HOUSE AMENDED
        PRIOR PRINTER'S NOS. 195, 1610                PRINTER'S NO. 2585

THE GENERAL ASSEMBLY OF PENNSYLVANIA


SENATE BILL

No. 186 Session of 1991


        INTRODUCED BY HOLL, O'PAKE, SALVATORE, BELAN AND CORMAN,
           JANUARY 29, 1991

        AS REPORTED FROM COMMITTEE ON INSURANCE, HOUSE OF
           REPRESENTATIVES, AS AMENDED, NOVEMBER 16, 1992

                                     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     on the Insurance Commissioner; providing penalties; and
     5     making repeals.

     6                         TABLE OF CONTENTS
     7  Chapter 1.  General Provisions
     8  Section 101.  Short title.
     9  Section 102.  Definitions.
    10  Section 103.  Fraternal benefit societies.
    11  Section 104.  Lodge system.
    12  Section 105.  Representative form of government.
    13  Section 106.  Purposes, powers and limitations of societies.
    14  Chapter 2.  Membership
    15  Section 201.  Qualifications for membership.
    16  Section 202.  Office, meetings, publications and grievance
    17                 procedures.


     1  Section 203.  Personal liability.
     2  Section 204.  Waiver.
     3  Chapter 3.  Governance
     4  Section 301.  Organization.
     5  Section 302.  Amendments to laws.
     6  Section 303.  Institutions.
     7  Section 304.  Reinsurance.
     8  Section 305.  Consolidations and mergers.
     9  Section 306.  Conversion of fraternal benefit society into
    10                 mutual life insurance company.
    11  SECTION 307.  DOMESTICATION.                                      <--
    12  Chapter 4.  Contractual Benefits
    13  Section 401.  Benefits.
    14  Section 402.  Beneficiaries.
    15  Section 403.  Benefits not attachable.
    16  Section 404.  Benefit contract.
    17  Section 405.  Nonforfeiture benefits, cash surrender values,
    18                 certificate loans and other options.
    19  Chapter 5.  Financial
    20  Section 501.  Investments.
    21  Section 502.  Funds.
    22  Chapter 6.  Regulation
    23  Section 601.  Valuation.
    24  Section 602.  Reports.
    25  Section 603.  Annual license.
    26  Section 604.  Examination of societies.
    27  Section 605.  Foreign or alien society; admission.
    28  Section 606.  Injunction, liquidation and receivership of
    29                 domestic society.
    30  Section 607.  Suspension, revocation or refusal of license of
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     1                 foreign or alien society.
     2  Section 608.  Injunction.
     3  Section 609.  Licensing of agents.
     4  Section 610.  Unfair methods of competition and unfair and
     5                 deceptive acts and practices.
     6  Section 611.  Fees.
     7  Section 612.  Taxation.
     8  Section 613.  Service of process.                                 <--
     9  Section 614 613.  Review.                                         <--
    10  Section 615 614.  Penalties.                                      <--
    11  Section 616 615.  Applicability of insurance laws.                <--
    12  Section 617 616.  Exemption of certain societies.                 <--
    13  Chapter 7.  Repeals and Effective Date
    14  Section 701.  Repeals.
    15  Section 702.  Effective date.
    16     The General Assembly of the Commonwealth of Pennsylvania
    17  hereby enacts as follows:
    18                             CHAPTER 1
    19                         GENERAL PROVISIONS
    20  Section 101.  Short title.
    21     This act shall be known and may be cited as the Fraternal
    22  Benefit Societies Code.
    23  Section 102.  Definitions.
    24     The following words and phrases when used in this act shall
    25  have the meanings given to them in this section unless the
    26  context clearly indicates otherwise:
    27     "Benefit contract."  The agreement for provision of benefits
    28  authorized by section 401, as that agreement is described in
    29  section 404(a).
    30     "Benefit member."  An adult member who is designated by the
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     1  laws or rules of the society to be a benefit member under a
     2  benefit contract.
     3     "Certificate."  The document issued as written evidence of
     4  the benefit contract.
     5     "Commissioner."  The Insurance Commissioner of the
     6  Commonwealth.
     7     "Department."  The Insurance Department of the Commonwealth.
     8     "Impaired."  For a society that does not write variable
     9  contracts, impaired means whenever the society's assets are less
    10  than its total liabilities. For a society that does write
    11  variable contracts, impaired means whenever the society's assets
    12  are less than its total liabilities, plus the required surplus
    13  for a mutual life insurer to write such contracts.
    14     "Insurance laws."  Laws and regulations pertaining to
    15  insurance companies.
    16     "Laws."  The society's articles of incorporation,
    17  constitution and bylaws, however designated.
    18     "Lodge."  Subordinate member units of the society, known as
    19  camps, courts, councils, branches or by any other designation.
    20     "Premiums."  Premiums, rates, dues or other required
    21  contributions by whatever name known, which are payable under
    22  the certificate.
    23     "Rules."  Rules, regulations or resolutions adopted by the
    24  supreme governing body or board of directors which are intended
    25  to have general application to the members of the society.
    26     "Society."  Fraternal benefit society, unless otherwise
    27  indicated.
    28  Section 103.  Fraternal benefit societies.
    29     Any incorporated society, order or supreme lodge, without
    30  capital stock, including one exempted under the provisions of
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     1  section 617(a)(2) whether incorporated or not, conducted solely
     2  for the benefit of its members and their beneficiaries and not
     3  for profit, operated on a lodge system with or without
     4  ritualistic form of work, having a representative form of
     5  government and providing benefits in accordance with this act,
     6  is hereby declared to be a fraternal benefit society.
     7  Section 104.  Lodge system.
     8     (a)  General rule.--A society is operating on the lodge
     9  system if it has a supreme governing body and subordinate lodges
    10  into which members are elected, initiated or admitted in
    11  accordance with its laws, rules and rituals. Subordinate lodges
    12  shall be required by the laws of the society to hold regular
    13  meetings at least once in each quarter in furtherance of the
    14  purposes of the society.
    15     (b)  Lodges for children.--A society may, at its option,
    16  organize and operate lodges for children under the minimum age
    17  for adult membership. Membership and initiation in local lodges
    18  shall not be required of such children, nor shall they have a
    19  voice or vote in the management of the society.
    20  Section 105.  Representative form of government.
    21     A society has a representative form of government when the
    22  following circumstances occur:
    23         (1)  It has a supreme governing body constituted in one
    24     of the following ways:
    25             (i)  The supreme governing body is an assembly
    26         composed of delegates elected directly by the members or
    27         at intermediate assemblies or conventions of members or
    28         their representatives, together with other delegates as
    29         may be prescribed in the society's laws. A society may
    30         provide for election of delegates by mail. The elected
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     1         delegates shall constitute a majority in number and shall
     2         not have less than two-thirds of the votes and not less
     3         than the number of votes required to amend the society's
     4         laws. The assembly shall be elected and shall meet at
     5         least once every four years and shall elect a board of
     6         directors to conduct the business of the society between
     7         meetings of the assembly. Vacancies on the board of
     8         directors between elections may be filled in the manner
     9         prescribed by the society's laws.
    10             (ii)  The supreme governing body is a board composed
    11         of persons elected by the members, either directly or by
    12         their representatives in intermediate assemblies, and any
    13         other persons prescribed in the society's laws. A society
    14         may provide for election of the board by mail. Each term
    15         of a board member may not exceed four years. Vacancies on
    16         the board between elections may be filled in the manner
    17         prescribed by the society's laws. Those persons elected
    18         to the board shall constitute a majority in number and
    19         not less than the number of votes required to amend the
    20         society's laws. A person filling the unexpired term of an
    21         elected board member shall be considered to be an elected
    22         member. The board shall meet at least quarterly to
    23         conduct the business of the society.
    24         (2)  The officers of the society are elected either by
    25     the supreme governing body or by the board of directors.
    26         (3)  Only benefit members are eligible for election to
    27     the supreme governing body, the board of directors or any
    28     intermediate assembly.
    29         (4)  Each voting member has one vote; no vote may be cast
    30     by proxy.
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     1  Section 106.  Purposes, powers and limitations of societies.
     2     (a)  Purposes.--A society shall operate for the benefit of
     3  members and their beneficiaries by:
     4         (1)  providing benefits as specified in section 401; and
     5         (2)  operating for one or more social, intellectual,
     6     educational, charitable, benevolent, moral, fraternal,
     7     patriotic or religious purposes for the benefit of its
     8     members, which may also be extended to others.
     9  These purposes may be carried out directly by the society, or
    10  indirectly through subsidiary corporations or affiliated
    11  organizations.
    12     (b)  Powers.--Every society shall have the power to adopt
    13  laws and rules for the government of the society, the admission
    14  of its members and the management of its affairs. The society
    15  shall have the power to change, alter, add to or amend such laws
    16  and rules and shall have such other powers as are necessary and
    17  incidental to carrying into effect the objects and purposes of
    18  the society.
    19     (c)  Limitations.--No subsidiary corporation or affiliated     <--
    20  organization shall transact insurance or engage in any other
    21  activity regulated under Pennsylvania law unless the subsidiary
    22  corporation or affiliated organization complies with all
    23  provisions of the applicable law. No society or subsidiary
    24  corporation or affiliated organization through which a society
    25  carries out its purposes shall own or operate a funeral home or
    26  undertaking establishment.
    27                             CHAPTER 2
    28                             MEMBERSHIP
    29  Section 201.  Qualifications for membership.
    30     (a)  General rule.--A society shall specify in its laws or
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     1  rules:
     2         (1)  Eligibility standards for each and every class of
     3     membership. If benefits are provided on the lives of
     4     children, the minimum age for adult membership shall be 15
     5     years and the maximum age shall be 21 years.
     6         (2)  The process for admission to membership for each
     7     membership class.
     8         (3)  The rights and privileges of each membership class.
     9     Only benefit members shall have the right to vote on the
    10     management of the insurance affairs of the society.
    11     (b)  Social members.--A society may also admit social members
    12  who shall have no voice or vote in the management of the
    13  insurance affairs of the society.
    14     (c)  Membership is personal.--Membership rights in the
    15  society are personal to the member and are not assignable.
    16  Section 202.  Office, meetings, publications and grievance
    17                 procedures.
    18     (a)  Office and meetings.--The principal office of any
    19  domestic society shall be located in this Commonwealth. The
    20  meetings of the supreme governing body of the society may be
    21  held in any state or country on the North American continent, or
    22  in any other location determined by the supreme governing body.
    23  All business transacted at such meetings shall be as valid in
    24  all respects as if the meetings were held in this Commonwealth.
    25  The minutes of the proceedings of the supreme governing body and
    26  of the board of directors shall be in the English language.
    27     (b)  Publications.--
    28         (1)  A society may provide in its laws for an official
    29     publication in which any notice, report or statement required
    30     by law to be given to members, including notice of election,
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     1     may be published. Any required reports, notices and
     2     statements shall be printed conspicuously in the publication.
     3     If the records of a society show that two or more members
     4     have the same mailing address, an official publication mailed
     5     to one member is deemed to be mailed to all members at the
     6     same address unless a member requests a separate copy. This
     7     paragraph shall not apply to certificate requirements,
     8     reports or notices in connection with the issuance of
     9     certificates.
    10         (2)  Not later than June 1 of each year, a synopsis of
    11     the society's annual statement providing an explanation of
    12     the facts concerning the condition of the society thereby
    13     disclosed shall be printed and mailed to each benefit member
    14     of the society or, in lieu thereof, the synopsis may be
    15     published in the society's official publication.
    16     (c)  Grievance procedures.--A society may provide in its laws
    17  or rules for grievance or complaint procedures for members.
    18  Section 203.  Personal liability.
    19     (a)  General rule.--The officers and members of the supreme
    20  governing body or any subordinate body of a society shall not be
    21  personally liable for any benefits provided by a society.
    22     (b)  Indemnification and reimbursement.--
    23         (1)  Any person may be indemnified and reimbursed by any
    24     society for expenses reasonably incurred by, and liabilities
    25     imposed upon, that person in connection with or arising out
    26     of any action, suit or proceeding, whether civil, criminal,
    27     administrative or investigative, or threat thereof, in which
    28     that person may be involved by reason of the fact that that
    29     person is or was a director, officer, employee or agent of
    30     the society or of any firm, corporation or organization which
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     1     the person served in any capacity at the request of the
     2     society.
     3         (2)  A person shall not be so indemnified or reimbursed:
     4             (i)  in relation to any matter in an action, suit or
     5         proceeding as to which the person shall finally be
     6         adjudged to be or have been guilty of a breach of a duty
     7         as a director, officer, employee or agent of the society;
     8         or
     9             (ii)  in relation to any matter in an action, suit or
    10         proceeding, or threat thereof, which has been made the
    11         subject of a compromise settlement;
    12     unless in either case the person acted in good faith for a
    13     purpose the person reasonably believed to be in or not
    14     opposed to the best interests of the society and, in a
    15     criminal action or proceeding, in addition, had no reasonable
    16     cause to believe that his conduct was unlawful.
    17         (3)  The determination whether the conduct of such person
    18     met the standard required in order to justify indemnification
    19     and reimbursement in relation to any matter described in
    20     paragraph (2) may only be made by the supreme governing body
    21     or board of directors by a majority vote of a quorum
    22     consisting of persons who were not parties to such action,
    23     suit or proceeding or by a court of competent jurisdiction.
    24     The termination of any action, suit or proceeding by
    25     judgment, order, settlement, conviction, or upon a plea of no
    26     contest, as to that person shall not in itself create a
    27     conclusive presumption that the person did not meet the
    28     standard of conduct required in order to justify
    29     indemnification and reimbursement. The foregoing right of
    30     indemnification and reimbursement shall not be exclusive of
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     1     other rights to which that person may be entitled as a matter
     2     of law and shall inure to the benefit of that person's heirs,
     3     executors and administrators.
     4     (c)  Insurance.--A society shall have power to purchase and
     5  maintain insurance on behalf of any person who is or was a
     6  director, officer, employee or agent of the society, or who is
     7  or was serving at the request of the society as a director,
     8  officer, employee or agent of any other firm, corporation or
     9  organization against any liability asserted against that person
    10  and incurred in any such capacity or arising out of that
    11  person's status as such, whether or not the society would have
    12  the power to indemnify the person against such liability under
    13  this section.
    14  Section 204.  Waiver.
    15     The laws of the society may provide that no subordinate body
    16  nor any of its subordinate officers or members shall have the
    17  power or authority to waive any of the provisions of the laws of
    18  the society. Such provision shall be binding on the society and
    19  every member and beneficiary of a member.
    20                             CHAPTER 3
    21                             GOVERNANCE
    22  Section 301.  Organization.
    23     (a)  General rule.--A domestic society organized on or after
    24  the effective date of this act shall be formed as provided in
    25  this section.
    26     (b)  Articles of incorporation.--Seven or more citizens of
    27  the United States, a majority of whom are citizens of this
    28  Commonwealth, who desire to form a fraternal benefit society may
    29  make, sign and acknowledge before some officer competent to take
    30  acknowledgment of deeds, articles of incorporation in which
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     1  shall be stated:
     2         (1)  The proposed corporate name of the society, which
     3     shall not so closely resemble the name of any society or
     4     insurance company as to be misleading or confusing.
     5         (2)  The purposes for which it is being formed and the
     6     mode in which its corporate powers are to be exercised. Such
     7     purposes shall not include more liberal powers than are
     8     granted by this chapter.
     9         (3)  The names and residences of the incorporators and
    10     the names, residences and official titles of all the
    11     officers, trustees, directors or other persons who are to
    12     have and exercise the general control of the management of
    13     the affairs and funds of the society for the first year or
    14     until the ensuing election at which all the officers shall be
    15     elected by the supreme governing body, which election shall
    16     be held not later than one year from the date of issuance of
    17     the permanent certificate of authority.
    18     (c)  Filing.--Such articles of incorporation, duly certified
    19  copies of the society's bylaws and rules, copies of all proposed
    20  forms of certificates and applications therefor and circulars to
    21  be issued by the society and a bond conditioned upon the return
    22  to applicants of the advanced payments if the organization is
    23  not completed within one year shall be filed with the
    24  commissioner, who may require such further information as the
    25  commissioner deems necessary. The bond with sureties approved by
    26  the commissioner shall be in an amount, not less than $300,000
    27  nor more than $1,500,000, as required by the commissioner. All
    28  documents filed shall be in the English language. If the
    29  purposes of the society conform to the requirements of this
    30  chapter and all provisions of the law have been complied with,
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     1  the commissioner shall so certify, retain and file the articles
     2  of incorporation and furnish the incorporators a preliminary
     3  certificate of authority authorizing the society to solicit
     4  members as provided in this section.
     5     (d)  Duration of preliminary certificate.--No preliminary
     6  certificate of authority granted under the provisions of this
     7  section shall be valid after one year from its date of issuance
     8  or after a further period, not exceeding one year, as may be
     9  authorized by the commissioner upon cause shown, unless the 500
    10  applicants required under subsection (e) have been secured and
    11  the organization has been completed as provided in this section.
    12  The articles of incorporation and all other proceedings
    13  thereunder shall become null and void in one year from the date
    14  of the preliminary certificate of authority, or at the
    15  expiration of the extended period, unless the society shall have
    16  completed its organization and received a certificate of
    17  authority to do business as provided in this section.
    18     (e)  Solicitation of members.--Upon receipt of a preliminary
    19  certificate of authority from the commissioner, the society may
    20  solicit members for the purpose of completing its organization,
    21  shall collect from each applicant the amount of not less than
    22  one regular monthly premium in accordance with its table of
    23  rates, and shall issue to each applicant a receipt for the
    24  amount collected. No society shall incur any liability other
    25  than for the return of the advance premium, nor issue any
    26  certificate, nor pay or allow, or offer or promise to pay or
    27  allow, any benefit to any person until the following conditions
    28  are met:
    29         (1)  Actual bona fide applications for benefits
    30     aggregating at least $500,000 have been secured on not less
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     1     than 500 applicants, and any necessary evidence of
     2     insurability has been furnished to and approved by the
     3     society.
     4         (2)  At least ten subordinate lodges have been
     5     established into which the 500 applicants have been admitted.
     6         (3)  There has been submitted to the commissioner, under
     7     oath of the president or secretary, or corresponding officer
     8     of the society, a list of the applicants, giving the name and
     9     address of each, the date each was admitted, the name and
    10     number of the subordinate lodge of which each applicant is a
    11     member, and the amount of benefits to be granted and premiums
    12     for each applicant.
    13         (4)  It shall have been shown to the commissioner, by
    14     sworn statement of the treasurer, or corresponding officer of
    15     the society, that at least 500 applicants have each paid in
    16     cash at least one regular monthly premium as provided in this
    17     subsection, which premiums in the aggregate shall amount to
    18     at least $150,000. These advance premiums shall be held in
    19     trust during the period of organization and if the society
    20     has not qualified for a certificate of authority within one
    21     year, as provided in this section, the premiums shall be
    22     returned to the applicants.
    23         (5)  The commissioner may make such examination and
    24     require such further information as the commissioner deems
    25     advisable. Upon presentation of satisfactory evidence that
    26     the society has complied with all the provisions of law, the
    27     commissioner shall issue to the society a certificate of
    28     authority to that effect and to the effect that the society
    29     is authorized to transact business pursuant to the provisions
    30     of this chapter. The certificate of authority shall be prima
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     1     facie evidence of the existence of the society at the date of
     2     the certificate. The commissioner shall cause a record of the
     3     certificate of authority to be made. A certified copy of the
     4     record may be given in evidence with like effect as the
     5     original certificate of authority.
     6     (f)  Limitations.--The provisions of subsection (e) shall not
     7  apply to:
     8         (1)  Any society organized prior to April 6, 1893, under
     9     any statute of this Commonwealth which was engaged in doing
    10     business in this Commonwealth on that date. After the
    11     effective date of this act, any such society may exercise all
    12     the rights conferred by this act and all the rights, powers,
    13     privileges and exemptions now exercised or possessed by it,
    14     under its charter or articles of incorporation or articles of
    15     association, and neither its existence as a corporation nor
    16     its rights to exercise any corporate rights, vested in it by
    17     virtue of its past incorporation, shall be affected by
    18     anything contained in this act.
    19         (2)  Any fraternal benefit society incorporated under the
    20     provisions of the act of April 6, 1893 (P.L.10, No.6), the
    21     act of May 20, 1921 (P.L.916, No.324), the act of July 17,
    22     1935 (P.L.1092, No.357) or the act of July 29, 1977 (P.L.105,
    23     No.38), relating to fraternal benefit societies. For the
    24     purposes of this act, a corporation which is exempt from the
    25     requirements of this section by reason of paragraph (1) shall
    26     be deemed to be a holder of a certificate of authority issued
    27     under this act.
    28     (g)  Reincorporation not required.--Any incorporated society
    29  authorized to transact business in this Commonwealth at the time
    30  this act becomes effective shall not be required to
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     1  reincorporate.
     2  Section 302.  Amendments to laws.
     3     (a)  General rule.--A domestic society may amend its laws in
     4  accordance with the provisions thereof by action of its supreme
     5  governing body at any regular or special meeting thereof or, if
     6  its laws so provide, by referendum. The referendum may be held
     7  in accordance with the provisions of its laws by the vote of the
     8  voting members of the society, by the vote of delegates or
     9  representatives of voting members or by the vote of local
    10  lodges. A society may provide for voting by mail. No amendment
    11  submitted for adoption by referendum shall be adopted unless,
    12  within six months from the date of submission thereof, a
    13  majority of the members voting shall have signified their
    14  consent to the amendment by one of the methods specified in this
    15  section. A society having a direct election form of organization
    16  as described in section 105(1)(ii) may amend its constitution or
    17  articles of incorporation only by referendum.
    18     (b)  Approval of amendment.--No amendment to the laws of any
    19  domestic society shall take effect unless approved by the
    20  commissioner who shall approve the amendment if the commissioner
    21  finds that it has been duly adopted and is not inconsistent with
    22  any requirement of the laws of this Commonwealth or with the
    23  character, objects and purposes of the society. Unless the
    24  commissioner shall disapprove the amendment within 60 days after
    25  the filing, the amendment shall be considered approved. The
    26  approval or disapproval of the commissioner shall be in writing
    27  and shall be mailed to the secretary or corresponding officer of
    28  the society at its principal office. If the commissioner
    29  disapproves the amendment, the reasons for the disapproval shall
    30  be stated in the written notice.
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     1     (c)  Copies to members.--Within 90 days from the approval
     2  thereof by the commissioner, the amendments, or a synopsis
     3  thereof, shall be furnished to all members of the society either
     4  by mail or by publication in full in the official publication of
     5  the society. The affidavit of any officer of the society or of
     6  anyone authorized by it to mail any amendments or synopsis
     7  thereof, stating facts which show that same have been duly
     8  addressed and mailed, shall be prima facie evidence that the
     9  amendments or synopsis thereof have been furnished the
    10  addressee.
    11     (d)  Filings of foreign societies.--Every foreign or alien
    12  society authorized to do business in this Commonwealth shall
    13  file with the commissioner a duly certified copy of all
    14  amendments of, or additions to, its laws within 90 days after
    15  their enactment.
    16     (e)  Certified copies as evidence.--Printed copies of the
    17  laws as amended, certified by the secretary or corresponding
    18  officer of the society, shall be prima facie evidence of the
    19  legal adoption.
    20  Section 303.  Institutions.
    21     A society may create, maintain and operate or may establish
    22  organizations to operate, not-for-profit institutions to further
    23  the purposes permitted by section 106(a)(2). These institutions
    24  may furnish services free or at a reasonable charge. Any real or
    25  personal property owned, held or leased by the society for this
    26  purpose shall be reported in every annual statement but shall
    27  not be allowed as an admitted asset of the society except as
    28  provided in section 501(b).
    29  Section 304.  Reinsurance.
    30     (a)  General rule.--A domestic society may, by a reinsurance
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     1  agreement, cede any individual risk or risks in whole or in part
     2  to an insurer (other than another fraternal benefit society)
     3  having the power to make such reinsurance and authorized to do
     4  business in this Commonwealth, or if not so authorized, one
     5  which is approved by the commissioner, but no society may
     6  reinsure substantially all of its insurance in force without the
     7  written permission of the commissioner. It may take credit for
     8  the reserves on the ceded risks to the extent reinsured, but no
     9  credit shall be allowed as an admitted asset or as a deduction
    10  from liability, to a ceding society for reinsurance made, ceded,
    11  renewed or otherwise becoming effective after the effective date
    12  of this chapter, unless the reinsurance is payable by the
    13  assuming insurer on the basis of the liability of the ceding
    14  society under the contract or contracts reinsured without
    15  diminution because of the insolvency of the ceding society.
    16     (b)  Reinsurance by another society.--Notwithstanding the
    17  limitation in subsection (a), a society may reinsure the risks
    18  of another society in a consolidation or merger approved by the
    19  commissioner under section 305.
    20  Section 305.  Consolidations and mergers.
    21     (a)  General rule.--A domestic society may consolidate or
    22  merge with any other society by complying with the provisions of
    23  this section. It shall file with the commissioner:
    24         (1)  A certified copy of the written contract containing
    25     in full the terms and conditions of the consolidation or
    26     merger.
    27         (2)  A sworn statement by the president and secretary or
    28     corresponding officers of each society showing the financial
    29     condition of the society on a date fixed by the commissioner
    30     but not earlier than December 31 next preceding the date of
    19910S0186B2585                 - 18 -

     1     the contract.
     2         (3)  A certificate of the officers, duly verified by
     3     their respective oaths, that the consolidation or merger has
     4     been approved by a two-thirds vote of the supreme governing
     5     body of each society, which vote had been conducted at a
     6     regular or special meeting of each body or, if the society's
     7     laws permit, by mail.
     8         (4)  Evidence that at least 60 days prior to the action
     9     of the supreme governing body of each society, the text of
    10     the contract was furnished to all members of each society
    11     either by mail or by publication in full in the official
    12     publication of each society.
    13     (b)  Approval by commissioner.--If the commissioner finds
    14  that the contract is in conformity with the provisions of this
    15  section, that the financial statements are correct and that the
    16  consolidation or merger is just and equitable to the members of
    17  each society, the commissioner shall approve the contract and
    18  issue a certificate to that effect. Upon this approval, the
    19  contract shall be in full force and effect unless any society
    20  which is a party to the contract is incorporated under the laws
    21  of any other state or territory. In such event the consolidation
    22  or merger shall not become effective unless and until it has
    23  been approved as provided by the laws of that state or territory
    24  and a certificate of the approval filed with the commissioner of
    25  this Commonwealth or, if the laws of that state or territory
    26  contain no such provision, then the consolidation or merger
    27  shall not become effective unless and until it has been approved
    28  by the commissioner of insurance of that state or territory and
    29  a certificate of the approval filed with the commissioner of
    30  this Commonwealth.
    19910S0186B2585                 - 19 -

     1     (c)  Vesting of rights and liabilities.--When the
     2  consolidation or merger becomes effective as provided in this
     3  section, all the rights, franchises and interests of the
     4  consolidated or merged societies in and to every species of
     5  property, real, personal or mixed, and things in action
     6  thereunto belonging shall be vested in the society resulting
     7  from or remaining after the consolidation or merger without any
     8  other instrument, except that conveyances of real property may
     9  be evidenced by proper deeds, and the title to any real estate
    10  or interest therein, vested under the laws of this Commonwealth
    11  in any of the societies consolidated or merged, shall not revert
    12  or be in any way impaired by reason of the consolidation or
    13  merger, but shall vest absolutely in the society resulting from
    14  or remaining after the consolidation or merger.
    15     (d)  Effect of affidavit.--The affidavit of any officer of
    16  the society or of anyone authorized by it to mail any notice or
    17  document, stating that such notice or document has been duly
    18  addressed and mailed, shall be prima facie evidence that the
    19  notice or document has been furnished the addressees.
    20  Section 306.  Conversion of fraternal benefit society into
    21                 mutual life insurance company.
    22     Any domestic fraternal benefit society may be converted and
    23  licensed as a mutual life insurance company by compliance with
    24  all the requirements of the act of May 17, 1921 (P.L.682,
    25  No.284), known as The Insurance Company Law of 1921, if the plan
    26  of conversion has been approved by the commissioner. A plan of
    27  conversion shall be prepared in writing by the board of
    28  directors setting forth in full the terms and conditions of
    29  conversion. The affirmative vote of two-thirds of all members of
    30  the supreme governing body at a regular or special meeting shall
    19910S0186B2585                 - 20 -

     1  be necessary for the approval of such plan. No conversion shall
     2  take effect unless and until approved by the commissioner who
     3  may give approval if the commissioner finds that the proposed
     4  change is in conformity with the requirements of law and not
     5  prejudicial to the certificateholders of the society.
     6  SECTION 307.  DOMESTICATION.                                      <--
     7     (A)  FILING REQUIREMENTS.--A FOREIGN OR ALIEN SOCIETY
     8  AUTHORIZED TO DO BUSINESS IN THIS COMMONWEALTH MAY BECOME A
     9  DOMESTIC SOCIETY BY FILING WITH THE COMMISSIONER IN THE ENGLISH
    10  LANGUAGE:
    11         (1)  ARTICLES OF DOMESTICATION WHICH SHALL SET FORTH THE
    12     NAME OF THE SOCIETY, THE ADDRESS, INCLUDING STREET AND
    13     NUMBER, OF ITS PRINCIPAL OFFICE IN THIS COMMONWEALTH AND ANY
    14     OTHER PROVISIONS OF ITS CURRENT ARTICLES OF INCORPORATION
    15     THAT THE SOCIETY DESIRES TO RETAIN.
    16         (2)  A STATEMENT THAT UPON DOMESTICATION THE SOCIETY WILL
    17     BE SUBJECT TO ALL THE LAWS OF THIS COMMONWEALTH APPLICABLE TO
    18     DOMESTIC FRATERNAL BENEFIT SOCIETIES.
    19         (3)  A BRIEF STATEMENT OF THE PURPOSE OR PURPOSES FOR
    20     WHICH IT IS TO BE DOMESTICATED, WHICH SHALL BE A PURPOSE OR
    21     PURPOSES FOR WHICH A DOMESTIC SOCIETY MAY BE INCORPORATED
    22     UNDER THIS CHAPTER.
    23         (4)  A LETTER OR ORDER APPROVING THE REDOMESTICATION FROM
    24     THE INSURANCE DEPARTMENT OF THE CURRENT STATE OF DOMICILE.
    25         (5)  A CERTIFICATE OF THE PRESIDENT AND SECRETARY OF THE
    26     SOCIETY DULY VERIFIED BY THEIR RESPECTIVE OATHS THAT THE
    27     DOMESTICATION HAS BEEN APPROVED BY THE MAJORITY OF THE VOTES
    28     CAST BY THE SUPREME GOVERNING BODY OF THE SOCIETY, UNLESS A
    29     GREATER PERCENTAGE OF AFFIRMATIVE VOTES IS REQUIRED EITHER BY
    30     THE SOCIETY'S CONSTITUTION AND BYLAWS OR BY THE STATUTE IN
    19910S0186B2585                 - 21 -

     1     THE SOCIETY'S STATE OF DOMICILE.
     2     (B)  APPROVAL BY COMMISSIONER.--IF THE COMMISSIONER FINDS
     3  THAT THE FILING BY THE SOCIETY IS IN PROPER ORDER, THAT THE
     4  DOMESTICATION IS IN THE BEST INTEREST OF THE MEMBERS OF THE
     5  SOCIETY, THAT THE SOCIETY HAS COMPLIED WITH THE REQUIREMENTS FOR
     6  THE ISSUANCE OF A CERTIFICATE OF AUTHORITY TO DO BUSINESS IN
     7  THIS COMMONWEALTH AND THAT THE SOCIETY WILL MAINTAIN ITS
     8  PRINCIPAL OFFICE IN THIS COMMONWEALTH, THE COMMISSIONER SHALL
     9  APPROVE THE ARTICLES OF DOMESTICATION AND ISSUE A CERTIFICATE TO
    10  THAT EFFECT.
    11     (C)  EFFECT OF DOMESTICATION.--UPON APPROVAL OF THE ARTICLES
    12  OF DOMESTICATION BY THE COMMISSIONER, THE SOCIETY SHALL
    13  THEREAFTER BECOME A DOMESTIC SOCIETY AND SHALL BE SUBJECT TO ALL
    14  THE LAWS OF THIS COMMONWEALTH APPLICABLE TO DOMESTIC SOCIETIES.
    15                             CHAPTER 4
    16                        CONTRACTUAL BENEFITS
    17  Section 401.  Benefits.
    18     (a)  General rule.--A society authorized to do business in
    19  this Commonwealth may provide the following contractual benefits
    20  in any form:
    21         (1)  Death benefits.
    22         (2)  Endowment benefits.
    23         (3)  Annuity benefits.
    24         (4)  Temporary or permanent disability benefits.
    25         (5)  Hospital, medical or nursing benefits.
    26         (6)  Other benefits which are authorized for insurers
    27     licensed to write life, accident and health insurance and
    28     which are not inconsistent with this chapter.
    29     (b)  Eligible members.--A society shall specify in its rules
    30  those persons who may be issued, or covered by, the contractual
    19910S0186B2585                 - 22 -

     1  benefits in subsection (a), consistent with providing benefits
     2  to members and their dependents. A society may provide benefits
     3  on the lives of children under the minimum age for adult
     4  membership upon application of an adult person.
     5  Section 402.  Beneficiaries.
     6     (a)  Designation.--The owner of a benefit contract shall have
     7  the right at all times to change the beneficiary or
     8  beneficiaries in accordance with the laws or rules of the
     9  society unless the owner waives this right by specifically
    10  requesting in writing that the beneficiary designation be
    11  irrevocable. A society may, through its laws or rules, limit the
    12  scope of beneficiary designations and shall provide that no
    13  revocable beneficiary shall have or obtain any vested interest
    14  in the proceeds of any certificate until the certificate has
    15  become due and payable in conformity with the provisions of the
    16  benefit contract.
    17     (b)  Payment of funeral benefits.--A society may make
    18  provision for the payment of funeral benefits to the extent of
    19  that portion of any payment under a certificate as might
    20  reasonably appear to be due to any person equitably entitled
    21  thereto by reason of having incurred expense occasioned by the
    22  burial of the member, provided the portion so paid shall not
    23  exceed the sum of $2,000.
    24     (c)  Absence of beneficiary.--If, at the death of any person
    25  insured under a benefit contract, there is no lawful beneficiary
    26  to whom the proceeds shall be payable, the amount of the
    27  benefit, except to the extent that funeral benefits may be paid
    28  as provided in this section, shall be payable to the personal
    29  representative of the deceased insured, or if none, then payment
    30  may be made in accordance with 20 Pa.C.S. § 3101(d) (relating to
    19910S0186B2585                 - 23 -

     1  payments to family and funeral directors). If the owner of the
     2  certificate is other than the insured, the proceeds shall be
     3  payable to the owner.
     4  Section 403.  Benefits not attachable.
     5     No money or other benefit, charity, relief or aid to be paid,
     6  provided or rendered by any society shall be liable to
     7  attachment, garnishment or other process, or to be seized,
     8  taken, appropriated or applied by any legal or equitable process
     9  or operation of law to pay any debt or liability of a member or
    10  beneficiary, or any other person who may have a right
    11  thereunder, either before or after payment by the society.
    12  Section 404.  Benefit contract.
    13     (a)  General rule.--Every society authorized to do business
    14  in this Commonwealth shall issue to each owner of a benefit
    15  contract a certificate specifying the amount of benefits
    16  provided by the contract. The certificate, together with any
    17  riders or endorsements attached to it, the laws of the society,
    18  the application for membership, the application for insurance
    19  and declaration of insurability, if any, signed by the
    20  applicant, and all amendments to each thereof, shall constitute
    21  the benefit contract, as of the date of issuance, between the
    22  society and the owner, and the certificate shall so state. The    <--
    23  certificate shall also incorporate by reference the laws of the
    24  Society. The society shall maintain a copy of its laws at each
    25  lodge for inspection by the benefit member, and shall furnish a
    26  copy to each benefit member upon request. A copy of the
    27  application for insurance and declaration of insurability, if
    28  any, shall be endorsed upon or attached to the certificate. All
    29  statements on the application shall be representations and not
    30  warranties. Any waiver of this provision shall be void.
    19910S0186B2585                 - 24 -

     1     (b)  Effect of subsequent changes.--Any changes, additions or
     2  amendments to the laws of the society duly made or enacted
     3  subsequent to the issuance of the certificate shall bind the
     4  owner and the beneficiaries, and shall govern and control the
     5  benefit contract in all respects the same as if the changes,
     6  additions or amendments had been made prior to and were in force
     7  at the time of the application for insurance, except that no
     8  change, addition or amendment shall destroy or diminish benefits
     9  which the society contracted to give the owner as of the date of
    10  issuance.
    11     (c)  Effect on minority.--Any person upon whose life a
    12  benefit contract is issued prior to attaining the age of
    13  majority shall be bound by the terms of the application and
    14  certificate and by all the laws and rules of the society to the
    15  same extent as though the age of majority had been attained at
    16  the time of application.
    17     (d)  Payment of deficiencies.--A society shall provide in its
    18  laws that, if its reserves as to all or any class of
    19  certificates become impaired its board of directors or
    20  corresponding body may require that there shall be paid by the
    21  owner to the society the amount of the owner's equitable
    22  proportion of such deficiency as ascertained by its board, and
    23  if the payment is not made:
    24         (1)  it shall stand as an indebtedness against the
    25     certificate and draw interest not to exceed the rate
    26     specified for certificate loans under the certificates; or
    27         (2)  in lieu of or in combination with paragraph (1), the
    28     owner may accept a proportionate reduction in benefits under
    29     the certificate.
    30  The society may specify the manner of the election and which
    19910S0186B2585                 - 25 -

     1  alternative is to be presumed if no election is made.
     2     (e)  Certified copies as evidence.--Copies of any of the
     3  documents mentioned in this section, certified by the secretary
     4  or corresponding officer of the society, shall be received in
     5  evidence of the terms and conditions thereof.
     6     (f)  Content.--No certificate, application, rider or
     7  endorsement used in connection therewith shall be delivered or
     8  issued for delivery in this Commonwealth unless the form
     9  contains provisions required for like forms issued by life,
    10  accident and health insurers in this Commonwealth and a copy of
    11  the form has been filed with and approved by the commissioner in
    12  the manner provided for like policies issued by life, accident
    13  and health insurers in this Commonwealth. Every life, accident,
    14  health or disability insurance certificate, every annuity
    15  certificate, and every application, rider or endorsement used in
    16  connection therewith approved prior to the effective date of
    17  this act shall be brought into compliance with this chapter
    18  within one year of the effective date of this act.
    19     (g)  Premium grace period.--The certificate may contain a
    20  provision for a grace period for payment of premiums of one full
    21  month in its certificates.
    22     (h)  Additional provisions.--The certificate shall also
    23  contain the following:
    24         (1)  A provision stating the amount of premiums which are
    25     payable under the certificate and a provision reciting or
    26     setting forth the substance of any sections of the society's
    27     laws or rules in force at the time of issuance of the
    28     certificate which, if violated, will result in the
    29     termination or reduction of benefits payable under the
    30     certificate.
    19910S0186B2585                 - 26 -

     1         (2)  A provision that any member expelled or suspended,
     2     except for nonpayment of a premium or within the contestable
     3     period for material misrepresentation in the application for
     4     membership or insurance, shall have the privilege of
     5     maintaining the certificate in force by continuing payment of
     6     the required premium.
     7         (3)  A provision that in case the age or sex of the
     8     member or of any other person is considered in determining
     9     the premium and it is found at any time before final
    10     settlement under the certificate that the age or sex has been
    11     misstated, and the discrepancy and premium involved have not
    12     been adjusted, the amount payable under the certificate shall
    13     be such as the premium would have purchased at the correct
    14     age and sex. If the correct age was not an insurable age
    15     under the society's charter or laws, only the premiums paid
    16     to the society, less any payments previously made to the
    17     member, shall be returned or, at the option of the society,
    18     the amount payable under the certificate shall be such as the
    19     premium would have purchased at the correct age according to
    20     the society's promulgated rates and any extension thereof
    21     based on actuarial principles.
    22     (i)  Transfer of contract or ownership.--Benefit contracts
    23  issued on the lives of persons below the society's minimum age
    24  for adult membership may provide for transfer of control or
    25  ownership to the insured at an age specified in the certificate.
    26  A society may require approval of an application for membership
    27  in order to effect this transfer and may provide in all other
    28  respects for the regulation, government and control of the
    29  certificates and all rights, obligations and liabilities
    30  incident thereto and connected therewith. Ownership rights prior
    19910S0186B2585                 - 27 -

     1  to the transfer shall be specified in the certificate.
     2     (j)  Assignment.--A society may specify the terms and
     3  conditions on which benefit contracts may be assigned.
     4  Section 405.  Nonforfeiture benefits, cash surrender values,
     5                 certificate loans and other options.
     6     (a)  Existing certificates.--For certificates issued prior to
     7  one year after the effective date of this act, the value of
     8  every paid-up nonforfeiture benefit and the amount of any cash
     9  surrender value, loan or other option granted shall comply with
    10  the provisions of law applicable immediately prior to the
    11  effective date of this act.
    12     (b)  New certificates.--For LIFE certificates issued on or     <--
    13  after one year from the effective date of this act for which
    14  reserves are computed on the Commissioner's 1941 Standard
    15  Ordinary Mortality Table, the Commissioner's 1941 Standard
    16  Industrial Table or the Commissioner's 1958 Standard Ordinary
    17  Mortality Table, or the Commissioner's 1980 Standard Mortality
    18  Table, or any more recent table made applicable to life
    19  insurers, every paid-up nonforfeiture benefit and the amount of
    20  any cash surrender value, loan or other option granted shall not
    21  be less than the corresponding amount ascertained in accordance
    22  with the laws of this Commonwealth applicable to life insurers
    23  issuing policies containing like benefits based upon such
    24  tables. FOR ANNUITY CERTIFICATES ISSUED ON OR AFTER ONE YEAR      <--
    25  FROM THE EFFECTIVE DATE OF THIS ACT, EVERY PAID-UP ANNUITY
    26  BENEFIT, CASH SURRENDER VALUE OR DEATH BENEFIT SHALL NOT BE LESS
    27  THAN THE CORRESPONDING AMOUNT IN ACCORDANCE WITH THE LAWS OF
    28  THIS COMMONWEALTH APPLICABLE TO LIFE INSURERS ISSUING POLICIES
    29  CONTAINING LIKE BENEFITS.
    30                             CHAPTER 5
    19910S0186B2585                 - 28 -

     1                             FINANCIAL
     2  Section 501.  Investments.
     3     (a)  General rule.--A society shall invest its funds only in
     4  investments authorized by the laws of this Commonwealth for the
     5  investment of assets of life insurers and subject to the
     6  limitations thereon. Any foreign or alien society permitted or
     7  seeking to do business in this Commonwealth which invests its
     8  funds in accordance with the laws of the state, district,
     9  territory, country or province in which it is incorporated,
    10  shall be held to meet the requirements of this section for the
    11  investment of funds.
    12     (b)  Real estate.--In addition to the investment of assets as
    13  prescribed in this section or any other laws of this
    14  Commonwealth, a fraternal benefit society may purchase, receive,
    15  hold and convey real estate or any interest therein for the
    16  purpose of maintenance or construction of camps or recreational
    17  areas with necessary facilities for all its members. These
    18  assets shall be shown on the annual statement at cost in the
    19  year acquired and may not exceed 5% of other admitted assets of
    20  the society.
    21  Section 502.  Funds.
    22     (a)  General rule.--All assets shall be held, invested and
    23  disbursed for the use and benefit of the society, and no member
    24  or beneficiary shall have or acquire individual rights therein
    25  or become entitled to any apportionment on the surrender of any
    26  part thereof, except as provided in the benefit contract.
    27     (b)  Special 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 the society.
    30     (c)  Separate accounts.--A society may, pursuant to
    19910S0186B2585                 - 29 -

     1  resolution of its supreme governing body, establish and operate
     2  one or more separate accounts and issue contracts on a variable
     3  basis, subject to the insurance laws regulating life insurers
     4  establishing those accounts and issuing those contracts. To the
     5  extent the society deems it necessary in order to comply with
     6  any applicable Federal or State laws, or any rules issued
     7  thereunder, the society may:
     8         (1)  Adopt special procedures for the conduct of the
     9     business and affairs of a separate account.
    10         (2)  For persons having beneficial interests therein,
    11     provide special voting and other rights, including, without
    12     limitation special rights and procedures relating to
    13     investment policy, investment advisory services, selection of
    14     certified public accountants, and selection of a committee to
    15     manage the business and affairs of the account.
    16         (3)  Issue contracts on a variable basis to which section
    17     404(b) and (d) shall not apply.
    18                             CHAPTER 6
    19                             REGULATION
    20  Section 601.  Valuation.
    21     (a)  Existing certificates.--Standards of valuation THE        <--
    22  MINIMUM RESERVES for certificates issued prior to one year after
    23  the effective date of this act shall be those provided by the
    24  laws applicable immediately prior to the effective date of this
    25  act.
    26     (b)  New certificates.--The minimum standards of valuation     <--
    27  RESERVES for certificates issued on or after one year from the    <--
    28  effective date of this act shall be based on the following
    29  tables:
    30         (1)  For certificates of life insurance - the
    19910S0186B2585                 - 30 -

     1     Commissioner's 1941 Standard Ordinary Mortality Table, the
     2     Commissioner's 1941 Standard Industrial Mortality Table, the
     3     Commissioner's 1958 Standard Ordinary Mortality Table, the
     4     Commissioner's 1980 Standard Ordinary Mortality Table or any
     5     more recent table made applicable to life insurers.
     6         (2)  For annuity and pure endowment certificates, for
     7     total and permanent disability benefits, for accidental death
     8     benefits and for noncancelable accident and health benefits -  <--
     9     such tables as are authorized for use by life insurers in
    10     this Commonwealth.
    11     (c)  Valuation methods and standards.--All of the valuations
    12  under subsection (a) or (b) shall be under valuation methods and  <--
    13  standards, including interest assumptions, INTEREST STANDARDS in  <--
    14  accordance with the laws of this Commonwealth applicable to life
    15  insurers issuing policies containing like benefits.
    16     (d)  Other valuation standards.--The commissioner may, in his
    17  discretion, accept other standards for valuation if the
    18  commissioner finds that the reserves produced thereby will not
    19  be less in the aggregate than reserves computed in accordance
    20  with the minimum valuation standard prescribed in this section.
    21  The commissioner may, in his discretion, vary the standards of
    22  mortality applicable to all benefit contracts on substandard
    23  lives or other extra hazardous lives by any society authorized
    24  to do business in this Commonwealth.
    25     (e)  Excess reserves.--Any society, with the consent of the
    26  commissioner of insurance of the state of domicile of the
    27  society and under such conditions, if any, which the
    28  commissioner may impose, may establish and maintain reserves on
    29  its certificates in excess of the reserves required thereunder,
    30  but the contractual rights of any benefit member shall not be
    19910S0186B2585                 - 31 -

     1  affected thereby.
     2  Section 602.  Reports.
     3     (a)  General rule.--Reports shall be filed in accordance with
     4  the provisions of this section.
     5     (b)  Annual statement.--Every society transacting business in
     6  this Commonwealth shall annually, on or before March 1, unless
     7  for cause shown the time has been extended by the commissioner,
     8  file with the commissioner a true statement of its financial
     9  condition, transactions and affairs for the preceding calendar
    10  year and shall pay the fee prescribed in section 701 611 for the  <--
    11  filing. The statement shall be in general form and context as
    12  approved by the National Association of Insurance Commissioners   <--
    13  A NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, APPROVED BY    <--
    14  THE INSURANCE DEPARTMENT, for fraternal benefit societies and as
    15  supplemented by additional information required by the
    16  commissioner.
    17     (c)  Valuation of certificates.--As part of the annual
    18  statement required in this section, each society shall, on or
    19  before March 1, file with the commissioner a valuation of its
    20  certificates in force on December 31 last preceding. The
    21  commissioner may, in his discretion for cause shown, extend the
    22  time for filing the valuation for not more than two calendar
    23  months. The valuation shall be done in accordance with the
    24  standards specified in section 601. The valuation and underlying
    25  data shall be certified by a qualified actuary.
    26     (d)  Failure to file statement.--A society neglecting to file
    27  the annual statement in the form and within the time provided by
    28  this section shall forfeit $100 for each day during which that
    29  neglect continues and, upon notice by the commissioner to that
    30  effect, its authority to do business in this Commonwealth shall
    19910S0186B2585                 - 32 -

     1  cease while the default continues.
     2  Section 603.  Annual license.
     3     Societies which are now authorized to transact business in
     4  this Commonwealth may continue such business until April 1 next
     5  succeeding the effective date of this act. The authority of such
     6  societies and all societies hereafter licensed, may thereafter
     7  be renewed annually, but in all cases to terminate on the
     8  succeeding April 1. However, a license so issued shall continue
     9  in full force and effect until the new license is issued or
    10  specifically refused. For each license or renewal the society
    11  shall pay the commissioner the prescribed fee. A duly certified
    12  copy or duplicate of such license shall be prima facie evidence
    13  that the licensee is a fraternal benefit society within the
    14  meaning of this act.
    15  Section 604.  Examination of societies.
    16     (a)  General rule.--The commissioner, or any person he may
    17  appoint, may examine any domestic, foreign or alien society
    18  transacting or applying for admission to transact business in
    19  this Commonwealth in the same manner as authorized for
    20  examination of domestic, foreign or alien insurers. Requirements
    21  of notice and an opportunity to respond before findings are made
    22  public as provided in the insurance laws regulating insurers
    23  shall also be applicable to the examination of societies.
    24     (b)  Payment of expenses.--The expense of each examination
    25  and of each valuation, including compensation and actual expense
    26  of examiners, shall be paid by the society examined or whose
    27  certificates are valued, upon statements furnished by the
    28  commissioner.
    29  Section 605.  Foreign or alien society; admission.
    30     No foreign or alien society shall transact business in this
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     1  Commonwealth without a license issued by the commissioner. Any
     2  such society desiring admission to this Commonwealth shall
     3  comply substantially with the requirements and limitations of
     4  this act applicable to domestic societies. Any such society may
     5  be licensed to transact business in this Commonwealth upon
     6  filing the following with the commissioner and upon a showing
     7  that its assets are invested in accordance with the provisions
     8  of this act:
     9         (1)  A duly certified copy of its articles of
    10     incorporation.
    11         (2)  A copy of its bylaws, certified by its secretary or
    12     corresponding officer.
    13         (3)  A power of attorney to the commissioner as
    14     prescribed in section 613.
    15         (4)  A statement of its business under oath of its
    16     president and secretary or corresponding officers in a form
    17     prescribed by the commissioner, duly verified by an
    18     examination made by the supervising insurance official of its
    19     home state or other state, territory, province or country,
    20     satisfactory to the commissioner.
    21         (5)  Certification from the proper official of its home
    22     state, territory, province or country that the society is
    23     legally incorporated and licensed to transact business
    24     therein.
    25         (6)  Copies of its certificate forms.
    26         (7)  Such other information as the commissioner may deem
    27     necessary.
    28  Section 606.  Injunction, liquidation and receivership of
    29                 domestic society.
    30     (a)  Notice of deficiencies and sanctions.--When the
    19910S0186B2585                 - 34 -

     1  commissioner upon investigation finds that a domestic society:
     2         (1)  has exceeded its powers;
     3         (2)  has failed to comply with any provision of this act;
     4         (3)  is not fulfilling its contracts in good faith;
     5         (4)  has a membership of less than 400 after an existence
     6     of one year or more;
     7         (5)  is conducting business fraudulently or in a manner
     8     hazardous to its members, creditors, the public or the
     9     business; or
    10         (6)  has become impaired;
    11  the commissioner shall notify the society of the deficiency or
    12  deficiencies and state in writing the reasons for his
    13  dissatisfaction. The commissioner shall at once issue a written
    14  notice to the society requiring that the deficiency or
    15  deficiencies which exist are corrected. After this notice the
    16  society shall have a 30-day period in which to comply with the
    17  commissioner's request for correction and, if the society fails
    18  to comply, the commissioner shall notify the society of the
    19  findings of noncompliance and require the society to show cause
    20  on a date named why it should not be enjoined from carrying on
    21  any business until the violation complained of shall have been
    22  corrected or why an action in quo warranto should not be
    23  commenced against the society.
    24     (b)  Action by Attorney General.--If on that date the society
    25  does not present good and sufficient reasons why it should not
    26  be so enjoined or why such action should not be commenced, the
    27  commissioner may present the facts relating thereto to the
    28  Attorney General who shall, if he deems the circumstances
    29  warrant, commence an action to enjoin the society from
    30  transacting business or in quo warranto.
    19910S0186B2585                 - 35 -

     1     (c)  Hearing and order.--The court shall thereupon notify the
     2  officers of the society of a hearing. If after a full hearing it
     3  appears that the society should be so enjoined or liquidated or
     4  a receiver appointed, the court shall enter the necessary order.
     5  No society so enjoined shall have the authority to do business
     6  until all of the following occur:
     7         (1)  The commissioner finds that the violation complained
     8     of has been corrected.
     9         (2)  The costs of such action shall have been paid by the
    10     society if the court finds that the society was in default as
    11     charged.
    12         (3)  The court has dissolved its injunction.
    13         (4)  The commissioner has reinstated the certificate of
    14     authority.
    15     (d)  Liquidation.--If the court orders the society
    16  liquidated, it shall be enjoined from carrying on any further
    17  business, whereupon the receiver of the society shall proceed at
    18  once to take possession of the books, papers, money and other
    19  assets of the society and, under the direction of the court,
    20  proceed forthwith to close the affairs of the society and to
    21  distribute its funds to those entitled thereto.
    22     (e)  Validity of action and appointment of receiver.--No
    23  action under this section shall be recognized in any court of
    24  this Commonwealth unless brought by the Attorney General upon
    25  request of the commissioner. Whenever a receiver is to be
    26  appointed for a domestic society, the court shall appoint the
    27  commissioner as the receiver.
    28     (f)  Applicability to voluntary dissolution.--The provisions
    29  of this section relating to hearing by the commissioner, action
    30  by the Attorney General at the request of the commissioner,
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     1  hearing by the court, injunction and receivership shall be
     2  applicable to a society which shall voluntarily determine to
     3  discontinue business.
     4  Section 607.  Suspension, revocation or refusal of license of
     5                 foreign or alien society.
     6     (a)  Notice of deficiencies and sanctions.--When the
     7  commissioner upon investigation finds that a foreign or alien
     8  society transacting or applying to transact business in this
     9  Commonwealth:
    10         (1)  has exceeded its powers;
    11         (2)  has failed to comply with any of the provisions of
    12     this act;
    13         (3)  is not fulfilling its contracts in good faith; or
    14         (4)  is conducting its business fraudulently or in a
    15     manner hazardous to its members or creditors or the public;
    16  the commissioner shall notify the society of such deficiency or
    17  deficiencies and state in writing the reasons for his
    18  dissatisfaction. The commissioner shall at once issue a written
    19  notice to the society requiring that the deficiency or
    20  deficiencies which exist are corrected. After such notice the
    21  society shall have a 30-day period in which to comply with the
    22  commissioner's request for correction and, if the society fails
    23  to comply, the commissioner shall notify the society of the
    24  findings of noncompliance and require the society to show cause
    25  on a date named why its license should not be suspended, revoked
    26  or refused. If on that date the society does not present good
    27  and sufficient reason why its authority to do business in this
    28  Commonwealth should not be suspended, revoked or refused, the
    29  commissioner may suspend or refuse the license of the society to
    30  do business in this Commonwealth until satisfactory evidence is
    19910S0186B2585                 - 37 -

     1  furnished to the commissioner that the suspension or refusal
     2  should be withdrawn or the commissioner may revoke the authority
     3  of the society to do business in this Commonwealth.
     4     (b)  Existing contracts unaffected.--Nothing contained in
     5  this section shall be taken or construed as preventing any such
     6  society from continuing in good faith all contracts made in this
     7  Commonwealth during the time the society was legally authorized
     8  to transact business in this Commonwealth.
     9  Section 608.  Injunction.
    10     No application or petition for injunction against any
    11  domestic, foreign or alien society, or lodge thereof, respecting
    12  any matter pertaining to a regulatory law administered by the
    13  commissioner shall be recognized in any court of this
    14  Commonwealth unless made by the Attorney General upon request of
    15  the commissioner.
    16  Section 609.  Licensing of agents.
    17     (a)  General rule.--Agents of societies shall be licensed in
    18  accordance with the insurance laws regulating the licensing,
    19  revocation, suspension, or termination of license of resident
    20  and nonresident agents.
    21     (b)  Exemptions from licensure.--No examination or license
    22  shall be required of any regular salaried officer, employee or
    23  member of a licensed society who devotes substantially all of
    24  his services to activities other than the solicitation of
    25  fraternal insurance contracts from the public and who receives
    26  for the solicitation of such contracts no commission or other
    27  compensation directly dependent upon the amount of business
    28  obtained.
    29     (c)  Examination.--Any person who in the preceding calendar
    30  year has solicited and procured life insurance contracts on
    19910S0186B2585                 - 38 -

     1  behalf of any society in an amount of insurance in excess of
     2  $100,000, or, in the case of any other kind or kinds of
     3  insurance which the society might write, on the persons of more
     4  than 25 individuals and who has received or will receive a
     5  commission or other compensation therefor, shall be required to
     6  take an examination. No examination shall be required of any
     7  agent who was in the service of a society on January 28, 1978.
     8     (d)  Limitation.--No society doing business in this
     9  Commonwealth shall pay any commission or other compensation to
    10  any person for any services in obtaining in this Commonwealth
    11  any new contract of life, accident or health insurance, or any
    12  new annuity contract, except to a licensed, fraternal insurance
    13  agent of that society.
    14  Section 610.  Unfair methods of competition and unfair and
    15                 deceptive acts and practices.
    16     Every society authorized to do business in this Commonwealth
    17  shall be subject to the provisions of the act of July 22, 1974
    18  (P.L.589, No.205), known as the Unfair Insurance Practices Act,
    19  but nothing in that act shall be construed as applying to or
    20  affecting the right of any society to determine its eligibility
    21  requirements for membership by reason of common bond, or be
    22  construed as applying to or affecting the offering of benefits
    23  exclusively to members or persons eligible for membership in the
    24  society by a subsidiary corporation or affiliated organization
    25  organized to carry out the purposes set forth in section
    26  106(a)(2).
    27  Section 611.  Fees.
    28     The commissioner shall charge and collect fees from fraternal
    29  benefit societies as set forth in section 612-A of the act of
    30  April 9, 1929 (P.L.177, No.175), known as The Administrative
    19910S0186B2585                 - 39 -

     1  Code of 1929. All fees collected shall be paid daily into the
     2  State Treasury.
     3  Section 612.  Taxation.
     4     Every society organized or licensed under this act is hereby
     5  declared to be a charitable and benevolent institution, and all
     6  of its funds shall be exempt from all and every Commonwealth,
     7  county, district, municipal and school tax other than taxes on
     8  real estate and office equipment.
     9  Section 613.  Service of process.                                 <--
    10     (a)  Appointment of commissioner.--Every society authorized
    11  to do business in this Commonwealth shall appoint in writing the
    12  commissioner and each successor in office to be its true and
    13  lawful attorney upon whom all lawful process in any action or
    14  proceeding against it shall be served, and shall agree in
    15  writing that any lawful process against it which is served on
    16  the attorney shall be of the same legal force and validity as if
    17  served upon the society, and that the authority shall continue
    18  in force so long as any liability remains outstanding in this
    19  Commonwealth. Copies of the appointment, certified by the
    20  commissioner, shall be deemed sufficient evidence thereof and
    21  shall be admitted in evidence with the same force and effect as
    22  the original thereof might be admitted.
    23     (b)  Service upon commissioner.--Service shall only be made
    24  upon the commissioner or, if absent, upon the person in charge
    25  of the commissioner's office. It shall be made in duplicate and
    26  shall constitute sufficient service upon the society. When legal
    27  process against a society is served upon the commissioner, the
    28  commissioner shall forthwith forward one of the duplicate copies
    29  by registered mail, prepaid, directed to the secretary or
    30  corresponding officer. No such service shall require a society
    19910S0186B2585                 - 40 -

     1  to file its answer, pleading or defense in less than 30 days
     2  from the date of mailing the copy of the service to a society.
     3  Legal process shall not be served upon a society except in the
     4  manner herein provided. At the time of serving any process upon
     5  the commissioner, the plaintiff or complainant in the action
     6  shall pay to the commissioner a fee of $10.
     7  Section 614 613.  Review.                                         <--
     8     All decisions and findings of the commissioner made under the
     9  provisions of this act shall be subject to review by proper
    10  proceedings in any court of competent jurisdiction in this
    11  Commonwealth.
    12  Section 615 614.  Penalties.                                      <--
    13     (a)  False statements.--It shall be prohibited for any person
    14  to willfully make a false or fraudulent statement in or relating
    15  to an application for membership or for the purpose of obtaining
    16  money from or a benefit in any society.
    17     (b)  Filing of false statement.--Any person who willfully
    18  makes a false or fraudulent statement in any verified report or
    19  declaration under oath required or authorized by this act, or of
    20  any material fact or thing contained in a sworn statement
    21  concerning the death or disability of a member for the purpose
    22  of procuring payment of a benefit named in the certificate,
    23  commits perjury and shall be subject to the penalties therefor
    24  prescribed by law.
    25     (c)  Solicitation by nonlicensed society.--A person who
    26  solicits membership for or in any manner assists in procuring
    27  membership in any society not licensed to do business in this
    28  Commonwealth commits a summary offense and shall, upon
    29  conviction, be sentenced to pay a fine of not less than $500 nor
    30  more than $1,000.
    19910S0186B2585                 - 41 -

     1     (d)  Penalty for other violation.--A person who willfully
     2  violates, neglects or refuses to comply with the provisions of
     3  this act for which a penalty is not otherwise prescribed,
     4  commits a summary offense and shall, upon conviction, be
     5  sentenced to pay a fine of not more than $500. Upon satisfactory
     6  evidence of a violation of any provision of this act, the
     7  commissioner may in his discretion, in lieu of seeking criminal
     8  prosecution, pursue any one or more of the following courses of
     9  action:
    10         (1)  Suspend or revoke or refuse to renew the license of
    11     the offending party or parties.
    12         (2)  Impose a civil penalty of not more than $1,000 for
    13     each and every act in violation of the provisions of this act
    14     by the party or parties.
    15  Section 616 615.  Applicability of insurance laws.                <--
    16     Except as provided in this act, societies shall be governed
    17  by this act and shall be exempt from all other provisions of the
    18  insurance laws of this Commonwealth unless they are expressly
    19  designated therein or unless it is specifically made applicable
    20  by this act.
    21  Section 617 616.  Exemption of certain societies.                 <--
    22     (a)  General rule.--Nothing contained in this act shall be so
    23  construed as to affect or apply to:
    24         (1)  Grand or subordinate lodges of societies, orders or
    25     associations now doing business in this Commonwealth which
    26     provide benefits exclusively through local or subordinate
    27     lodges.
    28         (2)  Orders, societies or associations which admit to
    29     membership only persons engaged in one or more crafts or
    30     hazardous occupations, in the same or similar lines of
    19910S0186B2585                 - 42 -

     1     business, insuring only their own members and their families,
     2     and the ladies' societies or ladies' auxiliaries to such
     3     orders, societies or associations.
     4         (3)  Domestic societies which limit their membership to
     5     employees of a particular city or town, designated firm,
     6     business house or corporation which provide for a death
     7     benefit of not more than $400 or disability benefits of not
     8     more than $350 to any person in any one year, or both.
     9         (4)  Domestic societies or associations of a purely
    10     religious, charitable or benevolent description which provide
    11     for a death benefit of not more than $400 or for disability
    12     benefits of not more than $350 to any one person in any one
    13     year, or both.
    14     (b)  Exclusions from exemption.--Any society or association
    15  described in subsection (a)(3) or (4) which provides for death
    16  or disability benefits for which benefit certificates are
    17  issued, and any society or association included in subsection
    18  (a)(4) which has more than 1,000 members, shall not be exempted
    19  from the provisions of this act but shall comply with all
    20  requirements thereof.
    21     (c)  Limitation or compensation payments.--No society which,
    22  by the provisions of this section, is exempt from the
    23  requirements of this act, except any society described in
    24  subsection (a)(2), shall give or allow, or promise to give or
    25  allow, to any person any compensation for procuring new members.
    26     (d)  Accidental benefits.--Every society which provides for
    27  benefits in case of death or disability resulting solely from
    28  accident and which does not obligate itself to pay natural death
    29  or sick benefits shall have all of the privileges and be subject
    30  to all the applicable provisions and regulations of this chapter
    19910S0186B2585                 - 43 -

     1  except that the provisions thereof relating to medical
     2  examination, valuations of benefit certificates and
     3  incontestability shall not apply to such society.
     4     (e)  Submission of information.--The commissioner may require
     5  from any society or association, by examination or otherwise,
     6  such information as will enable the commissioner to determine
     7  whether the society or association is exempt from the provisions
     8  of this chapter.
     9     (f)  Exemption from insurance laws.--Societies exempted under
    10  the provisions of this section shall also be exempt from all
    11  other provisions of the insurance laws of this Commonwealth.
    12                             CHAPTER 7
    13                     REPEALS AND EFFECTIVE DATE
    14  Section 701.  Repeals.
    15     (a)  Absolute repeals.--The following acts and parts of acts
    16  are repealed:
    17     Act of July 29, 1977 (P.L.105, No.38), known as the Fraternal
    18  Benefit Society Code.
    19     40 Pa.C.S. Ch. 65 (relating to fraternal benefit societies).
    20     (b)  Inconsistent repeals.--The following acts and parts of
    21  acts are repealed insofar as they are inconsistent with this
    22  act:
    23     Article XIII.1 of the act of April 9, 1929 (P.L.343, No.176),
    24  known as The Fiscal Code.
    25     Act of June 4, 1937 (P.L.1643, No. 342), entitled "An act
    26  relating to certain existing beneficial societies; conferring
    27  certain rights, powers and duties upon them, their officers and
    28  members; authorizing the payment of benefits by them in the
    29  event of sickness, accident, disability or death; regulating
    30  such societies and corporations; and limiting the amount for
    19910S0186B2585                 - 44 -

     1  which they may issue membership certificates or policies;
     2  providing for reserves; imposing penalties; and repealing
     3  certain existing laws and parts of law."
     4  Section 702.  Effective date.
     5     This act shall take effect in 60 days.

















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