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PRINTER'S NO. 1166
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1016
Session of
2019
INTRODUCED BY DeLUCA, PICKETT, MILLARD, ROTHMAN, MATZIE, TOEPEL,
READSHAW, WARREN, GOODMAN, COMITTA, KORTZ, EVERETT, SIMMONS,
MARKOSEK, TOPPER, PASHINSKI, A. DAVIS, HARKINS, DRISCOLL,
SCHWEYER, KIM, BIZZARRO, ECKER, ISAACSON, FREEMAN, FLYNN,
DAWKINS, T. DAVIS AND NESBIT, APRIL 2, 2019
REFERRED TO COMMITTEE ON INSURANCE, APRIL 2, 2019
AN ACT
Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An
act relating to insurance; amending, revising, and
consolidating the law providing for the incorporation of
insurance companies, and the regulation, supervision, and
protection of home and foreign insurance companies, Lloyds
associations, reciprocal and inter-insurance exchanges, and
fire insurance rating bureaus, and the regulation and
supervision of insurance carried by such companies,
associations, and exchanges, including insurance carried by
the State Workmen's Insurance Fund; providing penalties; and
repealing existing laws," in fraternal benefit societies,
providing for solvency and further providing for benefit
contract and for injunction, liquidation and receivership of
domestic society.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The act of May 17, 1921 (P.L.682, No.284), known
as The Insurance Company Law of 1921, is amended by adding a
section to read:
Section 2428. Solvency.
(a) Hazardous condition.--If a domestic society has an
authorized control level event, under circumstances the
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commissioner determines will not be promptly remedied, the
commissioner may, in addition to all other actions required or
permitted by this act and other applicable law, issue an order
declaring the domestic society to be in hazardous condition and
ordering that all steps be taken to remedy the condition in
accordance with this section.
(b) Transfer of assets and liabilities.--
(1) Upon the commissioner's order, a domestic society
may negotiate an agreement to transfer all members,
certificates and other assets and liabilities of the domestic
society to another fraternal benefit society or other insurer
through merger, consolidation, assumption or other means. The
following apply:
(i) The transfer shall be concluded within the time
frame agreed to by the commissioner and subject to
approval by the commissioner.
(ii) The transfer agreement shall be deemed fully
approved by the domestic society upon majority vote of
its board of directors, notwithstanding the provisions of
section 2405, any other law or regulation or the laws of
the domestic society requiring notice to members or
approval by two-thirds majority vote of the supreme
governing body, which shall be suspended by this section.
(iii) The domestic society shall provide notice to
its members of the transaction not later than 30 days
after approval by the commissioner.
(2) The board of directors of a domestic society may
suspend or modify the qualifications for membership in the
domestic society as necessary to facilitate a transfer under
this section, notwithstanding the laws of the domestic
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society or any law or regulation to the contrary.
(3) Upon the effective date of a transfer to an
organization that is not a fraternal benefit society and in
consideration for that transfer, each member of the society
shall be deemed to agree that any terms of a certificate
subjecting the certificate to the laws of the society or
providing for the maintenance of the society's solvency,
except to the extent of any outstanding assessment not
released by the terms of the transfer, shall be null and
void, and the assuming organization shall endorse the
certificates accordingly.
(4) Each domestic society shall amend its laws to permit
the transactions contemplated by this section, including
suspending any provisions requiring notice to members or
approval of the supreme governing body with respect to the
transfer of its certificates if the society has an authorized
control level event and the transfer is approved by the
commissioner.
(c) Definitions.--As used in this section, the following
words and phrases shall have the meanings given to them in this
subsection unless the context clearly indicates otherwise:
"Authorized control level event." As defined in section 501-
A of the act of May 17, 1921 (P.L.789, No.285), known as The
Insurance Department Act of 1921.
Section 2. Section 2434(d) of the act is amended to read:
Section 2434. Benefit contract.
* * *
(d) Payment of deficiencies.--A society shall provide in its
laws that, if its reserves as to all or any class of
certificates become impaired, its board of directors or
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corresponding body may require that there shall be paid by the
owner to the society the amount of the owner's equitable
proportion of such deficiency as ascertained by its board, and
if the payment is not made:
(1) it shall stand as an indebtedness against the
certificate and draw interest not to exceed the rate
specified for certificate loans under the certificates; or
(2) in lieu of or in combination with paragraph (1), the
owner may accept a proportionate reduction in benefits under
the certificate.
The society may specify the manner of the election and which
alternative is to be presumed if no election is made. No
assessment under this subsection shall take effect prior to 90
days from notification of the commissioner, but the commissioner
may approve an earlier effective date. The commissioner may
disapprove the assessment if the commissioner finds that the
assessment was not duly adopted in conformity with the
provisions of this article, is contrary to the interests of the
benefit members of the society or does not materially improve
the long-term viability of the society.
* * *
Section 3. Section 2456(a) of the act is amended and the
section is amended by adding a subsection to read:
Section 2456. Injunction, liquidation and receivership of
domestic society.
(a) Notice of deficiencies and sanctions.--When the
commissioner upon investigation finds that a domestic society:
(1) has exceeded its powers;
(2) has failed to comply with any provision of this
article;
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(3) is not fulfilling its contracts in good faith;
(4) has a membership of less than 400 after an existence
of one year or more;
(5) is conducting business fraudulently or in a manner
hazardous to its members, creditors, the public or the
business; [or]
(6) has become impaired;
(7) has failed to comply with an order of the
commissioner under section 2428; or
(8) has failed to remedy the hazardous condition as
determined by the commissioner within the time frames
established by the commissioner in accordance with section
2428;
the commissioner shall notify the society of the deficiency or
deficiencies and state in writing the reasons for his
dissatisfaction. The commissioner shall at once issue a written
notice to the society requiring that the deficiency or
deficiencies which exist are corrected. After this notice the
society shall have a 30-day period in which to comply with the
commissioner's request for correction, and, if the society fails
to comply, the commissioner shall notify the society of the
findings of noncompliance and require the society to show cause
on a date named why it should not be enjoined from carrying on
any business until the violation complained of shall have been
corrected or why an action in quo warranto should not be
commenced against the society.
* * *
(g) Liquidation proceedings.--Liquidation proceedings for a
domestic society shall be conducted consistent with the purposes
of section 501 of the act of May 17, 1921 (P.L.789, No.285),
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known as The Insurance Department Act of 1921, in a manner
designed to conserve assets, limit liquidation expenses and
avoid an assessment. The following apply:
(1) The liquidator may attempt to transfer policies or
certificates of the liquidating fraternal benefit society by
way of assignment, assumption or other means to another
qualified fraternal benefit society, whether domestic or
foreign, or, if no qualified fraternal benefit society will
accept the transfer, to another insurer. The following apply:
(i) In determining whether a fraternal benefit
society is qualified, the liquidator shall consider,
among other things, the solvency of the society.
(ii) A fraternal benefit society shall not be
obligated in any circumstance to accept the transfer.
(iii) Upon the effective date of a transfer to an
insurer that is not a fraternal benefit society and in
consideration for that transfer, each member of the
society and owner of a policy or certificate shall be
deemed to agree that any terms of an insurance policy or
certificate providing for the maintenance of the
society's solvency or subjecting the policy or
certificate to the bylaws of the society shall be null
and void. Other changes determined by the liquidator to
be necessary to effectuate the transfer shall be made,
and the assuming insurer shall endorse the policy or
certificate accordingly.
(2) Notwithstanding section 2434(d), an assessment may
not be imposed against a certificate by a domestic society
after a petition for liquidation is filed, except as
determined by the commissioner to be necessary to satisfy
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claims as described in section 544(a) and (b) of The
Insurance Department Act of 1921.
Section 4. This act shall take effect in 60 days.
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