the timely transmission of the data.
  9. If the contract provides for a sharing of interim profits by the managing general agent, and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves or controlling claim payments, or in any other manner, interim profits will not be paid to the managing general agent until one year after they are earned for property insurance business and five years after they are earned on casualty business and not until the profits have been verified pursuant to section 26.1-26.3-04.
  10. The managing general agent may not:
    1. Bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages, and amounts or percentages that may be reinsured and commission schedules.
    2. Commit the insurer to participate in insurance or reinsurance syndicates.
    3. Appoint any insurance producer without assuring that the insurance producer is licensed in the appropriate lines of insurance.
    4. Without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, which may not exceed one percent of the insurer’s policyholder’s surplus as of December thirty-first of the last completed calendar year.
    5. Collect any payment from a reinsurer or commit the insurer to any claim settlement with a reinsurer without prior approval of the insurer. If prior approval is given, a report must be promptly forwarded to the insurer.
    6. Permit its subagent to serve on the insurer’s board of directors.
    7. Jointly employ an individual who is employed with the insurer.
    8. Appoint a submanaging general agent.

The insurer has the right to cancel or nonrenew any policy of insurance subject to the applicable laws and rules concerning the cancellation and nonrenewal of insurance policies.

Source:

S.L. 1991, ch. 305, § 11; 1993, ch. 54, § 106; 1993, ch. 292, § 21; 2001, ch. 262, § 90.

26.1-26.3-04. Duties of insurers.

  1. The insurer shall have on file, in a form acceptable to the commissioner, an independent financial examination of each managing general agent with which it has done business.
  2. If a managing general agent establishes loss reserves, the insurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the managing general agent. This is in addition to any other required loss reserve certification.
  3. The insurer shall periodically and at least semiannually conduct an onsite review of the underwriting and claims processing operations of the managing general agent.
  4. Binding authority for all reinsurance contracts or participation in insurance or reinsurance syndicates rests with an officer of the insurer, who may not be affiliated with the managing general agent.
  5. Within thirty days of entering into or termination of a contract with a managing general agent, the insurer shall provide written notification of the appointment or termination to the commissioner. Notices of appointment of a managing general agent must include a statement of duties which the applicant is expected to perform on behalf of the insurer, the lines of insurance for which the applicant is to be authorized to act, and any other information the commissioner may request.
  6. An insurer shall review its books and records each quarter to determine if any of its insurance producers have become, by operation of subsection 3 of section 26.1-26.3-01, a managing general agent as defined in that section. If the insurer determines that an insurance producer has become a managing general agent pursuant to the above, the insurer shall promptly notify the insurance producer and the commissioner of the determination and the insurer and insurance producer shall fully comply with the provisions of this chapter within thirty days.
  7. An insurer may not appoint to its board of directors an officer, director, employee, subagent, or controlling shareholder of its managing general agents. This subsection does not apply to relationships governed by chapter 26.1-10.

Source:

S.L. 1991, ch. 305, § 11; 2001, ch. 262, § 91.

26.1-26.3-05. Examination authority.

The acts of the managing general agent are considered to be the acts of the insurer on whose behalf it is acting. A managing general agent may be examined as if it were the insurer.

Source:

S.L. 1991, ch. 305, § 11.

26.1-26.3-06. Penalties and liabilities.

  1. If the commissioner determines that the managing general agent or any other person has not materially complied with this chapter or any rule or order adopted under this chapter, after notice and opportunity to be heard, the commissioner may order:
    1. For each separate violation, a penalty in an amount not exceeding one thousand dollars;
    2. Revocation or suspension of the insurance producer’s license; and
    3. If it was found that because of the material noncompliance that the insurer has suffered any loss or damage, the commissioner may maintain a civil action brought by or on behalf of the insurer and its policyholders and creditors for recovery of compensatory damages for the benefit of the insurer and its policyholders and creditors or other appropriate relief.
  2. If an order of rehabilitation or liquidation of the insurer has been entered pursuant to chapter 26.1-06.1, and the receiver appointed under that order determines that the managing general agent or any other person has not materially complied with this chapter, or any rule or order adopted under this chapter, and the insurer suffered any loss or damage as a result of the material noncompliance, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the insurer.
  3. Nothing contained in this section affects the right of the commissioner to impose any other penalties provided for in the insurance law.
  4. Nothing contained in this chapter is intended to or shall in any manner limit or restrict the rights of policyholders, claimants, and auditors.
  5. The decision, determination, or order of the commissioner pursuant to subsection 1 is subject to judicial review pursuant to chapter 28-32.

Source:

S.L. 1991, ch. 305, § 11; 1993, ch. 292, §§ 20, 22; 2001, ch. 262, § 92.

26.1-26.3-07. Rules.

The insurance commissioner may adopt reasonable rules for the implementation and administration of the provisions of this chapter.

Source:

S.L. 1991, ch. 305, § 11.

CHAPTER 26.1-26.4 Health Care Service Utilization Review

26.1-26.4-01. Purpose and scope.

This chapter applies to grandfathered health plans unless a health care insurer or utilization review agent determines to extend the protections of section 26.1-36-47 to a grandfathered plan. “Grandfathered health plan” has the meaning stated in the Patient Protection and Affordable Care Act [Pub. L. 111-148], as amended by the Health Care and Education Reconciliation Act of 2010 [Pub. L. 111-152]. The purpose of this chapter is to:

  1. Promote the delivery of quality health care in a cost-effective manner;
  2. Assure that utilization review agents adhere to reasonable standards for conducting utilization review;
  3. Foster greater coordination and cooperation between health care providers and utilization review agents;
  4. Improve communications and knowledge of benefits among all parties concerned before expenses are incurred; and
  5. Ensure that utilization review agents maintain the confidentiality of medical records in accordance with applicable laws.

Source:

S.L. 1991, ch. 316, § 1; 2011, ch. 218, § 2.

26.1-26.4-02. Definitions. [Effective through August 31, 2022]

For purposes of this chapter, unless the context requires otherwise:

  1. “Commissioner” means the insurance commissioner.
  2. “Emergency medical condition” means a medical condition of recent onset and severity, including severe pain, that would lead a prudent layperson acting reasonably and possessing an average knowledge of health and medicine to believe that the absence of immediate medical attention could reasonably be expected to result in serious impairment to bodily function, serious dysfunction of any bodily organ or part, or would place the person’s health, or with respect to a pregnant woman the health of the woman or her unborn child, in serious jeopardy.
  3. “Emergency services” means health care services, supplies, or treatments furnished or required to screen, evaluate, and treat an emergency medical condition.
  4. “Enrollee” means an individual who has contracted for or who participates in coverage under an insurance policy, a health maintenance organization contract, a health service corporation contract, an employee welfare benefit plan, a hospital or medical services plan, or any other benefit program providing payment, reimbursement, or indemnification for health care costs for the individual or the individual’s eligible dependents.
  5. “Health care insurer” includes an insurance company as defined in section 26.1-02-01, a health service corporation as defined in section 26.1-17-01, a health maintenance organization as defined in section 26.1-18.1-01, and a fraternal benefit society as defined in section 26.1-15.1-02.
  6. “Provider of record” means the physician or other licensed practitioner identified to the utilization review agent as having primary responsibility for the care, treatment, and services rendered to an individual.
  7. “Retrospective” means utilization review of medical necessity which is conducted after services have been provided to a patient, but does not include the review of a claim that is limited to an evaluation of reimbursement levels, veracity of documentation, accuracy of coding, or adjudication for payment.
  8. “Utilization review” means a system for prospective, retrospective, and concurrent review of the necessity and appropriateness in the allocation of health care resources and services that are subject to state insurance regulation and which are given or proposed to be given to an individual within this state. Utilization review does not include elective requests for clarification of coverage.
  9. “Utilization review agent” means any person or entity performing utilization review, except:
    1. An agency of the federal government; or
    2. An agent acting on behalf of the federal government or the department of human services, but only to the extent that the agent is providing services to the federal government or the department of human services.

Source:

S.L. 1991, ch. 316, § 2; 1993, ch. 305, § 1; 1999, ch. 253, § 2; 1999, ch. 257, § 3; 1999, ch. 264, § 1; 2001, ch. 269, § 1.

26.1-26.4-02. Definitions. [Effective September 1, 2022]

For purposes of this chapter, unless the context requires otherwise:

  1. “Commissioner” means the insurance commissioner.
  2. “Emergency medical condition” means a medical condition of recent onset and severity, including severe pain, that would lead a prudent layperson acting reasonably and possessing an average knowledge of health and medicine to believe that the absence of immediate medical attention could reasonably be expected to result in serious impairment to bodily function, serious dysfunction of any bodily organ or part, or would place the person’s health, or with respect to a pregnant woman the health of the woman or her unborn child, in serious jeopardy.
  3. “Emergency services” means health care services, supplies, or treatments furnished or required to screen, evaluate, and treat an emergency medical condition.
  4. “Enrollee” means an individual who has contracted for or who participates in coverage under an insurance policy, a health maintenance organization contract, a health service corporation contract, an employee welfare benefit plan, a hospital or medical services plan, or any other benefit program providing payment, reimbursement, or indemnification for health care costs for the individual or the individual’s eligible dependents.
  5. “Health care insurer” includes an insurance company as defined in section 26.1-02-01, a health service corporation as defined in section 26.1-17-01, a health maintenance organization as defined in section 26.1-18.1-01, and a fraternal benefit society as defined in section 26.1-15.1-02.
  6. “Provider of record” means the physician or other licensed practitioner identified to the utilization review agent as having primary responsibility for the care, treatment, and services rendered to an individual.
  7. “Retrospective” means utilization review of medical necessity which is conducted after services have been provided to a patient, but does not include the review of a claim that is limited to an evaluation of reimbursement levels, veracity of documentation, accuracy of coding, or adjudication for payment.
  8. “Utilization review” means a system for prospective, retrospective, and concurrent review of the necessity and appropriateness in the allocation of health care resources and services that are subject to state insurance regulation and which are given or proposed to be given to an individual within this state. Utilization review does not include elective requests for clarification of coverage.
  9. “Utilization review agent” means any person or entity performing utilization review, except:
    1. An agency of the federal government; or
    2. An agent acting on behalf of the federal government or the department of health and human services, but only to the extent that the agent is providing services to the federal government or the department of health and human services.

Source:

S.L. 1991, ch. 316, § 2; 1993, ch. 305, § 1; 1999, ch. 253, § 2; 1999, ch. 257, § 3; 1999, ch. 264, § 1; 2001, ch. 269, § 1; 2021, ch. 352, § 314, eff September 1, 2022.

26.1-26.4-03. Certification.

A utilization review agent may not conduct utilization review in this state unless the utilization review agent has certified to the commissioner in writing that the agent is in compliance with section 26.1-26.4-04. Certification must be made annually on or before March first of each calendar year. In addition, a utilization review agent must file the following information:

  1. The name, address, telephone number, and normal business hours of the utilization review agent.
  2. The name and telephone number of a person for the commissioner to contact.
  3. A description of the appeal procedures for utilization review determinations.
  4. A list of the third-party payers for whom the private review agent is performing utilization review in the state.

A provider may request that a utilization review agent furnish the provider with the medical review criteria to be used in evaluating proposed or delivered health care services. Any material changes in the information filed in accordance with this section must be filed with the commissioner within thirty days of the change.

Source:

S.L. 1991, ch. 316, § 3; 1993, ch. 305, § 2.

26.1-26.4-04. Minimum standards of utilization review agents.

All utilization review agents must meet the following minimum standards:

  1. Notification of a determination by the utilization review agent must be provided to the enrollee or other appropriate individual in accordance with 29 U.S.C. 1133 and the timeframes set forth in 29 CFR 2560.503-1.
  2. Any determination by a utilization review agent as to the necessity or appropriateness of an admission, service, or procedure must be reviewed by a physician or, if appropriate, a licensed psychologist, or determined in accordance with standards or guidelines approved by a physician or licensed psychologist.
  3. Any notification of a determination not to certify an admission or service or procedure must include the information required by 29 U.S.C. 1133 and 29 CFR 2560.503-1.
  4. Utilization review agents shall maintain and make available a written description of the appeal procedure by which enrollees or the provider of record may seek review of determinations by the utilization review agent. The appeal procedure must provide for the following:
    1. On appeal, all determinations not to certify an admission, service, or procedure as being necessary or appropriate must be made by a physician or, if appropriate, a licensed psychologist.
    2. Utilization review agents shall complete the adjudication of appeals of determinations not to certify admissions, services, and procedures in accordance with 29 U.S.C. 1133 and the timeframes for appeals set forth in 29 CFR 2560.503-1.
    3. Utilization review agents shall provide for an expedited appeals process complying with 29 U.S.C. 1133 and 29 CFR 2560.503-1.
  5. Utilization review agents shall make staff available by toll-free telephone at least forty hours per week during normal business hours.
  6. Utilization review agents shall have a telephone system capable of accepting or recording incoming telephone calls during other than normal business hours and shall respond to these calls within two working days.
  7. Utilization review agents shall comply with all applicable laws to protect confidentiality of individual medical records.
  8. Psychologists making utilization review determinations shall have current licenses from the state board of psychologist examiners. Physicians making utilization review determinations shall have current licenses from the North Dakota board of medicine.
  9. When conducting utilization review or making a benefit determination for emergency services:
    1. A utilization review agent may not deny coverage for emergency services and may not require prior authorization of these services.
    2. Coverage of emergency services is subject to applicable copayments, coinsurance, and deductibles.
  10. When an initial appeal to reverse a determination is unsuccessful, a subsequent determination regarding hospital, medical, or other health care services provided or to be provided to a patient which may result in a denial of third-party reimbursement or a denial of precertification for that service must include the evaluation, findings, and concurrence of a physician trained in the relevant specialty to make a final determination that care provided or to be provided was, is, or may be medically inappropriate.

However, the commissioner may find that the standards in this section have been met if the utilization review agent has received approval or accreditation by a utilization review accreditation organization.

Source:

S.L. 1991, ch. 316, § 4; 1993, ch. 305, § 3; 1999, ch. 257, § 4; 1999, ch. 264, § 2; 2001, ch. 269, §§ 2 to 4; 2003, ch. 248, § 1; 2015, ch. 297, § 12, eff August 1, 2015.

26.1-26.4-04.1. Utilization review in this state — Conditions of employment.

A utilization review agent is deemed to be conducting utilization review in this state if the agent conducts utilization review involving services rendered or to be rendered in the state regardless of where the agent actually performs the utilization review. No person may be employed or compensated as a private review agent under any agreement or contract when compensation of the review agent is contingent upon a denial or reduction in the payment for hospital, medical, or other health care services.

Source:

S.L. 1993, ch. 305, § 4.

26.1-26.4-04.2. Utilization review — Duty of health care insurers.

A health care insurer that contracts with another entity to perform utilization review on its behalf remains responsible to ensure that all the requirements of this chapter are met to the same extent the health care insurer would be if it performed the utilization review itself.

Source:

S.L. 1999, ch. 253, § 3.

26.1-26.4-05. Utilization review agent violations — Penalty.

Whenever the commissioner has reason to believe that a utilization review agent subject to this chapter has been or is engaged in conduct that violates section 26.1-26.4-03 or 26.1-26.4-04, the commissioner shall notify the utilization review agent of the alleged violation. The utilization review agent has thirty days from the date the notice is received to respond to the alleged violation.

If the commissioner believes that the utilization review agent has violated this chapter, or is not satisfied that the alleged violation has been corrected, the commissioner shall conduct a hearing on the alleged violation in accordance with chapter 28-32.

If, after the hearing, the commissioner determines that the utilization review agent has engaged in violations of this chapter, the commissioner shall reduce the findings to writing and shall issue and cause to be served upon the utilization review agent a copy of the findings and an order requiring the utilization review agent to cease and desist from engaging in the violations. The commissioner may also, at the commissioner’s discretion, order:

  1. Payment of a penalty of not more than ten thousand dollars for a violation that occurred with such frequency as to indicate a general business practice; or
  2. Suspension or revocation of the authority to do business in this state as a utilization review agent if the utilization review agent knew that the act was in violation of this chapter.

Source:

S.L. 1991, ch. 316, § 5.

CHAPTER 26.1-26.5 Insurance Broker Controlled Insurer

26.1-26.5-01. Definitions.

As used in this chapter:

  1. “Accredited state” means a state in which the insurance department or regulatory agency has qualified as meeting the minimum financial regulatory standards promulgated and established from time to time by the national association of insurance commissioners.
  2. “Control” or “controlled” has the meaning ascribed in chapter 26.1-10.
  3. “Controlled insurer” means a licensed insurer which is controlled, directly or indirectly, by an insurance broker.
  4. “Controlling insurance broker” means an insurance broker who, directly or indirectly, controls an insurer.
  5. “Insurance broker” means an insurance broker or brokers or any other person, firm, association, or corporation, when, for any compensation, commission, or other thing of value, such person, firm, association, or corporation acts or aids in any manner in soliciting, negotiating, or procuring the making of any insurance contract on behalf of an insured other than the person, firm, association, or corporation.
  6. “Licensed insurer” or “insurer” means any person, firm, association, or corporation duly licensed to transact a property and casualty insurance business in this state. The following, inter alia, are not licensed insurers for the purposes of this chapter:
    1. All risk retention groups as defined in the Superfund Amendments Reauthorization Act of 1986 [Pub. L. 99-499; 100 Stat. 1613] and the Risk Retention Act [15 U.S.C. 3901 et seq.] and chapter 26.1-46.
    2. All residual market pools and joint underwriting authorities or associations.
    3. All captive insurers. For the purposes of this chapter, captive insurers are insurance companies owned by another organization whose exclusive purpose is to insure risks of the parent organization and affiliated companies or, in the case of groups and associations, insurance organizations owned by the insureds whose exclusive purpose is to insure risks to member organizations or group members and their affiliates.

Source:

S.L. 1993, ch. 292, § 23.

26.1-26.5-02. Applicability.

This chapter applies to licensed insurers as defined in section 26.1-26.5-01, either domiciled in this state or domiciled in a state that is not an accredited state having in effect a substantially similar law. All provisions of the Insurance Holding Company Act, to the extent they are not superseded by this chapter, continue to apply to all parties within holding company systems subject to this chapter.

Source:

S.L. 1993, ch. 292, § 23.

26.1-26.5-03. Minimum standards.

    1. The provisions of this section apply if, in any calendar year, the aggregate amount of gross written premium on business placed with a controlled insurer by a controlling insurance broker is equal to or greater than five percent of the admitted assets of the controlled insurer, as reported in the controlled insurers’ quarterly statement filed as of September thirtieth of the prior year.
    2. Notwithstanding subdivision a, the provisions of this section do not apply if:
      1. The controlling insurance broker places insurance only with the controlled insurer, or only with the controlled insurer and a member or members of the controlled insurer’s holding company system, or the controlled insurer’s parent, affiliate, or subsidiary and receives no compensation based upon the amount of premiums written in connection with such insurance; and accepts insurance placements only from nonaffiliated insurance brokers, and not directly from insureds.
      2. The controlled insurer, except for insurance business written through a residual market facility, accepts insurance business only from a controlling insurance broker, an insurance broker controlled by the controlled insurer, or an insurance broker that is a subsidiary of the controlled insurer.
  1. A controlled insurer may not accept business from a controlling insurance broker and a controlling insurance broker may not place business with a controlled insurer unless there is a written contract between the controlling insurance broker and the insurer specifying the responsibilities of each party, which contract has been approved by the board of directors of the insurer and contains the following minimum provisions:
    1. The controlled insurer may terminate the contract for cause, upon written notice to the controlling insurance broker. The controlled insurer shall suspend the authority of the controlling insurance broker to write business during the pendency of any dispute regarding the cause for the termination.
    2. The controlling insurance broker shall render accounts to the controlled insurer detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to, the controlling insurance broker.
    3. The controlling insurance broker shall remit all funds due under the terms of the contract to the controlled insurer on at least a monthly basis. The due date must be fixed so that premiums or installments thereof collected shall be remitted no later than ninety days after the effective date of any policy placed with the controlled insurer under this contract.
    4. All funds collected for the controlled insurer’s account must be held by the controlling insurance broker in a fiduciary capacity, in one or more appropriately identified bank accounts in banks that are members of the federal reserve system, in accordance with the provisions of the insurance law as applicable. However, funds of a controlling insurance broker not required to be licensed in this state must be maintained in compliance with the requirements of the controlling insurance broker’s domiciliary jurisdiction.
    5. The controlling insurance broker shall maintain separately identifiable records of business written for the controlled insurer.
    6. The contract may not be assigned, in whole or in part, by the controlling insurance broker.
    7. The controlled insurer shall provide the controlling insurance broker with its underwriting standards, rules and procedures, manuals setting forth the rates to be charged, and the conditions for the acceptance or rejection of risks. The controlling insurance broker shall adhere to the standards, rules, procedures, rates, and conditions. The standards, rules, procedures, rates, and conditions must be the same as those applicable to comparable business placed with the controlled insurer by an insurance broker other than the controlling insurance broker.
    8. The rates and terms of the controlling insurance broker’s commissions, charges, or other fees and the purposes for those charges or fees. The rates of the commissions, charges, and other fees must be no greater than those applicable to comparable business placed with the controlled insurer by insurance brokers other than controlling insurance brokers. For purposes of this subdivision and subdivision g, examples of “comparable business” include the same lines of insurance, same kinds of insurance, same kinds of risks, similar policy limits, and similar quality of business.
    9. If the contract provides that the controlling insurance broker, on insurance business placed with the insurer, is to be compensated contingent upon the insurer’s profits on that business, then such compensation may not be determined and paid until at least five years after the premiums on liability insurance are earned and at least one year after the premiums are earned on any other insurance. In no event may the commissions be paid until the adequacy of the controlled insurer’s reserves on remaining claims has been independently verified pursuant to subdivision a of subsection 4.
    10. A limit on the controlling insurance broker’s writings in relation to the controlled insurer’s surplus and total writings. The insurer may establish a different limit for each line or subline of business. The controlled insurer shall notify the controlling insurance broker when the applicable limit is approached and may not accept business from the controlling insurance broker if the limit is reached. The controlling insurance broker may not place business with the controlled insurer if it has been notified by the controlled insurer that the limit has been reached.
    11. The controlling insurance broker may negotiate but may not bind reinsurance on behalf of the controlled insurer on business the controlling insurance broker places with the controlled insurer, except that the controlling insurance broker may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the controlled insurer contains underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured, and commission schedules.
  2. Every controlled insurer shall have an audit committee of the board of directors composed of independent directors. The audit committee shall annually meet with management, the insurer’s independent certified public accountants, and an independent casualty actuary or other independent loss reserve specialist acceptable to the commissioner to review the adequacy of the insurer’s loss reserves.
    1. In addition to any other required loss reserve certification, the controlled insurer shall annually, on April first of each year, file with the commissioner an opinion of an independent casualty actuary, or such other independent loss reserve specialist acceptable to the commissioner, reporting loss ratios for each line of business written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of yearend, including incurred but not reported, on business placed by the insurance broker.
    2. The controlled insurer shall annually report to the commissioner the amount of commissions paid to the insurance broker, the percentage such amount represents of the net premiums written, and comparable amounts and percentage paid to noncontrolling insurance brokers for placements of the same kinds of insurance.

Source:

S.L. 1993, ch. 292, § 23.

26.1-26.5-04. Disclosure.

The insurance broker, prior to the effective date of the policy, shall deliver written notice to the prospective insured disclosing the relationship between the insurance broker and the controlled insurer, except that, if the business is placed through an insurance broker who is not a controlling insurance broker, the controlling insurance broker shall retain a signed commitment from the insurance broker that the insurance broker is aware of the relationship between the insurer and the insurance broker and that the insurance broker has or will notify the insured.

Source:

S.L. 1993, ch. 292, § 23.

26.1-26.5-05. Liability of controlling insurance broker in the event of insolvency of controlled insurer.

If the commissioner has reason to believe that a controlling insurance broker has committed or is committing an act which could be determined to be a violation, and that the violation substantially contributed to the insolvency of a controlled insurer, the commissioner or receiver may maintain a civil action against the controlling insurance broker for all damages caused by the insurance broker’s acts.

Source:

S.L. 1993, ch. 292, § 23.

26.1-26.5-06. Administrative penalties and actions by the commissioner.

  1. In addition to any other remedies provided herein, whenever it appears to the commissioner that a person has committed or is committing an act that could be determined to be a violation, the commissioner may institute a proceeding under chapter 28-32. After the hearing, the commissioner may order any or all of the following:
    1. That the person permanently cease and desist from committing the acts found to be in violation of this chapter.
    2. Payment of a penalty of not more than ten thousand dollars for each and every act or violation.
    3. That the controlling insurance broker cease placing business with the controlled insurer.
  2. If it is found, after hearing, that the controlling broker or any other person has not materially complied with this chapter and that the controlled insurer or any policyholder thereof has suffered any loss or damage, the commissioner may maintain a civil action or intervene in an action brought by or on behalf of the insurer or policyholder for recovery of compensatory damages for the benefit of the insurer or policyholder or other appropriate relief.
  3. If an order for liquidation or rehabilitation of the controlled insurer has been entered pursuant to chapter 26.1-06.1, and the receiver appointed under that order believes that the controlling insurance broker or any other person has not materially complied with this chapter, or any rule or order adopted hereunder, and the insurer suffered any loss or damage therefrom, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the insurer.
  4. Nothing contained in this section affects the right of the commissioner to impose any other penalties provided for in the insurance law.
  5. Nothing contained in this section is intended to or in any manner alters or affects the rights of policyholders, claimants, creditors, or other third parties.

Source:

S.L. 1993, ch. 292, § 23.

26.1-26.5-07. Effective date.

Within sixty days of August 1, 1993, each controlled insurer and each controlling insurance broker must comply with the provisions of sections 26.1-26.5-03 and 26.1-26.5-04.

Source:

S.L. 1993, ch. 292, § 23.

CHAPTER 26.1-26.6 Bail Bondsmen

26.1-26.6-01. Definition.

As used in this chapter, unless the context otherwise requires, “bail bond agent” means any person that has been licensed by the commissioner and appointed by an insurer by power of attorney to execute or countersign bail bonds for the insurer in connection with the judicial proceedings and charges and receives money for the services.

Source:

S.L. 1993, ch. 306, § 1; 2005, ch. 267, § 1; 2015, ch. 44, § 8, eff July 1, 2015.

26.1-26.6-02. Licensing and continuing education requirements.

The licensing and continuing education requirements under chapter 26.1-26 apply to bail bond agents.

Source:

S.L. 1993, ch. 306, § 1; 2005, ch. 267, § 2.

26.1-26.6-03. Persons disqualified as bail bond agents — Penalty.

The following persons or classes may not be bail bond agents and may not directly or indirectly receive any benefits from the execution of any bail bond: jailers, police officers, committing magistrates, magistrate court judges, sheriffs, deputy sheriffs and constables, or any person having the power to arrest or having anything to do with the control of federal, state, county, or municipal prisoners. A violation of this section is a class B misdemeanor.

Source:

S.L. 1993, ch. 306, § 1; 2005, ch. 267, § 3.

26.1-26.6-04. Appointment and license as bail bond agent — Pledge of property as security — Penalty.

A person may not act in the capacity of a bail bond agent or perform any of the functions, duties, or powers prescribed for a bail bond agent under this chapter unless that person is appointed and licensed as provided in this chapter. However, this section does not prohibit any individual from pledging real or other property as security for a bail bond in judicial proceedings if the individual does not receive, or is not promised, money or other things of value therefor. Violation of this section is a class A misdemeanor.

Source:

S.L. 1993, ch. 306, § 1; 2005, ch. 267, § 4; 2015, ch. 44, § 9, eff July 1, 2015.

26.1-26.6-05. Violations — Penalties.

  1. The commissioner may suspend, revoke, or refuse to continue, issue, or renew any license issued under this chapter if, after notice to the licensee and hearing, the commissioner finds as to the licensee any of the following conditions:
    1. Recommending any particular attorney at law to handle the case in which the bail bond agent has caused a bond to be issued under this chapter.
    2. Forging the name of another to a bond or application for bond.
    3. Soliciting business in or about any place for prisoners or persons confined, arraigned, or in custody.
    4. Paying a fee or rebate, or giving or promising anything of value to a jailer, trustee, police officer or officer of the law, or any other person who has power to arrest or hold in custody or to any public official or public employee in order to secure a settlement, compromise, remission, or reduction of the amount of any bail bond or entreatment thereof, or to secure, delay, or other advantage. This subdivision does not apply to a jailer, police officer, or officer of the law who is not on duty and who assists in the apprehension of a defendant.
    5. Paying a fee or rebating or giving anything of value to an attorney in bail bond matters, except in defense of any action on a bond.
    6. Accepting anything of value from a principal other than a premium. Provided, the bail bond agent may accept collateral security or other indemnity from the principal which must be returned immediately upon final termination of liability on the bond. Such collateral security or other indemnity required by the bail bond agent must be reasonable in relation to the amount of the bond.
    7. Willfully failing to return collateral security to the principal when the principal is entitled to the security.
    8. Knowingly employing a person whose insurance producer license has been revoked, suspended, or denied in this or any other state.
    9. Knowingly or intentionally executing a bail bond without collecting in full a premium for the bond, at the premium rate as filed with and approved by the commissioner.
    10. Failing to pay any forfeiture as directed by a court and as required by this chapter.
  2. For purposes of subdivisions f and g of subsection 1, a bail bond agent shall monitor the status of bonds written by the bail bond agent to make timely return of the collateral security to the principal. It is not a defense to administrative action under this section that the bail bond agent did not know liability on the bond had been terminated or that the principal was entitled to return of the security.
  3. A bail bond agent or bail bond agency may not advertise as or hold itself out to be a surety company.
  4. A bail bond agent may not sign nor countersign any blank in any bond, nor give up power of attorney to or otherwise authorize, anyone to countersign the bail bond agent’s name to bonds.
  5. When a bail bond agent accepts collateral, the bail bond agent shall give a written receipt for the collateral and this receipt must contain a full description of the collateral received in the terms of redemption. The bail bond agent shall keep copies of all receipts of the bonds to be placed in business to be available to the commissioner for the commissioner’s review.
  6. The provisions and penalties under this section are in addition to those provided under chapter 26.1-26.

Source:

S.L. 1993, ch. 306, § 1; 2001, ch. 262, § 93; 2005, ch. 267, § 5; 2015, ch. 44, § 10, eff July 1, 2015.

26.1-26.6-06. Access to jails.

Every person who holds a valid bail bond agent license issued by the insurance commissioner is entitled to equal access to the jails of the state for the purpose of making bond, subject to the provisions of this chapter and the rules adopted in the manner provided by law. Jail personnel, law enforcement officers, and court personnel may not suggest, recommend, advise, or promote a particular bail bond agent. Each jail shall furnish a space convenient to the telephones in the booking area to be used to hold business cards of bail bond agents.

Source:

S.L. 1993, ch. 306, § 1; 2005, ch. 267, § 6.

26.1-26.6-07. Surrender of defendant prior to breach.

At any time before there has been a breach of the undertaking in any type of bail provided herein, the surety or bail bond agent may surrender the defendant, or the defendant may surrender, to the official to whose custody the defendant would have been given had the defendant been committed. The defendant may be surrendered without the return of premium for the bond if the defendant has been guilty of nonpayment of premium, changing address without notifying the bail bond agent, self-concealment, or leaving the jurisdiction of the court without the permission of the bail bond agent, or of violating the defendant’s contract with the bail bond agent in any way that does harm to the bail bond agent, or the surety, or violates the obligation to the court. For the purpose of surrendering the defendant, the surety may arrest the defendant before the forfeiture of the undertaking, or by written authority endorsed on a certified copy of the undertaking, may empower any peace officer to make arrest, first paying the lawful fees therefor.

Source:

S.L. 1993, ch. 306, § 1; 2005, ch. 267, § 7.

26.1-26.6-08. Maximum commission or fee — Mileage.

A bail bond agent may not charge a premium, commission, or fee for a bond in an amount more than twenty percent of the amount of bail furnished by the bail bond agent, or one hundred fifty dollars, whichever is greater. In addition to the premium, commission, or fee charged under this section, a bail bond agent may charge for mileage reimbursement, which may not exceed mileage reimbursement rates provided for state employees under section 54-06-09.

Source:

S.L. 1993, ch. 306, § 1; 2003, ch. 249, § 1; 2005, ch. 267, § 8; 2015, ch. 213, § 1, eff August 1, 2015.

26.1-26.6-09. Failure to appear.

If a defendant fails to appear for a scheduled court appearance, the clerk of court shall notify the bail bond agent. If the bail bond agent returns the defendant to the jurisdiction of the court, the bail bond agent may petition the court for a return of the forfeiture. If the bail bond agent returns the defendant to the jurisdiction of the court within six months of receiving notice of the failure to appear, the court shall return at least fifty percent of the forfeiture upon petition by the bail bond agent. If the bail bond agent returns the defendant to the jurisdiction of the court beyond six months of receiving notice of the failure to appear, the court may return the forfeiture upon receipt of a petition from the bail bond agent, less five percent for court costs.

Source:

S.L. 1993, ch. 306, § 1; 2003, ch. 250, § 1; 2005, ch. 267, § 9.

26.1-26.6-10. Rules.

The commissioner may adopt reasonable rules for implementation and administration of this chapter.

Source:

S.L. 1993, ch. 306, § 1.

CHAPTER 26.1-26.7 Portable Electronics Insurance

26.1-26.7-01. Definitions.

For purposes of this chapter:

  1. “Business entity” means a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity.
  2. “Customer” means a person that purchases a portable electronic device or services related to the use of a portable electronic device.
  3. “Enrolled customer” means a customer that elects coverage under a portable electronics insurance policy issued to a vendor of portable electronic devices.
  4. “Location” means any physical location in this state or any website, call center site, or similar location directed to residents of this state.
  5. “Person” means an individual or a business entity.
  6. “Portable electronic device”:
    1. Means personal, self-contained, easily carried by hand, battery-operated electronic communication, viewing, listening, recording, gaming, computing, or global positioning devices, including cellular or satellite phones, personal global positioning satellite units, portable computers, portable audio listening, video viewing or recording devices, digital cameras, video camcorders, portable gaming systems, docking stations, and accessories for any of these devices with a retail value of less than five thousand dollars.
    2. Does not include telecommunications switching equipment, transmission wires, cell site transceiver equipment, or other equipment and systems used by telecommunications companies to provide telecommunications service to consumers.
  7. “Portable electronics insurance” means insurance providing coverage for the repair or replacement of portable electronic devices due to one or more of the following causes of loss: loss, theft, inoperability due to mechanical failure, malfunction, damage, or other similar cause of loss. The term includes any agreement whereby a person, in exchange for consideration paid, agrees to provide for the future repair or replacement of a portable electronic device. The term does not include:
    1. A property service contract as defined under section 9-01-21;
    2. A policy of insurance covering a seller’s or a manufacturer’s obligations under a warranty; or
    3. A homeowner’s, renter’s, private passenger automobile, commercial multi-peril, or similar policy.
  8. “Portable electronics transaction” means the sale or lease of portable electronic devices by a vendor to a customer or the sale of a service related to the use of a portable electronic device by a vendor to a customer.
  9. “Vendor” means a person in the business of engaging in portable electronics transactions, directly or indirectly.

History. S.L. 2015, ch. 214, § 1, eff July 1, 2015.

26.1-26.7-02. Licensure of vendors.

  1. A vendor shall hold a limited lines license under this section to sell or offer coverage under a policy of portable electronics insurance.
  2. A limited lines license issued under this section is limited to authorizing a vendor and the vendor’s employees or authorized representatives to sell or offer coverage under a policy of portable electronics insurance to a customer to whom the vendor and the vendor’s employees or authorized representatives sells or leases a portable electronic device or services related to the use of a portable electronic device.
  3. A limited lines license issued under this section authorizes a vendor and the vendor’s employees or authorized representatives to sell or offer portable electronics insurance coverage at each location at which the vendor engages in portable electronics transactions.
  4. The vendor shall maintain a registry of locations that are authorized to sell or solicit portable electronics insurance coverage in this state. Upon request by the commissioner, and with five days’ notice to the vendor, the vendor shall provide the registry to the commissioner for inspection and examination.
  5. Notwithstanding any other provision of law, a license issued under this section authorizes the licensee and the licensee’s employees or authorized representatives to engage only in those activities that are permitted in this chapter in connection with the business of insurance unless authorized to do so under an existing license issued by the commissioner.
  6. A vendor, and the vendor’s employees or authorized representatives, are exempt from the continuing education requirements of section 26.1-26-31.1.

History. S.L. 2015, ch. 214, § 1, eff July 1, 2015; 2021, ch. 227, § 5, eff August 1, 2021.

26.1-26.7-03. Requirements for sale of portable electronics insurance.

  1. At every location where portable electronics insurance is offered to customers, the vendor shall make available to a prospective customer brochures or other written materials that:
    1. Disclose portable electronics insurance may provide a duplication of coverage already provided by a customer’s homeowner’s insurance policy, renter’s insurance policy, or other source of coverage.
    2. State the enrollment by the customer in a portable electronics insurance program is not required in order to purchase or lease a portable electronic device or services.
    3. Summarize the material terms of the insurance coverage, including:
      1. The identity of the insurer;
      2. The amount of any applicable deductible and how the deductible is to be paid;
      3. Benefits of the coverage; and
      4. Key terms and conditions of coverage, such as whether a portable electronic device may be repaired or replaced with similar make and model reconditioned or nonoriginal manufacturer parts or equipment.
    4. Summarize the process for filing a claim, including a description of how to return a portable electronic device and the maximum fee applicable in the event the customer fails to comply with any equipment return requirements.
    5. State an enrolled customer may cancel enrollment for coverage under a portable electronics insurance policy at any time and the person paying the premium shall receive a refund of any applicable unearned premium.
  2. The written materials required by this section are not subject to filing or approval requirements with the commissioner.
  3. Portable electronics insurance may be offered on a month-to-month or other periodic basis as a group or master commercial inland marine policy issued to a vendor of portable electronic devices for the vendor’s enrolled customers.
  4. A policy of portable electronics insurance must provide primary coverage in the event of a covered loss under more than one policy.
  5. Eligibility and underwriting standards for customers electing to enroll in coverage must be established for each portable electronics insurance program.

History. S.L. 2015, ch. 214, § 1, eff July 1, 2015.

26.1-26.7-04. Authority of vendors of portable electronic devices.

  1. An employee and an authorized representative of a vendor may sell or offer portable electronics insurance to customers and are not subject to licensure as an insurance producer under this chapter if:
    1. The vendor obtains a limited lines license to authorize the vendor’s employees or authorized representatives to sell or offer portable electronics insurance under this chapter.
    2. The vendor files an acknowledgment with the commissioner in a form and manner directed by the commissioner which the vendor’s counter sales personnel and authorized representatives act on the vendor’s behalf and the vendor is responsible for any representations made by the counter sales personnel or authorized representatives relating to insurance products offered through the vendor. The acknowledgment must state the commissioner may take any administrative action contemplated in this title.
    3. The insurer issuing the portable electronics insurance either directly supervises or the vendor supervises the development of a training program for employees and authorized representatives of the vendors. The training required by this subdivision must comply with the following:
      1. The training must be delivered to employees and authorized representatives of vendors who are directly engaged in the activity of selling or offering portable electronics insurance, and the training materials must be maintained by the vendor and be made available to the commissioner for inspection upon request; and
      2. Each employee and authorized representative shall receive basic instruction about the portable electronics insurance offered to customers and the disclosures required under section 26.1-26.7-03; and
    4. An employee or authorized representative of a vendor of portable electronic devices may not advertise, represent, or otherwise hold out to the public as a nonlimited lines-licensed insurance producer.
  2. A vendor’s employees and authorized representatives may not be paid directly by an insurance company, a commission, or any other compensation for the sale of insurance. However, this section does not prevent a vendor from including the insurance products in an overall employee performance compensation incentive program.
  3. The vendor of portable electronic devices may bill and collect charges for portable electronic devices insurance coverage. Any charge to the enrolled customer for coverage that is not included in the cost associated with the purchase or lease of a portable electronic device or related service must be separately itemized on the enrolled customer’s bill. If the portable electronics insurance coverage is included with the purchase or lease of a portable electronic device or related services, the vendor clearly and conspicuously shall disclose to the enrolled customer any portable electronics insurance coverage included with the portable electronic device or related service, and the stand-alone cost of the premium for the same or similar insurance must be made on the customer’s bill and in any marketing materials made available at the point of sale. A vendor billing and collecting the charges are not required to maintain the funds in a segregated account if the vendor is authorized by the insurer to hold the funds in an alternative manner. All funds received by a vendor from an enrolled customer for the sale of portable electronics insurance must be considered funds held in trust by the vendor in a fiduciary capacity for the benefit of the insurer. A vendor may receive compensation for billing and collection services.

History. S.L. 2015, ch. 214, § 1, eff July 1, 2015.

26.1-26.7-05. Termination of portable electronics insurance.

Notwithstanding any other provision of law:

  1. An insurer may terminate or otherwise change the terms and conditions of a policy of portable electronics insurance only upon providing the policyholder and enrolled customers with at least thirty days notice.
  2. If the insurer changes the terms and conditions, the insurer shall provide the vendor policyholder with a revised policy or endorsement and each enrolled customer with a revised certificate, endorsement, updated brochure, or other evidence indicating a change in the terms and conditions has occurred and a summary of material changes.
  3. Notwithstanding subsection 1, an insurer may terminate an enrolled customer’s enrollment under a portable electronics insurance policy upon thirty days notice for discovery of fraud or material misrepresentation in obtaining coverage or in the presentation of a claim under the policy.
  4. Notwithstanding subsection 1, an insurer may terminate an enrolled customer’s enrollment under a portable electronics insurance policy upon ten days notice for nonpayment of premium.
  5. Notwithstanding subsection 1, an insurer immediately may terminate an enrolled customer’s enrollment under a portable electronics insurance policy without prior notice:
    1. If the enrolled customer ceases to have an active service with the vendor of portable electronic devices; or
    2. If an enrolled customer exhausts the aggregate limit of liability, if any, under the terms of the portable electronics insurance policy and the insurer sends notice of termination to the enrolled customer within thirty calendar days after exhaustion of the limit. However, if notice is not timely sent, coverage must continue, notwithstanding the aggregate limit of liability until the insurer sends notice of termination to the enrolled customer.
  6. If a portable electronics insurance policy is terminated by a policyholder, the policyholder shall mail or deliver written notice to each enrolled customer advising the enrolled customer of the termination of the policy and the effective date of termination. The written notice must be mailed or delivered to the enrolled customer at least thirty days before the termination.
  7. If notice or correspondence with respect to a policy of portable electronics insurance is required under this section or is otherwise required by law, the notice or correspondence must be in writing and sent within the notice period, if any, specified within the statute or regulation requiring the notice or correspondence. Notwithstanding any other provision of law, notices and correspondence may be sent by mail or by electronic means as set forth in this subsection. If the notice or correspondence is mailed, it must be sent to the vendor of portable electronic devices at the vendor’s mailing address specified for this purpose and to the vendor’s affected enrolled customers’ last known mailing addresses on file with the insurer. The insurer or vendor of portable electronic devices, as the case may be, shall maintain proof of mailing in a form authorized or accepted by the United States postal service or other commercial mail delivery service. If the notice or correspondence is sent by electronic means, the notice or correspondence must be sent to the vendor of portable electronic devices at the vendor’s electronic mail address specified for this purpose and to the vendor’s affected enrolled customers’ last known electronic mail address as provided by each enrolled customer to the insurer or vendor of portable electronic devices, as the case may be. For purposes of this subsection, an enrolled customer’s provision of an electronic mail address to the insurer or vendor of portable electronic devices, as the case may be, is deemed consent to receive notices and correspondence by electronic means. The insurer or vendor of portable electronic devices, as the case may be, shall maintain proof the notice or correspondence was sent.
  8. Notice or correspondence required by this section or otherwise required by law may be sent on behalf of an insurer or vendor, as the case may be, by a business entity that is a licensed insurance producer and that is appointed by the insurer issuing the portable electronics insurance policy to assist with the administration of the portable electronics insurance program.

History. S.L. 2015, ch. 214, § 1, eff July 1, 2015.

26.1-26.7-06. Application for license and fees.

  1. A vendor shall apply for licensure under subsection 2 of section 26.1-26-13.3.
  2. An applicant shall apply for licensure under the provisions of section 26.1-26-13.3. In lieu of providing the information for all officers, directors, and shareholders owning more than ten percent of the applicant, the requirements for the applicant are limited to requiring the applicant to provide the name, residence address, and other information required by the commissioner for an employee or officer of the vendor that is designated by the applicant as the person responsible for the vendor’s compliance with the requirements of this chapter. However, if the vendor derives more than fifty percent of the vendor’s revenue from the sale of portable electronics insurance the information required under this subsection must be provided for all officers, directors, and shareholder of record having beneficial ownership of ten percent or more.
  3. Each vendor of portable electronic devices licensed under this chapter shall pay to the commissioner a fee as prescribed by the commissioner.
  4. Any vendor engaging in portable electronics insurance transactions before July 1, 2015, shall apply for licensure within ninety days of the application being made available by the commissioner. Any applicant commencing operations after July 1, 2015 shall obtain a license before offering portable electronics insurance. The provisions and penalties under this section are in addition to those provided under chapter 26.1-26.

History. S.L. 2015, ch. 214, § 1, eff July 1, 2015.

CHAPTER 26.1-26.8 Public Adjusters

Source:

S.L. 2019, HB1219, § 2, eff July 1, 2019.

26.1-26.8-01. Scope.

This chapter governs the qualifications and procedures for licensing public adjusters in this state and specifies the duties of and restrictions on public adjusters, including limitation of licensure to assisting only insureds with first-party claims.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-02. Definitions.

As used in this chapter:

  1. “Business entity” has the same meaning as provided in section 26.1-26-02.
  2. “Department” means the insurance department.
  3. “Home state” means the state in which the principal place of residence or principal place of business of the public adjuster is located.
  4. “Insured” means a person insured under the insurance policy against which the claim is made.
  5. “Public adjuster” means a person that, for compensation, does the following:
    1. Acts for or aids an insured in negotiating for or effecting the settlement of a first-party claim for loss or damage to real or personal property of the insured;
    2. Advertises for employment as a public adjuster of first-party claims or otherwise solicits business or represents to the public the person is a public adjuster of first-party claims for loss or damage to real or personal property of an insured; or
    3. Solicits the business of investigating or adjusting losses or of advising an insured about first-party claims for loss or damage to real or personal property of the insured.
  6. “Uniform business entity application” means the uniform business entity application prescribed by the commissioner which conforms substantially to the uniform business entity application for resident and nonresident business entities adopted by the national association of insurance commissioners.
  7. “Uniform individual application” means the uniform individual application prescribed by the commissioner which conforms substantially to the uniform application for individual adjuster licensing adopted by the national association of insurance commissioners.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-03. License required — Penalty.

  1. A person may not operate as or represent that the person is a public adjuster in this state unless the person is licensed as a public adjuster in accordance with this chapter.
  2. A public adjuster may not misrepresent to an insured the public adjuster is an adjuster representing an insurer in any capacity, including acting as an employee of the insurer or acting as an independent adjuster.
  3. A public adjuster may not solicit or enter an agreement for the repair or replacement of damaged property on which the public adjuster has engaged to adjust or settle claims for losses or damages of the insured.
  4. Except as provided in subsection 1, licensure as a public adjuster is not required for:
    1. An attorney admitted to practice in this state, in the course of acting in the attorney’s professional capacity as an attorney;
    2. A person that negotiates or settles claims arising under a life or health insurance policy or an annuity contract;
    3. An individual employed for the limited purpose of obtaining facts surrounding a loss or furnishing technical assistance to a licensed public adjuster, including a photographer, estimator, private investigator, engineer, or handwriting expert;
    4. A licensed health care provider, or an employee of a licensed health care provider, who prepares or files a health claim form on behalf of a patient; or
    5. A person that settles subrogation claims between insurers.
  5. A person willfully violating subsection 1 or 2 is guilty of a class C felony.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-04. Application for resident license.

An individual applying for a resident public adjuster license shall submit to the commissioner a completed uniform individual application and declare under penalty of denial, suspension, or revocation of the license that the statements made in the application are true, correct, and complete to the best of the individual’s knowledge and belief. The commissioner shall approve the application if the commissioner determines the individual:

  1. Is at least eighteen years of age;
  2. Has a principal place of residence or principal place of business in this state;
  3. Has not committed an act that is a ground for denial, suspension, or revocation set forth in section 26.1-26.8-10;
  4. Has paid the resident licensing fee, not to exceed one hundred dollars, prescribed by the commissioner;
  5. Except as otherwise provided in this chapter, has passed the examinations required by section 26.1-26.8-07;
  6. Is trustworthy, reliable, and of good reputation;
  7. Is financially responsible to exercise the license and has provided proof of financial responsibility, as required in section 26.1-26.8-11;
  8. Maintains an office in this state, with public access to the office by reasonable appointment or regular business hours; and
  9. Has completed a criminal history record check as provided in section 12-60-24.
    1. All costs associated with the criminal history record check under this section are the responsibility of the applicant.
    2. This subsection does not apply to license continuation under section 26.1-26.8-09 or to an individual who applies for a public adjuster license within twelve months following the cancellation or expiration of a valid resident public adjuster license issued by the department, unless the license was suspended or revoked.
    3. The commissioner may make arrangements, including contracting with an outside service, for the collection and transmission of fingerprints for conducting criminal history record checks.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-05. Nonresident license reciprocity.

  1. An individual applying for a nonresident public adjuster license shall apply to the commissioner in the manner prescribed by the commissioner and declare under penalty of denial, suspension, or revocation of the license that the statements made in the application are true, correct, and complete to the best of the individual’s knowledge and belief. The commissioner shall approve the application if the commissioner determines the applicant:
    1. Is licensed as a resident public adjuster and in good standing in the individual’s home state and the home state awards nonresident public adjuster licenses to residents of this state on the same basis as provided for in this chapter; and
    2. Has paid the nonresident licensing fee, not to exceed one hundred dollars, prescribed by the commissioner.
  2. The commissioner may verify the licensing status of a nonresident public adjuster through the producer database maintained by the national association of insurance commissioners, or the association’s affiliates or subsidiaries.
  3. As a condition to continuation of a nonresident public adjuster license, a nonresident public adjuster shall maintain a resident public adjuster license in good standing in the individual’s home state.
  4. A licensed nonresident public adjuster shall surrender immediately to the commissioner the individual’s nonresident public adjuster license and the commissioner shall terminate the individual’s nonresident public adjuster license if the home state public adjuster license terminates for any reason, unless the individual has been issued a license as a resident public adjuster in a new home state and the new home state has reciprocity with this state. A licensed nonresident public adjuster shall notify the commissioner of a change to a new home state as soon as possible, but no later than thirty days after receiving a license as a resident public adjuster from the new home state. The licensed nonresident public adjuster shall include both the new and the old addresses in the notice to the commissioner.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-06. License required for business entity.

  1. A business entity acting as a public adjuster in this state must be licensed as a public adjuster. A business entity applying for a public adjuster license shall submit to the commissioner a completed uniform business entity application and declare under penalty of denial, suspension, or revocation of the license that the statements made in the application are true, correct, and complete to the best of the knowledge and belief of the entity. The commissioner shall approve the application if the commissioner determines the applicant:
    1. Has paid the business entity licensing fee, not to exceed one hundred fifty dollars, prescribed by the commissioner; and
    2. Has designated a resident public adjuster or a nonresident public adjuster licensed pursuant to this chapter to be responsible for compliance with the insurance laws, rules, and regulations of this state for the business entity.
  2. The commissioner may require additional documents be submitted that are reasonably necessary to verify the information contained in an application pursuant to this section.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-07. Examination.

  1. An individual applying for a resident public adjuster license shall pass a written examination, unless exempt pursuant to section 26.1-26.8-08. The examination must test the individual’s knowledge concerning the duties and responsibilities of a public adjuster and the insurance laws and regulations of this state and be conducted as prescribed by the commissioner.
  2. The commissioner may make arrangements, including contracting with an outside testing service, for administering the written examination required pursuant to subsection 1 and collecting the nonrefundable fee as prescribed by the commissioner as set forth in section 26.1-01-07.
  3. An individual applying for examination shall remit a nonrefundable fee as prescribed by the commissioner as set forth in section 26.1-01-07.
  4. An individual who fails to appear for the examination as scheduled or fails to pass the examination may reapply for an examination if the individual remits all required fees and forms before being rescheduled for another examination.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-08. Exemptions from examination.

  1. An individual who applies for a resident public adjuster license in this state who was previously licensed as a public adjuster in another state is not required to complete an examination. This exemption is available only if:
    1. The applicant is currently licensed in another state; or
    2. The commissioner receives the application within ninety days of the cancellation of the applicant’s previous license and the prior state issues a certification that, at the time of cancellation, the applicant was in good standing in the state or the state’s public adjuster database records, maintained by the national association of insurance commissioners or the association’s affiliates or subsidiaries, indicate the applicant is or was licensed in good standing.
  2. To become a resident licensee pursuant to section 26.1-26.8-04, an individual licensed as a public adjuster in another state who moves to this state shall apply within ninety days of establishing legal residence in this state. An examination may not be required of that individual to obtain a resident public adjuster license unless the commissioner determines otherwise by rule.
  3. If an individual who applies for a resident public adjuster license previously was licensed as either a resident public adjuster or a nonresident public adjuster in this state, the commissioner may not require the individual to complete an examination if:
    1. The application is received within twelve months of the termination of the previous license in this state; and
    2. At the time of the termination, the applicant was in good standing in this state.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-09. License — Renewal — Reinstatement.

  1. The commissioner shall issue a resident public adjuster license or nonresident public adjuster license to an individual who meets the necessary requirements of this chapter.
    1. A resident public adjuster license and a nonresident public adjuster license expire on the last day of the month of the licensed public adjuster’s birthday following the two-year anniversary of issuance of a license by the commissioner.
    2. To renew a license, a licensed resident public adjuster and a licensed nonresident public adjuster shall file a biennial license continuation in the form and manner prescribed by the commissioner and pay a fee of twenty-five dollars. The commissioner shall give a licensee at least sixty days’ notice of the biennial license continuation filing deadline. A resident public adjuster or a nonresident public adjuster who allows the license to lapse may, within the twelve-month period immediately following the expiration date, reinstate the same license without the necessity of passing a written examination, upon payment of a reinstatement fee, not to exceed one hundred twenty-five dollars, prescribed by the commissioner in addition to the renewal fee.
    3. The commissioner may grant an individual licensee who is unable to comply with license renewal procedures due to military service or some other extenuating circumstance, including a long-term medical disability, a waiver of an examination requirement or a fine, fee, or sanction imposed for failure to comply with renewal procedures.
  2. The commissioner shall issue a business entity public adjuster license to a business entity that meets the necessary requirements of this chapter.
    1. A business entity public adjuster license expires on the two-year anniversary of issuance of a license by the commissioner.
    2. To renew a license, a licensed business entity public adjuster shall file a biennial license continuation in the form and manner prescribed by the commissioner.
    3. A business entity public adjuster license may be renewed within the ninety-day period immediately preceding the expiration date upon payment of the renewal fee, not to exceed one hundred fifty dollars, prescribed by the commissioner. A business entity public adjuster that allows the license to lapse may, within the thirty-day period immediately following the expiration date, renew the same license upon payment of a late renewal fee, not to exceed one hundred twenty-five dollars, prescribed by the commissioner in addition to the renewal fee.
    4. A business entity public adjuster license renewed within the thirty-day period immediately following the expiration date pursuant to this section is deemed to have been renewed before the expiration date.
  3. A license issued pursuant to this chapter must contain the licensee’s name, address, and license number; the date of issuance; the lines of authority; the expiration date; and any information the commissioner deems necessary.
  4. Within thirty days after the change, a licensee shall inform the commissioner, by any means acceptable to the commissioner, of a change of legal name, address, or other information submitted on the application.
    1. A licensee who fails to provide this notification of change is subject to a fine by the commissioner of not more than five hundred dollars per violation, suspension of the license until the change is reported to the commissioner, or both.
    2. A licensee doing business under a name other than the licensee’s legal name shall notify the commissioner before using the assumed name.
  5. A licensee is subject to the provisions of chapter 26.1-04.
  6. A licensee shall report to the commissioner any administrative action taken against the licensee in another jurisdiction or by another governmental agency in this state within thirty days of the final disposition of the matter. The report must include a copy of the order, consent to order, or other relevant legal documents.
  7. Within thirty days after a criminal conviction, a licensee shall report to the commissioner any criminal conviction of the licensee taken in any jurisdiction. The report must include a copy of the initial complaint, the order issued by the court, and any other relevant legal documents.
  8. The commissioner may contract with nongovernmental entities, including the national association of insurance commissioners, or affiliates or subsidiaries the national association oversees, to perform ministerial functions, including the collection of fees, related to the administration of this chapter.
  9. The commissioner may adopt rules establishing license renewal procedures.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-10. License denial, nonrenewal, or revocation — Penalty.

  1. The commissioner may suspend, revoke, or refuse to issue or renew a resident public adjuster license, nonresident public adjuster license, or business entity public adjuster license or may levy an administrative fine in accordance with subsection 4, or a combination of those actions, for the following causes:
    1. Providing incorrect, misleading, incomplete, or materially untrue information in the license application;
    2. Violating any provision of this title or violating a rule, regulation, subpoena, or order of the commissioner or another state’s insurance commissioner;
    3. Obtaining or attempting to obtain a license through misrepresentation or fraud;
    4. Improperly withholding, misappropriating, or converting money or property received in the course of doing business;
    5. Intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance;
    6. Having been convicted of a felony or a class A or B misdemeanor;
    7. Having admitted or been found to have committed an insurance unfair trade practice, an unfair claims settlement practice, or fraud;
    8. Using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this state or elsewhere or failing to comply with section 26.1-26.8-15;
    9. Having an insurance or public adjuster license, or its equivalent, denied, suspended, placed on probation, or revoked in this state or in another state, province, district, or territory;
    10. Forging another person’s name to an application for insurance or to a document related to an insurance transaction;
    11. Improperly using notes or other reference materials to complete an examination for an insurance license;
    12. Knowingly accepting insurance business from a person that is not licensed;
    13. Failing to comply with an administrative or court order imposing a child support obligation;
    14. Failing to pay state income tax or comply with an administrative or court order directing payment of state income tax; or
    15. Failing to maintain in good standing a resident license in the public adjuster’s home state.
  2. If the commissioner does not renew or denies an application for a public adjuster license, the commissioner shall notify the applicant or licensee and advise, in writing, the reason for the denial or nonrenewal of the license. Within thirty days of nonrenewal or denial, the applicant or licensee may make written demand upon the commissioner for a hearing before the commissioner to determine the reasonableness of the commissioner’s action. The hearing must be held pursuant to chapter 28-32.
  3. A business entity public adjuster license may be suspended, revoked, or denied if the commissioner finds, after notice and hearing, that a violation committed by an individual licensee providing services through the business entity was known or should have been known by one or more of the partners, officers, or managers acting on behalf of the business entity and the violation neither was reported to the commissioner nor was corrective action taken in relation to the violation.
  4. In addition to or in lieu of an applicable denial, suspension, or revocation of a license, a person violating this chapter may, after notice and hearing, be subject to an administrative fine of not more than ten thousand dollars per violation. A fine may be enforced in the same manner as civil judgments. A person charged with a violation of this chapter may waive the right to a hearing and consent to the discipline the commissioner determines is appropriate. Chapter 28-32 governs all hearings held pursuant to this subsection.
  5. The commissioner may enforce this chapter and impose a penalty or remedy authorized by this chapter against a person under investigation for or charged with a violation of this chapter even if the person’s license has been surrendered or lapsed by operation of law. A disciplinary proceeding may not be instituted against a person after three years from the termination of the person’s license.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-11. Proof of bond or insurance.

  1. At the time of issuance of a resident public adjuster license or a nonresident public adjuster license and for the duration of the license, an applicant shall maintain a surety bond or proof of insurance satisfactory to the commissioner for the use and benefit of the commissioner for insureds that have remitted fees, retainers, compensation, deposits, or other things of value to the public adjuster in the course of the public adjuster’s business. The bond:
    1. Must be a minimum of twenty thousand dollars; and
    2. May not be terminated by the surety company or public adjuster unless written notice has been filed with the commissioner and submitted to the public adjuster at least sixty days before the termination.
  2. The commissioner may request the evidence of financial responsibility at any time the commissioner deems relevant.
  3. A public adjuster immediately shall notify the commissioner if evidence of financial responsibility terminates or becomes impaired. The authority to act as a public adjuster automatically terminates if the evidence of financial responsibility terminates or becomes impaired.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-12. Continuing education.

  1. Except as otherwise provided in this section, an individual who holds a resident public adjuster license or a nonresident public adjuster license shall satisfactorily complete a minimum of twenty-four credits of continuing education, including three credits of ethics, reported on a biennial basis in conjunction with the license renewal cycle. Credits for continuing education courses attended in any one year over the minimum number of hours of education required, not to exceed twelve hours, may be credited to the year next preceding the year in which the credits were earned or to the year next following the year in which the credits were earned. Report of continuing education must be made at the end of a two-year period. The commissioner may provide a one-time extension of the two-year reporting requirement, not to exceed thirty-six months, if additional time is necessary to implement the transition to reporting continuing education by birth month.
  2. The requirements of subsection 1 do not apply to a nonresident public adjuster who has met the continuing education requirements of the adjuster’s home state and whose home state gives credit to residents of this state on the same basis.
  3. The commissioner shall provide by rule for reporting by birth month of compliance with the continuing education requirements of this section.
  4. The commissioner shall adopt by rule criteria for the accreditation of courses for continuing education. Applications for accreditation of a continuing education course offered in this state must be submitted to the commissioner within the time provided by rule and on forms established by rule and with a fee of fifty dollars. The commissioner shall make a final determination as to accreditation and assignment of credit-hours for continuing education courses.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-13. Contract between public adjuster and insured.

  1. A contract for a public adjuster’s services must be in writing and contain the following terms:
    1. Legible full name of the public adjuster signing the contract, as specified in commissioner records;
    2. Home state, business address, and telephone number;
    3. Public adjuster license number;
    4. Title of “Public Adjuster Contract”;
    5. Insured’s full name and street address, insurer name, and insurance policy number, if known or upon notification;
    6. Description of the loss and the location of the loss, if applicable;
    7. Description of services to be provided to the insured;
    8. Signatures of the public adjuster and the insured;
    9. The date the contract was signed by the public adjuster and the date the contract was signed by the insured;
    10. Attestation language stating the public adjuster is fully bonded pursuant to state law; and
    11. The specific amount of compensation, including the full salary, fee, commission, or other consideration the public adjuster is to receive for services.
  2. The contract may specify the public adjuster must be named as a copayee on an insurer’s payment of a claim.
  3. If the compensation is based on a share of the insurance settlement, the exact percentage must be specified in the contract.
  4. Initial expenses to be reimbursed to the public adjuster from the proceeds of the claim payment must be specified by type and the dollar estimates must be set forth in the contract. Additional expenses must be approved in writing by the insured.
  5. Compensation provisions in a public adjuster contract may not be redacted in a copy of the contract provided to the commissioner.
  6. If the insurer, not later than three days after the date on which the loss is reported to the insurer, either pays or commits in writing to pay to the insured the policy limit of the insurance policy, the public adjuster:
    1. May not receive a commission consisting of a percentage of the total amount paid by an insurer to resolve a claim;
    2. Shall inform the insured the loss recovery amount might not be increased by the insurer; and
    3. Is entitled only to reasonable compensation from the insured for services provided by the public adjuster on behalf of the insured, based on the time spent on a claim and expenses incurred by the public adjuster, until the claim is paid or the insured receives a written commitment to pay from the insurer.
  7. A public adjuster contract may not contain a contract term that:
    1. Allows for balance billing of the insured;
    2. Allows a percentage fee to be collected by the public adjuster if money is due from an insurer, but not paid, or allows a public adjuster to collect the entire fee from the first check issued by an insurer, rather than a percentage of each check issued by an insurer;
    3. Requires the insured to authorize an insurer to issue a check only in the name of the public adjuster;
    4. Imposes collection costs or late fees; or
    5. Precludes a public adjuster from pursuing civil remedies.
  8. Before the signing of the contract the public adjuster shall provide the insured with a separate disclosure document regarding the claim process which states:
    1. Property insurance policies obligate the insured to present a claim to the insurer for consideration.
    2. The following three types of adjusters could be involved in the claim process:
      1. “Company adjuster” means an insurance adjuster who is an employee of an insurer. A company adjuster represents the interest of the insurer, is paid by the insurer, and will not charge the insured a fee.
      2. “Independent adjuster” means an insurance adjuster who is hired on a contract basis by an insurer to represent the interest of the insurer in the settlement of the claim. An independent adjuster is paid by the insurer and will not charge the insured a fee.
      3. “Public adjuster” means an insurance adjuster who does not work for an insurer. A public adjuster works for the insured to assist in the preparation, presentation, and settlement of the claim. The insured hires a public adjuster by signing a contract agreeing to pay a fee or commission based on a percentage of the settlement or other method of compensation.
    3. The insured is not required to hire a public adjuster to help the insured meet the insured’s obligations under the policy, but has the right to do so.
    4. The insured has the right to initiate direct communications with the insured’s attorney, the insurer, the company adjuster, and the insurer’s attorney, or any person regarding the settlement of the insured’s claim.
    5. The public adjuster is not a representative or employee of the insurer.
    6. The salary, fee, commission, or other consideration to be paid to a public adjuster is the obligation of the insured, not the insurer.
  9. The contract must be executed in duplicate to provide an original contract to the public adjuster and to the insured. The original contract retained by the public adjuster must be available at all times for inspection without notice by the department.
  10. The public adjuster shall provide the insurer a notification letter signed by the insured, authorizing the public adjuster to represent the insured’s interest. The notification letter must include a copy of the signed contract.
  11. The public adjuster shall give the insured written notice of the insured’s rights as provided in this section.
  12. Within three days after the claim is submitted to the insurer, the insured has the right to rescind the contract. The rescission must be in writing and mailed or delivered to the public adjuster at the address in the contract within the three business-day period.
  13. If the insured exercises the right to rescind the contract, anything of value given by the insured under the contract must be returned to the insured within fifteen days following the receipt by the public adjuster of the rescission notice.
  14. The commissioner may require a public adjuster to file a contract with the department in a manner prescribed by the commissioner.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-14. Record retention.

  1. A public adjuster shall maintain a complete record of each transaction as a public adjuster. The records required by this section include:
    1. The name of the insured;
    2. The date, location, and amount of the loss;
    3. A copy of the contract between the public adjuster and the insured;
    4. The name of the insurer, amount, expiration date, and policy number for each policy carried with respect to the loss;
    5. An itemized statement of the amount recovered for the insured;
    6. An itemized statement of all compensation received by the public adjuster, from any source, in connection with the loss;
    7. A register of all money received, deposited, disbursed, or withdrawn in connection with a transaction with an insured, including fees, transfers, and disbursements from a trust account and all transactions concerning all interest-bearing accounts;
    8. The name of the public adjuster who executed the contract;
    9. The name of the attorney representing the insured, if applicable, and the name of the claims representative of the insurer; and
    10. Evidence of financial responsibility in a format prescribed by the commissioner.
  2. A public adjuster shall maintain the records for at least six years after the termination of the transaction with an insured and shall open the records to examination by the department at all times.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-15. Standards of conduct of public adjuster.

  1. A public adjuster shall serve with objectivity and complete loyalty to the interest of the insured and in good faith shall render to the insured such information, counsel, and service, as within the knowledge, understanding, and opinion of the public adjuster will best serve the insurance claim needs and interest of the insured.
  2. A public adjuster may not solicit or attempt to solicit an insured during the progress of a loss-producing occurrence, as defined in the insured’s insurance contract.
  3. A public adjuster may not permit an unlicensed employee or representative of the public adjuster to conduct business for which a license is required under this chapter.
  4. A public adjuster may not have a financial interest in any aspect of the claim, other than the salary, fee, commission, or other consideration established in the written contract with the insured. A financial interest includes ownership of, employment by, or other consideration received from an individual or business entity that performs work pertaining to damage related to the insured loss.
  5. A public adjuster may not acquire an interest in salvage of property subject to the contract with the insured unless the public adjuster obtains written permission from the insured after settlement of the claim with the insurer.
  6. A public adjuster may not refer or direct the insured to obtain needed repairs or services in connection with a loss from a person:
    1. With which the public adjuster has a financial interest; or
    2. From which the public adjuster may receive compensation or other consideration for the referral.
  7. A public adjuster may not undertake the adjustment of a claim if the public adjuster is not competent and knowledgeable as to the terms and conditions of the insurance coverage or if the loss or coverage otherwise exceeds the current expertise of the public adjuster.
  8. A public adjuster may not knowingly make a false oral or written material statement regarding a person engaged in the business of insurance to an insured client or potential insured client.
  9. A public adjuster, while licensed pursuant to this chapter, may not represent or act as a company adjuster or independent adjuster in any circumstance.
  10. A public adjuster may not enter a contract or accept a power of attorney that vests in the public adjuster the effective authority to choose the person that will perform repair work.
  11. A public adjuster may not agree to a loss settlement without the insured’s knowledge and consent.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-16. Public adjuster fees.

  1. A public adjuster may charge the insured a reasonable fee for public adjuster services.
  2. A person may not accept a commission, service fee, or other valuable consideration for investigating or settling claims in this state if the person is required to be licensed under this chapter and is not licensed.
  3. A public adjuster may not charge, agree to, or accept as compensation or reimbursement a payment, commission, fee, or other thing of value equal to or more than ten percent of an insurance settlement or proceeds resulting from a catastrophic disaster.
  4. A public adjuster may not require, demand, or accept a fee, retainer, compensation, deposit, or other thing of value before settlement of a claim, unless the loss is being handled by the public adjuster on a time-plus-expense basis.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-17. Rulemaking authority.

The commissioner may adopt rules to carry out this chapter.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-18. Investigation by commissioner.

Within a reasonable time after receipt of a properly completed application for a license under this chapter, the commissioner may conduct an investigation and propound interrogatories concerning the applicant’s qualifications, residence, business affiliations, and any other matter the commissioner believes necessary or advisable to determine compliance with this chapter or for the protection of the public.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-19. Approval of examination by commissioner — Contents.

Each examination must be approved for use by the commissioner and must reasonably test the applicant’s knowledge as to the policies and transactions to be handled under the license applied for, the duties and responsibilities of the licensee, and the pertinent insurance laws of this state.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-20. Vendor authority.

The commissioner may contract with nongovernmental entities, including the national association of insurance commissioners or any affiliate or subsidiary the national association of insurance commissioners oversees, to perform any ministerial functions, including the collection of fees, related to public adjuster licensing.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-21. Commissioner may make examinations and investigations.

Whenever the commissioner believes this chapter has been violated, the commissioner, at the expense of the public adjuster involved, may examine, at the offices of the public adjuster, whether located within or outside this state, all books, records, and papers of the public adjuster or the company with which the public adjuster is affiliated and any books, records, and papers of any insured within this state, and may examine under oath, the officers, managers, and public adjusters or the insured as to the violation.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

26.1-26.8-22. Statute of limitations.

After the effective date of this Act, a civil action for the recovery of damages resulting from negligence or breach of contract brought against any person licensed under this chapter by any person claiming to have been injured as a result of the providing of public adjusting services or the failure to provide public adjusting services of a licensee may not be commenced in this state unless the action is commenced on or before the earlier of:

  1. Two years from the date the alleged act, omission, or neglect is discovered or should have been discovered by exercise of reasonable diligence; or
  2. Six years after performance of the service for which the claim for relief arises, unless discovery was prevented by the fraudulent conduct of the licensee.

Source:

S.L. 2019, ch. 239, § 2, eff July 1, 2019.

CHAPTER 26.1-26.9 Self-Service Storage Insurance

Source:

S.L. 2019, HB1391, § 1, eff July 1, 2019.

26.1-26.9-01. Definitions.

For purposes of this chapter, unless the context otherwise requires:

  1. “Location” means any physical location in this state or any website, call center site, or similar location directed to residents of this state.
  2. “Occupant” means the person who rents a space at a self-service storage facility under a rental agreement, or a sublessee, successor, or assignee of the renter.
  3. “Owner” means any person who owns, leases, subleases, manages, or operates a self-service storage facility and receives rent from an occupant under a rental agreement.
  4. “Personal property” means movable property not affixed to land, including merchandise and household goods.
  5. “Rental agreement” means a written agreement between the owner and the occupant which establishes or modifies the terms and conditions of the occupant’s use of a space at a self-service storage facility.
  6. “Self-service storage facility” means any real property used for renting or leasing individual spaces in which occupants customarily store and remove their personal property. The term does not include a garage used principally for parking motor vehicles; any property of a financial institution which contains vaults, safe deposit boxes, or other receptacles for the purpose and benefit of the financial institution’s customers; or a warehouse where warehouse receipts, bills of lading, or other documents of title are issued for the personal property stored.
  7. “Self-service storage insurance” means personal property insurance offered in connection with and incidental to the rental of a space at a self-service storage facility and which provides coverage to occupants at the self-service storage facility where the insurance is transacted for the loss of or damage to personal property occurring at the facility or when the property is in transit to or from the facility during the period of the rental agreement.
  8. “Supervising entity” means a person that is a licensed insurer or insurance producer appointed by an insurer to supervise the administration of a self-service storage insurance program.

Source:

S.L. 2019, ch. 240, § 1, eff July 1, 2019.

26.1-26.9-02. Licensure of owners.

  1. An owner shall obtain from the insurance commissioner and hold a limited lines license under this section if the owner sells, solicits, or offers coverage for self-service storage insurance. This section does not require an owner to be licensed solely to display and make available to occupants and prospective occupants brochures and other promotional materials created by or on behalf of an authorized insurer or surplus lines insurer.
  2. A limited lines license issued under this section is limited to authorizing an owner and the owner’s employees and authorized representatives to sell, solicit, and offer coverage for self-service storage insurance to occupants.
  3. A limited lines license issued under this section authorizes an owner and the owner’s employees and authorized representatives to sell, solicit, and offer self-service storage insurance coverage at each location at which the owner conducts business.
  4. The owner or supervising entity shall maintain a registry of owner locations authorized to sell, solicit, or offer self-service storage insurance coverage in this state. Upon request by the commissioner, and with five days’ notice, the owner or supervising entity shall provide the registry to the commissioner for inspection and examination.
  5. Notwithstanding any other provision of law, a license issued under this section authorizes the licensee and the licensee’s employees and authorized representatives to engage only in activities permitted by this chapter in connection with the business of insurance unless authorized to do so under another license issued by the commissioner.

Source:

S.L. 2019, ch. 240, § 1, eff July 1, 2019.

26.1-26.9-03. Sale of self-service storage insurance — Requirements.

  1. At every location where self-service storage insurance is offered to occupants, the owner shall make available to occupants brochures or other written or electronic materials that:
    1. Disclose that self-service storage insurance may provide a duplication of coverage already provided by an occupant’s homeowner’s insurance policy, renter’s insurance policy, or other source of coverage.
    2. State the purchase by the occupant of the self-service storage insurance offered by the owner is not required to lease a space at the self-service storage facility.
    3. Provide the actual terms of the self-service storage insurance coverage, or summarize the material terms of the insurance coverage, including:
      1. The identity of the insurer;
      2. The identity of the supervising entity;
      3. The amount of any applicable deductible and how the deductible is to be paid;
      4. Benefits of the coverage; and
      5. Key terms and conditions of the coverage.
    4. Summarize the process for filing a claim.
    5. State an occupant that purchases self-service storage insurance may cancel enrollment for the occupant’s coverage at any time, and the person paying the premium shall receive a refund of any applicable unearned premium.
  2. The written materials required by this section are not subject to filing or approval requirements with the commissioner.
  3. Self-service storage insurance may be provided under an individual policy or a commercial, corporate, group, or master policy. Form, policy, and rate filings for self-service storage insurance must be made with the commissioner in accordance with this chapter and section 26.1-30-19.
  4. Eligibility and underwriting standards for occupants electing to purchase self-service storage insurance coverage must be established for the self-service storage insurance program.
  5. The owner is exempt from the examination and education requirements in chapter 26.1-26.

Source:

S.L. 2019, ch. 240, § 1, eff July 1, 2019; 2021, ch. 227, § 6, eff August 1, 2021.

26.1-26.9-04. Authority of owners.

  1. Employees and authorized representatives of an owner may sell, solicit, and offer self-service storage insurance to occupants and are not subject to licensure as an insurance producer under this chapter if:
    1. The owner obtains a limited lines license to authorize the owner’s employees and authorized representatives to sell, solicit, and offer self-service storage insurance under this chapter.
    2. The owner files an acknowledgment with the commissioner in a form and manner directed by the commissioner that the owner’s counter sales employees and authorized representatives act on the owner’s behalf and the owner is responsible for any representations made by the counter sales employees or authorized representatives relating to the self-service storage insurance offered through the owner. The acknowledgment must state the commissioner may take any administrative action included in this title.
    3. The insurer issuing the self-service storage insurance or a supervising entity supervises the development of a training program for employees and authorized representatives of the owner. The training required by this subdivision:
      1. Must be delivered to employees and authorized representatives of the owner who are engaged directly in the activity of selling, soliciting, or offering self-service storage insurance, and the training materials must be maintained by the owner and made available to the commissioner for inspection upon request.
      2. Must include providing each employee and authorized representative with basic instruction about the self-service storage insurance offered to customers and the disclosures required under section 26.1-26.9-03; and
      3. May be provided in electronic form, provided the owner or supervising entity implements a supplemental education program regarding the self-service storage insurance conducted and overseen by a licensed producer.
    4. An employee or authorized representative of an owner may not advertise, represent, or otherwise be held out to the public as a nonlimited lines-licensed insurance producer, unless otherwise licensed.
  2. An owner’s employees and authorized representatives may not be paid directly by an insurance company, or be paid a commission or any other compensation for the sale of self-service storage insurance. This section does not prevent an owner from including the results of selling, soliciting, or offering self-service storage insurance in an overall performance compensation incentive program for employees and authorized representatives.
  3. The owner may bill and collect charges for self-service storage insurance coverage. Any charge to the occupant for coverage not included in the cost of the rental of a space must be separately itemized on the occupant’s bill. If the self-service storage insurance coverage is included with the lease of a space, the owner clearly and conspicuously shall disclose to the occupant, on the rental invoice or elsewhere, any self-service storage insurance coverage included with the rental of a space. An owner billing and collecting the charges is not required to maintain the funds in a segregated account if the owner is authorized by the insurer to hold the funds in an alternative manner. All premiums received by an owner from an occupant for the sale of self-service storage insurance must be considered funds held by the owner in a fiduciary capacity for the benefit of the insurer. An owner may receive compensation for billing and collection services.

Source:

S.L. 2019, ch. 240, § 1, eff July 1, 2019.

26.1-26.9-05. Application for license and fees.

  1. An owner selling, soliciting, or offering self-service storage insurance shall apply to the commissioner.
    1. The applicant shall provide the name, residential address, and other information required by the commissioner for the supervising entity designated by the applicant as the person responsible for the owner’s compliance with the insurance laws, rules, and regulations of this state.
    2. If the owner derives more than fifty percent of the owner’s revenue from the sale of self-service storage insurance, the names, residential addresses, and other information required by the commissioner must be provided for all officers, directors, and shareholders of record having beneficial ownership of ten percent or more.
  2. Each owner licensed under this chapter shall pay to the commissioner a fee as prescribed by the commissioner.
  3. An owner selling, soliciting, or offering self-service storage insurance before the effective date of this Act shall apply for licensure within ninety days of the application being made available by the commissioner. An applicant that begins to sell, solicit, or offer self-service storage insurance after the effective date of this Act shall obtain a license before selling, soliciting, or offering self-service storage insurance.

Source:

S.L. 2019, ch. 240, § 1, eff July 1, 2019; 2021, ch. 227, § 7, eff August 1, 2021.

26.1-26.9-06. Authority of commissioner to investigate.

Within a reasonable time after receipt of a properly completed application for a license under this chapter, the commissioner may conduct investigations and propound interrogatories concerning the applicant’s qualifications, residence, business affiliations, and any other matter the commissioner believes necessary or advisable to determine compliance with this chapter or for the protection of the public.

Source:

S.L. 2019, ch. 240, § 1, eff July 1, 2019.

26.1-26.9-07. Examination and investigation by commissioner.

If the commissioner believes this chapter has been violated, the commissioner, at the expense of the insurer involved, may examine, at the offices of the insurer or insurance producer, whether located within or outside this state, all books, records, and papers of the insurer or insurance producer, and may examine under oath, the officers, managers, and insurance producer of the insurer, or the insured, regarding the violation.

Source:

S.L. 2019, ch. 240, § 1, eff July 1, 2019.

26.1-26.9-08. License suspension, revocation, or refusal — Grounds.

The commissioner may suspend, revoke, place on probation, or refuse to continue or issue a license issued under this chapter if, after notice to the licensee or applicant and a hearing, the commissioner finds as to the licensee any of the following conditions:

  1. A materially untrue statement in the license application.
  2. An acquisition or attempt to acquire a license through misrepresentation or fraud.
  3. The applicant cheated on an examination for an insurance license.
  4. Any cause for which issuance of the license could have been refused had it then existed and been known to the commissioner at the time of issuance.
  5. The applicant or licensee has been convicted of a felony or convicted of an offense, as defined by section 12.1-01-04, determined by the commissioner to have a direct bearing on a person’s ability to serve the public as a licensee, or the commissioner finds, after conviction of an offense, the person is not sufficiently rehabilitated under section 12.1-33-02.1.
  6. In the conduct of affairs under the license, the licensee has used fraudulent, coercive, or dishonest practices, or has shown to be incompetent, untrustworthy, or financially irresponsible.
  7. A misrepresentation of the terms of any actual or proposed insurance contract.
  8. The licensee knowingly solicited, procured, or sold unnecessary or excessive insurance coverage to any person.
  9. The licensee has forged another’s name to an application for insurance.
  10. An improper withholding of, misappropriating of, or converting to one’s own use any moneys belonging to policyholders, insurers, beneficiaries, or others received in the course of one’s insurance business.
  11. The licensee has been found guilty of any unfair trade practice defined in this title or fraud.
  12. A violation of or noncompliance with any insurance laws of this state or a violation of or noncompliance with any lawful rules or orders of the commissioner or of a commissioner of another state.
  13. The licensee’s license has been suspended or revoked in any other state, province, district, or territory for any reason or purpose other than noncompliance with continuing education programs, or noncompliance with mandatory filing requirements imposed upon a licensee by the state, province, district, or territory, provided the filing does not directly affect the public interest, safety, or welfare.
  14. The applicant or licensee has refused to respond within twenty days to a written request by the commissioner for information regarding any potential violation of this section.
  15. Without express prior written approval from the commissioner, the licensee communicates with a person the licensee knows has contacted the department regarding an alleged violation committed by the licensee in an attempt to have the complainant dismiss the complaint.
  16. The licensee knowingly accepts insurance business from an individual who is not licensed.
  17. The applicant or licensee knowingly fails to comply with a court order imposing child support obligation.
  18. The applicant or licensee fails to file the required returns or pay the taxes due under chapter 57-38 or comply with a court order directing payment of any income tax or employer income tax withholding imposed by chapter 57-38.

Source:

S.L. 2019, ch. 240, § 1, eff July 1, 2019.

26.1-26.9-09. Rulemaking authority.

The commissioner may adopt reasonable rules for the implementation and administration of this chapter.

Source:

S.L. 2019, ch. 240, § 1, eff July 1, 2019.

CHAPTER 26.1-27 Administrators of Life or Health Insurance or Annuities

26.1-27-01. Administrator defined.

In this chapter, “administrator” means any person who collects charges or premiums from, or who adjusts or settles claims on, residents of this state in connection with life or health insurance coverage or annuities other than:

  1. An employer on behalf of its employees or the employees of one or more subsidiary or affiliated corporations or limited liability companies of the employer.
  2. A union on behalf of its members.
  3. An insurance company, health maintenance organization, or nonprofit health service corporation either licensed in this state or acting as an insurer with respect to a policy lawfully issued and delivered by it in and pursuant to the laws of a state in which the insurer was authorized to do an insurance business or prepaid health care plan, including its sales representatives licensed in this state when engaged in the performance of their duties as such.
  4. A life or health insurance producer licensed in this state, whose activities are limited exclusively to the sale of insurance.
  5. A creditor on behalf of its debtors with respect to insurance covering a debt between the creditor and its debtors.
  6. A trust, its trustees, agents, and employees acting thereunder, established in conformity with 29 U.S.C. 186.
  7. A trust exempt from taxation under section 501(a) of the federal Internal Revenue Code of 1954, as amended, its trustees, and employees acting thereunder, or a custodian, its agents and employees acting pursuant to a custodian account which meets the requirements of section 401(f) of the federal Internal Revenue Code of 1954, as amended.
  8. A financial institution subject to supervision or examination by federal or state banking authorities.
  9. A credit card issuing company that advances for and collects premiums or charges from its credit card holders who have authorized it to do so, provided the company does not adjust or settle claims.
  10. A person who adjusts or settles claims in the normal course of practice or employment as an attorney at law, and who does not collect charges or premiums in connection with life or health insurance coverage or annuities.

Source:

S.L. 1985, ch. 316, § 4; 1993, ch. 54, § 106; 2001, ch. 262, § 94.

Derivation:

N.D.C.C. § 26-17.2-01.

26.1-27-01.1. Pharmacy benefits manager.

A pharmacy benefits manager, as defined under section 26.1-27.1-01, is an administrator for purposes of this chapter.

Source:

S.L. 2005, ch. 269, § 1.

26.1-27-02. Insurer defined.

In this chapter, “insurer” means any person, including a self-insurer, engaged as a principal in the business of annuities or life or health insurance.

Source:

S.L. 1985, ch. 316, § 4.

Derivation:

N.D.C.C. § 26-17.2-01.1.

26.1-27-03. Certificate of authority required — Penalty.

  1. A person, including a person who directly or indirectly underwrites, collects charges or premiums from, or adjusts or settles claims on residents of this state in connection with life, annuity, or health coverage provided by a self-funded plan, may not act as or hold oneself out to be an administrator in this state, for the kinds of business for which the person is acting as an administrator, without a certificate of authority issued by the commissioner. Any person violating this subsection is guilty of a class C felony.
  2. All applications must be accompanied by a filing fee of one hundred dollars.
  3. The commissioner shall issue a certificate unless the commissioner after due notice and hearing determines that the administrator is not competent, trustworthy, financially responsible, or of good personal and business reputation, or has had a previous application for an insurance license denied for cause within five years.
  4. The administrator shall pay an annual renewal fee of fifty dollars to maintain the certificate.
  5. After notice and hearing, the commissioner may revoke a certificate or fine the administrator not more than ten thousand dollars, or both, or the commissioner may suspend a certificate, or fine the administrator not more than five thousand dollars, or both, upon finding that either the administrator violated section 26.1-27-05 and subsection 4 of section 26.1-27-06 and also violated subsection 1, 2, or 3 of section 26.1-27-06 or section 26.1-27-07, 26.1-27-08, 26.1-27-10, 26.1-27-11, or 26.1-27-12, or the administrator is not competent, trustworthy, financially responsible, or of good personal and business reputation.

Source:

S.L. 1985, ch. 316, § 4; 2005, ch. 268, § 1.

Derivation:

N.D.C.C. § 26-17.2-11.

26.1-27-03.1. Bond or insurance requirement.

An administrator that administers or will administer self-insured plans in this state shall maintain a surety bond or proof of insurance satisfactory to the commissioner for the use and benefit of the commissioner for covered persons who have remitted premiums or insurance charges or other moneys to the administrator in the course of the administrator’s business in the greater of the following amounts:

  1. One hundred thousand dollars; or
  2. Ten percent of the aggregate total amount of administered coverage under the plans handled in this state.

Source:

S.L. 2005, ch. 268, § 2.

26.1-27-04. Waiving of registration requirements. [Repealed]

Repealed by S.L. 2005, ch. 268, § 3.

26.1-27-05. Written agreement required — Trust agreement — Retention.

No person may act as an administrator without a written agreement between the administrator and the insurer. The administrator and the insurer shall retain the written agreement as part of their official records for the duration of the agreement and five years thereafter. When a policy is issued to a trustee or trustees, the administrator shall furnish a copy of the trust agreement and any amendments thereto to the insurer. The administrator and the insurer shall retain a copy of the trust agreement, with amendments, as part of their official records for the duration of the policy and five years thereafter.

Source:

S.L. 1985, ch. 316, § 4.

Derivation:

N.D.C.C. § 26-17.2-02.

26.1-27-06. Contents of agreement — Requirements.

The agreement between the administrator and the insurer must contain:

  1. A provision with respect to underwriting or other standards pertaining to the business underwritten by the insurer.
  2. A provision that the administrator may use only such advertising pertaining to the business underwritten by an insurer as has been approved by the insurer in advance of its use.
  3. A provision that withdrawals from the fiduciary account may be made only for:
    1. Remittance to an insurer entitled thereto.
    2. Deposit in an account maintained in the name of the insurer.
    3. Transfer to and deposit in a claims paying account, with claims to be paid as provided in section 26.1-27-10.
    4. Payment to a group policyholder for remittance to the insurer entitled thereto.
    5. Payment to the administrator of its commission, fees, or charges.
    6. Remittance of return premiums to the person or persons entitled thereto.
  4. Provisions which include the requirements of sections 26.1-27-08, 26.1-27-10, 26.1-27-11, and 26.1-27-12 except insofar as those requirements do not apply to the functions performed by the administrator.

Source:

S.L. 1985, ch. 316, § 4; 1987, ch. 73, § 11.

Derivation:

N.D.C.C. §§ 26-17.2-02, 26-17.2-05, 26-17.2-06, 26-17.2-07.

26.1-27-07. Notification required.

When the services of an administrator are used, the administrator shall provide a written notice approved by the insurer, to insureds, advising them of the identity of and relationship among the administrator, the policyholder, and the insurer. When an administrator collects funds, it shall identify and state separately in writing to the person paying to the administrator any charge or premium for insurance coverage the amount of any such charge or premium specified by the insurer for the insurance coverage.

Source:

S.L. 1985, ch. 316, § 4.

Derivation:

N.D.C.C. § 26-17.2-10.

26.1-27-08. Premium collection — Fiduciary account required.

All insurance charges or premiums collected by an administrator on behalf of or for an insurer or insurers, and return premiums received from such insurer or insurers, must be held by the administrator in a fiduciary capacity. The funds must be immediately remitted to the person or persons entitled thereto, or must be deposited promptly in a fiduciary bank account established and maintained by the administrator. If charges or premiums so deposited have been collected on behalf of or for more than one insurer, the administrator shall cause the bank in which the fiduciary account is maintained to keep records clearly recording the deposits in and withdrawals from the account on behalf of or for each insurer. The administrator shall promptly obtain and keep copies of all such records and, upon request of an insurer, shall furnish the insurer with copies of such records pertaining to deposits and withdrawals on behalf of or for the insurer. The administrator may not pay any claim by withdrawals from the fiduciary account.

Source:

S.L. 1985, ch. 316, § 4.

Derivation:

N.D.C.C. § 26-17.2-07.

26.1-27-09. Payment to administrator.

Whenever an insurer uses the services of an administrator, the payment to the administrator of any premiums or charges for insurance by or on behalf of the insured is deemed to have been received by the insurer, and the payment of return premiums or claims by the insurer to the administrator is not deemed payment to the insured or claimant until the payment is received by the insured or claimant. This section does not limit any right of the insurer against the administrator resulting from its failure to make payments to the insurer, insureds, or claimants.

Source:

S.L. 1985, ch. 316, § 4.

Derivation:

N.D.C.C. § 26-17.2-03.

26.1-27-10. Payment of claims.

All claims paid by the administrator from funds collected on behalf of the insurer may be paid only on drafts of and as authorized by the insurer.

Source:

S.L. 1985, ch. 316, § 4.

Derivation:

N.D.C.C. § 26-17.2-08.

26.1-27-11. Claim adjustment or settlement.

With respect to any policies when an administrator adjusts or settles claims, the compensation to the administrator with regard to the policies may not be contingent on claim experience. This section does not prevent the compensation of an administrator from being based on premiums or charges collected or number of claims paid or processed.

Source:

S.L. 1985, ch. 316, § 4.

Derivation:

N.D.C.C. § 26-17.2-09.

Collateral References.

Liability of independent or public insurance adjuster to insured for conduct in adjusting claim, 50 A.L.R.4th 900.

26.1-27-12. Maintenance of information.

Every administrator shall maintain at its principal administrative office for the duration of the written agreement and five years thereafter adequate books and records of all transactions between it, insurers, and insureds. The books and records must be maintained in accordance with prudent standards of insurance recordkeeping. The commissioner shall have access to such books and records for the purpose of examination, audit, and inspection. Any trade secrets contained therein, including the identity and addresses of policyholders and certificate holders, are confidential, except the commissioner may use such information in any proceedings instituted against the administrator. The insurer shall retain the right to continuing access to the books and records of the administrator sufficient to permit the insurer to fulfill all of its contractual obligations to insured persons, subject to any restrictions in the written agreement between the insurer and administrator on the proprietary rights of the parties in the books and records.

Source:

S.L. 1985, ch. 316, § 4.

Derivation:

N.D.C.C. § 26-17.2-04.

CHAPTER 26.1-27.1 Pharmacy Benefits Management

26.1-27.1-01. Definitions.

In this chapter, unless the context otherwise requires:

  1. “Covered entity” means a nonprofit hospital or a medical service corporation; a health insurer; a health benefit plan; a health maintenance organization; a health program administered by the state in the capacity of provider of health coverage; or an employer, a labor union, or other entity organized in the state which provides health coverage to covered individuals who are employed or reside in the state. The term does not include a self-funded plan that is exempt from state regulation pursuant to the Employee Retirement Income Security Act of 1974 [Pub. L. 93-406; 88 Stat. 829; 29 U.S.C. 1001 et seq.]; a plan issued for coverage for federal employees; or a health plan that provides coverage only for accidental injury, specified disease, hospital indemnity, Medicare supplement, disability income, long-term care, or other limited-benefit health insurance policy or contract.
  2. “Covered individual” means a member, a participant, an enrollee, a contractholder, a policyholder, or a beneficiary of a covered entity who is provided health coverage by the covered entity. The term includes a dependent or other individual provided health coverage through a policy, contract, or plan for a covered individual.
  3. “De-identified information” means information from which the name, address, telephone number, and other variables have been removed in accordance with requirements of title 45, Code of Federal Regulations, part 164, section 512, subsections (a) or (b).
  4. “Generic drug” means a drug that is chemically equivalent to a brand name drug for which the patent has expired.
  5. “Labeler” means a person that has been assigned a labeler code by the federal food and drug administration under title 21, Code of Federal Regulations, part 207, section 20, and that receives prescription drugs from a manufacturer or wholesaler and repackages those drugs for later retail sale.
  6. “Payment received by the pharmacy benefits manager” means the aggregate amount of the following types of payments:
    1. A rebate collected by the pharmacy benefits manager which is allocated to a covered entity;
    2. An administrative fee collected from the manufacturer in consideration of an administrative service provided by the pharmacy benefits manager to the manufacturer;
    3. A pharmacy network fee; and
    4. Any other fee or amount collected by the pharmacy benefits manager from a manufacturer or labeler for a drug switch program, formulary management program, mail service pharmacy, educational support, data sales related to a covered individual, or any other administrative function.
  7. “Pharmacy benefits management” means the procurement of prescription drugs at a negotiated rate for dispensation within this state to covered individuals; the administration or management of prescription drug benefits provided by a covered entity for the benefit of covered individuals; or the providing of any of the following services with regard to the administration of the following pharmacy benefits:
    1. Claims processing, retail network management, and payment of claims to a pharmacy for prescription drugs dispensed to a covered individual;
    2. Clinical formulary development and management services; or
    3. Rebate contracting and administration.
  8. “Pharmacy benefits manager” means a person that performs pharmacy benefits management. The term includes a person acting for a pharmacy benefits manager in a contractual or employment relationship in the performance of pharmacy benefits management for a covered entity. The term does not include a public self-funded pool or a private single-employer self-funded plan that provides benefits or services directly to its beneficiaries. The term does not include a health carrier licensed under title 26.1 if the health carrier is providing pharmacy benefits management to its insureds.
  9. “Rebate” means a retrospective reimbursement of a monetary amount by a manufacturer under a manufacturer’s discount program with a pharmacy benefits manager for drugs dispensed to a covered individual.
  10. “Utilization information” means de-identified information regarding the quantity of drug prescriptions dispensed to members of a health plan during a specified time period.

Source:

S.L. 2005, ch. 269, § 2.

26.1-27.1-02. Licensing.

A person may not perform or act as a pharmacy benefits manager in this state unless that person holds a certificate of registration as an administrator under chapter 26.1-27.

Source:

S.L. 2005, ch. 269, § 2.

26.1-27.1-03. Disclosure requirements.

  1. A pharmacy benefits manager shall disclose to the commissioner any ownership interest of any kind with:
    1. Any insurance company responsible for providing benefits directly or through reinsurance to any plan for which the pharmacy benefits manager provides services.
    2. Any parent company, subsidiary, or other organization that is related to the provision of pharmacy services, the provision of other prescription drug or device services, or a pharmaceutical manufacturer.
  2. A pharmacy benefits manager shall notify the commissioner in writing within five business days of any material change in the pharmacy benefits manager’s ownership.

Source:

S.L. 2005, ch. 269, § 2.

26.1-27.1-04. Prohibited practices.

  1. A pharmacy benefits manager shall comply with chapter 19-02.1 regarding the substitution of one prescription drug for another.
  2. A pharmacy benefits manager may not require a pharmacist or pharmacy to participate in one contract in order to participate in another contract. The pharmacy benefits manager may not exclude an otherwise qualified pharmacist or pharmacy from participation in a particular network if the pharmacist or pharmacy accepts the terms, conditions, and reimbursement rates of the pharmacy benefits manager’s contract.

Source:

S.L. 2005, ch. 269, § 2.

26.1-27.1-05. Contents of pharmacy benefits management agreement — Requirements.

  1. A pharmacy benefits manager shall offer to a covered entity options for the covered entity to contract for services that must include:
    1. A transaction fee without a sharing of a payment received by the pharmacy benefits manager;
    2. A combination of a transaction fee and a sharing of a payment received by the pharmacy benefits manager; or
    3. A transaction fee based on the covered entity receiving all the benefits of a payment received by the pharmacy benefits manager.
  2. The agreement between the pharmacy benefits manager and the covered entity must include a provision allowing the covered entity to have audited the pharmacy benefits manager’s books, accounts, and records, including de-identified utilization information, as necessary to confirm that the benefit of a payment received by the pharmacy benefits manager is being shared as required by the contract.

Source:

S.L. 2005, ch. 269, § 2.

26.1-27.1-06. Examination of insurer-covered entity.

  1. During an examination of a covered entity as provided for in chapter 26.1-03, 26.1-17, or 26.1-18.1, the commissioner shall examine any contract between the covered entity and a pharmacy benefits manager and any related record to determine if the payment received by the pharmacy benefits manager which the covered entity received from the pharmacy benefits manager has been applied toward reducing the covered entity’s rates or has been distributed to covered individuals.
  2. To facilitate the examination, the covered entity shall disclose annually to the commissioner the benefits of the payment received by the pharmacy benefits manager received under any contract with a pharmacy benefits manager and shall describe the manner in which the payment received by the pharmacy benefits manager is applied toward reducing rates or is distributed to covered individuals.
  3. Any information disclosed to the commissioner under this section is considered a trade secret under chapter 47-25.1.

Source:

S.L. 2005, ch. 269, § 2.

26.1-27.1-07. Rulemaking authority.

The commissioner shall adopt rules as necessary before implementation of this chapter.

Source:

S.L. 2005, ch. 269, § 2.

CHAPTER 26.1-28 Insurance Vending Machines

26.1-28-01. Sale of insurance from vending machines restricted.

No insurance may be offered for sale, issued, or sold by or from any vending machine or appliance or any other medium, device, or object designed or used for vending purposes, in this chapter referred to as a vending machine, except as provided in this chapter.

Source:

S.L. 1985, ch. 316, § 5.

Derivation:

N.D.C.C. § 26-33-01.

26.1-28-02. Sale of insurance through vending machines under certain conditions.

Insurance producers licensed by the commissioner under this title to solicit applications for and to sell policies of personal travel accident insurance providing benefits for accidental bodily injury or accidental death may also solicit applications for and issue or sell such insurance by means of vending machines supervised by them and placed in locations for the convenience of the traveling public, upon the following conditions:

  1. That each policy is reasonably suited for sale and issuance through a vending machine, and that use of a vending machine in a proposed location would be of material convenience to the traveling public.
  2. That the type of vending machine proposed to be used is reasonably suitable and practical for the purpose.
  3. That reasonable means, as determined by the commissioner, are provided for informing the prospective purchaser of the benefits, limitations, and exclusions of the policy, the premium rates, the name and address of the insurance producer, and the name and home office address of the insurer.
  4. That the vending machine is constructed and operated to retain, or is provided with a suitable place for deposit and safekeeping of, a copy of the application, which shows the date of the application, name and address of the applicant and the beneficiary, and the amount of insurance.
  5. That no policy of insurance sold through a vending machine may be for a period of time longer than the duration of a specified one-way or round trip not exceeding one hundred eighty days.
  6. That the vending machine has provided on it or immediately adjacent thereto, in a prominent location, adequate envelopes for use of purchasers in mailing policies vended through the machine, or that the policy itself, if designed to permit the procedure, may be mailed without an envelope; provided, however, that the commissioner may modify or waive this requirement, by a writing delivered to the insurance producer.
  7. That each vending machine is supervised, inspected, and tested by the insurance producer with such frequency as may reasonably be required by the commissioner, and if any machine is not in good working condition the insurance producer shall promptly cause a notice to be displayed on the machine that the machine is out of order, and cause the machine to be promptly removed from service until it is in proper working order.
  8. That prompt refund by the insurance producer is provided to each applicant or prospective applicant of money deposited in any defective vending machine and for which no insurance, or a less amount than paid for, is actually received.

The commissioner may adopt by rule additional conditions for types and locations of vending machines, their maintenance and operation, and the methods to be used by the insurance producer in the solicitation and sale of insurance by means of vending machines as are reasonable and necessary.

Source:

S.L. 1985, ch. 316, § 5; 2001, ch. 262, § 95.

Derivation:

N.D.C.C. § 26-33-02.

26.1-28-03. Licensing of vending machine devices — Expiration date.

The insurance producer shall apply for a license for each vending machine to be used. The commissioner shall prescribe the form of the application. A fee of two dollars for each vending machine must be paid at the time of making the application. Upon approval of the application, the commissioner shall issue to the insurance producer a special vending machine license. The license applies to a specific vending machine or to any machine of identical type which, after written notice by the insurance producer to the commissioner, is substituted for it. The license must specify the name and address of the insurance producer, the name and home office address of the insurer, the name or other identifying information of the policy or policies to be sold, the serial number or other identification of the vending machine, and the address, including the location on the premises, where the machine is to be in operation. A vending machine for which a license has been issued for operation at a specific address may be transferred to a different address during the license year upon written notice to the commissioner at the time of the transfer. The license for each vending machine expires April thirtieth of each year, but may be renewed from year to year by the commissioner upon approval of the application of the insurance producer, the furnishing of information requested by the commissioner, and the payment of two dollars for each license year or part thereof for each machine. Proof of the existence of a subsisting license must be displayed on or about each vending machine in use in the manner the commissioner may reasonably require.

Source:

S.L. 1985, ch. 316, § 5; 2001, ch. 262, § 96.

Derivation:

N.D.C.C. § 26-33-03.

26.1-28-04. Suspension, revocation, or refusal of license — Notice and opportunity to be heard.

The license for each vending machine is subject to expiration, suspension, or revocation coincidentally with that of the insurance producer or the insurer. The commissioner also may suspend, revoke, or refuse to renew the license as to any vending machine concerning which the commissioner finds any conditions upon which the machine was licensed or referred to in section 26.1-28-02 have been violated, or no longer exist, or that the machine is being used or operated by the insurance producer in violation of the laws of this state. Before suspending, revoking, or refusing to renew a license for a vending machine, the commissioner shall conduct a hearing and shall make a determination upon the basis of the standards, conditions, and requirements of this section.

Source:

S.L. 1985, ch. 316, § 5; 2001, ch. 262, § 97.

Derivation:

N.D.C.C. § 26-33-04.

26.1-28-05. Penalty.

Any person who violates this chapter is guilty of a class B misdemeanor.

Source:

S.L. 1985, ch. 316, § 5.

Derivation:

N.D.C.C. § 26-33-05.

CHAPTER 26.1-29 Insurance Contracts

26.1-29-01. Insurance contract defined.

An insurance contract is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from an unknown or contingent event.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-01.

DECISIONS UNDER PRIOR LAW

Ambiguities.

When the terms of an insurance policy are ambiguous they must be liberally construed in favor of the insured; thus, the son of the insured was covered as a dependent relative, notwithstanding the fact that he had become twenty-one years old before the accident, and under the father’s policy the son’s newly acquired automobile was automatically insured for thirty days. Nodak Mut. Ins. Co. v. Loeffler, 225 N.W.2d 290, 1974 N.D. LEXIS 142 (N.D. 1974).

Fire Insurance.

A contract of fire insurance is a contract of indemnity whereby the insurer undertakes to make the insured whole as against such loss of insured property as the insured may suffer on account of fire in an amount not exceeding that stipulated in the policy. Butler v. Aetna Ins. Co., 64 N.D. 764, 256 N.W. 214, 1934 N.D. LEXIS 265 (N.D. 1934).

Taxability.

Under statute imposing on every insurance company a tax of two and one-half percent of the gross amount of premiums received, a foreign life insurance company was not, prior to the amendment thereof, taxable for money received as consideration for granting annuities. State v. Equitable Life Assurance Soc'y, 68 N.D. 641, 282 N.W. 411, 1938 N.D. LEXIS 154, 1938 N.D. LEXIS 155 (N.D. 1938).

Law Reviews.

Is Good Faith in Insurance Contracts a Two-Way Street? 62 N.D. L. Rev. 355 (1986).

Policy Technicalities and Insured’s Reasonable Expectations: Comment on Atwater Creamery Co. v. Western National Mutual Insurance Co., 366 N.W.2d 271, 52 A.L.R.4th 1217 (Minn. 1985).

26.1-29-02. Insurer and insured defined.

An insurer is a person who undertakes to indemnify another by an insurance contract and the insured is the person indemnified.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-02.

DECISIONS UNDER PRIOR LAW

Insurance Company.

A corporation which undertakes to guarantee a fixed revenue per acre from farming lands and contracts, for a specified consideration, to pay a fixed amount per acre for the crop grown, irrespective of its value, is an insurance company. In re Hogan, 8 N.D. 301, 78 N.W. 1051, 1899 N.D. LEXIS 7 (N.D. 1899).

Insured.

The insured in a life insurance policy means the person whose life is insured and whose death matures the obligation of the insurer to pay. Sand v. Merchants Nat'l Bank & Trust Co., 81 N.W.2d 748, 1957 N.D. LEXIS 107 (N.D. 1957).

26.1-29-03. Who may be parties to insurance contract.

Anyone who is capable of making a contract, except as restricted by law, may be an insurer, and anyone except a public enemy may be an insured.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-03.

26.1-29-04. Insurable interest defined and classified.

An insurable interest is an interest in property, or any relation thereto, or liability in respect thereof, of such a nature that a contemplated peril might damnify directly the insured, and may consist in:

  1. An existing interest;
  2. An inchoate interest founded on an existing interest; or
  3. An expectancy coupled with an existing interest in that out of which the expectancy arises.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-06.

DECISIONS UNDER PRIOR LAW

Analysis

Cancellation of Conditional Sale.

A fire insurance company cannot take advantage of a conditional sale of the insured’s automobile and declare a forfeiture, if the sale was canceled and the automobile restored to the insured before a loss. Anderson v. United State Fire Ins. Co., 57 N.D. 462, 222 N.W. 609, 1928 N.D. LEXIS 150 (N.D. 1928).

Creditor’s Interest in Business Concern.

A creditor who loans money to a business concern, and takes as collateral therefor a pledge of a fire insurance policy on goods used in the business, has an insurable interest in the goods. Hecker v. Commercial State Bank, 35 N.D. 12, 159 N.W. 97, 1916 N.D. LEXIS 141 (N.D. 1916).

Establishing Proof of Interest.

Where a farm machinery dealer purchased goods under a conditional sale from the seller and contracted to insure the goods and all other merchandise, with loss payable to the seller, the seller, not having acquired a lien on the other merchandise or an assignment of the policy, did not acquire an interest in the proceeds of the policy on account of a loss sustained by the destruction of the other merchandise. Implement Dealers' Mut. Fire Ins. Co. v. Myron, 62 N.D. 167, 242 N.W. 404, 1932 N.D. LEXIS 162 (N.D. 1932).

Fixtures on Land.

Barn which was purchased and moved onto purchaser’s land and placed on blocks was not affixed to land as fixture but was personalty, with the result that the purchaser had an insurable interest in the barn under the fire policy, even though land, had been lost on execution sale before the barn burned. Strobel v. Northwest G. F. Mut. Ins. Co., 152 N.W.2d 794, 1967 N.D. LEXIS 91 (N.D. 1967).

Rights in Property.

Any relation to property of such a nature that a contemplated peril might damnify directly the insured is an insurable interest. Reishus v. Implement Dealers Mut. Ins. Co., 118 N.W.2d 673, 1962 N.D. LEXIS 104 (N.D. 1962).

A person has an insurable interest in property by the existence of which he will gain an advantage, or by the destruction of which he will suffer a loss, whether or not he has any title in, or lien upon, or possession of the property. Reishus v. Implement Dealers Mut. Ins. Co., 118 N.W.2d 673, 1962 N.D. LEXIS 104 (N.D. 1962).

Vendor’s Interest.

A vendor of real property who has a statutory lien as provided in section 35-20-01 has an insurable interest in the property. Koppinger v. Implement Dealers Mut. Ins. Co., 122 N.W.2d 134, 1963 N.D. LEXIS 88 (N.D. 1963).

The fact that the vendor’s interest is less at the time of the destruction of the property than it was at the time of the issuance of the insurance does not bar his recovery. Koppinger v. Implement Dealers Mut. Ins. Co., 122 N.W.2d 134, 1963 N.D. LEXIS 88 (N.D. 1963).

The recoverable interest of a vendor of real property is the amount of his vendor’s lien for the unpaid purchase price at the time of the fire, not exceeding the amount of coverage provided by the policy. Koppinger v. Implement Dealers Mut. Ins. Co., 122 N.W.2d 134, 1963 N.D. LEXIS 88 (N.D. 1963).

26.1-29-05. Insurable interest essential to insurance contract.

The sole object of insurance is the indemnity of the insured, and if the insured has no insurable interest, the contract is void.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-04.

Collateral References.

Construction and effect of contracts or insurance policies providing pre-need coverage of burial expense or services, 67 A.L.R.4th 36.

26.1-29-06. When insurable interest must exist.

An insurable interest must exist when the insurance takes effect and when the loss occurs but need not exist in the meantime.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-05.

DECISIONS UNDER PRIOR LAW

Time of Loss.

An insurance company is not liable if the insured had no interest in the insured property at the time of loss. Tierney v. Phoenix Ins. Co., 4 N.D. 565, 62 N.W. 642, 1895 N.D. LEXIS 53 (N.D. 1895).

26.1-29-07. Measure of insurable interest.

The measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury of the property.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-08.

DECISIONS UNDER PRIOR LAW

Interest in Insured Crop.

One who has a part interest in an insured crop cannot recover in excess of his insurable interest, and such interest is the amount of his interest in the crop. Berglund v. State Farmers' Mut. Hall Ins. Co., 26 N.D. 17, 142 N.W. 941, 1913 N.D. LEXIS 37 (N.D. 1913).

26.1-29-08. Carrier or depositary has insurable interest.

A carrier or depositary of any kind has an insurable interest in a thing held by the carrier or depositary as such to the extent of its value.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-07.

26.1-29-09. Insurable interest in life or health insurance. [Repealed]

Repealed by S.L. 1987, ch. 357, § 2.

26.1-29-09.1. Insurable interest in personal insurance.

  1. An individual of competent legal capacity may procure or effect an insurance contract upon that individual’s own life or body for the benefit of any person. A person may not procure or cause to be procured an insurance contract upon the life or body of another individual unless the benefits under the contract are payable to the individual insured or that individual’s personal representatives, or to a person having, at the time the contract was made, an insurable interest in the individual insured.
  2. If the beneficiary, assignee, or other payee under a contract made in violation of this section receives from the insurer any benefits from the contract upon the death, disablement, or injury of the individual insured, the individual insured or that individual’s executor or administrator may maintain an action to recover the benefits from the person receiving the benefits.
  3. “Insurable interest”, with reference to personal insurance, includes only the following interests:
    1. In the case of an individual related closely by blood or by law, a substantial interest engendered by love and affection.
    2. In the case of a person other than an individual described in subdivision a, a lawful and substantial economic interest in having the life, health, or bodily safety of the individual insured continue, as distinguished from an interest that would arise only by, or would be enhanced in value by, the death, disablement, or injury of the individual insured.
    3. In the case of an individual party to a contract or option for the purchase or sale of an interest in a business partnership or firm, of a membership interest in a limited liability company, or of shares of stock of a closed corporation or of an interest in the shares, an interest in the life of each individual party to the contract for the purpose of the contract only, in addition to an insurable interest that may otherwise exist as to the life of the individual.
    4. In the case of a religious, educational, eleemosynary, charitable, or benevolent organization, a lawful interest in the life of the individual insured if that individual executed a written consent to the insurance contract.
    5. In the case of an employer or the trustee of a trust providing life, health, disability, retirement, or similar benefits to employees of one or more employers, and acting in a fiduciary capacity with respect to the employees, retired employees, or the employees’ dependents or beneficiaries, an employer or the trustee of a trust has an insurable interest in the lives of employees for whom the benefits are to be provided and the employer or trustee of a trust may purchase, accept, or otherwise acquire an interest in personal insurance as a beneficiary or owner. Written consent of the insured individual is required if the personal insurance purchased names the employer or the trustee of a trust as a beneficiary.
    6. In the case of a service recipient or the trustee of a trust providing a nonqualified deferred compensation plan, as defined by section 409 A(d)(1) of the Internal Revenue Code [26 U.S.C. 409 A(d)(a)], to a service provider, an insurable interest in the life of the service provider for whom the nonqualified deferred compensation plan is provided. The service recipient or the trustee of a trust may purchase, accept, or otherwise acquire an interest in personal insurance with the trust as a beneficiary or owner. Written consent of the insured individual is required. As used in this subdivision:
      1. “Service provider” means an individual, other than an employee, who provides significant services to a service recipient.
      2. “Service recipient” means the entity for which services are performed by a service provider.

Source:

S.L. 1985, ch. 316, § 6; 1987, ch. 357, § 1; 1989, ch. 364, § 1; 1993, ch. 54, § 106; 1995, ch. 284, § 1; 2003, ch. 252, § 2; 2017, ch. 218, § 1, eff August 1, 2017.

DECISIONS UNDER PRIOR LAW

Interest in Life Insurance.

A life insurance contract is not void as a wagering contract where the insured was indebted to the bank which paid the premiums and the policy was assigned to secure an existing debt. Midland Nat'l Life Ins. Co. v. Mosher, 60 N.D. 129, 232 N.W. 894, 1930 N.D. LEXIS 217 (N.D. 1930).

26.1-29-10. Contingent or expectant interest not insurable.

A mere contingent or expectant interest in anything, not founded on an actual right to the thing nor upon any valid contract for it, is not insurable.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-10.

26.1-29-11. What may be insured against.

Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest or create a liability against the person may be insured against, subject to this title, with the exception of an insurance for or against the drawing of any lottery or for or against any chance or ticket in a lottery drawing a prize.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-11.

Collateral References.

Private contests and lotteries: entrants’ rights and remedies, 64 A.L.R.4th 1021.

Notes to Decisions

Known loss doctrine.

District court properly denied the motions filed by an insurer and its agent (jointly, the insurer) for judgment as a matter of law and their alternative motion for a new trial in the insureds' action for breach of their insurance contract and negligence because a factual issue—whether the insureds had knowledge a loss had occurred or was substantially likely to occur—existed, there was an evidentiary basis to support a finding that the agent failed to follow the insureds' instruction to ensure that all of the stored potatoes were insured, and it was not clear which theory of liability the jury based its decision on where the jury was issued a general verdict form and conflicting evidence concerning both theories of liability was presented. Bjorneby v. Nodak Mut. Ins. Co., 2016 ND 142, 882 N.W.2d 232, 2016 N.D. LEXIS 140 (N.D. 2016).

26.1-29-12. Effect of change in insurable interest.

A change of interest in any part of a thing insured, unaccompanied by a corresponding change of interest in the insurance, suspends the insurance to an equivalent extent until the interest in the thing insured and the interest in the insurance are vested in the same person, except as follows:

  1. In the cases of life, accident, and health insurance.
  2. A change of interest in a thing insured after the occurrence of an injury which results in a loss does not affect the right of the insured to indemnity for the loss.
  3. A change of interest in one or more of several distinct things insured by one policy does not avoid the insurance as to the others.
  4. A change of interest by will or succession on the death of the insured does not avoid an insurance, and the decedent’s interest in the insurance passes to the person taking the decedent’s interest in the thing insured.
  5. A transfer of interest by one of several partners, joint owners, or owners in common who are insured jointly to the others does not avoid an insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured.
  6. The encumbering of one or more of several distinct things insured by one policy does not render void any insurance upon the things not covered by the encumbrance, but in case of loss or damage, such an amount must be deducted from the insurance as the value of the property so encumbered bears to the value of all the property covered by the policy.

Any agreement to waive subsection 3 or 6 is void.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-12.

DECISIONS UNDER PRIOR LAW

Additional Insurance.

A fire insurance contract covering a bank building and its contents is treated as two separate and distinct policies, one on the building and the other on the personal property and fixtures, and a breach of conditions subsequent, i.e., the placing of additional insurance on the building, which renders the insurance void as to one, does not affect the other. First Nat'l Bank v. German Am. Ins. Co., 23 N.D. 139, 134 N.W. 873, 1911 N.D. LEXIS 73 (N.D. 1911).

Collateral References.

Fire insurance: insurable interest of one expecting to inherit property or take by will, 52 A.L.R.4th 1273.

26.1-29-13. Mutual disclosures required in insurance contract.

Each party to an insurance contract shall communicate to the other in good faith all facts within the party’s knowledge which are or which the party believes to be material to the contract and which the other party has not the means of ascertaining and as to which the party makes no warranty.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-13.

Notes to Decisions

Applicability.

Although the statute generally imposes a duty on parties to an insurance contract to disclose in good faith facts material to the contract, it extends this rule only to facts “which the other party has not the means of ascertaining and as to which the party makes no warranty,” and, therefore, the statute does not apply to a change in the law as all persons are presumed to know the law. Haley v. AIG Life Ins. Co., 2002 U.S. Dist. LEXIS 1114 (D.N.D. Jan. 24, 2002).

DECISIONS UNDER PRIOR LAW

Application Part of Insurance Contract.

Where an application for insurance is made the basis of a contract, and is attached to and made a part of a policy, the application and questions and answers thereto are as material as any other part of the contract. Thomas v. New York Life Ins. Co., 65 N.D. 625, 260 N.W. 605, 1935 N.D. LEXIS 151 (N.D. 1935).

Notice of Coverage.

Requiring an insurer to provide notice of coverage and relevant provisions to a named insured is a logical extension of the policy enunciated in this section. Kippen v. Farm Bureau Mut. Ins. Co., 421 N.W.2d 483, 1988 N.D. LEXIS 77 (N.D. 1988).

Where an insurer never saw fit to inform the insured that underinsured motorist coverage was provided, it would be unconscionable to allow the insurer to avoid coverage because of the insureds’ failure to give notice to, and obtain consent of, an unknown insurer, regarding their settlement of the claim with the tortfeasor. Kippen v. Farm Bureau Mut. Ins. Co., 421 N.W.2d 483, 1988 N.D. LEXIS 77 (N.D. 1988).

Section Not Applicable to Agents.

Because former N.D.C.C. § 26-02-03 defined “party to a contract of insurance” as the “insured” or the “insurer”, it did not include the agent who procured the policy, and such agent had no duty of disclosure to the insurer under such section; any such duty arises out of and is defined by the agency contract. Schock v. Ocker Ins. Corp., 248 N.W.2d 786, 1976 N.D. LEXIS 167 (N.D. 1976).

Collateral References.

Failure to disclose terminal illness as basis for life insurer’s avoidance of high-risk, high-premium policy requiring no health warranties or proof of insurability, 42 A.L.R.4th 158.

Insured-insurer communications as privileged, 55 A.L.R.4th 336.

Insurer’s duty, and effect of its failure, to provide insured or payee with copy of policy or other adequate documentation of its terms, 78 A.L.R.4th 9.

Rescission or cancellation of insurance policy for insured’s misrepresentation or concealment of information concerning human immunodeficiency virus (HIV), acquired immunodeficiency syndrome (AIDS), or related health problems, 15 A.L.R.5th 92.

26.1-29-14. Concealment defined.

“Concealment” means a neglect to communicate that which a party knows and ought to communicate.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-14.

DECISIONS UNDER PRIOR LAW

Ignorance of the Truth.

Even though applicant did not know that he was suffering from a certain disease or that he was in bad health when he applied for life insurance, it was not necessarily a defense to the insurer’s action to cancel the policy for fraudulent misrepresentations in an application, if the applicant had good grounds for guessing that he was not in good health. New York Life Ins. Co. v. Fleck, 73 N.D. 143, 12 N.W.2d 530, 1944 N.D. LEXIS 48 (N.D. 1944).

Omission to Communicate.

Under former similar statute, an omission to communicate is at times as much a concealment as commission would be. New York Life Ins. Co. v. Fleck, 73 N.D. 143, 12 N.W.2d 530, 1944 N.D. LEXIS 48 (N.D. 1944).

26.1-29-15. Rescission for concealment — Exception.

A concealment, whether intentional or unintentional, entitles the injured party to rescind an insurance contract. An intentional and fraudulent omission on the part of one insured to communicate information of matters proving or tending to prove the falsity of a warranty entitles the insurer to rescind. This section does not apply to automobile insurance policies, but such policies are subject to cancellation as provided in section 26.1-40-02.

Source:

S.L. 1985, ch. 316, § 6; 1987, ch. 358, § 1.

Derivation:

N.D.C.C. § 26-02-15.

DECISIONS UNDER PRIOR LAW

Untrue Representations.

There are grounds for rescission when representations, which are made a part of the insurance contract and are untrue, are made with intent to deceive, or if they increase the risk of loss, regardless of intent. Thomas v. New York Life Ins. Co., 65 N.D. 625, 260 N.W. 605, 1935 N.D. LEXIS 151 (N.D. 1935).

Collateral References.

Rescission of Directors’ and Officers’ Liability Insurance Policy, 29 A.L.R.6th 189.

Construction and Application of Exclusion Provisions of Directors and Officers Insurance Policy, Exclusive of Regulatory and Insured vs. Insured Exclusions, 34 A.L.R.6th 345.

26.1-29-16. Matters as to which disclosure is not required.

Neither party to an insurance contract is bound to communicate information of the matters following, except in answer to the inquiries of the other:

  1. Those that the other knows.
  2. Those that in the exercise of ordinary care the other ought to know and the former has no reason to suppose the other ignorant.
  3. Those that the other waives communication.
  4. Those that prove or tend to prove the existence of a risk excluded by a warranty and which are not otherwise material.
  5. Those that relate to a risk excepted from the policy and are not otherwise material.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-16.

DECISIONS UNDER PRIOR LAW

Application As Part of Contract.

Where an application for insurance is made the basis of a contract, and is attached to and made a part of a policy, the application and questions and answers thereto are as material as any other part of the contract. Thomas v. New York Life Ins. Co., 65 N.D. 625, 260 N.W. 605, 1935 N.D. LEXIS 151 (N.D. 1935).

Waiver of Disclosure.

Where insurer did not require physical examination of prospective insured before issuance of credit life insurance policy, it waived its right to disclosure of his physical condition; however, it retained a right to disclosure of impending death on the basis of the principle that the law forbids insuring against a loss which the insured knows has already occurred. Schock v. Ocker Ins. Corp., 248 N.W.2d 786, 1976 N.D. LEXIS 167 (N.D. 1976).

Collateral References.

Failure to disclose terminal illness as basis for life insurer’s avoidance of high-risk, high-premium policy requiring no health warranties or proof of insurability, 42 A.L.R.4th 158.

26.1-29-17. Materiality of matters — How determined.

Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due in forming the party’s estimate of the disadvantages of the proposed contract or in making the party’s inquiries.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-17.

DECISIONS UNDER PRIOR LAW

Analysis

Effect of Concealment.

The fact that the insured under a life insurance policy died from drowning, and not from any disease, did not eliminate the effect of the materiality of the concealment by the insured of the condition of his health in the application. New York Life Ins. Co. v. Hansen, 71 N.D. 383, 2 N.W.2d 163, 1941 N.D. LEXIS 180 (N.D. 1941).

Materiality As Issue for Court.

Materiality is a matter which is to be determined by the court. Equitable Life Assurance Soc'y v. Boisvert, 66 N.D. 6, 262 N.W. 188, 1935 N.D. LEXIS 164 (N.D. 1935).

Misrepresentations Influencing Insurer.

Misrepresentations increasing the risk of loss under former N.D.C.C. § 26-02-05 did not include all misrepresentations which would probably have influenced insurer. O'Keefe v. Zurich General Acci. & Liability Ins. Co., 43 F.2d 809, 1930 U.S. App. LEXIS 3953 (8th Cir. N.D. 1930), cert. denied, 282 U.S. 898, 51 S. Ct. 182, 75 L. Ed. 791, 1931 U.S. LEXIS 89 (U.S. 1931).

Test of Materiality.

Every fact untruly asserted or wrongfully suppressed must be regarded as material if the knowledge or ignorance thereof would materially influence the judgment of the underwriter in making the contract, or in estimating the degree and character of the risk, or in fixing the rate of premium. Waterbury v. Dakota Fire & Marine Ins. Co., 43 N.W. 697, 6 Dakota 468, 1889 Dakota LEXIS 23 (Dakota 1889).

26.1-29-18. Presumption of knowledge.

Each party to an insurance contract is bound to know all the general causes which are open to the party’s inquiry equally with that of the other and which may affect either the political or material perils contemplated and all general usages of trade.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-18.

26.1-29-19. Communication of material facts may be waived.

The right to information of material facts may be waived, either by the terms of insurance or by neglect to make inquiries as to such facts, when they distinctly are implied in other facts of which information is communicated.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-19.

26.1-29-20. Information as to interest need not be communicated.

Information of the nature or amount of the interest of one insured need not be communicated unless in answer to inquiry, except as required to prepare the policy as prescribed by section 26.1-30-01.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-20.

26.1-29-21. Matters of opinion need not be disclosed.

Neither party to an insurance contract is bound to communicate, even upon inquiry, information of the party’s own judgment upon the matters in question.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-21.

26.1-29-22. Representation — Form — When made.

A representation, either oral or written, may be made before or at the time of issuing the policy.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-22.

26.1-29-23. Interpretation of representations regarding insurance.

A representation is to be interpreted by the general rules of contract interpretation. A representation as to the future is a promise unless the representation appears that it was merely a statement of belief or expectation. A representation cannot qualify an express provision in an insurance contract, but it may qualify an implied warranty.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-23.

DECISIONS UNDER PRIOR LAW

Application As Part of Contract.

Where an application for insurance is made the basis of a contract, and is attached to and made a part of a policy, the application and questions and answers thereto are as material as any other part of the contract. Thomas v. New York Life Ins. Co., 65 N.D. 625, 260 N.W. 605, 1935 N.D. LEXIS 151 (N.D. 1935).

Collateral References.

Rescission or cancellation of insurance policy for insured’s misrepresentation or concealment of information concerning human immunodeficiency virus (HIV), acquired immunodeficiency syndrome (AIDS), or related health problems, 15 A.L.R.5th 92.

26.1-29-24. False representation — Materiality and effect.

A representation is false when the facts fail to correspond with its assertions or stipulations. If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time when the representation becomes false. The materiality of a representation is determined by the same rule which determines the materiality of a concealment.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-24.

DECISIONS UNDER PRIOR LAW

Application As Part of Contract.

Where an application for insurance is made the basis of a contract, and is attached to and made a part of a policy, the application and questions and answers thereto are as material as any other part of the contract. Thomas v. New York Life Ins. Co., 65 N.D. 625, 260 N.W. 605, 1935 N.D. LEXIS 151 (N.D. 1935).

Materiality of Promise.

The failure to build a chimney as voluntarily promised in an application for insurance did not render the policy void since the promise was not material. Waterbury v. Dakota Fire & Marine Ins. Co., 43 N.W. 697, 6 Dakota 468, 1889 Dakota LEXIS 23 (Dakota 1889).

26.1-29-25. Misrepresentations — Determination of materiality — Effect.

An oral or written misrepresentation made in the negotiation of an insurance contract or policy by the insured or in the insured’s behalf is material or defeats or avoids the policy or prevents its attaching only if the misrepresentation has been made with actual intent to deceive or unless the matter misrepresented increased the risk of loss.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-25.

Notes to Decisions

Misrepresentation Not Found.

Trial court’s ruling that a misrepresentation of insured’s income did not increase insurer’s risk of loss was not held to be error, where there was ample evidence for jury’s implicit finding insured did not misrepresent his income, and insurer’s decision to rescind policy was not reasonable. Ingalls v. Paul Revere Life Ins. Group, 1997 ND 43, 561 N.W.2d 273, 1997 N.D. LEXIS 61 (N.D. 1997).

Recorded Easement.

The absence of a recorded easement for ingress and egress to property did not place a cloud on the property title or increase mortgage insurer’s risk of loss; the trial court did not err in concluding that insurer was not entitled to rescind its contract of insurance. Industrial Comm'n v. McKenzie County Nat'l Bank, 518 N.W.2d 174, 1994 N.D. LEXIS 127 (N.D. 1994), overruled in part, Strand v. Cass County, 2008 ND 149, 753 N.W.2d 872, 2008 N.D. LEXIS 150 (N.D. 2008).

DECISIONS UNDER PRIOR LAW

Applicability to Contract for Reinstatement.

Former similar section applied to a contract for reinstatement of a life policy. New York Life Ins. Co. v. Hansen, 71 N.D. 383, 2 N.W.2d 163, 1941 N.D. LEXIS 180 (N.D. 1941).

Burden of Proof.

The burden is on an applicant to show the absence of intent to deceive and that the risk of loss was not increased by untrue statements in the application. Brown v. Inter-State Business Men's Accident Ass'n, 57 N.D. 941, 224 N.W. 894, 1929 N.D. LEXIS 341 (N.D. 1929).

Where an insurance company seeks to avoid a policy of insurance because of misrepresentations, it must show, not only that the misrepresentation was made during negotiations, but that it was made with intent to deceive the insurer or that the matter misrepresented in fact increased the risk of loss. Equitable Life Assurance Soc'y v. Boisvert, 66 N.D. 6, 262 N.W. 188, 1935 N.D. LEXIS 164 (N.D. 1935); New York Life Ins. Co. v. Hansen, 71 N.D. 383, 2 N.W.2d 163, 1941 N.D. LEXIS 180 (N.D. 1941).

Grounds for Rescission.

Representations which are made a part of the insurance contract and are untrue are grounds for rescission when they are made with intent to deceive, or if they increase the risk of loss, regardless of intent. Thomas v. New York Life Ins. Co., 65 N.D. 625, 260 N.W. 605, 1935 N.D. LEXIS 151 (N.D. 1935); Lindlauf v. Northern Founders Ins. Co., 130 N.W.2d 86, 1964 N.D. LEXIS 124 (N.D. 1964).

Increase of Risk of Loss.

The provision in former similar section relating to defeat of a contract because a misrepresented matter increased the risk of loss was made for the benefit of the insurance company, but the provision could be waived by the company. Plotner v. Northwestern Nat'l Life Ins. Co., 48 N.D. 295, 183 N.W. 1000, 1921 N.D. LEXIS 39 (N.D. 1921).

Insurance experts may testify concerning the usage of insurance companies generally in charging higher rates of premiums or in rejecting risks when made aware of facts relating to matters which increase the risk. Thomas v. New York Life Ins. Co., 65 N.D. 625, 260 N.W. 605, 1935 N.D. LEXIS 151 (N.D. 1935).

Misrepresentations of material facts made in an application for an insurance policy will void the policy issued in reliance thereon when such misrepresentations increase the risk of loss. New York Life Ins. Co. v. Fleck, 73 N.D. 143, 12 N.W.2d 530, 1944 N.D. LEXIS 48 (N.D. 1944).

Concealment of fact that life insurance applicant had ailments and symptoms (high blood pressure) which placed him in a class of individuals that had a shorter life expectancy than individuals without such ailments and symptoms related to a matter which increased the risk of loss as a matter of law, where the insurer would have rejected the application or “rated up” the policy had it known the concealed fact. Lindlauf v. Northern Founders Ins. Co., 130 N.W.2d 86, 1964 N.D. LEXIS 124 (N.D. 1964).

Interpretation of Answers in Application.

The answers in an application for life insurance must be given a reasonable interpretation. Donahue v. Mutual Life Ins. Co., 37 N.D. 203, 164 N.W. 50, 1917 N.D. LEXIS 118 (N.D. 1917); Plotner v. Northwestern Nat'l Life Ins. Co., 48 N.D. 295, 183 N.W. 1000, 1921 N.D. LEXIS 39 (N.D. 1921).

Misrepresentations Influencing Insurer.

Misrepresentations increasing the risk of loss under former N.D.C.C. § 26-02-05 did not include all misrepresentations which would probably have influenced the insurer. O'Keefe v. Zurich General Acci. & Liability Ins. Co., 43 F.2d 809, 1930 U.S. App. LEXIS 3953 (8th Cir. N.D. 1930), cert. denied, 282 U.S. 898, 51 S. Ct. 182, 75 L. Ed. 791, 1931 U.S. LEXIS 89 (U.S. 1931).

Warranties.

Former similar section did not change the effect of a false warranty in a contract of insurance as to a fact material to the risk assumed. Satterlee v. Modern Bhd. of Am., 15 N.D. 92, 106 N.W. 561, 1906 N.D. LEXIS 14 (N.D. 1906); Van Woert v. Modern Woodmen of Am., 29 N.D. 441, 151 N.W. 224, 1915 N.D. LEXIS 21 (N.D. 1915).

Former similar section included statements in applications called warranties by the law of insurance. Such statutes are remedial and are liberally construed. Soules v. Brotherhood of Am. Yeomen, 19 N.D. 23, 120 N.W. 760, 1909 N.D. LEXIS 62 (N.D. 1909); Donahue v. Mutual Life Ins. Co., 37 N.D. 203, 164 N.W. 50, 1917 N.D. LEXIS 118 (N.D. 1917).

Collateral References.

Failure to disclose terminal illness as basis for life insurer’s avoidance of high-risk, high-premium policy requiring no health warranties or proof of insurability, 42 A.L.R.4th 158.

Negligent misrepresentation as “accident” or “occurrence” warranting insurance coverage, 58 A.L.R.5th 483.

Rescission of Directors’ and Officers’ Liability Insurance Policy, 29 A.L.R.6th 189.

Construction and Application of Exclusion Provisions of Directors and Officers Insurance Policy, Exclusive of Regulatory and Insured vs. Insured Exclusions, 34 A.L.R.6th 345.

26.1-29-26. Representations on information and belief.

When a person insured has no personal knowledge of a fact, the person may repeat information which that person has upon the subject and which that person believes to be true with the explanation that that person does so on the information of others, or that person may submit the information in its whole extent to the insurer. In neither case is the person responsible for the truth of the representation unless it proceeds from an insurance producer of the insured who has a duty to give the information.

Source:

S.L. 1985, ch. 316, § 6; 2001, ch. 262, § 98.

Derivation:

N.D.C.C. § 26-02-26.

26.1-29-27. Time to which representation refers.

A representation must be presumed to refer to the time of the completion of the insurance contract.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-27.

26.1-29-28. Alteration or withdrawal of representation.

A representation may be altered or withdrawn before the effective date of the insurance but not afterwards.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-28.

26.1-29-29. Insurance of mortgaged property — Act of mortgagor may avoid insurance.

When a mortgagor of property effects insurance in the mortgagor’s own name providing that the loss is payable to the mortgagee, or when the mortgagor assigns an insurance policy to the mortgagee, the insurance is considered to be upon the interest of the mortgagor. The mortgagor does not cease to be a party to the original contract, and any act of the mortgagor which otherwise would avoid the insurance will have the same effect although the property is in the hands of the mortgagee.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-30.

DECISIONS UNDER PRIOR LAW

Cancellation of Policy.

Where the insured canceled a policy because of inability to pay the premium, the fact that the premium note was not delivered to him did not prevent effective cancellation. Halpern v. National Fire Ins. Co., 56 N.D. 116, 216 N.W. 209, 1927 N.D. LEXIS 79 (N.D. 1927).

Suit by Mortgagee Alone.

A mortgagee to whom an insurance policy to mortgagor is made payable may sue alone if his claim exceeds the amount of insurance. Travelers' Ins. Co. v. California Ins. Co., 1 N.D. 151, 45 N.W. 703, 1890 N.D. LEXIS 19 (N.D. 1890).

Collateral References.

Duty of mortgagee of real property with respect to obtaining or maintenance of fire or other casualty insurance protecting mortgagor, 42 A.L.R.4th 188.

26.1-29-30. New contract on transfer of insurance on mortgaged property — Effect of mortgagor’s acts.

If an insurer assents to the transfer of an insurance contract from a mortgagor to a mortgagee and at the time of the insurer’s assent imposes further obligations on the assignee, making a new contract with the assignee, the acts of the mortgagor cannot affect the mortgagee’s right under the insurance.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-31.

26.1-29-31. Modification of insurance contract — Exercise of right of rescission.

This chapter applies to a modification of an insurance contract as well as to its original formation. The right to rescind an insurance contract given to the insurer under the provisions of this title may be exercised at any time prior to the commencement of an action on the contract.

Source:

S.L. 1985, ch. 316, § 6.

Derivation:

N.D.C.C. § 26-02-29.

CHAPTER 26.1-30 Insurance Policies

26.1-30-01. Insurance policy defined — Requirements.

An insurance policy is the written insurance contract. It must specify:

  1. The parties between whom the contract is made.
  2. The rate of premium.
  3. The property or life insured.
  4. The interest of the insured in the property insured if the insured is not the absolute owner of the property.
  5. The risks insured against.
  6. The period during which the insurance is to continue.

Source:

S.L. 1985, ch. 316, § 7; 1989, ch. 69, § 29.

Derivation:

N.D.C.C. § 26-03-01.

DECISIONS UNDER PRIOR LAW

Life Insurance Policies.

Chapter 140, S.L. 1907, had the effect of withdrawing life insurance policies from the control of former sections 26-03-01 and 26-06-03. There was no inconsistency in retaining these sections in the code because they were still operative as to all other forms of insurance. Jordon v. Western States Life Ins. Co., 78 N.D. 902, 53 N.W.2d 860, 1952 N.D. LEXIS 85 (N.D. 1952).

Collateral References.

Partnership or joint venture exclusion in contractor’s or other similar comprehensive general liability insurance policy, 57 A.L.R.4th 1155.

26.1-30-02. Policy executed by gambling void.

Every insurance policy executed by way of gaming or wagering is void.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-02.

26.1-30-03. Policies classified — Open, running, and valued policies defined.

An insurance policy is open, running, or valued, and these terms are defined as follows:

  1. An open policy is one in which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss.
  2. A running policy is one which contemplates successive insurances and which provides that the object of the policy may be defined from time to time, especially as to the subjects of insurance, by additional statements or endorsements.
  3. A valued policy is one which expresses on its face an agreement that the thing insured must be valued at a specified sum.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-03.

Collateral References.

State regulation of insurer’s right to classify insureds for premium or other underwriting purposes by occupation, 57 A.L.R.4th 625.

Applicability of Valued-Policy Statutes to Flood, Wind, and Hurricane Damage. 62 A.L.R.6th 227.

26.1-30-03.1. Issuance of foreign language policies.

An insurance carrier or producer licensed to provide insurance under this title may provide insurance policies, endorsements, or riders in a language other than English. All policies, endorsements, and riders written in languages other than English must be filed pursuant to sections 26.1-30-19, 26.1-30-20, and 26.1-30-21 and must include a written certification declaring to the commissioner that the non-English documents are accurate translations of the benefits provided in the English version pursuant to sections 26.1-30-19, 26.1-30-20, and 26.1-30-21. If there is a dispute or complaint regarding the non-English documents, the English language version of the insurance coverage controls the resolution of the dispute or complaint. This section does not abrogate or supersede the provisions of chapter 26.1-04 relating to prohibited practices within insurance business.

Source:

S.L. 2013, ch. 233, § 1.

26.1-30-04. Insurance only on interest of insured — Stipulation of interest void.

When the name of the person intended to be insured is specified in an insurance policy, it can be applied only to that person’s own proper interest. Every stipulation in an insurance policy for the payment of loss regardless of whether the person insured has or has not any interest in the property insured or that the policy is proof of such interest is void.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-04.

26.1-30-05. Policy may provide for benefit to any owner.

An insurance policy may be written so it will inure to the benefit of whomever, during the continuance of the risk, may become the owner of the interest insured.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-05.

26.1-30-06. Insurance by agent or trustee may be designated in policy.

When an insurance is made by an agent or trustee, the fact that the principal or beneficiary is the person actually insured may be indicated by designation of the agent or trustee or by other general words in the insurance policy.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-06.

26.1-30-07. Joint or common interest must be shown in policy.

When an insurance policy is entered into by a part owner of an interest, the terms of the insurance policy must be applicable to joint or common interest for the policy to be effective as to the interests of other part owners.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-07.

26.1-30-08. Person intended may claim benefit of policy.

When the description of the insured in an insurance policy is so general that it may comprehend any person or any class of persons, the benefit of the policy may be claimed only by a person who can show that it was intended to include that person.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-08.

26.1-30-09. Agreement not to transfer claim on policy is void.

An agreement made before a loss occurs that the insured will not transfer any claim that might arise on the insurance policy is void.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-10.

26.1-30-10. Warranties — Form and scope.

A warranty is either express or implied. No particular form of words is necessary to create a warranty. It may relate to the past, present, or future, or to all of them.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-14.

DECISIONS UNDER PRIOR LAW

Waiver and Estoppel.

By the enactment of the sections of the code dealing with the subject of warranties in relation to insurance contracts and the effect of a breach thereof it was not the legislative intent to do away with the well-settled and most equitable rule of implied waiver and estoppel in pais. Leisen v. St. Paul Fire & Marine Ins. Co., 20 N.D. 316, 127 N.W. 837, 1910 N.D. LEXIS 106 (N.D. 1910).

26.1-30-11. Express warranty must be written as part of policy.

Every express warranty made at or before the execution of an insurance policy must be contained in the policy or in another instrument signed by the insured and referred to in the policy as a part of the policy.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-15.

26.1-30-12. Statement of fact in policy is a warranty.

A statement in an insurance policy of a matter relating to the person or thing insured or to the risk as a fact is an express warranty thereof.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-16.

26.1-30-13. Statement of intention in policy is a warranty.

A statement in an insurance policy which imports that it is intended to do or not to do a thing which materially affects the risk is a warranty that the act or omission will take place.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-17.

Collateral References.

Policy provision limiting time within which action may be brought on the policy as applicable to tort action by insured against insurer, 66 A.L.R.4th 859.

26.1-30-14. Breach of warranty — When excused.

When, before the time arrives for the performance of a warranty relating to the future, a loss insured against happens, or performance becomes impossible or unlawful at the place of the contract, the omission to fulfill the warranty does not avoid the insurance policy.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-18.

26.1-30-15. Policy may be rescinded for violation of material warranty.

The violation of a material warranty or other material provision of an insurance policy on the part of either party to the policy entitles the other to rescind.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-19.

26.1-30-16. Effect of nonfraudulent breach of warranty in policy.

A breach of warranty without fraud exonerates an insurer from the time the breach occurs, or when a warranty is broken in its inception, prevents the insurance policy from attaching to the risk.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-20.

DECISIONS UNDER PRIOR LAW

Waiver of Grounds for Forfeiture.

By fraud in its inception a policy may never attach to the risk, but the forfeitures may be waived by the party entitled to its benefit. Johnson v. Dakota Fire & Marine Ins. Co., 1 N.D. 167, 45 N.W. 799, 1890 N.D. LEXIS 21 (N.D. 1890).

26.1-30-17. Breach of immaterial provision does not avoid policy unless otherwise provided.

An insurance policy may declare that a violation of specified provisions of the policy avoids it. In the absence of such declaration, the breach of an immaterial provision does not avoid the insurance policy.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-21.

DECISIONS UNDER PRIOR LAW

Qualified Warranty.

Where statements in an application as to the condition of a house constituted a warranty of their truthfulness, such being expressly provided by the policy, the warranty was not absolute, but was qualified by the words of the application “material to the risk”, and, unless the promise made was material, a breach of it would not avoid the policy. Waterbury v. Dakota Fire & Marine Ins. Co., 43 N.W. 697, 6 Dakota 468, 1889 Dakota LEXIS 23 (Dakota 1889).

Waiver of Forfeiture.

By demanding judgment for a premium note by way of counterclaim in an answer to plaintiff’s complaint, the insurer waives a forfeiture. Johnson v. Dakota Fire & Marine Ins. Co., 1 N.D. 167, 45 N.W. 799, 1890 N.D. LEXIS 21 (N.D. 1890).

If an insurance premium was received with full knowledge of the facts, the policy cannot be avoided after loss. Leisen v. St. Paul Fire & Marine Ins. Co., 20 N.D. 316, 127 N.W. 837, 1910 N.D. LEXIS 106 (N.D. 1910).

Collateral References.

Aviation insurance: casual link between breach of policy provisions and accident as requisite to avoid insurer’s liability, 48 A.L.R.4th 778.

Propriety of Use of Multiple Juries at Joint Trial of Multiple Defendants in State Criminal Prosecution, 41 A.L.R.6th 295.

26.1-30-18. Inception and expiration of policies — Inception of hail insurance policies.

An insurance policy covers the insured at 12:01 a.m. on the day on which coverage begins and expires at 12:01 a.m. on the day of expiration of the policy. However, a policy of insurance on growing crops against loss by hail takes effect at the time and on the day stated on the application for the insurance. The provision allowing a policy of insurance on growing crops against loss by hail to take effect as provided on the application may not be limited or restricted by rule or bulletin of the commissioner.

Source:

S.L. 1985, ch. 316, § 7.

Derivation:

N.D.C.C. § 26-03-49.

DECISIONS UNDER PRIOR LAW

Policy Providing Different Expiration Time.

Where fire insurance policy provided for an expiration time of noon, December 28, 1979, and there was an assignment of the policy which did not change the expiration time and specifically stated that the provisions of the policy were otherwise not changed, the assigned policy was in effect until noon, December 28, 1979, as provided in the initial policy, and did not expire at the time provided by this section. Bumann v. St. Paul Fire & Marine Ins. Co., 312 N.W.2d 459, 1981 N.D. LEXIS 416 (N.D. 1981).

Collateral References.

Policy provision limiting time within which action may be brought on the policy as applicable to tort action by insured against insurer, 66 A.L.R.4th 859.

26.1-30-19. Policy forms to be filed with and approved by commissioner.

  1. No insurance policy, contract, agreement, or rate schedule may be issued or delivered in this state until the form of that policy, contract, agreement, or rate schedule has been filed with and approved by the commissioner.
  2. No life insurance policy, certificate, contract, or agreement or annuity contract may be issued for delivery or delivered to any person in this state nor may any application, rider, or endorsement be used in connection therewith until the form thereof has been filed with and approved by the commissioner and is in compliance with chapters 26.1-33, 26.1-34, 26.1-35, and 26.1-37.
  3. No insurance policy, certificate, contract, or agreement or notice of proposed insurance against loss or expense from the sickness, bodily injury, or death by accident of the insured may be issued for delivery or delivered to any person in this state nor may any application, rider, or endorsement be used in connection therewith until the form thereof and the classification of risks and the premium rates, or in the case of cooperatives or assessment companies the estimated costs pertaining thereto, have been filed with and approved by the commissioner. A form must be disapproved if the benefits provided are unreasonable in relation to the premium charge or if the benefits do not comply with chapters 26.1-36 and 26.1-37.
  4. No casualty or fire and property insurance policy, certificate, contract, or agreement may be issued for delivery or delivered to any person in this state nor may any application, rider, or endorsement be used in connection therewith until the form thereof has been filed and approved by the commissioner to the extent rates are filed and approved pursuant to chapter 26.1-25.
  5. A filing and any supporting information is not open to public inspection or subject to the provisions of chapter 44-04 unless the filing is approved by the commissioner.

Source:

S.L. 1985, ch. 316, § 7; 2021, ch. 230, § 4, eff August 1, 2021.

Derivation:

N.D.C.C. §§ 26-03-42, 26-31-04, 26-35-08, 26-35-09.

26.1-30-20. Procedure for use of policy forms filed with commissioner.

No insurance policy, certificate, contract, agreement, or rate schedule, except as is otherwise provided, may be issued, nor may any application, rider, or endorsement be used in connection therewith until the expiration of sixty days after it has been filed unless the commissioner gives written approval. The commissioner may extend the sixty-day period for an additional period not to exceed fifteen days if the commissioner gives written notice within the sixty-day period to the insurer which made the filing that the commissioner needs the additional time for the consideration of the filing.

Source:

S.L. 1985, ch. 316, § 7; 1987, ch. 350, § 3; 1995, ch. 276, § 6.

Derivation:

N.D.C.C. §§ 26-03-42, 26-35-08.

26.1-30-21. Disapproval of form by commissioner — Notice and hearing.

  1. If the commissioner disapproves any form, the commissioner shall notify the company or organization which filed the form within sixty days after filing or within the additional period provided for in section 26.1-30-20 and provide written notice of disapproval of the form, specifying the reasons for disapproval and stating that a hearing may be requested in writing within forty-five days. No company or organization may issue any insurance policy in the form which has been disapproved. If a hearing is requested, the commissioner may suspend or postpone the effective date of disapproval.
  2. The commissioner may, at any time after a hearing of which not less than twenty days’ written notice has been given to the insurer, withdraw approval of any form if it contains a provision which is unjust, unfair, inequitable, misleading, or deceptive, or on any of the grounds stated in this title. It is unlawful for the insurer to issue the form or use it in connection with any policy after the effective date of withdrawal of approval. The notice of any hearing called under this subsection must specify the matters to be considered at the hearing and any decision affirming disapproval or directing withdrawal of approval under this section must be in writing and must specify the reasons for the decision.

Source:

S.L. 1985, ch. 316, § 7; 1987, ch. 350, § 4.

Derivation:

N.D.C.C. §§ 26-03-43, 26-35-08.

CHAPTER 26.1-30.1 Cancellation and Nonrenewal of Commercial Insurance

26.1-30.1-01. Application.

This chapter applies to policies primarily insuring risks arising from the conduct of a commercial or industrial enterprise except workforce safety and insurance policies, private passenger automobile policies, inland marine policies, excess umbrella liability policies, errors and omissions policies, and officers and directors liability policies.

Source:

S.L. 1987, ch. 359, § 1; 1989, ch. 69, § 29; 2003, ch. 561, § 3.

Collateral References.

Liability insurance: what is “claim” under deductibility-per-claim clause, 60 A.L.R.4th 983.

Liability of tortfeasor’s insurance agent or broker to injured party for failure to procure or maintain liability insurance, 72 A.L.R.4th 1095.

26.1-30.1-01.1. Unlawful grounds for declination.

The declination or termination of a commercial insurance policy subject to sections 26.1-30.1-01 through 26.1-30.1-08 by an insurer or insurance producer is prohibited if the declination or termination is based solely upon any of the following reasons:

  1. The race, religion, nationality, ethnic group, disability, age, sex, or marital status of the applicant or named insured, except this subsection does not prohibit rating differentials based upon age, sex, or marital status.
  2. The lawful occupation or profession of the applicant or named insured, except that this provision does not apply to an insurer or insurance producer that limits its market to one lawful occupation or profession or to several related occupations or professions.
  3. The age or location of the property of the applicant or named insured, unless the decision is for a business purpose that is not a mere pretext for unfair discrimination.
  4. The principal location of the insured motor vehicle, unless the decision is for a business purpose which is not a mere pretext for unfair discrimination.
  5. The fact that another insurer previously declined to insure the applicant or terminated an existing policy in which the applicant was the named insured.
  6. The fact that the applicant or named insured previously obtained insurance coverage through a residual market insurance mechanism or an insurance company that insures substandard risks.

Source:

S.L. 1999, ch. 251, § 6; 2001, ch. 262, § 99.

26.1-30.1-01.2. Policy transfer.

  1. A policy transferred to an insurer within the same insurance holding company system is not subject to sections 26.1-30.1-02, 26.1-30.1-03, 26.1-30.1-03.1, and 26.1-30.1-06.
  2. The transferring insurer shall give notice to the policyholder of the policy transfer.

Source:

S.L. 2001, ch. 270, § 1.

26.1-30.1-02. Midterm cancellation of commercial insurance.

No insurer may cancel a policy of commercial insurance during the term of the policy, except for one or more of the following reasons:

  1. Nonpayment of premiums;
  2. Misrepresentation or fraud made by or with the knowledge of the insured in obtaining the policy or in pursuing a claim under the policy;
  3. Actions by the insured that have substantially increased or substantially changed the risk insured;
  4. Refusal of the insured to eliminate known conditions that increase the potential for loss after notification by the insurer that the condition must be removed;
  5. Substantial change in the risk assumed, except to the extent that the insurer should reasonably have foreseen the change or contemplated the risk in writing the contract;
  6. Loss of reinsurance by the insurer which provided coverage to the insurer for a significant amount of the underlying risk insured. Any notice of cancellation pursuant to this subsection must advise the policyholder that the policyholder has ten days from the date of receipt of the notice to appeal the cancellation to the insurance commissioner and that the commissioner will render a decision as to whether the cancellation is justified because of the loss of reinsurance within five business days after receipt of the appeal;
  7. A determination by the insurance commissioner that the continuation of the policy could place the insurer in violation of the insurance laws of this state;
  8. Nonpayment of dues to an association or organization, other than an insurance association or organization, when payment of dues is a prerequisite to obtaining or continuing such insurance; except this provision for cancellation for failure to pay dues does not apply to persons who are retired at sixty-two years of age or older or to any person who is disabled according to social security standards; or
  9. A violation of any local fire, health, safety, building, or construction regulation or ordinance with respect to any insured property or the occupancy thereof which substantially increases any hazard insured against.

Source:

S.L. 1987, ch. 359, § 2; 1991, ch. 302, § 19.

Notes to Decisions

Applicability.

By express language, this section unambiguously limits its application to the cancellation of a policy of commercial insurance “during the term of the policy.” The statute does not contain language requiring an insurer to give notice when a policy expires by its own terms. Wahl v. Country Mut. Ins. Co., 2002 ND 42, 640 N.W.2d 689, 2002 N.D. LEXIS 44 (N.D. 2002).

Legislative Intent.

The clear intent of this section is to provide limitations upon the midterm cancellations of coverage by insurers, rather than to impose a notice requirement for an expired policy. The statute does not impose a duty upon an insurer to provide a notice of cancellation at the end of the policy term when an insured fails to pay a premium to continue insurance coverage. Wahl v. Country Mut. Ins. Co., 2002 ND 42, 640 N.W.2d 689, 2002 N.D. LEXIS 44 (N.D. 2002).

26.1-30.1-03. Notice.

Cancellation under subsections 2 through 9 of section 26.1-30.1-02 is not effective prior to thirty days after notice to the policyholder. The notice of cancellation must contain a specific reason for cancellation as provided in section 26.1-30.1-02. A policy may not be canceled for nonpayment of premium pursuant to subsection 1 of section 26.1-30.1-02 unless the insurer, at least ten days prior to the effective cancellation date, has given notice to the policyholder of the amount of premium due and the due date. The notice must state the effect of nonpayment by the due date. No cancellation for nonpayment of premium is effective if payment of the amount due is made prior to the effective date set forth in the notice.

Source:

S.L. 1987, ch. 359, § 3; 1991, ch. 302, § 20.

DECISIONS UNDER PRIOR LAW

Analysis

Failure to Receive Notice.

Where, under former N.D.C.C. § 26-02-34, cancellation required that notice be mailed or delivered, insurance company failed to prove that it had mailed written notice of cancellation to insured since evidence that letter was not received was probative of whether it was mailed. Auto-Owners Ins. Co. v. State Farm Mut. Auto. Ins. Co., 434 N.W.2d 348, 1989 N.D. LEXIS 9 (N.D. 1989).

Presumptive Evidence of Mailing.

Where, under former N.D.C.C. § 26-02-34, cancellation required that notice be mailed or delivered, mail worker’s testimony that she mailed notice was not presumptive evidence of its mailing since worker did not testify that she mailed notice of cancellation to insured, and worker had no knowledge of whether envelope addressed to insured and stuffed with cancellation notice had ever been prepared or mailed. Auto-Owners Ins. Co. v. State Farm Mut. Auto. Ins. Co., 434 N.W.2d 348, 1989 N.D. LEXIS 9 (N.D. 1989).

26.1-30.1-03.1. Five-day notice exception for cancellation.

Policies subject to this chapter may be canceled upon five days’ written notice to the named insureds if one or more of the following conditions exist:

  1. Buildings with at least sixty-five percent of the rental units in the building unoccupied.
  2. Buildings that have been damaged by a peril insured against and the insured has stated or such time has elapsed as clearly indicates that the damage will not be repaired.
  3. Buildings to which, following a fire, permanent repairs have not commenced within sixty days following satisfactory adjustment of loss.
  4. Buildings that have been unoccupied sixty consecutive days, except buildings that have a seasonal occupancy, and buildings actually in the course of construction or repair and reconstruction which are properly secured against unauthorized entry.
  5. Buildings that are in danger of collapse because of serious structural conditions or those buildings subject to extremely hazardous conditions not contemplated in filed rating plans such as those buildings that are in a state of disrepair as to be dilapidated.
  6. Buildings on which, because of their physical condition, there is an outstanding order to vacate or an outstanding demolition order, or which have been declared unsafe in accordance with applicable law.
  7. Buildings from which fixed and salvageable items have been or are being removed and the insured can give no reasonable explanation for the removal.
  8. Buildings on which there is reasonable knowledge and belief that the property is endangered and is not reasonably protected from possible arson for the purpose of defrauding an insurer.
  9. Buildings with any of the following conditions:
    1. Failure to furnish heat, water, sewer service, or public lighting for thirty consecutive days or more.
    2. Failure to correct conditions dangerous to life, health, or safety.
    3. Failure to maintain the building in accordance with applicable law.
    4. Failure to pay property taxes for more than one year.
  10. Buildings that have characteristics of ownership condition, occupancy, or maintenance which are violative of law or public policy.

Source:

S.L. 1991, ch. 302, § 21.

26.1-30.1-04. New policies.

Sections 26.1-30.1-02 and 26.1-30.1-03 do not apply to insurance policies which have been in effect less than ninety days at the time the notice of cancellation is mailed or delivered. No cancellation under this section is effective until at least ten days after the written notice to the policyholder.

Source:

S.L. 1987, ch. 359, § 4.

26.1-30.1-05. Longer term policies.

A policy may be issued for a term longer than one year or for an indefinite term with a clause providing for cancellation by the insurer for the reasons stated in section 26.1-30.1-02 by giving a notice as required by section 26.1-30.1-03 at least thirty days prior to any anniversary date.

Source:

S.L. 1987, ch. 359, § 5.

DECISIONS UNDER PRIOR LAW

Waiver of Provisions for Forfeiture.

The conduct of an insurance company, and its retention of unearned premiums, waived the provisions for forfeiture of the policy providing against additional insurance, and the company was estopped to deny its liability on the policy contract. Yusko v. Middlewest F. Ins. Co., 39 N.D. 66, 166 N.W. 539, 1917 N.D. LEXIS 142 (N.D. 1917).

26.1-30.1-06. Nonrenewal of commercial insurance policies — Notice required — Exceptions.

  1. An insurer shall renew the policy, unless at least sixty days prior to the date of expiration provided in the policy, a notice of intention not to renew the policy beyond the agreed expiration date is made to the policyholder. The insurer shall include a statement of the reasons for a nonrenewal with the notice.
  2. This section does not apply if the policyholder has insured elsewhere, has accepted replacement coverage, or has requested or agreed to nonrenewal.

Source:

S.L. 1987, ch. 359, § 6; 1991, ch. 302, § 22; 2003, ch. 245, § 2.

Notes to Decisions

Applicability.

This section does not impose a duty upon an insurer to provide a notice of nonrenewal to terminate an insured’s policy for failure to pay a renewal premium upon expiration of the policy term. Wahl v. Country Mut. Ins. Co., 2002 ND 42, 640 N.W.2d 689, 2002 N.D. LEXIS 44 (N.D. 2002).

26.1-30.1-07. Renewal of insurance with altered rates.

  1. Subject to subsection 2, if the insurer offers or purports to renew a policy at less favorable terms as to the dollar amount of coverage or deductibles or increases the rates in excess of fifteen percent, the new terms and new rates may take effect on the renewal date if the insurer has sent to the policyholder notice of the new terms and rates at least ten days prior to the expiration date. If the insurer has not so notified the policyholder, the policyholder may elect to cancel the renewal policy within the ten-day period after receipt of the notice. Earned premium for the period of coverage, if any, must be calculated on a pro rata basis and the rates must be based on the previous policy term.
  2. Subsection 1 does not apply if the change relates to guide “A” rates or excess rates also known as “consent to rate”.

Source:

S.L. 1987, ch. 359, § 7.

26.1-30.1-08. Penalties.

  1. A violation of any of the provisions of sections 26.1-30.1-01 through 26.1-30.1-07 must be deemed an unfair trade practice in the business of insurance and subject the violator to a penalty as determined by the commissioner not exceeding one thousand dollars for each and every act or violation. After three violations of any of the provisions of sections 26.1-30.1-01 through 26.1-30.1-07 within a twelve-month period, and after a hearing upon fifteen days’ notice, the commissioner may revoke the license to transact business in this state of any insurance organization that committed such violations.
  2. All notices required by this chapter must be made by first-class mail addressed to the policyholder’s last-known address as stated in the policy. Notice by first-class mail is effective upon deposit in the United States mail. In addition to giving notice to the policyholder, the insurer shall also give notice to the agent of record, if any, in the manner specified for the policyholder.

Source:

S.L. 1987, ch. 359, § 8.

CHAPTER 26.1-31 Reinsurance and Double Insurance

26.1-31-01. Reinsurance contract defined.

A reinsurance contract is one by which an insurer contracts with a third person to insure the insurer against loss or liability by reason of an original insurance contract made by the insurer.

Source:

S.L. 1985, ch. 316, § 8.

Derivation:

N.D.C.C. § 26-05-01.

Collateral References.

Who may enforce liability of reinsurer, 87 A.L.R.6th 319.

26.1-31-02. Scope of reinsurance contract.

A reinsurance contract is presumed to be a contract of indemnity against liability and not merely against damage.

Source:

S.L. 1985, ch. 316, § 8.

Derivation:

N.D.C.C. § 26-05-02.

Collateral References.

Reinsurer’s liability for primary liability insurer’s failure to compromise or settle, 42 A.L.R.4th 1130.

26.1-31-03. Interest of insured in reinsurance contract.

The original insured has no interest in a reinsurance contract.

Source:

S.L. 1985, ch. 316, § 8.

Derivation:

N.D.C.C. § 26-05-04.

26.1-31-04. Disclosures required on reinsurance.

When an insurer obtains reinsurance, the insurer shall communicate all the representations of the original insured and all the knowledge and information the insurer possesses, regardless of when acquired, which is material to the risk.

Source:

S.L. 1985, ch. 316, § 8.

Derivation:

N.D.C.C. § 26-05-05.

26.1-31-05. Double insurance defined.

A double insurance exists when the same person is insured by several insurers separately in respect to the same interest.

Source:

S.L. 1985, ch. 316, § 8.

Derivation:

N.D.C.C. § 26-05-06.

26.1-31-06. Double insurance of one of several things.

The procurement of any other insurance contract upon one or more of several distinct interests insured by one insurance policy does not render void any insurance upon the interests not covered by such other insurance contract. In case of loss or damage, the value of property doubly insured must be deducted from the value of all the property covered by the insurance policy. Any agreement made to waive the provisions of this section is void.

Source:

S.L. 1985, ch. 316, § 8.

Derivation:

N.D.C.C. § 26-05-07.

DECISIONS UNDER PRIOR LAW

Analysis

Applicability.

The provisions of the statute, concerning payment of policy’s face amount, apply whenever a single insurance policy is involved and no fraud is involved; however, whenever more than one policy covering the same property is involved, proration of the loss among the policies, applies. Bumann v. St. Paul Fire & Marine Ins. Co., 312 N.W.2d 459, 1981 N.D. LEXIS 416 (N.D. 1981).

Pro Rata Payment on Loss.

Where loss is to be prorated among various insurance policies, each insurance company should be required to pay a pro rata share in accordance with the ratio the company’s policy bears to the total insurance coverage. Bumann v. St. Paul Fire & Marine Ins. Co., 312 N.W.2d 459, 1981 N.D. LEXIS 416 (N.D. 1981).

26.1-31-07. Contribution of insurers on fire loss doubly insured. [Repealed]

Repealed by S.L. 1985, ch. 330, § 4.

CHAPTER 26.1-31.1 Reinsurance Intermediaries

26.1-31.1-01. Definitions.

As used in this chapter:

  1. “Actuary” means a person who is a member in good standing of the American academy of actuaries.
  2. “Controlling person” means any person, firm, association, corporation, or limited liability company who directly or indirectly has the power to direct or cause to be directed, the management, control, or activities of the reinsurance intermediary.
  3. “Insurer” means any person, firm, association, or corporation duly licensed in this state pursuant to the applicable provisions of the insurance law as an insurer.
  4. “Licensed producer” means an insurance producer or reinsurance intermediary licensed pursuant to the applicable provision of this title.
  5. “Qualified United States financial institution” means an institution that:
    1. Is organized or in the case of a United States office of a foreign banking organization, is licensed, under the laws of the United States or any state thereof;
    2. Is regulated, supervised, and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and
    3. Has been determined by either the commissioner, or the securities valuation office of the national association of insurance commissioners, to meet standards of financial condition and standing considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.
  6. “Reinsurance intermediary” means a reinsurance intermediary-broker or a reinsurance intermediary-manager as these terms are defined in subsections 7 and 8.
  7. “Reinsurance intermediary-broker” means any person, other than an officer or employee of the ceding insurer, firm, association, or corporation who solicits, negotiates, or places reinsurance cessions or retrocessions on behalf of a ceding insurer without the authority or power to bind reinsurance on behalf of such insurer.
  8. “Reinsurance intermediary-manager” means any person, firm, association, corporation, or limited liability company who has authority to bind or manages all or part of the assumed reinsurance business of a reinsurer, including the management of a separate division, department, or underwriting office, and acts as an agent for the reinsurer whether known as a reinsurance intermediary-manager, manager, or other similar term. Notwithstanding this definition, the following persons may not be considered a reinsurance intermediary-manager, with respect to such reinsurer, for the purposes of this chapter:
    1. An employee of the reinsurer.
    2. A United States manager of the United States branch of an alien reinsurer.
    3. An underwriting manager which, pursuant to contract, manages all or part of the reinsurance operations of the reinsurer, is under common control with the reinsurer and subject to chapter 26.1-10, and whose compensation is not based on the volume of premiums written.
    4. The manager of a group, association, pool, or organization of insurers which engage in joint underwriting or joint reinsurance and who are subject to examination by the insurance commissioner of the state in which the manager’s principal business office is located.
  9. “Reinsurer” means any person, firm, association, or corporation duly licensed in this state pursuant to the applicable provisions of this title as an insurer with the authority to assume reinsurance.
  10. “To be in violation” means that the reinsurance intermediary, insurer, or reinsurer for whom the reinsurance intermediary was acting failed to substantially comply with the provisions of this chapter.

Source:

S.L. 1991, ch. 305, § 12; 1993, ch. 54, § 106; 1993, ch. 292, § 24; 2001, ch. 262, § 100.

Collateral References.

Who may enforce liability of reinsurer, 87 A.L.R.6th 319.

26.1-31.1-02. Licensure.

  1. No person, firm, association, or corporation may act as a reinsurance intermediary-broker in this state if the reinsurance intermediary-broker maintains an office either directly or as a member or employee of a firm or association, or an officer, director, or employee of a corporation:
    1. In this state, unless the reinsurance intermediary-broker is a licensed producer in this state; or
    2. In another state, unless the reinsurance intermediary-broker is a licensed producer in this state or another state having a law substantially similar to this law or such reinsurance intermediary-broker is licensed in this state as a nonresident reinsurance intermediary.
  2. No person, firm, association, or corporation may act as a reinsurance intermediary-manager:
    1. For a reinsurer domiciled in this state, unless the reinsurance intermediary-manager is a licensed producer in this state.
    2. In this state, if the reinsurance intermediary-manager maintains an office either directly or as a member or employee of a firm or association, or as an officer, director, or employee of a corporation in this state, unless the reinsurance intermediary-manager is a licensed producer in this state.
    3. In another state for a nondomestic insurer, unless the reinsurance intermediary-manager is a licensed producer in this state or another state having a law substantially similar to this law or the person is licensed in this state as a nonresident reinsurance intermediary.
  3. The commissioner may require a reinsurance intermediary-manager subject to subsection 2 to:
    1. File a bond in an amount from an insurer acceptable to the commissioner for the protection of the reinsurer; and
    2. Maintain an errors and omissions policy in an amount acceptable to the commissioner.
    1. The commissioner may issue a reinsurance intermediary license to any person, firm, association, corporation, or limited liability company who has complied with the requirements of this chapter. Any such license issued to a firm or association will authorize all the members of the firm or association and any designated employees to act as reinsurance intermediaries under the license, and all such persons must be named in the application and any supplements thereto. Any such license issued to a corporation must authorize all of the officers and any designated employees and directors thereof to act as reinsurance intermediaries on behalf of the corporation, and all such persons must be named in the application and any supplements thereto. Any such license issued to a limited liability company must authorize all of the managers and any designated employees and governors thereof to act as reinsurance intermediaries on behalf of the limited liability company, and all such persons must be named in the application and any supplements thereto.
    2. If the applicant for a reinsurance intermediary license is a nonresident, the applicant, as a condition precedent to receiving or holding a license, shall designate the commissioner as agent for service of process in the manner, and with the same legal effect, provided for by this title for designation of service of process upon unauthorized insurers. The applicant shall also furnish the commissioner with the name and address of a resident of this state upon whom notices or orders of the commissioner or process affecting the nonresident reinsurance intermediary may be served. The licensee shall promptly notify the commissioner in writing of every change in its designated agent for service of process, and the changes do not become effective until acknowledged by the commissioner.
  4. The commissioner may refuse to issue a reinsurance intermediary license if, in the commissioner’s judgment, the applicant, anyone named on the application, or any member, principal, officer, or director of the applicant, is not trustworthy, or that any controlling person of the applicant is not trustworthy to act as a reinsurance intermediary, or that any of the foregoing has given cause for revocation or suspension of the license, or has failed to comply with any prerequisite for the issuance of such license. Upon written request therefor, the commissioner will furnish a summary of the basis for refusal to issue a license.
  5. Licensed attorneys at law of this state when acting in their professional capacity as such are exempt from this section.

Source:

S.L. 1991, ch. 305, § 12; 1993, ch. 54, §§ 79, 106; 1993, ch. 292, § 25.

26.1-31.1-03. Required contract provisions — Reinsurance intermediary-brokers.

Transactions between a reinsurance intermediary-broker and the insurer it represents in such capacity may only be entered into, pursuant to a written authorization, specifying the responsibilities of each party. The authorization must, at a minimum, contain provisions that:

  1. The insurer may terminate the reinsurance intermediary-broker’s authority at any time.
  2. The reinsurance intermediary-broker will render accounts to the insurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing, to the reinsurance intermediary-broker, and remit all funds due to the insurer within thirty days of receipt.
  3. All funds collected for the insurer’s account will be held by the reinsurance intermediary-broker in a fiduciary capacity in a bank which is a qualified United States financial institution as defined by this chapter.
  4. The reinsurance intermediary-broker will comply with section 26.1-31.1-04.
  5. The reinsurance intermediary-broker will comply with the written standards established by the insurer for the cessions or retrocession of all risks.
  6. The reinsurance intermediary-broker will disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded.

Source:

S.L. 1991, ch. 305, § 12.

26.1-31.1-04. Books and records — Reinsurance intermediary-brokers.

  1. For at least ten years after expiration of each contract of reinsurance transacted by the reinsurance intermediary-broker, the reinsurance intermediary-broker will keep a complete record for each transaction showing:
    1. The type of contract, limits, underwriting restrictions, classes or risks, and territory;
    2. Period of coverage, including the effective date and the expiration date, cancellation provisions and notice required of cancellation;
    3. Reporting and settlement requirements of balances;
    4. Rate used to compute the reinsurance premium;
    5. Names and addresses of assuming reinsurers;
    6. Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-broker;
    7. Related correspondence and memoranda;
    8. Proof of placement;
    9. Details regarding retrocessions handled by the reinsurance intermediary-broker, including the identity of retrocessionaires and percentage of each contract assumed or ceded;
    10. Financial records, including premium and loss accounts; and
    11. When the reinsurance intermediary-broker procures a reinsurance contract on behalf of a licensed ceding insurer:
      1. Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or
      2. If placed through a representative of the assuming reinsurer, other than an employee, written evidence that the reinsurer has delegated binding authority to the representative.
  2. The insurer will have access and the right to copy and audit all accounts and records maintained by the reinsurance intermediary-broker related to its business in a form usable by the insurer.

Source:

S.L. 1991, ch. 305, § 12.

26.1-31.1-05. Duties of insurers utilizing the services of reinsurance intermediary-broker.

  1. An insurer may not engage the services of any person, firm, association, corporation, or limited liability company to act as a reinsurance intermediary-broker on its behalf unless the person, firm, association, corporation, or limited liability company is licensed as required by subsection 1 of section 26.1-31.1-02.
  2. An insurer may not employ an individual who is employed by a reinsurance intermediary-broker with which it transacts business, unless the reinsurance intermediary-broker is under common control with the insurer and subject to chapter 26.1-10.
  3. The insurer shall annually obtain a copy of statements of the financial condition of each reinsurance intermediary-broker with which it transacts business.

Source:

S.L. 1991, ch. 305, § 12; 1993, ch. 54, § 106.

26.1-31.1-06. Required contract provisions — Reinsurance intermediary-managers.

Transactions between a reinsurance intermediary-manager and the reinsurer it represents in that capacity may only be entered into pursuant to a written contract, approved by the reinsurer’s board of directors, which specifies the responsibilities of each party. At least thirty days before the reinsurer assumes or cedes business through the producer, a true copy of the approved contract must be filed with the commissioner for approval. The contract must, at a minimum, contain provisions that:

  1. The reinsurer may terminate the contract for cause upon written notice to the reinsurance intermediary-manager. The reinsurer may immediately suspend the authority of the reinsurance intermediary-manager to assume or cede business during the pendency of any dispute regarding the cause for termination.
  2. The reinsurance intermediary-manager will render accounts to the reinsurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to the reinsurance intermediary-manager, and remit all funds due under the contract to the reinsurer on not less than a monthly basis.
  3. All funds collected for the reinsurer’s account will be held by the reinsurance intermediary-manager in a fiduciary capacity in a bank which is a qualified United States financial institution as defined by this chapter. The reinsurance intermediary-manager may retain no more than three months’ estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary-manager shall maintain a separate bank account for each reinsurer that it represents.
  4. For at least ten years after expiration of each contract of reinsurance transacted by the reinsurance intermediary-manager, the reinsurance intermediary-manager will keep a complete record for each transaction showing:
    1. The type of contract, limits, underwriting restrictions, classes or risks, and territory;
    2. Period of coverage, including the effective date and the expiration date, cancellation provisions and notice required of cancellation, and disposition of outstanding reserves on covered risks;
    3. Reporting and settlement requirements of balances;
    4. Rate used to compute the reinsurance premium;
    5. Names and addresses of reinsurers;
    6. Rate of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-manager;
    7. Related correspondence and memoranda;
    8. Proof of placement;
    9. Details regarding retrocessions handled by the reinsurance intermediary-manager, as permitted by subsection 4 of section 26.1-31.1-08, including the identity of retrocessionaires and percentage of each contract assumed or ceded;
    10. Financial records premium and loss accounts; and
    11. When the reinsurance intermediary-manager places a reinsurance contract on behalf of a ceding insurer:
      1. Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or
      2. If placed through a representative of the assuming reinsurer, other than an employee, written evidence that the reinsurer has delegated binding authority to the representative.
  5. The reinsurer will have access and the right to copy all accounts and records maintained by the reinsurance intermediary-manager related to its business in a form usable by the reinsurer.
  6. The contract cannot be assigned in whole or in part by the reinsurance intermediary-manager.
  7. The reinsurance intermediary-manager will comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection, or cession of all risks.
  8. Set forth the rates, terms, and purposes of commissions, charges, and other fees which the reinsurance intermediary-manager may levy against the reinsurer.
  9. If the contract permits the reinsurance intermediary-manager to settle claims on behalf of the reinsurer:
    1. All claims will be reported to the reinsurer in a timely manner.
    2. A copy of the claim file will be sent to the reinsurer at its request or as soon as it becomes known that the claim:
      1. Has the potential to exceed the lesser of an amount determined by the commissioner or the limit set by the reinsurer;
      2. Involves a coverage dispute;
      3. May exceed the reinsurance intermediary-manager’s claims settlement authority;
      4. Is open for more than six months; or
      5. Is closed by payment of the lesser of an amount set by the commissioner or an amount set by the reinsurer.
    3. All claim files will be the joint property of the reinsurer and reinsurance intermediary-manager. However, upon an order of liquidation of the reinsurer the files become the sole property of the reinsurer or its estate. The reinsurance intermediary-manager shall have reasonable access to and the right to copy the files on a timely basis.
    4. Any settlement authority granted to the reinsurance intermediary-manager may be terminated for cause upon the reinsurer’s written notice to the reinsurance intermediary-manager or upon the termination of the contract. The reinsurer may suspend the settlement authority during the pendency of the dispute regarding the cause of termination.
  10. If the contract provides for a sharing of interim profits by the reinsurance intermediary-manager, the interim profits will not be paid until one year after the end of each underwriting period for property business and five years after the end of each underwriting period for casualty business, or a later period set by the commissioner for specified lines of insurance, and not until the adequacy of reserves on remaining claims has been verified pursuant to subsection 3 of section 26.1-31.1-08.
  11. The reinsurance intermediary-manager will annually provide the reinsurer with a statement of its financial condition prepared by an independent certified public accountant.
  12. The reinsurer shall periodically and at least semiannually conduct an onsite review of the underwriting and claims processing operations of the reinsurance intermediary-manager.
  13. The reinsurance intermediary-manager will disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with the insurer pursuant to this contract.
  14. The acts of the reinsurance intermediary-manager must be deemed to be the acts of the reinsurer on whose behalf it is acting.

Source:

S.L. 1991, ch. 305, § 12; 1993, ch. 292, § 26.

26.1-31.1-07. Prohibited acts.

The reinsurance intermediary-manager may not:

  1. Bind retrocessions on behalf of the reinsurer, except that the reinsurance intermediary-manager may bind facultative retrocessions pursuant to obligatory facultative agreements if the contract with the reinsurer contains reinsurance underwriting guidelines for such retrocessions. The guidelines must include a list of reinsurers with which the automatic agreements are in effect, and for each such reinsurer, the coverages and amounts or percentages that may be reinsured, and commission schedules.
  2. Commit the reinsurer to participate in reinsurance syndicates.
  3. Appoint any producer without assuring that the producer is lawfully licensed to transact the type of reinsurance for which the producer is appointed.
  4. Without prior approval of the reinsurer, pay or commit the reinsurer to pay a claim, net of retrocessions, that exceeds the lesser of an amount specified by the reinsurer or one percent of the reinsurer’s policyholder’s surplus as of December thirty-first of the last complete calendar year.
  5. Collect any payment from a retrocessionaire or commit the reinsurer to any claim settlement with a retrocessionaire, without prior approval of the reinsurer. If prior approval is given, a report must be promptly forwarded to the reinsurer.
  6. Jointly employ an individual who is employed by the reinsurer unless such reinsurance intermediary-manager is under common control with the reinsurer subject to chapter 26.1-10.
  7. Appoint a subreinsurance intermediary-manager.

Source:

S.L. 1991, ch. 305, § 12; 1993, ch. 292, § 27.

26.1-31.1-08. Duties of reinsurers utilizing the services of a reinsurance intermediary-manager.

  1. A reinsurer may not engage the services of any person, firm, association, corporation, or limited liability company to act as a reinsurance intermediary-manager on its behalf unless such person, firm, association, corporation, or limited liability company is licensed as required by subsection 2 of section 26.1-31.1-02.
  2. The reinsurer shall annually obtain a copy of statements of the financial condition of each reinsurance intermediary-manager which the reinsurer has engaged, prepared by an independent certified public accountant, in a form acceptable to the commissioner.
  3. If a reinsurance intermediary-manager establishes loss reserves, the reinsurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the reinsurance intermediary-manager. This opinion must be in addition to any other required loss reserve certification.
  4. Binding authority for all retrocessional contracts or participation in reinsurance syndicates rests with an officer of the reinsurer who may not be affiliated with the reinsurance intermediary-manager.
  5. Within thirty days of termination of a contract with a reinsurance intermediary-manager, the reinsurer shall provide written notification of its termination to the commissioner.
  6. A reinsurer may not appoint to its board of directors any officer, director, employee, controlling shareholder, or subproducer of its reinsurance intermediary-manager. This subsection does not apply to relationships governed by chapter 26.1-10.

Source:

S.L. 1991, ch. 305, § 12; 1993, ch. 54, § 106.

26.1-31.1-09. Examination authority.

  1. A reinsurance intermediary is subject to examination by the commissioner. The commissioner shall have access to all books, bank accounts, and records of the reinsurance intermediary in a form usable to the commissioner.
  2. A reinsurance intermediary-manager may be examined as if it was the reinsurer.

Source:

S.L. 1991, ch. 305, § 12.

26.1-31.1-10. Penalties and liabilities.

  1. If the commissioner determines that the reinsurance intermediary or any other person has not materially complied with this chapter, or any rule or order adopted under this chapter, after notice and opportunity to be heard, the commissioner may order:
    1. For each separate violation, a penalty in an amount not exceeding five thousand dollars;
    2. Revocation or suspension of the reinsurance intermediary’s license; and
    3. If it was found that because of the material noncompliance the insurer or reinsurer has suffered any loss or damage, the commissioner may maintain a civil action brought by or on behalf of the reinsurer or insurer and its policyholders and creditors for recovery of compensatory damages for the benefit of the reinsurer or insurer and its policyholders and creditors or seek other appropriate relief.
  2. If an order of rehabilitation or liquidation of the insurer has been entered pursuant to chapter 26.1-06.1, and the receiver appointed under that order determines that the reinsurance intermediary or any other person has not materially complied with this chapter, or any rule or order adopted under this chapter, and the insurer suffered any loss or damage as a result of the material noncompliance, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions for the benefit of the insurer.
  3. Nothing contained in this section affects the right of the commissioner to impose any other penalties provided for in the insurance law.
  4. Nothing contained in this chapter is intended to or may in any manner limit or restrict the rights of policyholders, claimants, creditors, or other third parties.
  5. The decision, determination, or order of the commissioner pursuant to subsection 1 is subject to judicial review pursuant to chapter 28-32.

Source:

S.L. 1991, ch. 305, § 12; 1993, ch. 292, § 28.

26.1-31.1-11. Rules.

The commissioner may adopt reasonable rules for the implementation and administration of the provisions of this chapter.

Source:

S.L. 1991, ch. 305, § 12.

26.1-31.1-12. Effective date.

No insurer or reinsurer may continue to utilize the services of a reinsurance intermediary after July 7, 1991, unless utilization is in compliance with this chapter.

Source:

S.L. 1991, ch. 305, § 12.

CHAPTER 26.1-31.2 Reinsurance Credit

26.1-31.2-01. Credit allowed a domestic ceding insurer.

  1. Credit for reinsurance must be allowed a domestic ceding insurer as either an asset or a reduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of subsection 2, 3, 4, 5, 6, 7, or 8. Credit will be allowed under subsection 2, 3, or 4 only with respect to cessions of a kind or class of business that the assuming insurer is licensed or otherwise permitted to write or assume in its state of domicile or, in the case of a United States branch of an alien assuming insurer, in the state through which it is entered and licensed to transact insurance or reinsurance. Credit must be allowed under subsection 4 or 5 only if the applicable requirements of subsection 9 have been satisfied.
  2. Credit must be allowed when the reinsurance is ceded to an assuming insurer that is licensed to transact insurance or reinsurance in this state.
  3. Credit must be allowed when the reinsurance is ceded to an assuming insurer which is accredited by the commissioner as a reinsurer in this state. In order to be eligible for accreditation, a reinsurer:
    1. Shall file with the commissioner evidence of its submission to this state’s jurisdiction;
    2. Shall submit to this state’s authority to examine its books and records;
    3. Must be licensed to transact insurance or reinsurance in at least one state, or, in the case of a United States branch of an alien assuming insurer, be entered through and licensed to transact insurance or reinsurance in at least one state;
    4. Annually, shall file with the commissioner a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement; and
    5. Shall demonstrate to the satisfaction of the commissioner the assuming insurer has adequate financial capacity to meet the assuming insurer’s reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of application the assuming insurer maintains a surplus as regards policyholders in an amount which is not less than twenty million dollars and the assuming insurer’s accreditation has not been denied by the commissioner within ninety days after submission of its application.
    1. Credit must be allowed when the reinsurance is ceded to an assuming insurer domiciled in, or in the case of a United States branch of an alien assuming insurer, is entered through, a state which employs standards regarding credit for reinsurance substantially similar to those applicable under this statute and the assuming insurer or United States branch of an alien assuming insurer:
      1. Maintains a surplus as regards policyholders in an amount not less than twenty million dollars; and
      2. Submits to the authority of this state to examine its books and records.
    2. The requirement of subdivision a does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.
    1. Credit must be allowed when the reinsurance is ceded to an assuming insurer that maintains a trust fund in a qualified United States financial institution, as defined in subsection 2 of section 26.1-31.2-03, for the payment of valid claims of its United States ceding insurers, their assigns, and successors in interest. To enable the commissioner to determine the sufficiency of the trust fund, the assuming insurer shall report annually to the commissioner information substantially the same as that required to be reported on the national association of insurance commissioners annual statement form by licensed insurers. The assuming insurer shall submit to examination of the insurer’s books and records by the commissioner and bear the expense of examination.
      1. Credit for reinsurance may not be granted under this subsection unless the form of the trust and any amendments to the trust have been approved by:
        1. The commissioner of the state in which the trust is domiciled; or
        2. The commissioner of another state who, pursuant to the terms of the trust instrument, accepted principal regulatory oversight of the trust.
      2. The form of the trust and any trust amendments also must be filed with the commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled. The trust instrument must provide that contested claims are valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust must vest legal title to the trust’s assets in the trust’s trustees for the benefit of the assuming insurer’s United States ceding insurers, their assigns, and successors in interest. The trust and the assuming insurer are subject to examination as determined by the commissioner.
      3. The trust shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust. No later than February twenty-eighth of each year the trustee of the trust shall report to the commissioner in writing the balance of the trust and listing of the trust’s investments at the preceding year-end and shall certify the date of termination of the trust, if so planned, or certify the trust will not expire before the following December thirty-first.
    2. The following requirements apply to the following categories of assuming insurer:
      1. The trust fund for a single assuming insurer must consist of funds in trust in an amount not less than the assuming insurer’s liabilities attributable to reinsurance ceded by United States ceding insurers and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars, except as provided in paragraph 2.
      2. At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years, the commissioner with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of United States ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and must consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates, and the effect of the surplus requirements on the assuming insurer’s liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than thirty percent of the assuming insurer’s liabilities attributable to reinsurance ceded by United States ceding insurers covered by the trust.
        1. In the case of a group, including incorporated and individual unincorporated underwriters:
          1. For reinsurance ceded under a reinsurance agreement with an inception, amendment, or renewal date after December 31, 1992, the trust must consist of a trusteed account in an amount not less than the respective underwriters’ several liabilities attributable to business ceded by United States domiciled ceding insurers to any underwriter of the group;
          2. For reinsurance ceded under a reinsurance agreement with an inception date before January 1, 1993, and not amended or renewed after that date, notwithstanding the other provisions of this chapter, the trust must consist of a trusteed account in an amount not less than the respective underwriters’ several insurance and reinsurance liabilities attributable to business written in the United States; and
          3. In addition to these trusts, the group shall maintain a trusteed surplus of one hundred million dollars which must be held jointly for the benefit of the United States domiciled ceding insurers of any member of the group for all years of account.
        2. The incorporated members of the group may not be engaged in any business other than underwriting as a member of the group and are subject to the same level of regulation and solvency control by the group’s domiciliary regulator as are the unincorporated members.
        3. Within ninety days after its financial statements are due to be filed with the group’s domiciliary regulator, the group shall provide to the commissioner an annual certification by the group’s domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements prepared by independent public accountants of each underwriter member of the group.
      3. In the case of a group of incorporated underwriters under common administration, the group:
        1. Must have continuously transacted an insurance business outside the United States for at least three years immediately prior to making application for accreditation;
        2. Shall maintain aggregate policyholders’ surplus of at least ten billion dollars;
        3. Shall maintain a trust fund in an amount not less than the group’s several liabilities attributable to business ceded by United States domiciled ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of the group; (d) Shall maintain a joint trusteed surplus of which one hundred million dollars must be held jointly for the benefit of United States domiciled ceding insurers of any member of the group as additional security for these liabilities; and
  4. Credit must be allowed when the reinsurance is ceded to an assuming insurer that has been certified by the commissioner as a reinsurer in this state and secures the assuming insurer’s obligations in accordance with the requirements of this subsection.
    1. In order to be eligible for certification, the assuming insurer shall meet the following requirements:
      1. The assuming insurer must be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to subdivision c;
      2. The assuming insurer shall maintain minimum capital and surplus, or its equivalent, in an amount to be determined by the commissioner pursuant to rule;
      3. The assuming insurer shall maintain financial strength ratings from two or more rating agencies deemed acceptable by the commissioner pursuant to rule;
      4. The assuming insurer shall agree to submit to the jurisdiction of this state, appoint the commissioner as its agent for service of process in this state, and agree to provide security for one hundred percent of the assuming insurer’s liabilities attributable to reinsurance ceded by United States ceding insurers if the assuming insurer resists enforcement of a final United States judgment;
      5. The assuming insurer shall agree to meet applicable information filing requirements as determined by the commissioner, both with respect to an initial application for certification and on an ongoing basis; and
      6. The assuming insurer shall satisfy any other requirements for certification deemed relevant by the commissioner.
    2. An association, including incorporated and individual unincorporated underwriters, may be a certified reinsurer. In order to be eligible for certification, in addition to satisfying requirements of subdivision a:
      1. The association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents, net of liabilities, of the association and the association’s members which must include a joint central fund that may be applied to any unsatisfied obligation of the association or any of the association’s members, in an amount determined by the commissioner to provide adequate protection;
      2. The incorporated members of the association may not be engaged in any business other than underwriting as a member of the association and are subject to the same level of regulation and solvency control by the association’s domiciliary regulator as are the unincorporated members; and
      3. Within ninety days after the association’s financial statements are due to be filed with the association’s domiciliary regulator, the association shall provide to the commissioner an annual certification by the association’s domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the association.
    3. The commissioner shall create and publish a list of qualified jurisdictions, under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the commissioner as a certified reinsurer.
      1. In order to determine whether the domiciliary jurisdiction of a non-United States assuming insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits, and the extent of reciprocal recognition afforded by the non-United States jurisdiction to reinsurers licensed and domiciled in the United States. A qualified jurisdiction must agree to share information and cooperate with the commissioner with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the commissioner has determined the jurisdiction does not adequately and promptly enforce final United States judgments and arbitration awards. Additional factors may be considered in the discretion of the commissioner.
      2. A list of qualified jurisdictions must be published through the national association of insurance commissioner committee process. The commissioner shall consider this list in determining qualified jurisdictions. If the commissioner approves a jurisdiction as qualified which does not appear on the list of qualified jurisdictions, the commissioner shall provide thoroughly documented justification in accordance with criteria to be developed under regulations.
      3. United States jurisdictions that meet the requirement for accreditation under the national association of insurance commissioners financial standards and accreditation program must be recognized as qualified jurisdictions.
      4. If a certified reinsurer’s domiciliary jurisdiction ceases to be a qualified jurisdiction, in lieu of revocation, the commissioner may suspend the reinsurer’s certification indefinitely.
    4. The commissioner shall assign a rating to each certified reinsurer. Giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable to the commissioner pursuant to rule. The commissioner shall publish a list of all certified reinsurers and the reinsurer’s ratings.
    5. A certified reinsurer shall secure obligations assumed from United States ceding insurers under this subsection at a level consistent with the certified reinsurer’s rating, as specified in rules adopted by the commissioner.
      1. In order for a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form acceptable to the commissioner and consistent with the provisions of section 26.1-31.2-02 or in a multibeneficiary trust in accordance with subsection 5, except as otherwise provided in this subsection.
      2. If a certified reinsurer maintains a trust to fully secure the certified reinsurer’s obligations subject to subsection 5, and chooses to secure the certified reinsurer’s obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts for the certified reinsurer’s obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this subsection or comparable laws of other United States jurisdictions and for the certified reinsurer’s obligations subject to subsection 5. As a condition to the grant of certification under subsection 6, the certified reinsurer must have bound itself, by the language of the trust and agreement with the commissioner with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account.
      3. The minimum trusteed surplus requirements provided in subsection 5 are not applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this subsection, except that such trust must maintain a minimum trusteed surplus of ten million dollars.
      4. With respect to obligations incurred by a certified reinsurer under this subsection, if the security is insufficient, the commissioner shall reduce the allowable credit by an amount proportionate to the deficiency, and may impose further reductions in allowable credit upon finding there is a material risk the certified reinsurer’s obligations will not be paid in full when due.
      5. For purposes of this subsection, a certified reinsurer whose certification has been terminated for any reason must be treated as a certified reinsurer required to secure one hundred percent of the certified reinsurer’s obligations.
        1. As used in this subsection, “terminated” refers to revocation, suspension, voluntary surrender, and inactive status.
        2. If the commissioner continues to assign a higher rating as permitted by other provisions of this section, this requirement does not apply to a certified reinsurer in inactive status or to a reinsurer whose certification has been suspended.
    6. If an applicant for certification has been certified as a reinsurer in a national association of insurance commissioners accredited jurisdiction, the commissioner may defer to that jurisdiction’s certification, and may defer to the rating assigned by that jurisdiction, and such assuming insurer must be considered to be a certified reinsurer in this state.
    7. A certified reinsurer that ceases to assume new business in this state may request to maintain the certified reinsurer’s certification in inactive status in order to continue to qualify for a reduction in security for the certified reinsurer’s in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this subsection, and the commissioner shall assign a rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new business.
    1. Credit must be allowed if the reinsurance is ceded to an assuming insurer meeting each of the following conditions:
      1. The assuming insurer must have the assuming insurer’s head office or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction. A “reciprocal jurisdiction” is a jurisdiction that meets one of the following:
        1. A non-United States jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and European Union, is a member state of the European Union. As used in this subsection, a “covered agreement” is an agreement entered pursuant to the federal Dodd-Frank Wall Street Reform and Consumer Protection Act [31 U.S.C. 313 and 314] which is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering a reinsurance agreement with a ceding insurer domiciled in this state or for allowing the ceding insurer to recognize credit for reinsurance;
        2. A United States jurisdiction that meets the requirements for accreditation under the national association of insurance commissioners financial standards and accreditation program recognized by the commissioner; or
        3. A qualified jurisdiction, as determined by the commissioner pursuant to subdivision c of subsection 6, which is not otherwise described in subdivision a or b of subsection 6 and which meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by rules adopted by the commissioner.
      2. The assuming insurer must have and maintain, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of the assuming insurer’s domiciliary jurisdiction, in an amount in compliance with rules adopted by the commissioner. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, the assuming insurer must have and maintain, on an ongoing basis, minimum capital and surplus equivalents, net of liabilities, calculated according to the methodology applicable in the domiciliary jurisdiction of the assuming insurer, and a central fund containing a balance in compliance with rules adopted by the commissioner.
      3. The assuming insurer must have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, in compliance with rules adopted by the commissioner. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, the assuming insurer must have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction in which the assuming insurer has the assuming insurer’s head office or is domiciled, as applicable, and is also licensed.
      4. The assuming insurer shall agree and provide adequate assurance to the commissioner, in a form in compliance with rules adopted by the commissioner, as follows:
        1. The assuming insurer shall provide prompt written notice and explanation to the commissioner if the assuming insurer falls below the minimum requirements set forth in paragraph 2 or 3, or if any regulatory action is taken against the assuming insurer for serious noncompliance with applicable law;
        2. The assuming insurer shall consent in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process. The commissioner may require consent for service of process be provided to the commissioner and included in each reinsurance agreement. This subparagraph does not limit or in any way alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws;
        3. The assuming insurer shall consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or the ceding insurer’s legal successor, which have been declared enforceable in the jurisdiction in which the judgment was obtained;
        4. Each reinsurance agreement must include a provision requiring the assuming insurer to provide security in an amount equal to one hundred percent of the assuming insurer’s liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which the final judgment was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by the ceding insurer’s legal successor on behalf of the ceding insurer’s resolution estate; and
        5. The assuming insurer shall confirm the assuming insurer is not presently participating in any solvent scheme of arrangement that involves this state’s ceding insurers, and agree to notify the ceding insurer and the commissioner and to provide security in an amount equal to one hundred percent of the assuming insurer’s liabilities to the ceding insurer, if the assuming insurer enters such a solvent scheme of arrangement. Such security must be in a form consistent with the provisions of subsection 6 and section 26.1-31.2-02 and as specified by the commissioner by rule.
      5. The assuming insurer or the assuming insurer’s legal successor shall provide, if requested by the commissioner, on behalf of the assuming insurer and any legal predecessors, certain documentation to the commissioner, as specified by the commissioner by regulation.
      6. The assuming insurer shall maintain a practice of prompt payment of claims under reinsurance agreements, pursuant to criteria set forth by the commissioner by rule.
      7. The assuming insurer’s supervisory authority shall confirm to the commissioner on an annual basis, as of the preceding December thirty-first or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in paragraphs 2 and 3.
      8. This subdivision does not preclude an assuming insurer from providing the commissioner with information on a voluntary basis.
    2. The commissioner shall create timely and publish a list of reciprocal jurisdictions.
      1. A list of reciprocal jurisdictions is published through the national association of insurance commissioners committee process. The commissioner’s list must include any reciprocal jurisdiction as defined under subparagraphs a and b of paragraph 1 of subdivision a, and must consider any other reciprocal jurisdiction included on the national association of insurance commissioners’ list. The commissioner may approve a jurisdiction that does not appear on the national association of insurance commissioners’ list of reciprocal jurisdictions in accordance with criteria to be set by rules adopted by the commissioner.
      2. The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination the jurisdiction no longer meets the requirements of a reciprocal jurisdiction, in accordance with a process set by rules adopted by the commissioner, except that the commissioner may not remove from the list a reciprocal jurisdiction as defined under subparagraphs a and b of paragraph 1 of subdivision a. Upon removal of a reciprocal jurisdiction from this list credit for reinsurance ceded to an assuming insurer that has the assuming insurer’s home office or is domiciled in that jurisdiction must be allowed, if otherwise allowed pursuant to chapter 26.1-31.2.
    3. The commissioner timely shall create and publish a list of assuming insurers that have satisfied the conditions set forth in this subsection and to which cessions must be granted credit in accordance with this subsection. The commissioner may add an assuming insurer to the list if a national association of insurance commissioners accredited jurisdiction has added the assuming insurer to a list of the assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the commissioner as required under paragraph 4 of subdivision a and complies with any additional requirements the commissioner may impose by rule, except to the extent the requirements conflict with an applicable covered agreement.
    4. If the commissioner determines an assuming insurer no longer meets one or more of the requirements under this subsection, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subsection in accordance with procedures set forth by rule.
      1. While an assuming insurer’s eligibility is suspended, a reinsurance agreement issued, amended, or renewed after the effective date of the suspension does not qualify for credit except to the extent the assuming insurer’s obligations under the contract are secured in accordance with section 26.1-31.2-02.
      2. If an assuming insurer’s eligibility is revoked, credit for reinsurance may not be granted after the effective date of the revocation with respect to any reinsurance agreements entered by the assuming insurer, including reinsurance agreements entered before the date of revocation, except to the extent the assuming insurer’s obligations under the contract are secured in a form acceptable to the commissioner and consistent with the provisions of section 26.1-31.2-02.
    5. If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer, or the ceding insurer’s representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring the assuming insurer post security for all outstanding ceded liabilities.
    6. This subsection does not limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this chapter.
    7. Credit may be taken under this subsection only for reinsurance agreements entered, amended, or renewed on or after the effective date of this Act, and only with respect to losses incurred and reserves reported on or after the later of the date on which the assuming insurer has met all eligibility requirements pursuant to subdivision a and the effective date of the new reinsurance agreement, amendment, or renewal.
      1. This subdivision does not alter or impair a ceding insurer’s right to take credit for reinsurance, to the extent that credit is not available under this subsection, as long as the reinsurance qualifies for credit under any other applicable provision of this chapter.
      2. This subsection does not authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.
      3. This subsection does not limit or in any way alter the capacity of parties to any reinsurance agreement to renegotiate the agreement.
  5. Credit must be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of subsection 2, 3, 4, 5, 6, or 7 but only as to the insurance of risks located in jurisdictions where the reinsurance is required by applicable law or regulation of that jurisdiction.
    1. If the assuming insurer is not licensed, accredited, or certified to transact insurance or reinsurance in this state, the credit permitted by subsections 4 and 5 may not be allowed unless the assuming insurer agrees in the reinsurance agreements:
      1. In the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, will comply with all requirements necessary to give the court jurisdiction, and will abide by the final decision of the court or of any appellate court in the event of an appeal; and
      2. To designate the commissioner or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on behalf of the ceding insurer.
    2. This subsection is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if this obligation is created in the agreement.
  6. If the assuming insurer does not meet the requirements of subsection 2, 3, 4, or 8, the credit permitted by subsection 5 or 6 may not be allowed unless the assuming insurer agrees in the trust agreements to the following conditions:
    1. Notwithstanding any other provisions in the trust instrument, if the trust fund is inadequate because the trust fund contains an amount less than the amount required by subdivision c of subsection 5, or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the commissioner with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the commissioner with regulatory oversight all of the assets of the trust fund.
    2. The assets must be distributed by and claims must be filed with and valued by the commissioner with regulatory oversight in accordance with the laws of the state in which the trust is domiciled which are applicable to the liquidation of domestic insurers.
    3. If the commissioner with regulatory oversight determines the assets of the trust fund or any part of this trust fund are not necessary to satisfy the claims of the United States ceding insurers of the grantor of the trust, the assets or part of the assets must be returned by the commissioner with regulatory oversight to the trustee for distribution in accordance with the trust agreement.
    4. The grantor shall waive any right otherwise available to the grantor under United States law that is inconsistent with this provision.
  7. If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, the commissioner may suspend or revoke the reinsurer’s accreditation or certification.
    1. The commissioner shall give the reinsurer notice and opportunity for a hearing. The suspension or revocation may not take effect until after the commissioner’s order on a hearing, unless:
      1. The reinsurer waives the reinsurer’s right to a hearing;
      2. The commissioner’s order is based on regulatory action by the reinsurer’s domiciliary jurisdiction or the voluntary surrender or termination of the reinsurer’s eligibility to transact insurance or reinsurance business in the reinsurer’s domiciliary jurisdiction or in the primary certifying state of the reinsurer under subdivision f of subsection 6; or
      3. The commissioner finds an emergency requires immediate action and a court of competent jurisdiction has not stayed the commissioner’s action.
    2. During the period of suspension of a reinsurer’s accreditation or certification, a reinsurance contract issued or renewed after the effective date of the suspension does not qualify for credit except to the extent that the reinsurer’s obligations under the contract are secured in accordance with section 26.1-31.2-02. If a reinsurer’s accreditation or certification is revoked, credit for reinsurance may not be granted after the effective date of the revocation, except to the extent the reinsurer’s obligations under the contract are secured in accordance with subdivision e of subsection 5 of section 26.1-31.2-02.
    1. A ceding insurer shall take steps to manage the ceding insurer’s reinsurance recoverables proportionate to the ceding insurer’s own book of business. A domestic ceding insurer shall notify the commissioner within thirty days after reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, exceed fifty percent of the domestic ceding insurer’s last reported surplus to policyholders, or after it is determined reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification must demonstrate the exposure is safely managed by the domestic ceding insurer.
    2. A ceding insurer shall take steps to diversify the ceding insurer’s reinsurance program. A domestic ceding insurer shall notify the commissioner within thirty days after ceding to any single assuming insurer, or group of affiliated assuming insurers, more than twenty percent of the ceding insurer’s gross written premium in the prior calendar year, or after the ceding insurer’s determined the reinsurance ceded to any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification must demonstrate the exposure is safely managed by the domestic ceding insurer.
    3. Credit for reinsurance ceded to a certified reinsurer is limited to reinsurance contracts entered or renewed on or after the effective date of the commissioner’s certification of the assuming insurer.

(e) Within ninety days after its financial statements are due to be filed with the group’s domiciliary regulator, shall make available to the commissioner an annual certification of each underwriter member’s solvency by the member’s domiciliary regulator and financial statements of each underwriter member of the group prepared by its independent public accountant.

Source:

S.L. 1991, ch. 301, § 14; 1991, ch. 305, § 13; 1993, ch. 290, § 3; 1993, ch. 292, §§ 29, 30; 1995, ch. 285, § 1; 2001, ch. 264, § 7; 2015, ch. 215, § 1, eff January 1, 2016; 2021, ch. 236, § 1, eff August 1, 2021.

26.1-31.2-02. Asset or reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of section 26.1-31.2-01.

An asset or reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of section 26.1-31.2-01 must be allowed in an amount not exceeding the liabilities carried by the ceding insurer. The reduction must be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with the assuming insurer as security for the payment of obligations thereunder, if the security is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer; or, in the case of a trust, held in a qualified United States financial institution, as defined in subsection 2 of section 26.1-31.2-03. This security may be in the form of:

  1. Cash;
  2. Securities listed by the securities valuation office of the national association of insurance commissioners, including those securities deemed exempt from filing as defined by the purposes and procedures manual of the securities valuation office, and qualifying as admitted assets;
    1. Clean, irrevocable, unconditional letters of credit issued or confirmed by a qualified United States institution, as defined in subsection 1 of section 26.1-31.2-03, effective no later than December thirty-first of the year for which the filing is being made, and in the possession of, or in trust for, the ceding insurer on or before the filing date of its annual statement; or
    2. Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation must, notwithstanding the issuing or confirming institution’s subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification, or amendment, whichever first occurs; or
  3. Any other form of security acceptable to the commissioner.

Source:

S.L. 1991, ch. 305, § 13; 1993, ch. 292, § 31; 1995, ch. 276, § 7; 2001, ch. 264, § 8; 2015, ch. 215, § 2, eff January 1, 2016.

26.1-31.2-03. Qualified United States financial institutions.

  1. For purposes of subsection 3 of section 26.1-31.2-02, a “qualified United States financial institution” means an institution that:
    1. Is organized, or in case of a United States office of a foreign banking organization, is licensed, under the laws of the United States or any state thereof;
    2. Is regulated, supervised, and examined by United States federal or state authorities having regulatory authority over banks and trust companies; and
    3. Has been determined by either the commissioner, or the securities valuation office of the national association of insurance commissioners, to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.
  2. A “qualified United States financial institution” means, for purposes of those provisions of this chapter specifying those institutions that are eligible to act as a fiduciary of a trust, an institution that:
    1. Is organized, or in the case of a United States branch or agency office of a foreign banking organization, is licensed, under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers; and
    2. Is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies.

Source:

S.L. 1991, ch. 305, § 13; 2015, ch. 215, § 3, eff January 1, 2016.

26.1-31.2-04. Rulemaking authority.

The commissioner may adopt rules for the implementation and administration of this chapter.

Source:

S.L. 1991, ch. 305, § 13; 2015, ch. 215, § 4, eff January 1, 2016.

26.1-31.2-05. Reinsurance agreements affected.

Sections 26.1-31.2-01, 26.1-31.2-02, 26.1-31.2-03, and 26.1-31.2-04 apply to all cessions after July 7, 1991, under reinsurance agreements which have had an inception, anniversary, or renewal date not less than six months after July 7, 1991.

Source:

S.L. 1991, ch. 305, § 13.

CHAPTER 26.1-32 Loss and Notice of Loss

26.1-32-01. Liability of insurer for loss — Proximate and remote cause.

An insurer is liable for a loss proximately caused by a peril insured against even though a peril not contemplated by the insurance contract may have been a remote cause of the loss. An insurer is not liable for a loss of which the peril insured against was only a remote cause. The efficient proximate cause doctrine applies only if separate, distinct, and totally unrelated causes contribute to the loss.

Source:

S.L. 1985, ch. 316, § 9; 2003, ch. 251, § 1.

Derivation:

N.D.C.C. § 26-06-01.

Notes to Decisions

Construction.

This section and N.D.C.C. § 26.1-32-03 codify the efficient proximate cause doctrine for determining insurance coverage for property damage where an excluded peril and a covered peril contribute to the damage; and an insurer may not contractually exclude coverage when a covered peril is the efficient proximate cause of damage, even though an excluded peril may have contributed to the damage. W. Nat'l Mut. Ins. Co. v. Univ. of N.D., 2002 ND 63, 643 N.W.2d 4, 2002 N.D. LEXIS 81 (N.D. 2002).

Collateral References.

Liability insurer’s postloss conduct as waiver of, or estoppel to assert, “no-action” clause, 68 A.L.R.4th 389.

Event triggering liability insurance coverage as occurring within period of time covered by liability insurance policy where injury or damage is delayed — modern cases, 14 A.L.R.5th 695.

Validity, Construction, and Application of Anticoncurrent Causation (ACC) Clauses in Insurance Policies. 37 A.L.R.6th 657.

Law Reviews.

North Dakota Supreme Court Review (Western National Ins. Co. v. University of N.D., 2002 ND 63, 643 N.W.2d 4), see 79 N.D. L. Rev. 589 (2003).

26.1-32-02. Liability of insurer for loss in rescuing thing insured.

An insurer is liable when the thing insured is rescued from a peril insured against that otherwise would have caused a loss, if in the course of rescue the thing is exposed to peril not insured against which permanently deprives the insured of its possession in whole or in part. The insurer is liable, also, when a loss is caused by efforts to rescue the thing insured from a peril insured against.

Source:

S.L. 1985, ch. 316, § 9.

Derivation:

N.D.C.C. § 26-06-02.

26.1-32-03. Insurer not liable for excepted peril.

When a peril is excepted specially in an insurance contract, a loss which would not have occurred but for that peril is excepted although the immediate cause of the loss was a peril which was not excepted. An insurer may contract out of the efficient proximate cause doctrine.

Source:

S.L. 1985, ch. 316, § 9; 2003, ch. 251, § 2.

Derivation:

N.D.C.C. § 26-06-03.

DECISIONS UNDER PRIOR LAW

Life Insurance Policies.

Chapter 140, S.L. 1907, had the effect of withdrawing life insurance policies from the control of former N.D.C.C. §§ 26-03-01 and 26-03-03. There was no inconsistency in retaining these sections in the code because they were still operative as to all other forms of insurance. Jordon v. Western States Life Ins. Co., 78 N.D. 902, 53 N.W.2d 860, 1952 N.D. LEXIS 85 (N.D. 1952).

Law Reviews.

North Dakota Supreme Court Review (W. Nat’l Mut. Ins. Co. v. Univ. of N.D., 2002 ND 63, 643 N.W.2d 4 (2002)), see 79 N.D. L. Rev. 589 (2003).

26.1-32-04. Willful act exonerates insurer, negligence does not.

An insurer is not liable for a loss caused by the willful act of the insured, but the insurer is not exonerated by the negligence of the insured or of the insured’s agents or others.

Source:

S.L. 1985, ch. 316, § 9.

Derivation:

N.D.C.C. § 26-06-04.

Notes to Decisions

Acting In Concert.

Because a jury’s findings that insureds acted in concert, as defined by N.D.C.C. § 32-03.2-02, when they wrongfully interfered with a business was res judicata as to whether their tortious conduct was intentional, their insurer had no duty to indemnify them. Coverage was precluded as a matter of law by intentional acts exclusions and by the public policy stated in N.D.C.C. §§ 9-08-02, 26.1-32-04; however, the jury’s findings did not relieve the insurer of the duty to defend, which was determined by the allegations in the underlying complaint. Tibert v. Nodak Mut. Ins. Co., 2012 ND 81, 816 N.W.2d 31, 2012 N.D. LEXIS 81 (N.D. 2012).

Arson.

This section, N.D.C.C. § 9-08-02, and public policy prevented plaintiff insurer from being liable for insurance coverage of losses sustained by defendant neighboring businesses as a result of arson at a nightclub; the arsonist’s intent extended to the damage to neighboring buildings, and allowing coverage would benefit the arsonist when the insurer defended the claim, thereby reducing the arsonist’s expenses. Capitol Indem. Corp. v. Evolution, Inc., 293 F. Supp. 2d 1067, 2003 U.S. Dist. LEXIS 21125 (D.N.D. 2003).

Assault and Battery.

Insurance company could not be held liable for injuries willfully inflicted upon plaintiff during an attack upon the plaintiff by one of insurance company’s insureds. Hins v. Heer, 259 N.W.2d 38, 1977 N.D. LEXIS 204 (N.D. 1977).

Manslaughter.

Homeowner’s manslaughter conviction for the point-blank shooting of man he found in his wife’s bedroom was an intentional act for which coverage was excluded by his homeowner’s policy. Ohio Cas. Ins. Co. v. Clark, 1998 ND 153, 583 N.W.2d 377, 1998 N.D. LEXIS 161 (N.D. 1998).

Murder.

Because policy holder’s policy with Farmers Union contained an exclusion of liability for intentional acts and because the issue of whether he acted intentionally when he shot and killed the police officer was res judicata by virtue of his conviction for murder, the district court did not err in ruling Farmers Union had no duty to defend the policy holder in a wrongful death suit instituted by the police officer’s widow. Mead v. Farmers Union Mut. Ins. Co., 2000 ND 139, 613 N.W.2d 512, 2000 N.D. LEXIS 148 (N.D. 2000).

Punitive Damages.

Insurance carriers are generally exempt from liability for punitive damages or any other losses incurred by an insured because of his intentionally wrongful conduct. Continental Casualty Co. v. Kinsey, 499 N.W.2d 574, 1993 N.D. LEXIS 80 (N.D. 1993).

Violation of Penal Laws.

Section 9-08-02 and this section manifest a public policy precluding an insured from being indemnified for losses caused by the insured’s sexual molestation of a child, and an insurer has no duty to defend against any alleged negligent acts inextricably linked with the intentional molestation. Nodak Mut. Ins. Co. v. Heim, 1997 ND 36, 559 N.W.2d 846, 1997 N.D. LEXIS 33 (N.D. 1997).

DECISIONS UNDER PRIOR LAW

Automobile Liability Policy.

As a general rule, whether a personal injury intentionally inflicted may be considered to be the result of an accident within the meaning of a liability policy is determined from the standpoint of the victim and not the aggressor, and where an injury ensues from an unprovoked and unauthorized assault it is the result of an accident. HASER v. MARYLAND CAS. CO., 78 N.D. 893, 53 N.W.2d 508, 1952 N.D. LEXIS 84 (N.D. 1952).

Excepted Peril.

Insured’s act was accidental so that the resulting injuries and damages were not within the exclusionary provisions of his policy where the insured was involved in a 110 mile per hour chase during the heat of a marital dispute in which shots had been fired between the insured and the insured’s father-in-law, and the insured was driving with his left wheels on the dirt shoulder of a road, and in order to avoid a ditch on the left side of the road, he veered his automobile to the right, hooking bumpers with the automobile driven by the father-in-law, causing that automobile to lose control when the bumpers unhooked and injuring the occupants of that car. Automobile Club Ins. Co. v. Hoffert, 195 N.W.2d 542, 1972 N.D. LEXIS 115 (N.D. 1972).

Fire Loss.

Former similar section had reference merely to the original cause of a fire, and it distinguished, between a loss resulting from a willful setting of a fire and one resulting from a fire caused through mere negligence of the insured, and if it was shown that a policyholder did not exercise proper diligence to save personal property from loss by fire, he could not recover on the contract. First Nat'l Bank v. German Am. Ins. Co., 23 N.D. 139, 134 N.W. 873, 1911 N.D. LEXIS 73 (N.D. 1911).

Collateral References.

Theft and vandalism insurance: coinsured’s misconduct as barring innocent coinsured’s right to recover on policy, 64 A.L.R.4th 714.

Law Reviews.

Punitive Damages and Insurance: Are Punitive Damages Insurable? The North Dakota Supreme Court Says Yes, Despite North Dakota’s Public Policy to the Contrary, 70 N.D. L. Rev. 637 (1994).

26.1-32-05. Notice of loss must be given promptly.

In case of loss upon an insurance against fire, an insurer is exonerated if notice of the loss is not given to the insurer by some person insured or entitled to the benefit of the insurance without unnecessary delay.

Source:

S.L. 1985, ch. 316, § 9.

Derivation:

N.D.C.C. § 26-06-05.

26.1-32-06. Proof or notice of loss — Requirements.

When preliminary proof of loss is required by an insurance policy, the insured is not bound to give such proof as would be necessary in a court, but it is sufficient for the insured to give the best evidence which the insured has at the time.

Source:

S.L. 1985, ch. 316, § 9.

Derivation:

N.D.C.C. § 26-06-06.

26.1-32-07. Waiver of defects in notice of loss.

All defects in a notice of loss or in preliminary proof of loss which the insured might remedy and which the insurer omits to specify to the insured without unnecessary delay as grounds of objection are waived.

Source:

S.L. 1985, ch. 316, § 9.

Derivation:

N.D.C.C. § 26-06-07.

DECISIONS UNDER PRIOR LAW

Specified Defects.

An objection to specified defects in the proof of loss constitutes a waiver of all others not mentioned. Reineke v. Commonwealth Ins. Co., 52 N.D. 324, 202 N.W. 657, 1924 N.D. LEXIS 130 (N.D. 1924).

An insurance company must indicate the particulars in regard to the notice and preliminary proof of loss in which it claims that the requirements of the policy have not been complied with, and mere notice that strict performance of the policy is necessary is not sufficient. Reineke v. Commonwealth Ins. Co., 52 N.D. 324, 202 N.W. 657, 1924 N.D. LEXIS 130 (N.D. 1924).

26.1-32-08. Proof of loss — Insurer to furnish blanks — Waiver.

When notice of loss is given to the insurer on behalf of the insured or the beneficiary of a life insurance policy, the insurer, within twenty days after receipt of notice, shall furnish to the insured or beneficiary, as the case may be, a blank form of proof of loss. In the case of life insurance, the beneficiary shall have ninety days after receipt of the blank form in which to make proof of loss. In the case of insurance other than life insurance, the insured shall have sixty days after the blank form is furnished in which to make proof of loss. If the insurer fails to furnish a blank form of proof of loss within the required time, the insurer has waived the requirement of proof of loss. Any agreement made to waive the provisions of this section is void.

Source:

S.L. 1985, ch. 316, § 9.

Derivation:

N.D.C.C. § 26-06-08.

DECISIONS UNDER PRIOR LAW

Effect of False Statement.

It was error to instruct that a false sworn statement of loss by an insured would be immaterial if the loss actually amounted to the sum sworn to. Diehl v. Grant Farmers' Mut. Fire & Lightning Ins. Co., 53 N.D. 273, 205 N.W. 672, 1925 N.D. LEXIS 72 (N.D. 1925).

26.1-32-09. Waiver of delay in presenting notice or proof of loss.

Delay in the presentation to an insurer of notice or proof of loss is waived if the delay is caused by any act of the insurer, or if the insurer fails to make a prompt and specific objection.

Source:

S.L. 1985, ch. 316, § 9.

Derivation:

N.D.C.C. § 26-06-09.

DECISIONS UNDER PRIOR LAW

Nonservice of Proofs of Loss.

Where, aside from the nonproduction of proofs of loss, the company repudiates all liability, it would be useless and unavailing to furnish the proofs, and in such cases the insured is excused for their nonproduction. Johnson v. Dakota Fire & Marine Ins. Co., 1 N.D. 167, 45 N.W. 799, 1890 N.D. LEXIS 21 (N.D. 1890).

By its refusal to pay a claim on account of the alleged nonpayment of premiums, a company waived the defense that no formal proofs of loss were filed. Ennis v. Retail Merchants Ass'n Mut. Fire Ins. Co., 33 N.D. 20, 156 N.W. 234, 1916 N.D. LEXIS 65 (N.D. 1916).

26.1-32-10. Policy requiring corroboration — Proof of loss — How made.

If an insurance policy requires the certificate or testimony of a person other than the insured for a preliminary proof of loss, it is sufficient for the insured to use reasonable diligence to procure the evidence and, in case of the refusal of the person to provide evidence, to furnish reasonable evidence to the insurer that refusal was not induced by any just grounds of disbelief of the facts necessary to be certified.

Source:

S.L. 1985, ch. 316, § 9.

Derivation:

N.D.C.C. § 26-06-10.

CHAPTER 26.1-33 Life Insurance

26.1-33-01. Life insurance policy contains entire contract.

Every life insurance policy issued or delivered in this state by any life insurance corporation doing business in the state must contain the entire contract between the parties.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-11.

DECISIONS UNDER PRIOR LAW

Right to Modify Contract by Mutual Agreement.

The statutory requirement that every policy of insurance used in the state shall contain the entire contract between the parties does not limit the right of the parties to alter or modify a life policy by mutual agreement. Anderson v. Northern & Dakota Trust Co., 69 N.D. 571, 288 N.W. 562, 1939 N.D. LEXIS 186 (N.D. 1939).

Collateral References.

Credit life insurer’s punitive damage liability for refusing payment, 55 A.L.R.4th 246.

26.1-33-02. Solicitation of life insurance regulated by rule of the commissioner.

Insurers shall deliver to purchasers of life insurance information which will improve the purchaser’s ability to select the most appropriate plan of life insurance for the purchaser’s needs, which will improve the purchaser’s understanding of the basic features of the policy which has been purchased or which is under consideration, and which will improve the ability of the purchaser to evaluate the relative costs of similar plans of life insurance. The commissioner may adopt reasonable rules to implement this section.

Source:

S.L. 1985, ch. 316, § 10; 1991, ch. 301, § 15.

Derivation:

N.D.C.C. § 26-10-08.1.

Collateral References.

Accident or life insurance: death by autoerotic asphyxiation as accidental, 62 A.L.R.4th 823.

26.1-33-02.1. Life insurance policies and certificates — Right to return.

A person who purchases a life insurance policy or certificate issued or delivered in this state may return the policy or certificate within twenty days of delivery to the purchaser. If a policy or certificate is returned, the purchaser is entitled to a refund of the premium. Every life insurance policy or certificate issued or delivered in this state to any person must have a notice prominently printed on or attached to the first page of the policy or certificate stating in substance that the purchaser may return the policy or certificate within twenty days of its delivery and have the premium refunded if, after examination of the policy, the applicant is not satisfied for any reason.

Source:

S.L. 1989, ch. 365, § 1; 1999, ch. 251, § 7.

26.1-33-03. Form of life insurance policy restricted.

No life insurance policy may be issued or delivered in this state unless the form of the policy is authorized by this chapter.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-25.

26.1-33-04. Single premium and nonparticipating life policies.

A single premium life insurance policy may be issued in any form prescribed in this chapter omitting therefrom provisions or portions thereof applicable only to other than single premium policies. A nonparticipating life insurance policy may be issued in any form prescribed in this chapter if the policy contains a provision that the policy is nonparticipating, and the policy omits clauses for participation in the surplus of the company.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-32.

26.1-33-05. Provisions required in life policy.

No life insurance policy may be issued or delivered in this state, unless the policy contains:

  1. A provision that all premiums are payable in advance either at the home office of the company, or to an agent of the company, upon delivery of a receipt signed by one or more of the officers who are named in the policy.
  2. A provision that the policyholder is entitled to a thirty-one-day grace period for the payment of every premium after the first, which may be subject to an interest charge, during which grace period the insurance continues in force. The provision may contain a stipulation that if the insured dies during the grace period, the overdue premium will be deducted in any settlement under the policy.
  3. A provision that the policy constitutes the entire contract between the parties and is incontestable after it has been in force during the lifetime of the insured for two years from its date, except for nonpayment of premiums and except for violations of the policy relating to naval or military service in time of war, and, at the option of the company, provisions relative to benefits in the event of total and permanent disability and provisions that grant additional insurance specifically against death by accident also may be excepted.
  4. A provision that all statements made by the insured, in the absence of fraud, are representations and not warranties, and that no such statement avoids the policy unless it is contained in a written application and a copy of the application is endorsed upon or attached to the policy when issued.
  5. A provision that if the age of the insured has been understated, the amount payable under the policy is such as the premium would have purchased at the correct age.
  6. A provision that the policy participates in the surplus of the company and that, beginning not later than the end of the third policy year, the company annually will determine and account for the portion of the divisible surplus accruing on the policy, and that the owner of the policy has the right each year to have the current dividend arising from such participation paid in cash; and if the policy provides other dividend options, it must provide further which one of the four standard options is effective if the owner of the policy does not elect any of the other options. The four standard options are payment in cash, application toward payment of any premiums, application to the purchase of paid-up additions to the policy, or accumulation to the credit of the policy with interest at the rate provided for in the policy and payable at the maturity of the policy or at the anniversary of the policy. This provision, however, is not required in nonparticipating policies.
  7. A provision that after the policy has been in force three years, the company at any time while the policy is in force, will advance on proper assignment of the policy and on the sole security thereof, at a specified rate of interest, a sum equal to, or at the option of the owner of the policy, less than, the reserve at the end of the current policy year on the policy and on any dividend additions thereto, computed according to a mortality table, interest rate, and method of valuation permitted by chapter 26.1-35, less a sum not more than two and one-half percent of the amount insured by the policy and of any dividend additions thereto; and that the company will deduct from the loan value any existing indebtedness on the policy and any unpaid balance of the premium for the current policy year, and may collect interest in advance on the loan to the end of the current policy year. The provision may provide further that the loan may be deferred for not exceeding six months after the application for the loan is made. It must be stipulated further in the policy that failure to repay any advance or to pay interest thereon does not void the policy unless the total indebtedness thereon to the company equals or exceeds the loan value at the time of the failure nor until one month after notice has been mailed by the company to the last-known address of the insured and of the assignee, if any. No other condition may be exacted as a prerequisite to any such advance. This provision is not required in a policy of term insurance.
  8. A provision that if, in event of default in premium payments, the value of the policy is applied to the purchase of other insurance, and if the insurance is in force and the original policy has not been surrendered to the company and canceled, the policy may be reinstated within three years from the default upon evidence of insurability satisfactory to the company and payment of arrears of premiums with interest.
  9. A provision that when a policy becomes a claim by the death of the insured, settlement must be made upon receipt of due proof of death, or not later than two months after receipt of the proof, and must include reasonable interest accrued from the date of death so long as a proof of death is filed within one hundred eighty days after the date of the death.
  10. A table showing the amounts of installments in which the policy may provide its proceeds may be payable.
  11. A title on the face and on the back of the policy correctly describing the policy.
  12. A statement whether any conditions or restrictions of liability by reason of travel, occupation, change of residence, or suicide are provided. These restrictions, except in the case of armed forces or military service in time of war, may only be effective during the first year after the issuance of the policy for suicide and for two years after the issuance of the policy in all other instances.
  13. A provision that in the event of the death of an insured, the insurer will refund within thirty days after notice to the insurer of the insured’s death the portion of the premium, fee, or other sum paid beyond the month of death. This provision does not apply to term life insurance, flexible premium life insurance, or to any policy when the insurer has a valid defense to the payment of benefits under the policy.

Any of the foregoing provisions or portions thereof, relating to premiums not applicable to single premium policies, may not be incorporated to the extent to which they are inapplicable in a single premium policy.

Source:

S.L. 1985, ch. 316, § 10; 1987, ch. 73, § 12; 1987, ch. 337, § 2; 1991, ch. 301, § 16.

Derivation:

N.D.C.C. §§ 26-03-26 to 26-03-31, 26-03-35.

DECISIONS UNDER PRIOR LAW

Extended Insurance.

A fifteen-year term policy in the standard statutory form did not give the privilege of extended insurance, and was not within the purpose of former N.D.C.C. § 26-03-35, providing automatic insurance in case of default. Halliday v. Equitable Life Assurance Soc'y, 54 N.D. 466, 209 N.W. 965, 1926 N.D. LEXIS 170 (N.D. 1926).

Form of Policy.

A life insurance policy is not required to be written on standard forms. Young v. Mutual Trust Life Ins. Co., 54 N.D. 600, 210 N.W. 177, 1926 N.D. LEXIS 66 (N.D. 1926); Eberlien v. Guarantee Fund Life Ass'n, 58 N.D. 617, 226 N.W. 810, 1929 N.D. LEXIS 255 (N.D. 1929).

Grace Period.

Before the policy grace period would be applicable, the first premium must have been paid; where policy provided for annual premium payment and insured had paid only one-twelfth of the annual premium and received a conditional receipt that provided that he had purchased insurance on a pro rata basis unless an amount equal to the remainder of the first premium was paid, the one-twelfth payment did not constitute the first premium and no grace period was applicable after the pro rata coverage of one month provided by the payment had expired and the insurer had not waived its right to be paid an annual premium or accepted the one-twelfth payment in lieu of the annual premium. Griffin v. Aetna Life Ins. Co., 487 F. Supp. 755, 1979 U.S. Dist. LEXIS 9487 (D.N.D. 1979), aff'd, 624 F.2d 1108, 1980 U.S. App. LEXIS 18184 (8th Cir. N.D. 1980).

Incontestability Clause.

Fraud is not excepted from the operation of an incontestability provision in a life insurance policy which includes the standard incontestability provision. Johnson v. Great N. Life Ins. Co., 73 N.D. 572, 17 N.W.2d 337, 1945 N.D. LEXIS 73 (N.D. 1945).

A policy of insurance issued in this state which contains an incontestability clause which excepts from its operation and effect any risk additional to those which the clause required by statute excepts must be construed and enforced as it would have been had it contained the statutory clause. Jordon v. Western States Life Ins. Co., 78 N.D. 902, 53 N.W.2d 860, 1952 N.D. LEXIS 85 (N.D. 1952).

Meaning of “Insured”.

In statutory forms of life insurance policies, the term “insured” means the person whose life is insured and does not include an assignee who becomes the owner of the policy or acquires an interest therein by virtue of an assignment. Sand v. Merchants Nat'l Bank & Trust Co., 81 N.W.2d 748, 1957 N.D. LEXIS 107 (N.D. 1957).

Law Reviews.

Aids and the Incontestability Clause, 66 N.D. L. Rev. 267 (1990).

26.1-33-06. Provisions prohibited in life policy.

No life insurance policy may be issued or delivered in this state if it contains any of the following:

  1. A provision for forfeiture of the policy for failure to repay any loan on the policy, or to pay interest on such loan, while the total indebtedness on the policy is less than the loan value thereof; or any provision for forfeiture for failure to repay any such loan or to pay interest on the loan unless the provision contains a stipulation that no forfeiture occurs until at least one month after notice has been mailed by the company to the last-known address of the insured and of the assignee, if any.
  2. A provision limiting the time within which any action may be commenced to less than five years after the claim for relief accrues.
  3. A provision by which the policy purports to be issued or take effect more than six months before the original application for the insurance was made. This subsection does not prohibit the exchange, alteration, or conversion of any policy of life insurance.
  4. A provision for any mode of settlement at maturity of less value than the amount insured on the face of the policy plus dividend additions, if any, less any indebtedness to the company on the policy and less any premium that by the terms of the policy may be deducted.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-36.

26.1-33-07. Life policy issued by domestic companies in foreign state may conform to laws thereof.

The life insurance policies of a domestic life insurance company, when issued or delivered in any other state, country, province, or territory, may contain any provision required by the laws of the state, country, province, or territory in which issued, anything in this chapter to the contrary notwithstanding.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-37.

26.1-33-08. Exempted companies.

Sections 26.1-33-03 through 26.1-33-07 do not apply to annuity or industrial policies nor to corporations or associations operating on the assessment or fraternal plan.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-44.

26.1-33-09. Cooperative or assessment life association must identify policies.

Every cooperative or assessment life association transacting business in this state shall print in bold type and in red ink, near the top of the front page of each policy or certificate issued upon the life of any resident of this state, the words “issued upon the assessment plan”.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-22.

26.1-33-10. Agreement depriving insured in life policy of right to apportionment of surplus and automatic insurance void.

No agreement between a life insurance company and a holder of a participating policy or an applicant for insurance under a participating policy relating to the apportionment annually of the surplus of the company, the rights of the policyholder in the surplus, automatic insurance, or to the limitation on contingency reserves waives any of the provisions of this chapter relating thereto.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-10-07.

26.1-33-11. Group life policy — Required provisions.

No group life insurance policy may be delivered in this state unless it contains in substance the following provisions, or provisions which in the opinion of the commissioner are more favorable to the insureds, or at least as favorable to the insureds and more favorable to the policyholder; provided, however, that the standard provisions required for an individual life insurance policy may not apply to a group life insurance policy:

  1. A provision that the policyholder is entitled to a grace period of thirty-one days for the payment of any premium due except the first, during which grace period the death benefit coverage continues in force, unless the policyholder has given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the policy. The policy may provide that the policyholder is liable to the insurer for the payment of a pro rata premium for the time the policy was in force during such a grace period.
  2. A provision that the validity of the policy may not be contested except for nonpayment of premiums, after it has been in force for two years from its date of issue; and that no statement made by any person insured under the policy relating to insurability may be used in contesting the validity of the insurance with respect to which the statement was made after the insurance has been in force prior to the contest for a period of two years during the insured’s lifetime nor unless it is contained in a written instrument signed by the insured; provided, however, that no such provision may preclude the assertion of any time of defenses based upon provisions in the policy which relate to eligibility for coverage.
  3. A provision that a copy of the application, if any, of the policyholder will be attached to the policy when issued, that all statements made by the policyholder or by the persons insured are representations and not warranties, and that no statement made by any insured may be used in any contest unless a copy of the instrument containing the statement is or has been furnished to the insured or, in the event of death or incapacity of the insured, to the insured’s beneficiary or personal representative.
  4. A provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of the individual’s coverage.
  5. A provision specifying an equitable adjustment of premiums or of benefits or of both to be made if the age of an insured has been misstated. The provision must contain a clear statement of the method of adjustment to be made.
  6. A provision that any sum becoming due by reason of the death of an insured is payable to the beneficiary designated by the insured, except that when the policy contains conditions pertaining to family status the beneficiary may be the family member specified by the policy terms, subject to the provisions of the policy in the event there is no designated beneficiary, as to all or any part of such sum, living at the death of the insured and subject to any right reserved by the insurer in the policy and set forth in the certificate to pay at its option a part of such sum not exceeding five thousand dollars to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the person insured.
  7. If the group life insurance policy is on a plan of insurance other than the term plan, a nonforfeiture provision which in the opinion of the commissioner is equitable to the insureds and to the policyholder, but this does not require the policy to contain the same nonforfeiture provision required for an individual life insurance policy.
  8. A provision that the insurer will issue to the policyholder for delivery to each insured a certificate setting forth a statement as to the insurance protection to which that person is entitled, a statement as to any dependent’s coverage included in the certificate, and the rights and conditions set forth in subsections 9, 10, 11, and 12.
  9. A provision that if the insurance, or any portion of it, on an insured or on the dependent of an insured, ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy, the insured is entitled to have issued to the insured by the insurer, without evidence of insurability, an individual life insurance policy without disability or other supplementary benefits, provided application for the individual policy is made, and the first premium paid to the insurer, within thirty-one days after such termination, and provided further that:
    1. The individual policy must, at the option of such person, be on any one of the forms then customarily issued by the insurer at the age and for the amount applied for, except that the group policy may exclude the option to elect term insurance;
    2. The individual policy must be in an amount not in excess of life insurance which ceases because of such termination, less the amount of life insurance for which the person becomes eligible under the same or any other group policy within thirty-one days after termination, provided that any amount of insurance which has matured on or before the date of termination as an endowment payable to the person insured, whether in one sum or in installments or in the form of an annuity, may not, for purposes of this provision, be included in the amount which is considered to cease because of the termination; and
    3. The premium on the individual life insurance policy is at the insurer’s then customary rate applicable to the form and amount of the individual policy, to the class of risk to which such person then belongs, and to the individual age attained on the effective date of the individual policy.
  10. A provision that if the group policy terminates or is amended so as to terminate the insurance of any class of insured persons, every insured at the date of termination whose insurance terminates, including the insured dependent of a covered person, and who has been so insured for at least five years prior to the termination date is entitled to have issued by the insurer an individual life insurance policy, subject to the same conditions and limitations as are provided by subsection 9, except that the group policy may provide that the amount of such individual policy may not exceed the smaller of:
    1. The amount of the person’s life insurance protection ceasing because of the termination or amendment of the group policy, less the amount of any life insurance for which the person is or becomes eligible under a group policy issued or reinstated by the same or another insurer within thirty-one days after such termination; or
    2. Ten thousand dollars.
  11. A provision that if an insured, or the insured dependent of a covered person, dies during the period within which the individual would have been entitled to have an individual life insurance policy issued in accordance with subsection 9 or 10 and before such an individual policy has become effective, the amount of life insurance that the insured would have been entitled to have issued under the individual policy is payable as a claim under the group policy, whether or not application for the individual policy or the payment of the first premium therefor has been made.
  12. When active employment is a condition of insurance, a provision that an insured may continue coverage during the insured’s total disability by timely payment to the policyholder of that portion, if any, of the premium that would have been required from the insured had total disability not occurred. The continuation shall be on a premium paying basis for a period of six months from the date on which the total disability started, but not beyond the earlier of:
    1. Approval by the insurer of continuation of the coverage under any disability provision which the group policy may contain; or
    2. The discontinuance of the group policy.
  13. A provision that the settlement of a death claim must be made upon receipt of due proof of death, or not later than two months after receipt of the proof of death, and must include reasonable interest accrued from the date of death so long as a proof of death is filed within one hundred eighty days after the date of the death.

Subject to the same conditions set forth above, the conversion privilege must be available to a surviving dependent, if any, at the death of the employee or member, with respect to the coverage under the group policy which terminates by reason of such death and to the dependent of the employee or member upon termination of coverage of the dependent, while the employee or member remains under the group policy, by reason of the dependent ceasing to be a qualified family member under the group policy.

Source:

S.L. 1985, ch. 316, § 10; 2003, ch. 252, § 1.

Derivation:

N.D.C.C. § 26-03.6-01.

26.1-33-12. Group life policy conversion privileges.

If any individual insured under a group life insurance policy delivered in this state after July 1, 1983, becomes entitled under the terms of the policy to have an individual life insurance policy issued without evidence of insurability, subject to making of application and payment of the first premium within the period specified in the policy, and if the individual is not given notice of the existence of the right at least fifteen days prior to the expiration date of the period, then the individual has an additional period within which to exercise that right. This additional period expires fifteen days after the individual is given notice. Written notice presented to the individual or mailed by the policyholder to the last-known address of the individual or mailed by the insurer to the last-known address of the individual as furnished by the policyholder or notice of the right of conversion included in a certificate provided to each employee or notice provided by the attachment of a separate notice to the certificate constitutes notice for the purpose of this section.

Source:

S.L. 1985, ch. 316, § 10; 1991, ch. 301, § 17.

Derivation:

N.D.C.C. § 26-03.6-02.

26.1-33-12.1. Life of a child — Disclosure.

A group life insurance policy issued in this state which insures the life of a newborn child of the certificate holder may not include a provision delaying coverage on the life of the newborn child for a specified period, unless the existence and length of the waiting period is prominently disclosed in the certificate or rider or otherwise disclosed by the group policyholder to a certificate holder at the time the certificate holder becomes eligible or enrolls for the coverage.

Source:

S.L. 2019, ch. 241, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 241, S.L. 2019 provides, “ APPLICATION - NOTIFICATION. Section 1 of this Act applies to life insurance policies issued in this state after July 31, 2019. The insurance commissioner shall require an insurer with a life insurance policy issued before the effective date of this Act, which contains a waiting period, notify the certificate holder of the existence of that waiting period or notify the group policyholder, which upon receipt of such notice shall notify the certificate holders of the existence of that waiting period.”

26.1-33-13. Variable life contracts — Separate accounts.

Any domestic life insurance company, including any domestic fraternal benefit society that operates on a legal reserve basis, may establish one or more separate accounts and may allocate thereto amounts, including proceeds applied under optional modes of settlement or under dividend options, to provide for life insurance, and benefits incidental thereto, payable in fixed or variable amounts or both, subject to the following:

  1. The income, gains, and losses, realized or unrealized from assets allocated to a separate account, must be credited to or charged against the account, without regard to other income, gains, or losses of the company.
  2. Except as may be provided with respect to reserves for guaranteed benefits and funds referred to in subsection 3:
    1. Amounts allocated to any separate account and accumulations thereon may be invested and reinvested without regard to any requirements or limitations prescribed by laws of this state governing the investments of life insurance companies.
    2. Investments in a separate account or accounts may not be taken into account in applying the investment limitations otherwise applicable to the investments of the company.
  3. Except with the approval of the commissioner and under any conditions as to investments and other matters the commissioner may prescribe, which must recognize the guaranteed nature of the benefits provided, reserves for benefits guaranteed as to dollar amount and duration and funds guaranteed as to principal amount or stated rate of interest may not be maintained in a separate account.
  4. Unless otherwise approved by the commissioner, assets allocated to a separate account must be valued at their market value on the date of valuation, or if there is no readily available market, then as provided under the terms of the contract or the rules or other written agreement applicable to the separate account. Unless otherwise approved by the commissioner, the portion of the assets of the separate account equal to the company’s reserve liability with regard to the guaranteed benefits and funds referred to in subsection 3 must be valued in accordance with the rules otherwise applicable to the company’s assets.
  5. Amounts allocated to a separate account are owned by the company, and the company may not be, nor hold itself out to be, a trustee with respect to such amounts. To the extent provided under the applicable contracts, that portion of the assets of any separate account equal to the reserves and other contract liabilities with respect to the account is not chargeable with liabilities arising out of any other business the company may conduct.
  6. No sale, exchange, or other transfer of assets may be made by a company between any of its separate accounts or between any other investment account and its separate accounts unless, in case of a transfer into a separate account, the transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made, and unless the transfer, whether into or from a separate account, is made by a transfer of cash or by a transfer of securities having a readily determinable market value, provided that a transfer of securities is approved by the commissioner. The commissioner may approve other transfers among such accounts if, in the commissioner’s opinion, the transfers would not be inequitable.
  7. To the extent the company determines it is necessary to comply with any applicable federal or state laws, the company, with respect to any separate account, including any separate account which is a management investment company or a unit investment trust, may provide for persons having an interest therein appropriate voting and other rights and special procedures for the conduct of the business of the account, including special rights and procedures relating to investment policy, investment advisory services, selection of independent public accountants, and selection of a committee, the members of which need not be otherwise affiliated with the company, to manage the business of the account.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-11.1-01.

26.1-33-14. License required for variable life contracts.

No company may deliver or issue for delivery in this state variable life insurance contracts unless it is licensed or organized to do a life insurance business in this state, and the commissioner is satisfied that the company’s condition or method of operation in connection with the issuance of variable contracts will not render its operation hazardous to the public or its policyholders in this state. In this connection, the commissioner shall consider, among other things, the history and financial condition of the company; the character, responsibility, and fitness of the officers and directors of the company; and the laws and rules under which the company is authorized in the state of domicile to issue variable life insurance contracts. If the company is a subsidiary of an admitted life insurance company, or affiliated with such company through common management or ownership, it may be deemed by the commissioner to have met the provisions of this section if it or the parent or the affiliated company meets these requirements.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-11.1-03.

26.1-33-15. Content of variable life contracts.

Any variable life insurance contract delivered or issued for delivery in this state must contain a statement of the essential features of the procedures to be followed by the insurance company in determining the dollar amount of the variable benefits. Any contract under which the benefits vary to reflect investment experience, including a group contract and any certificate in evidence of variable benefits issued thereunder, must state that the dollar amount will so vary and must contain on its first page a statement to the effect that the benefits under the contract are on a variable basis.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-11.1-02.

26.1-33-16. Policy provisions exceptions for variable life contracts.

Except for subsections 2, 6, 7, 8, and 10 of section 26.1-33-05, and except as otherwise provided in sections 26.1-33-13 through 26.1-33-15, all pertinent provisions of this title apply to separate accounts and variable life insurance contracts. Any individual variable life insurance contract, delivered or issued for delivery in this state, must contain grace, reinstatement, and nonforfeiture provisions appropriate to the contract. The reserve liability for variable contracts must be established in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-11.1-05.

26.1-33-17. Rulemaking authority relating to variable life contracts.

The commissioner may adopt reasonable rules to implement sections 26.1-33-13 through 26.1-33-16.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-11.1-04.

26.1-33-18. Nonforfeiture benefits.

In the case of policies issued after December 31, 1978, a life insurance policy, except as stated in section 26.1-33-28, may not be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions which are at least as favorable to the defaulting or surrendering policyholder as are the minimum requirements specified in this section and are essentially in compliance with section 26.1-33-27:

  1. In the event of default in any premium payment, the insurer will grant, upon proper request not later than sixty days after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of the due date, of the amount as may be hereinafter specified. In lieu of the stipulated paid-up nonforfeiture benefit, the insurer may substitute, upon proper request not later than sixty days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit that provides a greater amount or longer period of death benefits or, if applicable, a greater amount or earlier payment of endowment benefits.
  2. Upon surrender of the policy within sixty days after the due date of any premium payment in default after premiums have been paid for at least three full years in the case of ordinary insurance or five full years in the case of industrial insurance, the insurer will pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value of the amount as may be hereinafter specified.
  3. A specified paid-up nonforfeiture benefit becomes effective as specified in the policy unless the person entitled to make the election elects another available option not later than sixty days after the due date of the premium in default.
  4. If the policy has become paid up by completion of all premium payments or if it is continued under any paid-up nonforfeiture benefit which became effective on or after the third policy anniversary in the case of ordinary insurance or the fifth policy anniversary in the case of industrial insurance, then the insurer will pay, upon surrender of the policy within thirty days after any policy anniversary, a cash surrender value of the amount as may be hereinafter specified.
  5. In the case of policies which cause on a basis guaranteed in the policy unscheduled changes in benefits or premiums, or which provide an option for changes in benefits or premiums other than a change to a new policy, a statement of the mortality table, interest rate, and method used in calculating cash surrender values and the paid-up nonforfeiture benefits available under the policy. In the case of all other policies, a statement of the mortality table and interest rate or rates used in calculating the cash surrender values and the paid-up nonforfeiture benefits available under the policy, together with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary either during the first twenty policy years or during the term of the policy, whichever is shorter, such values and benefits to be calculated upon the assumption that there are no dividends or paid-up additions credited to the policy and that there is no indebtedness to the insurer on the policy.
  6. A statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by or pursuant to the insurance law of the state in which the policy is delivered. An explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the insurer on the policy. If a detailed statement of the method of computation of the values and benefits shown in the policy is not stated in the policy, a statement that the method of computation has been filed with the commissioner. A statement of the method to be used in calculating the cash surrender value and paid-up nonforfeiture benefit available under the policy on any policy anniversary beyond the last anniversary for which such values and benefits are consecutively shown in the policy.

Any of the foregoing provisions or portions thereof not applicable by reason of the plan of insurance may, to the extent inapplicable, be omitted from the policy.

The insurer shall reserve the right to defer the payment of any cash surrender value for a period of six months after demand therefor with surrender of the policy.

Source:

S.L. 1985, ch. 316, § 10; 2015, ch. 216, § 1.

26.1-33-19. Computation of cash surrender value.

  1. Any cash surrender value available under a life insurance policy in the event of default in a premium payment due on any policy anniversary, whether or not required by section 26.1-33-18, must be an amount not less than the excess, if any, of the present value, on the anniversary, of the future guaranteed benefits which would have been provided for by the policy, including any existing paid-up additions, if there had been no default, over the sum of:
    1. The then present value of the adjusted premiums as defined in sections 26.1-33-21 through 26.1-33-24 corresponding to premiums which would have fallen due on and after the anniversary; and
    2. The amount of any indebtedness to the insurer on the policy.
  2. Any life insurance policy issued on or after the operative date of section 26.1-33-24, which provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium by rider or supplemental policy provision, the cash surrender value referred to in subsection 1 must be an amount not less than the sum of the cash surrender value for an otherwise similar policy issued at the same age without the rider or supplemental policy provision and the cash surrender value as defined in subsection 1 for a policy which provides only the benefits otherwise provided by the rider or supplemental policy provision.
  3. For any family policy issued on or after the operative date of section 26.1-33-24, which defines a primary insured and provides term insurance on the life of the spouse of the primary insured expiring before the spouse’s age seventy-one, the cash surrender value referred to in subsection 1 must be an amount not less than the sum of the cash surrender value for an otherwise similar policy issued at the same age without such term insurance on the life of the spouse and the cash surrender value as defined in subsection 1 for a policy which provides only the benefits otherwise provided by term insurance on the life of the spouse.
  4. Any cash surrender value available within thirty days after any policy anniversary under any policy paid up by completion of all premium payments or any policy continued under any paid-up nonforfeiture benefit, whether or not required by section 26.1-33-18, must be an amount not less than the present value, on such anniversary, of the future guaranteed benefits provided for by the policy, including any existing paid-up additions, decreased by any indebtedness to the insurer on the policy.

Source:

S.L. 1985, ch. 316, § 10; 2015, ch. 216, § 2.

Derivation:

N.D.C.C. § 26-03.2-02.

26.1-33-20. Computation of paid-up nonforfeiture benefits.

Any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment due on any policy anniversary must be such that its present value as of the anniversary must be at least equal to the cash surrender value then provided for by the policy or, if none is provided for, that cash surrender value which would have been required by sections 26.1-33-18 through 26.1-33-28 in the absence of the condition that premiums must have been paid for at least a specified period.

Source:

S.L. 1985, ch. 316, § 10; 2015, ch. 216, § 3.

Derivation:

N.D.C.C. § 26-03.2-03.

26.1-33-21. Calculation of adjusted premiums.

  1. This section does not apply to policies issued on or after the operative date of section 26.1-33-24. Except as provided in subsection 3, the adjusted premiums for any policy must be calculated on an annual basis and must be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding amounts stated in the policy as extra premiums to cover impairments or special hazards, that the present value, at the date of issue of the policy, of all the adjusted premiums equals the sum of:
    1. The then present value of the future guaranteed benefits provided for by the policy.
    2. Two percent of the amount of insurance, if the insurance is uniform in amount, or of the equivalent uniform amount, as hereinafter defined, if the amount of insurance varies with duration of the policy.
    3. Forty percent of the adjusted premium for the first policy year.
    4. Twenty-five percent of either the adjusted premium for the first policy year or the adjusted premium for a whole life policy of the same uniform or equivalent uniform amount with uniform premiums for the whole of life issued at the same age for the same amount of insurance, whichever is less.
  2. In the case of a policy providing an amount of insurance varying with duration of the policy, the equivalent level amount for the purpose of this section is deemed to be the level amount of insurance provided by an otherwise similar policy, containing the same endowment benefit or benefits, if any, issued at the same age and for the same term, the amount of which does not vary with duration and the benefits under which have the same present value at the inception of the insurance as the benefits under the policy.
  3. The adjusted premiums for any life insurance policy providing term insurance benefits by rider or supplemental policy provision must be equal to:
    1. The adjusted premiums for an otherwise similar policy issued at the same age without such term insurance benefits, increased, during the period for which premiums for the term insurance benefits are payable, by;
    2. The adjusted premiums for such term insurance, subdivisions a and b being calculated separately and as specified in subsections 1 and 2 except that, for the purposes of subdivisions b, c, and d of subsection 1, the amount of insurance or equivalent uniform amount of insurance used in the calculation of the adjusted premiums referred to in subdivision b of subsection 1 must be equal to the excess of the corresponding amount determined for the entire policy over the amount used in the calculation of the adjusted premiums in subdivision a.
  4. Except as otherwise provided in sections 26.1-33-22 and 26.1-33-23, all adjusted premiums and present values referred to in sections 26.1-33-18 through 26.1-33-28, for all policies of ordinary insurance, must be calculated on the basis of the commissioners 1941 standard ordinary mortality table. However, for any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to any age not more than three years younger than the actual age of the insured and such calculations for all policies of industrial insurance must be made on the basis of the 1941 standard industrial mortality table. All calculations must be made on the basis of the rate of interest, not exceeding three and one-half percent per annum, specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits. In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than one hundred thirty percent of the rates of mortality according to the applicable table. For insurance issued on a substandard basis, the calculation of any adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the commissioner.

In applying the percentages specified in subdivisions c and d, no adjusted premium may be deemed to exceed four percent of the amount of insurance or level amount equivalent. The date of issue of a policy for the purpose of this section is the date as of which the rated age of the insured is determined.

Source:

S.L. 1985, ch. 316, § 10; 2015, ch. 216, § 4.

Derivation:

N.D.C.C. § 26-03.2-04.

26.1-33-22. Calculation of adjusted premiums — Ordinary policies.

This section does not apply to ordinary policies issued on or after the operative date of section 26.1-33-24. In the case of ordinary policies issued on or after the operative date of this section, all adjusted premiums and present values referred to in sections 26.1-33-18 through 26.1-33-28 must be calculated on the basis of the commissioners 1958 standard ordinary mortality table and the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits, provided that the rate of interest may not exceed three and one-half percent per annum except that a rate of interest not exceeding five and one-half percent per year may be used for policies issued after June 30, 1977, except that for any single premium whole life or endowment insurance policy a rate of interest not exceeding six and one-half percent per year may be used; and provided that for any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than six years younger than the actual age of the insured. In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the commissioners 1958 extended term insurance table. For insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the commissioner. Upon the operative date of this section, any insurer may file with the commissioner a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1966. After the filing of such notice, upon the specified date, which must be the operative date of this section for that insurer, this section becomes operative with respect to the ordinary policies issued by the insurer after that date. If an insurer makes no election, the operative date of this section for the insurer is January 1, 1966.

Source:

S.L. 1985, ch. 316, § 10; 2015, ch. 216, § 5.

Derivation:

N.D.C.C. § 26-03.2-05.

26.1-33-23. Calculation of adjusted premiums — Industrial policies.

This section does not apply to industrial policies issued on or after the operative date of section 26.1-33-24. In the case of industrial policies issued on or after the operative date of this section, all adjusted premiums and present values referred to in sections 26.1-33-18 through 26.1-33-28 must be calculated on the basis of the commissioners 1961 standard industrial mortality table and the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits, provided that such rate of interest may not exceed three and one-half percent per annum except that a rate of interest not exceeding five and one-half percent per year may be used for policies issued after June 30, 1977, except that for any single premium whole life or endowment insurance policy a rate of interest not exceeding six and one-half percent per year may be used. In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the commissioners 1961 industrial extended term insurance table. For insurance issued on a substandard basis, the calculations of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the commissioner. Upon the operative date of this section, any insurer may file with the commissioner a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1968. After the filing of such notice, upon the specified date, which must be the operative date of this section for that insurer, this section must become operative with respect to the industrial policies issued after that date by the insurer. If an insurer makes no election, the operative date of this section for the insurer is January 1, 1968.

Source:

S.L. 1985, ch. 316, § 10; 2015, ch. 216, § 6.

Derivation:

N.D.C.C. § 26-03.2-06.

26.1-33-24. Calculations of adjusted premiums by the nonforfeiture net level premium method.

  1. This section applies to all policies issued on or after the operative date of this section. Except as provided in subsection 7, the adjusted premiums for any policy must be calculated on an annual basis and must be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments or special hazards and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the date of issue of the policy, of all adjusted premiums equals the sum of:
    1. The then present value of the future guaranteed benefits provided for by the policy;
    2. One percent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years; and
    3. One hundred twenty-five percent of the nonforfeiture net level premium as hereinafter defined.
  2. The nonforfeiture net level premium is equal to the present value, at the date of issue of the life insurance policy, of the guaranteed benefits provided for by the policy divided by the present value, at the date of issue of the policy, of an annuity of one per annum payable on the date of issue of the policy and on each anniversary of the policy on which a premium falls due.
  3. In the case of life insurance policies that cause on a basis guaranteed in the policy unscheduled changes in benefits or premiums, or that provide an option for changes in benefits or premiums other than a change to a new policy, the adjusted premiums and present values must initially be calculated on the assumption that future benefits and premiums do not change from those stipulated at the date of issue of the policy. At the time of any change in the benefits or premiums the future adjusted premiums, nonforfeiture net level premiums, and present values must be recalculated on the assumption that future benefits and premiums do not change from those stipulated by the policy immediately after the change.
  4. Except as otherwise provided in subsection 7, the recalculated future adjusted premiums for any life insurance policy must be the uniform percentage of the respective future premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments and special hazards, and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the time of change to the newly defined benefits or premiums, of all such future adjusted premiums equals the excess of:
    1. The sum of:
      1. The then present value of the then future guaranteed benefits provided for by the policy; plus
      2. The additional expense allowance, if any; divided by
    2. The then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy.
  5. The additional expense allowance, at the time of the change to the newly defined benefits or premiums, is the sum of:
    1. One percent of the excess, if positive, of the average amount of insurance at the beginning of each of the first ten policy years subsequent to the change over the average amount of insurance prior to the change at the beginning of each of the first ten policy years subsequent to the time of the most recent previous change, or, if there has been no previous change, the date of issue of the policy; and
    2. One hundred twenty-five percent of the increase, if positive, in the nonforfeiture net level premium.
  6. The recalculated nonforfeiture net level premium is equal to the result obtained by dividing the sum of the nonforfeiture net level premium applicable prior to the change times the present value of an annuity of one per annum payable on each anniversary of the policy on or subsequent to the date of the change on which a premium would have fallen due had the change not occurred and the present value of the increase in future guaranteed benefits provided for by the policy by the present value of an annuity of one per annum payable on each anniversary of the policy on or subsequent to the date of change on which a premium falls due.
  7. Notwithstanding any other provision of this section to the contrary, in the case of a life insurance policy issued on a substandard basis which provides reduced graded amounts of insurance so that, in each policy year, the policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis which provides higher uniform amounts of insurance, adjusted premiums and present values for the substandard policy may be calculated as if it were issued to provide the higher uniform amounts of insurance on the standard basis.
  8. All adjusted premiums and present values referred to in sections 26.1-33-18 through 26.1-33-28 must for all ordinary life insurance policies be calculated on the basis of the commissioners 1980 standard ordinary mortality table, or at the election of the insurer for any one or more specified plans of life insurance, the commissioners 1980 standard ordinary mortality table with ten-year select mortality factors; must for all policies of industrial insurance be calculated on the basis of the commissioners 1961 standard industrial mortality table; and must for all policies issued in a particular calendar year be calculated on the basis of a rate of interest not exceeding the nonforfeiture interest rate as defined in this section for policies issued in that calendar year. However:
    1. At the option of the insurer, calculations for all policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding the nonforfeiture interest rate, as defined in this section, for policies issued in the immediately preceding calendar year.
    2. Under any paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available, whether or not required by section 26.1-33-18, must be calculated on the basis of the mortality table and rate of interest used in determining the amount of such paid-up nonforfeiture benefit and paid-up dividend additions, if any.
    3. An insurer may calculate the amount of any guaranteed paid-up nonforfeiture benefit, including any paid-up additions under the policy on the basis of an interest rate no lower than that specified in the policy for calculating cash surrender values.
    4. In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the commissioners 1980 extended term insurance table for ordinary life insurance policies and not more than the commissioners 1961 industrial extended term insurance table for industrial insurance policies.
    5. For insurance issued on a substandard basis, the calculation of any adjusted premiums and present values may be based on appropriate modifications of the tables.
    6. For policies issued before the operative date of the valuation manual, any commissioners standard ordinary mortality tables, adopted after 1980 by the national association of insurance commissioners, that are approved by rule adopted by the commissioner for use in determining the minimum nonforfeiture standard may be substituted for the commissioners 1980 standard ordinary mortality table with or without ten-year select mortality factors or for the commissioners 1980 extended term insurance table. For policies issued on or after the operative date of the valuation manual, the valuation manual must provide the commissioners standard mortality table for use in determining the minimum nonforfeiture standard that may be substituted for the commissioners 1980 standard ordinary mortality table with or without ten-year select mortality factors or for the commissioners 1980 extended term insurance table. If the commissioner approves by rule any commissioners standard ordinary mortality table adopted by the national association of insurance commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the valuation manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the valuation manual.
    7. For policies issued before the operative date of the valuation manual, any commissioners standard industrial mortality tables, adopted after 1980 by the national association of insurance commissioners, that are approved by rule adopted by the commissioner for use in determining the minimum nonforfeiture standard may be substituted for the commissioners 1961 standard industrial mortality table or the commissioners 1961 industrial extended term insurance table. For policies issued on or after the operative date of the valuation manual, the valuation manual must provide the commissioners standard mortality table for use in determining the minimum nonforfeiture standard that may be substituted for the commissioners 1961 standard industrial mortality table or the commissioners 1961 industrial extended term insurance table. If the commissioner approves by rule any commissioners standard industrial mortality table adopted by the national association of insurance commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the valuation manual then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the valuation manual.
  9. The nonforfeiture interest rate is defined:
    1. For policies issued before the operative date of the valuation manual, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be equal to one hundred twenty-five percent of the calendar year statutory valuation interest rate for such policy as defined in chapter 26.1-35, rounded to the nearer one quarter of one percent, but the nonforfeiture interest rate may not be less than four percent.
    2. For policies issued on or after the operative date of the valuation manual the nonforfeiture interest rate per annum for any policy issued in a particular calendar year must be provided by the valuation manual.
  10. Notwithstanding any other provision in this title to the contrary, any refiling of nonforfeiture values or their methods of computation for any previously approved policy form which involves only a change in the interest rate or mortality table used to compute nonforfeiture values does not require refiling of any other provisions of that policy form.
  11. Upon the operative date of this section, any insurer may file with the commissioner a written notice of its election to comply with the provision of this section after a specified date before January 1, 1989, which must be the operative date of this section for the insurer. If an insurer makes no election, the operative date of this section for the insurer is January 1, 1989.

In applying the percentage specified in subdivision c, no nonforfeiture net level premium may exceed four percent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years. The date of issue of a policy for the purpose of this section is the date as of which the rated age of the insured is determined.

Source:

S.L. 1985, ch. 316, § 10; 2015, ch. 216, § 7.

Derivation:

N.D.C.C. § 26-03.2-06.1.

26.1-33-25. Nonforfeiture benefits for indeterminate premium plans.

In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurer based on estimates of future experience, or in the case of any plan of life insurance which is of such a nature that minimum values cannot be determined by the methods described in sections 26.1-33-18 through 26.1-33-24, then:

  1. The commissioner must be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by sections 26.1-33-18 through 26.1-33-24;
  2. The commissioner must be satisfied that the benefits and the pattern of premiums of that plan are not such as to mislead prospective policyholders or insureds;
  3. The cash surrender values and paid-up nonforfeiture benefits provided by the plan may not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of sections 26.1-33-18 through 26.1-33-28, as determined by rules adopted by the commissioner; and
  4. Notwithstanding any other provision in the laws of this state, any policy, contract, or certificate providing life insurance under any plan must be affirmatively approved by the commissioner before it can be marketed, issued, delivered, or used in this state.

Source:

S.L. 1985, ch. 316, § 10; 2015, ch. 216, § 8.

Derivation:

N.D.C.C. § 26-03.2-06.2.

26.1-33-26. Benefits on default off the anniversary — Exempted benefits.

Any cash surrender value and any paid-up nonforfeiture benefit, available under the policy in the event of default in a premium payment due at any time other than on the policy anniversary, must be calculated with allowance for the lapse of time and the payment of fractional premiums beyond the last preceding policy anniversary. All values referred to in sections 26.1-33-19 through 26.1-33-24 may be calculated upon the assumption that any death benefit is payable at the end of the policy year of death. The net value of any paid-up additions, other than paid-up term additions, may be not less than the amounts used to provide the additions. Notwithstanding section 26.1-33-19, additional benefits payable:

  1. In the event of death or dismemberment by accident or accidental means;
  2. In the event of total and permanent disability;
  3. As reversionary annuity or deferred reversionary annuity benefits;
  4. As term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, sections 26.1-33-18 through 26.1-33-28 would not apply;
  5. As term insurance on the life of a child or on the lives of children provided in a policy on the life of a parent of the child, if such term insurance expires before the child’s age is twenty-six years, is uniform in amount after the child’s age is one year, and has not become paid up by reason of the death of a parent of the child; and
  6. As other policy benefits additional to life insurance and endowment benefits, and premiums for all such additional benefits, must be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by sections 26.1-33-18 through 26.1-33-28, and no such additional benefits may be required to be included in any paid-up nonforfeiture benefits.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03.2-07.

26.1-33-27. Determination of minimum values after January 1, 1987.

  1. This section, in addition to all other applicable sections of this law, applies to all policies issued after December 31, 1986. Any cash surrender value available under a life insurance policy in the event of default in a premium payment due on any policy anniversary must be in an amount which does not differ by more than two-tenths of one percent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years, from the sum of:
    1. The greater of zero and the basic cash value hereinafter specified; and
    2. The present value of any existing paid-up additions less the amount of any indebtedness to the insurer under the policy.
  2. The basic cash value is equal to the present value, on such anniversary, of the future guaranteed benefits which would have been provided for by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the insurer, if there had been no default, less the then present value of the nonforfeiture factors, as defined in this chapter, corresponding to premiums that would have fallen due on and after the anniversary. However, the effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in section 26.1-33-19 or 26.1-33-21, whichever is applicable, shall be the same as are the effects specified in section 26.1-33-19 or 26.1-33-21, whichever is applicable, on the cash surrender values defined in that section.
  3. The nonforfeiture factor for each policy year is an amount equal to a percentage of the adjusted premium for the policy year, as defined in section 26.1-33-21 or 26.1-33-24, whichever is applicable. Except as is required by subsection 4, the percentage:
    1. Must be the same percentage for each policy year between the second policy anniversary and the later of:
      1. The fifth policy anniversary; and
      2. The first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two-tenths of one percent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years; and
    2. Must be such that no percentage after the later of the two policy anniversaries specified in subdivision a may apply to fewer than five consecutive policy years.
  4. No basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, as defined in section 26.1-33-24, were substituted for the nonforfeiture factors in the calculation of the basic cash value.
  5. All adjusted premiums and present values referred to in this section must for a particular policy be calculated on the same mortality and interest bases as are used in demonstrating the policy’s compliance with sections 26.1-33-18 through 26.1-33-28. The cash surrender values referred to in this section include any endowment benefits provided for by the policy.
  6. Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment must be determined in manners consistent with the manners specified for determining the analogous minimum amounts in sections 26.1-33-18 through 26.1-33-20, 26.1-33-24, and 26.1-33-26. The amounts of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed in subsections 1 through 6 of section 26.1-33-26 must conform with the principles of this section.

Source:

S.L. 1985, ch. 316, § 10; 2015, ch. 216, § 9.

Derivation:

N.D.C.C. § 26-03.2-07.1.

26.1-33-28. Exceptions.

Sections 26.1-33-18 through 26.1-33-27do not apply to:

  1. Reinsurance;
  2. Group insurance;
  3. Pure endowment;
  4. An annuity or reversionary annuity contract;
  5. A term policy of uniform amount, which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of twenty years or less expiring before age seventy-one, for which uniform premiums are payable during the entire term of the policy;
  6. A term policy of decreasing amount, which provides no guaranteed nonforfeiture or endowment benefits, on which each adjusted premium, calculated as specified in sections 26.1-33-21 through 26.1-33-24 is less than the adjusted premium so calculated on a term policy of uniform amount, or renewal thereof, which provides no guaranteed nonforfeiture or endowment benefits, issued at the same age and for the same initial amount of insurance and for a term of twenty years or less expiring before age seventy-one, for which uniform premiums are payable during the entire term of the policy;
  7. A policy, which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, calculated as specified in sections 26.1-33-19 through 26.1-33-24, exceeds two and one-half percent of the amount of insurance at the beginning of the same policy year; nor
  8. A policy delivered outside this state through an insurance producer or other representative of the insurer issuing the policy.

For purposes of determining the applicability of sections 26.1-33-18 through 26.1-33-28, the age of expiry for a joint term life insurance policy is the age of expiry of the oldest life.

Source:

S.L. 1985, ch. 316, § 10; 2001, ch. 262, § 101; 2015, ch. 216, § 10.

Derivation:

N.D.C.C. § 26-03.2-08.

26.1-33-29. Applicability of life policy simplification standards.

  1. Except as provided in subsection 3, sections 26.1-33-29 through 26.1-33-32 apply to all individual and group life insurance policies, insurance certificates under group life insurance policies, and death benefit certificates issued by fraternal benefit societies filed after June 30, 1982. No policy may be delivered or issued for delivery in this state after June 30, 1986, unless the policy form has been approved by the commissioner or is permitted to be issued under sections 26.1-33-29 through 26.1-33-32. Any policy form that has been approved or permitted to be issued prior to July 1, 1986, and that meets the standards set by sections 26.1-33-29 through 26.1-33-32 need not be refiled for approval, but may continue to be delivered or issued for delivery in this state upon the filing with the commissioner of a list of the forms identified by form number and accompanied by a certificate as to each form in the manner provided in subsection 6 of section 26.1-33-30.
  2. The commissioner may extend the dates in subsection 1.
  3. Sections 26.1-33-29 through 26.1-33-32 do not apply to:
    1. A policy that is a security subject to federal jurisdiction.
    2. A group life insurance policy covering a group of one thousand or more lives at date of issue. However, this does not except any certificate issued pursuant to a group policy delivered or issued for delivery in this state.
    3. A group annuity contract that serves as a funding vehicle for pension, profit sharing, or deferred compensation plans.
    4. A form used in connection with, as a conversion from, as an addition to, or in exchange pursuant to a contractual provision for, a policy delivered or issued for delivery on a form approved or permitted to be issued prior to the dates the form must be approved under sections 26.1-33-29 through 26.1-33-32.
    5. The renewal of a policy delivered or issued for delivery prior to the dates the form must be approved under sections 26.1-33-29 through 26.1-33-32.
  4. No other state law setting language simplification standards applies to a policy form.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. §§ 26-03.5-02, 26-03.5-03, 26-03.5-08.

26.1-33-30. Minimum life policy language simplification standards.

  1. No policy form may be delivered or issued for delivery in this state, unless:
    1. The text achieves a minimum score of forty on the Flesch reading ease test or an equivalent score on any other comparable test as provided in subsection 3.
    2. It is printed, except for specification pages, schedules, and tables, in not less than ten-point type, one point leaded.
    3. The style, arrangement, and overall appearance of the policy give no undue prominence to any portion of the text of the policy or to any endorsement or rider.
    4. It contains a table of contents or an index of the principal sections of the policy, if the policy has more than three thousand words printed or three or fewer pages of text, or if the policy has more than three pages regardless of the number of words.
  2. The commissioner may authorize a lower score than the Flesch reading ease score required in subdivision a of subsection 1 whenever the commissioner finds that a lower score:
    1. Will provide a more accurate reflection of the readability of a policy form.
    2. Is warranted by the nature of a particular policy form or type or class of policy forms.
    3. Is caused by certain policy language which is drafted to conform to the requirements of any state law or rule, or agency interpretation.
  3. A Flesch reading ease test score is measured by the following method:
    1. For policy forms containing ten thousand words or less of text, the entire form must be analyzed. For policy forms containing more than ten thousand words, the readability of two 200-word samples per page may be analyzed instead of the entire form. The samples must be separated by at least twenty printed lines.
    2. The number of words and sentences in the text must be counted and the total number of words divided by the total number of sentences. The figure obtained must be multiplied by a factor of one and fifteen thousandths.
    3. The total number of syllables must be counted and divided by the total number of words. The figure obtained must be multiplied by a factor of eighty-four and six-tenths.
    4. The sum of the figures computed under subdivisions b and c subtracted from two hundred six and eight hundred thirty-five thousandths equals the Flesch reading ease score for the policy form.
    5. For purposes of subdivisions b, c, and d, the following procedures must be used:
      1. A contraction, hyphenated word, or numbers and letters, when separated by spaces, are counted as one word.
      2. A unit of words ending with a period, semicolon, or colon, but excluding headings and captions, is counted as a sentence.
      3. A syllable means a unit of spoken language consisting of one or more letters of a word as divided by an accepted dictionary. When the dictionary shows two or more equally acceptable pronunciations of a word, the pronunciation containing fewer syllables may be used.
  4. As used in this section, “text” includes all printed matter except:
    1. The name and address of the insurer, the name, number, or title of the policy, the table of contents or index, captions and subcaptions, specification pages, schedules, and tables.
    2. Any policy language drafted to conform to the requirements of any federal law, regulation, or agency interpretation, any policy language required by any collectively bargained agreement, any medical terminology, any words defined in the policy, and any policy language required by law or rule; provided, however, the insurer identifies the language or terminology excepted by this subdivision and certifies, in writing, that the language or terminology is entitled to be excepted by this subdivision.
  5. The commissioner may approve any other reading test for use as an alternative to the Flesch reading ease test if the other test is comparable in result to the Flesch reading ease test.
  6. Filings subject to this section must provide the minimum reading ease score or a statement that the score is lower than the minimum required but should be approved in accordance with subsection 2. To confirm the accuracy of any statement, the commissioner may require the submission of further information to verify the certification in question.
  7. At the option of the life insurance company or fraternal benefit society, riders, endorsements, applications, and other forms made a part of the policy may be scored as separate forms or as part of the policy with which they may be used.

Source:

S.L. 1985, ch. 316, § 10; 1999, ch. 251, § 8.

Derivation:

N.D.C.C. §§ 26-03.5-02, 26-03.5-04, 26-03.5-06.

26.1-33-31. Approval of life policy forms.

A policy form meeting the requirements of subsection 1 of section 26.1-33-30 must be approved notwithstanding any other law which specifies the contents of a policy, if the policy form provides the policyholders and claimants protection not less favorable than they would be entitled to under such laws.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03.5-07.

26.1-33-32. Effect of life policy simplification standards on filed policies.

Sections 26.1-33-29 through 26.1-33-31 do not negate any law of this state permitting the issuance of a policy form after it has been on file for the required time period and has not been disapproved by the commissioner.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03.5-05.

26.1-33-33. Life policy transferable.

A life insurance policy may pass by transfer, will, or succession to any person, whether that person has an insurable interest or not, and that person may recover upon the policy in accordance with the terms of the policy. An insured under a group life insurance policy, pursuant to agreement among the insured, the group policyholder, and the insurer, may make an assignment of all or any part of the incidents of ownership held by the insured under the policy, including any right to designate a beneficiary and any right to have an individual policy issued in case of termination of employment. An assignment, whether made prior to or subsequent to July 1, 1971, is valid for the purpose of vesting in the assignee all the incidents of ownership assigned, and entitles the insurer to deal with the assignee as the owner in accordance with the policy, but without prejudice to the insurer on account of any payment made or individual policy issued prior to receipt by the insurer of such notice as may be required by the policy.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-12.

DECISIONS UNDER PRIOR LAW

Assignment As Security for Debt.

A life insurance policy was not void as a wagering contract where the insured was indebted to the bank which paid the premiums, and the policy was assigned to secure an existing debt. Midland Nat'l Life Ins. Co. v. Mosher, 60 N.D. 129, 232 N.W. 894, 1930 N.D. LEXIS 217 (N.D. 1930).

Assignment As Transfer.

An assignment was a transfer under former similar section. Where the assignment was unrestricted, it made the proceeds payable directly to the assignee upon the death of the person whose life was insured. Sand v. Merchants Nat'l Bank & Trust Co., 81 N.W.2d 748, 1957 N.D. LEXIS 107 (N.D. 1957).

Later Enactment.

Former N.D.C.C. § 26-03-12 was not repealed by former N.D.C.C. § 26-10-18. Talcott v. Bailey, 54 N.D. 19, 208 N.W. 549, 1926 N.D. LEXIS 107 (N.D. 1926).

Policy Payable to Estate of Decedent.

Pursuant to former N.D.C.C. § 26-10-18, a policy of life insurance made payable to the estate of decedent was deemed to have been made payable to his heirs, and the heirs took the proceeds by contract, and not by descent. The provision in former N.D.C.C. § 26-03-12 was in no way inconsistent with former N.D.C.C. § 26-10-18. Farmers State Bank v. Smith, 36 N.D. 225, 162 N.W. 302, 1917 N.D. LEXIS 181 (N.D. 1917); Marifjeren v. Farup, 51 N.D. 78, 199 N.W. 181, 1924 N.D. LEXIS 147 (N.D. 1924); Talcott v. Bailey, 54 N.D. 19, 208 N.W. 549, 1926 N.D. LEXIS 107 (N.D. 1926); Anderson v. Northern & Dakota Trust Co., 65 N.D. 721, 261 N.W. 759, 1935 N.D. LEXIS 159 (N.D. 1935).

26.1-33-34. Notice of transfer of life policy unnecessary — Exception.

Notice to an insurer of a transfer or bequest of a life insurance policy is not necessary to preserve the validity of the policy unless notice is required by the policy.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-13.

26.1-33-35. Insurance in favor of corporation or limited liability company on life of corporate officer or employee or limited liability company manager or employee — Powers of corporation or limited liability company.

Whenever a domestic corporation or limited liability company causes to be insured the life of any director, officer, agent, or employee of the corporation or on the life of any governor, manager, agent, or employee of the limited liability company, or whenever a domestic corporation or limited liability company is named as a beneficiary in or assignee of any life insurance policy, due authority to effect, assign, release, relinquish, convert, or surrender, or to change the beneficiary in, the policy, or to take any other or different action with reference to, the insurance, is sufficiently evidenced to the insurance company by a written statement to that effect signed by the president and the secretary or other corresponding officers of the corporation or limited liability company. The statement is binding upon the corporation or limited liability company and protects the insurance company in any act done or suffered by it upon the faith of the notice without further inquiry into the validity of the corporate authority or the regularity of the corporate proceedings. No person may be disqualified, by reason of interest in the subject matter, from acting as a director or as a member of the executive committee of the corporation on any corporate act touching the insurance or from acting as a governor or as a member of the executive committee of the limited liability company or any limited liability company act touching the insurance.

Source:

S.L. 1985, ch. 316, § 10; 1993, ch. 54, § 80.

Derivation:

N.D.C.C. § 26-10-19.

26.1-33-36. Rights in life policies exempt from claims of creditors.

The surrender value of any life insurance policy which, upon the death of the insured, would be payable to the spouse, children, or any relative of the insured dependent, or likely to be dependent, upon the insured for support, is exempt absolutely from the claims of creditors of the insured to the extent provided in section 28-22-03.1. No creditor of the insured, and no court or officer of a court acting for any such creditors, may elect for the insured to have the life insurance policy surrendered or in anywise converted into money, and no life insurance policy or property right in the policy belonging to the holder, except for the value thereof in excess of the amount provided by section 28-22-03.1, may be subject to seizure under any process of any court under any circumstance.

Source:

S.L. 1985, ch. 316, § 10; 1987, ch. 360, § 1.

Derivation:

N.D.C.C. § 26-10-17.

Notes to Decisions

Valuation in Bankruptcy.

A bankruptcy debtor was not allowed to maximize his exemptions by heightening the cash value of an already existing and paid up life insurance policy. In re Erdman, 96 B.R. 978, 1988 Bankr. LEXIS 2330 (Bankr. D.N.D. 1988).

26.1-33-37. Suicide — Determination — No defense to life policy or certificate after one year.

The sanity or insanity of the person is not a factor in determining whether a person committed suicide within the terms of a life insurance policy or certificate regulating the payment of benefits in the event of the insured’s suicide. In any suit on a life insurance policy or certificate, it is no defense after the policy or certificate has been in force one year that the insured committed suicide, and any provision or stipulation to the contrary in the policy or certificate is void.

Source:

S.L. 1985, ch. 316, § 10; 1987, ch. 361, § 1; 1991, ch. 301, § 18.

DECISIONS UNDER PRIOR LAW

Premeditated Suicide.

Where the insured commits suicide while sane, after the expiration of one year from the date of the policy, the company is liable for the amount of the policy, even though it appeared that the act of the suicide was premeditated before the expiration of the one year, and even though the date of the liability of the company is fixed by the voluntary act of the insured. Harrington v. Mutual Life Ins. Co., 21 N.D. 447, 131 N.W. 246, 1911 N.D. LEXIS 107 (N.D. 1911).

26.1-33-38. Measure of indemnity in life policy.

Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a life insurance policy is the sum fixed in the policy.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-23.

26.1-33-39. Life policy — When payable.

A life insurance policy may be made payable on the death of the insured or on the insured’s surviving a specified period, or periodically so long as the insured lives, or otherwise contingently on the continuance or termination of life.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-03-09.

26.1-33-40. Avails of life policy payable to deceased or to the deceased’s heirs, personal representatives, or estate — Exemption — Distribution.

The avails of a life insurance policy or of a contract payable by any mutual aid or benevolent society, when made payable to the deceased, to the personal representatives of the deceased, to the deceased’s heirs, or to the deceased’s estate, is not subject to the debts of the decedent upon the death of the insured or member of the society except by special contract. The avails must be inventoried as a part of the estate of the decedent and must be considered as part of the general assets of the estate. The insured may transfer the avails of the life insurance policy or contract either by will or by contract. Nothing contained in this section affects, in any manner, any life insurance policy or beneficiary certificate which is made payable to a designated person, including the spouse of the insured, or to persons or to members of a family designated as a class, such as “all children” or “all brothers and sisters”, even though the members of the class are not designated by name; or permits any insured to dispose of the avails of a contract by a mutual or fraternal society by will to anyone who could not be a beneficiary in the contract under the charter or bylaws of the society.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-10-18.

DECISIONS UNDER PRIOR LAW

Constitutionality.

Former statute was not unconstitutional on ground that it placed administrative duties upon county judges or executors and administrators or on ground it conferred upon county judges the right to try the title to property or money. Farmers State Bank v. Smith, 36 N.D. 225, 162 N.W. 302, 1917 N.D. LEXIS 181 (N.D. 1917).

Former section was not in conflict with former Art. XVII, § 208 of the state constitution (see now N.D. Const. Art. XI, § 22); it was not an “exemption” law as the term is used in the constitution. Farmers State Bank v. Smith, 36 N.D. 225, 162 N.W. 302, 1917 N.D. LEXIS 181 (N.D. 1917); Lapland v. Stearns, 79 N.D. 62, 54 N.W.2d 748, 1952 N.D. LEXIS 99 (N.D. 1952).

Former similar section did not violate the due process clause of the federal or state constitutions. Lapland v. Stearns, 79 N.D. 62, 54 N.W.2d 748, 1952 N.D. LEXIS 99 (N.D. 1952).

Action for Recovery.

Where administrator acted in good faith and with knowledge of heirs in distributing avails of a life insurance policy, and avails were expended largely for the direct benefit of the heirs, they were precluded from maintaining an action against the administrator for the amounts so expended. Hafey v. Hafey, 57 N.D. 381, 222 N.W. 256, 1928 N.D. LEXIS 141 (N.D. 1928).

The proceeds of a life insurance policy or other designated insurance contract, when made payable to personal representatives, heirs, or estates, are not assets of the estate, so that § 7871, C.L. 1913, covering actions by and against executors and administrators, did not apply to an action on the policy. Miller v. First Nat'l Bank, 62 N.D. 122, 242 N.W. 124, 1932 N.D. LEXIS 157 (N.D. 1932); Anderson v. Northern & Dakota Trust Co., 69 N.D. 571, 288 N.W. 562, 1939 N.D. LEXIS 186 (N.D. 1939).

Applicability.

Former similar section applied only to policies in which the personal representatives, heirs, or estate of the insured were designated as beneficiaries. Cohen v. Gordon Ferguson, Inc., 56 N.D. 545, 218 N.W. 209, 1928 N.D. LEXIS 171 (N.D. 1928); Anderson v. Northern & Dakota Trust Co., 69 N.D. 571, 288 N.W. 562, 1939 N.D. LEXIS 186 (N.D. 1939).

Assignment of Policy.

Where there was an assignment of a policy falling within the terms of former similar section, the avails or proceeds were payable directly to the assignee upon the death of the person whose life was insured. Jorgensen v. DeViney, 57 N.D. 63, 222 N.W. 464 (1928), explained, Anderson v. Northern & Dakota Trust Co., 65 N.D. 721, 261 N.W. 759 (1935) and ANDERSON v. NORTHERN & DAKOTA TRUST CO., 67 N.D. 458, 274 N.W. 127, 1937 N.D. LEXIS 102 (N.D. 1937); Sand v. Merchants Nat'l Bank & Trust Co., 81 N.W.2d 748, 1957 N.D. LEXIS 107 (N.D. 1957).

Avails.

Term “avails” was synonymous with proceeds; no property was to be taken out of estate by virtue of former similar section, nor were heirs to be enriched by having expenses of transferring avails to them paid out of estate; rather, such expenses were to be borne by heirs to whom avails were transferred; 1927 amendment qualifying term “heirs at law” to be those as determined “in accordance with the laws of succession” indicated intention of legislators to provide that laws of succession as applied to avails determined who beneficiaries were without regard to the value of the estate; in view of the amendment, it could not be said that the heirs at law were those determined by the county court or by reference to estate or its value. Hill v. Schroeder, 156 N.W.2d 695, 1968 N.D. LEXIS 119 (N.D. 1968).

Benefit Certificates Payable to “Legal Heirs”.

Where benefit certificates in certain fraternal organizations were made payable to the “legal heirs” of the insured, the heirs took the proceeds by contract and not by descent. Finn v. Walsh, 19 N.D. 61, 121 N.W. 766, 1909 N.D. LEXIS 77 (N.D. 1909).

Character of Avails After Distribution to Heirs.

Where a man dies leaving an insurance policy payable to his estate, the avails of such policy are not subject to his debts, unless made so by special contract; but when these avails have been distributed to his heirs, they lose the character which gives them exemption. Funk v. Luithle, 58 N.D. 416, 226 N.W. 595, 1929 N.D. LEXIS 226 (N.D. 1929).

Declaration of Intent.

In absence of a contrary provision in the policy, an insured has the right to bequeath a life policy to executors or administrators, and the intention on the part of the insured to dispose of a policy by will must be declared in clear and unmistakable terms. Jorgensen v. DeViney, 57 N.D. 63, 222 N.W. 464 (1928), explained, Anderson v. Northern & Dakota Trust Co., 65 N.D. 721, 261 N.W. 759 (1935) and ANDERSON v. NORTHERN & DAKOTA TRUST CO., 67 N.D. 458, 274 N.W. 127, 1937 N.D. LEXIS 102 (N.D. 1937); Hill v. Hanna, 57 N.D. 412, 222 N.W. 459, 1928 N.D. LEXIS 145 (N.D. 1928).

A will directing the use of life insurance in paying a mortgage did not manifest an intention on the part of decedent to dispose of a life policy; the proceeds descended to the heirs at law. Hill v. Hanna, 57 N.D. 412, 222 N.W. 459, 1928 N.D. LEXIS 145 (N.D. 1928).

In absence of provisions in a policy of insurance to the contrary, the insured has the right and power to dispose by will of the avails of a policy made payable to his estate, and the intention to dispose of the avails by will must be declared in clear and unmistakable terms. ANDERSON v. NORTHERN & DAKOTA TRUST CO., 67 N.D. 458, 274 N.W. 127, 1937 N.D. LEXIS 102 (N.D. 1937).

Escheat to State.

If no heirs can be found to whom the avails of a policy can pass, the avails escheat to the state in accordance with section 54-01-02. Lapland v. Stearns, 79 N.D. 62, 54 N.W.2d 748, 1952 N.D. LEXIS 99 (N.D. 1952).

Failure to Issue Policy.

The fruits of an action brought by the administratrix of an estate for the negligence of an insurance company in failing to issue and deliver an insurance policy are the “avails” of a life insurance policy and are not subject to the debts of the estate. In re Coughlin's Estate, 53 N.D. 188, 205 N.W. 14, 1925 N.D. LEXIS 61 (N.D. 1925); Sand v. Merchants Nat'l Bank & Trust Co., 81 N.W.2d 748, 1957 N.D. LEXIS 107 (N.D. 1957).

“Heirs” Defined.

A father was not an heir within the meaning of former similar section so as to share in the proceeds of an insurance policy payable to the estate, if the intestate left a surviving widow but no lineal descendants. Maixner v. Zumpf, 51 N.D. 140, 199 N.W. 183, 1924 N.D. LEXIS 148 (N.D. 1924).

“Heirs” means those who succeed the ancestor at his death. Jorgensen v. DeViney, 57 N.D. 63, 222 N.W. 464 (1928), explained, Anderson v. Northern & Dakota Trust Co., 65 N.D. 721, 261 N.W. 759 (1935) and ANDERSON v. NORTHERN & DAKOTA TRUST CO., 67 N.D. 458, 274 N.W. 127, 1937 N.D. LEXIS 102 (N.D. 1937).

“Insured” Defined.

The term “insured” means the person whose life is insured and whose death matures the contingent obligation of the insurer to pay under the terms of the policy and does not include an assignee who becomes the owner of the policy or acquires an interest therein by virtue of an assignment. Sand v. Merchants Nat'l Bank & Trust Co., 81 N.W.2d 748, 1957 N.D. LEXIS 107 (N.D. 1957).

Payable to Named Beneficiary.

Avails of a life insurance policy payable to a named beneficiary, who was deceased insured’s wife, were not subject to the debts of the decedent. McCarney v. Knudsen, 342 N.W.2d 380, 1983 N.D. LEXIS 424 (N.D. 1983).

Policy Payable to Estate.

A life insurance policy, payable to the estate of the decedent, is deemed to have been made payable to decedent’s heirs, and the heirs take the proceeds thereof by contract and not by descent. Marifjeren v. Farup, 51 N.D. 78, 199 N.W. 181, 1924 N.D. LEXIS 147 (N.D. 1924); Anderson v. Northern & Dakota Trust Co., 65 N.D. 721, 261 N.W. 759, 1935 N.D. LEXIS 159 (N.D. 1935); ANDERSON v. NORTHERN & DAKOTA TRUST CO., 67 N.D. 458, 274 N.W. 127, 1937 N.D. LEXIS 102 (N.D. 1937); Lapland v. Stearns, 79 N.D. 62, 54 N.W.2d 748, 1952 N.D. LEXIS 99 (N.D. 1952).

Chapter 149, S.L. 1929, did not change the law insofar as it applied to the rights of the heirs of an insured to the avails of a policy payable to the estate; the proceeds were deemed payable to the insured’s heirs, and the avails thereof were not assets of the estate. Crabtree v. Kelly, 65 N.D. 501, 260 N.W. 262, 1935 N.D. LEXIS 136 (N.D. 1935); Anderson v. Northern & Dakota Trust Co., 65 N.D. 721, 261 N.W. 759, 1935 N.D. LEXIS 159 (N.D. 1935); Lapland v. Stearns, 79 N.D. 62, 54 N.W.2d 748, 1952 N.D. LEXIS 99 (N.D. 1952).

Where an insured dies intestate and insurance is payable to his estate, the proceeds pass to the insured’s heirs at law, as determined under the laws of succession applied to the amount of the proceeds, without reference to the value of deceased’s estate; proceeds of $ 9,124.82 went to surviving wife where insured left no issue, both father and mother were dead, and policies were payable to estate. Hill v. Schroeder, 156 N.W.2d 695, 1968 N.D. LEXIS 119 (N.D. 1968).

Policy Payable to Estate or Executor, Administrator, or Assigns.

Where a policy of life insurance was payable to the estate of the insured or his executor, administrator, or assigns, insured’s will disposing of the estate or his property did not affect the proceeds of the policy. Talcott v. Bailey, 54 N.D. 19, 208 N.W. 549, 1926 N.D. LEXIS 107 (N.D. 1926).

A policy of life insurance payable to the estate or the executors, administrators, or assigns of the insured is deemed payable to the insured’s heirs, who take by contract, and not by descent. Talcott v. Bailey, 54 N.D. 19, 208 N.W. 549 (1926), distinguished, Jorgensen v. DeViney, 57 N.D. 63, 222 N.W. 464 (1928); Jorgensen v. DeViney, 57 N.D. 63, 222 N.W. 464 (1928), explained, Anderson v. Northern & Dakota Trust Co., 65 N.D. 721, 261 N.W. 759 (1935) and ANDERSON v. NORTHERN & DAKOTA TRUST CO., 67 N.D. 458, 274 N.W. 127, 1937 N.D. LEXIS 102 (N.D. 1937).

Transfer of Policy by Will or Assignment.

The right to transfer a policy by will or assignment still remains. Talcott v. Bailey, 54 N.D. 19, 208 N.W. 549, 1926 N.D. LEXIS 107 (N.D. 1926).

War Risk Insurance Policy.

Federal statutes govern in determining who is entitled to unpaid installments due on a war risk policy after the death of the person first entitled, and so far as this form of insurance is concerned, former similar section did not apply. In re Root's Estate, 58 N.D. 422, 226 N.W. 598, 1929 N.D. LEXIS 227 (N.D. 1929).

26.1-33-41. Designation of beneficiary not affected by wills law.

A designation in accordance with the terms of any insurance, annuity, or endowment contract when the designation in any agreement issued or entered into by the insurance company in connection therewith, supplemental thereto, or in settlement thereof, or the designation under a thrift, pension, retirement, death benefit, stock bonus, or profit-sharing contract, plan, system, or trust, created by an employer for the exclusive benefit of some or all of the employer’s employees, or their beneficiary, of a person to be a beneficiary, payee, or owner of any right, title, or interest thereunder upon the death of another, is not subject to or defeated or impaired by any law relating to the signing and attestation of wills, even though the designation is revocable with the rights of the beneficiary, payee, or owner, or otherwise subject to defeasance.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-10-20.

26.1-33-42. Designation of trustee as beneficiary — Prior existence of will not required — Payments — Discharge.

  1. Under section 26.1-33-41, it is permissible to designate as beneficiary, payee, or owner a trustee named in any inter vivos or testamentary trust whether or not such will or codicil is in existence at the date of such designation. It is not necessary to the validity of the trust that there be in existence a trust corpus other than the right to receive the benefits or to exercise the rights resulting from such a designation.
  2. It is also permissible to designate as a beneficiary, payee, or owner a trustee named or to be named in, or ascertainable under, the will of the designator. Benefits or rights resulting from such a designation are payable or transferable to the trustee upon admission of the will or codicil to probate. Upon the payment of benefits to the trustee, the benefits must be held, administered, and disposed of in accordance with the terms of the testamentary trust created by the will or codicil. Payment of the benefits does not cause the benefits or rights to be included in the property administered as part of the designator’s estate as subject to the claims of creditors.
  3. If a trustee is designated pursuant to this section and no qualified trustee makes claim to the benefits or rights resulting from the designation within one year of the death of the designator, or if it is satisfactory to the person obligated to make the payment or transfer as furnished within the one-year period that there is or will be no trustee to receive the proceeds, payment or transfer must be made to the person or representative of the designator, unless otherwise provided by the designation or other controlling agreement made during the lifetime of the designator.
  4. The payment of the benefits due or a transfer of the rights given under a designation pursuant to this section and the receipt of the payment or transfer executed by the trustee or other authorized payee constitutes a full discharge and acquittance of the person or institution obligated to make payment or transfer.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. §§ 26-10-21 to 26-10-25.

26.1-33-43. Commingling of death benefits with trust assets.

Death benefits held in trust may be commingled with any other assets which may properly come into the trust. Sections 26.1-33-41 and 26.1-33-42 do not invalidate previous life insurance policy beneficiary designations naming trustees of trusts established by will.

Source:

S.L. 1985, ch. 316, § 10.

Derivation:

N.D.C.C. § 26-10-26.

26.1-33-44. Life insurance policy ownership or retention by trust — Duties of trustee.

Notwithstanding any other provision of law, the duties of a trustee regarding the acquisition, retention, or ownership of a life insurance policy upon the life of any one or more of the grantor of the trust, the grantor’s spouse, children, grandchildren, or parents include a duty of loyalty and fair dealing, but, except as provided below, do not include a duty to:

  1. Determine whether any life insurance policy in the trust is or remains a proper investment;
  2. Exercise a policy option, right, or privilege available under a life insurance policy; or
  3. Diversify the investment.

A trustee is not liable to the beneficiaries under the trust instrument or to any other person for a loss that is claimed to result from the absence of these duties, except if a trustee acquires a replacement policy for the trust which replaces an existing policy owned by the trust or previously owned by the trust. The trustee’s exoneration from duty provided in this section does not apply to the replacement policy and only applies to a policy transferred to a trust by the grantor or some other party other than the trustee or acquired by the trustee of a trust which before the acquisition of the policy had never owned any such life insurance policy.

Source:

S.L. 2001, ch. 272, § 1.

CHAPTER 26.1-33.1 Viatical Settlement Contracts [Repealed]

[Repealed by S.L. 2001, ch. 271, § 3]

CHAPTER 26.1-33.2 Viatical Settlement Contracts [Repealed]

[Repealed by S.L. 2007, ch. 266, § 3]

26.1-33.2-01. Definitions. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-02. License requirements — Penalty. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-03. License revocation and denial. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-04. Approval of viatical settlement contracts and disclosure statements. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-05. Reporting requirements and confidentiality. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-06. Examination or investigations. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-07. Disclosure. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-08. General rules. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-09. Prohibited practices. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-10. Fraud prevention and control. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-11. Injunctions — Civil remedies — Cease and desist. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-12. Unfair trade practices. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

26.1-33.2-13. Authority to adopt rules. [Repealed]

Repealed by S.L. 2007, ch. 266, § 3.

CHAPTER 26.1-33.3 Viatical Settlement Contracts [Repealed]

[Repealed by S.L. 2009, ch. 254, § 3]

26.1-33.3-01. Definitions. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-02. License and bond requirements. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-03. License revocation and denial. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-04. Approval of viatical settlement contracts and disclosure statements. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-05. Reporting requirements and privacy. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-06. Examination or investigations. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-07. Disclosure to viator. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-08. Disclosure to insurer. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-09. General rules. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-10. Prohibited practices. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-11. Prohibited practices and conflicts of interest. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-12. Advertising for viatical settlements. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-13. Fraud prevention and control. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-14. Injunctions — Civil remedies — Cease and desist — Penalty. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-15. Unfair trade practices. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-16. Authority to promulgate regulations. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

26.1-33.3-17. Effective date. [Repealed]

Repealed by S.L. 2009, ch. 254, § 3.

CHAPTER 26.1-33.4 Life Settlements

26.1-33.4-01. Definitions.

As used in this chapter, unless the context requires otherwise:

  1. “Advertisement” means any written, electronic, or printed communication or any communication by means of recorded telephone messages or transmitted on radio; television; the internet; or similar communications media, including filmstrips, motion pictures, and videos; published, disseminated, circulated, or placed before the public, directly or indirectly, for the purpose of creating an interest in or inducing a person to purchase or sell, assign, devise, bequest, or transfer the death benefit or ownership of a life insurance policy or an interest in a life insurance policy pursuant to a life settlement contract.
  2. “Broker” means an individual who, on behalf of an owner and for a fee, commission, or other valuable consideration, offers or attempts to negotiate life settlement contracts between an owner and providers. A broker represents only the owner and owes a fiduciary duty to the owner to act according to the owner’s instructions, and in the best interest of the owner, notwithstanding the manner in which the broker is compensated. The term does not include an attorney, certified public accountant, or financial planner retained in the type of practice customarily performed in that individual’s professional capacity to represent the owner whose compensation is not paid directly or indirectly by the provider or any other person, except the owner.
  3. “Business of life settlements” includes an activity involved in offering to enter, soliciting, negotiating, procuring, effectuating, monitoring, or tracking of life settlement contracts.
  4. “Chronically ill” means:
    1. Being unable to perform at least two activities of daily living, such as eating, toileting, transferring, bathing, dressing, or continence;
    2. Requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment; or
    3. Having a level of disability similar to that described in subdivision a as determined by the United States secretary of health and human services.
  5. “Financing entity” means an underwriter, a placement agent, a lender, a purchaser of securities, a purchaser of a policy or certificate from a provider, a credit enhancer, or any entity that has a direct ownership in a policy or certificate that is the subject of a life settlement contract, but whose principal activity related to the transaction is providing funds to effect the life settlement contract or purchase of one or more policies, and who has an agreement in writing with one or more providers to finance the acquisition of life settlement contracts. The term does not include a nonaccredited investor or purchaser.
  6. “Financing transaction” means a transaction in which a licensed provider obtains financing from a financing entity, including any secured or unsecured financing, any securitization transaction, or any securities offering which either is registered or exempt from registration under federal and state securities law.
  7. “Fraudulent life settlement act” includes:
    1. Any act or omission committed by any person that, knowingly and with intent to defraud, for the purpose of depriving another of property or for pecuniary gain, commits or permits the person’s employees or agents to engage in acts, including:
      1. Presenting, causing to be presented, or preparing with knowledge and belief that it will be presented to or by a provider, premium finance lender, broker, insurer, insurance producer, or any other person, false material information, or concealing material information, as part of, in support of, or concerning a fact material to one or more of the following:
        1. An application for the issuance of a life settlement contract or insurance policy;
        2. The underwriting of a life settlement contract or insurance policy;
        3. A claim for payment or benefit pursuant to a life settlement contract or insurance policy;
        4. Premiums paid on an insurance policy;
        5. Payments and changes in ownership or beneficiary made in accordance with the terms of a life settlement contract or insurance policy;
        6. The reinstatement or conversion of an insurance policy;
        7. In the solicitation, offer to enter, or effectuation of a life settlement contract or insurance policy;
        8. The issuance of written evidence of life settlement contracts or insurance;
        9. Any application for, the existence of, or any payments related to a loan secured directly or indirectly by any interest in a life insurance policy; or
        10. Enter into any practice or plan which involves stranger-originated life insurance;
      2. Failing to disclose to the insurer where the request for such disclosure has been asked for by the insurer that the prospective insured has undergone a life expectancy evaluation by any individual or entity other than the insurer or the insurer’s authorized representatives in connection with the issuance of the policy.
      3. Employing any device, scheme, or artifice to defraud in the business of life settlements.
      4. In the solicitation, application, or issuance of a life insurance policy, employing any device, scheme, or artifice in violation of state insurable interest laws.
    2. In the furtherance of a fraud or to prevent the detection of a fraud, any person commits or permits the person’s employees or agents to:
      1. Remove, conceal, alter, destroy, or sequester from the commissioner the assets or records of a licensee or other person engaged in the business of life settlements;
      2. Misrepresent or conceal the financial condition of a licensee, financing entity, insurer, or other person;
      3. Transact the business of life settlements in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of life settlements;
      4. File with the commissioner or the chief insurance regulatory official of another jurisdiction a document containing false information or otherwise concealing information about a material fact from the commissioner;
      5. Engage in embezzlement, theft, misappropriation, or conversion of moneys, funds, premiums, credits, or other property of a provider, an insurer, an insured, an owner, an insurance, a policyowner, or any other person engaged in the business of life settlements or insurance;
      6. Knowingly and with intent to defraud, enter, broker, or otherwise deal in a life settlement contract, the subject of which is a life insurance policy that was obtained by presenting false information concerning any fact material to the policy or by concealing, for the purpose of misleading another, information concerning any fact material to the policy, where the owner or the owner’s agent intended to defraud the policy’s issuer;
      7. Attempt to commit, assist, aid, or abet in the commission of or conspiracy to commit the acts or omissions specified in this subsection; or
      8. Misrepresent the state of residence of an owner to be a state or jurisdiction that does not have a law substantially similar to this chapter for the purpose of evading or avoiding the provisions of this chapter.
  8. “Insured” means the individual covered under the policy being considered for sale in a life settlement contract.
  9. “Life expectancy” means the arithmetic mean of the number of months the insured under the life insurance policy to be settled can be expected to live as determined by a life expectancy company considering medical records and appropriate experiential data.
  10. “Life insurance producer” means any person licensed in this state as a resident or nonresident insurance producer that has received qualification or authority for life insurance coverage or a life line of coverage pursuant to chapter 26.1-26.
  11. “Life settlement contract” means a written agreement entered between a provider, or any affiliate of the provider, and an owner establishing the terms under which compensation or anything of value will be paid, which compensation or thing of value is less than the expected death benefit of the insurance policy or certificate, in return for the owner’s present or future assignment, transfer, sale, devise, or bequest of the death benefit or ownership of any portion of an insurance policy or certificate of insurance for compensation; provided, however, that the minimum value for a life settlement contract must be greater than a cash surrender value or accelerated death benefit available at the time of an application for a life settlement contract. The term includes the transfer for compensation or value of ownership or beneficial interest in a trust or other entity that owns such policy if the trust or other entity was formed or availed of for the principal purpose of acquiring one or more life insurance contracts, which life insurance contract insures the life of an individual residing in this state.
    1. “Life settlement contract” also includes:
      1. A written agreement for a loan or other lending transaction, secured primarily by an individual or group life insurance policy; or
      2. A premium finance loan made for a policy on or before the date of issuance of the policy when:
        1. The loan proceeds are not used solely to pay premiums for the policy and any costs or expenses incurred by the lender or the borrower in connection with the financing;
        2. The owner receives on the date of the premium finance loan a guarantee of the future life settlement value of the policy; or
        3. The owner agrees on the date of the premium finance loan to sell the policy or any portion of the policy’s death benefit on any date following the issuance of the policy.
    2. “Life settlement contract” does not include:
      1. A policy loan by a life insurance company pursuant to the terms of the life insurance policy or accelerated death benefits provisions contained in the life insurance policy, whether issued with the original policy or as a rider;
      2. A premium finance loan, as defined herein, or any loan made by a bank or other licensed financial institution, provided that neither default on such loan nor the transfer of the policy in connection with such default is pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this chapter;
      3. A collateral assignment of a life insurance policy by an owner;
      4. A loan made by a lender that does not violate chapter 26.1-20.1, provided the loan is not described in paragraph 1, and is not otherwise within the definition of life settlement contract;
      5. An agreement in which all the parties:
        1. Are closely related to the insured by blood or law; or
        2. Have a lawful substantial economic interest in the continued life, health, and bodily safety of the individual insured, or are trusts established primarily for the benefit of such parties;
      6. Any designation, consent, or agreement by an insured who is an employee of an employer in connection with the purchase by the employer, or trust established by the employer, of life insurance on the life of the employee;
      7. A bona fide business succession planning arrangement:
        1. Between one or more shareholders in a corporation or between a corporation and one or more of the corporation’s shareholders or one or more trusts established by the corporation’s shareholders;
        2. Between one or more partners in a partnership or between a partnership and one or more of the partnership’s partners or one or more trusts established by the partnership’s partners; or
        3. Between one or more members in a limited liability company or between a limited liability company and one or more of the limited liability company’s members or one or more trusts established by the limited liability company’s members;
      8. An agreement entered by a service recipient, or a trust established by the service recipient, and a service provider, or a trust established by the service provider, who performs significant services for the service recipient’s trade or business; or
      9. Any other contract, transaction, or arrangement from the definition of life settlement contract that the commissioner determines is not of the type intended to be regulated by this chapter.
  12. “Net death benefit” means the amount of the life insurance policy or certificate to be settled less any outstanding debt or lien.
  13. “Owner” means the owner of a life insurance policy or a certificate holder under a group policy, with or without a terminal illness, who enters or seeks to enter a life settlement contract. For the purposes of this definition, an owner is not limited to an owner of a life insurance policy or a certificate holder under a group policy that insures the life of an individual with a terminal or chronic illness or condition except where specifically addressed. The term does not include:
    1. Any provider or other licensee under this chapter;
    2. A qualified institutional buyer as defined in rule 144A of the federal Securities Act of 1933, as amended [15 U.S.C. 77a et seq.];
    3. A financing entity;
    4. A special purpose entity; or
    5. A related provider trust.
  14. “Patient identifying information” means an insured’s address, telephone number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, social security number, or any other information that is likely to lead to the identification of the insured.
  15. “Policy” means an individual or group policy, group certificate, contract, or arrangement of life insurance owned by a resident of this state, regardless of whether delivered or issued for delivery in this state.
  16. “Premium finance loan” means a loan made primarily for the purposes of making premium payments on a life insurance policy, which loan is secured by an interest in such life insurance policy.
  17. “Provider” means a person, other than an owner, that enters or effectuates a life settlement contract with an owner. The term does not include:
    1. Any bank, savings bank, savings and loan association, or credit union;
    2. A licensed lending institution, creditor, or secured party pursuant to a premium finance loan agreement which takes an assignment of a life insurance policy or certificate issued pursuant to a group life insurance policy as collateral for a loan;
    3. The insurer of a life insurance policy or rider to the extent of providing accelerated death benefits or riders or cash surrender value;
    4. Any individual who enters or effectuates no more than one agreement in a calendar year for the transfer of a life insurance policy or certificate issued pursuant to a group life insurance policy, for compensation or anything of value less than the expected death benefit payable under the policy;
    5. A purchaser;
    6. Any authorized or eligible insurer that provides stop-loss coverage to a provider, purchaser, financing entity, special purpose entity, or related provider trust;
    7. A financing entity;
    8. A special purpose entity;
    9. A related provider trust;
    10. A broker; or
    11. An accredited investor or qualified institutional buyer as defined respectively in regulation D, rule 501 or rule 144A of the federal Securities Act of 1933, as amended [15 U.S.C. 77a et seq.], that purchases a life settlement policy from a provider.
  18. “Purchased policy” means a policy or group certificate that has been acquired by a provider pursuant to a life settlement contract.
  19. “Purchaser” means a person that pays compensation or anything of value as consideration for a beneficial interest in a trust which is vested with, or for the assignment, transfer, or sale of, an ownership or other interest in a life insurance policy or a certificate issued pursuant to a group life insurance policy which has been the subject of a life settlement contract.
  20. “Related provider trust” means a titling trust or other trust established by a licensed provider or a financing entity for the sole purpose of holding the ownership or beneficial interest in purchased policies in connection with a financing transaction. In order to qualify as a related provider trust, the trust must have a written agreement with the licensed provider under which the licensed provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files relating to life settlement transactions available to the insurance department as if those records and files were maintained directly by the licensed provider.
  21. “Settled policy” means a life insurance policy or certificate that has been acquired by a provider pursuant to a life settlement contract.
  22. “Special purpose entity” means an organization formed solely to provide either directly or indirectly access to institutional capital markets for a financing entity or provider; or in connection with a transaction in which the securities in the special purpose entity are acquired by the owner or by a “qualified institutional buyer” as defined in rule 144 promulgated under the federal Securities Act of 1933, as amended [15 U.S.C. 77a et seq.]; or the securities pay a fixed rate of return commensurate with established a set-backed institutional capital markets.
  23. “Stranger-originated life insurance” is a practice or plan to initiate a life insurance policy for the benefit of a third-party investor that at the time of policy origination has no insurable interest in the insured. Stranger-originated life insurance practices include cases in which life insurance is purchased with resources or guarantees from or through a person that at the time of policy inception could not lawfully initiate the policy on its own, and in which at the time of inception there is an arrangement or agreement, whether verbal or written, to directly or indirectly transfer the ownership of the policy or the policy benefits or both to a third party. Trusts that are created to give the appearance of insurable interest, and are used to initiate policies for investors, violate insurable interest laws and the prohibition against wagering on life. Stranger-originated life insurance arrangements do not include those practices set forth in subdivision b of subsection 11.
  24. “Terminally ill” means having an illness or sickness that can reasonably be expected to result in death in twenty-four months or less.

Source:

S.L. 2009, ch. 254, § 2.

Collateral References.

State Regulation of Viatical Life Insurance Programs, Viatical Settlements, and Viatical Investments, 28 A.L.R.6th 281.

26.1-33.4-02. Licensing and bonding requirements.

  1. A person, wherever located, may not act as a provider or broker with an owner or multiple owners who is a resident of this state without first having obtained a license from the commissioner. If there is more than one owner on a single policy and the owners are residents of different states, the life settlement contract must be governed by the law of the state in which the owner having the largest percentage ownership resides or, if the owners hold equal ownership, the state of residence of one owner agreed upon in writing by all owners.
  2. Application for a provider or broker license must be made to the commissioner by the applicant on a form prescribed by the commissioner, and the application must be accompanied by a fee in an amount established by the commissioner; provided, however, that the license and renewal fees for a provider license must be reasonable and that the license and renewal fees for a broker license may not exceed those established for an insurance producer, as such fees are otherwise provided for in this title.
  3. A life insurance producer who has been duly licensed as a resident insurance producer with a life line of authority in this state or the producer’s home state for at least one year and is licensed as a nonresident producer in this state is deemed to meet the licensing requirements of this section and must be permitted to operate as a broker.
  4. Not later than thirty days from the first day of operating as a broker, the life insurance producer shall notify the commissioner that the broker is acting as a broker on a form prescribed by the commissioner, and shall pay any applicable fee to be determined by the commissioner. Notification must include an acknowledgement by the life insurance producer that the broker will operate as a broker in accordance with this chapter.
  5. The insurer that issued the policy that is the subject of a life settlement contract may not be responsible for any act or omission of a broker, provider, or purchaser arising out of or in connection with the life settlement transaction, unless the insurer receives compensation for the placement of a life settlement contract from the provider, purchaser, or broker in connection with the life settlement contract.
  6. An individual licensed as an attorney, certified public accountant, or financial planner accredited by a nationally recognized accreditation agency, who is retained to represent the owner, whose compensation is not paid directly or indirectly by the provider or purchaser, may negotiate life settlement contracts on behalf of the owner without having to obtain a license as a broker.
  7. Licenses may be renewed annually on the anniversary date upon payment of the periodic renewal fee. As specified in subsection 2, the renewal fee for a provider may not exceed a reasonable fee. Failure to pay the fee within the terms prescribed results in the automatic revocation of the license requiring periodic renewal.
  8. The term of provider license must be equal to that of a domestic stock life insurance company and the term of a broker license must be equal to that of an insurance producer license. Licenses requiring periodic renewal may be renewed on their anniversary date upon payment of the periodic renewal fee as specified in subsection 2. Failure to pay the fees before the expiration of the renewal date results in expiration of the license.
  9. The applicant shall provide such information as the commissioner may require on forms prepared by the commissioner. The commissioner, at any time, may require the applicant to fully disclose the identity of the applicant’s stockholders (except stockholders owning fewer than ten percent of the shares of an applicant whose shares are publicly traded), partners, officers, and employees, and the commissioner may refuse to issue the license in the name of any person if not satisfied that any officer, employee, stockholder, or partner thereof who may materially influence the applicant’s conduct meets the standards of this chapter.
  10. A license issued to a partnership, corporation, or other entity authorizes all members, officers, and designated employees to act as a licensee under the license, if those individuals are named in the application and any supplements to the application.
  11. Upon the filing of an application and the payment of the license fee, the commissioner shall make an investigation of each applicant and may issue a license if the commissioner finds that the applicant:
    1. If a provider, has provided a detailed plan of operation;
    2. Is competent and trustworthy and intends to transact the applicant’s business in good faith;
    3. Has a good business reputation and has had experience, training, or education so as to be qualified in the business for which the license is applied;
    4. If the applicant is a legal entity, is formed or organized pursuant to the laws of this state, or is a foreign legal entity authorized to transact business in this state, or provides a certificate of good standing from the state of its domicile;
    5. Has provided to the commissioner an antifraud plan that meets the requirements of section 26.1-33.4-12 and includes:
      1. A description of the procedures for detecting and investigating possible fraudulent acts and procedures for resolving material inconsistencies between medical records and insurance applications;
      2. A description of the procedures for reporting fraudulent insurance acts to the commissioner;
      3. A description of the plan for antifraud education and training of the applicant’s underwriters and other personnel; and
      4. A written description or chart outlining the arrangement of the antifraud personnel who are responsible for the investigation and reporting of possible fraudulent insurance acts and investigating unresolved material inconsistencies between medical records and insurance applications; and
    6. If a provider or broker, has demonstrated evidence of financial responsibility in a format prescribed by the commissioner through a surety bond executed and issued by an insurer authorized to issue surety bonds in this state or through a deposit of cash, certificates of deposit, or securities or any combination thereof in the amount of one hundred fifty thousand dollars. The commissioner shall accept, as evidence of financial responsibility under this subdivision, proof that financial instruments in accordance with the requirements in this subdivision have been filed with one or more states in which the applicant is licensed as a provider or broker. The commissioner may ask for evidence of financial responsibility at any time the commissioner determines necessary. Any surety bond issued pursuant to this subdivision must specifically authorize recovery by the commissioner on behalf of any person in this state which sustained damages as the result of erroneous acts, failure to act, conviction of fraud, or conviction of unfair practices by the provider or broker.
  12. The commissioner may not issue any license to any nonresident applicant unless a written designation of an agent for service of process is filed and maintained with the commissioner or unless the applicant has filed with the commissioner the applicant’s written irrevocable consent that any action against the applicant may be commenced against the applicant by service of process on the commissioner.
  13. Each licensee shall file with the commissioner before March first of each year an annual statement containing such information as the commissioner by rule may prescribe.
  14. A provider may not use any person to perform the functions of a broker, as provided under this chapter, unless the person holds a current, valid license as a broker, and as provided in this section.
  15. A broker may not use any person to perform the functions of a provider as defined in this chapter unless such person holds a current, valid license as a provider and as provided in this section.
  16. A provider or broker shall provide to the commissioner new or revised information about officers, ten percent or more stockholders, partners, directors, members, or designated employees within thirty days of the change.
  17. An individual licensed as a broker shall complete on a biennial basis fifteen hours of training related to life settlements and life settlement transactions as required by the commissioner; provided, however, that a life insurance producer who is operating as a broker pursuant to this section is not subject to the requirements of this subsection. Any person failing to meet the requirements of this subsection shall be subject to the penalties imposed by the commissioner.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-03. License suspension, revocation, or refusal to renew.

  1. The commissioner may suspend, revoke, or refuse to renew the license of any licensee if the commissioner finds that:
    1. There was any material misrepresentation in the application for the license;
    2. The licensee or any officer, partner, member, or director has been guilty of fraudulent or dishonest practices, is subject to a final administrative action, or is otherwise shown to be untrustworthy or incompetent to act as a licensee;
    3. The provider demonstrates a pattern of unreasonably withholding payments to policyowners;
    4. The licensee no longer meets the requirements for initial licensure;
    5. The licensee or any officer, partner, member, or director has been convicted of a felony or of any misdemeanor of which criminal fraud is an element; or the licensee has pleaded guilty or nolo contendere with respect to any felony or any misdemeanor of which criminal fraud or moral turpitude is an element, regardless whether a judgment of conviction has been entered by the court;
    6. The provider has entered any life settlement contract that has not been approved pursuant to this chapter;
    7. The provider has failed to honor contractual obligations set out in a life settlement contract;
    8. The provider has assigned, transferred, or pledged a settled policy to a person other than a provider licensed in this state, a purchaser, an accredited investor or qualified institutional buyer as defined respectively in regulation D, rule 501 or rule 144A of the federal Securities Act of 1933, as amended [15 U.S.C. 77a et seq.], financing entity, special purpose entity, or related provider trust; or
    9. The licensee or any officer, partner, member, or key management personnel has violated any of the provisions of this chapter.
  2. The commissioner may suspend, revoke, or refuse to renew the license of a broker if the commissioner finds that the broker has violated this chapter or has otherwise engaged in bad-faith conduct with one or more owners.
  3. Before the commissioner denies a license application or suspends, revokes, or refuses to renew the license of any licensee under this chapter, the commissioner shall conduct a hearing.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-04. Contract requirements.

  1. A person may not use any form of life settlement contract in this state unless the contract has been filed with and approved, if required, by the commissioner in a manner that conforms with the filing procedures and any time restrictions or deeming provisions, if any, for life insurance forms, policies, and contracts.
  2. An insurer may not require, as a condition of responding to a request for verification of coverage or in connection with the transfer of a policy pursuant to a life settlement contract, that the owner, insured, provider, or broker sign any form, disclosure, consent, waiver, or acknowledgment that has not been expressly approved by the commissioner for use in connection with life settlement contracts in this state.
  3. A person may not use a life settlement contract form or provide to an owner a disclosure statement form in this state unless first filed with and approved by the commissioner. The commissioner shall disapprove a life settlement contract form or disclosure statement form if, in the commissioner’s opinion, the contract or provisions contained therein fail to meet the requirements of sections 26.1-33.4-07, 26.1-33.4-08, and 26.1-33.4-10 and subsection 2 of section 26.1-33.4-14 or are unreasonable, contrary to the interests of the public, or otherwise misleading or unfair to the owner. The commissioner may require the submission of advertising material.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-05. Reporting requirements and privacy.

  1. For any policy settled within five years of policy issuance, each provider shall file with the commissioner before March first of each year an annual statement containing such information as the commissioner may prescribe by regulation. In addition to any other requirements, the annual statement must specify the total number, aggregate face amount, and life settlement proceeds of policies settled during the immediately preceding calendar year, together with a breakdown of the information by policy issue year. The annual statement also must include the names of the insurance companies whose policies have been settled and the brokers that have settled said policies.
    1. Such information must be limited to only those transactions where the insured is a resident of this state and may not include individual transaction data regarding the business of life settlements or information that there is a reasonable basis to believe could be used to identify the owner or the insured.
    2. Every provider that willfully fails to file an annual statement as required in this section, or willfully fails to reply within thirty days to a written inquiry by the commissioner in connection therewith, shall, in addition to other penalties provided by this chapter, be subject, upon due notice and opportunity to be heard, to a penalty of up to two hundred fifty dollars per day of delay, not to exceed twenty-five thousand dollars in the aggregate, for each such failure.
  2. Except as otherwise allowed or required by law, a provider, broker, insurance company, insurance producer, information bureau, rating agency or company, or any other person with actual knowledge of an insured’s identity, may not disclose the identity of an insured or information that there is a reasonable basis to believe could be used to identify the insured or the insured’s financial or medical information to any other person unless the disclosure:
    1. Is necessary to effect a life settlement contract between the owner and a provider and the owner and insured have provided prior written consent to the disclosure;
    2. Is necessary to effectuate the sale of life settlement contracts, or interests therein, as investments, provided the sale is conducted in accordance with applicable state and federal securities law, and provided further that the owner and the insured have both provided prior written consent to the disclosure;
    3. Is provided in response to an investigation or examination by the commissioner or any other governmental officer or agency or pursuant to the requirements of section 26.1-33.4-12;
    4. Is a term or condition to the transfer of a policy by one provider to another provider, in which case the receiving provider shall comply with the confidentiality requirements of subsection 2 of section 26.1-33.4-05;
    5. Is necessary to allow the provider or broker or its authorized representative to make contacts for the purpose of determining health status. For the purposes of this section, the term “authorized representative” does not include any person that has or may have any financial interest in the settlement contract other than a provider, licensed broker, financing entity, related provider trust, or special purpose entity; further, a provider or broker shall require its authorized representative to agree in writing to adhere to the privacy provisions of this chapter; or
    6. Is required to purchase stop-loss coverage.
  3. Nonpublic personal information solicited or obtained in connection with a proposed or actual life settlement contract is subject to the provisions applicable to financial institutions under the federal Gramm-Leach-Bliley Act [Pub. L. 106-102] and all other state and federal laws relating to confidentiality of nonpublic personal information.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-06. Examination.

  1. The commissioner, when the commissioner deems it reasonably necessary to protect the interests of the public, may examine the business and affairs of any licensee or applicant for a license. The commissioner may order any licensee or applicant to produce any records, books, files, or other information reasonably necessary to ascertain whether such licensee or applicant is acting or has acted in violation of the law or otherwise contrary to the interests of the public. The expenses incurred in conducting any examination must be paid by the licensee or applicant.
  2. In lieu of an examination under this chapter of any foreign or alien licensee licensed in this state, the commissioner may, at the commissioner’s discretion, accept an examination report on the licensee as prepared by the commissioner for the licensee’s state of domicile or port-of-entry state.
  3. Names of and individual identification data for all owners and insureds must be considered private and confidential information and may not be disclosed by the commissioner unless required by law.
  4. Records of all consummated transactions and life settlement contracts must be maintained by the provider for three years after the death of the insured and must be available to the commissioner for inspection during reasonable business hours.
    1. Upon determining that an examination should be conducted, the commissioner shall issue an examination warrant appointing one or more examiners to perform the examination and instructing the examiners as to the scope of the examination. In conducting the examination, the examiner shall use methods common to the examination of any life settlement licensee and should use those guidelines and procedures set forth in an examiners’ handbook adopted by a national organization.
    2. Every licensee or person from whom information is sought, its officers, directors, and agents shall provide to the examiners timely, convenient, and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, assets, and computer or other recordings relating to the property, assets, business, and affairs of the licensee being examined. The officers, directors, employees, and agents of the licensee or person shall facilitate the examination and aid in the examination so far as it is in their power to do so. The refusal of a licensee, by its officers, directors, employees, or agents, to submit to examination or to comply with any reasonable written request of the commissioner is grounds for suspension or refusal of, or nonrenewal of any license or authority held by the licensee to engage in the life settlement business or other business subject to the commissioner’s jurisdiction. Any proceedings for suspension, revocation, or refusal of any license or authority must be conducted pursuant to section 26.1-01-03.1.
    3. The commissioner may issue subpoenas, administer oaths, and examine under oath any person as to any matter pertinent to the examination. Upon the failure or refusal of a person to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence.
    4. When making an examination under this chapter, the commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists as examiners, the reasonable cost of which must be borne by the licensee that is the subject of the examination.
    5. This chapter does not limit the commissioner’s authority to terminate or suspend an examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions made pursuant to any examination are prima facie evidence in any legal or regulatory action.
    6. This chapter does not limit the commissioner’s authority to use and, if appropriate, to make public any final or preliminary examination report, any examiner or licensee workpapers, or other documents, or any other information discovered or developed during the course of any examination in the furtherance of any legal or regulatory action which the commissioner determines appropriate.
    1. Examination reports must be composed of only facts appearing upon the books, from the testimony of its officers or agents, or other persons examined concerning its affairs, and such conclusions and recommendations as the examiners find reasonably warranted from the facts.
    2. No later than sixty days following completion of the examination, the examiner in charge shall file with the commissioner a verified written report of examination under oath. Upon receipt of the verified report, the commissioner shall transmit the report to the licensee examined, together with a notice that shall afford the licensee examined a reasonable opportunity of not more than thirty days to make a written submission or rebuttal with respect to any matters contained in the examination report and which shall become part of the report or to request a hearing on any matter in dispute.
    3. If the commissioner determines that regulatory action is appropriate as a result of an examination, the commissioner may initiate any proceedings or actions provided by law.
    1. Names and individual identification data for all owners, purchasers, and insureds must be considered private and confidential information and may not be disclosed by the commissioner, unless the disclosure is to another regulator, is required under law, or is allowed under section 26.1-03-19.4.
    2. Except as otherwise provided in this chapter, all examination reports, working papers, recorded information, documents, and copies thereof produced by, obtained by, or disclosed to the commissioner or any other person in the course of an examination made under this chapter, or in the course of analysis or investigation by the commissioner of the financial condition or market conduct of a licensee must be confidential by law and privileged, is not subject to the state’s open records laws, is not subject to subpoena, and is not subject to discovery or admissible in evidence in any private civil action. The commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as part of the commissioner’s official duties. The licensee being examined may have access to all documents used to make the report.
    1. An examiner may not be appointed by the commissioner if the examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this chapter. This section may not be construed to automatically preclude an examiner from being:
      1. An owner;
      2. An insured in a life settlement contract or insurance policy; or
      3. A beneficiary in an insurance policy that is proposed for a life settlement contract.
    2. Notwithstanding the requirements of this subsection, the commissioner may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though these persons may from time to time be similarly employed or retained by persons subject to examination under this chapter.
    1. No cause of action arises nor may any liability be imposed against the commissioner, the commissioner’s authorized representatives, or any examiner appointed by the commissioner for any statements made or conduct performed in good faith while carrying out this chapter.
    2. No cause of action arises, nor may any liability be imposed against any person for the act of communicating or delivering information or data to the commissioner or the commissioner’s authorized representative or examiner pursuant to an examination made under this chapter, if the act of communication or delivery was performed in good faith and without fraudulent intent or the intent to deceive. This subdivision does not abrogate or modify in any way any common-law or statutory privilege or immunity heretofore enjoyed by any person identified in subdivision a.
    3. A person identified in subdivision a or b is entitled to an award of attorney’s fees and costs if the person is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this chapter and the party bringing the action was not substantially justified in doing so. For purposes of this section, a proceeding is “substantially justified” if it had a reasonable basis in law or fact at the time that it was initiated.
  5. The commissioner may investigate suspected fraudulent life settlement acts and persons engaged in the business of life settlements.
  6. The commissioner may charge for examinations as provided for under section 26.1-01-07.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-07. Advertising.

  1. A broker or provider licensed pursuant to this chapter may conduct or participate in advertisements within this state. Advertisements must comply with all advertising and marketing laws or rules adopted by the commissioner which are applicable to life insurers or to brokers and providers licensed pursuant to this chapter.
  2. Advertisements must be accurate and truthful, and may not be misleading in fact or by implication.
  3. A person or trust may not:
    1. Directly or indirectly, market, advertise, solicit, or otherwise promote the purchase of a policy for the sole purpose of or with an emphasis on settling the policy; or
    2. Use the words “free” or “no cost” or words of similar import in the marketing, advertising, soliciting, or otherwise promoting of the purchase of a policy.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-08. Disclosures to owners.

  1. The provider shall provide in writing, in a separate document that is signed by the owner and provider, the following information to the owner no later than the date the life settlement contract is signed by all parties:
    1. The fact that possible alternatives to life settlement contracts exist, including accelerated benefits offered by the issuer of the life insurance policy.
    2. The fact that some or all of the proceeds of a life settlement contract may be taxable and that assistance should be sought from a professional tax adviser.
    3. The fact that the proceeds from a life settlement contract could be subject to the claims of creditors.
    4. The fact that receipt of proceeds from a life settlement contract may adversely affect the recipient’s eligibility for public assistance or other government benefits or entitlements and that advice should be obtained from the appropriate agencies.
    5. The fact the owner has the right to rescind a life settlement contract before the earlier of sixty calendar days after the date upon which the life settlement contract is executed by all parties or thirty calendar days after the life settlement proceeds have been delivered to the escrow agent by or on behalf of the provider as provided in subsection 11 of section 26.1-33.4-10. Rescission, if exercised by the owner, is effective only if both notice of the rescission is given and the owner repays all proceeds and any premiums, loans, and loan interest paid on account of the provider within the rescission period. If the insured dies during the rescission period, the contract is deemed to have been rescinded subject to repayment by the owner or the owner’s estate of all proceeds and any premiums, loans, and loan interest to the provider.
    6. The fact that proceeds will be sent to the owner within three business days after the provider has received the insurer’s or group administrator’s acknowledgement that ownership of the policy or interest in the certificate has been transferred and the beneficiary has been designated in accordance with the terms of the life settlement contract.
    7. The fact that entering into a life settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits, that may exist under the policy or certificate of a group policy to be forfeited by the owner and that assistance should be sought from a professional financial adviser.
    8. The amount and method of calculating the compensation paid or to be paid to the broker, or any other person acting for the owner in connection with the transaction, wherein the term compensation includes anything of value paid or given.
    9. The date by which the funds will be available to the owner and the transmitter of the funds.
    10. The fact that the commissioner shall require delivery of a buyer’s guide or a similar consumer advisory package in the form prescribed by the commissioner to owners during the solicitation process.
    11. The disclosure document must contain the following language:
    12. The fact that the commissioner shall require providers and brokers to print separate signed fraud warnings on their applications and on their life settlement contracts the following statement:
    13. The fact that the insured may be contacted by either the provider or broker or its authorized representative for the purpose of determining the insured’s health status or to verify the insured’s address. This contact is limited to once every three months if the insured has a life expectancy of more than one year, and no more than once per month if the insured has a life expectancy of one year or less. This contact may be made only by a provider or broker licensed in the state in which the owner resided at the time of the settlement or by the authorized representative of such a provider or broker.
    14. The affiliation, if any, between the provider and the issuer of the insurance policy to be settled.
    15. That a broker represents exclusively the owner, and not the insurer or the provider or any other person, and owes a fiduciary duty to the owner, including a duty to act according to the owner’s instructions and in the best interest of the owner.
    16. The document must include the name, address, and telephone number of the provider.
    17. The name, business address, and telephone number of the independent third-party escrow agent, and the fact that the owner may inspect or receive copies of the relevant escrow or trust agreements or documents.
    18. The fact that a change of ownership could in the future limit the insured’s ability to purchase future insurance on the insured’s life because there is a limit to how much coverage insurers will issue on one life.
    19. If an insurance policy to be settled has been issued as a joint policy or involves family riders or any coverage of a life other than the insured under the policy to be settled, that the owner must be informed of the possible loss of coverage on the other lives under the policy and must be advised to consult with the owner’s insurance producer or the insurer issuing the policy for advice on the proposed settlement.
    20. The dollar amount of the current death benefit payable to the provider under the policy or certificate. If known, the provider also shall disclose the availability of any additional guaranteed insurance benefits, the dollar amount of any accidental death and dismemberment benefits under the policy or certificate, and the extent to which the owner’s interest in those benefits will be transferred as a result of the viatical settlement contract.
    21. Any affiliations or contractual arrangements between the provider and the purchaser.
  2. The written disclosures must be conspicuously displayed in any life settlement contract furnished to the owner by a provider, including any affiliations or contractual arrangements between the provider and the broker.
  3. A broker shall provide the owner and the provider with at least the following disclosures no later than the date the life settlement contract is signed by all parties. The disclosures must be conspicuously displayed in the life settlement contract or in a separate document signed by the owner and provide the following information:
    1. The name, business address, and telephone number of the broker.
    2. A full, complete, and accurate description of all the offers, counteroffers, acceptances, and rejections relating to the proposed life settlement contract.
    3. A written disclosure of any affiliations or contractual arrangements between the broker and any person making an offer in connection with the proposed life settlement contracts.
    4. The name of each broker who receives compensation and the amount of compensation received by that broker, which compensation includes anything of value paid or given to the broker in connection with the life settlement contract.
    5. A complete reconciliation of the gross offer or bid by the provider to the net amount of proceeds or value to be received by the owner. For the purpose of this section, gross offer or bid means the total amount or value offered by the provider for the purchase of one or more life insurance policies, inclusive of commissions and fees.
    6. The failure to provide the disclosures or rights described in this section is deemed an unfair trade practice pursuant to section 26.1-33.4-16.

All medical, financial, or personal information solicited or obtained by a provider or broker about an insured, including the insured’s identity or the identity of family members, a spouse, or a significant other may be disclosed as necessary to effect the life settlement contract between the owner and provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase. You may be asked to renew your permission to share information every two years.

Any person that knowingly presents false information in an application for insurance or life settlement contract is guilty of a crime and may be subject to fines and confinement in prison.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-09. Disclosure to insurer.

Without limiting the ability of an insurer from assessing the insurability of a policy applicant and determining whether to issue the policy, and in addition to other questions an insurance carrier may lawfully pose to a life insurance applicant, insurance carriers may inquire in the application for insurance whether the proposed owner intends to pay premiums with the assistance of financing from a lender that will use the policy as collateral to support the financing.

  1. If, as described in subsection 11 of section 26.1-33.4-01, the loan provides funds that can be used for a purpose other than paying for the premiums, costs, and expenses associated with obtaining and maintaining the life insurance policy and loan, the application must be rejected as a violation of the prohibited practices in section 26.1-33.4-12.
  2. If the financing does not violate section 26.1-33.4-12 in this manner, the insurance carrier:
    1. May make disclosures, such as the following, to the applicant and the insured, either on the application or an amendment to the application to be completed no later than the delivery of the policy: “If you have entered a loan arrangement where the policy is used as collateral, and the policy does change ownership at some point in the future in satisfaction of the loan, the following may be true:
      1. A change of ownership could lead to a stranger owning an interest in the insured’s life;
      2. A change of ownership could in the future limit your ability to purchase future insurance on the insured’s life because there is a limit to how much coverage insurers will issue on one life;
      3. Should there be a change of ownership and you wish to obtain more insurance coverage on the insured’s life in the future, the insured’s higher issue age, a change in health status, and other factors may reduce the ability to obtain coverage and may result in significantly higher premiums; and
      4. You should consult a professional adviser, since a change in ownership in satisfaction of the loan may result in tax consequences to the owner, depending on the structure of the loan;” and
    2. May require certifications, such as the following, from the applicant or the insured or both:

I have not entered into any agreement or arrangement providing for the future sale of this life insurance policy; My loan arrangement for this policy provides funds sufficient to pay for some or all of the premiums, costs, and expenses associated with obtaining and maintaining my life insurance policy, but I have not entered into any agreement by which I am to receive consideration in exchange for procuring this policy; and The borrower has an insurable interest in the insured.

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Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-10. General rules.

  1. A provider entering a life settlement contract with any owner of a policy, wherein the insured is terminally or chronically ill, first shall obtain:
    1. If the owner is the insured, a written statement from a licensed attending physician that the owner is of sound mind and under no constraint or undue influence to enter into a settlement contract; and
    2. A document in which the insured consents to the release of the insured’s medical records to a provider, settlement broker, or insurance producer and, if the policy was issued less than two years from the date of application for a settlement contract, to the insurance company that issued the policy.
  2. The insurer shall respond to a request for verification of coverage submitted by a provider, settlement broker, or life insurance producer not later than thirty calendar days from the date the request is received. The request for verification of coverage must be made on a form approved by the commissioner. The insurer shall complete and issue the verification of coverage or indicate in which respects it is unable to respond. In its response, the insurer shall indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation at this time regarding the validity of the insurance contract.
  3. Before or at the time of execution of the settlement contract, the provider shall obtain a witnessed document in which the owner consents to the settlement contract, represents that the owner has a full and complete understanding of the settlement contract, that the owner has a full and complete understanding of the benefits of the policy, acknowledges that the owner is entering into the settlement contract freely and voluntarily, and, for persons with a terminal or chronic illness or condition, acknowledges that the insured has a terminal or chronic illness and that the terminal or chronic illness or condition was diagnosed after the policy was issued.
  4. The insurer may not unreasonably delay effecting change of ownership or beneficiary with any life settlement contract lawfully entered in this state or with a resident of this state.
  5. If a settlement broker or life insurance producer performs any of these activities required of the provider, the provider is deemed to have fulfilled the requirements of this section.
  6. If a broker performs the verification of coverage activities required of the provider, the provider is deemed to have fulfilled the requirements of subsection 1 of section 26.1-33.4-08.
  7. Within twenty days after an owner executes the life settlement contract, the provider shall give written notice to the insurer that issued that insurance policy that the policy has become subject to a life settlement contract. The notice must be accompanied by the documents required by subdivision b of subsection 2 of section 26.1-33.4-09.
  8. All medical information solicited or obtained by any licensee must be subject to the applicable provision of state law relating to confidentiality of medical information if not otherwise provided in this chapter.
  9. All life settlement contracts entered in this state must provide the owner with a right to rescind the contract before the earlier of sixty calendar days after the date upon which the life settlement contract is executed by all parties or thirty calendar days after the life settlement proceeds have been sent to the escrow agent by or on behalf of the provider as provided in subsection 11. Rescission by the owner may be conditioned upon the owner giving notice and repaying to the provider within the rescission period all proceeds of the settlement and any premiums, loans, and loan interest paid by or on behalf of the provider in connection with or as a consequence of the life settlement. If the insured dies during the rescission period, the life settlement contract is deemed to have been rescinded, subject to repayment to the provider or purchaser of all life settlement proceeds and any premiums, loans, and loan interest that have been paid by the provider or purchaser, within sixty calendar days of the death of the insured. In the event of any rescission, if the provider has paid commissions or other compensation to a broker in connection with the rescinded transaction, the broker shall refund all the commissions and compensation to the provider within five business days following receipt of written demand from the provider, which demand must be accompanied by either the owner’s notice of rescission if rescinded at the election of the owner or notice of the death of the insured if rescinded by reason of the death of the insured within the applicable rescission period.
  10. Within three business days after receipt from the owner of documents to effect the transfer of the insurance policy, the provider shall pay the proceeds of the settlement to an escrow or trust account managed by a trustee or escrow agent in a state or federally chartered financial institution pending acknowledgment of the transfer by the issuer of the policy. The trustee or escrow agent must be required to transfer the proceeds due to the owner within three business days of the later to occur of the expiration of any then remaining rescission period or the escrow agent’s receipt of the acknowledgment of the properly completed transfer of ownership, assignment, or designation of beneficiary from the insurance company.
  11. Failure to tender the life settlement contract proceeds to the owner by the date disclosed to the owner renders the contract voidable by the owner for lack of consideration until the time the proceeds are tendered to and accepted by the owner. A failure to give written notice of the right of rescission tolls the right of rescission until sixty days after the written notice of the right of rescission has been given.
  12. Any fee paid by a provider, party, individual, or an owner to a broker in exchange for services provided to the owner pertaining to a life settlement contract must be computed as a percentage of the offer obtained, not the face value of the policy. This section does not prohibit a broker from reducing such broker’s fee below this percentage if the broker so chooses.
  13. The broker shall disclose to the owner anything of value paid or given to a broker which relates to a life settlement contract.
  14. It is a violation of this chapter for any person to enter a life settlement contract at any time before or at the time of the application for or issuance of a policy that is the subject of a life settlement contract or within a five-year period commencing with the date of issuance of the insurance policy or certificate unless the owner certifies to the provider or the provider otherwise conclusively shows that one or more of the following conditions have been met within the five-year period:
    1. The policy was issued upon the owner’s exercise of conversion rights arising out of a group or individual policy, provided the total of the time covered under the conversion policy plus the time covered under the prior policy is at least sixty months. The time covered under a group policy must be calculated without regard to any change in insurance carriers, provided the coverage has been continuous and under the same group sponsorship;
    2. The owner submitted independent evidence to the provider that one or more of the following conditions have been met within the five-year period:
      1. The owner or insured is terminally or chronically ill;
      2. The owner’s spouse died or no remaining beneficiaries are then surviving;
      3. The owner retired from full-time employment; or
      4. The owner became physically or mentally disabled and a physician determined that the disability prevents the owner from maintaining full-time employment;
    3. A final order, judgment, or decree has been entered by a court of competent jurisdiction, on the application of a creditor of the owner, adjudicating the owner in default, bankrupt, or insolvent, or approving a petition seeking reorganization of the owner or appointing a receiver, trustee, or liquidator to all or a substantial part of the owner’s assets; or
    4. The owner entered a life settlement contract more than two years after the date of issuance of a policy and, with respect to the policy, at all times before the date that is two years after policy issuance, the following conditions are met:
      1. Policy premiums have been funded exclusively with unencumbered assets, including an interest in the life insurance policy being financed only to the extent of the policy’s net cash surrender value, provided by, or fully recourse liability incurred by, the insured or a person described in paragraph 5 of subdivision b of subsection 11 of section 26.1-33.4-01;
      2. There is no agreement or understanding with any other person to guarantee any such liability or to purchase, or stand ready to purchase, the policy, including through an assumption or forgiveness of the loan; and
      3. Neither the insured nor the policy has been evaluated for settlement in connection with the issuance of the policy.
  15. Copies of the independent evidence described in subdivision b of subsection 14 and documents required by subsection 1, 2, 3, or 7 must be submitted to the insurer when the provider submits a request to the insurer for verification of coverage. The copies must be accompanied by a letter of attestation from the provider that the copies are true and correct copies of the documents received by the provider.
  16. If the provider submits to the insurer a copy of the owner’s or insured’s certification described in and the independent evidence required by subdivision b of subsection 14 when the provider submits a request to the insurer to effect the transfer of the policy or certificate to the provider, the copy is deemed to establish conclusively that the life settlement contract satisfies the requirements of this section and the insurer timely shall respond to the request.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-11. Authority to adopt regulations — Conflict of laws.

  1. The commissioner may adopt rules implementing this chapter and regulating the activities and relationships of providers, brokers, and insurers and their agents.
  2. The commissioner may establish standards for evaluating reasonableness of a payment under a life settlement contract for an individual who is terminally or chronically ill. This authority includes regulation of discount rates used to determine the amount paid in exchange for assignment, transfer, sale, devise, or bequest of a benefit under a life insurance policy insuring the life of an individual who is chronically or terminally ill.
  3. The commissioner may establish appropriate licensing requirements, fees, and standards for continued licensure for providers and brokers.
    1. If there is more than one owner on a single policy and the owners are residents of different states, the life settlement contract must be governed by the law of the state in which the owner having the largest percentage ownership resides, or if the owners hold equal ownership, the state of residence of one owner agreed upon in writing by all of the owners. The law of the state of the insured governs if equal owners fail to agree in writing upon a state of residence for jurisdictional purposes.
    2. A provider from this state who enters a life settlement contract with an owner who is a resident of another state that has enacted statutes or adopted regulations governing life settlement contracts is governed in the effectuation of that life settlement contract by the statutes and regulations of the owner’s state of residence. If the state in which the owner is a resident has not enacted statutes or regulations governing life settlement contracts, the provider shall give the owner notice that neither state regulates the transaction upon which the owner is entering. For transactions in those states, however, the provider is to maintain all records required if the transactions were executed in the state of residence. The forms used in those states need not be approved by the commissioner.
    3. If there is a conflict in the laws that apply to an owner and a purchaser in any individual transaction, the laws of the state that apply to the owner shall take precedence and the provider shall comply with those laws.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-12. Prohibited practices.

  1. It is unlawful for any person to:
    1. Enter a life settlement contract if such person knows or reasonably should have known that the life insurance policy was obtained by means of a false, deceptive, or misleading application for such policy;
    2. Engage in any transaction, practice, or course of business if such person knows or reasonably should have known that the intent was to avoid the notice requirements of this chapter;
    3. Engage in any fraudulent act or practice in connection with any transaction relating to any settlement involving an owner who is a resident of this state;
    4. Issue, solicit, market, or otherwise promote the purchase of an insurance policy for the purpose of or with an emphasis on settling the policy;
    5. Enter a premium finance agreement with any person or agency, or any person affiliated with such person or agency, pursuant to which such person shall receive any proceeds, fees, or other consideration, directly or indirectly, from the policy or owner of the policy or any other person with respect to the premium finance agreement or any settlement contract or other transaction related to such policy that are in addition to the amounts required to pay the principal, interest, and service charges related to policy premiums pursuant to the premium finance agreement or subsequent sale of such agreement; provided, further, that any payments, charges, fees, or other amounts in addition to the amounts required to pay the principal, interest, and service charges related to policy premiums paid under the premium finance agreement must be remitted to the original owner of the policy or to the original owner’s estate if the original owner is not living at the time of the determination of the overpayment;
    6. With respect to any settlement contract or insurance policy and a broker, knowingly solicit an offer from, effectuate a life settlement contract with, or make a sale to any provider, financing entity, or related provider trust that is controlling, controlled by, or under common control with such broker;
    7. With respect to any life settlement contract or insurance policy and a provider, knowingly enter into a life settlement contract with an owner, if, in connection with such life settlement contract, anything of value will be paid to a broker that is controlling, controlled by, or under common control with such provider or the financing entity or related provider trust that is involved in such settlement contract;
    8. With respect to a provider, enter into a life settlement contract unless the life settlement promotional, advertising, and marketing materials, as may be prescribed by regulation, have been filed with the commissioner. In no event may any marketing materials expressly reference that the insurance is “free” for any period of time. The inclusion of any reference in the marketing materials that would cause an owner to reasonably believe that the insurance is free for any period of time must be considered a violation of this chapter; or
    9. With respect to any life insurance producer, insurance company, broker, or provider, make any statement or representation to the applicant or policyholder in connection with the sale or financing of a life insurance policy to the effect that the insurance is free or without cost to the policyholder for any period of time unless provided in the policy.
  2. A violation of this section is deemed a fraudulent life settlement act.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-13. Fraud prevention and control.

    1. A person may not commit a fraudulent life settlement act.
    2. A person may not knowingly and intentionally interfere with the enforcement of the provisions of this chapter or investigations of suspected or actual violations of this chapter.
    3. A person in the business of life settlements may not knowingly or intentionally permit any person convicted of a felony involving dishonesty or breach of trust to participate in the business of life settlements.
    1. Life settlement contracts and applications for life settlement contracts, regardless of the form of transmission, must contain the following statement or a substantially similar statement:
    2. The lack of a statement as required in subdivision a does not constitute a defense in any prosecution for a fraudulent life settlement act.
    1. Any person engaged in the business of life settlements having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be, or has been committed shall provide to the commissioner the information required by and in a manner prescribed by the commissioner.
    2. Any other person having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be, or has been committed may provide to the commissioner the information required by and in a manner prescribed by the commissioner.
    1. Civil liability may not be imposed on and no cause of action may arise from a person’s furnishing information concerning suspected, anticipated, or completed fraudulent life settlement acts or suspected or completed fraudulent insurance acts if the information is provided to or received from:
      1. The commissioner or the commissioner’s employees, agents, or representatives;
      2. Federal, state, or local law enforcement or regulatory officials or their employees, agents, or representatives;
      3. A person involved in the prevention and detection of fraudulent life settlement acts or that person’s agents, employees, or representatives;
      4. Any regulatory body or its employees, agents, or representatives overseeing life insurance, life settlements, securities, or investment fraud;
      5. The life insurer that issued the life insurance policy covering the life of the insured; or
      6. The licensee and any agents, employees, or representatives.
    2. Subdivision a does not apply to statements made with actual malice. In an action brought against a person for filing a report or furnishing other information concerning a fraudulent life settlement act or a fraudulent insurance act, the party bringing the action shall plead specifically any allegation that subdivision a does not apply because the person filing the report or furnishing the information did so with actual malice.
    3. A person identified in subdivision a is entitled to an award of attorney’s fees and costs if that person is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this chapter and the party bringing the action was not substantially justified in doing so. For purposes of this section, a proceeding is “substantially justified” if the proceeding had a reasonable basis in law or fact at the time the proceeding was initiated.
    4. This section does not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in subdivision a.
    1. The documents and evidence provided pursuant to subsection 4 or obtained by the commissioner in an investigation of suspected or actual fraudulent life settlement acts is privileged and confidential and may not be a public record and may not be subject to discovery or subpoena in a civil or criminal action.
    2. Subdivision a does not prohibit release by the commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent life settlement acts:
      1. In administrative or judicial proceedings to enforce laws administered by the commissioner;
      2. To federal, state, or local law enforcement or regulatory agencies, to an organization established for the purpose of detecting and preventing fraudulent life settlement acts, or to the national association of insurance commissioners; or
      3. At the discretion of the commissioner, to a person in the business of life settlements that is aggrieved by a fraudulent life settlement act.
    3. Release of documents and evidence under subdivision b does not abrogate or modify the privilege granted in subdivision a.
  1. This chapter does not:
    1. Preempt the authority or relieve the duty of other law enforcement or regulatory agencies to investigate, examine, and prosecute suspected violations of law;
    2. Preempt, supersede, or limit any provision of any state securities law or any rule, order, or notice issued thereunder;
    3. Prevent or prohibit a person from disclosing voluntarily information concerning life settlement fraud to a law enforcement or regulatory agency other than the insurance department; or
    4. Limit the powers granted elsewhere by the laws of this state to the commissioner or an insurance fraud unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers.
    1. Providers and brokers shall have in place antifraud initiatives reasonably calculated to detect, prosecute, and prevent fraudulent life settlement acts. The commissioner may order, or a licensee may request and the commissioner may grant, such modifications of the following required initiatives as necessary to ensure an effective antifraud program. The modifications may be more or less restrictive than the required initiatives so long as the modifications may reasonably be expected to accomplish the purpose of this section. Antifraud initiatives include:
      1. Fraud investigators, who may be provider or broker employees or independent contractors; and
      2. An antifraud plan, which must be submitted to the commissioner. The antifraud plan must include:
        1. A description of the procedures for detecting and investigating possible fraudulent life settlement acts and procedures for resolving material inconsistencies between medical records and insurance applications;
        2. A description of the procedures for reporting possible fraudulent life settlement acts to the commissioner;
        3. A description of the plan for antifraud education and training of underwriters and other personnel; and
        4. A description or chart outlining the organizational arrangement of the antifraud personnel who are responsible for the investigation and reporting of possible fraudulent life settlement acts and investigating unresolved material inconsistencies between medical records and insurance applications.
    2. Antifraud plans submitted to the commissioner are privileged and confidential and are not a public record and may not be subject to discovery or subpoena in a civil or criminal action.

Any person that knowingly presents false information in an application for insurance or life settlement contract is guilty of a crime and may be subject to fines and confinement in prison.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-14. Injunctions — Civil remedies — Cease and desist.

  1. In addition to the penalties and other enforcement provisions of this chapter, if any person violates this chapter or any rule implementing this chapter, the commissioner may seek an injunction in a court of competent jurisdiction in the county where the person resides or has a principal place of business and may apply for temporary and permanent orders that the commissioner determines necessary to restrain the person from further committing the violation.
  2. Any person damaged by the acts of another person in violation of this chapter or any rule or regulation implementing this chapter may bring a civil action for damages against the person committing the violation in a court of competent jurisdiction.
  3. The commissioner may issue a cease and desist order upon a person that violates any provision of this part, any rule or order adopted by the commissioner, or any written agreement entered into with the commissioner in accordance with chapter 28-32.
  4. When the commissioner finds that such an action presents an immediate danger to the public and requires an immediate final order, the commissioner may issue an emergency cease and desist order reciting with particularity the facts underlying such findings. The emergency cease and desist order is effective immediately upon service of a copy of the order on the respondent and remains effective for ninety days. If the commissioner begins nonemergency cease and desist proceedings under subsection 1, the emergency cease and desist order remains effective, absent an order by an appellate court of competent jurisdiction pursuant to chapter 28-32. In the event of a willful violation of this chapter, the trial court may award statutory damages in addition to actual damages in an additional amount up to three times the actual damage award. The provisions of this chapter may not be waived by agreement. A choice of law provision may not be utilized to prevent the application of this chapter to any settlement in which a party to the settlement is a resident of this state.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-15. Penalties.

  1. It is a violation of this chapter for any person, provider, broker, or any other party related to the business of life settlements to commit a fraudulent life settlement act.
  2. For criminal liability purposes, a person that commits a fraudulent life settlement act is guilty of committing insurance fraud.
  3. The commissioner may levy a civil penalty not exceeding fifty thousand dollars per violation and the amount of the claim for each violation upon any person, including those persons and their employees licensed pursuant to this chapter, who is found to have committed a fraudulent life settlement act or violated any other provision of this chapter.
  4. The license of a person licensed under this chapter which commits a fraudulent life settlement act must be revoked.

Source:

S.L. 2009, ch. 254, § 2.

26.1-33.4-16. Unfair trade practices.

A violation of this chapter is considered an unfair trade practice pursuant to state law and subject to the penalties provided by state law.

Source:

S.L. 2009, ch. 254, § 2.

CHAPTER 26.1-34 Annuities

26.1-34-01. Required annuity contract provisions relating to cessation of payment of considerations by contractholder.

In the case of annuity contracts issued after June 30, 1979, unless the company, by written notice filed with the commissioner, opted for an earlier operative date, no annuity contract, except as stated in section 26.1-34-10, may be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the commissioner are at least as favorable to the contractholder upon cessation of payment of considerations under the contract:

  1. Upon cessation of payment of considerations under an annuity contract, the company will grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in sections 26.1-34-03 through 26.1-34-06 and section 26.1-34-08.
  2. If an annuity contract provides for a lump sum settlement at maturity, or at any other time, then upon surrender of the contract at or prior to the commencement of any annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in sections 26.1-34-03, 26.1-34-04, 26.1-34-06, and 26.1-34-08. The company shall reserve the right to defer the payment of the cash surrender benefit for a period of six months after demand for the benefit with surrender of the contract.
  3. A statement of the mortality table, if any, and interest rates used in calculating any minimum paid-up annuity, cash surrender, or death benefits that are guaranteed under the annuity contract, together with sufficient information to determine the amounts of the benefits.
  4. A statement that any paid-up annuity, cash surrender, or death benefits that may be available under the annuity contract are not less than the minimum benefits required by any law of this state and an explanation of the manner in which the benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract, or any prior withdrawals from or partial surrenders of the contract.
  5. A statement that when an annuity contract becomes a claim by reason of death, settlement:
    1. If payable in one sum, must be made upon due proof of death, or not later than two months after receipt of the proof, and must include reasonable interest accrued from the date of death; or
    2. If made under a settlement option other than subdivision a, must include reasonable interest accrued from date of death until such option is made according to the provisions of the contract.

As used in this subsection, the term “reasonable interest” means the same rate of interest as paid on death proceeds left on deposit with the insurer.

Notwithstanding the requirements of this section, any deferred annuity contract may provide that if no considerations have been received under a contract for a period of two full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from considerations paid prior to such period would be less than twenty dollars monthly, the company may at its option terminate the contract by payment in cash of the then present value of such portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by such payment is relieved of any further obligation under the contract.

Source:

S.L. 1985, ch. 316, § 11; 1993, ch. 307, § 1; 1995, ch. 276, § 8.

Derivation:

N.D.C.C. § 26-03.3-01.

26.1-34-01.1. Annuity policies and certificates — Right to return.

A person who purchases an annuity policy or certificate issued or delivered in this state may return the policy within twenty days of delivery to the purchaser. If a policy or certificate is returned, the purchaser is entitled to a refund of the premium, except in the sale of variable annuities in which the purchaser is entitled to the value of the annuity plus all expense charges. Every annuity, policy, or certificate issued or delivered in this state must have a notice prominently printed on or attached to the first page of the policy or certificate stating in substance that the purchaser may return the policy or certificate within twenty days of its delivery and have the premium, or such other amount as specified above, refunded if, after examination of the policy or certificate, the applicant is not satisfied for any reason.

Source:

S.L. 1991, ch. 317, § 1.

26.1-34-02. Minimum nonforfeiture amount defined.

The minimum values as specified in sections 26.1-34-03 through 26.1-34-06 and section 26.1-34-08 of any paid-up annuity, cash surrender, or death benefits available under an annuity contract must be based upon minimum nonforfeiture amounts as defined in this section.

  1. For an annuity contract issued before August 1, 2003:
    1. With respect to annuity contracts providing for flexible considerations, the minimum nonforfeiture amount at any time at or prior to the commencement of any annuity payments must be equal to an accumulation up to such time at a rate of interest of three percent per year of percentages of the net considerations, as hereinafter defined, paid prior to such time, decreased by the sum of any prior withdrawals from or partial surrenders of the contract accumulated at a rate of interest of three percent per year and the amount of any indebtedness to the company on the contract, including interest due and accrued; and increased by any existing additional amounts credited by the company to the contract. The net considerations for a given contract year used to define the minimum nonforfeiture amount must be an amount not less than zero and must equal the corresponding gross considerations credited to the contract during that contract year less an annual contract charge of thirty dollars and less a collection charge of one dollar and twenty-five cents for each consideration credited to the contract during that contract year. The percentages of net considerations must be sixty-five percent of the net consideration for the first contract year and eighty-seven and one-half percent of the net considerations for the second and later contract years. Notwithstanding the preceding sentence, the percentage must be sixty-five percent of the portion of the total net consideration for any renewal contract year which exceeds by not more than two times the sum of those portions of the net considerations in all prior contract years for which the percentage was sixty-five percent.
    2. With respect to contracts providing for fixed scheduled considerations, minimum nonforfeiture amounts must be calculated on the assumption that considerations are paid annually in advance and must be defined as for contracts with flexible considerations which are paid annually, with two exceptions:
      1. The portion of the net consideration for the first contract year to be accumulated is the sum of sixty-five percent of the net consideration for the first contract year plus twenty-two and one-half percent of the excess of the net consideration for the first contract year over the lesser of the net considerations for the second and third contract years.
      2. The annual contract charge is the lesser of thirty dollars or ten percent of the gross annual considerations.
    3. With respect to contracts providing for a single consideration, minimum nonforfeiture amounts must be defined as for contracts with flexible considerations except that the percentage of net consideration used to determine the minimum nonforfeiture amount must equal ninety percent and the net consideration must be the gross consideration less a contract charge of seventy-five dollars.
  2. For an annuity contract issued after July 31, 2005:
    1. The minimum nonforfeiture amount at any time at or before the commencement of any annuity payments must be equal to an accumulation up to such time at rates of interest, as provided under subdivision c, of the net considerations, as defined under subdivision b, paid before such time, decreased by the sum of:
      1. Any prior withdrawals from or partial surrenders of the contract accumulated at rates of interest as provided under subdivision c;
      2. An annual contract charge of fifty dollars, accumulated at rates of interest as provided under subdivision c;
      3. Any premium tax paid by the company for the contract, accumulated at rates of interest as provided under subdivision c; and
      4. The amount of any indebtedness to the company on the contract, including interest due and accrued.
    2. The net considerations for a given contract year used to define the minimum nonforfeiture amount under subdivision a must be an amount equal to eighty-seven and one-half percent of the gross considerations credited to the contract during that contract year.
    3. The interest rate used in determining minimum nonforfeiture amounts must be determined as the lesser of:
      1. Three percent per annum; or
      2. The five-year constant maturity rate reported by the federal reserve as of a date or average over a period, reduced by one hundred twenty-five basis points. The rate calculated under this paragraph may not be less than fifteen one-hundredths of one percent, must be specified in the contract, and must be determined no more than fifteen months before the contract issue date or redemption date.
    4. The interest rate used in determining minimum nonforfeiture amounts applies for an initial period and may be redetermined for additional periods. The redetermination date basis and period, if any, must be stated in the contract. The basis is the date or average over a specified period that produces the value of the five-year constant maturity treasury rate to be used at each redetermination date.
    5. Notwithstanding subdivisions a, b, c, and d, during the period or term that a contract provides substantive participation in an equity indexed benefit, the contract may increase the reduction of one hundred twenty-five basis points under paragraph 2 of subdivision c by an amount not to exceed one hundred basis points, in order to reflect the value of the equity index benefit. The present value at the contract issue date, the present value at each redetermination date, or the additional reduction may not exceed the market value of the benefit. The commissioner may require a demonstration that the present value of the reduction does not exceed the market value of the benefit. Lacking such a demonstration acceptable to the commissioner, the commissioner may disallow or limit the additional reduction.
    6. The commissioner may adopt rules to implement the provisions of subdivision e and to provide further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts if the commissioner determines that adjustments are justified.
  3. For an annuity contract issued after July 31, 2003, and before August 1, 2005, on a contract form by contract form basis, a company may elect to apply the provisions of subsection 1 or 2.

Source:

S.L. 1985, ch. 316, § 11; 2003, ch. 254, § 1; 2021, ch. 237, § 1, eff August 1, 2021.

Derivation:

N.D.C.C. § 26-03.3-02.

26.1-34-03. Value of paid-up annuity benefit to be at least equal to minimum nonforfeiture amount.

Any paid-up annuity benefit available under an annuity contract must be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. The present value must be computed using the mortality table, if any, and the interest rate specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.

Source:

S.L. 1985, ch. 316, § 11.

Derivation:

N.D.C.C. § 26-03.3-03.

26.1-34-04. Cash surrender benefit to be at least equal to value of paid-up annuity benefit.

For annuity contracts that provide cash surrender benefits, the cash surrender benefits available prior to maturity may not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit which would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the contract. The present value must be calculated on the basis of an interest rate not more than one percent higher than the interest rate specified in the contract for accumulating the net considerations to determine the maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. A cash surrender benefit may not be less than the minimum nonforfeiture amount at that time. The death benefit under the contracts must at least equal the cash surrender benefit.

Source:

S.L. 1985, ch. 316, § 11.

Derivation:

N.D.C.C. § 26-03.3-04.

26.1-34-05. Minimum value of paid-up annuity on cessation of payment of considerations — Cash surrender benefits not provided.

For annuity contracts that do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity may not be less than the present value of the portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity. The present value must be calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine the maturity value, and increased by any existing additional amounts credited by the company to the contract. For contracts that do not provide any death benefits prior to the commencement of any annuity payments, the present values must be calculated on the basis of the interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. The present value of a paid-up annuity benefit may not be less than the minimum nonforfeiture amount at that time.

Source:

S.L. 1985, ch. 316, § 11.

Derivation:

N.D.C.C. § 26-03.3-05.

26.1-34-06. Definition of maturity date.

For the purpose of determining the benefits calculated under sections 26.1-34-04 and 26.1-34-05, in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date is deemed to be the latest date for which election is permitted by the contract, but may not be deemed to be later than the anniversary of the contract next following the annuitant’s seventieth birthday or the tenth anniversary of the contract, whichever is later.

Source:

S.L. 1985, ch. 316, § 11.

Derivation:

N.D.C.C. § 26-03.3-06.

26.1-34-07. Disclosure if annuity contract does not provide cash surrender or death benefits.

Any annuity contract that does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amounts prior to the commencement of any annuity payments must include a statement in a prominent place in the contract that such benefits are not provided.

Source:

S.L. 1985, ch. 316, § 11.

Derivation:

N.D.C.C. § 26-03.3-07.

26.1-34-08. Benefits on cessation of payment of considerations off the anniversary.

Any paid-up annuity, cash surrender, or death benefits available at any time, other than on the contract anniversary, under any annuity contract with fixed scheduled considerations, must be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.

Source:

S.L. 1985, ch. 316, § 11.

Derivation:

N.D.C.C. § 26-03.3-08.

26.1-34-09. Minimum nonforfeiture benefits for annuity contract providing both annuity and life insurance benefits — Excepted benefits.

For any annuity contract that provides within the same contract, by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits must equal the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding sections 26.1-34-03 through 26.1-34-06 and section 26.1-34-08, additional benefits payable in the event of total and permanent disability, as reversionary annuity or deferred reversionary annuity benefits, or as other policy benefits additional to life insurance, endowment and annuity benefits, and considerations for all such additional benefits, must be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits that may be required by sections 26.1-34-01 through 26.1-34-09. The inclusion of such additional benefits may not be required in any paid-up benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender, or death benefits.

Source:

S.L. 1985, ch. 316, § 11.

Derivation:

N.D.C.C. § 26-03.3-09.

26.1-34-10. Exemptions from annuity nonforfeiture provisions.

Sections 26.1-34-01 through 26.1-34-09 do not apply to any reinsurance, group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer, including a partnership, limited liability company, or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the federal Internal Revenue Code, as amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, deferred annuity contract after annuity payments have commenced, or reversionary annuity, nor to any contract delivered outside this state.

Source:

S.L. 1985, ch. 316, § 11; 1993, ch. 54, § 106.

Derivation:

N.D.C.C. § 26-03.3-10.

26.1-34-11. Variable annuities authorized — Application of variable life policy sections — Rulemaking authority.

Any domestic life insurance company, including any domestic fraternal benefit society which operates on a legal reserve basis, may establish one or more separate accounts and may allocate thereto amounts, including proceeds applied under optional modes of settlement or under dividend options, to provide for annuities, and benefits incidental thereto, payable in fixed or variable amounts or both, subject to the requirements of subsections 1 through 7 of section 26.1-33-13. No company may deliver or issue for delivery in this state variable contracts unless it is licensed or organized to do an annuity business in this state. Except for the requirement that an individual variable life insurance contract contain certain provisions, sections 26.1-33-14, 26.1-33-15, and 26.1-33-16 apply to variable annuities authorized by this section. The commissioner may adopt reasonable rules to implement this section.

Source:

S.L. 1985, ch. 316, § 11.

Derivation:

N.D.C.C. §§ 26-11.1-01 to 26-11.1-05.

CHAPTER 26.1-34.1 Charitable Gift Annuities

26.1-34.1-01. Application for certificate of exemption to issue gift annuities.

A domestic or foreign corporation organized and operated exclusively as, or for the purpose of aiding, an educational, religious, charitable, scientific, or philanthropic institution and which is organized as a nonprofit organization without profit to any person, may apply to the commissioner for a certificate of exemption to receive gifts of money or other property conditioned upon, or in return for, its agreement to pay an annuity to a donor or nominee or both. The corporation shall include with its application any documents or information the commissioner reasonably requires, including:

  1. Its name, location, and organization;
  2. Evidence that it possesses a current tax-exempt status under the laws of the United States;
  3. A designation form appointing the commissioner as its attorney upon whom may be served all lawful process in any action, suit, or proceeding instituted by or on behalf of an annuitant or beneficiary arising out of any annuity contract;
  4. A statement of the financial condition, management, and affairs of the organization, including an accurate and complete financial statement consisting of a balance sheet and income and expense statement, showing the current financial condition of the corporation and sworn to by the officer of the corporation having the responsibility for preparing such statement; and
  5. A filing fee of one hundred dollars coincident with its application.

Source:

S.L. 1991, ch. 318, § 1.

Collateral References.

Validity of charitable gift or trust containing gender restrictions on beneficiaries, 90 A.L.R.4th 836.

26.1-34.1-02. Issuance of certificate of exemption to issue gift annuities.

The commissioner shall issue a certificate of exemption if:

  1. All requirements of this chapter have been met; and
  2. The commissioner is satisfied that the corporation is in a position to competently execute its responsibilities relative to such annuity contracts.

Source:

S.L. 1991, ch. 318, § 1.

26.1-34.1-03. Segregated account.

  1. Every corporation possessing a certificate of exemption shall maintain a segregated account for all of its gift annuity liabilities.
  2. The assets of the segregated account are not liable for any debts of the corporation other than those incurred pursuant to this chapter.
  3. The segregated account must be adequate to meet the future payments under all outstanding annuity agreements.

Source:

S.L. 1991, ch. 318, § 1.

26.1-34.1-04. Contents of annuity contract or policy form.

Each charitable annuity contract or policy form used or issued by the corporation must include at least the following information:

  1. The value of the property to be transferred;
  2. The amount of the periodic annuity benefits to be paid;
  3. The manner in which and the intervals at which payment is to be made;
  4. The age of the person during whose life payment is to be made; and
  5. The reasonable value as of the date of the agreement of the benefits thereby created.

Source:

S.L. 1991, ch. 318, § 1.

26.1-34.1-05. Continued compliance.

The commissioner may require that a corporation possessing a certificate of exemption submit periodically any report the commissioner determines to be desirable or necessary to ascertain compliance with requirements of this chapter. The commissioner, whenever the commissioner determines it to be expedient, may make or cause to be made an examination of the assets and liabilities and other affairs of the corporation as the same pertains to annuity agreements entered into pursuant to this chapter. The reasonable expenses incurred for any such examination must be fixed and paid in accordance with section 26.1-03-19.6.

Source:

S.L. 1991, ch. 318, § 1; 1995, ch. 54, § 20.

26.1-34.1-06. Grounds for denial, revocation, or suspension of certificate of exemption.

The commissioner may refuse to grant, or may revoke or suspend, a certificate of exemption if the commissioner finds that the corporation does not meet or continue to meet the requirements of this chapter or that the corporation has violated this chapter or chapter 26.1-04.

Source:

S.L. 1991, ch. 318, § 1.

26.1-34.1-07. Other applicable code provisions.

Except as prescribed in this chapter, the corporation is otherwise exempt from the provisions of this code and other insurance laws.

Source:

S.L. 1991, ch. 318, § 1.

CHAPTER 26.1-34.2 Annuity Transaction Practices

26.1-34.2-01. Exemptions.

Unless otherwise specifically included, this chapter does not apply to recommendations involving:

  1. Direct response solicitations if there is no recommendation based on information collected from the consumer pursuant to this chapter; and
  2. Contracts used to fund:
    1. An employee pension or welfare benefit plan that is covered by the Employee Retirement and Income Security Act;
    2. A plan described by section 401(a), 401(k), 403(b), 408(k), or 408(p) of the Internal Revenue Code, as amended, if established or maintained by an employer;
    3. A government or church plan defined in section 414 of the Internal Revenue Code, a government or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax-exempt organization under section 457 of the Internal Revenue Code;
    4. A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor;
    5. Settlements of or assumptions of liabilities associated with personal injury litigation or a dispute or claim resolution process; or
    6. Formal prepaid funeral contracts.

Source:

S.L. 2007, ch. 267, § 1.

26.1-34.2-01.1. Scope. [Effective through December 31, 2021]

This chapter applies to any recommendation to purchase, exchange, or replace an annuity made to a consumer by an insurance producer, or an insurer when no producer is involved, that results in the purchase, exchange, or replacement recommended.

Source:

S.L. 2011, ch. 217, § 1.

26.1-34.2-01.1. Scope. [Effective January 1, 2022]

This chapter applies to a sale or recommendation of an annuity. This chapter may not be construed to create or imply a private cause of action for a violation of this chapter or to subject a producer to civil liability under the best interest standard of care outlined in section 26.1-34.2-03 or under standards governing the conduct of a fiduciary or a fiduciary relationship.

Source:

S.L. 2011, ch. 217, § 1; 2021, ch. 238, § 1, eff January 1, 2022.

26.1-34.2-02. Definitions. [Effective through December 31, 2021]

  1. “Annuity” means an annuity that is an insurance product under state law which is individually solicited, whether the product is classified as an individual or group annuity.
  2. “Insurance producer” means a person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance, including annuities.
  3. “Insurer” means a company required to be licensed under the laws of this state to provide insurance products, including annuities.
  4. “Recommendation” means advice provided by an insurance producer, or an insurer when no producer is involved, to an individual consumer which results in a purchase, replacement, or exchange of an annuity in accordance with that advice.
  5. “Replacement” means a transaction in which a new policy or contract is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer if there is no producer, that by reason of the transaction, an existing policy or contract has been or is to be:
    1. Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or otherwise terminated;
    2. Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;
    3. Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;
    4. Reissued with any reduction in cash value; or
    5. Used in a financed purchase.
  6. “Suitability information” means information that is reasonably appropriate to determine the suitability of a recommendation, including the following:
    1. Age;
    2. Annual income;
    3. Financial situation and needs, including the financial resources used for the funding of the annuity;
    4. Financial experience;
    5. Financial objectives;
    6. Intended use of the annuity;
    7. Financial time horizon;
    8. Existing assets, including investment and life insurance holdings;
    9. Liquidity needs;
    10. Liquid net worth;
    11. Risk tolerance; and
    12. Tax status.

Source:

S.L. 2007, ch. 267, § 1; 2011, ch. 217, § 2.

26.1-34.2-02. Definitions. [Effective January 1, 2022]

  1. “Annuity” means an annuity that is an insurance product under state law which is individually solicited, whether the product is classified as an individual or group annuity.
  2. “Cash compensation” means a discount, concession, fee, service fee, commission, sales charge, loan, override, or cash benefit received by a producer in connection with the recommendation or sale of an annuity from an insurer or intermediary or directly from the consumer.
  3. “Comparable standards”:
    1. With respect to a broker-dealer and registered representative of a broker-dealer, applicable federal securities and exchange commission and financial industry regulatory authority rules pertaining to best interest obligations and supervision of annuity recommendations and sales, including Regulation Best Interest [17 CFR 240];
    2. With respect to an investment adviser registered under federal or state securities laws or an investment adviser representative, the fiduciary duties and all other requirements imposed on such investment advisers or investment adviser representatives by contract or under the federal Investment Advisers Act of 1940 [15 U.S.C. 80 b-1 et seq.] or applicable state securities law, including, the form ADV and interpretations; and
    3. With respect to plan fiduciaries or fiduciaries, the duties, obligations, prohibitions, and all other requirements attendant to such status under the federal Employee Retirement Income Security Act of 1974 [29 U.S.C. 1001 et seq.] or the federal Internal Revenue Code as amended.
  4. “Consumer profile information” means information that is reasonably appropriate to determine whether a recommendation addresses the consumer’s financial situation, insurance needs, and financial objectives, including, at a minimum, the following:
    1. Age;
    2. Annual income;
    3. Financial situation and needs, including debts and other obligations;
    4. Financial experience;
    5. Insurance needs;
    6. Financial objectives;
    7. Intended use of the annuity;
    8. Financial time horizon;
    9. Existing assets or financial products, including investment, annuity, and insurance holdings;
    10. Liquidity needs;
    11. Liquid net worth;
    12. Risk tolerance, including willingness to accept nonguaranteed elements in the annuity;
    13. Financial resources used to fund the annuity; and
    14. Tax status.
  5. “Continuing education credit” means one continuing education credit as provided for under section 26.1-26-31.1.
  6. “Continuing education provider” means an individual or entity approved to offer continuing education courses pursuant to section 26.1-26-31.1.
  7. “Financial professional” means a producer that is regulated and acting as:
    1. A broker-dealer registered under federal or state securities laws or a registered representative of a broker-dealer;
    2. An investment adviser registered under federal or state securities laws or an investment adviser representative associated with the federal or state registered investment adviser; or
    3. A plan fiduciary under section 3(21) of the federal Employee Retirement Income Security Act of 1974 [29 CFR 2510.3-21] or fiduciary under section 4975(e)(3) of the Internal Revenue Code [26 U.S.C. 4975(e)(3)] as amended.
  8. “Insurer” means a company required to be licensed under the laws of this state to provide insurance products, including annuities.
  9. “Intermediary” means an entity contracted directly with an insurer or with another entity contracted with an insurer to facilitate the sale of the insurer’s annuities by producers.
  10. “Material conflict of interest” means a financial interest of the producer in the sale of an annuity which a reasonable person would expect to influence the impartiality of a recommendation. The term does not include cash compensation or noncash compensation.
  11. “Noncash compensation” means any form of compensation that is not cash compensation, including health insurance, office rent, office support, and retirement benefits.
  12. “Nonguaranteed elements” means the premiums, credited interest rates, including a bonus, benefits, values, dividends, noninterest based credits, charges, or elements of formulas used to determine any of these which are subject to company discretion and are not guaranteed at issue. An element is considered nonguaranteed if any of the underlying nonguaranteed elements are used in the element’s calculation.
  13. “Producer” means an individual or entity required to be licensed under the laws of this state to sell, solicit, or negotiate insurance, including annuities. The term includes an insurer if no producer is involved.
  14. “Recommendation” means advice provided by a producer to an individual consumer which was intended to result or results in a purchase, a replacement, or an exchange of an annuity in accordance with that advice. The term does not include general communication to the public, generalized customer services assistance or administrative support, general educational information and tools, prospectuses, or other product and sales material.
  15. “Replacement” means a transaction in which a new annuity is to be purchased, and it is known or should be known to the proposing producer, or to the proposing insurer whether or not a producer is involved, that by reason of the transaction, an existing annuity or other insurance policy has been or is to be any of the following:
    1. Lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing insurer, or otherwise terminated;
    2. Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values;
    3. Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid;
    4. Reissued with any reduction in cash value; or
    5. Used in a financed purchase.

Source:

S.L. 2007, ch. 267, § 1; 2011, ch. 217, § 2; 2021, ch. 238, § 2, eff January 1, 2022.

26.1-34.2-03. Duties of insurers and insurance producers. [Effective through December 31, 2021]

  1. In recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, the insurance producer, or the insurer when no producer is involved, must have reasonable grounds for believing that the recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to the consumer’s investments and other insurance products and as to the consumer’s financial situation and needs, including the consumer’s suitability information, and that there is a reasonable basis to believe all of the following:
    1. The consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge; potential tax penalty if the consumer sells, exchanges, surrenders or annuitizes the annuity; mortality and expense fees; investment advisory fees; potential charges for and features of riders; limitations on interest returns; insurance and investment components; and market risk;
    2. The consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization, or death or living benefit;
    3. The particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable, and in the case of an exchange or replacement, the transaction as a whole is suitable, for the particular consumer based on the consumer’s suitability information; and
    4. In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable, including taking into consideration whether:
      1. The consumer will incur a surrender charge; be subject to the commencement of a new surrender period; lose existing benefits, such as death, living, or other contractual benefits; or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements;
      2. The consumer would benefit from product enhancements and improvements; and
      3. The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding thirty-six months.
  2. Before the execution of a purchase, replacement, or exchange of an annuity resulting from a recommendation, an insurance producer, or an insurer when no producer is involved, shall make reasonable efforts to obtain the consumer’s suitability information.
  3. Except as permitted under subsection 4, an insurer may not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity is suitable based on the consumer’s suitability information.
    1. Except as provided under subdivision b, neither an insurance producer, nor an insurer, has any obligation to a consumer under subsection 1 or 3 related to any annuity transaction if:
      1. A recommendation was not made;
      2. A recommendation was made and was later found to have been prepared based on materially inaccurate information provided by the consumer;
      3. A consumer refuses to provide relevant suitability information and the annuity transaction is not recommended; or
      4. A consumer decides to enter an annuity transaction that is not based on a recommendation of the insurer or the insurance producer.
    2. An insurer’s issuance of an annuity subject to subdivision a must be reasonable under all the circumstances actually known to the insurer at the time the annuity is issued.
  4. An insurance producer or, when no insurance producer is involved, the responsible insurer representative, at the time of sale shall:
    1. Make a record of any recommendation subject to subsection 1;
    2. Obtain a customer signed statement documenting a customer’s refusal to provide suitability information, if any; and
    3. Obtain a customer signed statement acknowledging that an annuity transaction is not recommended if a customer decides to enter an annuity transaction that is not based on the insurance producer’s or insurer’s recommendation.
    1. An insurer shall establish a supervision system that is reasonably designed to achieve the insurer’s and the insurer’s insurance producers’ compliance with this chapter, including the following:
      1. The insurer shall maintain reasonable procedures to inform the insurer’s insurance producers of the requirements of this chapter and shall incorporate the requirements of this chapter into relevant insurance producer training manuals.
      2. The insurer shall establish standards for insurance producer product training and shall maintain reasonable procedures to require the insurer’s insurance producers to comply with the requirements of section 26.1-34.2-03.1.
      3. The insurer shall provide product-specific training and training materials that explain all material features of the insurer’s annuity products to the insurer’s insurance producers.
      4. The insurer shall maintain procedures for review of each recommendation before issuance of an annuity which are designed to ensure that there is a reasonable basis to determine that a recommendation is suitable. Such review procedures may apply a screening system for the purpose of identifying selected transactions for additional review and may be accomplished electronically or through other means, including physical review. Such an electronic or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria.
      5. The insurer shall maintain reasonable procedures to detect recommendations that are not suitable. This may include confirmation of consumer suitability information, systematic customer surveys, interviews, confirmation letters, and programs of internal monitoring. This paragraph does not prevent an insurer from complying with this paragraph by applying sampling procedures or by confirming suitability information after issuance or delivery of the annuity.
      6. Annually, the insurer shall provide a report to senior management, including to the senior manager responsible for audit functions, which details a review, with appropriate testing, reasonably designed to determine the effectiveness of the supervision system, the exceptions found, and corrective action taken or recommended, if any.
      1. This subsection does not restrict an insurer from contracting for performance of a function, including maintenance of procedures, required under subdivision a. An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to section 26.1-34.2-04, regardless of whether the insurer contracts for performance of a function and regardless of the insurer’s compliance with paragraph 2.
      2. An insurer’s supervision system under subdivision a must include supervision of contractual performance under this subsection. This includes the following:
        1. Monitoring and, as appropriate, conducting audits to assure that the contracted function is properly performed; and
        2. Annually, obtaining a certification from a senior manager who has responsibility for the contracted function that the manager has a reasonable basis to represent, and does represent, that the function is properly performed.
    2. An insurer is not required to include in the insurer’s system of supervision an insurance producer’s recommendations to consumers of products other than the annuities offered by the insurer.
  5. An insurance producer may not dissuade, or attempt to dissuade, a consumer from:
    1. Responding truthfully to an insurer’s request for confirmation of suitability information;
    2. Filing a complaint; or
    3. Cooperating with the investigation of a complaint.
    1. Sales made in compliance with the financial industry regulatory authority requirements pertaining to suitability and supervision of annuity transactions must satisfy the requirements under this chapter. This subsection applies to financial industry regulatory authority broker-dealer sales of variable annuities and fixed annuities if the suitability and supervision is similar to those applied to variable annuity sales. However, this subsection does not limit the insurance commissioner’s ability to enforce, including investigate, this chapter.
    2. For subdivision a to apply, an insurer shall:
      1. Monitor the financial industry regulatory authority member broker-dealer using information collected in the normal course of an insurer’s business; and
      2. Provide to the financial industry regulatory authority member broker-dealer information and reports that are reasonably appropriate to assist the financial industry regulatory authority member broker-dealer to maintain its supervision system.

Source:

S.L. 2007, ch. 267, § 1; 2009, ch. 255, §§ 1, 2; 2011, ch. 217, § 3.

26.1-34.2-03. Duties of insurers and insurance producers. [Effective January 1, 2022]

  1. A producer, if making a recommendation of an annuity, shall act in the best interest of the consumer under the circumstances known at the time the recommendation is made, without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest. A producer has acted in the best interest of the consumer if the producer has satisfied the following obligations regarding care, disclosure, conflict of interest, and documentation:
      1. The producer, in making a recommendation, shall exercise reasonable diligence, care, and skill to:
        1. Know the consumer’s financial situation, insurance needs, and financial objectives;
        2. Understand the available recommendation options after making a reasonable inquiry into options available to the producer;
        3. Have a reasonable basis to believe the recommended option effectively addresses the consumer’s financial situation, insurance needs, and financial objectives over the life of the product, as evaluated in light of the consumer profile information; and
        4. Communicate the basis or bases of the recommendation.
      2. The requirements under this subdivision include making reasonable efforts to obtain consumer profile information from the consumer before the recommendation of an annuity.
      3. The requirements under this subdivision require a producer to consider the types of products the producer is authorized and licensed to recommend or sell which address the consumer’s financial situation, insurance needs, and financial objectives. This does not require analysis or consideration of any products outside the authority and license of the producer or other possible alternative products or strategies available in the market at the time of the recommendation. A producer must be held to standards applicable to producers with similar authority and licensure.
      4. The requirements under this subdivision do not create a fiduciary obligation or relationship and only create a regulatory obligation as established in this chapter.
      5. The consumer profile information, characteristics of the insurer, and product costs, rates, benefits, and features are those factors generally relevant in making a determination whether an annuity effectively addresses the consumer’s financial situation, insurance needs, and financial objectives, but the level of importance of each factor under the care obligation of this paragraph may vary depending on the facts and circumstances of a particular case. However, each factor may not be considered in isolation.
      6. The requirements under this subdivision include having a reasonable basis to believe the consumer would benefit from certain features of the annuity, such as annuitization, death or living benefit, or other insurance-related features.
      7. The requirements under this subdivision apply to the particular annuity as a whole and the underlying subaccounts to which funds are allocated at the time of purchase or exchange of an annuity, and riders and similar producer enhancements, if any.
      8. The requirements under this subdivision do not mean the annuity with the lowest one-time or multiple occurrence compensation structure necessarily must be recommended.
      9. The requirements under this subdivision do not mean the producer has ongoing monitoring obligations under the care obligation under this paragraph, although such an obligation may be owed separately under the terms of a fiduciary, consulting, investment advising, or financial planning agreement between the consumer and the producer.
      10. In the case of an exchange or replacement of an annuity, the producer shall consider the whole transaction, which includes taking into consideration whether:
        1. The consumer will incur a surrender charge; be subject to the commencement of a new surrender period; lose existing benefits, such as death, living, or other contractual benefits; or be subject to increased fees, investment advisory fees, or charges for riders and similar product enhancements;
        2. The replacing product would benefit the consumer substantially in comparison to the replaced product over the life of the product; and
        3. The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding sixty months.
      11. This chapter may not be construed to require a producer to obtain a license other than a producer license with the appropriate line of authority to sell, solicit, or negotiate insurance in this state, including a securities license, in order to fulfill the duties and obligations contained in this chapter; provided the producer does not give advice or provide services that are otherwise subject to securities laws or engage in any other activity requiring other professional licenses.
      1. Before the recommendation or sale of an annuity, the producer prominently shall disclose to the consumer on a form substantially similar to a model form designed by the insurance department:
        1. A description of the scope and terms of the relationship with the consumer and the role of the producer in the transaction;
        2. An affirmative statement on whether the producer is licensed and authorized to sell the following products:
          1. Fixed annuities;
          2. Fixed indexed annuities;
          3. Variable annuities;
          4. Life insurance;
          5. Mutual funds;
          6. Stocks and bonds; and
          7. Certificates of deposit;
        3. An affirmative statement describing the insurers the producer is authorized, contracted, or appointed, or otherwise able to sell insurance products for, using the following descriptions:
          1. One insurer;
          2. From two or more insurers; or
          3. From two or more insurers although primarily contracted with one insurer;
        4. A description of the sources and types of cash compensation and noncash compensation to be received by the producer, including whether the producer is to be compensated for the sale of a recommended annuity by commission as part of premium or other remuneration received from the insurer, intermediary, or other producer or by fee as a result of a contract for advice or consulting services; and
        5. A notice of the consumer’s right to request additional information regarding cash compensation described in subparagraph d.
      2. Upon request of the consumer or the consumer’s designated representative, the producer shall disclose:
        1. A reasonable estimate of the amount of cash compensation to be received by the producer, which may be stated as a range of amounts or percentages; and
        2. Whether the cash compensation is a one-time or multiple occurrence amount, and if a multiple occurrence amount, the frequency and amount of the occurrence, which may be stated as a range of amounts or percentages.
      3. Before or at the time of the recommendation or sale of an annuity, the producer must have a reasonable basis to believe the consumer has been informed of various features of the annuity, such as the potential surrender period and surrender charge; potential tax penalty if the consumer sells, exchanges, surrenders or annuitizes the annuity; mortality and expense fees; investment advisory fees; annual fees; potential charges for and features of riders or other options of the annuity; limitations on interest returns; potential changes in nonguaranteed elements of the annuity; insurance and investment components; and market risk.
    1. A producer shall identify and avoid or reasonably manage and disclose material conflicts of interest, including material conflicts of interest related to an ownership interest.
    2. At the time of recommendation or sale the producer shall:
      1. Make a written record of any recommendation and the basis for the recommendation subject to this chapter;
      2. Obtain a consumer-signed statement on a form substantially similar to a model form established by the insurance department:
        1. A customer’s refusal to provide the consumer profile information, if any; and
        2. A customer’s understanding of the ramifications of not providing the customer’s consumer profile information or providing insufficient consumer profile information; and
      3. Obtain a consumer-signed statement on a form substantially similar to a model form established by the insurance department acknowledging the annuity transaction is not recommended if a customer decides to enter an annuity transaction that is not based on the producer’s recommendation.
    3. A requirement applicable to a producer under this subsection applies to every producer who has exercised material control or influence in the making of a recommendation and has received direct compensation as a result of the recommendation or sale, regardless of whether the producer has had any direct contact with the consumer. Activities such as providing or delivering marketing or educational materials, product wholesaling or other back office product support, and general supervision of a producer do not, in and of themselves, constitute material control or influence.
    1. Except as provided under subdivision b, a producer does not have an obligation to a consumer under subsection 1 or 3 related to any annuity transaction if:
      1. A recommendation was not made;
      2. A recommendation was made and was later found to have been prepared based on materially inaccurate information provided by the consumer;
      3. A consumer refuses to provide relevant consumer profile information and the annuity transaction is not recommended; or
      4. A consumer decides to enter an annuity transaction that is not based on a recommendation of the producer.
    2. An insurer’s issuance of an annuity subject to subdivision a must be reasonable under all the circumstances actually known to the insurer at the time the annuity is issued.
    1. Except as permitted under subdivision b, an insurer may not issue an annuity recommended to a consumer unless there is a reasonable basis to believe the annuity would effectively address the particular consumer’s financial situation, insurance needs, and financial objectives based on the consumer’s consumer profile information.
    2. An insurer shall establish and maintain a supervision system that is reasonably designed to achieve the insurer’s and the insurer’s producers’ compliance with this chapter, including the following:
      1. The insurer shall establish and maintain reasonable procedures to inform the insurer’s producers of the requirements of this chapter and shall incorporate the requirements of this chapter into relevant producer training manuals.
      2. The insurer shall establish and maintain standards for insurance producer product training and shall maintain reasonable procedures to require the insurer’s producers to comply with the requirements of section 26.1-34.2-03.1.
      3. The insurer shall provide product-specific training and training materials that explain all material features of the insurer’s annuity products to the insurer’s producers.
      4. The insurer shall establish and maintain procedures for the review of each recommendation before issuance of an annuity which are designed to ensure there is a reasonable basis to determine that the recommended annuity effectively would address the particular consumer’s financial situation, insurance needs, and financial objectives. Such review procedures may apply a screening system for the purpose of identifying selected transactions for additional review and may be accomplished electronically or through other means, including physical review. Such an electronic or other system may be designed to require additional review only of those transactions identified for additional review by the selection criteria.
      5. The insurer shall establish and maintain reasonable procedures to detect recommendations that are not in compliance with this paragraph and paragraphs 1, 2, and 4. This may include confirmation of the consumer profile information, systematic customer surveys, producer and consumer interviews, confirmation letters, producer statements or attestations, and programs of internal monitoring. This paragraph does not prevent an insurer from complying with this paragraph by applying sampling procedures or by confirming the consumer profile information or other required information under this section after issuance or delivery of the annuity.
      6. The insurer shall establish and maintain reasonable procedures to assess, before or upon issuance or delivery of an annuity, whether a producer has provided to the customer the information required to be provided under this section.
      7. The insurer shall establish and maintain reasonable procedures to identify and address suspicious consumer refusals to provide consumer profile information.
      8. The insurer shall establish and maintain reasonable procedures to identify and eliminate any sales contests, sales quotas, bonuses, and noncash compensation that are based on the sales of specific annuities within a limited period of time. The requirements of this subdivision are not intended to prohibit the receipt of health insurance, office rent, office support, retirement benefits, or other employee benefits by employees as long as those benefits are not based on the volume of sales of a specific annuity within a limited period of time.
      9. Annually, the insurer shall provide a written report to senior management, including to the senior manager responsible for audit functions, which details a review, with appropriate testing, reasonably designed to determine the effectiveness of the supervision system, the exceptions found, and corrective action taken or recommended, if any.
      1. This subsection does not restrict an insurer from contracting for performance of a function, including maintenance of procedures, required under this subdivision. An insurer is responsible for taking appropriate corrective action and may be subject to sanctions and penalties pursuant to section 26.1-34.2-04, regardless of whether the insurer contracts for performance of a function and regardless of the insurer’s compliance with paragraph 2.
      2. An insurer’s supervision system under this subsection must include supervision of contractual performance under this subsection. This includes the following:
        1. Monitoring and, as appropriate, conducting audits to assure that the contracted function is properly performed; and
        2. Annually, obtaining a certification from a senior manager who has responsibility for the contracted function that the manager has a reasonable basis to represent, and does represent, that the function is properly performed.
    3. An insurer is not required to include in the insurer’s system of supervision:
      1. A producer’s recommendations to consumers of products other than the annuities offered by the insurer; or
      2. Include consideration of or comparison to options available to the producer or compensation relating to those options other than annuities or other products offered by the insurer.
  2. A producer or an insurer may not dissuade, or attempt to dissuade, a consumer from:
    1. Responding truthfully to an insurer’s request for confirmation of the consumer profile information;
    2. Filing a complaint; or
    3. Cooperating with the investigation of a complaint.
    1. Recommendations and sales of annuities made in compliance with comparable standards must satisfy the requirements under this chapter. This subsection applies to recommendations and sales of annuities made by financial professionals in compliance with business rules, controls, and procedures that satisfy a comparable standard even if the standard would not otherwise apply to the product or recommendation at issue. However, this subsection does not limit the insurance commissioner’s ability to enforce, including investigate, this chapter. This subdivision does not limit the insurer’s obligation to comply with subdivision a of subsection 3 although the insurer may base the insurer’s analysis on information received from either the financial professional or the entity supervising the financial professional.
    2. For subdivision a to apply, an insurer shall:
      1. Monitor relevant conduct of the financial professional seeking to rely upon subdivision a or the entity responsible for supervising the financial professional, such as the financial professional’s broker-dealer or an investment advisor registered under federal or state securities laws using information collected in the normal course of an insurer’s business; and
      2. Provide to the entity responsible for supervising the financial professional seeking to rely on subdivision a, such as the financial professional’s broker-dealer or investment advisor registered under federal or state securities laws, information and reports that are reasonably appropriate to assist the entity to maintain its supervision system.

Source:

S.L. 2007, ch. 267, § 1; 2009, ch. 255, §§ 1, 2; 2011, ch. 217, § 3; 2021, ch. 238, § 3, eff January 1, 2022.

26.1-34.2-03.1. Insurance producer training. [Effective through December 31, 2021]

  1. An insurance producer may not solicit the sale of an annuity product unless the insurance producer has adequate knowledge of the product to recommend the annuity and the insurance producer is in compliance with the insurer’s standards for product training. An insurance producer may rely on insurer-provided product-specific training standards and materials to comply with this subsection.
    1. (1) An insurance producer who engages in the sale of annuity products shall complete a one-time, four-hour training course.
    2. The training required under this subsection must include information on the following topics:
      1. The types of annuities and various classifications of annuities;
      2. Identification of the parties to an annuity;
      3. How fixed, variable, and indexed annuity contract provisions affect consumers;
      4. The application of income taxation of qualified and nonqualified annuities;
      5. The primary uses of annuities; and
      6. Appropriate sales practices, replacement, and disclosure requirements.
    3. Providers of courses intended to comply with this subsection shall cover all topics listed in the prescribed outline and may not present any marketing information or provide training on sales techniques or provide specific information about a particular insurer’s products. Additional topics may be offered in conjunction with and in addition to the required outline.
    4. Providers of annuity training shall issue certificates of completion.
    5. The satisfaction of the training requirements of another state which are substantially similar to the provisions of this subsection are deemed to satisfy the training requirements of this subsection in this state.
    6. An insurer shall verify that an insurance producer has completed the annuity training course required under this subsection before allowing the producer to sell an annuity product for that insurer. An insurer may satisfy the insurer’s responsibility under this subsection by obtaining certificates of completion of the training course or obtaining reports from a reasonably reliable commercial database vendor that has a reporting arrangement with insurance education providers.

(2) An insurance producer who holds a life insurance line of authority on August 1, 2011, and who desires to sell annuities shall complete the requirements of this subsection within twelve months after August 1, 2011. An individual who obtains a life insurance line of authority on or after August 1, 2011, may not engage in the sale of annuities until the annuity training course required under this subsection has been completed.

Source:

S.L. 2011, ch. 217, § 4.

26.1-34.2-03.1. Producer training. [Effective January 1, 2022]

  1. A producer may not solicit the sale of an annuity product unless the producer has adequate knowledge of the product to recommend the annuity and the producer is in compliance with the insurer’s standards for product training. A producer may rely on insurer-provided product-specific training standards and materials to comply with this subsection.
    1. A producer who engages in the sale of annuity products shall complete a one-time, four-hour training course.
    2. The training required under this subsection must include information on the following topics:
      1. The types of annuities and various classifications of annuities;
      2. Identification of the parties to an annuity;
      3. How fixed, variable, and indexed annuity contract provisions affect consumers;
      4. The application of income taxation of qualified and nonqualified annuities;
      5. The primary uses of annuities; and
      6. Appropriate standards of conduct, sales practices, replacement, and disclosure requirements.
    3. Providers of courses intended to comply with this subsection shall cover all topics listed in the prescribed outline and may not present any marketing information or provide training on sales techniques or provide specific information about a particular insurer’s products. Additional topics may be offered in conjunction with and in addition to the required outline.
    4. A producer who has completed an annuity training course approved by the insurance department before January 1, 2022, within six months after such date, shall complete either:
      1. A new four-credit training course approved by the insurance department after January 1, 2022; or
      2. An additional one-time, one-credit training course approved by the insurance department and provided by an insurance department -approved education provider on appropriate sales practices, replacement, and disclosure requirements under this chapter.
    5. Providers of annuity training shall issue certificates of completion.
    6. The satisfaction of the training requirements of another state which are substantially similar to the provisions of this subsection are deemed to satisfy the training requirements of this subsection in this state.
    7. The satisfaction of the components of the training requirements of a course with components substantially similar to the provisions of this subsection is deemed to satisfy the training requirements of this subsection in this state.
    8. An insurer shall verify that the producer has completed the annuity training course required under this subsection before allowing the producer to sell an annuity product for that insurer. An insurer may satisfy the insurer’s responsibility under this subsection by obtaining certificates of completion of the training course or obtaining reports from a reasonably reliable commercial database vendor that has a reporting arrangement with insurance education providers.

Source:

S.L. 2011, ch. 217, § 4; 2021, ch. 238, § 4, eff January 1, 2022.

26.1-34.2-04. Mitigation of responsibility — Penalty. [Effective through December 31, 2021]

  1. An insurer is responsible for compliance with this chapter. If a violation occurs, either because of the action or inaction of the insurer or the insurer’s insurance producer, the commissioner may order:
    1. An insurer to take reasonably appropriate corrective action for any consumer harmed by the insurer’s or by the insurer’s insurance producer’s violation of this chapter;
    2. A general agency, independent agency, or the insurance producer to take reasonably appropriate corrective action for any consumer harmed by the insurance producer’s violation of this chapter; and
    3. Appropriate penalties and sanctions.
  2. Any applicable penalty under section 26.1-01-03.3 for a violation of subsection 1 or 2 or subdivision b of subsection 3 of section 26.1-34.2-03 may be reduced or eliminated, according to a schedule adopted by the commissioner, if corrective action for the consumer was taken promptly after a violation was discovered.

Source:

S.L. 2007, ch. 267, § 1; 2011, ch. 217, § 5.

26.1-34.2-04. Compliance mitigation — Enforceability — Penalty. [Effective January 1, 2022]

  1. An insurer is responsible for compliance with this chapter. If a violation occurs, either because of the action or inaction of the insurer or the insurer’s producer, the commissioner may order:
    1. An insurer to take reasonably appropriate corrective action for any consumer harmed by a failure to comply with this chapter by the insurer or by the producer;
    2. A general agency, independent agency, or the producer to take reasonably appropriate corrective action for any consumer harmed by the producer’s violation of this chapter; and
    3. Appropriate penalties and sanctions.
  2. Any applicable penalty under section 26.1-01-03.3 for a violation of this chapter may be reduced or eliminated, according to a schedule adopted by the commissioner, if corrective action for the consumer was taken promptly after a violation was discovered.
  3. The authority to enforce compliance with this section is vested exclusively with the commissioner.

Source:

S.L. 2007, ch. 267, § 1; 2011, ch. 217, § 5; 2021, ch. 238, § 5, eff January 1, 2022.

26.1-34.2-05. Recordkeeping. [Effective through December 31, 2021]

  1. Insurers, general agents, independent agencies, and insurance producers shall maintain or be able to make available to the commissioner a record of the information collected from the consumer and other information used in making the recommendations that were the basis for insurance transactions for ten years after the insurance transaction is completed by the insurer. An insurer is permitted, but is not required, to maintain documentation on behalf of an insurance producer.
  2. Records required to be maintained by this chapter may be maintained in paper, photographic, microprocess, magnetic, mechanical, or electronic media, or by any process that accurately reproduces the actual document.

Source:

S.L. 2007, ch. 267, § 1.

26.1-34.2-05. Recordkeeping. [Effective January 1, 2022]

  1. Insurers, general agents, independent agencies, and producers shall maintain or be able to make available to the commissioner a record of the information collected from the consumer, disclosures made to the consumer, including summaries of oral disclosures, and other information used in making the recommendations that were the basis for insurance transactions for ten years after the insurance transaction is completed by the insurer. An insurer is permitted, but is not required, to maintain documentation on behalf of a producer.
  2. Records required to be maintained by this chapter may be maintained in paper, photographic, microprocess, magnetic, mechanical, or electronic media, or by any process that accurately reproduces the actual document.

Source:

S.L. 2007, ch. 267, § 1; 2021, ch. 238, § 6, eff January 1, 2022.

CHAPTER 26.1-35 Standard Valuation Law

26.1-35-00.1. Definitions.

In this chapter, the following definitions apply on or after the operative date of the valuation manual:

  1. “Accident and health insurance” means a contract that incorporates morbidity risk and provides protection against economic loss resulting from accident, sickness, or medical conditions and as may be specified in the valuation manual.
  2. “Appointed actuary” means a qualified actuary who is appointed in accordance with the valuation manual to prepare the actuarial opinion required in subsection 2 of section 26.1-35-01.1.
  3. “Deposit-type contract” means a contract that does not incorporate mortality or morbidity risks and as may be specified in the valuation manual.
  4. “Insurer” means an entity that has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state:
    1. And has at least one such policy in force or on claim; or
    2. Is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in this state.
  5. “Life insurance” means a contract that incorporates mortality risk, including annuity and pure endowment contracts, and as may be specified in the valuation manual.
  6. “Policyholder behavior” means any action a policyholder, contract holder, or any other person with the right to elect options, such as a certificate holder, may take under a policy or contract subject to this chapter, including lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization, or benefit elections prescribed by the policy or contract. The term does not include events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract.
  7. “Principle-based valuation” means a reserve valuation that uses one or more methods or one or more assumptions determined by the insurer and is required to comply with section 26.1-35-12 as specified in the valuation manual.
  8. “Qualified actuary” means an individual who is qualified to sign the applicable statement of actuarial opinion in accordance with the American academy of actuaries qualification standards for actuaries signing such statements and who meets the requirements specified in the valuation manual.
  9. “Tail risk” means a risk that occurs either when the frequency of low probability events is higher than expected under a normal probability distribution or when there are observed events of very significant size or magnitude.
  10. “Valuation manual” means the manual of valuation instructions adopted by the national association of insurance commissioners and approved by the commissioner as specified in this chapter.

Source:

S.L. 2015, ch. 217, § 1.

26.1-35-00.2. Application of valuation manual — Changes to valuation manual — Requirements of valuation manual.

  1. Except as provided under subsections 4 or 6 of section 26.1-35-00.2, for policies issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under subsection 2 of section 26.1-35-01.
  2. Unless the commissioner or a change in the valuation manual specifies a later effective date, changes to the valuation manual become effective on January first following the date the commissioner adopts the changes. The commissioner may adopt changes to the valuation manual if the valuation manual has been adopted by the national association of insurance commissioners by an affirmative vote representing:
    1. At least three-fourths of the members of the national association of insurance commissioners voting, but not less than a majority of the total membership; and
    2. Members of the national association of insurance commissioners representing jurisdictions totaling greater than seventy-five percent of the direct premiums written as reported in the following annual statements most recently available before the vote in paragraph a: life, accident and health annual statements; health annual statements; or fraternal annual statements.
  3. The valuation manual must specify all of the following:
    1. Minimum valuation standards for and definitions of the policies or contracts subject to subsection 2 of section 26.1-35-01. The minimum valuation standards must be:
      1. The commissioners reserve valuation method for life insurance contracts, other than annuity contracts, subject to subsection 2 of section 26.1-35-01;
      2. The commissioners annuity reserve valuation method for annuity contracts subject to subsection 2 of section 26.1-35-01; and
      3. Minimum reserves for all other policies or contracts subject to subsection 2 of section 25.1-35-01.
    2. Which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation in subsection 1 of section 26.1-35-12 and the minimum valuation standards consistent with those requirements.
    3. For policies and contracts subject to a principle-based valuation under section 26.1-35-12.
      1. Requirements for the format of reports to the commissioner under subdivision c of subsection 2 of section 26.1-35-12 and which must include information necessary to determine if the valuation is appropriate and in compliance with this chapter;
      2. Assumptions must be prescribed for risks over which the insurer does not have significant control or influence; and
      3. Procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or modification of such procedures.
    4. For policies not subject to a principle-based valuation under section 26.1-35-12, the minimum valuation standard must:
      1. Be consistent with the minimum standard of valuation before the operative date of the valuation manual; or
      2. Develop reserves that quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring.
    5. Other requirements, including those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of insurer experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandums, transition rules, and internal controls.
    6. The data and form of the data required under section 26.1-35-13, with whom the data must be submitted, and may specify other requirements including data analyses and reporting of analyses.
  4. In the absence of a specific valuation requirement or if a specific valuation requirement in the valuation manual is not, in the opinion of the commissioner, in compliance with this chapter, with respect to such requirements, the insurer shall comply with minimum valuation standards prescribed by the commissioner by rule.
  5. The commissioner may employ or contract with a qualified actuary, at the expense of the insurer, to perform an actuarial examination of the insurer and opine on the appropriateness of any reserve assumption or method used by the insurer, or to review and opine on an insurer’s compliance with any requirement set forth in this chapter. The commissioner may rely upon the opinion regarding provisions contained within this chapter, of a qualified actuary engaged by the commissioner of another state, district, or territory of the United States.
  6. The commissioner may require an insurer to change any assumption or method that, in the opinion of the commissioner, is necessary in order to comply with the requirements of the valuation manual or this chapter; and the insurer shall adjust the reserves as required by the commissioner. The commissioner may take other disciplinary action as permitted under this title.

Source:

S.L. 2015, ch. 217, § 2.

26.1-35-01. Reserve valuation.

  1. The following apply to policies and contracts issued before the operative date of the valuation manual:
    1. The commissioner shall annually value, or cause to be valued, the reserve liabilities, in this chapter referred to as reserves, for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurer doing business in this state issued after June 30, 1977, and before the operative date of the valuation manual. In calculating the reserves, the commissioner may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves required of a foreign or alien insurer, the commissioner may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standards provided in this chapter.
    2. Except sections 26.1-35-00.2 and 26.1-35-12, this chapter applies to all policies and contracts, as appropriate, subject to this chapter issued after June 30, 1977, and before the operative date of the valuation manual; however, sections 26.1-35-00.2 and 26.1-35-12 do not apply to such policies and contracts.
    3. The minimum standard for the valuation of policies and contracts issued before July 1, 1977, are the standards provided by the laws in effect immediately before that date.
  2. The following apply to policies and contracts issued on or after the operative date of the valuation manual:
    1. Annually, the commissioner shall value, or cause to be valued, the reserve liabilities, in this chapter referred to as reserves, for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of every insurer issued on or after the operative date of the valuation manual. In lieu of the valuation of the reserves required of a foreign or alien insurer, the commissioner may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this chapter.
    2. The provisions set forth in sections 26.1-35-00.2 and 26.1-35-12 apply to all policies and contracts issued on or after the operative date of the valuation manual.

Source:

S.L. 1985, ch. 316, § 12; 2015, ch. 217, § 3.

Derivation:

N.D.C.C. § 26-10.1-01.

26.1-35-01.1. Actuarial opinion of reserves.

  1. The following apply to the actuarial opinions issued before the operative date of the valuation manual:
    1. Every life insurer doing business in this state shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by rule are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this state. The commissioner by rule shall define the specifics of this opinion and add any other items deemed to be necessary to its scope.
    2. Actuarial analysis of reserves and assets supporting such reserves.
      1. Every life insurer, except as exempted by or pursuant to rule, shall also annually include in the opinion required by subsection 1, an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by rule, when considered in light of the assets held by the insurer with respect to the reserves and related actuarial items, including the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the insurer’s obligations under the policies and contracts, including the benefits under and expenses associated with the policies and contracts.
      2. The commissioner may provide by rule for a transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this section.
    3. Requirement for opinion under subdivision b. Each opinion required by subdivision b must be governed by the following provisions:
      1. A memorandum, in form and substance acceptable to the commissioner as specified by rule, must be prepared to support each actuarial opinion.
      2. If the insurer fails to provide a supporting memorandum at the request of the commissioner within a period specified by rule or the commissioner determines that the supporting memorandum provided by the insurer fails to meet the standards prescribed by rule or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the insurer to review the opinion and the basis for the opinion and prepare the supporting memorandum required by the commissioner.
    4. Requirement for all opinions subject to subsection 1. Every opinion subject to subsection 1 must be governed by the following provisions:
      1. The opinion must be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after December 31, 1994.
      2. The opinion must apply to all business in force, including individual and group health insurance plans, in form and substance acceptable to the commissioner as specified by rule.
      3. The opinion must be based on standards adopted from time to time by the actuarial standards board and on such additional standards as the commissioner may by rule prescribe.
      4. In the case of an opinion required to be submitted by a foreign or alien insurer, the commissioner may accept the opinion filed by that insurer with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to an insurer domiciled in this state.
      5. For the purposes of this section, “qualified actuary” means a member in good standing of the American academy of actuaries who meets the requirements set forth in the rule.
      6. Except in cases of fraud or willful misconduct, the qualified actuary is not liable for damages to any person, other than the insurer and the commissioner, for any act, error, omission, decision, or conduct with respect to the actuary’s opinion.
      7. Disciplinary action by the commissioner against the insurer or the qualified actuary must be defined in rules by the commissioner.
      8. Except as provided in paragraphs 12, 13, and 14, documents, materials, or other information in the possession or control of the insurance department that are a memorandum in support of the opinion, and any other material provided by the insurer to the commissioner in connection with the memorandum, are confidential records not subject to section 44-04-18 and are privileged, are not subject to subpoena, and are not subject to discovery or admissible in evidence in any private civil action. However, the commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s official duties.
      9. Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner is permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to paragraph 8.
      10. In order to assist in the performance of the commissioner’s duties, the commissioner:
        1. May share documents, materials, or other information including the confidential and privileged documents, materials, or information subject to paragraph 8 with other state, federal, and international regulatory agencies; with the national association of insurance commissioners and its affiliates and subsidiaries; and with state, federal, and international law enforcement authorities, if the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information;
        2. May receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the national association of insurance commissioners and its affiliates and subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information; and
        3. May enter agreements governing sharing and use of information consistent with paragraphs 8, 9, and 10.
      11. A waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information may not occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in paragraph 10.
      12. A memorandum in support of the opinion, and any other material provided by the insurer to the commissioner in connection with the memorandum, may be subject to subpoena for the purpose of defending an action seeking damages from the actuary submitting the memorandum by reason of an action required by this section or by rules adopted under this section.
      13. The memorandum or other material may otherwise be released by the commissioner with the written consent of the insurer or to the American academy of actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum or other material.
      14. Once any portion of the confidential memorandum is cited by the insurer in its marketing or is cited before any governmental agency other than a state insurance department or is released by the insurer to the news media, all portions of the confidential memorandum are no longer confidential.
  2. The following apply to actuarial opinions of reserves issued after the operative date of the valuation manual:
    1. Every insurer with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and subject to regulation by the commissioner annually shall submit the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this state. The valuation manual prescribes the specifics of this opinion, including any items deemed to be necessary to its scope.
    2. Every insurer with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and subject to regulation by the commissioner, except as exempted in the valuation manual, also annually shall include in the opinion required by subdivision a an opinion of the same appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified in the valuation manual, when considered in light of the assets held by the insurer with respect to the reserves and related actuarial items, including the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the insurer’s obligations under the policies and contracts, including the benefits under and expenses associated with the policies and contracts.
    3. Each opinion required by this subsection is governed by the following provisions:
      1. A memorandum, in form and substance as specified in the valuation manual, and acceptable to the commissioner, must be prepared to support each actuarial opinion.
      2. If the insurer fails to provide a supporting memorandum at the request of the commissioner within a period specified in the valuation manual or the commissioner determines that the supporting memorandum provided by the insurer fails to meet the standards prescribed by the valuation manual or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the insurer to review the opinion and the basis for the opinion and prepare the supporting memorandum required by the commissioner.
    4. Under this subsection, every opinion is governed by the following provisions:
      1. The opinion must be in a form and substance as specified in the valuation manual and acceptable to the commissioner.
      2. The opinion must be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after the operative date of the valuation manual.
      3. The opinion must apply to all policies and contracts subject to subdivision b, plus other actuarial liabilities as may be specified in the valuation manual.
      4. The opinion must be based on standards adopted by the actuarial standards board or its successor and approved by the commissioner and on such additional standards as may be prescribed in the valuation manual.
      5. In the case of an opinion required to be submitted by a foreign or alien insurer, the commissioner may accept the opinion filed by that insurer with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to an insurer domiciled in this state.
      6. Except in cases of fraud or willful misconduct, the appointed actuary is not liable for damages to any person, other than the insurer and the commissioner, for any act, error, omission, decision, or conduct with respect to the appointed actuary’s opinion.
      7. Disciplinary action by the commissioner against the insurer or the appointed actuary must be defined in rules adopted by the commissioner.

Source:

S.L. 1993, ch. 292, § 32; 2015, ch. 217, § 4.

26.1-35-02. Computation of minimum standard.

Except as provided in sections 26.1-35-03, 26.1-35-04, and 26.1-35-11, the minimum standard for the valuation of all life or accident insurance policies and contracts issued prior to July 1, 1977, are those provided by sections 26-03-33, 26-03-34, and 26-10-01 as they existed on June 30, 1977. Except as otherwise provided in sections 26.1-35-03, 26.1-35-04, and 26.1-35-11, the minimum standard for the valuation of all life or accident insurance policies and contracts issued after June 30, 1977, is the commissioners reserve valuation methods defined in sections 26.1-35-05, 26.1-35-06, 26.1-35-09, and 26.1-35-11, five and one-half percent interest for single premium life insurance policies and four and one-half percent interest for all other such policies and contracts issued after June 30, 1977, other than annuity and pure endowment contracts, and the following tables:

  1. For ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in the policies, the commissioners 1941 standard ordinary mortality table for policies issued before the operative date of section 26.1-33-22, the commissioners 1958 standard ordinary mortality table for policies issued on or after the operative date of section 26.1-33-22 and prior to the earlier of a specified date filed by an insurer with the commissioner in a written notice of the insurer’s election to comply with this chapter or January 1, 1989, provided that for any category of policies issued on female risks, all modified net premiums and present values referred to in this chapter may be calculated according to an age not more than six years younger than the actual age of the insured; and for policies issued on or after the earlier of a specified date filed by an insurer with the commissioner in a written notice of the insurer’s election to comply with this chapter or January 1, 1989:
    1. The commissioners 1980 standard ordinary mortality table;
    2. At the election of the insurer for any one or more specified plans of life insurance, the commissioners 1980 standard ordinary mortality table with ten-year select mortality factors; or
    3. Any ordinary mortality table, adopted after 1980 by the national association of insurance commissioners, that is approved by rule adopted by the commissioner for use in determining the minimum standard of valuation for the policies.
  2. For industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in the policies, the 1941 standard industrial mortality table for policies issued before the operative date of section 26.1-33-23, and for policies issued on or after the operative date of section 26.1-33-23, the commissioners 1961 standard industrial mortality table or any industrial mortality table, adopted after 1980 by the national association of insurance commissioners, that is approved by rule adopted by the commissioner for use in determining the minimum standard of valuation for the policies.
  3. For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies, the 1937 standard annuity mortality table, or at the option of the insurer, the annuity mortality table for 1949, ultimate, or any modification of either of these tables approved by the commissioner.
  4. For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies, the group annuity mortality table for 1951, a modification of the table approved by the commissioner, or at the option of the insurer, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts.
  5. For total and permanent disability benefits in or supplementary to policies or contracts, for policies or contracts issued after December 31, 1965, the tables of period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 disability study of the society of actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates, adopted after 1980 by the national association of insurance commissioners, that are approved by rule adopted by the commissioner for use in determining the minimum standard of valuation for those policies; for policies or contracts issued after December 31, 1960, and before January 1, 1966, either those tables or, at the option of the insurer, the class (3) disability table (1926); and for policies issued before January 1, 1961, the class (3) disability table (1926). The table must, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies.
  6. For accidental death benefits in or supplementary to policies issued after December 31, 1965, the 1959 accidental death benefits table or any accidental death benefits table, adopted after 1980 by the national association of insurance commissioners, that is approved by rule adopted by the commissioner for use in determining the minimum standard of valuation for the policies; for policies issued after December 31, 1960, and before January 1, 1966, either that table or, at the option of the insurer, the intercompany double indemnity mortality table; and for policies issued before January 1, 1961, the intercompany double indemnity mortality table. Either table must be combined with a mortality table for calculating the reserves for life insurance policies.
  7. For group life insurance, life insurance issued on the substandard basis and other special benefits, any tables approved by the commissioner.

Source:

S.L. 1985, ch. 316, § 12; 2015, ch. 217, § 5.

Derivation:

N.D.C.C. § 26-10.1-02.

Collateral References.

Death or injury from taking illegal drugs or narcotics as accidental or result of accidental means within insurance coverage, 32 A.L.R.5th 629.

26.1-35-03. Computation of minimum standard for annuities.

  1. Except as provided in section 26.1-35-04, the minimum standard of valuation for individual annuity and pure endowment contracts issued on or after the operative date of this section, and for annuities and pure endowments purchased on or after the operative date under group annuity and pure endowment contracts, must be the commissioners reserve valuation methods defined in sections 26.1-35-05 and 26.1-35-06 and the following tables and interest rates:
    1. For individual annuity and pure endowment contracts issued before July 1, 1977, excluding any disability and accidental death benefits in those contracts, the 1971 individual annuity mortality table, or any modification of this table approved by the commissioner, and six percent interest for single premium immediate annuity contracts and four percent interest for all other individual annuity and pure endowment contracts.
    2. For individual single premium immediate annuity contracts issued after June 30, 1977, excluding any disability and accidental death benefits in those contracts, the 1971 individual annuity mortality table or any individual annuity mortality table, adopted after 1980 by the national association of insurance commissioners, that is approved by rule adopted by the commissioner for use in determining the minimum standard of valuation for the contracts, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.
    3. For individual annuity and pure endowment contracts issued after June 30, 1977, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in the contracts, the 1971 individual annuity mortality table or any individual annuity mortality table adopted after 1980 by the national association of insurance commissioners, that is approved by rule adopted by the commissioner for use in determining the minimum standard of valuation for the contracts, or any modification of these tables approved by the commissioner, and five and one-half percent interest for single premium deferred annuity and pure endowment contracts and four and one-half percent interest for all other individual annuity and pure endowment contracts.
    4. For annuities and pure endowments purchased prior to July 1, 1977, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under those contracts, the 1971 group annuity mortality table or any modification of this table approved by the commissioner, and six percent interest.
    5. For annuities and pure endowments purchased after June 30, 1977, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under these contracts, the 1971 group annuity mortality table or any group annuity mortality table adopted after 1980 by the national association of insurance commissioners, that is approved by rule adopted by the commissioner for use in determining the minimum standard of valuation for annuities and pure endowments, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.
  2. After June 30, 1977, any insurer may file with the commissioner a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1979, which must be the operative date of this section for that insurer. If an insurer makes no election, the operative date of this section for that insurer must be January 1, 1979.

Source:

S.L. 1985, ch. 316, § 12; 2015, ch. 217, § 6.

Derivation:

N.D.C.C. § 26-10.1-03.

26.1-35-04. Computation of minimum standard by calendar year of issue.

  1. The interest rates used in determining the minimum standard for the valuation of the following are the calendar year statutory valuation interest rates as defined in this section:
    1. Life insurance policies issued in a particular calendar year, on or after the earlier of a specified date filed by an insurer with the commissioner in a written notice of the insurer’s election to comply with this chapter or January 1, 1989.
    2. Individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1984.
    3. Annuities and pure endowments purchased in a particular calendar year on or after January 1, 1984, under group annuity and pure endowment contracts.
    4. The net increase, if any, in a particular calendar year after January 1, 1984, in amounts held under guaranteed interest contracts.
  2. The calendar year statutory valuation interest rates, I, must be determined as follows and the results rounded to the nearer one-quarter of one percent:
    1. For life insurance:
    2. For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options:
    3. For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in subdivision b, the formula for life insurance stated in subdivision a applies to annuities and guaranteed interest contracts with guarantee durations in excess of ten years and the formula for single premium immediate annuities stated in subdivision b applies to annuities and guaranteed interest contracts with guarantee duration of ten years or less.
    4. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in subdivision b applies.
    5. For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in subdivision b applies.
  3. The weighting factors referred to in the formulas in subsection 2 are given in the following tables:
    1. The weighting factors for life insurance are:
    2. The weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options is eighty hundredths.
    3. The weighting factors for other annuities and for guaranteed interest contracts, except as stated in subdivision b, are as specified in paragraphs 1, 2, and 3, according to the requirements and definitions in paragraphs 4, 5, and 6:
      1. For annuities and guaranteed interest contracts valued on an issue year basis:
        1. Plan type A: At any time the policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, without such adjustment but in installments over five years or more, as an immediate life annuity, or no withdrawal permitted.
        2. Plan type B: Before expiration of the interest rate guarantee, the policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, without an adjustment but in installments over five years or more, or no withdrawal permitted. At the end of the interest rate guarantee, funds may be withdrawn without an adjustment in a single sum or installments over less than five years.
        3. Plan type C: The policyholder may withdraw funds before expiration of the interest rate guarantee in a single sum or installments over less than five years either without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer, or subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.
  4. The reference interest rate referred to in subsection 2 is defined as follows:
    1. For life insurance, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June thirtieth of the calendar year next preceding the year of issue, the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.
    2. For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or year of purchase, the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.
    3. For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subdivision b with guarantee duration in excess of ten years, the lesser of the average over a period of thirty-six months and the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.
    4. For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subdivision b with guaranteed duration of ten years or less, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.
    5. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of twelve months, ending on June thirtieth of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.
    6. For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in subdivision b the average over a period of twelve months, ending on June thirtieth of the calendar year of the change in the fund, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s investors service, incorporated.
  5. If the monthly average of the composite yield on seasoned corporate bonds is no longer published by Moody’s investors service, incorporated, or if the national association of insurance commissioners determines that the monthly average of the composite yield on seasoned corporate bonds as published by Moody’s investors service, incorporated, is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate adopted by the national association of insurance commissioners and approved by rule adopted by the commissioner, may be substituted.

I=.03+WR1-.03+W2R2-.09

I = .03 + W (R - .03)

where R1 is the lesser of R and .09, R2 is the greater of R and .09, R is the reference interest rate defined in this section, and W is the weighting factor defined in this section.

However, if the calendar year statutory valuation interest rate for a life insurance policy issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent, the calendar year statutory valuation interest rate for the life insurance policies must equal the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year must be determined for 1980 by using the reference interest rate defined for 1979, and must be determined for each subsequent calendar year regardless of when section 26.1-33-24 becomes operative.

Guarantee Duration Weighting Factors 10 years or less .50 More than 10 years, but not more than 20 years .45 More than 20 years .35

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For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy.

Guarantee Duration Weighting Factor for Plan Type

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A B C 5 years or less .80 .60 .50 More than 5 years, but not more than 10 years .75 .60 .50 More than 10 years, but not more than 20 years .65 .50 .45 More than 20 years .45 .35 .35 (2) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in paragraph 1 increased by .15 .25 .05 (3) For annuities and guaranteed interest contracts valued on an issue year basis, other than those with no cash settlement options, which do not guarantee interest on considerations received more than one year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on considerations received more than twelve months beyond the valuation date, the factors shown in paragraph 1 or derived in paragraph 2 increased by .05 .05 .05

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(4) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of twenty years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guaranteed duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

(5) The plan type as used in the tables in this subsection is defined as follows:

(6) An insurer may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis. As used in this section, an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract. A change in fund basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund.

Source:

S.L. 1985, ch. 316, § 12; 2015, ch. 217, § 7.

Derivation:

N.D.C.C. § 26-10.1-03.1.

26.1-35-05. Reserves by commissioners’ reserve valuation method.

  1. Except as otherwise provided in sections 26.1-35-06 and 26.1-35-09, reserves according to the commissioners’ reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, must be the excess, if any, of the present value, at the date of valuation, of the future guaranteed benefits provided by the policies, over the present value of any future modified net premiums for the policies. The modified net premiums must be the uniform percentage of the respective contract premiums for the benefits that the present value, at the date of issue of the policy, of all the modified net premiums equals the sum of the present value of the benefits provided by the policy and the excess of subdivision a over subdivision b as follows:
    1. A net level annual premium equal to the present value, at the date of issue, of the benefits provided after the first policy year, divided by the present value, at the date of issue, of an annuity of one per year payable on the first and each subsequent anniversary of the policy on which a premium falls due; provided, however, that the net level annual premium may not exceed the net level annual premium on the nineteen-year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of the policy.
    2. A net one-year term premium for the benefits provided in the first policy year.
  2. For any life insurance policy issued after December 31, 1986, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than the excess premium, the reserve according to the commissioners’ reserve valuation method as of any policy anniversary occurring on or before the assumed ending date, which is defined as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than the excess premium, except as otherwise provided in section 26.1-35-09, must be the greater of the reserve as of such policy anniversary calculated as described in this section and the reserve as of such policy anniversary calculated as described in this section, but with the value defined in subdivision a of subsection 1 being reduced by fifteen percent of the amount of such excess first year premium; all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date; the policy being assumed to mature on such date as an endowment; and the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison, the mortality and interest bases stated in sections 26.1-35-02 and 26.1-35-04 must be used.
  3. Reserves according to the commissioners’ reserve valuation method for life insurance policies providing a varying amount of insurance or requiring the payment of varying premiums; group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership, limited liability company, or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the federal Internal Revenue Code, as amended; disability and accidental death benefits in all policies and contracts; and all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, must be calculated by a method consistent with the principles of this section.

Source:

S.L. 1985, ch. 316, § 12; 1993, ch. 54, § 106; 2015, ch. 217, § 8.

26.1-35-06. Reserve valuation — Annuity and pure endowment benefits method.

  1. This section applies to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the federal Internal Revenue Code of 1954, as amended.
  2. Reserves according to the commissioner annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in the contracts, must be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by the contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of the contracts, that become payable prior to the end of the respective contract year. The future guaranteed benefits must be determined by using the mortality tables, if any, and the interest rate, or rates, specified in the contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of the contracts to determine nonforfeiture values.

Source:

S.L. 1985, ch. 316, § 12; 2015, ch. 217, § 9.

Derivation:

N.D.C.C. § 26-10.1-05.

26.1-35-07. Minimum reserves.

  1. An insurer’s aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued after June 30, 1977, may not be less than the aggregate reserves calculated in accordance with the methods set forth in sections 26.1-35-05, 26.1-35-06, 26.1-35-09, and 26.1-35-10 and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for the policies.
  2. The aggregate reserves for all policies, contracts, and benefits may not be less than the aggregate reserves determined by the qualified actuary to be necessary to render the opinion required by section 26.1-35-01.1.

Source:

S.L. 1985, ch. 316, § 12; 1993, ch. 292, § 33; 2015, ch. 217, § 10.

Derivation:

N.D.C.C. § 26-10.1-06.

26.1-35-08. Optional reserve calculation.

  1. Reserves for all policies and contracts issued prior to July 1, 1977, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for the policies and contracts than the minimum reserves required by the laws in effect on June 30, 1977.
  2. Reserves for any category of policies, contracts, or benefits, as established by the commissioner, issued on or after July 1, 1977, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for the category than those calculated according to the minimum standard provided in this chapter, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, may not be greater than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided in the policies and contracts.
  3. An insurer that has adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided in this chapter may, with the approval of the commissioner, adopt any lower standard of valuation, but not lower than the minimum provided in this chapter; provided, however, that for the purposes of this section, the holding of additional reserves previously determined by the appointed actuary to be necessary to render the opinion required by section 26.1-35-01.1 may not be deemed to be the adoption of a higher standard of valuation.

Source:

S.L. 1985, ch. 316, § 12; 1993, ch. 292, § 34; 2015, ch. 217, § 11.

Derivation:

N.D.C.C. § 26-10.1-07.

26.1-35-09. Reserve calculation — Valuation net premium exceeding the gross premium charged.

  1. If in any contract year the gross premium charged by an insurer on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for the policy or contract is the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for the policy or contract, or the reserve calculated by the method actually used for the policy or contract but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this section are those standards stated in sections 26.1-35-02 and 26.1-35-04.
  2. For a life insurance policy issued after December 31, 1986, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than the excess premium, the provisions of this section must be applied as if the method actually used in calculating the reserve for the policy was the method described in section 26.1-35-05, ignoring subsection 2 of that section. The minimum reserve at each policy anniversary must be the greater of the minimum reserve calculated in accordance with section 26.1-35-05, including subsection 2 of that section, and the minimum reserve calculated in accordance with this section.

Source:

S.L. 1985, ch. 316, § 12; 2015, ch. 217, § 12.

Derivation:

N.D.C.C. § 26-10.1-08.

26.1-35-10. Reserve calculation — Indeterminate premium plans.

In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurer based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of such a nature that the minimum reserves cannot be determined by the methods described in sections 26.1-35-05, 26.1-35-06, and 26.1-35-09, the reserves which are held under the plan must be appropriate in relation to the benefits and the pattern of premiums for that plan, and must be computed by a method that is consistent with the principles of this chapter, as determined by rules adopted by the commissioner.

Source:

S.L. 1985, ch. 316, § 12; 2015, ch. 217, § 13.

Derivation:

N.D.C.C. § 26-10.1-09.

26.1-35-11. Minimum standard for accident and health insurance contracts.

For an accident and health insurance contract issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under subsection 2 of section 26.1-35-01. For an accident and health insurance contract issued after June 30, 1977, and before the operative date of the valuation manual, the minimum standard of valuation is the standard adopted by the commissioner by rule.

Source:

S.L. 2015, ch. 217, § 14.

26.1-35-12. Requirements of a principle-based valuation.

  1. An insurer shall establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:
    1. Quantify the benefits and guarantees and the funding associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For polices or contracts with significant tail risk, reflects conditions appropriately adverse to quantify the tail risk.
    2. Incorporate assumptions, risk analysis methods, and financial models and management techniques that are consistent with, but not necessarily identical to, those utilized within the insurer’s overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods.
    3. Incorporate assumptions that are derived in one of the following manners:
      1. The assumption is prescribed in the valuation manual.
      2. For assumptions that are not prescribed, the assumptions must:
        1. Be established utilizing the insurer’s available experience, to the extent the experience is relevant and statistically credible; or
        2. To the extent that insurer data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience.
    4. Provide margins for uncertainty, including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve.
  2. An insurer using a principle-based valuation for one or more policies or contracts subject to this section as specified in the valuation manual shall:
    1. Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual.
    2. Provide to the commissioner and the board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. The controls must be designed to assure that all material risks inherent in the liabilities and associated assets subject to the valuation are included in the valuation, and that valuations are made in accordance with the valuation manual. The certification must be based on the controls in place as of the end of the preceding calendar year.
    3. Develop, and file with the commissioner upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual.
  3. A principle-based valuation may include a prescribed formulaic reserve component.

Source:

S.L. 2015, ch. 217, § 15, eff August 1, 2015.

26.1-35-13. Experience reporting for policies in force on or after the operative date of the valuation manual.

An insurer shall submit mortality, morbidity, policyholder behavior, and expense experience and other data as prescribed in the valuation manual.

Source:

S.L. 2015, ch. 217, § 16.

26.1-35-14. Confidentiality.

  1. For purposes of this section, “confidential information” means:
    1. A memorandum in support of an opinion submitted under section 26.1-35-01.1 and any other documents, materials, and other information, including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such memorandum;
    2. All documents, materials, and other information, including all working papers and copies of working papers, created, produced, or obtained by or disclosed to the commissioner or any other person in the course of an examination made under subsection 5 of section 26.1-35-00.2. However, if an examination report or other material prepared in connection with an examination made under chapter 26.1-03 is not held as private and confidential information under chapter 26.1-03, an examination report or other material prepared in connection with an examination made under subsection 5 of section 26.1-35-00.2 may not be confidential information to the same extent as if such examination report or other material had been prepared under chapter 26.1-03;
    3. Any reports, documents, materials, and other information developed by an insurer in support of, or in connection with, an annual certification by the insurer under subdivision b of subsection 2 of section 26.1-35-12 evaluating the effectiveness of the insurer’s internal controls with respect to a principle-based valuation and any other documents, materials, and other information, including all working papers and copies of working papers created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such reports, documents, materials, and other information;
    4. Any principle-based valuation report developed under subdivision c of subsection 2 of section 26.1-35-12 and any other documents, materials, and other information, including all working papers and copies of working papers created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such report; and
    5. Any documents, materials, data, and other information submitted by an insurer under section 26.1-35-13, collectively referred to as experience data, and any other documents, materials, data, and other information, including all working papers and copies of working papers created or produced in connection with such experience data, in each case that include any potentially insurer-identifying or personally identifiable information, that is provided to or obtained by the commissioner, together with any experience data, the experience materials, and any other documents, materials, data, and other information, including all working papers and copies of working papers created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such experience materials.
    1. Except as provided in this section, an insurer’s confidential information is confidential and privileged, and is not subject to section 44-04-18, is not subject to subpoena, and is not subject to discovery or admissible in evidence in any private civil action. However, the commissioner may use the confidential information in the furtherance of any regulatory or legal action brought against the insurer as a part of the commissioner’s official duties.
    2. Neither the commissioner nor any person that received confidential information while acting under the authority of the commissioner is permitted or required to testify in any private civil action concerning any confidential information.
    3. In order to assist in the performance of the commissioner’s duties, the commissioner may share confidential information with other state, federal, and international regulatory agencies and with the national association of insurance commissioners and its affiliates and subsidiaries, and in the case of confidential information specified in subdivisions a and d of subsection 1 only, with the actuarial board for counseling and discipline or its successor upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with state, federal, and international law enforcement officials, provided that such recipient agrees, and has the legal authority to agree, to maintain the confidentiality and privileged status of such documents, materials, data, and other information in the same manner and to the same extent as required for the commissioner.
    4. The commissioner may receive documents, materials, data, and other information, including otherwise confidential and privileged documents, materials, data, or information, from the national association of insurance commissioners and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions, and from the actuarial board for counseling and discipline or its successor and shall maintain as confidential or privileged any document, material, data, or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or other information.
    5. The commissioner may enter agreements governing sharing and use of information consistent with this subsection.
    6. A waiver of any applicable privilege or claim of confidentiality in the confidential information may not occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subdivision c.
    7. A privilege established under the law of any state or jurisdiction which is substantially similar to the privilege established under this subsection is available and must be enforced in any proceeding in and in any court of this state.
    8. In this section, reference to regulatory agency, law enforcement agency, and the national association of insurance commissioners, includes the employees, agents, consultants, and contractors of these entities.
  2. Notwithstanding subsection 2, any confidential information specified in subdivisions a and d of subsection 1:
    1. May be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under section 26.1-35-01.1 or principle-based valuation report developed under subdivision c of subsection 2 of section 26.1-35-12 by reason of an action required by this chapter or by rules adopted under this chapter;
    2. May otherwise be released by the commissioner with the written consent of the insurer; and
    3. Once any portion of a memorandum in support of an opinion submitted under section 26.1-35-01.1 or a principle-based valuation report developed under subdivision c of subsection 2 of section 26.1-35-12 is cited by the insurer in its marketing or is publicly volunteered to or before a governmental agency other than a state insurance department or is released by the insurer to the news media, all portions of such memorandum or report are no longer confidential.

Source:

S.L. 2015, ch. 217, § 17, eff August 1, 2015.

CHAPTER 26.1-36 Accident and Health Insurance

26.1-36-01. Scope.

No section of this chapter applies to or affects any policy of workforce safety and insurance or any policy of liability insurance with or without supplementary expense coverage therein; or any policy or contract of reinsurance; or any blanket or group insurance policy, except when the section refers to a blanket or group insurance policy; or life insurance, endowment or annuity contracts, or contracts supplemental thereto which contain only such provisions relating to accident and sickness insurance as provide additional benefits in case of death or dismemberment or loss of sight by accident, or as operate to safeguard such contracts against lapse, or to give a special surrender value or special benefit or an annuity in the event that the insured or annuitant shall become totally and permanently disabled, as defined by the contract or supplemental contract.

Source:

S.L. 1985, ch. 316, § 13; 1989, ch. 69, § 30; 2003, ch. 561, § 3.

Derivation:

N.D.C.C. § 26-03.1-08.

Collateral References.

Coverage under medical and health insurance plans for services performed by dentists, oral surgeons, and orthodontists, 43 A.L.R.5th 657.

26.1-36-01.1. Scope — Accident and health insurance policy mandates.

Unless expressly provided otherwise, an accident and health insurance policy health coverage mandate under this chapter does not apply to an accident and health insurance policy that is a high-deductible health plan under 26 U.S.C. 223 if the mandate would cause the policy to fail to qualify as a high-deductible health plan under this federal law.

Source:

S.L. 2021, ch. 31, § 1, eff May 1, 2021.

26.1-36-01.2. Examinations.

  1. As used in this section, the terms “health carrier” and “health benefit plan” have the same meaning as provided under section 26.1-36.3-01.
  2. Whenever the commissioner, in the commissioner’s sole discretion, deems it appropriate, but at least once every five years, the commissioner or any of the commissioner’s examiners shall conduct a comprehensive examination of a health carrier with a market share of twenty-five percent or more of health benefit plan covered lives in this state. The examination must be conducted in accordance with an examination conducted under chapter 26.1-03. In determining the scope of the comprehensive examination, the commissioner shall consider the criteria set forth in the market conduct handbook adopted by the national association of insurance commissioners and adopted by the commissioner which is in effect when the examination is initiated and any other matters deemed appropriate by the commissioner.

Source:

S.L. 2021, ch. 10, § 7, eff July 1, 2021.

26.1-36-02. Accident and health insurance policy defined.

“Accident and health insurance policy” includes any contract policy insuring against loss resulting from sickness or bodily injury, or death by accident, or both.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03.1-01.

Collateral References.

Policy provision limiting time within which action may be brought on the policy as applicable to tort action by insured against insurer, 66 A.L.R.4th 859.

26.1-36-02.1. Accident and health policies and certificates — Notice of free examination.

Accident and health policies and certificates must have a notice prominently printed on or attached to the first page of the policy or certificate stating in substance that the applicant may return the policy or certificate within ten days of its delivery and have the premium refunded if, after examination of the policy or certificate, the applicant is not satisfied for any reason.

Source:

S.L. 1991, ch. 317, § 2.

26.1-36-02.2. Individual health plans — Open enrollment periods — Rules.

  1. As used in this section:
    1. “Adverse selection” occurs when an individual who experiences greater than average health risks seeks to purchase an individual health plan.
    2. “Annual open enrollment period” means a period each year during which an individual may enroll or change coverage in an individual health plan that is not sold through a health benefit exchange.
    3. “Health benefit exchange” means a governmental agency or nonprofit entity that:
      1. Meets the applicable requirements of the federal Patient Protection and Affordable Care Act [Pub. L. 111-148] and the provisions of the Health Care and Education Reconciliation Act of 2010 [Pub. L. 111-152]; and
      2. Makes qualified health plans available to qualified individuals and qualified employers through a state health benefit exchange, regional health benefit exchange, subsidiary health benefit exchange, or a federally facilitated health benefit exchange.
    4. “Individual health plan” means health insurance coverage offered to individuals, other than in connection with a group health plan. The term does not include limited scope dental or vision benefits, coverage only for specified disease or illness, hospital indemnity or other fixed indemnity insurance, or other similar limited benefit health plans.
    5. “Initial enrollment period” means a period during which an individual may enroll in individual health plan coverage sold outside a health benefit exchange for coverage during the 2014 benefit year.
    6. “Special enrollment period” means a period that is outside of the initial and annual open enrollment periods, during which an individual or enrollee who experiences certain qualifying events may enroll in or change enrollment in an individual health plan not sold through a health benefit exchange.
  2. The commissioner may adopt rules reasonably necessary to mitigate adverse selection or other undesirable market effect among individual health plans sold inside and among individual health plans sold outside a health benefit exchange. The rules may contain:
    1. Requirements for the initial enrollment period;
    2. Requirements for an annual open enrollment period;
    3. Requirements for a special enrollment period;
    4. Requirements for an individual who purchases individual health plan coverage during a special enrollment period; and
    5. Any other provision reasonably required to mitigate adverse selection or other undesirable market effect in individual health plans sold inside or outside a health benefit exchange.

Source:

S.L. 2013, ch. 234, § 1.

26.1-36-03. Form of policy.

  1. No accident and health insurance policy may be delivered or issued for delivery to any person in this state unless:
    1. The entire money and other considerations for the policy are expressed in the policy.
    2. The time at which the insurance takes effect and terminates is expressed in the policy.
    3. The policy purports to insure only one person, except that a policy may insure, originally or by subsequent amendment, upon the application of an adult member of a family who is deemed the policyholder, any two or more eligible members of that family, including spouse, dependent children or any children under a specified age which may not exceed twenty-two years, and any other person dependent upon the policyholder.
    4. The style, arrangement, and overall appearance of the policy give no undue prominence to any portion of the text, and unless every printed portion of the text of the policy and of any endorsements or attached papers is plainly printed in lightfaced type of a style in general use, the size of which is uniform and not less than ten point with a lowercase unspaced alphabet length not less than one hundred twenty point. The “text” must include all printed matter except the name and address of the insurer, name or title of the policy, the brief description, if any, and captions and subcaptions.
    5. The exceptions and reductions of indemnity are set forth in the policy and, except those which are set forth in section 26.1-36-04, are printed at the insurer’s option, either included with the benefit provisions to which they apply, or under an appropriate caption such as “EXCEPTIONS” or “EXCEPTIONS AND REDUCTIONS”. If an exception or reduction specifically applies only to a particular benefit of the policy, a statement of the exception or reduction must be included with the benefit provision to which it applies.
    6. Each form, including riders and endorsements, must be identified by a form number in the lower left-hand corner of the first page thereof.
    7. It contains no provision purporting to make any portion of the charter, rules, constitution, or bylaws of the insurer a part of the policy unless the portion is set forth in full in the policy, except in the case of the incorporation of, or reference to, a statement of rates or classification of risks, or short-rate table filed with the commissioner.
  2. If any policy is issued by an insurer domiciled in this state for delivery to a person residing in another state, and if the insurance department of that state has advised the commissioner that the policy is not subject to approval or disapproval by that official, the commissioner may by ruling require that the policy meet the standards set forth in subsection 1 and in section 26.1-36-04.

Source:

S.L. 1985, ch. 316, § 13; 1999, ch. 251, § 9.

Derivation:

N.D.C.C. § 26-03.1-02.

DECISIONS UNDER PRIOR LAW

Suicide.

Where insured under accident policy commits suicide while so insane as not to comprehend the nature of the act nor the physical result which would flow from it, his death is caused by accidental means within meaning of policy insuring against bodily injury from external, violent, and accidental means. Weber v. Interstate Business Men's Accident Ass'n, 48 N.D. 307, 184 N.W. 97, 1921 N.D. LEXIS 40 (N.D. 1921).

26.1-36-03.1. Information disclosure.

An insurance company, as defined in section 26.1-02-01, a health maintenance organization, or any other entity providing a plan of health insurance subject to state insurance regulation may not deliver, issue, execute, or renew a health insurance policy or health service contract unless that insurer makes available to persons covered under the policy or contract a plan description that discloses in writing the terms and conditions of the policy or contract. The plan description must use the plain and ordinary meaning of words so as to reasonably ensure comprehension by a layperson and must be made available to each person covered under the contract, in any manner reasonably assuring availability prior to the delivery, issuance, execution, or renewal of the policy or contract.

  1. The information required to be disclosed by the insurer must include, in addition to any other disclosures required by law:
    1. A general description of benefits and covered services, including benefit limits and coverage exclusions and the definition of medical necessity used by the insurer in determining whether benefits will be covered;
    2. A general description of the insured’s financial responsibility for payment of premiums, deductibles, coinsurance, and copayment amounts, including any maximum limitations on out-of-pocket expenses, any maximum limits on payments for health care services, and the maximum out-of-pocket costs for services that are provided by nonparticipating health care professionals;
    3. A general explanation of the extent to which benefits and services may be obtained from nonparticipating providers, including any out-of-network coverage or options;
    4. A general explanation of the extent to which a person covered under the policy or contract may select from among participating providers and any limitations imposed on the selection of participating health care providers;
    5. A general description of the insurer’s use of any prescription drug formulary or any other general limits on the availability of prescription drugs;
    6. A general description of the procedures and any conditions for persons covered under the policy or contract to change participating primary and specialty providers;
    7. A general description of the procedures and any conditions for obtaining referrals;
    8. A general description of the procedure for providing emergency services, including an explanation of what constitutes an emergency situation and notice that emergency services are not subject to prior authorization, the procedure for obtaining emergency services and any cost-sharing applicable to emergency services, including out-of-network services, and any limitation on access to emergency services;
    9. A general description of any utilization review policies and procedures, including a description of any required prior authorizations or other requirements for health care services and appeal procedures;
    10. A general description of all complaint or grievance rights and procedures used to resolve disputes between the insurer and persons covered under the policy or contract or a health care provider, including the method for filing grievances and the timeframes and circumstances for acting on grievances and appeals;
    11. A general description of any methods used by the insurer for providing financial payment incentives or other payment arrangements to reimburse health care providers;
    12. Notice of appropriate mailing addresses and telephone numbers to be used by persons covered under the policy or contract in seeking information or authorization for treatment;
    13. If applicable, notice of the provisions required by section 26.1-47-03 that ensure access to health care services in preferred provider arrangements; and
    14. Notice that the information described in subsection 2 is available upon request.
  2. An insurer shall provide the following written information if requested by a person covered under a policy or contract:
    1. A description of any process for credentialing participating health care providers;
    2. A description of the policies and procedures established to ensure confidentiality of patient information;
    3. A description of the procedures followed by the insurer to make decisions about the experimental nature of individual drugs, medical devices, or treatments;
    4. With regard to any preferred provider arrangement or other network health plan, a list by specialty of the name and location of participating health care providers and the number, types, and geographic distribution of providers participating in the health plan; and
    5. Whether a specifically identified drug is included or excluded from coverage.
  3. Nothing in this section may be construed as preventing an insurer from making the information under subsections 1 and 2 available to a person covered under the policy or contract through a handbook or similar publication.

Source:

S.L. 1999, ch. 257, § 5.

26.1-36-04. Accident and health policy provisions.

  1. Except as provided in subsection 3, each accident and health insurance policy delivered or issued for delivery to any person in this state must contain provisions described in this section. The provisions contained in any policy may not be less favorable in any respect to the insured or the beneficiary.
    1. A provision that the policy, including the endorsements and the attached papers, if any, constitutes the entire insurance contract and that no change in the policy is valid until approved by an executive officer of the insurer and unless the approval is endorsed on or attached to the policy.
    2. A provision that no insurance producer has authority to change the policy or to waive any of its provisions.
    3. A provision that the validity of the policy may not be contested except for nonpayment of premiums, after it has been in force for two years from its date of issue; and that the validity of the policy may not be contested on the basis of a statement made relating to insurability by any person covered under the policy after the insurance has been in force for two years during the person’s lifetime unless the statement is contained in a written instrument signed by the person making the statement; provided, however, that no such provision precludes the assertion at any time of defenses based upon the person’s ineligibility for coverage under the policy.
    4. A provision specifying the additional exclusions or limitations, if any, applicable under the policy with respect to a disease or physical condition of a person, not otherwise excluded from the person’s coverage by name or specific description effective on the date of the person’s loss, which existed prior to the effective date of the person’s coverage under the policy. Any such exclusion or limitation may only apply to a pre-existing disease or physical condition for which medical advice or treatment was received by the person during the two-year period before the effective date of the person’s coverage. The exclusion or limitation may not apply to loss incurred or disability commencing after the end of the two-year period commencing on the effective date of the person’s coverage.
    5. A provision that the policyholder is entitled to a grace period of thirty-one days for the payment of any premium due except the first, during which the policy continues in force, unless the policyholder has given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the policy. The policy may provide that the policyholder is liable to the insurer for the payment of a pro rata premium for the time the policy was in force during the grace period.
    6. A provision that if any renewal premium is not paid within the time granted the insured for payment, a subsequent acceptance of premium by the insurer or by any agent duly authorized by the insurer to accept the premium, without requiring in connection therewith an application for reinstatement, reinstates the policy; provided, however, that if the insurer or the agent requires an application for reinstatement and issues a conditional receipt for the premium tendered, the policy will be reinstated upon approval of the application by the insurer or, lacking the approval, upon the forty-fifth day following the date of the conditional receipt unless the insurer has previously notified the insured in writing of its disapproval of the application. The policy must provide that the reinstated policy covers only loss resulting from an accidental injury sustained after the date of reinstatement and loss due to any sickness that begins more than ten days after the date. The policy must provide that in all other respects the insured and insurer have the same rights thereunder as they had under the policy immediately before the due date of the defaulted premium, subject to any provisions endorsed thereon or attached thereto in connection with the reinstatement. The provision may include a statement that any premium accepted in connection with a reinstatement will be applied to a period for which premium has not been previously paid, but not to any period more than sixty days prior to the date of reinstatement. This statement may be omitted from any policy which the insured has the right to continue in force subject to its terms by the timely payment of premiums until at least age fifty or in the case of a policy issued after age forty-four, for at least five years from its date of issue.
    7. A provision that written notice of claim must be given to the insurer within twenty days after the occurrence or commencement of any loss covered by the policy. Failure to give notice within this time does not invalidate nor reduce any claim if it is shown not to have been reasonably possible to give the notice and that notice was given as soon as was reasonably possible.
    8. A provision that the insurer will furnish to the person making claim, or to the policyholder for delivery to such person, the forms usually furnished for filing proof of loss. If the forms are not furnished before the expiration of fifteen days after the insurer receives notice of any claim under the policy, the person making the claim is deemed to have complied with the requirements of the policy as to proof of loss upon submitting within the time fixed in the policy for filing proof of loss, written proof covering the occurrence, character, and extent of the loss for which claims are made.
    9. A provision that in the case of claim for loss of time for disability, written proof of loss must be furnished to the insurer within ninety days after the commencement of the period for which the insurer is liable, and that subsequent written proof of continuance of the disability must be furnished to the insurer at such intervals as the insurer may reasonably require, and that in the case of claim for any other loss, written proof of loss must be furnished to the insurer within ninety days after the date of loss. Failure to furnish the proof within this time does not invalidate nor reduce any claim if it was not reasonably possible to furnish the proof within that time, provided the proof is furnished as soon as reasonably possible and in no event, except in the absence of legal capacity of the claimant, later than one year from the time proof is otherwise required.
    10. A provision that all benefits payable under the policy other than benefits for loss of time will be payable according to the provisions of section 26.1-36-37.1, and that, subject to due proof of loss, all accrued benefits payable under the policy for loss of time will be paid not less frequently than monthly during the continuance of the period for which the insurer is liable, and that any balance remaining unpaid at the termination of such period will be paid as soon as possible after receipt of proof of loss.
    11. A provision that benefits for loss of life of the person insured will be payable to the beneficiary designated by the insured person. However, if the policy contains conditions pertaining to family status, the beneficiary may be the family member specified by the policy terms. In either case, payment of these benefits is subject to the provisions of the policy in the event no such designated or specified beneficiary is living at the death of the insured person. All other benefits of the policy are payable to the insured person. The policy may also provide that if any benefit is payable to the estate of a person, or to a person who is a minor or otherwise not competent to give a valid release, the insurer may pay the benefit, up to an amount not exceeding five thousand dollars, to any relative by blood or connection by marriage of the person deemed by the insurer to be equitably entitled to the benefit.
    12. A provision that the insurer may examine the individual for whom claim is made when and so often as it may reasonably require during the pendency of claim under the policy and also may make an autopsy in case of death if the autopsy is not prohibited by law.
    13. A provision that no action may be brought to recover on the policy prior to the expiration of sixty days after proof of loss has been filed in accordance with the requirements of the policy and that no such action may be brought at all unless brought within three years from the expiration of the time which proof of loss is required by the policy.
    14. A provision that in the event of the death of an insured, the insurer will refund within thirty days after notice to the insurer of the insured’s death the portion of the premium, fees, or other sum paid beyond the month of death after deducting any claim for losses during the current term of the policy. This provision does not apply if the insurer has a valid defense to the payment of benefits under the policy.
  2. Except as provided in subsection 3, an accident and health insurance policy delivered or issued for delivery to any person in this state may not contain provisions respecting the matters described in this subsection unless the provisions in the policy are not less favorable in any respect to the insured or the beneficiary.
    1. A provision that if the insured is injured or contracts sickness after having changed occupation to one classified by the insurer as more hazardous than that stated in the policy or while doing for compensation anything pertaining to an occupation so classified, the insurer will pay only such portion of the indemnities provided in the policy as the premium paid would have purchased at the rates and within the limits fixed by the insurer for the more hazardous occupation. If the insured changes occupation to one classified by the insurer as less hazardous than that stated in the policy, the insurer, upon receipt of proof of the change of occupation, will reduce the premium rate accordingly, and will return the excess pro rata unearned premium from the date of change of occupation or from the policy anniversary date immediately preceding receipt of proof, whichever is the more recent. The provision must provide that the classification of occupational risk and the premium rates will be such as have been last filed by the insurer before the occurrence of the loss for which the insurer is liable or before date of proof of change in occupation with the state official having supervision of insurance in the state where the insured resided at the time the policy was issued; but if the filing was not required, then the classification of occupational risk and the premium rates will be those last made effective by the insurer in such state before the occurrence of the loss or before the date of proof of change in occupation.
    2. A provision that if the age of the insured has been misstated, all amounts payable under the policy will be such as the premium paid would have purchased at the correct age.
    3. A provision that if an accident or health or accident and health policy or policies previously issued by the insurer to the insured are in force concurrently therewith, making the aggregate indemnity for the type of coverage or coverages, in excess of the maximum limit of indemnity or indemnities, the excess insurance is void and all premiums paid for the excess will be returned to the insured or to the insured’s estate. In lieu of this type of provision, the policy may provide that insurance effective at any one time on the insured under the policy and a like policy or policies in the insurer is limited to the one such policy elected by the insured, the insured’s beneficiary, or the insured’s estate, as the case may be, and the insurer will return all premiums paid for all other such policies.
    4. A provision that upon the payment of a claim under the policy, any premium then due and unpaid or covered by any note or written order may be deducted from the payment.
    5. Subject to chapter 26.1-36.4, a provision that the insurer may cancel the policy at any time by written notice delivered to the insured, or mailed to the insured’s last address as shown by the records of the insurer, stating when, not less than five days thereafter, the cancellation is effective; and after the policy has been continued beyond its original term the insured may cancel the policy at any time by written notice delivered or mailed to the insurer, effective upon receipt or on such later date as may be specified in the notice. The provision must provide that in the event of cancellation, the insurer will return promptly the unearned portion of any premium paid, and, if the insured cancels, the earned premium will be computed by the use of the short-rate table last filed in the state where the insured resided when the policy was issued. The provision must provide that if the insurer cancels, the earned premium shall be computed pro rata. The provision must provide that cancellation is without prejudice to any claim originating prior to the effective date of cancellation.
    6. A provision that any provision of the policy which, on its effective date, is in conflict with the statutes of the state in which the insured resides on such date is amended to conform to the minimum requirements of such statutes.
    7. A provision that the insurer is not liable for any loss to which a contributing cause was the insured’s commission of or attempt to commit a felony or to which a contributing cause was the insured’s being engaged in an illegal occupation.
    8. A provision that after the loss-of-time benefit of the policy has been payable for ninety days, such benefit will be adjusted, as provided under this subdivision, if the total amount of unadjusted loss-of-time benefits provided in all valid loss-of-time coverage upon the insured should exceed a percentage of the insured’s earned income as provided in the policy; provided, however, that if the information contained in the application discloses that the total amount of loss-of-time benefits under the policy and under all other valid loss-of-time coverage expected to be effective upon the insured in accordance with the application for this policy exceeded an alternative percentage of the insured’s earned income as provided in the policy, at the time of the application, such higher percentage will be used in place of the original percentage provided.
      1. The provision must provide that the adjusted loss-of-time benefit under the policy for any month will be only such proportion of the loss-of-time benefit otherwise payable under the policy as (a) the product of the insured’s earned income and the original percent, or, if higher, the alternative percentage, bears to (b) the total amount of loss-of-time benefits payable for such month under the policy and all other valid loss-of-time coverage on the insured, without giving effect to the “overinsurance provision” in this or any other coverage, less in both (a) and (b) any amount of loss-of-time benefits payable under other valid loss-of-time coverage which does not contain an “overinsurance provision”.
      2. The provision must provide that in making the computation, all benefits and earnings will be converted to a consistent basis weekly if the loss-of-time benefit of the policy is payable weekly, or monthly if the benefit is payable monthly, or otherwise, based upon the time period. If the numerator of the foregoing ratio is zero or is negative, no benefit is payable.
      3. The provision must provide that in no event does the provision operate to reduce the total combined amount of loss-of-time benefits for such month payable under the policy and all other valid loss-of-time coverage below the lesser of three hundred dollars and the total combined amount of loss-of-time benefits determined without giving effect to any “overinsurance provision”, nor operate to increase the amount of benefits payable under the policy above the amount which would have been paid in the absence of the provision, nor take into account or operate to reduce any benefit other than the loss-of-time benefit.
      4. The provision must provide that:
        1. “Earned income”, except when otherwise specified, means the greater of the monthly earnings of the insured at the time disability commences and the insured’s average monthly earnings for a period of two years immediately preceding the commencement of the disability, and does not include any investment income or any other income not derived from the insured’s vocational activities.
        2. “Overinsurance provision” includes this type of provision and any other provision with respect to any loss-of-time coverage which may have the effect of reducing an insurer’s liability if the total amount of loss-of-time benefits under all coverage exceeds a stated relationship to the insured’s earnings.
      5. This type of provision may be included only in a policy that provides a loss-of-time benefit which may be payable for at least fifty-two weeks, which is issued on the basis of selective underwriting of each individual application, and for which the application includes a question designed to elicit information necessary either to determine the ratio of the total loss-of-time benefits of the insured to the insured’s earned income or to determine that such ratio does not exceed the percentage of earnings, not less than sixty percent, selected by the insurer and inserted in lieu of the blank factor above. The insurer may require, as part of the proof of claim, the information necessary to administer this provision. If the application indicates that other loss-of-time coverage is to be discontinued, the amount of such other coverage must be excluded in computing the alternative percentage in the first sentence of the overinsurance provision. The policy must include a definition of “valid loss-of-time coverage” which may include coverage provided by governmental agencies and by organizations subject to regulation by insurance law and by insurance departments of this or any other state or of any other country or subdivision thereof, coverage provided for the insured pursuant to any disability benefits statute or any workforce safety and insurance or employer’s liability statute, benefits provided by labor-management trusteed plans or union welfare plans or by employer or employee benefit organizations, or by salary continuance or pension programs, and any other coverage the inclusion of which may be approved.
  3. If any requirement of this section is in whole or in part inapplicable to or inconsistent with the coverage provided by a particular form of policy, the insurer, with the approval of the commissioner, shall omit from the policy any inapplicable provision or part of a provision, and shall modify any inconsistent provision or part of the provision in such manner as to make the provision as contained in the policy consistent with the coverage provided by the policy.
  4. The provisions that are subject to subsections 1 and 2 must be printed in the consecutive order of the requirements in such subsections or, at the option of the insurer, any such provision may appear as a unit in any part of the policy, with other provisions to which it may be logically related, provided the resulting policy is not in whole or in part unintelligible, uncertain, ambiguous, abstruse, or likely to mislead a person to whom the policy is offered, delivered, or issued.
  5. A provision not subject to this section may not make a policy, or any portion of the policy, less favorable in any respect to the insured or to the beneficiary than any provision which is subject to this chapter.
  6. Any policy of a foreign or alien insurer, when delivered or issued for delivery to any person in this state, may contain any provision that is not less favorable to the insured or the beneficiary than the provisions of this chapter and that is prescribed or required by the law of the state under which the insurer is organized. Any policy of a domestic insurer may, when issued for delivery in any other state or country, contain any provision permitted or required by the laws of such other state or country.

Source:

S.L. 1985, ch. 316, § 13; 1985, ch. 320, § 2; 1987, ch. 337, § 3; 1989, ch. 69, § 31; 1991, ch. 301, § 19; 1993, ch. 293, § 7; 1995, ch. 246, §§ 19, 20; 1999, ch. 253, § 4; 2001, ch. 262, § 102; 2003, ch. 561, § 3; 2007, ch. 268, § 1; 2009, ch. 256, § 1.

Derivation:

N.D.C.C. §§ 26-03.1-03, 26-03.1-04.

Note.

Section 5 of ch. 256, S.L. 2009 provides: “ LEGISLATIVE INTENT. This Act is not a mandate of health insurance coverage of services under section 54-03-28.

DECISIONS UNDER PRIOR LAW

Insurance Contract.

Court did not abuse its discretion in allowing insurance company to file amended answer asserting three-year statute of limitation rather than six-year statute. Bender v. Time Ins. Co., 286 N.W.2d 489, 1979 N.D. LEXIS 340 (N.D. 1979).

Three-year limitation-of-action provision in statute, applicable to sickness or accident insurance contract actions, is a special provision which is an exception to the general provision in N.D.C.C. § 28-01-16; it is also the specific legislative intent that this exception should prevail, so that even if insurance company had incorporated six-year limitation in its contract the three-year limitation would have governed in case of sickness or accident. Bender v. Time Ins. Co., 286 N.W.2d 489, 1979 N.D. LEXIS 340 (N.D. 1979).

Proof of Loss.

Requirement that written proof of loss be furnished to insurer “within ninety days after the termination of the period for which the insurer is liable” requires, in a continuous disability case, that proof of loss be given within ninety days after the termination of the entire period for which the insurer is liable, and not within ninety days of the end of the first monthly benefit period during which benefits accrue. Wall v. Pennsylvania Life Ins. Co., 274 N.W.2d 208, 1979 N.D. LEXIS 234 (N.D. 1979).

Suicide.

Where the insured in an accident insurance policy commits suicide while so insane as not to comprehend the nature of the act nor the physical result which would flow from it, his death is caused by accidental means within meaning of policy insuring against bodily injury from external, violent, and accidental means. Weber v. Interstate Business Men's Accident Ass'n, 48 N.D. 307, 184 N.W. 97, 1921 N.D. LEXIS 40 (N.D. 1921).

26.1-36-05. Group health policy or service contract standard provisions.

Neither a group health insurance policy nor a group health service contract may be delivered in this state unless it contains in substance the following provisions, or provisions that in the opinion of the commissioner are more favorable to the persons insured and more favorable to the policyholder or contractholder; provided, however, that subsections 5, 7, and 12 do not apply to credit accident and health insurance policies, that the standard provisions required for individual health insurance policies do not apply to group health insurance policies, and that if any provision of this section is in whole or in part inapplicable to or inconsistent with the coverage provided by a particular form of policy or contract, the insurer shall omit from the policy or contract any inapplicable provision or part of a provision, and shall modify any inconsistent provision or part of the provision to make the provision contained in the policy or contract consistent with the coverage provided by the policy or contract:

  1. A provision that the policyholder or contractholder is entitled to a grace period of thirty-one days for the payment of any premium due except the first, during which the policy or contract continues in force, unless the policyholder or contractholder has given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the policy or contract. The policy or contract may provide that the policyholder or contractholder is liable to the insurer for the payment of a pro rata premium for the time the policy or contract was in force during the grace period.
  2. A provision that the validity of the policy or contract may not be contested except for nonpayment of premiums, after it has been in force for two years from its date of issue; and that the validity of the policy or contract may not be contested on the basis of a statement made relating to insurability by any person covered under the policy or contract after the insurance has been in force for two years during the person’s lifetime unless the statement is contained in a written instrument signed by the person making the statement; provided, however, that no such provision precludes the assertion at any time of defenses based upon the person’s ineligibility for coverage under the policy or contract.
  3. A provision that a copy of the application, if any, of the policyholder or contractholder will be attached to the policy or contract when issued, that all statements made by the policyholder or contractholder or by the persons insured are deemed representations and not warranties, and that no statement made by any insured person may be used in any contest unless a copy of the instrument containing the statement is or has been furnished to that person or, in the event of the death or incapacity of the insured person, to the individual’s beneficiary or personal representative.
  4. A provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of the individual’s coverage.
  5. A provision specifying the additional exclusions or limitations, if any, applicable under the policy or contract with respect to a disease or physical condition of a person, not otherwise excluded from the person’s coverage by name or specific description effective on the date of the person’s loss, which existed prior to the effective date of the person’s coverage under the policy or contract. Any such exclusion or limitation may only apply to a disease or physical condition for which medical advice or treatment was received by the person during the twelve months before the effective date of the person’s coverage. The exclusion or limitation may not apply to loss incurred or disability commencing after the earlier of the end of a continuance period of twelve months commencing on or after the effective date of the person’s coverage during all of which the person has received no medical advice or treatment in connection with such disease or physical condition, or the end of the two-year period commencing on the effective date of the person’s coverage.
  6. If the premiums or benefits vary by age, a provision specifying an equitable adjustment of premiums or of benefits, or both, to be made in the event the age of a covered person has been misstated. The provision must contain a clear statement of the method of adjustment to be used.
  7. A provision that the insurer will issue to the policyholder or contractholder for delivery to each person insured a certificate setting forth a statement as to the insurance protection to which that person is entitled, to whom the insurance benefits are payable, and a statement as to any family member’s or dependent’s coverage.
  8. A provision that written notice of claim must be given to the insurer within twenty days after the occurrence or commencement of any loss covered by the policy or contract. Failure to give notice within this time does not invalidate nor reduce any claim if it is shown that it was not reasonably possible to give the notice and that notice was given as soon as was reasonably possible.
  9. A provision that the insurer will furnish to the person making claim, or to the policyholder or contractholder for delivery to the person making claim, the forms usually furnished for filing proof of loss. If the forms are not furnished before the expiration of fifteen days after the insurer receives notice of any claim under the policy or contract, the person making the claim is deemed to have complied with the requirements of the policy or contract as to proof of loss upon submitting within the time fixed in the policy or contract for filing proof of loss, written proof covering the occurrence, character, and extent of the loss for which claim is made.
  10. A provision that in the case of claim for loss of time for disability, written proof of loss must be furnished to the insurer within ninety days after the commencement of the period for which the insurer is liable, and that subsequent written proof of continuance of the disability must be furnished to the insurer at intervals the insurer may reasonably require, and that in the case of claim for any other loss, written proof of loss must be furnished to the insurer within ninety days after the date of loss. Failure to furnish the proof within this time does not invalidate nor reduce any claim if it was not reasonably possible to furnish the proof within that time, provided the proof is furnished as soon as reasonably possible and in no event, except in the absence of legal capacity of the claimant, later than one year from the time proof is otherwise required.
  11. A provision that all benefits payable under the policy or contract other than benefits for loss of time or unless subject to section 26.1-36-37.1 will be payable not more than sixty days after receipt of due proof of loss. All accrued benefits payable under the policy or contract for loss of time will be paid at least monthly during the continuance of the period for which the insurer is liable, and that any balance remaining unpaid at the termination of that period will be paid as soon as possible after receipt of proof of loss.
  12. A provision that benefits for loss of life of the person insured will be payable to the beneficiary designated by the insured person. If the policy or contract contains conditions pertaining to family status, however, the beneficiary may be the family member specified by the policy or contract terms. In either case, payment of these benefits is subject to the provisions of the policy or contract in the event the designated or specified beneficiary is not living at the death of the insured person. All other benefits of the policy or contract are payable to the insured person. The policy or contract may also provide that if any benefit is payable to the estate of a person, or to a person who is a minor or otherwise not competent to give a valid release, the insurer may pay the benefit, up to an amount not exceeding five thousand dollars, to any relative by blood or connection by marriage of the person deemed by the insurer to be equitably entitled to the benefit.
  13. A provision that the insurer may examine the individual for whom claim is made when and so often as it may reasonably require during the pendency of claim under the policy or contract and also may make an autopsy in case of death when the autopsy is not prohibited by law.
  14. A provision that no action may be brought to recover on the policy or contract prior to the expiration of sixty days after proof of loss has been filed in accordance with the requirements of the policy or contract and that the action may not be brought at all unless brought within three years from the expiration of the time which proof of loss is required by the policy or contract.
  15. A provision that except as otherwise provided under this subsection, the insurer is not liable for any loss to which a contributing cause was the insured’s commission of or attempt to commit a crime or to which a contributing cause was the insured’s engagement in an illegal occupation. However, under this subsection the insurer is liable for a loss to the extent the crime committed was a misdemeanor violation of section 39-08-01.

Source:

S.L. 1985, ch. 316, § 13; 1985, ch. 320, § 3; 1995, ch. 246, § 21; 1995, ch. 276, § 9; 1999, ch. 251, § 10; 2009, ch. 256, § 2.

Derivation:

N.D.C.C. § 26-03.6-03.

Note.

Section 5 of ch. 256, S.L. 2009 provides: “ LEGISLATIVE INTENT. This Act is not a mandate of health insurance coverage of services under section 54-03-28.

26.1-36-06. Group health policy and medical service contract options for drugs and chiropractic care.

No insurance company or health service corporation may deliver, issue, execute, or renew any health insurance policy or medical service contract that includes coverage of medical benefits on a group, blanket, franchise, or association basis unless the insurer makes available, at the option of the policyholder, the following coverages for which an additional premium may be charged:

  1. All drugs and medicines prescribed by the provider of health services.
  2. Services rendered and care administered by chiropractors licensed under chapter 43-06.

Source:

S.L. 1985, ch. 316, § 13; 1985, ch. 325, § 2.

Derivation:

N.D.C.C. §§ 26-03.1-04.1, 26.1-17-13.

26.1-36-06.1. Coverage for off-label uses of drugs.

  1. In this section:
    1. “Coverage of a drug” includes medically necessary services associated with the administration of the drug.
    2. “Medical literature” means scientific studies published in a peer review national medical journal.
    3. “Off-label use of drugs” means prescribing drugs for treatments other than those stated in the labeling approved by the federal food and drug administration.
    4. “Standard reference compendia” means the United States pharmacopeia drug information or American hospital formulary service drug information.
  2. An insurance company, nonprofit health service corporation, or health maintenance organization that provides coverage for drugs may not issue, deliver, execute, or renew any health insurance policy or health service contract on an individual, group, blanket, franchise, or association basis which excludes coverage of a drug for a particular indication on the grounds the drug has not been approved by the federal food and drug administration for that indication if the drug is recognized for treatment of the indication in one of the standard reference compendia or medical literature.
  3. The insurance commissioner may direct an insurer or contractor regulated by this section to make payments as required by this section.
  4. The state health officer may appoint a panel of up to eight qualified medical experts to review off-label uses of drugs not included in the standard reference compendia or medical literature. This panel shall advise the insurance commissioner whether a particular off-label use is medically appropriate and shall make recommendations regarding payment of off-label use.
  5. This section does not alter existing law regarding provisions limiting the coverage of drugs that have not been approved by the federal food and drug administration; does not require coverage for any drug when the federal food and drug administration has determined its use to be contraindicated; and does not require coverage for experimental drugs not otherwise approved for any indication by the federal food and drug administration.

Source:

S.L. 1997, ch. 254, § 1.

26.1-36-07. Health insurance coverage for newborn and adopted children — Scope of coverage — Notification of birth or adoption.

  1. All individual and group health insurance policies providing coverage on an expense-incurred basis and individual and group service or indemnity type contracts issued by a nonprofit corporation which provide coverage for a family member of the insured or subscriber must, as to the family members’ coverage, also provide that the health insurance benefits applicable for children are payable with respect to a newly born child of the insured or subscriber from the moment of birth and are also payable from the date of physical placement by a licensed child placement agency or by the birth parent pursuant to chapter 14-15.1 with respect to an adopted child.
  2. The coverage for newly born children and for children placed for adoption by a licensed child placement agency or by the birth parent pursuant to chapter 14-15.1 consists of coverage of injury or sickness, including the necessary care and treatment of medically diagnosed congenital defects and birth abnormalities.
  3. If payment of a specific premium or subscription fee is required to provide coverage for a child, the policy or contract may require that notification of birth of a newly born child or child placed for adoption by a licensed child placement agency or by the birth parent pursuant to chapter 14-15.1 and payment of the required premium or fees must be furnished to the insurer or nonprofit service or indemnity corporation within thirty-one days after the date of birth or date of physical placement by a licensed child placement agency or by the birth parent pursuant to chapter 14-15.1 of the child in order to have the coverage continue beyond the thirty-one-day period.

Source:

S.L. 1985, ch. 316, § 13; 1987, ch. 362, § 1; 1995, ch. 287, § 1.

Derivation:

N.D.C.C. §§ 26-03-38.1, 26-03-38.2, 26-03-38.3.

Collateral References.

Coverage of artificial insemination procedures or other infertility treatments by health, sickness, or hospitalization insurance, 80 A.L.R.4th 1059.

26.1-36-08. Group health policy and health service contract substance abuse coverage.

  1. An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy or health service contract on a group, blanket, franchise, or association basis unless the policy or contract provides benefits, of the same type offered under the policy or contract for other illnesses, for health services to any individual covered under the policy or contract, for the diagnosis, evaluation, and treatment of alcoholism, drug addiction, or other related illness, which benefits meet or exceed the benefits provided in subsection 2.
  2. The benefits must be provided for inpatient treatment, treatment by partial hospitalization, and outpatient treatment:
    1. In the case of benefits provided for inpatient treatment, the benefits must be provided for a minimum of sixty days of services covered under this section and section 26.1-36-09 in any calendar year. Services provided under this subdivision must be provided by an addiction treatment program licensed under chapter 50-31.
    2. In the case of benefits provided for partial hospitalization, the benefits must be provided for a minimum of one hundred twenty days of services covered under this section and section 26.1-36-09 in any calendar year. Services provided under this subdivision must be provided by an addiction treatment program licensed under chapter 50-31. For services provided in regional human service centers, charges must be reasonably similar to the charges for care provided by hospitals as defined in this subsection.
    3. Benefits may also be provided for a combination of inpatient and partial hospitalization treatment. For the purpose of computing the period for which benefits are payable, each day of inpatient treatment is equivalent to two days of treatment by partial hospitalization, provided that no more than forty-six days of the inpatient treatment benefits required by this section may be traded for treatment by partial hospitalization.
    4. In the case of benefits provided for outpatient treatment, the benefits must be provided for a minimum of twenty visits for services covered under this section in any calendar year, provided the diagnosis, evaluation, and treatment services are provided within the scope of licensure by a licensed physician, a licensed psychologist who is eligible for listing on the national register of health service providers in psychology, or the treatment services are provided within the scope of licensure by a licensed addiction counselor. The insurance company, nonprofit health service corporation, or health maintenance organization may not establish a deductible or a copayment for the first five visits in any calendar year, and may not establish a copayment greater than twenty percent for the remaining visits. The deductible limitation of this subdivision does not apply to a high-deductible health plan used to establish a health savings account pursuant to and as defined in section 223 of the Internal Revenue Code [26 U.S.C. 223].
    5. If the services are provided by a provider outside a preferred provider network without a referral from within the network, the insurance company, nonprofit health service corporation, or health maintenance organization may establish a copayment greater than twenty percent for only those visits after the first five visits in any calendar year.
    6. As used in this section and section 26.1-36-08.1, partial hospitalization means continuous treatment for at least three hours, but not more than twelve hours, in any twenty-four-hour period and includes the medically necessary treatment services provided by licensed professionals under the supervision of a licensed physician.
  3. This section does not prevent any insurance company, nonprofit health service corporation, or health maintenance organization from issuing, delivering, or renewing, at its option, any policy or contract containing provisions similar to those required by this section, when the policy or contract is not subject to such provisions.

Source:

S.L. 1985, ch. 316, § 13; 1985, ch. 326, § 6; 1987, ch. 363, § 1; 1989, ch. 366, § 1; 1995, ch. 243, § 2; 1995, ch. 288, § 1; 2003, ch. 255, § 1; 2003, ch. 432, § 2; 2005, ch. 270, § 1.

Derivation:

N.D.C.C. §§ 26-39-01 to 26-39-05.

26.1-36-08.1. Alternative group health policy and health service contract substance abuse coverage.

  1. As an alternative to the substance abuse coverage required under subsection 2 of section 26.1-36-08, an insurance company, a nonprofit health service corporation, or a health maintenance organization may provide substance abuse coverage under this section.
  2. The provisions of section 26.1-36-08 apply to this alternative, except:
    1. In addition to the inpatient treatment, treatment by partial hospitalization, and outpatient treatment coverage required under section 26.1-36-08, the coverage must include residential treatment.
    2. In the case of coverage for inpatient treatment, the benefits must be provided for a minimum of forty-five days of services covered under this section and section 26.1-36-09 in any calendar year.
    3. For the purpose of computing the period for which benefits are payable for a combination of inpatient and partial hospitalization, no more than twenty-three days of inpatient treatment benefits required under subdivision a may be traded for treatment by partial hospitalization.
    4. In the case of coverage for residential treatment, the benefits must be provided for a minimum of sixty days of services covered under this section in any calendar year. This residential treatment must be provided by an addiction treatment program licensed under chapter 50-31. If an individual receiving residential treatment services requires more than sixty days of residential treatment services, unused inpatient treatment benefits provided for under subdivision b may be traded for residential treatment benefits. For the purpose of computing the period for which benefits are payable, each day of inpatient treatment is equivalent to two days of treatment by a residential treatment program, provided that no more than twenty-three days of inpatient treatment benefits required by this section may be traded for residential treatment benefits required under this section.

Source:

S.L. 2003, ch. 255, § 2.

26.1-36-09. Group health policy and health service contract mental disorder coverage. [Effective through August 31, 2022]

  1. An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy or health service contract on a group or blanket or franchise or association basis unless the policy or contract provides benefits, of the same type offered under the policy or contract for other illnesses, for health services to any person covered under the policy or contract, for the diagnosis, evaluation, and treatment of mental disorder and other related illness, which benefits meet or exceed the benefits provided in subsection 2.
    1. The benefits must be provided for each of the following services: inpatient treatment, treatment by partial hospitalization, residential treatment, and outpatient treatment.
    2. In the case of benefits provided for inpatient treatment, the benefits must be provided for a minimum of forty-five days of services covered under this section and section 26.1-36-08 in any calendar year if provided by a hospital as defined under section 52-01-01 and rules of the state department of health pursuant thereto offering treatment for the prevention or cure of mental disorder or other related illness. An insurance provider may require an individualized treatment plan from the inpatient treatment service provider which indicates that the course of treatment is the most appropriate and least restrictive form of treatment available in the community.
    3. In the case of benefits provided for partial hospitalization, the benefits must be provided for a minimum of one hundred twenty days of services covered under this section and section 26.1-36-08 in any calendar year. Partial hospitalization must be provided by a hospital as defined under section 52-01-01 and rules of the state department of health pursuant thereto or by a regional human service center licensed under section 50-06-05.2, offering treatment for the prevention or cure of mental disorder or other related illness. For services provided in regional human service centers, charges must be reasonably similar to the charges for care provided by hospitals as defined in this subsection.
    4. In the case of benefits provided for residential treatment, the benefits must be provided for a minimum of one hundred twenty days of services covered under this section in any calendar year. Residential treatment services must be provided by a hospital as defined under section 52-01-01 and rules of the state department of health; by a regional human service center licensed under section 50-06-05.2 offering treatment for the prevention or cure of mental disorder or other related illness; or by a residential treatment program. For services provided in a regional human service center, charges must be reasonably similar to the charges for care provided by a hospital as defined in this subsection.
    5. Any individual receiving residential treatment services who requires residential treatment service beyond the minimum of one hundred twenty days may trade unused inpatient treatment benefits provided for under subdivision b. For the purpose of computing the period for which benefits are payable, each day of inpatient treatment is equivalent to two days of treatment by a residential treatment program; provided, however, that no more than twenty-three days of the inpatient treatment benefits required by this section may be traded for residential treatment services.
      1. In the case of benefits provided for outpatient treatment, the benefits must be provided for a minimum of thirty hours for services covered under this section in any calendar year if the treatment services are provided within the scope of licensure by a nurse who holds advanced licensure with a scope of practice within mental health or if the diagnosis, evaluation, and treatment services are provided within the scope of licensure by a licensed physician, a licensed psychologist who is eligible for listing on the national register of health service providers in psychology, a licensed professional clinical counselor who is qualified in the clinical mental health counseling specialty in this state, or a licensed independent clinical social worker.
      2. A person who is qualified for third-party payment by the board of social work examiners on August 1, 1997, is exempt from paragraph 1.
      3. Upon the request of an insurance company, a nonprofit health service corporation, or a health maintenance organization, the North Dakota board of social work examiners shall provide to the requesting entity information to certify that a licensed certified social worker meets the qualifications required under this section.
      4. The insurance company, nonprofit health service corporation, or health maintenance organization may not establish a deductible or a copayment for the first five hours in any calendar year, and may not establish a copayment greater than twenty percent for the remaining hours. The deductible limitation of this paragraph does not apply to a high-deductible health plan used to establish a health savings account pursuant to and as defined in section 223 of the Internal Revenue Code [26 U.S.C. 223].
      5. If the services are provided by a provider outside a preferred provider network without a referral from within the network, the insurance company, nonprofit health service corporation, or health maintenance organization may establish a copayment greater than twenty percent for only those hours after the first five hours in any calendar year.
    6. “Partial hospitalization” means continuous treatment for at least three hours, but not more than twelve hours, in any twenty-four-hour period and includes the medically necessary treatment services provided by licensed professionals under the supervision of a licensed physician.
    7. “Residential treatment” has the same meaning as provided in section 25-03.2-01, but only applies to individuals under twenty-one years of age.
  2. This section does not prevent any insurance company, nonprofit health service corporation, or health maintenance organization from issuing, delivering, or renewing, at its option, any policy or contract containing provisions similar to those required by this section, when the policy or contract is not subject to such provisions.

Source:

S.L. 1985, ch. 316, § 13; 1985, ch. 326, § 7; 1987, ch. 363, § 2; 1989, ch. 366, § 2; 1993, ch. 308, § 1; 1995, ch. 243, § 2; 1995, ch. 288, § 2; 1995, ch. 289, § 1; 1995, ch. 329, § 5; 1997, ch. 255, § 1; 1997, ch. 379, § 1; 1999, ch. 265, § 1; 1999, ch. 266, § 1; 2005, ch. 270, § 2.

Derivation:

N.D.C.C. §§ 26-39-01 to 26-39-05 .

26.1-36-09. Group health policy and health service contract mental disorder coverage. [Effective September 1, 2022]

  1. An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy or health service contract on a group or blanket or franchise or association basis unless the policy or contract provides benefits, of the same type offered under the policy or contract for other illnesses, for health services to any person covered under the policy or contract, for the diagnosis, evaluation, and treatment of mental disorder and other related illness, which benefits meet or exceed the benefits provided in subsection 2.
    1. The benefits must be provided for each of the following services: inpatient treatment, treatment by partial hospitalization, residential treatment, and outpatient treatment.
    2. In the case of benefits provided for inpatient treatment, the benefits must be provided for a minimum of forty-five days of services covered under this section and section 26.1-36-08 in any calendar year if provided by a hospital as defined under section 52-01-01 and rules of the department of health and human services pursuant thereto offering treatment for the prevention or cure of mental disorder or other related illness. An insurance provider may require an individualized treatment plan from the inpatient treatment service provider which indicates that the course of treatment is the most appropriate and least restrictive form of treatment available in the community.
    3. In the case of benefits provided for partial hospitalization, the benefits must be provided for a minimum of one hundred twenty days of services covered under this section and section 26.1-36-08 in any calendar year. Partial hospitalization must be provided by a hospital as defined under section 52-01-01 and rules of the department of health and human services pursuant thereto or by a regional human service center licensed under section 50-06-05.2, offering treatment for the prevention or cure of mental disorder or other related illness. For services provided in regional human service centers, charges must be reasonably similar to the charges for care provided by hospitals as defined in this subsection.
    4. In the case of benefits provided for residential treatment, the benefits must be provided for a minimum of one hundred twenty days of services covered under this section in any calendar year. Residential treatment services must be provided by a hospital as defined under section 52-01-01 and rules of the department of health and human services; by a regional human service center licensed under section 50-06-05.2 offering treatment for the prevention or cure of mental disorder or other related illness; or by a residential treatment program. For services provided in a regional human service center, charges must be reasonably similar to the charges for care provided by a hospital as defined in this subsection.
    5. Any individual receiving residential treatment services who requires residential treatment service beyond the minimum of one hundred twenty days may trade unused inpatient treatment benefits provided for under subdivision b. For the purpose of computing the period for which benefits are payable, each day of inpatient treatment is equivalent to two days of treatment by a residential treatment program; provided, however, that no more than twenty-three days of the inpatient treatment benefits required by this section may be traded for residential treatment services.
      1. In the case of benefits provided for outpatient treatment, the benefits must be provided for a minimum of thirty hours for services covered under this section in any calendar year if the treatment services are provided within the scope of licensure by a nurse who holds advanced licensure with a scope of practice within mental health or if the diagnosis, evaluation, and treatment services are provided within the scope of licensure by a licensed physician, a licensed psychologist who is eligible for listing on the national register of health service providers in psychology, a licensed professional clinical counselor who is qualified in the clinical mental health counseling specialty in this state, or a licensed independent clinical social worker.
      2. A person who is qualified for third-party payment by the board of social work examiners on August 1, 1997, is exempt from paragraph 1.
      3. Upon the request of an insurance company, a nonprofit health service corporation, or a health maintenance organization, the North Dakota board of social work examiners shall provide to the requesting entity information to certify that a licensed certified social worker meets the qualifications required under this section.
      4. The insurance company, nonprofit health service corporation, or health maintenance organization may not establish a deductible or a copayment for the first five hours in any calendar year, and may not establish a copayment greater than twenty percent for the remaining hours. The deductible limitation of this paragraph does not apply to a high-deductible health plan used to establish a health savings account pursuant to and as defined in section 223 of the Internal Revenue Code [26 U.S.C. 223].
      5. If the services are provided by a provider outside a preferred provider network without a referral from within the network, the insurance company, nonprofit health service corporation, or health maintenance organization may establish a copayment greater than twenty percent for only those hours after the first five hours in any calendar year.
    6. “Partial hospitalization” means continuous treatment for at least three hours, but not more than twelve hours, in any twenty-four-hour period and includes the medically necessary treatment services provided by licensed professionals under the supervision of a licensed physician.
    7. “Residential treatment” has the same meaning as provided in section 25-03.2-01, but only applies to individuals under twenty-one years of age.
  2. This section does not prevent any insurance company, nonprofit health service corporation, or health maintenance organization from issuing, delivering, or renewing, at its option, any policy or contract containing provisions similar to those required by this section, when the policy or contract is not subject to such provisions.

Source:

S.L. 1985, ch. 316, § 13; 1985, ch. 326, § 7; 1987, ch. 363, § 2; 1989, ch. 366, § 2; 1993, ch. 308, § 1; 1995, ch. 243, § 2; 1995, ch. 288, § 2; 1995, ch. 289, § 1; 1995, ch. 329, § 5; 1997, ch. 255, § 1; 1997, ch. 379, § 1; 1999, ch. 265, § 1; 1999, ch. 266, § 1; 2005, ch. 270, § 2; 2021, ch. 352, § 315, eff September 1, 2022.

26.1-36-09.1. Health insurance policy and health service contract — Mammogram examination coverage.

  1. An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage on an individual, group, blanket, franchise, or association basis unless the policy, contract, or evidence of coverage provides benefits, of the same type offered under the policy or contract for illnesses, for health services to any person covered under the policy or contract for:
    1. One baseline mammogram examination for each woman who is at least thirty-five but less than forty years of age.
    2. One mammogram examination every year, or more frequently if ordered by a physician, for each woman who is at least forty years of age.
  2. This section does not apply to individually guaranteed renewable supplemental, specified disease, long-term care, or other limited benefit policies.

Source:

S.L. 1989, ch. 367, § 1; 1993, ch. 293, § 8; 1999, ch. 267, § 1.

26.1-36-09.2. Health insurance policy and health service contract — Involuntary complications of pregnancy coverage.

No insurance company, nonprofit health service corporation, or health maintenance organization may deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage on an individual, group, blanket, franchise, or association basis if the policy, contract, or evidence of coverage contains any exclusion, reduction, or other limitation as to coverage, deductibles, or coinsurance provisions, as to involuntary complications of pregnancy, unless the provisions apply generally to all benefits paid under the policy, contract, or evidence of coverage. If a fixed amount is specified in the policy, contract, or evidence of coverage for surgery, the fixed amounts for surgical procedures involving involuntary complications of pregnancy must be commensurate with other fixed amounts payable for procedures of comparable difficulty and severity. If a fixed amount is payable for maternity benefits, involuntary complications of pregnancy are an illness and entitled to benefits otherwise provided by the policy, contract, or evidence of coverage. If the policy, contract, or evidence of coverage contains a maternity deductible, the maternity deductible applies only to expenses resulting from normal delivery and caesarean section delivery; however, expenses for caesarean section delivery in excess of the deductible must be treated as expenses for any other illness under the policy, contract, or evidence of coverage. For purposes of this section, “involuntary complications of pregnancy” includes nonelective caesarean section delivery.

Source:

S.L. 1989, ch. 368, § 1.

26.1-36-09.3. Coverage for treatment of certain disorders.

Except for policies that only provide coverage for specified diseases, no policy or certificate of health, medical, hospitalization, or accident and sickness insurance regulated under this chapter, or a subscriber contract provided by a nonprofit health service corporation, preferred provider organization, or health maintenance organization, may be issued, renewed, continued, delivered, issued for delivery, or executed in this state after January 1, 1990, unless the policy, certificate, plan, or contract specifically provides coverage for surgical and nonsurgical treatment of temporomandibular joint disorder and craniomandibular disorder. Coverage must be the same as that for treatment to any other joint in the body and applies if the treatment is administered or prescribed by a physician or a dentist. Benefits for the coverage may be limited to a lifetime maximum of ten thousand dollars per person for surgery, and two thousand five hundred dollars for nonsurgical treatment.

Source:

S.L. 1989, ch. 369, § 1; 1995, ch. 290, § 1.

26.1-36-09.4. Preventive health care — Copayments. [Repealed]

Repealed by S.L. 2013, ch. 236, § 6.

26.1-36-09.5. Service of advanced registered nurse practitioner — Direct reimbursement required.

The insured or any person covered by a health insurance policy, health service contract, or evidence of coverage on an individual, group, blanket, franchise, or association basis issued, delivered, executed, or renewed by an insurance company, nonprofit health service corporation, or health maintenance organization which provides for reimbursement or payment for services that are within the scope of practice of an advanced registered nurse practitioner who has received an advanced license under rules adopted by the North Dakota state board of nursing is entitled to reimbursement or payment for services performed by an advanced registered nurse practitioner and the advanced registered nurse practitioner is entitled to direct reimbursement by the insurer.

Source:

S.L. 1995, ch. 246, § 24.

26.1-36-09.6. Health insurance policy and health service contract — Prostate-specific antigen test coverage.

An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage on an individual, group, blanket, franchise, or association basis unless the policy, contract, or evidence of coverage provides an annual digital rectal examination and a prostate-specific antigen test for an asymptomatic male aged fifty and over, a black male aged forty and over, and a male aged forty or over with a family history of prostate cancer.

Source:

S.L. 1997, ch. 256, § 1.

26.1-36-09.7. Foods and food products for inherited metabolic diseases. [Effective through August 31, 2022]

  1. As used in this section:
    1. “Inherited metabolic disease” means maple syrup urine disease or phenylketonuria.
    2. “Low-protein modified food product” means a food product that is specially formulated to have less than one gram of protein per serving and is intended to be used under the direction of a physician for the dietary treatment of an inherited metabolic disease. The term does not include a natural food that is naturally low in protein.
    3. “Medical food” means a food that is intended for the dietary treatment of a disease or condition for which nutritional requirements are established by medical evaluation and is formulated to be consumed or administered under the direction of a physician.
  2. An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage that provides prescription coverage on an individual, group, blanket, franchise, or association basis, unless the policy or contract provides, for any person covered under the policy or contract, coverage for medical foods and low-protein modified food products determined by a physician to be medically necessary for the therapeutic treatment of an inherited metabolic disease.
  3. This section applies to any covered individual born after December 31, 1962. This section does not require coverage in excess of three thousand dollars per year total for low-protein modified food products or medical food for an individual with an inherited metabolic disease of amino acid or organic acid.
  4. This section does not require medical benefits coverage for low-protein modified food products or medical food for an individual to the extent those benefits are available to that individual under a state department of health or department of human services program.

Source:

S.L. 1997, ch. 257, § 1; 1999, ch. 268, § 1; 2001, ch. 260, § 7.

26.1-36-09.7. Foods and food products for inherited metabolic diseases. [Effective September 1, 2022]

  1. As used in this section:
    1. “Inherited metabolic disease” means maple syrup urine disease or phenylketonuria.
    2. “Low-protein modified food product” means a food product that is specially formulated to have less than one gram of protein per serving and is intended to be used under the direction of a physician for the dietary treatment of an inherited metabolic disease. The term does not include a natural food that is naturally low in protein.
    3. “Medical food” means a food that is intended for the dietary treatment of a disease or condition for which nutritional requirements are established by medical evaluation and is formulated to be consumed or administered under the direction of a physician.
  2. An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage that provides prescription coverage on an individual, group, blanket, franchise, or association basis, unless the policy or contract provides, for any person covered under the policy or contract, coverage for medical foods and low-protein modified food products determined by a physician to be medically necessary for the therapeutic treatment of an inherited metabolic disease.
  3. This section applies to any covered individual born after December 31, 1962. This section does not require coverage in excess of three thousand dollars per year total for low-protein modified food products or medical food for an individual with an inherited metabolic disease of amino acid or organic acid.
  4. This section does not require medical benefits coverage for low-protein modified food products or medical food for an individual to the extent those benefits are available to that individual under a department of health and human services program.

Source:

S.L. 1997, ch. 257, § 1; 1999, ch. 268, § 1; 2001, ch. 260, § 7; 2021, ch. 352, § 316, eff September 1, 2022.

26.1-36-09.8. Health insurance policy and health service contract — Postdelivery coverage for mothers and newborns.

  1. An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage that provides maternity benefits on an individual, group, blanket, franchise, or association basis unless the policy, contract, or evidence of coverage provides benefits, of the same type offered under the policy or contract for illnesses, for health services to any person covered under the policy or contract for:
    1. Inpatient care for at least forty-eight hours for a mother and her newborn child following a normal vaginal delivery, and inpatient care for at least ninety-six hours following a caesarean section, without requiring the attending physician or health care provider to obtain authorization to care for a mother and her newborn child in the inpatient setting for this period of time.
    2. Inpatient care in excess of forty-eight hours following a vaginal delivery and ninety-six hours following a caesarean section if the stay is determined to be reasonable and medically necessary.
  2. Coverage is not required for postdelivery inpatient care for a covered mother and her newborn child during the entire minimum time period required under subdivision a of subsection 1 if:
    1. The attending physician or health care provider, in consultation with the mother, decides to discharge the mother and her newborn child early; and
    2. The mother and her newborn child meet the minimum medical criteria for discharge as recommended in the “Guidelines for Perinatal Care” prepared by the American college of obstetricians and gynecologists and the American academy of pediatrics.
  3. A person covered under this section is not required to give birth in a hospital or stay in a hospital for a fixed period of time following the birth of her child or participate in any postdelivery visit.
  4. An insurance company, nonprofit health service corporation, health maintenance organization, or provider may not:
    1. Provide monetary payments to any insured person to request less than the minimum coverage required under this section;
    2. Penalize or otherwise reduce or limit the reimbursement of an attending physician or health care provider for recommending or providing care that is covered under this section;
    3. Waive any deductible, coinsurance, or copayment requirement for providing the minimum coverage required under this section;
    4. Deny to the mother or newborn child eligibility or continued eligibility to enroll or to renew coverage under the terms of the plan solely to avoid the requirements of this section; or
    5. Provide incentives, monetary or otherwise, to an attending physician or health care provider to induce the physician or provider to provide care to an individual participant or beneficiary in a manner inconsistent with this section.
  5. The coverage required under subsection 1 may not exceed policy aggregate limits for this coverage.
  6. This section does not prevent an insurance company, nonprofit health service corporation, or health maintenance organization from imposing deductibles, coinsurance, or other cost sharing in relation to benefits for hospital lengths of stay relating to childbirth for a mother or newborn child under the plan.

Source:

S.L. 1997, ch. 258, § 1; 2021, ch. 233, § 4, eff August 1, 2021.

Collateral References.

Liability of third-party health-care payor for injury resulting from failure to authorize required treatment, 56 A.L.R.5th 737.

26.1-36-09.9. Dental anesthesia and hospitalization coverage.

An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage on an individual, group, blanket, franchise, or association basis unless the policy, contract, or evidence of coverage provides benefits for anesthesia and hospitalization for dental care provided to a covered individual who is a child under age nine, is severely disabled, or who has a medical condition and requires hospitalization or general anesthesia for dental care treatment. A carrier may require preauthorization of hospitalization for dental care procedures under this section in the same manner preauthorization is required for hospitalization for other covered diseases or conditions. Coverage under this section applies regardless of whether the services are provided in a hospital or an ambulatory surgery center.

Source:

S.L. 1999, ch. 269, § 1.

26.1-36-09.10. Health insurance policy and health service contract — Prehospital emergency medical services. [Effective through August 31, 2022]

  1. In this section, unless the context or subject matter otherwise requires:
    1. “Emergency medical condition” means a medical condition that manifests itself by symptoms of sufficient severity which may include severe pain and that a prudent layperson who possesses an average knowledge of health and medicine could reasonably expect the absence of medical attention to result in placing the person’s health in jeopardy, serious impairment of a bodily function, or serious dysfunction of any body part.
    2. “Prehospital emergency medical services” means a service or its personnel either licensed under chapter 23-27 or certified by the state department of health.
  2. An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage that provides prehospital emergency medical services benefits on an individual, group, blanket, franchise, or association basis unless the policy, contract, or evidence of coverage provides prehospital emergency medical services benefits in the case of an emergency medical condition.
  3. The coverage required under this section does not require coverage in excess of policy aggregate limits or internal policy limits dealing specifically with prehospital emergency medical services.
  4. This section does not prevent an insurance company, nonprofit health service corporation, or health maintenance organization from imposing deductibles, coinsurance, or other cost sharing in relation to benefits for prehospital emergency medical services.

Source:

S.L. 1999, ch. 270, § 1.

26.1-36-09.10. Health insurance policy and health service contract — Prehospital emergency medical services. [Effective September 1, 2022]

  1. In this section, unless the context or subject matter otherwise requires:
    1. “Emergency medical condition” means a medical condition that manifests itself by symptoms of sufficient severity which may include severe pain and that a prudent layperson who possesses an average knowledge of health and medicine could reasonably expect the absence of medical attention to result in placing the person’s health in jeopardy, serious impairment of a bodily function, or serious dysfunction of any body part.
    2. “Prehospital emergency medical services” means a service or its personnel either licensed under chapter 23-27 or certified by the department of health and human services.
  2. An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage that provides prehospital emergency medical services benefits on an individual, group, blanket, franchise, or association basis unless the policy, contract, or evidence of coverage provides prehospital emergency medical services benefits in the case of an emergency medical condition.
  3. The coverage required under this section does not require coverage in excess of policy aggregate limits or internal policy limits dealing specifically with prehospital emergency medical services.
  4. This section does not prevent an insurance company, nonprofit health service corporation, or health maintenance organization from imposing deductibles, coinsurance, or other cost sharing in relation to benefits for prehospital emergency medical services.

Source:

S.L. 1999, ch. 270, § 1; 2021, ch. 352, § 317, eff September 1, 2022.

26.1-36-09.11. Breast reconstruction surgery.

An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage on an individual, group, blanket, or franchise basis unless the policy, contract, or evidence of insurance provides the benefit provisions of the federal Women’s Health and Cancer Rights Act of 1998 [Pub. L. 105-277; 112 Stat. 2681-337; 42 U.S.C. 300gg-6]. This section does not apply to individual or group supplemental, specified disease, long-term care, or other limited benefit policies.

Source:

S.L. 2001, ch. 273, § 1.

26.1-36-09.12. Medical services related to suicide.

An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any hospital, surgical, medical, or major medical benefit policy on an individual, group, blanket, franchise, or association basis unless the policy, contract, or evidence of coverage provides benefits, of the same type offered under the policy or contract for illnesses, for health services to any individual covered under the policy or contract for injury or illness resulting from suicide, attempted suicide, or self-inflicted injury. The medical benefits provided for in this section are exempt from section 54-03-28.

Source:

S.L. 2007, ch. 269, § 1.

26.1-36-09.13. Medical services related to intoxication.

An insurance company, nonprofit health service corporation, or health maintenance organization may not deliver, issue, execute, or renew any major medical expense policy on a group, individual, blanket, franchise, or association basis unless the policy, contract, or evidence of coverage provides benefits, of the same type offered under the policy or contract for illnesses, for health services to any individual covered under the policy or contract for injury or illness resulting from any loss sustained or contracted in the consequence of the insured’s being intoxicated or under the influence of any narcotic. The coverage required under this section may be subject to limitations under subdivision g of subsection 2 of section 26.1-36-04 or subsection 15 of section 26.1-36-05.

Source:

S.L. 2009, ch. 256, § 3.

Note.

Section 5 of ch. 256, S.L. 2009 provides: “ LEGISLATIVE INTENT. This Act is not a mandate of health insurance coverage of services under section 54-03-28 .”

26.1-36-09.14. Coverage of cancer treatment medications.

  1. As used in this section:
    1. “Cancer treatment medications” means prescription drugs and biologics that are used to kill, slow, or prevent the growth of cancerous cells.
    2. “Insurer” means an insurance company, nonprofit health service corporation, or health maintenance organization.
    3. “Patient-administered” includes oral administration and self-injection.
    4. “Policy” means an accident and health insurance policy, contract, or evidence of coverage on a group, individual, blanket, franchise, or association basis.
  2. An insurer may not deliver, issue, execute, or renew a policy that provides coverage for cancer treatment medications that are injected or are intravenously administered by a health care provider and that provides coverage for patient-administered cancer treatment medications unless the policy copayment, deductible, and coinsurance amounts for patient-administered cancer treatment medications do not exceed the amounts for cancer treatment medications that are injected or are intravenously administered by a health care provider, regardless of the formulation or benefit category.
  3. An insurer may not increase a copayment, deductible, or coinsurance amount for covered cancer treatment medications that are injected or intravenously administered in order to avoid compliance with subsection 2. An insurer may not reclassify benefits with respect to cancer treatment medications in a manner that is inconsistent with this section.

History. S.L. 2015, ch. 218, § 1, eff August 1, 2015.

26.1-36-09.15 Coverage of telehealth services.

  1. As used in this section:
    1. “Distant site” means a site at which a health care provider or health care facility is located while providing medical services by means of telehealth.
    2. “E-visit” means a face-to-face digital communication initiated by a patient to a provider through the provider’s online patient portal.
    3. “Health care facility” means any office or institution at which health services are provided. The term includes hospitals; clinics; ambulatory surgery centers; outpatient care facilities; nursing homes; nursing, basic, long-term, or assisted living facilities; laboratories; and offices of any health care provider.
    4. “Health care provider” includes an individual licensed under chapter 43-05, 43-06, 43-12.1 as a registered nurse or as an advanced practice registered nurse, 43-13, 43-15, 43-17, 43-26.1, 43-28, 43-32, 43-37, 43-40, 43-41, 43-42, 43-44, 43-45, 43-47, 43-58, or 43-60.
    5. “Nonpublic facing product” means a remote communication product that, as a default, allows only the intended parties to participate in the communication.
    6. “Originating site” means a site at which a patient is located at the time health services are provided to the patient by means of telehealth.
    7. “Policy” means an accident and health insurance policy, contract, or evidence of coverage on a group, individual, blanket, franchise, or association basis.
    8. “Secure connection” means a connection made using a nonpublic facing remote communication product that employs end-to-end encryption, and which allows only an individual and the person with whom the individual is communicating to see what is transmitted.
    9. “Store-and-forward technology” means electronic information, imaging, and communication that is transferred, recorded, or otherwise stored in order to be reviewed at a distant site at a later date by a health care provider or health care facility without the patient present in real time. The term includes telehome monitoring and interactive audio, video, and data communication.
    10. “Telehealth”:
      1. Means the use of interactive audio, video, or other telecommunications technology that is used by a health care provider or health care facility at a distant site to deliver health services at an originating site and that is delivered over a secure connection that complies with the requirements of state and federal laws.
      2. Includes the use of electronic media for consultation relating to the health care diagnosis or treatment of a patient in real time or through the use of store-and-forward technology.
      3. Does not include the use of electronic mail, facsimile transmissions, or audio-only telephone unless for the purpose of e-visits or a virtual check-in.
    11. “Virtual check-in” means a brief communication via telephone or other telecommunications device to decide whether an office visit or other service is needed.
  2. An insurer may not deliver, issue, execute, or renew a policy that provides health benefits coverage unless that policy provides coverage for health services delivered by means of telehealth which is the same as the coverage for health services delivered by in-person means.
  3. Payment or reimbursement of expenses for covered health services delivered by means of telehealth under this section may be established through negotiations conducted by the insurer with the health services providers in the same manner as the insurer establishes payment or reimbursement of expenses for covered health services that are delivered by in-person means.
  4. Coverage under this section may be subject to deductible, coinsurance, and copayment provisions.
  5. This section does not require:
    1. A policy to provide coverage for health services that are not medically necessary, subject to the terms and conditions of the policy;
    2. A policy to provide coverage for health services delivered by means of telehealth if the policy would not provide coverage for the health services if delivered by in-person means;
    3. A policy to reimburse a health care provider or health care facility for expenses for health services delivered by means of telehealth if the policy would not reimburse that health care provider or health care facility if the health services had been delivered by in-person means; or
    4. A health care provider to be physically present with a patient at the originating site unless the health care provider who is delivering health services by means of telehealth determines the presence of a health care provider is necessary.

Source:

S.L. 2017, ch. 219, § 1, eff August 1, 2017; 2021, ch. 204, § 2, eff May 10, 2021.

26.1-36-10. Health policy and health service contract coordination of benefit provisions.

A group health insurance policy or a group health service contract may contain coordination of benefit provisions for the control of overinsurance. An individual health insurance policy or individual health service contract, except a specific disease, hospital indemnity, or other limited benefit plan, may contain coordination of benefit provisions for the control of overinsurance. These provisions must be in accordance with appropriate guidelines set forth in rules adopted by the commissioner.

Source:

S.L. 1985, ch. 316, § 13; 1993, ch. 309, § 1.

Derivation:

N.D.C.C. §§ 26-03-48, 26.1-17-17.

26.1-36-11. Accident and health policy provision denying insured right to employ doctor or enter hospital prohibited.

Any provision in any accident or health insurance policy issued by any insurance company denying the insured, in case of accident or sickness, the right to consult or employ any doctor licensed to practice in this state the insured may choose, or to enter any hospital or sanitarium organized and operating under the laws of this state the insured may select is void. The insurance company shall recognize any proof of claim duly certified by such doctor or hospital or sanitarium notwithstanding any provision contained in the policy.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03-39.1.

26.1-36-12. Provisions prohibited in individual and group accident and health insurance policies, group health plans, and nonprofit health service contracts. [Effective through August 31, 2022]

  1. Any provision in any individual or group accident and health insurance policy, employee welfare benefit plan, or nonprofit health service contract issued by any insurance company, group health plan as defined in section 607(1) of the Employee Retirement Income Security Act of 1974 [Pub. L. 99-272; 100 Stat. 281; 29 U.S.C. 1167(1)], or nonprofit health service corporation denying or prohibiting the insured, participant, beneficiary, or subscriber from assigning to the department of human services any rights to medical benefits coverage to which the insured, participant, beneficiary, or subscriber is entitled under the policy, plan, or contract is void. An individual or group insurance company or nonprofit health service corporation shall recognize the assignment of medical benefits coverage completed by the insured, participant, beneficiary, or subscriber, notwithstanding any provision contained in the policy or contract to the contrary.
  2. Any individual or group provision in any accident and health insurance policy, employee welfare benefit plan, or nonprofit health service corporation contract issued by any insurance company, group health plan, or nonprofit health service corporation which limits or excludes payments of medical benefits coverage to or on behalf of the insured, participant, beneficiary, or subscriber if the insured, participant, beneficiary, or subscriber is eligible for medical assistance benefits under chapter 50-24.1 is void.

Source:

S.L. 1985, ch. 316, § 13; 1995, ch. 461, § 5.

Derivation:

N.D.C.C. § 26-03-39.2.

26.1-36-12. Provisions prohibited in individual and group accident and health insurance policies, group health plans, and nonprofit health service contracts. [Effective September 1, 2022]

  1. Any provision in any individual or group accident and health insurance policy, employee welfare benefit plan, or nonprofit health service contract issued by any insurance company, group health plan as defined in section 607(1) of the Employee Retirement Income Security Act of 1974 [Pub. L. 99-272; 100 Stat. 281; 29 U.S.C. 1167(1)], or nonprofit health service corporation denying or prohibiting the insured, participant, beneficiary, or subscriber from assigning to the department of health and human services any rights to medical benefits coverage to which the insured, participant, beneficiary, or subscriber is entitled under the policy, plan, or contract is void. An individual or group insurance company or nonprofit health service corporation shall recognize the assignment of medical benefits coverage completed by the insured, participant, beneficiary, or subscriber, notwithstanding any provision contained in the policy or contract to the contrary.
  2. Any individual or group provision in any accident and health insurance policy, employee welfare benefit plan, or nonprofit health service corporation contract issued by any insurance company, group health plan, or nonprofit health service corporation which limits or excludes payments of medical benefits coverage to or on behalf of the insured, participant, beneficiary, or subscriber if the insured, participant, beneficiary, or subscriber is eligible for medical assistance benefits under chapter 50-24.1 is void.

Source:

S.L. 1985, ch. 316, § 13; 1995, ch. 461, § 5; 2021, ch. 352, § 318, eff September 1, 2022.

26.1-36-12.1. Health service corporation contract provision denying insured or subscriber right to employ doctor or enter hospital prohibited.

Any provision in any health service contract issued by a health service corporation denying the insured or subscriber, subscriber member, officer, or employee, in case of accident or sickness, the right to consult or employ any doctor, including doctors of chiropractic, licensed to practice in this state whom the insured, subscriber, subscriber member, officer, or employee may choose, or to enter any hospital or sanitarium organized and operating under the laws of this state which the insured, subscriber, subscriber member, officer, or employee may select, is void. The health service corporation must recognize any proof of claim duly certified by the doctor, hospital, or sanitarium notwithstanding any provision contained in the contract.

Source:

S.L. 1989, ch. 354, § 2.

26.1-36-12.2. Freedom of choice for pharmacy services. [Effective through August 31, 2022]

  1. No third-party payer, including a health care insurer as defined in section 26.1-47-01, providing pharmacy services and prescription drugs to any beneficiary may:
    1. Prevent a beneficiary from selecting the pharmacy or pharmacist of the beneficiary’s choice to provide pharmaceutical goods and services, provided that pharmacist or pharmacy is licensed in this state;
    2. Impose upon any beneficiary selecting a participating or contracting provider a copayment, fee, or other condition not equally imposed upon all beneficiaries in the plan selecting a participating or contracting provider; or
    3. Deny any pharmacy or pharmacist the right to participate as a preferred provider under chapter 26.1-47 or as a contracting provider for any policy or plan, provided the pharmacist or pharmacy is licensed in this state, and accepts the terms of the third-party payer’s contract.
  2. Notwithstanding the provisions of subsection 1, the department of human services may exclude, from participation in the medical assistance program administered under chapter 50-24.1 and title XIX of the Social Security Act [Pub. L. 89-97; 79 Stat. 343; 42 U.S.C. 1396 et seq.], as amended, any provider of pharmacy services who does not agree to comply with state and federal requirements governing the program, or who, after so agreeing, fails to comply with those requirements.
  3. Any provision in a health insurance policy in this state which violates the provisions in subsection 1 is void.
  4. Any person who violates this section is guilty of a class A misdemeanor and each violation is a separate offense. The commissioner may levy an administrative penalty not to exceed ten thousand dollars for a violation of this section.
  5. The insurance commissioner shall enforce the provisions of this section.

Source:

S.L. 1989, ch. 370, § 1.

26.1-36-12.2. Freedom of choice for pharmacy services. [Effective September 1, 2022]

  1. No third-party payer, including a health care insurer as defined in section 26.1-47-01, providing pharmacy services and prescription drugs to any beneficiary may:
    1. Prevent a beneficiary from selecting the pharmacy or pharmacist of the beneficiary’s choice to provide pharmaceutical goods and services, provided that pharmacist or pharmacy is licensed in this state;
    2. Impose upon any beneficiary selecting a participating or contracting provider a copayment, fee, or other condition not equally imposed upon all beneficiaries in the plan selecting a participating or contracting provider; or
    3. Deny any pharmacy or pharmacist the right to participate as a preferred provider under chapter 26.1-47 or as a contracting provider for any policy or plan, provided the pharmacist or pharmacy is licensed in this state, and accepts the terms of the third-party payer’s contract.
  2. Notwithstanding the provisions of subsection 1, the department of health and human services may exclude, from participation in the medical assistance program administered under chapter 50-24.1 and title XIX of the Social Security Act [Pub. L. 89-97; 79 Stat. 343; 42 U.S.C. 1396 et seq.], as amended, any provider of pharmacy services who does not agree to comply with state and federal requirements governing the program, or who, after so agreeing, fails to comply with those requirements.
  3. Any provision in a health insurance policy in this state which violates the provisions in subsection 1 is void.
  4. Any person who violates this section is guilty of a class A misdemeanor and each violation is a separate offense. The commissioner may levy an administrative penalty not to exceed ten thousand dollars for a violation of this section.
  5. The insurance commissioner shall enforce the provisions of this section.

Source:

S.L. 1989, ch. 370, § 1; 2021, ch. 352, § 319, eff September 1, 2022.

26.1-36-12.3. Basic health insurance coverage — Exception to required coverages. [Expired]

Expired under S.L. 1991, ch. 319, § 3.

26.1-36-12.4. Confidentiality of medical information.

  1. An insurance company, as defined in section 26.1-02-01, health maintenance organization, or any other entity providing a plan of health insurance subject to state insurance regulation may not deliver, issue, execute, or renew a health insurance policy or health service contract unless confidentiality of medical information is assured pursuant to this section. An insurer shall adopt and maintain procedures to ensure that all identifiable information maintained by the insurer regarding the health, diagnosis, and treatment of persons covered under a policy or contract is adequately protected and remains confidential in compliance with all federal and state laws and regulations and professional ethical standards. Unless otherwise provided by law, any data or information pertaining to the health, diagnosis, or treatment of a person covered under a policy or contract, or a prospective insured, obtained by an insurer from that person or from a health care provider, regardless of whether the information is in the form of paper, is preserved on microfilm, or is stored in computer-retrievable form, is confidential and may not be disclosed to any person except:
    1. If the data or information identifies the covered person or prospective insured upon a written, dated, and signed approval by the covered person or prospective insured, or by a person authorized to provide consent pursuant to section 23-12-13 for a minor or an incapacitated person;
    2. If the data or information identifies the health care provider upon a written, dated, and signed approval by the provider. However, this subdivision may not be construed to prohibit an insurer from disclosing data or information pursuant to chapter 23-01.1 or from disclosing, as part of a contract or agreement in which the health care provider is a party, data or information that identifies a provider as part of mutually agreed-upon terms and conditions of the contract or agreement;
    3. If the data or information does not identify either the covered person or prospective insured or the health care provider, the data or information may be disclosed upon request for use for statistical purposes or research;
    4. Pursuant to statute or court order for the production or discovery of evidence; or
    5. In the event of a claim or litigation between the covered person or prospective insured and the insurer in which the data or information is pertinent.
  2. An insurer may claim any statutory privileges against disclosure that the health care provider who furnished the information to the insurer is entitled to claim.
  3. This section may not be construed to prevent disclosure necessary for an insurer to conduct utilization review or management consistent with the standards imposed by chapter 26.1-26.4, to facilitate payment of a claim, to analyze health plan claims or health care records data, to conduct disease management programs with health care providers, or to reconcile or verify claims under a shared risk or capitation arrangement. This section does not apply to data or information disclosed by an insurer as part of a biomedical research project approved by an institutional review board established under federal law. Nor may this section be construed to limit the insurance commissioner’s access to records of the insurer for purposes of enforcement or other activities related to compliance with state or federal laws; however, medical records acquired by the commissioner as part of an examination of an insurer’s business practices under section 26.1-03-19.2 or any other regulatory action or proceeding commenced by the commissioner are confidential.

Source:

S.L. 1999, ch. 257, § 6.

26.1-36-12.5. Basic health insurance coverage — Exceptions to required coverage.

  1. An insurance company, a nonprofit health service corporation, or a health maintenance organization may deliver, issue, execute, and renew a basic health insurance policy, health service contract, or evidence of coverage on an individual basis or an employer group, blanket, franchise, or association basis for employers with fewer than fifty employees.
  2. The basic health insurance coverage policy, contract, or evidence of coverage under this section is not subject to sections 26.1-36-06.1, 26.1-36-08, 26.1-36-09.1, 26.1-36-09.3, 26.1-36-09.6, 26.1-36-09.7, 26.1-36-09.9, 26.1-36-09.10, 26.1-36-12.1, and 43-13-31. However, the insurance company, nonprofit health service corporation, or health maintenance organization shall make the coverage required under these sections available at the option of the individual or employer and may charge an additional premium for each coverage provided.
  3. Any law that becomes effective after January 1, 2001, which provides for an accident and health insurance coverage mandate does not apply to a basic health insurance policy issued under this section unless the law specifically identifies application to a basic health insurance coverage policy.

Source:

S.L. 2001, ch. 274, § 1.

26.1-36-12.6. Ambulance services classifications.

For purposes of classifying ambulance services for an accident and health insurance policy, the classifications established under section 50-24.1-16 apply.

History. S.L. 2015, ch. 193, § 2, eff August 1, 2015.

26.1-36-13. Applicability of accident and health policy simplification standards.

  1. Except as provided in subsection 3, sections 26.1-36-13 through 26.1-36-16 apply to all individual and group accident and health insurance contracts, policies, plans, or agreements, insurance certificates under group accident and health insurance policies, and disability benefit certificates issued by fraternal benefit societies filed after June 30, 1982. No policy may be delivered or issued for delivery in this state after June 30, 1986, unless approved by the commissioner or permitted to be issued under sections 26.1-36-13 through 26.1-36-16. Any policy form that has been approved or permitted to be issued prior to July 1, 1986, and that meets the standards set by sections 26.1-36-13 through 26.1-36-16 need not be refiled for approval, but may continue to be delivered or issued for delivery in this state upon the filing with the commissioner of a list of the forms identified by form number and accompanied by a certificate as to each such form in the manner provided in subsection 6 of section 26.1-36-14.
  2. The commissioner may extend the dates in subsection 1.
  3. Sections 26.1-36-13 through 26.1-36-16 do not apply to:
    1. A policy that is a security subject to federal jurisdiction.
    2. Any group policy covering a group of one thousand or more lives at date of issue. However, this does not except any certificate issued pursuant to a group policy delivered or issued for delivery in this state.
    3. A form used in connection with, as a conversion from, as an addition to, or in exchange pursuant to a contractual provision for, a policy delivered or issued for delivery on a form approved or permitted to be issued prior to the dates such forms must be approved under sections 26.1-36-13 through 26.1-36-16.
    4. The renewal of a policy delivered or issued for delivery prior to the dates the forms must be approved under sections 26.1-36-13 through 26.1-36-16.
  4. No other state law setting language simplification standards applies to a policy form.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. §§ 26-03.5-02, 26-03.5-03, 26-03.5-08.

26.1-36-14. Minimum accident and health policy language simplification standards.

  1. No policy form may be delivered or issued for delivery in this state unless:
    1. The text achieves a minimum score of forty on the Flesch reading ease test or an equivalent score on any other comparable test as provided in subsection 3.
    2. It is printed, except for specification pages, schedules, and tables, in not less than ten-point type, one point leaded.
    3. The style, arrangement, and overall appearance of the policy give no undue prominence to any portion of the text of the policy or to any endorsement or rider.
    4. It contains a table of contents or an index of the principal sections of the policy, if the policy has more than three thousand words printed or three or fewer pages of text, or if the policy has more than three pages regardless of the number of words.
  2. The commissioner may authorize a lower score than the Flesch reading ease score required in subdivision a of subsection 1 whenever the commissioner finds that a lower score:
    1. Will provide a more accurate reflection of the readability of a policy form.
    2. Is warranted by the nature of a particular policy form or type or class of policy forms.
    3. Is caused by certain policy language which is drafted to conform to the requirements of any state law or rule, or agency interpretation.
  3. A Flesch reading ease test score is measured by the following method:
    1. For policy forms containing ten thousand words or less of text, the entire form must be analyzed. For policy forms containing more than ten thousand words, the readability of two 200-word samples per page may be analyzed instead of the entire form. The samples must be separated by at least twenty printed lines.
    2. The number of words and sentences in the text must be counted and the total number of words divided by the total number of sentences. The figure obtained must be multiplied by a factor of one and fifteen thousandths.
    3. The total number of syllables must be counted and divided by the total number of words. The figure obtained must be multiplied by a factor of eighty-four and six-tenths.
    4. The sum of the figures computed under subdivisions b and c subtracted from two hundred six and eight hundred thirty-five thousandths equals the Flesch reading ease score for the policy form.
    5. For purposes of subdivisions b, c, and d, the following procedures must be used:
      1. A contraction, hyphenated word, or numbers and letters, when separated by spaces, shall be counted as one word.
      2. A unit of words ending with a period, semicolon, or colon, but excluding headings and captions, shall be counted as a sentence.
      3. A syllable means a unit of spoken language consisting of one or more letters of a word as divided by an accepted dictionary. When the dictionary shows two or more equally acceptable pronunciations of a word, the pronunciation containing fewer syllables may be used.
  4. As used in this section, “text” includes all printed matter except:
    1. The name and address of the insurer, the name, number, or title of the policy, the table of contents or index, captions and subcaptions, specification pages, schedules, and tables.
    2. Any policy language drafted to conform to the requirements of any federal law, regulation, or agency interpretation, any policy language required by any collectively bargained agreement, any medical terminology, any words defined in the policy, and any policy language required by law or rule, provided, however, the insurer identifies the language or terminology excepted by this subdivision and certifies, in writing, that the language or terminology is entitled to be excepted by this subdivision.
  5. The commissioner may approve any other reading test for use as an alternative to the Flesch reading ease test if the other test is comparable in result to the Flesch reading ease test.
  6. Filings subject to this section must provide the minimum reading ease score or a statement that the score is lower than the minimum required but should be approved in accordance with subsection 2. To confirm the accuracy of any statement, the commissioner may require the submission of further information to verify the certification in question.
  7. At the option of the insurance company, nonprofit health service corporation, fraternal benefit society, or health maintenance organization, riders, endorsements, applications, and other forms made a part of the policy may be scored as separate forms or as part of the policy with which they may be used.

Source:

S.L. 1985, ch. 316, § 13; 1999, ch. 251, § 11.

Derivation:

N.D.C.C. §§ 26-03.5-02, 26-03.5-04, 26-03.5-06.

26.1-36-15. Approval of accident and health policy forms.

A policy form meeting the requirements of subsection 1 of section 26.1-36-14 must be approved notwithstanding any other law which specifies the contents of a policy, if the policy form provides the policyholders and claimants protection not less favorable than they would be entitled to under such laws.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03.5-07.

26.1-36-16. Effect of accident and health policy simplification standards on filed policies.

Sections 26.1-36-13 through 26.1-36-15 do not negate any law of this state permitting the issuance of a policy form after it has been on file for the required time period and has not been disapproved by the commissioner.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03.5-05.

26.1-36-17. Application for accident and health policy.

  1. The insured is not bound by any statement made in an application for an accident and health insurance policy unless a copy of the application is attached to or endorsed on the policy. If any policy delivered or issued for delivery to any person in this state is to be reinstated or renewed, and the insured or the beneficiary or assignee of the policy makes written request to the insurer for a copy of the application, if any, for reinstatement or renewal, the insurer, within fifteen days after the receipt of the request at its home office or any branch office of the insurer, shall deliver or mail to the person making the request a copy of the application. If the copy is not delivered or mailed, the insurer is precluded from introducing the application as evidence in any action or proceeding based upon or involving the policy or its reinstatement or renewal.
  2. No alteration of any written application for an accident and health insurance policy may be made by any person other than the applicant without the applicant’s written consent, except that insertions may be made by the insurer, for administrative purposes only, in such manner as to indicate clearly that the insertions are not to be ascribed to the applicant.
  3. The falsity of any statement in the application for an accident and health insurance policy may not bar the right to recovery under the policy unless the false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03.1-05.

Collateral References.

Negligent misrepresentation as “accident” or “occurrence” warranting insurance coverage, 58 A.L.R.5th 483.

26.1-36-18. Notice under accident and health policy — Waiver.

The acknowledgment by any insurer of the receipt of notice given under an accident or health insurance policy, or the furnishing of forms for filing proofs of loss, or the acceptance of such proofs, or the investigation of any claim does not operate as a waiver of any of the rights of the insurer in defense of any claim arising under the policy.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03.1-06.

26.1-36-19. Age limit in accident and health policy.

If an accident and health insurance policy contains a provision establishing, as an age limit or otherwise, a date after which the coverage provided by the policy will not be effective, and if the date falls within a period for which premium is accepted by the insurer or if the insurer accepts a premium after that date, the coverage provided by the policy continues in force subject to any right of cancellation until the end of the period for which premium has been accepted. In the event the age of the insured has been misstated and if, according to the correct age of the insured, the coverage provided by the policy would not have become effective, or would have ceased prior to the acceptance of the premium or premiums, then the liability of the insurer is limited to the refund, upon request, of all premiums paid for the period not covered by the policy.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03.1-07.

26.1-36-20. Juvenile’s accident and health coverage to continue — Conditions.

Insurance companies and nonprofit health service corporations licensed in this state shall continue coverage of a juvenile insured under an accident and health insurance policy or a health service contract while the legal custody of the juvenile has been given by a court, under chapters 27-20.3 and 27-20.4 , to any public institution or agency, to the same extent as the general public is covered as long as the juvenile meets all the other usual qualifications for insurability and continues to pay the policy or contract premiums. A juvenile’s incarceration may not be a basis for cancellation of the juvenile’s accident and health insurance policy or health service contract.

Source:

S.L. 1985, ch. 316, § 13; 1985, ch. 328, § 2; 2021, ch. 245, § 12, eff July 1, 2021.

Derivation:

N.D.C.C. §§ 26-03.1-13, 26.1-17-15.

26.1-36-21. Prisoner’s accident and health coverage to continue — Conditions.

Insurance companies and nonprofit health service corporations licensed in this state shall continue coverage of a prisoner insured under an accident and health insurance policy or a health service contract while the prisoner is incarcerated and under state supervision to the same extent as the general public is covered as long as the prisoner meets all the other usual qualifications for insurability and continues to pay the policy or contract premiums. A prisoner’s incarceration may not be a basis for cancellation of the prisoner’s accident and health insurance policy or health service contract.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. §§ 26-03.1-12, 26.1-17-14.

26.1-36-22. Individual and group health insurance for dependents.

An individual or group health insurance policy may be extended to insure the individuals, employees, or members with respect to their family members or dependents, including dependents of dependents, or any class or classes thereof, subject to the following:

  1. The premium for the insurance must be paid either from funds contributed by the employer, union, association, or other person to whom the policy has been issued, or from funds contributed by the covered persons, or from both. A policy on which no part of the premium for the family members or dependents coverage is to be derived from funds contributed by the covered persons must insure all eligible employees or members with respect to their family members or dependents, or any class or classes thereof.
  2. An insurer may exclude or limit the coverage on any family member or dependent as to whom evidence of individual insurability is not satisfactory to the insurer.
  3. A policy that provides coverage for a dependent child of an employee or other member of the covered group must provide such coverage up to a limiting age of twenty-two years of age, if the dependent child physically resides with the employee or other member and is chiefly dependent upon the employee or member for support and maintenance.
  4. A policy that provides that coverage for a dependent child of an employee or other member of the covered group terminates upon attainment of the limiting age for dependent children specified in the policy does not operate to terminate the coverage of a dependent child while the child is a full-time student and has not attained the age of twenty-six years or while the child is and continues to be both incapable of self-sustaining employment by reason of intellectual disability or physical disability and chiefly dependent upon the employee or member for support and maintenance, provided proof of incapacity and dependency is furnished to the insurer by the employee or member within thirty-one days of the child’s attainment of limiting age and subsequently as may be required by the insurer but not more frequently than annually after the two-year period following the child’s attainment of the limiting age.

Source:

S.L. 1985, ch. 316, § 13; 1995, ch. 246, § 25; 2011, ch. 207, § 19.

Derivation:

N.D.C.C. § 26-03.6-04.

26.1-36-23. Continuation of group hospital, surgical, and major medical coverage after termination of employment or membership.

A group policy or certificate of insurance or certificate on a master policy of a group as defined by subsection 6 of section 26.1-02-05 delivered or issued for delivery in this state issued by any insurance company, nonprofit health service corporation, health maintenance organization, or any other insurer that provides hospital, surgical, or major medical expense insurance or any accommodation of these coverages on an expense-incurred basis, but not a policy that provides benefits for specific diseases or for accidental injuries only, must provide that employees or members whose insurance under the group policy would otherwise terminate because of termination of employment or membership are entitled to continue their hospital, surgical, and major medical insurance under that group policy, for themselves and their eligible dependents, subject to all of the group policy’s terms and conditions applicable to those forms of insurance and to the following conditions:

  1. Continuation is only available to an employee or member who has been continuously insured under the group policy, and for similar benefits under any group policy which it replaced, during the entire three-month period ending with the termination.
  2. Continuation is not available for any person who is covered by Medicare. Neither is continuation available for any person who is covered by any other insured or uninsured arrangement which provides hospital, surgical, or medical coverages for individuals in a group and under which the person was not covered immediately prior to the termination.
  3. Continuation need not include dental, vision care, or prescription drug benefits or any other benefits provided under the group policy in addition to its hospital, surgical, or major medical benefits.
  4. An employee or member who wishes continuation of coverage must request the continuation in writing within the ten-day period following the later of the date of termination, or the day the employee is given notice of the right of continuation by either the employer or the group policyholder. The employee or member may not elect continuation more than thirty-one days after the date of termination.
  5. An employee or member electing continuation shall pay to the group policyholder or the employer, on a monthly basis in advance, the amount of contribution required by the policyholder or employer, but not more than the group rate for the insurance being continued under the group policy on the due date of each payment. The employee’s or member’s written election of continuation, together with the first contribution required to establish contributions on a monthly basis in advance, must be given to the policyholder or employer within thirty-one days of the date the employee’s or member’s insurance would otherwise terminate.
  6. Continuation of insurance under the group policy for any person terminates when the person fails to satisfy subsection 2 or, if earlier, at the first to occur of the following:
    1. The date thirty-nine weeks after the date the employee’s or member’s insurance under the policy would otherwise have terminated because of termination of employment or membership.
    2. If the employee or member fails to make timely payment of a required contribution, the end of the period for which contributions were made.
    3. The date on which the group policy is terminated or, in the case of an employee, the date the employer terminates participation under the group policy. However, if this subdivision applies and the coverage ceasing by reason of such termination is replaced by similar coverage under another group policy, the following apply:
      1. The employee or member may become covered under that other group policy for the balance of the period that the employee or member would have remained covered under the prior group policy in accordance with this subsection had a termination described in this subdivision not occurred.
      2. The minimum level of benefits to be provided by the other group policy is the applicable level of benefits of the prior group policy reduced by any benefits payable under that prior group policy.
      3. The prior group policy must continue to provide benefits to the extent of its accrued liabilities and extensions of benefits as if the replacement had not occurred.
  7. A notification of the continuation privilege must be included in each certificate of coverage.
  8. Upon termination of the continuation period, the member, surviving spouse, or dependent is entitled to exercise any option which is provided in the group plan to elect a conversion policy. The member electing a conversion policy shall notify the carrier of the election and pay the required premium within thirty-one days of the termination of the continued coverage under the group contract.
    1. Notwithstanding any other provision of this section, an employee or member who does not have an election of continuation coverage as described in this section in effect on the effective date of the American Recovery and Reinvestment Act of 2009 [Pub. L. 111-5], but who would be an assistance-eligible individual under title III of division B of the Act if the election were in effect, may elect continuation coverage. The employer or the group policyholder shall provide employees or members with additional written notice of the right to elect coverage under this subsection within sixty days of the date of enactment of the American Recovery and Reinvestment Act of 2009 or May 19, 2009, whichever is later. The employee or member may make the election in writing no later than sixty days after the date the employer or the group policyholder provides the notice to the employee or member.
    2. Continuation coverage elected under this subsection commences with the first period of coverage beginning after February 16, 2009, and may not extend beyond the period of continuation coverage that would have been required if the coverage had instead been elected under subsection 4.
    3. The period beginning on the date that the employee or member was involuntarily terminated and ending when the continuation coverage starts must be disregarded for the purpose of determining whether a pre-existing condition exclusion period applies.
    4. An employee or member electing continuation under this subsection shall pay to the group policyholder or the employer, on a monthly basis in advance, the amount of contribution required by the policyholder or employer, but not more than the group rate for the insurance being continued under the group policy on the due date of each payment. The employee’s or member’s written election of continuation, together with the contribution required to establish contributions on a monthly basis in advance, must be given to the policyholder or employer within thirty-one days of the date the employee’s or member’s election of continuation coverage.
    5. Continuation of insurance under this subsection terminates at the earlier of the date when the person fails to satisfy subsection 2 or when the person fails to satisfy any requirement of subsection 6.
    6. The notification described in subsection 7 is not required for continuation coverage elected under this subsection.
    7. Except as otherwise provided in this subsection, the provisions of this section apply to an employee or member electing continuation coverage.

Source:

S.L. 1985, ch. 316, § 13; 1987, ch. 331, § 2; 2009, ch. 10, § 10.

Derivation:

N.D.C.C. § 26-03.6-05.

26.1-36-23.1. Former spouse’s and dependent children’s accident and health coverage to continue — Conditions.

  1. No group accident and health insurance policy, including a policy issued under a self-insured plan, group health service contract issued under chapter 26.1-17, or evidence of coverage issued under chapter 26.1-18.1, providing coverage for hospital or medical expenses, delivered, issued for delivery, renewed, or amended after July 1, 1987, which in addition to covering the insured also provides coverage to the spouse of the insured, may contain a provision for termination of coverage for a spouse covered under the policy, contract, or evidence of coverage solely as a result of a break in the marital relationship except by reason of an entry of a decree of annulment of marriage or divorce.
  2. Every policy, contract, or evidence of coverage described in subsection 1 must contain a provision that permits continuation of coverage of the insured’s former spouse and dependent children upon entry of a decree of annulment of marriage or divorce, if the decree requires the insured to provide continued coverage for those persons. The coverage may be continued until the date of remarriage of the insured’s former spouse or the date coverage would otherwise terminate, whichever occurs first, but not to exceed thirty-six months. The insured shall pay any required premium contributions for the coverage not to exceed one hundred two percent of the premium for the group coverage.
  3. Every policy, contract, or evidence of coverage described in subsection 1 must contain a provision allowing a former spouse and dependent children, without providing evidence of insurability, to obtain from the insurer at the expiration of any continuation of coverage under subsection 2 or upon termination of coverage by reason of an entry of a decree of annulment or divorce which does not require the insured to provide continued coverage for the former spouse and dependent children, conversion coverage providing comparable benefits of the group policy, contract, or evidence of coverage, if an application is made to the insurer within thirty days following notice of the expiration of the continued coverage and upon payment of the appropriate premium. A policy, contract, or evidence of coverage providing reduced benefits at a reduced premium rate may be accepted by the former spouse and dependent children in lieu of the existing coverage. The policy, contract, or evidence of coverage must be renewable at the option of the former spouse as long as the former spouse is not covered under another accident and health insurance plan, policy, or contract, up to age sixty-five or to the day before the date of eligibility for coverage under title XVIII of the Social Security Act [42 U.S.C. 1305 et seq.], as amended.

Source:

S.L. 1987, ch. 364, § 1; 1999, ch. 251, § 12.

Collateral References.

Divorce and separation: effect of court order prohibiting sale or transfer of property on party’s right to change beneficiary of insurance policy, 68 A.L.R.4th 929.

26.1-36-24. Health policy transferable.

A health insurance policy may pass by transfer, will, or succession to any person, whether that person has an insurable interest or not, and that person may recover any benefit payable under the policy in accordance with the terms of the policy, but in no event shall such transfer or succession operate to change the named insured or insureds covered under the policy. An insured under a group health insurance policy, pursuant to agreement among the insured, the group policyholder and the insurer, may make an assignment of all or any part of the incidents of ownership held by the insured under the policy, including any right to designate a beneficiary and any right to have an individual policy issued in case of termination of employment. An assignment, whether made prior to or subsequent to July 1, 1971, is valid for the purpose of vesting in the assignee all the incidents of ownership assigned, and entitles the insurer to deal with the assignee as the owner in accordance with the policy, but without prejudice to the insurer on account of any payment made or individual policy issued prior to receipt by the insurer of such notice as may be required by the policy.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03-12 .

26.1-36-25. Notice of transfer of health policy unnecessary — Exception.

Notice to an insurer of a transfer or bequest of a health insurance policy is not necessary to preserve the validity of the policy unless notice is required by the policy.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03-13.

26.1-36-26. Dual choice option on group health coverage — Minimum conditions — Transfer of coverage.

If an existing or prospective employer group desires a dual choice option between a nonprofit health service corporation or an insurance company and a health maintenance organization, the dual choice option may be made available to the employees in the group only if all of the following conditions are met:

  1. There are at least fifteen employees in the group.
  2. The group shall maintain the highest enrollment percentage as specified in the underwriting manual of the nonprofit health service corporation, the insurance company, or the health maintenance organization, and the health maintenance organization enrollees must be combined with subscribers of nonprofit health service corporations or insureds of insurance companies in meeting the percentage requirements.
  3. An employee must be allowed to transfer between coverage offered by a health maintenance organization and coverage offered by a nonprofit health service organization or insurance company on the group’s anniversary date as specified in the master contract with the group, except a special opening must be offered at the group’s request for the following reasons:
    1. Upon a group’s initial offering of a dual choice plan in addition to existing coverages offered by a nonprofit health service corporation or an insurance company.
    2. When a group discontinues offering a dual choice plan with a health maintenance organization to request open enrollment into the group offered by the nonprofit health service corporation or the insurance company.
    3. If the group offers both coverage by a nonprofit health service corporation or an insurance company and a health maintenance organization and an individual employee enrolled in the health maintenance organization transfers within the same company but leaves the service area of the health maintenance organization, the employee must be allowed to enroll in the plan offered by the nonprofit health service corporation or the insurance company at the time of transfer.
    4. Any group that offers health coverage to its retired employees by a nonprofit health service corporation or an insurance company and a health maintenance organization must advise the employees who are enrolled under their present coverage that they may change to other coverage offered at the time of retirement, and if the employees who retire elect to retain or change their present coverage, the employees will no longer be eligible to change coverage after retirement.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03-39.5.

26.1-36-27. Dual choice option on group health coverage — Continuous coverage — Payment of benefits.

If an employee, or an eligible dependent of the employee, transfers from coverage provided by a nonprofit health service corporation or an insurance company to coverage offered by a health maintenance organization or transfers from coverage offered by a health maintenance organization to coverage offered by a nonprofit health service corporation or an insurance company and is an inpatient of a hospital or alcoholism treatment center on the day the coverage becomes effective, then the benefits for confinement on an inpatient basis of a hospital or alcoholism treatment center must be provided by the nonprofit health service corporation, insurance company, or health maintenance organization providing coverage on the date the employee or the eligible dependent of the employee was confined as an inpatient of a hospital or alcoholism treatment center so long as coverage is uninterrupted, medically necessary, and directly related to the inpatient’s stay.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03-39.6.

26.1-36-28. Measure of indemnity in health policy.

Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a health insurance policy is the sum fixed in the policy.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03-23.

26.1-36-29. Coordination of benefits in individual and group accident and health policies — Limitations.

An insurer or health service corporation may not issue or renew any individual or group accident and health insurance policy that excludes or reduces the benefits payable or services to be rendered to or on behalf of any insured because benefits have been paid or are also payable under any individually underwritten and individually issued contract or plan of insurance which provides exclusively for specific disease, hospital indemnity, and other limited benefits, irrespective of the mode or channel of premium payment, with or without payroll deduction, to the insurer and regardless of any reduction in the premium by virtue of the insured’s membership in any organization or of the insured’s status as an employee. This section does not affect the practice of coordination of benefits as provided in section 26.1-36-10.

Source:

S.L. 1985, ch. 316, § 13; 1991, ch. 301, § 20; 1993, ch. 309, § 2.

Derivation:

N.D.C.C. § 26-03-48.1.

26.1-36-30. Individual or group accident and health insurer or nonprofit health service corporation responsibility — Release of information to department of human services. [Effective through August 31, 2022]

  1. Any individual or group accident and health insurer or nonprofit health service corporation, upon request of the department of human services, shall provide any information contained in its records pertaining to an individual who is an applicant for or recipient of medical assistance under chapter 50-24.1, and who is covered under an accident and health insurance policy or a health service contract issued by the insurer or nonprofit health service corporation or the medical benefits paid by or claims paid to the insured or subscriber under a policy or contract. The insurer or nonprofit health service corporation shall make the requested records or information available upon receipt of a certification by the department of human services that the individual is an applicant for or recipient of medical assistance under chapter 50-24.1, or is a person who is legally responsible for the applicant or recipient.
  2. The information required to be made available pursuant to this section is limited to information necessary to determine whether benefits under the policy or contract have been or should have been claimed and paid pursuant to an accident and health insurance policy or health service contract with respect to items of medical care and services received by a particular individual for which medical assistance coverage would otherwise be available.
  3. The department of human services shall, in consultation with the commissioner, establish guidelines:
    1. For the method of requesting and furnishing appropriate information, the time in which the information is to be provided, and method of reimbursing insurance companies and nonprofit health service corporations for necessary costs incurred in furnishing the requested information.
    2. To assure that information relating to an individual certified to be an applicant for or recipient of medical assistance under chapter 50-24.1, furnished to an insurer or subscriber pursuant to this section, is used only for the purpose of identifying the records or information requested in such manner so as not to violate section 50-06-15.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03-39.3.

26.1-36-30. Individual or group accident and health insurer or nonprofit health service corporation responsibility — Release of information to department of health and human services. [Effective September 1, 2022]

  1. Any individual or group accident and health insurer or nonprofit health service corporation, upon request of the department of health and human services, shall provide any information contained in its records pertaining to an individual who is an applicant for or recipient of medical assistance under chapter 50-24.1, and who is covered under an accident and health insurance policy or a health service contract issued by the insurer or nonprofit health service corporation or the medical benefits paid by or claims paid to the insured or subscriber under a policy or contract. The insurer or nonprofit health service corporation shall make the requested records or information available upon receipt of a certification by the department of health and human services that the individual is an applicant for or recipient of medical assistance under chapter 50-24.1, or is a person who is legally responsible for the applicant or recipient.
  2. The information required to be made available pursuant to this section is limited to information necessary to determine whether benefits under the policy or contract have been or should have been claimed and paid pursuant to an accident and health insurance policy or health service contract with respect to items of medical care and services received by a particular individual for which medical assistance coverage would otherwise be available.
  3. The department of health and human services shall, in consultation with the commissioner, establish guidelines:
    1. For the method of requesting and furnishing appropriate information, the time in which the information is to be provided, and method of reimbursing insurance companies and nonprofit health service corporations for necessary costs incurred in furnishing the requested information.
    2. To assure that information relating to an individual certified to be an applicant for or recipient of medical assistance under chapter 50-24.1, furnished to an insurer or subscriber pursuant to this section, is used only for the purpose of identifying the records or information requested in such manner so as not to violate section 50-06-15.

Source:

S.L. 1985, ch. 316, § 13; 2021, ch. 352, § 320, eff September 1, 2022.

26.1-36-31. Medicare supplement policies — Definitions. [Repealed]

Repealed by S.L. 1991, ch. 304, § 14.

26.1-36-32. Standards for Medicare supplement policies. [Repealed]

Repealed by S.L. 1991, ch. 304, § 14.

26.1-36-33. Medicare supplement policy benefit standards. [Repealed]

Repealed by S.L. 1991, ch. 304, § 14.

26.1-36-34. Medicare supplement policy loss ratio standards. [Repealed]

Repealed by S.L. 1991, ch. 304, § 14.

26.1-36-35. Medicare supplement policy disclosure standards. [Repealed]

Repealed by S.L. 1991, ch. 304, § 14.

26.1-36-36. Medicare supplement policies — Notice of free examination. [Repealed]

Repealed by S.L. 1991, ch. 304, § 14.

26.1-36-36.1. Filing requirements for advertising. [Repealed]

Repealed by S.L. 1991, ch. 304, § 14.

26.1-36-36.2. Noncustodial care coverage.

An insurer offering convalescent nursing home, extended care facility, or skilled nursing facility coverage under chapter 26.1-36.1 or 26.1-45 shall cover intermediate care confinements in the same manner as skilled care confinements.

Source:

S.L. 1989, ch. 371, § 4; 1991, ch. 301, § 21.

26.1-36-37. Nursing home policy — Guaranteed renewable for life — Limitation on pre-existing conditions. [Repealed]

Repealed by S.L. 1991, ch. 304, § 14.

26.1-36-37.1. Standard health insurance proof of loss form — Claim payment time limits.

The commissioner shall prescribe by rule a standard health insurance proof of loss and claim form for use in filing proof of loss and a claim for all health care services. For purposes of this section, “health care service” means any service included in providing an individual with medical, dental, or hospital care or any service incident to providing medical, dental, or hospital care as well as any service provided to prevent, alleviate, care, or heal human illness or injury. After receipt of a health insurance proof of loss form, the insurer shall, within fifteen business days, pay the claim or that portion of the claim that is not contested, deny the claim, or make an initial request for additional information. If a claim or a portion of a claim is contested, the insured or the insured’s assignee must be notified in writing that the claim is contested and the reasons for the contest. Nothing in this notification precludes the insurer from denying the claim in whole or in part, for other reasons at a later date. Within fifteen business days of the receipt of the information initially requested, the insurer shall pay or deny the claim.

Source:

S.L. 1985, ch. 327, § 3; 1991, ch. 320, § 1; 1993, ch. 311, § 15.

26.1-36-37.2. Loss ratios — Rules.

For all policies providing hospital, surgical, medical, or major medical benefit, an insurance company, a nonprofit health service corporation, a fraternal benefit society, and any other entity providing a plan of health insurance or health benefit subject to state insurance regulation shall return benefits to group policyholders in the aggregate of not less than seventy percent of premium received and to individual policyholders in the aggregate of not less than fifty-five percent of premium received. The commissioner shall adopt rules to establish these minimum standards on the basis of incurred claims experienced and earned premiums for the entire period for which rates are computed to provide coverage in accordance with accepted actuarial principles and practices. This section does not apply to any contract or plan of insurance that provides exclusively for accident, disability income insurance, specified disease, hospital confinement indemnity, or other limited benefit health insurance.

Source:

S.L. 1993, ch. 311, § 16; 1995, ch. 291, § 1; 2007, ch. 270, § 1.

26.1-36-38. Rulemaking authority.

The commissioner may adopt reasonable rules necessary, proper, or advisable to administer this chapter.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03.1-03.

26.1-36-39. Effect of policy not conforming to chapter.

A policy delivered or issued for delivery to any person in this state in violation of this chapter is valid but must be construed as provided in this chapter. When any provision in a policy subject to this chapter is in conflict with this chapter, the rights, duties, and obligations of the insurer, the insured, and the beneficiary are governed by this chapter.

Source:

S.L. 1985, ch. 316, § 13.

Derivation:

N.D.C.C. § 26-03.1-04.

26.1-36-40. General penalty — License suspension or revocation.

Any person willfully violating any provision of this chapter or order of the commissioner made in accordance with this chapter is guilty of a class A misdemeanor. The commissioner may also suspend or revoke the license of an insurer or insurance producer for any such willful violation.

Source:

S.L. 1985, ch. 316, § 13; 2001, ch. 262, § 103.

Derivation:

N.D.C.C. § 26-03.1-09.

26.1-36-41. Contract limitations.

  1. An insurance company as defined by section 26.1-02-01 issuing a health and accident policy, a health maintenance organization, or any other entity providing a plan of health insurance subject to state insurance regulation may not terminate a practitioner’s participating contract, designate a practitioner as nonpayable, or otherwise impose sanctions on any practitioner solely for an excessive or inappropriate practice pattern unless the requirements of this section are met. If a practitioner engages in an excessive or inappropriate practice pattern for the practitioner’s specialty, the entity shall inform the practitioner, in writing, as to the manner in which the practitioner’s practice is excessive or inappropriate. The entity shall consult with the practitioner and provide a reasonable time period of not less than six months within which to modify the practitioner’s practice pattern. If the excessive or inappropriate practice pattern continues, the entity may impose reasonable sanctions on the practitioner, terminate the practitioner’s participating contract, or designate the practitioner as nonpayable. If considered for sanction, termination, or nonpayable status, the affected practitioner must first be given the opportunity to be present and to be heard by a committee appointed by the entity which must include at least one representative of the practitioner’s specialty. The entity may not impose sanctions on a practitioner, terminate a practitioner, or designate a practitioner as nonpayable in the absence of the committee’s recommendation to do so. All reports, practice profiles, data, and proceedings of the entity relative to a practitioner who is sanctioned, terminated, or considered for designation as nonpayable are confidential and may not be disclosed or be subject to subpoena or other legal process. Nonpayable status under this section may not commence until after appropriate notification to the entity’s subscribers and the affected practitioner. As used in this section, “practitioner” includes an optometrist, a physician, a chiropractor, or an advanced registered nurse practitioner duly licensed to practice in this state.
  2. If the entity uses a practice profile as a factor to evaluate a practitioner’s practice pattern, the entity shall provide upon request of the practitioner at any time a description of the criteria, data sources, and methodologies used to compile the practice profile concerning the practitioner and the manner in which the practice profile is used to evaluate the practitioner. An entity may not sanction a practitioner, terminate a practitioner’s participating contract, or designate a practitioner as nonpayable on the basis of a practice profile without informing the practitioner of the specific data underlying those findings. For purposes of this section, a “practice profile” means a profile, summary, economic analysis, or other analysis of data concerning the cost, quality, or quantity of services rendered by an individual practitioner, group of practitioners, or preferred provider. In addition, an entity in developing practice profiles or otherwise measuring practitioner performance shall:
    1. Make severity adjustments, including allowances for the severity of illness or condition of the patient mix and allowances for patients with multiple illnesses or conditions;
    2. Periodically evaluate, with input from specialty-specific practitioners as appropriate, the quality and accuracy of practice profiles, data sources, and methodologies;
    3. Develop and implement safeguards to protect against the unauthorized use or disclosure of practice profiles; and
    4. Provide the opportunity for any practitioner at any time to examine the accuracy, completeness, or validity of any practice profile concerning the practitioner and to prepare a written response to the profile. The entity shall negotiate in good faith with the practitioner to correct any inaccuracies or to make the profile complete. If the inaccuracies or deficiencies are not corrected to the satisfaction of the practitioner, the entity shall submit the written response prepared by the practitioner along with the profile at the time the profile is used pursuant to subsection 1 or provided to any third party consistent with section 26.1-36-12.4.
  3. This section does not limit the authority of the commissioner to obtain from an insurer information relating to an investigation of suspected or actual fraudulent insurance acts.

Source:

S.L. 1999, ch. 257, § 7; 2017, ch. 220, § 1, eff August 1, 2017.

26.1-36-42. Grievance procedures.

  1. An accident and health insurance policy may not be delivered or issued for delivery by an insurance company, as defined in section 26.1-02-01, or any other entity providing a plan of health insurance subject to state insurance regulation to a person in this state unless the entity establishes and maintains a grievance procedure for resolving complaints by covered persons and providers and addressing questions and concerns regarding any aspect of the plan, including access to and availability of services, quality of care, choice and accessibility of providers, and network adequacy. The procedure must include a system to record and document all grievances since the date of its last examination of the grievances.
  2. The procedure must be approved by the insurance commissioner. The commissioner may examine the grievance procedures.

Source:

S.L. 1999, ch. 257, § 8.

26.1-36-43. Uniform prescription drug information card.

  1. An insurance company, a nonprofit health service corporation, or a health maintenance organization that provides coverage for prescription drugs and that issues a card or other technology for prescription drug claims processing and an administrator of such coverage, including a third-party administrator for a self-insurance plan, a pharmacy benefits manager, and a state-administered plan may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage on an individual, group, blanket, franchise, or association basis unless the insured is also issued a uniform card or other technology containing uniform prescription drug information as provided under this section.
  2. The uniform prescription drug information card or other technology must be in the format approved by the national council for prescription drug programs and must include all of the fields the issuer determines necessary to submit a claim and all the fields necessary to conform to the most recent pharmacy information card or technology implementation guide produced by the national council for prescription drug programs, or must include all the fields necessary to conform to a national format acceptable to the commissioner. All information the issuer determines necessary for claims submission of prescription drug benefits, exclusive of information provided on the prescription as required by law or rule, must be included on the card or other technology in a clear, readable, and understandable manner. All information on the card or other technology which is required under this section and which is not specified by the national council for prescription drug programs must be formatted and arranged in a manner that corresponds in content and format acceptable to the commissioner. All information on the card must be formatted and arranged in a manner that corresponds in content and format to the current content and format required by the issuer to process the claim. If an issuer requires a conditional or situation field as defined by the national council for prescription drug programs, the field must conform to the pharmacy information card or technology implementation guide produced by the national council for prescription drug programs or conform to the national format acceptable to the commissioner.
  3. An issuer shall issue a new uniform prescription drug information card or other technology upon enrollment and reissue upon any change in the cardholder’s coverage which impacts data in content or format as contained on the card or which affects the data content or format required to be on the card or other technology as required by this section. Newly issued cards or other technology must be updated with the latest coverage information and must conform to the national council for prescription drug programs standards and to the implementation guide or must conform to the format specified by the commissioner. However, the issuer may issue to the insured stickers or other methodologies to temporarily update cards as may be acceptable to the commissioner.
  4. The card or other technology may be used for any health insurance coverage. This section does not require any person issuing the card or other technology to issue a separate card for prescription coverage, provided the card or other technology can accommodate the information necessary to process the claim as required by this section.

Source:

S.L. 2001, ch. 275, § 1.

26.1-36-44. Independent external review.

This section applies to grandfathered health plans. “Grandfathered health plan” has the meaning stated in the Patient Protection and Affordable Care Act [Pub. L. 111-148], as amended by the Health Care and Education Reconciliation Act of 2010 [Pub. L. 111-152]. Every insurance company, nonprofit health service corporation, and health maintenance organization that offers an accident and health line of insurance shall establish and implement an independent external review mechanism to review and determine whether medical care rendered under the line of insurance was medically necessary and appropriate to the claim as submitted by the provider. For purposes of this section, “independent external review” means a review conducted by the North Dakota health care review, inc., another peer review organization meeting the requirements of section 1152 of the Social Security Act, or any person designated by the commissioner to conduct an independent external review. A determination made by the independent external reviewer is binding on the parties. Costs associated with the independent external review are the responsibility of the nonprevailing party. A provider may not use an independent external review under this section unless the provider first has exhausted all internal appeal processes offered by the insurance company, nonprofit health service corporation, or health maintenance organization. The insurance commissioner shall take steps necessary to ensure compliance with this section. If federal laws or rules relating to independent external review are amended, repealed, or otherwise changed, the insurance commissioner shall adopt rules to ensure the independent external review procedure is in compliance with and substantively equivalent to the federal requirements.

Source:

S.L. 2005, ch. 271, § 1; 2009, ch. 257, § 1; 2011, ch. 218, § 3.

26.1-36-45. Health insurance coverage not required. [Effective through August 31, 2022]

  1. Regardless of whether a resident of this state has or is eligible for health insurance coverage under a health insurance policy, health service contract, or evidence of coverage by or through an employer or under a plan sponsored by the state or federal government, the resident is not required to obtain or maintain a policy of individual health coverage except as may be required by a court or by the department of human services through a court or administrative proceeding.
  2. This section does not render a resident of this state liable for any penalty, assessment, fee, or fine as a result of the resident’s failure to procure or obtain health insurance coverage.
  3. This section does not apply to:
    1. An individual who voluntarily applies for coverage under a state-administered program pursuant to the medical assistance program under title XIX of the federal Social Security Act [42 U.S.C. 1396 et seq.] or the state’s children’s health insurance program under title XXI of the federal Social Security Act [42 U.S.C. 1397aa et seq.].
    2. A student who is required by an institution of higher education to obtain and maintain health insurance as a condition of enrollment.
    3. An individual who is required by a religious institution to obtain and maintain health insurance.
  4. This section does not impair the rights of an individual to contract privately for health insurance coverage for family members or former family members.

Source:

S.L. 2011, ch. 219, § 1.

26.1-36-45. Health insurance coverage not required. [Effective September 1, 2022]

  1. Regardless of whether a resident of this state has or is eligible for health insurance coverage under a health insurance policy, health service contract, or evidence of coverage by or through an employer or under a plan sponsored by the state or federal government, the resident is not required to obtain or maintain a policy of individual health coverage except as may be required by a court or by the department of health and human services through a court or administrative proceeding.
  2. This section does not render a resident of this state liable for any penalty, assessment, fee, or fine as a result of the resident’s failure to procure or obtain health insurance coverage.
  3. This section does not apply to:
    1. An individual who voluntarily applies for coverage under a state-administered program pursuant to the medical assistance program under title XIX of the federal Social Security Act [42 U.S.C. 1396 et seq.] or the state’s children’s health insurance program under title XXI of the federal Social Security Act [42 U.S.C. 1397aa et seq.].
    2. A student who is required by an institution of higher education to obtain and maintain health insurance as a condition of enrollment.
    3. An individual who is required by a religious institution to obtain and maintain health insurance.
  4. This section does not impair the rights of an individual to contract privately for health insurance coverage for family members or former family members.

Source:

S.L. 2011, ch. 219, § 1; 2021, ch. 352, § 321, eff September 1, 2022.

26.1-36-46. External review procedures.

  1. As used in this section, unless the context otherwise requires:
    1. “Adverse benefit determination” means a denial of, reduction of, termination of, or a failure to provide or make payment for a claim for benefits which involves medical judgment and involves the cancellation or discontinuation of coverage that has retroactive effect. The term includes a determination based on the requirements of an insurance company, nonprofit health services corporation, or health maintenance organization for medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit and a determination that a treatment is experimental or investigational. The term does not include a denial of, reduction of, termination of, or failure to provide or make payment related to a claimant’s eligibility for benefits under the terms of coverage.
    2. “Claim for benefits” means a request for one or more benefits which is made by a claimant in accordance with the reasonable procedure for submitting benefit claims offered by an insurance company, nonprofit health services corporation, or health maintenance organization. A reasonable procedure includes an external review procedure that complies with this section.
    3. “Claimant” means an individual who makes a claim for benefits under this section.
    4. “Expedited external review” means an adverse benefit determination that involves:
      1. An admission, availability of care, a continued stay, or a health care service for which the claimant received emergency services but has not been discharged from the facility; or
      2. A medical condition for which the standard external review timeframes would seriously jeopardize the life or health of the claimant or jeopardize the claimant’s ability to regain maximum function.
    5. “External review” is a review of an adverse benefit determination conducted pursuant to this section.
    6. “Final external review determination” means a determination by an independent review organization at the conclusion of an external review.
    7. “Independent review organization” means an entity that conducts independent external reviews of adverse benefit determinations.
  2. An insurance company, nonprofit health services corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage on an individual, group, blanket, franchise, or association basis unless the policy, contract, or evidence of coverage meets the minimum requirements of 42 U.S.C. 300gg-19 and complies with 29 U.S.C. 1133, 29 CFR 2560.503-1; 42 U.S.C. 300gg-19, 26 CFR 54.9815-2719T; 29 U.S.C. 1185d, 29 CFR 2590.715-2719; and 26 U.S.C. 9815, 45 CFR 147.136. The insurance commissioner shall adopt rules as necessary to ensure compliance with this section and the federal minimum consumer protection standards. If federal laws or rules relating to external review are amended, repealed, or otherwise changed, the insurance commissioner shall adopt rules that track such changes to the federal external review rules to ensure the external review procedure set forth in this section is substantively equivalent and parallel to the federal requirements. An external review procedure must meet the requirement set forth in this section.
  3. An external review process offered by an insurance company, nonprofit health services corporation, or health maintenance organization pursuant to this section must include each of the following:
    1. An external review must be available to a claimant for:
      1. An adverse benefit determination involving medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit;
      2. A determination that a treatment is experimental or investigational if it is ensured that adequate clinical and scientific protocols are taken into account as part of the external review for determinations involving experimental or investigative claims for benefits; and
      3. An adverse benefit determination involving the cancellation or discontinuation of coverage that has a retroactive effect. For purposes of this paragraph, an adverse benefit determination does not include a denial, a reduction, a termination, or a failure to provide or make payment related to a claimant’s eligibility for benefits under the terms of coverage.
    2. An effective written notice must be provided to each claimant of the claimant’s rights related to external review of an adverse benefit determination.
    3. The insurance company, nonprofit health services corporation, or health maintenance organization may require a claimant to exhaust the internal claims and appeals process; however, a claimant may not be required to exhaust all internal and external claims and appeals processes if the insurance company, nonprofit health services corporation, or health maintenance organization waives this requirement, the claimant is considered to have exhausted the internal claims and appeals process under applicable law, or the claimant has filed for expedited external review. A claimant may file for an expedited external review without fully exhausting all internal claims and appeals requirements at the same time any internal appeal is being processed and the claimant meets the defined criteria for requesting an expedited external review.
    4. The insurance company, nonprofit health services corporation, or health maintenance organization against which a request for external review is submitted shall pay the cost of the independent review organization for completing the external review. An insurance company, nonprofit health services corporation, or health maintenance organization may require the claimant to pay a nominal filing fee from the claimant requesting an external review under this section. This fee may not exceed twenty-five dollars and must be refunded to the claimant if the adverse benefit determination is reversed by the independent review organization. A fee must be waived if payment imposes an undue hardship on the claimant. The fees charged by an insurance company, nonprofit health services corporation, or health maintenance organization to a claimant in any single plan year may not exceed seventy-five dollars.
    5. A minimum dollar requirement may not be imposed for a claim for benefits to qualify for external review.
    6. A claimant must have up to four months after receipt of notice of an adverse benefit determination to request external review.
    7. A requirement that the commissioner assign external review to independent review organizations on a random basis or other method of assignment that assures the independence and impartiality of the assignment process, such as rotational assignment. The commissioner’s process must provide for the maintenance of a list of at least three independent review organizations that are accredited by a nationally recognized private accrediting organization and are qualified to conduct the external review based on the nature of the health care service that is the subject of the review.
    8. The claimant must be notified that the claimant is allowed up to five business days to submit additional written information to the independent review organization and that this information must be considered by the independent review organization when completing the external review. Any additional information submitted by a claimant to an independent review organization for consideration in any external review must also be forwarded to the insurance company, nonprofit health services corporation, or health maintenance organization within one business day of receipt by the independent review organization.
    9. Any decision by an independent review organization through the external review process is binding on the claimant and on the insurance company, nonprofit health services corporation, or health maintenance organization, except to the extent other remedies are available under state or federal law and except that the requirement that the determination be binding does not preclude the insurance company, nonprofit health services corporation, or health maintenance organization from making payment on the claim for benefits or from failing to require such payment or benefits. The insurance company, nonprofit health services corporation, or health maintenance organization shall provide benefits, including making payment, pursuant to the final external review decision without delay, regardless of whether the insurance company, nonprofit health services corporation, or health maintenance organization intends to seek judicial review of the external review decision and unless or until there is a judicial decision otherwise.
    10. Within forty-five days of the independent review organization’s receipt of the request for external review, the independent review organization shall provide written notice to the commissioner, the claimant, and the insurance company, nonprofit health services corporation, or health maintenance organization of the independent review organization’s decision to uphold or reverse the adverse benefit determination. In regard to a request for an expedited external review, within seventy-two hours of the independent review organization’s receipt of a request for expedited review, the independent review organization shall make a decision to uphold or reverse the adverse benefit determination and notify the commissioner, the claimant, and the insurance company, nonprofit health services corporation, or health maintenance organization of the determination. If the notice by the independent review organization is not in writing, the independent review organization shall provide written confirmation of the decision within forty-eight hours after the date of the notice of the decision.
    11. An insurance company, nonprofit health services corporation, or health maintenance organization shall include a description of the external review process in or attached to the policy, certificate of coverage, or other plan documents or evidence of coverage provided to covered individuals.
    12. The contract with an independent review organization to provide external review services must require the independent review organization to maintain written records and to make those records specifically involving an external review available to the commissioner.
  4. An insurance company, nonprofit health services corporation, or health maintenance organization provides an effective and relevant notice in a culturally and linguistically appropriate manner with respect to any applicable non-English language if the insurance company, nonprofit health services corporation, or health maintenance organization provides, upon request, a notice in any applicable non-English language and a statement prominently displayed in any applicable non-English language clearly indicating how to access the language services provided by the insurance company, nonprofit health services corporation, or health maintenance organization. With respect to an address in any United States county to which such notice is sent, an applicable non-English language means that at least ten percent of the population residing in the county is literate only in the same non-English language as determined in guidance issued under federal law.

The commissioner may not use an independent review organization that has a conflict of interest that influences its independence. The independent review organization may not own or control, or be owned or controlled by, an insurance company, a nonprofit health services corporation, a health maintenance organization, a group health plan, the sponsor of a group health plan, a trade association of plans or insurance companies, or a trade association of health care providers. The independent review organization and clinical reviewer assigned to conduct an external review may not have a material professional, familial, or financial conflict of interest with the insurance company, nonprofit health services corporation, or health maintenance organization or plan that is the subject of the external review; with the claimant whose treatment is the subject of the external review; with any officer, director, or management employee of the insurance company, nonprofit health services corporation, or health maintenance organization; with employees, administrator, or sponsor of the claimant’s health plan; with the health care provider or with the health care provider’s group or practice association recommending the treatment that is subject to the external review; with the facility at which the recommended treatment would be provided; or with the developer or manufacturer of the principal drug, device, procedure, or other therapy being recommended and that is the subject of the external review.

Source:

S.L. 2011, ch. 218, § 4; 2011 Sp., ch. 581, § 1.

26.1-36-47. Internal claims and appeals procedures.

An insurance company, nonprofit health services corporation, or health maintenance organization may not deliver, issue, execute, or renew any health insurance policy, health service contract, or evidence of coverage on an individual, group, blanket, franchise, or association basis unless the policy, contract, or evidence of coverage meets the minimum requirements of 42 U.S.C. 300gg-19 and complies with 29 U.S.C. 1133, 29 CFR 2560.503-1; 42 U.S.C. 300gg-19, 26 CFR 54.9815-2719T; 29 U.S.C. 1185d, 29 CFR 2590.715-2719; and 26 U.S.C. 9815, 45 CFR 147.136. The insurance commissioner may take steps necessary to ensure compliance with this section. If federal laws or rules relating to internal claims and appeals are amended, repealed, or otherwise changed, the insurance commissioner shall adopt rules to ensure the internal claims and appeals procedure is in compliance with and substantively equivalent to the federal requirements.

Source:

S.L. 2011, ch. 218, § 5.

26.1-36-48. Short-term care insurance — Rules — Penalty.

  1. “Short-term care” means any insurance policy, group certificate of insurance, or rider advertised, marketed, offered, or designed to provide coverage for less than twelve consecutive months for each covered period on an expense-incurred, indemnity, prepaid, or other basis for one or more necessary or medically necessary diagnostic, preventative, therapeutic, rehabilitative, maintenance, adult day care, or personal care services provided in an insured’s own home or a licensed facility setting other than an acute care unit of a hospital.
  2. Any policy or rider advertised, marketed, or offered as short-term care insurance must comply with this section and all other applicable insurance laws to the extent the other laws do not conflict with this section.
  3. The insurance commissioner:
    1. May adopt rules that include standards for full and fair disclosure setting forth the manner, content, and required disclosures for the sale of short-term care insurance policies, terms of renewability, initial and subsequent conditions of eligibility, nonduplication of coverage provisions, coverage of dependents, pre-existing conditions, termination of insurance, continuation or conversion, probationary periods, limitations, exceptions, reductions, elimination periods, requirements for replacement, recurrent conditions, incontestability, rescission, return of policy provisions, and definitions of terms.
    2. May adopt rules establishing loss ratio standards for short-term care insurance policies; provided, that a specific reference to short-term care insurance policies is contained in the rules.
    3. May adopt rules to promote premium adequacy; protect the policyholder in the event of substantial rate increases; and to establish minimum standards for correcting abusive marketing practices, replacement forms, insurance producer testing, penalties, and reporting practices for short-term care insurance.
  4. In addition to any other penalties provided by the laws of this state, any insurer and any insurance producer found to have violated any requirement of this title relating to the regulation of short-term care insurance or the marketing of such insurance is subject to a fine of up to three times the amount of any commission paid for each policy involved in the violation or up to ten thousand dollars, whichever is greater.

Source:

S.L. 2013, ch. 235, § 1.

26.1-36-49. Short — Term limited — Duration health insurance plans. [Repealed]

Source:

S.L. 2019, ch. 242, § 1, eff August 1, 2019; Repealed by 2021, ch. 239, § 4, eff August 1, 2021.

CHAPTER 26.1-36.1 Medicare Supplement Policies

26.1-36.1-01. Medicare supplement policies — Definitions.

For purposes of this chapter:

  1. “Applicant” means:
    1. In the case of an individual Medicare supplement policy or subscriber contract, the person who seeks to contract for insurance benefits.
    2. In the case of a group Medicare supplement policy or subscriber contract, the proposed certificate holder.
  2. “Certificate” means any certificate issued under a group Medicare supplement policy which has been delivered or issued for delivery in this state.
  3. “Medicare” means the Health Insurance for the Aged and Disabled Act, title XVIII of the Social Security Act of 1965 [Pub. L. 92-603; 86 Stat. 1370 et seq.], as amended.
  4. “Medicare supplement policy” means a group or individual accident and health insurance policy or a subscriber contract of a health service corporation or a health care plan of a health maintenance organization or preferred provider organization, other than a policy issued pursuant to a contract under section 1876 of the federal Social Security Act [42 U.S.C. 1395 et seq.] or an issued policy under a demonstration project specified in 42 U.S.C. 1395ss(g)(1), which is advertised, marketed, or designed primarily as a supplement to reimbursements under Medicare for the hospital, medical, or surgical expenses of persons eligible for Medicare. The term does not include a policy or contract of one or more employers or labor organizations, or of the trustees of a fund established by one or more employers or labor organizations, or combination thereof, for employees or former employees, or combination thereof, or for members or former members, or combination thereof, of the labor organizations.

Source:

S.L. 1991, ch. 304, § 2; 1991 Sp., ch. 884, § 1; 1993, ch. 310, § 1; 1997, ch. 247, § 3.

26.1-36.1-02. Standards for Medicare supplement policies.

  1. The commissioner shall adopt reasonable rules to establish specific standards for provisions of Medicare supplement policies. The standards are in addition to and in accordance with applicable laws of this state, and may include coverage of:
    1. Terms of renewability.
    2. Initial and subsequent conditions of eligibility.
    3. Nonduplication of coverage.
    4. Probationary periods.
    5. Benefit limitations, exceptions, and reductions.
    6. Elimination periods.
    7. Requirements for replacement.
    8. Recurrent conditions.
    9. Definition of terms.
  2. The commissioner may adopt rules that specify prohibited Medicare supplement policy provisions not otherwise specifically authorized by statute which, in the opinion of the commissioner, are unjust, unfair, or unfairly discriminatory to any person insured or proposed for coverage under a Medicare supplement policy or certificate.
  3. Notwithstanding any other law, a Medicare supplement policy or certificate may not deny a claim for losses incurred for more than six months from the effective date of coverage for a pre-existing condition. The policy or certificate may not define a pre-existing condition more restrictively than a condition for which medical advice was given or treatment was recommended by or received from a physician within six months before the effective date of coverage.
  4. No Medicare supplement insurance policy, contract, or certificate in force in the state may contain benefits that duplicate benefits provided by Medicare.

Source:

S.L. 1991, ch. 304, § 2; 1991 Sp., ch. 884, § 2; 1993, ch. 310, § 2.

26.1-36.1-03. Rulemaking authority.

The commissioner may adopt rules to establish standards for benefits, standard policies and optional benefit riders, claims payments, abusive marketing practices and compensation arrangements, and reporting practices for Medicare supplement policies.

Source:

S.L. 1991, ch. 304, § 2.

26.1-36.1-04. Medicare supplement policy loss ratio standards.

Medicare supplement policies must return benefits to individual policyholders in the aggregate of not less than sixty-five percent of premium received. The commissioner shall adopt rules to establish minimum standards for Medicare supplement policy loss ratios on the basis of incurred claims experience and earned premiums for the entire period for which rates are computed to provide coverage and in accordance with accepted actuarial principles and practices.

Source:

S.L. 1991, ch. 304, § 2.

26.1-36.1-05. Medicare supplement policy disclosure standards.

  1. To provide for full and fair disclosure in the sale of Medicare supplement policies, no Medicare supplement policy or certificate may be delivered or issued for delivery in this state unless an outline of coverage is delivered to the applicant at the time application is made.
  2. The commissioner shall prescribe the format and content of the outline of coverage required by subsection 1. For purposes of this section, “format” means style, arrangement, and overall appearance, including such items as the size, color, and prominence of type and the arrangement of text and captions. The outline of coverage must include:
    1. A description of the principal benefits and coverage provided in the policy.
    2. A statement of the exceptions, reductions, and limitations contained in the policy.
    3. A statement of the renewal provisions, including any reservation by the insurer of a right to change premiums.
    4. A statement that the outline of coverage is a summary of the policy issued or applied for and that the policy should be consulted to determine governing contractual provisions.
  3. The commissioner may prescribe by rule a standard form and the contents of an informational brochure for persons eligible for Medicare which is intended to improve the buyer’s ability to select the most appropriate coverage and improve the buyer’s understanding of Medicare. Except in the case of direct response insurance policies, the commissioner may require by rule that the information brochure be provided to any prospective insureds eligible for Medicare concurrently with the delivery of the outline of coverage. With respect to direct response insurance policies, the commissioner may require by rule that the prescribed brochure be provided upon request to any prospective insureds eligible for Medicare, but in no event later than the time of policy delivery.
  4. The commissioner may adopt rules for captions or notice requirements, determined to be in the public interest and designed to inform prospective insureds that particular insurance coverages are not Medicare supplement coverages, for all accident and health insurance policies sold to persons eligible for Medicare, other than:
    1. Medicare supplement policies; or
    2. Disability income policies.
  5. The commissioner may also adopt rules to govern the full and fair disclosure of the information in connection with the replacement of accident and sickness policies, subscriber contracts, or certificates by persons eligible for Medicare.

Source:

S.L. 1991, ch. 304, § 2; 1993, ch. 310, § 3; 1997, ch. 247, § 4.

26.1-36.1-06. Medicare supplement policies — Notice of free examination.

Medicare supplement policies or certificates must have a notice prominently printed on or attached to the first page of the policy stating in substance that the applicant may return the policy or certificate within thirty days of its delivery and have the premium refunded if, after examination of the policy or certificate, the applicant is not satisfied for any reason.

Source:

S.L. 1991, ch. 304, § 2.

26.1-36.1-07. Filing requirements for advertising.

Every insurer, health care service plan, or other entity providing Medicare supplement insurance or benefits in this state shall provide a copy of any Medicare supplement advertisement within ten days after its first use in this state whether through written, radio, or television medium for review or approval by the commissioner to the extent required or authorized by state law.

Source:

S.L. 1991, ch. 304, § 2.

26.1-36.1-08. Effect of policy not conforming to chapter.

A policy delivered or issued for delivery to any person in this state in violation of this chapter is valid but must be construed as provided in this chapter. When any provision in a policy subject to this chapter is in conflict with this chapter, the rights, duties, and obligations of the insurer, the insured, and the beneficiary are governed by this chapter.

Source:

S.L. 1991, ch. 304, § 2.

26.1-36.1-09. General penalty — License suspension or revocation.

Any person willfully violating any provision of this chapter or order of the commissioner made in accordance with this chapter is guilty of a class A misdemeanor. The commissioner may also suspend or revoke the license of an insurer or insurance producer for any such willful violation.

Source:

S.L. 1991, ch. 304, § 2; 2001, ch. 262, § 104.

CHAPTER 26.1-36.2 Small Employer Employee Health Insurance Coverage [Repealed]

[Repealed by S.L. 1993, ch. 311, § 17]

CHAPTER 26.1-36.3 Small Employer Employee Health Insurance

26.1-36.3-01. Definitions.

As used in this chapter and section 26.1-36-37.2, unless the context otherwise requires:

  1. “Actuarial certification” means a written statement by a member of the American academy of actuaries, or other individual acceptable to the insurance commissioner, that a small employer carrier is in compliance with section 26.1-36.3-04, based upon the person’s examination of the small employer carrier, including a review of the appropriate records and the actuarial assumptions and methods used by the small employer carrier in establishing premium rates for applicable health benefit plans.
  2. “Affiliate” or “affiliated” means any entity or person who directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, a specified entity or person.
  3. “Association” means, with respect to health insurance coverage offered in this state, an association that:
    1. Has been actively in existence for at least five years;
    2. Has been formed and maintained in good faith for purposes other than obtaining insurance;
    3. Does not condition membership in the association on any health status-related factor relating to an individual, including an employee or dependent of an employee;
    4. Makes health insurance coverage offered through the association available to all members regardless of any health status-related factor relating to the members, or individuals eligible for coverage through a member; and
    5. Does not make health insurance coverage offered through the association available other than in connection with a member of the association.
  4. “Base premium rate” means, for each class of business as to a rating period, the lowest premium rate charged or that could have been charged under the rating system for that class of business by the small employer carrier to small employers with similar case characteristics for health benefit plans with the same or similar coverage.
  5. “Case characteristics” means demographic or other objective characteristics of a small employer that are considered by the small employer carrier in the determination of premium rates for the small employer; however, claim experience, health status, and duration of coverage are not case characteristics.
  6. “Church plan” has the meaning given the term under section 3(33) of the Employee Retirement Income Security Act of 1974 [Pub. L. 93-406; 88 Stat. 829; 29 U.S.C. 1001 et seq.].
  7. “Class of business” means all or a separate grouping of small employers established under section 26.1-36.3-03.
  8. “Control” is as defined in section 26.1-10-01.
  9. “Dependent” means a spouse, an unmarried child, including a dependent of an unmarried child, under the age of twenty-two, an unmarried child who is a full-time student under the age of twenty-six and who is financially dependent upon the enrollee, and an unmarried child, including a dependent of an unmarried child, of any age who is medically certified as disabled and dependent upon the enrollee as set forth in section 26.1-36-22.
  10. “Eligible employee” means an employee who works on a full-time basis and has a normal workweek of thirty or more hours. The term includes a sole proprietor, a partner of a partnership, and an independent contractor, if the sole proprietor, partner, or independent contractor is included as an employee under a health benefit plan of a small employer. The term does not include an employee who works on a part-time, temporary, or substitute basis.
  11. “Enrollee” means a person covered under a small employer health benefit plan.
  12. “Established geographic service area” means a geographic area, as approved by the insurance commissioner and based on the carrier’s certificate of authority to transact insurance in this state, within which the carrier is authorized to provide coverage.
  13. “Governmental plan” means an employee welfare benefit plan as defined in section 3(32) of the Employee Retirement Income Security Act of 1974 [Pub. L. 93-406; 88 Stat. 829; 29 U.S.C. 1001 et seq.] or any federal government plan.
  14. “Group health benefit plan” means an employee welfare benefit plan as defined in section 3(1) of the Employee Retirement Income Security Act of 1974 [Pub. L. 93-406; 88 Stat. 829; 29 U.S.C. 1001 et seq.] to the extent that the plan provides medical care as defined in this section and including items and services paid for as medical care to employees or their dependents as defined under the terms of the plan directly or through insurance, reimbursement, or otherwise. For purposes of this chapter:
    1. A plan, fund, or program that would not be, but for this section, an employee welfare benefit plan and which is established or maintained by a partnership, to the extent that the plan, fund, or program provides medical care, including items and services paid for as medical care, to present or former partners in the partnership, or to their dependents, as defined under the terms of the plan, fund, or program, directly or through insurance, reimbursement, or otherwise, must be treated as an employee welfare benefit plan which is a group health benefit plan;
    2. In the case of a group health benefit plan, the term “employer” also includes the partnership in relationship to any partner; and
    3. In the case of a group health benefit plan, the term “participant” also includes:
      1. In connection with a group health benefit plan maintained by a partnership, an individual who is a partner in relation to the partnership; or
      2. In connection with a group health benefit plan maintained by a self-employed individual, under which one or more employees are participants, the self-employed individual, if the individual is, or may become, eligible to receive benefits under the plan or the beneficiaries may be eligible to receive any benefit.
    1. “Health benefit plan” means any hospital or medical or major medical policy, certificate, or subscriber contract.
    2. “Health benefit plan” does not include one or more, or any combination of, the following:
      1. Coverage only for accident, or disability income insurance, or any combination thereof;
      2. Coverage issued as a supplement to liability insurance;
      3. Liability insurance, including general liability insurance and automobile liability insurance;
      4. Workforce safety and insurance or similar insurance;
      5. Automobile medical payment insurance;
      6. Credit-only insurance;
      7. Coverage for onsite medical clinics; and
      8. Other similar insurance coverage, specified in federal regulations, under which benefits for medical care are secondary or incidental to other insurance.
    3. “Health benefit plan” does not include the following benefits if they are provided under a separate policy, certificate, or contract of insurance or are otherwise not an integral part of the plan:
      1. Limited scope dental or vision benefits;
      2. Benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof; or
      3. Such other similar, limited benefits as are specified in federal regulations.
    4. “Health benefit plan” does not include the following benefits if the benefits are provided under a separate policy, certificate, or contract of insurance, there is no coordination between the provision of the benefits, and any exclusion of benefits under any group health benefit plan maintained by the same plan sponsor, and the benefits are paid with respect to an event without regard to whether benefits are provided with respect to such an event under any group health plan maintained by the same plan sponsor:
      1. Coverage only for specified disease or illness; or
      2. Hospital indemnity or other fixed indemnity insurance.
    5. “Health benefit plan” does not include the following if offered as a separate policy, certificate, or contract of insurance:
      1. Medicare supplemental health insurance as defined under section 1882(g)(1) of the Social Security Act;
      2. Coverage supplemental to the coverage provided under 10 U.S.C. 55; and
      3. Similar supplemental coverage provided under a group health plan.
    6. A carrier offering a policy or certificate of specified disease, hospital confinement indemnity, or limited benefit health insurance shall comply with the following:
      1. File with the insurance commissioner on or before March first of each year a certification that contains:
        1. A statement from the carrier certifying that the policy or certificate is being offered and marketed as supplemental health insurance and not as a substitute for hospital or medical expense insurance or major medical expense insurance.
        2. A summary description of the policy or certificate, including the average annual premium rates, or range of premium rates in cases when premiums vary by age, gender, or other factors, charged for the policy and certificate in this state.
      2. When the policy or certificate is offered for the first time in this state on or after August 1, 1993, file with the commissioner the information and statement required in paragraph 1 at least thirty days before the date the policy or certificate is issued or delivered in this state.
  15. “Health carrier” or “carrier” means any entity that provides health insurance in this state. For purposes of this chapter, health carrier includes an insurance company, a prepaid limited health service corporation, a fraternal benefit society, a health maintenance organization, nonprofit health service corporation, and any other entity providing a plan of health insurance or health benefits subject to state insurance regulation.
  16. “Health status-related factor” means any of the following factors:
    1. Health status;
    2. Medical condition, including both physical and mental illness;
    3. Claims experience;
    4. Receipt of health care;
    5. Medical history;
    6. Genetic information;
    7. Evidence of insurability, including condition arising out of acts of domestic violence; or
    8. Disability.
  17. “Index rate” means, for each class of business as to a rating period for small employers with similar case characteristics, the arithmetic average of the applicable base premium rate and the corresponding highest premium rate.
  18. “Late enrollee” means an eligible employee or dependent who requests enrollment in a health benefit plan of a small employer following the initial enrollment period during which the individual is entitled to enroll under the terms of the health benefit plan, provided that the initial enrollment period is a period of at least thirty days. An eligible employee or dependent may not be considered a late enrollee, however, if:
    1. The individual:
      1. Was covered under qualifying previous coverage at the time of the initial enrollment;
      2. Lost coverage under qualifying previous coverage as a result of termination of employment or eligibility, the involuntary termination of the qualifying previous coverage, death of a spouse, or divorce; and
      3. Requests enrollment within thirty days after termination of the qualifying previous coverage.
    2. The individual is employed by an employer that offers multiple health benefit plans and the individual elects a different plan during an open enrollment period.
    3. A court has ordered coverage be provided for a spouse or minor or dependent child under a covered employee’s health benefit plan and request for enrollment is made within thirty days after issuance of the court order.
    4. The individual had coverage under a Consolidated Omnibus Budget Reconciliation Act [Pub. L. 99-272; 100 Stat. 82] continuation provision and the coverage under that provision was exhausted.
  19. “Medical care” means amounts paid for:
    1. The diagnosis, care, mitigation, treatment, or prevention of disease, or amounts paid for the purpose of affecting any structure or function of the body;
    2. Transportation primarily for and essential to medical care referred to in subdivision a; and
    3. Insurance covering medical care referred to in subdivisions a and b.
  20. “Network plan” means health insurance coverage offered by a health carrier under which the financing and delivery of medical care, including items and services paid for as medical care, are provided, in whole or in part, through a defined set of providers under contract with the carrier.
  21. “New business premium rate” means, for each class of business as to a rating period, the lowest premium rate charged or offered, or which could have been charged or offered, by the small employer carrier to small employers with similar case characteristics for newly issued health benefit plans with the same or similar coverage.
  22. “Plan sponsor” has the meaning given the term under section 3(16)(B) of the Employee Retirement Income Security Act of 1974 [Pub. L. 93-406; 88 Stat. 829; 29 U.S.C. 1001 et seq.].
  23. “Premium” means money paid by a small employer and eligible employees as a condition of receiving coverage from a small employer carrier, including any fees or other contributions associated with the health benefit plan.
  24. “Producer” means insurance producer.
  25. “Qualifying previous coverage” and “qualifying existing coverage” mean, with respect to an individual, health benefits or coverage provided under any of the following:
    1. A group health benefit plan;
    2. A health benefit plan;
    3. Medicare;
    4. Medicaid;
    5. Civilian health and medical program for uniformed services;
    6. A medical care program of the Indian health service or of a tribal organization;
    7. A state health benefit risk pool, including coverage issued under chapter 26.1-08;
    8. A health plan offered under 5 U.S.C. 89;
    9. A public health plan as defined in federal regulations, including a plan maintained by a state government, the United States government, or a foreign government;
    10. A health benefit plan under section 5(e) of the Peace Corps Act [Pub. L. 87-293; 75 Stat. 612; 22 U.S.C. 2504(e)]; and
    11. A state’s children’s health insurance program funded through title XXI of the federal Social Security Act [42 U.S.C. 1397aa et seq.].
  26. “Rating period” means the calendar period for which premium rates established by a small employer carrier are assumed to be in effect.
  27. “Reinsuring carrier” means a small employer carrier which reinsures individuals or groups with the program.
  28. “Restricted network provision” means any provision of a health benefit plan that conditions the payment of benefits, in whole or in part, on the use of health care providers that have entered into a contractual arrangement with the carrier under chapters 26.1-17, 26.1-18, and 26.1-47 to provide health care services to covered individuals.
  29. “Small employer” means, in connection with a group health plan with respect to a calendar and a plan year, an employer who employed an average of at least two but not more than fifty eligible employees on business days during the preceding calendar year and who employs at least two employees on the first day of the plan year.
  30. “Small employer carrier” means any carrier that offers health benefit plans covering eligible employees of one or more small employers in this state.

The term “qualifying previous coverage” does not include coverage of benefits excepted from the definition of a “health benefit plan”.

Source:

S.L. 1993, ch. 311, § 1; 1995, ch. 246, §§ 26, 27; 1995, ch. 276, § 10; 1997, ch. 251, § 8; 1999, ch. 253, § 5; 2001, ch. 262, § 105; 2003, ch. 256, § 1; 2003, ch. 561, § 3; 2007, ch. 260, § 11; 2013, ch. 236, § 2.

26.1-36.3-02. Applicability and scope.

  1. This chapter and section 26.1-36-37.2 apply to any health benefit plan that provides coverage to the employees of a small employer in this state if:
    1. Any portion of the premium or benefits is paid by or on behalf of the small employer;
    2. An eligible employee or dependent is reimbursed, whether through wage adjustments or otherwise, by or on behalf of the small employer for any portion of the premium; or
    3. The health benefit plan is treated by the employer or any of the eligible employees or dependents as part of a plan or program for the purposes of section 106, 125, or 162 of the United States Internal Revenue Code.
    1. Except as provided in subdivision b, carriers that are affiliated companies or that are eligible to file a consolidated tax return must be treated as one carrier and any restrictions or limitations imposed by this chapter and section 26.1-36-37.2 apply as if all health benefit plans delivered or issued for delivery to small employers in this state by the affiliated carriers were issued by one carrier.
    2. An affiliated carrier that is a health maintenance organization having a certificate of authority may be considered to be a separate carrier for the purposes of this chapter and section 26.1-36-37.2.
    3. Unless otherwise authorized by the commissioner, a small employer carrier may not enter into one or more ceding arrangements with respect to health benefit plans delivered or issued for delivery to small employers in this state if the arrangements would result in less than fifty percent of the insurance obligation or risk for the health benefit plans being retained by the ceding carrier.
    1. A Taft Hartley trust, or a carrier with the written authorization of that trust, may make a written request to the commissioner for a waiver from the application of any of the provisions of subsection 1 of section 26.1-36.3-04 with respect to a health benefit plan provided to the trust.
    2. The commissioner may grant the waiver if the commissioner finds that application of subsection 1 of section 26.1-36.3-04, with respect to the trust:
      1. Would have a substantial adverse effect on the participants and beneficiaries of that trust; and
      2. Would require significant modifications to one or more collective bargaining arrangements under which the trust is established or maintained.
    3. A waiver granted under this section does not apply to a person who participates in the trust as an associate member of an employee organization.

Source:

S.L. 1993, ch. 311, § 2.

26.1-36.3-03. Establishment of classes of business.

  1. A small employer carrier may establish a separate class of business only to reflect substantial differences in expected claims experience or administrative costs resulting from:
    1. The small employer carrier using more than one type of system for the marketing and sale of health benefit plans to small employers.
    2. The small employer carrier having acquired a class of business from another small employer carrier.
    3. The small employer carrier providing coverage to one or more association groups that meet the requirements set forth in rules adopted by the commissioner.
  2. A small employer carrier may establish up to nine separate classes of business under subsection 1.
  3. The commissioner may adopt rules to provide for a period of transition in order for a small employer carrier to come into compliance with subsection 2 if the small employer carrier acquires an additional class of business from another small employer carrier.
  4. The commissioner may approve the establishment of additional classes of business if the carrier applies to the commissioner and the commissioner determines that the action would enhance the efficiency and fairness of the small employer marketplace.

Source:

S.L. 1993, ch. 311, § 3.

26.1-36.3-04. Restrictions relating to premium rates.

  1. This section only applies to a health benefit plan offered by a small employer who employed an average of at least two but not more than twenty-five eligible employees on business days during the preceding calendar year and who employs at least two employees on the first day of the plan year.
  2. Premium rates for health benefit plans subject to this section and section 26.1-36-37.2 are subject to the following:
    1. The index rate for a rating period for any class of business may not exceed the index rate for any other class of business by more than fifteen percent.
    2. For a class of business, the premium rates charged during a rating period to small employers with similar case characteristics for the same or similar coverage, or the rates that could be charged to the employers under the rating system for that class of business, may not vary from the index rate by more than twenty percent of the index rate.
    3. The percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of:
      1. The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a health benefit plan into which the small employer carrier is no longer enrolling new small employers, the small employer carrier shall use the percentage change in the base premium rate, provided that the change does not exceed, on a percentage basis, the change in the new business premium rate for the most similar health benefit plan into which the small employer carrier is actively enrolling new small employers;
      2. Any adjustment due to the claim experience, health status, or duration of coverage of the employees or dependents of the small employer as determined from the small employer carrier’s rate manual for the class of business; however, the adjustment may not exceed fifteen percent annually and must be adjusted pro rata for rating periods of less than one year; and
      3. Any adjustment due to change in coverage or change in the case characteristics of the small employer, as determined from the small employer carrier’s rate manual for the class of business.
    4. Adjustments in rates for claim experience, health status, and duration of coverage may not be charged to individual employees or dependents. Premium rates charged for a health benefit plan may not vary by a ratio of greater than four to one after January 1, 1997. Any adjustment must be applied uniformly to the rates charged for all employees and dependents of the small employer.
    5. A small employer carrier may utilize industry as a case characteristic in establishing premium rates, but the highest rate factor associated with any industry classification may not exceed the lowest rate factor associated with any industry classification by more than fifteen percent.
    6. In the case of health benefit plans delivered or issued for delivery before August 1, 1993, a premium rate for a rating period may exceed the ranges set forth in subdivisions a and b for a period of three years following August 1, 1993. Under this subdivision, the percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of:
      1. The percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period. In the case of a health benefit plan into which the small employer carrier is no longer enrolling new small employers, the small employer carrier shall use the percentage change in the base premium rate, provided that the change does not exceed, on a percentage basis, the change in the new business premium rate for the most similar health benefit plan into which the small employer carrier is actively enrolling new small employers.
      2. Any adjustment due to change in coverage or change in the case characteristics of the small employer, as determined from the carrier’s rate manual for the class of business.
      1. Small employer carriers shall apply rating factors, including case characteristics, consistently with respect to all small employers in a class of business. Rating factors must produce premiums for identical groups which differ only by amounts attributable to plan design and do not reflect differences due to the nature of the groups assumed to select particular health benefit plans.
      2. A small employer carrier shall treat all health benefit plans issued or renewed in the same calendar month as having the same rating period.
    7. For the purposes of this subsection, a health benefit plan that uses a restricted provider network may not be considered similar coverage to a health benefit plan that does not use a restricted provider network, if the use of the restricted provider network results in substantial differences in claims costs.
    8. A small employer carrier may not use case characteristics, other than age, gender, industry, geographic area, family composition, and group size, without prior approval of the commissioner. Gender may not be used as a case characteristic after January 1, 1996.
    9. The commissioner shall adopt rules to:
      1. Assure that differences in rates charged for health benefit plans by small employer carriers are reasonable and reflect objective differences in plan design, not including differences due to the nature of the groups assumed to select particular health benefit plans;
      2. Prescribe the manner in which case characteristics may be used by small employer carriers; and
      3. Otherwise implement this section.
  3. A small employer carrier may not transfer a small employer involuntarily into or out of a class of business. A small employer carrier may not offer to transfer a small employer into or out of a class of business unless the offer is made to transfer all small employers in the class of business without regard to case characteristics, claim experience, health status, or duration of coverage.
  4. The commissioner may suspend for a specified period the application of subdivision a of subsection 2 as to the premium rates applicable to one or more small employers included within a class of business of a small employer carrier for one or more rating periods upon a filing by the small employer carrier and a finding by the commissioner that the suspension is reasonable in light of the financial condition of the small employer carrier or that the suspension would enhance the efficiency and fairness of the marketplace for small employer health insurance.
  5. In connection with the offering for sale of any health benefit plan to a small employer, a small employer carrier shall make a reasonable disclosure, as part of its solicitation and sales materials, of:
    1. The extent to which premium rates for a specified small employer are established or adjusted based upon the actual or expected variation in claims costs or actual or expected variation in health status of the employees of the small employer and their dependents;
    2. The provisions of the health benefit plan concerning the small employer carrier’s right to change premium rates and factors, other than claim experience, that affect changes in premium rates;
    3. The provisions relating to renewability of policies and contracts; and
    4. The provisions relating to any pre-existing condition exclusion.
    1. Each small employer carrier shall maintain at its principal place of business a complete and detailed description of its rating practices and renewal underwriting practices, including information and documentation that demonstrate that its rating methods and practices are based upon commonly accepted actuarial assumptions and are in accordance with sound actuarial principles.
    2. Each small employer carrier shall file with the commissioner on or before March fifteenth of each year an actuarial certification certifying that the carrier is in compliance with this chapter and that the rating methods of the small employer carrier are actuarially sound. The certification must be in a form and manner and contain information specified by the commissioner. The small employer carrier shall retain a copy of the certification at the carrier’s principal place of business.
    3. A small employer carrier shall make the information and documentation described in subdivision a available to the commissioner upon request. Except in cases of violations of this chapter and section 26.1-36-37.2, the information is proprietary and trade secret information and is not subject to disclosure by the commissioner to persons outside the department except as agreed to by the small employer carrier or as ordered by a court of competent jurisdiction.

Source:

S.L. 1993, ch. 311, § 4; 1995, ch. 246, § 28; 1997, ch. 251, § 9; 2003, ch. 256, § 2; 2013, ch. 236, § 3.

26.1-36.3-05. Renewability of coverage.

  1. A health benefit plan subject to this chapter and section 26.1-36-37.2 must be renewable with respect to all eligible employees and dependents, at the option of the small employer, except for any of the following:
    1. The plan sponsor has failed to pay premiums or contributions in accordance with the terms of the health benefit plan or the health carrier has not received timely premium payments.
    2. The plan sponsor or small employer has performed an act or practice that constitutes fraud or made an intentional misrepresentation of a material fact under the terms of the coverage.
    3. Noncompliance with the carrier’s minimum participation requirements.
    4. Noncompliance with the carrier’s employer contribution requirements.
    5. A decision by the small employer carrier to discontinue offering a particular type of group health benefit plan in the state’s small employer market. A type of health benefit plan may be discontinued by the carrier in that market only if the carrier:
      1. Provides advance notice of its decision under this paragraph to the commissioner in each state in which it is licensed;
      2. Provides notice of the decision not to renew coverage to all affected small employers, participants, and beneficiaries, and to the commissioner in each state in which an affected insured individual is known to reside at least ninety days prior to the nonrenewal of any health benefit plans by the carrier. Notice to the commissioner under this subdivision must be provided at least three working days prior to the notice to the affected small employers and participants and beneficiaries;
      3. Offers to each plan sponsor provided the type of group health benefit plan the option to purchase all other health benefit plans currently being offered by the carrier to employers in the state; and
      4. In exercising the option to discontinue the particular type of group health benefit plan and in offering the option of coverage under paragraph 3, the carrier acts uniformly without regard to the claims experience of those sponsors or any health status-related factor relating to any participants or beneficiaries covered or new participants or beneficiaries who may become eligible for such coverage.
    6. A decision by the small employer carrier to discontinue offering and to nonrenew all its health benefit plans delivered or issued for delivery to small employers in this state. In such a case, the carrier shall:
      1. Provide advance notice of its decision under this paragraph to the commissioner in each state in which it is licensed;
      2. Provide notice of the decision not to renew coverage to all affected small employers, participants, and beneficiaries, and to the commissioner in each state in which an affected insured individual is known to reside at least one hundred eighty days prior to the nonrenewal of any health benefit plans by the carrier. Notice to the commissioner under this subdivision shall be provided at least three working days prior to the notice to the affected small employers and participants and beneficiaries; and
      3. Discontinue all health insurance issued or delivered for issuance in the state’s small employer market and not renew coverage under any health benefit plan issued to a small employer.
    7. In the case of health benefit plans that are made available in the small employer market only through one or more associations, the membership of an employer in the association, on the basis of which the coverage is provided, ceases, but only if the coverage is terminated under this subdivision uniformly without regard to any health status-related factor relating to any covered individual.
    8. The commissioner finds that the continuation of the coverage would not be in the best interests of the policyholders or certificate holders or would impair the carrier’s ability to meet its contractual obligations. In this case the commissioner shall assist affected small employers in finding replacement coverage.
  2. A small employer carrier that elects not to renew a health benefit plan under subdivision f of subsection 1 may not write new business in the small employer market in this state for a period of five years from the date of notice to the commissioner.
  3. In the case of a small employer carrier doing business in one established geographic service area of the state, this section only applies to the carrier’s operations in that service area.
  4. A small employer carrier offering through a network plan may not be required to offer coverage or accept applications pursuant to subsection 1 or 2 in the case of the following:
    1. To an eligible person who no longer resides, lives, or works in the service area, or in an area for which the carrier is authorized to do business, but only if coverage is terminated under this subdivision uniformly without regard to any health status-related factor; or
    2. To a small employer that no longer has any enrollee in connection with the plan who lives, resides, or works in the service area of the carrier, or the area for which the carrier is authorized to do business.
  5. At the time of coverage renewal, a health insurance carrier may modify the health insurance coverage for a product offered to a group health plan if, for coverage that is available in such market other than only through one or more bona fide associations, the modification is reasonable, consistent with state law, and effective on a uniform basis among group health plans with that product. If coverage is modified, the carrier shall:
    1. Provide advance notice of its decision under this subsection to the commissioner at least three working days prior to mailing the notice to the affected small employers and participants and beneficiaries.
    2. Provide notice of the decision to modify health coverage to all affected small employers, participants, and beneficiaries and the commissioner sixty days prior to the modification of health coverage by the carrier.

Source:

S.L. 1993, ch. 311, § 5; 1997, ch. 251, § 10; 2001, ch. 273, § 2.

26.1-36.3-06. Availability of coverage.

    1. As a condition of transacting business in this state with small employers, every small employer carrier shall actively offer small employers all health benefit plans it actively markets to small employers in this state.
      1. Subject to subdivision a of subsection 1, a small employer carrier shall issue any health benefit plan to any eligible small employer that applies for the plan and agrees to make the required premium payments and to satisfy the other reasonable provisions of the health benefit plan not inconsistent with this chapter and section 26.1-36-37.2. However, a carrier may not be required to issue a health benefit plan to a self-employed individual who is covered by, or is eligible for coverage under, a health benefit plan offered by an employer.
      2. In the case of a small employer carrier that establishes more than one class of business pursuant to section 26.1-36.3-03, the small employer carrier shall maintain and issue to eligible small employers all health benefit plans it actively markets to small employers. A small employer carrier may apply reasonable criteria in determining whether to accept a small employer into a class of business if the criteria are not intended to discourage or prevent acceptance of small employers applying for a health benefit plan, are not related to a health status-related factor of the small employer, and are applied consistently to all small employers applying for coverage in the class of business. The small employer carrier shall provide for the acceptance of all eligible small employers into one or more classes of business. This paragraph does not apply to a class of business into which the small employer carrier is no longer enrolling new small businesses.
  1. Health benefit plans covering small employers must comply with the following:
    1. A health benefit plan may impose a pre-existing condition exclusion only if:
      1. The exclusion relates to a condition, regardless of the cause of the condition, for which medical advice, diagnosis, care, or treatment was recommended or received within the six-month period immediately preceding the effective date of coverage;
      2. The exclusion extends for a period of not more than twelve months after the effective date of coverage;
      3. The exclusion does not relate to pregnancy as a pre-existing condition; and
      4. The exclusion does not treat genetic information as a pre-existing condition in the absence of a diagnosis of a condition related to such information.
    2. A small employer carrier shall reduce any time period applicable to a pre-existing condition exclusion or limitation period by the aggregate of periods the individual was covered by qualifying previous coverage, if any, if the qualifying previous coverage was continuous until at least sixty-three days prior to the effective date of the new coverage. Any waiting period applicable to an individual for coverage under a group health benefit plan may not be taken into account in determining the period of continuous coverage. This subdivision does not preclude application of an employer waiting period applicable to all new enrollees under the health benefit plan. Small employer carriers shall credit coverage by either a standard method or an alternative method. The commissioner shall adopt rules for crediting coverage under the standard and alternative method. These rules must be consistent with the Health Insurance Portability and Accountability Act of 1996 [Pub. L. 104-191; 110 Stat. 1936; 29 U.S.C. 1181 et seq.] and any federal rules adopted pursuant thereto.
    3. A health benefit plan may exclude coverage for late enrollees for the greater of eighteen months or for an eighteen-month pre-existing condition exclusion; however, if both a period of exclusion from coverage and a pre-existing condition exclusion are applicable to a late enrollee, the combined period may not exceed eighteen months from the date the individual enrolls for coverage under the health benefit plan.
      1. Except as provided in this subdivision, a small employer carrier shall apply requirements used to determine whether to provide coverage to a small employer, including requirements for minimum participation of eligible employees and minimum employer contributions, uniformly among all small employers with the same number of eligible employees who are applying for coverage or receiving coverage from the small employer carrier.
      2. A small employer carrier may vary application of minimum participation requirements and minimum employer contribution requirements only by the size of the small employer group.
        1. Except as provided in subparagraph b, a small employer carrier, in applying minimum participation requirements with respect to a small employer, may not consider employees or dependents who have qualifying existing coverage in determining whether the applicable percentage of participation is met. For purposes of determining the applicable percentage of participation under this subparagraph only, individual health benefit plans are not included in the definition of “qualifying existing coverage” under section 26.1-36.3-01.
        2. With respect to a small employer, with ten or fewer eligible employees, a small employer carrier may consider employees or dependents who have coverage under another health benefit plan sponsored by the small employer in applying minimum participation requirements.
      3. A small employer carrier may not increase any requirement for minimum employee participation or any requirement for minimum employer contribution applicable to a small employer at any time after the small employer has been accepted for coverage.
      1. If a small employer carrier offers coverage to a small employer, the small employer carrier shall offer coverage to all of the eligible employees of a small employer and their dependents. A small employer carrier may not offer coverage only to certain individuals in a small employer group or only to part of the group, except in the case of late enrollees as provided in subdivision c.
      2. Except as permitted under subsection 1 and this subsection, a small employer carrier may not modify a health benefit plan with respect to a small employer or any eligible employee or dependent through riders, endorsements, or otherwise, to restrict or exclude coverage for certain diseases or medical conditions otherwise covered by the health benefit plan.
    1. A small employer carrier offering coverage through a network plan is not required to offer coverage or accept applications under subsection 1 to a small employer if:
      1. The small employer does not have eligible individuals who live, work, or reside in the service area for such network plan; or
      2. The small employer does have eligible individuals who live, work, or reside in the service area for the network plan, but the carrier has demonstrated, if required, to the commissioner that it will not have the capacity to deliver services adequately to enrollees of any additional groups because of its obligations to existing group contractholders and enrollees, and that it is applying this paragraph uniformly to all employers without regard to the claims experience of those employers and their employees and their dependents or any health status-related factor relating to such employees and dependents.
    2. A small employer carrier, upon denying health insurance coverage in any service area in accordance with paragraph 2 of subdivision a, may not offer coverage in the small employer market within the service area for a period of one hundred eighty days after the date the coverage is denied.
  2. A small employer carrier is not required to provide coverage to small employers pursuant to subsection 1 for any period of time for which the commissioner determines that the carrier does not have the financial reserves to underwrite additional coverage and is applying this section uniformly without regard to the claims experience of small employers or any health status-related factor relating to employees and their dependents. A small employer carrier denying coverage in accordance with this section may not offer coverage in connection with a group health benefit plan in the small group market for a period of one hundred eighty days after the health coverage is denied or until the carrier has demonstrated to the commissioner sufficient financial reserves to underwrite financial coverage, whichever is later.
  3. Subsection 1 does not apply to health benefit plans offered by a small employer carrier if the carrier makes the health benefit plans available in the small employer market only through one or more associations.

Source:

S.L. 1993, ch. 311, § 6; 1997, ch. 251, § 11; 1999, ch. 253, §§ 6, 7; 2003, ch. 257, § 1; 2013, ch. 236, § 4.

26.1-36.3-07. Small employer carrier reinsurance program. [Repealed]

Repealed by S.L. 2003, ch. 256, § 3.

26.1-36.3-08. Health benefit plan committee. [Repealed]

Repealed by S.L. 2013, ch. § 6.

26.1-36.3-09. Periodic market evaluation. [Repealed]

Repealed by S.L. 2003, ch. 256, § 3.

26.1-36.3-10. Waiver of certain state laws. [Repealed]

Repealed by S.L. 2013, ch. 236, § 6.

26.1-36.3-11. Standards to assure fair marketing.

  1. Each small employer carrier shall actively market health benefit plan coverage to eligible small employers in the state.
    1. A small employer carrier or producer may not engage in the following activities, directly or indirectly:
      1. Encouraging or directing small employers to refrain from filing an application for coverage with the small employer carrier because of the health status, claims experience, industry, occupation, or geographic location of the small employer.
      2. Encouraging or directing small employers to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location of the small employer.
    2. Subdivision a does not apply to information provided by a small employer carrier or producer to a small employer regarding the established geographic service area or a restricted network provision of a small employer carrier.
    1. A small employer carrier may not enter into any contract, agreement, or arrangement, directly or indirectly, with a producer that provides for or results in the compensation paid to a producer for the sale of a health benefit plan to be varied because of the health status, claims experience, industry, occupation, or geographic location of the small employer.
    2. Subdivision a does not apply to a compensation arrangement that provides compensation to a producer on the basis of percentage of premium, provided the percentage does not vary because of the health status, claims experience, industry, occupation, or geographic area of the small employer.
  2. No small employer carrier may terminate, fail to renew, or limit its contract or agreement of representation with a producer for any reason related to the health status, claims experience, occupation, or geographic location of the small employers placed by the producer with the small employer carrier.
  3. No small employer carrier or producer may induce or otherwise encourage a small employer to separate or otherwise exclude an employee from health coverage or benefits provided in connection with the employee’s employment.
  4. Denial by a small employer carrier of an application for coverage from a small employer must be in writing and must state the reason or reasons for the denial.
  5. A violation of this section by a small employer carrier or a producer is an unfair trade practice under section 26.1-04-03.
  6. If a small employer carrier enters into a contract, agreement, or other arrangement with a third-party administrator to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the third-party administrator is subject to this section as if it were a small employer carrier.

Source:

S.L. 1993, ch. 311, § 11; 1997, ch. 251, § 12; 2013, ch. 236, § 5.

26.1-36.3-12. Restoration of terminated coverage.

The commissioner may adopt rules to require small employer carriers, as a condition of transacting business with small employers in this state after August 1, 1993, to reissue a health benefit plan to any small employer whose health benefit plan has been terminated or has not been renewed by the carrier after January 1, 1994. The rules may contain terms for the reissue of coverage as the commissioner determines necessary to provide continuity of coverage to small employers.

Source:

S.L. 1993, ch. 311, § 12.

CHAPTER 26.1-36.4 Hospital and Medical Insurance

26.1-36.4-01. Application and scope.

This chapter applies to all policies issued or renewed after July 31, 1995. The provisions of chapter 26.1-36 apply when not in conflict with this chapter.

Source:

S.L. 1995, ch. 246, § 22.

26.1-36.4-02. Definitions.

As used in this chapter, the definitions in section 26.1-36.3-01 apply, unless the context otherwise requires. In addition:

  1. “Insurer” means any insurance company, nonprofit health service organization, fraternal benefit society, or health maintenance organization that provides a plan of health insurance or health benefits subject to state insurance regulation.
  2. “Policy” means any health benefit plan as defined in section 26.1-36.3-01, whether offered on a group or individual basis. The term does not include an individual short-term limited-duration plan or association short-term limited-duration plan as defined in section 26.1-36.8-01.

Source:

S.L. 1995, ch. 246, § 22; 1997, ch. 251, § 13; 2019, ch. 242, § 2, eff August 1, 2019; 2021, ch. 239, § 1, eff August 1, 2021.

26.1-36.4-03. Limits on pre-existing condition exclusions.

An insurer may impose a pre-existing condition exclusion only if:

  1. The exclusion relates to a condition, regardless of the cause of the condition, for which medical diagnosis, care, or treatment was recommended or received within the six-month period ending on the effective date of the person’s coverage.
  2. The exclusion extends for a period of not more than twelve months after the effective date of coverage. A group policy may impose an eighteen-month pre-existing condition to a late enrollee, as the term late enrollee is defined in section 26.1-36.3-01.

Source:

S.L. 1995, ch. 246, § 22; 1997, ch. 251, § 14; 1999, ch. 253, § 8.

26.1-36.4-03.1. Additional limits on pre-existing condition exclusions.

A group policy may not impose a pre-existing condition exclusion that:

  1. Relates to pregnancy as a pre-existing condition.
  2. Treats genetic information as a pre-existing condition in the absence of a diagnosis of a condition related to such information.

Source:

S.L. 1997, ch. 251, § 15.

26.1-36.4-04. Portability of insurance policies.

An insurer shall reduce any time period applicable to a pre-existing condition, for a policy by the aggregate of periods the individual was covered by qualifying previous coverage, if the qualifying previous coverage as defined in section 26.1-36.3-01 is continuous until at least sixty-three days before the effective date of the new coverage. Any waiting period applicable to an individual for coverage under a health benefit plan may not be taken into account in determining the period of continuous coverage. Insurers shall credit coverage in the same manner as provided by section 26.1-36.3-06 and the rules adopted by the commissioner pursuant thereto.

Source:

S.L. 1995, ch. 246, § 22; 1997, ch. 251, § 16.

26.1-36.4-05. Renewability of health insurance coverage — Discrimination prohibited.

  1. An insurer issuing policies or certificates under this chapter shall provide for the renewability or continuability of coverage unless:
    1. The individual or group has failed to pay premiums or contributions in accordance with the terms of the health benefit plan or the insurer has not received timely premium payments.
    2. The individual or group has performed an act or practice that constitutes fraud or made an intentional misrepresentation of a material fact under the terms of the coverage.
    3. Noncompliance with the insurer’s minimum group participation requirements.
    4. Noncompliance with the insurer’s employer group contribution requirements.
    5. A decision by the insurer to discontinue offering a particular type of health insurance coverage in the group or individual market. A type of group health benefit plan or individual policy may be discontinued by the insurer in that market only if the insurer:
      1. Provides advance notice of its decision under this paragraph to the commissioner in each state in which it is licensed;
      2. Provides notice of the decision not to renew coverage to all affected individuals, employers, participants, beneficiaries, and to the commissioner in each state in which an affected insured is known to reside at least ninety days prior to the nonrenewal of any health benefit plans by the insurer. Notice to the commissioner under this subdivision must be provided at least three working days prior to the notice to the affected individuals, employers, participants, and beneficiaries;
      3. Offers to each affected group or individual the option to purchase all other health benefit plans or individual coverage currently being offered by the insurer in that market; and
      4. In exercising the option to discontinue the particular type of group health benefit plan or individual coverage and in offering the option of coverage under paragraph 3, the insurer acts uniformly without regard to claims experience or any health status-related factor relating to any affected individuals, participants, or beneficiaries covered or new individuals, participants, or beneficiaries who may become eligible for such coverage.
    6. A decision by the insurer to discontinue offering and to nonrenew all its health benefit plans or individual coverage delivered or issued for delivery to employers or individuals in this state. In such a case, the insurer shall:
      1. Provide advance notice of its decision under this paragraph to the commissioner in each state in which it is licensed;
      2. Provides notice of the decision not to renew coverage to all affected individuals, employers, participants, and beneficiaries, and to the commissioner in each state in which an affected insured is known to reside at least one hundred eighty days prior to the nonrenewal of any health benefit plans by the insurer. Notice to the commissioner under this subdivision must be provided at least three working days prior to the notice to the affected individuals, employers, participants, and beneficiaries; and
      3. Discontinue all health insurance issued or delivered for issuance in the state’s group or individual market and not renew such health coverage in that market.
    7. In the case of health benefit plans that are made available in the group or individual market only through one or more associations, the membership of an employer or individual in the association, on the basis of which the coverage is provided, ceases, but only if the coverage is terminated under this paragraph uniformly without regard to any health status-related factor relating to any covered individual.
    8. The commissioner finds that the continuation of the coverage would not be in the best interests of the policyholders or certificate holders or would impair the insurer’s ability to meet its contractual obligations. In this case the commissioner shall assist affected insureds in finding replacement coverage.
  2. An insurer that elects not to renew a health benefit plan under subdivision f of subsection 1 may not write new business in the applicable market in this state for a period of five years from the date of notice to the commissioner.
  3. In the case of an insurer doing business in one established geographic service area of the state, this section only applies to the insurer’s operations in that service area.
  4. An insurer offering coverage through a network plan may not be required to offer coverage or accept applications pursuant to subsection 1 or 2 in the case of the following:
    1. To an eligible person who no longer resides, lives, or works in the service area, or in an area for which the insurer is authorized to do business, but only if coverage is terminated under this subdivision uniformly without regard to any health status-related factor; or
    2. To an insurer that no longer has any enrollee in connection with the plan who lives, resides, or works in the service area of the insurer, or the area for which the insurer is authorized to do business.
  5. At the time of coverage renewal, an insurer may modify the health insurance coverage for a product offered to a group or individual, if the modification is reasonable, consistent with state law, and effective on a uniform basis. If coverage is modified, the carrier shall:
    1. Provide advance notice of its decision under this subsection to the commissioner at least three working days prior to mailing the notice to the affected employers and participants and beneficiaries.
    2. Provide notice of the decision to modify health coverage to all affected employers, participants, and beneficiaries and the commissioner sixty days prior to the modification of health coverage by the carrier.

Source:

S.L. 1995, ch. 246, § 22; 1997, ch. 251, § 17; 2001, ch. 273, § 3.

26.1-36.4-06. Modified community rating.

Premium rates for individual policies are subject to the following:

  1. For any class of individuals, the premium rates charged during a rating period to the individuals in that class for the same or similar coverage may not vary by a ratio of more than six to one after August 1, 1995, and by a ratio of more than five to one after August 1, 1996, when age, industry, gender, and duration of coverage of the individuals are considered. Gender and duration of coverage may not be used as a rating factor for policies issued after January 1, 1997.
  2. An insurer, in addition to the factors set forth in subsection 1, may use geography, family composition, healthy lifestyles, and benefit variations to determine premium rates.
  3. The commissioner shall design and adopt reporting forms to be used by an insurer to report information as to insurer’s experience as to insurance provided under this chapter on a periodic basis to determine the impact of the reforms and implementation of modified community rating contained in this chapter.

Source:

S.L. 1995, ch. 246, § 22; 2009, ch. 258, § 1; 2009, ch. 482, § 19.

26.1-36.4-07. Health benefits package required. [Repealed]

Repealed by S.L. 2013, ch. 236, § 6.

26.1-36.4-08. Employer payment of employee premium.

An insurer shall accept a personal or business check from an employer as a payment method for premium payment for an employee’s individual accident and health insurance policy. This section does not apply to groups as defined under chapter 26.1-36.3.

Source:

S.L. 2001, ch. 276, § 1.

26.1-36.4-09. Health insurance utilization reports.

  1. Once each calendar year, any employer with fifty-one or more eligible employees, any employer investigating becoming part of a health plan, including a plan sponsored by an association or a multiple employer welfare arrangement, or any employer upon termination of health insurance coverage, the employer is entitled to a report from the insurer or administrator of that employer’s employee health plan which includes:
    1. Annual data for the previous three years on the premiums paid by the employer and the claims paid by the insurer or administrator.
    2. A current census of employees and dependents covered under the employer’s health plan.
  2. Insurers shall provide the report pursuant to subsection 1 to an employer within thirty days of receipt of a request for the information.
  3. The information provided pursuant to subsection 1 may not identify specific employee claims or other confidential health care information.
  4. Upon notification of termination of health insurance before the end of a benefit period, the terminated insurer, at the request of the employer and within thirty days of the request, shall supply the succeeding or new insurer a report of all deductibles and coinsurance payments for each employee covered by the employer’s health insurance plan for the most recent benefit period.

Source:

S.L. 2001, ch. 277, § 1; 2021, ch. 240, § 1, eff April 23, 2021.

CHAPTER 26.1-36.5 Health Coverage for Children

26.1-36.5-01. Definition.

For purposes of this chapter, unless the context otherwise requires, “insurer” means any health insurer, including a group health plan, as defined in section 607(1) of the Employee Retirement Income Security Act of 1974 [Pub. L. 99-272; 100 Stat. 281; 29 U.S.C. 1167(1)], a health maintenance organization as defined in section 26.1-18.1-01, a health service corporation as defined in section 26.1-17-01, and a provider of an accident and health insurance policy as defined in section 26.1-36-03.

Source:

S.L. 1995, ch. 461, § 4; 2003, ch. 48, § 25.

26.1-36.5-02. Prohibited practices.

  1. No insurer may deny enrollment of a child under the health coverage of the child’s parent on the grounds that:
    1. The child was born out of wedlock;
    2. The child is not claimed as a dependent on the parent’s federal income tax return; or
    3. The child does not reside with the parent or in the insurer’s service area.
  2. Any provision in an individual or group accident and health insurance policy, nonprofit health service contract, or group health plan issued by any insurer that conflicts with subsection 1 is void.

Source:

S.L. 1995, ch. 461, § 4.

26.1-36.5-03. Enrollment of children. [Effective through August 31, 2022]

If a parent is required by a court or administrative order to provide health coverage for a child and the parent is eligible for family health coverage through an insurer, the insurer shall:

  1. Permit the parent to enroll under family coverage any child who is otherwise eligible for coverage without regard to any open enrollment restrictions and subject to the prohibited practices provisions of this chapter;
  2. If a parent fails to provide health coverage for any child, enroll the child under family coverage upon application by the child’s other parent or by the department of human services;
  3. Upon receipt of the national medical support notice issued under section 14-09-08.20 from the employer:
    1. Comply with the provisions of the national medical support notice;
    2. Within forty business days of the date of the national medical support notice, take appropriate action pursuant to the notice; and
    3. Enroll the child, and the obligor if necessary, in the insurer’s default plan, if any, if required under subsection 2 of section 14-09-08.20; and
  4. Not disenroll or eliminate coverage for any child unless the insurer is provided satisfactory written evidence that:
    1. The court or administrative order is no longer in effect; or
    2. The child is or will be enrolled with comparable coverage that will take effect no later than the effective date of disenrollment.

Source:

S.L. 1995, ch. 461, § 4; 2003, ch. 125, § 11.

26.1-36.5-03. Enrollment of children. [Effective September 1, 2022]

If a parent is required by a court or administrative order to provide health coverage for a child and the parent is eligible for family health coverage through an insurer, the insurer shall:

  1. Permit the parent to enroll under family coverage any child who is otherwise eligible for coverage without regard to any open enrollment restrictions and subject to the prohibited practices provisions of this chapter;
  2. If a parent fails to provide health coverage for any child, enroll the child under family coverage upon application by the child’s other parent or by the department of health and human services;
  3. Upon receipt of the national medical support notice issued under section 14-09-08.20 from the employer:
    1. Comply with the provisions of the national medical support notice;
    2. Within forty business days of the date of the national medical support notice, take appropriate action pursuant to the notice; and
    3. Enroll the child, and the obligor if necessary, in the insurer’s default plan, if any, if required under subsection 2 of section 14-09-08.20; and
  4. Not disenroll or eliminate coverage for any child unless the insurer is provided satisfactory written evidence that:
    1. The court or administrative order is no longer in effect; or
    2. The child is or will be enrolled with comparable coverage that will take effect no later than the effective date of disenrollment.

Source:

S.L. 1995, ch. 461, § 4; 2003, ch. 125, § 11; 2021, ch. 352, § 322, eff September 1, 2022.

26.1-36.5-04. Providing information and paying claims. [Effective through August 31, 2022]

If a child has health coverage through the insurer of a noncustodial parent, the insurer shall:

  1. Provide information to the custodial parent as may be necessary for the child to obtain benefits through the health coverage;
  2. Permit the custodial parent, the provider of health care, with the custodial parent’s approval, or the department of human services, as the custodial parent’s assignee, to submit claims for covered services without the approval of the noncustodial parent; and
  3. Make payment on claims submitted in accordance with subsection 2 directly to the custodial parent, provider, or department, as their interests may appear.

Source:

S.L. 1995, ch. 461, § 4.

26.1-36.5-04. Providing information and paying claims. [Effective September 1, 2022]

If a child has health coverage through the insurer of a noncustodial parent, the insurer shall:

  1. Provide information to the custodial parent as may be necessary for the child to obtain benefits through the health coverage;
  2. Permit the custodial parent, the provider of health care, with the custodial parent’s approval, or the department of health and human services, as the custodial parent’s assignee, to submit claims for covered services without the approval of the noncustodial parent; and
  3. Make payment on claims submitted in accordance with subsection 2 directly to the custodial parent, provider, or department, as their interests may appear.

Source:

S.L. 1995, ch. 461, § 4; 2021, ch. 352, § 323, eff September 1, 2022.

26.1-36.5-05. Authority and jurisdiction.

This chapter is adopted pursuant to the requirements of sections 4301 and 13623 of Public Law 103-66 [107 Stat. 312; 29 U.S.C. 1161 et seq. and 42 U.S.C. 1396g-1]. The commissioner may take any action reasonably necessary to enforce this chapter and section 26.1-36-12. Any insurer subject to the provisions of this chapter or section 26.1-36-12 must submit to the jurisdiction of the commissioner and to the courts of this state to the greatest extent permitted under state or federal law.

Source:

S.L. 1995, ch. 461, § 4.

CHAPTER 26.1-36.6 Self-Insurance Health Plans

Source:

S.L. 2019, HB1028, § 1, eff March 7, 2019.

26.1-36.6-01. Definitions.

As used in this chapter, “self-insurance health plan” has the same meaning as provided under section 54-52.1-01.

Source:

S.L. 2019, ch. 462, § 1, eff March 7, 2019.

26.1-36.6-02. Self-insurance health plans — Regulation.

The commissioner shall regulate the financial condition, integrity, and equitable administration of a self-insurance health plan established under chapter 54-52.1. All powers granted to the commissioner to regulate insurance companies and insurers under title 26.1 apply to the commissioner to regulate a self-insurance health plan.

Source:

S.L. 2019, ch. 462, § 1, eff March 7, 2019.

26.1-36.6-03. Self-insurance health plans — Requirements.

  1. The following policy provisions apply to a self-insurance health plan or to the administrative services only or third-party administrator, and are subject to the jurisdiction of the commissioner: 26.1-36-03, 26.1-36-03.1, 26.1-36-05, 26.1-36-10, 26.1-36-12, 26.1-36-12.4, 26.1-36-12.6, 26.1-36-13, 26.1-36-14, 26.1-36-17, 26.1-36-18, 26.1-36-19, 26.1-36-23, 26.1-36-29, 26.1-36-37.1, 26.1-36-38, 26.1-36-39, 26.1-36-41, 26.1-36-44, and 26.1-36-46.
  2. The following health benefit provisions applicable to a group accident and health insurance policy under chapter 26.1-36 apply to a self-insurance health plan and are subject to the jurisdiction of the commissioner: 26.1-36-06, 26.1-36-06.1, 26.1-36-07, 26.1-36-08, 26.1-36-08.1, 26.1-36-09, 26.1-36-09.1, 26.1-36-09.2, 26.1-36-09.3, 26.1-36-09.5, 26.1-36-09.6, 26.1-36-09.7, 26.1-36-09.8, 26.1-36-09.9, 26.1-36-09.10, 26.1-36-09.11, 26.1-36-09.12, 26.1-36-09.13, 26.1-36-09.14, 26.1-36-09.15, 26.1-36-11, 26.1-36-12.2, 26.1-36-20, 26.1-36-21, 26.1-36-22, 26.1-36-23.1, and 26.1-36-43.

Source:

S.L. 2019, ch. 462, § 1, eff March 7, 2019.

26.1-36.6-04. Rules.

The commissioner shall adopt rules to administer this chapter. The rules must establish reserve requirements. The rules may provide certain self-insurance health plans are exempt from all or portions of this chapter.

Source:

S.L. 2019, ch. 462, § 1, eff March 7, 2019.

CHAPTER 26.1-36.7 Reinsurance Association

26.1-36.7-01. Definitions.

For purposes of this chapter, unless the context otherwise requires:

  1. “Association” means the reinsurance association of North Dakota.
  2. “Board” means the board of directors of the reinsurance association of North Dakota.
  3. “Earned group health benefit plan premiums” means premium owed to an insurer for a period of time during which the insurer has been liable to cover claims for an insured pursuant to the terms of a group health benefit plan issued by the insurer.
  4. “Future losses” means reserves for claims incurred but not reported.
  5. “Group health benefit plan” means a health benefit plan offered through an employer, or an association of employers, to more than one individual employee.
  6. “Health benefit plan” means any hospital and medical expense-incurred policy or certificate, nonprofit health care service plan contract, health maintenance organization subscriber contract, or any other health care plan or arrangement that pays for or furnishes benefits that pay the costs of or provide medical, surgical, or hospital care.
    1. “Health benefit plan” does not include any one or more of the following:
      1. Coverage only for accident or disability income insurance, or any combination of the two;
      2. Coverage issued as a supplement to liability insurance;
      3. Liability insurance, including general liability insurance and automobile liability insurance;
      4. Workforce safety and insurance or similar workers’ compensation insurance;
      5. Automobile medical payment insurance;
      6. Credit-only insurance;
      7. Coverage for onsite medical clinics;
      8. Other similar insurance coverage, specified in federal regulations, under which benefits for medical care are secondary or incidental to other insurance benefits; and
      9. Self-funded plans.
    2. “Health benefit plan” does not include the following benefits if the benefits are provided under a separate policy, certificate, or contract of insurance or are otherwise not an integral part of the plan:
      1. Limited scope dental or vision benefits;
      2. Benefits for long-term care, nursing home care, home health care, or community-based care, or any combination of this care; and
      3. Other similar limited benefits specified under federal regulations issued under the federal Health Insurance Portability and Accountability Act of 1996 [Pub. L. 104-191; 110 Stat. 1936; 29 U.S.C. 1181 et seq.].
    3. “Health benefit plan” does not include the following benefits if the benefits are provided under a separate policy, certificate, or contract of insurance; there is no coordination between the provision of the benefits; and any exclusion of benefits under any group health insurance coverage maintained by the same plan sponsor, and the benefits are paid with respect to an event without regard to whether benefits are provided with respect to such an event under any group health plan maintained by the same sponsor:
      1. Coverage only for specified disease or illness; and
      2. Hospital indemnity or other fixed indemnity insurance.
    4. “Health benefit plan” does not include the following if offered as a separate policy, certificate, or contract of insurance:
      1. Medicare supplement health insurance as defined under section 1882(g)(1) of the federal Social Security Act [42 U.S.C. 13295ss(g)(1)];
      2. Coverage supplemental to the coverage provided under chapter 55 of United States Code title 10 [10 U.S.C. 1071 et seq.] relating to armed forces medical and dental care; and
      3. Similar supplemental coverage provided under a group health plan.
  7. “Individual health benefit plan” means a health benefit plan offered to individuals, other than in connection with a group health benefit plan. The term does not include an individual short-term limited-duration plan or association short-term limited-duration plan as defined by section 26.1-36.8-01.
  8. “Insured” means an individual who is insured by a health benefit plan.
  9. “Insurer” means an entity authorized to write health benefit plans or that provides health benefit plans in the state. The term includes an insurance company as defined in section 26.1-02-01, a nonprofit health service organization, a fraternal benefit society, and a health maintenance organization.
  10. “Member insurer” means an insurer that offers individual health benefit plans and is actively marketing individual health benefit plans in this state.

Source:

S.L. 2019, ch. 243, § 2, eff April 19, 2019; 2021, ch. 232, § 2, eff April 1, 2021; 2021, ch. 239, § 2, eff August 1, 2021.

Note.

Section 26.1-36.7-01 was amended 2 times by the 2021 Legislative Assembly. Pursuant to Section 1-02-09.1, the section is printed above to harmonize and give effect to the changes made in Section 2 of Chapter 232, Session Laws 2021, House Bill 1087; and Section 2 of Chapter 239, Session Laws 2021, Senate Bill 2073.

26.1-36.7-02. Waiver proposal and application.

  1. The commissioner may develop a proposal for an innovation waiver under section 1332 of the federal Patient Protection and Affordable Care Act [Pub. L. 111-148; 119 Stat. 124; 42 U.S.C. 1801 et seq.].
  2. On behalf of the state, in accordance with the proposal developed under subsection 1, the commissioner may submit an application to the United States department of health and human services and to the United States secretary of the treasury. The commissioner may implement any federally approved waiver.
  3. The commissioner may develop an amendment for an innovation waiver under section 1332 of the federal Patient Protection and Affordable Care Act [Pub. L. 111-148; 119 Stat. 124; 42 U.S.C. 1801 et seq.].

Source:

S.L. 2019, ch. 243, § 2, eff April 19, 2019; 2021, ch. 232, § 3, eff April 1, 2021.

26.1-36.7-03. Reinsurance association of North Dakota.

  1. The reinsurance association of North Dakota is established as a nonprofit legal entity. As a condition of writing health insurance business in this state, an insurer that has issued or administered a group health benefit plan within the previous twelve months or is actively marketing or administering a group health benefit plan in this state shall participate in the association.
  2. The association may begin operation on either:
    1. The January first following the date the commissioner certifies to the secretary of state and the legislative council that the state’s innovation waiver application has been approved by the federal government pursuant to section 1332 of the federal Patient Protection and Affordable Care Act [Pub L. 111-148; 119 Stat. 124; 42 U.S.C. 1801 et seq.]; or
    2. The January first following the date the commissioner certifies to the secretary of state and the legislative council that the Patient Protection and Affordable Care Act [Pub. L. 111-148] has been repealed, amended, or finally adjudicated by a court of law with jurisdiction over North Dakota as invalid or in a manner that makes the granting of an innovation waiver unnecessary or inapplicable.
  3. If the federal funding associated with an approved innovation waiver under section 1332 of the federal Patient Protection and Affordable Care Act [Pub. L. 111-148; 119 Stat. 124; 42 U.S.C. 1801 et seq.] is terminated or otherwise discontinued, the commissioner may cease or suspend operations of the reinsurance association of North Dakota beginning on the January first following the date the commissioner notifies the board that federal funding has been terminated or otherwise discontinued.

Source:

S.L. 2019, ch. 243, § 2, eff April 19, 2019; 2021, ch. 232, § 4, eff April 1, 2021.

26.1-36.7-04. Board of directors.

  1. The association is governed by the board of directors of the reinsurance association of North Dakota.
  2. The board consists of the state health officer, one senator appointed by the majority leader of the senate of the legislative assembly, one representative appointed by the speaker of the house of representatives of the legislative assembly, one individual from each of the four insurers of the association with the highest annual market share as determined by annual market share reports of health benefit plans provided by the commissioner annually, and two nonvoting members from the insurance department appointed by the commissioner.
  3. Members of the board may be reimbursed from the moneys of the association for expenses incurred by the members due to their service as board members, but may not otherwise be compensated by the association for board services.
  4. The costs of conducting the meetings of the association and the board are borne by the association.
  5. For cause, the commissioner may remove any board member representing one of the four insurers.

Source:

S.L. 2019, ch. 243, § 2, eff April 19, 2019; 2021, ch. 232, § 5, eff April 1, 2021.

26.1-36.7-05. Powers and duties of commissioner and board.

  1. The commissioner shall:
    1. Perform all functions necessary for the association to carry out the purposes of this chapter; and
    2. Approve any assessments to the insurers writing or otherwise issuing group health benefit plans. A group health benefit plan issued pursuant to chapter 54-52.1 is exempt from the assessment.
  2. The board shall:
    1. Formulate general policies to advance the purposes of this chapter;
    2. Schedule and approve independent biennial audits in order to:
      1. Ensure claims are being processed appropriately and only include services covered by the individual health benefit plan for the contracted rates; and
      2. Verify that the assessment base is accurate and that the appropriate percentage was used to calculate the assessment;
    3. Approve bylaws and operating rules; and
    4. Provide for other matters as may be necessary and proper for the execution of the commissioner’s and board’s powers, duties, and obligations.
  3. The commissioner and the members of the board are not liable for any obligations of the association.

Source:

S.L. 2019, ch. 243, § 2, eff April 19, 2019; 2021, ch. 232, § 6, eff April 1, 2021.

26.1-36.7-06. Assessments against insurers.

  1. For the purpose of providing the funds necessary to carry out the purposes of the association under this chapter, the commissioner shall assess insurers writing or otherwise issuing group health benefit plans based on the insurer’s group health benefit plan premium written in this state. The assessment must be paid quarterly within forty-five days of the end of the previous quarter on all earned group health benefit plan premiums for the previous calendar quarter. An assessment not paid within forty-five days of the end of the previous quarter accrues interest at twelve percent per annum beginning on the date due.
  2. An insurer writing less than one hundred thousand dollars, annually, in group health benefit plan premium is exempt from the assessments.
  3. The commissioner may verify the amount of each insurer’s assessment based on annual statements and other reports determined to be necessary by the commissioner. The commissioner may use any reasonable method of estimating an insurer’s group health benefit plan premium if the specific number is not reported to the commissioner.
  4. Any federal funding obtained by the association must be used to reduce the assessments of insurers writing or otherwise issuing group health benefit plans pursuant to this section.
  5. Before April second of each year, the association shall determine and report to the board the association’s net gains or net losses for the previous calendar year.
  6. Before April sixteenth of each year, the association shall provide an estimate to the commissioner and the board of the amount of assessments needed for the association to carry out the powers and duties of the association under this chapter.
  7. Before May second of each year, the board may provide a recommendation to the commissioner and the board of the amount of assessments needed for the association to carry out the powers and duties of the association under this chapter.
  8. An insurer may apply to the commissioner for a deferral of all or part of an assessment imposed by the association under this section. The commissioner may defer all or part of the assessment if the commissioner determines the payment of the assessment would place the insurer in a financially impaired condition. If all or part of the assessment is deferred, the amount deferred must be assessed against other insurers in a proportionate manner consistent with this section. The insurer that receives a deferral remains liable to the association for the amount deferred and is prohibited from reinsuring any person through the association until such time as the insurer pays the assessments.
  9. The board shall use any surplus, including any interest earned on the surplus, to:
    1. Offset future losses;
    2. Reduce future assessments to insurers writing or otherwise issuing group health benefit plans; or
    3. Pay off a line of credit issued pursuant to section 26.1-36.7-07.
  10. The commissioner may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer that fails to pay an assessment. As an alternative, the commissioner may levy a penalty on any member insurer that fails to pay an assessment when due. In addition, the commissioner may use any power granted to the commissioner by this title to collect any unpaid assessment.

Source:

S.L. 2019, ch. 243, § 2, eff April 19, 2019; 2021, ch. 232, § 7, eff April 1, 2021.

26.1-36.7-07. Bank of North Dakota line of credit.

The Bank of North Dakota shall extend to the association a line of credit not to exceed twenty-five million dollars. The association shall repay the line of credit from assessments against insurers writing or otherwise issuing group health benefit plans in this state or from other funds appropriated by the legislative assembly. The association may access the line of credit to the extent necessary to provide reimbursements to member insurers as required by this chapter.

Source:

S.L. 2019, ch. 243, § 2, eff April 19, 2019; 2021, ch. 232, § 8, eff April 1, 2021.

26.1-36.7-08. Reinsurance.

For claims of an insured which total one hundred thousand dollars to one million dollars incurred per plan year, a member insurer must be reinsured by the association at seventy-five percent of the member insurer’s responsibility for claims incurred by the insured pursuant to the terms of an individual’s nongrandfathered individual health benefit plan.

Source:

S.L. 2019, ch. 243, § 2, eff April 19, 2019; 2021, ch. 232, § 9, eff April 1, 2021.

26.1-36.7-09. Reimbursement of member insurer.

For nongrandfathered individual health benefit plans issued or renewed after the November second preceding to the date the association begins operation, a member insurer may seek reimbursement from the association and the association shall reimburse the member insurer pursuant to the provisions of section 26.1-36.7-08 to the extent the claims incurred by the insured and submitted by the member insurer to the association are eligible for coverage and reimbursement according to the terms of insured’s individual health benefit plan.

Source:

S.L. 2019, ch. 243, § 2, eff April 19, 2019; 2021, ch. 232, § 10, eff April 1, 2021.

26.1-36.7-10. Rulemaking.

The commissioner may adopt rules for the implementation and administration of this chapter.

Source:

S.L. 2019, ch. 243, § 2, eff April 19, 2019; 2021, ch. 232, § 11, eff April 1, 2021.

26.1-36.7-11. Third-party reinsurance.

The association may use federal funding received under section 1332 of the federal Patient Protection and Affordable Care Act [Pub. L. 111-148; 119 Stat. 124; 42 U.S.C. 1801 et seq.] to procure third-party reinsurance for the association’s portion of eligible claims.

Source:

S.L. 2021, ch. 232, § 12, eff April 1, 2021.

26.1-36.7-12. Federal funding — Administration of the association — Continuing appropriation.

Federal funding received by the association under the innovation waiver approved under section 1332 of the federal Patient Protection and Affordable Care Act [Pub. L. 111-148; 119 Stat. 124; 42 U.S.C. 1801 et seq.] is appropriated to the insurance commissioner on a continuing basis for the purposes of this chapter.

Source:

S.L. 2021, ch. 232, § 13, eff April 1, 2021.

CHAPTER 26.1-36.8 Short-term Limited-duration Health Insurance Plans

Source:

S.L. 2021, SB2073, § 3, eff August 1, 2021.

26.1-36.8-01. Definitions.

  1. “Association” means a group that has a constitution and bylaws, has been organized and maintained in good faith for the purposes other than that of obtaining insurance, and insures at least twenty-five members of the association for the benefit of persons other than the association or officers or trustees of the association.
  2. “Association short-term limited-duration plan” means health insurance coverage provided to an association which has an expiration date specified in the policy which is no longer than twelve months after the original effective date of the policy and, taking into account any renewals or extensions, has a duration of no more than thirty-six months in total.
  3. “Essential health benefits” means benefits pursuant to section 1302 of the federal Patient Protection and Affordable Care Act [42 U.S.C. 18022] and title 45, Code of Federal Regulations, section 156.110.
  4. “Individual short-term limited-duration plan” means health insurance coverage provided pursuant to an individual insurance policy which has an expiration date specified in the policy which is no longer than twelve mont hs after the original effective date of the policy including renewals or extension.

Source:

S.L. 2021, ch. 239, § 3, eff August 1, 2021.

26.1-36.8-02. Individual short-term limited-duration plans.

  1. An insurer issuing an individual short-term limited-duration plan shall provide, at the insured’s option, for renewal or continuation of coverage.
  2. An insurer may not subject an insured to additional underwriting at renewal or continuation of coverage and the insured shall remain within the same risk class as of the original effective date of the policy.
  3. An insurer shall provide a notice of termination of the individual short-term limited-duration plan to the insured at least fifteen days before renewal or end of the policy term.

Source:

S.L. 2021, ch. 239, § 3, eff August 1, 2021.

26.1-36.8-03. Association short-term limited-duration insurance plans.

  1. For purposes of this section an association short-term limited-duration insurance plan approved under section 26.1-30-19 before August 1, 2021, may maintain the current plan and is not required to comply with the requirements of this section.
  2. An insurer issuing a policy or certificate under this section shall provide, at the insured’s option, for renewal or continuation of coverage. The renewal or continuation of coverage period may not extend for more than thirty-six months from the original effective date of the policy.
  3. An insurer may not subject an insured to additional underwriting at renewal or continuation of coverage. An insurer offering a short-term limited-duration health insurance plan may not rate an insured based on any factor other than:
    1. Geographic areas;
    2. Tobacco use;
    3. Family size;
    4. Age; and
    5. Gender.
  4. At a minimum, an association short-term limited-duration plan must cover the following:
    1. Ambulatory patient services in accordance with the essential health benefits;
    2. Emergency services in accordance with the essential health benefits;
    3. Hospitalization in accordance with the essential health benefits;
    4. Pregnancy, maternity, and newborn care in accordance with the essential health benefits;
    5. Mental health and substance use disorder services in accordance with the essential health benefits;
    6. Prescription drugs in accordance with the essential health benefits;
    7. Rehabilitative and habilitative services and devices in accordance with the essential health benefits;
    8. Laboratory services in accordance with the essential health benefits; and
    9. Preventive and wellness services in accordance with the essential health benefits.
  5. An insurer shall provide a notice of termination of the policy or certificate to the insured at least fifteen days before renewal or end of the policy term.

Source:

S.L. 2021, ch. 239, § 3, eff August 1, 2021.

26.1-36.8-04. Marketing and sales of individual and association plans.

  1. All marketing materials related to the offering or sale of an individual or association short-term limited-duration plan must be filed with and approved by the commissioner before the plan is offered for sale in this state.
  2. Sale of an individual or association short-term limited-duration plan is only allowed through a licensed and properly appointed insurance producer. An insurance producer’s signature and identification number must be included on the prospective insured’s application.

Source:

S.L. 2021, ch. 239, § 3, eff August 1, 2021.

CHAPTER 26.1-36.9 Dental Benefit Plans

Source:

S.L. 2021, HB1154, § 1, eff August 1, 2021.

26.1-36.9-01. Definitions.

As used in this chapter:

  1. “Dental benefit plan” means a benefits plan that pays or provides dental expense benefits for covered dental services and is delivered through a dental insurer.
  2. “Dental insurer” means a dental insurance company, dental service corporation, or dental plan organization authorized to provide dental benefits.
  3. “Dental provider” means a licensed provider of dental services in this state.
  4. “Dental services” means services for the diagnosis, prevention, treatment, or cure of a dental condition, illness, injury, or disease.
  5. “Prior authorization” means confirmation by the covered individual’s dental benefit plan that the services sought to be provided by the dental provider meet the criteria for coverage under the covered individual’s dental benefit plan as defined by the covered individual’s dental benefit plan.

Source:

S.L. 2021, ch. 241, § 1, eff August 1, 2021.

26.1-36.9-02. Dental benefit plans — Prior authorization.

A dental benefit plan may not deny a claim subsequently submitted by a dental provider for procedures specifically included in a prior authorization, unless at least one of the following circumstances applies for each procedure denied:

  1. Benefit limitations, such as annual maximums and frequency limitations not applicable at the time of the prior authorization, are reached due to utilization after issuance of the prior authorization.
  2. The documentation for the claim provided by the dental provider submitting the claim clearly fails to support the claim as originally authorized.
  3. If, after the issuance of the prior authorization, new procedures are provided to the patient or a change in the condition of the patient occurs such that the prior authorized procedure would no longer be considered medically necessary, based on the prevailing standard of care.
  4. If, after the issuance of the prior authorization, new procedures are provided to the patient or a change in the patient’s condition occurs such that the prior authorized procedure would at that time require disapproval pursuant to the terms and conditions for coverage under the patient’s plan in effect at the time the prior authorization was used.
  5. The denial of the payment was due to one of the following:
    1. Another payor is responsible for payment.
    2. The dental provider already has been paid for the procedures identified on the claim.
    3. The claim was submitted fraudulently.
    4. The individual receiving the procedure was not eligible to receive the procedure on the date of service.

Source:

S.L. 2021, ch. 241, § 1, eff August 1, 2021.

CHAPTER 26.1-36.10 Prescription Drug Costs

Source:

S.L. 2021, ch. 242, § 1, eff July 1, 2021.

26.1-36.10-01. Definitions. [Effective through August 31, 2021]

As used in this chapter:

  1. “Board” means the state board of pharmacy.
  2. “Commissioner” means the insurance commissioner.
  3. “Concession” includes a free good, delayed billing, and billing forgiveness.
  4. “Drug” has the same meaning as provided under section 19-02.1-01.
  5. “Drug manufacturer” means the entity that holds the national drug code for a drug which is engaged in the production, preparation, propagation, compounding, conversion, or processing of the drug or which is engaged in the packaging, repackaging, labeling, relabeling, or distribution of the drug. The term does not include a wholesale drug distributor or retail pharmacy licensed in this state.
  6. “Health care plan” means an individual, blanket, or group plan, policy, or contract for health care services issued or delivered in this state by a health insurer.
  7. “Health insurer” means an insurance company, nonprofit health service corporation, health maintenance organization, third-party payer, health program administered by a state agency other than the department of human services or state department of health, or other person engaged as principal in the business of insurance which issues or delivers a health care plan in this state.
  8. “Manufacturer-packaged drug container” means a drug manufacturer-prepared supply of medication packaged in a container with a unique product-identifying national drug code number.
  9. “Net spending” means the cost of drugs minus any discounts that lower the price of the drugs, including a rebate, fee, retained price protection, retail pharmacy network spread, and dispensing fee.
  10. “Pharmacy benefits manager” has the same meaning as provided under section 19-03.6-01.
  11. “Prescription drug” has the same meaning as under section 43-15-01.
  12. “Rebate” includes any discount, financial incentive, or concession that affects the price of a drug to a pharmacy benefits manager or health insurer for a drug manufactured by the drug manufacturer.
  13. “Specialty drug” has the same meaning as provided under section 19-02.1-16.2.
  14. “Utilization management” means a set of formal techniques designed to monitor the use of, or evaluate the medical necessity, appropriateness, efficacy, or efficiency of, health care services, procedures, or settings.
  15. “Wholesale acquisition cost” means, with respect to a prescription drug, the drug manufacturer’s list price for the prescription drug to wholesalers or direct purchasers in the United States for the most recent month for which the information is available, as reported in wholesale price guides or other publications of drug pricing data, such as Medi-Span Price Rx, Gold Standard Drug Database, or First Databank drug data. The term does not include a rebate, prompt pay, or other discount or other reduction in price.

The term does not include the department of human services or state department of health.

Source:

S.L. 2021, ch. 242, § 1, eff July 1, 2021.

26.1-36.10-01. Definitions. [Effective September 1, 2022]

As used in this chapter:

  1. “Board” means the state board of pharmacy.
  2. “Commissioner” means the insurance commissioner.
  3. “Concession” includes a free good, delayed billing, and billing forgiveness.
  4. “Drug” has the same meaning as provided under section 19-02.1-01.
  5. “Drug manufacturer” means the entity that holds the national drug code for a drug which is engaged in the production, preparation, propagation, compounding, conversion, or processing of the drug or which is engaged in the packaging, repackaging, labeling, relabeling, or distribution of the drug. The term does not include a wholesale drug distributor or retail pharmacy licensed in this state.
  6. “Health care plan” means an individual, blanket, or group plan, policy, or contract for health care services issued or delivered in this state by a health insurer.
  7. “Health insurer” means an insurance company, nonprofit health service corporation, health maintenance organization, third-party payer, health program administered by a state agency other than the department of health and human services, or other person engaged as principal in the business of insurance which issues or delivers a health care plan in this state.
  8. “Manufacturer-packaged drug container” means a drug manufacturer-prepared supply of medication packaged in a container with a unique product-identifying national drug code number.
  9. “Net spending” means the cost of drugs minus any discounts that lower the price of the drugs, including a rebate, fee, retained price protection, retail pharmacy network spread, and dispensing fee.
  10. “Pharmacy benefits manager” has the same meaning as provided under section 19-03.6-01.
  11. “Prescription drug” has the same meaning as under section 43-15-01.
  12. “Rebate” includes any discount, financial incentive, or concession that affects the price of a drug to a pharmacy benefits manager or health insurer for a drug manufactured by the drug manufacturer.
  13. “Specialty drug” has the same meaning as provided under section 19-02.1-16.2.
  14. “Utilization management” means a set of formal techniques designed to monitor the use of, or evaluate the medical necessity, appropriateness, efficacy, or efficiency of, health care services, procedures, or settings.
  15. “Wholesale acquisition cost” means, with respect to a prescription drug, the drug manufacturer’s list price for the prescription drug to wholesalers or direct purchasers in the United States for the most recent month for which the information is available, as reported in wholesale price guides or other publications of drug pricing data, such as Medi-Span Price Rx, Gold Standard Drug Database, or First Databank drug data. The term does not include a rebate, prompt pay, or other discount or other reduction in price.

The term does not include the department of health and human services.

Source:

S.L. 2021, ch. 242, § 1, eff July 1, 2021.

26.1-36.10-02. Disclosure of drug pricing information.

  1. Each drug manufacturer shall submit a report to the commissioner no later than the fifteenth day of January, April, July, and October with the current wholesale acquisition cost information for the prescription drugs sold in or into the state by that drug manufacturer.
    1. Not more than thirty days after an increase in wholesale acquisition cost of forty percent or greater over the preceding five calendar years or ten percent or greater in the preceding twelve months for a prescription drug with a wholesale acquisition cost of seventy dollars or more for a manufacturer-packaged drug container, a drug manufacturer shall submit a report to the commissioner. The report must contain the following information:
      1. Name of the drug;
      2. Whether the drug is a brand name or a generic;
      3. The effective date of the change in wholesale acquisition cost;
      4. Aggregate, company-level research and development costs for the previous calendar year;
      5. Aggregate rebate amounts paid to each pharmacy benefits manager for the previous calendar year;
      6. The name of each of the drug manufacturer's drugs approved by the United States food and drug administration in the previous five calendar years;
      7. The name of each of the drug manufacturer's drugs that lost patent exclusivity in the United States in the previous five calendar years; and
      8. A concise statement of rationale regarding the factor or factors that caused the increase in the wholesale acquisition cost, such as raw ingredient shortage or increase in pharmacy benefits manager rebates.
    2. The quality and types of information and data a drug manufacturer submits to the commissioner pursuant to this subsection must be the same as the quality and types of information and data the drug manufacturer includes in the drug manufacturer's annual consolidated report on securities and exchange commission form 10-K or any other public disclosure.
  2. A drug manufacturer shall notify the commissioner in writing if the drug manufacturer is introducing a new prescription drug to market at a wholesale acquisition cost that exceeds the threshold set for a specialty drug under the Medicare part D program.
    1. The notice must include a concise statement of rationale regarding the factor or factors that caused the new drug to exceed the Medicare part D program price.
    2. The drug manufacturer shall provide the written notice within three calendar days following the release of the drug in the commercial market.
    3. A drug manufacturer may make the notification pending approval by the United States food and drug administration if commercial availability is expected within three calendar days following the approval.

Source:

S.L. 2021, ch. 242, § 1, eff July 1, 2021.

26.1-36.10-03. Disclosure of pharmacy benefits manager information.

  1. On or before April first of each year, a pharmacy benefits manager providing services for a health care plan shall file a report with the commissioner. The report must contain the following information for the previous calendar year:
    1. The aggregated rebates, fees, price protection payments, and any other payments collected from each drug manufacturer;
    2. The aggregated dollar amount of rebates, price protection payments, fees, and any other payments collected from each drug manufacturer which were passed to health insurers;
    3. The aggregated fees, price concessions, penalties, effective rates, and any other financial incentive collected from pharmacies which were passed to enrollees at the point of sale;
    4. The aggregated dollar amount of rebates, price protection payments, fees, and any other payments collected from drug manufacturers which were retained as revenue by the pharmacy benefits manager; and
    5. The aggregated rebates passed on to employers.
  2. Reports submitted by pharmacy benefits managers under this section may not disclose the identity of a specific health benefit plan or enrollee, the identity of a drug manufacturer, the prices charged for specific drugs or classes of drugs, or the amount of any rebates or fees provided for specific drugs or classes of drugs.

Source:

S.L. 2021, ch. 242, § 1, eff July 1, 2021.

26.1-36.10-04. Disclosure of health insurer spending information.

  1. On or before April first of each year, each health insurer shall submit a report to the commissioner. The report must contain the following information for the previous two calendar years:
    1. Names of the twenty-five most frequently prescribed drugs across all plans;
    2. Names of the twenty-five prescription drugs dispensed with the highest dollar spend in terms of gross revenue;
    3. Percent increase in annual net spending for prescription drugs across all plans;
    4. Percent increase in premiums which is attributable to prescription drugs across all plans;
    5. Percentage of specialty drugs with utilization management requirements across all plans; and
    6. Premium reductions attributable to specialty drug utilization management.
  2. A report submitted by a health insurer may not disclose the identity of a specific health benefit plan or the prices charged for specific prescription drugs or classes of prescription drugs.

Source:

S.L. 2021, ch. 242, § 1, eff July 1, 2021.

26.1-36.10-05. Website.

  1. The commissioner shall develop a website to publish information the commissioner receives under this chapter. The commissioner shall make the website available on the commissioner's website with a dedicated link prominently displayed on the home page, or by a separate, easily identifiable internet address.
  2. Within sixty days of receipt of reported information under this chapter, the commissioner shall publish the reported information on the website developed under this section. The information the commissioner publishes may not disclose or tend to disclose trade secret, proprietary, commercial, financial, or confidential information of any pharmacy, pharmacy benefits manager, drug wholesaler, or hospital.

Source:

S.L. 2021, ch. 242, § 1, eff July 1, 2021.

26.1-36.10-06. Rulemaking — Forms — Services — Records.

  1. The commissioner may adopt rules to implement this chapter.
  2. In consultation with the board, the commissioner shall develop forms that must be used for reporting required under this chapter.
  3. The commissioner may contract for services to implement this chapter.
  4. A report received by the commissioner is an exempt record as defined by section 44-04-17.1; however, as provided under section 44-04-18.4 any portion of a report which discloses trade secret, proprietary, commercial, or financial information is confidential if it is of a privileged nature and has not been previously publicly disclosed.

Source:

S.L. 2021, ch. 242, § 1, eff July 1, 2021.

26.1-36.10-07. Drug pricing fund — Transfer — Continuing appropriation.

There is created in the state treasury the drug pricing fund, which consists of any money deposited in the fund by the board and any interest earned on moneys in the fund. The board may deposit up to six hundred dollars of every wholesaler license fee and every virtual wholesaler license fee collected by the board under section 43-15.3-12 to the drug pricing fund. All moneys in the fund, not otherwise appropriated, are appropriated to the insurance department to implement this chapter.

Source:

S.L. 2021, ch. 242, § 1, eff July 1, 2021.

26.1-36.10-08. Civil penalty.

A health insurer, drug manufacturer, or pharmacy benefits manager that violates this chapter is subject to the imposition by the attorney general of a civil penalty not to exceed ten thousand dollars for each violation. The attorney general may waive or reduce a fine under this section upon a finding of good cause, such as excusable neglect or other extenuating circumstances. The fine may be collected and recovered in an action brought in the name of the state.

Source:

S.L. 2021, ch. 242, § 1, eff July 1, 2021.

CHAPTER 26.1-37 Credit Insurance

26.1-37-01. Scope.

  1. This chapter may be cited as the “Consumer Credit Insurance Model Act”.
  2. All consumer credit insurance issued or sold in connection with loans or other credit transactions for personal, family, or household purposes is subject to the provisions of this chapter, except:
    1. Insurance written in connection with a credit transaction that is:
      1. Secured by a first mortgage or deed of trust; or
      2. Made to finance the purchase of real property or the construction of a dwelling thereon, or to refinance a prior credit transaction made for such a purpose;
    2. Transactions involving extensions of credit primarily for business or commercial purposes;
    3. Private passenger motor vehicle insurance or mobile homeowner’s insurance;
    4. Creditor-placed insurance;
    5. Insurance sold as an isolated transaction on the part of the insurer and not related to an agreement or a plan for insuring debtors of the creditor;
    6. Insurance for which no identifiable charge is made to the debtor; and
    7. Insurance on accounts receivable.

Source:

S.L. 1985, ch. 316, § 14; 2001, ch. 278, § 1; 2003, ch. 252, § 3.

Derivation:

N.D.C.C. §§ 26-35-01, 26-35-02.

26.1-37-02. Definitions.

For the purposes of this chapter:

  1. “Closed-end credit” means a credit transaction that does not meet the definition of open-end credit.
  2. “Collateral” means personal property that is pledged as security for the satisfaction of a debt.
  3. “Consumer credit insurance” is a general term used in this chapter to refer to any or all of credit life insurance, credit accident and health insurance, credit unemployment insurance, credit property, or any other credit insurance.
  4. “Credit accident and health insurance” means insurance on a debtor to provide indemnity for payments becoming due on a specific loan or other credit transaction while the debtor is disabled as defined in the policy.
  5. “Credit agreement” means the written document that sets forth the terms of the credit transaction and includes the security agreement.
  6. “Credit life insurance” means insurance on a debtor or debtors, pursuant to or in connection with a specific loan or other credit transaction, to provide for satisfaction of a debt, in whole or in part, upon the death of an insured debtor.
  7. “Credit property insurance” means any policy, endorsement, rider, binder, certificate, or other instrument or evidence of insurance covering perils to goods purchased through a credit transaction or used as collateral for a credit transaction and which concerns a creditor’s interest in the purchased goods or pledged collateral either in whole or in part.
  8. “Credit transaction” means any transaction by the terms of which the repayment of money loaned or loan commitment made, or payment for goods, services, or properties sold or leased, is to be made at a future date or dates.
  9. “Credit unemployment insurance” means insurance on a debtor to provide indemnity for payments or debt becoming due on a specific loan or other credit transaction while the debtor is involuntarily unemployed as defined in the policy.
  10. “Creditor” means the lender of money or vendor or lessor of goods, services, or property, rights, or privileges, for which payment is arranged through a credit transaction, or any successor to the right, title, or interest of the lender, vendor, or lessor, and an affiliate, associate, or subsidiary of any of them or any director, officer, or employee of any of them, or any other person in any way associated with any of them.
  11. “Creditor-placed insurance” means insurance that is purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss, expense, or damage to the collateralized personal property as a result of fire, theft, collision, or other risks of loss that would either impair a creditor’s interest or adversely affect the value of collateral covered by dual interest insurance. It is purchased according to the terms of the credit agreement as a result of the debtor’s failure to provide required physical damage insurance, with the cost of the coverage being charged to the debtor. It is either single interest insurance or limited dual interest insurance.
  12. “Debtor” means a borrower of money or a purchaser or lessee of goods, services, property, rights, or privileges for which payment is arranged through a credit transaction.
  13. “Dual interest insurance” means credit property insurance covering the seller’s or creditor’s interest and at least partially the borrower’s interest in the goods purchased through the credit transaction or pledged as collateral for the credit transaction.
  14. “Finance charge” means any charge payable directly or indirectly as an incident to or as a condition of the extension of credit, including interest; time price differentials; amount payable under a discount system of additional charges; service, transaction, or carrying charges; loan fees; points or similar charges; appraisal fees; or charges incurred for investigating the creditworthiness of the consumer. The terms do not include charges as a result of default, taxes, license fees, delinquency charges, or filing fees.
  15. “Gross debt” means the sum of the remaining payments owed to the creditor by the debtor.
  16. “Identifiable charge” means a charge for a type of consumer credit insurance that is made to debtors having such insurance and not made to debtors not having such insurance, and includes a charge for insurance that is disclosed in the credit or other instrument furnished to the debtor which sets out the financial elements of the credit transaction and any difference in the finance, interest, service, or other similar charge made to debtors who are in like circumstances except for the insured or noninsured status of the debtor or of the property used as security for the credit transaction.
  17. “Net debt” means the amount necessary to liquidate the remaining debt in a single lump sum payment, excluding all unearned interest and other unearned finance charges.
  18. “Open-end credit” means credit extended by a creditor under an agreement in which:
    1. The creditor reasonably contemplates repeated transactions;
    2. The creditor imposes a finance charge from time to time on an outstanding unpaid balance; and
    3. The amount of credit that may be extended to the debtor during the term of the agreement, up to any limit set by the creditor, is generally made available to the extent that any outstanding balance is repaid.

Source:

S.L. 1985, ch. 316, § 14; 2001, ch. 278, § 2.

Derivation:

N.D.C.C. § 26-35-03.

26.1-37-03. Issuance of policies and certificates.

All credit insurance subject to this chapter may be delivered or issued for delivery in this state only by an insurer authorized to do an insurance business therein and may be issued only through holders of licenses or authorizations issued by the commissioner.

Source:

S.L. 1985, ch. 316, § 14; 2001, ch. 278, § 3.

Derivation:

N.D.C.C. § 26-35-10.

26.1-37-04. Forms of credit life insurance and credit accident and health insurance. [Repealed]

Repealed by S.L. 2001, ch. 278, § 12.

26.1-37-04.1. Types of consumer credit insurance.

The types of consumer credit insurance defined in section 26.1-37-02 may each be written separately or in combination with other types of consumer credit insurance on an individual policy or group policy basis. The commissioner may by rule prohibit or limit any combination.

Source:

S.L. 2001, ch. 278, § 4.

26.1-37-05. Amount of consumer credit insurance.

    1. Except as otherwise provided in this subsection, the initial amount of credit life insurance may not exceed the total amount repayable under the contract of indebtedness and, when an indebtedness is repayable in substantially equal installments, the amount of insurance may not exceed the scheduled or actual amount of unpaid indebtedness, whichever is greater. Insurance on agricultural loan commitments, not exceeding one year in duration, may be written up to the amount of the loan commitment, on a nondecreasing or level term plan. Insurance on educational loan commitments may be written for unpaid indebtedness plus any unused commitment.
    2. In the absence of any pre-existing condition exclusions, the amount of insurance payable in the event of death due to natural causes may be limited to the balance as the balance existed six months before the date of death if:
      1. There has been one increase or more in the outstanding balance during the six-month period, other than those due to the accrual of interest or late charges; and
      2. Evidence of individual insurability has not been required during the six-month period.
    3. Other patterns of insurance may be used which are not inconsistent with this subsection, including those providing coverage for lease payments or lump sum purchase at the end of the lease.
    1. The total amount of periodic indemnity payable by credit accident and health insurance or by credit unemployment insurance in the event of disability or unemployment, as defined in the policy, may not exceed the aggregate of the periodic scheduled unpaid installments of the gross debt; and the amount of each periodic indemnity payment may not exceed the original gross debt divided by the number of periodic installments.
    2. Notwithstanding subdivision a, for credit accident and health insurance or for credit unemployment insurance written in connection with an open-end credit agreement, the amount of insurance may not exceed the gross debt which would accrue on that amount using the periodic indemnity. Subject to any policy maximums, the periodic indemnity may not be less than the creditor’s minimum repayment schedule.
    1. For credit property insurance sold in conjunction with a closed-end transaction, an insurer may not issue credit property insurance coverage unless the amount financed exceeds three hundred dollars.
    2. For credit property insurance sold in conjunction with a closed-end transaction, the amount of credit property insurance may not exceed the underlying credit transaction.

Source:

S.L. 1985, ch. 316, § 14; 2001, ch. 278, § 5.

Derivation:

N.D.C.C. § 26-35-05.

26.1-37-06. Term of consumer credit insurance.

  1. Effective date of coverage:
    1. For consumer credit insurance made available to and elected by the debtor before or contemporaneous with a credit transaction to which the insurance relates, the term of the insurance, subject to acceptance by the insurer, commences on the date when the debtor becomes obligated to the creditor, except that when evidence of individual insurability is required and the evidence is furnished more than thirty days after the date when the debtor becomes obligated to the creditor, the term of the credit insurance may commence on the date on which the insurer determines the evidence to be satisfactory.
    2. For insurance coverage made available to and elected by the debtor on a date subsequent to the date of the consumer credit transaction to which the insurance relates, the insurance, subject to acceptance by the insurer, commences on a date not earlier than the date the election is made by the debtor nor later than thirty days following the date on which the insurance company accepts the risk for coverage, according to an objective method such as one related to a particular date within a billing or repayment cycle or a calendar month.
    3. Notwithstanding the provisions of subdivisions a and b, when a group policy provides coverage with respect to debts existing on the policy effective date, the insurance relating to the debt shall not commence before the effective date of the group policy.
    4. A charge for insurance may not be made to the debtor and retained by the creditor or insurer for any time prior to commencement of the consumer credit insurance to which the charge is related.
  2. Termination date of coverage:
    1. The term of any consumer credit insurance may not extend beyond the termination date specified in the policy. The termination date of insurance may precede, coincide with, or follow the scheduled maturity date of the debt to which it relates, subject to any other requirements and restrictions of this chapter.
    2. The term of any consumer credit insurance may not extend more than fifteen days beyond the scheduled maturity date of the debt except when extended without additional cost to the debtor or except when extended pursuant to a written agreement, signed by the debtor, in connection with a variable interest rate credit transaction or a deferral, renewal, refinancing, or consolidation of debt.
    3. If the debt is discharged due to renewal, refinancing, or consolidation prior to the scheduled termination date of the insurance, any insurance in force must be terminated before any new insurance may be written in connection with the renewed, refinanced, or consolidated debt.
    4. In all cases of termination of insurance prior to the scheduled termination of the insurance, an appropriate refund or credit to the debtor must be made of any unearned insurance charge paid by the debtor for a term of insurance after the date of the termination, except that a refund is not required of a charge made for insurance if the insurance is terminated by performance of the insurer’s obligation with respect to the insurance.
    5. An insured debtor may terminate consumer credit insurance at any time by providing advance request to the insurer. The individual policy or group certificate may require that the request be in writing or that the debtor surrender the individual policy or group certificate or both. The debtor’s right to terminate coverage may also be subject to the terms of the credit transaction contract.

Source:

S.L. 1985, ch. 316, § 14; 2001, ch. 278, § 6.

Derivation:

N.D.C.C. § 26-35-06.

26.1-37-07. Provisions of policies and certificates of insurance — Disclosure to debtors.

  1. Before the debtor elects to purchase consumer credit insurance in connection with a credit transaction, the following must be disclosed to the debtor in writing:
    1. That the purchase of consumer credit insurance is optional and not a condition of obtaining credit approval.
    2. If more than one kind of consumer credit insurance is being made available to the debtor, whether the debtor can purchase each kind separately or the multiple coverages only as a package.
    3. The conditions of eligibility, if any.
    4. That if the consumer has other insurance that covers the risk, the consumer may not want or need credit insurance.
    5. That within the first thirty days after receiving the individual policy or group certificate, the debtor may cancel the coverage and have all premiums paid by the debtor refunded or credited. Thereafter, the debtor may cancel the policy at any time during the term of the loan and receive a refund of any of the unearned premium. However, only in those instances when insurance is a requirement for the extension of credit, the debtor may be required to offer evidence of alternative insurance acceptable to the creditor at the time of cancellation.
    6. A brief description of the coverage, including a description of the amount, the term, any exceptions, limitations, and exclusions, the insured event, any waiting or elimination period, any deductible, any applicable waiver of premium provision, to whom the benefits would be paid, and the premium rate for each coverage or for all coverages in a package.
    7. That if the premium or insurance charge is financed, it will be subject to finance charges at the rate applicable to the credit transaction.
  2. The disclosures in subsection 1 must be provided in the following manner:
    1. In connection with consumer credit insurance offered contemporaneously with the extension of credit or offered through direct mail advertisements, disclosure must be made in writing and presented to the consumer in a clear and conspicuous manner.
    2. In conjunction with the offer of credit insurance subsequent to the extension of credit by other than direct mail advertisements, disclosure may be provided orally so long as written disclosures are provided to the debtor no later than the earlier of:
      1. Ten days after the election of coverage; or
      2. The date any other written material is provided to the debtor.
  3. All consumer credit insurance must be evidenced by an individual policy or a group certificate of insurance which must be delivered to the debtor.
  4. The individual policy or group certificate must, in addition to other requirements of law, set forth the following:
    1. The name and home-office address of the insurer;
    2. The name or names of the debtor or debtors or in the case of a group certificate, the identity by name or otherwise of the debtor or debtors;
    3. The premium or amount of payment by the debtor separately for each kind of coverage or for all coverages in a package, except that for open-end loans, the premium rate and the balance to which the premium rate applies;
    4. A full description of the coverage or coverages, including the amount and term thereof, and any exceptions, limitations, and exclusions;
    5. A statement that the benefits will be paid to the creditor to reduce or extinguish the unpaid debt or to repair or replace the property and, whenever the amount of insurance benefit exceeds the unpaid debt that any excess is payable to a beneficiary, other than the creditor, named by the debtor or to the debtor’s estate; and
    6. If the scheduled term of insurance is less than the scheduled term of the credit transaction, a statement to that effect on the face of the individual policy or group certificate in not less than ten-point bold-faced type.
  5. Unless the individual policy or group certificate of insurance is delivered to the debtor at the time the debt is incurred, or at such other time that the debtor elects to purchase coverage, a copy of the application for the policy or a notice of proposed insurance, signed by the debtor and setting forth the name and home-office address of the insurer, the name or names of the debtor, the premium or amount of payment by the debtor for the insurance and the amount, term, and a brief description of the coverage provided, must be delivered to the debtor at the time the debt is incurred or the election to purchase coverage is made. The copy of the application or notice of proposed insurance must also refer exclusively to insurance coverage, and must be separate and apart from the loan, sale, or other credit statement of account, instrument, or agreement, unless the information required by this subsection is prominently set forth in that material. Upon acceptance of the insurance by the insurer and within thirty days of the date upon which the debt is incurred or the election to purchase coverage is made, the insurer shall cause the individual policy or group certificate of insurance to be delivered to the debtor. The application or notice of proposed insurance must state that upon acceptance by the insurer, the insurance becomes effective as provided in section 26.1-37-06.
  6. The application, notice of proposed insurance, or certificate may be used to fulfill all of the requirements of subsections 1 and 4 if it contains all of the information required by those subsections.
  7. The debtor has thirty days from the date the debtor receives either the individual policy or the group certificate to review the coverage purchased. At any time within the thirty-day period, the debtor may contact the creditor or insurer issuing the policy or certificate and request that the coverage be canceled. The individual policy or group certificate may require the request to be in writing or that the policy or certificate be returned to the insurer, or both. The debtor must, within thirty days of the request, receive a full refund or credit of all premiums or insurance charges paid by the debtor.
  8. If the named insurer does not accept the risk, the debtor must receive a policy or certificate of insurance setting forth the name and home-office address of the substituted insurer and the amount of the premium to be charged, and if the amount of premium is less than that set forth in the notice of proposed insurance an appropriate refund must be made within thirty days. If no insurer accepts the risk, then all premiums paid must be refunded or credited within thirty days of application to the person entitled thereto.
  9. For the purpose of subsection 5, an individual policy or group certificate delivered in conjunction with an open-end consumer credit agreement or any consumer credit insurance requested by the debtor after the date of the debt must be deemed to be delivered at the time the debt is incurred or election to purchase coverage is made if the delivery occurs within thirty days of the date the insurance is effective.
  10. An individual policy or group certificate delivered in conjunction with an open-end credit agreement continues from its effective date through the term of the agreement unless the individual policy or group certificate is terminated in accordance with its terms at an earlier date.
  11. Credit property insurance coverage, at a minimum, must include the coverages in the standard fire policy with coverage attachment and extended coverage endorsement and must cover a substantial risk of loss of or damage to the property related to the credit transaction.

Source:

S.L. 1985, ch. 316, § 14; 2001, ch. 278, § 7.

Derivation:

N.D.C.C. § 26-35-07.

26.1-37-08. Premiums and refunds.

  1. An insurer may revise its schedules of premium rates from time to time and shall file the revised schedules with the commissioner. No insurer may issue any consumer credit insurance policy or group certificate for which the premium rate exceeds that determined by the schedules of the insurer as on file with the commissioner. The commissioner may adopt rules to assure that the premium rates are reasonable in relation to the benefits provided.
  2. Each individual policy or group certificate must provide for a refund in the event of termination of the insurance prior to the scheduled maturity date of the insurance and upon notice to the insurer. The refund of an amount paid by the debtor for insurance must be paid or credited promptly to the person entitled thereto; provided, however, that the commissioner shall prescribe a minimum refund and no refund which would be less than the minimum need be made. Refund formulas which an insurer desires to use must develop refunds that are at least as favorable to the debtor as refunds equal to the premium cost of scheduled benefits subsequent to the date of cancellation or termination, computed at the schedule of premium rates in effect on the date of issue. The formula to be used in computing the refund must be filed with and approved by the commissioner.
  3. If a creditor requires a debtor to make any payment for consumer credit insurance and an individual policy or group certificate of insurance is not issued, the creditor shall immediately give written notice to the debtor and shall promptly make an appropriate credit to the account.
  4. The amount charged to a debtor for any consumer credit insurance may not exceed the premiums charged by the insurer, as computed at the time the charge to the debtor is determined.
  5. This chapter does not authorize any payments for insurance prohibited under any law or rule governing credit transactions.

Source:

S.L. 1985, ch. 316, § 14; 2001, ch. 278, § 8.

Derivation:

N.D.C.C. § 26-35-09.

26.1-37-09. Applicability of credit life and health policy simplification standards.

All individual and group credit life insurance and credit accident and health insurance policies and insurance certificates must comply with sections 26.1-33-29 through 26.1-33-32 and 26.1-36-13 through 26.1-36-16, respectively.

Source:

S.L. 1985, ch. 316, § 14; 2001, ch. 278, § 9.

Derivation:

N.D.C.C. §§ 26-03.5-02, 26-03.5-03, 26-03.5-08.

26.1-37-10. Minimum credit life and health policy language simplification standards. [Repealed]

Repealed by S.L. 2001, ch. 278, § 12.

26.1-37-11. Approval of credit life and health forms. [Repealed]

Repealed by S.L. 2001, ch. 278, § 12.

26.1-37-12. Effect of credit life and health policy simplification standards on filed policies. [Repealed]

Repealed by S.L. 2001, ch. 278, § 12.

26.1-37-13. Claims.

  1. All claims must be promptly reported to the insurer or its designated claim representative, and the insurer shall maintain adequate claim files. All claims must be settled as soon as possible and in accordance with the terms of the insurance contract.
  2. All claims must be paid either by draft drawn upon the insurer or by check of the insurer to the order of the claimant to whom payment of the claim is due pursuant to the policy provisions, or upon direction of the claimant to one specified.
  3. No plan or arrangement may be used by which any person, firm, or corporation other than the insurer or its designated claim representative is authorized to settle or adjust claims. The creditor may not be designated as claim representative for the insurer in adjusting claims; provided, that a group policyholder may, by arrangement with the group insurer, draw drafts, checks, or electronic transfers in payment of claims due to the group policyholder subject to audit and review by the insurer.

Source:

S.L. 1985, ch. 316, § 14; 2001, ch. 278, § 10.

Derivation:

N.D.C.C. § 26-35-11.

Collateral References.

Credit life insurer’s punitive damage liability for refusing payment, 55 A.L.R.4th 246.

26.1-37-14. Existing insurance — Choice of insurer.

When consumer credit insurance is required as additional security for any debt, the debtor shall, upon request to the creditor, have the option of furnishing the required amount of insurance through existing insurance policies owned or controlled by the debtor or of procuring and furnishing the required coverage through any insurer authorized to transact insurance business in this state.

Source:

S.L. 1985, ch. 316, § 14; 2001, ch. 278, § 11.

Derivation:

N.D.C.C. § 26-35-12.

26.1-37-15. Enforcement.

The commissioner may adopt rules to implement this chapter. Whenever the commissioner finds that there has been a violation of this chapter or any rules adopted pursuant to this chapter, and after written notice thereof and hearing given to the insurer or other person authorized or licensed by the commissioner, the commissioner shall set forth the details of the findings together with an order for compliance by a specified date. The order is binding on the insurer and other person authorized or licensed by the commissioner on the date specified unless sooner withdrawn by the commissioner or a stay has been ordered by a court of competent jurisdiction.

Source:

S.L. 1985, ch. 316, § 14.

Derivation:

N.D.C.C. § 26-35-13.

26.1-37-16. Penalties.

In addition to any other penalty provided by law, any person violating an order of the commissioner after it has become final, and while the order is in effect, upon proof thereof to the satisfaction of the court, shall forfeit and pay to this state a sum not to exceed two hundred fifty dollars which may be recovered in a civil action, except that if the violation is found to be willful, the amount of the penalty may be a sum not to exceed one thousand dollars. The commissioner, after notice and hearing, may revoke or suspend the license or certificate of authority of the person guilty of the violation.

Source:

S.L. 1985, ch. 316, § 14.

Derivation:

N.D.C.C. § 26-35-15.

CHAPTER 26.1-38 Life and Health Insurance Guaranty Association [Repealed]

[Repealed by S.L. 1989, ch. 373, § 2]

CHAPTER 26.1-38.1 Life and Health Insurance Guaranty Association

26.1-38.1-01. Coverage and limitations.

  1. This section provides coverage for the policies and contracts specified in subsection 2:
    1. To persons, except for nonresident certificate holders under group policies or contracts, who, regardless of where they reside, are the beneficiaries, assignees, or payees, including health care providers rendering services covered under health insurance policies or certificates, of the persons covered under subdivision b.
    2. To persons who are owners of or certificate holders or enrollees under such policies or contracts other than unallocated annuity contracts and structured settlement annuities, and in each case who:
      1. Are residents; or
      2. Are not residents, but only under all of the following conditions:
        1. The member insurer that issued such policies or contracts is domiciled in this state;
        2. The states in which the persons reside have associations similar to the association created under this chapter; and
        3. The persons are not eligible for coverage by an association in any other state because the insurer or the health maintenance organization was not licensed in the state at the time specified in the state’s guaranty association law.
    3. For any unallocated annuity contract specified in subsection 2, subdivisions a and b do not apply, and this chapter, except as provided in subdivisions e and f, provides coverage to:
      1. Persons who are the owners of the unallocated annuity contracts if the contracts are issued to or in connection with a specific benefit plan, the sponsor of which has its principal place of business in this state; and
      2. Persons who are owners of unallocated annuity contracts issued to or in connection with government lotteries if the owners are residents.
    4. For structured settlement annuities specified in subsection 2, subdivisions a and b do not apply, and this chapter, except as provided in subdivisions e and f, provides coverage to a person who is a payee under a structured settlement annuity or beneficiary of a payee if the payee is deceased, if the payee:
      1. Is a resident, regardless of where the contract owner resides; or
      2. Is not a resident, and:
        1. The contract owner of the structured settlement annuity is a resident, or the contract owner of the structured settlement annuity is not a resident but the insurer that issued the structured settlement annuity is domiciled in this state and the state in which the contract owner resides has an association similar to the association created under this chapter; and
        2. Neither the payee or beneficiary nor the contract owner is eligible for coverage by the association of the state in which the payee or contract owner resides.
    5. This chapter does not provide coverage to:
      1. A person who is a payee or beneficiary of a contract owner resident of this state, if the payee or beneficiary is afforded any coverage by the association of another state;
      2. A person covered under subdivision c, if any coverage is provided by the association of another state to the person; or
      3. A person who acquires rights to receive payments through a structured settlement factoring transaction as defined in section 5891(c)(3)(A) of title 26 of the United States Code, regardless of whether the transaction occurred before or after this federal law became effective.
    6. This chapter provides coverage to a person who is a resident of this state and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this chapter is provided coverage under the laws of any other state, the person may not be provided coverage under this chapter. In determining the application of the provisions of this subdivision in situations in which a person could be covered by the association of more than one state, whether as an owner, payee, enrollee, beneficiary, or assignee, this chapter must be construed in conjunction with other state laws to result in coverage by only one association.
  2. This chapter provides coverage to the persons specified in subsection 1 for policies or contracts of direct, nongroup life insurance, health insurance, which for the purposes of this chapter includes health maintenance organization subscriber contracts and certificates, or annuities, and supplemental contracts to any of these, for certificates under direct group policies and contracts, and supplemental contracts to any of these and for unallocated annuity contracts issued by member insurers, except as limited by this chapter. Annuity contracts and certificates under group annuity contracts include guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, annuities issued to or in connection with government lotteries, and any immediate or deferred annuity contracts.
  3. Except for the portion of a policy or contract, including a rider, which provides long-term care or any other health insurance benefits, this chapter does not provide coverage for:
    1. Any portion of a policy or contract not guaranteed by the member insurer, or under which the risk is borne by the policy owner or contract owner;
    2. Any policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract;
    3. Any portion of a policy or contract to the extent that the rate of interest on which the portion of the policy or contract is based or to the extent that the rate of interest, crediting of a rate of interest, or similar factor determined by using an index or other external reference stated in the policy or contract which is employed in calculating returns or changes in value:
      1. Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds a rate of interest determined by subtracting two percentage points from Moody’s corporate bond yield average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier; and
      2. On and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody’s corporate bond yield average as most recently available;
    4. A portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, health, or annuity benefits to its employees, members, or others, to the extent that such plan or program is self-funded or uninsured, including benefits payable by an employer, association, or other person under:
      1. A multiple employer welfare arrangement as defined in section 1144 of title 29 of the United States Code;
      2. A minimum premium group insurance plan;
      3. A stop-loss group insurance plan; or
      4. An administrative services only contract;
    5. Any portion of a policy or contract to the extent that it provides for dividends or experience rating credits, voting rights, or payment of any fees or allowances to any person, including the policy owner or contract owner, in connection with the service to or administration of the policy or contract;
    6. Any policy or contract issued in this state by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue the policy or contract in this state;
    7. Any unallocated annuity contract issued to or in connection with a benefit plan protected under the federal pension benefit guaranty corporation regardless of whether the federal pension benefit guaranty corporation has yet become liable to make any payments with respect to the benefit plan;
    8. Any portion of any unallocated annuity contract which is not issued to, or in connection with, a specific employee, union, or association of natural persons benefit plan or a government lottery;
    9. A portion of a policy or contract to the extent that the assessments required by section 26.1-38.1-06 with respect to the policy or contract are preempted or otherwise not permitted by federal or state law;
    10. An obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner or policy owner, including:
      1. Claims based on marketing materials;
      2. Claims based on side letters, riders, or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements;
      3. Misrepresentations of or regarding policy or contract benefits;
      4. Extracontractual claims; or
      5. A claim for penalties or consequential or incidental damages;
    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 it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which has not been credited to the policy or contract, or as to which the policy owner’s or contract owner’s rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier. If a policy’s or contract’s interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this subdivision, the interest or changes in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and is not subject to forfeiture;
    13. A policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to part C or part D of subchapter XVIII of chapter 7 of title 42 of the United States Code, commonly known as Medicare part C and part D, or subchapter XIX of chapter 7 of title 42 of the United States Code; commonly known as Medicaid, or any regulations issued pursuant thereto; and
    14. Structured settlement annuity benefits to which a payee or beneficiary has transferred the payee’s or beneficiary’s rights in a structured settlement factoring transactions, as defined in section 5891(c)(3)(A) of title 26 of the United States Code, regardless of whether the transaction occurred before or after this federal law became effective.
  4. The benefits that the association may become obligated to cover may in no event exceed the lesser of:
    1. The contractual obligations for which the member insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or
      1. With any respect to one life, regardless of the number of policies, or contracts:
        1. Three hundred thousand dollars in life insurance death benefits, but not more than one hundred thousand dollars in net cash surrender and net cash withdrawal values for life insurance;
        2. For health insurance benefits:
          1. One hundred thousand dollars for coverages not defined as disability income insurance or health benefit plans or long-term care insurance, including any net cash surrender and net cash withdrawal values.
          2. Three hundred thousand dollars for disability income insurance, and three hundred thousand dollars for long-term care insurance.
          3. Five hundred thousand dollars for health benefit plans.
        3. Two hundred fifty thousand dollars in the present value of annuity benefits, including net cash surrender and net cash withdrawal values.
      2. With respect to each individual participating in a government retirement benefit plan established under section 401(k), 403(b), or 457 of the United States Internal Revenue Code covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, two hundred fifty thousand dollars in present value annuity benefits, including net cash surrender and net cash withdrawal values.
      3. With respect to each payee of a structured settlement annuity or beneficiary, or beneficiaries of the payee if deceased, two hundred fifty thousand dollars in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any.
      4. However, in no event shall the association be obligated to cover more than:
        1. An aggregate of three hundred thousand dollars in benefits with respect to any one life under paragraphs 1, 2, and 3 of subdivision b except with respect to the benefits for health benefit plans under subparagraph b of paragraph 1 of subdivision b, in which case the aggregate liability of the association shall not exceed five hundred thousand dollars with respect to any one individual; or
        2. With respect to one owner of multiple nongroup policies of life insurance, whether the persons insured are officers, managers, employees, or other persons, more than five million dollars in benefits, regardless of the number of policies and contracts held by the owner.
      5. With respect to either one contract owner provided coverage under paragraph 2 of subdivision c of subsection 1; or one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in paragraph 2 of subdivision b, five million dollars in benefits, irrespective of the number of contracts with respect to the contract owner or plan sponsor. However, in the case in which one or more unallocated annuity contracts are covered contracts under this chapter and are owned by a trust or other entity for the benefit of two or more plan sponsors, coverage must be afforded by the association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this state and in no event is the association obligated to cover more than five million dollars in benefits with respect to all these unallocated contracts.
      6. The limitations set forth in this subsection are limitations on the benefits for which the association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association’s obligations under this chapter may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to its subrogation and assignment rights.
  5. In performing its obligations to provide coverage under this chapter, the association is not required to guarantee, assume, reinsure, reissue, or perform, or cause to be guaranteed, assumed, reinsured, reissued, or performed, the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract.
  6. For purposes of this chapter, benefits provided by a long-term care rider to a life insurance policy or annuity contract must be considered the same type of benefits as the related base life insurance policy or annuity contract.

Source:

S.L. 1989, ch. 373, § 2; 1991, ch. 301, § 22; 1995, ch. 276, § 12; 1999, ch. 271, § 1; 2001, ch. 279, § 1; 2003, ch. 48, § 26; 2011, ch. 220, § 1; 2019, ch. 244, § 1, eff July 1, 2019.

Note.

Employee Retirement Income Security Act of 1974, see 29 USCS 1001 et seq.

United States Internal Revenue Code, see USCS, Title 26.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-02. Definitions.

As used in this chapter:

  1. “Account” means either of the two accounts created under section 26.1-38.1-03.
  2. “Association” means the North Dakota life and health insurance guaranty association created under section 26.1-38.1-03.
  3. “Authorized assessment” or the term “authorized” when used in the context of assessments means a resolution by the board of directors has been passed under which an assessment will be called immediately or in the future from member insurers for a specified amount. An assessment is authorized when the resolution is passed.
  4. “Benefit plan” means a specific employee, union, or association of natural persons benefit plan.
  5. “Called assessment” or “called” when used in the context of assessments means that a notice was issued by the association to member insurers requiring that an authorized assessment be paid within the time frame set forth within the notice. An authorized assessment becomes a called assessment when notice is mailed by the association to member insurers.
  6. “Commissioner” means the insurance commissioner of this state.
  7. “Contractual obligation” means any obligation under a policy or contract or certificate under a group policy or contract, or portion thereof for which coverage is provided under section 26.1-38.1-01.
  8. “Covered contract” or “covered policy” means any policy or contract or portion of a policy or contract for which coverage is provided under this chapter.
  9. “Extracontractual claims” include claims relating to bad faith in the payment of claims, punitive or exemplary damages, or attorney’s fees and costs.
  10. “Health benefit plan” means any hospital or medical expense policy or certificate, any health maintenance organization subscriber contract, or any other similar health contract. The term does not include:
    1. Accident only insurance;
    2. Credit insurance;
    3. Dental only insurance;
    4. Vision only insurance;
    5. Medicare supplement insurance;
    6. Benefits for long-term care, home health care, community-based care, or any combination of these benefits;
    7. Disability income insurance;
    8. Coverage for onsite medical clinics; or
    9. Specified disease, hospital confinement indemnity, or limited health insurance, if the types of coverage do not provide coordination of benefits and are provided under separate policies or certificates.
  11. “Impaired insurer” means a member insurer that, after July 1, 1989, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.
  12. “Insolvent insurer” means a member insurer which, after July 1, 1989, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.
  13. “Member insurer” means any insurer or health maintenance organization licensed or which holds a certificate of authority to transact in this state any kind of insurance or health maintenance organization business for which coverage is provided under section 26.1-38.1-01. The term includes any insurer or health maintenance organization whose license or certificate of authority in this state may have been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include:
    1. A fraternal benefit society;
    2. A mandatory state pooling plan;
    3. A mutual assessment company or other person that operates on an assessment basis;
    4. An insurance exchange;
    5. An organization that has a certificate or license limited to the issuance of charitable gift annuities under sections 26.1-34.1-01 through 26.1-34.1-07; or
    6. Any entity similar to any of the above.
  14. “Moody’s corporate bond yield average” means the monthly average corporates as published by Moody’s investors service, incorporated, or any successor thereto.
  15. “Owner” of a policy or contract and “policyholder”, “policy owner” and “contract owner” mean the person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and properly recorded as the owner on the books of the member insurer. The terms owner, contract owner, policyholder, and policy owner do not include persons with a mere beneficial interest in a policy or contract.
  16. “Person” means any individual, corporation, limited liability company, partnership, association, governmental entity, or voluntary organization.
  17. “Plan sponsor” means:
    1. The employer in the case of a benefit plan established or maintained by a single employer;
    2. The employee organization in the case of a benefit plan established or maintained by an employee organization; or
    3. In the case of a benefit plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan.
  18. “Premiums” means amounts or considerations, by whatever name called, received on covered policies or contracts less returned premiums, considerations, and deposits, and less dividends and experience credits. “Premiums” do not include any amounts or considerations received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under subsections 2 and 3 of section 26.1-38.1-01 and except that assessable premium shall not be reduced on account of subdivision c of subsection 3 of section 26.1-38.1-01, relating to interest limitations, and subsection 3 of section 26.1-38.1-01, relating to limitations with respect to any one individual, any one participant, and any one policy or contract owner. “Premiums” do not include:
    1. Premiums in excess of five million dollars on any unallocated annuity contract not issued under a governmental retirement plan established under section 401(k), 403(b), or 457 of the United States Internal Revenue Code; or
    2. With respect to multiple nongroup policies of life insurance owned by one owner, whether the policy or contract owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, premiums in excess of five million dollars with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.
    1. “Principal place of business” of a plan sponsor or a person other than a natural person means the single state in which the natural persons who establish policy for the direction, control, and coordination of the operations of the entity as a whole primarily exercise that function, determined by the association in its reasonable judgment by considering the following factors: the state in which the primary executive and administrative headquarters of the entity is located; the state in which the principal office of the chief executive officer of the entity is located; the state in which the board of directors or similar governing person or persons of the entity conducts the majority of its meetings; the state in which the executive or management committee of the board of directors or similar governing person or persons of the entity conducts the majority of its meetings; the state from which the management of the overall operations of the entity is directed; and in the case of a benefit plan sponsored by affiliated companies comprising a consolidated corporation, the state in which the holding company or controlling affiliate has its principal place of business as determined using the above factors. However, in the case of a plan sponsor, if more than fifty percent of the participants in the benefit plan are employed in a single state, that state is deemed to be the principal place of business of the plan sponsor.
    2. The principal place of business of a plan sponsor of a benefit plan described in subdivision c of subsection 17 is deemed to be the principal place of business of the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of a principal place of business, is deemed to be the principal place of business of the employer or employee organization that has the largest investment in the benefit plan in question.
  19. “Receivership court” means the court in the insolvent or impaired insurer’s state having jurisdiction over the conservation, rehabilitation, or liquidation of the member insurer.
  20. “Resident” means any person to whom a contractual obligation is owed and who resides in this state on the date of entry of a court order that determines a member insurer to be an impaired insurer or a court order that determines a member insurer to be an insolvent insurer, whichever occurs first. A person may be a resident of only one state, which in the case of a person other than a natural person must be its principal place of business. Citizens of the United States who are residents of foreign countries, or residents of United States possessions, territories, or protectorates that do not have an association similar to the association created under this chapter, are deemed residents of the state of domicile of the member insurer that issued the policies or contracts.
  21. “State” means a state, the District of Columbia, Puerto Rico, and a United States possession, territory, or protectorate.
  22. “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.
  23. “Supplemental contract” means any written agreement entered into for the distribution of proceeds under a life, health, or annuity policy or a life, health, or annuity contract.
  24. “Unallocated annuity contract” means any annuity contract or group annuity certificate which is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed to an individual by an insurer under such contract or certificate.

Source:

S.L. 1989, ch. 373, § 2; 1993, ch. 54, § 106; 1993, ch. 312, § 1; 1999, ch. 271, § 2; 2011, ch. 220, § 2; 2019, ch. 244, § 2, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-03. Creation of the association.

  1. There is created a nonprofit legal entity to be known as the North Dakota life and health insurance guaranty association. All member insurers must be and remain members of the association as a condition of their authority to transact insurance or a health maintenance organization business in this state. The association shall perform its functions under the plan of operation established and approved under section 26.1-38.1-07 and shall exercise its powers through a board of directors established under section 26.1-38.1-04. For purposes of administration and assessment, the association shall maintain two accounts:
    1. The life insurance and annuity account that includes the following subaccounts:
      1. Life insurance account;
      2. Annuity account, which includes annuity contracts owned by a governmental retirement plan or its trustee established under section 401, 403(b), or 457 of the United States Internal Revenue Code, but otherwise excludes unallocated annuities; and
      3. Unallocated annuity account that excludes contracts owned by a governmental retirement benefit plan or its trustee established under section 401, 403(b), or 457 of the United States Internal Revenue Code.
    2. The health account.
  2. The association shall come under the immediate supervision of the commissioner and is subject to the applicable provisions of the insurance laws of this state. Meetings or records of the association may be opened to the public upon majority vote of the board of directors of the association.

Source:

S.L. 1989, ch. 373, § 2; 1999, ch. 271, § 3; 2003, ch. 252, § 4; 2019, ch. 244, § 3, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-04. Board of directors.

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

Source:

S.L. 1989, ch. 373, § 2; 2019, ch. 244, § 4, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-05. Powers and duties of the association.

  1. If a member insurer is an impaired insurer, the association may, in its discretion, and subject to any conditions imposed by the association that do not impair the contractual obligations of the impaired insurer, and that are approved by the commissioner:
    1. Guarantee, assume, reissue, or reinsure, or cause to be guaranteed, assumed, reissued, or reinsured, any or all of the policies or contracts of the impaired insurer; or
    2. Provide such moneys, pledges, loans, notes, guarantees, or other means as are proper to effectuate subdivision a and assure payment of the contractual obligations of the impaired insurer pending action under subdivision a.
  2. If a member insurer is an insolvent insurer, the association, in its discretion, shall:
    1. Guarantee, assume, reissue, or reinsure, or cause to be guaranteed, assumed, reissued, or reinsured, the policies or contracts of the insolvent insurer;
    2. Assure payment of the contractual obligations of the insolvent insurer;
    3. Provide moneys, pledges, loans, notes, guarantees, or other means reasonably necessary to discharge the association’s duties; or
    4. Provide benefits and coverage in accordance with the following provisions:
      1. With respect to policies and contracts, assure payment of benefits that would have been payable under the policies or contracts of the insolvent insurer, for claims incurred:
        1. With respect to group policies and contracts, not later than the earlier of the next renewal date under those policies or contracts or forty-five days, but in no event less than thirty days, after the date on which the association becomes obligated with respect to the policies and contracts.
        2. With respect to nongroup policies, contracts, and annuities, not later than the earlier of the next renewal date, if any, under such policies or contracts or one year, but in no event less than thirty days, from the date on which the association becomes obligated with respect to the policies or contracts.
      2. Make diligent efforts to provide all known insureds, enrollees, or annuitants for nongroup policies and contracts, or group policy or contract owners with respect to group policies and contracts, thirty days’ notice of the termination pursuant to paragraph 1 of the benefits provided.
      3. With respect to nongroup policies and contracts covered by the association, make available to each known insured, enrollee, or annuitant, or owner if other than the insured or annuitant, and with respect to an individual formerly an insured, enrollee, or annuitant under a group policy or contract who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of paragraph 4, if the insureds, enrollees, or annuitants had a right under law or the terminated policy, contract, or annuity to convert coverage to individual coverage or to continue an individual policy, contract, or annuity in force until a specified age or for a specified time, during which the insurer or health maintenance organization had no right unilaterally to make changes in any provision of the policy, contract, or annuity or had a right only to make changes in premium by class.
        1. In providing the substitute coverage required under this paragraph, the association may offer either to reissue the terminated coverage or to issue an alternative policy or contract at actuarially justified rates, subject to the prior approval of the commissioner.
        2. Alternative or reissued policies or contracts shall be offered without requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy or contract.
        3. The association may reinsure any alternative or reissued policy or contract.
      4. Alternative policies or contracts adopted by the association shall be subject to the approval of the commissioner. The association may adopt alternative policies or contracts of various types for future issuance without regard to any particular impairment or insolvency.
      5. Alternative policies or contracts must contain at least the minimum statutory provisions required in this state and provide benefits that are not unreasonable in relation to the premium charged. The association shall set the premium in accordance with a table of rates which it shall adopt. The premium must reflect the amount of insurance to be provided and the age and class of risk of each insured, but may not reflect any changes in the health of the insured after the original policy or contract was last underwritten.
      6. Any alternative policy or contract issued by the association shall provide coverage of a type similar to that of the policy or contract issued by the impaired or insolvent insurer, as determined by the association.
      7. If the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy or contract, the premium must be actuarially justified and set by the association in accordance with the amount of insurance or coverage provided and the age and class of risk, subject to prior approval of the commissioner.
      8. The association’s obligations with respect to coverage under any policy or contract of the impaired or insolvent insurer or under any reissued or alternative policy or contract shall cease on the date the coverage or policy or contract is replaced by another similar policy or contract by the policy or contract owner, the insured, the enrollee, or the association.
  3. When proceeding under subsection 2 with respect to any policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with subdivision c of subsection 3 of section 26.1-38.1-01.
  4. Nonpayment of premiums within thirty-one days after the date required under the terms of any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage terminates the association’s obligations under the policy, contract, or coverage under this chapter with respect to the policy, contract, or coverage, except with respect to any claims incurred or any net cash surrender value which may be due in accordance with the provisions of this chapter.
  5. Premiums due for coverage after entry of an order of liquidation of an insolvent insurer belong to and are payable at the direction of the association. If the liquidator of an insolvent insurer requests, the association shall provide a report to the liquidator regarding the premium collected by the association. The association is liable for unearned premiums due to policy or contract owners arising after the entry of the order.
  6. The protection provided by this chapter does not apply when any guaranty protection is provided to residents of this state by the laws of the domiciliary state or jurisdiction of the impaired or insolvent insurer other than this state.
  7. In carrying out its duties under subsection 2, the association may:
    1. Subject to approval by a court in this state, impose permanent policy or contract liens in connection with any guarantee assumption or reinsurance agreement, if the association finds that the amounts which can be assessed under this chapter are less than the amounts needed to assure full and prompt performance of the association’s duties under this chapter, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of such permanent policy or contract liens, to be in the public interest.
    2. Subject to approval by a court in this state, impose temporary moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw funds held in conjunction with policies or contracts, in addition to any contractual provisions for deferral or cash or policy loan value. In addition, in the event of a temporary moratorium or moratorium charge imposed by the receivership court on payment of cash values or policy loans, or on any other right to withdraw funds held in conjunction with policies or contracts, out of the assets of the impaired or insolvent insurer, the association may defer the payment of cash values, policy loans, or other rights by the association for the period of the moratorium or moratorium charge imposed by the receivership court, except for claims covered by the association to be paid in accordance with a hardship procedure established by the liquidator or rehabilitator and approved by the receivership court.
  8. A deposit in this state, held according to law or as required by the commissioner for the benefits of creditors, including policy or contract owners, not turned over to the domiciliary liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of a member insurer domiciled in this state or in a reciprocal state, under section 26.1-06.1-50, must be paid promptly to the association. The association may retain a portion of any amount received equal to the percentage determined by dividing the aggregate amount of policy or contract owners’ claims related to that insolvency for which the association has provided statutory benefits by the aggregate amount of all policy or contract owners’ claims in this state related to that insolvency and shall remit to the domiciliary receiver the amount so paid to the association, less the amount retained pursuant to this subsection. Any amount paid to the association and retained by it is treated as a distribution of estate assets pursuant to section 26.1-06.1-43 or similar provision of the state of domicile of the impaired or insolvent insurer.
  9. If the association fails to act within a reasonable period of time with respect to an insolvent insurer, as provided in subsection 2, the commissioner shall have the powers and duties of the association under this chapter with respect to insolvent insurers.
  10. The association may render assistance and advice to the commissioner, upon request, concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of any impaired or insolvent insurer.
  11. The association shall have standing to appear or intervene before any court or agency in this state with jurisdiction over an impaired or insolvent insurer concerning which the association is or may become obligated under this chapter or with jurisdiction over any person or property against which the association may have rights through subrogation or otherwise. Such standing extends to all matters germane to the powers and duties of the association, including proposals for reinsuring, reissuing, modifying, or guaranteeing the policies or contracts of the impaired or insolvent insurer and the determination of the policies or contracts and contractual obligations. The association shall also have the right to appear or intervene before a court or agency in another state with jurisdiction over an impaired or insolvent insurer for which the association is or may become obligated or with jurisdiction over any person or property against whom the association may have rights through subrogation or otherwise.
  12. Any person receiving benefits under this chapter must be deemed to have assigned the rights under, and any causes of action against any person for losses arising under, resulting from, or otherwise relating to, the covered policy or contract to the association to the extent of the benefits received because of this chapter, whether the benefits are payments of or on account of contractual obligations, continuation of coverage, or provision of substitute or alternative policies, contracts, or coverages. The association may require an assignment to it of such rights and causes of action by any enrollee, payee, policy or contract owner, beneficiary, insured, or annuitant as a condition precedent to the receipt of any right or benefits conferred by this chapter upon such person.
  13. The subrogation rights of the association under this section have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this chapter.
  14. In addition to subsections 12 and 13, the association shall have all common-law rights of subrogation and other equitable or legal remedy that would have been available to the impaired or insolvent insurer or owner, beneficiary, enrollee, or payee of a policy or contract with respect to such policy or contract, including, in the case of a structured settlement annuity, any rights of the owner, beneficiary, or payee of the annuity, to the extent of benefits received under this chapter, against a person originally or by succession responsible for the losses arising from the personal injury relating to the annuity or payment for the personal injury, except any such person responsible solely by reason of serving as an assignee in respect of a qualified assignment under section 130 of the Internal Revenue Code.
  15. If subsections 12, 13, and 14 are invalid or ineffective with respect to any person or claim for any reason, the amount payable by the association with respect to the related covered obligations must be reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies or contracts or portion of the policies or contracts covered by the association. If the association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the association has rights as described in the preceding paragraphs of this subsection, the person shall pay to the association the portion of the recovery attributable to the policies or contracts or portion of the policies or contracts covered by the association.
  16. In addition to any other rights and powers under this chapter, the association may:
    1. Enter into such contracts as are necessary or proper to carry out the provisions and purposes of this chapter;
    2. Sue or be sued, including taking any legal actions necessary or proper to recover any unpaid assessments under section 26.1-38.1-06 and to settle claims or potential claims against it;
    3. Borrow money to effect the purposes of this chapter and any notes or other evidences of indebtedness of the association not in default shall be legal investments for domestic member insurers and may be carried as admitted assets;
    4. Employ or retain such persons as are necessary or appropriate to handle the financial transactions of the association, and to perform such other functions as become necessary or proper under this chapter;
    5. Take such legal action as may be necessary or appropriate to avoid or recover payment of improper claims;
    6. Exercise, for the purposes of this chapter and to the extent approved by the commissioner, the powers of a domestic life insurer, health insurer, or health maintenance organization, but in no case may the association issue policies or contracts other than those issued to perform its obligations under this chapter;
    7. Organize itself as a corporation or in other legal form permitted by the laws of this state;
    8. Request information from a person seeking coverage from the association in order to aid the association in determining its obligations under this chapter with respect to the person, and the person promptly shall comply with the request;
    9. Unless prohibited by law, in accordance with the terms and conditions of the policy or contract, file for actuarially justified rate or premium increases for any policy or contract for which the association provides coverage under this chapter; and
    10. Take other necessary or appropriate action to discharge its duties and obligations under this chapter or to exercise its powers under this chapter.
  17. The association may join an organization of one or more state associations of similar purposes, to further the purposes and administer the powers and duties of the association.
  18. At any time within one year after the date on which the association becomes responsible for the obligations of a member insurer, the association may elect to succeed to the rights and obligations of the member insurer which accrue on or after this coverage date and which relate to contracts covered in whole or in part by the association under any indemnity reinsurance agreement entered by the member insurer as a ceding insurer and selected by the association. However, the association may not exercise an election with respect to a reinsurance agreement if the receiver, rehabilitator, or liquidator of the member insurer previously and expressly has disaffirmed the reinsurance agreement. The election is effected by a notice to the receiver, rehabilitator, or liquidator and to the affected reinsurers. If the association makes an election, subdivisions a through d apply with respect to the agreements selected by the association.
    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 which relate to contracts covered, in whole or in part, by the association. The association may charge contracts covered in part by the association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the association.
    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 of these amounts, the association is obliged to pay to the beneficiary under the policy or contract on account of which the amounts were paid a portion of the amount equal to the excess of the amount received by the association, over the benefits paid by the association on account of the policy or contract less the retention of the impaired or insolvent member insurer applicable to the loss or event.
    3. Within thirty days following the association’s election, the association and each indemnity reinsurer shall calculate the net balance due to or from the association under each reinsurance agreement as of the date of the association’s election, giving full credit to every item paid by the member insurer or its receiver, rehabilitator, or liquidator, or the indemnity reinsurer during the period between the coverage date and the date of the association’s election. The association or indemnity reinsurer shall pay the net balance due the other within five days of the completion of the aforementioned calculation. If the receiver, rehabilitator, or liquidator received any amounts due the association pursuant to subdivision b, the receiver, rehabilitator, or liquidator shall remit the amounts to the association as promptly as practicable.
    4. If the association, within sixty days of the election, pays the premiums due for periods both before and after the coverage date that relate to contracts covered by the association, in whole or in part, the reinsurer may not terminate the reinsurance agreements, to the extent the agreements relate to contracts covered by the association, in whole or in part, and may not set off any unpaid premium due for periods before the coverage date against amounts due the association.
  19. If the association transfers its obligations to another insurer, and if the association and the other insurer agree, the other insurer shall succeed to the rights and obligations of the association under subsection 18 effective as of the date agreed by the association and the other insurer and regardless of whether the association made the election, provided that:
    1. The indemnity reinsurance agreements 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 subdivision b of subsection 18 no longer apply on and after the date the indemnity reinsurance agreement is transferred to the third-party insurer; and
    3. This subsection does not apply if the association previously expressly determined in writing that it will not exercise the election referred to in subsection 18.
  20. Subsections 18 and 19 supersede the provisions of any law of this state or of any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods after the coverage date, to the receiver, rehabilitator, or liquidator, of the insolvent member insurer. The receiver, rehabilitator, or liquidator remains entitled to any amounts payable by the reinsurer under the reinsurance agreement with respect to losses or events that occur in periods before the coverage date, subject to applicable setoff provisions.
  21. Except as otherwise expressly provided in this section, this section does not alter or modify the terms and conditions of the indemnity reinsurance agreements of the insolvent member insurer. This section does not abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance agreement. This section does not give a policy owner, contract owner, enrollee, certificate holder, or beneficiary an independent claim for relief against an indemnity reinsurer which is not otherwise set forth in the indemnity reinsurance agreement.
  22. The board of directors of the association has discretion and may exercise reasonable business judgment to determine the means by which the association is to provide the benefits of this chapter in an economical and efficient manner.
  23. If the association arranged or offered to provide the benefits of this chapter to a covered person under a plan or arrangement that fulfills the association’s obligations under this chapter, the person is not entitled to benefits from the association in addition to or other than those provided under the plan or arrangement.
  24. Burleigh County is the venue in a course of action against the association arising under this chapter. The association is not required to give an appeal bond in an appeal that relates to a cause of action arising under this chapter.
  25. The association, in carrying out association duties in connection with guaranteeing, assuming, reissuing, or reinsuring policies or contracts under subsections 1 and 2, may issue substitute coverage for a policy or contract that provides a rate of interest, crediting of a rate of interest, or similar factor determined by using an index or other external reference stated in the policy or contract which is employed in calculating returns or changes in value by issuing an alternative policy or contract if:
    1. Instead of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for a fixed interest rate, payment of dividends with minimum guarantees, or different method for calculating interest or changes in value;
    2. There is no requirement for evidence of insurability, a waiting period, or other exclusion that would not have applied under the replaced policy or contract; and
    3. The alternative policy or contract is substantially similar to the replaced policy or contract in all other material terms.

Source:

S.L. 1989, ch. 373, § 2; 1991, ch. 301, § 23; 1999, ch. 271, § 4; 2001, ch. 279, § 2; 2011, ch. 220, §§ 3, 4; 2019, ch. 244, § 5, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-06. Assessments.

  1. For the purpose of providing the funds necessary to carry out the powers and duties of the association, the board of directors shall assess the member insurers, separately for each account, at such time and for such amounts as the board finds necessary. Assessments must be due not less than thirty days after prior written notice to the member insurers and must accrue interest at eighteen percent per annum on and after the due date.
  2. There must be two classes of assessment, as follows:
    1. Class A assessments must be authorized and called for the purpose of meeting administrative and legal costs and other expenses. Class A assessments may be authorized and called whether or not related to a particular impaired or insolvent insurer.
    2. Class B assessments must be authorized and called to the extent necessary to carry out the powers and duties of the association under section 26.1-38.1-05 with regard to an impaired or insolvent insurer.
  3. The amount of any class A assessment must be determined at the discretion of the board of directors and must be authorized and called on a non-pro rata basis.
  4. The amount of any class B assessment, except for assessments related to long-term care insurance, must be allocated for assessment purposes between the accounts and among the subaccounts of the life insurance and annuity account, pursuant to an allocation formula which may be based on the premiums or reserves of the impaired or insolvent insurer or any other standard deemed by the board in its sole discretion as being fair and reasonable under the circumstances.
  5. The amount of the class B assessment for long-term care insurance written by the impaired or insolvent insurer must be allocated according to a methodology included in the plan of operation and approved by the commissioner. The methodology must provide for fifty percent of the assessment to be allocated to accident and health member insurers and fifty percent to be allocated to life and annuity member insurers.
  6. Class B assessments against member insurers for each account and subaccount must be in the proportion that the premiums received on business in this state by each assessed member insurer on policies or contracts covered by each account for the three most recent calendar years for which information is available preceding the year in which the member insurer became insolvent or, in the case of an assessment with respect to an impaired insurer, the three most recent calendar years for which information is available preceding the year in which the member insurer became impaired, bears to such premiums received on business in this state for such calendar years by all assessed member insurers.
  7. Assessments for funds to meet the requirements of the association with respect to an impaired or insolvent insurer may not be authorized or called until necessary to implement the purposes of this chapter. Classification of assessments under subsection 2 and computation of assessments under this section must be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible. The association shall notify each member insurer of its anticipated pro rata share of an authorized assessment not yet called within one hundred eighty days after the assessment is authorized.
  8. The association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. In the event an assessment against a member insurer is abated, or deferred in whole or in part, the amount by which such assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section. Once the conditions that caused a deferral are removed or rectified, the member insurer shall pay all assessments that were deferred pursuant to a repayment plan approved by the association.
    1. Subject to subdivision b, the total of all assessments authorized by the association with respect to a member insurer for each subaccount of the life insurance and annuity account and for the health account may not in any one calendar year exceed two percent of that member insurer’s average annual premiums received in this state on the policies and contracts covered by the subaccount or account during the three calendar years preceding the year in which the member insurer became an impaired or insolvent insurer.
    2. If two or more assessments are authorized in one calendar year with respect to member insurers that become impaired or insolvent in different calendar years, the average annual premiums for purposes of the aggregate assessment percentage limitation referenced in subdivision a must be equal and limited to the higher of the three-year average annual premiums for the applicable subaccount or account as calculated pursuant to this section.
    3. If the maximum assessment, together with the other assets of the association in an account, does not provide in one year in either account an amount sufficient to carry out the responsibilities of the association, the necessary additional funds must be assessed as soon after as permitted under this chapter.
  9. The board may provide in the plan of operation a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.
  10. If the maximum assessment for any subaccount of the life and annuity account in any one year does not provide an amount sufficient to carry out the responsibilities of the association, then pursuant to subsection 4, the board shall assess the other subaccounts of the life and annuity account for the necessary additional amount, subject to the maximum stated in subsection 9.
  11. The board may, by an equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each member insurer to that account, the amount by which the assets of the account exceed the amount the board finds is necessary to carry out during the coming year the obligations of the association with regard to that account, including assets accruing from assignment, subrogation, net realized gains, and income from investments. A reasonable amount may be retained in any account to provide funds for the continuing expenses of the association and for future claims.
  12. It is proper for any member insurer, in determining its premium rates and policy owner dividends as to any kind of insurance or health maintenance organization business within the scope of this chapter, to consider the amount reasonably necessary to meet its assessment obligations under this chapter.
  13. The association shall issue to each member insurer paying an assessment under this chapter, other than a class A assessment, a certificate of contribution, in a form prescribed by the commissioner, for the amount of the assessment so paid. All outstanding certificates must be of equal dignity and priority without reference to amounts or dates of issue. A certificate of contribution may be shown by the member insurer in its financial statement as an asset in such form and for such amount, if any, and period of time as the commissioner may approve.
    1. A member insurer that wishes to protest all or part of an assessment shall pay when due the full amount of the assessment as set forth in the notice provided by the association. The payment must be available to meet association obligations during the pendency of the protest or any subsequent appeal. Payment must be accompanied by a statement in writing that the payment is made under protest and must set forth a brief statement of the grounds for the protest.
    2. Within sixty days following the payment of an assessment under protest by a member insurer, the association shall notify the member insurer in writing of its determination with respect to the protest unless the association notifies the member insurer that additional time is required to resolve the issues raised by the protest.
    3. Within thirty days after a final decision was made, the association shall notify the protesting member insurer in writing of that final decision. Within sixty days of receipt of notice of the final decision, the protesting member insurer may appeal that final action to the commissioner.
    4. In the alternative to rendering a final decision with respect to a protest based on a question regarding the assessment base, the association may refer protests to the commissioner for a final decision, with or without a recommendation from the association.
    5. If the protest or appeal on the assessment is upheld, the amount paid in error or excess must be returned to the member insurer. Interest on a refund due a protesting member insurer shall be paid at the rate actually earned by the association.
  14. The association may request information of member insurers in order to aid in the exercise of its power under this section and member insurers shall comply promptly with a request.

Source:

S.L. 1989, ch. 373, § 2; 1999, ch. 271, § 5; 2011, ch. 220, §§ 5, 6; 2019, ch. 244, § 6, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-07. Plan of operation.

  1. The association shall submit to the commissioner a plan of operation and any amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration of the association. The plan of operation and any amendments thereto become effective upon the commissioner’s written approval or after thirty days if the commissioner has not disapproved the plan of operation and any amendments thereto.
  2. If the association fails to submit a suitable plan of operation within one hundred twenty days following July 1, 1989, or if at any time thereafter the association fails to submit suitable amendments to the plan, the commissioner shall, after notice and hearing, adopt such reasonable rules as are necessary or advisable to effectuate the provisions of this chapter. Such rules must continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner.
  3. All member insurers shall comply with the plan of operation.
  4. The plan of operation must, in addition to requirements enumerated elsewhere in this chapter:
    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 26.1-38.1-04;
    3. Establish regular places and times for meetings, including telephone conference calls of the board of directors;
    4. Establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors;
    5. Establish the procedures whereby selections for the board of directors will be made and submitted to the commissioner;
    6. Establish any additional procedures for assessments under section 26.1-38.1-06;
    7. Contain additional provisions necessary or proper for the execution of the powers and duties of the association;
    8. Establish procedures whereby a director may be removed for cause, including if a member insurer director becomes an impaired or insolvent insurer; and
    9. Require the board of directors to establish a policy and procedures for addressing conflicts of interest.
  5. The plan of operation may provide that any or all powers and duties of the association, except those under subdivision c of subsection 16 of section 26.1-38.1-05 and section 26.1-38.1-06, are delegated to a corporation, limited liability company, association, or other organization which performs or will perform functions similar to those of this association, or its equivalent, in two or more states. Such a corporation, limited liability company, association, or organization must be reimbursed for any payments made on behalf of the association and must be paid for its performance of any function of the association. A delegation under this subsection shall take effect only with the approval of both the board of directors and the commissioner, and may be made only to a corporation, limited liability company, association, or organization which extends protection not substantially less favorable and effective than that provided by this chapter.

Source:

S.L. 1989, ch. 373, § 2; 1993, ch. 54, § 106; 1999, ch. 271, § 6; 2011, ch. 220, § 7.

26.1-38.1-08. Duties and powers of the commissioner.

In addition to the duties and powers enumerated elsewhere in this chapter:

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

Source:

S.L. 1989, ch. 373, § 2; 1999, ch. 271, § 7; 2011, ch. 220, § 8; 2019, ch. 244, § 7, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-09. Prevention of insolvencies.

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

Source:

S.L. 1989, ch. 373, § 2; 1999, ch. 271, § 8; 2019, ch. 244, § 8, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-10. Credits for assessments paid — Tax offsets.

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

Source:

S.L. 1989, ch. 373, § 2; 1999, ch. 271, § 9; 2019, ch. 244, § 9, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-11. Miscellaneous provisions.

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

Source:

S.L. 1989, ch. 373, § 2; 1991, ch. 54, § 13; 1999, ch. 271, § 10; 2011, ch. 220, § 9; 2019, ch. 244, § 10, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-12. Examination of the association — Annual report.

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

Source:

S.L. 1989, ch. 373, § 2; 1999, ch. 271, § 11.

26.1-38.1-13. Tax exemptions.

The association is exempt from payment of all fees and all taxes levied by this state or any of its subdivisions, except taxes levied on real property.

Source:

S.L. 1989, ch. 373, § 2; 2019, ch. 244, § 11, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-14. Immunity.

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

Source:

S.L. 1989, ch. 373, § 2; 2019, ch. 244, § 12, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-15. Stay of proceedings — Reopening default judgments.

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

Source:

S.L. 1989, ch. 373, § 2; 2011, ch. 220, § 10.

26.1-38.1-16. Prohibited advertisement of Insurance Guaranty Association Act in insurance sales — Notice to policy owners.

  1. No person, including a member insurer, insurance producer, or affiliate of a member insurer, may make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in any newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement, written or oral, which uses the existence of the insurance guaranty association of this state for the purpose of sales, solicitation, or inducement to purchase any form of insurance or other coverage covered by chapter 26.1-38.1. However, this section does not apply to the North Dakota life and health insurance guaranty association or any other entity that does not sell or solicit insurance or coverage by a health maintenance organization.
  2. Before January 1, 1990, the association shall prepare a summary document describing the general purposes and current limitations of the chapter and complying with subsection 3. This document should be submitted to the commissioner for approval. Sixty days after receiving approval, no member insurer may deliver a policy or contract to a policy owner, contract owner, certificate holder, or enrollee unless the summary document is delivered to the policy owner, contract owner, certificate holder, or enrollee at the time of delivery of the policy or contract. The document should also be available upon request by a policy owner, contract owner, certificate holder, or enrollee. The distribution, delivery, or contents or interpretation of this document does not mean that either the policy or contract or the policy owner, contract owner, certificate holder, or enrollee is covered in the event of the impairment or insolvency of a member insurer. The description document must be revised by the association as amendments to the chapter may require. Failure to receive this document does not give the policy owner, contract owner, certificate holder, enrollee, or insured any greater rights than those stated in this chapter.
  3. The document prepared under subsection 2 must contain a clear and conspicuous disclaimer on its face. The commissioner shall establish the form and content of the disclaimer. The disclaimer must:
    1. State the name and address of the life and health insurance guaranty association and insurance department;
    2. Prominently warn the policy owner, contract owner, certificate holder, or enrollee that the North Dakota life and health insurance guaranty association may not cover the policy or contract, or, if coverage is available, it will be subject to substantial limitations and exclusions and be conditioned on continued residence in this state;
    3. State the types of policies or contracts for which guaranty funds will provide coverage;
    4. State that the member insurer and its insurance producers are prohibited by law from using the existence of the North Dakota life and health insurance guaranty association for the purpose of sales, solicitation, or inducement to purchase any form of insurance or health maintenance organization coverage;
    5. Emphasize that the policy owner, contract owner, certificate holder, or enrollee should not rely on coverage under the North Dakota life and health insurance guaranty association when selecting an insurer or health maintenance organization coverage;
    6. Explain rights available and procedures for filing a complaint to allege a violation of any provisions of this chapter; and
    7. Provide other information as directed by the commissioner, including sources for information about the financial condition of insurers provided the information is not proprietary and is subject to disclosure under the state’s public records law.
  4. A member insurer shall retain evidence of compliance with subsection 2 for so long as the policy or contract for which the notice is given remains in effect.

Source:

S.L. 1989, ch. 373, § 2; 1991, ch. 301, § 24; 1999, ch. 271, § 12; 2001, ch. 262, §§ 106, 107; 2019, ch. 244, § 13, eff July 1, 2019.

Note.

Section 15 of chapter 244, S.L. 2019 provides, “ APPLICATION. This Act applies to an insolvent insurer that is placed under an order of liquidation with a finding of insolvency after July 31, 2019.”

26.1-38.1-17. Prospective application. [Repealed]

Source:

S.L. 2011, ch. 220, § 11; Repealed by 2019, ch. 244, § 14, eff July 1, 2019.

CHAPTER 26.1-39 Property and Casualty Insurance

26.1-39-01. Rescission of fire insurance contract for alteration increasing risk.

An alteration in the use or condition of a thing insured from that to which it is limited by the policy, if made without the consent of the insurer, by means within the control of the insured, and if it increases the risk, entitles an insurer to rescind a fire insurance contract.

Source:

S.L. 1985, ch. 316, § 16.

Derivation:

N.D.C.C. § 26-18-04.

26.1-39-02. Rescission of fire contract not permitted if risk not increased.

An alteration in the use or condition of a thing insured from that to which it is limited by the policy, which does not increase the risk, does not affect a fire insurance contract.

Source:

S.L. 1985, ch. 316, § 16.

Derivation:

N.D.C.C. § 26-18-05.

26.1-39-03. When fire contract unaffected though risk increased.

A fire insurance contract is not affected by any act of the insured subsequent to the execution of the policy, if the act does not violate its provisions, even though it increases the risk and is the cause of a loss.

Source:

S.L. 1985, ch. 316, § 16.

Derivation:

N.D.C.C. § 26-18-06.

26.1-39-04. Measure of indemnity on fire policy.

If there is no valuation in the policy, the measure of indemnity in an insurance against fire is the full amount stated in the policy. If there is a valuation in the policy, the valuation is conclusive between the parties in the adjustment either of a partial or a total loss if the insured has some interest at risk and there is no fraud on the insured’s part. In the event of a partial loss, the insurer is liable only for the proportion of the amount insured as the loss bears to the value of the whole interest of the insured in the property insured. A valuation fraudulent in fact, however, entitles the insurer to rescind the contract. The provisions of this section may not be construed as a revocation of any of the rights of insurers delineated in section 26.1-39-05.

Source:

S.L. 1985, ch. 316, § 16; 1985, ch. 329, § 3.

Derivation:

N.D.C.C. § 26-18-07.

DECISIONS UNDER PRIOR LAW

Validity of Standard Policy Provision.

The standard fire insurance provision that the insurer shall not be liable beyond the actual loss or damage is valid as regards fire insurance on personal property, and fixes the measure of indemnity on personal property. Rohlik v. Farmers' Ins. Co., 49 N.D. 235, 191 N.W. 347, 1922 N.D. LEXIS 46 (N.D. 1922).

26.1-39-05. Face of policy to be paid in case of covered loss.

  1. Whenever any insurance policy is written or renewed to insure any real property in this state, including structures owned by persons other than the insured, against loss caused by or resulting from any covered cause of loss and the insured property is wholly or completely destroyed by any covered cause of loss without fraud on the part of the insured or the insured’s assigns, the amount of the insurance written in the policy is the true value of the property insured and the true amount of loss and measure of damages, subject to the following conditions:
    1. If the covered loss occurred within sixty days after the policy effective date or within sixty days after the policy limits were increased by twenty-five percent or more at the insured’s request, the loss payable to the insured for covered loss incurred during the first sixty days is the lesser of:
      1. The full value of the policy; or
      2. The amount paid in accordance with the policy provisions as if a partial loss occurred.
    2. Subdivision a does not apply to:
      1. Renewal policies with policy limits increases of less than twenty-five percent;
      2. Policies for which limits have increased twenty-five percent or more due to the construction of additions; or
      3. Policies for which the increased limits were approved by the insurer before the loss.
    3. Builder risk policies of insurance covering property in the process of being constructed must be valued and settled according to the actual value of that portion of construction completed at the time of any covered cause of loss.
    4. In case of double insurance, each insurer shall contribute proportionally toward the loss without regard to the dates of the insurance policies.
  2. This section does not apply as to personal property or any interest in the personal property.
  3. This section does not apply to any claim for loss of an appurtenant structure or separate structure. Any claim for loss of an appurtenant or separate structure must be settled for actual replacement cost or actual cash value, depending on the policy provisions applicable to the structure, unless an appurtenant or separate structure is individually described in the policy and a value is assigned to that specific structure before the loss.

Source:

S.L. 1985, ch. 316, § 16; 1985, ch. 329, § 4; 1985, ch. 330, § 3; 1987, ch. 367, § 1; 1987, ch. 368, § 1; 1997, ch. 259, § 1; 2015, ch. 219, § 1, eff August 1, 2015; 2017, ch. 221, § 1, eff August 1, 2017.

Derivation:

N.D.C.C. § 26-18-08.

DECISIONS UNDER PRIOR LAW

Application of Section.

Statute concerning payment of policy’s face amount applies whenever a single insurance policy is involved and no fraud is involved; however, whenever more than one policy covering the same property is involved, the provisions requiring proration of the loss among the policies applies. Bumann v. St. Paul Fire & Marine Ins. Co., 312 N.W.2d 459, 1981 N.D. LEXIS 416 (N.D. 1981).

Condemnation of Building Partially Destroyed by Fire.

Insured suffered a total loss and was entitled to the face amount of the fire insurance policy where, although the insured building was only partially destroyed by the fire, the damage was to such a degree that the local zoning code required the building to be condemned and demolished; policy provision excluding from coverage a claim for total loss arising from compulsory condemnation of a building that has suffered fire damage was void as against public policy of this section. Stevick v. Northwest G. F. Mut. Ins. Co., 281 N.W.2d 60, 1979 N.D. LEXIS 267 (N.D. 1979).

“Destroyed”.

“Destroyed” includes constructive total loss caused when a zoning ordinance requires the condemnation and destruction of a building damaged by fire. Stevick v. Northwest G. F. Mut. Ins. Co., 281 N.W.2d 60, 1979 N.D. LEXIS 267 (N.D. 1979).

Effect of Total Loss.

The insured is entitled to the amount of the insurance written in the policy where there was no fraud in the destruction of property, and the loss was total. Horswill v. North Dakota Mut. Fire Ins. Co., 45 N.D. 600, 178 N.W. 798, 1920 N.D. LEXIS 162 (N.D. 1920); Jakober v. Commercial Union Assurance Co., 49 N.D. 270, 191 N.W. 480, 1922 N.D. LEXIS 51 (N.D. 1922).

Evidence of Total Loss.

Demolition order issued pursuant to a zoning ordinance requiring that buildings damaged to a certain degree by fire must be condemned and destroyed is conclusive proof of total loss of the building, entitling insured to face value of fire insurance policy; when such order is issued, insured has no obligation to contest it or to attempt to obtain a building permit to make repairs. Stevick v. Northwest G. F. Mut. Ins. Co., 281 N.W.2d 60, 1979 N.D. LEXIS 267 (N.D. 1979).

Fraud Barring Recovery.

The fraud which will provide a defense to payment need not be fraud in inducing the loss, but may consist of any fraudulent act which would otherwise provide a defense to the insurer, including fraud in the procurement of the policy. Zuraff v. Empire Fire & Marine Ins. Co., 252 N.W.2d 302, 1977 N.D. LEXIS 237 (N.D. 1977).

Purpose.

The purpose of former similar section is twofold: first, to relieve the insured from the burden of proving the value of his property after its total destruction; and second, to prevent overinsurance by discouraging insurance companies from collecting premiums on overvalued property, but then contesting value when it becomes advantageous to them to do so. Zuraff v. Empire Fire & Marine Ins. Co., 252 N.W.2d 302, 1977 N.D. LEXIS 237 (N.D. 1977).

Collateral References.

Liability insurer’s post-loss conduct as waiver of, or estoppel to assert, “no-action” clause, 68 A.L.R.4th 389.

What is “flood” within exclusionary clause of property damage policy, 78 A.L.R.4th 817.

26.1-39-06. Standard fire insurance policy.

No fire insurance contract or policy, including a renewal, may be made, issued, used, or delivered by any insurer or by any insurance producer or representative of the insurer on property in this state other than such as conform in all particulars as to blanks, size of type, context, provisions, agreements, and conditions with the 1943 standard fire insurance policy of the state of New York, a copy of which must be filed in the office of the commissioner as the standard policy for this state. The cancellation provisions contained in the standard policy are superseded to the extent sections 26.1-39-10 through 26.1-39-21 are inconsistent with the provisions. No other or different provision, agreement, condition, or clause may be made a part of the contract or policy or be endorsed on the contract or policy or delivered with the contract or policy, except as follows:

  1. The name of the insurer, its location and place of business, the date of its incorporation or organization, and the state or county under which the insurer is organized, the amount of paid-up capital stock, whether it is a stock or mutual company, the names of its officers, the number and the date of the policy, and appropriate company emblems may be printed on policies issued on property in this state; provided, however, that any insurer organized under special charter provisions may so indicate upon its policy and may add a statement of the plan under which it operates in this state.
  2. Printed or written forms of description and specifications or schedules of the property covered by any particular policy and any other matter necessary to express clearly all the facts and conditions of insurance on any particular risk, which facts or conditions may not be inconsistent with or a waiver of any of the provisions or conditions of the standard policy, may be written upon or attached or appended to any policy issued on property in this state. Appropriate forms of contracts, supplemental contracts, or endorsements, by which the interest in the property described is insured against one or more of the perils which the insurer is empowered to assume, may be used in connection with the standard policy. The forms of contracts, supplemental contracts, or endorsements attached or printed on the policy may contain provisions and stipulations inconsistent with the standard policy if applicable only to the other perils. The first page of the standard policy may be rearranged to provide space for the listing of rates and premiums for coverages insured under the policy or under endorsements attached or printed on the policy, and such other data as may be included for duplication on daily reports for office records.
  3. An insurer, if entitled to do business in this state, may with the approval of the commissioner, if not already included in the standard form as filed with the commissioner, print on its policies any provision which it is required by law to insert in the policies if the provision is not in conflict with the laws of this state or the United States, or of the provisions of the standard policy, but the provision must be printed apart from the other provisions, agreements, or conditions of the policy and in type not smaller than the body of the policy and a separate title, as follows: “Provisions required by law to be stated in this policy”, and must be a part of the policy.
  4. A commercial insurance policy providing coverage for fire insurance in accordance with this section may exclude coverage for loss by fire insured against if the fire is caused directly or indirectly by terrorism.
  5. There may be endorsed in writing on the outside of any policy the name, with the word “Producer or Producers” and place of business, of any insurance producer or producers. There may also be added, with the approval of the commissioner, a statement of the group of companies with which the insurer is financially affiliated.
  6. When two or more insurers, each having previously complied with the laws of this state, unite to issue a joint policy, there may be expressed in the head line of each policy the fact of the severalty of the contract; also the proportion of premiums to be paid to each insurer and the proportion of liability which each insurer agrees to assume. And in the printed conditions of the policy the necessary change may be made from the singular to plural number, when reference is had to the insurers issuing such policy.
  7. With the approval of the commissioner, a combined farm policy may be used, the fire portion of which must be substantially in accord with the standard policy.
  8. The standard policy is an interest policy and must be so construed as to at all times protect the interest, whatever it may be, of any named insured. Provided, however, that a five-day grace period is allowed after the execution of any written instrument transferring interest in insured property during which full protection must be granted under the terms of the policy.
  9. In case of other coverage on the same peril, the liability of each insurer may not be for any greater amount or proportion of the loss than the ratio such insurance bears to the valid and collectible whole insurance covering the property against the peril involved.
  10. No contract or policy issued under this section may contain a limitation of less than three years for the bringing of any suit or action under the contract or policy.
  11. This section does not apply to inland marine, ocean marine, or automobile insurance.

Source:

S.L. 1985, ch. 316, § 16; 2001, ch. 262, § 108; 2005, ch. 272, § 1.

Derivation:

N.D.C.C. §§ 26-02-58, 26-03-40.

Notes to Decisions

Third Party Beneficiary.

Under fire insurance policy issued to corporation which operated a restaurant destroyed by a fire set by a mentally ill director/employee, neither the mortgagee bank nor the other corporate directors were entitled to third party beneficiary coverage. Kabob House v. Houston Gen. Ins. Co., 17 F. Supp. 2d 1090, 1997 U.S. Dist. LEXIS 22887 (D.N.D. 1997).

DECISIONS UNDER PRIOR LAW

Construction of Contract.

The provisions of the standard form of contract of fire insurance rest upon the same basis as any other written contract and are subject to the same rules of construction, and the law of waiver and estoppel may be applied to such contract with the same force and effect as to any other written contract. Yusko v. Middlewest F. Ins. Co., 39 N.D. 66, 166 N.W. 539, 1917 N.D. LEXIS 142 (N.D. 1917).

Effect of Use of Standard Policy.

A form of policy of fire insurance, although prescribed law, is, when issued by the insurance company, nonetheless a contract and is to be construed as such by the courts, and while it may affect a question of pure waiver, it does not abrogate the doctrine of estoppel. Leisen v. St. Paul Fire & Marine Ins. Co., 20 N.D. 316, 127 N.W. 837, 1910 N.D. LEXIS 106 (N.D. 1910); Yusko v. Middlewest F. Ins. Co., 39 N.D. 66, 166 N.W. 539, 1917 N.D. LEXIS 142 (N.D. 1917).

Insurable Interest.

Fact that vendor’s interest in property was less at time of fire than at time fire policy was issued to him did not bar his recovery on the policy. Koppinger v. Implement Dealers Mut. Ins. Co., 122 N.W.2d 134, 1963 N.D. LEXIS 88 (N.D. 1963).

Validity of Provision in Standard Policy.

The provision in the standard fire insurance policy fixing the measure of indemnity for loss of personal property is a valid stipulation and fixes the amount of compensation to which an insured is entitled. Rohlik v. Farmers' Ins. Co., 49 N.D. 235, 191 N.W. 347, 1922 N.D. LEXIS 46 (N.D. 1922).

Collateral References.

Fire insurance: insurable interest of one expecting to inherit property or take by will, 52 A.L.R.4th 1273.

26.1-39-07. Standard fire policy — Loss or damage caused by nuclear reaction.

An insurer issuing the standard policy pursuant to section 26.1-39-06 may affix to the policy or include in the policy a written statement that the policy does not cover loss or damage caused by nuclear reaction or nuclear radiation or radioactive contamination, all whether directly or indirectly resulting from an insured peril under the policy. An insurer may attach to the standard policy an endorsement or endorsements specifically assuming coverage for loss or damage caused by nuclear reaction or nuclear radiation or radioactive contamination.

Source:

S.L. 1985, ch. 316, § 16.

Derivation:

N.D.C.C. §§ 26-03-45, 26-03-46.

26.1-39-08. Construction of standard fire policy.

The standard policy is a valued policy as defined under section 26.1-30-03. An insurance policy in the form prescribed by section 26.1-39-06 is subject to the rules of construction as to its effect or the waiver of any of its provisions which would apply if the form had not been prescribed.

Source:

S.L. 1985, ch. 316, § 16.

Derivation:

N.D.C.C. §§ 26-03-40.1, 26-03-41.

DECISIONS UNDER PRIOR LAW

In General.

This section does not require all policies to conform in every respect with statutory provisions unless the statute is clear and unambiguous that the statutory provision must be incorporated in the policy. Bumann v. St. Paul Fire & Marine Ins. Co., 312 N.W.2d 459, 1981 N.D. LEXIS 416 (N.D. 1981).

Collateral References.

Applicability of Valued-Policy Statutes to Flood, Wind, and Hurricane Damage. 62 A.L.R.6th 227.

26.1-39-09. Nonstandard fire policy.

The commissioner may approve for use in this state a form of policy which does not correspond to the standard policy as provided by section 26.1-39-06; provided, that the coverage of the approved policy form with respect to the peril of fire may not be less than that contained in the standard policy.

Source:

S.L. 1985, ch. 316, § 16.

Derivation:

N.D.C.C. § 26-03-47.

DECISIONS UNDER PRIOR LAW

Standard Forms Not Required.

A life insurance policy is not required to be written on standard forms. Young v. Mutual Trust Life Ins. Co., 54 N.D. 600, 210 N.W. 177, 1926 N.D. LEXIS 66 (N.D. 1926).

26.1-39-09.1. Certain property and casualty insurance programs to be marketed through resident agents or brokers — Service fee. [Repealed]

Repealed by S.L. 1999, ch. 252, § 31.

26.1-39-09.2. Suspension or revocation of certificate or license for noncompliance or for acceptance of a reduced service fee.

The commissioner shall suspend or revoke the certificate of authority of any insurer who intentionally fails to comply with section 26.1-11-07.

Source:

S.L. 1987, ch. 342, § 3; 1999, ch. 252, § 30.

26.1-39-09.3 Fire protection class — Dispute.

  1. This section applies to an insurance policy issued or renewed to insure real property in this state.
  2. Within thirty days following quoting, issuing, or renewing of the policy, the insured may assert a fire protection class which differs from the class identified by the insurer and the insurer shall implement this class. The insured shall present to the insurer a credible basis for the assertion supported by factual information.
  3. Within ninety days following receipt of the assertion by an insured, the insurer may investigate the assertion and:
    1. Change the fire protection class, effective from the date of issuance or renewal; or
    2. Document the basis for the original class and implement the original class effective from the date of issuance or renewal.
  4. After making a determination under subsection 3, the insurer shall inform the insured of the determination.

Source:

S.L. 2019, ch. 245, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 245, S.L. 2019 provides, “ APPLICATION. This Act applies to quoting, issuing, or renewing of insurance policies on and after the effective date of this Act.”

26.1-39-10. Property and casualty policies — Declination, cancellation, and nonrenewal — Scope.

Sections 26.1-39-10 through 26.1-39-21 apply to insurance policies or risks located or resident in this state which are issued and take effect or which are renewed after July 1, 1983, and insure against any of the following:

  1. Loss of or damage to real property which consists of not more than four residential units, one of which is the principal place of residence of the named insured.
  2. Loss of or damage to personal property owned by the named insured or used for personal, family, or household purposes within a residential dwelling.
  3. Legal liability of the named insured arising out of bodily injury to or death of any persons or damage to property, except bodily injury, death, or property damage arising out of business pursuits other than professional legal or medical services.

Sections 26.1-39-10 through 26.1-39-21 do not apply to workforce safety and insurance policies, automobile policies, inland marine policies, insurance policies issued through a residual market mechanism, or policies primarily insuring risks arising from the conduct of a commercial or industrial enterprise.

For purposes of sections 26.1-39-10 through 26.1-39-21, any policy period or term of less than six months is considered a policy period or term of six months and any policy period or term of more than one year or any policy with no fixed expiration date is considered a policy period or term of one year.

Source:

S.L. 1985, ch. 316, § 16; 1985, ch. 331, § 3; 1989, ch. 69, § 32; 2003, ch. 561, § 3.

Derivation:

N.D.C.C. § 26-02-47.

Collateral References.

What constitutes “entering” or “alighting from” vehicle within meaning of insurance policy, or statute mandating insurance coverage, 59 A.L.R.4th 149.

What constitutes theft within automobile theft insurance policy — modern cases, 67 A.L.R.4th 82.

Property damage insurance: what constitutes “Contamination” within policy clause excluding coverage, 90 A.L.R.6th 635.

26.1-39-11. Definitions.

  1. “Declination” means the refusal of an insurer to issue a property insurance policy upon receipt of a written nonbinding application or written request for coverage from its insurance producer or an applicant. For the purposes of sections 26.1-39-10 through 26.1-39-21, the offering of insurance coverage with a company within an insurance group which is different from the company requested on the nonbinding application or written request for coverage or the offering of insurance upon different terms than requested in the nonbinding application or written request for coverage is considered a declination.
  2. “Nonpayment of premium” means the failure of the named insured to discharge any obligation in connection with the payment of premiums on property insurance policies subject to sections 26.1-39-10 through 26.1-39-21, whether the payments are directly payable to the insurer or its insurance producer or indirectly payable under a premium finance plan or extension of credit. “Nonpayment of premium” includes the failure to pay dues or fees when payment of dues or fees is a prerequisite to obtaining or continuing property insurance coverage.
  3. “Renewal” or “to renew” means the issuance and delivery by an insurer at the end of a policy period of a policy superseding a policy previously issued and delivered by the same insurer, or the issuance and delivery of a certificate or notice extending the term of an existing policy beyond its policy period or term. The term includes a change or alteration in the amount of a deductible, coverage, or exclusion which results in substantially equivalent coverage if the altered terms are provided to the insured in the notice of renewal.
  4. “Termination” means cancellation or nonrenewal of property insurance coverage in whole or in part. Cancellation occurs during the policy term. Nonrenewal occurs at the end of the policy term as set forth in subsection 3. For purposes of sections 26.1-39-10 through 26.1-39-21, the transfer of a policy between companies within the same insurance holding company system is not a termination. A renewal with altered terms as provided in subsection 3 is not a termination.

Source:

S.L. 1985, ch. 316, § 16; 2001, ch. 262, § 109; 2001, ch. 270, § 3; 2017, ch. 222, § 1, eff August 1, 2017; 2019, ch. 246, § 1, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-02-48.

26.1-39-12. Notification and reasons for declination of property and casualty policies.

  1. Upon declining to insure any property subject to sections 26.1-39-10 through 26.1-39-21, the insurer making the declination shall either provide the insurance applicant with a written explanation of the specific reasons for the declination at the time of the declination or advise the applicant that a written explanation of the specific reasons for the declination will be provided within twenty-one days of the time of the receipt of the applicant’s written request for such an explanation. An applicant’s written request is timely under this section if received within ninety days of the date of that notice to the applicant.
  2. No insurer not represented by an insurance producer may refuse to provide an insurance application form or other means of making a written request for insurance to a prospective applicant who requires insurance coverage from the insurer.
  3. No insurance producer, for any reason set out in section 26.1-39-17, may refuse to provide an insurance application form or other means of making a written request for insurance to a prospective applicant who requests insurance coverage from the insurance producer or insurer.

Source:

S.L. 1985, ch. 316, § 16; 2001, ch. 262, § 110.

Derivation:

N.D.C.C. § 26-02-49.

26.1-39-13. Notification and reasons for cancellation of property and casualty policies.

  1. After coverage has been in effect for more than sixty days or after the effective date of a renewal policy, a notice of cancellation may not be issued unless it is based upon at least one of the following reasons:
    1. Nonpayment of premium.
    2. Discovery of fraud or material misrepresentation and the procurement of the insurance or with respect to any claims submitted thereunder.
    3. Discovery of willful or reckless acts or omissions on the part of the named insured which increase any hazard insured against.
    4. The occurrence of a change in the risk which substantially increases any hazard insured against after insurance coverage has been issued or renewed.
    5. A violation of any local fire, health, safety, building, or construction regulation or ordinance with respect to any insured property or the occupancy thereof which substantially increases any hazard insured against.
    6. A determination by the commissioner that the continuation of the policy would place the insurer in violation of the insurance laws of this state.
    7. Conviction of the named insured of a crime having as one of its necessary elements an act increasing any hazard insured against.
  2. A written notice of cancellation must be mailed or delivered to the named insured, at the last-known address of the named insured, at least thirty days before the effective date of cancellation or when the cancellation is for nonpayment of premium at least ten days before the effective date of cancellation. Conclusive proof of mailing and receipt on the third calendar day after the mailing of the notice is established if the insurer produces:
    1. A United States postal service certificate of mailing to the named insured at the insured’s last-known address; or
    2. Proof or acknowledgment of United States postal service mailing to the named insured at the insured’s last-known address using:
      1. IMb tracing; or
      2. A similar method of first-class mail tracking which identifies the named insured, the insured’s last-known address, and the date of mailing.

Source:

S.L. 1985, ch. 316, § 16; 2015, ch. 220, § 1, eff August 1, 2015.

Derivation:

N.D.C.C. §§ 26-02-50, 26-02-51.

26.1-39-14. Five-day notice exception for cancellation of property and casualty policies.

Policies subject to sections 26.1-39-10 through 26.1-39-21 may be canceled upon five days’ written notice to the named insureds if one or more of the following conditions exist:

  1. Buildings with at least sixty-five percent of the rental units in the building unoccupied.
  2. Buildings that have been damaged by a peril insured against and the insured has stated or such time has elapsed as clearly indicates that the damage will not be repaired.
  3. Buildings to which, following a fire, permanent repairs have not commenced within sixty days following satisfactory adjustment of loss.
  4. Buildings that have been unoccupied sixty consecutive days, except buildings that have a seasonal occupancy, and buildings actually in the course of construction or repair and reconstruction which are properly secured against unauthorized entry.
  5. Buildings that are in danger of collapse because of serious structural conditions or those buildings subject to extremely hazardous conditions not contemplated in filed rating plans such as those buildings that are in a state of disrepair as to be dilapidated.
  6. Buildings on which, because of their physical condition, there is an outstanding order to vacate or an outstanding demolition order, or which have been declared unsafe in accordance with applicable law.
  7. Buildings from which fixed and salvageable items have been or are being removed and the insured can give no reasonable explanation for the removal.
  8. Buildings on which there is reasonable knowledge and belief that the property is endangered and is not reasonably protected from possible arson for the purpose of defrauding an insurer.
  9. Buildings with any of the following conditions:
    1. Failure to furnish heat, water, sewer service, or public lighting for thirty consecutive days or more.
    2. Failure to correct conditions dangerous to life, health, or safety.
    3. Failure to maintain the building in accordance with applicable law.
    4. Failure to pay property taxes for more than one year.
  10. Buildings that have characteristics of ownership condition, occupancy, or maintenance which are violative of law or public policy.

Source:

S.L. 1985, ch. 316, § 16.

Derivation:

N.D.C.C. § 26-02-52.

Collateral References.

Property damage resulting from inadequate or improper design or construction of dwelling as within coverage of “all risks” homeowner’s insurance policy, 41 A.L.R.4th 1095.

26.1-39-15. Statement of reasons for cancellation of property and casualty policies.

The notice of cancellation must state or be accompanied by either a statement of the reason for cancellation, or a statement that upon written request of the named insured, the insurer will specify in writing the reason for cancellation. The written request must be mailed or delivered to the insurer at least ten days prior to the effective date of cancellation or if cancellation occurs pursuant to section 26.1-39-14, within ten days from the effective date of cancellation. The insurer shall mail or deliver the reason to the named insured within ten days after receipt of the written request.

Source:

S.L. 1985, ch. 316, § 16.

Derivation:

N.D.C.C. § 26-02-53.

26.1-39-16. Notification and statement of reasons for nonrenewal of property and casualty policies.

  1. An insurer shall renew a property insurance policy unless a written notice of nonrenewal is mailed or delivered to the named insured, at the last-known address of the named insured, at least forty-five days before the expiration date of the policy, except if the policy provides professional liability coverage for legal and medical services, the nonrenewal notice must be mailed or delivered at least ninety days before the policy expiration date. Conclusive proof of mailing and receipt on the third calendar day after the mailing of the notice is established if the insurer produces:
    1. A United States postal service certificate of mailing to the named insured at the insured’s last-known address; or
    2. Proof or acknowledgment of United States postal service mailing to the named insured at the insured’s last-known address using:
      1. IMb tracing; or
      2. A similar method of first-class mail tracking which identifies the named insured, the insured’s last-known address, and the date of mailing.
  2. The insurer shall include a statement of the reasons for a nonrenewal with the notice or shall furnish it upon the written request of the insured. The written request must be mailed or delivered to the insurer at least ten days prior to the expiration date of the policy. The insurer shall comply with such a request within ten days after receipt thereof.
  3. No notice of intention not to renew is required when the named insured is given notice of the insurer’s willingness to renew the policy by the mailing or delivering of a renewal notice, bill, certificate, or policy. If notice as required by this subsection is not provided, coverage is deemed to be renewed for the ensuing policy period upon payment of the appropriate premium under the same terms and conditions, and subject to subsection 1 of section 26.1-39-13, until the named insured has accepted the replacement coverage with another insurer or until the named insured has agreed to the nonrenewal.
  4. Proof of mailing a notice of intention not to renew or business records of the notice of the insurer’s willingness to renew must be retained for a period of not less than one year by the insurer or insurance producer giving the notice.

Source:

S.L. 1985, ch. 316, § 16; 1985, ch. 331, § 4; 2001, ch. 262, § 111; 2003, ch. 245, § 3; 2015, ch. 220, § 2, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-02-54.

26.1-39-17. Prohibited reasons for declination or termination of property and casualty policies.

The declination or termination of a property insurance policy subject to sections 26.1-39-10 through 26.1-39-21 by an insurer or insurance producer is prohibited if the declination or termination is based upon any of the following reasons:

  1. The race, religion, nationality, ethnic group, age, sex, or marital status of the applicant or named insured.
  2. The lawful occupation or profession of the applicant or named insured, except that this provision does not apply to an insurer that limits its market to one lawful occupation or profession or to several related lawful occupations or professions.
  3. The age or location of the residence of the applicant or named insured unless the decision is for a business purpose that is not a mere pretext for unfair discrimination.
  4. The fact that another insurer previously declined to insure the applicant or terminated an existing policy in which the applicant was the named insured.
  5. The fact that the applicant or named insured previously obtained insurance coverage through a residual market insurance mechanism.

Source:

S.L. 1985, ch. 316, § 16; 2001, ch. 262, § 112.

Derivation:

N.D.C.C. § 26-02-55.

26.1-39-18. Declination or termination requirements for property and casualty policies — Enforcement — Penalties.

  1. Whenever the commissioner, upon the filing of a complaint or through the commissioner’s own investigation has reason to believe that an insurer or insurance producer has engaged in practices which violate sections 26.1-39-10 through 26.1-39-21 and that a proceeding would be in the public interest, the commissioner shall conduct a hearing.
  2. If after hearing the commissioner determines that an insurer has violated subsection 1 of section 26.1-39-13, section 26.1-39-16, or section 26.1-39-17, the commissioner may require the insured to accept the application or written request for insurance coverage at a rate and on the same terms and conditions as are available to other risks similarly situated, or reinstate insurance coverage to the end of the policy period, or continue insurance coverage at a rate and on the same terms and conditions as are available to other risks similarly situated.
  3. If the commissioner after hearing determines that any person has violated sections 26.1-39-10 through 26.1-39-21, the commissioner may issue a cease and desist order to restrain the person from engaging in practices that violate these sections or assess a penalty against the person of up to five hundred dollars for each violation of the sections or for each willful and knowing violation of these sections assess a penalty against such person of up to five thousand dollars or cancel, revoke, or refuse to renew a company’s certificate of authority to do business in this state.
  4. If the commissioner determines in a final order that an insurer has violated subsection 1 of section 26.1-39-13, section 26.1-39-16, or section 26.1-39-17, the applicant or named insured aggrieved by the violation may bring an action in a court of competent jurisdiction in this state to recover from the insurer any loss not otherwise recovered through insurance which would have been paid under the insurance coverage that was declined or terminated in violation of these sections.
  5. Any amount recovered may not be duplicative of any recovery obtained through the exercise of any other statutory or common-law claim for relief arising out of the same occurrence. No action under this section may be brought two years after the date of a final order of the commissioner finding a violation of subsection 1 of section 26.1-39-13 or section 26.1-39-16.

Source:

S.L. 1985, ch. 316, § 16; 2001, ch. 262, § 113.

Derivation:

N.D.C.C. § 26-02-56.

26.1-39-19. Immunity.

There is no liability on the part of and no claim for relief arises against the commissioner, any insurer or its authorized representatives, agents, or employees, any licensed insurance producer, or any person furnishing information to an insurer as to reasons for a termination or declination for any communication giving notice of or specifying the reasons for a declination or termination or for any statement made in connection with an attempt to discover or verify the existence of conditions which would be a reason for a declination or termination under these sections. This section does not apply to statements made in bad faith with malice in fact.

Source:

S.L. 1985, ch. 316, § 16; 2001, ch. 262, § 114.

Derivation:

N.D.C.C. § 26-02-57.

26.1-39-20. Duplicate coverage — Termination of coverage when another policy in force — Notice.

Notwithstanding the failure of an insurer to comply with sections 26.1-39-13 through 26.1-39-16, if an insured obtains a replacement policy providing equal or more extensive coverage for a property covered in both policies, the first insurer’s coverage of that property may be terminated either by cancellation or nonrenewal. The termination is effective on the effective date of the second policy providing duplicate replacement coverage. Upon termination, the insured is entitled to a refund of the premium and written notice must be mailed or delivered to the named insured.

Source:

S.L. 1985, ch. 316, § 16; 2017, ch. 222, § 2, eff August 1, 2017.

Derivation:

N.D.C.C. § 26-02-59.

26.1-39-21. Renewal of property and casualty policies — Waiver — Estoppel.

Renewal of a property insurance policy does not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of the policy providing duplicate coverage.

Source:

S.L. 1985, ch. 316, § 16.

Derivation:

N.D.C.C. § 26-02-60.

26.1-39-22. Termination of property and casualty insurance agency contracts.

Any insurer authorized to transact property or casualty business in this state, upon termination of an insurance producer’s appointment by the insurer, shall permit the renewal and endorsement of all insurance contracts written by the insurance producer for a period of one year from the date of the termination, as determined by the individual underwriting requirements of the insurer. If any contract does not meet the underwriting requirements, the insurer shall give the insurance producer sixty days’ notice of its intention not to renew the contract. This section does not apply if the contract is terminated because of the insurance producer’s failure, after receiving a written demand, to pay over moneys due the insurer.

Source:

S.L. 1985, ch. 316, § 16; 2001, ch. 262, § 115.

Derivation:

N.D.C.C. § 26-18-13.

26.1-39-23. Temporary insurance — Use of binders.

A binder or contract for temporary property lines of insurance may be made orally or in writing and is deemed to include all the terms of a standard fire insurance policy and all applicable endorsements as may be designated in the binder. However, the cancellation clause of the standard fire insurance policy and the clause specifying the hour of the day at which the insurance commences may be superseded by the express terms of the binder. A duly authorized binder must be accepted as evidence of insurance coverage required as a condition of financing the purchase of property, except that a mortgagee or lender is not required to accept a renewal or extension of the binder. Any insurance producer who has express authority to bind property and casualty lines of insurance coverage, and who orally agrees on behalf of an insurer to provide insurance coverage, if requested, shall execute and deliver a written memorandum or binder containing the terms of the oral agreement to the insured within three business days from the time of the oral agreement.

Source:

S.L. 1989, ch. 374, § 1; 2001, ch. 262, § 116; 2017, ch. 223, § 1, eff August 1, 2017.

26.1-39-24. Domestic violence — Intentional acts.

An insurer issuing or renewing a policy of property and casualty insurance in this state may not base any rating, underwriting, or claim-handling decision solely on whether an applicant or insured suffers from domestic violence as defined under chapter 14-07.1. If a property and casualty insurance policy excludes property coverage for intentional acts, the insurer may not deny payment to an innocent coinsured who did not cooperate in or contribute to the creation of the loss if the loss arose out of domestic violence and the perpetrator of the loss is criminally prosecuted for the act causing the loss. Payment to this innocent coinsured may be limited to the innocent coinsured’s ownership interest in the property as reduced by any payment to a mortgagor or other secured interest.

Source:

S.L. 1999, ch. 272, § 1.

26.1-39-25. Notice of transfer.

The insurer transferring a policy to another insurer within the same insurance holding company system shall give notice to the policyholder of the transfer.

Source:

S.L. 2001, ch. 270, § 2.

26.1-39-26. Electronic notices and documents. [Repealed]

History. S.L. 2015, ch. 221, § 1, eff August 1, 2015; Repealed by 2019, ch. 232, § 3, eff August 1, 2019.

26.1-39-27. Travel, event, and unmanned aircraft insurance.

  1. As used in this section:
    1. “Event cancellation coverage” means insurance covering the cancellation of an organized event, either public or private, described in the policy, which occurs on a specified date and time.
    2. “Unmanned aircraft” means an aircraft operated without the possibility of direct human intervention from within or on the aircraft.
  2. Unless otherwise provided under this title, the following insurance coverages are the only coverages that may cover an insured for a period of time other than beginning at 12:01 a.m. on the day on which coverage begins and ending at 12:01 a.m. on the day of expiration of the policy, as required by section 26.1-30-18:
    1. Travel insurance;
    2. Event cancellation coverage insurance; and
    3. Unmanned aircraft liability insurance.
  3. Any insurance policy covering insureds for a period of time other than beginning at 12:01 a.m. on the day on which coverage begins and ending at 12:01 a.m. on the day of expiration of the policy is subject to the provisions of sections 26.1-30-19, 26.1-30-20, and 26.1-30-21.

Source:

S.L. 2019, ch. 247, § 1, eff March 13, 2019.

26.1-39-28. Rulemaking.

The commissioner may adopt rules for the implementation and administration of this chapter.

Source:

S.L. 2019, ch. 247, § 2, eff March 13, 2019.

CHAPTER 26.1-39.1 Property and Casualty Insurance Certificates

26.1-39.1-01. Definitions.

As used in this chapter:

  1. “Certificate holder” means a person, other than a policyholder, to which a certificate of insurance has been issued.
  2. “Certificate of insurance” means a document or instrument, regardless of how titled or described, that is prepared or issued by an insurer or insurance producer as a statement of property or casualty insurance coverage. The term does not include a policy of insurance or insurance binder.
  3. “Insurance producer” means a person required to be licensed under the laws of this state to sell, solicit, or negotiate property or casualty insurance.
  4. “Insurer” means any organization that issues property or casualty insurance.
  5. “Policyholder” means a person that contracted with an insurer for property or casualty insurance coverage.

Source:

S.L. 2011, ch. 221, § 1.

26.1-39.1-02. Limitations on issuance of certificates of insurance.

A person may not prepare, issue, or require the issuance of a certificate of insurance on property, operations, or risks located in this state unless the certificate of insurance form has been filed with the commissioner by or on behalf of the insurer and has been approved by the commissioner. The commissioner may designate as meeting the requirements of this section and not requiring further approval a standard certificate of insurance form, which may include a form promulgated and filed by a national insurance advisory organization, such as the association for cooperative research and development, the American association of insurance services, and the insurance services office.

Source:

S.L. 2011, ch. 221, § 1.

26.1-39.1-03. Certificate of insurance limitations.

A person may not alter or modify a certificate of insurance form approved by the commissioner; may not demand, require, or issue a certificate of insurance that contains any false or misleading information concerning the policy of insurance to which the certificate of insurance makes reference; and may not knowingly prepare or issue a certificate of insurance that purports to affirmatively or negatively alter, amend, or extend the coverage provided by the policy. A certificate of insurance may not contain a reference to a construction contract, service contract, or insurance requirement for the purpose of amending coverage afforded by the policy to which the certificate makes reference.

Source:

S.L. 2011, ch. 221, § 1.

26.1-39.1-04. Notice requirements.

The only circumstance under which a certificate holder is entitled to the legal right to notice of cancellation, nonrenewal, or any material change or any similar notice concerning a policy of insurance is if the certificate holder has such notice rights under the terms of the policy or under any endorsement to the policy. The terms and conditions of the notice, including the required timing of the notice, are governed by the policy of insurance and may not be altered by a certificate of insurance.

Source:

S.L. 2011, ch. 221, § 1.

CHAPTER 26.1-39.2 Residential Contractor Contracts

Source:

S.L. 2019, HB1219, § 3, eff July 1, 2019.

26.1-39.2-01. Definitions.

As used in this chapter:

  1. “Residential contractor” means a person in the business of contracting or offering to contract with an owner or possessor of residential real estate to:
    1. Repair or replace a roof system or perform other exterior repair, replacement, construction, or reconstruction work on residential real estate;
    2. Perform interior or exterior cleanup services on residential real estate; or
    3. Arrange for, manage, or process the work referred to in subdivision a or b.
  2. “Residential real estate” means a new or existing building, including a detached garage, constructed for habitation by at least one but no more than four families.
  3. “Roof system” includes roof coverings, roof sheathing, roof weatherproofing, and insulation.

Source:

S.L. 2019, ch. 239, § 3, eff July 1, 2019.

26.1-39.2-02. Contract to be paid from proceeds of property and casualty insurance policy — Right to cancel — Duties.

  1. A person that enters a written contract with a residential contractor to provide goods or services to be paid from the proceeds of a property and casualty insurance policy may cancel the contract before midnight on the later of the fifth business day after the person has:
    1. Entered the written contract; or
    2. Received written notice from the person’s insurer that all or part of the claim or contract is not a covered loss under the insurance policy.
  2. The written contract must include a statement that the insured homeowner has the right to cancel the contract in accordance with subsection 1.
  3. The person seeking to cancel the contract shall evidence the cancellation by giving the residential contractor a signed and dated copy of written notice of the cancellation.
    1. The notice of cancellation may be delivered or mailed to the address of the residential contractor’s place of business as stated in the contract.
    2. The notice of cancellation must include a copy of the written notice from the person’s insurer, if applicable, to the effect that all or part of the claim or contract is not a covered loss under the insurance policy.
    3. Notice of cancellation given by mail is effective upon deposit in the United States mail, postage prepaid, if properly addressed to the residential contractor.
    4. Notice of cancellation is not required to be in a particular form and is sufficient if the notice indicates the intent of the insured not to be bound by the contract.
  4. Within ten days after a contract to provide goods or services to be paid from the proceeds of a property and casualty insurance policy has been canceled by notification pursuant to this section, the residential contractor shall tender to the person canceling the contract any payments, partial payments, or deposits made by the person and any note or other evidence of indebtedness, except if the residential contractor has provided goods or services agreed to by the person in writing to be necessary to prevent damage to the premises, the residential contractor is entitled to be paid the reasonable value of those goods or services. A contract provision to provide goods or services to be paid from the proceeds of a property and casualty insurance policy requiring the payment of a fee that is not for those goods or services is not enforceable against a person that has canceled a contract pursuant to this section.

Source:

S.L. 2019, ch. 239, § 3, eff July 1, 2019.

26.1-39.2-03. Prohibited acts.

A residential contractor may not promise to rebate a portion of an insurance deductible as an inducement to the sale of goods or services. A promise to rebate a portion of an insurance deductible includes granting an allowance or offering a discount against the fees to be charged or paying an insured or a person associated with the residential real estate a form of compensation, except for an item of nominal value.

Source:

S.L. 2019, ch. 239, § 3, eff July 1, 2019.

26.1-39.2-04. Post-loss assignment of rights or benefits.

A post-loss assignment of rights or benefits to a residential contractor under a property and casualty insurance policy insuring residential real estate is subject to each of the following:

  1. The assignment may authorize a residential contractor to be named as a copayee for the payment of benefits under a property and casualty insurance policy covering residential real estate.
  2. The assignment must be provided to the insurer of the residential real estate within five business days after execution.
  3. The assignment must include a statement that the residential contractor made no assurances the claimed loss will be fully covered by an insurance contract and must include the following notice in capitalized fourteen-point type:
  4. The assignment may not impair the interest of a mortgagee listed on the declarations page of the property and casualty insurance policy that is the subject of the assignment.
  5. The assignment may not prevent or inhibit an insurer from communicating with the named insured or mortgagee listed on the declarations page of the property and casualty insurance policy that is the subject of the assignment.
  6. The assignment must include a statement that the insured homeowner has the right to cancel the assignment in accordance with subsection 1 of section 26.1-39.2-02.

“YOU ARE AGREEING TO ASSIGN CERTAIN RIGHTS YOU HAVE UNDER YOUR INSURANCE POLICY. THE ITEMIZED DESCRIPTION OF THE WORK TO BE DONE SHOWN IN THIS ASSIGNMENT FORM HAS NOT BEEN AGREED TO BY THE INSURER. PLEASE READ AND UNDERSTAND THIS DOCUMENT BEFORE SIGNING.

THE INSURER MAY ONLY PAY FOR THE COST TO REPAIR OR REPLACE DAMAGED PROPERTY CAUSED BY A COVERED PERIL, SUBJECT TO THE TERMS OF THE POLICY.”

Source:

S.L. 2019, ch. 239, § 3, eff July 1, 2019.

26.1-39.2-05. Itemized description of work.

Before commencement of repair or replacement work, a residential contractor shall furnish the insured and insurer with an itemized description of the work to be done and the materials, labor, and fees for repair or replacement of the damaged residential real estate and the total itemized amount agreed to be paid for the work to be performed, except the description may not limit the insured or residential contractor from identifying other goods and services necessary to complete repairs or replacement associated with a covered loss.

Source:

S.L. 2019, ch. 239, § 3, eff July 1, 2019.

26.1-39.2-06. Notice required.

A written contract, repair estimate, or work order prepared by a residential contractor to provide goods or services to be paid from the proceeds of a property and casualty insurance policy must include the following notice of the prohibition contained in section 26.1-39.2-03 in capitalized fourteen-point type which must be signed by the named insured and sent to the named insured’s insurer before payment of proceeds under the applicable insurance policy:

“IT IS A VIOLATION OF THE INSURANCE LAWS OF NORTH DAKOTA TO REBATE ANY PORTION OF AN INSURANCE DEDUCTIBLE AS AN INDUCEMENT TO THE INSURED TO ACCEPT A RESIDENTIAL CONTRACTOR’S PROPOSAL TO REPAIR DAMAGED PROPERTY. REBATE OF A DEDUCTIBLE INCLUDES GRANTING AN ALLOWANCE OR OFFERING A DISCOUNT AGAINST THE FEES TO BE CHARGED FOR WORK TO BE PERFORMED OR PAYING THE INSURED HOMEOWNER THE DEDUCTIBLE AMOUNT SET FORTH IN THE INSURANCE POLICY.

THE INSURED HOMEOWNER IS PERSONALLY RESPONSIBLE FOR PAYMENT OF THE DEDUCTIBLE. THE INSURANCE FRAUD STATUTES AND NORTH DAKOTA CRIMINAL STATUTES PROHIBIT THE INSURED HOMEOWNER FROM ACCEPTING FROM A RESIDENTIAL CONTRACTOR A REBATE OF THE DEDUCTIBLE OR OTHERWISE ACCEPTING AN ALLOWANCE OR DISCOUNT FROM THE RESIDENTIAL CONTRACTOR TO COVER THE COST OF THE DEDUCTIBLE. VIOLATIONS MAY BE PUNISHABLE BY CIVIL OR CRIMINAL PENALTIES.”

Source:

S.L. 2019, ch. 239, § 3, eff July 1, 2019.

26.1-39.2-07. Violation of the chapter.

A contract entered with a residential contractor is void if the residential contractor violates this chapter.

Source:

S.L. 2019, ch. 239, § 3, eff July 1, 2019.

26.1-39.2-08. Rulemaking authority.

The commissioner may adopt rules to carry out this chapter.

Source:

S.L. 2019, ch. 239, § 3, eff July 1, 2019.

CHAPTER 26.1-40 Automobile Insurance and Warranties

26.1-40-01. Definitions — Limitations.

As used in sections 26.1-40-02 through 26.1-40-12:

  1. “Declination” means the refusal of an insurer to issue a policy upon receipt of a written nonbinding application or written request for coverage from its insurance producer or an applicant. The offering of insurance coverage with a company within an insurance group which is different from the company requested on the nonbinding application or written request for coverage, or the offering of policy coverage or rates substantially less favorable than requested in the nonbinding application or written request for coverage, is a declination.
  2. “Nonpayment of premium” means failure of the insured to discharge when due any of the insured’s obligations in connection with the payment of premium on a policy, or any installment of the premium, whether the premium is payable directly to the insurer or its insurance producer or indirectly under any premium finance plan or extension of credit.
  3. “Policy” means any automobile policy which includes automobile liability coverage, uninsured motorist coverage, underinsured motorist coverage, automobile medical payments coverage, basic or optional excess no-fault benefits, or automobile physical damage coverage, delivered or issued for delivery in this state, insuring as the named insured an individual residing in this state, and under which the insured vehicles designated in the policy are of the following types only:
    1. A motor vehicle of the private passenger type that is not used as a public or livery conveyance, nor rented to others.
    2. Any four-wheel motor vehicle with a load capacity of one thousand five hundred pounds [680.39 kilograms] or less which is not used in the occupation, profession, or business of the insured, nor used as a public or livery conveyance, nor rented to others.
    3. Any motorcycle as that term is defined in section 39-01-01 that is not used as a public or livery conveyance, nor rented to others.
    4. An unconventional vehicle as that term is defined in subsection 2 of section 39-29.2-01 that is not used as a public or livery conveyance, nor rented to others.
  4. “Renewal” or “to renew” means the issuance and delivery by an insurer of a policy replacing, at the end of the previous policy period, a policy previously issued and delivered by the same insurer; the issuance and delivery of a certificate or notice extending the term of a policy beyond its policy period or term; or the extension of the term of a policy beyond its policy period or term pursuant to a provision for extending the policy by payment of a continuation premium. The term includes a change or alteration in the amount of a deductible, coverage, or exclusion which results in substantially equivalent coverage if the altered terms are provided to the insured in the notice of renewal. Any policy with a policy period or term of less than six months must be considered as if written for a policy period or term of six months except in case of termination under any of the circumstances specified in subsection 2 of section 26.1-40-05. Any policy written for a term longer than one year or any policy with no fixed expiration date must be considered as if written for successive policy periods or terms of one year and any termination by an insurer effective on an anniversary date of the policy is deemed a failure to renew.
  5. “Termination” means cancellation or nonrenewal of automobile insurance coverage in whole or in part. Cancellation occurs during the policy term. Nonrenewal occurs at the end of the policy term. An insurer’s substitution of insurance upon renewal which results in substantially equivalent coverage is not a termination. The transfer of a policy between companies within the same insurance holding company system is not a termination. A renewal with altered terms as provided in subsection 4 is not a termination.

“Policy” does not include any policy that has been in effect less than sixty days at the time notice of cancellation is mailed or delivered by the insurer unless it is a renewal policy; any policy issued under the North Dakota assigned risk plan; any policy insuring more than six motor vehicles; any policy covering the operation of a garage, automobile sales agency, repair shop, service station, or public parking place; any policy providing insurance only on an excess basis; or any other contract providing insurance to a named insured even though the contract may incidentally provide insurance with respect to such motor vehicles.

Source:

S.L. 1985, ch. 316, § 17; 1991, ch. 302, § 23; 2001, ch. 262, § 117; 2001, ch. 270, § 4; 2015, ch. 276, § 1, eff April 20, 2015; 2017, ch. 222, § 3, eff August 1, 2017; 2019, ch. 246, § 2, eff August 1, 2019.

Derivation:

N.D.C.C. § 26-02-32.

Collateral References.

What constitutes ownership of automobile within meaning of automobile insurance owner’s policy, 36 A.L.R.4th 7.

Who is a “spouse” within clause of automobile liability, uninsured motorist, or no-fault insurance policy defining additional insured, 36 A.L.R.4th 588.

What constitutes “entering” or “alighting from” vehicle within meaning of insurance policy, or statute mandating insurance coverage, 59 A.L.R.4th 149.

Liability insurance: what is “claim” under deductibility-per-claim clause, 60 A.L.R.4th 983.

Automobile insurance coverage for drive-by shootings and other incidents involving the intentional discharge of firearms from moving motor vehicles, 41 A.L.R.5th 91.

Validity, construction, and application of provision in automobile liability policy excluding from coverage injury to, or death of, employee of insured, 43 A.L.R.5th 149.

Automobile insurance: what constitutes “occupying” under owned-vehicle exclusion on uninsured- or underinsured-motorist coverage of automobile insurance policy, 59 A.L.R.5th 191.

26.1-40-02. Cancellation of policy — Exclusive reasons.

  1. No insurer may cancel a policy except for the following reasons:
    1. Nonpayment of premium.
    2. Because the motor vehicle operator’s license or motor vehicle registration of either the named insured or any other operator who resides in the same household as the named insured or who customarily operates a motor vehicle insured under the policy has been suspended, rescinded, canceled, or revoked during the policy period, or, if the policy is a renewal, during its policy period or for one hundred eighty days immediately preceding its effective date. This subdivision does not apply and the insurer may not cancel a policy when the operator whose license is suspended or revoked is excluded from coverage under the policy. The insurer shall notify the named insured of the possibility of excluding an operator whose license has been suspended or revoked prior to cancellation of the policy. When an operator whose license is suspended or revoked is excluded from coverage under the policy covering a secured motor vehicle, the owner of the motor vehicle who gives expressed or implied consent to the operator to use the motor vehicle is not relieved of liability under subsection 5 of section 26.1-41-02.
    3. Fraud or material misrepresentation made by or with the knowledge of any insured in obtaining the policy, continuing the policy, or in presenting a claim under the policy.
    4. The insured motor vehicle is:
      1. So mechanically defective that its operation might endanger public safety;
      2. Used in carrying passengers for hire or compensation; provided, however, that the use of an automobile for a car pool is not use of an automobile for hire or compensation;
      3. Used in the transportation of flammables or explosives or for an illegal purpose;
      4. An authorized emergency vehicle; or
      5. Altered by an insured during the policy period so as to substantially increase the risk.
    5. The named insured moves to a state where the insurer is not licensed to do business.
    6. Failure to pay dues or fees when payment of the dues or fees is a prerequisite to obtaining or continuing automobile insurance coverage.
    7. A determination by the commissioner that the continuation of the policy would place the insurer in violation of the law or would be hazardous to the interests of policyholders, creditors, or the public.
  2. During the policy period no modification of automobile physical damage coverage, except coverage for loss caused by collision, by which provision is made for the application of a deductible amount not exceeding one hundred dollars is deemed a cancellation of the coverage or of the policy.
  3. Renewal of a policy does not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of the renewal.

Source:

S.L. 1985, ch. 316, § 17; 1991, ch. 54, § 14.

Derivation:

N.D.C.C. § 26-02-33.

Collateral References.

State regulation of insurer’s nonacceptance, cancellation, or nonrenewal of, or increase in rate on, automobile insurance policy, based on driving record, 36 A.L.R.4th 1205.

Automatic termination, validity and construction of automobile insurance provisions or statute automatically terminating coverage when insured obtains another policy providing similar coverage, 61 A.L.R.4th 1130.

26.1-40-02.1. Cancellation of minor’s driving privileges — Effect.

An insurer may not use or rely on the cancellation of a minor’s driving privileges under section 39-06-01.1 as the sole reason to cancel, deny, or not renew the automobile insurance policy of the minor or a parent of the minor unless the points or offenses on the minor’s public driving record, separate from a cancellation under section 39-06-01.1, would be a reason to cancel, deny, or not renew the policy.

Source:

S.L. 2001, ch. 340, § 1.

26.1-40-03. Notice of cancellation.

No insurer may exercise its right to cancel a policy unless a written notice of cancellation is mailed or delivered to the named insured, at the address shown in the policy, at least twenty days prior to the effective date of cancellation. When cancellation is for nonpayment of premium, the notice must be mailed or delivered to the named insured at the address shown in the policy at least ten days prior to the effective date of cancellation.

Source:

S.L. 1985, ch. 316, § 17.

Derivation:

N.D.C.C. § 26-02-34.

26.1-40-04. Statement of reason for cancellation.

A notice of cancellation for nonpayment of premium must include or be accompanied by a statement of the reason for cancellation. Any other notice of cancellation must state or be accompanied by either a statement of the reason for cancellation, or a statement that upon written request of the named insured, the insurer will specify in writing the reason for cancellation. The written request must be mailed or delivered to the insurer at least ten days prior to the effective date of cancellation. The insurer shall mail or deliver the reason to the named insured within ten days after receipt of the written request. Failure to comply with the notice of cancellation provisions of section 26.1-40-03 or failure to furnish reasons for cancellation when required or requested is sufficient cause for the commissioner to cancel, revoke, or refuse to renew that company’s certificate of authority to do business in this state.

Source:

S.L. 1985, ch. 316, § 17.

Derivation:

N.D.C.C. §§ 26-02-34, 26-02-35.

Collateral References.

State regulation of insurer’s nonacceptance, cancellation, or nonrenewal of, or increase in rate on, automobile insurance policy, based on driving record, 36 A.L.R.4th 1205.

26.1-40-05. Nonrenewal — Notice — Statement of reasons — Nonrenewal not to be based on certain facts.

  1. No insurer may fail to renew a policy unless a written notice of nonrenewal is mailed or delivered to the named insured, at the address shown in the policy, at least thirty days prior to the expiration date of the policy or anniversary date of a policy written for a term longer than one year or with no fixed expiration date. The insurer shall include a statement of the reasons for nonrenewal with the notice or shall furnish it upon the written request of the insured mailed or delivered to the insurer at least ten days prior to the expiration date of the policy. The insurer shall comply with such a request within ten days after receipt thereof.
  2. Subsection 1 does not apply:
    1. If the insurer has manifested in any way its willingness to renew;
    2. In case of nonpayment of premium for the expiring policy; or
    3. If the insured fails to pay the premium as required by the insurer for renewal.

Source:

S.L. 1985, ch. 316, § 17.

Derivation:

N.D.C.C. § 26-02-36.

Collateral References.

State regulation of insurer’s nonacceptance, cancellation, or nonrenewal of, or increase in rate on, automobile insurance policy, based on driving record, 36 A.L.R.4th 1205.

Insured’s right of action for arbitrary nonrenewal of policy, where insurer has option not to renew, 37 A.L.R.4th 862.

26.1-40-06. Notification of possible eligibility for assigned risk policy.

When a policy is canceled, other than for nonpayment of premium, or in the event of failure to renew a policy to which subsection 1 of section 26.1-40-05 applies, the insurer shall notify the named insured of the insured’s possible eligibility for automobile insurance through the automobile assigned risk plan or automobile insurance plan. The notification must accompany or be included in the notice of cancellation or nonrenewal required by sections 26.1-40-03 and 26.1-40-05.

Source:

S.L. 1985, ch. 316, § 17.

Derivation:

N.D.C.C. § 26-02-37.

26.1-40-07. Proof of notice of termination.

  1. Proof of mailing a notice of cancellation or a notice of an intention not to renew, or business records of the notice of the insured’s willingness to renew, must be retained for a period of one year by the insurer or insurance producer giving the notice.
  2. Sufficient proof of mailing a notice under this section is established if the producer or insurer produces:
    1. A United States postal service certificate of mailing to the named insured at the address shown on the insured’s policy; or
    2. Proof or acknowledgment of United States postal service mailing to the named insured at the address shown on the insured’s policy using:
      1. IMb tracing; or
      2. A similar method of first-class mail tracking which identifies the named insured, the address shown on the insured’s policy, and the date of mailing.

Source:

S.L. 1985, ch. 316, § 17; 2001, ch. 262, § 118; 2015, ch. 220, § 3, eff August 1, 2015.

Derivation:

N.D.C.C. § 26-02-38.

26.1-40-08. Reason for cancellation or nonrenewal — Nonliability of parties.

The specific reason for cancellation or nonrenewal which is furnished to the insured does not constitute grounds for any claim for relief against the insurer or the insured’s authorized representative, or its agents or employees, or any person who in good faith furnishes to the insurer the information upon which the reasons for cancellation or nonrenewal are based.

Source:

S.L. 1985, ch. 316, § 17.

Derivation:

N.D.C.C. § 26-02-40.

Collateral References.

State regulation of insurer’s nonacceptance, cancellation, or nonrenewal of, or increase in rate on, automobile insurance policy, based on driving record, 36 A.L.R.4th 1205.

Insured’s right of action for arbitrary nonrenewal of policy, where insurer has option not to renew, 37 A.L.R.4th 862.

26.1-40-09. Duplicate coverage — Termination of coverage when another policy in force — Notice.

Notwithstanding the failure of an insurer to comply with sections 26.1-40-01 through 26.1-40-12, if an insured obtains a replacement policy providing equal or more extensive coverage for a motor vehicle covered in both policies, the first insurer’s coverage of that motor vehicle may be terminated either by cancellation or nonrenewal. The termination is effective on the effective date of the second policy providing duplicate replacement coverage. Upon termination, the insured is entitled to a refund of the premium and written notice must be mailed or delivered to the named insured.

Source:

S.L. 1985, ch. 316, § 17; 2017, ch. 222, § 4, eff August 1, 2017.

Derivation:

N.D.C.C. § 26-02-39.

26.1-40-10. Notification and reasons for a declination.

  1. Upon declining an application or written request for a policy, the insurer making the declination shall either provide the insurance applicant with the specific reasons in writing for the declination at the time of the declination or advise the applicant in writing that specific written reasons for the declination will be provided within twenty-one days of the timely receipt by the insurer making the declination of the applicant’s written request for the reasons. An applicant’s written request is timely under this subsection if received within ninety days of the date of the notice to the applicant.
  2. No insurer not represented by an insurance producer may refuse to provide an insurance application form or other means of making a written request for insurance to a prospective applicant who requests insurance coverage from the insurer.
  3. No insurance producer, for any reason set out in section 26.1-40-11, may refuse to provide an insurance application form or other means of making a written request for insurance to a prospective applicant who requests insurance coverage from the insurance producer or insurer.

Source:

S.L. 1985, ch. 316, § 17; 2001, ch. 262, § 119.

Derivation:

N.D.C.C. § 26-02-38.1.

Collateral References.

State regulation of insurer’s nonacceptance, cancellation, or nonrenewal of, or increase in rate on, automobile insurance policy, based on driving record, 36 A.L.R.4th 1205.

Who is “employed or engaged in automobile business” within the exclusionary clause of liability policy, 55 A.L.R.4th 261.

26.1-40-11. Terminations — Declinations — Prohibited reasons.

The declination of an application for, or the termination of, a policy by an insurer or insurance producer is prohibited if the declination or termination is:

  1. Based upon the race, religion, nationality, or ethnic group of the applicant or named insured.
  2. Based solely upon the lawful occupation or profession of the applicant or named insured, except that this provision does not apply to any insurer or insurance producer which limits its market to one lawful occupation or profession or to several related lawful occupations or professions.
  3. Based upon the principal location of the insured motor vehicle unless such decision is for a business purpose which is not mere pretext for unfair discrimination.
  4. Based solely upon the age, sex, or marital status of an applicant or an insured, except that this subsection does not prohibit rating differentials based upon age, sex, or marital status.
  5. Based upon the fact that the applicant or named insured previously obtained insurance coverage through a residual market insurance mechanism or an insurance company that insures substandard risks.
  6. Based upon the fact that another insurer previously declined to insure the applicant or terminated an existing policy in which the applicant was the named insured.

Source:

S.L. 1985, ch. 316, § 17; 1993, ch. 303, § 2; 2001, ch. 262, § 120.

Derivation:

N.D.C.C. § 26-02-38.2.

Collateral References.

State regulation of insurer’s nonacceptance, cancellation, or nonrenewal of, or increase in rate on, automobile insurance policy, based on driving record, 36 A.L.R.4th 1205.

26.1-40-11.1. Juvenile’s suspension of driving privileges — Nontraffic delinquent conduct.

Insurers are prohibited from using or relying on a nontraffic delinquent juvenile’s suspension of driving privileges under section 27-20.4-16 as a reason for canceling, denying, or nonrenewing the automobile insurance policy of the nontraffic delinquent juvenile offender or the parents of the nontraffic delinquent juvenile offender.

Source:

S.L. 1995, ch. 124, § 7; 2021, ch. 245, § 13, eff July 1, 2021.

26.1-40-12. Sanctions.

If the commissioner after hearing determines that an insurer has violated section 26.1-40-02, 26.1-40-10, or 26.1-40-11, the commissioner may require the insurer to accept the application or written request for insurance coverage at a rate and on the same terms and conditions as are available to its other risks with similar characteristics, or reinstate insurance coverage to the end of the policy period; or continue insurance coverage at a rate and on the same terms and conditions as are available to its other risks with similar characteristics. If the commissioner has determined, after hearing, that any person has violated sections 26.1-40-02 through 26.1-40-12, the commissioner may issue a cease and desist order to restrain the person from engaging in practices which violate these sections, or assess a penalty against the person of up to five hundred dollars for each violation, or assess a penalty against the person of up to five thousand dollars for each willful and knowing violation, or cancel, revoke, or refuse to renew a company’s certificate of authority to do business in this state.

Source:

S.L. 1985, ch. 316, § 17.

Derivation:

N.D.C.C. § 26-02-38.3.

26.1-40-13. Definitions applicable to sections 26.1-40-13 through 26.1-40-15. [Repealed]

Repealed by S.L. 1989, ch. 375, § 8.

26.1-40-14. Uninsured and underinsured motorist coverage — Compulsory — Stacking not permitted. [Repealed]

Repealed by S.L. 1989, ch. 375, § 8.

26.1-40-15. Rights of insurer making payments under uninsured or underinsured motorist coverage. [Repealed]

Repealed by S.L. 1989, ch. 375, § 8.

26.1-40-15.1. Definitions — Applicable to sections 26.1-40-15.1 through 26.1-40-15.7.

As used in sections 26.1-40-15.1 through 26.1-40-15.7 and unless the context otherwise requires:

  1. “Motor vehicle” means a vehicle, excluding motor vehicles weighing more than twenty thousand pounds, having two or more load-bearing wheels, of a kind required to be registered under the laws of this state relating to motor vehicles, designed primarily for operation upon the public streets, roads, and highways, and driven by power other than muscular power, and includes a trailer drawn by or attached to such a vehicle.
  2. “Underinsured motor vehicle” means a motor vehicle for which there is a bodily injury liability insurance policy, or bond providing equivalent liability protection, in effect at the time of the accident, but the applicable limit of bodily injury liability of such policy or bond:
    1. Is less than the applicable limit for underinsured motorist coverage under the insured’s policy; or
    2. Has been reduced by payments to other persons injured in the accident to an amount less than the limit for underinsured motorist coverage under the insured’s policy.
  3. “Uninsured motor vehicle” means a motor vehicle for which:
    1. There is no bodily injury liability insurance policy, or bond providing equivalent liability protection, in effect at the time of the accident.
    2. There is an applicable policy or bond, but the insurer or issuer thereof refuses to provide coverage, denies coverage, or is or becomes insolvent as defined in section 26.1-42.1-02.
    3. The identity of the owner or operator cannot be ascertained and the bodily injury, sickness, disease, or death of the insured is either caused by actual physical contact of such motor vehicle with the insured, or with a motor vehicle occupied by the insured, or is independently verified by a disinterested witness.
  4. The terms “uninsured motor vehicle” and “underinsured motor vehicle” do not mean a motor vehicle:
    1. Insured under the liability coverage of the same policy of which the uninsured motorist or underinsured motorist coverage is a part.
    2. Owned by any governmental unit, political subdivision, or agency thereof.
    3. Located for use as a residence or premises.
    4. With respect to uninsured motorist coverage, a self-insured motor vehicle within the meaning of the financial or safety responsibility law of the state in which the motor vehicle is registered, or any similar state or federal law.
    5. Operated by any person who is specifically excluded from coverage in the policy.

The term “underinsured motor vehicle” may not be construed to include an “uninsured motor vehicle”.

Source:

S.L. 1989, ch. 375, § 1; 1999, ch. 259, § 3.

Notes to Decisions

Construction with Other Laws.

To trigger underinsured coverage under current statutory provisions for underinsured motorist coverage, a tortfeasor’s motor vehicle must meet the definition of underinsured motor vehicle in this section; if that threshold definition is not satisfied, an insured is not entitled to underinsured proceeds. If that threshold definition is satisfied, however, the insurer’s maximum liability under N.D.C.C § 26.1-40-15.3 is the lower of (1) the compensatory damages established but not recovered from the tortfeasor, or (2) the insured’s liability limits for underinsured coverage. DeCoteau v. Nodak Mut. Ins. Co., 2000 ND 3, 603 N.W.2d 906, 2000 N.D. LEXIS 3 (N.D. 2000).

Government Vehicles.

Under prior law, underinsured motorist policy provisions excluding coverage for accidents involving government vehicles were invalid as contrary to law. Gabriel v. Minnesota Mut. Fire & Casualty, 506 N.W.2d 73, 1993 N.D. LEXIS 166 (N.D. 1993).

Motor Vehicle.

Statutory definition of motor vehicle was not applicable in a case involving an injury resulting from operation of a combine because statutory scheme expressly allowed insurance companies to provide broader uninsured motorist coverage than was required by statute, and defendant insurance companies’ comprehensive custom combining insurance package did that. Thedin v. United States Fidelity & Guar. Ins. Co., 518 N.W.2d 703, 1994 N.D. LEXIS 140 (N.D. 1994).

Underinsured Motor Vehicle.

Vehicle involved in an accident was underinsured as a matter of law where the policy insuring the vehicle paid out a sum to the plaintiff less than the underinsured limit on the plaintiff’s policy; the plain unambiguous language of this section requires one to look solely at the policy covering the vehicle in question and not at liability coverage available to the driver. Rask v. Nodak Mut. Ins. Co., 2001 ND 94, 626 N.W.2d 693, 2001 N.D. LEXIS 118 (N.D. 2001).

Insurer’s exposure for an underinsured motorist claim was $ 100,000, not $ 50,000 as asserted in an insured’s motion for remand because once the definition of “underinsured motor vehicle” was met under N.D.C.C. § 26.1-40-15.1(2) and the trigger established, the underinsured motorist insurer’s maximum liability was the lower of (1) the compensatory damages established but not recovered from the tortfeasor; or (2) the limits of the underinsured motorist coverage. The $ 50,000 that the insured had received from the liability insurer was to be deducted from the total compensatory damages established, not from the underinsured motorist limits, e.g., if the fact finder determined that the insured’s total compensatory damages as a result of the automobile accident were $ 150,000 or more, the liability limits of $ 50,000 would have been subtracted from the compensatory damages awarded and the insurer would still have owed its $ 100,000 underinsured motorist limits. Lochthowe v. State Farm Mut. Auto. Ins. Co., 470 F. Supp. 2d 1033, 2007 U.S. Dist. LEXIS 4527 (D.N.D. 2007).

In a case in which a husband and wife sought benefits arising from an underinsured motorists (UIM) policy issued by the husband’s employer’s auto insurer and they appealed a district court’s entry of summary judgment in favor of the insurer, the negligent driver’s vehicle was not underinsured as a matter of law. The negligent driver’s excess-liability policy was a bodily injury policy under N.D.C.C. § 26.1-40-15.1, and, as the limitations on the driver’s auto policy and excess-liability policy exceeded the UIM endorsement on the employer’s policy, the driver’s vehicle was not underinsured as a matter of law. Jung v. Gen. Cas. Co., 651 F.3d 796, 2011 U.S. App. LEXIS 16361 (8th Cir. N.D. 2011).

Collateral References.

Motorist having “no-fault” insurance affording no liability coverage in circumstances as “uninsured” or “underinsured” motorist under damaged party’s insurance, 40 A.L.R.4th 1202.

Right of insured, precluded from recovering against owner or operator of uninsured motor vehicle because of governmental immunity, to recover uninsured motorist benefits, 55 A.L.R.4th 806.

“Excess” or “umbrella” insurance policy as providing coverage for accidents with uninsured or underinsured motorist, 2 A.L.R.5th 922.

Insured’s recovery of uninsured motorist claim against insurer as affecting subsequent recovery against tortfeasors causing injury, 3 A.L.R.5th 746.

Uninsured and underinsured motorist coverage: enforceability of policy provision limiting appeals from arbitration, 23 A.L.R.5th 801.

Uninsured or underinsured motorist insurance: Validity and construction of policy provision purporting to reduce recovery by amount of social security disability benefits or payments under similar disability benefits law, 24 A.L.R.5th 766.

Automobile insurance: what constitutes “occupying” under owned-vehicle exclusion on uninsured- or underinsured-motorist coverage of automobile insurance policy, 59 A.L.R.5th 191.

Who is “member” or “resident” of same “family” or “household” within no-fault or uninsured motorist provisions of motor vehicle insurance policy, 66 A.L.R.5th 269.

Law Reviews.

Case Comment: Insurance — Automobile Insurance: The North Dakota Supreme Court Rules the Head of Household’s Liability Under the Family Car Doctrine Is Not Necessarily Covered By His Automobile Insurance Policy (McPhee v. Tufty, 2001 ND 51, 623 N.W.2d 390 (2001)), 78 N.D. L. Rev. 479 (2002).

North Dakota Supreme Court Review (Sandberg v. American Family Ins. Co.), 83 N.D. L. Rev. 1085 (2007).

26.1-40-15.2. Uninsured motorist coverage.

  1. No motor vehicle liability insurance policy may be delivered, issued for delivery, or renewed in this state with respect to any specifically insured or identified motor vehicle registered, licensed, and principally garaged in this state unless uninsured motorist coverage is provided therein or supplemental thereto in limits set forth in section 39-16.1-11. Uninsured motorist coverage must pay compensatory damages which an insured is legally entitled to collect for bodily injury, sickness, or disease, including death resulting therefrom, or such insured, from the owner or operator of an uninsured motor vehicle arising out of the ownership, maintenance, or use of such uninsured motor vehicle.
  2. At the request of a named insured, or applicant for insurance, the insurer providing uninsured motorist coverage shall also make available higher limits of uninsured motorist coverage in accordance with its rating plan and rules. The insurer need not provide uninsured motorist coverage limits in excess of the insured’s bodily injury liability limits, or one hundred thousand dollars per person and three hundred thousand dollars per accident, or if consistent with such rating plan and rules, a combined single limit equivalent of three hundred thousand dollars per accident, whichever is less.
  3. The maximum liability of the uninsured motorist coverage is the lower of:
    1. The amount of compensatory damages established but not recovered by any agreement, settlement, or judgment with or for the person or organization legally liable for the bodily injury, sickness, disease, or death resulting therefrom; or
    2. The limits of liability of the uninsured motorist coverage.
  4. In any claim for uninsured motorist benefits, the insured and the insurer each bear responsibility for one’s own attorney’s fees incurred unless the insurance contract specifically provides otherwise or the insurance company is found to have acted in bad faith. It is neither a conflict of interest nor bad faith for an insurer to contest and press all defenses that the uninsured motorist could press.

Source:

S.L. 1989, ch. 375, § 2; 2003, ch. 258, § 1.

Notes to Decisions

Definition of Coverage.

This section is a remedial statute which requires motor vehicle liability insurers to provide financial protection to its insured motorists if they are injured by an uninsured motorist; insurers are prohibited from defining persons having uninsured motorist coverage more restrictively than they define persons having liability protection under the same policy. Thedin v. United States Fidelity & Guar. Ins. Co., 518 N.W.2d 703, 1994 N.D. LEXIS 140 (N.D. 1994).

Legally Entitled to Recover.

Where a passenger, in a car driven by a coemployee, was injured when car collided with a pickup, the passenger was not legally entitled to recover damages under the uninsured motorist coverage statute and under the insurance policies because workers’ compensation afforded the exclusive remedy against coemployee. Cormier v. National Farmers Union Property & Casualty Co., 445 N.W.2d 644, 1989 N.D. LEXIS 162 (N.D. 1989).

Recovery of Damages.

Under former N.D.C.C. § 26.1-40-15.2, where the wrongdoer was not immune from liability, the requirement that an insured be “legally entitled to recover” was fulfilled if the insured had a legally enforceable right to recover damages. Where the plaintiffs had a legally enforceable right to recover limited damages from a school district, they were not barred from uninsured motorist coverage. Gabriel v. Minnesota Mut. Fire & Casualty, 506 N.W.2d 73, 1993 N.D. LEXIS 166 (N.D. 1993).

DECISIONS UNDER PRIOR LAW

Judgment Against Uninsured Motorist.

Judgment against uninsured motorist conclusively established liability of uninsured motorist and was enforceable against insurance company under its uninsured motorist coverage where insurance company, who was not a party to the action against the uninsured motorist, had notice of the action and an opportunity to intervene and defend. Hughes v. State Farm Mut. Auto. Ins. Co., 604 F.2d 573, 1979 U.S. App. LEXIS 12416 (8th Cir. N.D. 1979).

“Stacking” of Uninsured Motorist Coverage.

The mandatory uninsured motorist statute does not prohibit “stacking” of uninsured motorist coverage; however, insurance policy provision which clearly prohibits “stacking” of uninsured motorist coverage is not against public policy and is enforceable. St. Paul Mercury Ins. Co. v. Andrews, 321 N.W.2d 483, 1982 N.D. LEXIS 291 (N.D. 1982).

Collateral References.

Right of liability insurer or uninsured motorist insurer to invoke defense based on insured’s tort immunity arising out of marital or other close family relationship to injured party, 36 A.L.R.4th 747.

Punitive damages as within coverage of uninsured or underinsured motorist insurance, 54 A.L.R.4th 1186.

Automobile uninsured motorist coverage: “legally entitled to recover” clause as barring claim compensable under workers’ compensation statute, 82 A.L.R.4th 1096.

Validity of territorial restrictions on uninsured/underinsured coverage in automobile insurance policies, 55 A.L.R.5th 747.

What constitutes use of automobile “to carry persons or property for fee” within exclusion of automobile insurance policy, 57 A.L.R.5th 591.

Validity, construction, and application of exclusion of government vehicles from uninsured motorist provision, 58 A.L.R.5th 511.

Who is “member” or “resident” of same “family” or “household” within no-fault or uninsured motorist provisions of motor vehicle insurance policy, 66 A.L.R.5th 269.

Uninsured motorist indorsement: construction and application of requirement that there be “physical contact” with unidentified or hit-and-run vehicle; “hit-and-run” cases, 79 A.L.R.5th 289.

26.1-40-15.3. Underinsured motorist coverage.

  1. The insurer shall also provide underinsured motorist coverage at limits equal to the limits of uninsured motorist coverage. Underinsured motorist coverage must pay compensatory damages which an insured is legally entitled to collect for bodily injury, sickness, disease, including death resulting therefrom, of such insured, from the owner or operator of an underinsured motor vehicle arising out of the ownership, maintenance, or use of such underinsured motor vehicle.
  2. The maximum liability of the underinsured motorist coverage is the lower of:
    1. The amount of compensatory damages established but not recovered by any agreement, settlement, or judgment with or for the person or organization legally liable for the bodily injury, sickness, disease, or death resulting therefrom; or
    2. The limits of liability of the underinsured motorist coverage.
  3. In any claim for underinsured motorist benefits, the insured and the insurer each bear responsibility for one’s own attorney’s fees incurred unless the insurance contract specifically provides otherwise or the insurance company is found to have acted in bad faith. It is neither a conflict of interest nor bad faith for an insurer to contest and press all defenses that the underinsured motorist could press.

Source:

S.L. 1989, ch. 375, § 3; 2003, ch. 258, § 2.

Notes to Decisions

Choice of Law.

In an insurer’s action seeking a declaration of which state’s law to apply as to stacking provisions, the trial court properly found that North Dakota had the more significant contacts and interest with regard to the issues of insurance coverage: all contacts other than the location of the insured decedents’ accident occurred in North Dakota, and Montana did not mandate underinsured motorist (UIM) coverage. Thus, North Dakota more clearly than Montana articulated its interest in UIM coverage by mandating such coverage, and clearly articulated a limit to such coverage by prohibiting stacking of coverages. Nodak Mut. Ins. Co. v. Wamsley, 2004 ND 174, 687 N.W.2d 226, 2004 N.D. LEXIS 304 (N.D. 2004).

In a suit brought by a passenger against a driver’s insurer, where the federal district court had diversity jurisdiction, North Dakota law applied to determine whether the passenger was, as specified in the policy, “legally entitled to collect” underinsured motorist benefits from the insurer for injuries sustained by the passenger in an accident in Canada between the driver, a North Dakota resident, and a citizen of Manitoba, Canada; North Dakota, rather than Canadian, law applied because (1) the insurance policy conformed with North Dakota law; (2) the premiums were paid in North Dakota; (3) the driver and the passenger were residents of North Dakota; (4) the insurance contract was entered into in North Dakota; (5) the application of North Dakota law in such a situation would protect the legitimate expectation of consistent results; and (6) North Dakota had a substantial interest in governing contractual relations between its residents and companies that conducted business in the state. Sher Ali Shah v. State Farm Mut. Auto. Ins. Co., 377 F. Supp. 2d 748, 2005 U.S. Dist. LEXIS 14731 (D.N.D. 2005).

North Dakota tort choice of law rules govern which jurisdiction’s law determines the damages a North Dakota insured is “legally entitled to collect” from an underinsured motorist. Sher Ali Shah v. State Farm Mut. Auto. Ins. Co., 377 F. Supp. 2d 748, 2005 U.S. Dist. LEXIS 14731 (D.N.D. 2005).

Compulsory Coverage.

Where the insured’s son was injured while driving his father’s truck, he filed suit against the insurance company seeking a payment of benefits under the underinsured motorist (UIM) provisions of a commercial auto insurance policy; the insurance company claimed that there was no coverage based on the insured’s alleged material misrepresentations made to obtain the insurance policy, fraud, concealment, and collusion. The district court erred by granting summary judgment for the insurance company; there was a genuine issue of material fact as to whether N.D.C.C. § 39-16.1-11(6)(a) prohibited cancellation of the policy, because the son was an injured innocent third party and UIM coverage was mandatory under N.D.C.C. § 26.1-40-15.3. Kambeitz v. Acuity Ins. Co., 2009 ND 166, 772 N.W.2d 632, 2009 N.D. LEXIS 177 (N.D. 2009).

Construction.

To trigger underinsured coverage, a tortfeasor’s motor vehicle must meet the definition of underinsured motor vehicle in N.D.C.C. § 26.1-40-15.1; if that threshold definition is not satisfied, an insured is not entitled to underinsured proceeds. If that threshold definition is satisfied, however, the insurer’s maximum liability under this section is the lower of (i) the compensatory damages established but not recovered from the tortfeasor, or (2) the insured’s liability limits for underinsured coverage. DeCoteau v. Nodak Mut. Ins. Co., 2000 ND 3, 603 N.W.2d 906, 2000 N.D. LEXIS 3 (N.D. 2000).

Purpose of N.D.C.C. § 26.1-40-15.3 is best served by interpreting an insurance policy’s “legally entitled to collect” requirement as providing underinsured motorist coverage when the wrongdoer’s damage liability is limited and not covered by the at-fault driver’s insurance. Sher Ali Shah v. State Farm Mut. Auto. Ins. Co., 377 F. Supp. 2d 748, 2005 U.S. Dist. LEXIS 14731 (D.N.D. 2005).

Plaintiff’s claim that an excess policy’s underinsured motorist exclusion created an ambiguity that provided coverage was rejected. The excess policy provided only third-party liability coverage. Wisness v. Nodak Mut. Ins. Co., 2011 ND 197, 806 N.W.2d 146, 2011 N.D. LEXIS 200 (N.D. 2011).

Definition of Underinsured Motor Vehicle.

In 1987, the legislature enacted compulsory underinsurance coverage which included a provision which defines an underinsured motor vehicle as one for which the applicable limit of liability insurance is less than the applicable limit of underinsurance coverage. Thompson v. Nodak Mut. Ins. Co., 466 N.W.2d 115, 1991 N.D. LEXIS 18 (N.D. 1991).

Legislative History.

For a discussion of the legislative history of underinsured motorist coverage statutes, and their construction, see DeCoteau v. Nodak Mut. Ins. Co., 2000 ND 3, 603 N.W.2d 906, 2000 N.D. LEXIS 3 (N.D. 2000).

Offset.

N.D.C.C. § 26.1-40-15.4(1) required the reduction for benefits paid or payable under any Workforce Safety and Insurance (WSI) law from the insured’s total compensable damages and not from the insured’s underinsured motorist coverage limit, because making insureds whole was furthered by construing the reducing language of N.D.C.C. § 26.1-40-15.4(1) to authorize a reduction from compensatory damages rather than from the underinsured motorist coverage limit as long as the insured did not duplicate recovery for the same loss, and that purpose would be frustrated for WSI benefits since WSI had a subrogation right against a tortfeasor for fifty percent of the damages recovered up to a maximum of the total amount it has paid or would otherwise pay. Jund v. Johnnie B's Bar & Grill, Inc., 2011 ND 230, 814 N.W.2d 776, 2011 N.D. LEXIS 230 (N.D. 2011).

Phrase “legally entitled to collect” in N.D.C.C. § 26.1-40-15.3(1) was construed as defining the compensatory damages payable under underinsured coverage and contemplating an initial allocation for comparative fault under N.D.C.C. § 32-03.2-02, i.e., the scope of the damages underinsured coverage must pay was the compensatory damages attributable to the comparative fault of the owner or operator of the underinsured vehicle. Hiltner v. Owners Ins. Co., 2016 ND 45, 876 N.W.2d 460, 2016 N.D. LEXIS 45 (N.D. 2016).

Under the specific certified question, construing N.D.C.C. §§ 26.1-40-15.3(1) and 26.1-40-15.4(1)(b) together and in conjunction with comparative fault law, the federal district court should first reduce the past economic damages for the percentage of fault attributable to the underinsured insured, and other persons or parties, other than the operator or owner of the underinsured motor vehicle, and then deduct the no-fault benefits paid. Hiltner v. Owners Ins. Co., 2016 ND 45, 876 N.W.2d 460, 2016 N.D. LEXIS 45 (N.D. 2016).

Rejection of Coverage.

According to the Supreme Court of North Dakota, an underinsured motorist (UIM) carrier had to demonstrate that it suffered actual prejudice from a lack of prior notice of a settlement and release with the tortfeasors, pursuant to N.D.C.C. § 26.1-40-15.6(7), in order to reject UIM coverage, and since the district court effectively read the requirement of an adverse effect out of the statute and applied the wrong legal standard and failed to consider the appropriate factors to determine if the UIM insurer suffered actual prejudice (including the amount of the tortfeasor’s assets, the likelihood of recovery via subrogation, the extent of the insured’s damages, and the expenses and risks of litigating the insured’s cause of action), summary judgment in the insurer’s favor was reversed and the case was remanded. Hasper v. Ctr. Mut. Ins. Co., 2006 ND 220, 723 N.W.2d 409, 2006 N.D. LEXIS 226 (N.D. 2006).

Scope of Coverage.

Although N.D.C.C. § 26.1-40-15.5 permits the terms of coverage and conditions to be more favorable to an insured or the limit higher than required by this section, underinsured motorist coverage is essentially a function of a statute. Score v. American Family Mut. Ins. Co., 538 N.W.2d 206, 1995 N.D. LEXIS 168 (N.D. 1995).

North Dakota law, rather than Canadian law, governed in a suit brought by a passenger against a driver’s insurer to determine whether the passenger was, as specified in the policy, “legally entitled to collect” underinsured motorist (UIM) benefits from the insurer for injuries sustained by the passenger in an accident in Canada between the driver, a North Dakota resident, and a citizen of Manitoba, Canada. Thus, the passenger was not limited by Canadian law to submitting a claim only to the Canadian citizen’s insurer and could, under North Dakota law, which made UIM coverage compulsory, submit a claim to the insurer for personal injury damages sustained in the accident. Sher Ali Shah v. State Farm Mut. Auto. Ins. Co., 377 F. Supp. 2d 748, 2005 U.S. Dist. LEXIS 14731 (D.N.D. 2005).

N.D.C.C. § 26.1-40-15.4(2) prohibited stacking policies to determine the amount of coverage available where the term “insured” referred solely to the insureds’ son, and the son was the “insured” entitled to underinsured motorist coverage under N.D.C.C. § 26.1-40-15.3(1). Tweten v. Country Preferred Ins. Co., 2013 ND 112, 833 N.W.2d 435, 2013 N.D. LEXIS 115 (N.D. 2013).

Underinsured Vehicle.

Under former N.D.C.C. § 26.1-40-13, where each of the plaintiffs received less than total compensation for injuries from the defendant’s insurance company, even though the defendant’s insurer paid its policy limit, because the amount received by each plaintiff was less than the underinsured motorist limit, the defendant’s vehicle was an “underinsured motor vehicle.” Gabriel v. Minnesota Mut. Fire & Casualty, 506 N.W.2d 73, 1993 N.D. LEXIS 166 (N.D. 1993).

In a case in which a husband and wife sought benefits arising from an underinsured motorists (UIM) policy issued by the husband’s employer’s auto insurer and they appealed a district court’s entry of summary judgment in favor of the insurer, the negligent driver’s vehicle was not underinsured as a matter of law. The negligent driver’s excess-liability policy was a bodily injury policy under N.D.C.C. § 26.1-40-15.1, and, as the limitations on the driver’s auto policy and excess-liability policy exceeded the UIM endorsement on the employer’s policy, the driver’s vehicle was not underinsured as a matter of law. Jung v. Gen. Cas. Co., 651 F.3d 796, 2011 U.S. App. LEXIS 16361 (8th Cir. N.D. 2011).

Collateral References.

Punitive damages as within coverage of uninsured or underinsured motorist insurance, 54 A.L.R.4th 1186.

Validity of territorial restrictions on uninsured/ underinsured coverage in automobile insurance policies, 55 A.L.R.5th 747.

Law Reviews.

North Dakota Supreme Court Review (Hasper v. Center Mutual Ins. Co.), 83 N.D. L. Rev. 1085 (2007).

26.1-40-15.4. Other insurance and priority of payment.

  1. Any damages payable to or for any insured for uninsured or underinsured motorist coverage must be reduced by:
    1. The amount paid, or payable under any workforce safety and insurance or other similar law, exclusive of nonoccupational disability benefits; and
    2. Amounts paid or payable under any valid and collectible motor vehicle medical payments, personal injury protection insurance, or similar motor vehicle coverages.
  2. Regardless of the number of motor vehicles involved, the number of persons covered or claims made, vehicles or premiums shown in the policy or premiums paid, the limit of liability for uninsured motorist or underinsured motorist coverage may not be added to or stacked upon limits for such coverages applying to other motor vehicles to determine the amount of coverage available to an insured in any one accident.
  3. If an insured is entitled to uninsured motorist or underinsured motorist coverage under more than one policy, the maximum amount such insured may recover may not exceed the highest limit of such coverage provided for any one vehicle under any one policy. If more than one policy applies, the following order of priority applies:
    1. A policy covering a motor vehicle occupied by the injured person at the time of the accident.
    2. A policy covering a motor vehicle not involved in the accident under which the injured person is a named insured.
    3. A policy covering a motor vehicle not involved in the accident under which the injured person is an insured other than a named insured.

Coverage available under a lower priority policy applies only to the extent it exceeds the coverage of a higher priority policy.

Source:

S.L. 1989, ch. 375, § 4; 2003, ch. 561, § 3.

Notes to Decisions

Denial of Offset.

Trial court did not abuse its discretion in refusing to offset damages awarded to the insured by the amount of no-fault benefits paid or to be paid by the insurer because the insured had not received a double recovery for economic damages; the parties did not claim that the basic no-fault limit of $ 30,000 was exhausted and did not dispute payment of no-fault damages for medical expenses. Hartman v. Estate of Miller, 2003 ND 24, 656 N.W.2d 676, 2003 N.D. LEXIS 22 (N.D. 2003).

No Consent to Settle.

While an employee did not obtain her uninsured motorist insurer’s consent to a settlement with Workforce Safety and Insurance (WSI), summary dismissal of the employee’s breach of contract claim against the insurer pursuant to N.D.C.C. § 26.1-40-15.6(7) was error as the insurer was still entitled to reduce the amount payable to the employee pursuant to N.D.C.C. § 26.1-40-15.4(1)(a), and was not, therefore, adversely affected by the employee’s settlement with the WSI. Sandberg v. Am. Family Ins. Co., 2006 ND 198, 722 N.W.2d 359, 2006 N.D. LEXIS 202 (N.D. 2006).

Scope of Coverage.

N.D.C.C. § 26.1-40-15.4(2) prohibited stacking policies to determine the amount of coverage available where the term “insured” referred solely to the insureds’ son, and the son was the “insured” entitled to underinsured motorist coverage under N.D.C.C. § 26.1-40-15.3(1). Tweten v. Country Preferred Ins. Co., 2013 ND 112, 833 N.W.2d 435, 2013 N.D. LEXIS 115 (N.D. 2013).

Workforce Safety And Insurance Benefits.

N.D.C.C. § 26.1-40-15.4(1) required the reduction for benefits paid or payable under any Workforce Safety and Insurance (WSI) law from the insured’s total compensable damages and not from the insured’s underinsured motorist coverage limit, because making insureds whole was furthered by construing the reducing language of N.D.C.C. § 26.1-40-15.4(1) to authorize a reduction from compensatory damages rather than from the underinsured motorist coverage limit as long as the insured did not duplicate recovery for the same loss, and that purpose would be frustrated for WSI benefits since WSI had a subrogation right against a tortfeasor for fifty percent of the damages recovered up to a maximum of the total amount it has paid or would otherwise pay. Jund v. Johnnie B's Bar & Grill, Inc., 2011 ND 230, 814 N.W.2d 776, 2011 N.D. LEXIS 230 (N.D. 2011).

Collateral References.

Validity, construction, and application of exclusion of government vehicles from uninsured motorist provision, 58 A.L.R.5th 511.

26.1-40-15.5. Reimbursement and subrogation.

  1. In the event of payment under uninsured or underinsured motorist coverage, the insurer making payment to the extent of the payment is entitled to the proceeds of any agreement, settlement, or judgment resulting from the exercise of any rights of recovery of such insured for compensatory damages or be entitled to exercise a right of subrogation against any person or organization legally responsible for the bodily injury, sickness, disease, or death for which such payment is made.
  2. No insurer providing underinsured motorist coverage has a right of subrogation against an underinsured motorist if the insurer has been provided with a written notice in advance of an agreement, settlement, or judgment between its insured and the underinsured motorist, and the insurer fails to advance a payment to the insured in an amount equal to the tentative agreement or settlement within thirty days following receipt of such notice. An insurer advancing such payment has full rights of subrogation.
  3. If an insurer makes payment under uninsured or underinsured motorist coverages because of an insurer insolvency, as defined in section 26.1-42.1-02, the paying insurer’s rights of reimbursement and subrogation do not include any rights of recovery against the insured of the insolvent insurer or against the North Dakota guaranty fund, except for the amount that is in excess of the limits of liability of the policy of the insolvent insurer.

Source:

S.L. 1989, ch. 375, § 5; 1999, ch. 259, § 4.

Notes to Decisions

Scope of Coverage.

Although this section permits the terms of coverage and conditions to be more favorable to an insured or the limit higher than required by N.D.C.C. § 26.1-40-15.3, underinsured motorist coverage is essentially a function of a statute. Score v. American Family Mut. Ins. Co., 538 N.W.2d 206, 1995 N.D. LEXIS 168 (N.D. 1995).

UIM Insurer Required to Show Actual Prejudice.

According to the Supreme Court of North Dakota, an under-insured motorist (UIM) carrier had to demonstrate that it suffered actual prejudice from a lack of prior notice of a settlement and release with the tortfeasors, pursuant to N.D.C.C. § 26.1-40-15.6(7), in order to reject UIM coverage, and since the district court effectively read the requirement of an adverse effect out of the statute and applied the wrong legal standard and failed to consider the appropriate factors to determine if the UIM insurer suffered actual prejudice (including the amount of the tortfeasor’s assets, the likelihood of recovery via subrogation, the extent of the insured’s damages, and the expenses and risks of litigating the insured’s cause of action), summary judgment in the insurer’s favor was reversed and the case was remanded. Hasper v. Ctr. Mut. Ins. Co., 2006 ND 220, 723 N.W.2d 409, 2006 N.D. LEXIS 226 (N.D. 2006).

DECISIONS UNDER PRIOR LAW

Limitation on Recoupment of Settlement Proceeds From Joint Tort-feasor.

Uninsured motorist insurer does not have right to recoup the proceeds of a settlement its insured makes with a party commonly or jointly liable with an insured tort-feasor where its insured has not been fully compensated for his injuries; recoupment should be permitted only to the extent necessary to prevent double recovery. Hughes v. State Farm Mut. Auto. Ins. Co., 604 F.2d 573, 1979 U.S. App. LEXIS 12416 (8th Cir. N.D. 1979).

Collateral References.

Right of insurer under automobile insurance policy to restitution of payments made under mistake, 37 A.L.R.4th 1048.

Validity and construction of provision of uninsured or underinsured motorist coverage that damages under the coverage will be reduced by amount of recovery from tortfeasor, 40 A.L.R.5th 603.

Conduct or inaction by insurer constituting waiver of, or creating estoppel to assert, right of subrogation, 125 A.L.R.5th 1.

26.1-40-15.6. Limitations.

The uninsured and underinsured coverages provided for in sections 26.1-40-15.1 through 26.1-40-15.7 do not apply to bodily injury, sickness, disease, or death resulting therefrom of an insured:

  1. While occupying a motor vehicle owned by, furnished or available for the regular use of the insured, a resident spouse, or resident relative, if such motor vehicle is not described in the policy under which a claim is made, or is not a newly acquired or replacement motor vehicle covered under the terms of the policy;
  2. While operating or occupying a motor vehicle without the specific permission of the owner thereof, or without a reasonable belief that the insured is entitled to do so;
  3. For damages for pain, suffering, mental anguish, inconvenience, or other noneconomic loss which could not have been recovered had the owner or operator of the motor vehicle responsible for such loss maintained the security required under any applicable state no-fault law;
  4. For punitive, exemplary, or other noncompensatory damages;
  5. With respect to which the applicable statute of limitations has expired on the insured’s claim against the uninsured or underinsured motorist;
  6. Until the limits of all bodily injury liability policies and bonds that apply have been exhausted by payment of settlements or judgments, or such limits or the remaining part of them have been offered to the insured in writing;
  7. When the insured, without the written consent of the insurer, shall make any agreement or settlement with any person who may be legally liable therefor, if such agreement adversely affects the rights of the insurer. The insurer is not bound by any agreement or settlement without its prior knowledge and consent. This limitation does not apply to underinsured motorist coverage when the insured has advised the insurer, in compliance with subsection 2 of section 26.1-40-15.5, and the insurer has failed to advance the required payment to protect its right of reimbursement and subrogation;
  8. If the insured has failed to report the accident to the proper law enforcement authorities as soon as practicable; and
  9. While operating a motor vehicle in which the individual is specifically excluded.

Source:

S.L. 1989, ch. 375, § 6; 2001, ch. 280, § 1.

Notes to Decisions

Consent to Settlement.

While an employee did not obtain her uninsured motorist insurer’s consent to a settlement with Workforce Safety and Insurance (WSI), summary dismissal of the employee’s breach of contract claim against the insurer pursuant to N.D.C.C. § 26.1-40-15.6(7) was error as the insurer was still entitled to reduce the amount payable to the employee pursuant to N.D.C.C. § 26.1-40-15.4(1)(a), and was not, therefore, adversely affected by the employee’s settlement with the WSI. Sandberg v. Am. Family Ins. Co., 2006 ND 198, 722 N.W.2d 359, 2006 N.D. LEXIS 202 (N.D. 2006).

According to the Supreme Court of North Dakota, an under-insured motorist (UIM) carrier had to demonstrate that it suffered actual prejudice from a lack of prior notice of a settlement and release with the tortfeasors, pursuant to N.D.C.C. § 26.1-40-15.6(7), in order to reject UIM coverage, and since the district court effectively read the requirement of an adverse effect out of the statute and applied the wrong legal standard and failed to consider the appropriate factors to determine if the UIM insurer suffered actual prejudice (including the amount of the tortfeasor’s assets, the likelihood of recovery via subrogation, the extent of the insured’s damages, and the expenses and risks of litigating the insured’s cause of action), summary judgment in the insurer’s favor was reversed and the case was remanded. Hasper v. Ctr. Mut. Ins. Co., 2006 ND 220, 723 N.W.2d 409, 2006 N.D. LEXIS 226 (N.D. 2006).

Alleged Settlement.

In granting defendant’s motion to enforce an alleged settlement agreement, the district court did not hold a hearing, made no findings of fact as to the terms of the settlement, and no evidence appears in the record as to the agreement’s terms. Because no evidence established the terms by which the parties intended to settle plaintiff’s action, the district court erred in granting defendant’s motion seeking to enforce the alleged settlement agreement. Ryberg v. Landsiedel, 2021 ND 56, 956 N.W.2d 749, 2021 N.D. LEXIS 50 (N.D. 2021).

Law Reviews.

North Dakota Supreme Court Review (Sandberg v. American Family Ins. Co.), 83 N.D. L. Rev. 1085 (2007).

North Dakota Supreme Court Review (Hasper v. Center Mutual Ins. Co.), 83 N.D. L. Rev. 1085 (2007).

26.1-40-15.7. General provisions.

  1. After selection of limits by a named insured or applicant for insurance, the insurer or any of its affiliates is not required to notify any insured in any renewal, reinstatement, substitute, amended, or replacement policy as to the availability of optional limits. Such selection by a named insured or an applicant is valid for all insureds under the policy. The insured may make, subject to the limitations expressed in sections 26.1-40-15.1 through 26.1-40-15.7, a request for additional coverage or coverage more extensive than that provided on a prior policy.
  2. No insurer is required to offer, provide, or make available coverage conforming to sections 26.1-40-15.1 through 26.1-40-15.7 in connection with any excess policy, umbrella policy, or any other policy which does not provide primary motor vehicle insurance for liabilities arising out of the ownership, maintenance, operation, or use of a specifically insured motor vehicle.
  3. Notwithstanding any other provision of sections 26.1-40-15.1 through 26.1-40-15.7, an insurer may make underinsured motorist coverage a part of uninsured motorist coverage.
  4. Notwithstanding any other provision of sections 26.1-40-15.1 through 26.1-40-15.7 or other laws of this state, a motor vehicle liability insurance policy may provide as to uninsured and underinsured motorist coverage, that any dispute with respect to issues of liability and damages may be submitted to binding arbitration if both parties agree. Such policy may also provide that coverage questions are not subject to arbitration.
  5. Nothing in sections 26.1-40-15.1 through 26.1-40-15.7 may be construed to prevent an insurer from offering, making available, or providing coverage terms and conditions more favorable to its insured or limits higher than are required by sections 26.1-40-15.1 through 26.1-40-15.7.

Source:

S.L. 1989, ch. 375, § 7.

Notes to Decisions

Expanded Coverage.

Statutory definition of motor vehicle was not applicable in a case involving an injury resulting from operation of a combine because statutory scheme expressly allowed insurance companies to provide broader uninsured motorist coverage than required by statute, and defendant insurance companies’ comprehensive custom combining insurance package did that. Thedin v. United States Fidelity & Guar. Ins. Co., 518 N.W.2d 703, 1994 N.D. LEXIS 140 (N.D. 1994).

Offset.

N.D.C.C. § 26.1-40-15.4(1) required the reduction for benefits paid or payable under any Workforce Safety and Insurance (WSI) law from the insured’s total compensable damages and not from the insured’s underinsured motorist coverage limit, because making insureds whole was furthered by construing the reducing language of N.D.C.C. § 26.1-40-15.4(1) to authorize a reduction from compensatory damages rather than from the underinsured motorist coverage limit as long as the insured did not duplicate recovery for the same loss, and that purpose would be frustrated for WSI benefits since WSI had a subrogation right against a tortfeasor for fifty percent of the damages recovered up to a maximum of the total amount it has paid or would otherwise pay. Jund v. Johnnie B's Bar & Grill, Inc., 2011 ND 230, 814 N.W.2d 776, 2011 N.D. LEXIS 230 (N.D. 2011).

Third-party Liability Coverage.

Plaintiff’s claim that an excess policy’s underinsured motorist exclusion created an ambiguity that provided coverage was rejected. The excess policy provided only third-party liability coverage. Wisness v. Nodak Mut. Ins. Co., 2011 ND 197, 806 N.W.2d 146, 2011 N.D. LEXIS 200 (N.D. 2011).

Law Reviews.

North Dakota Supreme Court Review (Hasper v. Center Mutual Ins. Co.), 83 N.D. L. Rev. 1085 (2007).

26.1-40-16. Exclusion of named persons — Restrictive endorsements.

By written agreement with the named insured, a private passenger automobile insurance policy covering an automobile or other motor vehicle registered or principally garaged in this state may exclude a named individual, individuals, or class of individuals from coverage. The policy may contain a restrictive endorsement reducing the limits of liability, uninsured motorist coverage, underinsured motorist coverage, basic no-fault benefits coverage, or collision coverage while the vehicle is operated by a named individual or class of individuals. However, if the policy does provide liability coverage to a person named in a restrictive endorsement, the coverage may not be less than the minimum provided under section 26.1-40-15.2, section 26.1-40-15.3, subsection 2 of section 26.1-41-01, and section 39-16.1-11. If the policy excludes a named individual, individuals, or class of individuals from all coverage and the named insured expressly or impliedly consents to the operation of a secured motor vehicle by the excluded party, the named insured is not relieved of personal liability as provided by subsection 5 of section 26.1-41-02.

Source:

S.L. 1985, ch. 316, § 17; 2001, ch. 280, § 2.

Derivation:

N.D.C.C. § 26-02-45.

Notes to Decisions

Construction.

Statute is not ambiguous, as the first sentence requires a written agreement with the insured before individuals or a class of individuals may be excluded from coverage, and the second and third sentences of address restrictive endorsements containing step-down provisions, which are a different subject matter than exclusions from coverage, and do not mention the requirement of a written agreement; the statute does not require a written agreement or other form of an insured’s acquiescence for a valid restrictive endorsement containing a step-down provision. Nodak Mut. Ins. Co. v. Bahr-Renner, 2014 ND 39, 842 N.W.2d 912, 2014 N.D. LEXIS 41 (N.D. 2014).

Notice.

Step-down provision, in accordance with the statute, was contained in a restrictive endorsement to the insurance policy and was titled in large print; the endorsement provided sufficient notice to an insured of the importance of its provisions. Nodak Mut. Ins. Co. v. Bahr-Renner, 2014 ND 39, 842 N.W.2d 912, 2014 N.D. LEXIS 41 (N.D. 2014).

Validity.

Step-down provision was not invalid for failing to recite the dollar amounts of reduced coverage. Nodak Mut. Ins. Co. v. Bahr-Renner, 2014 ND 39, 842 N.W.2d 912, 2014 N.D. LEXIS 41 (N.D. 2014).

Collateral References.

Who is a “spouse” within clause of automobile liability, uninsured motorist, or no-fault insurance policy defining additional insured, 36 A.L.R.4th 588.

26.1-40-16.1. Payment of benefits to family members of a policyholder.

An automobile insurance policy that provides coverage for bodily injury may not contain any provision limiting payment of benefits or reducing the amount of benefits payable to a person because the person to whom benefits are being paid under that policy is related to the policyholder by blood, marriage, or adoption, or is a foster child, and resides in the same household as the policyholder. However, a relative may be excluded from coverage under section 26.1-40-16.

Source:

S.L. 1993, ch. 313, § 1; 2001, ch. 280, § 3.

Collateral References.

Who is “member” or “resident” of same “family” or “household” within no-fault or uninsured motorist provisions of motor vehicle insurance policy, 66 A.L.R.5th 269.

26.1-40-17. Establishment of primary and excess automobile liability coverages in certain instances.

When an automobile insurance policy which includes only automobile liability coverage, uninsured motorist coverage, underinsured motorist coverage, automobile medical payments coverage, and basic or optional excess no-fault benefits is in force for anyone engaged in the business of selling, repairing, servicing, storing, leasing, renting, or parking motor vehicles and the owner of the vehicles loans, rents, or leases a vehicle to any other person or organization and the vehicle is involved in an accident out of which bodily injury or property damage arises, the following is applicable:

  1. If no other automobile insurance policy is in force at the time of the accident for the person or organization to whom the vehicle was loaned, rented, or leased, the coverage provided by the motor vehicle owner’s automobile policy extends to the borrower, rentee, or lessee in the event the owner’s automobile insurance policy extends coverage to the borrower, rentee, or lessee.
  2. If another automobile insurance policy is in force for the person or organization to whom the vehicle was loaned, rented, or leased, any coverage provided by the motor vehicle owner’s automobile insurance policy is excess coverage only but limited, however, by the terms of the owner’s applicable automobile insurance policy. The policy afforded the person or organization to whom the vehicle was loaned, rented, or leased is primary.

Any policy provisions at variance with this section must be interpreted so as to comply with this section.

Source:

S.L. 1985, ch. 316, § 17; 1991, ch. 302, § 24; 2011, ch. 222, § 1.

Derivation:

N.D.C.C. §§ 26-34-01, 26-34-02.

Notes to Decisions

Legislative Intent.

Resort to the legislative history of this section reveals the purpose of this legislation was to establish primary and excess liability coverage priority when a garage liability policy is in force and the insured garage owner loans, rents, or leases a vehicle to a customer while the customer’s vehicle is being repaired in the garage. Travelers Indem. Co. v. American Motorist Ins. Co., 766 F. Supp. 804, 1991 U.S. Dist. LEXIS 8084 (D.N.D. 1991).

The modified language in the enacted legislation is not inconsistent with the legislature’s stated purpose of determining coverage priority when a garage liability policy is in force. Travelers Indem. Co. v. American Motorist Ins. Co., 766 F. Supp. 804, 1991 U.S. Dist. LEXIS 8084 (D.N.D. 1991).

The phrase “engaged in the business of selling…[or] leasing” is intended to refer to garage owners or persons insured under garage liability insurance policies. It further appears from the legislative history that the phrase is not intended to refer to car rental franchisees. Travelers Indem. Co. v. American Motorist Ins. Co., 766 F. Supp. 804, 1991 U.S. Dist. LEXIS 8084 (D.N.D. 1991).

Collateral References.

Construction and application of “automatic insurance” or “newly acquired vehicle” clause (“replacement,” and “blanket,” or “fleet” provisions) contained in automobile liability policy, 39 A.L.R.4th 229.

Construction and application of statute imposing liability expressly upon motor vehicle lessor for damage caused by operation of vehicle, 41 A.L.R.4th 993.

Construction and application of substitution provision of automobile liability policy, 42 A.L.R.4th 1145.

26.1-40-17.1. Motor vehicle liability policy — Rental vehicles covered.

  1. Every motor vehicle liability insurance policy, as required by section 39-08-20, covering noncommercial private passenger motor vehicles must provide that all of the obligation for damage and loss of use to a rented private passenger vehicle will be covered by the property damage liability portion of the policy and subject to that policy limit. The obligation of the policy must not be contingent on fault or negligence of the insured. For purposes of this section, private passenger motor vehicle includes station wagons, minivans, vans, and pickups, and does not include motor homes, motorcycles, or trucks other than pickups.
  2. A vehicle is rented for purposes of this section if the vehicle is rented under an agreement for thirty continuous days or less.
  3. The policy or certificate issued by the insurer must inform the insured of the application of the insurance policy to rental vehicles and that the insured may not need to purchase additional coverage from the rental company.
  4. If an insured has two or more vehicles covered by a plan or plans of liability insurance containing the rented motor vehicle coverage required under subsection 1, the insured may select the policy that the insured wishes to collect from and the insurer that issued that plan is entitled to a pro rata contribution from any other plan or insurers based upon the property damage limits of liability. If the person renting the motor vehicle is also covered by that person’s employer’s insurance policy or the employer’s automobile self-insurance plan, the insurer or obligor under the employer’s policy or self-insurance plan has primary responsibility to pay claims arising from use of the rented vehicle.
  5. A notice advising the insured of rental vehicle coverage must be given by the insurer to each current insured with their first renewal notice following July 6, 1989. The notice must be approved by the insurance commissioner. The commissioner may specify the form of the notice.
  6. A rental car company may not require as a condition to its rental contract that the renter make a deposit for a prior payment of damage to the rented vehicle or loss of use of that vehicle.
  7. For each day a damaged vehicle is out of service because of damage to the vehicle while rented to others, the rental car company is entitled to collect sixty percent of the daily rental fee applicable to the contract in force when the car was damaged, but not to exceed fifteen days.

Source:

S.L. 1989, ch. 376, § 1; 1991, ch. 302, § 25.

26.1-40-18. Automobile warranties construed.

  1. A person who issues a written automobile warranty contract, automobile mechanical breakdown contract, or automobile service contract shall maintain a policy of insurance which provides coverage for the person’s contractual obligation.
  2. The policy must be issued by an insurer licensed, registered, or otherwise authorized to do business in this state. From the time the policy is filed with the commissioner:
    1. The insurer shall maintain surplus as to policyholders and paid-in capital of at least fifteen million dollars and annually file copies of the insurer’s audited financial statements, the national association of insurance commissioners annual statement, and the actuarial certification required by and filed in the insurer’s state of domicile; or
    2. The insurer shall maintain surplus as to policyholders and paid-in capital of between fifteen million dollars and ten million dollars, demonstrate to the satisfaction of the commissioner that the company maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not greater than three to one, and annually file copies of the insurer’s audited financial statements, the national association of insurance commissioners annual statement, and the actuarial certification required by and filed in the insurer’s state of domicile.
  3. This section does not apply to an original equipment manufacturer.

Source:

S.L. 1985, ch. 316, § 17; 2001, ch. 107, § 2; 2005, ch. 273, § 1; 2009, ch. 259, § 1.

Derivation:

N.D.C.C. § 26-31-01.

26.1-40-19. Certificate of authority to issue automobile warranty policy — Issuance — Qualifications — Renewal. [Repealed]

Repealed by S.L. 2001, ch. 107, § 4.

26.1-40-20. Automobile warranties considered insurance — Surety bond. [Repealed]

Repealed by S.L. 2001, ch. 107, § 4.

26.1-40-21. Revocation of certificate of authority. [Repealed]

Repealed by S.L. 2001, ch. 107, § 4.

26.1-40-22. Penalty.

Any person violating section 26.1-40-18 is guilty of a class A misdemeanor.

Source:

S.L. 1985, ch. 316, § 17; 2001, ch. 107, § 3.

Derivation:

N.D.C.C. § 26-31-06.

26.1-40-23. Notice to transfer.

The insurer transferring a policy to an insurer within the same insurance holding company system shall give notice to the policyholder of the transfer.

Source:

S.L. 2001, ch. 270, § 5.

26.1-40-24. Notice requirements following total loss.

If an insurer determines an automobile with physical damage coverage has incurred a total loss or constructive total loss and that insurer continues to write comprehensive or collision coverage on that automobile, the insurer shall provide notice to the insured that:

  1. The insurer determined the automobile is a total loss;
  2. The insured’s current coverage on that automobile includes comprehensive or collision coverage;
  3. If the insured does not repair the automobile, the insurer will reduce the amount of any future physical damage claim for that automobile by the amount paid for the total loss; and
  4. If the insured does not repair that automobile, the insured should contact the agent to request that the comprehensive or collision coverage on that automobile be discontinued.

Source:

S.L. 2003, ch. 259, § 1.

26.1-40-25. Proof of insurance.

An insurer who issues a policy shall provide proof of insurance to the insured in the form of written or electronic evidence of the policy’s terms as to type, duration, and the vehicle covered by the policy.

Source:

S.L. 2007, ch. 271, § 1; 2015, ch. 222, § 1, eff August 1, 2015.

CHAPTER 26.1-40.1 Transportation Network Company Insurance

26.1-40.1-01. Definitions.

As used in this chapter and chapter 39-34, unless the context otherwise requires:

  1. “Application off stage” of operation means the time period when the driver is operating the vehicle for personal noncommercial reasons and not engaged in any manner or operation for the transportation network company.
  2. “Application on stage” means the time period the driver is logged onto the online-enabled application of a transportation network company and available for hire but not engaged and there is no passenger on board.
  3. “Engaged stage” means the time period from the moment a participating driver accepts a ride request on the transportation network company’s online-enabled application or platform until the driver completes the transaction on the online-enabled application or platform or until the ride is complete, whichever is later.
  4. “Participating driver” or “driver” means an individual who:
    1. Receives connections to potential passengers and related services from a transportation network company in exchange for payment or a fee to the transportation network company; and
    2. Uses a personal vehicle to offer or provide prearranged transportation services to a passenger upon connection through an online-enabled application or platform controlled by a transportation network company in return for compensation or payment of a fee.
  5. “Passengers on-board stage” means the time period when there are passengers in the vehicle pursuant to the driver’s participation in a transportation network company.
  6. “Personal injury protection” means basic no-fault benefits as defined under subsection 2 of section 26.1-41-01.
  7. “Transportation network company” means a person operating in this state which uses an online-enabled application or platform to connect a passenger with an independent participating driver who provides prearranged transportation services using a personal vehicle. A transportation network company may not be deemed to control, direct, or manage the personal vehicles or participating drivers that connect to the transportation network company’s online-enabled application or platform, unless agreed to by written contract.
  8. “Transportation network company insurance” means an insurance policy that covers a driver’s use of a vehicle in connection with a transportation network company’s online-enabled application or platform.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

26.1-40.1-02. Required disclosures.

  1. A transportation network company shall disclose in writing or electronic form to participating drivers, as part of its agreement with those drivers, the insurance coverage and limits of liability that the transportation network company provides while the driver uses a vehicle in connection with a transportation network company’s online-enabled application or platform and shall advise a participating driver that the driver’s personal automobile insurance policy may not provide coverage under the agreement.
  2. A transportation network company shall disclose in writing or electronic form to participating drivers, as part of its agreement with those drivers, of when the driver’s personal automobile insurance policy may not provide collision or comprehensive coverage, under the agreement.
  3. A transportation network company shall provide notice in writing or electronically to the driver instructing the driver to notify the driver’s personal automobile insurer of the driver’s participation in the transportation network.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

26.1-40.1-03. Coverage required when transportation network company application is engaged until completion of ride when the passenger has exited the vehicle.

  1. A transportation network company and any participating driver shall maintain transportation network company insurance that provides for the following requirements that apply to transportation network company insurance during the engaged stage and during the passenger on-board stage.
    1. Transportation network company liability insurance is primary and in the amount of one million dollars for death, bodily injury, and property damage. The requirements for the coverage required by this subdivision may be satisfied by any of the following:
      1. Transportation network company insurance maintained by a participating driver.
      2. Transportation network company insurance maintained by a transportation network company.
      3. Any combination of paragraphs 1 and 2.
    2. Transportation network company insurance coverage provided under this section for uninsured motorist coverage must meet the requirements under section 26.1-40-15.2, which is primary coverage.
    3. Transportation network company insurance coverage provided under this section for underinsured motorist coverage must meet the requirements under section 26.1-40-15.3, which is primary coverage.
    4. Transportation network company insurance coverage must provide primary personal injury protection to drivers, passengers, and pedestrians under chapter 26.1-41.
    5. The primary insurer, in the case of insurance coverage provided under subdivision a, has the sole duty to defend and indemnify the insured.
    6. Coverage under a transportation network company insurance policy may neither be dependent on a driver’s personal automobile insurance policy carrier first denying a claim nor a personal automobile insurance policy carrier being required to first deny a claim.
    7. If transportation network company insurance maintained by a participating driver to fulfill the insurance obligations of this section has excluded coverage according to its policy or ceased to exist, the transportation network company shall provide the coverage required by this section beginning with the first dollar of a claim.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

26.1-40.1-04. Insurance coverage during the application on stage with no passengers in vehicle.

  1. During the application on stage, the transportation network company insurance must include:
    1. Motor vehicle liability coverage that is primary coverage. The coverage must include at least fifty thousand dollars per person and one hundred thousand dollars per incident for death and bodily injury and at least twenty-five thousand dollars for property damage.
    2. Uninsured motorist coverage under section 26.1-40-15.2 which is primary coverage.
    3. Underinsured motorist coverage under section 26.1-40-15.3 which is primary coverage.
    4. Personal injury protection under chapter 26.1-41 which is primary coverage.
  2. The requirements for coverage under this section may be satisfied by:
    1. Transportation network company insurance maintained by a participating driver;
    2. Transportation network company insurance maintained by a transportation network company; or
    3. Any combination of subdivisions a and b.
  3. The following apply to insurance requirements under this section:
    1. The primary insurer, in the case of insurance coverage provided under subdivision a of subsection 1, has the sole duty to defend and indemnify the insured.
    2. Coverage under a transportation network company insurance policy may neither be dependent on a driver’s personal automobile insurance policy carrier first denying a claim nor a personal automobile insurance policy carrier being required to first deny a claim.
    3. If transportation network company insurance maintained by a participating driver to fulfill the insurance obligations of this section has excluded coverage according to its policy or ceased to exist, the transportation network company shall provide the coverage required by this section beginning with the first dollar of a claim.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

26.1-40.1-05. Automobile insurers.

Insurers that write personal automobile insurance may allow no-fault insurance coverage to be conditional on transportation network company no-fault insurance coverage under sections 26.1-40.1-03 and 26.1-40.1-04.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

26.1-40.1-06. Liability of transportation network company beyond required limits.

This chapter does not limit the liability of a transportation network company arising out of an automobile accident involving a participating driver in any action for damages against a transportation network company for an amount above the required insurance coverage.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

26.1-40.1-07. Discretionary personal insurance where offered by personal automobile insurer.

A personal automobile insurer may offer an automobile liability insurance policy, or an amendment or endorsement to an existing policy that covers a private passenger vehicle or similar type of vehicle with a passenger capacity of less than eight persons, including the driver, while used in connection with a transportation network company’s online-enabled application or platform.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

26.1-40.1-08. Duty to cooperate.

In a claims coverage investigation involving a participating driver, a transportation network company or its insurer shall cooperate with insurers that are involved in the claims coverage investigation to facilitate the exchange of information, including the provision of dates and times at which an accident occurred involving a participating driver and the precise times that the participating driver logged on and off the transportation network company’s online-enabled application or platform.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

26.1-40.1-09. Financial responsibility.

Transportation network company insurance that meets the requirements of this chapter is deemed to satisfy the financial responsibility requirements of chapter 39-16.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

26.1-40.1-10. Proof of insurance.

A participating driver of a transportation network company shall carry proof of transportation network company insurance coverage at all times during the driver’s use of a vehicle in connection with a transportation network company’s online-enabled application or platform. In the event of an accident, a participating driver shall provide this insurance coverage information to any other party involved in the accident and to a police officer, upon request.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

26.1-40.1-11. Authorized or eligible carrier.

Transportation network company insurance required by this chapter may be placed with an insurer authorized to do business in the state or with a surplus lines insurer eligible under section 26.1-44-03.

History. S.L. 2015, ch. 223, § 1, eff April 22, 2015.

CHAPTER 26.1-41 Auto Accident Reparations

26.1-41-01. Definitions.

As used in this chapter:

  1. “Accidental bodily injury” means bodily injury, sickness, or disease, including death resulting therefrom, arising out of the operation of a motor vehicle, and excluding injury as the result of an individual entering or alighting from a stopped motor vehicle if the injury is not caused by another motor vehicle, and which is accidental as to the person claiming basic or optional excess no-fault benefits.
  2. “Basic no-fault benefits” means benefits for economic loss resulting from accidental bodily injury. The maximum amount of basic no-fault benefits payable for all economic loss incurred and resulting from accidental bodily injury to any one person as the result of any one accident may not exceed thirty thousand dollars, regardless of the number of persons entitled to the benefits or the number of basic no-fault insurers obligated to pay the benefits. Basic no-fault benefits payable may not exceed one hundred fifty dollars per week per person prorated for any lesser period for work loss or survivors’ income loss, or three thousand five hundred dollars for funeral, cremation, and burial expenses.
  3. “Basic no-fault insurer” means an insurer or a qualified self-insurer.
  4. “Bus” means:
    1. Any motor vehicle owned by a public or governmental agency and operated for the transportation of children to or from school or privately owned and operated for compensation for the transportation of children to or from school.
    2. Any motor vehicle owned by a charitable, religious, educational, or governmental corporation or organization designed for carrying more than ten passengers and used for the transportation of persons not for compensation.
    3. Any motor vehicle owned by a political subdivision and operated as part of a public transit system in which all or a portion of the costs of operation are subsidized by the political subdivision or the federal government.
  5. “Dependent survivors” means the surviving spouse of a deceased injured person if residing in the deceased’s household at the time of the deceased’s death, and other persons receiving support from the deceased injured person at the time of the deceased’s death which would qualify them as dependents of the deceased for federal income tax purposes under the federal Internal Revenue Code. The dependency of a surviving spouse terminates upon remarriage.
  6. “Disability” means the inability to engage in substantially all of the injured person’s usual and customary daily activities.
  7. “Economic loss” means medical expenses, rehabilitation expenses, work loss, replacement services loss, survivors’ income loss, survivors’ replacement services loss, and funeral, cremation, and burial expenses.
  8. “Injured person” means an individual who sustains accidental bodily injury.
  9. “Medical expenses” means usual and customary charges incurred for reasonable and necessary medical, surgical, diagnostic, x-ray, dental, prosthetic, ambulance, hospital, or professional nursing services or services for remedial treatment and care. Usual and customary charges do not include:
    1. The portion of the charge for a room in any hospital, clinic, convalescent or nursing home, extended care facility, or any similar facility in excess of the reasonable and customary charge for semiprivate accommodations unless intensive care is medically needed.
    2. Charges for drugs sold without a prescription.
    3. Charges for experimental treatments.
    4. Charges for medically unproven treatments.
  10. “Motor vehicle” means a vehicle having more than three load-bearing wheels, of a kind required to be registered under the laws of this state relating to motor vehicles, designed primarily for operation upon the public streets, roads, and highways, and driven by power other than muscular power, and includes a trailer drawn by or attached to such a vehicle. The term does not include an unconventional vehicle defined in subsection 2 of section 39-29.2-01.
  11. “Noneconomic loss” means pain, suffering, inconvenience, and other nonpecuniary damage recoverable under the tort law of this state.
  12. “Occupying” means to be in or upon a motor vehicle.
  13. “Operation of a motor vehicle” means operation, maintenance, or use of a motor vehicle as a vehicle. Operation of a motor vehicle does not include conduct within the course of a business of repairing, servicing, or otherwise maintaining a motor vehicle unless the injury occurs off the business premises, or conduct in the course of loading and unloading the vehicle unless the injury occurs while occupying the motor vehicle.
  14. “Owner” means the person in whose name the motor vehicle has been registered. If ownership has been transferred, but the registration record has not been changed, “owner” means the person, other than a lienholder, to whom ownership has been transferred. If no registration is in effect at the time of an accident involving the motor vehicle, “owner” means the person, other than a lienholder, who holds the legal title to the motor vehicle. If the motor vehicle is the subject of a security agreement with the debtor having the right to possession, a lease with an option to purchase with the lessee having the right to possession, or a lease with a term of six months or more with the lessee having the right to possession, “owner” means the debtor or lessee.
  15. “Pedestrian” means any individual not occupying any vehicle designed to be driven or drawn by power other than muscular power.
  16. “Rehabilitation expense” means the cost of a procedure or treatment for rehabilitation or a course of rehabilitative occupational training if the procedure, treatment, or training is reasonable and appropriate for the particular case, its cost is reasonable in relation to its probable rehabilitative effects, and it is likely to contribute substantially to medical or occupational rehabilitation.
  17. “Relative” means any of the following residing in the same household as the owner: an individual related to the owner by blood, marriage, or adoption, or a foster child. An individual resides in the same household if that individual usually makes a home in the same family unit, even though temporarily living elsewhere.
  18. “Replacement services loss” means expenses not exceeding fifteen dollars per day in obtaining ordinary and necessary services from others not members of the injured person’s household in lieu of those that the injured person would have performed had the injured person not been injured, not for income but for the benefit of the injured person or the injured person’s household. Replacement services loss does not include any loss after the death of an injured person.
  19. “Secured motor vehicle” means a motor vehicle with respect to which the security required by this chapter was in effect at the time of its involvement in the accident resulting in accidental bodily injury.
  20. “Secured person” means the owner, operator, or occupant of a secured motor vehicle, and any other person legally responsible for the acts or omissions of the owner, operator, or occupant.
  21. “Serious injury” means an accidental bodily injury which results in death, dismemberment, serious and permanent disfigurement or disability beyond sixty days, or medical expenses in excess of two thousand five hundred dollars. An injured person who is furnished the services in subsection 9 without charge or at less than the usual and customary charge for the service in this state is deemed to have sustained a serious injury if a court determines that the usual and customary value of the services exceeds two thousand five hundred dollars.
  22. “Survivors’ income loss” means loss sustained after an injured person’s death by dependent survivors during their dependency and consisting of the loss of the contributions they would have received for their support from the decedent out of income from work the decedent would normally have performed had the decedent not died.
  23. “Survivors’ replacement services loss” means expenses, not to exceed fifteen dollars per day after the injured person’s death, by dependent survivors in obtaining ordinary and necessary services from others not members of the decedent’s household in lieu of the services the decedent would have performed not for income but for the benefit of the decedent’s household.
  24. “Work loss” means eighty-five percent of loss of income from work an injured person who would normally be employed in gainful activity during the period of disability would have performed had the person not been injured, reduced by any income from substitute work actually performed by the injured person or by income the injured person would have earned in available appropriate substitute work that the injured person was capable of performing but unreasonably failed to undertake. Work loss does not include any loss after death of an injured person.

Source:

S.L. 1985, ch. 316, § 18; 1985, ch. 332, § 3; 1991, ch. 322, § 1; 1991, ch. 323, § 1; 2005, ch. 274, § 2; 2015, ch. 276, § 2, eff April 20, 2015.

Derivation:

N.D.C.C. § 26-41-03.

Notes to Decisions

Disability.
—Not Shown.

Where plaintiff did not miss any work because of an auto accident, nor did he expect to miss any work in the future, and when asked if there were things that he could not do that were related to the accident, he responded “No,” and where plaintiff presented no evidence that any of his daily and customary activities were substantially affected by the accident, while plaintiff may have been injured, the evidence raised no issue of material fact that his injuries constituted a “disability.” Ellingson v. Knudson, 498 N.W.2d 814, 1993 N.D. LEXIS 74 (N.D. 1993).

Entitlement to No-Fault Benefits.

One becomes entitled to no-fault benefits under the condition of occupancy of the vehicle, not on foreseeability of accident. Ertelt v. Emcasco Ins. Co., 486 N.W.2d 233, 1992 N.D. LEXIS 143 (N.D. 1992).

Occupancy is not the only no-fault requirement a potential beneficiary must satisfy; the injury must arise out of the “operation of a motor vehicle.” State Farm Mut. Auto. Ins. Co. v. Estate of Gabel, 539 N.W.2d 290, 1995 N.D. LEXIS 190 (N.D. 1995).

Decedent’s death, resulting from an aneurysm neither caused by, nor aggravated by automobile accident, was not within the statutory defined no-fault coverage. State Farm Mut. Auto. Ins. Co. v. Estate of Gabel, 539 N.W.2d 290, 1995 N.D. LEXIS 190 (N.D. 1995).

Independent Medical Exam Not a No-Fault Benefit.

Summary judgment was properly granted for the insurer in the insured’s action to recover no-fault insurance benefits because, even though the no-fault insurance policy and N.D.C.C. § 26.1-41-11 required the insured to undergo an independent medical exam before filing suit, the exam was not a no-fault benefit for the insured within meaning of N.D.C.C. § 26.1-41-01(9) and did not toll the four-year statute of limitations, N.D.C.C. § 26.1-41-19(1). The term “necessary medical service” as used in N.D.C.C. § 26.1-41-01(9) means necessary medical services for the benefit and treatment of the insured, and the trigger for the statute of limitations in N.D.C.C. § 26.1-41-19(1) is the last payment for necessary medical services for treatment. Johnson v. Nodak Mut. Ins. Co., 2005 ND 112, 699 N.W.2d 45, 2005 N.D. LEXIS 128 (N.D. 2005).

Medical Expenses.

Medical expenses do not have priority over any other form of economic loss. St. Alexius Hosp. v. Eckert, 284 N.W.2d 441, 1979 N.D. LEXIS 309 (N.D. 1979).

The “reasonable degree of medical certainty” standard does not apply to medical expenses that have already been incurred. Erdmann v. Thomas, 446 N.W.2d 245, 1989 N.D. LEXIS 177 (N.D. 1989).

Expert medical testimony is not required to lay the foundation for the admission of medical bills or expenses into evidence. Erdmann v. Thomas, 446 N.W.2d 245, 1989 N.D. LEXIS 177 (N.D. 1989).

The legislature, by its use of the term “necessary” in subsection 9, defining “medical expenses,” did not intend that expert medical testimony be required to establish that medical expenses were necessitated by an accident. Erdmann v. Thomas, 446 N.W.2d 245, 1989 N.D. LEXIS 177 (N.D. 1989).

Damages for future medical expenses did not qualify for payable benefits under the No-Fault Act, and district court erred by reducing plaintiff’s tort recovery for future medical expenses. Johnson v. Methorst, 110 F.3d 1313, 1997 U.S. App. LEXIS 6279 (8th Cir. N.D. 1997).

Where an insured vehicle was involved in a collision and a passenger in the vehicle declined medical treatment and denied injury, where the passenger presented to the hospital one month later complaining of hip and spinal injuries, and where the passenger filed suit against the insurance company after it denied her claim for no-fault medical benefits under N.D.C.C. § 26.1-41-01, the trial court properly granted summary judgment in favor of the insurance company because the passenger failed to present evidence to establish a causal connection between the accident and the injuries of which she complained one month later. Although the passenger claimed that the medical records raised a genuine issue of material fact as to the issue of causation, the medical records merely contained the passenger’s statement of the cause of her injuries; this was insufficient because the records did not contain the medical opinion of a physician suggesting a causal connection. Halvorson v. Sentry Ins., 2008 ND 205, 757 N.W.2d 398, 2008 N.D. LEXIS 229 (N.D. 2008).

District court abused its discretion in certifying the North Dakota class because the certified class did not meet the predominance requirements; answering the question of whether the insurer’s claim processing methodology breached its contract under North Dakota law necessitated individual fact inquiries for each member of the class (if a health-care provider accepted the insurer’s payment at the 80th percentile as payment in full, or if the insurer settled the dispute without involving the plaintiff, the plaintiff was not injured). Halvorson v. Auto-Owners Ins. Co., 718 F.3d 773, 2013 U.S. App. LEXIS 13580 (8th Cir. N.D. 2013).

Secured Motor Vehicle.

A secured motor vehicle is a vehicle which, at the time of the accident, is insured as required by this chapter. Van Klootwyk v. Arman, 477 N.W.2d 590, 1991 N.D. LEXIS 205 (N.D. 1991).

District court erred in denying the utilities insurance company’s motion to dismiss and in granting the insurer summary judgment to require arbitration under former N.D.C.C. § 26.1-41-17 (repealed 2005) as the company’s excess liability policy was not providing the security required by N.D.C.C. ch. 26.1-41 and the insurer could not seek an equitable allocation from the company. Based upon the definitions of “secured person” and “secured motor vehicle” in N.D.C.C. § 26.1-41-01, the “motor vehicle liability insurer” contemplated under former N.D.C.C. § 26.1-41-17 must have been providing the security for the motor vehicle as required under N.D.C.C. ch. 26.1-41, which the company, as an excess insurer, did not provide. Farmers Union Mut. Ins. Co. v. Associated Elec. & Gas Ins. Servs., 2007 ND 135, 737 N.W.2d 253, 2007 N.D. LEXIS 131 (N.D. 2007).

Secured Person.

In accident involving two vehicles that were both secured vehicles, the drivers of both vehicles and the passenger in one of the vehicles were all secured persons. Moser v. Wilhelm, 300 N.W.2d 840, 1980 N.D. LEXIS 309 (N.D. 1980).

A secured person is the owner, operator or occupant of a secured motor vehicle. Van Klootwyk v. Arman, 477 N.W.2d 590, 1991 N.D. LEXIS 205 (N.D. 1991).

Serious Injury.

Defendant’s failure to object to admission of evidence of medical expenses did not constitute an implied stipulation to the truth of the facts the evidence attempted to demonstrate, and stipulation to the foundation of medical records was not a stipulation that plaintiff suffered a serious injury as defined in this section. Schutt v. Schumacher, 548 N.W.2d 381, 1996 N.D. LEXIS 143 (N.D. 1996).

A cut on the upper lip resulting in a permanent scar was not a “serious and permanent disfigurement” sufficient to qualify as a “serious injury.” Tuhy v. Schlabsz, 1998 ND 31, 574 N.W.2d 823, 1998 N.D. LEXIS 37 (N.D. 1998).

The plaintiff’s affidavit which established medical bills of $ 3,508 adequately evidenced past medical expenses in excess of $ 2,500, meeting the “serious injury” threshold to defeat a summary judgment motion. Tuhy v. Schlabsz, 1998 ND 31, 574 N.W.2d 823, 1998 N.D. LEXIS 37 (N.D. 1998).

Plaintiff failed to meet threshold of $ 2,500 set forth in (21) of this provision when court excluded a pharmacy printout and summary of medications finding many of the medications were not related to the accident and thus could have been confusing and misleading to the jury. Schaefer v. Souris River Telecomms. Coop., 2000 ND 187, 618 N.W.2d 175, 2000 N.D. LEXIS 207 (N.D. 2000).

“Stacking” of Basic No-Fault Benefits.

The “stacking” of basic no-fault benefits is prohibited by subsection 2 of this section. St. Paul Mercury Ins. Co. v. Andrews, 321 N.W.2d 483, 1982 N.D. LEXIS 291 (N.D. 1982).

DECISIONS UNDER PRIOR LAW

Pedestrian Defined.

The term “pedestrian” generally connotes a person who is on foot and on or about a public highway or street where motor vehicle laws apply (this section replaces N.D.C.C. § 26-41-03(13), repealed in 1985). Olmstead v. Miller, 383 N.W.2d 817, 1986 N.D. LEXIS 287 (N.D. 1986).

The use of the term “pedestrian” in the No-Fault Act evinces a legislative intention that some practical limitation be placed upon its meaning. If the legislature had intended the No-Fault Act to be applicable to anyone injured by a motor vehicle regardless of the circumstances, it could have done so through the use of a more generic term, rather than using “pedestrian”, a word with such a limited connotation (this section replaces N.D.C.C. § 26-41-03(13), repealed in 1985). Olmstead v. Miller, 383 N.W.2d 817, 1986 N.D. LEXIS 287 (N.D. 1986).

Although the term “pedestrian” appears to be broadly defined in the No-Fault Act, the term does not encompass all persons, such as occupants of a parked trailer house, injured by a motor vehicle regardless of the circumstances under which the injuries occurred (this section replaces N.D.C.C. § 26-41-03(13), repealed in 1985). Olmstead v. Miller, 383 N.W.2d 817, 1986 N.D. LEXIS 287 (N.D. 1986).

Persons injured in an automobile accident while they are secure in their homes do not fall within the definition of “pedestrian” (this section replaces N.D.C.C. § 26-41-03(13), repealed in 1985). Olmstead v. Miller, 383 N.W.2d 817, 1986 N.D. LEXIS 287 (N.D. 1986).

Uniformity in Construction.

Because the North Dakota Auto Accident Reparations Act is undeniably a part of a uniform statute, supreme court is obligated to consider the provisions of N.D.C.C. § 1-02-13 requiring uniformity in construing and interpreting this Act. St. Paul Mercury Ins. Co. v. Andrews, 321 N.W.2d 483, 1982 N.D. LEXIS 291 (N.D. 1982).

Collateral References.

Statutory or policy exclusion, from automobile no-fault coverage, of property damage covered by homeowner’s policy of household member who is owner, registrant, or operator of vehicle involved, 41 A.L.R.4th 973.

Modern status of choice of law in application of automobile guest statutes, 63 A.L.R.4th 167.

What constitutes “motor vehicle” for purposes of no-fault insurance, 73 A.L.R.4th 1053.

No-fault insurance coverage for injury or death of insured occurring during carjacking or attempted carjacking, 42 A.L.R.5th 727.

Law Reviews.

“North Dakota Auto Accident Reparations Act” — North Dakota’s No-Fault Insurance Law, 52 N.D. L. Rev. 147 (1975).

Summary of North Dakota Supreme Court decisions on Insurance, 72 N.D. L. Rev. 810 (1996).

Note: Collision Of Negligence Theory: Does A “Blackout” Constitute An Unavoidable, Sudden Emergency In North Dakota?, 87 N. Dak. L. Rev. 233 (2011).

26.1-41-02. Security requirements — Authority of director of the department of transportation.

  1. The owner of a motor vehicle required to be registered in this state, or the owner of a motor vehicle operated in this state by the owner or with the owner’s permission, shall continuously provide with respect to the motor vehicle during the period in which operation is contemplated in this state security for payment of basic no-fault benefits and the liabilities covered under the motor vehicle liability insurance.
  2. The security may be provided by an insurance policy complying with this chapter issued by an insurer authorized to transact business in this state, or, by self-insurance as approved by the commissioner.
  3. If the motor vehicle is registered in another state, the security may be provided by an insurance policy issued by an insurer authorized to transact business in either this state or the state in which the motor vehicle is registered, or, by self-insurance as approved by the insurance department of the state in which the motor vehicle is registered.
  4. The owner of any motor vehicle who operates it or permits it to be operated in this state when the owner knows or should know that the owner has failed to comply with the requirement that the owner provide security under this chapter shall have the motor vehicle registration revoked or suspended in accordance with procedures established by the director of the department of transportation under the motor vehicle law of this state until the owner provides the security required by this chapter.
  5. An owner of a motor vehicle with respect to which security is required who fails to have the security in effect at the time of an accident is absolutely liable at law for payment of basic no-fault benefits and has all the rights and obligations of a basic no-fault insurer under this chapter. This remedy is in addition to any other remedy that an injured person may have against the owner.
  6. An insurance policy which purports to provide coverage for basic no-fault benefits or is sold with the representation that it fulfills the requirements of security as required by this chapter is deemed to include all coverage required by this chapter.
  7. The director of the department of transportation may supervise the enforcement of the compulsory security requirements of this chapter and may adopt the rules necessary in respect to the maintenance of the requirements.

Source:

S.L. 1985, ch. 316, § 18.

Derivation:

N.D.C.C. § 26-41-04.

Notes to Decisions

No-Fault Coverage.

North Dakota’s no-fault statutes impose no-fault requirements on the owner of a motor vehicle. State Farm Mut. Auto. Ins. Co. v. LaRoque, 486 N.W.2d 235, 1992 N.D. LEXIS 147 (N.D. 1992).

No-fault is a territorial form of statutorily-mandated coverage, and Minnesota has a deeper interest in application of no-fault principles for an accident occurring in that state involving a North Dakota driver and a Minnesota driver. American Family Mut. Ins. Co. v. Farmers Ins. Exch., 504 N.W.2d 307, 1993 N.D. LEXIS 152 (N.D. 1993).

A couple that owned a vehicle which their college-age son was driving during an accident was, under subsection (5) of this section, absolutely liable for basic no-fault benefits. Malchose v. Kalfell, 2003 ND 75, 664 N.W.2d 508, 2003 N.D. LEXIS 85 (N.D. 2003).

District court erred in denying the utilities insurance company’s motion to dismiss and in granting the insurer summary judgment to require arbitration under former N.D.C.C. § 26.1-41-17 (repealed 2005) as the company’s excess liability policy was not providing the security required by N.D.C.C. ch. 26.1-41 and the insurer could not seek an equitable allocation from the company. Based upon the definitions of “secured person” and “secured motor vehicle” in N.D.C.C. § 26.1-41-01, the “motor vehicle liability insurer” contemplated under former N.D.C.C. § 26.1-41-17 must have been providing the security for the motor vehicle as required under N.D.C.C. ch. 26.1-41 and as defined by N.D.C.C.§ 26.1-41-02, which the company, as an excess insurer, did not provide. Farmers Union Mut. Ins. Co. v. Associated Elec. & Gas Ins. Servs., 2007 ND 135, 737 N.W.2d 253, 2007 N.D. LEXIS 131 (N.D. 2007).

26.1-41-03. Suspension of coverage — Request by owner.

Upon notice from the owner of a secured motor vehicle stating that the secured motor vehicle will not be operated on public roads or highways during a period of not less than thirty consecutive days, the basic no-fault insurer of the vehicle shall suspend on a pro rata basis or shall offer a similar credit, to the extent requested by the owner, insurance coverage afforded under the policy providing the security for payment of basic no-fault benefits and the liabilities covered under the motor vehicle liability insurance for the secured motor vehicle until notified by the owner that the coverage should be reinstated. The owner may not be required to surrender the number plates during the policy suspension period. During the period of suspension, subsections 1, 2, 4, 5, 6, and 7 of section 26.1-41-02 do not apply with respect to the secured motor vehicle, but if the secured motor vehicle is operated by or with the permission of the owner during the period of suspension, subsections 1, 2, 4, 5, and 7 of section 26.1-41-02 become applicable. This section does not apply to an owner of a secured motor vehicle for which proof of financial responsibility is required under the financial responsibility laws of this state.

Source:

S.L. 1985, ch. 316, § 18; 2009, ch. 260, § 1.

Derivation:

N.D.C.C. § 26-41-04.1.

26.1-41-04. Optional excess no-fault benefits.

Each basic no-fault insurer of the owner of a secured motor vehicle shall also make available optional excess no-fault benefits for excess economic loss commencing upon the exhaustion of basic no-fault benefits, up to a total of eighty thousand dollars in no-fault benefits for accidental bodily injury to any one person in any one accident, including an accident when the person who purchased the optional excess no-fault benefits or that person’s relative is injured in a motor vehicle not owned by the insured or as a pedestrian. A basic no-fault insurer may also offer benefits and limits other than those prescribed in this section, and a basic no-fault insurer may incorporate in optional excess no-fault coverage the terms, conditions, and exclusions as may be consistent with the premiums charged. The amounts payable under optional excess no-fault benefits may be duplicative of benefits received from any collateral sources or may be written in excess of such collateral source benefits, or may provide for reasonable waiting period, deductibles, or coinsurance provisions. The optional excess no-fault benefits of a basic no-fault insurer may provide for subrogation to the injured person’s right of recovery against any responsible third party.

Source:

S.L. 1985, ch. 316, § 18; 1985, ch. 332, § 4; 1989, ch. 377, § 1.

Derivation:

N.D.C.C. § 26-41-06.

DECISIONS UNDER PRIOR LAW

Subrogation.

In accordance with the former N.D.C.C. § 26-41-06, the no-fault insurer was contractually subrogated to its insured’s right of recovery against any responsible third party. Imperial Casualty & Indem. Co. v. General Casualty Co., 458 N.W.2d 335, 1990 N.D. LEXIS 147 (N.D. 1990).

26.1-41-05. Self-insurance — Liability policies — Authority of commissioner.

  1. Self-insurance used as security required by this chapter may be provided by filing in satisfactory form all of the following:
    1. A continuing undertaking by the owner or other appropriate person to pay basic no-fault benefits and the liabilities covered by motor vehicle liability insurance and to perform all other obligations imposed by this chapter.
    2. Evidence that appropriate provision exists for the prompt and efficient administration of all claims, benefits, and obligations provided by this chapter.
    3. Evidence that reliable financial arrangements, deposits, or commitments exist providing assurance for payment of basic no-fault benefits and the liabilities covered by motor vehicle liability insurance and all other obligations imposed by this chapter substantially equivalent to those afforded by an insurance policy that would comply with this chapter.
  2. Every insurer authorized to transact the business of motor vehicle liability insurance in this state shall file with the commissioner as a condition of its continued transaction of business in this state a form declaring that its motor vehicle liability policies wherever issued are deemed to provide the security required by this chapter when the motor vehicle is operated in this state. Any nonadmitted insurer may file this form.
  3. The commissioner may adopt necessary rules not inconsistent with this chapter. The commissioner may provide schedules of reasonable maximum benefits payments for specified medical services and rehabilitation expenses which basic no-fault insurers may incorporate into their policies of basic or optional excess coverages afforded pursuant to this chapter.

Source:

S.L. 1985, ch. 316, § 18.

Derivation:

N.D.C.C. § 26-41-05.

26.1-41-06. Persons entitled to basic no-fault benefits.

Each basic no-fault insurer of a secured motor vehicle shall pay basic no-fault benefits without regard to fault for economic loss resulting from:

  1. Accidental bodily injury sustained in the United States or its possessions or in Canada by the owner of the motor vehicle or any relative of the owner:
    1. While occupying any motor vehicle; or
    2. While a pedestrian as the result of being struck by a motor vehicle or motorcycle.
  2. Accidental bodily injury sustained by any other person while occupying the secured motor vehicle if the accident occurs in the United States or its possessions or in Canada.
  3. Accidental bodily injury sustained by any pedestrian in this state as a result of being struck by the secured motor vehicle.

Source:

S.L. 1985, ch. 316, § 18.

Derivation:

N.D.C.C. § 26-41-07.

Notes to Decisions

Accidental Bodily Injury.

This section requires that a basic no-fault insurer of a secured motor vehicle pay basic no-fault benefits for economic loss from accidental bodily injury. Van Klootwyk v. Arman, 477 N.W.2d 590, 1991 N.D. LEXIS 205 (N.D. 1991).

Bodily injury arising out of a motor vehicle accident includes negligent medical treatment of personal injuries sustained in a motor vehicle accident. Haff v. Hettich, 1999 ND 94, 593 N.W.2d 383, 1999 N.D. LEXIS 116 (N.D. 1999).

Secured Person Exemption.

Under N.D.C.C. § 26.1-41-08(2), two requirements must be satisfied before a secured person can claim the secured-person exemption against an injured person who is not the owner of the unsecured vehicle: the injured person must be a person who may qualify for no-fault benefits under this section and the injured person cannot be excluded from no-fault coverage under N.D.C.C. § 26.1-41-07. Van Klootwyk v. Arman, 477 N.W.2d 590, 1991 N.D. LEXIS 205 (N.D. 1991).

The secured-person exemption under N.D.C.C. § 26.1-41-08(2) only applies if the injured non-owner actually qualifies at the time of the accident for benefits under this section. Van Klootwyk v. Arman, 477 N.W.2d 590, 1991 N.D. LEXIS 205 (N.D. 1991).

DECISIONS UNDER PRIOR LAW

Basic Obligation of Insurer.

A basic no-fault insurer of a secured motor vehicle must pay no-fault benefits, without regard to fault, for economic loss resulting from accidental bodily injury to persons occupying the insured motor vehicle. Imperial Casualty & Indem. Co. v. General Casualty Co., 458 N.W.2d 335, 1990 N.D. LEXIS 147 (N.D. 1990).

Causal Connection Test.

“Causal connection test” used in interpreting scope of coverage of insurance policies prior to adoption of no-fault statutes was not applied in interpreting the scope of coverage under the no-fault statutes. Weber v. State Farm Mut. Auto. Ins. Co., 284 N.W.2d 299, 1979 N.D. LEXIS 307 (N.D. 1979).

Construction.

This section does not enumerate those persons entitled to basic no-fault benefits but rather seems to prescribe what types of claims are payable under the no-fault coverage; therefore, there is no conflict between this section and the section enumerating those persons entitled to no-fault benefits. United States v. Dairyland Ins. Co., 674 F.2d 750, 1982 U.S. App. LEXIS 20347 (8th Cir. N.D. 1982).

Hunting Accidents.

Owner of a vehicle was killed while occupying his motor vehicle and was covered by no-fault insurance benefits where he was killed while seated in the driver’s seat of his vehicle by the gunshot wound of a hunting companion who had jumped from the vehicle to shoot at a deer and whose gun went off accidentally while being loaded during the jump. Weber v. State Farm Mut. Auto. Ins. Co., 284 N.W.2d 299, 1979 N.D. LEXIS 307 (N.D. 1979).

United States Government.

Where United States government, pursuant to 10 USCS § 1074, paid the medical expenses of U.S. servicemen injured in an auto accident, and at the time of the accident an insurer had issued a basic no-fault policy covering the auto involved which policy would have made the insurer primarily liable for the medical expenses if the government had not paid them, the government was not entitled to reimbursement from the insurer under the no-fault law because the government was not a designated payee under such law and was not entitled to recovery as a third-party beneficiary under the no-fault policy because there was no intent by either the policy or the no-fault statutes to benefit the government. United States v. Dairyland Ins. Co., 674 F.2d 750, 1982 U.S. App. LEXIS 20347 (8th Cir. N.D. 1982).

Victim Covered Under Two Different Policies.

Passenger injured in an auto accident was entitled to basic no-fault benefits, pursuant to subdivision 1a, under a no-fault policy issued to her father and, pursuant to subsection 2, under a policy issued to the owner-driver of the wrecked auto; insurer of the owner-driver was the basic no-fault insurer and was primarily liable for the benefits and insurer of the father was entitled to recover from the insurer of the owner-driver benefits it had paid under its policy with injured passenger’s father. National Farmers Union Property & Casualty Co. v. Dairyland Ins. Co., 485 F. Supp. 1009, 1980 U.S. Dist. LEXIS 10443 (D.N.D. 1980).

Collateral References.

Necessity or permissibility of naming no-fault insurer as defendant where insured automobile owner or operator is not liable for economic losses under no-fault insurance law, 40 A.L.R.4th 858.

Motorist having “no-fault” insurance affording no liability coverage in circumstances as “uninsured” or “underinsured” motorist under damaged party’s insurance, 40 A.L.R.4th 1202.

Injury or death caused by assault as within coverage of no-fault motor vehicle insurance, 44 A.L.R.4th 1010.

26.1-41-07. Persons not entitled to benefits.

Basic or optional excess no-fault benefits are not payable to or on behalf of any person who is injured while:

  1. Occupying any motor vehicle without the expressed or implied consent of the owner or while not in lawful possession of the motor vehicle.
  2. Occupying a motor vehicle owned by such person which is not insured for the benefits required by this chapter unless uninsured solely because the insurance company of the owner has not filed a form pursuant to subsection 2 of section 26.1-41-05 to provide the basic no-fault benefits required by this chapter.
  3. During a racing or speed contest, or in practicing or preparing for a racing or speed contest.
  4. Intentionally causing or attempting to cause injury to oneself or another person.

Source:

S.L. 1985, ch. 316, § 18; 1997, ch. 51, § 18.

Derivation:

N.D.C.C. § 26-41-08.

Notes to Decisions

Eligibility.

Under N.D.C.C. § 26.1-41-08(2), two requirements must be satisfied before a secured person can claim the secured-person exemption against an injured person who is not the owner of the unsecured vehicle: the injured person must be a person who may qualify for no-fault benefits under N.D.C.C. § 26.1-41-06 and the injured person cannot be excluded from no-fault coverage under this section. Van Klootwyk v. Arman, 477 N.W.2d 590, 1991 N.D. LEXIS 205 (N.D. 1991).

DECISIONS UNDER PRIOR LAW

Hunting Accidents.

This section does not exclude from coverage a person injured in a hunting accident while he is occupying his own car. Weber v. State Farm Mut. Auto. Ins. Co., 284 N.W.2d 299, 1979 N.D. LEXIS 307 (N.D. 1979).

Indians on Reservation.

This section does not exclude from benefits enrolled Indians who are injured in automobile accidents occurring on an Indian reservation. State ex rel. Moug v. North Dakota Auto. Assigned Claims Plan, 341 N.W.2d 623, 1983 N.D. LEXIS 440 (N.D. 1983).

Collateral References.

No-fault insurance; general release of tortfeasor by accident victim as affecting automobile insurer’s obligation for personal injury protection (PIP) benefits, 39 A.L.R.4th 378.

26.1-41-08. Secured person exemption.

  1. In any action against a secured person to recover damages because of accidental bodily injury arising out of the ownership or operation of a secured motor vehicle in this state, the secured person is exempt from liability to pay damages for:
    1. Noneconomic loss unless the injury is a serious injury.
    2. Economic loss to the extent of all basic no-fault benefits paid or to become payable for such injury under this chapter after subtracting the same elements of loss recoverable under any workforce safety and insurance law.
  2. The exemption under subsection 1 does not apply unless the person who has sustained accidental bodily injury is a person who may qualify for basic no-fault benefits pursuant to section 26.1-41-06 and who is not excluded under section 26.1-41-07.

Source:

S.L. 1985, ch. 316, § 18; 1989, ch. 69, § 33; 2003, ch. 561, § 3.

Derivation:

N.D.C.C. § 26-41-12.

Notes to Decisions

Economic Loss.

The term “become payable” in subdivision (1)(b) requires certainty, not mere probability. Johnson v. Methorst, 110 F.3d 1313, 1997 U.S. App. LEXIS 6279 (8th Cir. N.D. 1997).

Economic Loss in Excess of No-Fault Benefits.

The issue of whether the plaintiff’s economic loss exceeds the no-fault benefits paid or payable to plaintiff is not one for the jury; depending upon the particular circumstances, the trial court may decide the issue pretrial, but in any event should decide it and exclude the amount of paid or payable basic no-fault benefits before entering judgment, in order to prevent double recovery. Reisenauer v. Schaefer, 515 N.W.2d 152, 1994 N.D. LEXIS 94 (N.D. 1994).

Eligibility.

The secured-person exemption under subsection (2) of this section only applies if the injured non-owner actually qualifies at the time of the accident for benefits under N.D.C.C. § 26.1-41-06. Van Klootwyk v. Arman, 477 N.W.2d 590, 1991 N.D. LEXIS 205 (N.D. 1991).

Under subsection (2) of this section, two requirements must be satisfied before a secured person can claim the secured-person exemption against an injured person who is not the owner of the unsecured vehicle: the injured person must be a person who may qualify for no-fault benefits under N.D.C.C. § 26.1-41-06 and the injured person cannot be excluded from no-fault coverage under N.D.C.C. § 26.1-41-07. Van Klootwyk v. Arman, 477 N.W.2d 590, 1991 N.D. LEXIS 205 (N.D. 1991).

In the context of no-fault benefits, nothing in this chapter suggests an intent on the part of the legislature to extend the application of subdivision 1(a) of this section to exempt secured persons from liability for non-economic loss except in cases of serious injury, to cases involving uninsured vehicles. Malchose v. Kalfell, 2003 ND 75, 664 N.W.2d 508, 2003 N.D. LEXIS 85 (N.D. 2003).

Equitable Allocation.

Equitable allocation, unlike subrogation, does not require that the injured party have a valid, enforceable claim against the tortfeasor. Burgener v. Bushaw, 545 N.W.2d 163, 1996 N.D. LEXIS 70 (N.D. 1996).

Exemption from Liability.

Under subsection (1)(b) of this section, a secured person is exempt from liability for economic damages to the extent the victim has been or will be paid basic no-fault benefits for those economic damages. Reisenauer v. Schaefer, 515 N.W.2d 152, 1994 N.D. LEXIS 94 (N.D. 1994).

Serious Injury.
—In General.

Under subsection (1)(a) of this section, a secured person is exempt from liability for noneconomic loss unless the victim has sustained a serious injury; the supreme court has construed this subsection as a threshold requirement for seeking noneconomic damages and has placed the burden on the plaintiff to allege and establish that the threshold requirement has been met. Reisenauer v. Schaefer, 515 N.W.2d 152, 1994 N.D. LEXIS 94 (N.D. 1994).

—Not Shown.

Jury could have concluded some of plaintiff’s medical expenses were for treatment of aliments preexisting accident, and neither related to nor aggravated by it, and that plaintiff was not disabled, where he continued to operate his own carpentry business, and engage in other activities, but with some limitations. Schutt v. Schumacher, 548 N.W.2d 381, 1996 N.D. LEXIS 143 (N.D. 1996).

Because the jury could have logically and consistently found on the evidence presented that plaintiff incurred $ 3,000 of past economic loss but did not meet the medical expense threshold found in N.D.C.C. § 26.1-41-01(21), the jury verdict in this case was logical and probable and was not irreconcilable or clearly contrary to the evidence. Anderson v. Jacobson, 2001 ND 40, 622 N.W.2d 730, 2001 N.D. LEXIS 40 (N.D. 2001).

—Proof.

Defendant’s failure to object to admission of evidence of medical expenses did not constitute an implied stipulation to the truth of the facts the evidence attempted to demonstrate, and stipulation to the foundation of medical records was not a stipulation that plaintiff suffered a serious injury as defined in N.D.C.C. § 26.1-41-01. Schutt v. Schumacher, 548 N.W.2d 381, 1996 N.D. LEXIS 143 (N.D. 1996).

Threshold Requirement.

A plaintiff is not entitled to recover in tort for economic loss unless he alleges and establishes that his economic loss exceeds the basic no-fault benefits paid or payable to him. Reisenauer v. Schaefer, 515 N.W.2d 152, 1994 N.D. LEXIS 94 (N.D. 1994).

Unspecified Future Treatment.

Medical affidavit which suggested that plaintiff might cross the medical expense threshold of the North Dakota Auto Accident Reparations Act failed to raise a genuine dispute of fact as to whether plaintiff would cross the threshold with reasonable medical certainty; claim of unspecified treatment over the next half century was too speculative to defeat summary judgment. Ellingson v. Knudson, 498 N.W.2d 814, 1993 N.D. LEXIS 74 (N.D. 1993).

Damages for future medical expenses did not qualify for payable benefits under the No-Fault Act, and district court erred by reducing plaintiff’s tort recovery for future medical expenses. Johnson v. Methorst, 110 F.3d 1313, 1997 U.S. App. LEXIS 6279 (8th Cir. N.D. 1997).

DECISIONS UNDER PRIOR LAW

Economic Loss.

Where passenger and drivers of both vehicles involved in the accident were secured persons, all were exempt from liability for economic losses to the extent of all basic no-fault benefits paid or payable; passenger was properly prevented from introducing evidence of economic loss in action against one of the drivers where she had not exhausted her basic no-fault benefits. Moser v. Wilhelm, 300 N.W.2d 840, 1980 N.D. LEXIS 309 (N.D. 1980).

Statute of Limitations.

Six-year statute of limitations provided in N.D.C.C. § 28-01-16 is applicable to a negligence action against a “secured person” for personal injury resulting from an auto accident, and such action filed within six-year statute of limitations is not barred by $ 1,000 medical expense threshold necessary to establish a “serious injury” if plaintiff can, in good faith, allege and establish at trial that his total medical expenses will exceed $ 1,000, including those medical expenses incurred within six-year statute of limitations period and those which, with reasonable medical certainty, will be incurred in future beyond limitations period. Calavera v. Vix, 356 N.W.2d 901, 1984 N.D. LEXIS 412 (N.D. 1984).

Collateral References.

Necessity or permissibility of naming no-fault insurer as defendant where insured automobile owner or operator is not liable for economic losses under no-fault insurance law, 40 A.L.R.4th 858.

Motorist having “no-fault” insurance affording no liability coverage in circumstances as “uninsured” or “underinsured” motorist under damaged party’s insurance, 40 A.L.R.4th 1202.

26.1-41-09. Payment of basic and optional excess no-fault benefits.

  1. Basic and optional excess no-fault benefits are payable monthly for economic loss sustained by an injured person or dependent survivors or incurred on the injured person’s behalf by the injured person’s spouse, relatives, or guardian. A basic no-fault insurer may pay basic or optional excess no-fault benefits when due to the above persons who it believes have sustained or incurred the economic loss or at its option to the person rendering, for a charge, the services for which the benefits are payable. If the injured person dies, a basic no-fault insurer may pay the benefits due directly to those entitled to the benefits without the appointment of a personal representative and unless a court directs otherwise, may pay all benefits for survivors’ income loss or replacement services loss to the surviving spouse for the use and benefit of all dependent survivors. A basic no-fault insurer’s payments made in good faith in accordance with this chapter discharges its liability to the extent of the payments unless the basic no-fault insurer has been notified in writing of the claim of some other person prior to the making of any of the payments.
  2. Basic and optional excess no-fault benefits are overdue if not paid within thirty days after the basic no-fault insurer receives reasonable proof of the fact and the amount of loss sustained, except that the basic no-fault insurer may accumulate claims for periods not exceeding one month, and the benefits are not overdue if paid within twenty days after the period of accumulation. If reasonable proof is not supplied as to the entire claim, the amount supported by reasonable proof is overdue if not paid within thirty days after the proof is received by the basic no-fault insurer. Any part or all of the remainder of the claim that is later supported by reasonable proof is overdue if not paid within thirty days after proof is received by the basic no-fault insurer. Payment is deemed made on the date of mailing. All overdue payments must bear interest at the judgment rate allowed in section 28-20-34.
  3. Neither the injured person nor a basic no-fault insurer is required to pay for services billed more than one hundred eighty days after the date of treatment.

Source:

S.L. 1985, ch. 316, § 18; 2005, ch. 274, § 3.

Derivation:

N.D.C.C. § 26-41-09.

Notes to Decisions

Construction.

There is no conflict between the section which prescribes what types of claims are payable under no-fault coverage and the provision of this section enumerating those persons entitled to no-fault benefits. United States v. Dairyland Ins. Co., 674 F.2d 750, 1982 U.S. App. LEXIS 20347 (8th Cir. N.D. 1982).

United States Government.

Where United States government, pursuant to 10 USCS § 1074, paid the medical expenses of U.S. servicemen injured in an auto accident, and at the time of the accident an insurer had issued a basic no-fault policy covering the auto involved which policy would have made the insurer primarily liable for the medical expenses if the government had not paid them, the government was not entitled to reimbursement from the no-fault insurer under the no-fault law because the government was not a designated payee under this section and was not entitled to recovery as a third-party beneficiary under the no-fault policy because there was no intent by either the policy or this section to benefit the government. United States v. Dairyland Ins. Co., 674 F.2d 750, 1982 U.S. App. LEXIS 20347 (8th Cir. N.D. 1982).

26.1-41-10. Assignment of nonmedical benefits unenforceable — Exemption of benefits from process.

An agreement for assignment of any right to nonmedical benefits payable in the future is unenforceable. Basic no-fault benefits are exempt from garnishment, attachment, execution, and any other process or claim to the extent that wages or earnings are exempt under any applicable law exempting wages or earnings from process or claims.

Source:

S.L. 1985, ch. 316, § 18.

Derivation:

N.D.C.C. § 26-41-15.

Collateral References.

Construction, operation, and effect of statute giving hospital lien against recovery from tortfeasor causing patient’s injuries, 16 A.L.R.5th 262.

Law Reviews.

North Dakota Choice of Law in Tort and Contract Actions: A Summary of Cases and a Critique, 71 N.D. L. Rev. 721 (1995).

26.1-41-11. Mental and physical examinations.

  1. Whenever the mental or physical condition of an individual is material to any claim that has been or may be made for past or future basic or optional excess no-fault benefits, the individual shall submit to mental or physical examination by a physician designated by the basic no-fault insurer at a reasonably convenient location. Basic no-fault insurers are authorized to include reasonable provisions of this nature in policies providing basic or excess no-fault benefits.
  2. If an individual refuses to submit to a mental or physical examination, a court at the request of the insurer may enter an order requiring the individual to submit to the examination. If the court finds that the individual failed to appear for the examination without good cause, the court shall order the insured to reimburse the insurer for any reasonably demonstrable cancellation charges for the examination.

Source:

S.L. 1985, ch. 316, § 18; 2005, ch. 274, § 4.

Derivation:

N.D.C.C. § 26-41-17.

Notes to Decisions

Required Physical Examination.

Summary judgment was properly granted for the insurer in the insured’s action to recover no-fault insurance benefits because, even though the no-fault insurance policy and N.D.C.C. § 26.1-41-11 required the insured to undergo an independent medical exam before filing suit, the exam was not a “necessary medical expense” for the benefit and treatment of the insured within the meaning of N.D.C.C. § 26.1-41-01(9) and did not toll the four-year statute of limitations, N.D.C.C. § 26.1-41-19(1), as the limitation period was triggered by the last payment for necessary medical services for treatment. Johnson v. Nodak Mut. Ins. Co., 2005 ND 112, 699 N.W.2d 45, 2005 N.D. LEXIS 128 (N.D. 2005).

26.1-41-12. Discovery of facts about an injured person.

  1. Every employer or claimant, if a written request is made by a basic no-fault insurer against whom a claim has been made, shall furnish forthwith, in a form approved by the insurance commissioner, a sworn statement of the earnings, since the time of the accidental bodily injury and for a twelve-month period before the injury, of the individual upon whose injury the claim is based.
  2. Every physician, coroner or medical officer, hospital, clinic, or other medical institution providing, before or after an accidental bodily injury upon which a claim for basic or optional excess no-fault benefits is based, any products, services, or accommodations in relation to the injury, or in relation to a condition claimed to be connected with the injury, if requested in writing to do so by the basic no-fault insurer against whom the claim has been made, shall:
    1. Promptly furnish a written report of the history, condition, treatment, and dates and costs of treatment.
    2. Permit the inspection and copying of its records regarding the history, condition, treatment, and dates and costs of treatment.
    3. Promptly furnish autopsy reports.
  3. In the event of any dispute regarding a basic no-fault insurer’s right to discovery of facts about an injured person’s earnings or about history, condition, treatment, and dates and costs of such treatment, a court of record may enter an order for such discovery as justice requires.
  4. A person may not charge more than twenty dollars for the first twenty-five pages and seventy-five cents per page for every page beyond twenty-five pages for providing a copy of medical records or medical bills in paper or facsimile format to a basic no-fault insurer pursuant to this chapter. If providing an electronic, digital, or other computerized format, a person may charge thirty dollars for the first twenty-five pages and twenty-five cents per page after twenty-five pages for providing a copy of medical records or medical bills to a basic no-fault insurer pursuant to this chapter. This charge includes any administrative fee, retrieval fee, and postage expense.

Source:

S.L. 1985, ch. 316, § 18; 2005, ch. 274, § 5; 2011, ch. 190, § 2.

Derivation:

N.D.C.C. § 26-41-18.

26.1-41-13. Priority of applicable security — Coordination of benefits.

  1. A basic no-fault insurer has the primary obligation to make payment for economic loss because of accidental bodily injury arising out of the operation of a motor vehicle; provided, that the amount of all benefits a claimant recovered or is entitled to recover for the same elements of loss under any workforce safety and insurance law must be subtracted from the basic no-fault benefits otherwise payable for the injury.
  2. As between applicable security basic no-fault benefits are payable as follows:
    1. As to any person injured while occupying a secured motor vehicle, or injured as a pedestrian by a secured motor vehicle, the basic no-fault insurer of the secured motor vehicle shall pay the benefits.
    2. As to any person who is injured while occupying an unsecured motor vehicle, or while being struck as a pedestrian by an unsecured motor vehicle, the basic no-fault insurer affording the benefits to the injured person shall pay the benefits.
    3. As to any person injured while occupying a bus that is a secured motor vehicle, the basic no-fault insurer affording benefits to the injured person as the owner of a secured motor vehicle or as a relative of the owner of a secured motor vehicle shall pay the benefits; and, if there is no basic no-fault insurer affording benefits to the injured person, then the basic no-fault insurer of the bus shall pay the benefits.
    4. As to any person injured while occupying a secured motor vehicle that is transporting persons under a ridesharing arrangement, as defined in section 8-02-07, the basic no-fault insurer affording benefits to the injured person as the owner of a secured motor vehicle or as a relative of the owner of a secured motor vehicle shall pay the benefits; and, if there is no basic no-fault insurer affording benefits to the injured person, then the basic no-fault insurer of the secured motor vehicle shall pay the benefits.
  3. An insurer, health maintenance organization, or nonprofit health service corporation, other than a basic no-fault insurer, authorized to do business in this state may coordinate any benefits it is obligated to pay for economic loss incurred as a result of accidental bodily injury, with the first ten thousand dollars of basic no-fault benefits. A basic no-fault insurer authorized to do business in this state may coordinate any benefits it is obligated to pay for medical expenses incurred as a result of accidental bodily injury in excess of ten thousand dollars. An insurer, health maintenance organization, or nonprofit health service corporation, other than a basic no-fault insurer, may not coordinate benefits unless it provides those persons who purchase benefits from it with an equitable reduction or savings in the direct or indirect cost of purchased benefits. The commissioner shall approve any coordination of benefits plan.

Source:

S.L. 1985, ch. 316, § 18; 1987, ch. 370, § 1; 1989, ch. 69, § 34; 1991, ch. 324, § 1; 2003, ch. 260, § 1; 2003, ch. 561, § 3.

Derivation:

N.D.C.C. § 26-41-10.

Notes to Decisions

Choice of Law.

Under “significant contacts” test, the law of North Dakota rather than Minnesota was applicable to determine which insurer was obligated to pay basic no-fault benefits to passenger who was a resident of North Dakota and who was injured in a single-vehicle accident in Minnesota. Daley v. American States Preferred Ins. Co., 1998 ND 225, 587 N.W.2d 159, 1998 N.D. LEXIS 226 (N.D. 1998).

Construction.

The words “the injury” at the end of subsection (1) relate back to the first part of that subsection, and refer only to an accidental bodily injury arising out of the work-related operation of a motor vehicle. Kroh v. American Family Ins., 487 N.W.2d 306, 1992 N.D. LEXIS 112 (N.D. 1992).

Reading N.D.C.C. § 65-05-15 and subsection (1) of this section together and in light of their respective purposes, an insurer could not offset workers’ compensation benefits after the workers’ compensation bureau had applied former subsection 4 of N.D.C.C. § 65-05-15, prior to the 1997 amendment of that section, and had reduced plaintiff’s benefits by fifty percent as a result of his injury sustained in his later nonwork-related motor vehicle accident. Kroh v. American Family Ins., 487 N.W.2d 306, 1992 N.D. LEXIS 112 (N.D. 1992).

Coordination of Benefits.

A no-fault insurer may subtract workers’ compensation benefits payable for an injury sustained as a result of a work-related motor vehicle accident. It may not deduct benefits payable for a work-compensable injury not involving the operation of a motor vehicle. Kroh v. American Family Ins., 487 N.W.2d 306, 1992 N.D. LEXIS 112 (N.D. 1992).

By reducing plaintiff’s workers’ compensation benefits by fifty percent, the Workers’ Compensation Bureau ensured that it paid benefits only for his work injury and not for his nonemployment injury. Consequently, plaintiff received no workers’ compensation benefits for his nonemployment injury which overlap with or duplicate basic no-fault insurance benefits. It followed that there were no workers’ compensation benefits to be deducted from plaintiff’s basic no-fault benefits. He was entitled, therefore, to receive all of the basic no-fault benefits due for his nonemployment injury sustained as a result of his nonwork-related auto accident. Kroh v. American Family Ins., 487 N.W.2d 306, 1992 N.D. LEXIS 112 (N.D. 1992).

Coverage.

The Workers’ Compensation Act compensates injuries in the course of employment. The Auto Accident Reparations Act compensates injuries arising out of the operation of a motor vehicle. Kroh v. American Family Ins., 487 N.W.2d 306, 1992 N.D. LEXIS 112 (N.D. 1992).

Injury.

“Injury”, in the context of this section, means an injury arising out of an auto accident, the only kind of injury for which no-fault benefits must be paid. If that injury is also work-related, the offset provision is triggered to avoid duplication of benefits for the same injury. Kroh v. American Family Ins., 487 N.W.2d 306, 1992 N.D. LEXIS 112 (N.D. 1992).

No-Fault Coverage.

North Dakota’s no-fault statutes impose no-fault requirements on the owner of a motor vehicle. State Farm Mut. Auto. Ins. Co. v. LaRoque, 486 N.W.2d 235, 1992 N.D. LEXIS 147 (N.D. 1992).

Purpose.

The primary purpose of this section is to “provide adequate compensation for victims of motor vehicle accidents.” The purpose of an offset provision is to prevent double recovery or overlapping of benefits. Kroh v. American Family Ins., 487 N.W.2d 306, 1992 N.D. LEXIS 112 (N.D. 1992).

DECISIONS UNDER PRIOR LAW

Coordination of Benefits.

Person suffering economic loss because of an automobile accident occurring after the effective date of the 1977 amendment of the prior law is required to collect the first five thousand dollars of economic loss benefits from his no-fault insurer before making claim on an additional insurer who has coordinated benefits; prior to the 1977 amendment such person was entitled to allocate the medical expense portion of economic loss to his medical insurer and the other economic losses to his no-fault insurer where his total economic loss exceeded the no-fault benefits. St. Alexius Hosp. v. Eckert, 284 N.W.2d 441, 1979 N.D. LEXIS 309 (N.D. 1979).

Duplicate Payment.

No-fault auto insurance is not required to duplicate payment of medical expenses where they have been separately paid by health insurance coordinated with the no-fault policy. Kiefer v. General Casualty Co., 381 N.W.2d 205, 1986 N.D. LEXIS 258 (N.D. 1986) (decided under N.D.C.C. § 26.1-14-10 prior to its 1985 renumbering as this section).

Duplication of payments by no-fault and health insurers for the same economic loss of medical expenses is not commanded by this statute. Kiefer v. General Casualty Co., 381 N.W.2d 205, 1986 N.D. LEXIS 258 (N.D. 1986) (decided under N.D.C.C. § 26.1-14-10 prior to its renumbering as this section).

Primary Liability.

Where passenger injured in an auto accident was entitled to basic no-fault benefits for economic loss under a policy issued to her father and was also entitled to benefits under a policy issued to the owner-driver of the wrecked auto, the insurer of the owner-driver was the basic no-fault insurer and was primarily liable for the no-fault benefits; insurer of the father was entitled to recover from the insurer of the owner-driver the benefits it had paid under the policy issued to the injured passenger’s father. National Farmers Union Property & Casualty Co. v. Dairyland Ins. Co., 485 F. Supp. 1009, 1980 U.S. Dist. LEXIS 10443 (D.N.D. 1980).

Where passenger in an automobile was injured in an accident in Minnesota, in determining whether the passenger’s insurer or the insurer of the automobile was primarily liable for no-fault benefits paid to the injured passenger, the court applied a significant contacts approach to determine since both the injured passenger and the driver of the automobile were North Dakota residents, and the automobile was registered in North Dakota, and that the insurance policies in question were entered into, issued, and delivered in North Dakota, that North Dakota law, under which the insurer of the automobile was primarily liable, was applicable to determine primary liability between the insurers; and, pursuant to the statute governing accidents outside the state, the primary insurer was required to provide the amount of benefits provided by Minnesota law since those benefits were higher than those provided by North Dakota law. National Farmers Union Property & Casualty Co. v. Nodak Mut. Ins. Co., 528 F. Supp. 1093, 1981 U.S. Dist. LEXIS 16621 (D.N.D. 1981), aff'd, 682 F.2d 741, 1982 U.S. App. LEXIS 17660 (8th Cir. N.D. 1982).

Collateral References.

Necessity or permissibility of naming no-fault insurer as defendant where insured automobile owner or operator is not liable for economic losses under no-fault insurance law, 40 A.L.R.4th 858.

26.1-41-14. Stacking of basic no-fault benefits prohibited.

When an injured person is provided basic no-fault benefits by an insurance policy issued in compliance with this chapter, the injured person is covered only to the extent of the basic no-fault benefits provided on the secured motor vehicle involved in the accident and the optional excess no-fault benefits purchased by the injured person, or a relative of the injured person, on a secured motor vehicle, if any, in excess of the basic no-fault benefits provided on the secured motor vehicle involved in the accident. If any person is injured while occupying an unsecured motor vehicle, basic no-fault benefits are only available to the extent of the applicable basic no-fault benefits provided to the injured person as the owner of a secured motor vehicle or as a relative of the owner of a secured motor vehicle. In either instance, basic no-fault benefits on any secured motor vehicle may not be added or stacked upon basic no-fault benefits available from any other source.

Source:

S.L. 1985, ch. 316, § 18; 1989, ch. 377, § 2.

Derivation:

N.D.C.C. § 26-41-10.1.

26.1-41-15. Motor vehicle liability insurance — Extraterritorial provision.

  1. Motor vehicle liability insurance applies to the amounts which the owner is legally obligated to pay as damages because of accidental bodily injury and accidental property damage arising out of the ownership or operation of a motor vehicle, if the accident occurs in the United States or its possessions or in Canada. Motor vehicle liability insurance must afford limits of liability not less than those required under the financial responsibility laws of this state. Customary terms and conditions applicable to motor vehicle liability insurance apply.
  2. If the accident occurs outside this state but in the United States or its possessions or in Canada:
    1. If the limits of liability of the financial responsibility or compulsory insurance laws of the applicable jurisdiction exceed the limits of liability of the financial responsibility laws of North Dakota, the motor vehicle liability insurance is deemed to comply with the limits of liability of the laws of the applicable jurisdiction.
    2. If the limits of no-fault benefits of the applicable jurisdiction exceed the limits provided under this chapter for no-fault benefits, the no-fault benefits are deemed to comply with the limits of the benefits of the laws of the applicable jurisdiction.

Source:

S.L. 1985, ch. 316, § 18.

Derivation:

N.D.C.C. § 26-41-11.

DECISIONS UNDER PRIOR LAW

Accident Occurring in Another State.

Where passenger in an automobile was injured in an accident in Minnesota, and in applying a significant contacts approach it was determined that North Dakota law, under which the insurer of the automobile was primarily liable, and not the insurer of the passenger, for no-fault benefits to be paid the injured passenger, the insurer of the automobile was required to provide the amount of no-fault benefits provided by Minnesota law since those benefits were greater in amount than those required by North Dakota law. National Farmers Union Property & Casualty Co. v. Nodak Mut. Ins. Co., 528 F. Supp. 1093, 1981 U.S. Dist. LEXIS 16621 (D.N.D. 1981), aff'd, 682 F.2d 741, 1982 U.S. App. LEXIS 17660 (8th Cir. N.D. 1982).

26.1-41-16. Insurer’s right of subrogation.

A basic no-fault insurer which has paid or may become obligated to pay basic no-fault benefits under this chapter is subrogated to the extent of its obligations to all of the rights of the injured person against any person other than a secured person. The subrogee has a lien to the extent of its obligations, and no release of rights is effective against the rights without the subrogee’s consent.

Source:

S.L. 1985, ch. 316, § 18.

Derivation:

N.D.C.C. § 26-41-13.

Notes to Decisions

Conflict of Laws.

Minnesota, rather than North Dakota where the accident occurred, had the more substantial interest in regulating the no-fault subrogation rights of a Minnesota no-fault insured and its insurer where the only no-fault insured involved in the case was a Minnesota resident who had purchased the insurance in Minnesota under the requirements of the Minnesota no-fault insurance act. Starry v. Central Dakota Printing, 530 N.W.2d 323, 1995 N.D. LEXIS 62 (N.D. 1995).

DECISIONS UNDER PRIOR LAW

Primary Liability Between Insurers.

Where passenger injured in an auto accident was entitled to basic no-fault benefits for economic loss under a policy issued to her father and was also entitled to benefits under a policy issued to the owner-driver of the wrecked auto, the insurer of the owner-driver was the basic no-fault insurer and was primarily liable for the no-fault benefits; insurer of the father was entitled to recover from the insurer of the owner-driver the benefits it had paid under the policy issued to the injured passenger’s father. National Farmers Union Property & Casualty Co. v. Dairyland Ins. Co., 485 F. Supp. 1009, 1980 U.S. Dist. LEXIS 10443 (D.N.D. 1980).

Where passenger in an automobile was injured in an accident in Minnesota, in determining whether the passenger’s insurer or the insurer of the automobile was primarily liable for no-fault benefits paid to the injured passenger, the court applied a significant contacts approach to determine that North Dakota law, under which the insurer of the automobile was primarily liable, was applicable to determine liability between the insurers; insurer of the passenger was entitled to recover the benefits it had paid to the passenger under its no-fault policy from the insurer of the automobile, which was primarily liable. National Farmers Union Property & Casualty Co. v. Nodak Mut. Ins. Co., 528 F. Supp. 1093, 1981 U.S. Dist. LEXIS 16621 (D.N.D. 1981), aff'd, 682 F.2d 741, 1982 U.S. App. LEXIS 17660 (8th Cir. N.D. 1982).

Secured Person’s Obligation.

A secured person is exempt from liability to pay damages for economic loss to the extent that the injured person receives basic no-fault benefits. Imperial Casualty & Indem. Co. v. General Casualty Co., 458 N.W.2d 335, 1990 N.D. LEXIS 147 (N.D. 1990).

United States Government.

United States government which paid medical expenses, pursuant to 10 USCS § 1074, of U.S. servicemen injured in an auto accident, had not undertaken to indemnify another by a contract of insurance and was therefore not a basic no-fault insurer nor entitled to the subrogation rights provided by this section. United States v. Dairyland Ins. Co., 485 F. Supp. 539, 1980 U.S. Dist. LEXIS 10444 (D.N.D. 1980).

26.1-41-17. Equitable allocation of losses among insurers. [Repealed]

Repealed by S.L. 2005, ch. 274, § 6.

26.1-41-18. Assigned claims plan.

  1. Basic no-fault insurers authorized to provide basic no-fault benefits in this state shall organize, participate in, and maintain an assigned claims plan to provide that an injured person who suffers economic loss and is eligible for basic no-fault benefits under section 26.1-41-06, other than a person not entitled to benefits under section 26.1-41-07, may obtain basic no-fault benefits through the plan if:
    1. Basic no-fault benefits are not applicable to the injury for some reason other than those specified in section 26.1-41-07; or
    2. Basic no-fault benefits applicable to the injury are inadequate to provide the contracted-for benefits because of financial inability of a basic no-fault insurer to fulfill its obligations.
  2. If a claim qualifies for assignment under this section, the assigned claims plan or any basic no-fault insurer to whom the claim is assigned is subrogated to the rights of the claimant against any person liable, and against any basic no-fault insurer, its successor in interest, or substitute legally obligated to provide basic no-fault benefits to the claimant, for basic no-fault benefits provided by the assignment.
  3. The assigned claims plan must contain any rules for the operation of the plan and for the equitable distribution of costs as may be approved by the commissioner. Any claim brought through the plan must be assigned to a basic no-fault insurer in accordance with the rules and the insurer, after assignment, has the rights and obligations it would have had if prior to the assignment it has issued security providing basic no-fault benefits applicable to the loss. Any person accepting benefits under this section has the rights and obligations as that person would have had under security issued to that person providing basic no-fault benefits.
  4. Any person who sustains accidental bodily injury while an occupant in or as a result of being struck by any motor vehicle is not eligible for benefits under the assigned claims plan if the person owned a motor vehicle on the date of loss and failed to provide continuous security for the motor vehicle as required by section 26.1-41-02.
  5. Any person who requests suspension of coverage in accordance with section 26.1-41-03 is not ineligible for assigned claims plan benefits while the suspension is in effect if bodily injury is sustained while an occupant in or as a result of being struck by a motor vehicle not owned by that person.

Payments made by the assigned claims plan pursuant to this subsection constitute covered claims under chapter 26.1-42.1.

Source:

S.L. 1985, ch. 316, § 18; 1999, ch. 259, § 5.

Derivation:

N.D.C.C. § 26-41-19.

DECISIONS UNDER PRIOR LAW

Analysis

Indians on Reservation.

Where four enrolled Indians were injured in an automobile accident which occurred on an Indian reservation, and they filed claims with the social services board for medical assistance for needy persons, and the benefits were paid and the social services board, in turn, assigned its assignments from the four Indians to the assigned claims plan and requested payment under this section, the social services board was entitled to payment since the Auto Accident Reparations Act does not exclude from benefits enrolled Indians when the injury occurred on an Indian reservation and the chapter does not require that the assignment, to be valid, must guarantee that the assignee will be able to recover under the assignment, nor that the original assignor is subject to the jurisdiction of the state courts, nor a showing that the individual against whom an action may lie for an alleged wrong is not judgment-proof. State ex rel. Moug v. North Dakota Auto. Assigned Claims Plan, 341 N.W.2d 623, 1983 N.D. LEXIS 440 (N.D. 1983).

Suit Against Assigned Risk Plan.

The North Dakota assigned claims plan is an entity capable of being sued. State ex rel. Moug v. North Dakota Auto. Assigned Claims Plan, 322 N.W.2d 245, 1982 N.D. LEXIS 320 (N.D. 1982).

26.1-41-19. Limitation of actions.

  1. If no basic or optional excess no-fault benefits have been paid for loss, an action for the benefits may be commenced not later than two years after the injured person suffers the loss and either knows, or in the exercise of reasonable diligence should know, that the loss was caused by the accident, or not later than four years after the accident, whichever is earlier. If basic or optional excess no-fault benefits have been paid for loss, an action for recovery of further benefits for the loss by either the same or another claimant may be commenced not later than four years after the last payment of benefits.
  2. If no basic or optional excess no-fault benefits have been paid to the decedent or dependent survivors, an action for benefits for survivors’ income loss and replacement services loss and funeral and burial expenses may be commenced not later than two years after the death or six years after the accident from which death results, whichever is earlier. If survivors’ income loss and replacement services loss benefits have been paid to any dependent survivor, an action for recovery of further survivors’ income loss or replacement services loss benefits by either the same or another claimant may be commenced not later than six years after the last payment of benefits. If basic or optional excess no-fault benefits have been paid for loss suffered by an injured person before the injured person’s death resulting from the injury, an action for recovery of survivors’ income loss or replacement services loss benefits may be commenced not later than two years after the death or six years after the last payment of benefits, whichever is earlier.
  3. Except as subsection 1 or 2 prescribes a longer period, an action by a claimant on an assigned claim which has been timely presented may be commenced not later than sixty days after the claimant received written notice of rejection of the claim by the basic no-fault insurer to which it was assigned.
  4. The time period limitations prescribed in this section govern all actions for basic and optional excess no-fault benefits under this chapter notwithstanding any limitation prescribed elsewhere in the laws of this state.

Source:

S.L. 1985, ch. 316, § 18; 1989, ch. 378, § 1.

Derivation:

N.D.C.C. § 26-41-16.

DECISIONS UNDER PRIOR LAW

Analysis

Independent Medical Exam Not Considered No-Fault Benefit.

Summary judgment was properly granted for the insurer in the insured’s action to recover no-fault insurance benefits because even though the no-fault insurance policy and N.D.C.C. § 26.1-41-11 required the insured to undergo an independent medical exam before filing suit, the exam was not a no-fault benefit for the insured within meaning of N.D.C.C. § 26.1-41-01(9) and did not toll the four-year statute of limitations, N.D.C.C. § 26.1-41-19(1). The term “necessary medical service” as used in N.D.C.C. § 26.1-41-01(9) means necessary medical services for the benefit and treatment of the insured, and the trigger for the statute of limitations in N.D.C.C. § 26.1-41-19(1) is the last payment for necessary medical services for treatment. Johnson v. Nodak Mut. Ins. Co., 2005 ND 112, 699 N.W.2d 45, 2005 N.D. LEXIS 128 (N.D. 2005).

State Claims for Repayment of Medical Assistance Provided Needy Persons.

Where, pursuant to N.D.C.C. ch. 50-24.1, state paid the costs of medical assistance provided needy persons injured in automobile accidents under circumstances which made the assigned risk plan applicable, N.D.C.C. § 50-24.1-08 was applicable to stop the running of the statute of limitations against claims of the state for repayment of the medical assistance provided, notwithstanding the provisions in subsection 4 of this section. State ex rel. Moug v. North Dakota Auto. Assigned Claims Plan, 322 N.W.2d 245, 1982 N.D. LEXIS 320 (N.D. 1982).

26.1-41-20. Secured person exemption for no liability insurance.

In any action against a secured person to recover damages because of accidental bodily injury arising out of the ownership or operation of a secured motor vehicle in this state, the secured person may not be assessed damages for noneconomic loss for a serious injury in favor of a party who has at least one prior unrelated conviction under section 39-08-20 and who was operating a motor vehicle owned by that party at the time of injury without a valid policy of liability insurance in order to respond to damages for liability arising out of the ownership, maintenance, or use of that motor vehicle.

Source:

S.L. 1999, ch. 273, § 1; 2003, ch. 258, § 3.

CHAPTER 26.1-42 Insurance Guaranty Association [Repealed]

[Repealed by S.L. 1999, ch. 259, § 8]

CHAPTER 26.1-42.1 Insurance Guaranty Association

26.1-42.1-01. Scope.

This chapter applies to every kind of direct insurance, except:

  1. Life, annuity, health, or disability insurance;
  2. Mortgage guaranty, financial guaranty, or other forms of insurance offering protection against investment risks;
  3. Fidelity or surety bonds or any other bonding obligations;
  4. Credit insurance, vendors’ single interest insurance, collateral protection insurance, or any similar insurance protecting the interests of a creditor arising out of a creditor-debtor transaction;
  5. Insurance of warranties or service contracts, including insurance that provides for the repair, replacement, or service of goods or property; for indemnification for repair, replacement, or service; for the operational or structural failure of the goods or property due to a defect in materials, workmanship, or normal wear and tear; or for reimbursement for the liability incurred by the issuer of agreements or service contracts that provide these benefits;
  6. Title insurance;
  7. Ocean marine insurance;
  8. Any transaction or combination of transactions between a person, including affiliates of such person, and an insurer, including affiliates of that insurer, which involves the transfer of investment or credit risk unaccompanied by transfer of insurance risk; or
  9. Any insurance provided by or guaranteed by government.

Source:

S.L. 1999, ch. 259, § 6.

DECISIONS UNDER PRIOR LAW

Workers Compensation Fund.

The workers compensation fund is like an accident insurance fund in that it is a fund made available when an injury occurs. However, the workers compensation fund is unlike an accident insurance fund in that (1) it is governmentally created and administered, (2) the injury must be work-related, and (3) because it is work-related, questions of fault are irrelevant. Thus the workers compensation fund is not a health or accident insurance fund. Beyer's Cement v. North Dakota Ins. Guar. Ass'n, 417 N.W.2d 370, 1987 N.D. LEXIS 454 (N.D. 1987).

26.1-42.1-02. Definitions.

As used in this chapter:

  1. “Affiliate” means a person who directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with an insolvent insurer on December thirty-first of the year immediately following the date the insurer becomes an insolvent insurer.
  2. “Association” means the North Dakota insurance guaranty association created under section 26.1-42.1-03.
  3. “Claimant” means any insured making a first-party claim or any person instituting a liability claim, provided that no person who is an affiliate of the insolvent insurer may be a claimant.
  4. “Control” means the direct or indirect possession of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control is presumed to exist if any person directly or indirectly owns, controls, holds with the power to vote, or holds proxies representing at least ten percent of the voting securities of any other person. This presumption may be rebutted by a showing that control does not exist in fact.
  5. “Covered claim” means an unpaid claim, including an unpaid claim for unearned premiums, submitted by a claimant, that arises out of and is within the coverage and is subject to the applicable limits of an insurance policy to which this chapter applies, issued by an insurer, if this insurer becomes an insolvent insurer after August 1, 1999, and the claimant or insured is a resident of this state at the time of the insured event; provided that for entities other than an individual, the residence of a claimant, insured, or policyholder is the state in which the entity’s principal place of business is located at the time of the insured event; or the claim is a first-party claim for damage to property with a permanent location in this state. The term does not include:
    1. Any amount awarded as punitive or exemplary damages;
    2. Any amount sought as a return of premium under any retrospective rating plan;
    3. Any amount due any reinsurer, insurer, insurance pool, or underwriting association as subrogation recoveries, as reinsurance recoveries, as contribution, as indemnification, or otherwise. A claim under this subdivision for any amount due any reinsurer, insurer, insurance pool, or underwriting association may not be asserted against a person insured under a policy issued by an insolvent insurer other than to the extent the claim exceeds the association obligation limitations set forth in section 26.1-42.1-05;
    4. Workforce safety and insurance, including any contract indemnifying an employer who pays compensation directly to employees;
    5. Any first-party claim by an insured whose net worth exceeds ten million dollars on December thirty-first of the year immediately following the date the insurer becomes an insolvent insurer; provided that an insured’s net worth on that date is deemed to include the aggregate net worth of the insured and all of the insured’s subsidiaries as calculated on a consolidated basis; and
    6. Any first-party claim by an insured that is an affiliate of the insolvent insurer.
  6. “Insolvent insurer” means an insurer licensed to transact insurance in this state at the time the policy was issued or when the insured event occurred, and against whom a final order of liquidation was entered after August 1, 1999, with a finding of insolvency by a court of competent jurisdiction in the insurer’s state of domicile.
  7. “Member insurer” means any person that writes any kind of insurance to which this chapter applies under section 26.1-42.1-01, including the exchange of reciprocal or interinsurance contracts and that is licensed to transact insurance in this state. An insurer shall cease to be a member insurer on the day following the termination or expiration of the insurer’s license to transact the kinds of insurance to which this chapter applies, however the insurer remains liable as a member insurer for every obligation, including an obligation for assessments levied before the termination or expiration of the insurer’s license and assessments levied after the termination or expiration, which relate to any insurer that became an insolvent insurer before the termination or expiration of that insurer’s license.
  8. “Net direct written premiums” means direct gross premiums written in this state on insurance policies to which this chapter applies, less return premiums on these policies and dividends paid or credited to policyholders on this direct business. The term does not include premiums on contracts between insurers or reinsurers.

Source:

S.L. 1999, ch. 259, § 6; 2003, ch. 561, § 3; 2019, ch. 236, § 15, eff August 1, 2019.

DECISIONS UNDER PRIOR LAW

Analysis

“Covered Claim”.

Where a claimant and insurance company entered into a contract of insurance, the claim against a third-party insured was a subrogation claim and not a “covered claim” so that the North Dakota Insurance Guaranty Association had no obligation to pay for claims for which the claimant had already received payment from its own insurers. North Dakota Ins. Guar. Ass'n v. Agway, Inc., 462 N.W.2d 142, 1990 N.D. LEXIS 220 (N.D. 1990).

An attorney’s claim for preinsolvency attorney fees arises from a separate contract for services between the insolvent insurer and the provider of the legal services; therefore, a claim for such fees and litigation expenses was not considered a covered claim within the coverage of the insurance policy or this chapter. Zuger v. N.D. Ins. Guar. Ass'n, 494 N.W.2d 135, 1992 N.D. LEXIS 257 (N.D. 1992).

Covered Claim Exclusions.

The “covered claim” exclusions listed in subsection (3) for amounts due to a “reinsurer, insurer, insurance pool, or underwriting association” contemplate individual members, and amalgamations of members, of the insurance industry. Beyer's Cement v. North Dakota Ins. Guar. Ass'n, 417 N.W.2d 370, 1987 N.D. LEXIS 454 (N.D. 1987).

Workers Compensation Board.

A workers compensation board is not a member of the insurance industry, but is rather a governmentally created board designed to provide for workers injured in the workplace regardless of fault. Beyer's Cement v. North Dakota Ins. Guar. Ass'n, 417 N.W.2d 370, 1987 N.D. LEXIS 454 (N.D. 1987).

The workers compensation fund is like an accident insurance fund in that it is a fund made available when an injury occurs. However, the workers compensation fund is unlike an accident insurance fund in that (1) it is governmentally created and administered, (2) the injury must be work-related, and (3) because it is work-related, questions of fault are irrelevant. Thus the workers compensation fund is not a health or accident insurance fund. Beyer's Cement v. North Dakota Ins. Guar. Ass'n, 417 N.W.2d 370, 1987 N.D. LEXIS 454 (N.D. 1987).

The statutory references to insurance in the workers compensation laws do not make the protections provided by a workers compensation board into insurance as contemplated in this chapter, governing the Guaranty Association. The funds provided by the workers compensation board are not insurance; they are workers compensation, and are derived from a statutorily created scheme designed to protect workers injured in the course of their employment. Beyer's Cement v. North Dakota Ins. Guar. Ass'n, 417 N.W.2d 370, 1987 N.D. LEXIS 454 (N.D. 1987).

26.1-42.1-03. Creation of the association.

A nonprofit unincorporated legal entity known as the North Dakota insurance guaranty association is created. Every insurer defined as a member insurer in section 26.1-42.1-02 shall be and remain a member of the association as a condition of that insurer’s authority to transact insurance in this state. The association shall perform association functions under a plan of operation established and approved under section 26.1-42.1-05 and shall exercise association powers through a board of directors established under section 26.1-42.1-04.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-04. Board of directors.

  1. The board of directors of the association consists of a minimum of five and a maximum of nine persons serving terms as established in the plan of operation. The members of the board must be selected by member insurers, subject to the approval of the commissioner. A vacancy on the board must be filled for the remaining period of the unexpired term by a majority vote of the remaining board members, subject to the approval of the commissioner. If the initial board members are not selected within sixty days after August 1, 1999, the commissioner may appoint the initial members of the board.
  2. In approving selections to the board, the commissioner shall consider at least whether all member insurers are fairly represented.
  3. Every member of the board may be reimbursed from the assets of the association for expenses incurred by the member in the course of the member’s official duties.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-05. Powers and duties of the association.

  1. The association:
    1. Shall pay covered claims existing before the order of liquidation and arising within thirty days after the order of liquidation or before the policy expiration date if less than thirty days after the order of liquidation, or before the insured replaces the policy or causes the policy’s cancellation, if the insured does so within thirty days of the order of liquidation. The obligation must be satisfied by paying to the claimant an amount as follows:
      1. An amount not exceeding ten thousand dollars per policy for a covered claim for the return of unearned premium.
      2. An amount not exceeding three hundred thousand dollars per claim for all other covered claims.
    2. Is not obligated to pay a claimant an amount in excess of the obligation of the insolvent insurer under the policy or coverage from which the claim arises. Notwithstanding any other provision of this chapter, a covered claim does not include a claim filed with the association after the earlier of eighteen months after the date of the order of liquidation or the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer and a claim does not include any claim filed with the association or a liquidator for protection afforded under the insured’s policy for incurred, but not reported, losses.
    3. Is deemed the insurer only to the extent of the association’s obligation on the covered claims and to that extent, subject to the limitations provided in this chapter, has all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent, including the right to pursue and retain salvage and subrogation recoverable on paid covered claim obligations. The association may not be deemed the insolvent insurer for any purpose relating to the issue of whether the association is amenable to the personal jurisdiction of the courts of any state.
    4. Shall assess member insurer’s amounts necessary to pay the obligations of the association under subdivision a following an insolvency, the expenses of handling covered claims following an insolvency and other expenses authorized by this chapter. The assessments of each member insurer must be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment. Each member insurer must be notified of the assessment at least thirty days before the assessment is due. A member insurer may not be assessed in any one year an amount greater than two percent of that member insurer’s net direct written premiums for the calendar year preceding the assessment. If the maximum assessment, together with the other assets of the association, does not provide in any one year an amount sufficient to make all necessary payments, the funds available must be prorated and the unpaid portion must be paid as soon as funds become available. The association shall pay claims in any order the association determines reasonable, including the payment of claims as the claims are received from the claimants or in groups or categories of claims. The association may exempt or defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer’s financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance; provided, however, that during the period of deferment, dividends may not be paid to shareholders or policyholders. Deferred assessments must be paid when payment will not reduce capital or surplus below required minimums. Deferred assessment payments must be refunded to those companies receiving larger assessments by virtue of this deferment, or at the election of any such company, credited against future assessments. Each member insurer may set off against any assessment authorized payments made on covered claims and expenses incurred in the payment of these claims by the member insurer.
    5. Shall investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association’s obligation and deny all other claims. The association may review settlements, releases, and judgments to which the insolvent insurer or the insolvent insurer’s insureds were parties to determine the extent to which these settlements, releases, and judgments may be properly contested. The association may appoint and direct legal counsel retained under liability insurance policies for the defense of covered claims.
    6. Shall handle claims through the association’s employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the commissioner, but this designation may be declined by a member insurer.
    7. Shall reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this chapter.
  2. The association may:
    1. Employ or retain persons necessary to handle claims and perform other duties of the association;
    2. Borrow funds necessary to effect the purposes of this chapter in accordance with the plan of operation;
    3. Sue or be sued, and this power to sue includes the power and right to intervene as a party before any court in this state which has jurisdiction over an insolvent insurer;
    4. Negotiate and become a party to contracts that are necessary to carry out the purposes of this chapter;
    5. Perform acts that are necessary or proper to effectuate the purposes of this chapter; and
    6. Refund to the member insurers in proportion to the contribution of each member insurer that amount by which the assets of the association exceed the liabilities, if at the end of any calendar year, the board of directors finds that the assets of the association exceed the liabilities for the coming year as estimated by the board.
  3. Except for actions by member insurers aggrieved by final actions or decisions by the association pursuant to subdivision h of subsection 3 of section 26.1-42.1-06, all claims for relief relating to this chapter against the association must be brought in the courts of this state. These courts have exclusive jurisdiction over all actions relating to this chapter against the association. Exclusive venue in any action by or against the association is in the district courts of this state. The association, at its option, may waive this exclusive venue as to specific actions.

Any obligation of the association to defend an insured on a covered claim ceases upon the association’s payment, by settlement releasing the insured or on a judgment, of an amount equal to the lesser of the association’s covered claim obligation limit or the applicable policy limit or upon the association’s tender of that amount.

Notwithstanding any other provision of this chapter, an obligation of the association to any person ceases when ten million dollars is paid in the aggregate by the association and any one or more associations similar to the association of any other state or states or any property and casualty security fund that obtains contributions from insurers on a preinsolvency basis, to or on behalf of any insured and the insured’s affiliates on covered claims or allowed claims arising under the policy or policies of any one insolvent insurer. For purposes of this section, the term “affiliate” means a person who, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person. If the association determines that there may be more than one claimant having a covered claim or allowed claim against the association or any associations similar to the association or any property and casualty insurance security fund in other states, under the policy or policies of any one insolvent insurer, the association may establish a plan to allocate amounts payable by the association in any manner the association deems equitable.

Source:

S.L. 1999, ch. 259, § 6.

DECISIONS UNDER PRIOR LAW

Analysis

Insolvent Insurer.

The North Dakota Insurance Guaranty Association is designed to provide financial resources when an insurer becomes insolvent and there is a claim for which the insolvent insurer was obligated to provide coverage. Beyer's Cement v. North Dakota Ins. Guar. Ass'n, 417 N.W.2d 370, 1987 N.D. LEXIS 454 (N.D. 1987).

Preinsolvency Attorney Fees.

Attorney’s claim for preinsolvency attorney fees and litigation expenses is not a covered claim under this chapter. Zuger v. N.D. Ins. Guar. Ass'n, 494 N.W.2d 135, 1992 N.D. LEXIS 257 (N.D. 1992).

A claim for preinsolvency attorney fees arises from a separate contract for services between the insolvent insurer and the provider of the legal services; therefore, it is not considered a claim within the coverage of the insurance policy. Zuger v. N.D. Ins. Guar. Ass'n, 494 N.W.2d 135, 1992 N.D. LEXIS 257 (N.D. 1992).

26.1-42.1-06. Plan of operation.

  1. The association shall submit to the commissioner a plan of operation and any amendments to this plan necessary or suitable to assure the fair, reasonable, and equitable administration of the association. The plan of operation and any amendments become effective upon written approval by the commissioner. If the association fails to submit a suitable plan of operation within ninety days following August 1, 1999, or if at any time after August 1, 1999, the association fails to submit suitable amendments to the plan, the commissioner, after notice and hearing, shall adopt rules as necessary or advisable to implement this chapter. These rules continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner.
  2. All member insurers shall comply with the plan of operation.
  3. The plan of operation must:
    1. Establish procedures by which all the powers and duties of the association under section 26.1-42.1-05 will be performed.
    2. Establish procedures for handling assets of the association.
    3. Establish procedures for the disposition of liquidating dividends or other moneys received from the estate of the insolvent insurer.
    4. Establish the amount and method of reimbursing members of the board of directors under section 26.1-42.1-04.
    5. Establish procedures by which claims may be filed with the association, if necessary, and establish acceptable forms of proof of covered claims. Notice of claims to the receiver or liquidator of the insolvent insurer are deemed notice to the association or the association’s agent and periodically a list of claims must be submitted to the association or similar organization in another state by the receiver or liquidator.
    6. Establish regular places and times for meetings of the board of directors.
    7. Establish procedures for records to be kept of all financial transactions of the association, the association’s agents, and the board of directors.
    8. Provide that any member insurer aggrieved by any final action or decision of the association may appeal to the commissioner within thirty days after the action or decision.
    9. Establish procedures by which selections for the board of directors will be submitted to the commissioner.
    10. Contain provisions necessary or proper for the execution of the powers and duties of the association.
  4. The plan of operation may provide that powers and duties of the association, except those under subdivision d of subsection 1 of section 26.1-42.1-05 and subdivision b of subsection 2 of section 26.1-42.1-05, are delegated to a corporation, association, or other organization that performs or will perform functions similar to those of this association or this association’s equivalent in two or more states. This corporation, association, or organization must be reimbursed as a servicing facility would be reimbursed and must be paid for performance of any other functions of the association. A delegation under this subsection takes effect only with the approval of the board of directors and the commissioner, and may be made only to a corporation, association, or organization that extends protection not substantially less favorable and less effective than that provided by this chapter.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-07. Duties and powers of the commissioner.

  1. The commissioner shall:
    1. Notify the association of the existence of an insolvent insurer within three days after the commissioner receives notice of the determination of the insolvency. The association is entitled to a copy of any complaint seeking an order of liquidation with a finding of insolvency against a member company at the same time that this complaint is filed with a court of competent jurisdiction.
    2. Upon request of the board of directors, provide the association with a statement of the net direct written premiums of each member insurer.
  2. The commissioner may:
    1. Suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer that fails to pay an assessment when due or fails to comply with the plan of operation. In the alternative, the commissioner may levy a fine on any member insurer that fails to pay an assessment when due. A fine under this subdivision may not exceed five percent of the unpaid assessment per month, except that a fine may not be less than one hundred dollars per month.
    2. Revoke the designation of any servicing facility if the commissioner finds claims are being handled unsatisfactorily.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-08. Effect of paid claims.

  1. Any person recovering under this chapter is deemed to have assigned that person’s rights under the policy to the association to the extent of recovery from the association. Every insured or claimant seeking the protection of this chapter shall cooperate with the association to the same extent as that insured or claimant would have been required to cooperate with the insolvent insurer. The association does not have a claim for relief against the insured of the insolvent insurer for any sums the association paid out except for claims for relief the insolvent insurer would have had if the sums had been paid by the insolvent insurer and except as provided in subsection 2. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the association do not reduce the liability of the insureds to the receiver, liquidator, or statutory successor for unpaid assessments.
  2. The association may recover from the following persons the amount of any covered claim paid on behalf of that person pursuant to this chapter:
    1. Any insured whose net worth on December thirty-first of the year immediately preceding the date the insurer becomes an insolvent insurer exceeds twenty-five million dollars and whose liability obligations to other persons are satisfied in whole or in part by payments made under this chapter;
    2. Any person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under this chapter; and
    3. Any insured who is not a resident of this state at the time of the insured event, except for first-party covered claims for property damage to an insured’s property that is permanently located in this state.
  3. The association and any similar organization in another state are recognized as claimants in the liquidation of an insolvent insurer for any amounts paid by the association or similar organization on covered claims obligations as determined under this chapter or similar laws in other states and receive dividends and any other distributions at the priority set forth in section 26.1-06.1-41. The receiver, liquidator, or statutory successor of an insolvent insurer is bound by determinations of covered claim eligibility under this chapter and by settlements of claims made by the association or a similar organization in another state. The court with jurisdiction shall grant these claims priority equal to that which the claimant would have been entitled in the absence of this chapter against the assets of the insolvent insurer.
  4. The association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the association and estimates of anticipated claims on the association which preserve the rights of the association against the assets of the insolvent insurer.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-09. Exhaustion of other coverage.

  1. Any person with a claim against an insurer, regardless of whether that insurer is a member insurer under any provision in an insurance policy other than a policy of an insolvent insurer which is also a covered claim, is required to exhaust first that person’s right under that policy. Any amount payable on a covered claim under this chapter must be reduced by the amount of any recovery under the insurance policy.
  2. Any person with a claim that may be recovered under more than one insurance guaranty association or equivalent shall seek recovery first from the association of the place of residence of the insured except that if the claim is a first-party claim for damage to property with a permanent location, the person shall seek recovery first from the association of the location of the property. Any recovery under this chapter must be reduced by the amount of recovery from any other insurance guaranty association or equivalent.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-10. Prevention of insolvencies.

To aid in the detection and prevention of insurer insolvencies:

  1. The board of directors, upon majority vote, may make recommendations to the commissioner for the detection and prevention of insurer insolvencies.
  2. The board of directors, upon majority vote, may make recommendations to the commissioner on matters generally related to improving or enhancing regulation for solvency.
  3. The board of directors, at the conclusion of any domestic insurer insolvency in which the association was obligated to pay covered claims, may prepare a report on the history and causes of the insolvency, based on the information available to the association and submit this report to the commissioner.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-11. Examination of the association.

The association is subject to examination and regulation by the commissioner. The board of directors shall submit, by March thirty-first of each year, a financial report for the preceding calendar year in a form approved by the commissioner.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-12. Tax exemption.

The association is exempt from payment of all fees and all taxes levied by this state or any political subdivision except taxes levied on property.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-13. Recognition of assessments in rates.

The rate and premiums charged for insurance policies to which this chapter applies must include amounts sufficient to recoup a sum equal to the amounts paid to the association by the member insurer less any amounts returned to the member insurer by the association. These rates may not be determined to be excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-14. Immunity.

There is no liability on the part of and no claim for relief may arise against any member insurer, the association or the association’s agents or employees, the board of directors, or any person serving as a representative of any director, or the commissioner or the commissioner’s representatives for any action taken or any failure to act by these entities in the performance of their powers and duties under this chapter.

Source:

S.L. 1999, ch. 259, § 6.

26.1-42.1-15. Stay of proceedings.

All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in this state, subject to waiver by the association in specific cases involving covered claims, must be stayed until the last day fixed by the court for the filing of claims and additional time after this as may be determined by the court from the date the insolvency is determined or an ancillary proceeding is instituted in the state, whichever is later, to permit proper defense by the association of all pending causes of action. As to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the insolvent insurer or the insolvent insurer’s failure to defend an insured, the association on its own behalf or on behalf of such insured may apply to have the judgment, order, decision, verdict, or finding set aside by the same court or administrator that made the judgment, order, decision, verdict, or finding and may defend the claim on the merits. The liquidator, receiver, or statutory successor of an insolvent insurer covered by this chapter shall permit access by the board or the board’s authorized representative to the insolvent insurer’s records that are necessary for the board in carrying out the board’s functions under this chapter with regard to covered claims. In addition, the liquidator, receiver, or statutory successor shall provide the board or the board’s representative with copies of these records upon the request by the board and at the expense of the board.

Source:

S.L. 1999, ch. 259, § 6.

CHAPTER 26.1-43 Legal Expense Insurance

26.1-43-01. Legal expense insurance defined.

“Legal expense insurance”, as authorized in this title, means insurance which involves the assumption of a contractual obligation to reimburse the beneficiary against or on behalf of the beneficiary, all or a portion of the beneficiary’s fees, costs, or expenses related to or arising out of services by or under the supervision of an attorney licensed to practice law in this state, regardless of whether the payment is made by the beneficiaries individually or by a third party for them.

Source:

S.L. 1985, ch. 316, § 20.

Derivation:

N.D.C.C. § 26-02-46.

26.1-43-02. What legal expense insurance does not include.

Legal expense insurance does not include the provision of or reimbursement for legal services incidental to other insurance coverages.

Source:

S.L. 1985, ch. 316, § 20.

Derivation:

N.D.C.C. § 26-02-46.

26.1-43-03. Legal plans and contracts excepted from insurance code.

Unless otherwise provided, this title does not apply to:

  1. Plans licensed under chapter 26.1-19.
  2. Retainer contracts made by attorneys with individual clients with fees based upon an estimate of the nature and amount of services to be provided to a specific client and similar contracts made with a group of clients involved in the same or closely related legal matters.
  3. Employee welfare benefit plans as defined by the Employee Retirement Income Security Act of 1974 [Pub. L. 93-406; 88 Stat. 829].

Source:

S.L. 1985, ch. 316, § 20.

Derivation:

N.D.C.C. § 26-02-46.

CHAPTER 26.1-44 Surplus Lines Insurance

26.1-44-01. Surplus lines insurance valid.

Insurance contracts procured as surplus lines coverage from nonadmitted insurers in accordance with this chapter are valid and enforceable as to all parties and must be given recognition in all matters and respects to the same effect as like contracts issued by admitted insurers.

Source:

S.L. 1985, ch. 316, § 21; 2011, ch. 223, § 1.

Derivation:

N.D.C.C. § 26-09.2-08.

26.1-44-01.1. Definitions.

  1. “Admitted insurer” means an insurer licensed to engage in the business of insurance in this state.
  2. “Eligible surplus lines insurer” means a nonadmitted insurer with which a surplus lines producer may place surplus lines insurance pursuant to section 26.1-44-03.
  3. “Exempt commercial purchaser” means any person purchasing commercial insurance that, at the time of placement, meets the following requirements:
    1. The person employs or retains a qualified risk manager to negotiate insurance coverage.
    2. The person has paid aggregate nationwide commercial property and casualty insurance premiums in excess of one hundred thousand dollars in the immediately preceding twelve months.
      1. The person meets at least one of the following criteria:
        1. The person possesses a net worth in excess of twenty million dollars, as such amount is adjusted pursuant to paragraph 2.
        2. The person generates annual revenues in excess of fifty million dollars, as such amount is adjusted pursuant to paragraph 2.
        3. The person employs more than five hundred full-time or full-time equivalent employees per individual insured or is a member of an affiliated group employing more than one thousand employees in the aggregate.
        4. The person is a not-for-profit organization or public entity generating annual budgeted expenditures of at least thirty million dollars, as such amount is adjusted pursuant to paragraph 2.
        5. The person is a municipality with a population in excess of fifty thousand persons.
      2. Each fifth January first occurring after July 21, 2010, and ongoing thereafter, the amounts in subparagraphs a, b, and d of paragraph 1 will be adjusted to reflect the percentage change for such five-year period in the consumer price index for all urban consumers published by the bureau of labor statistics of the department of labor.
  4. “Home state”.
    1. Except as provided in subdivision b, “home state” means, with respect to an insured:
      1. The state in which an insured maintains its principal place of business or, in the case of an individual, the individual’s principal residence; or
      2. If one hundred percent of the insured risk is located out of the state referred to in paragraph 1, the state to which the greatest percentage of the insured’s taxable premium for that insurance contract is allocated.
    2. If more than one insured from an affiliated group are named insureds on a single nonadmitted insurance contract, the term “home state” means the home state, as determined pursuant to subdivision a, of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract.
  5. “Independently procured insurance” means insurance procured directly by an insured from a nonadmitted insurer.
  6. “Kind of insurance” means one of the types of insurance required to be reported in the annual statement which must be filed with the commissioner by admitted insurers.
  7. “Nonadmitted insurance” means any property and casualty insurance permitted to be placed directly or through a surplus lines producer with a nonadmitted insurer eligible to accept such insurance pursuant to section 26.1-44-03.
  8. “Nonadmitted insurer” means an insurer not licensed to engage in the business of insurance in this state but does not include a risk retention group as defined in paragraph 4 of subdivision a of section 2 of the Liability Risk Retention Act of 1986 [15 U.S.C. 3901(a)(4)].
  9. “Surplus lines insurance” means any property and casualty insurance on properties, risks, or exposures, located or to be performed in this state, permitted to be placed through a surplus lines producer with a nonadmitted insurer eligible to accept such insurance pursuant to section 26.1-44-03.
  10. “Surplus lines producer” means a person licensed under chapter 26.1-26 to place insurance on properties, risks, or exposures with nonadmitted insurers eligible to accept such insurance pursuant to section 26.1-44-03.
  11. “Type of insurance” means coverage afforded under the particular policy that is being placed.

Source:

S.L. 2011, ch. 223, § 2; 2015, ch. 224, § 1, eff June 1, 2015.

26.1-44-02. Duty to file evidence of insurance and signed statement.

  1. Each surplus lines producer, after the placing of any surplus lines insurance if the insured’s home state is this state, shall execute and file a report of placement, no later than March first for the quarter ending the preceding December thirty-first, June first for the quarter ending the preceding March thirty-first, September first for the quarter ending the preceding June thirtieth, and December first for the quarter ending the preceding September thirtieth of each year, regarding the insurance which must be kept confidential by the commissioner. The report of placement must include:
    1. The name and address of the insured;
    2. The identity of the insurer or insurers;
    3. The amount of premium charged for the insurance;
    4. The amount of premium tax;
    5. Any other pertinent information as the commissioner may reasonably require; and
    6. A signed statement certifying under penalty of law in the form prescribed by the commissioner as to the diligent efforts to place the coverage with admitted insurers and the results of that effort. The signed diligent search statement must be open to public inspection. The signed diligent search statement must affirm that the insured was expressly advised in writing before placement of the insurance that:
      1. The surplus lines insurer with which the insurance was to be placed is not licensed in this state and is not subject to the state’s supervision; and
      2. In the event of the insolvency of the surplus lines insurer, losses will not be paid by the state insurance guaranty fund.
  2. A surplus lines producer seeking to place nonadmitted insurance for an exempt commercial purchaser is not required to make a due diligence search or to file the signed diligent search statement in subdivision f of subsection 1 if the surplus lines producer has disclosed to the exempt commercial purchaser that such insurance may or may not be available from the admitted market that may provide greater protection with more regulatory oversight and the exempt commercial purchaser has subsequently requested in writing the surplus lines producer to procure or place such insurance from a nonadmitted insurer.

Source:

S.L. 1985, ch. 316, § 21; 2001, ch. 262, § 121; 2003, ch. 261, § 1; 2011, ch. 223, § 3; 2019, ch. 248, § 1, eff March 8, 2019.

Derivation:

N.D.C.C. §§ 26-09.2-01, 26-09.2-04, 26-17.1-02.

26.1-44-03. Surplus lines insurance.

The placement of nonadmitted insurance is subject to this section only if the insured’s home state is this state. Surplus lines insurance may be placed by a surplus lines producer if:

  1. Each insurer is an eligible surplus lines insurer;
  2. Each insurer is authorized to write the kind of insurance in its domiciliary jurisdiction;
  3. The full amount or type of insurance cannot be obtained from insurers who are admitted to do business in this state. The full amount or type of insurance may be procured from eligible surplus lines insurers provided that a diligent search is made among the insurers who are admitted to transact and are actually writing the particular type of insurance in this state if any are writing it;
  4. At the time of placement the surplus lines producer has determined that the nonadmitted insurer:
    1. Has established satisfactory evidence of good repute and financial integrity and has capital and surplus or its equivalent under the laws of its domiciliary jurisdiction which equals the greater of:
        1. The minimum capital and surplus requirements under the law of this state; or
        2. Fifteen million dollars.
      1. The requirements of paragraph 1 may be satisfied by an insurer possessing less than the minimum capital and surplus upon an affirmative finding of acceptability by the commissioner. The finding must be based upon such factors as quality of management, capital and surplus of any parent company, company underwriting profit and investment income trends, market availability, and company record and reputation within the industry. The commissioner may not make an affirmative finding of acceptability when the nonadmitted insurer’s capital and surplus is less than four million five hundred thousand dollars; or
    2. For an insurer not domiciled in the United States or its territories, the insurer is listed on the quarterly listing of alien insurers maintained by the national association of insurance commissioners international insurers department; and
  5. All other requirements of this chapter are met.

Source:

S.L. 1985, ch. 316, § 21; 2001, ch. 262, § 122; 2011, ch. 223, § 4.

Derivation:

N.D.C.C. § 26-09.2-11.

26.1-44-03.1. Surplus lines tax.

  1. If the insured’s home state is this state, every surplus lines producer shall pay to the commissioner a sum equal to one and three-fourths percent of the gross premiums charged, assessments, membership fees, subscriber fees, policy fees, and service fees, less any return premiums, for surplus lines insurance provided by the surplus lines producer.
  2. The tax on any portion of the premium unearned at termination of insurance having been credited or refunded by the state to the surplus lines producer must be returned to the policyholder directly by the surplus lines producer. The surplus lines producer is prohibited from rebating, for any reason, any part of the tax.
  3. At the time of filing the annual tax statement as set forth in section 26.1-44-06.1, each surplus lines producer shall pay the premium tax due for the policies written during the period covered by the annual tax statement.

Source:

S.L. 2011, ch. 223, § 5; 2015, ch. 44, § 11, eff July 1, 2015; 2015, ch. 224, § 2, eff June 1, 2015; 2019, ch. 248, § 2, eff March 8, 2019.

26.1-44-03.2. Domestic surplus lines insurers.

  1. A North Dakota domestic insurer may be designated a domestic surplus lines insurer if:
    1. The insurer possesses a policyholder surplus of at least fifteen million dollars;
    2. The designation is in compliance with a resolution of the insurer’s board of directors; and
    3. The commissioner has provided written approval of the designation.
  2. A domestic surplus lines insurer may write surplus lines insurance in North Dakota and any other jurisdiction in which the insurer is eligible. A domestic surplus lines insurer may insure in this state any risk if:
    1. Produced pursuant to chapter 26.1-44; and
    2. The premium is subject to surplus lines premium tax pursuant to section 26.1-44-03.1
  3. For purposes of the federal Nonadmitted and Reinsurance Reform Act of 2010 [15 U.S.C. 8201 et seq.], a domestic surplus lines insurer is considered a nonadmitted insurer as defined under that Act, with respect to risks insured in this state.
  4. A domestic surplus lines insurer may not issue a policy designed to satisfy the motor vehicle financial responsibility requirements in chapter 26.1-41 or any other law mandating insurance coverage by a licensed insurance company.
  5. Except as specifically exempted from such requirements, a domestic surplus lines insurer is subject to compliance with all financial examination and solvency requirements that apply to domestic insurers under chapter 26.1-03 regarding examinations and reports.
  6. A domestic surplus lines insurer is not subject to the provisions of chapter 26.1-38.1 regarding the life and health insurance guaranty association nor to chapter 26.1-39 regarding property and casualty insurance.

Source:

S.L. 2013, ch. 237, § 1; 2019, ch. 248, § 3, eff March 8, 2019.

26.1-44-04. Service of process.

Any insurer desiring to transact any business under this chapter, by any surplus lines producer in this state, shall appoint in writing the commissioner as its true and lawful attorney, upon whom legal process in any action or proceeding against it must be served, and in the writing, shall agree that any legal process against it, which is served upon the attorney, is of the same legal force and validity as if served upon the insurer, and that the authority continues in force so long as any liability remains outstanding in this state. Copies of the appointment certified by the commissioner are sufficient evidence thereof and must be admitted in evidence with the same force and effect as the original. Legal process may not be served upon the insurer except as provided by this section. In any suit on a policy on behalf of the owner or holder of the policy, the service of process must be made as provided by this section, but the action must be prosecuted in the county of the policyholder’s residence.

Source:

S.L. 1985, ch. 316, § 21; 2001, ch. 262, § 123; 2011, ch. 223, § 6.

Derivation:

N.D.C.C. § 26-09.2-06.

26.1-44-05. Consumer notice.

If the insured’s home state is this state, the surplus lines producer shall give the following consumer notice to every person applying for insurance with a nonadmitted insurer. The notice must be printed in sixteen-point type on a separate document affixed to the application. The applicant shall sign and date a copy of the notice to acknowledge receiving it. The surplus lines producer shall maintain the signed notice in its file for a period of five years from expiration of the policy. The surplus lines producer shall tender a copy of the signed notice to the insured at the time of delivery of each policy the producer transacts with a nonadmitted insurer. The copy must be a separate document affixed to the policy.

“Notice: 1. An insurer that is not licensed in this state is issuing the insurance policy that you have applied to purchase. These companies are called “nonadmitted” or “surplus lines” insurers. 2. The insurer is not subject to the financial solvency regulation and enforcement that applies to licensed insurers in this state. 3. These insurers generally do not participate in insurance guaranty funds created by state law. These guaranty funds will not pay your claims or protect your assets if the insurer becomes insolvent and is unable to make payments as promised. 4. Some states maintain lists of approved or eligible surplus lines insurers and surplus lines producers may use only insurers on the lists. Some states issue orders that particular surplus lines insurers cannot be used. 5. For additional information about the above matters and about the insurer, you should ask questions of your insurance producer or surplus lines producer. You may also contact your insurance department consumer help line.”

Source:

S.L. 1985, ch. 316, § 21; 1997, ch. 247, § 5; 2001, ch. 262, § 124; 2011, ch. 223, § 7.

Derivation:

N.D.C.C. § 26-09.2-05.

26.1-44-06. Records of surplus lines producer.

  1. If the insured’s home state is this state, each surplus lines producer shall keep in this state a full and true record of each surplus lines insurance contract placed by or through the producer, including a copy of the policy, certificate, cover note, or other evidence of insurance showing each of the following applicable items:
    1. Amount of the insurance, risks, and perils insured;
    2. Brief description of the property insured and its location;
    3. Gross premium charged;
    4. Any return premium paid;
    5. Rate of premium charged upon the several items of property;
    6. Effective date and terms of the contract;
    7. Name and address of the insured;
    8. Name and address of the insurer;
    9. Amount of tax and other sums to be collected from the insured;
    10. Identity of the producer of record;
    11. Any confirming correspondence from the insurer or its representative; and
    12. The application.
  2. The surplus lines producer shall keep open the record of each contract at all reasonable times to examination by the commissioner without notice for a period not less than five years following termination of the contract. In lieu of maintaining offices in this state, each nonresident surplus lines producer shall make available to the commissioner any and all records that the commissioner deems necessary for examination.

Source:

S.L. 1985, ch. 316, § 21; 2001, ch. 262, § 125; 2011, ch. 223, § 8; 2019, ch. 248, § 4, eff March 8, 2019.

Derivation:

N.D.C.C. § 26-09.2-07.

26.1-44-06.1. Reports and policy changes.

  1. If the insured’s home state is this state, no later than March first of each year, each surplus lines producer shall file with the commissioner on forms prescribed by the commissioner an annual tax statement of all surplus lines insurance transacted during the preceding calendar year, including:
    1. Aggregate gross premiums written;
    2. Aggregate return premiums; and
    3. Amount of aggregate tax remitted.
  2. An annual tax statement is not required to be filed if a surplus lines producer has transacted no surplus lines insurance during the preceding calendar year.
    1. If the insured’s home state is this state, each surplus lines producer shall file with the commissioner in the manner prescribed by the commissioner any surplus lines insurance endorsement, audit, or cancellation as follows:
      1. After any change to the initial surplus lines insurance placement which changes the insurance premium amount; or
      2. After the producer obtains knowledge of any change to the initial surplus lines insurance placement which changes the insurance premium amount and the producer is able to provide written proof to the commissioner of the date the producer obtained knowledge of the change.
    2. Any endorsement, audit, or cancellation subject to subdivision a must be filed no later than March first for the calendar quarter ending the preceding December thirty-first, June first for the calendar quarter ending the preceding March thirty-first, September first for the calendar quarter ending the preceding June thirtieth, or December first for the calendar quarter ending the preceding September thirtieth of each year.

Source:

S.L. 2011, ch. 223, § 9; 2015, ch. 224, § 3, eff June 1, 2015; 2015, ch. 225, § 1, eff June 1, 2015; 2019, ch. 248, § 5, eff March 8, 2019.

26.1-44-07. Actions against insurers issuing insurance — Venue — Service of process — Time for answer.

Every insurer making insurance under this chapter is deemed to be doing business in this state as an unlicensed concern and may be sued upon any claim for relief arising under any policy of insurance so issued and delivered by the insurer. The suit must be brought in the district court of the county in which the plaintiff resides. Service of summons and complaint in the suit must be made upon the commissioner in the manner provided by section 26.1-44-04.

Source:

S.L. 1985, ch. 316, § 21.

Derivation:

N.D.C.C. § 26-09.2-09.

26.1-44-08. Civil penalty for failure to file report of placement and signed statement, endorsement, audit, cancellation, file annual tax statement, and pay tax — Action for recovery — Revocation of license — Conditions prerequisite to reissuance — Hearing procedure and judicial review.

  1. A surplus lines producer is liable for a fine up to twenty-five dollars for each day of delinquency, not to exceed the sum of five hundred dollars for each failure or refusal to file, if the producer:
    1. Fails or refuses to file the report of placement or signed diligent search statement as required under section 26.1-44-02;
    2. Fails or refuses to file the endorsement, audit, or cancellation as required under section 26.1-44-06.1; or
    3. Fails or refuses to make and file the annual tax statement or pay the tax no later than March first as required under section 26.1-44-06.1.
  2. The tax and fine may be recovered in an action to be instituted by the commissioner in the name of the state, the attorney general representing the commissioner, in any court of competent jurisdiction, and the fine, when so collected, must be paid to the state treasurer and placed to the credit of the general fund. The commissioner, if satisfied that the delay in filing the annual tax statement, report of placement, endorsement, audit cancellation, or signed diligent search statement or the payment of the tax was excusable, may waive all or any part of the fine. The commissioner may revoke or suspend the surplus lines producer’s license if any surplus lines producer fails to make and file the annual tax statement and pay the taxes, refuses to allow the commissioner to inspect and examine the producer’s records of the business transacted by the producer pursuant to this chapter, fails to keep the records in the manner required by the commissioner, or falsifies or provides false information in the signed diligent search statement referred to in section 26.1-44-02.
  3. If the license of a surplus lines producer is revoked, whether by the action of the commissioner or by judicial proceedings, another license may not be issued to that surplus lines producer until two years have elapsed from the effective date of the revocation, nor until all taxes and fines are paid, nor until the commissioner is satisfied that full compliance with this chapter will be had.

Source:

S.L. 1985, ch. 316, § 21; 2001, ch. 262, § 126; 2003, ch. 261, § 2; 2011, ch. 223, § 10; 2015, ch. 225, § 2, eff June 1, 2015; 2019, ch. 248, § 6, eff March 8, 2019.

Derivation:

N.D.C.C. § 26-09.2-10.

26.1-44-09. Rulemaking authority.

The commissioner may adopt reasonable rules to implement this chapter.

Source:

S.L. 1985, ch. 316, § 21.

Derivation:

N.D.C.C. § 26-09.2-13.

26.1-44-10. Independently procured insurance — Duty to report and pay tax.

If the insured’s home state is this state, in accordance with subsection 9 of section 26.1-02-05, each insured in this state who independently procures or continues or renews insurance with a nonadmitted insurer on properties, risks, or exposures located or to be performed in whole or in part in this state, other than insurance procured through a surplus lines producer, is subject to the same requirements under this chapter as apply to a surplus lines producer.

Source:

S.L. 2011, ch. 223, § 11.

26.1-44-11. Enactment of surplus lines insurance multistate compliance compact. [Repealed]

Source:

S.L. 2011, ch. 223, § 12; Repealed by 2015, ch. 224, § 4, eff June 1, 2015.

CHAPTER 26.1-45 Long-term Care Insurance

26.1-45-01. Definitions.

In this chapter, unless the context requires otherwise:

  1. “Applicant” means:
    1. In the case of an individual long-term care insurance policy, the person who seeks to contract for benefits.
    2. In the case of a group long-term care insurance policy, the proposed certificate holder.
  2. “Certificate” means any certificate issued under a group long-term care insurance policy that has been delivered or issued for delivery in this state.
  3. “Group long-term care insurance” means a long-term care insurance policy that is delivered or issued for delivery in this state to:
    1. One or more employers or labor organizations, or to a trust or to the trustees of a fund established by one or more employers or labor organizations, or a combination thereof, for employees or former employees or a combination thereof, or for members or former members or a combination thereof, of the labor organizations.
    2. Any professional, trade, or occupational association for its members or former or retired members, or combination thereof, if the association:
      1. Is composed of individuals all of whom are or were actively engaged in the same profession, trade, or occupation; and
      2. Has been maintained in good faith for purposes other than obtaining insurance.
    3. An association, a trust, or the trustee of a fund established, created, or maintained for the benefit of members of one or more associations meeting the requirements of section 26.1-45-02.
    4. A group other than a group described in subdivision a, b, or c if the commissioner finds that:
      1. The issuance of the group policy is not contrary to the best interest of the public;
      2. The issuance of the group policy would result in economies of acquisition or administration; and
      3. The benefits are reasonable in relation to the premiums charged.
  4. “Long-term care insurance” means any insurance policy or rider primarily advertised, marketed, offered, or designed to provide coverage for not less than twelve consecutive months for each covered person on an expense incurred, indemnity, prepaid, or other basis, for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital. The term includes group and individual annuities and life insurance policies or riders, whether issued by insurers, fraternal benefit societies, nonprofit health service corporations, prepaid health plans, health maintenance organizations, or any similar entity, which provide directly or which supplement long-term care insurance. The term also includes home health care type insurance policies or riders which provide directly or which supplement long-term care insurance; and includes a policy or rider which provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. The term includes qualified long-term care insurance contracts. The term includes long-term care insurance products issued by insurers; fraternal benefit societies; nonprofit health, hospital, and medical service corporations; prepaid health plans; health maintenance organizations; or a similar organization to the extent that the organization is otherwise authorized to issue life or health insurance. The term does not include any insurance policy that is offered primarily to provide basic Medicare supplement coverage, basic hospital expense coverage, basic medical-surgical expenses coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income or related asset-protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage. With regard to life insurance, this term does not include life insurance policies which accelerate the death benefit specifically for one or more of the qualifying events of terminal illness, medical conditions requiring extraordinary medical intervention, or permanent institutional confinement, and which provide the option of a lump sum payment for those benefits and in which neither the benefits nor the eligibility for the benefits is conditioned upon the receipt of long-term care. Notwithstanding any other provision contained herein, any product advertised, marketed, or offered as a long-term care insurance is subject to the provisions of this chapter.
  5. “Policy” means any policy, contract, subscriber agreement, rider, or endorsement delivered or issued for delivery in this state by an insurer, fraternal benefit society, nonprofit health, hospital, or medical service corporation, prepaid health plan, health maintenance organization, or any similar entity.
    1. “Qualified long-term care insurance contract” or “federally tax-qualified long-term care insurance contract” means an individual or group insurance contract that meets the requirements of section 7702B(b) of the Internal Revenue Code of 1986, as amended, as follows:
      1. The only insurance protection provided under the contract is coverage of qualified long-term care services. A contract satisfies the requirements of this paragraph even if payments are made on a per diem or other periodic basis without regard to the period in which the expenses are incurred;
      2. The contract does not pay or reimburse expenses incurred for services or items to the extent that the expenses are reimbursable under title XVIII of the Social Security Act, as amended, or would be so reimbursable but for the application of a deductible or coinsurance amount. The requirements of this paragraph do not apply to expenses that are reimbursable under title XVIII of the Social Security Act only as a secondary payer. A contract satisfies the requirements of this paragraph even if payments are made on a per diem or other periodic basis without regard to the period in which the expenses are incurred;
      3. The contract is guaranteed renewable, within the meaning of section 7702B(b)(1)(c) of the Internal Revenue Code of 1986, as amended;
      4. The contract does not provide for a cash surrender value or other money that can be paid, assigned, pledged as collateral for a loan, or borrowed except as provided in paragraph 5;
      5. All refunds of premiums and all policyholder dividends or similar amounts under the contract are to be applied as a reduction in future premiums or to increase future benefits, except that a refund on the event of death of the insured or a complete surrender or cancellation of the contract cannot exceed the aggregate premiums paid under the contract; and
      6. The contract meets the consumer protection provisions set forth in section 7702B(g) of the Internal Revenue Code of 1986, as amended.
    2. “Qualified long-term care insurance contract” or “federally tax-qualified long-term care insurance contract” also means the portion of a life insurance contract that provides long-term care insurance coverage by rider or as part of the contract and that satisfies the requirements of sections 7702B(b) and (e) of the Internal Revenue Code of 1986, as amended.

Source:

S.L. 1987, ch. 371, § 1; 1991, ch. 304, § 3; 1993, ch. 310, § 4; 2003, ch. 262, §§ 1, 2.

Cross-References.

Unfair claim settlement practices defined, see N.D.C.C. § 26.1-04-03.

Collateral References.

Construction and Application of Long-Term Care Insurance Policies, 30 A.L.R.6th 395.

26.1-45-02. Group long-term care insurance — Association requirements — Approval.

Group long-term care insurance may be issued or delivered for the benefit of members of an association, as defined in subdivision c of subsection 3 of section 26.1-45-01, if prior to advertising, marketing, or offering a policy within this state, the association, or the insurer of the association, files evidence with the insurance commissioner that the association has at the outset a minimum of one hundred persons, has been organized and maintained in good faith for purposes other than that of obtaining insurance, has been in active existence for at least one year, and has a constitution and bylaws that provide that:

  1. The association hold regular meetings not less than annually to further the purposes of the members.
  2. Except for credit unions, the association collect dues or solicit contributions from members.
  3. The members have voting privileges and representation on the governing board and committees.

Thirty days after the filing, the association is deemed to satisfy the organizational requirements, unless the commissioner makes a finding that the association does not satisfy the organizational requirements.

Source:

S.L. 1987, ch. 371, § 2.

26.1-45-03. Limits of group long-term care insurance.

No group long-term care insurance coverage may be offered to a resident of this state under a group policy issued in another state to a group described in subdivision d of subsection 3 of section 26.1-45-01 unless the insurance commissioner or an insurance department in another state having statutory and regulatory long-term care insurance requirements substantially similar to those in this state has made a determination that the long-term care insurance requirements have been met.

Source:

S.L. 1987, ch. 371, § 3.

26.1-45-04. Disclosure and standards for long-term care insurance.

The insurance commissioner may adopt rules that include standards for full and fair disclosure setting forth the manner, content, and required disclosures for the sale of long-term care insurance policies, terms of renewability, initial and subsequent conditions of eligibility, nonduplication of coverage provisions, coverage of dependents, pre-existing conditions, termination of insurance, continuation or conversion, probationary periods, limitations, exceptions, reductions, elimination periods, requirements for replacement, recurrent conditions, and definitions of terms.

Source:

S.L. 1987, ch. 371, § 4; 1991, ch. 304, § 4.

26.1-45-04.1. Adoption of long-term care benefits comparison guides by commissioner.

The insurance commissioner shall adopt rules to create a long-term care benefits comparison guide to be presented at the point of sale between the client and insurance producer. The guide must include information regarding nursing home coverage and alternatives to nursing home coverage.

Source:

S.L. 1993, ch. 315, § 1; 2001, ch. 262, § 127.

26.1-45-05. Cancellation — Nonrenewal — Termination.

No long-term care insurance policy may:

  1. Be canceled, nonrenewed, or otherwise terminated on the grounds of the age or the deterioration of the mental or physical health of the insured individual or certificate holder.
  2. Contain a provision establishing a new waiting period in the event existing coverage is converted to or replaced by a new or other form within the same company, except with respect to an increase in benefits voluntarily selected by the insured individual or group policyholder.
  3. Provide coverage for skilled nursing care only or provide significantly more coverage for skilled care in a facility than coverage for lower levels of care.

Source:

S.L. 1987, ch. 371, § 5; 1991, ch. 304, §§ 5, 6.

26.1-45-05.1. Incontestability and rescission of long-term care insurance policy or certificate.

  1. If a policy or certificate has been in force for less than six months, an insurer may not rescind a long-term care insurance policy or certificate or deny an otherwise valid long-term care insurance claim except upon a showing of misrepresentation that is material to the acceptance for coverage.
  2. If a policy or certificate has been in force for at least six months but less than two years, an insurer may not rescind a long-term care insurance policy or certificate or deny an otherwise valid long-term care insurance claim except upon a showing of misrepresentation that is both material to the acceptance for coverage and that pertains to the condition for which benefits are sought.
  3. If a policy or certificate has been in force for two years, the policy or certificate may be contested only upon a showing that the insured knowingly and intentionally misrepresented relevant facts relating to the insured’s health. The policy or certificate may not be contested based upon misrepresentation alone.
  4. A long-term care insurance policy or certificate may not be field-issued based on medical or health status. For purposes of this section, “field-issued” means a policy or certificate issued by an agent or a third-party administrator pursuant to the underwriting authority granted to the agent or third-party administrator by an insurer.
  5. If an insurer has paid benefits under the long-term care insurance policy or certificate, the benefit payments may not be recovered by the insurer in the event that the policy or certificate is rescinded.
  6. In the event of the death of the insured, this section does not apply to the remaining death benefit of a life insurance policy that accelerates benefits for long-term care. In this situation, the remaining death benefits under these policies are governed by section 26.1-33-05. In all other situations, this section applies to life insurance policies that accelerate benefits for long-term care.

Source:

S.L. 1989, ch. 372, § 2; 1993, ch. 310, § 5; 1999, ch. 251, § 13; 2003, ch. 262, § 3.

26.1-45-05.2. Nursing home policy — Guaranteed renewable for life — Limitation on preexisting conditions.

Any long-term care insurance policy or certificate providing benefits for confinement to a nursing home must be guaranteed renewable for life. For purposes of this section, “guaranteed renewable for life” means the insured has the right to continue the policy in force for life subject to the policy’s terms by the timely payment of premiums during which the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force. The insurer may, however, in accordance with the provisions of the policy, make changes in premium rates as to all insureds who are placed in the same class for purposes of rate determination in the process of issuance of the policy or making it guaranteed renewable.

A policy or certificate of insurance providing benefits for confinement to a nursing home which is sold to a consumer in addition to another nursing home policy or which is sold to a consumer to replace such a policy may not contain any provision limiting payment of benefits due to pre-existing conditions of the insured except if there is any time period remaining relating to the exclusion of coverage for pre-existing conditions as specified in the underlying policy that the remaining waiting period for coverage of pre-existing conditions shall apply to the new policy unless the policy otherwise provides.

Source:

S.L. 1991, ch. 304, § 7.

26.1-45-06. Pre-existing conditions.

  1. No long-term care insurance policy or certificate other than a policy or certificate issued to a group as defined in subdivision a of subsection 3 of section 26.1-45-01 may define “pre-existing condition” as more restrictive than meaning a condition for which medical advice or treatment was recommended by, or received from a provider of health care services, within six months preceding the effective date of coverage of an insured person.
  2. No long-term care insurance policy or certificate issued on a group long-term care insurance policy other than a policy or certificate issued to a group as defined in subdivision a of subsection 3 of section 26.1-45-01 may exclude coverage for a loss or confinement that is the result of a pre-existing condition unless the loss or confinement begins within six months following the effective date of coverage of an insured person.
  3. The commissioner may extend the limitation periods set forth in this section as to the specific age group categories or specific policy forms upon findings that the extension is in the best interest of the public.
  4. The limitation on defining a pre-existing condition does not prohibit an insurer from using an application form designed to elicit the complete health history of an applicant, and, on the basis of the answers on that application, from underwriting in accordance with that insurer’s established underwriting standards. Unless otherwise provided in the policy or certificate, a pre-existing condition, regardless of whether it is disclosed on the application, need not be covered until the waiting period described in subsection 2 expires. No long-term care insurance policy or certificate may exclude or use waivers or riders of any kind to exclude, limit, or reduce coverage or benefits for specifically named or described pre-existing diseases or physical conditions beyond the waiting period described in subsection 2.

Source:

S.L. 1987, ch. 371, § 6; 1989, ch. 372, § 3; 1991, ch. 304, § 8.

26.1-45-07. Prior institutionalization requirement prohibited.

  1. No long-term care insurance policy or certificate may be delivered or issued for delivery in this state if such policy:
    1. Conditions eligibility for any benefits on a prior hospitalization requirement.
    2. Conditions eligibility for benefits provided in an institutional care setting on the receipt of a higher level of such institutional care.
    3. Conditions eligibility for any benefits other than waiver of premium, postconfinement, postacute care, or recuperative benefits on a prior institutionalization requirement.
    1. A long-term care insurance policy containing postconfinement, postacute care, or recuperative benefits must clearly label in a separate paragraph of the policy or certificate entitled “limitations or conditions on eligibility for benefits” such limitations or conditions, including any required number of days of confinement.
    2. A long-term care insurance policy or rider which conditions eligibility of noninstitutional benefits on the prior receipt of institutional care may not require a prior institutional stay of more than thirty days.
  2. No long-term care insurance policy or rider which provides benefits only following institutionalization may condition such benefits upon admission to a facility for the same or related conditions within a period of less than thirty days after discharge from the institution.

Source:

S.L. 1987, ch. 371, § 7; 1989, ch. 372, § 4; 1991, ch. 304, § 9; 2003, ch. 262, § 4.

Notes to Decisions

Retroactivity.

This statute does not apply retroactively. Haley v. AIG Life Ins. Co., 2002 U.S. Dist. LEXIS 1114 (D.N.D. Jan. 24, 2002).

26.1-45-08. Loss ratio standards.

The commissioner may adopt or amend rules establishing loss ratio standards for long-term care insurance policies; provided, that a specific reference to long-term care insurance policies is contained in the rules.

Source:

S.L. 1987, ch. 371, § 8.

26.1-45-09. Right to return policy — Outline of coverage required — Contents of certificate — Summary of policy provisions — Report of benefits status.

  1. Long-term care insurance applicants have the right to return the policy or certificate within thirty days of the date of its delivery or within thirty days of its effective date, whichever occurs later, and to have the premium refunded if, after examination of the policy or certificate, the applicant is not satisfied for any reason. Long-term care insurance policies and certificates must have a notice prominently printed on the first page or attached thereto stating in substance that the applicant has the right to return the policy or certificate within thirty days of the date of its delivery or within thirty days of its effective date, whichever occurs later, and to have the premium refunded if, after examination of the policy or certificate, other than a certificate issued pursuant to a policy issued to a group defined in subdivision a of subsection 3 of section 26.1-45-01, the applicant is not satisfied for any reason.
    1. An outline of coverage must be delivered to a prospective applicant for long-term care insurance at the time of initial solicitation through means that prominently direct the attention of the recipient to the document and its purpose.
      1. The commissioner shall prescribe a standard format, including style, arrangement, overall appearance, and the content of an outline of coverage.
      2. In the case of insurance producer solicitations, an insurance producer must deliver the outline of coverage prior to the presentation of an application or enrollment form.
      3. In the case of direct response solicitations, the outline of coverage must be presented in conjunction with any application or enrollment form.
      4. In the case of a policy issued to a group defined in subdivision a of subsection 3 of section 26.1-45-01, an outline of coverage is not required to be delivered, provided that the information described in paragraphs 1 through 7 of subdivision b is contained in other materials relating to enrollment. Upon request, these other materials must be made available to the commissioner.
    2. The outline of coverage must include:
      1. A description of the principal benefits and coverage provided in the policy.
      2. A statement of the principal exclusions, reductions, and limitations contained in the policy.
      3. A statement of the terms under which the policy or certificate, or both, may be continued in force or discontinued, including any reservation in the policy of a right to change premium. Continuation or conversion provisions of group coverage must be specifically described.
      4. A statement that the outline of coverage is a summary only, not a contract of insurance, and that the policy or group master policy contains the governing contractual provisions.
      5. A description of the terms under which the policy or certificate may be returned and premium refunded.
      6. A brief description of the relationship of cost of care and benefits.
      7. A statement that discloses to the policyholder or certificate holder whether the policy is intended to be a federally tax-qualified long-term care insurance contract under 7702B(b) of the Internal Revenue Code of 1986, as amended.
  2. A certificate issued pursuant to a group long-term care insurance policy which policy is delivered or issued for delivery in this state must include:
    1. A description of the principal benefits and coverage provided in the policy.
    2. A statement of the principal exclusions, reductions, and limitations contained in the policy.
    3. A statement that the group master policy determines governing contractual provisions.
  3. If an application for a long-term care insurance contract or certificate is approved and issued, the issuer, directly or through an authorized representative, shall deliver the contract or certificate of insurance to the applicant no later than thirty days after the date of approval.
  4. At the time of policy delivery, a policy summary must be delivered for an individual life insurance policy which provides long-term care benefits within the policy or by rider. In the case of direct response solicitations, the insurer shall deliver the policy summary upon the applicant’s request, but regardless of request shall make such delivery no later than at the time of policy delivery. In addition to complying with all applicable requirements, the summary must also include:
    1. An explanation of how the long-term care benefit interacts with other components of the policy, including deductions from death benefits;
    2. An illustration on the amount of benefits, the length of benefit, and the guaranteed lifetime benefits, if any, for each covered person;
    3. Any exclusions, reductions, and limitations on benefits of long-term care;
    4. A statement as to whether a long-term care inflation protection option is available under this policy;
    5. If applicable to the policy type, the summary shall also include:
      1. A disclosure of the effects of exercising other rights under the policy;
      2. A disclosure of guarantees relating to long-term care costs of insurance charges; and
      3. Current and projected maximum lifetime benefits; and
    6. The provisions of the policy summary listed above may be incorporated into a basic illustration or into a life insurance policy summary delivered to the consumer.
  5. Any time a long-term care benefit, funded through a life insurance vehicle by the acceleration of the death benefit, is in benefit payment status a monthly report must be provided to the policyholder. Such report must include:
    1. Any long-term care benefits paid out during the month;
    2. An explanation of any changes in the policy, e.g., death benefits or cash values, due to long-term care benefits being paid out; and
    3. The amount of long-term care benefits existing or remaining.
  6. If a claim under a long-term care insurance contract is denied, the issuer shall, within sixty days of the date of a written request by the policyholder or certificate holder, or a representative thereof:
    1. Provide a written explanation of the reasons for the denial; and
    2. Make available all information directly related to the denial.

Source:

S.L. 1987, ch. 371, § 9; 1989, ch. 365, § 2; 1989, ch. 372, § 5; 1991, ch. 304, § 10; 1993, ch. 310, § 6; 2001, ch. 262, § 128; 2003, ch. 262, § 5.

26.1-45-10. Application.

Any policy or rider advertised, marketed, or offered as long-term care or nursing home insurance must comply with the provisions of this chapter and all other applicable insurance laws insofar as they do not conflict with this chapter.

Source:

S.L. 1987, ch. 371, § 10; 1991, ch. 304, § 11.

26.1-45-11. Rulemaking authority.

The commissioner may adopt reasonable rules to promote premium adequacy, protect the policyholder in the event of substantial rate increases, and to establish minimum standards for correcting abusive marketing practices, replacement forms, insurance producer testing, penalties, and reporting practices for long-term care insurance.

Source:

S.L. 1991, ch. 304, § 12; 2001, ch. 262, § 129; 2003, ch. 262, § 6.

26.1-45-12. Penalties.

In addition to any other penalties provided by the laws of this state, any insurer and any insurance producer found to have violated any requirement of this title relating to the regulation of long-term care insurance or the marketing of such insurance shall be subject to a fine of up to three times the amount of any commissions paid for each policy involved in the violation or up to ten thousand dollars, whichever is greater.

Source:

S.L. 1991, ch. 304, § 13; 2001, ch. 262, § 130.

26.1-45-13. Qualified service providers. [Effective through August 31, 2022]

Any insurance company providing long-term care coverage for home and community-based services shall pay a provider meeting qualified service provider standards a daily payment allowance as defined in the policy or certificate. “Qualified service provider” means a human service zone or independent contractor that agrees to meet standards for personal attendant care service as established by the department of human services.

Source:

S.L. 1997, ch. 260, § 1; 2019, ch. 391, § 23, eff January 1, 2020.

26.1-45-13. Qualified service providers. [Effective September 1, 2022]

Any insurance company providing long-term care coverage for home and community-based services shall pay a provider meeting qualified service provider standards a daily payment allowance as defined in the policy or certificate. “Qualified service provider” means a human service zone or independent contractor that agrees to meet standards for personal attendant care service as established by the department of health and human services.

Source:

S.L. 1997, ch. 260, § 1; 2019, ch. 391, § 23, eff January 1, 2020; 2021, ch. 352, § 324, eff September 1, 2022.

26.1-45-14. Nonforfeiture benefits.

  1. Except as provided in subsection 2, a long-term care insurance policy may not be delivered or issued for delivery in this state unless the policyholder or certificate holder has been offered the option of purchasing a policy or certificate, including a nonforfeiture benefit. The offer of a nonforfeiture benefit may be in the form of a rider that is attached to the policy. In the event the policyholder or certificate holder declines the nonforfeiture benefits, the insurer shall provide a contingent benefit upon lapse that is available for a specific period of time following a substantial increase in premium rates.
  2. When a group long-term care insurance policy is issued, the offer required in subsection 1 must be made to the group policyholder. However, if the policy is issued as group long-term care insurance as defined in subdivision d of subsection 3 of section 26.1-45-01, other than to a continuing care retirement community or other similar entity, the offering must be made to each proposed certificate holder.
  3. The commissioner shall adopt rules specifying the type of nonforfeiture benefits to be offered as part of long-term care insurance policies and certificates, the standards for nonforfeiture benefits, and the rules regarding contingent benefit upon lapse, including a determining of the specific period of time during which a contingent benefit upon lapse will be available and the substantial premium rate increase that triggers a contingent benefit upon lapse as described in subsection 1.

Source:

S.L. 2003, ch. 262, § 7.

CHAPTER 26.1-45.1 Partnership for Long-Term Care Program [Repealed]

[Repealed by S.L. 1999, ch. 274, § 1]

CHAPTER 26.1-46 Risk Retention Groups and Purchasing Groups

26.1-46-01. Definitions.

As used in this chapter, unless the context requires otherwise:

  1. “Commissioner” means the North Dakota insurance commissioner or the commissioner, director, or superintendent of insurance in any other state.
  2. “Completed operations liability” means liability arising out of the installation, maintenance, or repair of any product at a site which is not owned or controlled by any person who performs that work or any person who hires an independent contractor to perform that work, but includes liability for activities which are completed or abandoned before the date of the occurrence giving rise to the liability.
  3. “Domicile”, for purposes of determining the state in which a purchasing group is domiciled, means:
    1. For a corporation or limited liability company, the state in which the purchasing group is incorporated or organized.
    2. For an entity which is not a corporation or limited liability company, the state of its principal place of business.
  4. “Hazardous financial condition” means that, based on its present or reasonably anticipated financial condition, a risk retention group, although not yet financially impaired or insolvent, is unlikely to be able to do either of the following:
    1. To meet obligations to policyholders with respect to known claims and reasonably anticipated claims.
    2. To pay other obligations in the normal course of business.
  5. “Insurance” means primary insurance, excess insurance, reinsurance, surplus lines insurance, and any other arrangement for shifting and distributing risk which is determined to be insurance under the laws of this state.
  6. “Liability” means legal liability for damages, including costs of defense, legal costs and fees, and other claims expenses because of injuries to other persons, damage to their property, or other damage or loss to such other persons resulting from or arising out of either of the following:
    1. Any business whether profit or nonprofit, trade, product, services including professional services, premises, or operations.
    2. Any activity of any state or local government, or any agency or political subdivision thereof.
  7. “Personal risk liability” means liability for damages because of injury to any person, damage to property, or other loss or damage resulting from any personal, familial, or household responsibilities or activities, rather than from responsibilities or activities referred to in subsection 5.
  8. “Plan of operation or a feasibility study” means an analysis which presents the expected activities and results of a risk retention group, including, at a minimum, all of the following:
    1. For each state in which it intends to operate, the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the group intends to offer.
    2. Historical and expected loss experience of the proposed members and national experience of similar exposures to the extent that this experience is reasonably available.
    3. Pro forma financial statements and projections.
    4. Appropriate opinions by a qualified independent casualty actuary, including a determination of minimum premium or participation levels required to commence operations and to prevent a hazardous financial condition.
    5. Identification of management, underwriting and claims procedures, marketing methods, managerial oversight methods, reinsurance agreements, and investment policies.
    6. Such other matters as may be prescribed by the commissioner for liability insurance companies authorized by the insurance laws of the state in which the risk retention group is chartered.
    7. Information sufficient to verify that its members are engaged in businesses or activities similar or related with respect to the liability to which such members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations.
    8. Identification of each state in which the risk retention group has obtained, or sought to obtain, a charter and license, and a description of its status in each such state.
  9. “Product liability” means liability for damages because of any personal injury, death, emotional harm, consequential economic damage, or property damage, including damages resulting from the loss of use of property, arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product, but does not include the liability of any person for those damages if the product involved was in the possession of such a person when the incident giving rise to the claim occurred.
  10. “Purchasing group” means any group which meets all of the following:
    1. The group has as one of its purposes the purchase of liability insurance on a group basis.
    2. The group purchases such insurance only for its group members and only to cover their similar or related liability exposure, as described in subdivision c.
    3. The group is composed of members whose business or activities are similar or related with respect to the liability to which members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations.
    4. The group is domiciled in any state.
  11. “Risk retention group” means any corporation or other limited liability association:
    1. Whose primary activity consists of assuming and spreading all, or any portion, of the liability exposure of its group members.
    2. Which is organized for the primary purpose of conducting the activity described under subdivision a.
    3. Which is chartered and licensed as a liability insurance company and authorized to engage in the business of insurance under the laws of any state; or, before January 1, 1985, was chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands and, before such date, had certified to the insurance commissioner of at least one state that it satisfied the capitalization requirements of such state, except that any such group shall be considered to be a risk retention group only if it has been engaged in business continuously since that date and only for the purpose of continuing to provide insurance to cover product liability or completed operations liability as such terms were defined in the Product Liability Risk Retention Act of 1981 before the date of the enactment of the Liability Risk Retention Act of 1986.
    4. Which does not exclude any person from membership in the group solely to provide for members of such a group a competitive advantage over such a person.
    5. Which has as its owners only persons who comprise the membership of the risk retention group and who are provided insurance by such group, or has as its sole owner an organization which has as its members only persons who comprise the membership of the risk retention group and its owners only persons who comprise the membership of the risk retention group and who are provided insurance by such group.
    6. Whose members are engaged in businesses or activities similar or related with respect to the liability of which such members are exposed by virtue of any related, similar, or common business trade, product, services, premises, or operations.
    7. Whose activities do not include the provision of insurance other than:
      1. Liability insurance for assuming and spreading all or any portion of the liability of its group members.
      2. Reinsurance with respect to the liability of any other risk retention group or any members of such other group which is engaged in business or activities so that the group or member meets the requirement described in subdivision f from membership in the risk retention group which provides such reinsurance.
    8. The name of which includes the phrase “risk retention group”.
  12. “State” means any state of the United States or the District of Columbia.

The term does not include personal risk liability and an employer’s liability with respect to its employees other than legal liability under the federal Employer’s Liability Act [45 U.S.C. 51 et seq.].

Source:

S.L. 1987, ch. 372, § 1; 1993, ch. 54, § 106; 1993, ch. 292, §§ 35 to 38.

26.1-46-02. Risk retention groups chartered in this state.

A risk retention group seeking to be chartered in this state must be chartered and licensed as a liability insurance company authorized by the insurance laws of this state and, except as provided elsewhere in this chapter, shall comply with all of the laws, rules, regulations, and requirements applicable to such insurers chartered and licensed in this state and with section 26.1-46-03 to the extent such requirements are not a limitation on laws, rules, regulations, or requirements of this state. Notwithstanding any other provision to the contrary, all risk retention groups chartered in this state shall file with the department and the national association of insurance commissioners an annual statement in a form prescribed by the national association of insurance commissioners and in diskette form, if required by the commissioner, and completed in accordance with its instructions and the national association of insurance commissioners accounting practices and procedures manual. Before it may offer insurance in any state, each risk retention group doing business in this state, except for a risk retention group chartered in this state which does business only in this state and which has fewer than twenty-six resident members or insureds, shall also submit for approval to the insurance commissioner of this state a plan of operation or a feasibility study and revisions of such plan or study if the group intends to offer any additional lines of liability insurance. Immediately upon receipt of an application for charter in this state, the risk retention group shall provide summary information concerning the filing to the national association of insurance commissioners, including the name of the risk retention group, the identity of the initial members of the group, the identity of the individuals who organized the group or who will provide administrative services or otherwise influence or control the activities of the group, the amount and nature of initial capitalization, the coverages to be afforded, and the states in which the group intends to operate. Upon receipt of this information, the commissioner shall forward the information to the national association of insurance commissioners. Providing notification to the national association of insurance commissioners is in addition to, and is not sufficient to satisfy, the requirements of this chapter.

Source:

S.L. 1987, ch. 372, § 2; 1993, ch. 292, § 39.

26.1-46-03. Risk retention groups not chartered in this state — Requirements for operation.

Risk retention groups chartered in states other than this state and seeking to do business as a risk retention group in this state shall observe and abide by the laws of this state as follows:

  1. Notice of operations and designation of commissioner as agent. Before offering insurance in this state, a risk retention group shall submit to the commissioner on a form prescribed by the national association of insurance commissioners all of the following:
    1. A statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, date of chartering, its principal place of business, and such other information, including information on its membership, as the commissioner of this state may require to verify that the risk retention group is qualified under subsection 11 of section 26.1-46-01.
    2. A copy of its plan of operation or a feasibility study and revisions of such plan or study submitted to its state of domicile; provided, however, that the provision relating to the submission of a plan of operation or a feasibility study does not apply with respect to any line or classification of liability insurance which was defined in the Product Liability Risk Retention Act of 1981 before October 27, 1986, and was offered before such date by any risk retention group which had been chartered and operating for not less than three years before such date.
    3. The risk retention group shall submit a copy of any revision to its plan of operation or feasibility study required by section 26.1-46-02 at the same time that the revision is submitted to the commissioner of its chartering state.
    4. A statement of registration, for which a filing fee must be determined by the commissioner, which designated the commissioner as its agent for the purpose of receiving service of legal documents or process.
  2. Financial condition. Any risk retention group doing business in this state shall submit to the commissioner upon the commissioner’s request all of the following:
    1. A copy of the group’s financial statement submitted to its state of domicile, which must be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American academy of actuaries or a qualified loss reserve specialist according to criteria established by the national association of insurance commissioners.
    2. A copy of each examination of the risk retention group as certified by the commissioner or public official conducting the examination.
    3. Upon request by the commissioner, a copy of any audit performed with respect to the risk retention group.
    4. Such information as may be required to verify its continuing qualifications as a risk retention group under subsection 11 of section 26.1-46-01.
  3. Taxation.
    1. All premiums paid for coverages within this state to risk retention groups are subject to taxation at the same rate and subject to the same interest, fines, and penalties for nonpayment that are applicable to foreign-admitted insurers.
    2. To the extent insurance producers are utilized, the insurance producers shall report and pay the taxes for the premiums for risks which the insurance producers have placed with or on behalf of a risk retention group not chartered in this state.
    3. To the extent the insurance producers are not utilized or fail to pay the tax, each risk retention group shall pay the tax for risks insured within the state. Further, each risk retention group shall report all premiums paid to it for risks insured within the state.
    4. This subsection does not apply to risk retention groups doing business in this state which have fewer than twenty-six resident members or insureds.
    5. To the extent that insurance producers are utilized pursuant to section 26.1-46-11, each insurance producer shall keep a complete and separate record of all policies procured from each risk retention group, which record must be open to examination by the commissioner, as provided in sections 26.1-03-19.1 through 26.1-03-22. These records must, for each policy and each kind of insurance provided thereunder, include the limit of liability, the time period covered, the effective date, the name of the risk retention group which issued the policy, the gross premium charged, and the amount of return premiums, if any.
  4. Compliance with prohibited practices chapter. Any risk retention group, its insurance producers and representatives, shall comply with chapter 26.1-04.
  5. Examination regarding financial condition. Any risk retention group must submit to an examination by the commissioner to determine its financial condition if the commissioner of the jurisdiction in which the group is chartered has not initiated an examination or does not initiate an examination, within sixty days after a request by the commissioner of this state. Any such examination must be coordinated to avoid unjustified repetition and conducted in an expeditious manner and in accordance with the national association of insurance commissioners examiner handbook.
  6. Notice to purchasers. Any policy issued by a risk retention group must contain in ten-point type of the front page and the declaration page, the following notice:
  7. Prohibited acts regarding solicitation or sale. The following acts by a risk retention group are prohibited:
    1. The solicitation or sale of insurance by a risk retention group to any person who is not eligible for membership in such group.
    2. The solicitation or sale of insurance by, or operation of, a risk retention group that is in a hazardous financial condition or is financially impaired.
  8. Prohibition on ownership by an insurance company. No risk retention group may be allowed to do business in this state if an insurance company is directly or indirectly a member or owner of such risk retention group, other than in the case of a risk retention group all of whose members are insurance companies.
  9. Delinquency proceedings. A risk retention group not chartered in this state and doing business in this state shall comply with a lawful order issued in a voluntary dissolution proceeding or in a delinquency proceeding commenced by a state insurance commissioner if there has been a finding of financial impairment after an examination under subsection 4.
  10. Any risk retention group, its insurance producers, and representatives shall comply with chapter 26.1-04. The terms of any insurance policy issued by any risk retention group may not provide, or be construed to provide, coverage prohibited generally by statute of this state or declared unlawful by the highest court of this state whose law applies to such policy.
  11. A risk retention group that violates any provisions of this chapter will be subject to fines and penalties, including revocation of its right to do business in this state, applicable to licensed insurers generally. In addition to complying with the requirements of this section, any risk retention group operating in this state prior to enactment of this chapter, within thirty days after the effective date of this chapter, shall comply with the provision of subdivision a of subsection 1.

NOTICE

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This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for your risk retention group.

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Source:

S.L. 1987, ch. 372, § 3; 1993, ch. 292, §§ 40 to 42; 2001, ch. 262, § 131.

26.1-46-04. Compulsory associations.

  1. No risk retention group may join or contribute financially to any insurance insolvency guaranty fund, or similar mechanism, in this state, nor may any risk retention group, or its insureds, receive any benefit from any such fund for claims arising out of the operations of such risk retention group.
  2. When a purchasing group obtains insurance covering its members’ risks from an insurer not authorized in this state or a risk retention group, no such risks, wherever resided or located, may be covered by any insurance guaranty fund or similar mechanism in this state.
  3. When a purchasing group obtains insurance covering its members’ risks from an authorized insurer, only risks resident or located in this state may be covered by the state guaranty fund subject to chapter 26.1-42.1.

Source:

S.L. 1987, ch. 372, § 4; 1993, ch. 292, § 43; 1999, ch. 259, § 7.

26.1-46-05. Countersignatures not required.

A policy of insurance issued to a risk retention group or any member of that group may not be required to be countersigned except as otherwise provided in section 26.1-11-07.

Source:

S.L. 1987, ch. 372, § 5.

26.1-46-06. Purchasing groups — Exemption from certain laws relating to the group purchase of insurance.

A purchasing group and its insurer or insurers is subject to all applicable laws of this state, except that a purchasing group and its insurer or insurers are exempt, in regard to liability insurance for the purchasing group, from any law that would:

  1. Prohibit the establishment of a purchasing group.
  2. Make it unlawful for an insurer to provide or offer to provide insurance on a basis providing, to a purchasing group or its members, advantages based on their loss and expense experience not afforded to other persons with respect to rates, policy forms, coverages, or other matters.
  3. Prohibit a purchasing group or its members from purchasing insurance on a group basis described in subsection 2.
  4. Prohibit a purchasing group from obtaining insurance on a group basis because the group has not been in existence for a minimum period of time or because any member has not belonged to the group for a minimum period of time.
  5. Require that a purchasing group must have a minimum number of members, common ownership or affiliation, or certain legal form.
  6. Require that a certain percentage of a purchasing group must obtain insurance on a group basis.
  7. Otherwise discriminate against a purchasing group or any of its members.
  8. Require that any insurance policy issued to a purchasing group or any of its members be countersigned by an insurance producer residing in this state.

Source:

S.L. 1987, ch. 372, § 6; 1993, ch. 292, § 44; 2001, ch. 262, § 132.

26.1-46-07. Notice and registration requirements of purchasing groups.

  1. A purchasing group which intends to do business in this state shall, prior to doing business, furnish notice to the commissioner on forms prescribed by the national association of insurance commissioners which must do all of the following:
    1. Identify the state in which the group is domiciled.
    2. Identify all other states in which the group intends to do business.
    3. Specify the lines and classifications of liability insurance which the purchasing group intends to purchase.
    4. Identify the insurance company from which the group intends to purchase its insurance and the domicile of such company.
    5. Specify the method by which, and the person or persons, if any, through whom insurance will be offered to its members whose risks are resident or located in this state.
    6. Identify the principal place of business of the group.
    7. Provide such other information as may be required by the commissioner to verify that the purchasing group is qualified under subsection 10 of section 26.1-46-01.
  2. A purchasing group shall, within ten days, notify the commissioner of any changes in any of the items set forth in subsection 1.
  3. The purchasing group shall register with and designate the insurance commissioner as its agent solely for the purpose of receiving service of legal documents or process, except that such requirements do not apply in the case of a purchasing group which only purchases insurance that was authorized under the federal Products Liability Risk Retention Act of 1981 to which all of the following apply:
    1. The group was domiciled before April 1, 1986, and is domiciled on and after October 27, 1986, in any state of the United States.
    2. Before October 27, 1986, the group purchased insurance from an insurance carrier licensed in any state and since October 27, 1986, the group purchased its insurance from an insurance carrier licensed in any state.
    3. The group was a purchasing group under the requirements of the federal Product Liability Risk Retention Act of 1981 before October 27, 1986.
    4. The group does not purchase insurance that was not authorized for purposes of an exemption under that Act, as in effect before October 27, 1986.
    5. Each purchasing group that is required to give notice pursuant to subsection 1 shall also furnish such information as may be required by the commissioner to verify that the entity qualifies as a purchasing group, determine where the purchasing group is located, and determine appropriate tax treatment.
    6. Any purchasing group which was doing business in this state prior to the enactment of this chapter shall, within thirty days after August 1, 1993, furnish notice to the commissioner pursuant to the provisions of subsection 1 and furnish such information as may be required pursuant to subsections 2 and 3.

Source:

S.L. 1987, ch. 372, § 7; 1993, ch. 292, § 45.

26.1-46-08. Restrictions on insurance purchased by purchasing groups.

  1. A purchasing group may not purchase insurance from a risk retention group that is not chartered in a state or from an insurer not admitted in the state in which the purchasing group is located, unless the purchase is effected through a licensed insurance producer acting pursuant to the surplus lines laws and regulations of such state.
  2. A purchasing group which obtains liability insurance from an insurer not admitted in this state or a risk retention group shall inform each of the members of the group which have a risk resident or located in this state that the risk is not protected by an insurance insolvency guaranty fund in this state, and that the risk retention group or insurer may not be subject to all insurance laws and rules of this state.
  3. No purchasing group may purchase insurance providing for a deductible or self-insured retention applicable to the group as a whole; however, coverage may provide for a deductible or self-insured retention applicable to individual members.
  4. Purchases of insurance by purchasing groups are subject to the same standards regarding aggregate limits which are applicable to all purchases of group insurance.

Source:

S.L. 1987, ch. 372, § 8; 1993, ch. 292, § 46; 2001, ch. 262, § 133.

26.1-46-08.1. Purchasing group taxation.

Premium taxes and taxes on premiums paid for coverage of risks resident or located in this state by a purchasing group or any members of the purchasing group must be:

  1. Imposed at the same rate and subject to the same interest, fines, and penalties as that applicable to premium taxes and taxes on premiums paid for similar coverage from a similar insurance source by other insureds; and
  2. Paid first by such insurance source, and if not by such source, by the insurance producer for the purchasing group, and if not by such insurance producer, then by the purchasing group, and if not by such purchasing group, then by each of its members.

Source:

S.L. 1993, ch. 292, § 47; 2001, ch. 262, § 134.

26.1-46-09. Administrative and procedural authority regarding risk retention groups and purchasing groups.

The commissioner is authorized to make use of any of the powers and requirements established under title 26.1 so long as those powers or requirements are not specifically pre-empted by the federal Product Liability Risk Retention Act of 1981, as amended by the Risk Retention Amendments of 1986. This includes the commissioner’s administrative authority to investigate, issue subpoenas, conduct depositions and hearings, issue orders, impose penalties, and seek injunctive relief. With regard to any investigation, administrative proceedings, or litigation, the commissioner can rely on the procedural law and regulations of the state. The injunctive authority of the commissioner in regard to risk retention groups is restricted by the requirements that any injunction be issued by a court of competent jurisdiction.

Source:

S.L. 1987, ch. 372, § 9; 1993, ch. 292, § 48.

26.1-46-10. Penalties.

A risk retention group which violates any provision of this chapter is subject to fines and penalties applicable to licensed insurers generally, including revocation of its certificate of authority to do business in this state.

Source:

S.L. 1987, ch. 372, § 10.

26.1-46-11. Duty of insurance producers to obtain license.

Any person acting, or offering to act, as an insurance producer for a risk retention group or purchasing group, which solicits members, sells insurance coverage, purchases coverage for its members located within the state, or otherwise does business in this state, shall, before commencing any such activity, obtain a license from the commissioner. This section does not apply to any person acting as an insurance producer for a risk retention group doing business in this state which has fewer than twenty-six resident members or insureds.

Source:

S.L. 1987, ch. 372, § 11; 2001, ch. 262, § 135.

26.1-46-12. Binding effect of orders issued in United States district court.

An order issued by any district court of the United States enjoining a risk retention group from soliciting or selling insurance, or operating, in any state or in all states or in any territory or possession of the United States upon a finding that such a group is in a hazardous financial condition is enforceable in the courts of the state.

Source:

S.L. 1987, ch. 372, § 12.

26.1-46-13. Rules and regulations.

The commissioner may adopt such rules relating to risk retention groups as may be necessary or desirable to carry out the provisions of the chapter.

Source:

S.L. 1987, ch. 372, § 13.

CHAPTER 26.1-47 Preferred Provider Organizations

26.1-47-01. Definitions. [Effective through August 31, 2022]

As used in this chapter, unless the context indicates otherwise:

  1. “Air ambulance” means a specially equipped aircraft licensed by the state department of health for transporting patients.
  2. “Air ambulance provider” means a publicly or privately owned organization that is licensed or applies for licensure by the state department of health to provide transportation and care of patients by air ambulance.
  3. “Authorized representative” means:
    1. A person to which a covered person has given express written consent to represent the covered person;
    2. A person authorized by law to provide substituted consent for a covered person; or
    3. If a covered person is unable to provide consent, the covered person’s treating health care professional or a family member of the covered person.
  4. “Balance billing” means the practice of an air ambulance provider billing for the difference between the air ambulance provider’s charge and the health care insurer’s allowed amount.
  5. “Commissioner” means the insurance commissioner of the state of North Dakota.
  6. “Covered person” means an individual on whose behalf the health care insurer is obligated to pay for or provide health care services.
  7. “Facility” means an institution or other immobile health care setting providing physical, mental, or behavioral health care services.
  8. “Health benefit plan” means the health insurance policy or subscriber agreement between the covered person or the policyholder and the health care insurer which defines the services covered.
  9. “Health care insurer” includes an insurance company as defined in section 26.1-02-01, a health service corporation as defined in section 26.1-17-01, a health maintenance organization as defined in section 26.1-18.1-01, and a fraternal benefit society as defined in section 26.1-15.1-02.
  10. “Health care provider” means licensed providers of health care services in this state.
  11. “Health care services” means services rendered or products sold by a health care provider within the scope of the provider’s license. The term includes hospital, medical, surgical, dental, vision, chiropractic, and pharmaceutical services or products.
  12. “Network” means a group of preferred providers providing services under a network plan.
  13. “Network plan” means a health benefit plan that requires a covered person to use, or creates incentives, including financial incentives, for a covered person to use health care providers managed by, owned by, under contract with, or employed by the health care insurer.
  14. “Out-of-network” means a provider that is not providing the service under a network plan.
  15. “Preferred provider” means a duly licensed health care provider or group of providers who have contracted with the health care insurer, under this chapter, to provide health care services to covered persons under a health benefit plan.
  16. “Preferred provider arrangement” means a contract between the health care insurer and one or more health care providers which complies with all the requirements of this chapter.
  17. “Prior authorization” means confirmation by the covered person’s health care insurer that the air ambulance services sought to be provided by the air ambulance provider meet the criteria for coverage under the covered person’s health benefit plan as defined by the provisions of the covered person’s health benefit plan.

Source:

S.L. 1987, ch. 373, § 1; 1997, ch. 51, § 19; 1999, ch. 253, § 9; 2017, ch. 194, § 2, eff January 1, 2018; 2017, ch. 194, § 3, eff August 1, 2021; 2021, ch. 243, § 2, eff August 1, 2021.

Note.

Section 26.1-47-01 was amended 2 times by the 2021 Legislative Assembly. Pursuant to Section 1-02-09.1, the section is printed above to harmonize and give effect to the changes made in Section 2 of Chapter 243, Session Laws 2021, Bill 1493; and Section 325 of Chapter 352, Session Laws 2021, House Bill 1247.

Section 10 of chapter 194, S.L. 2017 provides, “ CONTINGENT EFFECTIVE DATE . If Section 26.1-47-09 is declared invalid, this section becomes effective on the date the insurance commissioner certifies the invalidity of Section 26.1-47-09 to the Secretary of State and the Legislative Council."

26.1-47-01. Definitions. [Effective September 1, 2022]

As used in this chapter, unless the context indicates otherwise:

  1. “Air ambulance” means a specially equipped aircraft licensed by the department of health and human services for transporting patients.
  2. “Air ambulance provider” means a publicly or privately owned organization that is licensed or applies for licensure by the department of health and human services to provide transportation and care of patients by air ambulance.
  3. “Authorized representative” means:
    1. A person to which a covered person has given express written consent to represent the covered person;
    2. A person authorized by law to provide substituted consent for a covered person; or
    3. If a covered person is unable to provide consent, the covered person’s treating health care professional or a family member of the covered person.
  4. “Balance billing” means the practice of an air ambulance provider billing for the difference between the air ambulance provider’s charge and the health care insurer’s allowed amount.
  5. “Commissioner” means the insurance commissioner of the state of North Dakota.
  6. “Covered person” means an individual on whose behalf the health care insurer is obligated to pay for or provide health care services.
  7. “Facility” means an institution or other immobile health care setting providing physical, mental, or behavioral health care services.
  8. “Health benefit plan” means the health insurance policy or subscriber agreement between the covered person or the policyholder and the health care insurer which defines the services covered.
  9. “Health care insurer” includes an insurance company as defined in section 26.1-02-01, a health service corporation as defined in section 26.1-17-01, a health maintenance organization as defined in section 26.1-18.1-01, and a fraternal benefit society as defined in section 26.1-15.1-02.
  10. “Health care provider” means licensed providers of health care services in this state.
  11. “Health care services” means services rendered or products sold by a health care provider within the scope of the provider’s license. The term includes hospital, medical, surgical, dental, vision, chiropractic, and pharmaceutical services or products.
  12. “Network” means a group of preferred providers providing services under a network plan.
  13. “Network plan” means a health benefit plan that requires a covered person to use, or creates incentives, including financial incentives, for a covered person to use health care providers managed by, owned by, under contract with, or employed by the health care insurer.
  14. “Out-of-network” means a provider that is not providing the service under a network plan.
  15. “Preferred provider” means a duly licensed health care provider or group of providers who have contracted with the health care insurer, under this chapter, to provide health care services to covered persons under a health benefit plan.
  16. “Preferred provider arrangement” means a contract between the health care insurer and one or more health care providers which complies with all the requirements of this chapter.
  17. “Prior authorization” means confirmation by the covered person’s health care insurer that the air ambulance services sought to be provided by the air ambulance provider meet the criteria for coverage under the covered person’s health benefit plan as defined by the provisions of the covered person’s health benefit plan.

Source:

S.L. 1987, ch. 373, § 1; 1997, ch. 51, § 19; 1999, ch. 253, § 9; 2017, ch. 194, § 2, eff January 1, 2018; 2017, ch. 194, § 3, eff August 1, 2021; 2021, ch. 243, § 2, eff August 1, 2021; 2021, ch. 352, § 325, eff September 1, 2022.

26.1-47-02. Preferred provider arrangements.

Notwithstanding any provision of law to the contrary, any health care insurer may enter into preferred provider arrangements.

  1. Preferred provider arrangements must:
    1. Establish the amount and manner of payment to the preferred provider. The amount and manner of payment may include capitation payments for preferred providers.
    2. Include mechanisms, subject to the minimum standards imposed by chapter 26.1-26.4, which are designed to review and control the utilization of health care services and establish a procedure for determining whether health care services rendered are medically necessary.
    3. Include mechanisms which are designed to preserve the quality of health care.
    4. With regard to an arrangement in which the preferred provider is placed at risk for the cost or utilization of health care services, specifically include a description of the preferred provider’s responsibilities with respect to the health care insurer’s applicable administrative policies and programs, including utilization review, quality assessment and improvement programs, credentialing, grievance procedures, and data reporting requirements. Any administrative responsibilities or costs not specifically described or allocated in the contract establishing the arrangement as the responsibility of the preferred provider are the responsibility of the health care insurer.
    5. Provide that in the event the health care insurer fails to pay for health care services as set forth in the contract, the covered person is not liable to the provider for any sums owed by the health care insurer.
    6. Provide that in the event of the health care insurer insolvency, services for a covered person continue for the period for which premium payment has been made and until the covered person’s discharge from inpatient facilities.
    7. Provide that either party terminating the contract without cause provide the other party at least sixty days’ advance written notice of the termination.
  2. Preferred provider arrangements may not unfairly deny health benefits to persons for covered medically necessary services.
  3. Preferred provider arrangements may not restrict a health care provider from entering into preferred provider arrangements or other arrangements with other health care insurers.
  4. A health care insurer must file all its preferred provider arrangements with the commissioner within ten days of implementing the arrangements. If the preferred provider arrangement does not meet the requirements of this chapter, the commissioner may declare the contract void and disapprove the preferred provider arrangement in accordance with the procedure for policies set out in chapter 26.1-30.
  5. A preferred provider arrangement may not offer an inducement to a preferred provider to provide less than medically necessary services to a covered person. This subsection does not prohibit a preferred provider arrangement from including capitation payments or shared-risk arrangements authorized under subdivision a of subsection 1 which are not tied to specific medical decisions with respect to a patient.
  6. A health care insurer may not penalize a provider because the provider, in good faith, reports to state or federal authorities any act or practice by the health care insurer which jeopardizes patient health or welfare.

Source:

S.L. 1987, ch. 373, § 2; 1999, ch. 253, § 10; 1999, ch. 257, § 9; 2017, ch. 194, § 4, eff January 1, 2018.

26.1-47-02.1. Fees for dental services — Prohibition.

  1. As used in this section, “covered services” means dental care services for which a reimbursement is available under an enrollee’s plan or for which a reimbursement would be available but for the application of a deductible, copayment, coinsurance, waiting period, annual or lifetime maximum, or frequency limitation.
  2. Except for fees for covered services, a preferred provider arrangement for a dental plan may not directly or indirectly set or otherwise regulate the fees charged by the preferred provider for dental care services.

Source:

S.L. 2011, ch. 224, § 1.

Note.

Section 2 of chapter 224, S.L. 2011 provides: “ APPLICATION. Section 1 of this Act applies to all preferred provider arrangements issued on or after the effective date of this Act.”

26.1-47-02.2. Dental networks.

  1. As used in this section:
    1. “Affiliate” means a person that directly or indirectly through one or more intermediaries controls, or is under the control of, or is under common control with, the person specified.
    2. “Contracting entity” means a person that enters a direct contract with a dental provider for the delivery of dental services.
    3. “Network” means a group of preferred dental providers providing services under a network plan.
    4. “Network plan” means a dental benefit plan that requires a covered individual to use, or creates incentives, including financial incentives, for a covered individual to use a dental provider managed by, owned by, under contract with, or employed by the dental insurer.
    5. “Third party” means an entity that is not a party to a contracting entity’s dental provider network.
  2. A contracting entity may grant a third party access to a dental provider network contract, or a provider’s dental services or contractual discounts provided pursuant to a dental provider network contract, if all of the following are met:
    1. The contract specifically states the contracting entity may enter an agreement with a third party allowing the third party to obtain the contracting entity’s rights and responsibilities as if the third party were the contracting entity.
    2. If the contracting entity is a dental insurer, the dental provider may opt out of the third- party access at the time the dental provider network contract was entered or renewed.
    3. The contracting entity identifies, in writing or electronic form to the dental provider, all third parties in existence as of the date the contract is entered or renewed.
    4. The contracting entity notifies dental network providers that a new third party is leasing or purchasing the network at least thirty days in advance of the relationship taking effect.
    5. The contracting entity makes available a copy of the dental provider network contract relied on in the adjudication of a claim to a participating dental provider within thirty days of a request from the dental provider.
  3. A dental provider’s refusal to agree in writing to the third-party access to the dental provider network does not permit the contracting entity to end the contractual relationship with the dental provider.
  4. The provisions of this section do not apply if access to a provider network contract is granted to a dental carrier or an entity operating in accordance with the same brand licensee program as the contracting entity or to an entity that is an affiliate of the contracting entity.

Source:

S.L. 2021, ch. 241, § 2, eff August 1, 2021.

26.1-47-02.3. Postpayment of dental claims — Payment recovery limitations.

  1. As used in this section, “dental care provider” means a licensed provider of dental care services in this state.
  2. Other than recovery for duplicate payments, a dental insurer, if engaging in overpayment recovery efforts, shall provide written notice to the dental care provider which identifies the error made in the processing or payment of the claim and justifies the overpayment recovery.
  3. A dental insurer shall provide a dental care provider with the opportunity to challenge an overpayment recovery, including the sharing of claims information, and shall establish written policies and procedures for a dental care provider to follow to challenge an overpayment recovery.
  4. A dental insurer may not initiate overpayment recovery efforts more than twelve months after the original payment for the claim was made. This time limit does not apply to overpayment recovery efforts that are:
    1. Based on reasonable belief of fraud, abuse, or other intentional misconduct;
    2. Required by, or initiated at the request of, a self-insured plan; or
    3. Required by a state or federal government plan.

Source:

S.L. 2021, ch. 241, § 3, eff August 1, 2021.

26.1-47-03. Health benefits plans.

  1. Health care insurers may issue policies or subscriber agreements which provide for incentives for covered persons to use the health care services of preferred providers. These policies or subscriber agreements must contain all of the following provisions:
    1. A provision that if a covered person receives emergency care and cannot reasonably reach a preferred provider that care will be reimbursed as though the covered person had been treated by a preferred provider.
    2. A provision that if covered services are not available through a preferred provider, reimbursement for those services will be made as though the covered person had been treated by a preferred provider.
    3. A provision which clearly discloses differentials between benefit levels for health care services of preferred providers and benefit levels for health care services of other providers.
    4. A provision that entitles the covered person, if any health care services covered under the health benefit plan are not available through a preferred provider within fifty miles [80.47 kilometers] of the policyholder’s legal residence, to the provision of those covered services under the health benefit plan by a health care provider not under contract with the health care insurer and located within fifty miles [80.47 kilometers] of the policyholder’s legal residence. For the covered person to be eligible for benefits under this subdivision, the health care provider not under contract with the health care insurer must furnish the health care services at the same cost or less that would have been incurred had the covered person secured the health care services through a preferred provider.
  2. If the policy or subscriber agreement provides differences in benefit levels payable to preferred providers compared to other providers, the differences may not unfairly deny payment for covered services and may be no greater than necessary to provide a reasonable incentive for covered persons to use the preferred provider.

Source:

S.L. 1987, ch. 373, § 3; 1989, ch. 355, § 2.

26.1-47-04. Preferred provider participation requirements.

Health care insurers may place reasonable limits on the number of classes of preferred providers which satisfy the standards set forth by the health care insurer, provided that there be no discrimination against any providers on the basis of religion, race, color, national origin, age, sex, or marital status, and further provided that selection of preferred providers is made on the combined basis of least cost and highest quality of service.

Source:

S.L. 1987, ch. 373, § 4.

26.1-47-04.1 Maintenance of certification.

  1. As used in this section, the terms “continuing medical education”, “maintenance of certification”, “physician”, and “specialty medical board certification” have the same meaning as provided under section 23-16-18.
  2. A health care insurer may not deny reimbursement to or prevent a physician from being a preferred provider based solely on a physician’s decision to not participate in maintenance of certification, including basing a physician’s network participation on any form of maintenance of certification participation or status.
  3. A health care insurer may not discriminate with respect to reimbursement levels based solely on a physician’s decision to not participate in any form of maintenance of certification.

Source:

S.L. 2019, ch. 210, § 2, eff March 14, 2019.

26.1-47-05. General requirements.

Health care insurers complying with this chapter are subject to all other applicable laws, rules, and regulations of this state.

Source:

S.L. 1987, ch. 373, § 5.

26.1-47-06. Rules.

The commissioner may adopt rules necessary to enforce and administer this chapter.

Source:

S.L. 1987, ch. 373, § 6.

26.1-47-07. Penalty.

The commissioner may levy an administrative penalty not to exceed ten thousand dollars for a violation of this chapter.

Source:

S.L. 1987, ch. 373, § 7; 2017, ch. 194, § 5, eff January 1, 2018.

26.1-47-08. Air ambulance subscription agreements — Prohibition.

An air ambulance provider, or an agent of an air ambulance provider, may not sell, solicit, or negotiate a subscription agreement or contract relating to services or the billing of services provided by an air ambulance provider. An air ambulance provider, or agent of an air ambulance provider, which violates this section is subject to a civil fine in an amount not to exceed ten thousand dollars for each violation. The fine may be collected and recovered in an action brought in the name of the state.

History. S.L. 2017, ch. 194, § 9, eff August 1, 2017.

Notes to Decisions

Preemption.

ADA preempted the North Dakota payment and subscription provisions, N.D.C.C. §§ 26.1-47-09(3) and 26.1-47-08, as they were clearly related to and had a connection with the price that air ambulance providers charged for their services. Guardian Flight LLC v. Godfread, 991 F.3d 916, 2021 U.S. App. LEXIS 7704 (8th Cir. N.D. 2021).

McCarran-Ferguson Act did not bar ADA preemption of the subscription provision, N.D.C.C. § 26.1-47-08 as it regulated the relationship between only a consumer and an air ambulance company, and thus, it was not enacted for the purpose of regulating the business of insurance. Guardian Flight LLC v. Godfread, 991 F.3d 916, 2021 U.S. App. LEXIS 7704 (8th Cir. N.D. 2021).

26.1-47-09. Air ambulances.

  1. A health benefit plan may not be issued in this state unless the plan provides the reimbursement rate for out-of-network air ambulance provider services is equal to the average of the insurer’s in-network rates for air ambulance providers in the state.
  2. An insurer may not use the average of an insurer’s in-network rates for air ambulance providers in the state in order to decrease current or future contractual rates between an insurer and an air ambulance provider.
  3. For purposes of settling a claim made by the insured for air ambulance services, a payment made by an insurer under the plan in compliance with this section is deemed to be the same as an in-network payment and is considered a full and final payment by the insured for out-of-network air ambulance services billed to the insured.
  4. This section does not apply to a policy or certificate of insurance, whether written on a group or individual basis, which provides coverage limited to:
    1. A specified disease, a specified accident, or accident-only coverage;
    2. Credit;
    3. Dental;
    4. Disability;
    5. Hospital;
    6. Long-term care insurance as defined by chapter 26.1-45;
    7. Vision care or any other limited supplemental benefit;
    8. A Medicare supplement policy of insurance, as defined by the commissioner by rule or coverage under a plan through Medicare;
    9. Medicaid;
    10. The federal employees health benefits program and any coverage issued as a supplement to that coverage;
    11. Coverage issued as supplemental to liability insurance, workers’ compensation, or similar insurance; or
    12. Automobile medical payment insurance.

Source:

S.L. 2017, ch. 194, § 6, eff January 1, 2018.

Notes to Decisions

Preemption.

ADA preempted the North Dakota payment and subscription provisions, N.D.C.C. §§ 26.1-47-09(3) and 26.1-47-08, as they were clearly related to and had a connection with the price that air ambulance providers charged for their services. Guardian Flight LLC v. Godfread, 991 F.3d 916, 2021 U.S. App. LEXIS 7704 (8th Cir. N.D. 2021).

McCarran-Ferguson Act did not bar ADA preemption of the payment provision, N.D.C.C. § 26.1-47-09(3), as it was enacted to reduce air ambulance providers’ permissible prices and prohibit the practice of balance billing. Thus, it regulated the relationship between the insured and the service provider and did not possess the purpose of adjusting, managing, or controlling the business of insurance. Guardian Flight LLC v. Godfread, 991 F.3d 916, 2021 U.S. App. LEXIS 7704 (8th Cir. N.D. 2021).

26.1-47-10. Preferred provider arrangements — Requirements for accessing air ambulance providers. [Effective until August 31, 2022]

  1. In addition to the other preferred provider arrangement requirements under this chapter, a preferred provider arrangement must require the health care insurer and health care provider comply with this section.
  2. Except as otherwise provided under this section, before a health care provider arranges for air ambulance services for an individual the health care provider knows to be a covered person, the health care provider shall request a prior authorization from the covered person’s health care insurer for the air ambulance services to be provided to the covered person. If the health care provider is unable to request or obtain prior authorization from the covered person’s health care insurer:
    1. The health care provider shall provide the covered person or the covered person’s authorized representative an out-of-network services written disclosure stating the following:
      1. Certain air ambulance providers may be called upon to render care to the covered person during the course of treatment;
      2. These air ambulance providers might not have contracts with the covered person’s health care insurer and are, therefore, considered to be out of network;
      3. If these air ambulance providers do not have contracts with the covered person’s health care insurer, the air ambulance services will be provided on an out-of-network basis;
      4. A description of the range of the charges for the out-of-network air ambulance services for which the covered person may be responsible;
      5. A notification the covered person or the covered person’s authorized representative may agree to accept and pay the charges for the out-of-network air ambulance services, contact the covered person’s health care insurer for additional assistance, or rely on other rights and remedies that may be available under state or federal law; and
      6. A statement indicating the covered person or the covered person’s authorized representative may obtain a list of air ambulance providers from the covered person’s health care insurer which are preferred providers and the covered person or the covered person’s representative may request those participating air ambulance providers be accessed by the health care provider.
    2. Before air ambulance services are accessed for the covered person, the health care provider shall provide the covered person or the covered person’s authorized representative the written disclosure, as outlined by subdivision a and obtain the covered person’s or the covered person’s authorized representative’s signature on the disclosure document acknowledging the covered person or the covered person’s authorized representative received the disclosure document before the air ambulance services were accessed. If the health care provider is unable to provide the written disclosure or obtain the signature required under this subdivision, the health care provider shall document the reason, which may include the health and safety of the patient. The health care provider documentation satisfies the requirement under this subdivision.
  3. The rights and remedies provided under this section to covered persons are in addition to and may not preempt any other rights and remedies available to covered persons under state or federal law.
  4. The department shall enforce this section and shall report a violation of this section by a facility to the state department of health.
  5. This section does not apply to a policy or certificate of insurance, whether written on a group or individual basis, which provides coverage limited to:
    1. A specified disease, a specified accident, or accident-only coverage;
    2. Credit;
    3. Dental;
    4. Disability;
    5. Hospital;
    6. Long-term care insurance as defined by chapter 26.1-45;
    7. Vision care or any other limited supplemental benefit;
    8. A Medicare supplement policy of insurance, as defined by the commissioner by rule or coverage under a plan through Medicare;
    9. Medicaid;
    10. The federal employees health benefits program and any coverage issued as a supplement to that coverage;
    11. Coverage issued as supplemental to liability insurance, workers’ compensation, or similar insurance; or
    12. Automobile medical payment insurance.
  6. A health care provider is exempt from complying with this section if the health care provider determines and documents that due to emergency circumstances, compliance might jeopardize the health or safety of the patient.
  7. The commissioner may adopt rules to implement this section.

Source:

S.L. 2017, ch. 194, § 7, eff August 1, 2021; 2021, ch. 243, § 1, eff August 1, 2021.

Note.

Section 26.1-47-10 was amended 2 times by the 2021 Legislative Assembly. Pursuant to Section 1-02-09.1, the section is printed above to harmonize and give effect to the changes made in Section 1 of Chapter 243, Session Laws 2021, House Bill 1493; and Section 326 of Chapter 352, Session Laws 2021, House Bill 1247.

Section 2 of Chapter 243, S.L. 2021, amended the effective date of § 7, S.L. 2017 (this section), as provided by § 10, Chapter 194, S.L. 2017.

26.1-47-10. Preferred provider arrangements — Requirements for accessing air ambulance providers. [Effective September 1, 2022]

  1. In addition to the other preferred provider arrangement requirements under this chapter, a preferred provider arrangement must require the health care insurer and health care provider comply with this section.
  2. Except as otherwise provided under this section, before a health care provider arranges for air ambulance services for an individual the health care provider knows to be a covered person, the health care provider shall request a prior authorization from the covered person’s health care insurer for the air ambulance services to be provided to the covered person. If the health care provider is unable to request or obtain prior authorization from the covered person’s health care insurer:
    1. The health care provider shall provide the covered person or the covered person ' s authorized representative an out-of-network services written disclosure stating the following:
      1. Certain air ambulance providers may be called upon to render care to the covered person during the course of treatment;
      2. These air ambulance providers might not have contracts with the covered person’s health care insurer and are, therefore, considered to be out of network;
      3. If these air ambulance providers do not have contracts with the covered person’s health care insurer, the air ambulance services will be provided on an out-of-network basis;
      4. A description of the range of the charges for the out-of-network air ambulance services for which the covered person may be responsible;
      5. A notification the covered person or the covered person’s authorized representative may agree to accept and pay the charges for the out-of-network air ambulance services, contact the covered person’s health care insurer for additional assistance, or rely on other rights and remedies that may be available under state or federal law; and
      6. A statement indicating the covered person or the covered person’s authorized representative may obtain a list of air ambulance providers from the covered person’s health care insurer which are preferred providers and the covered person or the covered person’s representative may request those participating air ambulance providers be accessed by the health care provider.
    2. Before air ambulance services are accessed for the covered person, the health care provider shall provide the covered person or the covered person’s authorized representative the written disclosure, as outlined by subdivision a and obtain the covered person’s or the covered person’s authorized representative’s signature on the disclosure document acknowledging the covered person or the covered person’s authorized representative received the disclosure document before the air ambulance services were accessed. If the health care provider is unable to provide the written disclosure or obtain the signature required under this subdivision, the health care provider shall document the reason, which may include the health and safety of the patient. The health care provider documentation satisfies the requirement under this subdivision.
  3. The rights and remedies provided under this section to covered persons are in addition to and may not preempt any other rights and remedies available to covered persons under state or federal law.
  4. The department shall enforce this section and shall report a violation of this section by a facility to the department of health and human services.
  5. This section does not apply to a policy or certificate of insurance, whether written on a group or individual basis, which provides coverage limited to:
    1. A specified disease, a specified accident, or accident-only coverage;
    2. Credit;
    3. Dental;
    4. Disability;
    5. Hospital;
    6. Long-term care insurance as defined by chapter 26.1-45;
    7. Vision care or any other limited supplemental benefit;
    8. A Medicare supplement policy of insurance, as defined by the commissioner by rule or coverage under a plan through Medicare;
    9. Medicaid;
    10. The federal employees health benefits program and any coverage issued as a supplement to that coverage;
    11. Coverage issued as supplemental to liability insurance, workers’ compensation, or similar insurance; or
    12. Automobile medical payment insurance.
  6. A health care provider is exempt from complying with this section if the health care provider determines and documents that due to emergency circumstances, compliance might jeopardize the health or safety of the patient.
  7. The commissioner may adopt rules to implement this section.

Source:

S.L. 2017, ch. 194, § 7, eff August 1, 2021; 2021, ch. 243, § 1, eff August 1, 2021; 2021, ch. 352, § 326, eff September 1, 2022.

26.1-47-11. Rules — Air ambulance.

If an action of Congress, the president of the United States, or a federal agency allows the state to regulate the rates, routes, or services of air ambulance providers, the commissioner may adopt rules consistent with the action taken.

Source:

S.L. 2017, ch. 194, § 8, eff August 1, 2021.

Note.

Section 2 of Chapter 243, S.L. 2021, amended the effective date of § 8, Chapter 194, S.L. 2017 (this section), as provided by § 10, Chapter 194, S.L. 2017.

CHAPTER 26.1-48 Aircraft Aftermarket Risk Contracts and Insurance

26.1-48-01. Definitions.

As used in this chapter:

  1. “Aftermarket risk insurance” means aircraft and aircraft component product and completed operations liability insurance that conforms with sections 26.1-48-02 and 26.1-48-03.
  2. “Aircraft” means general aviation light craft that is powered and intended to fly above the ground; is designed to carry one person or more, but with a maximum seating capacity of fewer than twenty passengers; and weighs less than twelve thousand five hundred pounds [5669.9 kilograms].
  3. “Aircraft component” means a manufactured part or assembly intended for use in the construction, replacement, or repair of an aircraft. The term includes any complete aircraft subsystem, including the aircraft engine, that carries its own manufacturer’s warranty or services provided separately from the warranty of the manufacturer of the aircraft.
  4. “Aviation manufacturer” means a manufacturer of aircraft or aircraft components who has its place of manufacture and place of production of aircraft or aircraft components located within this state. The term includes a manufacturer located in this state who imports raw materials, components, and aircraft subassemblies from outside the state for manufacturing purposes. The term also includes a person who modifies, maintains, alters, repairs, or installs aircraft components in aircraft in accordance with federal aviation administration regulations and holds a repair station certificate issued by the federal aviation administration.

Source:

S.L. 1995, ch. 292, § 1.

Law Reviews.

Contracts v. Torts: North Dakota’s Aftermarket Risk Contract & Aftermarket Risk Insurance, Products Liability, and the General Aviation Industry, 72 N.D. L. Rev. 663 (1996).

26.1-48-02. North Dakota aftermarket risk contract.

The sale of aircraft and aircraft components sold by an aviation manufacturer and the performance of any modification, maintenance, alteration, repair, or installation of components in aircraft in this state are governed by an aftermarket risk contract. The contract between the seller or aviation manufacturer and the purchaser must be executed at the time of purchase and reconsidered at each subsequent resale. The first and subsequent seller or aviation manufacturer shall agree to be bound by North Dakota law and the aftermarket risk contract or to provide a fully paid aftermarket product liability insurance policy that covers exposure to tort liability within the United States. The option of providing the insurance policy applies only to aircraft or aircraft components that sell for more than two thousand dollars.

Source:

S.L. 1995, ch. 292, § 2; 1997, ch. 51, § 20.

Law Reviews.

Contracts v. Torts: North Dakota’s Aftermarket Risk Contract & Aftermarket Risk Insurance, Products Liability, and the General Aviation Industry, 72 N.D. L. Rev. 663 (1996).

26.1-48-03. Aftermarket risk insurance requirements — Encumbrances.

  1. An aftermarket risk insurance policy purchased pursuant to section 26.1-48-02 must hold harmless all aviation manufacturers that manufactured, modified, maintained, repaired, or altered the aircraft or aircraft component assembled or first sold in this state.
  2. The aviation manufacturer or seller of the aircraft or aircraft component may offer in the sales contract aftermarket risk insurance based on continued choice of North Dakota law. The aftermarket risk insurance option must be attached to the original sales contract as a lien on the aircraft holding the first owner and each subsequent owner financially responsible for the cost of purchasing and maintaining aftermarket risk insurance and binding the owner to governance by North Dakota law. An aftermarket insurance obligation must be recorded as a lien on the aircraft at the federal aviation administration aircraft registry.

Source:

S.L. 1995, ch. 292, § 3.

26.1-48-04. Stabilization of aftermarket risk insurance market.

  1. An aviation manufacturer and a purchaser of an aircraft or aircraft component which intend to be bound by North Dakota law must be covered by insurance that meets the requirements of insurance laws of this state. The sales contract must include a dispute resolution procedure for aftermarket risk contracts and insurance contracts.
  2. An aftermarket risk insurance provider domiciled in this state may limit coverage to include any caps and limitations permitted by law at the time of the first sale of the product.
  3. Upon resale of an aircraft or aircraft component, the purchaser agrees to purchase insurance and the insurance carrier shall provide evidence of coverage. A default on the insurance may reinstate, by contract, the lien back to the aviation manufacturer. An aftermarket risk contract may include a requirement for removal of the aircraft or aircraft component from service, consent to be governed by North Dakota law, and purchase of additional passenger and public risk insurance coverage.
  4. An aviation manufacturer or value-added reseller shall provide confidential access to data necessary for actuarial analysis by aftermarket insurance carriers to assist in maintaining a competitive insurance market with a choice of alternative carriers.

Source:

S.L. 1995, ch. 292, § 4.

26.1-48-05. Financial responsibility.

An owner of an aircraft or aircraft component manufactured in this state shall provide proof of financial responsibility in the amount of one hundred thousand dollars, per occurrence, for property damage and personal injury or death on the ground resulting from the use of the aircraft or aircraft component.

Source:

S.L. 1995, ch. 292, § 5.

CHAPTER 26.1-49 Health Provider Cooperatives

26.1-49-01. Definitions.

As used in this chapter:

  1. “Commissioner” means the insurance commissioner.
  2. “Health care provider” means any person or institution licensed to provide health care services in this state.
  3. “Health provider cooperative” means a corporation organized under this chapter and operated on a cooperative plan to provide health care services to purchasers of those services.
  4. “Member” means a licensed health care provider or an organization owned, controlled, or affiliated with a health care provider, including without limitation, a professional corporation, partnership, or other similar organization.

Source:

S.L. 1995, ch. 293, § 1.

26.1-49-02. Organization — Licensure.

A health provider cooperative shall organize under chapter 10-15 unless otherwise provided in this chapter. After incorporation the health provider cooperative is subject to chapter 10-15 unless otherwise provided in this chapter. If a provision of this chapter conflicts with chapter 10-15, the provision of this chapter applies. A health provider cooperative organized under this chapter is not an insurance company under chapter 26.1-12, a health maintenance organization under chapter 26.1-18.1, or a nonprofit health service corporation under chapter 26.1-17. A health provider cooperative does not violate limitations on the corporate practice of medicine.

Source:

S.L. 1995, ch. 293, § 1.

26.1-49-03. Powers.

In addition to the powers granted a cooperative under chapter 10-15, a health provider cooperative has the powers granted a nonprofit corporation under chapter 10-33. The power granted under chapter 10-15 controls over any inconsistent power granted by chapter 10-33.

Source:

S.L. 1995, ch. 293, § 1; 1999, ch. 50, § 46.

26.1-49-04. Provider contracts.

A health provider cooperative and its members may execute service contracts permitting the provider members to provide some or all of their health care services through the health provider cooperative to the enrollees, members, subscribers, or insureds of a nonprofit health service plan, health maintenance organization, accident and health insurance company, or the state medical assistance program. Each purchaser may execute contracts for the purchase of health services from a health provider cooperative in accordance with this section. A contract between a health provider cooperative and a purchaser must provide for payment by the purchaser on a substantially capitated or similar risk-sharing basis.

  1. Every contract between a health provider cooperative and a purchaser must be in writing and must provide that if the purchaser fails to pay for health care services as set forth in the contract, the enrollee is not liable to the provider for any sums owed by the purchaser.
  2. A member provider, agent, or trustee, or assignee thereof, may not maintain any action at law against an enrollee to collect sums owed by the purchaser.

Source:

S.L. 1995, ch. 293, § 1.

26.1-49-05. Contract filing — Approval.

The health provider cooperative shall file each contract between the cooperative and a purchaser with the commissioner. The commissioner shall disapprove any contract:

  1. In which the consideration paid for health services is unreasonably high in relationship to the services provided.
  2. That fails to include evidence of the specific procedures used to inform prospective enrollees of any limitations imposed on the enrollee’s right to receive care from a health provider of the enrollee’s choice.
  3. Under which a health provider cooperative assumes a corridor of risk greater than fifteen percent in its first year of operation, or greater than thirty percent in any year thereafter.

Any actuarial costs incurred by the department in review of that filing must be borne by the cooperative. The commissioner may adopt rules implementing this section.

Source:

S.L. 1995, ch. 293, § 1.

26.1-49-06. Election of directors — Vote by mail.

Directors of health provider cooperatives are elected under procedures set forth in chapter 10-15. A member may vote by mail for a director unless mail voting is prohibited for election of directors by the articles or bylaws of the cooperative. The board of directors shall prescribe the form of the ballot. The members shall mark the ballot for the candidate chosen and mail the ballot to the cooperative in a sealed plain envelope inside another envelope bearing the member’s name. If the ballot of the member is received by the cooperative on or before the date of the regular members’ meeting, the ballot must be accepted and counted as the vote of the absent member.

Source:

S.L. 1995, ch. 293, § 1.

26.1-49-07. State and federal governmental participation.

The state or federal government, or any entity or political subdivision of the state or federal government, may be a member of a health provider cooperative. Any state or federal governmental hospital may be a member of a health provider cooperative. With respect to federal governmental participation:

  1. A health provider cooperative may limit its enrollment to those persons entitled to care under the federal program responsible for the health provider cooperative.
  2. A health provider cooperative may request that the commissioner waive the eligibility requirements for participation that are contrary to federal law or regulations.
  3. The commissioner shall consult with federal officials to develop procedures to allow a health provider cooperative to use the federal government as a guaranteeing organization.
  4. In developing and implementing initiatives to expand access to health care, the commissioner must recognize the unique problems of veterans and consider methods to reach underserved portions of the veteran population.

Source:

S.L. 1995, ch. 293, § 1.

26.1-49-08. Prohibited practices — Penalty.

  1. It is unlawful for any person, company, or corporation or any agent, officer, or employee thereof, to coerce or require any person to agree, either in writing or orally, not to join or become or remain a member of any health provider cooperative as a condition of securing or retaining a contract for health care services with the person, firm, or corporation.
  2. It is unlawful for any person, company, or corporation, or any combination of persons, companies, or corporations, or any agents, officers, or employees thereof, to engage in acts of coercion, intimidation, or boycott of, or any refusal to deal with, any health care providing entity arising from that entity’s actual or potential participation in a health provider cooperative.
  3. It is unlawful for any health provider cooperative to engage in any acts of coercion, intimidation, or boycott of, or any concerted refusal to deal with any health plan company seeking to contract with the cooperative on a competitive, reasonable, and nonexclusive basis.
  4. It is unlawful for any health provider cooperative to refuse membership to any licensed health care provider or organization that applies for membership and that otherwise agrees to the membership requirements of the health provider cooperative.
  5. Any person violating subsections 1 through 4 is deemed to have committed a violation of chapter 51-08.1 and is subject to the provisions, procedures, and penalties of that chapter.

Source:

S.L. 1995, ch. 293, § 1.

CHAPTER 26.1-50 North Dakota Low-Risk Incentive Fund

26.1-50-01. Definitions.

As used in this chapter:

  1. “Fund” means the North Dakota low-risk incentive fund.
  2. “Governing board” means the board of directors of the corporation or board of governors of the limited liability company established under section 26.1-50-02.
  3. “Insurer” means any foreign or domestic corporation, association, benefit society, exchange, partnership, limited liability company, or individual engaged as principal in the business of insurance in this state.
  4. “Primary sector business” has the meaning provided in section 1-01-49.

Source:

S.L. 1997, ch. 261, § 1; 2001, ch. 488, § 16; 2017, ch. 56, § 4, eff for taxable years beginning after December 31, 2016.

26.1-50-02. Establishment — Organization.

Any insurer or group of insurers may establish a corporation or limited liability company to own and operate the North Dakota low-risk incentive fund. Except as provided in this chapter, all authority regarding the articles of incorporation or articles of organization is the province of the governing board, which must include a representative of the Bank of North Dakota and the commissioner of commerce or the commissioner’s designee. The Bank of North Dakota shall administer the fund; however, the governing board is responsible for adopting fund policies and procedures. The governing board may not distribute more than seventy-five percent of the net profit of the fund in any of the first five years of operation.

Source:

S.L. 1997, ch. 261, § 2; 2001, ch. 488, § 17; 2007, ch. 493, § 4.

26.1-50-03. North Dakota low-risk incentive fund use.

The fund may be used only for making loans to low-risk businesses for primary sector business projects in this state. A loan may not be approved or made by the fund without some participation in the loan by the Bank of North Dakota. A loan from the fund may not be made to an insurer. The governing board shall establish the rate of interest and terms of repayment for a loan from the fund. Fifty percent of the amount loaned from the fund during the first year of a biennium must be reserved solely for businesses in rural areas. The remainder loaned from the fund may be used in urban or rural areas. For purposes of this section, “rural areas” means the area of the state not including territory within the corporate limits of a city with a population of twenty thousand or more.

Source:

S.L. 1997, ch. 261, § 3; 1999, ch. 275, § 1.

26.1-50-04. Loan administration.

An application for a loan from the fund must contain the information prescribed by the governing board. Except as provided in this section, information contained in applications for loans from the fund is confidential. The Bank of North Dakota shall review each loan application, report to the governing board whether the applicant represents a primary sector business project, and make a recommendation to the governing board to either approve or disapprove the loan application. The Bank of North Dakota shall administer all loans issued by the fund and shall receive from the fund a service fee of twenty-five basis points on all loans in place. The insurance commissioner may examine the fund and activities of insurers in connection with the fund to assure compliance with this title. The fund shall pay for the costs of an examination and no credit may be allowed any insurer for payment of examination costs as otherwise provided under section 26.1-03-17.

Source:

S.L. 1997, ch. 261, § 4.

26.1-50-05. Audited financial statement — Report of fund operations.

The governing board shall contract annually with a certified public accountant for performance of an audit and preparation of audited financial statements of the fund prepared in accordance with generally accepted accounting principles and a report containing an analysis of the impact of the fund on the state’s economy, business and employment activity generated by loans from the fund, and the effects of that activity on state and local tax revenues. The governing board shall provide the financial statements and report to the governor, the insurance commissioner, and the legislative council and make copies available to the public. The cost of the audit and preparation of financial statements and report must be paid from the fund.

Source:

S.L. 1997, ch. 261, § 5.

26.1-50-06. Tax credit.

If the requirements of this chapter are met, an insurer is entitled to a credit against taxes due under section 26.1-03-17 or 26.1-11-06 as determined under this section. If the insurer is a member of an insurance holding company system, the insurer or any affiliate insurer is entitled to a credit against taxes under section 26.1-03-17 or 26.1-11-06 as determined under this section.

  1. An insurer making or participating in a loan under this chapter or an affiliate insurer under this chapter is entitled to a premium tax credit calculated for each calendar year the loan is in place. The amount of the credit is the difference between:
    1. The participating insurer’s share of the interest earned on the loan during the calendar year; and
    2. The participating insurer’s share of an amount of interest that would have been earned during the same period by applying an interest rate, calculated by adding three hundred basis points to a comparable treasury security rate at the date of the issuance of the loan.
  2. The maximum credit allowed an insurer for any calendar year is the amount of interest that would have been earned during the period by applying an interest rate of three hundred basis points. A credit may not be allowed if the interest earned exceeds the interest that would have been earned by applying the calculation in subdivision b of subsection 1.
  3. The credit may not exceed the total amount of the insurer’s tax liability under subsection 1 of section 26.1-03-17 and no unused credit may be carried forward.
  4. Credits under this section for all insurers may not exceed seven hundred fifty thousand dollars in a calendar year.

Source:

S.L. 1997, ch. 261, § 6; 1999, ch. 258, § 2.

26.1-50-07. Assets of insurers.

The amount of a loan made by an insurer or the amount of an insurer’s participation in a loan made under this chapter may not be considered or reported on the insurer’s annual statement as an admitted asset except to the extent provided under section 26.1-05-19.

Source:

S.L. 1997, ch. 261, § 7; 1999, ch. 258, § 3.

CHAPTER 26.1-51 Self-critical Insurance Analysis Privilege

26.1-51-01. Definitions.

In this chapter, unless the context or subject matter otherwise requires:

  1. “Commissioner” means the insurance commissioner.
  2. “Insurance compliance audit” means a voluntary, internal evaluation, review, assessment, audit, or investigation for the purpose of identifying or preventing noncompliance with, or promoting compliance with, laws, regulations, orders, or industry or professional standards, which is conducted by or on behalf of an insurer licensed or regulated under this title, or which involves an activity regulated under this title.
  3. “Insurance compliance self-critical analysis audit document” means a document prepared as a result of or in connection with an insurance compliance audit. An insurance compliance self-critical analysis audit document may include a written response to the findings of an insurance compliance audit. An insurance compliance self-critical analysis audit document may include, as applicable, field notes and records of observations, workpapers, findings, opinions, suggestions, conclusions, drafts, memoranda, drawings, photographs, exhibits, computer-generated or electronically recorded information, telephone records, maps, charts, graphs, and surveys, provided this supporting information is collected or developed for the primary purpose and in the course of an insurance compliance audit. An insurance compliance self-critical analysis audit document also includes:
    1. An insurance compliance audit report prepared by an auditor, who may be an employee of the insurer or an independent contractor, which may include the scope of the audit, the information gained in the audit, and conclusions and recommendations, with exhibits and appendices;
    2. Memoranda and documents analyzing portions or all of the insurance compliance audit report and discussing potential implementation issues;
    3. An implementation plan that addresses correcting past noncompliance, improving current compliance, and preventing future noncompliance; or
    4. Analytic data generated in the course of conducting the insurance compliance audit.
  4. “Insurer” means an insurance company, nonprofit service corporation, or health maintenance organization organized under the laws of this state or a foreign insurance company, nonprofit service corporation, or health maintenance organization authorized to do business in this state.

Source:

S.L. 1999, ch. 276, § 1.

26.1-51-02. Self-critical analysis privilege created — Scope.

An insurance compliance self-critical analysis privilege is created to protect the confidentiality of insurance compliance self-critical analysis documents or communications in regard to their content relating to voluntary internal compliance audits conducted by insurers and persons in regard to activities regulated under this title, both to conduct voluntary internal audits of its compliance programs and management systems, and to assess and improve compliance with state and federal statutes, rules, and orders. The insurance compliance self-critical analysis privilege applies to all litigation or administrative proceedings pending on August 1, 1999.

Source:

S.L. 1999, ch. 276, § 2.

26.1-51-03. Insurance compliance self-critical analysis document not discoverable or admissible.

Except as provided in sections 26.1-51-05, 26.1-51-06, and 26.1-51-07, an insurance compliance self-critical analysis audit document is privileged information and is not discoverable or admissible evidence in any legal action in any civil, criminal, or administrative proceeding. The privilege is a matter of substantive law of this state and is not merely a procedural matter governing administrative, civil, or criminal procedures in the courts of this state.

Source:

S.L. 1999, ch. 276, § 3.

26.1-51-04. Application of privilege.

If an insurer, person, or entity performs or directs the performance of an insurance compliance audit, an officer, employee, or agent involved with the insurance compliance audit, or any consultant who is hired for the purpose of performing the insurance compliance audit, may not be examined in any civil, criminal, or administrative proceeding as to the insurance compliance audit or any insurance compliance self-critical analysis audit document. This section does not apply if it is determined under section 26.1-51-06 or 26.1-51-07 that the privilege does not apply.

Source:

S.L. 1999, ch. 276, § 4.

26.1-51-05. Submission to commissioner.

  1. Upon request of the commissioner, an insurer must submit an insurance compliance self-critical analysis audit document to the commissioner, or the commissioner’s designee, as a confidential document under the provisions of section 26.1-03-19.4 without waiving the privilege set forth in this chapter to which the insurer would otherwise be entitled. However, the provisions of sections 26.1-03-19.3 and 26.1-03-19.4 permitting the commissioner to make confidential documents public and accessible to the national association of insurance commissioners does not apply to the insurance compliance self-critical analysis audit documents voluntarily submitted. To the extent the commissioner has the authority to compel the disclosure of an insurance compliance self-critical analysis audit document under other provisions of applicable law, any report furnished to the commissioner may not be provided to any other person or entity and must be accorded the same confidentiality and other protections as provided above for voluntarily submitted documents. Any use of an insurance compliance self-critical analysis audit document furnished as a result of a request of the commissioner, whether under a claim of authority to compel disclosure or not, is limited to determining whether any disclosed defects in an insurer’s policies or procedures or inappropriate treatment of customers has been remedied or that an appropriate plan for their remedy is in place. The commissioner may not impose any type of administrative fine or penalty as to any area addressed or matter covered in an insurance compliance self-critical analysis audit document furnished at the commissioner’s request, except when there is clear and convincing evidence that the insurer failed to undertake reasonable corrective action, eliminate inappropriate treatment of customers, or failed to implement an appropriate plan to rectify any noncompliance with state and federal statutes, rules, and orders.
  2. An insurer’s insurance compliance self-critical analysis audit document submitted to the commissioner remains subject to all applicable statutory or common-law privileges, including the work product doctrine, attorney-client privilege, or the subsequent remedial measures exclusion. An insurance compliance self-critical analysis audit document submitted to and in the possession of the commissioner remains the property of the insurer and is not subject to any disclosure or production under section 44-04-18.
  3. Disclosure of an insurance compliance self-critical analysis audit document to a governmental agency, whether voluntary or pursuant to compulsion of law, does not constitute a waiver of the privilege with respect to any other person or any other governmental agency.

Source:

S.L. 1999, ch. 276, § 5.

26.1-51-06. Waiver of privilege by insurer — Grounds for determination of privilege — Civil, administrative, or criminal proceedings.

  1. The self-critical analysis privilege does not apply to the extent that it is expressly waived by the insurer that prepared or caused to be prepared the insurance compliance self-critical analysis audit document.
  2. In a civil or administrative proceeding, a court of record, after an in-camera review, may require disclosure of material for which the privilege is asserted, if the court determines one of the following:
    1. The privilege is asserted for a fraudulent purpose; or
    2. The material is not subject to the privilege.
  3. In a criminal proceeding, a court of record, after an in-camera review, may require disclosure of material for which the privilege is asserted, if the court determines one of the following:
    1. The privilege is asserted for a fraudulent purpose;
    2. The material is not subject to the privilege; or
    3. The material contains evidence relevant to commission of a criminal offense, and all three of the following factors are present:
      1. The commissioner, state’s attorney, or attorney general has a compelling need for the information;
      2. The information is not otherwise available; and
      3. The commissioner, state’s attorney, or attorney general is unable to obtain the substantial equivalent of the information by any other means without incurring unreasonable cost and delay.

Source:

S.L. 1999, ch. 276, § 6.

26.1-51-07. Determination of privilege — Procedure.

  1. If a person seeks from an insurer communications involving an insurance compliance audit or any insurance compliance self-critical analysis audit document during the course of a pending civil or criminal proceeding, the insurer may assert the self-critical analysis privilege and provide the information set forth in subsection 6 during the course of those proceedings just as any other privilege is asserted in the courts of this state. If the court is required to make a determination as to the privilege, the court shall follow the procedure and conditions set forth in subsection 5.
  2. If there is a pending administrative proceeding, or there is no pending civil or criminal proceeding, the commissioner, state’s attorney, or attorney general may serve on an insurer a written request by certified mail for disclosure of an insurance compliance self-critical analysis audit document. Within thirty days after the commissioner, state’s attorney, or attorney general serves on an insurer a written request by certified mail for disclosure of an insurance compliance self-critical analysis audit document, the insurer that prepared or caused the document to be prepared may file with the appropriate court a petition requesting an in-camera hearing on whether the insurance compliance self-critical analysis audit document or portions of the document are privileged under this chapter or subject to disclosure. The court has jurisdiction over a petition filed by an insurer under this subsection requesting an in-camera hearing on whether the insurance compliance self-critical analysis document or portions of the document are privileged or subject to disclosure. Failure by the insurer to file a petition waives the privilege for only the specific request made.
  3. An insurer asserting the insurance compliance self-critical analysis privilege in response to a request for disclosure under this section shall include in its request for an in-camera hearing all of the information set forth in subsection 6.
  4. Upon the filing of a petition under this section, the court shall issue an order scheduling, within forty-five days after the filing of the petition, an in-camera hearing to determine whether the insurance compliance self-critical analysis audit document or portions of the document are privileged under this chapter or subject to disclosure.
  5. The court, after an in-camera review, may require disclosure of material for which the privilege is asserted if the court determines, based upon its in-camera review, that any one of the conditions set forth in subsection 2 of section 26.1-51-06 is applicable as to a civil or administrative proceeding or that any one of the conditions set forth in subsection 3 of section 26.1-51-06 is applicable as to a criminal proceeding. Upon making such determination, the court may only compel the disclosure of those portions of an insurance compliance self-critical analysis document relevant to issues in dispute in the underlying proceeding. A compelled disclosure may not be considered to be a public document or be deemed to be a waiver of the privilege for any other civil, criminal, or administrative proceeding. An insurer unsuccessfully opposing disclosure may apply to the court for an appropriate order protecting the document from further disclosure.
  6. An insurer asserting the insurance compliance self-critical analysis privilege in response to a request for disclosure under this section shall provide at the time of making and filing any objection to the disclosure all of the following information:
    1. The date of the insurance compliance self-critical analysis audit document;
    2. The identity of the entity conducting the audit;
    3. The general nature of the activities covered by the insurance compliance audit; and
    4. An identification of the portions of the insurance compliance self-critical analysis audit document for which the privilege is being asserted.

Source:

S.L. 1999, ch. 276, § 7.

26.1-51-08. Privilege — Burden of proof — Stipulation.

An insurer asserting the insurance compliance self-critical analysis privilege set forth in this chapter has the burden of demonstrating the applicability of the privilege. Once an insurer has established the applicability of the privilege, a party seeking disclosure has the burden of proving that the privilege is asserted for a fraudulent purpose. The commissioner, state’s attorney, or attorney general seeking disclosure of the privilege has the burden of proving the elements set forth in subdivisions a and c of subsection 3 of section 26.1-51-06.

The parties may at any time stipulate in proceedings under section 26.1-51-06 or 26.1-51-07 to entry of an order directing whether the specific information contained in an insurance compliance self-critical analysis audit document is or is not subject to the privilege provided under this chapter. Any such stipulation may be limited to the instant proceeding and, absent specific language to the contrary, is not applicable to any other proceeding.

Source:

S.L. 1999, ch. 276, § 8.

26.1-51-09. Nonapplication of privilege.

The self-critical analysis privilege set forth in this chapter does not extend to:

  1. Documents, communications, data, reports, or other information expressly required to be collected, developed, maintained, or reported to a regulatory agency pursuant to this title, or other federal or state law;
  2. Information obtained by observation or monitoring by any regulatory agency; or
  3. Information obtained from a source independent of the insurance compliance audit.

Source:

S.L. 1999, ch. 276, § 9.

CHAPTER 26.1-52 Property Insurance Placement Facility

26.1-52-01. Sunrise — Trigger.

The commissioner may implement a property insurance placement facility for those residents who are unable to obtain necessary property insurance through the standard insurance market. The commissioner shall hold a public hearing upon notice of not less than twenty days to determine the reasonable availability of property insurance in the market. Upon a finding by the commissioner that there is a lack of availability of property insurance in the market, the commissioner shall by order authorize the implementation of a property insurance placement facility as set forth in this chapter.

Source:

S.L. 2003, ch. 263, § 1.

26.1-52-02. Definitions.

As used in this chapter:

  1. “Basic property insurance” means insurance against direct loss to property as defined and limited in standard fire policies and extended coverage endorsements thereon.
  2. “Homeowners insurance” means insurance on owner-occupied dwellings providing personal multiperil property and liability coverage.
  3. “Insurer” means an insurance company authorized to write and that is engaged in writing in North Dakota, on a direct basis, basic property and homeowners insurance or components thereof.
  4. “North Dakota property insurance placement facility” or “facility” means the organization formed by insurers to assist applicants in securing basic property or homeowners insurance.

Source:

S.L. 2003, ch. 263, § 1.

26.1-52-03. Board.

  1. A board of directors consisting of seven members shall direct the operations of the property insurance placement facility. The seven members are comprised of five directors from the insurance industry and two public directors as follows:
    1. Two of the five industry representatives must come from domestic insurance companies, one must come from county mutual insurance companies, one from foreign stock companies, and one from foreign mutual companies. The commissioner shall appoint the first board on a staggered basis. Subsequent board members are to be elected by facility members.
    2. The public directors must be appointed by the commissioner. Public directors may include licensed insurance agents.
    3. The term of each director is three years beginning on January first of the year the director is elected or appointed, except as staggered in the initial appointment process. A vacancy must be filled by election by the other directors for the remainder of the term. A vacancy to a public directorship must be filled by appointment by the commissioner for the remainder of the term. If the board fails to elect a replacement for an industry vacancy within thirty days, the commissioner shall appoint a replacement for the remainder of the term.
  2. The board shall prepare and maintain a plan of operation which provides for the management of the facility, including the hiring of employees or contracting services to carry out the plan of operation, establishment of necessary facilities within the state, assessment of members to defray losses and expenses, negotiating commission agreements, establishing reasonable underwriting standards, developing reasonable cancellation and nonrenewal standards, acceptance and cession of reinsurance, adopting procedures for determining amounts of insurance to be provided, procedures for payment of claims, procedures for appealing adverse actions, procedures for reporting the plan experience to a statistical agent, and procedures for contracting facility functions to the private sector. The board has ninety days to submit the initial plan of operation to the commissioner for approval. All subsequent amendments to the plan of operation must be submitted to the commissioner for approval. The commissioner may require the board to waive the assessment requirement for an insurer if the assessment would cause a significant financial impairment to the insurer or would jeopardize the solvency of the insurer.

Source:

S.L. 2003, ch. 263, § 1.

26.1-52-04. Facility membership.

Each insurer authorized to write and who is engaged in writing within this state, on a direct basis, basic property insurance or any component thereof in multiperil policies or homeowners insurance shall participate in the facility as a condition of its authority to do the business of insurance in this state. Members of the facility are responsible for the cost of funding the operations, expenses, and losses of the facility. Each year the board shall assess the members based upon each member’s pro rata share of the aggregate property insurance premium written in the second preceding calendar year as disclosed in the annual statement and other reports filed by members with the commissioner. The assessment must be based on the premiums reported from income from this state in the following lines of the annual statement: fire, allied lines, and homeowners multiple peril.

Source:

S.L. 2003, ch. 263, § 1.

26.1-52-05. Coverage and forms.

The plan must use standard policy forms to provide coverage for basic property and homeowners insurance. The plan may not provide coverage for automobile or commercial risks.

Source:

S.L. 2003, ch. 263, § 1.

26.1-52-06. Rates.

The facility shall establish rates and may include data from an advisory or statistical organization in the development of its rates. Rates must be submitted to the commissioner for approval prior to use. Rates must be actuarially sound under chapter 26.1-25 and may not actively compete with rates in the voluntary market.

Source:

S.L. 2003, ch. 263, § 1.

26.1-52-07. Underwriting.

A person who has been refused coverage, in writing, by at least five standard carriers based on an underwriting, claims, or credit history is eligible to apply to the facility for coverage.

Source:

S.L. 2003, ch. 263, § 1.

26.1-52-08. Agents.

A licensed property and casualty agent may submit an application on behalf of an applicant to the facility. The agent is entitled to receive a commission for the service. The agent is not a representative of the facility.

Source:

S.L. 2003, ch. 263, § 1.

26.1-52-09. Immunity.

The facility, its members, employees, contractors, agents, and the commissioner are not liable for, nor may a cause of action be brought against them, for statements made in good faith in the course of conducting facility operations and procedures.

Source:

S.L. 2003, ch. 263, § 1.

26.1-52-10. Examinations and audits.

The commissioner shall examine the facility every three years. The facility shall submit a financial report and an annual report to the commissioner by April first of each year. The report must include premiums written, losses incurred, loss-adjusting expenses incurred, underwriting expenses, claims losses, and assessments.

Source:

S.L. 2003, ch. 263, § 1.

CHAPTER 26.1-53 Discount Medical Plans [Repealed]

Source:

Repealed by S.L. 2019, ch. 249, § 2, eff July 1, 2019.

CHAPTER 26.1-53.1 Discount plans

Source:

S.L. 2019, SB2102, § 1, eff August 1, 2019.

26.1-53.1-01. Definitions.

For purposes of this chapter, unless the context otherwise requires:

  1. “Affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.
  2. “Ancillary services” includes audiology, dental, vision, mental health, substance abuse, chiropractic, and podiatry services.
  3. “Control”, “controlled by”, or “under control with” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing ten percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by section 26.1-10-04, that control does not exist in fact. The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.
  4. “Direct primary care” means any private contract between a provider and consumer for services associated with that provider.
  5. “Discount plan” means a business arrangement or contract in which a person, in exchange for fees, dues, charges, or other consideration, offers members the access to providers of medical or ancillary services and the right to receive discounts on medical or ancillary services provided under the discount plan from those providers. The term includes a discount prescription drug plan. The term does not include:
    1. A plan that does not charge a membership, payment, dues, other consideration, or other fee to use the discount plan;
    2. Any product otherwise regulated under title 26.1;
    3. Direct primary care;
    4. A patient access program; or
    5. A Medicare prescription drug plan.
  6. “Discount plan organization” means an entity that, in exchange for fees, dues, charges, or other consideration, provides access for discount plan members to providers of medical or ancillary services and the right to receive medical or specialty services from those providers at a discount. It is the organization that contracts with providers, provider networks, or other discount plan organizations to offer access to medical or specialty services at a discount and determines the charge to discount plan members.
  7. “Discount prescription drug plan” means a business arrangement or contract in which a person, in exchange for fees, dues, charges, or other consideration, provides members the access to providers of pharmacy services and the right to receive discounts on pharmacy services provided under the discount prescription drug plan from those providers.
  8. “Facility” means an institution providing medical or ancillary services or a health care setting. The term includes:
    1. A hospital or other licensed inpatient center;
    2. An ambulatory surgical or treatment center;
    3. A skilled nursing center;
    4. A residential treatment center;
    5. A rehabilitation center; and
    6. A diagnostic, laboratory, or imaging center.
  9. “Health care professional” means a physician, pharmacist, or other health care practitioner who is licensed, accredited, or certified to perform specified medical or ancillary services within the scope of the professional’s license, accreditation, certification, or other appropriate authority consistent with state law.
  10. “Health insurer” means an entity subject to the insurance laws and regulations of this state, or subject to the jurisdiction of the commissioner, that contracts or offers to contract to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services, including a sickness and accident insurance company, a health maintenance organization, a nonprofit hospital and health service corporation, or any other entity providing a plan of health insurance, health benefits, or medical or ancillary services.
  11. “Marketer” means a person that markets, promotes, sells, or distributes a discount plan, including a private label entity that places the entity’s name on and markets or distributes a discount plan pursuant to a marketing agreement with a discount plan organization.
  12. “Medical services” means any maintenance care of, or preventive care for, the human body, or care, service, or treatment of an illness or dysfunction of, or injury to, the human body. The term includes physician care, inpatient care, hospital surgical services, emergency services, ambulance services, dental care services, vision care services, mental health services, substance abuse services, chiropractic services, podiatric services, laboratory services, medical equipment and supplies, pharmacy services, and ancillary services.
  13. “Medicare prescription drug plan” means a plan that provides Medicare part D prescription drug benefits in accordance with the requirements of the federal Medicare Prescription Drug, Improvement, and Modernization Act of 2003 [Pub. L. 108-173].
  14. “Member” means any individual who pays fees, dues, charges, or other consideration for the right to receive the benefits of a discount plan or discount prescription drug plan.
  15. “Patient access program” means a voluntary program sponsored by a pharmaceutical manufacturer, or a consortium of pharmaceutical manufacturers, which provide free or discounted health care products directly to low-income or uninsured individuals either through a discount card or direct shipment.
  16. “Person” means an individual, a corporation, a partnership, an association, a joint venture, a joint stock company, a trust, an unincorporated organization, any similar entity, or any combination of the foregoing.
  17. “Pharmacy services” includes pharmaceutical supplies and prescription drugs.
  18. “Provider” means any health care professional or facility that has contracted, directly or indirectly, with a discount plan organization to provide medical or ancillary services to members.
  19. “Provider network” means an entity that negotiates, directly or indirectly, with a discount plan organization on behalf of more than one provider to provide medical or ancillary services to members.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-02. Application.

  1. This chapter applies to all discount plan organizations conducting business in this state.
  2. A discount plan organization that is a health insurer licensed pursuant to title 26.1:
    1. Is not required to be registered as a discount plan organization. However, any of the organization’s affiliates that operate as a discount plan organization in this state shall comply with all provisions of this chapter and must be registered as a discount plan organization.
    2. Is required to comply with sections 26.1-53.1-14 through 26.1-53.1-21.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-03. Registration requirements for a discount plan organization — Fees.

  1. Before doing business in or from this state as a discount plan organization, a discount plan organization:
    1. Must be authorized to transact business in this state through the secretary of state; and
    2. Must be registered by the commissioner to operate as a discount plan organization.
  2. An application for registration under this chapter must be filed with the commissioner on a form prescribed by the commissioner.
  3. The application must demonstrate, set forth, or be accompanied by the following:
    1. The five hundred dollar application fee;
    2. A list of the names, addresses, official positions, and biographical information of each individual responsible for conducting the applicant’s affairs, including each:
      1. Member of the board of directors, board of trustees, executive committee, or other governing board or committee; and
      2. Officer;
    3. A copy of the form of any contract made or arrangement to be made between the applicant and any individual listed in subdivision b;
    4. All marketing materials to be used in connection with marketing a discount plan in this state;
    5. A description of member complaint procedures to be established and maintained by the applicant;
    6. A copy of the applicant’s cancellation and refund policy;
    7. The name and address of the applicant’s agent for service of process, notice, or demand, or if not domiciled in this state, a duly executed instrument appointing the commissioner and the commissioner’s successors, the applicant’s attorney upon whom all process in any action or proceeding against the applicant may be served; and
    8. Any other information the commissioner may reasonably require.
  4. The department may request a copy of the form of all contracts to be made or sold in this state or to be made between the applicant and any providers or provider networks regarding provision of medical or ancillary services to members.
  5. The department may request a copy of the form of any contract between the applicant and any person or other entity for the performance on the applicant’s behalf of any function, including marketing, administration, enrollment, investment management, and contracting for the provision of medical or ancillary services to cardholders.
  6. After the receipt of an application filed pursuant to this section, the commissioner shall review the application and notify the applicant of any deficiencies in the application.
  7. After receipt of a completed application, the commissioner shall:
    1. Register the applicant as a discount plan if the commissioner is satisfied the applicant has met the following:
      1. The requirements of this section; and
      2. The ownership, control, and management of the applicant are competent and trustworthy and possess managerial experience that would make the proposed operation of the discount plan organization beneficial to discount plan members; or
    2. Deny the registration application and state the grounds for denial.
  8. Registration is effective for one year, unless before expiration the registration is renewed in accordance with this subsection or suspended or revoked in accordance with section 26.1-53.1-12.
  9. Not later than March first of each year, the discount plan organization shall submit:
    1. Updated information to anything provided pursuant to subsections 3, 4, and 5 and section 26.1-53.1-23; and
    2. The renewal fee of two hundred fifty dollars.
  10. The commissioner shall renew the registration of each discount plan organization that meets the requirements of this chapter and pays the appropriate renewal fee.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-04. Exception to registration for providers giving discounts to own patients.

A provider that provides discounts to the provider’s own patients, without any cost or fee of any kind to the patient, is not required to obtain and maintain registration under this chapter as a discount plan organization.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-05. Surety bond.

Each registered discount plan organization shall maintain in force a surety bond in the organization’s own name in an amount not less than thirty-five thousand dollars to be used in the discretion of the commissioner to protect the financial interest of members. The bond must be issued by an insurance company licensed to do business in this state. Initially, a copy of the bond or a statement identifying the depository, trustee, and account number of the surety account, and for renewal proof of annual renewal of the bond or maintenance of the surety account, must be filed with the commissioner.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-06. Surety bonds not subject to levy by claimants.

Except for the commissioner, the assets or securities held in this state as a deposit pursuant to section 26.1-53.1-05 are not subject to levy by a judgment creditor or other claimant of the discount plan organization.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-07. Internet website to be established.

Before registration by the commissioner, each discount plan organization shall establish an internet website. The internet website must have an up-to-date list of names and addresses of the providers with which the organization has contracted directly or through a provider network. The internet website address must be displayed prominently on all of the discount plan organization’s advertisements, marketing materials, brochures, and discount plan cards.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-08. Investigation by commissioner.

Within a reasonable time after receipt of a properly completed application for registration under this chapter, the commissioner may conduct investigations and propound interrogatories concerning the applicant’s qualifications, residence, business affiliations, and any other matter the commissioner believes necessary or advisable to determine compliance with this chapter or for the protection of the public.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-09. Reporting of actions.

A discount plan organization shall report to the commissioner any administrative action taken against the organization in another jurisdiction or by another governmental agency in this state within thirty days of the final disposition of the matter. This report must include a copy of the order, consent to order, or other relevant legal documents.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-10. Nonrenewal, suspension, or revocation.

The commissioner may suspend the authority of a discount plan organization to enroll new members or refuse to renew, suspend, or revoke a discount plan organization’s registration if, after notice to the registrant and hearing, the commissioner finds that any of the following conditions exist:

  1. The discount plan organization is not operating in compliance with this chapter;
  2. The discount plan organization has advertised, merchandised, or attempted to merchandise the organization’s services in such a manner as to misrepresent the organization’s services or capacity for service or has engaged in deceptive, misleading, or unfair practices with respect to advertising or merchandising;
  3. The discount plan organization is not fulfilling the organization’s obligations as a discount plan organization; or
  4. The continued operation of the discount plan organization would be hazardous to the organization’s members.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-11. Winding up of affairs.

If the registration of a discount plan organization is surrendered, revoked, or not renewed, the discount plan organization shall proceed, immediately following surrender, or the effective date of the order of revocation or, in the case of a nonrenewal, the date of expiration of the registration, to wind up the organization’s affairs transacted under the registration. The discount plan organization may not engage in any further advertising, solicitation, collecting of fees, or renewal of contracts.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-12. Duration of suspension — Conditions for reinstatement.

The commissioner shall, in the commissioner’s order suspending the authority of the discount plan organization to enroll new members, specify the period during which the suspension is to be in effect and the conditions, if any, that must be met by the discount plan organization before reinstatement of the organization’s registration to enroll members. The commissioner may rescind or modify the order of suspension before the expiration of the suspension period. Registration of a discount plan organization may not be reinstated unless requested by the discount plan organization. The commissioner may not grant the request for reinstatement if the commissioner finds the circumstances for which the suspension occurred still exist or are likely to continue.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-13. Examination or investigation of discount plan organization — Expenses.

The commissioner may examine or investigate the business and affairs of any discount plan organization to protect the interests of the residents of this state for any potential violations of this chapter or as the commissioner deemed necessary. The discount plan organization shall produce any requested information and documentation within twenty days of such request. The discount plan organization that is the subject of the examination or investigation shall pay the expenses incurred in conducting the examination or investigation. Failure by the discount plan organization to pay the expenses is grounds for denial of registration or revocation of registration to operate as a discount plan organization. The discount plan organization is subject to the provisions of section 26.1-04-03 and nothing in this chapter may be construed to discharge any requirements imposed by section 26.1-04-03.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-14. Charges and fees — Refund requirements.

  1. A discount plan organization may charge a periodic charge as well as a reasonable one-time processing fee for a discount plan.
  2. If a member cancels the member’s membership in the discount plan organization within the first thirty days after the date of receipt of the signed consumer contract or agreement, the member shall receive a reimbursement of all periodic charges.
  3. If the discount plan organization cancels a membership for any reason other than nonpayment of charges by the member, the discount plan organization shall make a pro rata reimbursement of all periodic charges to the member.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-15. Bundled products.

  1. If a discount plan is bundled with other products, the bundled product must clearly identify the discount plan component separately from each other component.
  2. A discount plan organization that is a health insurer licensed pursuant to title 26.1 which provides a discount plan product that is incidental to the insured product is not subject to this section.
  3. If a discount plan is bundled with an insurance product, the discount plan organization or marketer selling such product must be licensed pursuant to chapter 26.1-26.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-16. Provider agreements.

  1. A discount plan organization must have a written provider agreement with all providers offering medical or ancillary services to the organization’s members. The written provider agreement may be entered directly with the provider or indirectly with a provider network to which the provider belongs.
  2. A provider agreement between a discount plan organization and a provider must provide the following:
    1. A list of the medical or ancillary services and products to be provided at a discount;
    2. The amount or amounts of the discounts or, alternatively, a fee schedule that reflects the provider’s discounted rates; and
    3. That the provider will not charge members more than the discounted rates.
  3. A provider agreement between a discount plan organization and a provider network must require that the provider network have written agreements with the provider network’s providers which:
    1. Contain the provisions described in subsection 2;
    2. Authorize the provider network to contract with the discount plan organization on behalf of the provider; and
    3. Require the provider network to maintain an up-to-date list of the provider network’s contracted providers and to provide the list on a monthly basis to the discount plan organization.
  4. A provider agreement between a discount plan organization and an entity that contracts with a provider network must require that the entity, in the entity’s contract with the provider network, require the provider network to have written agreements with the provider network’s providers which comply with subsection 3.
  5. The discount plan organization shall maintain a copy of each active provider agreement into which the organization has entered.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-17. Marketing requirements.

  1. A discount plan organization may market directly or contract with other marketers for the distribution of the organization’s product.
  2. The discount plan organization must have an executed written agreement with a marketer before the marketer’s marketing, promoting, selling, or distributing the discount plan.
  3. The agreement between the discount plan organization and the marketer must prohibit the marketer from using advertising, marketing materials, brochures, and discount plan cards without the discount plan organization’s approval in writing.
  4. The discount plan organization must be bound by and responsible for the activities of a marketer which are within the scope of the marketer’s agency relationship with the organization, or are otherwise approved by or under the direction and control of the organization.
  5. Before use, a discount plan shall approve in writing any advertisements, marketing materials, brochures, and discount cards used by marketers to market, promote, sell, or distribute the discount plan.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-18. Advertisements to be truthful and not misleading.

Any advertisements, marketing materials, brochures, discount plan cards, and any other communications of a discount plan organization provided to prospective members and members must be truthful and not misleading in fact or implication. An advertisement, marketing material, brochure, discount plan card, or other communication is misleading in fact or in implication if the communication has a capacity or tendency to mislead or deceive based on the overall impression the communication is reasonably expected to create within the segment of the public to which the communication is directed.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-19. Prohibited conduct.

A discount plan organization may not:

  1. Except as otherwise provided in this chapter, or as a disclaimer of any relationship between discount plan benefits and insurance, or as a description of an insurance product connected with a discount plan, use the term “insurance” in any advertisement, marketing material, brochure, or discount plan cards;
  2. Use in any advertisements, marketing materials, brochures, or discount plan cards the terms “health plan”, “coverage”, “copay”, “copayments”, “deductible”, “preexisting conditions”, “guaranteed issue”, “premium”, “PPO”, “preferred provider organization”, or other terms in a manner that could reasonably mislead an individual into believing the discount plan is health insurance;
  3. Use language in any advertisements, marketing materials, brochures, or discount plan cards with respect to being licensed or registered by the state insurance department in a manner that could reasonably mislead an individual into believing the discount plan is insurance or has been endorsed by the state;
  4. Make misleading, deceptive, or fraudulent representations regarding the discount or range of discounts offered by the discount plan;
  5. Have restrictions on access to discount plan providers, including, except for hospital services, waiting periods and notifications periods; or
  6. Pay providers any fees for medical or ancillary services or collect or accept money from a member to pay a provider for medical or ancillary services provided, unless the discount plan organization has an active certificate of authority to act as a third-party administrator in accordance with chapter 26.1-27.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-20. Required disclosures.

  1. A discount plan organization or marketer shall disclose clearly and conspicuously in writing to any prospective member and on any advertisements, marketing materials, or brochures relating to a discount plan:
    1. The plan is a discount plan and is not insurance coverage;
    2. The range of discounts for medical or ancillary services provided under the plan will vary depending on the type of provider and medical or ancillary service received;
    3. Unless the discount plan organization has an active certificate of authority to act as a third-party administrator as described in subsection 6 of section 26.1-53.1-19, that the plan does not make payments to providers for the medical or ancillary services received under the discount plan;
    4. The plan member is obligated to pay for all medical or ancillary services, but will receive a discount from those providers that have contracted with the discount plan organization; and
    5. The toll-free telephone number and internet website address for the registered discount plan organization for prospective members and members to obtain additional information about and assistance on the discount plan and up-to-date lists of providers participating in the discount plan.
  2. If the initial contact with a prospective member is by telephone, the disclosures required under subsection 1 must be made orally and be included in the initial written materials that describe the benefits under the discount plan provided to the prospective or new member.
  3. In addition to the disclosures required under subsection 1, each discount plan organization or marketer shall provide to each prospective member, at the time of enrollment, information that describes the terms and conditions of the discount plan, including any limitations or restrictions on the refund of any processing fees or periodic charges associated with the discount plan.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-21. Written agreement with member.

Each new member must be provided a written document that contains the terms and conditions of the discount plan that clearly provides:

  1. The name of the member;
  2. The benefits to be provided under the discount plan;
  3. Any processing fees and periodic charges associated with the discount plan, including any limitations or restrictions on the refund of any processing fees and periodic charges;
  4. The mode of payment of any processing fees and periodic charges, such as monthly or quarterly, and procedures for changing the mode of payment;
  5. Any limitations, exclusions, or exceptions regarding the receipt of discount plan benefits;
  6. Any waiting periods for certain medical or ancillary services under the discount plan;
  7. Procedures for obtaining discounts under the discount plan, such as requiring members to contact the discount plan organization to make an appointment with a provider on the member’s behalf;
  8. Cancellation procedures, including information on the member’s thirty-day cancellation rights and refund requirements and procedures for obtaining refunds;
  9. Renewal, termination, and cancellation terms and conditions;
  10. Procedures for adding new members to a family discount plan, if applicable;
  11. Procedures for filing complaints under the discount plan organization’s complaint system and information that, if the member remains dissatisfied after completing the organization’s complaint system, the plan member may contact the plan member’s state insurance department; and
  12. The name and mailing address of the registered discount plan organization where the member can make inquiries about the plan, send cancellation notices, and file complaints.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-22. Notice of change in name or address.

Each discount plan organization shall provide the commissioner at least thirty days’ advance notice of any change in the discount plan organization’s name, principal business address, mailing address, or internet website address.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-23. Annual reports.

  1. A discount plan organization shall file an annual report with the commissioner in the form prescribed by the commissioner no later than March first.
  2. The report must include:
    1. If different from the initial application for registration or at the time of renewal of registration or the last annual report, as appropriate, a list of the names and residence addresses of all persons responsible for the conduct of the organization’s affairs, together with a disclosure of the extent and nature of any contracts or arrangements with these persons and the discount plan organization, including any possible conflict of interest;
    2. The number of discount plan members in the state; and
    3. Any other information relating to the performance of the discount plan organization which the commissioner may require.
  3. Any discount plan organization that fails to file an annual report in the form and within the time required by this section:
    1. Accrues monetary penalties of:
      1. Up to five hundred dollars each day for the first ten days during which the violation continues; and
      2. Up to one thousand dollars each day after the first ten days during which the violation continues; and
    2. Upon notice by the commissioner, lose the organization’s authority to enroll new members or do business in this state while the violation continues.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-24. Civil penalties for violation of chapter.

In addition to or in lieu of any applicable denial, suspension, or revocation of registration, any person violating this chapter may, after hearing, be subject to a civil fine not to exceed ten thousand dollars for each violation. The fine may be collected and recovered in an action brought in the name of the state.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-25. Designation of compliance officer.

Each discount plan organization shall designate and provide the commissioner with the name, address, and telephone number of the discount plan organization’s compliance officer responsible for ensuring compliance with this chapter.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-26. Record filing and retention requirements.

  1. Upon demand by the commissioner, a discount plan organization shall file with the commissioner a list of prospective member fees and charges associated with the discount plan.
  2. A copy of every form to be used by a discount plan organization, including the form for the written document demonstrating membership in the plan and all advertising, marketing materials, and brochures, must be retained by such organization and available for inspection by the commissioner for at least five years from the date on which the form was last used.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-27. Rulemaking.

The commissioner may adopt rules for the implementation and administration of this chapter.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

26.1-53.1-28. Application to existing discount plan organizations.

A person doing business in this state as a discount plan organization on or before the effective date of this chapter has six months following the effective date of this Act to come into compliance with the requirements of this chapter.

Source:

S.L. 2019, ch. 249, § 1, eff July 1, 2019.

CHAPTER 26.1-54 American Health Benefit Exchange

26.1-54-01. American health benefit exchange. [Effective through August 31, 2022]

To ensure that an American health benefit exchange is created in the state, the commissioner and the department of human services shall:

  1. Plan for the implementation of an American health benefit exchange for the state that facilitates the purchase of qualified health benefit plans; provides for the establishment of a small business health options program that is designed to assist qualified small employers in facilitating the enrollment of their employees in qualified health benefit plans offered in the small group market; implements eligibility determination and enrollment of individuals in the state’s medical assistance program and the state’s children’s health insurance program; provides simplification; provides coordination among medical assistance, the children’s health insurance program, and the state health insurance exchange; and meets the requirements of the Patient Protection and Affordable Care Act of 2010 [Pub. L. 111-148] as amended by the Health Care and Education Reconciliation Act of 2010 [Pub. L. 111-152]. The legislative assembly may consider establishing one exchange that will provide services to both qualified individuals and qualified small employers;
  2. Subject to section 3 of chapter 225 of the 2011 Session Laws, take all actions necessary to ensure that the exchange is determined, not later than January 1, 2013, by the federal government to be ready to operate not later than January 1, 2014, and that the exchange is operating on or after January 1, 2014;
  3. Subject to section 3 of chapter 225 of the 2011 Session Laws, consider whether to seek federal grant funds for the planning and implementation of the exchange and administer all funds appropriated or made available for the purpose of carrying out the provisions of this chapter;
  4. Subject to section 3 of chapter 225 of the 2011 Session Laws, contract with outside entities as necessary to provide services necessary to implement the exchange; and
  5. Collaborate with the information technology department as necessary and appropriate in completing the responsibilities set forth in this section.

Source:

S.L. 2011, ch. 225, § 1.

26.1-54-01. American health benefit exchange. [Effective September 1, 2022]

To ensure that an American health benefit exchange is created in the state, the commissioner and the department of health and human services shall:

  1. Plan for the implementation of an American health benefit exchange for the state that facilitates the purchase of qualified health benefit plans; provides for the establishment of a small business health options program that is designed to assist qualified small employers in facilitating the enrollment of their employees in qualified health benefit plans offered in the small group market; implements eligibility determination and enrollment of individuals in the state’s medical assistance program and the state’s children’s health insurance program; provides simplification; provides coordination among medical assistance, the children’s health insurance program, and the state health insurance exchange; and meets the requirements of the Patient Protection and Affordable Care Act of 2010 [Pub. L. 111-148] as amended by the Health Care and Education Reconciliation Act of 2010 [Pub. L. 111-152]. The legislative assembly may consider establishing one exchange that will provide services to both qualified individuals and qualified small employers;
  2. Subject to section 3 of chapter 225 of the 2011 Session Laws, take all actions necessary to ensure that the exchange is determined, not later than January 1, 2013, by the federal government to be ready to operate not later than January 1, 2014, and that the exchange is operating on or after January 1, 2014;
  3. Subject to section 3 of chapter 225 of the 2011 Session Laws, consider whether to seek federal grant funds for the planning and implementation of the exchange and administer all funds appropriated or made available for the purpose of carrying out the provisions of this chapter;
  4. Subject to section 3 of chapter 225 of the 2011 Session Laws, contract with outside entities as necessary to provide services necessary to implement the exchange; and
  5. Collaborate with the information technology department as necessary and appropriate in completing the responsibilities set forth in this section.

Source:

S.L. 2011, ch. 225, § 1; 2021, ch. 352, § 327, eff September 1, 2022.

26.1-54-02. Rules. [Effective through August 31, 2022]

The commissioner and the department of human services may adopt rules necessary or desirable to carry out the provisions of this chapter.

Source:

S.L. 2011, ch. 225, § 1.

26.1-54-02. Rules. [Effective September 1, 2022]

The commissioner and the department of health and human services may adopt rules necessary or desirable to carry out the provisions of this chapter.

Source:

S.L. 2011, ch. 225, § 1; 2021, ch. 352, § 328, eff September 1, 2022.

26.1-54-03. Cooperation of state agencies. [Effective through August 31, 2022]

State agencies shall cooperate with the commissioner and the department of human services to ensure the success of the exchange.

Source:

S.L. 2011, ch. 225, § 1.

26.1-54-03. Cooperation of state agencies. [Effective September 1, 2022]

State agencies shall cooperate with the commissioner and the department of health and human services to ensure the success of the exchange.

Source:

S.L. 2011, ch. 225, § 1; 2021, ch. 352, § 329, eff September 1, 2022.

26.1-54-04. Records. [Effective through August 31, 2022]

Notwithstanding any provision of this code making records confidential, the commissioner or the commissioner’s designee and the department of human services may receive from and provide to federal and state agencies information gathered in the administration of the exchange, including social security numbers, if the disclosure is necessary for the commissioner, the department of human services, or the receiving entity to perform its duties and responsibilities.

Source:

S.L. 2011, ch. 225, § 1.

26.1-54-04. Records. [Effective September 1, 2022]

Notwithstanding any provision of this code making records confidential, the commissioner or the commissioner’s designee and the department of health and human services may receive from and provide to federal and state agencies information gathered in the administration of the exchange, including social security numbers, if the disclosure is necessary for the commissioner, the department of health and human services, or the receiving entity to perform its duties and responsibilities.

Source:

S.L. 2011, ch. 225, § 1; 2021, ch. 352, § 330, eff September 1, 2022.

CHAPTER 26.1-55 Unclaimed Life Insurance Benefits

26.1-55-01. Definitions.

As used in this chapter:

  1. “Contract” means an annuity contract issued in this state. The term does not include an annuity used to fund an employment-based retirement plan or program in which the insurer is not committed by terms of the annuity contract to pay death benefits to the beneficiaries of specific plan participants.
  2. “Death master file” means the United States social security administration’s death master file or any other database or service the commissioner has determined is at least as comprehensive as the United States social security administration’s death master file for determining that an individual has reportedly died.
  3. “Death master file match” means a search of the death master file or revised death master file which results in a match of the social security number or of the name and date of birth of an insured, annuity owner, or retained asset accountholder.
  4. “Policy” means any policy or certificate of life insurance issued in this state which provides a death benefit. The term does not include:
    1. A policy or certificate of life insurance which provides a death benefit under an employee benefit plan subject to the federal Employee Retirement Income Security Act of 1974 [Pub. L. 93-406; 29 U.S.C. 1002 et seq.];
    2. A policy or certificate of life insurance which provides a death benefit under an employee benefit plan under any federal employee benefit program;
    3. A policy or certificate of life insurance which is used to fund a pre-need funeral contract or prearrangement; or
    4. A policy or certificate of credit life or accidental death insurance.
  5. “Revised death master file” means the names added to the death master file since the insurer’s most recent semiannual comparison required under this chapter.

Source:

S.L. 2013, ch. 238, § 1.

Effective Date.

This chapter became effective August 1, 2013.

26.1-55-02. Insurer conduct.

  1. Before November 1, 2014, an insurer shall perform a comparison of the insurer’s insureds’ in-force life insurance policies and retained asset accounts against a death master file in order to identify potential matches of the insurer’s insureds. Semiannually, an insurer shall perform a comparison of the insurer’s insureds’ in-force life insurance policies and retained asset accounts against the revised death master file in order to identify the potential matches of the insurer’s insureds.
  2. For each potential match identified as a result of a death master file or revised death master file match, within twelve months of the potential match, the insurer shall:
    1. Complete a good-faith effort, which the insurer shall document, to confirm the death of the insured or retained asset accountholder against other available records and information;
    2. Review the insurer’s records to determine whether the individual who has died purchased any other products with the insurer; and
    3. Determine whether benefits are due in accordance with the applicable policy or contract, and if benefits are due in accordance with the applicable policy or contract the insurer shall:
      1. Use good-faith efforts, which the insurer shall document, to locate the beneficiary or beneficiaries; and
      2. Provide the appropriate claims forms or instructions to the beneficiary or beneficiaries to make a claim, including the need to provide an official death certificate, if applicable under the policy or contract.
  3. With respect to group life insurance, for each potential match identified as a result of a death master file or revised death master file match, the insurer shall confirm the possible death of an insured if the insurer maintains at least the following information of those covered under a policy or certificate:
    1. The social security number or the name and date of birth;
    2. Beneficiary designation information;
    3. Coverage eligibility;
    4. Benefit amount; and
    5. Premium payment status.
  4. Every insurer shall implement procedures to account for:
    1. Nicknames, initials used in lieu of a first or middle name, use of a middle name, compound first and middle names, and interchanged first and middle names;
    2. Compound last names, maiden or married names, and hyphens, blank spaces, and apostrophes in last names;
    3. Incomplete date of birth data and transposition of the month and date portions of a date of birth; and
    4. Incomplete social security numbers.
  5. To the extent permitted by law, for each potential match identified as a result of a death master file or revised death master file match, the insurer may disclose minimum necessary personal information about the insured or beneficiary to:
    1. A person the insurer reasonably believes may be able to assist the insurer locate the beneficiary; or
    2. A person otherwise entitled to payment of the claims proceeds.
  6. An insurer or an insurer’s service provider may not charge an insured, accountholder, or beneficiary for any fees or costs associated with a comparison, search, or verification conducted pursuant to this section.
  7. The benefits from a life insurance policy or a retained asset account, plus any applicable accrued interest must be first payable to the designated beneficiaries or owners and if the beneficiaries or owners cannot be found, escheat to the state as unclaimed property as provided under this chapter.
  8. Within twelve months following a potential match identified as a result of a death master file or revised death master file match, an insurer shall:
    1. Notify the state abandoned property office that a life insurance policy beneficiary or retained asset accountholder has not submitted and completed a claim with the insurer and that the insurer has complied with subsections 2 and 3 and has been unable, after good-faith efforts documented by the insurer, to contact the retained asset accountholder, beneficiary, or beneficiaries and unable to complete the necessary payment; and
    2. Submit any unclaimed life insurance benefits or unclaimed retained asset accounts, plus any applicable accrued interest, to the state abandoned property office under chapter 47-30.2.
  9. Except as otherwise provided under this chapter, chapter 47-30.2 applies to the escheatment of unclaimed life insurance benefits or unclaimed retained asset accounts.

Source:

S.L. 2013, ch. 238, § 1; 2021, ch. 337, §§ 6, 7, eff July 1, 2021.

Note.

Section 26.1-55-02 was amended 2 times by the 2021 Legislative Assembly. Pursuant to Section 1-02-09.1, the section is printed above to harmonize and give effect to the changes made in Section 6 of Chapter 337, Session Laws 2021, Senate Bill 2048; and Section 7 of Chapter 337, Session Laws 2021, Senate Bill 2048.

26.1-55-03. Rulemaking.

The commissioner may adopt rules to limit an insurer’s death master file comparisons and revised death master file comparisons required under this chapter to the insurer’s electronic searchable files, to allow the commissioner to approve an insurer’s plan and timeline for conversion of the insurer’s files to electronic searchable files, and to allow for phasing-in compliance with this chapter according to an insurer’s plan and timeline approved by the commissioner.

Source:

S.L. 2013, ch. 238, § 1.

26.1-55-04. Application.

Chapter 47-30.2, relating to unclaimed property, applies to a contract or policy to the extent the laws do not conflict with this chapter.

Source:

S.L. 2013, ch. 238, § 1; 2021, ch. 337, § 8, eff July 1, 2021.

26.1-55-05. Unfair trade practices — Liability limitation.

Failure to meet any requirement of this chapter is a violation of chapter 26.1-04. This chapter does not create a private cause of action for violation of this chapter. Once an insurer submits unclaimed life insurance benefits or unclaimed retained asset accounts, plus any applicable accrued interests, to the state abandoned property office in compliance with this chapter, the insurer is relieved and indemnified from additional liability to any person relating to the proceeds submitted. This indemnification from liability is in addition to any other protections provided by law.

Source:

S.L. 2013, ch. 238, § 1.

CHAPTER 26.1-57 Guaranteed Asset Protection Waivers

Source:

S.L. 2019, HB1181, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 250, S.L. 2019 provides, “ APPLICATION. This Act applies to all guaranteed asset protection waivers that become effective on or after the effective date of this Act.”

26.1-57-01. Definitions.

As used in this chapter:

  1. “Administrator” means a person, other than an insurer or creditor, which performs administrative or operational functions pursuant to guaranteed asset protection waiver programs.
  2. “Borrower” means a debtor, retail buyer, or lessee, under a finance agreement.
  3. “Creditor” means the lender in a loan or credit transaction; the lessor in a lease transaction; a dealer that provides credit to a motor vehicle retail buyer; the seller in a commercial retail installment transaction; or an assignee of any of the these persons.
  4. “Dealer” has the same meaning as provided under section 39-01-01.
  5. “Finance agreement” means a loan, lease, or retail installment sales contract for the purchase or lease of a motor vehicle.
  6. “Free-look period” means the period of time from the effective date of the guaranteed asset protection waiver until the date the borrower may cancel the contract without penalty, fees, or costs to the borrower. This period of time may not be shorter than thirty days.
  7. “Guaranteed asset protection waiver” means a contractual agreement in which a creditor agrees for a separate charge to cancel or waive all or part of amounts due on a borrower’s finance agreement if there is a total physical damage loss or unrecovered theft of the motor vehicle, which agreement must be part of, or a separate addendum to, the finance agreement.
  8. “Insurer” means an insurance company licensed, registered, or otherwise authorized to do business under the insurance laws of this state.
  9. “Motor vehicle” has the same meaning as provided under section 39-01-01, except the term includes a snowmobile and a trailer for a snowmobile, motorcycle, boat, camper, or personal watercraft.

Source:

S.L. 2019, ch. 250, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 250, S.L. 2019 provides, “ APPLICATION. This Act applies to all guaranteed asset protection waivers that become effective on or after the effective date of this Act.”

26.1-57-02. Scope.

  1. This chapter does not apply to:
    1. An insurance policy offered by an insurer under the insurance laws of this state;
    2. A debt cancellation or debt suspension contract offered in compliance with title 12, Code of Federal Regulations, part 37 or title 12, Code of Federal Regulations, part 721, or other federal law; or
    3. A debt cancellation or debt suspension contract offered by a bank or credit union chartered under the laws of this state.
  2. Guaranteed asset protection waivers are not insurance and, except as provided under this chapter, are exempt from the insurance laws of this state. A person marketing, selling, or offering to sell guaranteed asset protection waivers to borrowers which complies with this chapter is exempt from the insurance requirements of this state.

Source:

S.L. 2019, ch. 250, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 250, S.L. 2019 provides, “ APPLICATION. This Act applies to all guaranteed asset protection waivers that become effective on or after the effective date of this Act.”

26.1-57-03. Requirements for offering guaranteed asset protection waivers.

  1. A guaranteed asset protection waiver may be offered, sold, or provided to a borrower in this state in compliance with this chapter.
  2. A guaranteed asset protection waiver may, at the option of the creditor, be sold for a single payment or may be offered with a monthly or periodic payment option.
  3. Notwithstanding any contrary provision of law, any cost to the borrower for a guaranteed asset protection waiver entered in compliance with the federal Truth in Lending Act [15 U.S.C. 1601 et seq.], and related implementing regulations, must be separately stated and is not a finance charge or interest.
  4. A dealer shall insure the dealer’s guaranteed asset protection waiver obligations under a contractual liability or other insurance policy issued by an insurer. A creditor, other than a dealer, may insure the creditor’s guaranteed asset protection waiver obligations under a contractual liability policy or other such policy issued by an insurer. Any such insurance policy may be obtained directly by a creditor or dealer, or may be procured by an administrator, to cover a creditor’s or dealer’s obligations. However, a dealer that is a lessor on a motor vehicle is not required to insure obligations related to guaranteed asset protection waivers on that leased vehicle.
  5. The guaranteed asset protection waiver remains a part of the finance agreement upon the assignment, sale, or transfer of that finance agreement by the creditor.
  6. Neither the extension of credit, the term of credit, nor the term of the related motor vehicle sale or lease may be conditioned upon the purchase of a guaranteed asset protection waiver.
  7. A creditor that offers a guaranteed asset protection waiver shall report the sale of, and forward funds received on all such waivers to the designated party, if any, as prescribed in any applicable administrative services agreement, contractual liability policy, other insurance policy, or other specified program documents.
  8. Funds received or held by a creditor or administrator and belonging to an insurer, creditor, or administrator, pursuant to the terms of a written agreement, must be held by the creditor or administrator in a fiduciary capacity.

Source:

S.L. 2019, ch. 250, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 250, S.L. 2019 provides, “ APPLICATION. This Act applies to all guaranteed asset protection waivers that become effective on or after the effective date of this Act.”

26.1-57-04. Contractual liability or other insurance policies.

  1. Contractual liability or other insurance policies insuring guaranteed asset protection waivers must state the obligation of the insurer to reimburse or pay to the creditor any sums the creditor is legally obligated to waive under the guaranteed asset protection waivers issued by the creditor and purchased or held by the borrower.
  2. Coverage under a contractual liability or other insurance policy insuring a guaranteed asset protection waiver also must cover any subsequent assignee upon the assignment, sale, or transfer of the finance agreement.
  3. Coverage under a contractual liability or other insurance policy insuring a guaranteed asset protection waiver must remain in effect unless canceled or terminated in compliance with applicable insurance laws of this state.
  4. The cancellation or termination of a contractual liability or other insurance policy may not reduce the insurer’s responsibility for guaranteed asset protection waivers issued by the creditor before the date of cancellation or termination and for which premium has been received by the insurer.

Source:

S.L. 2019, ch. 250, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 250, S.L. 2019 provides, “ APPLICATION. This Act applies to all guaranteed asset protection waivers that become effective on or after the effective date of this Act.”

26.1-57-05. Disclosures.

A guaranteed asset protection waiver must disclose, as applicable, in writing and in clear, understandable language that is easy to read, the following:

  1. Neither the extension of credit, the terms of the credit, nor the terms of the related motor vehicle sale or lease, may be conditioned upon the purchase of the guaranteed asset protection waiver.
  2. The name and address of the initial creditor and the borrower at the time of sale, and the identity of any administrator if different from the creditor.
  3. The purchase price and the terms of the guaranteed asset protection waiver, including the requirements for protection, conditions, or exclusions associated with the guaranteed asset protection waiver.
  4. The borrower may cancel the guaranteed asset protection waiver within a free-look period as specified in the waiver, and is entitled to a full refund of the purchase price, if no benefits have been provided.
  5. The procedure the borrower shall follow, if any, to obtain guaranteed asset protection waiver benefits under the terms and conditions of the waiver, including a telephone number and address at which the borrower may apply for waiver benefits.
  6. The procedure for canceling the guaranteed asset protection waiver and for requesting any refund due.
  7. To receive any refund due in the event of a borrower’s cancellation of the guaranteed asset protection waiver agreement or early termination of the finance agreement after the free-look period of the guaranteed asset protection waiver, the borrower, in accordance with terms of the waiver, shall provide a written request to cancel to the creditor, administrator, or such other party. If the request to cancel is a result of the early termination of the finance agreement the borrower shall provide the written request to cancel within ninety days of the occurrence of the event terminating the finance agreement.
  8. The methodology for calculating any refund of the unearned purchase price of the guaranteed asset protection waiver due, in the event of cancellation of the guaranteed asset protection waiver or early termination of the finance agreement.

Source:

S.L. 2019, ch. 250, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 250, S.L. 2019 provides, “ APPLICATION. This Act applies to all guaranteed asset protection waivers that become effective on or after the effective date of this Act.”

26.1-57-06. Cancellation.

  1. A guaranteed asset protection waiver agreement is cancellable. A guaranteed asset protection waiver must provide if a borrower cancels a waiver within the free-look period, the borrower is entitled to a full refund of the purchase price, if benefits have not been provided. If a borrower cancels the waiver after the free-look period and no benefits have been provided, the creditor, administrator, or other authorized party shall provide the borrower a refund of the purchase price, calculated in a manner at least as favorable as using the sum-of-the-digits method, less any cancellation fee no greater than fifty dollars.
  2. To receive a refund, the borrower, in accordance with any applicable terms of the waiver, shall provide a written request to cancel to the creditor, administrator, or other party. If the request to cancel is a result of the early termination of the finance agreement the borrower shall provide the written request to cancel within ninety days of the occurrence of the event terminating the finance agreement.
  3. If the cancellation of a guaranteed asset protection waiver occurs as a result of a default under the finance agreement or the repossession of the motor vehicle associated with the finance agreement, or any other termination of the finance agreement, any refund due may be paid directly to the creditor or administrator and applied as set forth in subsection 4.
  4. Any cancellation refund under subsection 1, 2, or 3 may be applied by the creditor as a reduction of the amount owed under the finance agreement, unless the borrower can show that the finance agreement has been paid in full.

Source:

S.L. 2019, ch. 250, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 250, S.L. 2019 provides, “ APPLICATION. This Act applies to all guaranteed asset protection waivers that become effective on or after the effective date of this Act.”

26.1-57-07. Commercial transactions exempted.

Subsection 3 of section 26.1-57-03, section 26.1-57-05, and section 26.1-57-06, are not applicable to a guaranteed asset protection waiver offered in connection with a lease or retail installment sale associated with a commercial transaction.

Source:

S.L. 2019, ch. 250, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 250, S.L. 2019 provides, “ APPLICATION. This Act applies to all guaranteed asset protection waivers that become effective on or after the effective date of this Act.”

26.1-57-08. Enforcement — Penalty.

  1. The commissioner may take action as necessary or appropriate to enforce this chapter and to protect guaranteed asset protection waiver holders in this state.
  2. After proper notice and opportunity for hearing, the commissioner may:
    1. Order the creditor, administrator, or any other person not in compliance with this chapter to cease and desist from further guaranteed asset protection waiver-related operations that are in violation of this chapter.
    2. Impose a penalty of not more than five hundred dollars per violation and no more than ten thousand dollars in the aggregate for all violations of a similar nature. For purposes of this chapter, violations are of a similar nature if the violation consists of the same or similar course of conduct, action, or practice, regardless of the number of times the conduct or practice determined to be a violation of the chapter occurred.
    3. Order the creditor, administrator, or any other person not in compliance with this chapter to pay restitution of the guaranteed asset protection waiver purchase price.

Source:

S.L. 2019, ch. 250, § 1, eff August 1, 2019.

Note.

Section 2 of chapter 250, S.L. 2019 provides, “ APPLICATION. This Act applies to all guaranteed asset protection waivers that become effective on or after the effective date of this Act.”