BENEFICIAL SOCIETIES, REGULATION
                 Act of Jun. 4, 1937, P.L. 1643, No. 342              Cl. 40
                                  AN ACT

     Relating to certain existing beneficial societies; conferring
        certain rights, powers and duties upon them, their officers
        and members; authorizing the payment of benefits by them in
        the event of sickness, accident, disability or death;
        regulating such societies and corporations; and limiting the
        amount for which they may issue membership certificates or
        policies; providing for reserves; imposing penalties; and
        repealing certain existing laws and parts of law.

        Compiler's Note:  Section 905 of Act 38 of 1977 provided that
            Act 342 is repealed insofar as it is inconsistent with
            Act 38.
        Compiler's Note:  Section 3 of Act 506 of 1965 provided that
            Act 342 is repealed insofar as it is inconsistent with
            Act 506.
        Section 1.  Applicability.--Be it enacted, &c.,
        A.  That the provisions of this act shall apply to the
     following beneficial societies:
        (1)  All beneficial societies incorporated under general or
     special laws since the thirteenth day of October, one thousand
     eight hundred and fifty-seven.
        (2)  All beneficial societies incorporated heretofore which
     have accepted the provisions of the Constitution and the general
     insurance laws enacted since the thirteenth day of October, one
     thousand eight hundred and fifty-seven.
        (3)  All beneficial societies incorporated under any general
     or special law prior to the thirteenth day of October, one
     thousand eight hundred and fifty-seven, which, by the terms of
     their charters or the acts under which they were incorporated,
     hold charters subject to alteration or revocation.
        B.  Any beneficial society heretofore incorporated as
     aforesaid, and now actually conducting business, may continue
     such business pending the issuance of a certificate of authority
     by the Insurance Commissioner, or until notified by the
     Insurance Commissioner that he has declined to issue such
     certificate of authority.
        Section 2.  Benefits Limited.--Any beneficial society may pay
     or enter into contracts to pay money or benefits, not exceeding
     twenty dollars ($20) per week, in the event of sickness,
     accident or disability, and not exceeding two hundred and fifty
     dollars ($250), in the event of death.
        Section 3.  Number, Election, Term and Classification of
     Directors; Vacancies.--A.  The annual meeting of members for
     election of directors of a beneficial society shall be held at
     such time, prior to the first day of May in every year, as the
     by-laws of the society may direct. Notice of the time and place
     of meeting shall be given to the members in accordance with the
     provisions of the by-laws. At such annual meeting, the members
     shall elect by ballot the number of directors stated in the
     articles of association or the by-laws, which shall be not less
     than five nor more than thirteen. Each director shall hold
     office for the term for which he is elected and until his
     successor shall have been duly elected and qualified.
        B.  Except as otherwise provided in the by-laws, each
     director shall be elected for a term of one year. If the
     articles or by-laws of a beneficial society so provide, the
     directors thereof may be classified in respect to the time for
     which they shall severally hold office. In such case, each class
     shall be as nearly equal in number as possible, the term of
     office of at least one class shall expire in each year, and the
     members of a class shall not be elected for a shorter period
     than one year or for a longer period than three years. At each
     ensuing election of directors after such classification, only
     the number of directors equal to the number of the class whose
     terms expire at the time of the election, shall be elected, and
     such directors shall be elected for the longest term for which
     any class may have been elected, as provided in this section.
        C.  Except as otherwise provided in the by-laws, vacancies in
     the board of directors shall be filled by the remaining members
     of the board, and each person so elected shall be a director
     until his successor is elected by the shareholders or members,
     who may make such election at the next annual meeting of the
     shareholders or members, or at any special meeting duly called
     for that purpose and held prior thereto.
        D.  Except as otherwise provided in this act, the business
     and affairs of every beneficial society shall be run and
     regulated in accordance with the provisions provided by existing
     law relating to insurance companies.
        Section 4.  Holding, Management or Agency Corporations.--The
     business and affairs of each beneficial society shall be
     conducted and managed by its elected officers. No contracts or
     agreements shall be entered into by any society with any
     holding, management or agency corporation by which the control
     of the management of the society would pass to such holding,
     management or agency corporation, nor any person or persons,
     holding, management or agency corporation by which the control
     of the management of the society would pass to such person or
     persons, holding, management or agency corporation, nor through
     which percentages or portions of the members dues and other
     payments would be paid over to them.
        Section 5.  Reserves.--A.  A beneficial society doing
     business in this Commonwealth shall, at all times, maintain
     reserves as follows:
        (1)  On the life portion, contained in all policies or
     contracts, reserves shall be based upon a standard table of
     mortality, approved by the Insurance Commissioner, with interest
     at a rate also approved by the Insurance Commissioner, and such
     reserves shall be computed in accordance with the requirements
     provided by law for the computation of the reserve liability for
     life insurance.
        (2)  On the disability portion, except in the case of
     noncancellable health and accident insurance issued on and after
     January first, nineteen hundred fifty, contained in all policies
     or contracts, reserves shall be computed in accordance with the
     requirements provided by law for the computation of the unearned
     premium reserve liability for casualty insurance.
        (3)  For all definite and outstanding claims, reserves shall
     be calculated in accordance with the requirements provided by
     law for the computation of reserves against unpaid losses in
     casualty insurance, other than losses under noncancellable
     health and accident insurance issued on and after January first,
     nineteen hundred fifty, compensation or liability insurance.
        (4)  On the noncancellable health and accident insurance
     portion contained in all policies or contracts issued on and
     after January first, nineteen hundred fifty, reserves shall be
     computed in accordance with the requirements provided by law for
     the computation of policy and loss reserves for noncancellable
     health and accident insurance.
        (5)  Noncancellable health and accident insurance means
     insurance against disability resulting from sickness, ailment,
     or bodily injury, under a policy or contract under which the
     insurer does not have the option to cancel or otherwise
     terminate the contract at or after the expiration of one year
     from its effective date.
        B.  A sum equal to the amount of the reserves required by
     this section shall be invested in those investments authorized
     by law for the investment of the reserve funds of life insurance
     companies.
        C.  The Insurance Commissioner shall each year approve the
     computation of the reserve liability, as of the thirty-first day
     of December of the preceding year, of every beneficial society
     authorized to make insurance on lives in this Commonwealth.
        D.  Whenever any beneficial society doing business in this
     Commonwealth has not on hand the net value of all policies in
     force after all other debts and claims against it have been
     provided for, the Insurance Commissioner shall notify such
     beneficial society to issue no new policies until its funds
     become equal to its liabilities.
        (5 amended May 20, 1949, P.L.1505, No.452)
        Section 6.  Investment of Surplus.--The surplus of a
     beneficial society or a reincorporated mutual beneficial society
     shall be invested in accordance with the requirements provided
     by law for the investment of the surplus of life insurance
     companies.
        Section 7.  Annual Statements; Penalties.--A.  Every
     beneficial society doing business in this Commonwealth shall
     annually, on or before the first day of March, file in the
     office of the Insurance Commissioner a statement which shall
     exhibit its financial condition as of the thirty-first day of
     December of the previous year and its business of that year.
     Such statement shall be in the form prescribed, or on forms
     furnished, by the Insurance Commissioner, and shall contain such
     information as shall seem to the commissioner best adapted for
     the purpose of eliciting from the beneficial society a true
     exhibit of its financial condition. It shall also, within thirty
     days after requested by the Insurance Commissioner, render such
     additional statement or statements concerning its affairs and
     financial condition as the Insurance Commissioner may, in his
     discretion, require.
        B.  Any beneficial society which neglects to make and file
     its annual statement in the form or within the time required by
     this section, shall forfeit a sum of not more than one hundred
     dollars for each day during which its failure to file a
     statement continues, and, upon notice from the Insurance
     Commissioner, its authority to transact new business shall cease
     while its default continues.
        C.  A beneficial society and the persons, who make an oath or
     subscribe to a false annual statement in its behalf, shall
     severally be punished for wilfully making a false annual
     statement by a fine of not less than five hundred dollars or
     more than five thousand dollars. A person who makes oath to such
     false statement with the knowledge that it is false shall be
     deemed guilty of perjury.
        Section 8.  Examinations.--The Insurance Commissioner, or any
     person or persons he may appoint, shall have the power of
     visitation and examination into the affairs of every beneficial
     society. He may employ such additional assistance, from time to
     time, as he may deem necessary or expedient for the purpose of
     such examination, and he, or any person or persons he may
     appoint, shall have free access to all the books, papers, and
     documents that relate to the business of the society, and may
     summon and qualify as witness under oath, and examine its
     officers and employes or other persons in relation to the
     affairs, transactions and conditions of the society. Such
     examinations shall be made every three (3) years or oftener as
     he deems it to be necessary, and the costs of such examinations,
     as determined by the Insurance Commissioner, shall be imposed
     upon each society so examined.
        Whenever, after examination, the Insurance Commissioner is
     satisfied that any beneficial society is exceeding its powers,
     or is transacting business fraudulently, or is in such condition
     that its further transaction of business will be hazardous to
     its members or to the public, or shall determine to discontinue
     business, the Insurance Commissioner may present the facts
     relating thereto to the Attorney General who shall, if he deem
     the circumstances warrant, proceed against such society in the
     method prescribed by the laws of this State providing for the
     liquidation of insolvent or delinquent companies, orders or
     associations transacting any class of insurance.
        No such proceedings shall be commenced by the Attorney
     General against any such society until after notice has been
     duly served on the chief executive officers of the society, and
     a reasonable opportunity given to it, on a date to be named in
     said notice, to show cause why such proceedings should not be
     commenced. No application for injunction against or proceedings
     for the dissolution of, or appointment of a receiver for, any
     beneficial society or branch thereof, shall be entertained by
     any court of this Commonwealth unless the same is made by the
     Attorney General.
        Section 9.  Copies of Policies, Contracts, and Certificates
     of Membership to Be Filed with and Approved by the Insurance
     Commissioner.--No policy, contract or certificate of membership
     shall be issued or delivered by any beneficial society in this
     Commonwealth, nor applications, riders or endorsements used in
     connection therewith, until the forms of the same have been
     submitted to, and formally approved by, the Insurance
     Commissioner under such reasonable rules and regulations as he
     shall make concerning the terms and provisions contained in such
     policies, contracts or certificates of membership, and their
     submission to and approval by him.
        Section 10.  Qualifications of Solicitors and Agents.--
     Solicitors or agents for beneficial societies shall meet the
     same prerequisites as existing law requires of agents for
     insurance companies.
        Section 11.  When Application, Constitution, By-Laws and
     Rules are Considered Part of Policy.--All beneficial
     certificates issued by any beneficial society in which the
     application of the member, the constitution, by-laws or other
     rules of the society form part of the certificate or contract
     between the parties thereto, or have any bearing thereon, shall
     contain or have attached thereto correct copies of the
     application as signed by the applicant or the constitution, by-
     laws or other rules referred to, and, unless so attached and
     accompanying the certificate or contract, such application,
     constitution or by-laws or other rules shall not be received in
     evidence in any controversy between the parties to or interested
     in the certificate or contract, nor shall such application,
     constitution, by-laws or other rules be considered a part of the
     certificate or contract between such parties.
        Section 12.  Penalties.--A.  Any person or beneficial society
     violating any of the provisions of this act shall be guilty of a
     misdemeanor, and, upon conviction thereof, shall be sentenced to
     pay a fine of not more than five hundred dollars for each
     violation thereof.
        B.  Upon satisfactory evidence of the violation of any of the
     sections of this act by any beneficial society, the Insurance
     Commissioner may, in his discretion, pursue any one or more of
     the following courses of action--(1) suspend or revoke the
     certificate of authority of such offending beneficial society;
     (2) refuse for a period of not to exceed one year thereafter to
     issue a new certificate of authority to such beneficial society;
     (3) impose a penalty of not more than one thousand dollars for
     each and every act in violation of this act.
        Before the Insurance Commissioner shall take any action as
     above set forth, he shall give written notice to the beneficial
     society accused of violating the law, stating specifically the
     nature of such alleged violation, and fixing a time and place,
     at least ten days thereafter, when a hearing of the matter shall
     be held. After such hearing, or upon failure of a duly
     authorized representative of the accused beneficial society to
     appear at such hearing, the commissioner shall impose such of
     the above penalties as he deems advisable.
        (12 repealed in part Apr. 28, 1978, P.L.202, No.53)

        Compiler's Note:  Section 508(a)(58) of Act 223 of 1970
            provided that the jurisdiction of the court named in
            section 12 is vested in the Commonwealth Court and
            provided that section 12 is repealed insofar as it is
            inconsistent with Act 223.
        Compiler's Note:  Section 14(a)(58) of Act 185 of 1969
            provided that the jurisdiction of the court named in
            section 12 is vested in the Commonwealth Court
            andprovided that section 12 is repealed insofar as it is
            inconsistent with Act 185.
        Section 13.  Scope of Act.--Provisions of this act shall not
     apply to--
        (1)  Beneficial associations which are formed by or for the
     exclusive benefit of those who, at the time of becoming members
     of such associations, are engaged in educational work in any
     department or district of the public school system of the
     Commonwealth of Pennsylvania, or in any college or university
     therein, and which issues beneficiary certificates only to such
     members.
        (2)  Fraternal, charitable or secret societies issuing
     beneficial certificates and paying benefits to their membership
     through the lodge system.
        (3)  Insurance or relief associations formed by or for the
     exclusive benefit of employes of corporations or firms, or
     formed by or for the exclusive benefit of members of any
     religious corporation or association.
        (4)  Associations whose benefits are limited to post-mortem
     assessments of the members.
        Section 15.  Constitutional Construction.--The provisions of
     this act are severable, and if any of the provisions hereof are
     held to be unconstitutional, the decision shall not be construed
     to impair any other provision of this act. It is hereby declared
     as a legislative intent that this act would have been adopted
     had such unconstitutional provisions not been included therein.