Know the Regulator and the Regulated Parties

Introduction

A life insurance sale in Nevada can involve three roles. A company, the insurer, makes the promise to pay. When a producer is involved, that licensed person helps the buyer get the policy. Not every sale goes through a separately licensed producer: the insurer itself is exempt from producer licensing, although its officers, directors, employees, subsidiaries and affiliates who sell, solicit or negotiate are not. A state official, the Commissioner of Insurance, regulates the insurer and any producer involved. This lesson teaches you to keep those roles separate, to describe an insurance company accurately, and to find the specific rule that governs a regulatory deadline or penalty.

Most wrong answers in this area come from letting one label stand in for another. A company formed in Nevada is not automatically allowed to sell. A fee is not excused from being premium because someone renamed it. A 30-day rule that applies to one kind of hearing does not apply to every hearing. You will practice asking the one question that each label actually answers.

All companies, people, dates and dollar amounts in the examples are fictional and are given only so you can work through the reasoning.

What You Will Be Able to Do

• Tell an insurer from a producer, and classify any insurer separately by ownership, domicile and Nevada authorization.
• Decide whether an activity counts as transacting insurance and whether a charge counts as premium, regardless of its label or whether a policy was ever signed.
• Explain what the Commissioner can do directly, what requires a court, and what goes to a prosecutor. This includes the limits on examinations and on access to records.
• Choose the correct hearing, notice, order and fine rule for a set of facts, without stretching a special rule into a general one.

Before you start: You should know that a life policy is a contract in which the insurer makes the enforceable promise to pay. See Why a life policy is a contract. You should also know that the person selling the policy plays a different role from the company making that promise.

The Insurer Makes the Promise; the Producer Brings the Buyer

An insurer is a business that enters into insurance contracts as a principal. Plain English: the insurer is the party that is itself obligated to pay if a covered claim happens.

A producer of insurance is a person who must be licensed under Nevada law to sell, solicit or negotiate insurance. Plain English: the producer helps the buyer obtain coverage. Doing that does not make the producer the one who owes the benefit.

Example (fictional). Sierra Crest Life Company issues life policies. Dana Okafor, a licensed producer, meets a buyer, explains the policy and takes the application. Suppose the insured later dies and the claim is covered. Sierra Crest owes the death benefit, not Dana.

Why the example fits. Sierra Crest is the principal on the contract. Dana's activities are selling, soliciting and negotiating, which are exactly the activities that require a producer license.

Qualification. The two kinds of permission are separate. Dana's license allows Dana to sell, but it does not turn Dana into an insurer. Sierra Crest's authority to do business does not license Dana. Each needs its own permission from the state.

Tempting mistake: "The producer's name and signature are on the application, so the producer is a party to the policy." A signature shows who handled the paperwork. It does not show who makes the promise to pay.

Check 1. A buyer pays a premium through a licensed producer. The producer later leaves the business. Who still owes a covered death benefit under the policy, and why?

Answer: Explanation

The insurer still owes it. The insurer is the principal on the contract, and the producer's role was to bring the buyer to the policy and help obtain it. The producer leaving the business does not move the insurer's promise onto anyone else.

Three Separate Questions About Every Insurer

Three different labels describe an insurer, and each one answers a different question. Knowing the answer to one tells you nothing about the other two.

Ownership: Stock or Mutual

A stock insurer is an incorporated insurer whose capital is divided into shares owned by stockholders. Plain English: investors own the company through shares.

A mutual insurer is an incorporated insurer without capital stock whose governing body is elected by its policyholders. Plain English: no shareholders own it, and policyholders elect the people who run it.

Qualification. The Commissioner may still treat certain foreign insurers as mutual if they are organized on the mutual plan under the laws of their home state. This applies even if such an insurer has temporary share capital, or elects its governing body on a reasonable basis rather than strictly by policyholder vote.

Tempting mistake: "Mutual means policyholders are guaranteed dividends." The definition describes who governs the company. It says nothing about dividends. Do not infer a dividend promise from the word "mutual."

Domicile: Domestic, Foreign or Alien

• Domestic: formed under Nevada law, unless it has converted into a foreign insurer, or an insurer that has converted into a domestic insurer.
• Foreign: formed under the law of any jurisdiction other than Nevada, unless it has converted into a domestic insurer, or an insurer that has converted into a foreign insurer.
• Alien: formed under the law of a country other than the United States or one of its states.

Plain English: domicile answers "under whose law was this company created, or which status has it converted to?" It does not depend on where its customers live.

Qualification. Unless the context draws a distinction, "foreign insurer" also includes alien insurers. An insurer formed in Canada is alien, and it is also covered by rules that refer to foreign insurers unless the wording separates the two.

Authorization: Authorized or Unauthorized

An authorized insurer is authorized to transact insurance or reinsurance in Nevada under a certificate of authority from the Commissioner that is currently in force. In the statute's word, the certificate is subsisting. An unauthorized insurer is one without that authority. Plain English: authorization is current permission to do business in Nevada, and it can be gained or lost.

Worked Example: Change One Fact at a Time

Start with Sierra Crest Life Company (fictional). It was formed under Nevada law, it issues shares to stockholders, and it holds a Nevada certificate of authority that is in force. Classification: domestic, stock, authorized.

1. Change only where it was formed, to Utah. It is now foreign. It is still authorized if its Nevada certificate remains in force. Being foreign does not mean being unauthorized.
2. Return to Nevada formation, and change only the certificate, which is no longer in force. It is now unauthorized, but it is still domestic. Being domestic does not grant permission to transact.
3. Change only the ownership, so that there is no capital stock and policyholders elect the board. It is now mutual. Its domicile and its authorization do not change.

Each change moved exactly one label. That is the skill being tested: answer each question separately.

Check 2. Basin Reserve Life (fictional) was just formed under Nevada law. It has shareholders and has applied for a certificate of authority, but no certificate has been issued yet. Classify it on all three questions.

Answer: Explanation

Basin Reserve Life is domestic, because it was formed under Nevada law. It is a stock insurer, because shareholders own it. It is unauthorized, because it holds no certificate of authority yet.

The tempting error is to assume that a Nevada-formed company is automatically allowed to do business. Domicile and authorization are separate questions. As an applicant for an initial certificate, Basin Reserve Life must also be examined by the Commissioner, which is covered later in this lesson.

Holding and Qualifying for a Certificate of Authority

The General Requirement

A person may not act as an insurer, and an insurer may not transact insurance in Nevada, except as authorized by a certificate of authority that is in full force. The only exceptions are transactions the Insurance Code expressly provides for. This applies to business done "by mail or otherwise," so having no Nevada office is not an escape.

The requirement also reaches outward from Nevada. A domestic insurer may not solicit applications or otherwise transact insurance in another state or country unless it holds a Nevada certificate for the same kinds of insurance. The same restriction applies to a foreign insurer that operates from offices, personnel or facilities located in Nevada.

An officer, director, agent, representative or employee of an insurer who willfully authorizes, negotiates, makes or issues a contract in violation of this requirement is guilty of a misdemeanor.

What an Insurer Must Show to Qualify

To qualify for and keep a certificate, an insurer must meet requirements that include the following:

• It complies with the Insurance Code and with its own charter powers.
• It is an incorporated stock or mutual insurer, or a reciprocal insurer, of a type that could be formed as a domestic insurer.
• It is authorized in its home state or country for the kind of insurance it wants to write in Nevada.
• The kind of insurance it proposes falls within the Code's defined kinds of insurance.
• It is not behind on fees, taxes, assessments, fines or penalties owed to Nevada from earlier business.
• If it is a foreign insurer, it maintains the required reserves and does not operate on an assessment plan or a similar plan anywhere in the United States.
• If it is a foreign insurer, it is not owned or controlled, wholly or substantially, by a government. Certain arrangements are expressly not treated as government ownership or control, such as membership in a mutual, nonvoting stock, or ordinary supervision by a public authority.
• Its management passes scrutiny. The Commissioner may not grant or continue authority if management is found incompetent, dishonest, untrustworthy or of unfavorable business reputation. The same applies if management lacks experience to a degree that makes the operation hazardous, if the insurer is affiliated with persons of unfavorable reputation, or if its operations have been marked by illegality, manipulation or bad faith that injured others.

Two Narrow Exceptions

The law lists several situations where a certificate is not required. Two of them are commonly confused. Each applies only when all of its conditions are met.

1. Handling business left over from former authorized operations. An insurer that used to be authorized in Nevada does not need a certificate to investigate, settle or litigate claims under policies it lawfully wrote in Nevada, or to liquidate its assets and liabilities. This exception expressly excludes collecting new premiums. Plain English: a former insurer can finish handling its old business, but this exception does not let it bring in new premium.

2. Certain out-of-state group coverage. Transactions in Nevada involving group life, group or blanket health, or group annuities do not require a certificate if all of the following are true:

• The master policy was lawfully solicited, issued and delivered under the laws of a state where the insurer was authorized.
• The policy was issued to a group organized for purposes other than buying insurance, or to a group approved under Nevada's specified group statutes.
• The policy was issued where the policyholder is domiciled or otherwise has a genuine base of operations.

Tempting mistake: "Group coverage is exempt." No blanket group exemption exists. Remove any one of the conditions and this exception no longer applies.

The statute lists other exceptions as well. Do not assume one applies unless the facts show that its conditions are met.

Check 3. Highland Mutual Life (fictional) withdrew from Nevada last year and no longer holds a certificate. It pays a death claim on a policy it lawfully wrote in Nevada years ago. The same week, it mails Nevada residents an offer for a brand-new policy and asks for the first premium. Which activity, if either, fits the leftover-business exception?

Answer: Explanation

Paying the death claim fits the exception. It is claim settlement under a policy lawfully written in Nevada during the insurer's former authorized operations.

The mailed offer does not fit. Soliciting new business and collecting new premium fall outside the exception, which expressly excludes new premium collection. Sending the offer by mail does not help either, because the certificate requirement applies "by mail or otherwise."

What Counts as Transacting Insurance, and What Counts as Premium

Transacting Insurance

Transacting insurance includes any of the following, whether done by mail or otherwise and whether or not for profit:

• soliciting or inducing someone to buy
• negotiating
• effectuating a contract, meaning putting it into effect
• handling matters that arise from the contract after it takes effect

Plain English: transacting starts long before a policy is issued and continues long after.

Tempting mistake: "No policy was issued, so no insurance was transacted." Solicitation alone counts. A signature or an issued policy is not required.

The rules on unauthorized insurers make this concrete. Any of these acts done in Nevada by or for an unauthorized insurer counts as transacting insurance business in Nevada:

• making or proposing to make an insurance contract
• taking or receiving an application
• receiving or collecting premiums, membership fees, assessments, dues or other consideration
• delivering contracts
• acting as an agent, or otherwise aiding the insurer in soliciting, negotiating, procuring or handling claims

Premium

Premium is the consideration for insurance, whatever it is called. It includes any assessment and any membership, policy, survey, inspection, service or similar fee or other charge that the insurer or its agent assesses or collects in exchange for an insurance contract or for obtaining one. Plain English: if a charge is paid for the coverage, or to get the coverage, it is premium regardless of its label.

Example (fictional). Desert Shield Benefits charges each buyer $45 per month, which it calls "coverage," plus a one-time $60 "membership fee" and a $10 monthly "policy service fee." The coverage is available only to buyers who pay all three charges. All three are premium, because each is collected in exchange for the coverage or for obtaining it.

Qualification. What makes a charge premium is its connection to the insurance, not its label. A charge that pays for something genuinely unrelated to the coverage is not made premium by this definition. Calling a coverage charge a "service fee," however, does not make it unrelated.

When the Insurer Was Unauthorized

Suppose an insurer transacted business in Nevada without a certificate. Three consequences follow:

• The contract is not void. The lack of a certificate does not impair the validity of the insurer's contracts or acts.
• The insurer can defend but cannot sue to enforce. The insurer may defend lawsuits in Nevada courts. It may not maintain an action to enforce a right, claim or demand arising from that business until it obtains a certificate.
• People who helped can be liable. If the unauthorized insurer fails to pay a claim that falls within the contract's terms, anyone who directly or indirectly helped procure the contract is liable to the insured for the full amount of the claim, as the contract provides.

Tempting mistake: "An unauthorized insurer's policy is worthless." The law protects the buyer by keeping the contract valid and by making those who helped sell it answerable for an unpaid covered claim.

Check 4. An unauthorized insurer collects a $300 "enrollment fee" (fictional amount) from a Nevada resident but never issues a policy. Did it transact insurance in Nevada? Is the fee premium?

Answer: Explanation

Yes to both. Collecting consideration for insurance is one of the listed acts that count as transacting insurance business in Nevada, and no issued policy is required. The fee is premium because it was collected in exchange for coverage or for obtaining it. The label "enrollment fee" does not change that.

What the Commissioner Can Do, and What Belongs to Courts and Prosecutors

Nevada's Commissioner of Insurance heads the Division of Insurance. The Commissioner's duties are to:

• manage the Division
• carry out the duties the Insurance Code imposes
• enforce the Code
• exercise the powers the Code grants expressly, plus those reasonably implied from it
• conduct examinations and investigations the Commissioner considers proper upon reasonable and probable cause, to find out whether anyone violated the Code or to gather information useful for enforcing or administering it

Tempting mistake: "The Commissioner can examine or investigate only after fraud is proven." The standard for investigations is reasonable and probable cause, not proof. As you will see below, routine insurer examinations follow a schedule and need no accusation at all.

The Commissioner Does Not Have to Act Personally

The Commissioner may delegate any power, duty or function to a deputy, an examiner or a Division employee, to be exercised in the Commissioner's name. An official act by that person acting with the Commissioner's authority counts as the Commissioner's own act.

Some specific powers carry extra conditions. Delegating the power to administer oaths or to issue subpoenas must be done in writing.

Regulations

The Commissioner may adopt reasonable regulations to administer the Code. A person who willfully violates a regulation faces the suspension, revocation or fine that applies to the underlying provision of the Code.

There is one important protection. No penalty applies to an act done in good faith in conformity with a regulation, even if the regulation is later amended, rescinded or found invalid.

Courts and Prosecutors

The Commissioner's administrative powers stop at certain points, and other officials take over:

• Courts. The Commissioner may ask a court for an injunction or other process to stop an existing or threatened violation, or to enforce the Commissioner's own orders.
• Prosecutors. If the Commissioner believes someone committed a violation that deserves criminal prosecution, the Commissioner gives the information to the appropriate district attorney or to the Attorney General. That prosecutor decides what action the information justifies and brings the case.
• Legal counsel. Unless the Code provides otherwise, the Attorney General acts as legal counsel to the Commissioner and the Division.

Plain English: the Commissioner regulates and imposes administrative penalties. Criminal charges belong to prosecutors, and court orders come from courts.

Records

The Commissioner must preserve the Division's records. Those records are generally open to public inspection, except where the law provides otherwise. The major exceptions are these:

• Records and information related to a Commissioner's investigation are confidential. They may be released if the Commissioner decides that release will not harm the investigation or the person investigated, or that it serves the interests of policyholders, shareholders or the public. They may also be released if a court orders it after finding that release will not damage the investigation.
• During an investigation, related information generally stays confidential unless the Commissioner finds an imminent threat of harm and determines that publishing serves the policyholders, shareholders or public.
• The Commissioner may classify as confidential certain records obtained from government agencies, documents received on the express condition that they stay confidential, and consumer records when needed to protect the consumer.
• The Commissioner may share confidential material with other regulators, law enforcement agencies and the National Association of Insurance Commissioners, if the recipient agrees to keep it confidential. Sharing it this way does not waive confidentiality.

Tempting mistake: "All records at the Division are public." Public access is the starting point, and investigation records are a major exception.

Check 5. An insurer follows a Commissioner's regulation in good faith. A court later rules the regulation invalid. Can the insurer be penalized for the acts it took while following the regulation?

Answer: Explanation

No. No penalty applies to an act done in good faith in conformity with a regulation, even if the regulation is later found invalid. The protection depends on both conditions: the act must be in good faith, and it must conform to the regulation.

Examinations

Insurers: A Required Schedule

To check an insurer's financial condition, its performance of its contracts and its compliance with the law, the Commissioner examines each authorized insurer as often as the Commissioner considers advisable. The Commissioner must do so at least every 5 years, unless the insurance title expressly provides otherwise. A few related rules apply:

• Each insurer applying for an initial certificate of authority is examined in the same way.
• For a foreign or alien insurer, the Commissioner may accept an examination report prepared by the regulator of the insurer's home state, or of its state of entry into the United States, in place of a separate Nevada examination.
• An alien insurer's examination is limited to its U.S. insurance transactions, assets, trust deposits and affairs, unless the Commissioner requires more.

Producers and Others: No 5-Year Promise

To check compliance with the law or a person's dealings with an insurer, the Commissioner may examine the records of other people as often as the Commissioner considers advisable. These include producers and other licensees, people who manage or control an insurer, holding companies, subsidiaries, and people promoting or financing an insurer.

Nothing in this rule requires a producer examination every 5 years. The 5-year minimum is a rule about authorized insurers.

How an Examination Is Conducted

• The Commissioner designates examiners and tells them the scope of the examination. An examiner must show official credentials on demand.
• The examination must be expeditious, fair and impartial.
• The Commissioner may administer oaths. An examiner may do so only if specifically authorized in writing.
• The person being examined, along with its officers, employees and agents, must make the relevant records and assets freely available and must facilitate the examination.
• If records are inadequate, the Commissioner may hire experts to reconstruct them at the examined person's expense. This is allowed only after the person received written notice and a reasonable opportunity to fix the records and failed to do so.
• Originals stay put. Neither the Commissioner nor an examiner may remove original records or other property from the examined person's premises without that person's written consent given before removal, or a court order. Making and removing copies or abstracts is allowed.
• Refusing without just cause to be examined under oath, or willfully obstructing examiners, is a misdemeanor.

Who Pays

The person examined generally pays the expense of examining an insurer, a producer or other listed licensee, a person controlling an insurer by contract, a promoter or financer, or an independent review organization. That expense is limited to:

• reasonable compensation and per diem for the examiners, including expert help
• incidental expenses necessarily incurred in the examination

The Commissioner must consider the scales recommended by the National Association of Insurance Commissioners. The examined person must pay promptly after receiving a reasonably detailed written statement.

Exception: the Commissioner may bill an insurer for the examination of a producer or other licensee.

Examination payments go into the Fund for Insurance Administration and Enforcement. That is a different destination from the licensing fines covered later, which go to the State General Fund.

Check 6. An examiner reviewing a producer's office wants to carry the original client files back to the Division. The producer objects. Who is right, and what can the examiner do instead?

Answer: Explanation

The producer may refuse removal of the originals. Removal requires the producer's written consent given in advance, or a court order. The producer must still make the files freely available and facilitate the examination. The examiner may make copies or abstracts and take those away.

The tempting error is to think an examiner can seize anything. The opposite error is to think the producer can refuse access altogether. Willful obstruction is a misdemeanor.

Hearings, Notices and Orders: Pick the Rule That Matches the Facts

No single deadline governs every hearing. Use these steps:

1. Identify the event. Is the question about filing an application, holding the hearing, giving notice, or issuing the order?
2. Check for a specific rule first. Particular provisions prevail over general ones. Each general rule below expressly yields to a different period set by another law.
3. If no specific rule applies, use the general rule for that event.

The General Rules

When a hearing must be held. The Commissioner may hold a hearing on the Commissioner's own initiative. The Commissioner must hold one if another provision of the Code requires it, or on written application by a person aggrieved by any of the following:

• an act, or failure to act, related to the business of insurance
• a report, rule, regulation or order of the Commissioner

Two kinds of orders are excluded: an order to hold a hearing, and an order issued on a hearing the person had notice of.

Application deadline: 60 days. The application must be filed within 60 days after the person knew, or reasonably should have known, of the act, failure, report, rule, regulation or order. If another law applicable to the matter sets a different period, that law governs. The application must briefly state how the applicant is aggrieved and the grounds for relief.

Hearing deadline: 60 days. If the Commissioner finds that the application is made in good faith, that the applicant would be aggrieved if the grounds are proven, and that the grounds otherwise justify a hearing, the hearing must be held within 60 days after the application is filed. The deadline can be postponed by mutual consent.

If the Commissioner fails to hold a hearing for an entitled applicant, that failure counts as a denial of relief and is treated as a final order for purposes of appeal. While a hearing is pending, the Commissioner may suspend or postpone the effective date of the earlier action.

Notice: at least 20 days. Unless a different period is expressly provided, the Commissioner must give written notice at least 20 days before the hearing. The notice must state the date, time, place and matters to be considered. When a person is entitled to a hearing before a proposed action, the notice may take the form of a notice to show cause.

Tempting mistake: "The application deadline and the notice period are the same kind of rule." They are different. The 60-day application deadline limits how long the aggrieved person has to ask for a hearing. The 20-day notice rule limits how close to the hearing the Commissioner can send notice.

Conducting the hearing.

• The hearing may be held in Carson City or another convenient place.
• The Commissioner, a deputy or assistant, or an appointee presides.
• The Commissioner may appoint an outside, impartial hearing officer, whose order has the same effect as the Commissioner's.
• Testimony may be oral or by deposition.
• A person whose financial interests are directly and immediately affected may intervene for good cause, if timely.
• A record is kept, either as a transcript or as a summary.

In hearings and in the orders that follow, the Commissioner acts in a quasi-judicial capacity, meaning the Commissioner decides like a judge would, on the evidence presented.

Subpoenas and compelled testimony.

• Whoever conducts a hearing, examination or investigation by the Commissioner's authority may subpoena witnesses and documents and administer oaths. A delegation of the oath or subpoena power must be in writing.
• A subpoena has the same force as a court subpoena. If someone disobeys, the Commissioner may report it to a court for action.
• Willfully failing to appear, failing to produce documents, or refusing to be sworn or to answer is a misdemeanor.
• Suppose a person asks to be excused from testifying because the testimony might incriminate them, and the Attorney General nonetheless directs them to testify. They must comply. They then cannot be prosecuted or penalized for the matter they testified about, and the testimony cannot be used against them in a criminal case.
• That immunity has two limits. It does not protect against prosecution for perjury in that testimony. It does not prevent the refusal, suspension or revocation of a license or authority under the Code.

Order timing: 30 days, unless another period applies. The Commissioner must issue an order on hearing within 30 days after the hearing, rehearing or reargument ends, or within any other period the Code specifies for that particular kind of proceeding. The order must contain:

• the facts found
• the conclusions drawn from those facts
• the order itself and its effective date
• citations to the Code provisions it relies on

The contested-case rule: 45 days. Unless a specific statute provides otherwise, the Commissioner must issue a final order in a contested case within 45 days after the hearing on that contested case closes. "Contested case" is a defined term borrowed from Nevada's administrative procedure law. When the facts tell you the proceeding is a contested case, use 45 days, not 30.

Appeal. Except for certain rate-regulation matters, an appeal may be taken only from one of these:

• an order on hearing
• a refusal or failure to hold a hearing after a proper application
• a refusal or failure to issue a required order on hearing

A person who was a party to the hearing, or whose financial interests were directly and immediately affected by the refusal or failure, and who is aggrieved, may petition for judicial review under Nevada's administrative procedure law. This lesson's sources do not state a filing deadline for that petition, so do not assume one.

Worked Example A: General Rules (fictional)

The Commissioner issues an order requiring Sierra Crest to change a business practice. No hearing was held before the order. Sierra Crest learns of the order the day it is issued.

• Application: Sierra Crest has 60 days from learning of the order to file a written application, unless another law sets a different period.
• Hearing: If the Commissioner makes the required findings, the hearing must be held within 60 days after the application is filed, unless both sides agree to postpone it.
• Notice: The Commissioner must send written notice at least 20 days before the hearing date.
• Order: After the hearing ends, the order is due within 30 days. If the matter is a contested case, the final order is due within 45 days after the hearing closes, unless a specific statute says otherwise.

The Licensing Rule: Denial or Nonrenewal of a License

One section in the chapter governing producers and other licensees changes the general hearing timing for a particular situation. Do not extend it beyond that situation.

Written reason. If the Commissioner denies an application for a license, or refuses to renew one, the Commissioner must notify the applicant or licensee and state the reason in writing.

30-day hearing. The applicant or licensee may apply in writing, under the general hearing section, for a hearing on whether the denial or refusal was reasonable. That hearing must be held within 30 days and conducted under the general rules for conducting hearings. The applicant or licensee may waive the 30-day requirement in writing before the hearing is held.

This section changes when the hearing must be held. It does not state its own filing deadline. Instead, it directs the request to be made under the general hearing section, whose filing window is 60 days unless another law sets a different period.

Fines: $25 to $500 per violation or act. This applies in addition to, or instead of, denying, suspending, revoking or refusing to renew a license under this chapter.

• The order imposing the fine must set a payment date between 15 and 30 days after the date of the order.
• If the fine is not paid when due, the Commissioner must immediately revoke the license, and the Attorney General brings a civil action to recover the fine.
• Fines collected go to the State General Fund.

Tempting mistake: "Insurance fines are $25 to $500." That range belongs to this licensing section. Other sections of the Code set their own amounts. Apply the range only where this section governs.

Surrender or lapse does not end the matter. The Commissioner keeps full authority to enforce the law, impose penalties and pursue remedies against a person who is under investigation for, or charged with, a violation, even if that person's license or registration was surrendered or lapsed by operation of law.

During a suspension. A suspended licensee must still pay all applicable fees, including renewal fees, and must keep up any required education.

For the full set of licensing requirements and grounds for discipline, see Obtain and keep the right license.

Worked Example B: The Licensing Rule (fictional)

The Commissioner refuses to renew producer Lee Varga's license and states the reason in writing. Lee applies in writing for a hearing.

• Hearing deadline: within 30 days, not 60, because the specific licensing rule displaces the general hearing deadline for this situation. If Lee waives the requirement in writing before the hearing, the 30-day limit no longer binds.
• What did not change: the notice rule. The general 20-day minimum still applies unless a different period is expressly provided.

Check 7. Continue Worked Example B. Lee has not waived the 30-day requirement, and no different notice period applies. The hearing must therefore be held by day 30 after Lee filed. Can the Commissioner wait until day 15 to send notice of the hearing?

Answer: Explanation

No. Notice sent on day 15 for a hearing held by day 30 gives at most 15 days of advance notice, which is less than the 20-day minimum. The Commissioner must send notice early enough to satisfy both rules: the hearing by day 30 and notice at least 20 days before it.

The point is that the special 30-day hearing rule does not erase the general notice rule. Both apply together.

Check 8. The Commissioner fines a producer $300 (stipulated) under the licensing section. The order sets a payment date 10 days after the order. What is wrong with the order, and what happens if a properly set fine goes unpaid?

Answer: Explanation

The payment date is wrong. It must fall between 15 and 30 days after the date of the order, and 10 days is too short. The $300 amount itself falls within the $25 to $500 range for each violation.

If a properly set fine is not paid when due, the Commissioner must immediately revoke the license, and the Attorney General brings a civil action to recover the fine.

Out-of-State Court Decrees Against Insurers

Here "foreign" describes where a court sits, not an insurer's domicile. A foreign decree is a decree or order in equity from a court in a reciprocal state, including a federal court located there, against an insurer incorporated or authorized in Nevada. A reciprocal state is one with substantially similar enforcement procedures. The Commissioner decides which states qualify and keeps the list current.

• An authenticated copy may be filed with a Nevada district court clerk. After confirming with the Commissioner that the decree qualifies, the clerk treats it like a Nevada district court decree.
• Once filed, the decree has the same effect as a Nevada decree. It is also subject to the same procedures and defenses, and the same rules for reopening, vacating or staying it.
• The Attorney General files an affidavit giving the defendant's name and last known address, and notice of the filing is mailed to the defendant and to the Commissioner.
• No execution or other enforcement process may issue until 30 days after the decree is filed.
• The court must stay enforcement in two situations. One is when the defendant shows that an appeal is pending or will be taken, or that a stay has been granted, in which case a stay is available on proof that the defendant furnished the security the original state requires. The other is when the defendant shows any ground that would stay a Nevada decree, in which case the court requires the same security Nevada would.

Tempting mistake: "Every out-of-state order is automatically enforceable in Nevada." Only qualifying, authenticated decrees from reciprocal states against qualifying insurers are enforceable this way, and they remain subject to defenses and stays.

Practice on Your Own

Question 1. An advertisement says, "Pine Hollow is a mutual company, so your dividends are guaranteed." Based only on the definition of a mutual insurer, what can you conclude about dividends?

Answer: Explanation

Nothing. The definition says only that a mutual insurer has no capital stock and that its policyholders elect its governing body. A dividend guarantee would have to come from somewhere other than the label. Treat the claim with suspicion; see Use honest advertising and required disclosures.

Question 2. Ridgeback Assurance (fictional) has no Nevada certificate. It sells a life policy to a Nevada resident with help from a local helper. Later, Ridgeback sues the policyholder in a Nevada court for unpaid premium. Separately, it refuses to pay a covered claim under a different policy. Answer three questions: Is the policy void? Can Ridgeback maintain its lawsuit? Who else might owe the unpaid claim?

Answer: Explanation

• The policy is not void. Lack of a certificate does not impair the validity of the insurer's contracts.
• Ridgeback cannot maintain its lawsuit to enforce a right arising from the unauthorized business until it obtains a certificate. It could, however, defend itself if sued.
• The helper may owe the claim. Anyone who helped procure the contract is liable to the insured for the full amount of a covered claim the unauthorized insurer fails to pay.

Question 3. Is a producer guaranteed to be examined at least every 5 years?

Answer: Explanation

No. The 5-year minimum applies to authorized insurers. Producers and other licensees may be examined as often as the Commissioner considers advisable, with no fixed schedule promised.

Question 4. A producer is charged with a violation and immediately surrenders their license, saying, "Now the Commissioner has no power over me." Is that correct?

Answer: Explanation

No. Under the licensing section, the Commissioner keeps authority to enforce the law, impose penalties and pursue remedies against a person who is under investigation for, or charged with, a violation, even after the license is surrendered or lapses.

Question 5. Two hearings close on the same day. The facts identify Hearing X as a contested case. Hearing Y is a general hearing with no special period specified in the Code. When is each order due?

Answer: Explanation

The final order in Hearing X is due within 45 days after the hearing closes, unless a specific statute provides otherwise. The order in Hearing Y is due within 30 days after the hearing ends, the general rule. The general 30-day rule itself yields to other periods the Code specifies, and the contested-case rule is one of them.

Question 6. A reporter asks the Division for documents from an investigation that is still open. The Commissioner has made no release finding, and no court has ordered release. Must the Division hand the documents over?

Answer: Explanation

No. Division records are generally public, but investigation records are confidential. They may be released only if the Commissioner finds that release will not harm the investigation or the person, or that it serves policyholders, shareholders or the public, or if a court orders release. During an investigation, publication generally also requires a finding of imminent threat of harm.

Question 7. A witness refuses to testify at the Commissioner's hearing, claiming the answers could incriminate them. The Attorney General directs them to testify, and they do. Can the Commissioner still revoke the witness's license based on what came out? Can the witness be prosecuted for lying under oath?

Answer: Explanation

Yes to both. The immunity bars prosecution and penalties for the matter testified about, and it prevents the testimony from being used in a criminal case. However, it expressly does not prevent refusal, suspension or revocation of a license under the Code, and it does not protect against prosecution for perjury committed in that testimony.

Question 8. A qualifying decree from a reciprocal state's court against a Nevada-authorized insurer is properly filed with a Nevada district court clerk. Ten days later, the state seeks to execute on it. Is that allowed?

Answer: Explanation

No. No execution or other enforcement process may issue until 30 days after the decree is filed. The insurer may also raise the same defenses, and seek the same stays, that would apply to a Nevada district court decree.

What to Remember

• The insurer promises; the producer sells. A producer is licensed to sell, solicit and negotiate. That never makes the producer the insurer, and the insurer's authority never licenses the producer.
• Ask three separate questions about every insurer:
• Stock or mutual answers who owns and governs it.
• Domestic, foreign or alien answers under whose law it was formed or converted.
• Authorized or unauthorized answers whether it holds a Nevada certificate in force now.
• "Mutual" says nothing about guaranteed dividends. "Foreign" includes "alien" unless the context separates them.
• Certificate exceptions are conditional. Leftover claim handling excludes new premium. Out-of-state group coverage requires every listed condition.
• Transacting covers solicitation through post-sale handling, by mail or otherwise. Premium is any charge paid for the coverage, whatever its name.
• An unauthorized insurer's contract is valid. The insurer can defend but cannot sue to enforce, and people who helped procure the contract can owe an unpaid covered claim.
• The Commissioner administers and enforces the Code, may delegate, investigates on reasonable cause, and may adopt regulations. Good-faith compliance with a regulation is protected. Courts issue injunctions, and prosecutors decide criminal charges.
• Records are public by default, and investigation records are confidential unless the release conditions are met.
• Examinations. Insurers are examined at least every 5 years and before an initial certificate. Others are examined as considered advisable. Originals stay unless the person consents in writing beforehand or a court orders removal, and copies are allowed. Costs are limited to reasonable listed expenses.
• Timing and fine rules:

Review: Distinguish evidence powers, review and penalties

• What the Commissioner Can Do, and What Belongs to Courts and Prosecutors
• Hearings, Notices and Orders: Pick the Rule That Matches the Facts
• The Licensing Rule: Denial or Nonrenewal of a License