HB-5608, As Passed Senate, December 14, 2006

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 5608

 

 

 

 

 

 

 

 

 

 

 

 

 

     A bill entering into the interstate insurance product

 

regulation compact; and for related purposes.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

INTERSTATE INSURANCE PRODUCT REGULATION COMPACT

 

ARTICLE I. PURPOSES

 

     The purposes of this compact are, through means of joint and

 

cooperative action among the compacting states:

 

     1. To promote and protect the interest of consumers of

 

individual and group annuity, life insurance, disability income,

 

and long-term care insurance products.

 

     2. To develop uniform standards for insurance products covered

 

under the compact.

 

     3. To establish a central clearinghouse to receive and provide

 

prompt review of insurance products covered under the compact and,


 

in certain cases, advertisements related to those products,

 

submitted by insurers authorized to do business in 1 or more

 

compacting states.

 

     4. To give appropriate regulatory approval to those product

 

filings and advertisements satisfying the applicable uniform

 

standard.

 

     5. To improve coordination of regulatory resources and

 

expertise between state insurance departments regarding the setting

 

of uniform standards and review of insurance products covered under

 

the compact.

 

     6. To create the interstate insurance product regulation

 

commission.

 

     7. To perform these and such other related functions as may be

 

consistent with the state regulation of the business of insurance.

 

ARTICLE II. DEFINITIONS

 

     For purposes of this compact:

 

     1. "Advertisement" means any material designed to create

 

public interest in a product, or induce the public to purchase,

 

increase, modify, reinstate, borrow on, surrender, replace, or

 

retain a policy, as more specifically defined in the rules and

 

operating procedures of the commission.

 

     2. "Bylaws" means those bylaws established by the commission

 

for its governance or for directing or controlling the commission's

 

actions or conduct.

 

     3. "Compacting state" means any state which has enacted this

 

compact legislation and which has not withdrawn pursuant to article

 

XIV, section 1 of this compact, or been terminated pursuant to


 

article XIV, section 2 of this compact.

 

     4. "Commission" means the "interstate insurance product

 

regulation commission" established by this compact.

 

     5. "Commissioner" means the chief insurance regulatory

 

official of a state, including, but not limited to, commissioner,

 

superintendent, director, or administrator.

 

     6. "Domiciliary state" means the state in which an insurer is

 

incorporated or organized or, in the case of an alien insurer, its

 

state of entry.

 

     7. "Insurer" means any entity licensed by a state to issue

 

contracts of insurance for any of the lines of insurance covered by

 

this compact.

 

     8. "Member" means the commissioner, or his or her designee.

 

     9. "Non-compacting state" means any state that is not at the

 

time a compacting state.

 

     10. "Operating procedures" means procedures promulgated by the

 

commission implementing a rule, uniform standard, or a provision of

 

this compact.

 

     11. "Product" means the form of a policy or contract,

 

including any application, endorsement, or related form that is

 

attached to and made a part of the policy or contract, and any

 

evidence of coverage or certificate, for an individual or group

 

annuity, life insurance, disability income, or long-term care

 

insurance product that an insurer is authorized to issue.

 

     12. "Rule" means a statement of general or particular

 

applicability and future effect promulgated by the commission,

 

including a uniform standard developed pursuant to article VII of


 

this compact, designed to implement, interpret, or prescribe law or

 

policy or describing the organization, procedure, or practice

 

requirements of the commission, which shall have the force and

 

effect of law in the compacting states.

 

     13. "State" means any state, district, or territory of the

 

United States of America.

 

     14. "Third-party filer" means an entity that submits a product

 

filing to the commission on behalf of an insurer.

 

     15. "Uniform standard" means a standard adopted by the

 

commission for a product line, pursuant to article VII of this

 

compact, and shall include all of the product requirements in

 

aggregate; provided, that each uniform standard shall be construed,

 

whether express or implied, to prohibit the use of any

 

inconsistent, misleading, or ambiguous provisions in a product and

 

the form of the product made available to the public shall not be

 

unfair, inequitable, or against public policy as determined by the

 

commission.

 

ARTICLE III. ESTABLISHMENT OF THE COMMISSION AND VENUE

 

     1. The compacting states hereby create and establish a joint

 

public agency known as the "interstate insurance product regulation

 

commission". Pursuant to article IV of this compact, the commission

 

will have the power to develop uniform standards for product lines,

 

receive and provide prompt review of filed products, and give

 

approval to those product filings satisfying applicable uniform

 

standards; provided, it is not intended for the commission to be

 

the exclusive entity for receipt and review of insurance product

 

filings. This compact does not prohibit any insurer from filing its


 

product in any state wherein the insurer is licensed to conduct the

 

business of insurance, and any such filing shall be subject to the

 

laws of the state where filed.

 

     2. The commission is a body corporate and politic and an

 

instrumentality of the compacting states.

 

     3. The commission is solely responsible for its liabilities

 

except as otherwise specifically provided in this compact.

 

     4. Venue is proper and judicial proceedings by or against the

 

commission shall be brought solely and exclusively in a court of

 

competent jurisdiction where the principal office of the commission

 

is located.

 

ARTICLE IV. POWERS OF THE COMMISSION

 

     The commission shall have the following powers:

 

     1. To promulgate rules, pursuant to article VII of this

 

compact, which shall have the force and effect of law and shall be

 

binding in the compacting states to the extent and in the manner

 

provided in this compact.

 

     2. To exercise its rule-making authority and establish

 

reasonable uniform standards for products covered under the

 

compact, and advertisement related to those products, which shall

 

have the force and effect of law and shall be binding in the

 

compacting states, but only for those products filed with the

 

commission, provided, that a compacting state shall have the right

 

to opt out of such uniform standard pursuant to article VII of this

 

compact, to the extent and in the manner provided in this compact,

 

and, provided further, that any uniform standard established by the

 

commission for long-term care insurance products may provide the


 

same or greater protections for consumers as, but shall not provide

 

less than, those protections set forth in the national association

 

of insurance commissioners' long-term care insurance model act and

 

long-term care insurance model regulation, respectively, adopted as

 

of 2001. The commission shall consider whether any subsequent

 

amendments to the national association of insurance commissioners'

 

long-term care insurance model act or long-term care insurance

 

model regulation adopted by the national association of insurance

 

commissioners require amending of the uniform standards established

 

by the commission for long-term care insurance products.

 

     3. To receive and review in an expeditious manner products

 

filed with the commission, and rate filings for disability income

 

and long-term care insurance products, and give approval of those

 

products and rate filings that satisfy the applicable uniform

 

standard, where such approval shall have the force and effect of

 

law and be binding on the compacting states to the extent and in

 

the manner provided in the compact.

 

     4. To receive and review in an expeditious manner

 

advertisement relating to long-term care insurance products for

 

which uniform standards have been adopted by the commission, and

 

give approval to all advertisement that satisfies the applicable

 

uniform standard. For any product covered under this compact, other

 

than long-term care insurance products, the commission shall have

 

the authority to require an insurer to submit all or any part of

 

its advertisement with respect to that product for review or

 

approval prior to use, if the commission determines that the nature

 

of the product is such that an advertisement of the product could


 

have the capacity or tendency to mislead the public. The actions of

 

the commission as provided in this section shall have the force and

 

effect of law and shall be binding in the compacting states to the

 

extent and in the manner provided in the compact.

 

     5. To exercise its rule-making authority and designate

 

products and advertisement that may be subject to a self-

 

certification process without the need for prior approval by the

 

commission.

 

     6. To promulgate operating procedures, pursuant to article VII

 

of this compact, which shall be binding in the compacting states to

 

the extent and in the manner provided in this compact.

 

     7. To bring and prosecute legal proceedings or actions in its

 

name as the commission; provided, that the standing of any state

 

insurance department to sue or be sued under applicable law shall

 

not be affected.

 

     8. To issue subpoenas requiring the attendance and testimony

 

of witnesses and the production of evidence.

 

     9. To establish and maintain offices.

 

     10. To purchase and maintain insurance and bonds.

 

     11. To borrow, accept, or contract for services of personnel,

 

including, but not limited to, employees of a compacting state.

 

     12. To hire employees, professionals, or specialists, and

 

elect or appoint officers, and to fix their compensation, define

 

their duties, and give them appropriate authority to carry out the

 

purposes of the compact, and determine their qualifications, and to

 

establish the commission's personnel policies and programs relating

 

to, among other things, conflicts of interest, rates of


 

compensation, and qualifications of personnel.

 

     13. To accept any and all appropriate donations and grants of

 

money, equipment, supplies, materials, and services, and to

 

receive, utilize, and dispose of the same; provided that at all

 

times the commission shall strive to avoid any appearance of

 

impropriety.

 

     14. To lease, purchase, accept appropriate gifts or donations

 

of, or otherwise to own, hold, improve, or use, any property, real,

 

personal, or mixed; provided that at all times the commission shall

 

strive to avoid any appearance of impropriety.

 

     15. To sell, convey, mortgage, pledge, lease, exchange,

 

abandon, or otherwise dispose of any property, real, personal, or

 

mixed.

 

     16. To remit filing fees to compacting states as may be set

 

forth in the bylaws, rules, or operating procedures.

 

     17. To enforce compliance by compacting states with rules,

 

uniform standards, operating procedures, and bylaws.

 

     18. To provide for dispute resolution among compacting states.

 

     19. To advise compacting states on issues relating to insurers

 

domiciled or doing business in non-compacting jurisdictions,

 

consistent with the purposes of this compact.

 

     20. To provide advice and training to those personnel in state

 

insurance departments responsible for product review and to be a

 

resource for state insurance departments.

 

     21. To establish a budget and make expenditures.

 

     22. To borrow money.

 

     23. To appoint committees, including advisory committees


 

comprising members, state insurance regulators, state legislators

 

or their representatives, insurance industry and consumer

 

representatives, and such other interested persons as may be

 

designated in the bylaws.

 

     24. To provide and receive information from, and to cooperate

 

with, law enforcement agencies.

 

     25. To adopt and use a corporate seal.

 

     26. To perform such other functions as may be necessary or

 

appropriate to achieve the purposes of this compact consistent with

 

the state regulation of the business of insurance.

 

ARTICLE V. ORGANIZATION OF THE COMMISSION

 

     1. Membership, Voting, and Bylaws

 

     a. Each compacting state shall have and be limited to 1

 

member. Each member shall be qualified to serve in that capacity

 

pursuant to applicable law of the compacting state. Any member may

 

be removed or suspended from office as provided by the law of the

 

state from which he or she shall be appointed. Any vacancy

 

occurring in the commission shall be filled in accordance with the

 

laws of the compacting state where the vacancy exists. Nothing in

 

this compact shall be construed to affect the manner in which a

 

compacting state determines the election or appointment and

 

qualification of its own commissioner.

 

     b. Each member shall be entitled to 1 vote and shall have an

 

opportunity to participate in the governance of the commission in

 

accordance with the bylaws. Notwithstanding any provision in this

 

compact to the contrary, no action of the commission with respect

 

to the promulgation of a uniform standard shall be effective unless


 

2/3 of the members vote in favor of it.

 

     c. The commission shall, by a majority of the members,

 

prescribe bylaws to govern its conduct as may be necessary or

 

appropriate to carry out the purposes, and exercise the powers, of

 

the compact, including, but not limited to, all of the following:

 

     i. Establishing the fiscal year of the commission.

 

     ii. Providing reasonable procedures for appointing and

 

electing members, as well as holding meetings, of the management

 

committee.

 

     iii. Providing reasonable standards and procedures: for the

 

establishment and meetings of other committees, and governing any

 

general or specific delegation of any authority or function of the

 

commission.

 

     iv. Providing reasonable procedures for calling and conducting

 

meetings of the commission that consist of a majority of commission

 

members, ensuring reasonable advance notice of each such meeting,

 

and providing for the right of citizens to attend each such meeting

 

with enumerated exceptions designed to protect the public's

 

interest, the privacy of individuals, and insurers' proprietary

 

information, including trade secrets. The commission may meet in

 

camera only after a majority of the entire membership votes to

 

close a meeting en toto or in part. As soon as practicable, the

 

commission must make public a copy of the vote to close the meeting

 

revealing the vote of each member with no proxy votes allowed and

 

votes taken during such meeting.

 

     v. Establishing the titles, duties, and authority and

 

reasonable procedures for the election of the officers of the


 

commission.

 

     vi. Providing reasonable standards and procedures for the

 

establishment of the personnel policies and programs of the

 

commission. Notwithstanding any civil service or other similar laws

 

of any compacting state, the bylaws shall exclusively govern the

 

personnel policies and programs of the commission.

 

     vii. Promulgating a code of ethics to address permissible and

 

prohibited activities of commission members and employees.

 

     viii. Providing a mechanism for winding up the operations of

 

the commission and the equitable disposition of any surplus funds

 

that may exist after the termination of the compact after the

 

payment and/or reserving of all of its debts and obligations.

 

     d. The commission shall publish its bylaws in a convenient

 

form and file a copy of the bylaws and a copy of any amendment to

 

the bylaws with the appropriate agency or officer in each of the

 

compacting states.

 

     2. Management Committee, Officers, and Personnel

 

     a. A management committee comprising no more than 14 members

 

shall be established as follows:

 

     i. One member from each of the 6 compacting states with the

 

largest premium volume for individual and group annuities, life,

 

disability income, and long-term care insurance products,

 

determined from the records of the national association of

 

insurance commissioners for the prior year.

 

     ii. Four members from those compacting states with at least 2%

 

of the market based on the premium volume described above, other

 

than the 6 compacting states with the largest premium volume,


 

selected on a rotating basis as provided in the bylaws.

 

     iii. Four members from those compacting states with less than

 

2% of the market, based on the premium volume described above, with

 

1 selected from each of the 4 zone regions of the national

 

association of insurance commissioners as provided in the bylaws.

 

     b. The management committee shall have such authority and

 

duties as may be set forth in the bylaws, including, but not

 

limited to:

 

     i. Managing the affairs of the commission in a manner

 

consistent with the bylaws and purposes of the commission.

 

     ii. Establishing and overseeing an organizational structure

 

within, and appropriate procedures for, the commission to provide

 

for the creation of uniform standards and other rules, receipt and

 

review of product filings, administrative and technical support

 

functions, review of decisions regarding the disapproval of a

 

product filing, and the review of elections made by a compacting

 

state to opt out of a uniform standard; provided that a uniform

 

standard shall not be submitted to the compacting states for

 

adoption unless approved by 2/3 of the members of the management

 

committee.

 

     iii. Overseeing the offices of the commission.

 

     iv. Planning, implementing, and coordinating communications

 

and activities with other state, federal, and local government

 

organizations in order to advance the goals of the commission.

 

     c. The commission shall elect annually officers from the

 

management committee, with each having such authority and duties,

 

as may be specified in the bylaws.


 

     d. The management committee may, subject to the approval of

 

the commission, appoint or retain an executive director for such

 

period, upon such terms and conditions, and for such compensation

 

as the commission may deem appropriate. The executive director

 

shall serve as secretary to the commission, but shall not be a

 

member of the commission. The executive director shall hire and

 

supervise such other staff as may be authorized by the commission.

 

     3. Legislative and Advisory Committees

 

     a. A legislative committee comprising state legislators or

 

their designees shall be established to monitor the operations of,

 

and make recommendations to, the commission, including the

 

management committee; provided that the manner of selection and

 

term of any legislative committee member shall be as set forth in

 

the bylaws. Prior to the adoption by the commission of any uniform

 

standard, revision to the bylaws, annual budget, or other

 

significant matter as may be provided in the bylaws, the management

 

committee shall consult with and report to the legislative

 

committee.

 

     b. The commission shall establish 2 advisory committees, 1 of

 

which shall comprise consumer representatives independent of the

 

insurance industry and the other comprising insurance industry

 

representatives.

 

     c. The commission may establish additional advisory committees

 

as its bylaws may provide for the carrying out of its functions.

 

     4. Corporate Records of the Commission

 

     The commission shall maintain its corporate books and records

 

in accordance with the bylaws.


 

     5. Qualified Immunity, Defense, and Indemnification

 

     a. The members, officers, executive director, employees, and

 

representatives of the commission shall be immune from suit and

 

liability, either personally or in their official capacity, for any

 

claim for damage to or loss of property or personal injury or other

 

civil liability caused by or arising out of any actual or alleged

 

act, error, or omission that occurred, or that the person against

 

whom the claim is made had a reasonable basis for believing

 

occurred within the scope of commission employment, duties, or

 

responsibilities; provided, that nothing in this paragraph shall be

 

construed to protect any such person from suit and/or liability for

 

any damage, loss, injury, or liability caused by the intentional or

 

willful and wanton misconduct of that person.

 

     b. The commission shall defend any member, officer, executive

 

director, employee, or representative of the commission in any

 

civil action seeking to impose liability arising out of any actual

 

or alleged act, error, or omission that occurred within the scope

 

of commission employment, duties, or responsibilities, or that the

 

person against whom the claim is made had a reasonable basis for

 

believing occurred within the scope of commission employment,

 

duties, or responsibilities; provided, that nothing in this compact

 

shall be construed to prohibit that person from retaining his or

 

her own counsel; and provided further, that the actual or alleged

 

act, error, or omission did not result from that person's

 

intentional or willful and wanton misconduct.

 

     c. The commission shall indemnify and hold harmless any

 

member, officer, executive director, employee, or representative of


 

the commission for the amount of any settlement or judgment

 

obtained against that person arising out of any actual or alleged

 

act, error, or omission that occurred within the scope of

 

commission employment, duties, or responsibilities, or that such

 

person had a reasonable basis for believing occurred within the

 

scope of commission employment, duties, or responsibilities,

 

provided, that the actual or alleged act, error, or omission did

 

not result from the intentional or willful and wanton misconduct of

 

that person.

 

ARTICLE VI. MEETINGS AND ACTS OF THE COMMISSION

 

     1. The commission shall meet and take such actions as are

 

consistent with the provisions of this compact and the bylaws.

 

     2. Each member of the commission shall have the right and

 

power to cast a vote to which that compacting state is entitled and

 

to participate in the business and affairs of the commission. A

 

member shall vote in person or by such other means as provided in

 

the bylaws. The bylaws may provide for members' participation in

 

meetings by telephone or other means of communication.

 

     3. The commission shall meet at least once during each

 

calendar year. Additional meetings shall be held as set forth in

 

the bylaws.

 

ARTICLE VII. RULES & OPERATING PROCEDURES: RULEMAKING FUNCTIONS OF

 

THE COMMISSION AND OPTING OUT OF UNIFORM STANDARDS

 

     1. Rulemaking authority. The commission shall promulgate

 

reasonable rules, including uniform standards, and operating

 

procedures in order to effectively and efficiently achieve the

 

purposes of this compact. Notwithstanding the foregoing, in the


 

event the commission exercises its rulemaking authority in a manner

 

that is beyond the scope of the purposes of this compact, or the

 

powers granted under this compact, then such an action by the

 

commission shall be invalid and have no force and effect.

 

     2. Rulemaking procedure. Rules and operating procedures shall

 

be made pursuant to a rulemaking process that conforms to the model

 

state administrative procedure act of 1981 as amended, as may be

 

appropriate to the operations of the commission. Before the

 

commission adopts a uniform standard, the commission shall give

 

written notice to the relevant state legislative committees in each

 

compacting state responsible for insurance issues of its intention

 

to adopt the uniform standard. The commission in adopting a uniform

 

standard shall consider fully all submitted materials and issue a

 

concise explanation of its decision.

 

     3. Effective date and opt out of a uniform standard. A uniform

 

standard shall become effective 90 days after its promulgation by

 

the commission or such later date as the commission may determine;

 

provided, however, that a compacting state may opt out of a uniform

 

standard as provided in this article. "Opt out" shall be defined as

 

any action by a compacting state to decline to adopt or participate

 

in a promulgated uniform standard. All other rules and operating

 

procedures, and amendments to those rules and operating procedures,

 

shall become effective as of the date specified in each rule,

 

operating procedure, or amendment.

 

     4. Opt out procedure. A compacting state may opt out of a

 

uniform standard, either by legislation or regulation duly

 

promulgated by the insurance department under the compacting


 

state's administrative procedure act. If a compacting state elects

 

to opt out of a uniform standard by regulation, it must give

 

written notice to the commission no later than 10 business days

 

after the uniform standard is promulgated, or at the time the state

 

becomes a compacting state, and find that the uniform standard does

 

not provide reasonable protections to the citizens of the state,

 

given the conditions in the state. The commissioner shall make

 

specific findings of fact and conclusions of law, based on a

 

preponderance of the evidence, detailing the conditions in the

 

state that warrant a departure from the uniform standard and

 

determining that the uniform standard would not reasonably protect

 

the citizens of the state. The commissioner must consider and

 

balance the following factors and find that the conditions in the

 

state and needs of the citizens of the state outweigh the intent of

 

the legislature to participate in, and the benefits of, an

 

interstate agreement to establish national uniform consumer

 

protections for the products subject to this compact and the

 

presumption that a uniform standard adopted by the commission

 

provides reasonable protections to consumers of the relevant

 

product.

 

     Notwithstanding the foregoing, a compacting state may, at the

 

time of its enactment of this compact, prospectively opt out of all

 

uniform standards involving long-term care insurance products by

 

expressly providing for such opt out in the enacted compact, and

 

such an opt out shall not be treated as a material variance in the

 

offer or acceptance of any state to participate in this compact.

 

Such an opt out shall be effective at the time of enactment of this


 

compact by the compacting state and shall apply to all existing

 

uniform standards involving long-term care insurance products and

 

those subsequently promulgated.

 

     5. Effect of opt out. If a compacting state elects to opt out

 

of a uniform standard, the uniform standard shall remain applicable

 

in the compacting state electing to opt out until such time the opt

 

out legislation is enacted into law or the regulation opting out

 

becomes effective.

 

     Once the opt out of a uniform standard by a compacting state

 

becomes effective as provided under the laws of that state, the

 

uniform standard shall have no further force and effect in that

 

state unless and until the legislation or regulation implementing

 

the opt out is repealed or otherwise becomes ineffective under the

 

laws of the state. If a compacting state opts out of a uniform

 

standard after the uniform standard has been made effective in that

 

state, the opt out shall have the same prospective effect as

 

provided under article XIV of this compact for withdrawals.

 

     6. Stay of uniform standard. If a compacting state has

 

formally initiated the process of opting out of a uniform standard

 

by regulation, and while the regulatory opt out is pending, the

 

compacting state may petition the commission, at least 15 days

 

before the effective date of the uniform standard, to stay the

 

effectiveness of the uniform standard in that state. The commission

 

may grant a stay if it determines the regulatory opt out is being

 

pursued in a reasonable manner and there is a likelihood of

 

success. If a stay is granted or extended by the commission, the

 

stay or extension may postpone the effective date by up to 90 days,


 

unless affirmatively extended by the commission; provided, a stay

 

may not be permitted to remain in effect for more than 1 year

 

unless the compacting state can show extraordinary circumstances

 

that warrant a continuance of the stay, including, but not limited

 

to, the existence of a legal challenge that prevents the compacting

 

state from opting out. A stay may be terminated by the commission

 

upon notice that the rulemaking process has been terminated.

 

     7. Not later than 30 days after a rule or operating procedure

 

is promulgated, any person may file a petition for judicial review

 

of the rule or operating procedure; provided, that the filing of

 

such a petition shall not stay or otherwise prevent the rule or

 

operating procedure from becoming effective unless the court finds

 

that the petitioner has a substantial likelihood of success. The

 

court shall give deference to the actions of the commission

 

consistent with applicable law and shall not find the rule or

 

operating procedure to be unlawful if the rule or operating

 

procedure represents a reasonable exercise of the commission's

 

authority.

 

ARTICLE VIII. COMMISSION RECORDS AND ENFORCEMENT

 

     1. The commission shall promulgate rules establishing

 

conditions and procedures for public inspection and copying of its

 

information and official records, except such information and

 

records involving the privacy of individuals and insurers' trade

 

secrets. The commission may promulgate additional rules under which

 

it may make available to federal and state agencies, including law

 

enforcement agencies, records and information otherwise exempt from

 

disclosure, and may enter into agreements with such agencies to


 

receive or exchange information or records subject to nondisclosure

 

and confidentiality provisions.

 

     2. Except as to privileged records, data, and information, the

 

laws of any compacting state pertaining to confidentiality or

 

nondisclosure shall not relieve any compacting state commissioner

 

of the duty to disclose any relevant records, data, or information

 

to the commission; provided, that disclosure to the commission

 

shall not be deemed to waive or otherwise affect any

 

confidentiality requirement; and further provided, that, except as

 

otherwise expressly provided in this compact, the commission shall

 

not be subject to the compacting state's laws pertaining to

 

confidentiality and nondisclosure with respect to records, data,

 

and information in its possession. Confidential information of the

 

commission shall remain confidential after such information is

 

provided to any commissioner.

 

     3. The commission shall monitor compacting states for

 

compliance with duly adopted bylaws, rules, including uniform

 

standards, and operating procedures. The commission shall notify

 

any non-complying compacting state in writing of its noncompliance

 

with commission bylaws, rules, or operating procedures. If a non-

 

complying compacting state fails to remedy its noncompliance within

 

the time specified in the notice of noncompliance, the compacting

 

state shall be deemed to be in default as set forth in article XIV

 

of this compact.

 

     4. The commissioner of any state in which an insurer is

 

authorized to do business, or is conducting the business of

 

insurance, shall continue to exercise his or her authority to


 

oversee the market regulation of the activities of the insurer in

 

accordance with the provisions of the state's law. The

 

commissioner's enforcement of compliance with the compact is

 

governed by the following provisions:

 

     a. With respect to the commissioner's market regulation of a

 

product or advertisement that is approved or certified to the

 

commission, the content of the product or advertisement shall not

 

constitute a violation of the provisions, standards, or

 

requirements of the compact except upon a final order of the

 

commission, issued at the request of a commissioner after prior

 

notice to the insurer and an opportunity for hearing before the

 

commission.

 

     b. Before a commissioner may bring an action for violation of

 

any provision, standard, or requirement of the compact relating to

 

the content of an advertisement not approved or certified to the

 

commission, the commission, or an authorized commission officer or

 

employee, must authorize the action. However, authorization

 

pursuant to this paragraph does not require notice to the insurer,

 

opportunity for hearing, or disclosure of requests for

 

authorization or records of the commission's action on such

 

requests.

 

ARTICLE IX. DISPUTE RESOLUTION

 

     The commission shall attempt, upon the request of a member, to

 

resolve any disputes or other issues that are subject to this

 

compact and that may arise between 2 or more compacting states, or

 

between compacting states and non-compacting states, and the

 

commission shall promulgate an operating procedure providing for


 

resolution of such disputes.

 

ARTICLE X. PRODUCT FILING AND APPROVAL

 

     1. Insurers and third-party filers seeking to have a product

 

approved by the commission shall file the product with, and pay

 

applicable filing fees to, the commission. Nothing in this compact

 

shall be construed to restrict or otherwise prevent an insurer from

 

filing its product with the insurance department in any state where

 

the insurer is licensed to conduct the business of insurance, and

 

such filing shall be subject to the laws of the states where filed.

 

     2. The commission shall establish appropriate filing and

 

review processes and procedures pursuant to commission rules and

 

operating procedures. Notwithstanding any provision in this compact

 

to the contrary, the commission shall promulgate rules to establish

 

conditions and procedures under which the commission will provide

 

public access to product filing information. In establishing such

 

rules, the commission shall consider the interests of the public in

 

having access to such information, as well as protection of

 

personal medical and financial information and trade secrets, that

 

may be contained in a product filing or supporting information.

 

     3. Any product approved by the commission may be sold or

 

otherwise issued in those compacting states for which the insurer

 

is legally authorized to do business.

 

ARTICLE XI. REVIEW OF COMMISSION DECISIONS REGARDING FILINGS

 

     1. Not later than 30 days after the commission has given

 

notice of a disapproved product or advertisement filed with the

 

commission, the insurer or third party filer whose filing was

 

disapproved may appeal the determination to a review panel


 

appointed by the commission. The commission shall promulgate rules

 

to establish procedures for appointing such review panels and

 

provide for notice and hearing. An allegation that the commission,

 

in disapproving a product or advertisement filed with the

 

commission, acted arbitrarily, capriciously, or in a manner that is

 

an abuse of discretion or otherwise not in accordance with the law,

 

is subject to judicial review in accordance with article III,

 

section 4.

 

     2. The commission shall have authority to monitor, review, and

 

reconsider products and advertisement subsequent to their filing or

 

approval upon a finding that the product does not meet the relevant

 

uniform standard. Where appropriate, the commission may withdraw or

 

modify its approval after proper notice and hearing, subject to the

 

appeal process in section 1 above.

 

ARTICLE XII. FINANCE

 

     1. The commission shall pay or provide for the payment of the

 

reasonable expenses of its establishment and organization. To fund

 

the cost of its initial operations, the commission may accept

 

contributions and other forms of funding from the national

 

association of insurance commissioners, compacting states, and

 

other sources. Contributions and other forms of funding from other

 

sources shall be of such a nature that the independence of the

 

commission concerning the performance of its duties shall not be

 

compromised.

 

     2. The commission shall collect a filing fee from each insurer

 

and third party filer filing a product with the commission to cover

 

the cost of the operations and activities of the commission and its


 

staff in a total amount sufficient to cover the commission's annual

 

budget.

 

     3. The commission's budget for a fiscal year shall not be

 

approved until it has been subject to notice and comment as set

 

forth in article VII of this compact.

 

     4. The commission shall be exempt from all taxation in and by

 

the compacting states.

 

     5. The commission shall not pledge the credit of any

 

compacting state, except by and with the appropriate legal

 

authority of that compacting state.

 

     6. The commission shall keep complete and accurate accounts of

 

all its internal receipts, including grants and donations, and

 

disbursements of all funds under its control. The internal

 

financial accounts of the commission shall be subject to the

 

accounting procedures established under its bylaws. The financial

 

accounts and reports, including the system of internal controls and

 

procedures of the commission, shall be audited annually by an

 

independent certified public accountant. Upon the determination of

 

the commission, but no less frequently than every 3 years, the

 

review of the independent auditor shall include a management and

 

performance audit of the commission. The commission shall make an

 

annual report to the governor and legislature of the compacting

 

states, which shall include a report of the independent audit. The

 

commission's internal accounts shall not be confidential and such

 

materials may be shared with the commissioner of any compacting

 

state upon request, provided, however, that any work papers related

 

to any internal or independent audit and any information regarding


 

the privacy of individuals and insurers' proprietary information,

 

including trade secrets, shall remain confidential.

 

     7. No compacting state shall have any claim to or ownership of

 

any property held by or vested in the commission or to any

 

commission funds held pursuant to the provisions of this compact.

 

ARTICLE XIII. COMPACTING STATES, EFFECTIVE DATE, AND AMENDMENT

 

     1. Any state is eligible to become a compacting state.

 

     2. The compact shall become effective and binding upon

 

legislative enactment of the compact into law by 2 compacting

 

states; provided, the commission shall become effective for

 

purposes of adopting uniform standards for, reviewing, and giving

 

approval or disapproval of, products filed with the commission that

 

satisfy applicable uniform standards only after 26 states are

 

compacting states or, alternatively, by states representing greater

 

than 40% of the premium volume for life insurance, annuity,

 

disability income, and long-term care insurance products, based on

 

records of the national association of insurance commissioners for

 

the prior year. Thereafter, it shall become effective and binding

 

as to any other compacting state upon enactment of the compact into

 

law by that state.

 

     3. Amendments to the compact may be proposed by the commission

 

for enactment by the compacting states. No amendment shall become

 

effective and binding upon the commission and the compacting states

 

unless and until all compacting states enact the amendment into

 

law.

 

ARTICLE XIV. WITHDRAWAL, DEFAULT, AND TERMINATION

 

     1. Withdrawal


 

     a. Once effective, the compact shall continue in force and

 

remain binding upon each and every compacting state; provided, that

 

a compacting state may withdraw from the compact ("withdrawing

 

state") by enacting a statute specifically repealing the statute

 

that enacted the compact into law.

 

     b. The effective date of withdrawal is the effective date of

 

the repealing statute. However, the withdrawal shall not apply to

 

any product filings approved or self-certified, or any

 

advertisement of those products, on the date the repealing statute

 

becomes effective, except by mutual agreement of the commission and

 

the withdrawing state unless the approval is rescinded by the

 

withdrawing state as provided in paragraph e. of this section.

 

     c. The commissioner of the withdrawing state shall immediately

 

notify the management committee in writing upon the introduction of

 

legislation repealing this compact in the withdrawing state.

 

     d. The commission shall notify the other compacting states of

 

the introduction of such legislation within 10 days after its

 

receipt of notice of the introduction of withdrawing legislation.

 

     e. The withdrawing state is responsible for all obligations,

 

duties, and liabilities incurred through the effective date of

 

withdrawal, including any obligations, the performance of which

 

extend beyond the effective date of withdrawal, except to the

 

extent those obligations may have been released or relinquished by

 

mutual agreement of the commission and the withdrawing state. The

 

commission's approval of products and advertisement prior to the

 

effective date of withdrawal shall continue to be effective and be

 

given full force and effect in the withdrawing state, unless


 

formally rescinded by the withdrawing state in the same manner as

 

provided by the laws of the withdrawing state for the prospective

 

disapproval of products or advertisement previously approved under

 

state law.

 

     f. Reinstatement following withdrawal of any compacting state

 

shall occur upon the effective date of the withdrawing state

 

reenacting the compact.

 

     2. Default

 

     a. If the commission determines that any compacting state has

 

at any time defaulted ("defaulting state") in the performance of

 

any of its obligations or responsibilities under this compact, the

 

bylaws, or duly promulgated rules or operating procedures, then,

 

after notice and hearing as set forth in the bylaws, all rights,

 

privileges, and benefits conferred by this compact on the

 

defaulting state shall be suspended from the effective date of

 

default as fixed by the commission. The grounds for default

 

include, but are not limited to, failure of a compacting state to

 

perform its obligations or responsibilities, and any other grounds

 

designated in commission rules. The commission shall immediately

 

notify the defaulting state in writing of the defaulting state's

 

suspension pending a cure of the default. The commission shall

 

stipulate the conditions and the time period within which the

 

defaulting state must cure its default. If the defaulting state

 

fails to cure the default within the time period specified by the

 

commission, the defaulting state shall be terminated from the

 

compact and all rights, privileges, and benefits conferred by this

 

compact shall be terminated from the effective date of termination.


 

     b. Product approvals by the commission or product self-

 

certifications, or any advertisement in connection with that

 

product, that are in force on the effective date of termination

 

shall remain in force in the defaulting state in the same manner as

 

if the defaulting state had withdrawn voluntarily pursuant to

 

section 1 of this article.

 

     c. Reinstatement following termination of any compacting state

 

requires a reenactment of the compact.

 

     3. Dissolution of Compact

 

     a. The compact dissolves effective upon the date of the

 

withdrawal or default of the compacting state that reduces

 

membership in the compact to 1 compacting state.

 

     b. Upon the dissolution of this compact, the compact becomes

 

null and void and shall be of no further force or effect, and the

 

business and affairs of the commission shall be wound up and any

 

surplus funds shall be distributed in accordance with the bylaws.

 

ARTICLE XV. SEVERABILITY AND CONSTRUCTION

 

     1. The provisions of this compact shall be severable; and if

 

any phrase, clause, sentence, or provision is deemed unenforceable,

 

the remaining provisions of the compact shall be enforceable.

 

     2. The provisions of this compact shall be liberally construed

 

to effectuate its purposes.

 

ARTICLE XVI. BINDING EFFECT OF COMPACT AND OTHER LAWS

 

     1. Other Laws

 

     a. Nothing herein prevents the enforcement of any other law of

 

a compacting state, except as provided in paragraph b. of this

 

section.


 

     b. For any product approved or certified to the commission,

 

the rules, uniform standards, and any other requirements of the

 

commission shall constitute the exclusive provisions applicable to

 

the content, approval, and certification of such products. For

 

advertisement that is subject to the commission's authority, any

 

rule, uniform standard, or other requirement of the commission that

 

governs the content of the advertisement shall constitute the

 

exclusive provision that a commissioner may apply to the content of

 

the advertisement. Notwithstanding the foregoing, no action taken

 

by the commission shall abrogate or restrict the access of any

 

person to state courts, remedies available under state law related

 

to breach of contract, tort, or other laws not specifically

 

directed to the content of the product, state law relating to the

 

construction of insurance contracts, or the authority of the

 

attorney general of the state, including, but not limited to,

 

maintaining any actions or proceedings, as authorized by law.

 

     c. All insurance products filed with individual states shall

 

be subject to the laws of those states.

 

     2. Binding Effect of This Compact

 

     a. All lawful actions of the commission, including all rules

 

and operating procedures promulgated by the commission, are binding

 

upon the compacting states.

 

     b. All agreements between the commission and the compacting

 

states are binding in accordance with their terms.

 

     c. Upon the request of a party to a conflict over the meaning

 

or interpretation of commission actions, and upon a majority vote

 

of the compacting states, the commission may issue advisory


 

opinions regarding the meaning or interpretation in dispute.

 

     d. In the event any provision of this compact exceeds the

 

constitutional limits imposed on the legislature of any compacting

 

state, the obligations, duties, powers, or jurisdiction sought to

 

be conferred by that provision upon the commission shall be

 

ineffective as to that compacting state, and those obligations,

 

duties, powers, or jurisdiction shall remain in the compacting

 

state and shall be exercised by the agency to which those

 

obligations, duties, powers, or jurisdiction is delegated by law in

 

effect at the time this compact becomes effective.