AS Title 21, Chapter 33: Unauthorized Insurers

Chapter 33. Unauthorized Insurers. Sec. 21.33.010. Unauthorized insurers (unadmitted companies). [Repealed, § 2 ch 234 SLA 1968.] Sec. 21.33.011. Purpose. The legislature declares that insurance transactions with nonadmitted insurers are so affected with a public interest as to require regulation, taxation, supervision, and control of the transactions and matters relating to nonadmitted insurance as provided in this chapter in order to (1) protect the insureds and claimants of this state in transactions involving the purchase of insurance from nonadmitted insurers; (2) avoid the obstacle of resorting to distant forums for the purpose of asserting legal rights under policies issued by nonadmitted insurers; (3) provide a method of substituted service of process upon nonadmitted insurers for proceedings before the director and in the courts in this state; (4) provide for the public the ability to self-procure insurance directly from nonadmitted insurers; (5) protect the revenue of the state; (6) protect regulated, admitted insurers from unregulated and unfair competition by nonadmitted insurers; (7) regulate and supervise the effectuation of nonadmitted insurance under the laws of this state and 15 U.S.C. 1011; and (8) maintain reliable insurance markets. Sec. 21.33.015. Unauthorized insurance prohibited. [Repealed, § 26 ch 117 SLA 1984.] Sec. 21.33.020. Unauthorized Insurers Process Act. [Repealed, § 2 ch 234 SLA 1968.] Sec. 21.33.021. Service of process on director. (a) The transaction of insurance by an unauthorized person or nonadmitted insurer is equivalent to and constitutes an irrevocable appointment by that person or insurer, binding upon the person or insurer, the executor, administrator, or personal representative of the person or insurer, or its successor in interest if a corporation, of the director and the successors of the director in office to be the lawful attorney of that person or insurer upon whom may be served all legal process in any action, suit, or proceeding in any court arising out of a transaction of insurance in this state or relative to a subject resident, located, or to be performed in this state by that person or nonadmitted insurer, except in an action, suit, or proceeding by the director or by the state. The transaction of insurance by an unauthorized person or nonadmitted insurer is acceptance by that person or insurer that legal process so served has the same legal force and validity as personal service of process in this state upon the person or insurer, or upon the executor, administrator, or personal representative of the person or insurer, or its successor in interest if a corporation. (b) Service of process shall be made by leaving two copies in the hands or office of the director and paying to the director for the use of the state a fee set under AS 21.06.250 for each person or insurer. A certificate by the director showing the service, which shall be attached to the original or third copy of the process presented to the director for that purpose, is sufficient evidence of service. Service upon the director as attorney shall be service upon the principal. (c) The director shall immediately mail one copy of the process to the defendant at its last known principal place of business and shall keep a record of all process so served upon the director, which shall show the day and hour of service. This service of process is sufficient, provided notice of the service and a copy of the process are sent within 10 days by registered mail by the plaintiff or the attorney of the plaintiff to the defendant at the last known principal place of business of the defendant and the defendant's receipt, or receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person or insurer to whom the letter is addressed, and the affidavit of the plaintiff or the attorney of the plaintiff showing compliance with this subsection are filed with the clerk of the court in which the action is pending on or before the date the defendant is required to appear, or within additional time that the court may allow. (d) Service of process in an action, suit, or proceeding described in (a) of this section, in addition to the manner provided in (b) and (c) of this section, is valid if served upon a person in this state who on behalf of an unauthorized person or nonadmitted insurer is doing any transaction of insurance, and if a copy of the process is sent within 10 days by registered mail by the plaintiff or the attorney of the plaintiff to the defendant at the last known principal place of business of the defendant and the defendant's receipt, or receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person or insurer to whom the letter is addressed and the affidavit of the plaintiff or the attorney of the plaintiff showing compliance with this subsection are filed with the clerk of the court in which the action is pending on or before the date the defendant is required to appear, or within additional time that the court may allow. (e) A plaintiff or complainant is not entitled to a judgment by default in an action, suit or proceeding in which the process is served under this section unless there is compliance with the Rules of Civil Procedure governing default judgments. (f) Nothing contained in this section limits or abridges the right to serve a process, notice, or demand upon a person or insurer in any other manner now or hereafter permitted by law. Sec. 21.33.025. Service of process on lieutenant governor. (a) The transaction of insurance by an unauthorized person or nonadmitted insurer is equivalent to and constitutes an irrevocable appointment by that person or insurer, binding upon the person or insurer, the executor, administrator, or personal representative of the person or insurer, or its successor in interest if a corporation, of the lieutenant governor and the successors in office of the lieutenant governor to be the lawful attorney of that person or insurer upon whom may be served all legal process in any action, suit, or proceeding in any court by the director or by the state and upon whom may be served any notice, order, pleading, or process in any proceeding before the director and that arises out of the transaction of insurance in this state or relative to a subject resident, located, or to be performed in this state by that person or insurer. The transaction of insurance by an unauthorized person or nonadmitted insurer is acceptance by that person or insurer that legal process in the court action, suit, or proceeding and any notice, order, pleading, or process in an administrative proceeding before the director so served has the same legal force and validity as personal service of process in this state upon the person or insurer, or upon the executor, administrator, or personal representative of that person or insurer, or its successor in interest if a corporation. (b) The service of process in the action, suit, or proceeding in any court or the notice, order, pleading, or process in the administrative proceeding authorized by (a) of this section shall be made by leaving two copies in the hands or office of the lieutenant governor. A certificate by the lieutenant governor showing the service, which shall be attached to the original or third copy of the process presented to the lieutenant governor for that purpose, is sufficient evidence of service. Service upon the lieutenant governor as attorney shall be service upon the principal. (c) The lieutenant governor shall immediately mail one copy of the court process or notice, order, pleading, or process in proceedings before the director to the defendant in the court proceeding or to whom the notice, order, pleading, or process in the administrative proceeding is addressed or directed at the last known principal place of business of the defendant and shall keep a record of all process so served that shall show the day and hour of service. The service is sufficient, provided notice of the service and a copy of the court process or the notice, order, pleading, or process in the administrative proceeding are sent within 10 days after service by registered mail by the plaintiff or the attorney of the plaintiff in the court proceeding or by the director in the administrative proceeding to the defendant in the court proceeding or by whom the notice, order, pleading, or process in the administrative proceeding is addressed or directed at its last known principal place of business of the defendant in the court or administrative proceeding, and the defendant's receipt, or receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person or insurer to whom the letter is addressed, and the affidavit of the plaintiff or the attorney of the plaintiff in a court proceeding or of the director in an administrative proceeding, showing compliance are filed with the clerk of the court in which the action, suit, or proceeding is pending or with the director in administrative proceedings, on or before the date the defendant in the court or administrative proceeding is required to appear or respond, or within additional time that the court or director may allow. (d) A plaintiff or complainant may not obtain a judgment or determination by default in a court or administrative proceeding in which court process or notice, order, pleading, or process in proceedings before the director is served under this section until there is compliance with the Rules of Civil Procedure regarding default judgments. (e) This section does not limit or abridge the right to serve a process, notice, order, pleading, or demand upon a person or insurer in any other manner now or hereafter permitted by law. (f) The attorney general, upon request of the director, is authorized to proceed in the courts of this or another state or in a federal court or agency to enforce an order or decision in a court proceeding or in an administrative proceeding before the director. Sec. 21.33.030. Director process agent. [Repealed, § 2 ch 234 SLA 1968.] Sec. 21.33.031. Defendant's duties and rights. (a) Before an unauthorized person or nonadmitted insurer files or causes to be filed a pleading, a court action, suit, or proceeding or a notice, order, pleading, or process in an administrative proceeding before the director instituted against the person or insurer, by service made as provided in AS 21.33.021 or 21.33.025, the person or insurer shall either (1) deposit with the clerk of the court in which the action, suit, or proceeding is pending, or with the director in administrative proceedings before the director, cash or securities or bond with an admitted insurer to be approved by the court, or the director, in an amount to be fixed by the court or the director sufficient to secure the payment of a final judgment that may be rendered in the court proceeding or in the administrative proceeding before the director; however the court, or the director in administrative proceedings before the director, may in its or the director's discretion make an order dispensing with the deposit or bond where the insurer makes a showing satisfactory to the court or the director that it maintains in a state of the United States funds or securities, in trust or otherwise, sufficient and available to satisfy a final judgment that may be entered in the court action, suit, or proceeding or in an administrative proceeding before the director; or (2) obtain admission to transact insurance in this state through a certificate of authority issued under this title. (b) The court in an action, suit, or proceeding in which service is made as provided in AS 21.33.021 or AS 21.33.025 , or the director in an administrative proceeding before the director in which service is made as provided in AS 21.33.025 , may order postponement that may be necessary to afford the defendant reasonable opportunity to comply with (a) of this section and to offer a defense in the court action or administrative proceeding. (c) Nothing in (a) of this section may be construed to prevent an unauthorized person or nonadmitted insurer from filing a motion to quash a writ or to set aside service made as provided in AS 21.33.021 or 21.33.025 on the ground that the unauthorized person or insurer has not transacted insurance in this state or relative to a subject resident, located, or to be performed in this state or that the person on whom service was made under AS 21.33.021 (d) was not transacting insurance in this state or relative to a subject resident, located, or to be performed in this state. Sec. 21.33.035. Attorney fees. In an action against an unauthorized person or nonadmitted insurer upon a contract of insurance issued or delivered in this state to a resident or to a corporation authorized to do business in this state, if the person or insurer has failed for 30 days after demand before the commencement of the action to make payment in accordance with the terms of the contract, and it appears to the court that the refusal was vexatious and without reasonable cause, the court may allow to the plaintiff a reasonable attorney fee and include the fee in the judgment that may be rendered in the action. Failure of the person or insurer to defend the action shall be considered prima facie evidence that its failure to make payment was vexatious and without reasonable cause. Sec. 21.33.037. Acting for or aiding nonadmitted insurers prohibited. (a) A person may not directly or indirectly act as agent for, or otherwise represent, assist, or aid on behalf of another, a nonadmitted insurer in the transaction of insurance in this state. (b) This section does not apply to (1) matters authorized to be done by the director; (2) surplus lines insurance effected and written under AS 21.34 ; (3) transactions for which a certificate of authority is not required under this title; (4) reinsurance; (5) the property and operations of railroads or aircraft primarily engaged in interstate or foreign commerce and wet marine and transportation insurance; (6) life insurance, health insurance, and annuity contracts when solicited solely by mail or when not solicited, negotiated, or procured in this state; (7) transactions subsequent to issuance of a policy not covering a subject resident, located, or to be performed in this state at time of issuance and lawfully solicited, written, or delivered outside this state. (c) In addition to other penalties under this title, a person who represents or aids a nonadmitted insurer in violation of this chapter is subject to the penalties provided in AS 21.33.065 . This chapter does not preclude the insured from enforcing, under the terms and provisions of the contract and the laws of this state, the insured's rights under a contract entered into in violation of this chapter. (d) If the nonadmitted insurer fails to pay a claim or loss within the provisions of the insurance contract, a person who assisted or in any manner aided directly or indirectly in the procurement of the insurance contract, shall be liable to the insured for the full amount under the provisions of the insurance contract. Sec. 21.33.040. Service of process. [Repealed, § 2 ch 234 SLA 1968.] Sec. 21.33.041. Contract validity. [Repealed, § 26 ch 117 SLA 1984.] Sec. 21.33.042. Suits by nonadmitted insurers. A nonadmitted insurer may not commence or maintain an action in law or equity in this state to enforce a right arising out of a transaction of insurance in this state except with respect to (1) claims under policies lawfully written in this state; (2) liquidation of assets and liabilities, other than the collection of new premiums, resulting from its former admitted operations in this state; (3) transactions subsequent to issuance of a policy not covering a subject resident, located, or to be performed in this state at time of issuance and lawfully solicited, written, or delivered outside this state; (4) surplus lines insurance coverage exported under AS 21.34 ; (5) reinsurance; (6) the continuation and servicing of life insurance, health insurance policies, or annuity contracts remaining in force as to residents of this state where the insurer has withdrawn from the state and is not transacting new insurance; (7) servicing of policies written by an admitted insurer in a state to which the insured has moved but in which the insured is not licensed, until the term of the policy expires; (8) claims under policies covering wet marine and transportation insurance, including vessels of 50 displacement tons or less. Sec. 21.33.045. Investigation and disclosure of insurance contracts. (a) When the director has reason to believe that insurance has been effectuated by or for a person in this state with a nonadmitted insurer, the director shall in writing order the person to produce for examination all insurance contracts and other documents evidencing insurance with nonadmitted insurers and to disclose to the director the amount of insurance, name and address of each insurer, gross amount of premium paid or to be paid, the name and address of the person or persons assisting or aiding in the solicitation, negotiation, or effectuation of the insurance, and other information required by the director. (b) [Repealed, § 26 ch 117 SLA 1984.] (c) In case of a failure of any person to comply with the director's order under (a) of this section, the superior court, on application of the director, may issue an order requiring the production of the records and information sought by the director. (d) [Repealed, § 60 ch 38 SLA 2002.] Sec. 21.33.050. Exemptions from service of process provisions. [Repealed, § 2 ch 234 SLA 1968.] Sec. 21.33.051. Reporting of unauthorized insurance. [Repealed, § 26 ch 117 SLA 1984.] Sec. 21.33.055. Unauthorized insurance premium tax. (a) Except as to premiums on lawfully procured surplus lines insurance exported under AS 21.34 and premiums on independently procured insurance on which a tax has been paid under AS 21.33.061 , every nonadmitted insurer shall pay to the director, on or before March 1 following the calendar year in which the insurance was procured, continued, or renewed, a premium-receipts tax of 3.7 percent of gross premiums written for the insurance other than wet marine and transportation insurance and a premium-receipts tax of three-fourths of one percent of gross premiums charged for the wet marine and transportation insurance if the insured's home state is this state. If the insurance covers properties, risks, or exposures located or to be performed both in and out of this state, the tax payable shall be computed based on an amount equal to that portion of the gross premiums allocated under (b) of this section to this state, plus an amount equal to the portion of the premiums allocated under (b) of this section to other properties, risks, or exposures located or to be performed outside of this state. The insurance on subjects resident, located, or to be performed in this state procured through negotiations or an application, in whole or in part occurring or made in or from in or out of this state, or for which premiums in whole or in part are remitted directly or indirectly from in or out of this state, shall be considered to be insurance procured or continued or renewed in this state. The tax paid by the insurer under this section is in lieu of all insurer taxes and fire department dues. In this subsection, “premium” includes all premiums, membership fees, assessments, dues, and any other consideration for insurance. (b) In determining the amount of premiums taxable in this state, all premiums written, procured, or received in this state shall be considered written on property or a subject located or resident in this state, except premiums that are properly allocated or apportioned and reported as taxable premiums of another state. In determining the amount of gross premiums taxable in this state covering a subject resident, located, or to be performed both inside and outside the state, the tax due shall be computed on that portion of the policy premium that is attributable to the subject resident, located, or to be performed in this state and that relates to the kind of insurance being placed as determined by reference to an allocation schedule as follows: (1) if a policy covers more than one classification, (A) for any portion of the coverage identified by a classification on the allocation schedule, the tax shall be computed by using the allocation schedule for the corresponding portion of the premium; (B) for any portion of the coverage not identified by a classification on the allocation schedule, the tax shall be computed by using an alternative equitable method of allocation for the property or subject; (C) for any portion of the coverage where the premium is indivisible, the tax shall be computed by using the method of allocation that pertains to the classification describing the predominant coverage. (2) if the information provided is insufficient to substantiate the method of allocation used or if the director determines that the method is incorrect, the director shall determine the equitable and appropriate amount of tax due to the state as follows: (A) by use of the allocation schedule where the subject is appropriately identified in the schedule; (B) where the allocation schedule does not identify a classification appropriate to the coverage, the director may give acceptance by significant weight to documented evidence of the underwriting bases and other criteria used by the insurer or may give consideration to other available information to the extent it is sufficient and relevant, including the percentage of the insured's physical assets in this state, the percentage of the insured's sales in this state, the percentage of income or resources derived from this state, and the amount of premium tax paid to another jurisdiction for the policy. (c) This section does not apply to insurance of risks of the state or a political subdivision of the state, or to insurance of aircraft primarily engaged in interstate or foreign commerce. (d) On default of a nonadmitted insurer in the payment of the tax, the insured shall pay the tax within 30 days after written notice from the director of the default by the nonadmitted insurer. If the tax prescribed by this section is not paid by the nonadmitted insurer within the time stated or by the insured within the time stated after notice of default by the nonadmitted insurer, the tax may be increased by (1) a late payment fee of $1,000 or 10 percent of the tax due, whichever is greater; (2) interest at the rate of one percent a month or part of a month from the date the payment was originally due to the date paid; and (3) a penalty not to exceed $100 a day or 25 percent of the tax due, whichever is greater, from the date the payment was due to the date paid. Sec. 21.33.060. Defense of action by unauthorized insurer. [Repealed, § 2 ch 234 SLA 1968.] Sec. 21.33.061. Independently procured insurance; premium tax. (a) Every insured who procures or causes to be procured or continues or renews insurance with a nonadmitted insurer, or an insured or self-insurer who so procures or continues excess loss, catastrophe or other insurance, upon a subject of insurance resident, located, or to be performed in this state, other than insurance lawfully procured through a surplus lines broker under AS 21.34 shall, within 30 days after the date the insurance was procured, continued, or renewed, file a report with the director in writing and in a form prescribed by the director. The report must show the name and address of the insured, name and address of the insurer, the subject of the insurance, a general description of the coverage, the amount of premium currently charged, and additional pertinent information required by the director. (b) Insurance in a nonadmitted insurer of a subject of insurance resident, located, or to be performed in this state procured through negotiations or an application, in whole or in part occurring or made in or from in or out of this state, or for which premiums in whole or in part are remitted directly or indirectly from in or out of this state, is considered to be insurance procured or continued or renewed in this state within the intent of (a) of this section. (c) If the insured's home state is this state, the insured shall pay to the director, on or before March 1 following the calendar year in which the insurance was procured, continued, or renewed, a tax of 3.7 percent of the gross premiums paid for the insurance other than wet marine and transportation insurance, less any return premiums. For wet marine and transportation insurance, if the insured's home state is this state, the insured shall pay to the director a tax of three-fourths of one percent of the gross premiums paid for the wet marine and transportation insurance. If the insurance covers properties, risks, or exposures located or to be performed both in and out of this state, the tax payable shall be computed based on an amount equal to that portion of the gross premiums allocated under (d) of this section to this state, plus an amount equal to the portion of the premiums allocated under (d) of this section to other properties, risks, or exposures located or to be performed outside of this state. In the event of cancellation and rewriting of the insurance contract, the additional premium for tax purposes is the premium in excess of the unearned premium of the cancelled insurance contract. In this subsection, “premium” includes all premiums, membership fees, assessments, dues, and any other consideration for insurance. (d) In determining the amount of premiums taxable in this state, all premiums written, procured, or received in this state shall be considered written on property or a subject located or resident in this state, except premiums that are properly allocated or apportioned and reported as taxable premiums of another state. In determining the amount of gross premiums taxable in this state, the tax due shall be computed on that portion of the policy premium that is attributable to a subject resident, located, or to be performed in this state and that relates to the kind of insurance being placed as determined by reference to an allocation schedule as follows: (1) if a policy covers more than one classification, (A) for any portion of the coverage identified by a classification on the allocation schedule, the tax shall be computed by using the allocation schedule for the corresponding portion of the premium; (B) for any portion of the coverage not identified by a classification on the allocation schedule, the tax shall be computed by using an alternative equitable method of allocation for the property or subject; (C) for any portion of the coverage where the premium is indivisible, the tax shall be computed by using the method of allocation that pertains to the classification describing the predominant coverage; (2) if the information provided is insufficient to substantiate the method of allocation used, or if the director determines that the method is incorrect, the director shall determine the equitable and appropriate amount of tax due to this state as follows: (A) by use of the allocation schedule where the subject is appropriately identified in the schedule; (B) where the allocation schedule does not identify a classification appropriate to the coverage, the director may give significant weight to documented evidence of the underwriting bases and other criteria used by the insurer or may give consideration to other available information to the extent sufficient and relevant, including the percentage of the insured's physical assets in this state, the percentage of the insured's sales in this state, the percentage of income or resources derived from this state, and the amount of premium tax paid to another jurisdiction for the policy. (e) [Repealed, § 223 ch 67 SLA 1992.] (f) The attorney general, upon request of the director, shall proceed in the courts of this or another state or in a federal court or agency to recover the tax not paid within the time prescribed in this section. (g) This section does not apply to insurance of risks of the state or a political subdivision of the state, to insurance of aircraft primarily engaged in interstate or foreign commerce, to life insurance, to health insurance, or to annuity contracts. (h) This section does not abrogate or modify, and may not be construed or considered to abrogate or modify, a provision of AS 21.33.037 or 21.33.042 or another provision of this chapter. (i) [Repealed, § 223 ch 67 SLA 1992.] (j) If the tax payable under (c) of this section is not paid within the time stated, the tax may be increased by (1) a late payment fee of $1,000 or 10 percent of the tax due, whichever is greater; (2) interest at the rate of one percent a month or part of a month from the date the payment was due to the date paid; and (3) a penalty not to exceed $100 a day or 25 percent of the tax due, whichever is greater, from the date the payment was due to the date paid. Sec. 21.33.063. Agreements with other states. The director is authorized to participate in an agreement with another state for the purposes of collecting and disbursing to the other state any premium tax collected under this chapter and payable to the other state and for receiving from the other state premium tax it has collected and is owed to this state. To the extent that another state where a portion of the properties, risks, or exposures reside has failed to enter into an agreement with this state, the director shall retain all of the net premium tax collected by this state. Sec. 21.33.065. Penalties. (a) A person other than an insured, who in this state represents or aids a nonadmitted insurer in violation of AS 21.33.037 , is subject to a civil penalty of not more than $50,000 in addition to applicable criminal penalties and other penalties prescribed in this title. (b) In addition to any other penalty provided, a person who violates a provision of this chapter is subject to a civil penalty of not more than $10,000 for the first offense and not more than $100,000 for each succeeding violation. (c) [Repealed, § 223 ch 67 SLA 1992.] Sec. 21.33.068. Venue. [Repealed, § 26 ch 117 SLA 1984.] Sec. 21.33.070. Attorney fees. [Repealed, § 2 ch 234 SLA 1968.] Secs. 21.33.071 , 21.33.075. Insurer and insurance business defined; exceptions. [Repealed, § 26 ch 117 SLA 1984.] Secs. 21.33.080 — 21.33.300. Surplus Lines Insurance Law. [Repealed, § 26 ch 117 SLA 1984.] Sec. 21.33.310. Exemptions from surplus line law. [Repealed, § 13 ch 21 SLA 1985.] Sec. 21.33.320. [Renumbered as AS 21.33.900 .] Sec. 21.33.330. Surplus line broker defined. [Repealed, § 13 ch 21 SLA 1985.] Sec. 21.33.900. Records of insureds. In order that the director may effectively administer this chapter, a person who has placed insurance with an unauthorized insurer shall, upon the director's order, produce for the examination of the director all policies and other documents evidencing the insurance and shall disclose to the director the amount of premiums paid or agreed to be paid for the insurance and other information required by the director. For each refusal to obey the order, in addition to any other penalties prescribed in this title, the person is subject to a civil penalty of not more than $25,000 following an appropriate hearing as provided in AS 21.06.170 — 21.06.230. Sec. 21.33.910. Definitions. In this chapter, (1) “export” means to place surplus lines insurance with a nonadmitted insurer; (2) “transaction of insurance” means the solicitation, negotiation, procurement, effectuation, or renewal of insurance; forwarding of applications; delivery of policies or contracts; inspection of risks; fixing of rates; investigation or adjustment of claims or losses; collection or forwarding of premiums; or transaction of matters subsequent to effectuation of the contract of insurance and arising out of it; (3) “unauthorized person” means a person not licensed as a surplus lines broker, or not a salaried employee of the insured; (4) “wet marine and transportation insurance” has the meaning given in AS 21.34.900 .