California Life & Health Insurance Guarantee Association

Contact Information

California Life & Health Insurance Guarantee Association
2377 Gold Meadow Way, Suite 100
Gold River, CA 95670
(p) 916.631.1581 (f) not available
Association Web site: http://www.califega.org
State Insurance Department: http://www.insurance.ca.gov/

Law Summaries Report

[ Current as of January 01, 2020 ] ]

Coverages

Covered Contracts

§1067.02(b)(1): for direct, nongroup life, health, or annuity policies or contracts, and supplemental contracts to any of these, and for certificates under direct group policies and contracts, except as limited by this article. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts. The health policies and contracts covered under this article include, but are not limited to, basic hospital, medical, and surgical insurance, major medical insurance, disability income insurance, disability insurance, including insurance appertaining to injury, disablement, or death resulting to the insured from accidents, and appertaining to disablements resulting to the insured from sickness, and long-term care insurance, including any net cash surrender and net cash withdrawal values. Amended effective 9.27.2010.

Non-Covered Contracts

§1067.02(b)(2): (A) Any portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy owner or contract owner. (B) Any policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract. (C) A portion of a policy or contract to the extent that the rate of interest on which it is based or the interest rate, crediting rate, or similar factor determined by the use of an index or other external reference which is stated in the policy or contract and employed in calculating returns or changes in value does both of the following: (i) Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this article exceeds the rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for the lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under this article, not to go below a minimum of 0 percent. (ii) On and after the date on which the member insurer becomes an impaired or insolvent insurer under this article exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available, not to go below a minimum of 0 percent. (D) An unallocated annuity contract. (E) A portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, health, or annuity benefits to its employees, members, or others, to the extent that the plan or program is self-funded or uninsured, including, but not limited to, benefits payable by an employer, association, or other person under any of the following: (i) A multiple employer welfare arrangement as defined in Section 1144 of Title 29 of the United States Code. (ii) A minimum premium group insurance plan. (iii) A stop-loss group insurance plan. (iv) An administrative services only contract. (F) A portion of a policy or contract to the extent that it provides for any of the following: (i) Dividends or experience rating credits. (ii) Voting rights. (iii) Payment of any fees or allowances to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract. (G) Any policy or contract issued in this state by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue the policy or contract in this state. (H) Any annuity issued by a charitable organization that is duly qualified as such under applicable provisions of the Internal Revenue Code [FN1], and that is not engaged in the business of insurance as its primary business. (I) A portion of a policy or contract to the extent that the assessments required by Section 1067.08 with respect to the policy or contract are preempted or otherwise not permitted by federal or state law. (J) An obligation that does not arise under the express written terms of the policy or contract issued by the insurer to the contract owner or policy owner, including without limitation, any of the following: (i) Claims based on marketing materials. (ii) Claims based on side letters, riders, or other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements. (iii) Misrepresentations of, or regarding, policy benefits. (iv) Extracontractual claims. (v) A claim for penalties or consequential or incidental damages. (K) A contractual agreement that establishes the member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer. (L) A portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this article, whichever is earlier. If a policy's or contract's interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture pursuant to this subparagraph, the interest or change in value determined by using the procedures defined in the policy or contract shall be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and shall not be subject to forfeiture. (M) A policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to Part C of Title XVIII of the Social Security Act (42 U.S.C. Sec. 1395w-21 et seq.) or Part D of Title XVIII of the Social Security Act (42 U.S.C. Sec. 1395w-101 et seq.), commonly known as Medicare Parts C and D, or any regulations issued pursuant thereto. Amended effective 9.27.2010.

Non-Resident Coverage

§1067.02(a)(2)(B). Yes. The act covers nonresidents, but only under all of the following conditions: (i) The insurer that issued the policies or contracts is domiciled in this state; (ii) The states in which the persons reside have associations similar to the association created by this Act; (iii) The persons are not eligible for coverage by an association in any other State due to the fact that the insurer was not licensed in the state at the time specified in the state’s guaranty association law. (Amended effective 9/27/2010)

Benefit Limits

§ 1067.02(c). The benefits for which the association may become liable for life insurance and annuity policies shall in no event exceed the lesser of the following: (1) Eighty percent of the contractual obligations for each policy or contract as modified pursuant to subparagraph (C) of paragraph (2) of subdivision (b), for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer. (2)(A) With respect to any one life, regardless of the number of policies or contracts: (i) Three hundred thousand dollars ($300,000) in life insurance death benefits, but not more than one hundred thou-sand dollars ($ 100,000) in net cash surrender and net cash withdrawal values for life insurance. (ii) Two hundred fifty thousand dollars ($250,000) in the present value of annuity benefits, including net cash sur-render and net cash withdrawal values. (B) With respect to each payee of a structured settlement annuity, or beneficiaries of the payee if deceased, two hundred fifty thousand dollars ($250,000) in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values. (C) Notwithstanding subparagraphs (A) and (B), in no event shall the association be obligated to cover more than an aggregate of three hundred thousand dollars ($300, 000) in benefits with respect to any one life under subparagraphs (A) and (B). (D) Notwithstanding subparagraphs (A), (B), and (C), with respect to one owner of multiple nongroup policies of life insurance, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, in no event shall the association be obligated to cover more than five million dollars ($5,000,000) in benefits, regardless of the number of policies and contracts held by the owner. (d) The health insurance benefits for which the association may become liable shall in no event exceed the lesser of the following: (1) The contractual obligations for which the insurer is liable or for which the insurer would have been liable if it were not an impaired or insolvent insurer. (2) With respect to any one individual receiving health care benefits, regardless of the number of policies or contracts, two hundred thousand dollars ($200,000) in health insurance benefits; an amount that shall increase or decrease based upon changes in the health care cost component of the consumer price index from January 1, 1991, to the date on which the insurer becomes an insolvent insurer. Amended effective 9.27.2010.

Triggers

Discretionary Triggers

§1067.07(a). If a member insurer is an impaired insurer. Amended effective 9.27.2010.

Mandatory Triggers

§1067.07(b). If a member insurer an insolvent insurer. Amended effective 9.27.2010.

Foreign Triggers

No separate provision. Amended effective 9.27.2010.

"Impaired Insurer"

§1067.04(j) “Impaired insurer” means a member insurer which, after the effective date of this article, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction. Amended effective 9.27.2010.

"Insolvent Insurer"

§1067.04(k) “Insolvent insurer” means a member insurer that, after October 1, 1990, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency. Amended effective 9.27.2010.

"Member Insurer"

§1067.04(l) “Member insurer” means any insurer licensed or which holds a certificate of authority to transact in this state any kind of insurance for which coverage is provided under Section 1067.02 and includes any insurer whose license or certificate of authority in this state may have been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include any of the following: (1) A hospital or medical service organization, whether for profit or nonprofit. (2) A health maintenance organization. (3) A fraternal benefit society. (4) A mandatory state pooling plan. (5) A mutual assessment company or other person that operates on an assessment basis. (6) An insurance exchange. (7) An organization that has a certificate or license limited to the issuance of charitable gift annuities. (8) A grants and annuities society holding a certificate of authority under Section 11520. (9) An entity similar to any of the above. Amended effective 9.27.2010.

Account Structure

§1067.05: Two accounts: (1) The life insurance and annuity account which includes both of the following subaccounts: (A) The life insurance account. (B) The annuity account, which shall include annuity contracts owned by a governmental retirement plan, or its trustee, established under Section 401, 403(b), or 457 of the Internal Revenue Code. (2) The health insurance account. Amended effective 9.27.2010.

Assessments

Assessment Limits

§1067.08(e)(1): the total of all assessments authorized by the association with respect to a member insurer for each subaccount of the life insurance and annuity account and for the health account shall not in one calendar year exceed 2 percent of that member insurer's average annual premiums received in this state on the policies and contracts covered by the subaccount or account during the three calendar years preceding the year in which the insurer became an impaired or insolvent insurer. Amended effective 9.27.2010.

Assessment Classes

§1067.08(b). Two assessment classes: (1) Class A assessments shall be authorized and called for the purpose of meeting administrative and legal costs and other expenses and examinations conducted under the authority of subdivision (e) of Section 1067.11. Class A as-sessments may be authorized and called whether or not related to a particular impaired or insolvent insurer. (2) Class B assessments shall be authorized and called to the extent necessary to carry out the powers and duties of the association under Section 1067.07 with regard to an impaired or an insolvent insurer.

Interest Rate Adjustments

§1067.02(b)(2)(C): Guarantee Association excludes from coverage: A portion of a policy or contract to the extent that the rate of interest on which it is based or the interest rate, crediting rate, or similar factor determined by the use of an index or other external reference which is stated in the policy or contract and employed in calculating returns or changes in value does both of the following: (i) Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this article exceeds the rate of interest determined by subtracting two percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for the lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under this article, not to go below a minimum of 0 percent. (ii) On and after the date on which the member insurer becomes an impaired or insolvent insurer under this article exceeds the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average as most recently available, not to go below a minimum of 0 percent. Amended effective 9.27.2010.

Tax Offsets

§1067.08(i)(1). Yes. No tax offset provided by law; however, a health insurance assessment recoupment is permitted by way of policyholder surcharge. Member insurers are required to recoup over a reasonable length of time a sum reasonably calculated to recoup the assessments with respect to the health insurance account paid by the member insurer under this article by way of a surcharge on premiums charged for health insurance policies. Amounts recouped shall not be considered premiums for any other purpose, including the computation of gross premium tax or agent's commission.

Definition of Premium

§ 1067.04(q)(1) “Premiums” means amounts or considerations, by whatever name called, received on covered policies or con-tracts less returned premiums, considerations, and deposits and less dividends and experience credits. (2) “Premiums” does not include amounts or considerations received for * * *policies or contracts or for the portions of policies or contracts for which coverage is not provided under subdivision (b) of Section 1067.02, except that assessable premium shall not be reduced on account of subparagraph (C) of paragraph (2) of subdivision (b) of Section 1067.02 relating to interest limitations and paragraph (2) of subdivision (c) of Section 1067.02 relating to limitations with respect to one individual, one participant, and one contract owner. (3) “Premiums” does not include any of the following: (A) Premiums on an unallocated annuity contract. (B) With respect to multiple nongroup policies of life insurance owned by one owner, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, premiums in excess of five million dollars ($5, 000,000) with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.

Advertising Prohibition

§ 1067.17 “Use of existence of association for purpose of sales, solicitation, or inducement to purchase insurance; summary document; disclaimer; contracts not covered by association”(a) No person, including an insurer, agent, or affiliate of an insurer shall make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in any newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio station or television station, or in any other way, any advertisement, announcement, or statement, written or oral, which uses the existence of the California Life and Health Insurance Guarantee Association for the purpose of sales, solicitation, or inducement to purchase any form of insurance covered by the California Life and Health Insurance Guarantee Association Act. Provided, however, that this section shall not apply to the California Life and Health Insurance Guarantee Association or any other entity which does not sell or solicit insurance. (b)(1) The association shall prepare a summary document describing the general purposes and current limitations of the article and complying with subdivision (c). This document shall be submitted to the commissioner for approval. Sixty days after receiving approval, no insurer may deliver a policy or contract described in paragraph (1) of subdi-vision (b) of Section 1067.02 to a policyholder or contractholder unless the document is delivered to the policy or contractholder prior to or at the time of delivery of the policy or contract except if subdivision (d) applies. The document should also be available upon request by the policyholder. The distribution, delivery, or contents or inter-pretation of this document shall not mean that either the policy or the contract or the holder thereof would be covered in the event of the impairment or insolvency of a member insurer. The description document shall be revised by the association as amendments to the article may require. Failure to receive this document does not give the policyholder, contractholder, certificate holder, or insured any greater rights than those stated in this article. This paragraph shall remain operative only until paragraph (2) becomes operative. (2) Within 180 days of the effective date of the act that amended this section in the 2009-10 Regular Session, [FN1] the association shall prepare a summary document describing the general purposes and current limitations of the article and complying with subdivision (c). This document shall be submitted to the commissioner for approval. At the expiration of the 60th day after the date on which the commissioner approves the document, an insurer may not deliver a policy or contract described in paragraph (1) of subdivision (b) of Section 1067.02 to a policy or contract owner unless the summary document is delivered to the policy or contract owner at the time of delivery of the policy or contract. The document shall also be available upon request by a policy owner. The distribution, delivery, or contents or interpretation of this document does not guarantee that either the policy or the contract or the owner of the policy or contract is covered in the event of the impairment or insolvency of a member insurer. The description document shall be revised by the association, as amendments to the article may require. Failure to receive this document does not give the policy owner, contract owner, certificate holder, or insured any greater rights than those stated in this article. (c) The document prepared under subdivision (b) shall contain a clear and conspicuous disclaimer on its face. The commissioner shall promulgate a rule establishing the form and content of the disclaimer. The disclaimer shall do all of the following: (1) State the name and address of the life and health insurance guarantee association and insurance department. (2) Prominently warn the policy owner or contract owner that the California Life and Health Insurance Guarantee Association may not cover the policy or, if coverage is available, it will be subject to substantial limitations and ex-clusions and conditioned on continued residence in the state. (3) State that the insurer and its agents are prohibited by law from using the existence of the California Life and Health Insurance Guarantee Association for the purpose of sales, solicitation, or inducement to purchase any form of insurance. (4) State that the policy owner or contract owner should not rely on coverage under the California Life and Health Insurance Guarantee Association when selecting an insurer. (5) Provide other information as directed by the commissioner. Amended effective 9.27.2010.

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