PRINTER'S NO. 227
No. 207 Session of 1977
INTRODUCED BY MR. KOWALSHYN, MRS. GILLETTE, MESSRS. FINEMAN,
IRVIS, MANDERINO, ZEARFOSS, A. C. FOSTER, ZWIKL, BRUNNER,
A. K. HUTCHINSON, KNEPPER, D. R. WRIGHT, REED, LETTERMAN,
SALVATORE, SHUPNIK, CESSAR, SCHMITT, BELLOMINI, HALVERSON,
MACKOWSKI, MRS. HARPER, MESSRS. RUGGIERO, LIVENGOOD,
MELUSKEY, SCHWEDER, PRATT, RAVENSTAHL, HOPKINS AND GARZIA,
FEBRUARY 9, 1977
REFERRED TO COMMITTEE ON INSURANCE, FEBRUARY 9, 1977
AN ACT
1 Providing for the establishment, organization, operation and
2 termination of fraternal benefit societies; imposing
3 additional powers and duties on the Insurance Department and
4 Insurance Commissioner and providing penalties for
5 violations.
6 TABLE OF CONTENTS
7 Chapter 1. General Provisions
8 Section 101. Short title.
9 Section 102. Definitions.
10 Section 103. Severability.
11 Section 104. Exemptions from general insurance laws.
12 Chapter 2. Organization and Related Matters
13 Section 201. Initial organization.
14 Section 202. Initial papers to be filed with commissioner.
15 Section 203. Validity of preliminary certificate.
16 Section 204. Solicitation of members on receipt of
17 certificate.
1 Section 205. Examination by commissioner.
2 Section 206. Exemption.
3 Section 207. Approval necessary.
4 Section 208. Certain powers of societies.
5 Section 209. Review of department order.
6 Section 210. Classes of membership.
7 Section 211. Corporate powers retained.
8 Section 212. Existing voluntary associations.
9 Section 213. Location of office.
10 Section 214. Consolidations and mergers.
11 Section 215. Amendments to articles of incorporation,
12 constitution and laws.
13 Section 216. Institutions.
14 Section 217. Personal liability.
15 Section 218. Waiver.
16 Section 219. Conversion of fraternal benefit society into
17 mutual live insurance company.
18 Section 220. Reinsurance.
19 Chapter 3. Benefits and Beneficiaries
20 Section 301. Benefits.
21 Section 302. Benefits on lives of children.
22 Section 303. Nonforfeiture benefits, cash surrender values,
23 certificate loans and other options.
24 Section 304. Beneficiaries.
25 Section 305. Benefits not attachable.
26 Section 306. Contract for benefits.
27 Chapter 4. Certificates
28 Section 401. Approval of certificates.
29 Section 402. Certificate provisions required.
30 Section 403. Statement of title and premiums.
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1 Section 404. Grace period of certificate.
2 Section 405. Reinstatement.
3 Section 406. Default.
4 Section 407. Tables.
5 Section 408. Contestability of certificate.
6 Section 409. Redetermination of premiums in certain
7 circumstances.
8 Section 410. Right to maintain insurance.
9 Section 411. Surplus.
10 Section 412. Loan value of certificate.
11 Section 413. Prohibited provisions.
12 Chapter 5. Accident and Health Insurance and Total and
13 Permanent Disability Insurance Certificates
14 Section 501. Commissioner to regulate.
15 Section 502. Filing with and approval of contracts by
16 commissioner.
17 Section 503. Conditions for certificates.
18 Section 504. Standard certificate provision for insurance
19 for accident and health or for permanent and
20 total disability.
21 Section 505. Entire contract and changes.
22 Section 506. Time limits on certain defenses.
23 Section 507. Grace periods.
24 Section 508. Reinstatement.
25 Section 509. Written notice of claims.
26 Section 510. Forms for claims.
27 Section 511. Proofs of loss.
28 Section 512. Time of payment of claims.
29 Section 513. Payment of claims.
30 Section 514. Physical examinations and autopsy.
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1 Section 515. Legal actions.
2 Section 516. Change of beneficiary.
3 Section 517. Change of occupation.
4 Section 518. Misstatement of age.
5 Section 519. Other insurance in this society.
6 Section 520. Insurance with other benefit members.
7 Section 521. Insurance with other societies.
8 Section 522. Relation of earnings to insurance.
9 Section 523. Nonpayment of premiums.
10 Section 524. Cancellation.
11 Section 525. Conformity of provisions with State statutes.
12 Section 526. Illegal occupation.
13 Section 527. Intoxicants and narcotics.
14 Section 528. Provisions not applicable in certain
15 circumstances.
16 Section 529. Printed order of certain certificate
17 provisions.
18 Section 530. Third party ownership.
19 Section 531. Filing procedure.
20 Chapter 6. Licenses, Fees and Additional Powers For The
21 Commissioner
22 Section 601. Annual license.
23 Section 602. Fees.
24 Section 603. Foreign society.
25 Section 604. Injunction, liquidation or receivership of
26 domestic society.
27 Section 605. Suspension, revocation or refusal of license
28 to foreign society.
29 Section 606. Service of process.
30 Section 607. Application for injunction.
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1 Section 608. Court review.
2 Chapter 7. Agents
3 Section 701. Fraternal insurance agent defined.
4 Section 702. License required for agents.
5 Section 703. Payment of commissions forbidden.
6 Section 704. Commissioner may issue license.
7 Section 705. Agents' documents on file.
8 Section 706. Types of licenses to be issued.
9 Section 707. Refusal to issue license.
10 Section 708. Term of license.
11 Chapter 8. Funds, Investments and Investigations
12 Section 801. Funds.
13 Section 802. Investments.
14 Section 803. Report of financial condition.
15 Section 804. Synopsis of report to each member.
16 Section 805. Report of valuation of certificates.
17 Section 806. Reserves, determination.
18 Section 807. Deferred payments as liability.
19 Section 808. Certification of valuation.
20 Section 809. Valuation standards.
21 Section 810. Other standards for valuation.
22 Section 811. Excess reserves.
23 Section 812. Penalty for failures to file statement.
24 Section 813. Examination of domestic societies.
25 Section 814. Visitation and examination.
26 Section 815. Examination of foreign societies.
27 Section 816. No adverse publications.
28 Section 817. Misrepresentation.
29 Section 818. Discrimination and rebates.
30 Chapter 9. Miscellaneous
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1 Section 901. Taxation.
2 Section 902. Exemptions.
3 Section 903. Exemption of certain societies.
4 Section 904. Penalties.
5 Section 905. Repealer.
6 Chapter 10. Effective Date
7 Section 1001. Effective date.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 CHAPTER 1
11 GENERAL PROVISIONS
12 Section 101. Short title.
13 This act shall be known and may be cited as the "Fraternal
14 Benefit Society Code."
15 Section 102. Definitions.
16 The following words and phrases when used in this act shall
17 have, unless the context clearly indicates otherwise, the
18 meanings given to them in this section:
19 "Commissioner." The Insurance Commissioner of the
20 Commonwealth of Pennsylvania.
21 "Department." The Insurance Department of the Commonwealth
22 of Pennsylvania.
23 "Fraternal benefit society." Any incorporated society, order
24 or supreme lodge, without capital stock, including one exempted
25 under the provisions of section 903(a)(2), whether incorporated
26 or not, conducted solely for the benefit of its members and
27 their beneficiaries and not for profit, operated on a lodge
28 system with or without ritualistic form of work, having a
29 representative form of government, and which makes provision for
30 the payment of benefits in accordance with this act.
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1 When used in this chapter the word "society," unless
2 otherwise indicated, shall mean fraternal benefit society.
3 "Lodge system." A society shall be deemed to be operating on
4 the lodge system when the society has a supreme legislative or
5 governing body and subordinate lodges or branches by whatever
6 name known, into which members are elected, initiated or
7 admitted in accordance with its constitution, laws, rituals, or
8 rules, which subordinate lodges or branches shall be required by
9 the laws of the society to hold regular meetings at least once
10 in each quarter.
11 "Premium." Any charges, fees, dues, or other required
12 contributions by whatever name known.
13 "Representative form of government." A society shall be
14 deemed to have a representative form of government when:
15 (1) It provides in its constitution or laws for a
16 supreme legislative or governing body, composed of
17 representatives elected either by the members or by delegates
18 elected directly or indirectly by the members, together with
19 such other members of such body as may be prescribed by the
20 society's constitution and laws.
21 (2) The representatives elected constitute a majority in
22 number and have not less than two-thirds of the votes nor
23 less than the votes required to amend its constitution and
24 laws.
25 (3) The meetings of the supreme legislative or governing
26 body and the election of officers, representatives or
27 delegates are held as often as once in four calendar years.
28 (4) Each benefit member shall be eligible for election
29 to act or serve as a delegate to such meeting.
30 (5) The society has a board of directors charged with
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1 the responsibility for managing its affairs in the interim
2 between meetings of its supreme legislative or governing
3 body, subject to control by such body and having powers and
4 duties delegated to it in the constitution or laws of the
5 society.
6 (6) Such board of directors is elected by the supreme
7 legislative or governing body, except in case of filling a
8 vacancy in the interim between meetings of such body.
9 (7) The officers are elected either by the supreme
10 legislative or governing body or by the board of directors.
11 (8) The members, officers, representatives or delegates
12 shall not vote by proxy.
13 "Society." A fraternal benefit society as set forth in this
14 act.
15 Section 103. Severability.
16 If any provision of this act is held to be invalid or
17 unconstitutional, such decision shall not affect the remaining
18 provisions of this act.
19 Section 104. Exemptions from general insurance laws.
20 Except as otherwise provided in this act, a fraternal benefit
21 society holding a certificate of authority shall not be subject
22 to the laws of this Commonwealth now in force relating to the
23 business of insurance and no statute hereafter enacted relating
24 to the business of insurance shall apply to such a society
25 unless such statute shall specifically refer and apply to a
26 society subject to this act.
27 CHAPTER 2
28 ORGANIZATION AND RELATED MATTERS
29 Section 201. Initial organization.
30 The organization of a society shall be as herein provided.
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1 Seven or more citizens of the United States, a majority of whom
2 are citizens of this Commonwealth, who desire to form a
3 fraternal benefit society, may make, sign and acknowledge before
4 an officer competent to take acknowledgment of deeds, articles
5 of incorporation, in which shall be stated:
6 (1) The proposed corporate name of the society, which
7 shall not so closely resemble the name of any society or
8 insurance company as to be misleading or confusing.
9 (2) The purposes for which it is being formed and the
10 mode in which its corporate powers are to be exercised. Such
11 purposes shall not include more liberal powers than are
12 granted by this act, provided that any lawful, social,
13 intellectual, educational, charitable, benevolent, moral,
14 fraternal or religious advantages may be set forth among the
15 purposes of the society.
16 (3) The names and residences of the incorporators and
17 the names, residences and official titles of all the
18 officers, trustees, directors, or other persons who are to
19 have and exercise the general control of the management of
20 the affairs and funds of the society for the first year or
21 until the ensuing election at which all such officers shall
22 be elected by the supreme legislative or governing body,
23 which election shall be held not later than one year from the
24 date of the issuance of the permanent certificate.
25 Section 202. Initial papers to be filed with commissioner.
26 Such articles of incorporation, duly certified copies of the
27 constitution, laws and rules, copies of all proposed forms of
28 certificates, applications therefore, receipts and circulars to
29 be issued by the society and a bond conditioned upon the return
30 to applicants of the advanced payments if the organization is
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1 not completed within one year shall be filed with the
2 commissioner, who may require such further information as he
3 deems necessary. The bond with sureties approved by the
4 commissioner shall be in such amount, not less than $5,000 nor
5 more than $25,000, as required by the commissioner. All
6 documents filed are to be in the English language. If the
7 purposes of the society conform to the requirements of this act
8 and all provisions of the law have been complied with, the
9 commissioner shall so certify, retain and file the articles of
10 incorporation and furnish the incorporators a preliminary
11 certificate authorizing the society to solicit members as
12 hereinafter provided.
13 Section 203. Validity of preliminary certificate.
14 No preliminary certificate granted under the provisions of
15 this act shall be valid after one year from its date or after
16 such other period, not exceeding one year, as may be authorized
17 by the commissioner upon cause shown, unless the 500 applicants
18 hereinafter required have been secured and the organization has
19 been completed as herein provided. The articles of incorporation
20 and all other proceedings thereunder shall become null and void
21 in one year from the date of the preliminary certificate, or at
22 the expiration of the extended period, unless the society shall
23 have completed its organization and received a certificate of
24 authority to do business as hereinafter provided.
25 Section 204. Solicitation of members on receipt of certificate.
26 Upon receipt of a preliminary certificate from the
27 commissioner, the society may solicit members for the purpose of
28 completing its organization, shall collect from each applicant
29 the amount of not less than one regular monthly premium in
30 accordance with its table of premiums as provided by its
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1 constitution and laws, and shall issue to each such applicant a
2 receipt for the amount so collected. No society shall incur any
3 liability other than for the return of such advance premium, nor
4 issue any certificate, nor pay, allow, or offer or promise to
5 pay or allow, any death or disability benefit to any person
6 until:
7 (1) Actual bona fide applications for death benefits
8 have been secured aggregating at least $500,000 on not less
9 than 500 lives.
10 (2) All such applicants for death benefits shall have
11 furnished evidence of insurability satisfactory to the
12 society.
13 (3) Certificates of examinations or acceptable
14 declarations of insurability have been duly filed and
15 approved by the chief medical examiner of the society.
16 (4) Ten subordinate lodges or branches have been
17 established into which the 500 applicants have been admitted.
18 (5) There has been submitted to the commissioner, under
19 oath of the president or secretary, or corresponding officer
20 of the society, a list of such applicants, giving their
21 names, addresses, date each was admitted, name and number of
22 the subordinate branch of which each applicant is a member,
23 amount of benefits to be granted and premiums therefore.
24 (6) It shall have been shown to the commissioner, by
25 sworn statement of the treasurer, or corresponding officer of
26 such society, that at least 500 applicants have each paid in
27 cash at least one regular monthly premium as herein provided,
28 which premiums in the aggregate shall amount to at least
29 $2,500, all of which shall be credited to the fund or funds
30 from which benefits are to be paid and no part of which may
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1 be used for expenses. The advance premiums shall be held in
2 trust during the period of organization and if the society
3 has not qualified for a certificate of authority within one
4 year, as herein provided, such premiums shall be returned to
5 the applicants.
6 Section 205. Examination by commissioner.
7 The commissioner may make such examination and require such
8 further information as he deems advisable. Upon presentation of
9 satisfactory evidence that the society has complied with all the
10 provisions of law, he shall issue to the society a certificate
11 to that effect and that the society is authorized to transact
12 business pursuant to the provisions of this act. The certificate
13 shall be prima facie evidence of the existence of the society at
14 the date of such certificate. The commissioner shall cause a
15 record of such certificate to be made. A certified copy of such
16 record may be given in evidence with like effect as the original
17 certificate.
18 Section 206. Exemption.
19 The provisions of sections 204 and 205 of this chapter shall
20 not apply to:
21 (1) Any society organized prior to April 6, 1893 under
22 any statute of this Commonwealth which was engaged in doing
23 business in this Commonwealth on such date. Any such society
24 may exercise after the effective date of this act all the
25 rights conferred by this act and all the rights, powers,
26 privileges, and exemptions now exercised or possessed by it,
27 under its charter or articles of incorporation or articles of
28 association, and neither its existence as a corporation nor
29 its right to exercise any corporate rights, vested in it by
30 virtue of its past incorporation, shall be affected by
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1 anything contained in this act.
2 (2) Any fraternal benefit society incorporated under the
3 provisions of the act of April 6, 1893 (P.L.10, No.6), the
4 act of May 20, 1921 (P.L.916, No.324), or the act of July 17,
5 1935 (P.L.1092, No.357), relating to fraternal benefit
6 societies.
7 For the purposes of this act, a corporation which is exempt
8 from the requirements of sections 204 and 205 of this chapter by
9 reason of paragraph (1) of this section shall be deemed to be a
10 holder of a certificate of authority issued under this chapter.
11 Section 207. Approval necessary.
12 No society, authorized to transact business as set forth
13 above, shall issue any insurance forms, endorsements, or riders
14 without first having obtained the necessary approval.
15 Section 208. Certain powers of societies.
16 Every society shall have the power to adopt a constitution
17 and laws for the government of the society, the admission of its
18 members, the management of its affairs and the fixing of the
19 premiums of its members from time to time. It shall have the
20 power to change, alter, add to or amend such constitution and
21 laws and shall have such other powers as are necessary and
22 incidental to carrying into effect the objects and purposes of
23 the society.
24 Section 209. Review of department order.
25 Orders of the Insurance Department upon an application for a
26 certificate of authority under this section shall be subject to
27 judicial review in the manner and within the time provided by
28 law.
29 Section 210. Classes of membership.
30 (a) Two classes of membership.--Every society authorized to
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1 do business in this Commonwealth may admit to membership two
2 classes of members: benefit members and social members by
3 whatever name known. Social members shall not be entitled to any
4 of the benefits prescribed by sections 301 and 302 and shall
5 have no voice or vote in the management of the insurance affairs
6 of the society. Benefit members may be either adult members or
7 juvenile members. Juvenile members shall have no voice or vote
8 in the management of the insurance affairs of the society.
9 (b) Adult benefit membership.--Every such society may admit
10 to adult benefit membership any person not less than 15 years of
11 age at nearest birthday. Any person so admitted prior to
12 attaining the full age of 18 years shall be deemed competent to
13 contract for insurance benefits and to exercise and enjoy every
14 right, privilege and benefit provided by any insurance
15 certificate on such minor subject to the limitations contained
16 in section 302 as to the designation of beneficiary.
17 (c) Evidence of insurability required.--Every adult benefit
18 member entitled to insurance benefits shall, as to each
19 application for insurance, have furnished evidence of
20 insurability acceptable to the society.
21 Section 211. Corporate powers retained.
22 Any unincorporated society authorized to transact business in
23 this Commonwealth at the time this act becomes effective may
24 thereafter exercise all the rights, powers and privileges
25 prescribed in this act and in its charter or articles of
26 incorporation as far as consistent with this act. A domestic
27 society shall not be required to reincorporate.
28 Section 212. Existing voluntary associations.
29 (a) Necessity of incorporation.--One year from the effective
30 date of this act, no unincorporated or voluntary association
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1 shall be permitted to transact business in this Commonwealth as
2 a fraternal benefit society unless such association incorporates
3 pursuant to the provisions of this act.
4 (b) Receipt of certificate on incorporation.--Any domestic
5 voluntary association now authorized to transact business in
6 this Commonwealth may incorporate and shall receive from the
7 commissioner a permanent certificate of incorporation as a
8 fraternal benefit society when:
9 (1) It shall have completed its conversion to an
10 incorporated society not later than one year from the
11 effective date of this act.
12 (2) Itt has filed its articles of incorporation and has
13 satisfied the other requirements described in section 102.
14 (3) The commissioner shall have made such examination
15 and procured whatever additional information he shall deem
16 advisable.
17 (c) Obligations and benefits.--Every voluntary association
18 so incorporated shall incur the obligations and enjoy the
19 benefits thereof the same as though originally incorporated, and
20 such corporation shall be deemed a continuation of the original
21 voluntary association. The officers thereof shall serve through
22 their respective terms as provided in its original articles of
23 association, but their successors shall be elected and serve as
24 provided in its articles of incorporation. Incorporation of a
25 voluntary association shall not affect existing suits, claims or
26 contracts.
27 Section 213. Location of office.
28 The principal office of any domestic society shall be located
29 in this Commonwealth. The meetings of its supreme legislative or
30 governing body may be held in any state, district, province or
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1 territory wherein such society has at least five subordinate
2 branches and all business transacted at such meetings shall be
3 as valid in all respects as if such meetings were held in this
4 Commonwealth.
5 Section 214. Consolidations and mergers.
6 (a) Right to consolidate or merge.--A domestic society may
7 consolidate or merge with any other society by complying with
8 the provisions of this section.
9 (b) Statements to be filed.--It shall file with the
10 Commissioner of Insurance:
11 (1) A certified copy of the written contract containing
12 in full the terms and conditions of the consolidation or
13 merger.
14 (2) A sworn statement by the president and secretary or
15 corresponding officers of each society showing the financial
16 condition thereof on a date fixed by the commissioner but not
17 earlier than December 31, next preceding the date of the
18 contract.
19 (3) A certificate of such officers, duly verified by
20 their respective oaths, that the consolidation or merger has
21 been approved by a two-thirds vote of the supreme legislative
22 or governing body of each society.
23 (4) Evidence that at least 60 days prior to the action
24 of the supreme legislative or governing body of each society,
25 the text of the contract has been furnished to all members of
26 each society either by mail or by publication in full in the
27 official organ of each society.
28 (c) Commissioner to approve.--If the commissioner finds that
29 the contract is in conformity with the provisions of this
30 section, that the financial statements are correct and that the
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1 consolidation or merger is just and equitable to the members of
2 each society, he shall approve the contract and issue his
3 certificate to such effect. Upon such approval, the contract
4 shall be in full force and effect unless any society which is a
5 party to the contract is incorporated under the laws of any
6 other state or territory. In such event the consolidation or
7 merger shall not become effective unless and until it has been
8 approved as provided by the laws of such state or territory and
9 a certificate of such approval is filed with the commissioner of
10 this Commonwealth or, if the laws of such state or territory
11 contain no such provision, then the consolidation or merger
12 shall not become effective unless and until it has been approved
13 by the Commissioner of Insurance of such state or territory and
14 a certificate of such approval filed with the commissioner of
15 this Commonwealth.
16 (d) Property merged.--Upon the consolidation or merger
17 becoming effective, all the rights, franchises and interests of
18 the consolidated or merged societies in and to every species of
19 property, real, personal or mixed, and things in action thereto
20 belonging shall be vested in the society resulting from or
21 remaining after the consolidation or merger without any other
22 instrument, except that conveyances of real property may be
23 evidenced by proper deeds, and the title to any real estate or
24 interest therein, vested under the laws of this Commonwealth in
25 any of the societies consolidated or merged, shall not revert or
26 be in any way impaired by reason of the consolidation or merger,
27 but shall vest absolutely in the society resulting from or
28 remaining after such consolidation or merger.
29 (e) Affidavit as evidence.--The affidavit of any officer of
30 the society or of anyone authorized by it to mail any notice or
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1 document, stating that such notice or document has been duly
2 addressed and mailed, shall be prima facie evidence that such
3 notice or document has been furnished the addresses.
4 Section 215. Amendments to articles of incorporation,
5 constitution and laws.
6 (a) Power to amend.--A domestic society may amend its
7 articles of incorporation, constitution or laws in accordance
8 with the provisions thereof, by action of its supreme
9 legislative or governing body at any regular or special meeting
10 or, if its articles of incorporation, constitution or laws so
11 provide, by referendum. Such referendum may be held in
12 accordance with the provisions of its articles of incorporation,
13 constitution or laws by the vote of the voting members of the
14 society, by the vote of delegates or representatives of voting
15 members or by the vote of local lodges or branches. No amendment
16 submitted for adoption by referendum shall be adopted unless,
17 within six months from the date of submission thereof, a
18 majority of all of the voting members of the society shall have
19 signified their consent to such amendment by one of the methods
20 herein specified.
21 (b) Amendments require approval of commissioner.--No
22 amendment in the articles of incorporation, constitution or laws
23 of any domestic society shall take effect unless approved by the
24 commissioner who shall approve such amendment if he finds that
25 it has been duly adopted and is not inconsistent with any
26 requirement of the laws of this Commonwealth or with the
27 character, objects and purposes of the society. Unless the
28 commissioner shall disapprove any such amendment within 60 days
29 after the filing of the amendment, such amendment shall be
30 considered approved. The approval or disapproval of the
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1 commissioner shall be in writing and mailed to the secretary or
2 corresponding officer of the society at its principal office. In
3 case he disapproves such amendment, the reasons therefore shall
4 be stated in such written notice.
5 (c) Copies of changes.--Within 90 days from the approval
6 thereof by the commissioner, all such amendments, or a synopsis
7 thereof, shall be furnished to all members of the society either
8 by mail or by publication in full in the official organ of the
9 society. The affidavit of any officer of the society or of
10 anyone authorized by it to mail any amendments or synopsis
11 thereof, stating facts which show that same have been duly
12 addressed and mailed, shall be prima facie evidence that such
13 amendments or synopsis thereof, have been furnished the
14 addressee.
15 (d) Power of commissioner to review.--The Commissioner of
16 Insurance shall have the power to review existing articles of
17 incorporation, constitutions and bylaws of domestic fraternal
18 benefit societies at any time in order to determine whether said
19 articles, constitutions or bylaws comply with the minimum
20 standards set forth in this act.
21 (e) Foreign societies to file.--Every foreign or alien
22 society authorized to do business in this Commonwealth shall
23 file with the commissioner a duly certified copy of all
24 amendments of, or additions to, its articles of incorporation,
25 constitution or laws within 90 days after the enactment of same.
26 (f) Printed copies as evidence.--Printed copies of the
27 constitution or laws as amended, certified by the secretary or
28 corresponding officer of the society shall be prima facie
29 evidence of the legal adoption thereof.
30 Section 216. Institutions.
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1 (a) Power to own or establish.--It shall be lawful for a
2 society to create, maintain and operate charitable, benevolent
3 or educational institutions for the benefit of its members and
4 their families and dependents and for the benefit of children
5 insured by the society. For such purpose it may own, hold or
6 lease personal property or real property located within or
7 without this Commonwealth, with necessary buildings thereon.
8 Such property shall be reported in every annual statement but
9 shall not be allowed as an admitted asset of such society.
10 (b) Not to operate for profit.--Maintenance, treatment and
11 proper attendance in any such institution may be furnished free
12 or a reasonable charge may be made therefore, but no such
13 institution shall be operated for profit. The society shall
14 maintain a separate accounting of any income and disbursements
15 under this section and report them in its annual statement. No
16 society shall own or operate funeral homes or undertaking
17 establishments.
18 Section 217. Personal liability.
19 The officers and members of the supreme, grand or any
20 subordinate body of a society shall not be personally liable for
21 payment of any benefits provided by a society.
22 Section 218. Waiver.
23 The constitution and laws of the society shall provide that
24 no subordinate body, nor any of its subordinate officers or
25 members shall have the power or authority to waive any of the
26 provisions of the laws and constitution of the society. Such
27 provision shall be binding on the society and every member and
28 beneficiary of a member.
29 Section 219. Conversion of fraternal benefit society into mutual
30 life insurance company.
19770H0207B0227 - 20 -
1 Any domestic fraternal benefit society may be converted and
2 licensed as a mutual life insurance company by compliance with
3 all the financial requirements of the act of May 17, 1921
4 (P.L.682, No.284), known as "The Insurance Company Law of 1921,"
5 if such plan of conversion has been approved by the Commissioner
6 of Insurance. Such plan shall be prepared in writing setting
7 forth in full, the terms and conditions thereof. The board of
8 directors shall submit such plan to the supreme legislative or
9 governing body of such society at any regular or special meeting
10 thereof, by giving a full, true and complete copy of such plan
11 with the notice of such meeting. Such notice shall be given as
12 provided in the laws of the society for the convocation of a
13 regular or special meeting of such body, as the case may be. The
14 affirmative vote of two-thirds of all members of such body shall
15 be necessary for the approval of such agreement. No such
16 conversion shall take effect unless and until approved by the
17 commissioner who may give such approval if he finds that the
18 proposed change is in conformity with the requirements of law
19 and not prejudicial to the certificate holders of the society.
20 Section 220. Reinsurance.
21 A domestic society may, by a reinsurance agreement, cede any
22 individual risk or risks in whole or in part to an insurer
23 (other than another fraternal benefit society) having the power
24 to make such reinsurance and authorized to do business in this
25 Commonwealth, or if not so authorized, one which is approved by
26 the commissioner, but no such society may reinsure in excess of
27 50% all of its insurance in force without the written permission
28 of the commissioner. It may take credit for the reserves on such
29 ceded risks to the extent reinsured, but no credit shall be
30 allowed as an admitted asset or as a deduction from liability,
19770H0207B0227 - 21 -
1 to a ceding society for reinsurance made, ceded, renewed, or
2 otherwise becoming effective after the effective date of this
3 act, unless the reinsurance is payable by the assuming insurer
4 on the basis of the liability of the ceding society under the
5 contract or contracts reinsured without diminution because of
6 the insolvency of the ceding society.
7 CHAPTER 3
8 BENEFITS AND BENEFICIARIES
9 Section 301. Benefits.
10 (a) Power to grant benefits.--Any fraternal benefit society
11 holding a certificate of authority under this act may enter into
12 contracts in such forms and grant such benefits as its laws may
13 authorize. In the case of life insurance benefits, it shall
14 provide for the accumulation and maintenance of assets required
15 for the payment of such benefits, when valued upon an interest
16 basis, not exceeding 4% per annum, and mortality standards
17 adopted by it within the limitations provided in this act or, at
18 the option of the society, in the statutes relating to life
19 insurance companies. Any life certificates issued on a renewable
20 term basis shall set forth clearly thereon the successive future
21 rates of contribution to be paid thereunder.
22 (b) Family eligibility.--Benefits may be provided on the
23 lives of members or, upon application of a member, on the lives
24 of the member's family, including the member, the member's
25 spouse and minor children, in the same or separate certificates.
26 Section 302. Benefits on lives of children.
27 (a) Power to provide benefit on children's lives.--A society
28 may provide for insurance benefits or annuity benefits or both
29 on the lives of children under the minimum age for adult
30 membership but not greater than 18 years of age at time of
19770H0207B0227 - 22 -
1 application therefore, upon the application of some adult
2 person, as its laws or rules may provide, which benefits shall
3 be in accordance with the provisions of section 301(a). A
4 society may, at its option, organize and operate branches for
5 such children. Membership and initiation in local lodges shall
6 not be required of such children, nor shall they have a voice or
7 vote in the management of the society.
8 (b) Change of beneficiary.--A society shall have power to
9 provide for the designation and changing of designation of
10 beneficiaries in the certificates providing for such benefits
11 and to provide in all other respects for the regulation,
12 government and control of such certificates and all rights,
13 obligations and liabilities incident thereto and connected
14 therewith.
15 Section 303. Nonforfeiture benefits, cash surrender values,
16 certificate loans and other options.
17 (a) Power to make.--A society may grant paid-up
18 nonforfeiture benefits, cash surrender values, certificate loans
19 and such other options as its laws may permit. As to
20 certificates issued on and after the effective date of this act,
21 a society shall grant at least one paid-up nonforfeiture
22 benefit, except in the case of pure endowment, annuity or
23 reversionary annuity contracts, reducing term insurance
24 contracts or contracts of term insurance of a uniform amount of
25 15 years or less expiring before age 66.
26 (b) Reserves computed on other basis.--In the case of
27 certificates other than those for which reserves are computed on
28 the Commissioner's 1941 Standard Ordinary Mortality Table, the
29 1941 Standard Industrial Table or the Commissioner's 1958
30 Standard Ordinary Mortality Table, or any more recent table made
19770H0207B0227 - 23 -
1 applicable to life insurance companies the value of every paid-
2 up nonforfeiture benefit and the amount of any cash surrender
3 value, loan or other option granted shall not be less than the
4 excess, if any, of (1) over (2) as follows:
5 (1) The reserve under the certificate determined on the
6 basis specified in the certificate.
7 (2) The sum of any indebtedness to the society on the
8 certificate, including interest due and accrued, and a
9 surrender charge equal to 2 1/2% of the face amount of the
10 certificate, which, in the case of insurance on the lives of
11 children, shall be the ultimate face amount of the
12 certificate, if death benefits provided therein are graded.
13 (c) Reserves computed on substandard basis.--However, in the
14 case of certificates issued on a substandard basis or in the
15 case of certificates, the reserves for which are computed upon
16 the American Men Ultimate Table of Mortality the term of any
17 extended insurance benefit granted including accompanying pure
18 endowment, if any, may be computed upon the rates of mortality
19 not greater than 130% of those shown by the mortality table
20 specified in the certificate for the computation of the reserve.
21 (d) Reserves computed on certain tables.--In the case of
22 certificates for which reserves are computed on the
23 Commissioner's 1941 Standard Ordinary Mortality Table, the 1941
24 Standard Industrial Table or the Commissioner's 1958 Standard
25 Ordinary Mortality Table or any more recent table made
26 applicable to life insurance companies, every paid-up
27 nonforfeiture benefit and the amount of any cash surrender
28 value, loan or other option granted shall not be less than the
29 corresponding amount ascertained in accordance with the
30 provisions of the laws of this Commonwealth applicable to life
19770H0207B0227 - 24 -
1 insurance companies issuing policies containing like insurance
2 benefits based upon such tables.
3 Section 304. Beneficiaries.
4 (a) Power to change beneficiaries.--Unless otherwise
5 provided in the contract:
6 (1) The member shall have the right at all times to
7 change the beneficiary or beneficiaries and to assign the
8 certificate.
9 (2) No beneficiary shall have or obtain any interest in
10 the proceeds of any certificate until a certificate becomes
11 due and payable in conformity with its provisions.
12 (b) Limitation on scope of beneficiaries.--Every society by
13 its constitution, laws and rules may limit the scope of
14 beneficiaries.
15 (c) Payment of funeral benefits, limitation.--A society may
16 make provision for the payment of funeral benefits to the extent
17 of such portion of any payment under a certificate as might
18 reasonably appear to be due to any person equitably entitled
19 thereto by reason of having incurred expense occasioned by the
20 burial of the member, provided the portion so paid shall not
21 exceed the sum of $1,000.
22 (d) Payment to personal representative.--If, at the death of
23 any member, there is no lawful beneficiary to whom the insurance
24 benefits shall be payable, the amount of such benefits, except
25 to the extent that funeral benefits may be paid as hereinbefore
26 provided, shall be payable to the personal representative of the
27 deceased member.
28 Section 305. Benefits not attachable.
29 No money or other benefit, charity, relief or aid to be paid,
30 provided or rendered by any society, shall be liable to
19770H0207B0227 - 25 -
1 attachment, garnishment or other process, or to be seized,
2 taken, appropriated or applied by any legal or equitable process
3 or operation of law to pay any debt or liability of a member or
4 beneficiary, or any other person who may have a right
5 thereunder, either before or after payment by the society.
6 Section 306. Contract for benefits.
7 (a) Materials forming contract.--Every society authorized to
8 do business in this Commonwealth shall issue a certificate to
9 the benefit member, or the spouse of a member, or to the
10 applicant for a juvenile, specifying the amount of benefits
11 provided thereby. The certificate, together with any riders or
12 endorsements attached thereto, the charter or articles of
13 incorporation, the constitution and laws of the society, the
14 application for benefits and declaration of insurability, if
15 any, signed by the applicant, and all amendments to each
16 thereof, shall constitute the agreement, as of the date of
17 issuance, between the society and the member, and the
18 certificate shall so state. A copy of the application for
19 benefits and of the declaration of insurability, if any, shall
20 be endorsed upon or attached to the certificate.
21 (b) Statements and waiver.--All statements purporting to be
22 made by the member shall be representations and not warranties.
23 Any waiver of this provision shall be void.
24 (c) Amendments to bind.--Any changes, additions or
25 amendments to the charter or articles of incorporation,
26 constitution or laws duly made or enacted subsequent to the
27 issuance of the certificate, shall bind the member and the
28 beneficiaries, and shall govern and control the agreement in all
29 respects the same as though such changes, additions or
30 amendments had been made prior to and were in force at the time
19770H0207B0227 - 26 -
1 of the application for membership, except that no change,
2 addition or amendment shall destroy or diminish benefits which
3 the society contracted to give the member as of the date of
4 issuance.
5 (d) Responsibility of society members for deficiency.--Every
6 society shall contain in its laws and in each certificate of
7 life insurance it issues, a provision, to which every
8 certificate of insurance issued by the society shall be subject,
9 that if the financial position of the society becomes impaired,
10 subject to the prior written approval of the commissioner, the
11 board of directors or the supreme governing body may determine
12 on an equitable basis the proportionate share of the deficiency
13 of each member of the society. Each benefit member may then
14 either pay his share of the deficiency, or accept the imposition
15 of a lien on the certificate of insurance, to bear interest at
16 the rate charged on policy loans under the certificate, if
17 applicable, otherwise at a rate approved by the commissioner,
18 compounded annually until paid, or may accept a proportionate
19 reduction in benefits under his certificate. The society may
20 specify the manner of the election and which alternative is to
21 be presumed if no election is made, subject to the prior written
22 approval of the commissioner in the case of domestic societies.
23 CHAPTER 4
24 CERTIFICATES
25 Section 401. Approval of certificates.
26 (a) Submission to and approval by commissioner.--It shall be
27 unlawful for any fraternal benefit society doing business in
28 this Commonwealth to issue, sell, or dispose of any certificate,
29 covering life, health, accident, or contracts pertaining to pure
30 endowments or annuities, or any other contracts of insurance, or
19770H0207B0227 - 27 -
1 use applications, riders, or endorsements, in connection
2 therewith, until the forms of the same have been submitted to
3 and formally approved by the commissioner, and copies filed in
4 the Insurance Department: Provided, That riders and endorsements
5 relating to the manner of distribution of benefits, and to the
6 reservation of rights and benefits under any such certificate,
7 and used at the request of the individual certificate holder,
8 and any forms which, in the opinion of the commissioner, do not
9 require his approval need not be filed with the Insurance
10 Department.
11 (b) Approval after thirty days.--Forms so filed shall be
12 deemed approved at the expiration of 30 days after filing,
13 unless earlier approved or disapproved by the Commissioner of
14 Insurance. The commissioner, by written notice to the society
15 may, within such 30 day period, extend the period for approval
16 or disapproval for an additional 30 days.
17 (c) Approval void on disapproval.--Such approval shall
18 become void upon any subsequent notice of disapproval from the
19 commissioner, or upon any subsequent withdrawal of license or
20 refusal of the commissioner to relicense any such fraternal
21 benefit society, or upon the subsequent passage of an act which
22 would no longer make such contracts or related forms a fit
23 subject for approval, except that this provision shall not
24 affect contracts issued prior thereto.
25 (d) Notification of disapproval.--Upon any disapproval, the
26 commissioner shall notify the society in writing, specifying the
27 reason for such disapproval; and within 30 days from the date of
28 mailing of such notice to the society, such society may make
29 written application to the commissioner for a hearing thereon.
30 The hearing shall be held within 30 days after receipt of the
19770H0207B0227 - 28 -
1 application. The procedure before the commissioner shall be in
2 accordance with the adjudication procedure set forth in the act
3 of June 4, 1945 (P.L.1388, No.442), known as the "Administrative
4 Agency Law," and the society shall be entitled to the judicial
5 review as provided for by law.
6 (e) Penalty for violations.--Any person, corporation, order,
7 or society that shall, either as principal, or agent, issue, or
8 cause to be issued, any certificate or contract of insurance
9 within the Commonwealth, contrary to this section, shall be
10 guilty of a misdemeanor of the third degree, and, upon
11 conviction thereof, shall be sentenced to pay a fine not
12 exceeding $2,500.
13 (f) Additional sanctions.--Upon satisfactory evidence of the
14 violation of this section by any such person, corporation,
15 order, or society, the commissioner may, in his discretion,
16 pursue any one or more of the following courses of action:
17 (1) Suspend or revoke the license of such offending
18 person, corporation, order, or society.
19 (2) Refuse, for a period of not to exceed one year
20 thereafter, to issue a new license to such person,
21 corporation, order, or society.
22 (3) Impose a fine of not more than $1,000 for each and
23 every act in violation of this act.
24 When the commissioner shall take action in any of the ways above
25 recited, the person, corporation, order, or society aggrieved
26 may appeal to the Commonwealth Court of Pennsylvania.
27 Section 402. Certificate provisions required.
28 The certificate shall contain in substance the standard
29 provisions set forth in sections 403 to 412 or, in lieu thereof
30 provisions which are more favorable to the member. Any of the
19770H0207B0227 - 29 -
1 mandated provisions or portions thereof not applicable by reason
2 of the plan of insurance or because the certificate is an
3 annuity certificate may, to the extent inapplicable, be omitted
4 from the certificate.
5 Section 403. Statement of title and premiums.
6 There shall appear on the face of the filing page of the
7 certificate a statement of the title of the certificate and a
8 brief description which clearly and correctly describes its form
9 and identifies the insurer as a member of a fraternal benefit
10 society. There shall also appear a provision stating the amount
11 of premiums, dues or other required contributions, by whatever
12 name known, which are payable by the insured under the
13 certificate.
14 Section 404. Grace period of certificate.
15 There shall be a provision that the member is entitled to a
16 grace period of not less than a full month (or 30 days at the
17 option of the society) in which the payment of any premium after
18 the first, may be made. During the grace period the certificate
19 shall continue in full force and effect, but in case the
20 certificate becomes a claim during the grace period before the
21 overdue payment is made, the amount of the overdue payment or
22 payments may be deducted in any settlement under the
23 certificate.
24 Section 405. Reinstatement.
25 There shall be a provision that the member shall be entitled
26 to have the certificate reinstated at any time within three
27 years from the due date of the premium in default, unless the
28 certificate has been completely terminated through the
29 application of a nonforfeiture benefit, cash surrender value or
30 certificate loan, upon the production of evidence of
19770H0207B0227 - 30 -
1 insurability satisfactory to the society and the payment of all
2 overdue premiums and any other indebtedness to the society upon
3 the certificate, together with interest on such premiums and
4 such indebtedness, if any, at a rate not exceeding 6% per annum
5 compounded annually.
6 Section 406. Default.
7 (a) Society to grant paid-up nonforfeiture benefit.--Except
8 in the case of pure endowment, annuity or reversionary annuity
9 contracts, reducing term insurance contracts, or contracts of
10 term insurance of uniform amount of 15 years or less expiring
11 before age 66, there shall be a provision that, in the event of
12 default in payment of any premium after three full years
13 premiums have been paid or after premiums for a lesser period
14 have been paid if the contract so provides, the society will
15 grant, upon proper request not later than 60 days after the due
16 date of the premium in default, a paid-up nonforfeiture benefit
17 on the plan stipulated in the certificate, effective as of such
18 due date, of such value as specified in this act.
19 (b) Optional payment provisions.--The certificate may
20 provide, if the society's laws so specify, and if the member
21 shall so elect prior to the expiration of the grace period of
22 any overdue premium, that default shall not occur so long as
23 premiums can be paid under the provisions of an arrangement for
24 automatic premium loan as may be set forth in the certificate.
25 (c) Member may elect different paid-up nonforfeiture
26 benefit.--There shall be a statement that one paid-up
27 nonforfeiture benefit as specified in the certificate shall
28 become effective automatically unless the member elects another
29 available paid-up nonforfeiture benefit, not later than 60 days
30 after the due date of the premium in default.
19770H0207B0227 - 31 -
1 (d) Section not to apply.--The provisions of this section
2 shall not apply in the case of pure endowment, annuity or
3 reversionary annuity contracts, reducing term insurance
4 contracts, or contracts of term insurance of uniform amount of
5 15 years or less expiring before age 66.
6 Section 407. Tables.
7 (a) Mortality table and interest rate.--There shall be a
8 statement of the mortality table and rate of interest used in
9 determining all paid-up nonforfeiture benefits and cash
10 surrender options available under the certificate, and a brief
11 general description of the method used in calculating such
12 benefits.
13 (b) Table of certain values.--There shall be a table showing
14 in figures the value of every paid-up nonforfeiture benefit and
15 cash surrender option available under the certificate for each
16 certificate anniversary either during the first 20 certificate
17 years or during the term of the certificate whichever is
18 shorter.
19 Section 408. Contestability of certificate.
20 (a) Incontestable after two years.--A provision that the
21 certificate shall be incontestable after it has been in force
22 during the lifetime of the member for a period of two years from
23 its date of issue except for nonpayment of premiums. At the
24 option of the society, supplemental provisions relating to
25 waiver of premium and provisions which grant additional
26 insurance specifically against death by accident may also be
27 excepted.
28 (b) Contestability on reinstatement.--The certificate may
29 provide, as to statements made to procure reinstatement, that
30 the society shall have the right to contest a reinstated
19770H0207B0227 - 32 -
1 certificate within a period of two years from date of
2 reinstatement based on the information in the reinstatement
3 application.
4 Section 409. Redetermination of premiums in certain
5 circumstances.
6 There shall be a provision that in case the age or sex of the
7 member or of any other person is considered in determining the
8 premium and it is found at any time before final settlement
9 under the certificate that the age or sex has been misstated,
10 and the discrepancy and premium involved have not been adjusted,
11 the amount payable under the certificate shall be such as the
12 premium would have purchased at the correct age and sex. If the
13 correct age was not an insurable age under the society's charter
14 or laws, only the premiums paid to the society, less any
15 payments previously made to the member, shall be returned or, at
16 the option of the society, the amount payable under the
17 certificate shall be such as the premium would have purchased at
18 the correct age according to the society's promulgated rates and
19 any extension thereof based on actuarial principles.
20 Section 410. Right to maintain insurance.
21 There shall be a statement that any benefit member expelled
22 or suspended, except for nonpayment of a premium or within the
23 contestable period for material misrepresentations in such
24 member's application for membership shall have the privilege of
25 maintaining his insurance in force by continuing payment of the
26 required premium.
27 Section 411. Surplus.
28 (a) Right to surplus.--There shall be a provision that the
29 certificate shall participate in the surplus of the society, and
30 that, beginning not later than the end of the third certificate
19770H0207B0227 - 33 -
1 year, the society will annually determine the portion of the
2 divisible surplus accruing on the certificate, and that the
3 member entitled to elect such option shall have the right to
4 have the dividend arising from such participation paid in cash,
5 or applied in accordance with any one of such other dividend
6 options as may be provided by the certificate. If any such other
7 dividend options are provided, the certificate shall further
8 state which option shall be automatically effective, if such
9 member shall not have elected some other option.
10 (b) Optional surplus provision.--The certificate may contain
11 a provision that the certificate shall participate in the
12 surplus of the society, and that, beginning not later than the
13 end of the fifth certificate year, the society will determine
14 the portion of the divisible surplus accruing on the
15 certificate, and that the member entitled thereto shall have the
16 right to have the current dividend arising from such
17 participation paid in cash, and that, at periods of not more
18 than five years thereafter, such apportionment and payment, at
19 the option of such member, shall be had.
20 (c) Surplus on term certificates.--Renewable term
21 certificates of ten years or less may provide that the surplus
22 accruing to such certificates shall be determined and
23 apportioned each year after the second certificate year, and
24 accumulated during each renewal period, and that at the end of
25 any renewal period, or renewal of the certificate by the member,
26 the society shall apply the accumulated surplus as an annuity
27 for the next succeeding renewal term in the reduction of
28 premiums.
29 Section 412. Loan value of certificate.
30 There shall be a provision for a loan value at any time after
19770H0207B0227 - 34 -
1 three full years' premiums have been paid and while no premium
2 is in default beyond the grace period of payment.
3 In the case of any certificate issued on or after the
4 effective date of this act, the loan provision shall provide
5 that the society will advance, on proper assignment or pledge of
6 the certificate, and on the sole security thereof, at a
7 specified rate of interest, a sum equal to, or at the option of
8 the member entitled thereto, less than, the cash surrender value
9 at the end of the current certificate year as required by
10 section 302 and that the society may deduct from such loan value
11 (in addition to any indebtedness deducted in determining such
12 value) any unpaid balance of the premium for the current
13 certificate year, and may collect interest in advance on the
14 loan to the end of the current certificate year. The society
15 shall reserve the right to defer such loan, except any made to
16 pay premiums to the society, for 60 days after application
17 therefore is made. This section shall not apply to term
18 insurance.
19 Section 413. Prohibited provisions.
20 On and after the effective date of this act, no life benefit
21 certificate shall be delivered or issued for delivery in this
22 Commonwealth containing in substance any of the following
23 provisions:
24 (1) Any provision limiting the time within which any
25 action at law or in equity may be commenced to less than two
26 years after the cause of action shall accrue.
27 (2) Any provision by which the certificate shall purport
28 to be issued or to take effect more than six months before
29 the original application for the certificate was made, except
30 in case of transfer from one form of certificate to another
19770H0207B0227 - 35 -
1 in connection with which the member is to receive credit for
2 any reserve accumulation under the form of certificate from
3 which the transfer is made.
4 (3) Any provision for forfeiture of the certificate for
5 failure to repay any loan thereon or to pay interest on such
6 loan while the total indebtedness, including interest, is
7 less than the loan value of the certificate.
8 CHAPTER 5
9 ACCIDENT AND HEALTH INSURANCE AND TOTAL AND
10 PERMANENT DISABILITY INSURANCE CERTIFICATES
11 Section 501. Commissioner to regulate.
12 The commissioner shall have power, from time to time, to
13 make, alter and supersede reasonable regulations prescribing the
14 required, optional and prohibited provisions in accident and
15 health insurance contracts and in total and permanent disability
16 insurance contracts, and the regulations shall conform, as far
17 as practicable, to sections 502 to 527.
18 Section 502. Filing with and approval of contracts by
19 commissioner.
20 No certificate of insurance against loss from sickness, or
21 loss or damage from bodily injury or death of the insured by
22 accident, shall be issued or delivered by any society,
23 association or exchange issuing such certificate, to any person
24 in this Commonwealth until a copy of the form thereof, and of
25 the classification of risks and the dues, premiums, or other
26 required contribution pertaining thereto, have been filed with
27 and formally approved by the commissioner. If the commissioner
28 shall notify in writing the society which has filed such form
29 that it does not comply with the requirements of law specifying
30 the reason for his opinion, it shall be unlawful for any such
19770H0207B0227 - 36 -
1 society to issue any certificate in such form. The action of the
2 commissioner in this regard shall be subject to review by the
3 Commonwealth Court.
4 Section 503. Conditions for certificates.
5 (a) General conditions.--No such certificate shall be
6 delivered or issued for delivery to any person in this
7 Commonwealth unless all of the following conditions are met:
8 (1) The entire money and other considerations therefore
9 are expressed within the certificate.
10 (2) The time at which the insurance takes effect and
11 terminates is expressed within the certificate.
12 (3) It purports to insure only one person, except that a
13 policy may insure, originally or by subsequent amendment,
14 upon the application of an adult head of a family who shall
15 be deemed the certificate holder, any two or more eligible
16 members of that family, including husband, wife, dependent
17 children or any children under a specified age which shall
18 not exceed 19 years and any other person dependent upon the
19 certificate holder.
20 (4) The style, arrangement and overall appearance of the
21 certificate gives no undue prominence to any portion of the
22 text, and every printed portion of the text of the
23 certificate and of any endorsements or attached papers is
24 plainly printed in light faced type of a style in general
25 use, the size of which type shall be uniform and not less
26 than ten-point with a lower case unspaced alphabet length not
27 less than 120 point (the "text" shall include all printed
28 matter except the name and address of the society, name or
29 title of the certificate, the brief description, if any, and
30 captions and subcaptions).
19770H0207B0227 - 37 -
1 (5) The exceptions and reductions of indemnity are set
2 forth in the certificate and, except those which are set
3 forth in this chapter, are printed, at the society's option,
4 either included with the benefit provision to which they
5 apply, or under an appropriate caption such as "exceptions,"
6 or "exceptions and reductions": Provided, That if an
7 exception or reduction specifically applies only to a
8 particular benefit of the certificate, a statement of such
9 exception or reduction shall be included with the benefit
10 provision to which it applies.
11 (6) Each such form including riders and endorsements,
12 shall be identified by a form number in the lower left-hand
13 corner of the first page thereof.
14 (7) It contains no provision purporting to make any
15 portion of the charter, rules, constitution, or bylaws of the
16 society a part of the policy unless such portion is set forth
17 in full in the policy, except in the case of the
18 incorporation of, or reference to, a statement of rates or
19 classification of risks, or short-rate table filed with the
20 commissioner.
21 (8) If such certificate is entitled or referred to as
22 "noncancellable," such noncancellable certificate is
23 automatically renewable until age 60 upon payment of the
24 required premiums by the insured.
25 (9) A certificate delivered or issued for delivery after
26 January 1, 1968 under which coverage of a dependent of a
27 certificate holder terminates at a specified age, shall, with
28 respect to an unmarried child covered by the certificate
29 prior to the attainment of the age of 19 who is incapable of
30 self-sustaining employment by reason of mental retardation or
19770H0207B0227 - 38 -
1 physical handicap and who became so incapable prior to
2 attainment of age 19 and who is chiefly dependent upon such
3 certificate holder for support and maintenance, not to
4 terminate while the certificate remains in force and the
5 dependent remains in such condition, if the certificate
6 holder has within 31 days of such dependent's attainment of
7 the limiting age submitted proof of such dependent's
8 incapacity as described herein. The foregoing provisions of
9 this paragraph shall not require a society to insure a
10 dependent who is a mentally retarded or physically
11 handicapped child where the certificate is underwritten on
12 evidence of insurability based on health factors set forth in
13 the application or where such dependent does not satisfy the
14 conditions of the certificate as to any requirement for
15 evidence of insurability or other provisions of the
16 certificate, satisfaction of which is required for coverage
17 thereunder to take effect. In any such case, the terms of the
18 certificate shall apply with regard to the coverage or
19 exclusion from coverage of such dependent.
20 (b) Nonresident members.--If any certificate is issued by a
21 society domiciled in this Commonwealth for delivery to a person
22 residing in another state, and if the official having
23 responsibility for the administration of the insurance laws of
24 such other state shall have advised the commissioner that any
25 such certificate is not subject to approval or disapproval by
26 such official, the commissioner may by ruling require that such
27 certificate meet the standards set forth in section 401 and this
28 chapter.
29 Section 504. Standard certificate provision for insurance for
30 accident and health or for permanent and total
19770H0207B0227 - 39 -
1 disability.
2 Except as provided in this act, each certificate delivered or
3 issued for delivery to any person in this Commonwealth shall
4 contain the provisions specified in sections 505 to 527 in the
5 words in which the same appear in this act: Provided, however,
6 That the society may, at its option, substitute for one or more
7 of such provisions corresponding provisions of different wording
8 approved by the commissioner which are in each instance not less
9 favorable in any respect to the benefit member or the
10 beneficiary. Such provisions shall be preceded individually by
11 the caption appearing in this section or, at the option of the
12 society, by such appropriate individual or group captions or
13 subcaptions as the commissioner may approve.
14 Section 505. Entire contract and changes.
15 There shall be a provision as follows:
16 Entire Contract; Changes: This certificate, including the
17 endorsements and the attached papers, if any, constitutes the
18 entire contract of insurance. No change in this certificate
19 shall be valid until approved by an executive officer of the
20 society and unless such approval be endorsed hereon or attached
21 hereto. No agent has authority to change this certificate or to
22 waive any of its provisions.
23 Section 506. Time limits on certain defenses.
24 (a) Limitation.--There shall be a provision as follows:
25 Time Limit on Certain Defenses: After three years from the
26 date of issue of this certificate no misstatements, except
27 fraudulent misstatements, made by the applicant in the
28 application for such certificate shall be used to void the
29 certificate or to deny a claim for loss incurred or disability
30 (as defined in the certificate) commencing after the expiration
19770H0207B0227 - 40 -
1 of such three-year period.
2 (b) Nonapplicability.--The foregoing certificate provision
3 shall not be so construed as to affect any legal requirement for
4 avoidance of a certificate or denial of a claim during such
5 initial three-year period, nor to limit the application of
6 sections 505, 506, 507, 508 and 509 in the event of misstatement
7 with respect to age or occupation or other insurance.
8 (c) Optional language for weekly payment situations.--
9 (1) In a certificate where the dues, premiums or other
10 required contributions are payable weekly, the words "if such
11 application is made a part of the certificate" may be
12 inserted in the foregoing certificate provision between the
13 word "certificate" and the word "shall" immediately
14 following.
15 (2) In certificates whereon the dues, premiums, or the
16 required contributions are payable weekly, the words "or from
17 the date of any reinstatement thereof" may be inserted in the
18 foregoing certificate provision between the word
19 "certificate" and the word "shall" immediately following.
20 (d) Optional language where certificate member has power to
21 continue certificate.--A certificate which the benefit member
22 has the right to continue in force subject to its terms by the
23 timely payment of the dues, premium, or other required
24 contribution:
25 (1) until at least age 50; or
26 (2) in the case of a certificate issued after age 44,
27 for at least five years from its date of issue, may contain
28 in lieu of the language in section 509(a) the following
29 provision (from which the clause in parentheses may be
30 omitted at the insurer's option) under the caption
19770H0207B0227 - 41 -
1 "incontestable." After this certificate has been in force for
2 a period of three years during the lifetime of the benefit
3 member (excluding any period during which the benefit member
4 is disabled), it shall become incontestable as to the
5 statements contained in the application.
6 (e) Nondenial or reduction of certain claims prohibited.--No
7 claim for loss incurred or disability (as defined in the
8 certificate) commencing after three years from the date of issue
9 of this certificate shall be reduced or denied on the ground
10 that a disease or physical condition not excluded from coverage
11 by name or specific description effective on the date of loss
12 had existed prior to the effective date of coverage of this
13 certificate.
14 Section 507. Grace periods.
15 (a) Period established.--There shall be a grace period of
16 .......... (insert a number not less than "7" for weekly dues,
17 premium, or other required contribution certificates, "10" for
18 monthly dues, premium or other required contribution
19 certificates and "31" for all other certificates) days will be
20 granted for the payment of each dues, premium, or other required
21 contribution falling due after the first dues, premium, or other
22 required contribution during which grace period the certificate
23 shall continue in force.
24 (b) Optional language available.--A certificate which
25 contains a cancellation provision may add, at the end of the
26 provision, "subject to the right of the benefit member to cancel
27 in accordance with the cancellation provision hereof."
28 (c) Language where society reserves certain rights.--A
29 certificate in which the society reserves the right to refuse
30 any renewal shall have, at the beginning of the provision set
19770H0207B0227 - 42 -
1 forth in subsection (a), "unless not less than 30 days prior to
2 the dues, premium, or other required contribution due date the
3 society has delivered to the benefit member or has mailed to his
4 last address as shown by the records of the society written
5 notice of its intention not to renew this certificate beyond the
6 period for which the dues, premium, or other required
7 contribution has been accepted."
8 Section 508. Reinstatement.
9 There shall be a provision as follows:
10 Reinstatement: If any renewal dues, premium, or other
11 required contribution be not paid within the time granted the
12 society for payment, a subsequent acceptance of dues, premium,
13 or other required contribution by the society or by any agent
14 duly authorized by the society to accept such dues, premium, or
15 other required contribution without requiring in connection
16 therewith an application for reinstatement, shall reinstate the
17 certificate: Provided, however, That if the society or such
18 agent requires an application for reinstatement and issues a
19 conditional receipt for the dues, premium, or other required
20 contribution tendered, the certificate will be reinstated upon
21 approval of such application by the society, or, lacking such
22 approval, upon the forty-fifth day following the date of such
23 conditional receipt unless the society has previously notified
24 the benefit member in writing of its disapproval of such
25 application. The reinstated certificate shall cover only loss
26 resulting from such accidental injury as may be sustained after
27 the date of reinstatement and loss due to such sickness as may
28 begin more than ten days after such date. In all other respects
29 the benefit member and society shall have the same rights
30 thereunder as they had under the certificate immediately before
19770H0207B0227 - 43 -
1 the due date of the defaulted dues, premium, or other required
2 contribution subject to any provisions endorsed hereon or
3 attached hereto in connection with the reinstatement. Any dues,
4 premium, or other required contribution accepted in connection
5 with a reinstatement shall be applied to a period for which the
6 dues, premium, or other required contribution has not been
7 previously paid, but not to any period more than 60 days prior
8 to the date of reinstatement. The last sentence of the above
9 provision may be omitted:
10 (1) From any certificate which the benefit member has
11 the right to continue in force subject to its terms by the
12 timely payment of the dues, premiums, or other required
13 contributions:
14 (i) until at least age 50; or
15 (ii) in the case of a certificate issued after age
16 44, for at least five years from the date of its issue.
17 (2) From any certificate on which the dues, premiums, or
18 other required contributions are payable weekly.
19 Section 509. Written notice of claims.
20 (a) Notice of claim.--There shall be a provision as follows:
21 Notice of Claim: Written notice of claim must be given to the
22 society within 20 days after the occurrence or commencement of
23 any loss covered by the certificate, or as soon thereafter as is
24 reasonably possible. Notice given by or on behalf of the benefit
25 member or the beneficiary to the society at .......... (insert
26 the location of such office as the society may designate for the
27 purpose), or to any authorized agent of the society, with
28 information sufficient to identify the benefit member, shall be
29 deemed notice to the society.
30 (b) Optional language for weekly payment insurance.--In a
19770H0207B0227 - 44 -
1 certificate whereon the dues, premiums, or other required
2 contributions are payable weekly, the first sentence of the
3 foregoing certificate provision may read "written notice of
4 claim must be given to the society within 10 days of the
5 commencement of any nonhospital confining sickness covered by
6 the certificate and within 20 days after the occurrence or
7 commencement of any other loss covered by the certificate, or as
8 soon thereafter as is reasonably possible."
9 (c) Language in loss of time benefit insurance.--In a
10 certificate providing a loss of time benefit which may be
11 payable for at least two years, a society may, at its option,
12 insert the following between the first and second sentences of
13 the above provision: Subject to the qualifications set forth
14 below, if the benefit member suffers loss of time on account of
15 disability for which indemnity may be payable for at least two
16 years, he shall, at least once in every six months after having
17 given notice of claim, give to the society notice of continuance
18 of said disability, except in the event of legal incapacity. The
19 period of six months following any filing of proof by the
20 benefit member or any payment by the society on account of such
21 claim or any denial of liability in whole or in part by the
22 society shall be excluded in applying this provision. Delay in
23 the giving of such notice shall not impair the benefit member's
24 right to any indemnity which would otherwise have accrued during
25 the period of six months preceding the date on which such notice
26 is actually given.
27 Section 510. Forms for claims.
28 There shall be a provision as follows:
29 Claim Forms: The society, upon receipt of a notice claim,
30 will furnish to the claimant such forms as are usually furnished
19770H0207B0227 - 45 -
1 by it for filing proofs of loss. If such forms are not furnished
2 within 15 days after the giving of such notice, the claimant
3 shall be deemed to have complied with the requirements of this
4 certificate as to proof of loss upon submitting, within the time
5 fixed in the certificate for filing proofs of loss, written
6 proof covering the occurrence, the character and the extent of
7 the loss for which claim is made.
8 Section 511. Proofs of loss.
9 There shall be a provision as follows:
10 Proofs of Loss: Written proof of loss must be furnished to
11 the society at its said office in case of claim for loss for
12 which this certificate provides any periodic payment contingent
13 upon continuing loss within 90 days after the termination of the
14 period for which the society is liable and in case of claim for
15 any other loss within 90 days after the date of such loss.
16 Failure to furnish such proof within the time required shall not
17 invalidate nor reduce any claim if it was not reasonably
18 possible to give proof within such time, provided such proof is
19 furnished as soon as reasonably possible and in no event, except
20 in the absence of legal capacity, later than one year from the
21 time proof is otherwise required.
22 Section 512. Time of payment of claims.
23 There shall be a provision as follows:
24 Time of Payment of Claims: Indemnities payable under this
25 certificate for any loss other than loss for which this
26 certificate provides any periodic payment will be paid
27 immediately upon receipt of due written proof of such loss.
28 Subject to due written proof of loss, all accrued indemnities
29 for loss for which this certificate provides periodic payment
30 will be paid .......... (insert period for payment which must
19770H0207B0227 - 46 -
1 not be less frequently than monthly) and any balance remaining
2 unpaid upon the termination of liability will be paid
3 immediately upon receipt of due written proof.
4 Section 513. Payment of claims.
5 (a) Basic clause.--There shall be a provision as follows:
6 Payment of Claims: Indemnity for loss of life will be payable
7 in accordance with the beneficiary designation and the
8 provisions respecting such payment which may be prescribed
9 herein and effective at the time of payment. If no such
10 designation or provision is then effective, such indemnity shall
11 be payable to the estate of the insured. Any other accrued
12 indemnities unpaid at the benefit member's death may, at the
13 option of the society, be paid either to such beneficiary or to
14 such estate, all other indemnities will be payable to the
15 benefit member.
16 (b) Optional language available to society.--The following
17 provisions, or either of them may be included with the foregoing
18 provision at the option of the society:
19 (1) If any indemnity of this certificate shall be
20 payable to the estate of the benefit member, or to a benefit
21 member or beneficiary who is a minor or otherwise not
22 competent to give a valid release, the society may pay such
23 indemnity, up to an amount not exceeding $ .......... (insert
24 an amount which shall not exceed $1,000), to any relative by
25 blood or connection by marriage of the benefit member or
26 beneficiary who is deemed by the society to be equitably
27 entitled thereto. Any payment made by the society in good
28 faith pursuant to this provision shall fully discharge the
29 society to the extent of such payment.
30 (2) Subject to any written direction of the benefit
19770H0207B0227 - 47 -
1 member in the application or otherwise, all or a portion of
2 any indemnities provided by this certificate on account of
3 hospital, nursing, medical, or surgical services may, at the
4 society's option and, unless the benefit member requests
5 otherwise in writing, not later than the time of filing
6 proofs of such loss, be paid directly to the hospital or
7 person rendering such services; but it is not required that
8 the service be rendered by a particular hospital or person.
9 Section 514. Physical examinations and autopsy.
10 There shall be a provision as follows:
11 Physical Examinations and Autopsy: The society at its own
12 expense shall have the right and opportunity to examine the
13 person of the benefit member when and as often as it may
14 reasonably require during the pendency of a claim hereunder and
15 to make an autopsy in case of death where it is not forbidden by
16 law.
17 Section 515. Legal actions.
18 There shall be a provision relating to legal actions as
19 follows:
20 Legal Actions: No action at law or in equity shall be brought
21 to recover on this certificate prior to the expiration of 60
22 days after written proof of loss has been furnished in
23 accordance with the requirements of this certificate. No such
24 action shall be brought after the expiration of three years
25 after the time written proof of loss is required to be
26 furnished.
27 Section 516. Change of beneficiary.
28 There shall be a provision as follows:
29 Change of Beneficiary: Unless the benefit member makes an
30 irrevocable designation of beneficiary, the right to change of
19770H0207B0227 - 48 -
1 beneficiary is reserved to the benefit member and the consent of
2 the beneficiary or beneficiaries shall not be requisite to
3 surrender or assignment of this certificate or to any change of
4 beneficiary or beneficiaries, or to any other changes in this
5 certificate. The first clause of this provision, relating to the
6 irrevocable designation of beneficiary, may be omitted at the
7 society's option.
8 Section 517. Change of occupation.
9 There shall be a provision as follows:
10 Change of Occupation: If the benefit member be injured or
11 contract sickness after having changed his occupation to one
12 classified by the society as more hazardous than that stated in
13 this certificate or while doing for compensation anything
14 pertaining to an occupation so classified, the society will pay
15 only such portion of the indemnities provided in this
16 certificate as the dues, premiums, or other required
17 contributions paid would have purchased at the rates and within
18 the limits fixed by the society for such more hazardous
19 occupation. If the benefit member changes his occupation to one
20 classified by the society as less hazardous than that stated in
21 this certificate, the society, upon receipt of proof of such
22 change of occupation, will reduce the dues, premiums, or other
23 required contributions accordingly, and will return the excess
24 pro rata unearned dues, premiums, or other required
25 contributions from the date of change of occupation or from the
26 certificate anniversary date immediately preceding receipt of
27 such proof, whichever is the more recent. In applying this
28 provision, the classification of occupational risk and the dues,
29 premiums, or other required contributions shall be such as have
30 been last filed by the society prior to the occurrence of the
19770H0207B0227 - 49 -
1 loss for which the society is liable or prior to date of proof
2 of change in occupation with the state official having
3 supervision of insurance in the state where the benefit member
4 resided at the time this certificate was issued; but if such
5 filing was not required, then the classification of occupational
6 risk and the dues, premiums, or other required contributions
7 shall be those last made effective by the society in such state
8 prior to the occurrence of the loss or prior to the date of
9 proof of change in occupation.
10 Section 518. Misstatement of age.
11 There shall be a provision as follows:
12 Misstatement of Age: If the age of the benefit member has
13 been misstated, all amounts payable under this certificate shall
14 be such as the dues, premiums, or other required contributions
15 paid would have purchased at the correct age.
16 Section 519. Other insurance in this society.
17 There shall be a provision as follows:
18 Other Insurance in This Society: If an accident or sickness
19 or accident and sickness certificate or certificates previously
20 issued by the society to the benefit member be in force
21 concurrently herewith, making the aggregate indemnity for
22 .......... (insert type of coverage or coverages) in excess of
23 $ .......... (insert maximum limit of indemnity or indemnities),
24 the excess insurance shall be void and all dues, premiums, or
25 other required contributions paid for such excess shall be
26 returned to the benefit member or to his estate or, in lieu
27 thereof, insurance effective at any one time on the benefit
28 member under a like certificate or certificates in this society
29 is limited to the one such certificate elected by the benefit
30 member, his beneficiary or his estate, as the case may be, and
19770H0207B0227 - 50 -
1 the society will return all dues, premiums, or other required
2 contributions paid for all other such certificates.
3 Section 520. Insurance with other benefit members.
4 (a) Coverage outside of issuing society.--There shall be a
5 provision as follows:
6 Insurance with Other Benefit Members: If there be other valid
7 coverage, not with this society, providing benefits for the same
8 loss on a provision of service basis or on an expense incurred
9 basis and of which this society has not been given written
10 notice prior to the occurrence or commencement of loss, the only
11 liability under any expense incurred coverage of this
12 certificate shall be for such proportion of the loss of the
13 amount which would otherwise have been payable hereunder plus
14 the total of the like amounts under all such other valid
15 coverages for the same loss of which this society had notice
16 bears to the total like amounts under all valid coverages for
17 such loss, and for the return of such portion of the dues,
18 premiums, or other required contributions paid as shall exceed
19 the pro rata portion for the amount so determined. For the
20 purpose of applying this provision when other coverage is on a
21 provision of service basis, the "like amount" of such other
22 coverage shall be taken as the amount which the services
23 rendered would have cost in the absence of such coverage.
24 (b) Caption change in certain circumstances.--If the
25 foregoing certificate provision is included in a certificate
26 which also contains the certificate provision, set forth in
27 section 521, there shall be added to the caption of the
28 foregoing provision the phrase "... Expense Incurred Benefits."
29 The society may, at its option, include in this provision a
30 definition of "other valid coverage," approved as to form by the
19770H0207B0227 - 51 -
1 commissioner, which definition shall be limited in subject
2 matter to coverage provided by organizations subject to
3 regulation by insurance law or by insurance authorities of this
4 or any other state of the United States or any province of
5 Canada, and by hospital or medical service organizations, and to
6 any other coverage the inclusion of which may be approved by the
7 commissioner. In the absence of such definition, such term shall
8 not include group insurance, or coverage provided by hospital or
9 medical service organizations or by union welfare plans or
10 employer or employee benefit organizations. For the purpose of
11 applying the foregoing certificate provision with respect to any
12 benefit member, any amount of benefit provided for such benefit
13 member pursuant to any compulsory benefit statute (including any
14 workmen's compensation or employers' liability statute), whether
15 provided by a governmental agency or otherwise, shall in all
16 cases be deemed to be "other valid coverage" of which the
17 society has had notice. In applying the foregoing certificate
18 provision, no third party liability coverage shall be included
19 as "other valid coverage."
20 Section 521. Insurance with other societies.
21 (a) Valid coverage with other benefit societies.--There
22 shall be a provision as follows:
23 Insurance with Other Societies: If there be other valid
24 coverage, not with this society, providing benefits for the same
25 loss on other than an expense incurred basis and of which this
26 society has not been given written notice prior to the
27 occurrence or commencement of loss, the only liability for such
28 benefits under this certificate shall be for such proportion of
29 the indemnities otherwise provided hereunder for such loss as
30 the like indemnities of which the society had notice (including
19770H0207B0227 - 52 -
1 the indemnities under this certificate) bear to the total amount
2 of all like indemnities for such loss, and for the return of
3 such portion of the dues, premiums, or other required
4 contributions paid as shall exceed the pro rata portion for the
5 indemnities thus determined.
6 (b) Additional caption changes available.--If the foregoing
7 certificate provision is included in a certificate which also
8 contains the certificate provision set forth in section 520,
9 there shall be added to the caption of the foregoing provision
10 the phrase "... other benefits." The society may, at its option,
11 include in this provision a definition of "other valid
12 coverage," approved as to form by the commissioner, which
13 definition shall be limited subject matter to coverage provided
14 by organizations subject to regulation by insurance law or by
15 insurance authorities of this or any other state of the United
16 States or any province of Canada, and to any other coverage the
17 inclusion of which may be approved by the commissioner. In the
18 absence of such definition, such term shall not include group
19 insurance, or benefits provided by union welfare plans or by
20 employer or employee benefit organizations. For the purpose of
21 applying the foregoing certificate provision with respect to any
22 benefit member, any amount of benefit provided for such insured
23 pursuant to any compulsory benefit statute (including any
24 workmen's compensation or employer's liability statute), whether
25 provided by a governmental agency or otherwise, shall in all
26 cases be deemed to be "other valid coverage" of which the
27 society has had notice. In applying the foregoing certificate
28 provision, no third party liability coverage shall be included
29 as "other valid coverage."
30 Section 522. Relation of earnings to insurance.
19770H0207B0227 - 53 -
1 (a) Reduction of payments to rates with earnings.--There
2 shall be a provision as follows:
3 Relation of Earnings to Insurance: If the total monthly
4 amount of loss of time benefits promised for the same loss under
5 all valid loss of time coverage upon the benefit member, whether
6 payable on a weekly or monthly basis, shall exceed the monthly
7 earnings for the period of two years immediately preceding a
8 disability for which claim is made, whichever is the greater,
9 the society will be liable only for such proportionate amount of
10 such benefits under this certificate as the amount of such
11 monthly earnings or such average monthly earnings of the benefit
12 member bears to the total amount of monthly benefits for the
13 same loss under all such coverage upon the benefit member at the
14 time such disability commences and for the return of such part
15 of the dues, premiums, or other required contributions paid
16 during such two years as shall exceed the pro rata amount of the
17 dues, premiums, or other required contributions for the benefits
18 actually paid hereunder; but this shall not operate to reduce
19 the total monthly amount of benefits payable under all such
20 coverage upon the benefit member below the sum of $200 or the
21 sum of the monthly benefits specified in such coverages,
22 whichever is the lesser, nor shall it operate to reduce benefits
23 other than those payable for loss of time.
24 (b) Limited use of provision.--The foregoing certificate
25 provision may be inserted only in a certificate which the
26 benefit member has the right to continue in force subject to its
27 terms by the timely payment of dues, premiums, or other required
28 contributions:
29 (1) until at least age 50; or
30 (2) in the case of a certificate issued after age 44,
19770H0207B0227 - 54 -
1 for at least five years from its date of issue.
2 The society may, at its option, include in this provision a
3 definition of "valid loss of time coverage," approved as to form
4 by the commissioner, which definition shall be limited in
5 subject matter to coverage provided by governmental agencies or
6 by organizations subject to regulation by insurance law or by
7 insurance authorities of this or any other state of the United
8 States or any province of Canada, or to any other coverage, the
9 inclusion of which may be approved by the commissioner, or any
10 combination of such coverages. In the absence of such
11 definition, such term shall not include any coverage provided
12 for such benefit member pursuant to any compulsory benefit
13 statute (including any workmen's compensation or employer's
14 liability statute), or benefits provided by union welfare plans
15 or by employer or employee benefit organizations.
16 Section 523. Nonpayment of premiums.
17 There shall be a provision as follows:
18 Unpaid Dues, Premiums, or Other Required Contributions: Upon
19 the payment of a claim under this certificate, any dues,
20 premiums, or other required contributions then due and unpaid or
21 covered by any note or written order may be deducted therefrom.
22 Section 524. Cancellation.
23 There shall be a provision as follows:
24 Cancellation: The society may cancel this certificate at any
25 time by written notice delivered to the benefit member or mailed
26 to his last address as shown by the records of the society,
27 stating when, not less than 30 days thereafter, such
28 cancellation shall be effective; and after the certificate has
29 been continued beyond its original term, the benefit member may
30 cancel this certificate at any time by written notice delivered
19770H0207B0227 - 55 -
1 or mailed to the society, effective upon receipt or on such
2 later date as may be specified in such notice. In the event of
3 cancellation, the society will return promptly the unearned
4 portion of any dues, premiums, or other required contributions
5 paid. If the benefit member cancels, the unearned dues,
6 premiums, or other required contributions shall be computed by
7 the use of the short rate table last filed with the state
8 official having supervision of insurance in the state where the
9 benefit member resided when the certificate was issued. If the
10 society cancels, the earned dues, premiums, or other required
11 contributions shall be computed pro rata. Cancellation shall be
12 without prejudice to any claim originating prior to the
13 effective date of cancellation.
14 Section 525. Conformity of provisions with state statutes.
15 There shall be a provision as follows:
16 Conformity with State Statutes: Any provision of this
17 certificate which, on its effective date, is in conflict with
18 the statutes of the state in which the benefit member resides on
19 such date, is hereby amended to conform to the minimum
20 requirements of such statutes.
21 Section 526. Illegal occupation.
22 There shall be a provision as follows:
23 Illegal Occupation: The society shall not be liable for any
24 loss to which a contributing cause was the benefit member's
25 commission of or attempt to commit a felony, or to which a
26 contributing cause was the benefit member's being engaged in an
27 illegal occupation.
28 Section 527. Intoxicants and narcotics.
29 There shall be a provision as follows:
30 Intoxicants and Narcotics: The society shall not be liable
19770H0207B0227 - 56 -
1 for any loss sustained or contracted in consequence of the
2 benefit member's being intoxicated, or under the influence of
3 any narcotic unless administered on the advice of a physician.
4 Section 528. Provisions not applicable in certain
5 circumstances.
6 If any provision of this chapter is in whole or in part
7 inapplicable to or inconsistent with the coverage provided by a
8 particular form of certificate, the society, with the approval
9 of the commissioner, shall omit from such certificate any
10 inapplicable provision or part of a provision, and shall modify
11 any inconsistent provision or part of the provision in such
12 manner as to make the provision as contained in the certificate
13 consistent with the coverage provided by the certificate.
14 Section 529. Printed order of certain certificate provisions.
15 The provisions which are the subject of this chapter or any
16 corresponding provisions which are used in lieu thereof in
17 accordance with such chapter, shall be printed in the
18 consecutive order of the provisions in such chapter or, at the
19 option of the society, any such provision may appear as a unit
20 in any part of the certificate, with other provisions to which
21 it may be logically related, provided the resulting certificate
22 shall not be in whole or in part unintelligible, uncertain,
23 ambiguous, abstruse, or likely to mislead a person to whom the
24 certificate is offered, delivered or issued.
25 Section 530. Third party ownership.
26 The word "benefit member," as used in this act, shall not be
27 construed as preventing a person other than the benefit member
28 with a proper insurable interest from making application for and
29 owning a certificate covering the benefit member or from being
30 entitled under such a certificate to any indemnities, benefits
19770H0207B0227 - 57 -
1 and rights provided therein.
2 Section 531. Filing procedure.
3 The commissioner may make such reasonable rules and
4 regulations concerning the procedure for the filing or
5 submission of certificates subject to this act as are necessary,
6 proper or advisable to the administration of this act. This
7 provision shall not abridge any other authority granted the
8 commissioner by law. Where the Commissioner of Insurance deems
9 inapplicable, either in part or in their entirety, the
10 provisions of the foregoing sections, he may prescribe the
11 portions or summary thereof of the contract to be printed on the
12 certificate issued to the member.
13 CHAPTER 6
14 LICENSES, FEES AND ADDITIONAL POWERS FOR THE COMMISSIONER
15 Section 601. Annual license.
16 Societies which are now authorized to transact business in
17 this Commonwealth may continue such business until the first day
18 of April next succeeding the effective date of this act. The
19 authority of such societies and all societies hereafter
20 licensed, may thereafter be renewed annually, but in all cases
21 to terminate on the first day of the succeeding April. However,
22 a license so issued shall continue in full force and effect
23 until the new license be issued or specifically refused. A duly
24 certified copy or duplicate of such license shall be prima facie
25 evidence that the license is a fraternal benefit society within
26 the meaning of this act.
27 Section 602. Fees.
28 The Insurance Commissioner shall charge and collect fees as
29 follows:
30 (1) Filing copy of charter of a domestic, foreign or
19770H0207B0227 - 58 -
1 alien society, in addition to any fee for filing such charter
2 with the Department of State is $25.
3 (2) The filing of an annual or other statement is $40.
4 (3) License to society, or certified copy, or duplicate
5 thereof is $5.
6 (4) Each listing for written examination of an applicant
7 for license as an agent is $10.
8 (5) Each applicant for such licenses for which an
9 examination is not required is $5.
10 (6) Agent's license for each domestic or foreign
11 society, for life and/or accident and health lines,
12 regardless of the number of powers, excepting variable
13 annuities, for which licensed is $5.
14 All of the said agents' license fees shall be paid in full at
15 time of issuance of license and shall not be apportioned pro
16 ratably over the initial license period.
17 (7) Each copy of any paper filed in the department, 25¢
18 per page and $2 for certifying the same.
19 (8) Any other certificate required is $2.
20 (9) Making examinations, the expense of the examination.
21 (10) Filing and reviewing agreements of merger of
22 domestic, foreign and alien societies, $50 for the first two
23 societies involved and $10 for each additional society.
24 (11) Filing and review of a plan of conversion from a
25 fraternal benefit society to a mutual company and for filing
26 each amendment to registration statement is $50.
27 (12) For issuing a certificate of compliance, deposit or
28 surety, or any other certificate required to be issued by the
29 department, $5 for each certificate.
30 (13) Filing and review of qualification of a society to
19770H0207B0227 - 59 -
1 issue variable annuities is $100.
2 (14) Certification of an agent's license, or for
3 duplicate or replacement licenses is $5.
4 (15) Any other certificate issued by the division of
5 agents is $5.
6 (16) Each renewal of license as an individual agent is
7 $5.
8 (17) Each additional variable annuity power in such
9 license is $5.
10 All fees collected shall be paid daily into the State
11 Treasury.
12 Section 603. Foreign society.
13 (a) License required.--No foreign or alien society shall
14 transact business in this Commonwealth without a license issued
15 by the Commissioner of Insurance. Any such society may be
16 licensed to transact business in this Commonwealth upon filing
17 with the Commissioner of Insurance:
18 (1) A duly certified copy of its charter or articles of
19 incorporation.
20 (2) A copy of its constitution and laws, certified by
21 its secretary or corresponding officer.
22 (3) A power of attorney to the Commissioner of Insurance
23 as prescribed in section 606.
24 (4) A statement of its business under oath of its
25 president and secretary or corresponding officers in a form
26 prescribed by the commissioner, duly verified by an
27 examination made by the supervising insurance official of its
28 home state or other state, territory, province or country,
29 satisfactory to the commissioner of this Commonwealth.
30 (5) A certificate from the proper official of its home
19770H0207B0227 - 60 -
1 state, territory, province or country that the society is
2 legally incorporated and licensed to transact business
3 therein.
4 (6) Copies of its certificate forms.
5 (7) Such other information as he may deem necessary and
6 upon a showing that its assets are invested in accordance
7 with the provisions of this act.
8 (b) Qualifications.--Any foreign or alien society desiring
9 admission to this Commonwealth shall have the qualifications
10 required of domestic societies organized under this act.
11 Section 604. Injunction, liquidation or receivership of
12 domestic society.
13 (a) Findings and notification.--When the Commissioner of
14 Insurance upon investigation finds that a domestic society:
15 (1) has exceeded its powers;
16 (2) has failed to comply with any provision of this act;
17 (3) is not fulfilling its contracts in good faith;
18 (4) has a membership of less than 400 after an existence
19 of one year or more; or
20 (5) is conducting business fraudulently or in a manner
21 hazardous to its members, creditors, the public or the
22 business.
23 He shall notify the society of such deficiency or deficiencies
24 and state in writing the reasons for his dissatisfaction. He
25 shall at once issue a written notice to the society requiring
26 that the deficiency or deficiencies which exist be corrected.
27 After such notice the society shall have a 30 day period in
28 which to comply with the commissioner's request for correction,
29 and if the society fails to comply, the commissioner shall
30 notify the society of his findings of noncompliance and require
19770H0207B0227 - 61 -
1 the society to show cause, on a date named, why it should not be
2 enjoined from carrying on any business until the violation
3 complained of shall have been corrected, or why an action in quo
4 warranto should not be commenced against the society.
5 (b) Presentation to Attorney General.--If on such date the
6 society does not present good and sufficient reasons why it
7 should not be so enjoined or why such action should not be
8 commenced, the commissioner may present the facts relating
9 thereto to the Attorney General who shall, if he deems the
10 circumstances warrant, commence an action to enjoin the society
11 from transacting business or in quo warranto.
12 (c) Court notification of society.--The court shall
13 thereupon notify the officers of the society of a hearing. If
14 after a full hearing it appears that the society should be so
15 enjoined or liquidated or a receiver appointed, the court shall
16 enter the necessary order.
17 (d) Prerequisites for injunction.--No society so enjoined
18 shall have the authority to do business until:
19 (1) The Commissioner of Insurance finds that the
20 violation complained of has been corrected.
21 (2) The costs of such action shall have been paid by the
22 society if the court finds that the society was in default as
23 charged.
24 (3) The court has dissolved its injunction.
25 (4) The Commissioner of Insurance has reinstated the
26 certificate of authority.
27 (e) Court order for liquidation.--If the court orders the
28 society liquidated, it shall be enjoined from carrying on any
29 further business, whereupon the receiver of the society shall
30 proceed at once to take possession of the books, papers, money
19770H0207B0227 - 62 -
1 and other assets of the society, and under the direction of the
2 court, proceed forthwith to close the affairs of the society and
3 to distribute its funds to those entitled thereto.
4 (f) Necessity of Attorney General.--No action under this
5 section shall be recognized in any court of this Commonwealth
6 unless brought by the Attorney General upon request of the
7 Commissioner of Insurance. Whenever a receiver is to be
8 appointed for a domestic society, the court shall appoint the
9 commissioner as such receiver.
10 (g) Applicability to voluntary discontinuance.--The
11 provisions of this section relating to hearing by the
12 Commissioner of Insurance, action by the Attorney General at the
13 request of the Commissioner of Insurance, hearing by the court,
14 injunction and receivership shall be applicable to a society
15 which shall voluntarily determine to discontinue business.
16 Section 605. Suspension, revocation or refusal of license to
17 foreign society.
18 (a) Findings and notification.--When the commissioner upon
19 investigation finds that a foreign or alien society transacting
20 or applying to transact business in this Commonwealth:
21 (1) has exceeded its powers;
22 (2) has failed to comply with any of the provisions of
23 this act;
24 (3) is not fulfilling its contracts in good faith; or
25 (4) is conducting its business fraudulently or in a
26 manner hazardous to its members or creditors or the public.
27 He shall notify the society of such deficiency or deficiencies
28 and state in writing the reasons for his dissatisfaction. He
29 shall at once issue a written notice to the society requiring
30 that the deficiency or deficiencies which exist are corrected.
19770H0207B0227 - 63 -
1 After such notice the society shall have a 30 day period in
2 which to comply with the commissioner's request for correction,
3 and if the society fails to comply, the commissioner shall
4 notify the society of his findings of noncompliance and require
5 the society to show cause, on a date named, why its license
6 should not be suspended, revoked or refused. If on such date the
7 society does not present good and sufficient reason why its
8 authority to do business in this Commonwealth should not be
9 suspended, revoked or refused, he may suspend or refuse the
10 license of the society to do business in this Commonwealth until
11 satisfactory evidence is furnished to him that such suspension
12 or refusal should be withdrawn or he may revoke the authority of
13 the society to do business in this Commonwealth.
14 (b) Continuation of contract.--Nothing contained in this
15 section shall be taken or construed as preventing any such
16 society from continuing in good faith all contracts made in this
17 Commonwealth during the time such society was legally authorized
18 to transact business herein.
19 Section 606. Service of process.
20 (a) Appointment of commissioner to receive process.--Every
21 society authorized to do business in this Commonwealth shall
22 appoint in writing the commissioner and each successor in office
23 to be its true and lawful attorney upon whom all lawful process
24 in any action or proceeding against it shall be served, and
25 shall agree in such writing that any lawful process against it
26 which is served on said attorney shall be of the same legal
27 force and validity as if served upon the society, and that the
28 authority shall continue in force so long as any liability
29 remains outstanding in this Commonwealth. Copies of such
30 appointment, certified by said commissioner, shall be deemed
19770H0207B0227 - 64 -
1 sufficient evidence thereof and shall be admitted in evidence
2 with the same force and effect as the original thereof might be
3 admitted.
4 (b) Method of service.--Service shall only be made upon the
5 commissioner or upon his legal counsel's office. It shall be
6 made in duplicate and shall constitute sufficient service upon
7 the society. When legal process against a society is served upon
8 the commissioner he shall forthwith forward one of the duplicate
9 copies by registered mail, prepaid, directed to the secretary or
10 corresponding officer. No such service shall require a society
11 to file its answer, pleading or defense in less than 30 days
12 from the date of mailing the copy of the service to a society.
13 Legal process shall not be served upon a society except in the
14 manner herein proscribed. At the time of serving any process
15 upon the commissioner, the plaintiff or complainant in the
16 action shall pay to the commissioner a fee of $10.
17 Section 607. Application for Injunction.
18 No application or petition for injunction against any
19 domestic, foreign or alien society, or branch thereof, shall be
20 recognized in any court of this Commonwealth unless made by the
21 Attorney General upon request of the Commissioner of Insurance.
22 Section 608. Court review.
23 All decisions and findings of the Commissioner of Insurance
24 made under the provisions of this act shall be subject to review
25 by proper proceedings in the Commonwealth Court.
26 CHAPTER 7
27 AGENTS
28 Section 701. Fraternal insurance agent defined.
29 The term "fraternal insurance agent" as used in this chapter
30 means any authorized or acknowledged agent or representative of
19770H0207B0227 - 65 -
1 a society who acts as such in the solicitation, negotiation or
2 procurement or making of a life insurance, accident and health
3 insurance or annuity contract, except that the term "fraternal
4 insurance agent" shall not include:
5 (1) any regular salaried officer or employee of a
6 licensed society whose services are devoted substantially to
7 activities other than the solicitation of fraternal insurance
8 contracts, and who receives for the solicitation of such
9 contracts no commission or other compensation directly
10 dependent upon the amount of business obtained; or
11 (2) any member of a society whose solicitation or
12 negotiation of fraternal insurance contracts is incidental to
13 securing new members for his society, and whose only
14 remuneration consists of prizes in the form of merchandise or
15 payments of nominal amounts.
16 Section 702. License required for agents.
17 Agents of societies shall be licensed in accordance with the
18 provisions of this chapter.
19 Section 703. Payment of commissions forbidden.
20 No society doing business in this Commonwealth shall pay any
21 commission or other compensation to any person for any services
22 in obtaining in this Commonwealth any new contract of life,
23 accident or health insurance, or any new annuity contract,
24 except to a licensed, fraternal insurance agent of such society.
25 Section 704. Commissioner may issue license.
26 The Commissioner of Insurance may issue a license to any
27 person who has paid the annual license fee and who has complied
28 with the requirements of this chapter, authorizing such
29 licensees to act as a fraternal insurance agent on behalf of any
30 society named in such license which is authorized to do business
19770H0207B0227 - 66 -
1 in this Commonwealth.
2 Section 705. Agents' documents on file.
3 Before any fraternal insurance agent's license shall be
4 issued there shall be on file in the office of the commissioner
5 the following documents:
6 (1) A written application by the prospective licensee in
7 such form or forms and supplements thereto, and containing
8 such information, as the commissioner may prescribe.
9 (2) A certificate by the society which is to be named in
10 such license, stating that such society has satisfied itself
11 that the named applicant is trustworthy and competent to act
12 as such fraternal insurance agent and that the society will
13 appoint such applicant to act as its agent if the license
14 applied for is issued by the commissioner. Such certificates
15 shall be executed and acknowledged by an officer or managing
16 agent of such society.
17 Section 706. Types of licenses to be issued.
18 Except as otherwise provided in this chapter, fraternal
19 insurance agents shall be licensed as life and/or accident and
20 health agents, except that the examination requirements of such
21 provisions shall not be applicable to:
22 (1) Any fraternal insurance agent who was in the service
23 of a society on the effective date of this act.
24 (2) A fraternal insurance agent who, in the preceding
25 calendar year, has solicited and procured life insurance
26 contracts on behalf of any society in an amount of insurance
27 in excess of $100,000, or, in the case of any other kinds of
28 insurance which the society might write, on the persons of
29 more than 25 individuals and who has received or will receive
30 a commission or compensation therefore.
19770H0207B0227 - 67 -
1 Section 707. Refusal to issue license.
2 The Commissioner of Insurance may refuse to issue or renew
3 any fraternal insurance agent's license if, in his judgment, the
4 proposed licensee is not trustworthy and competent to act as
5 such agent, or has given cause for revocation or suspension of
6 such license, or has failed to comply with any prerequisite for
7 the issuance or renewal, as the case may be, of such license.
8 Section 708. Term of license.
9 The term, expiration, renewal procedures, termination notice
10 requirements, causes for revocation or suspension of the license
11 shall be the same as contained in Article VI of "The Insurance
12 Department Act of one thousand nine hundred and twenty-one," of
13 May 17, 1921 (P.L.789, No.285), dealing with license of life,
14 accident and health agents except as inconsistent herewith.
15 CHAPTER 8
16 FUNDS, INVESTMENTS AND INVESTIGATIONS
17 Section 801. Funds.
18 (a) Assets for use and benefit of society.--All assets shall
19 be held, invested and disbursed for the use and benefit of the
20 society and no member or beneficiary shall have or acquire
21 individual rights therein or become entitled to any
22 apportionment or the surrender of any part thereof, except as
23 provided in the contract.
24 (b) Use of funds.--A society may create, maintain, invest,
25 disburse and apply any special fund or funds necessary to carry
26 out any purpose permitted by the laws of such society.
27 (c) Statement of purposes and proportions of payments.--
28 Every society, the admitted assets of which are less than the
29 sum of its accrued liabilities and reserves under all of its
30 certificates when valued according to standards required for
19770H0207B0227 - 68 -
1 life insurance companies for certificates issued after one year
2 from the effective date of this act, shall, in every provision
3 of the laws of the society for payments by members of such
4 society, in whatever form made, distinctly state the purpose of
5 the same and the proportion thereof which may be used for
6 expenses, and no part of the money collected for mortuary or
7 disability purposes or the net accretions thereto shall be used
8 for expenses.
9 Section 802. Investments.
10 A society shall invest its funds only in such investments as
11 are authorized by the laws of this Commonwealth for the
12 investment of assets of life insurance companies and subject to
13 the limitations thereon. Any foreign or alien society permitted
14 or seeking to do business in this Commonwealth which invests its
15 funds in accordance with the laws of the state, district,
16 territory, country or province in which it is incorporated,
17 shall be held to meet the requirements of this section for the
18 investment of funds.
19 Section 803. Report of financial condition.
20 Every society transacting business in this Commonwealth shall
21 annually, on or before March 1, unless for cause shown such time
22 has been extended by the commissioner, file with the
23 commissioner a true statement of its financial condition,
24 transactions and affairs for the preceding calendar year and pay
25 a fee in accordance with section 602. The statement shall be in
26 general form and context as approved by the National Association
27 of Insurance Commissioners for fraternal benefit societies and
28 as supplemented by additional information required by the
29 commissioner.
30 Section 804. Synopsis of report to each member.
19770H0207B0227 - 69 -
1 A synopsis of its annual statement providing an explanation
2 of the facts concerning the condition of the society thereby
3 disclosed shall be printed and mailed to each benefit member of
4 the society not later than June 1 of each year, or, in lieu
5 thereof, such synopsis may be published in the society's
6 official publication.
7 Section 805. Report of valuation of certificates.
8 As a part of the annual statement herein required, each
9 society shall, on or before March 1, file with the commissioner
10 a valuation of its certificates in force on December 31 last
11 preceding, provided the commissioner may, in his discretion for
12 cause shown, extend the time for filing such valuation for not
13 more than two calendar months. Such report of valuation shall
14 show, as reserve liabilities, the difference between the present
15 midyear value of the promised benefits provided in the
16 certificates of such society in force and the present midyear
17 value of the future net premiums as the same are in practice
18 actually collected, not including therein any value for the
19 right to make extra assessments and not including any amount by
20 which the present midyear value of future net premiums exceeds
21 the present midyear value of promised benefits on individual
22 certificates. At the option of any society, in lieu of the
23 above, the valuation may show the net tabular value. Such net
24 tabular value as to certificates issued prior to one year after
25 the effective date of this act shall be determined in accordance
26 with the provisions of law applicable prior to the effective
27 date of this act and as to certificates issued on or after one
28 year from the effective date of this act shall not be less than
29 the reserves determined according to the commissioners' reserve
30 valuation method as hereinafter defined. If the premium charged
19770H0207B0227 - 70 -
1 is less than the tabular net premium according to the basis of
2 valuation used, an additional reserve equal to the present value
3 of the deficiency in such premiums shall be set up and
4 maintained as a liability. The reserve liabilities shall be
5 properly adjusted in the event that the midyear or tabular
6 values are not appropriate.
7 Section 806. Reserves, determination.
8 Reserves according to the commissioners' reserve valuation
9 method, for the life insurance and endowment benefits of
10 certificates providing for a uniform amount of insurance and
11 requiring the payment of uniform premiums shall be the excess,
12 if any, of the present value, at the date of valuation, of such
13 future guaranteed benefits provided for by such certificates,
14 over the then present value of any future modified net premiums
15 therefore. The modified net premiums for any such certificate
16 shall be such uniform percentage of the respective contract
17 premiums for such benefits that the present value, at the date
18 of issue of the certificate, of all such modified net premiums
19 shall be equal to the sum of the then present value of such
20 benefits provided for by the certificate and the excess of (A)
21 over (B) as follows:
22 (A) A net level premium equal to the present
23 value, at the date of issue, of such benefits
24 provided for after the first certificate year,
25 divided by the present value, at the date of issue,
26 of an annuity of one per annum payable on the first
27 and each subsequent anniversary of such certificate
28 on which a premium falls due; provided however, that
29 such net level annual premium shall not exceed the
30 net level annual premium on the 19 year premium whole
19770H0207B0227 - 71 -
1 life plan for insurance of the same amount at an age
2 one year higher than the age at issue of such
3 certificate.
4 (B) A net one year term premium for such
5 benefits provided for in the first certificate year.
6 Reserves according to the commissioners' reserve valuation
7 method for:
8 (1) Life insurance benefits for varying amounts of
9 benefits or requiring the payment of varying premiums.
10 (2) Annuity and pure endowment benefits.
11 (3) Disability and accidental death benefits in all
12 certificates and contracts.
13 (4) All other benefits except life insurance and
14 endowment benefits, shall be calculated by a method
15 consistent with the principles of this section.
16 Section 807. Deferred payments as liability.
17 The present value of deferred payments due under incurred
18 claims or matured certificates shall be deemed a liability of
19 the society and shall be computed upon mortality and interest
20 standards prescribed in sections 808, 809 and 810.
21 Section 808. Certification of valuation.
22 The valuation and underlying data shall be certified by a
23 competent actuary or, at the expense of the society, verified by
24 the actuary of the Department of Insurance of the state of
25 domicile of the society.
26 Section 809. Valuation standards.
27 (a) Valuation for certificates prior to this act.--The
28 minimum standards of valuation for certificates issued prior to
29 one year from the effective date of this act shall be those
30 provided by the law applicable immediately prior to the
19770H0207B0227 - 72 -
1 effective date of this act but not lower than the standards used
2 in the calculating of rates for such certificates.
3 (b) Valuation for certificates after this act.--The minimum
4 standard of valuation for certificates issued after one year
5 from the effective date of this act shall be 3 1/2% interest and
6 the following tables:
7 (1) For certificates of life insurance -- American Men
8 Ultimate Table of Mortality, with Bowerman's or Davis'
9 Extension thereof or with the consent of the commissioner,
10 the Commissioners 1941 Standard Ordinary Mortality Table, the
11 Commissioners 1941 Standard Industrial Mortality Table or the
12 Commissioners 1958 Standard Ordinary Mortality Table, using
13 actual age of the insured for male risks and an age not more
14 than three years younger than the actual age of the insured
15 for females risks.
16 (2) For annuity and pure endowment certificates,
17 excluding any disability and accidental death benefits in
18 such certificates -- the 1937 Standard Annuity Mortality
19 Table or the Annuity Mortality Table for 1949, Ultimate, or
20 any modification of either of these tables approved by the
21 Commissioner of Insurance.
22 (3) For total and permanent disability benefits in or
23 supplementary to life insurance certificates -- Hunter's
24 Disability Table, or the Class III Disability Table (1926)
25 modified to conform to the contractual waiting period, or the
26 tables of Period 2 disablement rates and the 1930 to 1950
27 termination rates of the 1952 Disability Study of the Society
28 of Actuaries with due regard to the type of benefit. Any such
29 table shall, for active lives, be combined with a mortality
30 table permitted for calculating the reserves for life
19770H0207B0227 - 73 -
1 insurance certificates.
2 (4) For accidental death benefits in or supplementary to
3 life insurance certificates -- the Inter-Company Double
4 Indemnity Mortality Table or the 1959 Accidental Death
5 Benefits Table. Either table shall be combined with a
6 mortality table permitted for calculating the reserves for
7 life insurance certificates.
8 (5) For noncancellable accident and health benefits --
9 the Class III Disability Table (1926) with conference
10 modifications or, with the consent of the Commissioner of
11 Insurance, tables based upon the society's own experience.
12 Provided, however, that any society may value its certificates
13 in accordance with valuation standards authorized by the laws of
14 this Commonwealth for the valuation of policies issued by life
15 insurance companies.
16 Section 810. Other standards for valuation.
17 The commissioner may, in his discretion, accept other
18 standards for valuation if he finds that the reserves produced
19 thereby will not be less in the aggregate than reserves computed
20 in accordance with the minimum valuation standard herein
21 prescribed. The commissioner may, in his discretion, vary the
22 standards of mortality applicable to all certificates of
23 insurance on substandard lives or other extra hazardous lives by
24 any society authorized to do business in this Commonwealth.
25 Whenever the mortality experience under all certificates valued
26 on the same mortality table is in excess of the expected
27 mortality according to such table for a period of three
28 consecutive years, the commissioner may require additional
29 reserves when deemed necessary in his judgment on account of
30 such certificates.
19770H0207B0227 - 74 -
1 Section 811. Excess reserves.
2 Any society, with the consent of the Commissioner of
3 Insurance of the state of domicile of the society and under such
4 conditions, if any, which he may impose, may establish and
5 maintain reserves on its certificates in excess of the reserves
6 required thereunder, but the contractual rights of any insured
7 member shall not be affected thereby.
8 Section 812. Penalty for failures to file statement.
9 A society neglecting to file the annual statement in the form
10 and within the time provided by this section shall forfeit $100
11 for each day during which such neglect continues, and, upon
12 notice by the commissioner to that effect, its authority to do
13 business in this Commonwealth shall cease while such default
14 continues.
15 Section 813. Examination of domestic societies.
16 Societies which have been examined by the commissioner have
17 the privilege of objecting to the report of examination within
18 30 days after reception of such report. If any objection is
19 made, the commissioner will grant a hearing to the society
20 before making the report available for public inspection.
21 Section 814. Visitation and examination.
22 The commissioner, or any person he may appoint, shall have
23 the power of visitation and examination into the affairs of any
24 domestic society and he shall make such examination at least
25 once in every three years. He may employ assistants for the
26 purpose of such examination, and he, or any person he may
27 appoint, shall have free access to all books, papers and
28 documents that relate to the business of the society. The
29 minutes of the proceedings of the supreme legislative or
30 governing body and of the board of directors or corresponding
19770H0207B0227 - 75 -
1 body of a society shall be in the English language. In making
2 any such examination, the commissioner may summon and qualify as
3 witnesses under oath and examine its officers, agents and
4 employees or other persons in relation to the affairs,
5 transactions and condition of the society. A summary of the
6 report of the commissioner and such recommendations or
7 statements of the commissioner as may accompany such report,
8 shall be read at the first meeting of the board of directors or
9 corresponding body of the society following the receipt thereof,
10 and if directed so to do by the commissioner, shall also be read
11 at the first meeting of the supreme legislative or governing
12 body of the society following receipt thereof. A copy of the
13 report, recommendations, and statements of the commissioner
14 shall be furnished by the society to each member of such board
15 of directors or other governing body. The expense of each
16 examination and of each valuation, including compensation and
17 actual expense of examiners, shall be paid by the society
18 examined or whose certificates are valued, upon statements
19 furnished by the commissioner.
20 Section 815. Examination of foreign societies.
21 The commissioner, or any person whom he may appoint, may
22 examine any foreign or alien society transacting or applying for
23 admission to transact business in this Commonwealth. He may
24 employ assistants and he, or any person he may appoint, shall
25 have free access to all books, papers and documents that relate
26 to the business of the society. He may in his discretion accept,
27 in lieu of such examination, the examination of the Insurance
28 Department of the state, territory, district, province or
29 country where such society is organized. The compensation and
30 actual expenses of the examiners making any examination or
19770H0207B0227 - 76 -
1 general or special valuation shall be paid by the society
2 examined or by the society whose certificate obligations have
3 been valued, upon statements furnished by the commissioner.
4 Section 816. No adverse publications.
5 Pending, during or after an examination or investigation of a
6 society, either domestic, foreign or alien, the commissioner
7 shall make public no financial statement, report or finding, nor
8 shall he permit to become public any financial statement, report
9 or finding affecting the status, standing or rights of any
10 society, until a copy thereof shall have been served upon the
11 society at its principal office and the society shall have been
12 afforded a reasonable opportunity to answer any such financial
13 statement, report or finding and to make such showing in
14 connection therewith as it may desire.
15 Section 817. Misrepresentation.
16 (a) Misrepresentation.--No person shall cause or permit to
17 be made, issued or circulated in any form:
18 (1) Any misrepresentation or false or misleading
19 statement concerning the terms, benefits or advantages of any
20 fraternal insurance contract now issued or to be issued in
21 this Commonwealth, or the financial condition of any society.
22 (2) Any false or misleading estimate or statement
23 concerning the dividends or shares of surplus paid or to be
24 paid by any society on any insurance contract.
25 (3) Any incomplete comparison of an insurance contract
26 of one society with an insurance contract of another society
27 or insurer for the purpose of inducing the lapse, forfeiture
28 or surrender of any insurance contract. A comparison of
29 insurance contracts is incomplete if it does not compare in
30 detail:
19770H0207B0227 - 77 -
1 (i) The gross rates, and the gross rates less any
2 dividend or other reduction allowed at the date of the
3 comparison.
4 (ii) Any increase in cash values, and all the
5 benefits provided by each contract for the possible
6 duration thereof as determined by the life expectancy of
7 the insured;
8 or if it omits from consideration:
9 (iii) Any benefit or value provided in the contract.
10 (iv) Any differences as to amount or period of
11 rates.
12 (v) Any differences in limitations or conditions or
13 provisions which directly or indirectly affect the
14 benefits.
15 In any determination of the incompleteness or misleading
16 character of any comparison or statement, it shall be presumed
17 that the insured had no knowledge of any of the contents of the
18 contract involved.
19 (b) Penalty.--Any person who violates any provision of this
20 section or knowingly receives any compensation or commission by
21 or in consequence of such violation, shall upon conviction be
22 punished by a fine not less than $100 nor more than $1000, or by
23 imprisonment in the county jail not less than 30 days nor more
24 than one year, or both fine and imprisonment and shall in
25 addition, be liable for a civil penalty in the amount of three
26 times the sum received by such violator as compensation or
27 commission, which penalty may be sued for and recovered by any
28 person or society aggrieved for his or its own use and benefit
29 in accordance with the rules of civil practice.
30 Section 818. Discrimination and rebates.
19770H0207B0227 - 78 -
1 (a) Discrimination.--No society doing business in this
2 Commonwealth shall make or permit any unfair discrimination
3 between benefit members, spouses or dependents of the same class
4 and equal expectation of life in the premiums charged for
5 certificates of insurance, in the dividends or other benefits
6 payable thereon or in any other of the terms and conditions of
7 the contracts it makes.
8 (b) Rebates.--No society, by itself, or any other party, and
9 no agent or solicitor, personally, or by any other party, shall
10 offer, promise, allow, give, set off, or pay, directly or
11 indirectly, any valuable consideration or inducement to, or for
12 insurance, on any risk authorized to be taken by such society,
13 which is not specified in the certificate. No member shall
14 receive or accept, directly or indirectly, any rebate of
15 premium, or part thereof, or agent's or solicitor's commission
16 thereon, payable on any certificate or receive or accept any
17 favor or advantage or share in the dividends or other benefits
18 to accrue on, or any valuable consideration or inducement not
19 specified in the contract of insurance.
20 CHAPTER 9
21 MISCELLANEOUS
22 Section 901. Taxation.
23 Every society organized or licensed under this act is hereby
24 declared to be a charitable and benevolent institution, and all
25 of its funds shall be exempt from all and every State, county,
26 district, municipal and school tax other than taxes on real
27 estate and office equipment.
28 Section 902. Exemptions.
29 Except as herein provided, societies shall be governed by
30 this act and shall be exempt from all other provisions of the
19770H0207B0227 - 79 -
1 insurance laws of this Commonwealth, not only in governmental
2 relations with the Commonwealth, but for every other purpose. No
3 present law or any law hereafter enacted shall apply to them,
4 unless they be expressly designated therein. To the extent that
5 laws and regulations are applicable to societies, the terms
6 thereof shall be deemed of no effect to the extent that they are
7 inconsistent with the expressed terms of this act.
8 Section 903. Exemption of certain societies.
9 (a) Exemption.--Nothing contained in this act shall be so
10 construed as to affect or apply to:
11 (1) grand or subordinate lodges of societies, orders or
12 associations now doing business in this Commonwealth which
13 provide benefits exclusively through local or subordinate
14 lodges;
15 (2) orders, societies or associations which admit to
16 membership only persons engaged in one or more crafts or
17 hazardous occupations, in the same or similar lines of
18 business, insuring only their own members and their families,
19 and the ladies' societies or ladies' auxiliaries to such
20 orders, societies or associations;
21 (3) domestic societies which limit their membership to
22 employees of a particular city or town, designated firm,
23 business house or corporation which provide for a death
24 benefit of not more than $400 or disability benefits of not
25 more than $350 to any person in any one year, or both; or
26 (4) domestic societies or associations of a purely
27 religious, charitable or benevolent description, which
28 provide for a death benefit of not more the $400 or for
29 disability benefits of not more than $350 to any one person
30 in any one year, or both.
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1 (b) Coverage extended.--Any such society or association
2 described in paragraphs (3) or (4) supra which provides for
3 death or disability benefits for which benefit certificates are
4 issued, and any such society or association included in
5 paragraph (4) which has more than 1000 members, shall not be
6 exempted from the provisions of this act but shall comply with
7 all requirements thereof.
8 (c) Prohibition.--No society which, by the provisions of
9 this section, is exempt from the requirements of this act,
10 except any society described in subsection (a)(2), shall give or
11 allow, or promise to give or allow to any person any
12 compensation for procuring new members.
13 (d) Subject to act.--Every society which provides for
14 benefits in case of death or disability resulting solely from
15 accident, and which does not obligate itself to pay natural
16 death or sick benefits shall have all of the privileges and be
17 subject to all the applicable provisions and regulations of this
18 act except that the provisions thereof relating to medical
19 examination, valuations of benefit certificates, and
20 incontestability, shall not apply to such society.
21 (e) Information may be rejected.--The Commissioner of
22 Insurance may require from any society or association, by
23 examination or otherwise, such information as will enable him to
24 determine whether such society or association is exempt from the
25 provisions of this act.
26 Section 904. Penalties.
27 (a) False statements.--It shall be prohibited for any person
28 to willfully make a false or fraudulent statement in or relating
29 to an application for membership or for the purpose of obtaining
30 money from or a benefit in any society.
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1 (b) Filing of false statement.--Any person who willfully
2 makes a false or fraudulent statement in any verified report or
3 declaration under oath required or authorized by this act, or of
4 any material fact or thing contained in a sworn statement
5 concerning the death or disability of a member for the purpose
6 of procuring payment of a benefit named in the certificate,
7 shall be guilty of perjury and shall be subject to the penalties
8 therefore prescribed by law.
9 (c) Solicitation by nonlicensed society.--Any person who
10 solicits membership for, or in any manner assists in procuring
11 membership in, any society not licensed to do business in this
12 Commonwealth shall upon conviction be fined not less than $500
13 nor more than $1000.
14 (d) Penalty for other violation.--Any person guilty of a
15 willful violation of, or neglect or refusal to comply with, the
16 provisions of this act for which a penalty is not otherwise
17 prescribed, shall be guilty of a misdemeanor and shall upon
18 conviction, be subject to a fine not exceeding $500. Upon
19 satisfactory evidence of a violation of any provision of this
20 act, the Commissioner of Insurance may in his discretion, in
21 lieu of seeking criminal prosecution, pursue any one or more of
22 the following courses of action:
23 (1) Suspend or revoke or refuse to renew the license of
24 such offending party or parties.
25 (2) Impose a civil penalty of not more than $1000 for
26 each and every act in violation of any of said sections by
27 said party or parties.
28 Section 905. Repealer.
29 The following acts of assembly are hereby repealed absolutely
30 from and after the effective date of this act insofar as
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1 expressly inconsistent with this act:
2 Act of June 4, 1937 (P.L.1643, No.342).
3 Act of August 9, 1971 (P.L.286, No.74).
4 Act of November 15, 1972 (P.L.1063, No.271).
5 CHAPTER 10
6 EFFECTIVE DATE
7 Section 1001. Effective date.
8 This act shall take effect in six months.
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