Section 59A-42-4 - [Effective 1/1/2025] Coverage-limitationsA. Coverage shall be provided for the policies and contracts specified in Subsection D of this section:(1) to persons who, regardless of where they reside, except for nonresident certificate holders under group policies or contracts, are the beneficiaries, assignees or payees, including health care providers rendering services covered under health insurance policies or certificates, of the persons covered pursuant to Paragraph (2) of this subsection;(2) to persons who are owners of, enrollees or certificate holders under the policies or contracts, other than unallocated annuity contracts and structured settlement annuities, and in each case who: (b) are not residents, but only under the following conditions: 1) the member insurer that issued the policies or contracts is domiciled in this state; 2) the states in which the persons reside have associations similar to this state's association; and 3) the persons are not eligible for coverage by an association in another state due to the fact that the member insurer or the health maintenance organization was not licensed in that state at the time specified in that state's guaranty association law;(3) for unallocated annuity contracts specified in Subsection D of this section, to which Paragraphs (1) and (2) of this subsection shall not apply, and except as provided in Subsections B and C of this section: (a) to persons who are the owners of the unallocated annuity contracts if the contracts are issued to or in connection with a specific benefit plan whose plan sponsor has its principal place of business in this state; and(b) to persons who are the owners of unallocated annuity contracts issued to or in connection with government lotteries if the owners are residents; and(4) for structured settlement annuities specified in Subsection D of this section, to which Paragraphs (1) and (2) of this subsection shall not apply, and except as provided in Subsections B and C of this section, to a person who is a payee under a structured settlement annuity, or a beneficiary of a payee if the payee is deceased, if the payee:(a) is a resident, regardless of where the contract owner resides; or(b) is not a resident, but only under the following conditions: 1) the contract owner of the structured settlement annuity is a resident or is not a resident, but the insurer that issued the structured settlement annuity is domiciled in this state and the state in which the contract owner resides has an association similar to this state's association; and 2) neither the payee, the payee's beneficiary or the contract owner is eligible for coverage by the association of the state in which the payee or contract owner resides.B. Coverage shall not be provided to: (1) a person who is a payee or beneficiary of a contract owner resident of this state, if the payee or beneficiary is afforded coverage by the association of another state;(2) a person covered pursuant to Paragraph (3) of Subsection A of this section, if coverage is provided by the association of another state to that person; or(3) a person who acquires rights to receive payments through a structured settlement factoring transaction.C. Coverage is intended to be provided to a person who is a resident of this state and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage pursuant to the Life and Health Insurance Guaranty Association Act is provided coverage under the laws of another state, the person shall not be provided coverage in this state. In determining the application of the provisions of this subsection in situations where a person could be covered by the association of more than one state, whether as an owner, payee, enrollee, beneficiary or assignee, the Life and Health Insurance Guaranty Association Act shall be construed in conjunction with other state laws to result in coverage by only one association.D. Coverage shall be provided to the persons specified in Subsection A of this section for policies or contracts of direct, non-group life insurance, health insurance, which for the purposes of the Life and Health Insurance Guaranty Association Act includes health maintenance organization subscriber contracts and certificates, or annuities and supplemental contracts to any of these, for certificates under direct group policies and contracts and supplemental contracts to these and for unallocated annuity contracts issued by member insurers, except as limited by the Life and Health Insurance Guaranty Association Act, Annuity contracts and certificates under group annuity contracts include guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, annuities issued to or in connection with government lotteries and immediate or deferred annuity contracts.E. Coverage shall not be provided for: (1) a portion of a policy or contract not guaranteed by the member insurer or under which the risk is borne by the policy or contract owner;(2) a policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract;(3) a portion of a policy or contract, except for any portion of a policy or contract, including a rider, that provides long-term care or any other health insurance benefit, to the extent that the rate of interest on which it is based, or the interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (a) averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer pursuant to the Life and Health Insurance Guaranty Association Act, whichever is earlier, exceeds the rate of interest determined by subtracting two percentage points from Moody's corporate bond yield average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under the Life and Health Insurance Guaranty Association Act, whichever is earlier; and(b) on and after the date on which the member insurer becomes an impaired or insolvent insurer pursuant to the Life and Health Insurance Guaranty Association Act, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody's corporate bond yield average as most recently available;(4) a portion of a policy or contract issued to a plan or program of an employer, association or other person to provide life, health or annuity benefits to its employees, members or others, to the extent that the plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association or other person under: (a) a multiple employer welfare arrangement;(b) a minimum premium group insurance plan;(c) a stop-loss group insurance plan; or(d) an administrative services only contract;(5) a portion of a policy or contract to the extent that it provides for: (a) dividends or experience rating credits;(c) payment of fees or allowances to a person, including the policy or contract owner, in connection with the service to or administration of the policy or contract;(6) a policy or contract issued in this state 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 this state;(7) an unallocated annuity contract issued to or in connection with a benefit plan protected under the federal pension benefit guaranty corporation, regardless of whether that corporation has yet become liable to make payments with respect to the benefit plan;(8) a portion of an unallocated annuity contract that is not issued to or in connection with a specific employee, union or association of natural persons benefit plan or a government lottery;(9) a portion of a policy or contract to the extent that the assessments required by Section 59A-42-8 NMSA 1978 with respect to the policy or contract are preempted by federal or state law;(10) an obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner or policy owner, including without limitation: (a) claims based on marketing materials;(b) claims based on side letters, riders or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements;(c) misrepresentations of or regarding policy or contract benefits;(d) extra-contractual claims; or(e) a claim for penalties or consequential or incidental damages;(11) a contractual agreement that establishes the member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer;(12) a portion of a policy or contract to the extent that it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer pursuant to the Life and Health Insurance Guaranty Association Act, whichever is earlier. If a policy or contract's interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and that are not subject to forfeiture pursuant to this paragraph, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values were the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture;(13) a policy or contract providing hospital, medical, prescription drug or other health care benefits pursuant to Part C or Part D of Subchapter 18 of Chapter 7 of Title 42 of the United States Code, commonly known as medicare Parts C and D, or Subchapter 19 of Chapter 7 of Title 42 of the United States Code, commonly known as medicaid, or any regulations promulgated pursuant to those acts; or(14) structured settlement annuity benefits to which a payee or beneficiary has transferred the payee's or beneficiary's rights in a structured settlement factoring transaction.F. 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 member insurer is liable or would have been liable if it were not an impaired or insolvent insurer;(2) with respect to one person's life, regardless of the number of policies or contracts:(a) for life insurance death benefits, three hundred thousand dollars ($300,000) but not more than one hundred thousand dollars ($100,000) in net cash surrender and net cash withdrawal values;(b) for health insurance benefits: 1) one hundred thousand dollars ($100,000) for coverages not constituting disability income insurance, health benefit plans or long-term care insurance, including net cash surrender and net cash withdrawal values; 2) three hundred thousand dollars ($300,000) for disability income insurance; 3) three hundred thousand dollars ($300,000) for long-term care insurance as defined in Section 59A-23A-4 NMSA 1978; and 4) five hundred thousand dollars ($500,000) for health benefit plans; or(c) for annuity benefits, two hundred fifty thousand dollars ($250,000) in present value, including net cash surrender and net cash withdrawal values;(3) with respect to each individual participating in a governmental retirement benefit plan established pursuant to Section 401, 403(b) or 457 of the federal Internal Revenue Code of 1986 covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, two hundred fifty thousand dollars ($250,000) in present value annuity benefits, including net cash surrender and net cash withdrawal values; or(4) with respect to each payee of a structured settlement annuity, or beneficiary or beneficiaries of the payee if the payee is deceased, two hundred fifty thousand dollars ($250,000) in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any.G. In no event shall the association be obligated to cover: (1) more than an aggregate of three hundred thousand dollars ($300,000) in benefits with respect to one person's life pursuant to Paragraphs (2), (3) and (4) of Subsection F of this section, except with respect to benefits for health benefit plans pursuant to Subparagraph (b) of Paragraph (2) of Subsection F of this section, in which case the aggregate liability of the association shall not exceed five hundred thousand dollars ($500,000) with respect to one person's life; or(2) with respect to one owner of multiple non-group policies of life insurance, whether the policy holder or contract owner is an individual, firm, corporation or other person, and whether the persons insured are officers, managers, employees or other persons, more than five million dollars ($5,000,000) in benefits, regardless of the number of policies and contracts held by the owner.H. With respect to either one contract owner provided coverage pursuant to Subparagraph (b) of Paragraph (3) of Subsection A of this section or one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in Paragraph (3) of Subsection F of this section, the benefits the association may become obligated to cover shall not exceed five million dollars ($5,000,000) irrespective of the number of contracts with respect to the contract owner or plan sponsor. However, in the case where one or more unallocated annuity contracts are covered contracts pursuant to the Life and Health Insurance Guaranty Association Act and are owned by a trust or other entity for the benefit of two or more plan sponsors, coverage shall be afforded by the association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this state. In no event shall the association be obligated to cover more than five million dollars ($5,000,000) in benefits with respect to all of these unallocated contracts.I. The limitations set forth in Subsections F, G and H of this section are limitations on the benefits for which the association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association's obligations may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to its subrogation and assignment rights.J. For purposes of the Life and Health Insurance Guaranty Association Act, benefits provided by a long-term care rider to a life insurance policy or annuity contract shall be considered the same type of benefit as the base life insurance policy or annuity contract to which it relates.K. In performing its obligations to provide coverage pursuant to this section and Section 59A-42-7 NMSA 1978, the association shall not be required to guarantee, assume, reinsure, reissue or perform, or cause to be guaranteed, assumed, reinsured, reissued or performed, the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract.Laws 1984, ch. 127, § 753; 1993, ch. 320, § 99; repealed and re enacted by Laws 2012, ch. 9, § 7.Amended by 2024, c. 36,s. 2, eff. 1/1/2025, app. to no member insurer that was insolvent or unable to fulfill the member insurer's contractual obligations prior to January 1, 2025.Amended by 2012, c. 9,s. 7, eff. 7/1/2012.This section is set out more than once due to postponed, multiple, or conflicting amendments.