P.R. Laws tit. 26, § 3903
(a) This chapter shall provide coverage under the policies and contracts specified in subsection (b) of this section:
(1) To persons who, regardless of where they reside, (with the exception of nonresident certificate holders under group policies or contracts), are the beneficiaries, assignees, or payees of the persons covered under clause (2), and
(2) to persons who are owners of or certificate holders under said policies, other than structured settlement annuities, and who:
(A) Are residents, or
(B) are not residents, but only if they meet all the following conditions:
(i) The insurers who issued said policies or contracts are domiciled in Puerto Rico;
(ii) said insurers never obtained a license or certificate of authority in the states where these persons reside;
(iii) those states have associations similar to the Association created by this chapter, and
(iv) said persons are not eligible for coverage by said associations.
(3) persons who are beneficiaries under a structured settlement annuities, only if the beneficiary:
(A) Is a resident, regardless of where the contract owner resides, or
(B) is not a resident, but only if the following conditions are met:
(i) The contract owner is a resident, and the beneficiary is not eligible for coverage by the association of the jurisdiction in which he/she resides, or
(ii) the contract owner is not a resident, but the insurer that issued the contract is domiciled in Puerto Rico, and neither the beneficiary nor the contract owner is eligible for coverage by the association of the jurisdiction in which they reside.
(4) This chapter shall not provide coverage to persons who are beneficiaries or assignee of contracts or policies of persons resident in Puerto Rico, if such beneficiary or assignee is eligible to obtain coverage by any other association.
(5) This chapter is intended to provide coverage to a person who is a resident of Puerto Rico, and in special circumstances, to a nonresident. In order to avoid duplicate coverage or payment recovery, if a person who would otherwise receive coverage under this chapter, is provided coverage under the laws of any other jurisdiction, he/she shall not be provided coverage under this chapter. In determining the application of this subsection in situations and/or cases where a person could be covered by more than one jurisdiction and/or association, whether as an owner, beneficiary, and/or assignee, this chapter shall be construed in conjunction with the laws of the other jurisdiction to result in coverage by only one association.
(b)
(1) This chapter shall provide coverage to the persons specified in subsection (a) of this section for direct or supplemental life and disability policies or contracts, which are not group policies or contracts, and for certificates under direct group policies and contracts issued by member insurers, except for the limitations imposed in this chapter.
(2) This chapter shall not provide coverage for:
(A) Any portion of a policy or contract which is not guaranteed by the insurer or under which the risk is assumed by the policy or contract holder.
(B) Any reinsurance policy or contract.
(C) Any portion of a policy or contract to the extent that the interest rate on which it is based:
(i) Averaged out for a period of four (4) years prior to the date in which the Association becomes obligated with respect to such policy or contract, exceeds an interest rate determined by subtracting two percentage points (2%) from “Moody’s Corporate Bond Yield Average”, averaged out by the same four (4)-year period or for a lesser period, if the policy or contract was issued less than four (4) years prior to the date in which the Association becomes obligated, and
(ii) on and after the date in which the Association becomes obligated with respect to such a policy or contract, exceeds the interest rate determined by subtracting three percentage points (3%) from the next recently available “Moody’s Corporate Bond Yield Average”.
(D) Any plan or program of an employer, association or similar entity to provide life, disability or annuity benefits to its employees or members, to the extent that said plan or program operates with its own funds or is not insured, including, but not limited to, benefits payable by an employer, association or similar entity under:
(i) A “Multiple Employer Welfare Arrangement” plan as defined in § 514 of the “Employee Retirement Income Security Act of 1974” as amended;
(ii) a minimum premium group insurance plan;
(iii) a stop loss group insurance plan;
(iv) a contract exclusively for administrative services;
(v) Any portion of a policy or contract to the extent that the it provides dividends or experience rating credits or payment of any fees or allowances to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract.
(vi) Any policy or contract issued in Puerto Rico by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue the policy or contract in Puerto Rico.
(vii) Any annuity contract not assigned.
(viii) Any obligation that does not arise under the express written terms of the policy or contract issued to the contract or policy owner, including without limitation:
(I) Claims based on marketing materials;
(II) claims based on letters, riders, clauses, amendments and/or other documents that were issued by the insurer without meeting the applicable policy form filing and/or approval requirements set forth by the Office of the Insurance Commissioner;
(III) extra-contractual claims, and
(IV) claims for penalties or incidental damages.
(c) The benefits that the association may become obligated to cover shall in no event exceed the lesser of:
(1) The contractual obligations for which the insurer is liable or would have been liable if he/she were not an impaired or insolvent insurer, or
(2) with respect to one life, regardless of the number of policies or contracts:
(A) Three hundred thousand dollars ($300,000) in life insurance death benefits, but not more than one hundred thousand dollars ($100,000) in net cash surrender and net cash withdrawal values.
(B) One hundred thousand dollars ($100,000) in disability insurance benefits, including any net cash surrender and net cash withdrawal values. For the purposes of this section, disability insurance is the insurance which provides for the payment of a monthly or weekly sum in cases of disability or in the event that the insured is incapable of working.
(C) One hundred thousand dollars ($100,000) in the present value of annuity benefits, including net cash surrender and net cash withdrawal values.
(D) Three hundred thousand dollars ($300,000) for basic hospital medical insurance and catastrophic health coverage. For the purposes of this section, basic hospital medical coverage is the medical expense coverage, which provides benefits to pay for the treatment of illnesses or injuries of an insured. It usually includes hospital, surgical, laboratory and office visit expenses. With respect to catastrophic health coverage, this subsection refers to health coverage for expenses related to an illness or injury after the basic hospital medical coverage limit is reached.
(3) With respect to each beneficiary of a structured settlement annuity, one hundred thousand dollars ($100,000) in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values.
(4) However, in no event shall the association be obligated to cover more than an aggregate of three hundred thousand dollars ($300,000) in benefits with respect to any one life under this section.
History —Ins. Code, added as § 39.030 on Aug. 17, 1991, No. 72, § 1; Aug. 20, 2009, No. 82, § 1.