Delaware General Assembly





Be it enacted by the Senate and House of Representatives of the State of Delaware in General Assembly met:

Section 1. That Chapter 20 of the Revised Code of Delaware, 1935, as amended by Chapter 80, Volume 41, Laws of Delaware, be and the same is hereby amended by repealing and striking out all of 567A. Sec. 107; 567B. Sec. 108; 567C. Sec. 109; 567D. Sec. 110; 567E. Sec. 111; 567F. Sec. 112; 567G. Sec. 113; 567H. Sec. 114; 5671. Sec. 115; 567J. Sec. 116; 567K. Sec. 117; 567L. Sec. 118; 567M. Sec. 119; 567N. Sec. 120; 5670. Sec. 121; 567P. Sec. 122; 567Q. Sec. 123, of Article 10 thereof and substituting in lieu thereof the following:


issuing certificates of membership providing for payment of benefits in case of sickness, disability or death of its members and which accumulates funds by the collection of fees or dues from its members, at either stated or irregular intervals, with which to discharge its liabilities on the aforesaid membership certificates and with which to pay the administrative expenses, is hereby declared to be a Mutual Benefit Association; provided, however, fraternal benefit societies as defined in Article 9, Chapter 20, Revised Code of Delaware, 1935, and fraternal organizations exempted by the provisions of Article 6, Chapter 20, Revised Code of Delaware, 1935, shall not be deemed to be Mutual Benefit Associations, nor shall a Mutual Benefit Association, whose membership is confined to employees or former employees of common carriers engaged in interstate commerce, or an association which administers two or more such associations, be subject to the provisions of this article.

567B. Sec. 108. Requirements on Filing Certificate of Incorporation With the Secretary of State:--The Secretary of State shall not file a Certificate of Incorporation for any Mutual Benefit Association unless such certificate shall be accompanied by a certificate duly signed by the Insurance Commissioner of the State setting forth that a deposit of twenty-five thousand dollars ($25,000.00) has been made with him in cash or approved securities, that conformity has been made with all of the requirements of this Article, and that the Certificate of Incorporation so presented for filing is in substantial compliance with the provisions of the Insurance Laws of the State of Delaware. The aforesaid deposit shall constitute a Guaranty Fund hereinafter mentioned and shall remain in trust with the Insurance Commissioner to answer any default of such Mutual Benefit Association.

567C. Sec. 109. No Mutual Benefit Association to Do Business Without Certificate of Authority, Requirements for Obtaining Certificate:--No mutual benefit association shall directly or indirectly issue any certificate of membership whatever without having a valid and unrevoked Certificate of Authority. All such Certificates of Authority shall be issued by the Insurance Commissioner under his seal of office, and shall bear the date of actual issuance. No

Certificate of Authority shall be issued to any mutual benefit association, unless:

1. It shall file with the Insurance Commissioner

(a) Certified copy of its Certificate of Incorporation or charter,

(a) Copy of its constitution and by-laws,

(a) Copy of all forms of certificates of membership which the association proposes to issue,

(b) Certified statement that such association has a membership of at least 500 persons or that it has at least 500 bona fide applications for membership accompanied by the initial payments.

2. It shall furnish such other information respecting its business or affairs as may be required of it by the said Insurance Commissioner.

3. It shall deposit with the Insurance Commissioner a Guaranty Fund as hereinafter provided.

567D. Sec. 110. Guaranty Fund, How Constituted:--All mutual benefit associations before receiving a Certificate of Authority shall deposit with the Insurance Commissioner of the State of Delaware the sum of Twenty-five Thousand Dollars ($25,000.00) in cash and/or approved securities; provided, however, every existing mutual benefit association which, on the date of the approval of this Act, is solvent and transacting business under a Certificate of Authority issued by the Insurance Commissioner of this State, shall be entitled to receive a new Certificate of Authority provided the same is applied for within sixty days from the date of approval of this Act, but the Insurance Commissioner shall not again renew any Certificate of Authority for any such existing mutual benefit association unless it has deposited with the said Insurance Commissioner the sum of Five Thousand Dollars ($5,000.00) in cash and/

or approved securities, which said sum shall be the total deposit required of every such existing mutual benefit association. All moneys or securities on deposit with the Insurance Commissioner as of the date of the approval of this Act to the credit of any such existing mutual benefit association, shall be applied in the name of any such association toward the payment of the said sum of Five Thousand Dollars ($5,000.00). The deposit required under this Section shall be considered as constituting a part of the Benefit Fund hereinafter described.

The association may collect the interest, dividends and profits upon such securities, and from time to time substitute therefor others of equally good character and value, subject to the approval of the Insurance Commissioner.

The aforesaid deposit shall constitute a Guaranty Fund and shall not be withdrawn by any association, as herein defined, except that the Insurance Commissioner may make withdrawals from said Fund upon the order of any Court of record of the State of Delaware issued upon a final judgment, to pay any claim reduced to final judgment by such Court in an action by any member or beneficiary based upon a certificate of membership. In the event of such withdrawal, such association making such deposit shall replace the amount withdrawn within six months from the date of such withdrawal.

Whenever a mutual benefit association determines to discontinue its business, it shall make written application to the Insurance Commissioner of its desire to withdraw its Guaranty Fund. Within three months of receipt of such application, the Insurance Commissioner shall determine the condition of the financial affairs of such association, and if he finds its books and records to be in proper order and no liabilities outstanding, he shall cancel the Certificate of Authority previously granted to such association and deliver to such association or its assigns, all moneys and/or securities deposited in the Guaranty Fund to the credit of such association, whereupon the directors or governing body of any such association shall forthwith cause to be dissolved the association in accordance with the

Laws of the State of Delaware and shall file proper evidence of such dissolution with the Insurance Commissioner.

567E. Sec. 111. Benefit Fund, How Created, Uses of:--Every mutual benefit association shall deposit in a bank or trust company approved by the Insurance Commissioner of the State of Delaware, a sum not less than fifty per cent of all dues collected by the association or by any agent thereof on all certificates of membership. This shall constitute a Benefit Fund for the payment of claims arising under certificates of membership, for the payments to the Guaranty Fund maintained with the Insurance Commissioner and for the payment of legal expenses incurred in 'adjusting and defending claims, for these purposes and no other; provided, that if after an examination of the financial affairs of any mutual benefit association the Insurance Commissioner shall determine that fifty per cent of all dues collected as aforesaid, is insufficient to properly maintain the Benefit Fund, he may require the association to deposit a larger percentage of said dues to the credit of the Benefit Fund.

567. Sec. 112. Certificates of Membership, Approved by Insurance Commissioner, Conditions Thereto:--No certificate of membership providing for sick, accident and/or death benefits to members or their beneficiaries, as hereinafter provided, shall be issued by any mutual benefit association unless the same shall first be approved by the Insurance Commissioner of the State of Delaware.

A certificate of membership, among other conditions not contrary to the provisions of this Article, may specify the diseases for which limited benefits may be paid in sickness or death, and may also specify the causes of personal injuries, or death therefrom, for which no benefits will be paid.

A certificate of membership may also restrict the payment of any benefit for sickness, accident and/or death that occurs within a specified time after the issuance of such certificate to the refund of all dues paid by the members or their beneficiaries, less the expense of carrying the same on the books of the association, and the payment of such refund shall fully liquidate all claims of a member against the association by reason of such certificate of membership.

A certificate of membership may also limit the time which shall elapse before any benefits are payable and may fix and determine the minimum and maximum benefits to be paid within limitations approved by the Insurance Commissioner.

567G. Sec. 113. Schedule of Benefits; Age Limitation:--No certificate of membership issued by any mutual benefit association shall provide for death benefits in excess of One Thousand Dollars, or sickness or accident disability benefits in excess of Twenty-five Dollars per week, nor shall such benefits be payable for a period of more than thirteen weeks in any twelve month period. No association shall issue more than one of each of the above type of certificates of membership to any one person.

No person under seventeen years of age or over seventy-five years of age shall be admitted to membership in any mutual benefit association, provided, however, a certificate of membership may be issued to a child under sixteen years of age upon an application of an adult member liable for such child's support, who shall exercise the privileges of membership of such child until he or she shall have attained the age of seventeen years. When such child attains the age of sixteen years he or she may exercise all of the contractual rights with respect to such membership.

567H. Sec. 114. Doing Business in and Outside State:--Any mutual benefit association organized under the General Corporation Laws of the State of Delaware with its principal office situated in this State shall be regarded as doing business in the State of Delaware regardless of whether or not its membership is acquired from residents of this State, other States, District of Columbia or Territories of the United States, and shall make the reports required by the Insurance Commissioner and pay all of the fees herein prescribed.

No domestic mutual benefit association shall issue any certificate of membership in any State or Territory of the United States, District of Columbia or foreign country unless it holds a valid and unrevoked Certificate from the Insurance Commissioner of the State of Delaware.

5671. Sec. 115. Agreement, How Constituted:--The Certificate of Membership, the Certificate of Incorporation, and any amendments thereto, the by-laws of the association and the provisions of this Article shall constitute an agreement between the association as a whole or the membership thereof, and the members, and binding on their respective beneficiaries.

567J. Sec. 116. General Powers and Duties of Insurance Commissioner:--The Insurance Commissioner shall examine the offairs of each domestic mutual benefit association as to its financial ability and condition at least once in three years. He shall also make an examination of any such association whenever he deems it prudent or advisable to do so. Such examination shall be made by the Commissioner personally or by his deputy or other accredited representative, and all proper charges incurred in making such examination, inclusive of expert assistance, shall be paid by the association examined, provided, however, the expenses of such examination shall not exceed twenty-five dollars ($25.00) per day, plus traveling expenses incurred.

For the purpose of such examination, the Commissioner or his deputy or person making examination shall have free access to all the books and papers of the association that relate to its business, and to the books and papers of any of its agents, and may summon and qualify as witnesses under oath and examine the directors, officers, agents and employees of any such association, and any other persons in relation to its affairs, transactions and conditions. The refusal of any such association to submit to and provide for such examination or to exhibit its books and records for inspection, shall be presumptive evidence that it has violated the provisions of this Article, and its Certificate of Authority shall be forthwith revoked, and it shall be subject to the penalties prescribed and imposed by

this Article. If from such examination, after notice and hearing before the Commissioner, it appears that it has violated the provisions of this Article, its Certificate of Authority shall be forthwith revoked.

Whenever the Insurance Commissioner shall have reason to believe, after notice and hearing before the Commissioner, that any mutual benefit association is insolvent, or fraudulently conducted, or that its assets are not sufficient for carrying on the business of the same, or that it has failed to comply with the provisions of this Article, or that its condition is such as to render its further proceeding hazardous to its certificate holders or to the public notwithstanding any special provision granted in its charter or certificate of incorporation, the Insurance Commissioner shall revoke its Certificate of Authority to do business; and if a domestic corporation, he shall take charge of its affairs and communicate the fact to the Attorney General, whose duty it shall then become to file a bill or petition in Chancery, in the name of the State, setting forth the facts, and thereupon to apply to the Court of Chancery of any County in which said association may be doing business, or to the Chancellor in vacation, for an Order requiring said association to show cause why its business should not be closed. In a proper case made, the said Court or the Chancellor in vacation, shall have power to appoint a Receiver to take charge of, settle and close up the affairs of said mutual benefit association under the direction of the said Court, to enjoin it from doing business, and to make such order and decree as may be necessary and proper.

567K. Sec. 117. Annual Statements:--Every mutual benefit association transacting business in accordance with the provisions of this Act shall annually, on or before the first day of March, file with the Insurance Commissioner a financial statement on forms furnished by the Insurance Commissioner subscribed and sworn to by its President and Secretary, or in their absence by two of its principal officers, showing its financial condition at the close of business on the thirty-first day of December of the year last preceding, also showing the total membership at such date.

The Insurance Commissioner shall annually, in the month of December, furnish to every mutual benefit association authorized to transact business in accordance with this Act, two or more blanks in the form adopted for such statements.

567L. Sec. 118. Fees, Paid to Whom, When:--Every mutual benefit association complying with the provisions of this Act shall be issued a Certificate of Authority by the Insurance Commissioner, which shall be valid until the first day of March following its issuance, and thereafter such associations shall be issued such Certificates of Authority annually on the first day of March to operate the year following. A fee of twenty-five dollars ($25.00) shall be paid by every mutual benefit association to the Insurance Commissioner at the time of issuance of such Certificate of Authority.

Upon the filing of the annual statement by every mutual benefit association, the Insurance Commissioner shall be paid a fee of twenty-five dollars to cover cost of filing. The above fee shall be for the use of the State, and shall be in lieu of all other taxes, levies, assessments or contributions, except taxes on real property.

Every mutual benefit association must also pay the actual expenses incurred in connection with the reviewing and approving of the certificates of membership.

567. Sec. 119. Investments, How Made:--Each mutual benefit association may invest its funds in any form of investment sanctioned in Section 31 of the Insurance Laws of the State of Delaware relating to Investments of Funds by Domestic Companies.

567. Sec. 120. Mergers, How Effected:--Every mutual benefit association, as herein defined, may merge, insure, reinsure, or accept the transfer of membership or funds with any other like mutual benefit association under such rules and regulations as the Insurance Commissioner shall prescribe.

5670. Sec. 121. Violations and Penalties:--Any corporation, society, order or association which shall organize and/or transact the business of a mutual benefit association in this State, contrary to the provisions of this Article, or any mutual benefit association which shall directly or indirectly transact such business in this State without having a valid and unrevoked Certificate of Authority therefor, agreeable to the provisions of this Article, shall, upon conviction thereof, pay a fine of *not more than One Thousand Dollars. Any officer, manager or agent of such corporation, society, order or association, or mutual benefit association, willfully violating or failing to observe or comply with the provisions of this Article, shall be punishable under this Section. All penal proceedings for the punishment of the offenses against the provisions of this Article may be brought in the Court of General Sessions in any of the Counties of this State.

Any mutual benefit association, or any officer, manager or agent thereof, neglecting or refusing to comply with, or violating any of the provisions of this Article, the penalty for which neglect, refusal or violation is not otherwise specified, shall be subject to a fine not exceeding Two Hundred Dollars upon conviction thereof.

567P. Sec. 122. Saving Clause:--If any clause, sentence, paragraph, or part of this Act shall, for any reason, be adjudged by any Court of competent jurisdiction, to be invalid, such judgment shall not affect, impair or invalidate the remainder of this Act, but shall be confined in its operation to the clause, sentence, paragraph or any part thereof directly involved in the controversy in which such judgment has been rendered.