Tennessee Life & Health Insurance Guaranty Association

Covered Contracts

§ 56-12-204 (b)(1) This part provides coverage to the persons specified in subsection (a) for policies or contracts of direct, non-group life insurance, accident and health insurance, which, for purposes of this part, includes health maintenance organization subscriber contracts and certificates, or annuities, for certificates under direct group policies and contracts, and for supplemental contracts to any of these, in each case issued by member insurers, except as limited by this part. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts.

Non-Covered Contracts

§ 56-12-204 (b)(2) Except as otherwise provided in subdivision (b)(3), this part does not provide coverage for: (A) A portion of a policy or contract not guaranteed by the member insurer, or under which the risk is borne by the policy or contract owner; (B) A 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 use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (i) Averaged over the period of four (4) years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this part, whichever is earlier, exceeds the rate of interest determined by subtracting two (2) percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four (4) years before the member insurer becomes an impaired or insolvent insurer under this part, whichever is earlier; and (ii) On and after the date on which the member insurer becomes an impaired or insolvent insurer under this part, whichever is earlier, exceeds the rate of interest determined by subtracting three (3) percentage points from Moody's Corporate Bond Yield Average as most recently available; (D) 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: (i) A multiple employer welfare arrangement as defined in 29 U.S.C. § 1002(40); (ii) A minimum premium group insurance plan; (iii) A stop-loss group insurance plan; or (iv) An administrative services only contract; (E) A portion of a policy or contract to the extent that it provides for: (i) Dividends or experience rating credits; (ii) Voting rights; or (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; (F) A 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; (G) A portion of a policy or contract to the extent that the assessments required by § 56-12-208 with respect to the policy or contract are preempted by federal or state law; (H) An obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner, or policy owner, including without limitation: (i) Claims based on marketing materials; (ii) Claims based on side letters, riders, or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements; (iii) Misrepresentations of or regarding policy or contract benefits; (iv) Extra-contractual claims; or (v) A claim for penalties or consequential or incidental damages; (I) 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; (J) An unallocated annuity contract; (K) 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 part, 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 under this subdivision (b)(2)(K), the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture; (L) A policy or contract providing any hospital, medical, prescription drug, or other healthcare benefits pursuant to part C or part D of Subchapter XVIII, Chapter 7 of Title 42 of the United States Code, commonly known as Medicare part C and D, or Subchapter XIX, Chapter 7 of Title 42 of the United States Code, commonly known as Medicaid, or any regulations issued pursuant thereto; or (M) Structured settlement annuity benefits to which a payee, or beneficiary, has transferred his or her rights in a structured settlement factoring transaction as defined in 26 U.S.C. § 5891(c)(3)(A), regardless of whether the transaction occurred before or after that section became effective.

Non-Resident Coverage

§ 56-12-204 (a)(1)(B)(ii) Yes, non residents are covered, but only under all of the following conditions: The member insurer that issued the policies or contracts is domiciled in this state; (b) The states in which the persons reside have associations similar to the association created by this part; and (c) The persons are not eligible for coverage by an association in any other state due to the fact that the insurer or the health maintenance organization was not licensed in the state at the time specified in the state's guaranty association law.

§ 56-12-204 (c) (c) The benefits that the association may become obligated to cover must in no event exceed the lesser of: (1) The contractual obligations for which the member insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or (2) (A) With respect to one (1) 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 thousand dollars ($100,000) in net cash surrender and net cash withdrawal values for life insurance; (ii) One hundred thousand dollars ($100,000) in health insurance benefits; provided, for policies or contracts issued by a member insurer that becomes insolvent after January 1, 2010, the limits for health insurance benefits are as follows: (a) One hundred thousand dollars ($100,000) for coverages that are not disability income insurance, health benefit plans, or long-term care insurance, including any net cash surrender and net cash withdrawal values; (b) Three hundred thousand dollars ($300,000) for disability income insurance and three hundred thousand dollars ($300,000) for long-term care insurance; (c) Five hundred thousand dollars ($500,000) for health benefit plans; and (iii) Two hundred fifty thousand dollars ($250,000) in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; or (B) With respect to each payee of a structured settlement annuity, or beneficiary 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, if any; (C) The association is not obligated to cover more than: (i) An aggregate of three hundred thousand dollars ($300,000) in benefits with respect to any one (1) life under subdivisions (c)(2)(A) and (B) except with respect to benefits for health benefit plans under subdivision (c)(2)(A)(ii)(c), in which case the aggregate liability of the association must not exceed five hundred thousand dollars ($500,000) with respect to any one (1) individual; or (ii) With respect to one (1) owner of multiple non-group policies of life insurance, whether the policy or contract owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, more than five million dollars ($5,000,000) in benefits, regardless of the number of policies and contracts held by the owner;

Discretionary Triggers

§ 56-12-207 (a) If a member insurer is an impaired insurer; Amended 4/5/2010

Mandatory Triggers

§ 56-12-207 (b) If a member insurer is an insolvent insurer; Amended 4/5/2010

Foreign Triggers

No separate provision.

"Impaired Insurer"

§56-12-203 (8) "Impaired insurer" means a member insurer which, after the effective date of this part, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction; Amended 4/5/2010

"Insolvent Insurer"

§56-12-203 (9) "Insolvent insurer" means a member insurer which after the effective date of this part, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency; Amended 4/5/2010

"Member Insurer"

§56-12-203 (12) "Member insurer" means an insurer, health maintenance organization, or nonprofit hospital and medical service organization licensed or that holds a certificate of authority to transact in this state any kind of insurance or health maintenance organization business for which coverage is provided under § 56-12-204, and includes an insurer or health maintenance organization whose license or certificate of authority in this state may have been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include: (A) A fraternal benefit society; (B) A mandatory state pooling plan; (C) A mutual assessment company or other person that operates on an assessment basis; (D) An insurance exchange; (E) An organization that is authorized under the law of this state to issue charitable gift annuities; or (F) An entity similar to any of the above;

§56-12-205 For purposes of administration and assessment, the association shall maintain two (2) accounts: (1) The life insurance and annuity account, which includes the following subaccounts: (A) Life insurance account; and (B) Annuity account, excluding unallocated annuities; and (2) The health account.

Assessment Limits

§56-12.208(e)(1)(A) Subject to subdivision (e)(1)(B), 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 must not in one (1) calendar year exceed two percent (2%) 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 (3) calendar years preceding the year in which the member insurer became an impaired or insolvent insurer.

Assessment Classes

§56-12.208(b). There are two (2) classes of assessments, as follows: (1) Class A assessments are made for the purpose of meeting administrative and legal costs and other expenses and examinations conducted under the authority of § 56-12-211(e). Class A assessments may be made whether or not related to a particular impaired or insolvent insurer; and (2) Class B assessments are made to the extent necessary to carry out the powers and duties of the association pursuant to § 56-12-207 with regard to an impaired or an insolvent insurer.

§ 56-12-204 (b)(2)(C) Guaranty 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 use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (i) Averaged over the period of four (4) years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this part, whichever is earlier, exceeds the rate of interest determined by subtracting two (2) percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four (4) years before the member insurer becomes an impaired or insolvent insurer under this part, whichever is earlier; and (ii) On and after the date on which the member insurer becomes an impaired or insolvent insurer under this part, whichever is earlier, exceeds the rate of interest determined by subtracting three (3) percentage points from Moody's Corporate Bond Yield Average as most recently available;

§56-12.212(a). Yes. Member insurers may offset assessments paid up to the lesser of: (1) 10% of the amount for each of the 10 years following the year in which assessment was paid, or (2) one tenth of 1% until recovery of the assessment(s) is made. Covers all assessments but administrative expenses.

§ 56-12-203 (16) "Premiums" means amounts or considerations, by whatever name called, received on covered policies or contracts less returned premiums, considerations, and deposits and less dividends and experience credits. "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 § 56-12-204(b), except that assessable premium must not be reduced on account of § 56-12-204(b)(2)(C) relating to interest limitations or § 56-12-204(c)(2) relating to limitations with respect to one (1) individual, one (1) participant, and one (1) policy or contract owner. "Premiums" does not include: (A) Premiums on an unallocated annuity contract; or (B) With respect to multiple non-group policies of life insurance owned by one (1) owner, whether the policy or contract 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;

§56-12-218 “Sales promotions listing association prohibited -- Disclaimer notice” (a) No person, including a member insurer or agent or affiliate of a member 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 or television broadcast, or in any other way, any advertisement, announcement, or statement, written or oral, that uses the existence of the Tennessee life and health insurance guaranty association for the purpose of sales, solicitation, or inducement to purchase any form of insurance or other coverage covered by this part. However, this section does not apply to the Tennessee life and health insurance guaranty association or any other entity that does not sell or solicit insurance or coverage by a health maintenance organization.