SENATE AMENDED
PRIOR PRINTER'S NOS. 227, 807 PRINTER'S NO. 1634
No. 207 Session of 1977
INTRODUCED BY MR. KOWALYSHYN, 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, GARZIA,
COHEN AND MRKONIC, FEBRUARY 9, 1977
SENATOR HANKINS, INSURANCE, IN SENATE, AS AMENDED, JUNE 21, 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
1 certificate.
2 Section 205. Examination by commissioner.
3 Section 206. Exemption.
4 Section 207. Approval necessary.
5 Section 208. Certain powers of societies.
6 Section 209. Review of department order.
7 Section 210. Classes of membership.
8 Section 211. Corporate powers retained.
9 Section 212. Existing voluntary associations.
10 Section 213. Location of office.
11 Section 214. Consolidations and mergers.
12 Section 215. Amendments to articles of incorporation,
13 constitution and laws.
14 Section 216. Institutions.
15 Section 217. Personal liability.
16 Section 218. Waiver.
17 Section 219. Conversion of fraternal benefit society into
18 mutual live insurance company.
19 Section 220. Reinsurance.
20 Chapter 3. Benefits and Beneficiaries
21 Section 301. Benefits.
22 Section 302. Benefits on lives of children.
23 Section 303. Nonforfeiture benefits, cash surrender values,
24 certificate loans and other options.
25 Section 304. Beneficiaries.
26 Section 305. Benefits not attachable.
27 Section 306. Contract for benefits.
28 Chapter 4. Certificates
29 Section 401. Approval of certificates.
30 Section 402. Certificate provisions required.
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1 Section 403. Statement of title and premiums.
2 Section 404. Grace period of certificate.
3 Section 405. Reinstatement.
4 Section 406. Default.
5 Section 407. Tables.
6 Section 408. Contestability of certificate.
7 Section 409. Redetermination of premiums in certain
8 circumstances.
9 Section 410. Right to maintain insurance.
10 Section 411. Surplus.
11 Section 412. Loan value of certificate.
12 Section 413. Prohibited provisions.
13 Chapter 5. Accident and Health Insurance and Total and
14 Permanent Disability Insurance Certificates
15 Section 501. Commissioner to regulate.
16 Section 502. Filing with and approval of contracts by
17 commissioner.
18 Section 503. Conditions for certificates.
19 Section 504. Standard certificate provision for insurance
20 for accident and health or for permanent and
21 total disability.
22 Section 505. Entire contract and changes.
23 Section 506. Time limits on certain defenses.
24 Section 507. Grace periods.
25 Section 508. Reinstatement.
26 Section 509. Written notice of claims.
27 Section 510. Forms for claims.
28 Section 511. Proofs of loss.
29 Section 512. Time of payment of claims.
30 Section 513. Payment of claims.
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1 Section 514. Physical examinations and autopsy.
2 Section 515. Legal actions.
3 Section 516. Change of beneficiary.
4 Section 517. Change of occupation.
5 Section 518. Misstatement of age.
6 Section 519. Other insurance in this society.
7 Section 520. Insurance with other benefit members.
8 Section 521. Insurance with other societies.
9 Section 522. Relation of earnings to insurance.
10 Section 523. Nonpayment of premiums.
11 Section 524. Cancellation.
12 Section 525. Conformity of provisions with State statutes.
13 Section 526. Illegal occupation.
14 Section 527. Intoxicants and narcotics.
15 Section 528. Provisions not applicable in certain
16 circumstances.
17 Section 529. Printed order of certain certificate
18 provisions.
19 Section 530. Third party ownership.
20 Section 531. Filing procedure.
21 Chapter 6. Licenses, Fees and Additional Powers For The
22 Commissioner
23 Section 601. Annual license.
24 Section 602. Fees.
25 Section 603. Foreign society.
26 Section 604. Injunction, liquidation or receivership of
27 domestic society.
28 Section 605. Suspension, revocation or refusal of license
29 to foreign society.
30 Section 606. Service of process.
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1 Section 607. Application for injunction.
2 Section 608. Court review.
3 Chapter 7. Agents
4 Section 701. Fraternal insurance agent defined.
5 Section 702. License required for agents.
6 Section 703. Payment of commissions forbidden.
7 Section 704. Commissioner may issue license.
8 Section 705. Agents' documents on file.
9 Section 706. Types of licenses to be issued.
10 Section 707. Refusal to issue license.
11 Section 708. Term of license.
12 Chapter 8. Funds, Investments and Investigations
13 Section 801. Funds.
14 Section 802. Investments.
15 Section 803. Report of financial condition.
16 Section 804. Synopsis of report to each member.
17 Section 805. Report of valuation of certificates.
18 Section 806. Reserves, determination.
19 Section 807. Deferred payments as liability.
20 Section 808. Certification of valuation.
21 Section 809. Valuation standards.
22 Section 810. Other standards for valuation.
23 Section 811. Excess reserves.
24 Section 812. Penalty for failures to file statement.
25 Section 813. Examination of domestic societies.
26 Section 814. Visitation and examination.
27 Section 815. Examination of foreign societies.
28 Section 816. No adverse publications.
29 Section 817. Misrepresentation.
30 Section 818. Discrimination and rebates.
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1 Chapter 9. Miscellaneous
2 Section 901. Taxation.
3 Section 902. Exemptions.
4 Section 903. Exemption of certain societies.
5 Section 904. Penalties.
6 Section 905. Repealer.
7 Chapter 10. Effective Date
8 Section 1001. Effective date.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 CHAPTER 1
12 GENERAL PROVISIONS
13 Section 101. Short title.
14 This act shall be known and may be cited as the "Fraternal
15 Benefit Society Code."
16 Section 102. Definitions.
17 The following words and phrases when used in this act shall
18 have, unless the context clearly indicates otherwise, the
19 meanings given to them in this section:
20 "Commissioner." The Insurance Commissioner of the
21 Commonwealth of Pennsylvania.
22 "Department." The Insurance Department of the Commonwealth
23 of Pennsylvania.
24 "Fraternal benefit society." Any incorporated society, order
25 or supreme lodge, without capital stock, including one exempted
26 under the provisions of section 903(a)(2), whether incorporated
27 or not, conducted solely for the benefit of its members and
28 their beneficiaries and not for profit, operated on a lodge
29 system with or without ritualistic form of work, having a
30 representative form of government, and which makes provision for
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1 the payment of benefits in accordance with this act.
2 When used in this chapter the word "society," unless
3 otherwise indicated, shall mean fraternal benefit society.
4 "Lodge system." A society shall be deemed to be operating on
5 the lodge system when the society has a supreme legislative or
6 governing body and subordinate lodges or branches by whatever
7 name known, into which members are elected, initiated or
8 admitted in accordance with its constitution, laws, rituals, or
9 rules, which subordinate lodges or branches shall be required by
10 the laws of the society to hold regular meetings at least once
11 in each quarter.
12 "Premium." Any charges, fees, dues, or other required
13 contributions by whatever name known.
14 "Representative form of government." A society shall be
15 deemed to have a representative form of government when:
16 (1) It provides in its constitution or laws for a
17 supreme legislative or governing body, composed of
18 representatives elected either by the members or by delegates
19 elected directly or indirectly by the members, together with
20 such other members of such body as may be prescribed by the
21 society's constitution and laws.
22 (2) The representatives elected constitute a majority in
23 number and have not less than two-thirds of the votes nor
24 less than the votes required to amend its constitution and
25 laws.
26 (3) The meetings of the supreme legislative or governing
27 body and the election of officers, representatives or
28 delegates are held as often as once in four calendar years.
29 (4) Each benefit member shall be eligible for election
30 to act or serve as a delegate to such meeting.
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1 (5) The society has a board of directors charged with
2 the responsibility for managing its affairs in the interim
3 between meetings of its supreme legislative or governing
4 body, subject to control by such body and having powers and
5 duties delegated to it in the constitution or laws of the
6 society.
7 (6) Such board of directors is elected by the supreme
8 legislative or governing body, except in case of filling a
9 vacancy in the interim between meetings of such body.
10 (7) The officers are elected either by the supreme
11 legislative or governing body or by the board of directors.
12 (8) The members, officers, representatives or delegates
13 shall not vote by proxy.
14 "Society." A fraternal benefit society as set forth in this
15 act.
16 Section 103. Severability.
17 If any provision of this act is held to be invalid or
18 unconstitutional, such decision shall not affect the remaining
19 provisions of this act.
20 Section 104. Exemptions from general insurance laws.
21 Except as otherwise provided in this act, a fraternal benefit
22 society holding a certificate of authority shall not be subject
23 to the laws of this Commonwealth now in force relating to the
24 business of insurance and no statute hereafter enacted relating
25 to the business of insurance shall apply to such a society
26 unless such statute shall specifically refer and apply to a
27 society subject to this act.
28 CHAPTER 2
29 ORGANIZATION AND RELATED MATTERS
30 Section 201. Initial organization.
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1 The organization of a society shall be as herein provided.
2 Seven or more citizens of the United States, a majority of whom
3 are citizens of this Commonwealth, who desire to form a
4 fraternal benefit society, may make, sign and acknowledge before
5 an officer competent to take acknowledgment of deeds, articles
6 of incorporation, in which shall be stated:
7 (1) The proposed corporate name of the society, which
8 shall not so closely resemble the name of any society or
9 insurance company as to be misleading or confusing.
10 (2) The purposes for which it is being formed and the
11 mode in which its corporate powers are to be exercised. Such
12 purposes shall not include more liberal powers than are
13 granted by this act, provided that any lawful, social,
14 intellectual, educational, charitable, benevolent, moral,
15 fraternal or religious advantages may be set forth among the
16 purposes of the society.
17 (3) The names and residences of the incorporators and
18 the names, residences and official titles of all the
19 officers, trustees, directors, or other persons who are to
20 have and exercise the general control of the management of
21 the affairs and funds of the society for the first year or
22 until the ensuing election at which all such officers shall
23 be elected by the supreme legislative or governing body,
24 which election shall be held not later than one year from the
25 date of the issuance of the permanent certificate.
26 Section 202. Initial papers to be filed with commissioner.
27 Such articles of incorporation, duly certified copies of the
28 constitution, laws and rules, copies of all proposed forms of
29 certificates, applications therefore, receipts and circulars to
30 be issued by the society and a bond conditioned upon the return
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1 to applicants of the advanced payments if the organization is
2 not completed within one year shall be filed with the
3 commissioner, who may require such further information as he
4 deems necessary. The bond with sureties approved by the
5 commissioner shall be in such amount, not less than $5,000 nor
6 more than $25,000, as required by the commissioner. All
7 documents filed are to be in the English language. If the
8 purposes of the society conform to the requirements of this act
9 and all provisions of the law have been complied with, the
10 commissioner shall so certify, retain and file the articles of
11 incorporation and furnish the incorporators a preliminary
12 certificate authorizing the society to solicit members as
13 hereinafter provided.
14 Section 203. Validity of preliminary certificate.
15 No preliminary certificate granted under the provisions of
16 this act shall be valid after one year from its date or after
17 such other period, not exceeding one year, as may be authorized
18 by the commissioner upon cause shown, unless the 500 applicants
19 hereinafter required have been secured and the organization has
20 been completed as herein provided. The articles of incorporation
21 and all other proceedings thereunder shall become null and void
22 in one year from the date of the preliminary certificate, or at
23 the expiration of the extended period, unless the society shall
24 have completed its organization and received a certificate of
25 authority to do business as hereinafter provided.
26 Section 204. Solicitation of members on receipt of certificate.
27 Upon receipt of a preliminary certificate from the
28 commissioner, the society may solicit members for the purpose of
29 completing its organization, shall collect from each applicant
30 the amount of not less than one regular monthly premium in
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1 accordance with its table of premiums as provided by its
2 constitution and laws, and shall issue to each such applicant a
3 receipt for the amount so collected. No society shall incur any
4 liability other than for the return of such advance premium, nor
5 issue any certificate, nor pay, allow, or offer or promise to
6 pay or allow, any death or disability benefit to any person
7 until:
8 (1) Actual bona fide applications for death benefits
9 have been secured aggregating at least $500,000 on not less
10 than 500 lives.
11 (2) All such applicants for death benefits shall have
12 furnished evidence of insurability satisfactory to the
13 society.
14 (3) Certificates of examinations or acceptable
15 declarations of insurability have been duly filed and
16 approved by the chief medical examiner of the society.
17 (4) Ten subordinate lodges or branches have been
18 established into which the 500 applicants have been admitted.
19 (5) There has been submitted to the commissioner, under
20 oath of the president or secretary, or corresponding officer
21 of the society, a list of such applicants, giving their
22 names, addresses, date each was admitted, name and number of
23 the subordinate branch of which each applicant is a member,
24 amount of benefits to be granted and premiums therefore.
25 (6) It shall have been shown to the commissioner, by
26 sworn statement of the treasurer, or corresponding officer of
27 such society, that at least 500 applicants have each paid in
28 cash at least one regular monthly premium as herein provided,
29 which premiums in the aggregate shall amount to at least
30 $2,500, all of which shall be credited to the fund or funds
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1 from which benefits are to be paid and no part of which may
2 be used for expenses. The advance premiums shall be held in
3 trust during the period of organization and if the society
4 has not qualified for a certificate of authority within one
5 year, as herein provided, such premiums shall be returned to
6 the applicants.
7 Section 205. Examination by commissioner.
8 The commissioner may make such examination and require such
9 further information as he deems advisable. Upon presentation of
10 satisfactory evidence that the society has complied with all the
11 provisions of law, he shall issue to the society a certificate
12 to that effect and that the society is authorized to transact
13 business pursuant to the provisions of this act. The certificate
14 shall be prima facie evidence of the existence of the society at
15 the date of such certificate. The commissioner shall cause a
16 record of such certificate to be made. A certified copy of such
17 record may be given in evidence with like effect as the original
18 certificate.
19 Section 206. Exemption.
20 The provisions of sections 204 and 205 of this chapter shall
21 not apply to:
22 (1) Any society organized prior to April 6, 1893 under
23 any statute of this Commonwealth which was engaged in doing
24 business in this Commonwealth on such date. Any such society
25 may exercise after the effective date of this act all the
26 rights conferred by this act and all the rights, powers,
27 privileges, and exemptions now exercised or possessed by it,
28 under its charter or articles of incorporation or articles of
29 association, and neither its existence as a corporation nor
30 its right to exercise any corporate rights, vested in it by
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1 virtue of its past incorporation, shall be affected by
2 anything contained in this act.
3 (2) Any fraternal benefit society incorporated under the
4 provisions of the act of April 6, 1893 (P.L.10, No.6), the
5 act of May 20, 1921 (P.L.916, No.324), or the act of July 17,
6 1935 (P.L.1092, No.357), relating to fraternal benefit
7 societies.
8 For the purposes of this act, a corporation which is exempt
9 from the requirements of sections 204 and 205 of this chapter by
10 reason of paragraph (1) of this section shall be deemed to be a
11 holder of a certificate of authority issued under this chapter.
12 Section 207. Approval necessary.
13 No society, authorized to transact business as set forth
14 above, shall issue any insurance forms, endorsements, or riders
15 without first having obtained the necessary approval.
16 Section 208. Certain powers of societies.
17 Every society shall have the power to adopt a constitution
18 and laws for the government of the society, the admission of its
19 members, the management of its affairs and the fixing of the
20 premiums of its members from time to time. It shall have the
21 power to change, alter, add to or amend such constitution and
22 laws and shall have such other powers as are necessary and
23 incidental to carrying into effect the objects and purposes of
24 the society.
25 Section 209. Review of department order.
26 Orders of the Insurance Department upon an application for a
27 certificate of authority under this section shall be subject to
28 judicial review in the manner and within the time provided by
29 law.
30 Section 210. Classes of membership.
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1 (a) Two classes of membership.--Every society authorized to
2 do business in this Commonwealth may admit to membership two
3 classes of members: benefit members and social members by
4 whatever name known. Social members shall not be entitled to any
5 of the benefits prescribed by sections 301 and 302 and shall
6 have no voice or vote in the management of the insurance affairs
7 of the society. Benefit members may be either adult members or
8 juvenile members. Juvenile members shall have no voice or vote
9 in the management of the insurance affairs of the society.
10 (b) Adult benefit membership.--Every such society may admit
11 to adult benefit membership any person not less than 15 years of
12 age at nearest birthday. Any person so admitted prior to
13 attaining the full age of 18 years shall be deemed competent to
14 contract for insurance benefits and to exercise and enjoy every
15 right, privilege and benefit provided by any insurance
16 certificate on such minor subject to the limitations contained
17 in section 302 as to the designation of beneficiary.
18 (c) Evidence of insurability required.--Every adult benefit
19 member entitled to insurance benefits shall, as to each
20 application for insurance, have furnished evidence of
21 insurability acceptable to the society.
22 Section 211. Corporate powers retained.
23 Any unincorporated INCORPORATED society authorized to <--
24 transact business in this Commonwealth at the time this act
25 becomes effective may thereafter exercise all the rights, powers
26 and privileges prescribed in this act and in its charter or
27 articles of incorporation as far as consistent with this act. A
28 domestic society shall not be required to reincorporate.
29 Section 212. Existing voluntary associations.
30 (a) Necessity of incorporation.--One year from the effective
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1 date of this act, no unincorporated or voluntary association
2 shall be permitted to transact business in this Commonwealth as
3 a fraternal benefit society unless such association incorporates
4 pursuant to the provisions of this act.
5 (b) Receipt of certificate on incorporation.--Any domestic
6 voluntary association now authorized to transact business in
7 this Commonwealth may incorporate and shall receive from the
8 commissioner a permanent certificate of incorporation as a
9 fraternal benefit society when:
10 (1) It shall have completed its conversion to an
11 incorporated society not later than one year from the
12 effective date of this act.
13 (2) Itt has filed its articles of incorporation and has
14 satisfied the other requirements described in section 102.
15 (3) The commissioner shall have made such examination
16 and procured whatever additional information he shall deem
17 advisable.
18 (c) Obligations and benefits.--Every voluntary association
19 so incorporated shall incur the obligations and enjoy the
20 benefits thereof the same as though originally incorporated, and
21 such corporation shall be deemed a continuation of the original
22 voluntary association. The officers thereof shall serve through
23 their respective terms as provided in its original articles of
24 association, but their successors shall be elected and serve as
25 provided in its articles of incorporation. Incorporation of a
26 voluntary association shall not affect existing suits, claims or
27 contracts.
28 Section 213. Location of office.
29 The principal office of any domestic society shall be located
30 in this Commonwealth. The meetings of its supreme legislative or
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1 governing body may be held in any state, district, province or
2 territory wherein such society has at least five subordinate
3 branches and all business transacted at such meetings shall be
4 as valid in all respects as if such meetings were held in this
5 Commonwealth.
6 Section 214. Consolidations and mergers.
7 (a) Right to consolidate or merge.--A domestic society may
8 consolidate or merge with any other society by complying with
9 the provisions of this section.
10 (b) Statements to be filed.--It shall file with the
11 Commissioner of Insurance:
12 (1) A certified copy of the written contract containing
13 in full the terms and conditions of the consolidation or
14 merger.
15 (2) A sworn statement by the president and secretary or
16 corresponding officers of each society showing the financial
17 condition thereof on a date fixed by the commissioner but not
18 earlier than December 31, next preceding the date of the
19 contract.
20 (3) A certificate of such officers, duly verified by
21 their respective oaths, that the consolidation or merger has
22 been approved by a two-thirds vote of the supreme legislative
23 or governing body of each society.
24 (4) Evidence that at least 60 days prior to the action
25 of the supreme legislative or governing body of each society,
26 the text of the contract has been furnished to all members of
27 each society either by mail or by publication in full in the
28 official organ of each society.
29 (c) Commissioner to approve.--If the commissioner finds that
30 the contract is in conformity with the provisions of this
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1 section, that the financial statements are correct and that the
2 consolidation or merger is just and equitable to the members of
3 each society, he shall approve the contract and issue his
4 certificate to such effect. Upon such approval, the contract
5 shall be in full force and effect unless any society which is a
6 party to the contract is incorporated under the laws of any
7 other state or territory. In such event the consolidation or
8 merger shall not become effective unless and until it has been
9 approved as provided by the laws of such state or territory and
10 a certificate of such approval is filed with the commissioner of
11 this Commonwealth or, if the laws of such state or territory
12 contain no such provision, then the consolidation or merger
13 shall not become effective unless and until it has been approved
14 by the Commissioner of Insurance of such state or territory and
15 a certificate of such approval filed with the commissioner of
16 this Commonwealth.
17 (d) Property merged.--Upon the consolidation or merger
18 becoming effective, all the rights, franchises and interests of
19 the consolidated or merged societies in and to every species of
20 property, real, personal or mixed, and things in action thereto
21 belonging shall be vested in the society resulting from or
22 remaining after the consolidation or merger without any other
23 instrument, except that conveyances of real property may be
24 evidenced by proper deeds, and the title to any real estate or
25 interest therein, vested under the laws of this Commonwealth in
26 any of the societies consolidated or merged, shall not revert or
27 be in any way impaired by reason of the consolidation or merger,
28 but shall vest absolutely in the society resulting from or
29 remaining after such consolidation or merger.
30 (e) Affidavit as evidence.--The affidavit of any officer of
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1 the society or of anyone authorized by it to mail any notice or
2 document, stating that such notice or document has been duly
3 addressed and mailed, shall be prima facie evidence that such
4 notice or document has been furnished the addresses.
5 Section 215. Amendments to articles of incorporation,
6 constitution and laws.
7 (a) Power to amend.--A domestic society may amend its
8 articles of incorporation, constitution or laws in accordance
9 with the provisions thereof, by action of its supreme
10 legislative or governing body at any regular or special meeting
11 or, if its articles of incorporation, constitution or laws so
12 provide, by referendum. Such referendum may be held in
13 accordance with the provisions of its articles of incorporation,
14 constitution or laws by the vote of the voting members of the
15 society, by the vote of delegates or representatives of voting
16 members or by the vote of local lodges or branches. No amendment
17 submitted for adoption by referendum shall be adopted unless,
18 within six months from the date of submission thereof, a
19 majority of all of the voting members of the society shall have
20 signified their consent to such amendment by one of the methods
21 herein specified.
22 (b) Amendments require approval of commissioner.--No
23 amendment in the articles of incorporation, constitution or laws
24 of any domestic society shall take effect unless approved by the
25 commissioner who shall approve such amendment if he finds that
26 it has been duly adopted and is not inconsistent with any
27 requirement of the laws of this Commonwealth or with the
28 character, objects and purposes of the society. Unless the
29 commissioner shall disapprove any such amendment within 60 days
30 after the filing of the amendment, such amendment shall be
19770H0207B1634 - 18 -
1 considered approved. The approval or disapproval of the
2 commissioner shall be in writing and mailed to the secretary or
3 corresponding officer of the society at its principal office. In
4 case he disapproves such amendment, the reasons therefore shall
5 be stated in such written notice.
6 (c) Copies of changes.--Within 90 days from the approval
7 thereof by the commissioner, all such amendments, or a synopsis
8 thereof, shall be furnished to all members of the society either
9 by mail or by publication in full in the official organ of the
10 society. The affidavit of any officer of the society or of
11 anyone authorized by it to mail any amendments or synopsis
12 thereof, stating facts which show that same have been duly
13 addressed and mailed, shall be prima facie evidence that such
14 amendments or synopsis thereof, have been furnished the
15 addressee.
16 (d) Power of commissioner to review.--The Commissioner of
17 Insurance shall have the power to review existing articles of
18 incorporation, constitutions and bylaws of domestic fraternal
19 benefit societies at any time in order to determine whether said
20 articles, constitutions or bylaws comply with the minimum
21 standards set forth in this act.
22 (e) Foreign societies to file.--Every foreign or alien
23 society authorized to do business in this Commonwealth shall
24 file with the commissioner a duly certified copy of all
25 amendments of, or additions to, its articles of incorporation,
26 constitution or laws within 90 days after the enactment of same.
27 (f) Printed copies as evidence.--Printed copies of the
28 constitution or laws as amended, certified by the secretary or
29 corresponding officer of the society shall be prima facie
30 evidence of the legal adoption thereof.
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1 Section 216. Institutions.
2 (a) Power to own or establish.--It shall be lawful for a
3 society to create, maintain and operate charitable, benevolent
4 or educational institutions for the benefit of its members and
5 their families and dependents and for the benefit of children
6 insured by the society. For such purpose it may own, hold or
7 lease personal property or real property located within or
8 without this Commonwealth, with necessary buildings thereon.
9 Such property shall be reported in every annual statement but
10 shall not be allowed as an admitted asset of such society.
11 (b) Not to operate for profit.--Maintenance, treatment and
12 proper attendance in any such institution may be furnished free
13 or a reasonable charge may be made therefore, but no such
14 institution shall be operated for profit. The society shall
15 maintain a separate accounting of any income and disbursements
16 under this section and report them in its annual statement. No
17 society shall own or operate funeral homes or undertaking
18 establishments.
19 Section 217. Personal liability.
20 The officers and members of the supreme, grand or any
21 subordinate body of a society shall not be personally liable for
22 payment of any benefits provided by a society.
23 Section 218. Waiver.
24 The constitution and laws of the society shall provide that
25 no subordinate body, nor any of its subordinate officers or
26 members shall have the power or authority to waive any of the
27 provisions of the laws and constitution of the society. Such
28 provision shall be binding on the society and every member and
29 beneficiary of a member.
30 Section 219. Conversion of fraternal benefit society into mutual
19770H0207B1634 - 20 -
1 life insurance company.
2 Any domestic fraternal benefit society may be converted and
3 licensed as a mutual life insurance company by compliance with
4 all the financial requirements of the act of May 17, 1921
5 (P.L.682, No.284), known as "The Insurance Company Law of 1921,"
6 if such plan of conversion has been approved by the Commissioner
7 of Insurance. Such plan shall be prepared in writing setting
8 forth in full, the terms and conditions thereof. The board of
9 directors shall submit such plan to the supreme legislative or
10 governing body of such society at any regular or special meeting
11 thereof, by giving a full, true and complete copy of such plan
12 with the notice of such meeting. Such notice shall be given as
13 provided in the laws of the society for the convocation of a
14 regular or special meeting of such body, as the case may be. The
15 affirmative vote of two-thirds of all members of such body shall
16 be necessary for the approval of such agreement. No such
17 conversion shall take effect unless and until approved by the
18 commissioner who may give such approval if he finds that the
19 proposed change is in conformity with the requirements of law
20 and not prejudicial to the certificate holders of the society.
21 Section 220. Reinsurance.
22 A domestic society may, by a reinsurance agreement, cede any
23 individual risk or risks in whole or in part to an insurer
24 (other than another fraternal benefit society) having the power
25 to make such reinsurance and authorized to do business in this
26 Commonwealth, or if not so authorized, one which is approved by
27 the commissioner, but no such society may reinsure in excess of
28 50% all of its insurance in force without the written permission
29 of the commissioner. It may take credit for the reserves on such
30 ceded risks to the extent reinsured, but no credit shall be
19770H0207B1634 - 21 -
1 allowed as an admitted asset or as a deduction from liability,
2 to a ceding society for reinsurance made, ceded, renewed, or
3 otherwise becoming effective after the effective date of this
4 act, unless the reinsurance is payable by the assuming insurer
5 on the basis of the liability of the ceding society under the
6 contract or contracts reinsured without diminution because of
7 the insolvency of the ceding society.
8 CHAPTER 3
9 BENEFITS AND BENEFICIARIES
10 Section 301. Benefits.
11 (a) Power to grant benefits.--Any fraternal benefit society
12 holding a certificate of authority under this act may enter into
13 contracts in such forms and grant such benefits as its laws may
14 authorize. In the case of life insurance benefits, it shall
15 provide for the accumulation and maintenance of assets required
16 for the payment of such benefits, when valued upon an interest
17 basis, not exceeding 4% per annum, and mortality standards
18 adopted by it within the limitations provided in this act or, at
19 the option of the society, in the statutes relating to life
20 insurance companies. Any life certificates issued on a renewable
21 term basis shall set forth clearly thereon the successive future
22 rates of contribution to be paid thereunder.
23 (b) Family eligibility.--Benefits may be provided on the
24 lives of members or, upon application of a member, on the lives
25 of the member's family, including the member, the member's
26 spouse and minor children, in the same or separate certificates.
27 Section 302. Benefits on lives of children.
28 (a) Power to provide benefit on children's lives.--A society
29 may provide for insurance benefits or annuity benefits or both
30 on the lives of children under the minimum age for adult
19770H0207B1634 - 22 -
1 membership but not greater than 18 years of age at time of
2 application therefore, upon the application of some adult
3 person, as its laws or rules may provide, which benefits shall
4 be in accordance with the provisions of section 301(a). A
5 society may, at its option, organize and operate branches for
6 such children. Membership and initiation in local lodges shall
7 not be required of such children, nor shall they have a voice or
8 vote in the management of the society.
9 (b) Change of beneficiary.--A society shall have power to
10 provide for the designation and changing of designation of
11 beneficiaries in the certificates providing for such benefits
12 and to provide in all other respects for the regulation,
13 government and control of such certificates and all rights,
14 obligations and liabilities incident thereto and connected
15 therewith.
16 Section 303. Nonforfeiture benefits, cash surrender values,
17 certificate loans and other options.
18 (a) Power to make.--A society may grant paid-up
19 nonforfeiture benefits, cash surrender values, certificate loans
20 and such other options as its laws may permit. As to
21 certificates issued on and after the effective date of this act,
22 a society shall grant at least one paid-up nonforfeiture
23 benefit, except in the case of pure endowment, annuity or
24 reversionary annuity contracts, reducing term insurance
25 contracts or contracts of term insurance of a uniform amount of
26 15 years or less expiring before age 66.
27 (b) Reserves computed on other basis.--In the case of
28 certificates other than those for which reserves are computed on
29 the Commissioner's 1941 Standard Ordinary Mortality Table, the
30 1941 Standard Industrial Table or the Commissioner's 1958
19770H0207B1634 - 23 -
1 Standard Ordinary Mortality Table, or any more recent table made
2 applicable to life insurance companies the value of every paid-
3 up nonforfeiture benefit and the amount of any cash surrender
4 value, loan or other option granted shall not be less than the
5 excess, if any, of (1) over (2) as follows:
6 (1) The reserve under the certificate determined on the
7 basis specified in the certificate.
8 (2) The sum of any indebtedness to the society on the
9 certificate, including interest due and accrued, and a
10 surrender charge equal to 2 1/2% of the face amount of the
11 certificate, which, in the case of insurance on the lives of
12 children, shall be the ultimate face amount of the
13 certificate, if death benefits provided therein are graded.
14 (c) Reserves computed on substandard basis.--However, in the
15 case of certificates issued on a substandard basis or in the
16 case of certificates, the reserves for which are computed upon
17 the American Men Ultimate Table of Mortality the term of any
18 extended insurance benefit granted including accompanying pure
19 endowment, if any, may be computed upon the rates of mortality
20 not greater than 130% of those shown by the mortality table
21 specified in the certificate for the computation of the reserve.
22 (d) Reserves computed on certain tables.--In the case of
23 certificates for which reserves are computed on the
24 Commissioner's 1941 Standard Ordinary Mortality Table, the 1941
25 Standard Industrial Table or the Commissioner's 1958 Standard
26 Ordinary Mortality Table or any more recent table made
27 applicable to life insurance companies, every paid-up
28 nonforfeiture benefit and the amount of any cash surrender
29 value, loan or other option granted shall not be less than the
30 corresponding amount ascertained in accordance with the
19770H0207B1634 - 24 -
1 provisions of the laws of this Commonwealth applicable to life
2 insurance companies issuing policies containing like insurance
3 benefits based upon such tables.
4 Section 304. Beneficiaries.
5 (a) Power to change beneficiaries.--Unless otherwise
6 provided in the contract:
7 (1) The member shall have the right at all times to
8 change the beneficiary or beneficiaries and to assign the
9 certificate.
10 (2) No beneficiary shall have or obtain any interest in
11 the proceeds of any certificate until a certificate becomes
12 due and payable in conformity with its provisions.
13 (b) Limitation on scope of beneficiaries.--Every society by
14 its constitution, laws and rules may limit the scope of
15 beneficiaries.
16 (c) Payment of funeral benefits, limitation.--A society may
17 make provision for the payment of funeral benefits to the extent
18 of such portion of any payment under a certificate as might
19 reasonably appear to be due to any person equitably entitled
20 thereto by reason of having incurred expense occasioned by the
21 burial of the member, provided the portion so paid shall not
22 exceed the sum of $1,000.
23 (d) Payment to personal representative.--If, at the death of
24 any member, there is no lawful beneficiary to whom the insurance
25 benefits shall be payable, the amount of such benefits, except
26 to the extent that funeral benefits may be paid as hereinbefore
27 provided, shall be payable to the personal representative of the
28 deceased member.
29 Section 305. Benefits not attachable.
30 No money or other benefit, charity, relief or aid to be paid,
19770H0207B1634 - 25 -
1 provided or rendered by any society, shall be liable to
2 attachment, garnishment or other process, or to be seized,
3 taken, appropriated or applied by any legal or equitable process
4 or operation of law to pay any debt or liability of a member or
5 beneficiary, or any other person who may have a right
6 thereunder, either before or after payment by the society.
7 Section 306. Contract for benefits.
8 (a) Materials forming contract.--Every society authorized to
9 do business in this Commonwealth shall issue a certificate to
10 the benefit member, or the spouse of a member, or to the
11 applicant for a juvenile, specifying the amount of benefits
12 provided thereby. The certificate, together with any riders or
13 endorsements attached thereto, the charter or articles of
14 incorporation, the constitution and laws of the society, the
15 application for benefits and declaration of insurability, if
16 any, signed by the applicant, and all amendments to each
17 thereof, shall constitute the agreement, as of the date of
18 issuance, between the society and the member, and the
19 certificate shall so state. A copy of the application for
20 benefits and of the declaration of insurability, if any, shall
21 be endorsed upon or attached to the certificate.
22 (b) Statements and waiver.--All statements purporting to be
23 made by the member shall be representations and not warranties.
24 Any waiver of this provision shall be void.
25 (c) Amendments to bind.--Any changes, additions or
26 amendments to the charter or articles of incorporation,
27 constitution or laws duly made or enacted subsequent to the
28 issuance of the certificate, shall bind the member and the
29 beneficiaries, and shall govern and control the agreement in all
30 respects the same as though such changes, additions or
19770H0207B1634 - 26 -
1 amendments had been made prior to and were in force at the time
2 of the application for membership, except that no change,
3 addition or amendment shall destroy or diminish benefits which
4 the society contracted to give the member as of the date of
5 issuance.
6 (d) Responsibility of society members for deficiency.--Every
7 society shall contain in its laws and in each certificate of
8 life insurance it issues, a provision, to which every
9 certificate of insurance issued by the society shall be subject,
10 that if the financial position of the society becomes impaired,
11 subject to the prior written approval of the commissioner, the
12 board of directors or the supreme governing body may determine
13 on an equitable basis the proportionate share of the deficiency
14 of each member of the society. Each benefit member may then
15 either pay his share of the deficiency, or accept the imposition
16 of a lien on the certificate of insurance, to bear interest at
17 the rate charged on policy loans under the certificate, if
18 applicable, otherwise at a rate approved by the commissioner,
19 compounded annually until paid, or may accept a proportionate
20 reduction in benefits under his certificate. The society may
21 specify the manner of the election and which alternative is to
22 be presumed if no election is made, subject to the prior written
23 approval of the commissioner in the case of domestic societies.
24 CHAPTER 4
25 CERTIFICATES
26 Section 401. Approval of certificates.
27 (a) Submission to and approval by commissioner.--It shall be
28 unlawful for any fraternal benefit society doing business in
29 this Commonwealth to issue, sell, or dispose of any certificate,
30 covering life, health, accident, or contracts pertaining to pure
19770H0207B1634 - 27 -
1 endowments or annuities, or any other contracts of insurance, or
2 use applications, riders, or endorsements, in connection
3 therewith, until the forms of the same have been submitted to
4 and formally approved by the commissioner, and copies filed in
5 the Insurance Department: Provided, That riders and endorsements
6 relating to the manner of distribution of benefits, and to the
7 reservation of rights and benefits under any such certificate,
8 and used at the request of the individual certificate holder,
9 and any forms which, in the opinion of the commissioner, do not
10 require his approval need not be filed with the Insurance
11 Department.
12 (b) Approval after thirty days.--Forms so filed shall be
13 deemed approved at the expiration of 30 days after filing,
14 unless earlier approved or disapproved by the Commissioner of
15 Insurance. The commissioner, by written notice to the society
16 may, within such 30 day period, extend the period for approval
17 or disapproval for an additional 30 days.
18 (c) Approval void on disapproval.--Such approval shall
19 become void upon any subsequent notice of disapproval from the
20 commissioner, or upon any subsequent withdrawal of license or
21 refusal of the commissioner to relicense any such fraternal
22 benefit society, or upon the subsequent passage of an act which
23 would no longer make such contracts or related forms a fit
24 subject for approval, except that this provision shall not
25 affect contracts issued prior thereto.
26 (d) Notification of disapproval.--Upon any disapproval, the
27 commissioner shall notify the society in writing, specifying the
28 reason for such disapproval; and within 30 days from the date of
29 mailing of such notice to the society, such society may make
30 written application to the commissioner for a hearing thereon.
19770H0207B1634 - 28 -
1 The hearing shall be held within 30 days after receipt of the
2 application. The procedure before the commissioner shall be in
3 accordance with the adjudication procedure set forth in the act
4 of June 4, 1945 (P.L.1388, No.442), known as the "Administrative
5 Agency Law," and the society shall be entitled to the judicial
6 review as provided for by law.
7 (e) Penalty for violations.--Any person, corporation, order,
8 or society that shall, either as principal, or agent, issue, or
9 cause to be issued, any certificate or contract of insurance
10 within the Commonwealth, contrary to this section, shall be
11 guilty of a misdemeanor of the third degree, and, upon
12 conviction thereof, shall be sentenced to pay a fine not
13 exceeding $2,500.
14 (f) Additional sanctions.--Upon satisfactory evidence of the
15 violation of this section by any such person, corporation,
16 order, or society, the commissioner may, in his discretion,
17 pursue any one or more of the following courses of action:
18 (1) Suspend or revoke the license of such offending
19 person, corporation, order, or society.
20 (2) Refuse, for a period of not to exceed one year
21 thereafter, to issue a new license to such person,
22 corporation, order, or society.
23 (3) Impose a fine of not more than $1,000 for each and
24 every act in violation of this act.
25 When the commissioner shall take action in any of the ways above
26 recited, the person, corporation, order, or society aggrieved
27 may appeal to the Commonwealth Court of Pennsylvania.
28 Section 402. Certificate provisions required.
29 The certificate shall contain in substance the standard
30 provisions set forth in sections 403 to 412 or, in lieu thereof
19770H0207B1634 - 29 -
1 provisions which are more favorable to the member. Any of the
2 mandated provisions or portions thereof not applicable by reason
3 of the plan of insurance or because the certificate is an
4 annuity certificate may, to the extent inapplicable, be omitted
5 from the certificate.
6 Section 403. Statement of title and premiums.
7 There shall appear on the face of the filing page of the
8 certificate a statement of the title of the certificate and a
9 brief description which clearly and correctly describes its form
10 and identifies the insurer as a member of a fraternal benefit
11 society. There shall also appear a provision stating the amount
12 of premiums, dues or other required contributions, by whatever
13 name known, which are payable by the insured under the
14 certificate.
15 Section 404. Grace period of certificate.
16 There shall be a provision that the member is entitled to a
17 grace period of not less than a full month (or 30 days at the
18 option of the society) in which the payment of any premium after
19 the first, may be made. During the grace period the certificate
20 shall continue in full force and effect, but in case the
21 certificate becomes a claim during the grace period before the
22 overdue payment is made, the amount of the overdue payment or
23 payments may be deducted in any settlement under the
24 certificate.
25 Section 405. Reinstatement.
26 There shall be a provision that the member shall be entitled
27 to have the certificate reinstated at any time within three
28 years from the due date of the premium in default, unless the
29 certificate has been completely terminated through the
30 application of a nonforfeiture benefit, cash surrender value or
19770H0207B1634 - 30 -
1 certificate loan, upon the production of evidence of
2 insurability satisfactory to the society and the payment of all
3 overdue premiums and any other indebtedness to the society upon
4 the certificate, together with interest on such premiums and
5 such indebtedness, if any, at a rate not exceeding 6% per annum
6 compounded annually.
7 Section 406. Default.
8 (a) Society to grant paid-up nonforfeiture benefit.--Except
9 in the case of pure endowment, annuity or reversionary annuity
10 contracts, reducing term insurance contracts, or contracts of
11 term insurance of uniform amount of 15 years or less expiring
12 before age 66, there shall be a provision that, in the event of
13 default in payment of any premium after three full years
14 premiums have been paid or after premiums for a lesser period
15 have been paid if the contract so provides, the society will
16 grant, upon proper request not later than 60 days after the due
17 date of the premium in default, a paid-up nonforfeiture benefit
18 on the plan stipulated in the certificate, effective as of such
19 due date, of such value as specified in this act.
20 (b) Optional payment provisions.--The certificate may
21 provide, if the society's laws so specify, and if the member
22 shall so elect prior to the expiration of the grace period of
23 any overdue premium, that default shall not occur so long as
24 premiums can be paid under the provisions of an arrangement for
25 automatic premium loan as may be set forth in the certificate.
26 (c) Member may elect different paid-up nonforfeiture
27 benefit.--There shall be a statement that one paid-up
28 nonforfeiture benefit as specified in the certificate shall
29 become effective automatically unless the member elects another
30 available paid-up nonforfeiture benefit, not later than 60 days
19770H0207B1634 - 31 -
1 after the due date of the premium in default.
2 (d) Section not to apply.--The provisions of this section
3 shall not apply in the case of pure endowment, annuity or
4 reversionary annuity contracts, reducing term insurance
5 contracts, or contracts of term insurance of uniform amount of
6 15 years or less expiring before age 66.
7 Section 407. Tables.
8 (a) Mortality table and interest rate.--There shall be a
9 statement of the mortality table and rate of interest used in
10 determining all paid-up nonforfeiture benefits and cash
11 surrender options available under the certificate, and a brief
12 general description of the method used in calculating such
13 benefits.
14 (b) Table of certain values.--There shall be a table showing
15 in figures the value of every paid-up nonforfeiture benefit and
16 cash surrender option available under the certificate for each
17 certificate anniversary either during the first 20 certificate
18 years or during the term of the certificate whichever is
19 shorter.
20 Section 408. Contestability of certificate.
21 (a) Incontestable after two years.--A provision that the
22 certificate shall be incontestable after it has been in force
23 during the lifetime of the member for a period of two years from
24 its date of issue except for nonpayment of premiums. At the
25 option of the society, supplemental provisions relating to
26 waiver of premium and provisions which grant additional
27 insurance specifically against death by accident may also be
28 excepted.
29 (b) Contestability on reinstatement.--The certificate may
30 provide, as to statements made to procure reinstatement, that
19770H0207B1634 - 32 -
1 the society shall have the right to contest a reinstated
2 certificate within a period of two years from date of
3 reinstatement based on the information in the reinstatement
4 application.
5 Section 409. Redetermination of premiums in certain
6 circumstances.
7 There shall be a provision that in case the age or sex of the
8 member or of any other person is considered in determining the
9 premium and it is found at any time before final settlement
10 under the certificate that the age or sex has been misstated,
11 and the discrepancy and premium involved have not been adjusted,
12 the amount payable under the certificate shall be such as the
13 premium would have purchased at the correct age and sex. If the
14 correct age was not an insurable age under the society's charter
15 or laws, only the premiums paid to the society, less any
16 payments previously made to the member, shall be returned or, at
17 the option of the society, the amount payable under the
18 certificate shall be such as the premium would have purchased at
19 the correct age according to the society's promulgated rates and
20 any extension thereof based on actuarial principles.
21 Section 410. Right to maintain insurance.
22 There shall be a statement that any benefit member expelled
23 or suspended, except for nonpayment of a premium or within the
24 contestable period for material misrepresentations in such
25 member's application for membership shall have the privilege of
26 maintaining his insurance in force by continuing payment of the
27 required premium.
28 Section 411. Surplus.
29 (a) Right to surplus.--There shall be a provision that the
30 certificate shall participate in the surplus of the society, and
19770H0207B1634 - 33 -
1 that, beginning not later than the end of the third certificate
2 year, the society will annually determine the portion of the
3 divisible surplus accruing on the certificate, and that the
4 member entitled to elect such option shall have the right to
5 have the dividend arising from such participation paid in cash,
6 or applied in accordance with any one of such other dividend
7 options as may be provided by the certificate. If any such other
8 dividend options are provided, the certificate shall further
9 state which option shall be automatically effective, if such
10 member shall not have elected some other option.
11 (b) Optional surplus provision.--The certificate may contain
12 a provision that the certificate shall participate in the
13 surplus of the society, and that, beginning not later than the
14 end of the fifth certificate year, the society will determine
15 the portion of the divisible surplus accruing on the
16 certificate, and that the member entitled thereto shall have the
17 right to have the current dividend arising from such
18 participation paid in cash, and that, at periods of not more
19 than five years thereafter, such apportionment and payment, at
20 the option of such member, shall be had.
21 (c) Surplus on term certificates.--Renewable term
22 certificates of ten years or less may provide that the surplus
23 accruing to such certificates shall be determined and
24 apportioned each year after the second certificate year, and
25 accumulated during each renewal period, and that at the end of
26 any renewal period, or renewal of the certificate by the member,
27 the society shall apply the accumulated surplus as an annuity
28 for the next succeeding renewal term in the reduction of
29 premiums.
30 Section 412. Loan value of certificate.
19770H0207B1634 - 34 -
1 There shall be a provision for a loan value at any time after
2 three full years' premiums have been paid and while no premium
3 is in default beyond the grace period of payment.
4 In the case of any certificate issued on or after the
5 effective date of this act, the loan provision shall provide
6 that the society will advance, on proper assignment or pledge of
7 the certificate, and on the sole security thereof, at a
8 specified rate of interest, a sum equal to, or at the option of
9 the member entitled thereto, less than, the cash surrender value
10 at the end of the current certificate year as required by
11 section 302 and that the society may deduct from such loan value
12 (in addition to any indebtedness deducted in determining such
13 value) any unpaid balance of the premium for the current
14 certificate year, and may collect interest in advance on the
15 loan to the end of the current certificate year. The society
16 shall reserve the right to defer such loan, except any made to
17 pay premiums to the society, for 60 days after application
18 therefore is made. This section shall not apply to term
19 insurance.
20 Section 413. Prohibited provisions.
21 On and after the effective date of this act, no life benefit
22 certificate shall be delivered or issued for delivery in this
23 Commonwealth containing in substance any of the following
24 provisions:
25 (1) Any provision limiting the time within which any
26 action at law or in equity may be commenced to less than two
27 years after the cause of action shall accrue.
28 (2) Any provision by which the certificate shall purport
29 to be issued or to take effect more than six months before
30 the original application for the certificate was made, except
19770H0207B1634 - 35 -
1 in case of transfer from one form of certificate to another
2 in connection with which the member is to receive credit for
3 any reserve accumulation under the form of certificate from
4 which the transfer is made.
5 (3) Any provision for forfeiture of the certificate for
6 failure to repay any loan thereon or to pay interest on such
7 loan while the total indebtedness, including interest, is
8 less than the loan value of the certificate.
9 CHAPTER 5
10 ACCIDENT AND HEALTH INSURANCE AND TOTAL AND
11 PERMANENT DISABILITY INSURANCE CERTIFICATES
12 Section 501. Commissioner to regulate.
13 The commissioner shall have power, from time to time, to
14 make, alter and supersede reasonable regulations prescribing the
15 required, optional and prohibited provisions in accident and
16 health insurance contracts and in total and permanent disability
17 insurance contracts, and the regulations shall conform, as far
18 as practicable, to sections 502 to 527.
19 Section 502. Filing with and approval of contracts by
20 commissioner.
21 No certificate of insurance against loss from sickness, or
22 loss or damage from bodily injury or death of the insured by
23 accident, shall be issued or delivered by any society,
24 association or exchange issuing such certificate, to any person
25 in this Commonwealth until a copy of the form thereof, and of
26 the classification of risks and the dues, premiums, or other
27 required contribution pertaining thereto, have been filed with
28 and formally approved by the commissioner. If the commissioner
29 shall notify in writing the society which has filed such form
30 that it does not comply with the requirements of law specifying
19770H0207B1634 - 36 -
1 the reason for his opinion, it shall be unlawful for any such
2 society to issue any certificate in such form. The action of the
3 commissioner in this regard shall be subject to review by the
4 Commonwealth Court.
5 Section 503. Conditions for certificates.
6 (a) General conditions.--No such certificate shall be
7 delivered or issued for delivery to any person in this
8 Commonwealth unless all of the following conditions are met:
9 (1) The entire money and other considerations therefore
10 are expressed within the certificate.
11 (2) The time at which the insurance takes effect and
12 terminates is expressed within the certificate.
13 (3) It purports to insure only one person, except that a
14 policy may insure, originally or by subsequent amendment,
15 upon the application of an adult head of a family who shall
16 be deemed the certificate holder, any two or more eligible
17 members of that family, including husband, wife, dependent
18 children or any children under a specified age which shall
19 not exceed 19 years and any other person dependent upon the
20 certificate holder.
21 (4) The style, arrangement and overall appearance of the
22 certificate gives no undue prominence to any portion of the
23 text, and every printed portion of the text of the
24 certificate and of any endorsements or attached papers is
25 plainly printed in light faced type of a style in general
26 use, the size of which type shall be uniform and not less
27 than ten-point with a lower case unspaced alphabet length not
28 less than 120 point (the "text" shall include all printed
29 matter except the name and address of the society, name or
30 title of the certificate, the brief description, if any, and
19770H0207B1634 - 37 -
1 captions and subcaptions).
2 (5) The exceptions and reductions of indemnity are set
3 forth in the certificate and, except those which are set
4 forth in this chapter, are printed, at the society's option,
5 either included with the benefit provision to which they
6 apply, or under an appropriate caption such as "exceptions,"
7 or "exceptions and reductions": Provided, That if an
8 exception or reduction specifically applies only to a
9 particular benefit of the certificate, a statement of such
10 exception or reduction shall be included with the benefit
11 provision to which it applies.
12 (6) Each such form including riders and endorsements,
13 shall be identified by a form number in the lower left-hand
14 corner of the first page thereof.
15 (7) It contains no provision purporting to make any
16 portion of the charter, rules, constitution, or bylaws of the
17 society a part of the policy unless such portion is set forth
18 in full in the policy, except in the case of the
19 incorporation of, or reference to, a statement of rates or
20 classification of risks, or short-rate table filed with the
21 commissioner.
22 (8) If such certificate is entitled or referred to as
23 "noncancellable," such noncancellable certificate is
24 automatically renewable until age 60 upon payment of the
25 required premiums by the insured.
26 (9) A certificate delivered or issued for delivery after
27 January 1, 1968 under which coverage of a dependent of a
28 certificate holder terminates at a specified age, shall, with
29 respect to an unmarried child covered by the certificate
30 prior to the attainment of the age of 19 who is incapable of
19770H0207B1634 - 38 -
1 self-sustaining employment by reason of mental retardation or
2 physical handicap and who became so incapable prior to
3 attainment of age 19 and who is chiefly dependent upon such
4 certificate holder for support and maintenance, not to <--
5 terminate while the certificate remains in force and the
6 dependent remains in such condition, if the certificate
7 holder has within 31 days of such dependent's attainment of
8 the limiting age submitted proof of such dependent's
9 incapacity as described herein. The foregoing provisions of
10 this paragraph shall not require a society to insure a
11 dependent who is a mentally retarded or physically
12 handicapped child where the certificate is underwritten on
13 evidence of insurability based on health factors set forth in
14 the application or where such dependent does not satisfy the
15 conditions of the certificate as to any requirement for
16 evidence of insurability or other provisions of the
17 certificate, satisfaction of which is required for coverage
18 thereunder to take effect. In any such case, the terms of the
19 certificate shall apply with regard to the coverage or
20 exclusion from coverage of such dependent.
21 (b) Nonresident members.--If any certificate is issued by a
22 society domiciled in this Commonwealth for delivery to a person
23 residing in another state, and if the official having
24 responsibility for the administration of the insurance laws of
25 such other state shall have advised the commissioner that any
26 such certificate is not subject to approval or disapproval by
27 such official, the commissioner may by ruling require that such
28 certificate meet the standards set forth in section 401 and this
29 chapter.
30 Section 504. Standard certificate provision for insurance for
19770H0207B1634 - 39 -
1 accident and health or for permanent and total
2 disability.
3 Except as provided in this act, each certificate delivered or
4 issued for delivery to any person in this Commonwealth shall
5 contain the provisions specified in sections 505 to 527 in the
6 words in which the same appear in this act: Provided, however,
7 That the society may, at its option, substitute for one or more
8 of such provisions corresponding provisions of different wording
9 approved by the commissioner which are in each instance not less
10 favorable in any respect to the benefit member or the
11 beneficiary. Such provisions shall be preceded individually by
12 the caption appearing in this section or, at the option of the
13 society, by such appropriate individual or group captions or
14 subcaptions as the commissioner may approve.
15 Section 505. Entire contract and changes.
16 There shall be a provision as follows:
17 Entire Contract; THIS CERTIFICATE INCLUDING THE SOCIETY'S <--
18 BYLAWS, THE ENDORSEMENTS, AND THE ATTACHED PAPERS CONSTITUTES
19 THE ENTIRE CONTRACT; Changes: This certificate, including the
20 endorsements and the attached papers, if any, constitutes the
21 entire contract of insurance. No change in this certificate
22 shall be valid until approved by an executive officer of the
23 society and unless such approval be endorsed hereon or attached
24 hereto. No agent has authority to change this certificate or to
25 waive any of its provisions.
26 Section 506. Time limits on certain defenses.
27 (a) Limitation.--There shall be a provision as follows:
28 Time Limit on Certain Defenses: After three years from the
29 date of issue of this certificate no misstatements, except
30 fraudulent misstatements, made by the applicant in the
19770H0207B1634 - 40 -
1 application for such certificate shall be used to void the
2 certificate or to deny a claim for loss incurred or disability
3 (as defined in the certificate) commencing after the expiration
4 of such three-year period.
5 (b) Nonapplicability.--The foregoing certificate provision
6 shall not be so construed as to affect any legal requirement for
7 avoidance of a certificate or denial of a claim during such
8 initial three-year period, nor to limit the application of
9 sections 505, 506, 507, 508 and 509 in the event of misstatement
10 with respect to age or occupation or other insurance.
11 (c) Optional language for weekly payment situations.--
12 (1) In a certificate where the dues, premiums or other
13 required contributions are payable weekly, the words "if such
14 application is made a part of the certificate" may be
15 inserted in the foregoing certificate provision between the
16 word "certificate" and the word "shall" immediately
17 following.
18 (2) In certificates whereon the dues, premiums, or the
19 required contributions are payable weekly, the words "or from
20 the date of any reinstatement thereof" may be inserted in the
21 foregoing certificate provision between the word
22 "certificate" and the word "shall" immediately following.
23 (d) Optional language where certificate member has power to
24 continue certificate.--A certificate which the benefit member
25 has the right to continue in force subject to its terms by the
26 timely payment of the dues, premium, or other required
27 contribution:
28 (1) until at least age 50; or
29 (2) in the case of a certificate issued after age 44,
30 for at least five years from its date of issue, may contain
19770H0207B1634 - 41 -
1 in lieu of the language in section 509(a) the following
2 provision (from which the clause in parentheses may be
3 omitted at the insurer's option) under the caption
4 "incontestable." After this certificate has been in force for
5 a period of three years during the lifetime of the benefit
6 member (excluding any period during which the benefit member
7 is disabled), it shall become incontestable as to the
8 statements contained in the application.
9 (e) Nondenial or reduction of certain claims prohibited.--No
10 claim for loss incurred or disability (as defined in the
11 certificate) commencing after three years from the date of issue
12 of this certificate shall be reduced or denied on the ground
13 that a disease or physical condition not excluded from coverage
14 by name or specific description effective on the date of loss
15 had existed prior to the effective date of coverage of this
16 certificate.
17 Section 507. Grace periods.
18 (a) Period established.--There shall be a grace period of
19 .......... (insert a number not less than "7" for weekly dues,
20 premium, or other required contribution certificates, "10" for
21 monthly dues, premium or other required contribution
22 certificates and "31" for all other certificates) days will be
23 granted for the payment of each dues, premium, or other required
24 contribution falling due after the first dues, premium, or other
25 required contribution during which grace period the certificate
26 shall continue in force.
27 (b) Optional language available.--A certificate which
28 contains a cancellation provision may add, at the end of the
29 provision, "subject to the right of the benefit member to cancel
30 in accordance with the cancellation provision hereof."
19770H0207B1634 - 42 -
1 (c) Language where society reserves certain rights.--A
2 certificate in which the society reserves the right to refuse
3 any renewal shall have, at the beginning of the provision set
4 forth in subsection (a), "unless not less than 30 days prior to
5 the dues, premium, or other required contribution due date the
6 society has delivered to the benefit member or has mailed to his
7 last address as shown by the records of the society written
8 notice of its intention not to renew this certificate beyond the
9 period for which the dues, premium, or other required
10 contribution has been accepted."
11 Section 508. Reinstatement.
12 There shall be a provision as follows:
13 Reinstatement: If any renewal dues, premium, or other
14 required contribution be not paid within the time granted the
15 society for payment, a subsequent acceptance of dues, premium,
16 or other required contribution by the society or by any agent
17 duly authorized by the society to accept such dues, premium, or
18 other required contribution without requiring in connection
19 therewith an application for reinstatement, shall reinstate the
20 certificate: Provided, however, That if the society or such
21 agent requires an application for reinstatement and issues a
22 conditional receipt for the dues, premium, or other required
23 contribution tendered, the certificate will be reinstated upon
24 approval of such application by the society, or, lacking such
25 approval, upon the forty-fifth day following the date of such
26 conditional receipt unless the society has previously notified
27 the benefit member in writing of its disapproval of such
28 application. The reinstated certificate shall cover only loss
29 resulting from such accidental injury as may be sustained after
30 the date of reinstatement and loss due to such sickness as may
19770H0207B1634 - 43 -
1 begin more than ten days after such date. In all other respects
2 the benefit member and society shall have the same rights
3 thereunder as they had under the certificate immediately before
4 the due date of the defaulted dues, premium, or other required
5 contribution subject to any provisions endorsed hereon or
6 attached hereto in connection with the reinstatement. Any dues,
7 premium, or other required contribution accepted in connection
8 with a reinstatement shall be applied to a period for which the
9 dues, premium, or other required contribution has not been
10 previously paid, but not to any period more than 60 days prior
11 to the date of reinstatement. The last sentence of the above
12 provision may be omitted:
13 (1) From any certificate which the benefit member has
14 the right to continue in force subject to its terms by the
15 timely payment of the dues, premiums, or other required
16 contributions:
17 (i) until at least age 50; or
18 (ii) in the case of a certificate issued after age
19 44, for at least five years from the date of its issue.
20 (2) From any certificate on which the dues, premiums, or
21 other required contributions are payable weekly.
22 Section 509. Written notice of claims.
23 (a) Notice of claim.--There shall be a provision as follows:
24 Notice of Claim: Written notice of claim must be given to the
25 society within 20 days after the occurrence or commencement of
26 any loss covered by the certificate, or as soon thereafter as is
27 reasonably possible. Notice given by or on behalf of the benefit
28 member or the beneficiary to the society at .......... (insert
29 the location of such office as the society may designate for the
30 purpose), or to any authorized agent of the society, with
19770H0207B1634 - 44 -
1 information sufficient to identify the benefit member, shall be
2 deemed notice to the society.
3 (b) Optional language for weekly payment insurance.--In a
4 certificate whereon the dues, premiums, or other required
5 contributions are payable weekly, the first sentence of the
6 foregoing certificate provision may read "written notice of
7 claim must be given to the society within 10 days of the
8 commencement of any nonhospital confining sickness covered by
9 the certificate and within 20 days after the occurrence or
10 commencement of any other loss covered by the certificate, or as
11 soon thereafter as is reasonably possible."
12 (c) Language in loss of time benefit insurance.--In a
13 certificate providing a loss of time benefit which may be
14 payable for at least two years, a society may, at its option,
15 insert the following between the first and second sentences of
16 the above provision: Subject to the qualifications set forth
17 below, if the benefit member suffers loss of time on account of
18 disability for which indemnity may be payable for at least two
19 years, he shall, at least once in every six months after having
20 given notice of claim, give to the society notice of continuance
21 of said disability, except in the event of legal incapacity. The
22 period of six months following any filing of proof by the
23 benefit member or any payment by the society on account of such
24 claim or any denial of liability in whole or in part by the
25 society shall be excluded in applying this provision. Delay in
26 the giving of such notice shall not impair the benefit member's
27 right to any indemnity which would otherwise have accrued during
28 the period of six months preceding the date on which such notice
29 is actually given.
30 Section 510. Forms for claims.
19770H0207B1634 - 45 -
1 There shall be a provision as follows:
2 Claim Forms: The society, upon receipt of a notice claim,
3 will furnish to the claimant such forms as are usually furnished
4 by it for filing proofs of loss. If such forms are not furnished
5 within 15 days after the giving of such notice, the claimant
6 shall be deemed to have complied with the requirements of this
7 certificate as to proof of loss upon submitting, within the time
8 fixed in the certificate for filing proofs of loss, written
9 proof covering the occurrence, the character and the extent of
10 the loss for which claim is made.
11 Section 511. Proofs of loss.
12 There shall be a provision as follows:
13 Proofs of Loss: Written proof of loss must be furnished to
14 the society at its said office in case of claim for loss for
15 which this certificate provides any periodic payment contingent
16 upon continuing loss within 90 days after the termination of the
17 period for which the society is liable and in case of claim for
18 any other loss within 90 days after the date of such loss.
19 Failure to furnish such proof within the time required shall not
20 invalidate nor reduce any claim if it was not reasonably
21 possible to give proof within such time, provided such proof is
22 furnished as soon as reasonably possible and in no event, except
23 in the absence of legal capacity, later than one year from the
24 time proof is otherwise required.
25 Section 512. Time of payment of claims.
26 There shall be a provision as follows:
27 Time of Payment of Claims: Indemnities payable under this
28 certificate for any loss other than loss for which this
29 certificate provides any periodic payment will be paid
30 immediately upon receipt of due written proof of such loss.
19770H0207B1634 - 46 -
1 Subject to due written proof of loss, all accrued indemnities
2 for loss for which this certificate provides periodic payment
3 will be paid .......... (insert period for payment which must
4 not be less frequently than monthly) and any balance remaining
5 unpaid upon the termination of liability will be paid
6 immediately upon receipt of due written proof.
7 Section 513. Payment of claims.
8 (a) Basic clause.--There shall be a provision as follows:
9 Payment of Claims: Indemnity for loss of life will be payable
10 in accordance with the beneficiary designation and the
11 provisions respecting such payment which may be prescribed
12 herein and effective at the time of payment. If no such
13 designation or provision is then effective, such indemnity shall
14 be payable to the estate of the insured. Any other accrued
15 indemnities unpaid at the benefit member's death may, at the
16 option of the society, be paid either to such beneficiary or to
17 such estate, all other indemnities will be payable to the
18 benefit member.
19 (b) Optional language available to society.--The following
20 provisions, or either of them may be included with the foregoing
21 provision at the option of the society:
22 (1) If any indemnity of this certificate shall be
23 payable to the estate of the benefit member, or to a benefit
24 member or beneficiary who is a minor or otherwise not
25 competent to give a valid release, the society may pay such
26 indemnity, up to an amount not exceeding $ .......... (insert
27 an amount which shall not exceed $1,000), to any relative by
28 blood or connection by marriage of the benefit member or
29 beneficiary who is deemed by the society to be equitably
30 entitled thereto. Any payment made by the society in good
19770H0207B1634 - 47 -
1 faith pursuant to this provision shall fully discharge the
2 society to the extent of such payment.
3 (2) Subject to any written direction of the benefit
4 member in the application or otherwise, all or a portion of
5 any indemnities provided by this certificate on account of
6 hospital, nursing, medical, or surgical services may, at the
7 society's option and, unless the benefit member requests
8 otherwise in writing, not later than the time of filing
9 proofs of such loss, be paid directly to the hospital or
10 person rendering such services; but it is not required that
11 the service be rendered by a particular hospital or person.
12 Section 514. Physical examinations and autopsy.
13 There shall be a provision as follows:
14 Physical Examinations and Autopsy: The society at its own
15 expense shall have the right and opportunity to examine the
16 person of the benefit member when and as often as it may
17 reasonably require during the pendency of a claim hereunder and
18 to make an autopsy in case of death where it is not forbidden by
19 law.
20 Section 515. Legal actions.
21 There shall be a provision relating to legal actions as
22 follows:
23 Legal Actions: No action at law or in equity shall be brought
24 to recover on this certificate prior to the expiration of 60
25 days after written proof of loss has been furnished in
26 accordance with the requirements of this certificate. No such
27 action shall be brought after the expiration of three years
28 after the time written proof of loss is required to be
29 furnished.
30 Section 516. Change of beneficiary.
19770H0207B1634 - 48 -
1 There shall be a provision as follows:
2 Change of Beneficiary: Unless the benefit member makes an
3 irrevocable designation of beneficiary, the right to change of
4 beneficiary is reserved to the benefit member and the consent of
5 the beneficiary or beneficiaries shall not be requisite to
6 surrender or assignment of this certificate or to any change of
7 beneficiary or beneficiaries, or to any other changes in this
8 certificate. The first clause of this provision, relating to the
9 irrevocable designation of beneficiary, may be omitted at the
10 society's option.
11 Section 517. Change of occupation.
12 There shall be a provision as follows:
13 Change of Occupation: If the benefit member be injured or
14 contract sickness after having changed his occupation to one
15 classified by the society as more hazardous than that stated in
16 this certificate or while doing for compensation anything
17 pertaining to an occupation so classified, the society will pay
18 only such portion of the indemnities provided in this
19 certificate as the dues, premiums, or other required
20 contributions paid would have purchased at the rates and within
21 the limits fixed by the society for such more hazardous
22 occupation. If the benefit member changes his occupation to one
23 classified by the society as less hazardous than that stated in
24 this certificate, the society, upon receipt of proof of such
25 change of occupation, will reduce the dues, premiums, or other
26 required contributions accordingly, and will return the excess
27 pro rata unearned dues, premiums, or other required
28 contributions from the date of change of occupation or from the
29 certificate anniversary date immediately preceding receipt of
30 such proof, whichever is the more recent. In applying this
19770H0207B1634 - 49 -
1 provision, the classification of occupational risk and the dues,
2 premiums, or other required contributions shall be such as have
3 been last filed by the society prior to the occurrence of the
4 loss for which the society is liable or prior to date of proof
5 of change in occupation with the state official having
6 supervision of insurance in the state where the benefit member
7 resided at the time this certificate was issued; but if such
8 filing was not required, then the classification of occupational
9 risk and the dues, premiums, or other required contributions
10 shall be those last made effective by the society in such state
11 prior to the occurrence of the loss or prior to the date of
12 proof of change in occupation.
13 Section 518. Misstatement of age.
14 There shall be a provision as follows:
15 Misstatement of Age: If the age of the benefit member has
16 been misstated, all amounts payable under this certificate shall
17 be such as the dues, premiums, or other required contributions
18 paid would have purchased at the correct age.
19 Section 519. Other insurance in this society.
20 There shall be a provision as follows:
21 Other Insurance in This Society: If an accident or sickness
22 or accident and sickness certificate or certificates previously
23 issued by the society to the benefit member be in force
24 concurrently herewith, making the aggregate indemnity for
25 .......... (insert type of coverage or coverages) in excess of
26 $ .......... (insert maximum limit of indemnity or indemnities),
27 the excess insurance shall be void and all dues, premiums, or
28 other required contributions paid for such excess shall be
29 returned to the benefit member or to his estate or, in lieu
30 thereof, insurance effective at any one time on the benefit
19770H0207B1634 - 50 -
1 member under a like certificate or certificates in this society
2 is limited to the one such certificate elected by the benefit
3 member, his beneficiary or his estate, as the case may be, and
4 the society will return all dues, premiums, or other required
5 contributions paid for all other such certificates.
6 Section 520. Insurance with other benefit members.
7 (a) Coverage outside of issuing society.--There shall be a
8 provision as follows:
9 Insurance with Other Benefit Members: If there be other valid
10 coverage, not with this society, providing benefits for the same
11 loss on a provision of service basis or on an expense incurred
12 basis and of which this society has not been given written
13 notice prior to the occurrence or commencement of loss, the only
14 liability under any expense incurred coverage of this
15 certificate shall be for such proportion of the loss of the
16 amount which would otherwise have been payable hereunder plus
17 the total of the like amounts under all such other valid
18 coverages for the same loss of which this society had notice
19 bears to the total like amounts under all valid coverages for
20 such loss, and for the return of such portion of the dues,
21 premiums, or other required contributions paid as shall exceed
22 the pro rata portion for the amount so determined. For the
23 purpose of applying this provision when other coverage is on a
24 provision of service basis, the "like amount" of such other
25 coverage shall be taken as the amount which the services
26 rendered would have cost in the absence of such coverage.
27 (b) Caption change in certain circumstances.--If the
28 foregoing certificate provision is included in a certificate
29 which also contains the certificate provision, set forth in
30 section 521, there shall be added to the caption of the
19770H0207B1634 - 51 -
1 foregoing provision the phrase "... Expense Incurred Benefits."
2 The society may, at its option, include in this provision a
3 definition of "other valid coverage," approved as to form by the
4 commissioner, which definition shall be limited in subject
5 matter to coverage provided by organizations subject to
6 regulation by insurance law or by insurance authorities of this
7 or any other state of the United States or any province of
8 Canada, and by hospital or medical service organizations, and to
9 any other coverage the inclusion of which may be approved by the
10 commissioner. In the absence of such definition, such term shall
11 not include group insurance, or coverage provided by hospital or
12 medical service organizations or by union welfare plans or
13 employer or employee benefit organizations. For the purpose of
14 applying the foregoing certificate provision with respect to any
15 benefit member, any amount of benefit provided for such benefit
16 member pursuant to any compulsory benefit statute (including any
17 workmen's compensation or employers' liability statute), whether
18 provided by a governmental agency or otherwise, shall in all
19 cases be deemed to be "other valid coverage" of which the
20 society has had notice. In applying the foregoing certificate
21 provision, no third party liability coverage shall be included
22 as "other valid coverage."
23 Section 521. Insurance with other societies.
24 (a) Valid coverage with other benefit societies.--There
25 shall be a provision as follows:
26 Insurance with Other Societies: If there be other valid
27 coverage, not with this society, providing benefits for the same
28 loss on other than an expense incurred basis and of which this
29 society has not been given written notice prior to the
30 occurrence or commencement of loss, the only liability for such
19770H0207B1634 - 52 -
1 benefits under this certificate shall be for such proportion of
2 the indemnities otherwise provided hereunder for such loss as
3 the like indemnities of which the society had notice (including
4 the indemnities under this certificate) bear to the total amount
5 of all like indemnities for such loss, and for the return of
6 such portion of the dues, premiums, or other required
7 contributions paid as shall exceed the pro rata portion for the
8 indemnities thus determined.
9 (b) Additional caption changes available.--If the foregoing
10 certificate provision is included in a certificate which also
11 contains the certificate provision set forth in section 520,
12 there shall be added to the caption of the foregoing provision
13 the phrase "... other benefits." The society may, at its option,
14 include in this provision a definition of "other valid
15 coverage," approved as to form by the commissioner, which
16 definition shall be limited subject matter to coverage provided
17 by organizations subject to regulation by insurance law or by
18 insurance authorities of this or any other state of the United
19 States or any province of Canada, and to any other coverage the
20 inclusion of which may be approved by the commissioner. In the
21 absence of such definition, such term shall not include group
22 insurance, or benefits provided by union welfare plans or by
23 employer or employee benefit organizations. For the purpose of
24 applying the foregoing certificate provision with respect to any
25 benefit member, any amount of benefit provided for such insured
26 pursuant to any compulsory benefit statute (including any
27 workmen's compensation or employer's liability statute), whether
28 provided by a governmental agency or otherwise, shall in all
29 cases be deemed to be "other valid coverage" of which the
30 society has had notice. In applying the foregoing certificate
19770H0207B1634 - 53 -
1 provision, no third party liability coverage shall be included
2 as "other valid coverage."
3 Section 522. Relation of earnings to insurance.
4 (a) Reduction of payments to rates with earnings.--There
5 shall be a provision as follows:
6 Relation of Earnings to Insurance: If the total monthly
7 amount of loss of time benefits promised for the same loss under
8 all valid loss of time coverage upon the benefit member, whether
9 payable on a weekly or monthly basis, shall exceed the monthly
10 earnings for the period of two years immediately preceding a
11 disability for which claim is made, whichever is the greater,
12 the society will be liable only for such proportionate amount of
13 such benefits under this certificate as the amount of such
14 monthly earnings or such average monthly earnings of the benefit
15 member bears to the total amount of monthly benefits for the
16 same loss under all such coverage upon the benefit member at the
17 time such disability commences and for the return of such part
18 of the dues, premiums, or other required contributions paid
19 during such two years as shall exceed the pro rata amount of the
20 dues, premiums, or other required contributions for the benefits
21 actually paid hereunder; but this shall not operate to reduce
22 the total monthly amount of benefits payable under all such
23 coverage upon the benefit member below the sum of $200 or the
24 sum of the monthly benefits specified in such coverages,
25 whichever is the lesser, nor shall it operate to reduce benefits
26 other than those payable for loss of time.
27 (b) Limited use of provision.--The foregoing certificate
28 provision may be inserted only in a certificate which the
29 benefit member has the right to continue in force subject to its
30 terms by the timely payment of dues, premiums, or other required
19770H0207B1634 - 54 -
1 contributions:
2 (1) until at least age 50; or
3 (2) in the case of a certificate issued after age 44,
4 for at least five years from its date of issue.
5 The society may, at its option, include in this provision a
6 definition of "valid loss of time coverage," approved as to form
7 by the commissioner, which definition shall be limited in
8 subject matter to coverage provided by governmental agencies or
9 by organizations subject to regulation by insurance law or by
10 insurance authorities of this or any other state of the United
11 States or any province of Canada, or to any other coverage, the
12 inclusion of which may be approved by the commissioner, or any
13 combination of such coverages. In the absence of such
14 definition, such term shall not include any coverage provided
15 for such benefit member pursuant to any compulsory benefit
16 statute (including any workmen's compensation or employer's
17 liability statute), or benefits provided by union welfare plans
18 or by employer or employee benefit organizations.
19 Section 523. Nonpayment of premiums.
20 There shall be a provision as follows:
21 Unpaid Dues, Premiums, or Other Required Contributions: Upon
22 the payment of a claim under this certificate, any dues,
23 premiums, or other required contributions then due and unpaid or
24 covered by any note or written order may be deducted therefrom.
25 Section 524. Cancellation.
26 There shall be a provision as follows:
27 Cancellation: The society may cancel this certificate at any
28 time by written notice delivered to the benefit member or mailed
29 to his last address as shown by the records of the society,
30 stating when, not less than 30 days thereafter, such
19770H0207B1634 - 55 -
1 cancellation shall be effective; and after the certificate has
2 been continued beyond its original term, the benefit member may
3 cancel this certificate at any time by written notice delivered
4 or mailed to the society, effective upon receipt or on such
5 later date as may be specified in such notice. In the event of
6 cancellation, the society will return promptly the unearned
7 portion of any dues, premiums, or other required contributions
8 paid. If the benefit member cancels, the unearned dues,
9 premiums, or other required contributions shall be computed by
10 the use of the short rate table last filed with the state
11 official having supervision of insurance in the state where the
12 benefit member resided when the certificate was issued. If the
13 society cancels, the earned dues, premiums, or other required
14 contributions shall be computed pro rata. Cancellation shall be
15 without prejudice to any claim originating prior to the
16 effective date of cancellation.
17 Section 525. Conformity of provisions with state statutes.
18 There shall be a provision as follows:
19 Conformity with State Statutes: Any provision of this
20 certificate which, on its effective date, is in conflict with
21 the statutes of the state in which the benefit member resides on
22 such date, is hereby amended to conform to the minimum
23 requirements of such statutes.
24 Section 526. Illegal occupation.
25 There shall be a provision as follows:
26 Illegal Occupation: The society shall not be liable for any
27 loss to which a contributing cause was the benefit member's
28 commission of or attempt to commit a felony, or to which a
29 contributing cause was the benefit member's being engaged in an
30 illegal occupation.
19770H0207B1634 - 56 -
1 Section 527. Intoxicants and narcotics.
2 There shall be a provision as follows:
3 Intoxicants and Narcotics: The society shall not be liable
4 for any loss sustained or contracted in consequence of the
5 benefit member's being intoxicated, or under the influence of
6 any narcotic unless administered on the advice of a physician.
7 Section 528. Provisions not applicable in certain
8 circumstances.
9 If any provision of this chapter is in whole or in part
10 inapplicable to or inconsistent with the coverage provided by a
11 particular form of certificate, the society, with the approval
12 of the commissioner, shall omit from such certificate any
13 inapplicable provision or part of a provision, and shall modify
14 any inconsistent provision or part of the provision in such
15 manner as to make the provision as contained in the certificate
16 consistent with the coverage provided by the certificate.
17 Section 529. Printed order of certain certificate provisions.
18 The provisions which are the subject of this chapter or any
19 corresponding provisions which are used in lieu thereof in
20 accordance with such chapter, shall be printed in the
21 consecutive order of the provisions in such chapter or, at the
22 option of the society, any such provision may appear as a unit
23 in any part of the certificate, with other provisions to which
24 it may be logically related, provided the resulting certificate
25 shall not be in whole or in part unintelligible, uncertain,
26 ambiguous, abstruse, or likely to mislead a person to whom the
27 certificate is offered, delivered or issued.
28 Section 530. Third party ownership.
29 The word "benefit member," as used in this act, shall not be
30 construed as preventing a person other than the benefit member
19770H0207B1634 - 57 -
1 with a proper insurable interest from making application for and
2 owning a certificate covering the benefit member or from being
3 entitled under such a certificate to any indemnities, benefits
4 and rights provided therein.
5 Section 531. Filing procedure.
6 The commissioner may make such reasonable rules and
7 regulations concerning the procedure for the filing or
8 submission of certificates subject to this act as are necessary,
9 proper or advisable to the administration of this act. This
10 provision shall not abridge any other authority granted the
11 commissioner by law. Where the Commissioner of Insurance deems
12 inapplicable, either in part or in their entirety, the
13 provisions of the foregoing sections, he may prescribe the
14 portions or summary thereof of the contract to be printed on the
15 certificate issued to the member.
16 CHAPTER 6
17 LICENSES, FEES AND ADDITIONAL POWERS FOR THE COMMISSIONER
18 Section 601. Annual license.
19 Societies which are now authorized to transact business in
20 this Commonwealth may continue such business until the first day
21 of April next succeeding the effective date of this act. The
22 authority of such societies and all societies hereafter
23 licensed, may thereafter be renewed annually, but in all cases
24 to terminate on the first day of the succeeding April. However,
25 a license so issued shall continue in full force and effect
26 until the new license be issued or specifically refused. A duly
27 certified copy or duplicate of such license shall be prima facie
28 evidence that the licensee is a fraternal benefit society within
29 the meaning of this act.
30 Section 602. Fees.
19770H0207B1634 - 58 -
1 The Insurance Commissioner shall charge and collect fees as
2 follows:
3 (1) Filing copy of charter of a domestic, foreign or
4 alien society, in addition to any fee for filing such charter
5 with the Department of State is $25.
6 (2) The filing of an annual or other statement is $40.
7 (3) License to society, or certified copy, or duplicate
8 thereof is $5.
9 (4) Each listing for written examination of an applicant
10 for license as an agent is $10.
11 (5) Each applicant for such licenses for which an
12 examination is not required is $5.
13 (6) Agent's license for each domestic or foreign
14 society, for life and/or accident and health lines,
15 regardless of the number of powers, excepting variable
16 annuities, for which licensed is $5.
17 All of the said agents' license fees shall be paid in full at
18 time of issuance of license and shall not be apportioned pro
19 ratably over the initial license period.
20 (7) Each copy of any paper filed in the department, 25¢
21 per page and $2 for certifying the same.
22 (8) Any other certificate required is $2.
23 (9) Making examinations, the expense of the examination.
24 (10) Filing and reviewing agreements of merger of
25 domestic, foreign and alien societies, $50 for the first two
26 societies involved and $10 for each additional society.
27 (11) Filing and review of a plan of conversion from a
28 fraternal benefit society to a mutual company and for filing
29 each amendment to registration statement is $50.
30 (12) For issuing a certificate of compliance, deposit or
19770H0207B1634 - 59 -
1 surety, or any other certificate required to be issued by the
2 department, $5 for each certificate.
3 (13) Filing and review of qualification of a society to
4 issue variable annuities is $100.
5 (14) Certification of an agent's license, or for
6 duplicate or replacement licenses is $5.
7 (15) Any other certificate issued by the division of
8 agents is $5.
9 (16) Each renewal of license as an individual agent is
10 $5.
11 (17) Each additional variable annuity power in such
12 license is $5.
13 All fees collected shall be paid daily into the State
14 Treasury.
15 Section 603. Foreign society.
16 (a) License required.--No foreign or alien society shall
17 transact business in this Commonwealth without a license issued
18 by the commissioner. Any such society may be licensed to
19 transact business in this Commonwealth upon filing with the
20 commissioner:
21 (1) A duly certified copy of its charter or articles of
22 incorporation.
23 (2) A copy of its constitution and laws, certified by
24 its secretary or corresponding officer.
25 (3) A power of attorney to the Commissioner of Insurance
26 as prescribed in section 606.
27 (4) A statement of its business under oath of its
28 president and secretary or corresponding officers in a form
29 prescribed by the commissioner, duly verified by an
30 examination made by the supervising insurance official of its
19770H0207B1634 - 60 -
1 home state or other state, territory, province or country,
2 satisfactory to the commissioner of this Commonwealth.
3 (5) A certificate from the proper official of its home
4 state, territory, province or country that the society is
5 legally incorporated and licensed to transact business
6 therein.
7 (6) Copies of its certificate forms.
8 (7) Such other information as he may deem necessary.
9 (8) Upon a showing that its assets are invested in
10 accordance with the provisions of this act.
11 (b) Qualifications.--Any foreign or alien society desiring
12 admission to this Commonwealth shall have the qualifications
13 required of domestic societies organized under this act.
14 Section 604. Injunction, liquidation or receivership of
15 domestic society.
16 (a) Findings and notification.--When the commissioner upon
17 investigation finds that a domestic society:
18 (1) has exceeded its powers;
19 (2) has failed to comply with any provision of this act;
20 (3) is not fulfilling its contracts in good faith;
21 (4) has a membership of less than 400 after an existence
22 of one year or more; or
23 (5) is conducting business fraudulently or in a manner
24 hazardous to its members, creditors, the public or the
25 business;
26 he shall notify the society of such deficiency or deficiencies
27 and state in writing the reasons for his dissatisfaction. He
28 shall at once issue a written notice to the society requiring
29 that the deficiency or deficiencies which exist be corrected.
30 After such notice the society shall have a 30 day period in
19770H0207B1634 - 61 -
1 which to comply with the commissioner's request for correction,
2 and if the society fails to comply, the commissioner shall
3 notify the society of his findings of noncompliance and require
4 the society to show cause, on a date named, why it should not be
5 enjoined from carrying on any business until the violation
6 complained of shall have been corrected, or why an action in quo
7 warranto should not be commenced against the society.
8 (b) Presentation to Attorney General.--If on such date the
9 society does not present good and sufficient reasons why it
10 should not be so enjoined or why such action should not be
11 commenced, the commissioner may present the facts relating
12 thereto to the Attorney General who shall, if he deems the
13 circumstances warrant, commence an action to enjoin the society
14 from transacting business or in quo warranto.
15 (c) Court notification of society.--The court shall
16 thereupon notify the officers of the society of a hearing. If
17 after a full hearing it appears that the society should be so
18 enjoined or liquidated or a receiver appointed, the court shall
19 enter the necessary order.
20 (d) Prerequisites for injunction.--No society so enjoined
21 shall have the authority to do business until:
22 (1) The commissioner finds that the violation complained
23 of has been corrected.
24 (2) The costs of such action shall have been paid by the
25 society if the court finds that the society was in default as
26 charged.
27 (3) The court has dissolved its injunction.
28 (4) The commissioner has reinstated the certificate of
29 authority.
30 (e) Court order for liquidation.--If the court orders the
19770H0207B1634 - 62 -
1 society liquidated, it shall be enjoined from carrying on any
2 further business, whereupon the receiver of the society shall
3 proceed at once to take possession of the books, papers, money
4 and other assets of the society, and under the direction of the
5 court, proceed forthwith to close the affairs of the society and
6 to distribute its funds to those entitled thereto.
7 (f) Necessity of Attorney General.--No action under this
8 section shall be recognized in any court of this Commonwealth
9 unless brought by the Attorney General upon request of the
10 commissioner. Whenever a receiver is to be appointed for a
11 domestic society, the court shall appoint the commissioner as
12 such receiver.
13 (g) Applicability to voluntary discontinuance.--The
14 provisions of this section relating to hearing by the
15 commissioner, action by the Attorney General at the request of
16 the commissioner, hearing by the court, injunction and
17 receivership shall be applicable to a society which shall
18 voluntarily determine to discontinue business.
19 Section 605. Suspension, revocation or refusal of license to
20 foreign society.
21 (a) Findings and notification.--When the commissioner upon
22 investigation finds that a foreign or alien society transacting
23 or applying to transact business in this Commonwealth:
24 (1) has exceeded its powers;
25 (2) has failed to comply with any of the provisions of
26 this act;
27 (3) is not fulfilling its contracts in good faith; or
28 (4) is conducting its business fraudulently or in a
29 manner hazardous to its members or creditors or the public;
30 he shall notify the society of such deficiency or deficiencies
19770H0207B1634 - 63 -
1 and state in writing the reasons for his dissatisfaction. He
2 shall at once issue a written notice to the society requiring
3 that the deficiency or deficiencies which exist are corrected.
4 After such notice the society shall have a 30 day period in
5 which to comply with the commissioner's request for correction,
6 and if the society fails to comply, the commissioner shall
7 notify the society of his findings of noncompliance and require
8 the society to show cause, on a date named, why its license
9 should not be suspended, revoked or refused. If on such date the
10 society does not present good and sufficient reason why its
11 authority to do business in this Commonwealth should not be
12 suspended, revoked or refused, he may suspend or refuse the
13 license of the society to do business in this Commonwealth until
14 satisfactory evidence is furnished to him that such suspension
15 or refusal should be withdrawn or he may revoke the authority of
16 the society to do business in this Commonwealth.
17 (b) Continuation of contract.--Nothing contained in this
18 section shall be taken or construed as preventing any such
19 society from continuing in good faith all contracts made in this
20 Commonwealth during the time such society was legally authorized
21 to transact business herein.
22 Section 606. Service of process.
23 (a) Appointment of commissioner to receive process.--Every
24 society authorized to do business in this Commonwealth shall
25 appoint in writing the commissioner and each successor in office
26 to be its true and lawful attorney upon whom all lawful process
27 in any action or proceeding against it shall be served, and
28 shall agree in such writing that any lawful process against it
29 which is served on said attorney shall be of the same legal
30 force and validity as if served upon the society, and that the
19770H0207B1634 - 64 -
1 authority shall continue in force so long as any liability
2 remains outstanding in this Commonwealth. Copies of such
3 appointment, certified by said commissioner, shall be deemed
4 sufficient evidence thereof and shall be admitted in evidence
5 with the same force and effect as the original thereof might be
6 admitted.
7 (b) Method of service.--Service shall only be made upon the
8 commissioner or upon his legal counsel's office. It shall be
9 made in duplicate and shall constitute sufficient service upon
10 the society. When legal process against a society is served upon
11 the commissioner he shall forthwith forward one of the duplicate
12 copies by registered mail, prepaid, directed to the secretary or
13 corresponding officer. No such service shall require a society
14 to file its answer, pleading or defense in less than 30 days
15 from the date of mailing the copy of the service to a society.
16 Legal process shall not be served upon a society except in the
17 manner herein proscribed. At the time of serving any process
18 upon the commissioner, the plaintiff or complainant in the
19 action shall pay to the commissioner a fee of $10.
20 Section 607. Application for Injunction.
21 No application or petition for injunction against any
22 domestic, foreign or alien society, or branch thereof, shall be
23 recognized in any court of this Commonwealth unless made by the
24 Attorney General upon request of the Commissioner of Insurance.
25 Section 608. Court review.
26 All decisions and findings of the commissioner made under the
27 provisions of this act shall be subject to review by proper
28 proceedings in the Commonwealth Court.
29 CHAPTER 7
30 AGENTS
19770H0207B1634 - 65 -
1 Section 701. Fraternal insurance agent defined.
2 The term "fraternal insurance agent" as used in this chapter
3 means any authorized or acknowledged agent or representative of
4 a society who acts as such in the solicitation, negotiation or
5 procurement or making of a life insurance, accident and health
6 insurance or annuity contract, except that the term "fraternal
7 insurance agent" shall not include:
8 (1) any regular salaried officer or employee of a
9 licensed society whose services are devoted substantially to
10 activities other than the solicitation of fraternal insurance
11 contracts, and who receives for the solicitation of such
12 contracts no commission or other compensation directly
13 dependent upon the amount of business obtained; or
14 (2) any member of a society whose solicitation or
15 negotiation of fraternal insurance contracts is incidental to
16 securing new members for his society, and whose only
17 remuneration consists of prizes in the form of merchandise or
18 payments of nominal amounts.
19 Section 702. License required for agents.
20 Agents of societies shall be licensed in accordance with the
21 provisions of this chapter.
22 Section 703. Payment of commissions forbidden.
23 No society doing business in this Commonwealth shall pay any
24 commission or other compensation to any person for any services
25 in obtaining in this Commonwealth any new contract of life,
26 accident or health insurance, or any new annuity contract,
27 except to a licensed, fraternal insurance agent of such society.
28 Section 704. Commissioner may issue license.
29 The commissioner may issue a license to any person who has
30 paid the annual license fee and who has complied with the
19770H0207B1634 - 66 -
1 requirements of this chapter, authorizing such licensees to act
2 as a fraternal insurance agent on behalf of any society named in
3 such license which is authorized to do business in this
4 Commonwealth.
5 Section 705. Agents' documents on file.
6 Before any fraternal insurance agent's license shall be
7 issued there shall be on file in the office of the commissioner
8 the following documents:
9 (1) A written application by the prospective licensee in
10 such form or forms and supplements thereto, and containing
11 such information, as the commissioner may prescribe.
12 (2) A certificate by the society which is to be named in
13 such license, stating that such society has satisfied itself
14 that the named applicant is trustworthy and competent to act
15 as such fraternal insurance agent and that the society will
16 appoint such applicant to act as its agent if the license
17 applied for is issued by the commissioner. Such certificates
18 shall be executed and acknowledged by an officer or managing
19 agent of such society.
20 Section 706. Types of licenses to be issued.
21 Except as otherwise provided in this chapter, fraternal
22 insurance agents shall be licensed as life and/or accident and
23 health agents, except that the examination requirements of such
24 provisions shall not be applicable to:
25 (1) Any fraternal insurance agent who was in the service
26 of a society on the effective date of this act.
27 (2) A fraternal insurance agent who, in the preceding
28 calendar year, has solicited and procured life insurance
29 contracts on behalf of any society in an amount of insurance
30 NOT in excess of $100,000, or, in the case of any other kinds <--
19770H0207B1634 - 67 -
1 of insurance which the society might write, on the persons of
2 NOT more than 25 individuals and who has received or will <--
3 receive a commission or compensation therefore.
4 Section 707. Refusal to issue license.
5 The commissioner may refuse to issue or renew any fraternal
6 insurance agent's license if, in his judgment, the proposed
7 licensee is not trustworthy and competent to act as such agent,
8 or has given cause for revocation or suspension of such license,
9 or has failed to comply with any prerequisite for the issuance
10 or renewal, as the case may be, of such license.
11 Section 708. Term of license.
12 The term, expiration, renewal procedures, termination notice
13 requirements, causes for revocation or suspension of the license
14 shall be the same as contained in Article VI of "The Insurance
15 Department Act of one thousand nine hundred and twenty-one," of
16 May 17, 1921 (P.L.789, No.285), dealing with license of life,
17 accident and health agents except as inconsistent herewith.
18 CHAPTER 8
19 FUNDS, INVESTMENTS AND INVESTIGATIONS
20 Section 801. Funds.
21 (a) Assets for use and benefit of society.--All assets shall
22 be held, invested and disbursed for the use and benefit of the
23 society and no member or beneficiary shall have or acquire
24 individual rights therein or become entitled to any
25 apportionment or the surrender of any part thereof, except as
26 provided in the contract.
27 (b) Use of funds.--A society may create, maintain, invest,
28 disburse and apply any special fund or funds necessary to carry
29 out any purpose permitted by the laws of such society.
30 (c) Statement of purposes and proportions of payments.--
19770H0207B1634 - 68 -
1 Every society, the admitted assets of which are less than the
2 sum of its accrued liabilities and reserves under all of its
3 certificates when valued according to standards required for
4 life insurance companies for certificates issued after one year
5 from the effective date of this act, shall, in every provision
6 of the laws of the society for payments by members of such
7 society, in whatever form made, distinctly state the purpose of
8 the same and the proportion thereof which may be used for
9 expenses, and no part of the money collected for mortuary or
10 disability purposes or the net accretions thereto shall be used
11 for expenses.
12 Section 802. Investments.
13 A society shall invest its funds only in such investments as
14 are authorized by the laws of this Commonwealth for the
15 investment of assets of life insurance companies and subject to
16 the limitations thereon. Any foreign or alien society permitted
17 or seeking to do business in this Commonwealth which invests its
18 funds in accordance with the laws of the state, district,
19 territory, country or province in which it is incorporated,
20 shall be held to meet the requirements of this section for the
21 investment of funds.
22 Section 803. Report of financial condition.
23 Every society transacting business in this Commonwealth shall
24 annually, on or before March 1, unless for cause shown such time
25 has been extended by the commissioner, file with the
26 commissioner a true statement of its financial condition,
27 transactions and affairs for the preceding calendar year and pay
28 a fee in accordance with section 602. The statement shall be in
29 general form and context as approved by the National Association
30 of Insurance Commissioners for fraternal benefit societies and
19770H0207B1634 - 69 -
1 as supplemented by additional information required by the
2 commissioner.
3 Section 804. Synopsis of report to each member.
4 A synopsis of its annual statement providing an explanation
5 of the facts concerning the condition of the society thereby
6 disclosed shall be printed and mailed to each benefit member of
7 the society not later than June 1 of each year, or, in lieu
8 thereof, such synopsis may be published in the society's
9 official publication.
10 Section 805. Report of valuation of certificates.
11 As a part of the annual statement herein required, each
12 society shall, on or before March 1, file with the commissioner
13 a valuation of its certificates in force on December 31 last
14 preceding, provided the commissioner may, in his discretion for
15 cause shown, extend the time for filing such valuation for not
16 more than two calendar months. Such report of valuation shall
17 show, as reserve liabilities, the difference between the present
18 midyear value of the promised benefits provided in the
19 certificates of such society in force and the present midyear
20 value of the future net premiums as the same are in practice
21 actually collected, not including therein any value for the
22 right to make extra assessments and not including any amount by
23 which the present midyear value of future net premiums exceeds
24 the present midyear value of promised benefits on individual
25 certificates. At the option of any society, in lieu of the
26 above, the valuation may show the net tabular value. Such net
27 tabular value as to certificates issued prior to one year after
28 the effective date of this act shall be determined in accordance
29 with the provisions of law applicable prior to the effective
30 date of this act and as to certificates issued on or after one
19770H0207B1634 - 70 -
1 year from the effective date of this act shall not be less than
2 the reserves determined according to the commissioners' reserve
3 valuation method as hereinafter defined. If the premium charged
4 is less than the tabular net premium according to the basis of
5 valuation used, an additional reserve equal to the present value
6 of the deficiency in such premiums shall be set up and
7 maintained as a liability. The reserve liabilities shall be
8 properly adjusted in the event that the midyear or tabular
9 values are not appropriate.
10 Section 806. Reserves, determination.
11 Reserves according to the commissioners' reserve valuation
12 method, for the life insurance and endowment benefits of
13 certificates providing for a uniform amount of insurance and
14 requiring the payment of uniform premiums shall be the excess,
15 if any, of the present value, at the date of valuation, of such
16 future guaranteed benefits provided for by such certificates,
17 over the then present value of any future modified net premiums
18 therefore. The modified net premiums for any such certificate
19 shall be such uniform percentage of the respective contract
20 premiums for such benefits that the present value, at the date
21 of issue of the certificate, of all such modified net premiums
22 shall be equal to the sum of the then present value of such
23 benefits provided for by the certificate and the excess of (A)
24 over (B) as follows:
25 (A) A net level premium equal to the present
26 value, at the date of issue, of such benefits
27 provided for after the first certificate year,
28 divided by the present value, at the date of issue,
29 of an annuity of one per annum payable on the first
30 and each subsequent anniversary of such certificate
19770H0207B1634 - 71 -
1 on which a premium falls due; provided however, that
2 such net level annual premium shall not exceed the
3 net level annual premium on the 19 year premium whole
4 life plan for insurance of the same amount at an age
5 one year higher than the age at issue of such
6 certificate.
7 (B) A net one year term premium for such
8 benefits provided for in the first certificate year.
9 Reserves according to the commissioners' reserve valuation
10 method for:
11 (1) Life insurance benefits for varying amounts of
12 benefits or requiring the payment of varying premiums.
13 (2) Annuity and pure endowment benefits.
14 (3) Disability and accidental death benefits in all
15 certificates and contracts.
16 (4) All other benefits except life insurance and
17 endowment benefits, shall be calculated by a method
18 consistent with the principles of this section.
19 Section 807. Deferred payments as liability.
20 The present value of deferred payments due under incurred
21 claims or matured certificates shall be deemed a liability of
22 the society and shall be computed upon mortality and interest
23 standards prescribed in sections 808, 809 and 810.
24 Section 808. Certification of valuation.
25 The valuation and underlying data shall be certified by a
26 competent actuary or, at the expense of the society, verified by
27 the actuary of the Department of Insurance of the state of
28 domicile of the society.
29 Section 809. Valuation standards.
30 (a) Valuation for certificates prior to this act.--The
19770H0207B1634 - 72 -
1 minimum standards of valuation for certificates issued prior to
2 one year from the effective date of this act shall be those
3 provided by the law applicable immediately prior to the
4 effective date of this act but not lower than the standards used
5 in the calculating of rates for such certificates.
6 (b) Valuation for certificates after this act.--The minimum
7 standard of valuation for certificates issued after one year
8 from the effective date of this act shall be 3 1/2% interest and
9 the following tables:
10 (1) For certificates of life insurance -- American Men
11 Ultimate Table of Mortality, with Bowerman's or Davis'
12 Extension thereof or with the consent of the commissioner,
13 the Commissioners 1941 Standard Ordinary Mortality Table, the
14 Commissioners 1941 Standard Industrial Mortality Table or the
15 Commissioners 1958 Standard Ordinary Mortality Table, using
16 actual age of the insured for male risks and an age not more
17 than three years younger than the actual age of the insured
18 for females risks.
19 (2) For annuity and pure endowment certificates,
20 excluding any disability and accidental death benefits in
21 such certificates -- the 1937 Standard Annuity Mortality
22 Table or the Annuity Mortality Table for 1949, Ultimate, or
23 any modification of either of these tables approved by the
24 commissioner.
25 (3) For total and permanent disability benefits in or
26 supplementary to life insurance certificates -- Hunter's
27 Disability Table, or the Class III Disability Table (1926)
28 modified to conform to the contractual waiting period, or the
29 tables of Period 2 disablement rates and the 1930 to 1950
30 termination rates of the 1952 Disability Study of the Society
19770H0207B1634 - 73 -
1 of Actuaries with due regard to the type of benefit. Any such
2 table shall, for active lives, be combined with a mortality
3 table permitted for calculating the reserves for life
4 insurance certificates.
5 (4) For accidental death benefits in or supplementary to
6 life insurance certificates -- the Inter-Company Double
7 Indemnity Mortality Table or the 1959 Accidental Death
8 Benefits Table. Either table shall be combined with a
9 mortality table permitted for calculating the reserves for
10 life insurance certificates.
11 (5) For noncancellable accident and health benefits --
12 the Class III Disability Table (1926) with conference
13 modifications or, with the consent of the commissioner,
14 tables based upon the society's own experience.
15 Provided, however, that any society may value its certificates
16 in accordance with valuation standards authorized by the laws of
17 this Commonwealth for the valuation of policies issued by life
18 insurance companies.
19 Section 810. Other standards for valuation.
20 The commissioner may, in his discretion, accept other
21 standards for valuation if he finds that the reserves produced
22 thereby will not be less in the aggregate than reserves computed
23 in accordance with the minimum valuation standard herein
24 prescribed. The commissioner may, in his discretion, vary the
25 standards of mortality applicable to all certificates of
26 insurance on substandard lives or other extra hazardous lives by
27 any society authorized to do business in this Commonwealth.
28 Whenever the mortality experience under all certificates valued
29 on the same mortality table is in excess of the expected
30 mortality according to such table for a period of three
19770H0207B1634 - 74 -
1 consecutive years, the commissioner may require additional
2 reserves when deemed necessary in his judgment on account of
3 such certificates.
4 Section 811. Excess reserves.
5 Any society, with the consent of the Commissioner of
6 Insurance of the state of domicile of the society and under such
7 conditions, if any, which he may impose, may establish and
8 maintain reserves on its certificates in excess of the reserves
9 required thereunder, but the contractual rights of any insured
10 member shall not be affected thereby.
11 Section 812. Penalty for failures to file statement.
12 A society neglecting to file the annual statement in the form
13 and within the time provided by this section shall forfeit $100
14 for each day during which such neglect continues, and, upon
15 notice by the commissioner to that effect, its authority to do
16 business in this Commonwealth shall cease while such default
17 continues.
18 Section 813. Examination of domestic societies.
19 Societies which have been examined by the commissioner have
20 the privilege of objecting to the report of examination within
21 30 days after reception of such report. If any objection is
22 made, the commissioner will grant a hearing to the society
23 before making the report available for public inspection.
24 Section 814. Visitation and examination.
25 The commissioner, or any person he may appoint, shall have
26 the power of visitation and examination into the affairs of any
27 domestic society and he shall make such examination at least
28 once in every three years. He may employ assistants for the
29 purpose of such examination, and he, or any person he may
30 appoint, shall have free access to all books, papers and
19770H0207B1634 - 75 -
1 documents that relate to the business of the society. The
2 minutes of the proceedings of the supreme legislative or
3 governing body and of the board of directors or corresponding
4 body of a society shall be in the English language. In making
5 any such examination, the commissioner may summon and qualify as
6 witnesses under oath and examine its officers, agents and
7 employees or other persons in relation to the affairs,
8 transactions and condition of the society. A summary of the
9 report of the commissioner and such recommendations or
10 statements of the commissioner as may accompany such report,
11 shall be read at the first meeting of the board of directors or
12 corresponding body of the society following the receipt thereof,
13 and if directed so to do by the commissioner, shall also be read
14 at the first meeting of the supreme legislative or governing
15 body of the society following receipt thereof. A copy of the
16 report, recommendations, and statements of the commissioner
17 shall be furnished by the society to each member of such board
18 of directors or other governing body. The expense of each
19 examination and of each valuation, including compensation and
20 actual expense of examiners, shall be paid by the society
21 examined or whose certificates are valued, upon statements
22 furnished by the commissioner.
23 Section 815. Examination of foreign societies.
24 The commissioner, or any person whom he may appoint, may
25 examine any foreign or alien society transacting or applying for
26 admission to transact business in this Commonwealth. He may
27 employ assistants and he, or any person he may appoint, shall
28 have free access to all books, papers and documents that relate
29 to the business of the society. He may in his discretion accept,
30 in lieu of such examination, the examination of the Insurance
19770H0207B1634 - 76 -
1 Department of the state, territory, district, province or
2 country where such society is organized. The compensation and
3 actual expenses of the examiners making any examination or
4 general or special valuation shall be paid by the society
5 examined or by the society whose certificate obligations have
6 been valued, upon statements furnished by the commissioner.
7 Section 816. No adverse publications.
8 Pending, during or after an examination or investigation of a
9 society, either domestic, foreign or alien, the commissioner
10 shall make public no financial statement, report or finding, nor
11 shall he permit to become public any financial statement, report
12 or finding affecting the status, standing or rights of any
13 society, until a copy thereof shall have been served upon the
14 society at its principal office and the society shall have been
15 afforded a reasonable opportunity to answer any such financial
16 statement, report or finding and to make such showing in
17 connection therewith as it may desire.
18 Section 817. Misrepresentation.
19 (a) Misrepresentation.--No person shall cause or permit to
20 be made, issued or circulated in any form:
21 (1) Any misrepresentation or false or misleading
22 statement concerning the terms, benefits or advantages of any
23 fraternal insurance contract now issued or to be issued in
24 this Commonwealth, or the financial condition of any society.
25 (2) Any false or misleading estimate or statement
26 concerning the dividends or shares of surplus paid or to be
27 paid by any society on any insurance contract.
28 (3) Any incomplete comparison of an insurance contract
29 of one society with an insurance contract of another society
30 or insurer for the purpose of inducing the lapse, forfeiture
19770H0207B1634 - 77 -
1 or surrender of any insurance contract. A comparison of
2 insurance contracts is incomplete if it does not compare in
3 detail:
4 (i) The gross rates, and the gross rates less any
5 dividend or other reduction allowed at the date of the
6 comparison.
7 (ii) Any increase in cash values, and all the
8 benefits provided by each contract for the possible
9 duration thereof as determined by the life expectancy of
10 the insured;
11 or if it omits from consideration:
12 (iii) Any benefit or value provided in the contract.
13 (iv) Any differences as to amount or period of
14 rates.
15 (v) Any differences in limitations or conditions or
16 provisions which directly or indirectly affect the
17 benefits.
18 In any determination of the incompleteness or misleading
19 character of any comparison or statement, it shall be presumed
20 that the insured had no knowledge of any of the contents of the
21 contract involved.
22 (b) Penalty.--Any person who violates any provision of this
23 section or knowingly receives any compensation or commission by
24 or in consequence of such violation, shall upon conviction be
25 punished by a fine not less than $100 nor more than $1000, or by
26 imprisonment in the county jail not less than 30 days nor more
27 than one year, or both fine and imprisonment and shall in
28 addition, be liable for a civil penalty in the amount of three
29 times the sum received by such violator as compensation or
30 commission, which penalty may be sued for and recovered by any
19770H0207B1634 - 78 -
1 person or society aggrieved for his or its own use and benefit
2 in accordance with the rules of civil practice.
3 Section 818. Discrimination and rebates.
4 (a) Discrimination.--No society doing business in this
5 Commonwealth shall make or permit any unfair discrimination
6 between benefit members, spouses or dependents of the same class
7 and equal expectation of life in the premiums charged for
8 certificates of insurance, in the dividends or other benefits
9 payable thereon or in any other of the terms and conditions of
10 the contracts it makes.
11 (b) Rebates.--No society, by itself, or any other party, and
12 no agent or solicitor, personally, or by any other party, shall
13 offer, promise, allow, give, set off, or pay, directly or
14 indirectly, any valuable consideration or inducement to, or for
15 insurance, on any risk authorized to be taken by such society,
16 which is not specified in the certificate. No member shall
17 receive or accept, directly or indirectly, any rebate of
18 premium, or part thereof, or agent's or solicitor's commission
19 thereon, payable on any certificate or receive or accept any
20 favor or advantage or share in the dividends or other benefits
21 to accrue on, or any valuable consideration or inducement not
22 specified in the contract of insurance.
23 CHAPTER 9
24 MISCELLANEOUS
25 Section 901. Taxation.
26 Every society organized or licensed under this act is hereby
27 declared to be a charitable and benevolent institution, and all
28 of its funds shall be exempt from all and every State, county,
29 district, municipal and school tax other than taxes on real
30 estate and office equipment.
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1 Section 902. Exemptions.
2 Except as herein provided, societies shall be governed by
3 this act and shall be exempt from all other provisions of the
4 insurance laws of this Commonwealth, not only in governmental
5 relations with the Commonwealth, but for every other purpose. No
6 present law or any law hereafter enacted shall apply to them,
7 unless they be expressly designated therein. To the extent that
8 laws and regulations are applicable to societies, the terms
9 thereof shall be deemed of no effect to the extent that they are
10 inconsistent with the expressed terms of this act.
11 Section 903. Exemption of certain societies.
12 (a) Exemption.--Nothing contained in this act shall be so
13 construed as to affect or apply to:
14 (1) grand or subordinate lodges of societies, orders or
15 associations now doing business in this Commonwealth which
16 provide benefits exclusively through local or subordinate
17 lodges;
18 (2) orders, societies or associations which admit to
19 membership only persons engaged in one or more crafts or
20 hazardous occupations, in the same or similar lines of
21 business, insuring only their own members and their families,
22 and the ladies' societies or ladies' auxiliaries to such
23 orders, societies or associations;
24 (3) domestic societies which limit their membership to
25 employees of a particular city or town, designated firm,
26 business house or corporation which provide for a death
27 benefit of not more than $400 or disability benefits of not
28 more than $350 to any person in any one year, or both; or
29 (4) domestic societies or associations of a purely
30 religious, charitable or benevolent description, which
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1 provide for a death benefit of not more the $400 or for
2 disability benefits of not more than $350 to any one person
3 in any one year, or both.
4 (b) Coverage extended.--Any such society or association
5 described in paragraphs (3) or (4) supra which provides for
6 death or disability benefits for which benefit certificates are
7 issued, and any such society or association included in
8 paragraph (4) which has more than 1000 members, shall not be
9 exempted from the provisions of this act but shall comply with
10 all requirements thereof.
11 (c) Prohibition.--No society which, by the provisions of
12 this section, is exempt from the requirements of this act,
13 except any society described in subsection (a)(2), shall give or
14 allow, or promise to give or allow to any person any
15 compensation for procuring new members.
16 (d) Subject to act.--Every society which provides for
17 benefits in case of death or disability resulting solely from
18 accident, and which does not obligate itself to pay natural
19 death or sick benefits shall have all of the privileges and be
20 subject to all the applicable provisions and regulations of this
21 act except that the provisions thereof relating to medical
22 examination, valuations of benefit certificates, and
23 incontestability, shall not apply to such society.
24 (e) Information may be rejected.--The Commissioner of
25 Insurance may require from any society or association, by
26 examination or otherwise, such information as will enable him to
27 determine whether such society or association is exempt from the
28 provisions of this act.
29 Section 904. Penalties.
30 (a) False statements.--It shall be prohibited for any person
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1 to willfully make a false or fraudulent statement in or relating
2 to an application for membership or for the purpose of obtaining
3 money from or a benefit in any society.
4 (b) Filing of false statement.--Any person who willfully
5 makes a false or fraudulent statement in any verified report or
6 declaration under oath required or authorized by this act, or of
7 any material fact or thing contained in a sworn statement
8 concerning the death or disability of a member for the purpose
9 of procuring payment of a benefit named in the certificate,
10 shall be guilty of perjury and shall be subject to the penalties
11 therefore prescribed by law.
12 (c) Solicitation by nonlicensed society.--Any person who
13 solicits membership for, or in any manner assists in procuring
14 membership in, any society not licensed to do business in this
15 Commonwealth shall upon conviction be fined not less than $500
16 nor more than $1000.
17 (d) Penalty for other violation.--Any person guilty of a
18 willful violation of, or neglect or refusal to comply with, the
19 provisions of this act for which a penalty is not otherwise
20 prescribed, shall be guilty of a misdemeanor and shall upon
21 conviction, be subject to a fine not exceeding $500. Upon
22 satisfactory evidence of a violation of any provision of this
23 act, the commissioner may in his discretion, in lieu of seeking
24 criminal prosecution, pursue any one or more of the following
25 courses of action:
26 (1) Suspend or revoke or refuse to renew the license of
27 such offending party or parties.
28 (2) Impose a civil penalty of not more than $1000 for
29 each and every act in violation of any of said sections by
30 said party or parties.
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1 Section 905. Repealer.
2 The following acts of assembly are hereby repealed absolutely
3 from and after the effective date of this act insofar as
4 expressly inconsistent with this act:
5 Act of June 4, 1937 (P.L.1643, No.342).
6 Act of August 9, 1971 (P.L.286, No.74).
7 Act of November 15, 1972 (P.L.1063, No.271).
8 CHAPTER 10
9 EFFECTIVE DATE
10 Section 1001. Effective date.
11 This act shall take effect in six months.
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