26.1-01-01. Commissioner defined.

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.].

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.].

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.

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.

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.

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.
3. 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.

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.

26.1-02.1-05. Penalties — Restitution.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.

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.

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.

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.

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.

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.

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.

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.

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.

26.1-02.1-11. Rules.

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

26.1-02.2-10. Rules and regulations.

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.
3. 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.
4. 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.
5. 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.
6. 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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”.

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.

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.

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.

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.

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.

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.

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.

26.1-03.2-10. Foreign health organizations.

1. 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.
2. 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.
3. 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.

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.

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.

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.

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.

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.

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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.
6. 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.

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.

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.

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.
2. 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.
3. 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.
4. 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.

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.
3. 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.
4. 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.

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.

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.

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.

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.
2. 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.
3. 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.
4. 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.

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.

26.1-06.1-27. Voidable preferences and liens.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.

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.

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.

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.
2. 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.
3. 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.
4. 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.
5. 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.
6. The liquidator may enforce any order or collect any judgment under subsection 5 by any lawful means.

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.

26.1-06.1-32. Recovery of premiums owed.

1. 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.
2. 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.
3. 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.
4. 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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
   4. 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

26.1-06.2-08. Rules.

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

26.1-08-14. Exempt from premium tax.

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.

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.
2. 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.
3. 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.
4. 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.
5. 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.

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.

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.

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.

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.

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, effective August 1, 2015.

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

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. The commissioner may adopt rules necessary for the administration of this section.
9. 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, effective 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.

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.

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.

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.

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.

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.

26.1-10-12. Rulemaking.

The commissioner may adopt rules and issue orders necessary to carry out this chapter.

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, effective August 1, 2015.

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.

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.

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.