HB403 Alabama 2012 Session

Summary

Primary Sponsor

Ken Johnson

Republican

Session

Regular Session 2012

Title

Insurance, Alabama Life and Disability Insurance Guaranty Association scope and purpose, specify limits for certain policies, to conform Alabama law to model law, Secs. 27-44-2, 27-44-3, 27-44-5, 27-44-8, 27-44-9, 27-44-11, 27-44-18 am'd

Summary

HB403 updates Alabama's Life and Disability Guaranty Association rules to align with model law, establishing coverage limits, residency-based payee rules for structured settlements, and funding and appeal processes.

What This Bill Does

The bill defines the scope and purpose of the Alabama Life and Disability Insurance Guaranty Association and sets specific coverage limits for life, disability, and annuity policies, plus present-value limits for structured settlements. It covers payees under structured settlement annuities based on the payee's residency to avoid duplicate protections with other states. It creates funding through assessments (with a Class A cap of $300 per year per member insurer) and allows appeals to the commissioner within 60 days and a 180-day stay on insolvency proceedings. It also sets rules for how the association may handle insolvent insurers, including subrogation, replacement coverage, and potential reinsurance, and amends several Alabama Code sections to implement these changes.

Who It Affects

• Policyowners, insureds, beneficiaries, payees, and annuitants of life, disability, or annuity policies in Alabama, who gain defined guaranty coverage up to stated limits and residency-based protection for structured settlements.
• Member insurers licensed to operate in Alabama (and, by extension, related reinsurers), who must pay assessments, comply with the association's powers and duties, and may appeal decisions and participate in coordination efforts.

Key Provisions

• Specifies coverage limits: life insurance—$300,000 death benefits and $100,000 in cash surrender values; disability insurance—$300,000 for disability income and long-term care, $500,000 for basic hospital/medical/major medical, and $100,000 for other coverages; annuities—$250,000 present value of annuity benefits; structured settlement annuities covered by payee residency.
• Structured settlement payees are covered based on the payee's residency to avoid duplication with guaranty associations in other states; coordination with other states is required to ensure coverage by only one association when appropriate.
• Funding and assessments: establishes three classes of assessments (A, B, C) with Class A capped at $300 per year per member insurer; assessment formulas allocate costs across accounts and states as needed; permits deferral or abatement of assessments under financial strain and refunds excess assets.
• Appeals and stay: allows a member insurer to appeal association decisions to the commissioner within 60 days; provides a 180-day stay on proceedings involving an insolvent insurer; sets procedures for protests and final decisions.
• Insolvent/ impaired insurer handling: outlines the association's authority to guarantee, reinsure, or assume policies; requires substitution coverage where appropriate; details subrogation rights and the handling of reinsurance contracts during liquidation or rehabilitation; permits the association to participate in court actions and to cooperate with liquidators or conservators.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Insurance