The Vermont Statutes Online

Title 8: Banking and Insurance

Chapter 121: Fraternal Benefit Societies

• § 4460. Statutory purposes

  The statutory purpose of the exemption for fraternal societies in section 4500 of this title is to support benevolent societies that provide benefits to members and to the community. (Added 2013, No. 200 (Adj. Sess.), § 18.)

• § 4461. Fraternal benefit societies defined

  (a) Any incorporated society, order, or supreme lodge, without capital stock, including one exempted under the provisions of subdivision 4502(a)(2) of this title, whether incorporated or not, conducted solely for the benefit of its members and their beneficiaries and not for profit, operated on a lodge system with ritualistic form of work, having a representative form of government, and that makes provision for the payment of benefits in accordance with this chapter, is hereby declared to be a fraternal benefit society.

  (b) As used in this chapter:

  (1) “Society” means a fraternal benefit society.

  (2) “Commissioner” means the Commissioner of Financial Regulation. (Added 1959, No. 197, § 1, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.), § 185, eff. July 1, 2022.)

• § 4462. Lodge system defined

  A society having a supreme legislative or governing body and subordinate lodges or branches by whatever name known, into which members are elected, initiated, or admitted in accordance with its constitutions, laws, ritual, and rules, which subordinate lodges or branches shall be required by the laws of the society to hold regular meetings, shall be deemed to be operating on the lodge system. (Added 1959, No. 197, § 2, eff. Nov. 22, 1959.)

• § 4463. Representative form of government defined

  A society shall be deemed to have a representative form of government when:

  (1) it provides in its constitution or laws for a supreme legislative or governing body, composed of representatives elected either by the members or by delegates elected directly or indirectly by the members, together with such other members of the body as may be prescribed by the society’s constitution and laws;

  (2) the representatives elected constitute a majority in number and have not less than two-thirds of the votes nor less than the votes required to amend its constitution and laws;

  (3) the meetings of the supreme legislative or governing body and the election of officers, representatives, or delegates are held as often as once in four calendar years;

  (4) each insured member is eligible for election to act or serve as a delegate to the meeting;

  (5) the society has a board of directors charged with the responsibility for managing its affairs in the interim between meetings of its supreme legislative or governing body, subject to control by the body and having powers and duties delegated to it in the constitution or laws of the society;

  (6) the board of directors is elected by the supreme legislative or governing body, except in case of filling a vacancy in the interim between meetings of the body;

  (7) the officers are elected either by the supreme legislative or governing body or by the board of directors; and

  (8) the members, officers, representatives, or delegates may not vote by proxy. (Added 1959, No. 197, § 3, eff. Nov. 22, 1959.)

• § 4464. Organization

  The organization of a society shall be governed as follows:

  (1) Seven or more citizens of the United States, a majority of whom are citizens of this State, who desire to form a fraternal benefit society, may make, sign, and acknowledge before some officer, competent to take acknowledgments of deeds, articles of incorporation, in which shall be stated:

  (A) The proposed corporate name of the society, which shall not so closely resemble the name of any society or insurance company as to be misleading or confusing;

  (B) The purposes for which it is being formed and the mode in which its corporate powers are to be exercised. The purposes shall not include more liberal powers than are granted by this chapter, provided that any lawful, social, intellectual, educational, charitable, benevolent, moral, fraternal, or religious advantages may be set forth among the purposes of the society; and

  (C) The names and residences of the incorporators and the names, residences, and official titles of all the officers, trustees, directors, or other persons who are to have and exercise the general control of the management of the affairs and funds of the society for the first year or until the ensuing election at which all the officers shall be elected by the supreme legislative or governing body, which election shall be held not later than one year from the date of the issuance of the permanent certificate.

  (2) The articles of incorporation, duly certified copies of the constitution, laws, and rules, copies of all proposed forms of certificates, applications therefor, and circulars to be issued by the society and a bond conditioned upon the return to applicants of the advanced payments if the organization is not completed within one year shall be filed with the Commissioner, who may require such further information as the Commissioner deems necessary. The bond with sureties approved by the Commissioner shall be in such amount, not less than $5,000.00 nor more than $25,000.00 as required by the Commissioner. All documents filed shall be in the English language. If the purposes of the society conform to the requirements of this chapter and all provisions of the law have been complied with, the Commissioner shall so certify, retain, and file the articles of incorporation and furnish the incorporators a preliminary certificate authorizing the society to solicit members as provided in this section.

  (3) A preliminary certificate granted under the provisions of this section shall be valid for one year or for a further period, not exceeding one year, as may be authorized by the Commissioner upon cause shown, unless the 500 applicants required have been secured and the organization has been completed as provided in this section. The articles of incorporation and all other proceedings thereunder shall become null and void one year from the date of the preliminary certificate, or at the expiration of the extended period, unless the society has completed its organization and received a certificate of authority to do business as provided in this section.

  (4) Upon receipt of a preliminary certificate from the Commissioner, the society may solicit members for the purpose of completing its organization, shall collect from each applicant the amount of not less than one regular monthly premium in accordance with its table of rates as provided by its constitution and laws, and shall issue to each such applicant a receipt for the amount so collected. No society may incur any liability other than for the return of the advance premium, nor issue any certificate, nor pay, allow, or offer or promise to pay or allow, any death or disability benefit to any person until:

  (A) actual bona fide applications for death benefits have been secured aggregating at least $500,000.00 on not less than 500 lives;

  (B) all such applicants for death benefits shall have furnished evidence of insurability satisfactory to the society;

  (C) certificates of examinations or acceptable declarations of insurability have been duly filed and approved by the chief medical examiner of the society;

  (D) ten subordinate lodges or branches have been established into which the 500 applicants have been admitted;

  (E) there has been submitted to the Commissioner under oath of the president or secretary, or corresponding officer of the society, a list of the applicants, giving their names, addresses, date each was admitted, name and number of the subordinate branch of which each applicant is a member, amount of benefits to be granted, and premiums therefor; and

  (F) it has been shown to the Commissioner, by sworn statement of the treasurer, or corresponding officer of the society, that at least 500 applicants have each paid in cash at least one regular monthly premium as provided in this section, which premiums in the aggregate shall amount to at least $2,500.00, all of which have been credited to the fund or funds from which benefits are to be paid and no part of which may be used for expenses. The advance premiums shall be held in trust during the period of organization, and if the society has not qualified for a certificate of authority within one year, as provided in this section, the premiums shall be returned to the applicants.

  (5) The Commissioner of Financial Regulation may make such examination and require such further information as he or she deems advisable. Upon presentation of satisfactory evidence that the society has complied with all the provisions of law, he or she shall issue to the society a certificate to that effect and that the society is authorized to transact business pursuant to the provisions of this chapter. The certificate shall be prima facie evidence of the existence of the society at the date of the certificate. The Commissioner of Financial Regulation shall cause a record of the certificate to be made. A certified copy of the record may be given in evidence with like effect as the original certificate.

  (6) Every society shall have the power to adopt a constitution and laws for the government of the society, the admission of its members, the management of its affairs, and the fixing and readjusting of the rates of its members from time to time. It shall have the power to change, alter, add to, or amend the constitution and laws and shall have such other powers as are necessary and incidental to carrying into effect the objects and purposes of the society. (Added 1959, No. 197, § 4, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 186, eff. July 1, 2022.)

• § 4465. Corporate powers retained

  Any incorporated society authorized to transact business in this State on November 22, 1959 may thereafter exercise all the rights, powers, and privileges prescribed in this chapter and in its charter or articles of incorporation as far as consistent with this chapter. A domestic society shall not be required to reincorporate. (Added 1959, No. 197, § 5, eff. Nov. 22, 1959.)

• § 4466. Existing voluntary associations; may incorporate

  (a) After one year from November 22, 1959, no unincorporated or voluntary association shall be permitted to transact business in this State as a fraternal benefit society.

  (b) Any domestic voluntary association now authorized to transact business in this State may incorporate and shall receive from the Commissioner of Financial Regulation a permanent certificate of incorporation as a fraternal benefit society when:

  (1) it has completed its conversion to an incorporated society not later than one year from November 22, 1959;

  (2) it has filed its articles of incorporation and has satisfied the other requirements described in section 4464 of this title; and

  (3) the Commissioner of Financial Regulation has made such examination and procured whatever additional information he or she believes advisable.

  (c) Every voluntary association so incorporated shall incur the obligations and enjoy the benefits thereof the same as though originally incorporated, and the corporation shall be deemed a continuation of the original voluntary association. The officers thereof shall serve through their respective terms as provided in its original articles of association, but their successors shall be elected and serve as provided in its articles of incorporation. Incorporation of a voluntary association shall not affect existing suits, claims, or contracts. (Added 1959, No. 197, § 6, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4467. Location of office; place of meeting

  The principal office of any domestic society shall be located in this State. The meetings of its supreme legislative or governing body may be held in any state, district, province, or territory wherein the society has at least five subordinate branches and all business transacted at the meetings shall be as valid in all respects as if the meetings were held in this State. (Added 1959, No. 197, § 7, eff. Nov. 22, 1959.)

• § 4468. Consolidations and mergers

  (a) A domestic society may consolidate or merge with any other society by complying with the provisions of this section.

  (b) It shall file with the Commissioner of Financial Regulation:

  (1) a certified copy of the written contract containing in full the terms and conditions of the consolidation or merger;

  (2) a sworn statement by the president and secretary or corresponding officers of each society showing the financial condition thereof on a date fixed by the Commissioner of Financial Regulation but not earlier than December 31, next preceding the date of the contract;

  (3) a certificate of the officers, duly verified by their respective oaths, that the consolidation or merger has been approved by a two-thirds vote of the supreme legislative or governing body of each society; and

  (4) evidence that at least 60 days prior to the action of the supreme legislative or governing body of each society, the text of the contract has been furnished to all members of each society either by mail or by publication in full in the official organ of each society.

  (c) If the Commissioner of Financial Regulation finds that the contract is in conformity with the provisions of this section, that the financial statements are correct, and that the consolidation or merger is just and equitable to the members of each society, he or she shall approve the contract and issue his or her certificate to that effect. Upon that approval, the contract shall be in full force and effect unless any society that is a party to the contract is incorporated under the laws of any other state or territory. In that event the consolidation or merger shall not become effective until it is approved as provided by the laws of that state or territory and a certificate of the approval is filed with the Commissioner of Financial Regulation of this State or, if the laws of that state or territory contain no such provision, then the consolidation or merger shall not become effective until it is approved by the commissioner of financial regulation of that state or territory and a certificate of the approval is filed with the Commissioner of Financial Regulation of this State.

  (d) Upon the consolidation or merger becoming effective as provided in this section, all the rights, franchises, and interests of the consolidated or merged societies in and to every species of property real, personal, or mixed, and things in action thereunto belonging shall be vested in the society resulting from or remaining after the consolidation or merger without any other instrument, except that conveyances of real property may be evidenced by proper deeds, and the title to any real estate or interest therein, vested under the laws of this State in any of the societies consolidated or merged, shall not revert or be in any way impaired by reason of the consolidation or merger but shall vest absolutely in the society resulting from or remaining after the consolidation or merger.

  (e) The affidavit of any officer of the society or of anyone authorized by it to mail any notice or document, stating that the notice or document has been duly addressed and mailed, shall be prima facie evidence that the notice or document has been furnished the addressees. (Added 1959, No. 197, § 8, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 187, eff. July 1, 2022.)

• § 4469. Conversion of fraternal benefit society into mutual life insurance company

  Any domestic fraternal benefit society may be converted and licensed as a mutual life insurance company by compliance with all the requirements of sections 3366, 3423-3425, 3701-3711 of this title if such plan of conversion is approved by the Commissioner of Financial Regulation. The plan shall be prepared in writing setting forth in full the terms and conditions thereof. The board of directors shall submit the plan to the supreme legislative or governing body of the society at any regular or special meeting thereof, by giving a full, true, and complete copy of the plan with the notice of the meeting. The notice shall be given as provided in the laws of the society for the convocation of a regular or special meeting of the body, as the case may be. The affirmative vote of two-thirds of all members of the body shall be necessary for the approval of the agreement. No conversion may take effect until approved by the Commissioner of Financial Regulation who may give the approval if he or she finds that the proposed change is in conformity with law and not prejudicial to the certificate holders of the society. (Added 1959, No. 197, § 9, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4470. Qualifications for membership

  (a) A society may admit to benefit membership any person not less than 15 years of age, at his or her nearest birthday, who has furnished evidence of insurability acceptable to the society. A member who applies for additional benefits more than six months after becoming a benefit member shall furnish additional evidence of insurability acceptable to the society.

  (b) A person admitted before becoming 18 years of age is bound by the terms of the application and certificate and by all the laws and rules of the society and is entitled to all the rights and privileges of membership to the same extent as though the age of majority had been reached at the time of application. A society may also admit general or social members who shall have no voice or vote in the management of its insurance affairs. (Added 1959, No. 197, § 10, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.), § 188, eff. July 1, 2022.)

• § 4471. Articles of incorporation, constitution, and laws; amendments

  (a) A domestic society may amend its articles of incorporation, constitution, or laws in accordance with the provisions thereof by action of its supreme legislative or governing body at any regular or special meeting of the society or, if its articles of incorporation, constitution, or laws so provide, by referendum. The referendum may be held in accordance with the provisions of its articles of incorporation, constitution, or laws by the vote of the voting members of the society, by the vote of delegates or representatives of voting members, or by the vote of local lodges or branches. No amendment submitted for adoption by referendum may be adopted unless, within six months from the date of its submission, a majority of all of the voting members of the society have signified their consent to the amendment by one of the methods specified in this section.

  (b) No amendment to the articles of incorporation, constitution, or laws of any domestic society may take effect unless approved by the Commissioner, who shall approve the amendment if the Commissioner finds that it has been duly adopted and is not inconsistent with any requirement of the laws of this State or with the character, objects, and purposes of the society. Unless the Commissioner disapproves an amendment within 60 days after its filing, the amendment shall be considered approved. The approval or disapproval of the Commissioner shall be in writing and mailed to the secretary or corresponding officer of the society at its principal office. If the Commissioner disapproves the amendment, the Commissioner shall state the reasons for the disapproval in the written notice.

  (c) Within 90 days from the approval thereof by the Commissioner of Financial Regulation, all amendments, or a synopsis thereof, shall be furnished to all members of the society either by mail or by publication in full in the official organ of the society. The affidavit of any officer of the society or of anyone authorized by it to mail any amendments or synopsis thereof, stating facts that show that they have been duly addressed and mailed, shall be prima facie evidence that the amendments or synopsis thereof have been furnished the addressee.

  (d) Every foreign or alien society authorized to do business in this State shall file with the Commissioner of Financial Regulation a duly certified copy of all amendments of, or additions to, its articles of incorporation, constitution, or laws within 90 days after the enactment of same.

  (e) Printed copies of the constitution or laws as amended, certified by the secretary or corresponding officer of the society, shall be prima facie evidence of the legal adoption thereof. (Added 1959, No. 197, § 11, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 189, eff. July 1, 2022.)

• § 4472. Institutions

  (a) It shall be lawful for a society to create, maintain, and operate charitable, benevolent, or educational institutions for the benefit of its members and their families and dependents and for the benefit of children insured by the society. For that purpose, it may own, hold, or lease personal property or real property located within or outside this State, with necessary buildings thereon. The property shall be reported in every annual statement but shall not be allowed as an admitted asset of the society.

  (b) Maintenance, treatment, and proper attendance in any such institution may be furnished free or a reasonable charge may be made therefor, but no such institution shall be operated for profit. The society shall maintain a separate accounting of any income and disbursements under this section and report them in its annual statement. No society shall own or operate funeral homes or undertaking establishments. (Added 1959, No. 197, § 12, eff. Nov. 22, 1959.)

• § 4473. No personal liability

  The officers and members of the supreme, grand, or any subordinate body of a society shall not be personally liable for payment of any benefits provided by a society. (Added 1959, No. 197, § 13, eff. Nov. 22, 1959.)

• § 4474. Benefits

  (a) A society authorized to do business in this State may provide for the payment of:

  (1) death benefits in any form;

  (2) endowment benefits;

  (3) annuity benefits;

  (4) temporary or permanent disability benefits as a result of disease or accident;

  (5) hospital, medical, or nursing benefits due to sickness or bodily infirmity or accident;

  (6) monument or tombstone benefits to the memory of deceased members not exceeding in any case the sum of $300.00; and

  (b) Such benefits may be provided on the lives of members or upon application of a member, on the lives of the member’s family, including the member, the member’s spouse and minor children, in the same or separate certificates. (Added 1959, No. 197, § 14, eff. Nov. 22, 1959.)

• § 4475. Benefits on lives of children

  (a) A society may provide for benefits on the lives of children under the minimum age for adult membership but not greater than 18 years of age at the time of application for such benefits, upon the application of an adult person who has an insurable interest, as its laws or rules may provide, which benefits shall be in accordance with the provisions of subsection 4474(a) of this title. A society may, at its option, organize and operate branches for such children. Membership and initiation in local lodges shall not be required of such children, nor shall they have a voice in the management of the society.

  (b) A society shall have power to provide for the designation and changing of designation of beneficiaries in the certificates providing for the benefits and to provide in all other respects for the regulation, government, and control of the certificates and all rights, obligations, and liabilities of and connected with the certificates. (Added 1959, No. 197, § 15, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.), § 190, eff. July 1, 2022.)

• § 4476. Nonforfeiture benefits, cash surrender values, certificate loans, and other options

  (a) A society may grant paid-up nonforfeiture benefits, cash surrender values, certificate loans, and such other options as its laws may permit. As to certificates issued on and after November 22, 1959, a society shall grant at least one paid-up nonforfeiture benefit, except in the case of pure endowment, annuity or reversionary annuity, contracts, reducing term insurance contracts or contracts of term insurance of uniform amount of 15 years or less expiring before age 66.

  (b) In the case of certificates other than those for which reserves are computed in accordance with subsection (d) of this section, the value of every paid-up nonforfeiture benefit and the amount of any cash surrender value, loan or other option granted shall not be less than the excess, if any, of (1) over (2) as follows:

  (1) the reserve under the certificate determined on the basis specified in the certificate; and

  (2) the sum of any indebtedness to the society on the certificate, including interest due and accrued, and a surrender charge equal to two and one-half percent of the face amount of the certificate, which, in the case of insurance on the lives of children, shall be the ultimate face amount of the certificate, if death benefits provided under the certificate are graded.

  (c) However, in the case of certificates issued on a substandard basis or in the case of certificates, the reserves for which are computed upon the American Men Ultimate Table of Mortality, the term of any extended insurance benefit granted including accompanying pure endowment, if any, may be computed upon the rates of mortality not greater than 130 percent of those shown by the mortality table specified in the certificate for the computation of the reserve.

  (d) In the case of certificates for which reserves are computed on the Commissioners 1941 Standard Ordinary Mortality Table, the 1941 Standard Industrial Table, or such later tables as are authorized for use by domestic life insurers, every paid-up nonforfeiture benefit and the amount of any cash surrender value, loan, or other option granted shall not be less than the corresponding amount ascertained in accordance with the provisions of the laws of this State applicable to life insurance companies issuing policies containing like insurance benefits based upon such tables. (Added 1959, No. 197, § 16, eff. Nov. 22, 1959; amended 1985, No. 111 (Adj. Sess.),§§ 2, 3, eff. April 8, 1986; amended 2021, No. 105 (Adj. Sess.), § 191, eff. July 1, 2022.)

• § 4477. Beneficiaries

  (a) The member shall have the right at all times to change the beneficiary or beneficiaries in accordance with the constitution, laws, or rules of the society. Every society by its constitution, laws, or rules may limit the scope of beneficiaries and shall provide that no beneficiary shall have or obtain any vested interest in the proceeds of any certificate until the certificate has become due and payable in conformity with the provisions of the insurance contract.

  (b) A society may provide for the payment of funeral benefits to the extent of such portion of any payment under a certificate as might reasonably appear to be due to any person equitably entitled to such benefits by reason of having incurred expense occasioned by the burial of the member, provided the portion paid shall not exceed the sum of $500.00.

  (c) If, at the death of any member, there is no lawful beneficiary to whom the insurance benefits are payable, the amount of the benefits, except to the extent that funeral benefits may be paid as provided in this section, shall be payable to the personal representative of the deceased member. (Added 1959, No. 197, § 17, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.), § 192, eff. July 1, 2022.)

• § 4478. Benefits not attachable

  No money or other benefit, charity, relief, or aid to be paid, provided, or rendered by any society, shall be liable to attachment, trustee, or other process, or to be seized, taken, appropriated, or applied by any legal or equitable process or operation of law to pay any debt or liability of a member or beneficiary, or any other person who may have a right thereunder, either before or after payment by the society. (Added 1959, No. 197, § 18, eff. Nov. 22, 1959.)

• § 4479. The contract

  (a) Every society authorized to do business in this State shall issue to each benefit member a certificate specifying the amount of benefits provided under the certificate. The certificate, together with any attached riders or endorsements, the charter or articles of incorporation, the constitution and laws of the society, the application for membership, and declaration of insurability, if any, signed by the applicant, and all amendments to each thereof, shall constitute the agreement, as of the date of issuance, between the society and the member, and the certificate shall so state. A copy of the application for membership and of the declaration of insurability, if any, shall be endorsed upon or attached to the certificate.

  (b) All statements purporting to be made by the member shall be representations and not warranties. Any waiver of this provision shall be void.

  (c) Any changes, additions, or amendments to the charter or articles of incorporation, constitution, or laws duly made or enacted subsequent to the issuance of the certificate, shall bind the member and the beneficiaries and shall control the agreement in all respects the same as though the changes, additions, or amendments had been made before and were in force at the time of the application for membership, except that no change, addition, or amendment shall destroy or diminish benefits that the society contracted to give the member as of the date of issuance.

  (d) Copies of any of the documents mentioned in this section, certified by the secretary or corresponding officer of the society, shall be received in evidence of the terms and conditions thereof.

  (e) A society shall provide in its constitution or laws that if its reserves as to all or any class of certificates become impaired, its board of directors or corresponding body may require that there shall be paid by the member to the society the amount of the member’s equitable proportion of the deficiency as ascertained by its board, and that if the payment be not made, it shall stand as an indebtedness against the certificate and draw interest not to exceed five percent a year compounded annually. (Added 1959, No. 197, § 19, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.), § 193, eff. July 1, 2022.)

• § 4480. Provisions; standard and prohibited

  (a) After one year from November 22, 1959, no life benefit certificate shall be delivered or issued for delivery in this State unless a copy of the form shall have been filed with the Commissioner of Financial Regulation. Each filing of a policy, contract, endorsement, rider, or certificate shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00 per filing submission.

  (b) The certificate shall contain in substance the following standard provisions or, in lieu thereof, provisions that are more favorable to the member:

  (1) title on the face and filing page of the certificate clearly and correctly describing its form;

  (2) a provision stating the amount of rates, premiums, or other required contributions, by whatever name known, that are payable by the insured under the certificate;

  (3) a provision that the member is entitled to a grace period of not less than a full month (or 30 days at the option of the society) in which the payment of any premium after the first, may be made. During the grace period, the certificate shall continue in full force, but if the certificate becomes a claim during the grace period before the overdue payment is made, the amount of the overdue payment or payments may be deducted in any settlement under the certificate;

  (4) a provision that the member shall be entitled to have the certificate reinstated at any time within three years from the due date of the premium in default, unless the certificate has been completely terminated through the application of a nonforfeiture benefit, cash surrender value, or certificate loan, upon the production of evidence of insurability satisfactory to the society and the payment of all overdue premiums and any other indebtedness to the society upon the certificate, together with interest on the premiums and the indebtedness, if any, at a rate not exceeding six percent a year compounded annually;

  (5) except in the case of pure endowment, annuity, or reversionary annuity contracts, reducing term insurance contracts, or contracts of term insurance of uniform amount of 15 years or less expiring before age 66, a provision that, in the event of default in payment of any premium after three full years’ premiums have been paid or after premiums for a lesser period have been paid if the contract so provides, the society will grant, upon proper request not later than 60 days after the due date of the premium in default, a paid-up nonforfeiture benefit on the plan stipulated in the certificate, effective as of the due date, of the value as specified in this chapter. The certificate may provide, if the society’s laws so specify or if the member shall so elect prior to the expiration of the grace period of any overdue premium, that default shall not occur so long as premiums can be paid under the provisions of an arrangement for automatic premium loan as may be set forth in the certificate;

  (6) a provision that one paid-up nonforfeiture benefit as specified in the certificate shall become effective automatically unless the member elects another available paid-up nonforfeiture benefit, not later than 60 days after the due date of the premium in default;

  (7) a statement of the mortality table and rate of interest used in determining all paid-up nonforfeiture benefits and cash surrender options available under the certificate, and a brief general statement of the method used in calculating the benefits;

  (8) a table showing in figures the value of every paid-up nonforfeiture benefit and cash surrender option available under the certificate for each certificate anniversary either during the first 20 certificate years or during the term of the certificate, whichever is shorter;

  (9) a provision that the certificate shall be incontestable after it has been in force during the lifetime of the member for a period of two years from its date of issue except for nonpayment of premiums, violation of the provisions of the certificate relating to military, aviation, or naval service; and violation of the provisions relating to suspension or expulsion as substantially set forth in the certificate. At the option of the society, supplemental provisions relating to benefits in the event of temporary or permanent disability or hospitalization and provisions that grant additional insurance specifically against death by accident or accidental means may also be accepted. The certificate shall be incontestable on the ground of suicide after it has been in force during the lifetime of the member for a period of two years from date of issue. The certificate may provide as to statements made to procure reinstatement that the society has the right to contest a reinstated certificate within a period of two years from date of reinstatement with the same exceptions as provided in this section;

  (10) a provision that in case the age or sex of the member or of any other person is considered in determining the premium and it is found at any time before final settlement under the certificate that the age or sex has been misstated, and the discrepancy and premium involved have not been adjusted, the amount payable shall be such as the premium would have purchased at the correct age and sex; but if the correct age was not in an insurable age under the society’s charter or laws, only the premiums paid to the society, less any payments previously made to the member, shall be returned or, at the option of the society, the amount payable under the certificate shall be such as the premium would have purchased at the correct age according to the society’s promulgated rates and any extension thereof based on actuarial principles;

  (11) a provision or provisions that recite fully, or that set forth the substance of, all sections of the charter, constitution, laws, rules, or regulations of the society, in force at the time of issuance of the certificate, the violation of which will result in the termination of, or in the reduction of, the benefit or benefits payable under the certificate;

  (12) if the constitution or laws of the society provide for expulsion or suspension of a member, any member so expelled or suspended, except for nonpayment of a premium or within the contestable period for material misrepresentations in the member’s application for membership shall have the privilege of maintaining the member’s insurance in force by continuing payment of the required premium; and any of the foregoing provisions or portions thereof not applicable by reason of the plan of insurance or because the certificate is an annuity certificate may, to the extent inapplicable, be omitted from the certificate.

  (c) After one year from November 22, 1959, no life benefit certificate shall be delivered or issued for delivery in this State containing in substance any of the following provisions:

  (1) any provision limiting the time within which any civil action may be commenced to less than two years after the cause of action accrues;

  (2) any provision by which the certificate shall purport to be issued or to take effect more than six months before the original application for the certificate was made, except in case of transfer from one form of certificate to another in connection with which the member is to receive credit for any reserve accumulation under the form of certificate from which the transfer is made; or

  (3) any provision for forfeiture of the certificate for failure to repay any loan thereon or to pay interest on the loan while the total indebtedness, including interest, is less than the loan value of the certificate.

  (d) The word “premiums” as used in this chapter means premiums, rates, or other required contributions by whatever name known. (Added 1959, No. 197, § 20, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1991, No. 166 (Adj. Sess.), § 6; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 194, eff. July 1, 2022.)

• § 4481. Accident and health insurance and total and permanent disability insurance certificates; filing and approval

  (a) No domestic, foreign, or alien society authorized to do business in this State shall issue or deliver in this State any certificate or other evidence of any contract of accident insurance or health insurance or of any total and permanent disability insurance contract unless and until the form thereof, together with the form of application and all riders of endorsements for use in connection therewith, has been filed with the Commissioner of Financial Regulation. Each filing of a policy, contract, endorsement, rider, or certificate shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00 per filing submission.

  (b) The Commissioner may adopt rules prescribing the required, optional, and prohibited provisions in the contracts, and the rules shall conform, as far as practicable, to the provisions of chapter 107 of this title. Where the Commissioner deems inapplicable, either in part or in their entity, the provisions of this chapter, the Commissioner may prescribe the portions or summary of the portions of the contract to be printed on the certificate issued to the member. (Added 1959, No. 197, § 21, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1991, No. 166 (Adj. Sess.), § 7; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 195, eff. July 1, 2022.)

• § 4482. Waiver

  The constitution and laws of the society may provide that no subordinate body, nor any of its subordinate officers or members, shall have the power or authority to waive any of the provisions of the laws and constitution of the society. The provision shall be binding on the society and every member and beneficiary of a member. (Added 1959, No. 197, § 22, eff. Nov. 22, 1959.)

• § 4483. Reinsurance

  A domestic society may, by a reinsurance agreement, cede any individual risk or risks in whole or in part to an insurer (other than another fraternal benefit society) having the power to make such reinsurance and authorized to do business in this State or, if not so authorized, one which is approved by the Commissioner of Financial Regulation, but no such society may reinsure substantially all of its insurance in force without the written permission of the Commissioner of Financial Regulation. It may take credit for the reserves on such ceded risks to the extent reinsured, but no credit shall be allowed as an admitted asset or as a deduction from liability, to a ceding society for reinsurance made, ceded, renewed, or otherwise becoming effective after November 22, 1959, unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding society under the contract or contracts reinsured without diminution because of the insolvency of the ceding society. (Added 1959, No. 197, § 23, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4484. Annual license

  Societies that are now authorized to transact business in this State may continue such business until May 1, 1960. The authority of the societies, and all societies hereafter licensed, may thereafter be renewed annually, but shall terminate on the first day of the succeeding May. However, a license so issued shall continue in full force until the new license is issued or specifically refused. The society shall pay to the Commissioner of Financial Regulation $300.00 for a license fee for the year of registration and $300.00 as a renewal fee for each year thereafter. A duly certified copy or duplicate of the license shall be prima facie evidence that the licensee is a fraternal benefit society within the meaning of this chapter. (Added 1959, No. 197, § 24, eff. Nov. 22, 1959; amended 1965, No. 56, eff. May 14, 1965; 1989, No. 225 (Adj. Sess.), § 25(b); 1991, No. 166 (Adj. Sess.), § 8; 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4485. Foreign or alien society; admission

  (a) No foreign or alien society may transact business in this State without a license issued by the Commissioner of Financial Regulation. Any such society may be licensed to transact business in this State upon filing with the Commissioner of Financial Regulation:

  (1) a duly certified copy of its charter or articles of incorporation;

  (2) a copy of its constitution and laws, certified by its secretary or corresponding officer;

  (3) a power of attorney to the Secretary of State as prescribed in section 4489 of this title;

  (4) a statement of its business under oath of its president and secretary or corresponding officers in a form prescribed by the Commissioner of Financial Regulation, duly verified by an examination made by the supervising insurance official of its home state or other state, territory, province, or country, satisfactory to the Secretary of State of this State;

  (5) a certificate from the proper official of its home state, territory, province, or country that the society is legally incorporated and licensed to transact business therein;

  (6) copies of its certificate forms; and

  (7) such other information as he or she may deem necessary; and upon a showing that its assets are invested in accordance with the provisions of this chapter.

  (b) Any foreign or alien society desiring admission to this State shall have the qualifications required of domestic societies organized under this chapter. (Added 1959, No. 197, § 25, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4486. Injunction; liquidation; receivership of domestic society

  (a) When the Commissioner of Financial Regulation upon investigation finds that a domestic society:

  (1) has exceeded its powers;

  (2) has failed to comply with any provision of this chapter;

  (3) is not fulfilling its contracts in good faith;

  (4) has a membership of less than 400 after an existence of one year or more; or

  (5) is conducting business fraudulently or in a manner hazardous to its members, creditors, the public, or the business; he or she shall notify the society of his or her findings, state in writing the reasons for his or her dissatisfaction, and require the society to show cause on a date named why it should not be enjoined from carrying on any business until the violation complained of shall have been corrected, or why an action in quo warranto should not be commenced against the society.

  (b) If on that date the society does not present good and sufficient reasons why it should not be so enjoined or why such action should not be commenced, the Commissioner may present the relevant facts to the Attorney General who shall, if the Attorney General believes the circumstances warrant, commence an action to enjoin the society from transacting business or an action under Rule 75 of the Vermont Rules of Civil Procedure.

  (c)(1) The court shall thereupon notify the officers of the society of a hearing. If after a full hearing it appears that the society should be so enjoined or liquidated or a receiver appointed, the court shall enter the necessary order.

  (2) No society so enjoined may do business until:

  (A) the Commissioner of Financial Regulation finds that the violation complained of has been corrected;

  (B) the costs of the action have been paid by the society if the court finds that the society was in default as charged;

  (C) the court has dissolved its injunction; and

  (D) the Commissioner of Financial Regulation has reinstated the certificate of authority.

  (3) If the court orders the society liquidated, the society shall be enjoined from carrying on any further business, whereupon the receiver of the society shall proceed at once to take possession of the books, papers, money, and other assets of the society and, under the direction of the court, immediately proceed to close the affairs of the society and to distribute its funds to those entitled to its funds.

  (d) No action under this section shall be recognized in any court of this State unless brought by the Attorney General upon request of the Commissioner of Financial Regulation. Whenever a receiver is to be appointed for a domestic society, the court shall appoint the Commissioner of Financial Regulation as the receiver.

  (e) The provisions of this section relating to hearing by the Commissioner of Financial Regulation, action by the Attorney General at the request of the Commissioner of Financial Regulation, hearing by the court, injunction, and receivership shall be applicable to a society that voluntarily determines to discontinue business. (Added 1959, No. 197, § 26, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 196, eff. July 1, 2022.)

• § 4487. Suspension, revocation, or refusal of license of foreign or alien society

  (a) When the Commissioner of Financial Regulation upon investigation finds that a foreign or alien society transacting or applying to transact business in this State:

  (1) has exceeded its powers;

  (2) has failed to comply with any of the provisions of this chapter;

  (3) is not fulfilling its contracts in good faith; or

  (4) is conducting its business fraudulently or in a manner hazardous to its members or creditors or the public; he or she shall notify the society of his or her findings, state in writing the reasons for his or her dissatisfaction and require the society to show cause on a date named why its license should not be suspended, revoked, or refused. If on that date the society does not present good and sufficient reason why its authority to do business in this State should not be suspended, revoked, or refused, he or she may suspend or refuse the license of the society to do business in this State until satisfactory evidence is furnished to him or her that the suspension or refusal should be withdrawn or he or she may revoke the authority of the society to do business in this State.

  (b) Nothing contained in this section shall be taken or construed as preventing any such society from continuing in good faith all contracts made in this State during the time the society was legally authorized to transact business in this State. (Added 1959, No. 197, § 27, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 197, eff. July 1, 2022.)

• § 4488. Licensing of agents

  Agents of societies shall be licensed in accordance with the provisions of this section.

  (1) Insurance agent defined. The term “insurance agent” as used in this section means any authorized or acknowledged agent of a society who acts as such in the solicitation, negotiation, procurement, or making of a life insurance, accident and health insurance, or annuity contract.

  (2) License required. Any person who in this State acts as insurance agent for a society without having authority so to do by virtue of a license issued and in force pursuant to the provisions of this section shall, except as provided in subdivision (1) of this section, be guilty of a misdemeanor.

  (3) Payment of commissions forbidden. No society doing business in this State may pay any commission or other compensation to any person for any services in obtaining in this State any new contract of life, accident, or health insurance, or any new annuity contract, except to a licensed insurance agent of the society and except to an agent exempted by the Commissioner of Financial Regulation.

  (4) Prerequisites, issuance, and renewal of insurance agents’ licenses.

  (A) The Commissioner of Financial Regulation may issue a license to any person who has paid an annual license fee of $30.00 and who has complied with the requirements of this section, authorizing the licensee to act as an insurance agent on behalf of any society named in the license that is authorized to do business in this State.

  (B) Before any insurance agent’s license shall be issued, there shall be on file at the Department of Financial Regulation the following documents:

  (i) A written application by the prospective licensee in such form or forms and with such supplements, and containing such information, as the Commissioner may prescribe.

  (ii) A certificate by the society that is to be named in the license, stating that the society has satisfied itself that the named applicant is trustworthy and competent to act as an insurance agent and that the society will appoint the applicant to act as its agent if the license applied for is issued by the Commissioner of Financial Regulation. The certificates shall be executed and acknowledged by an officer or managing agent of the society.

  (C) A written examination may be required of any individual seeking to be named as a licensee to represent a fraternal benefit society as its agent.

  (D) The Commissioner of Financial Regulation may refuse to issue or renew any insurance agent’s license if in his or her judgment the proposed licensee is not trustworthy and competent to act as an agent, or has given cause for revocation or suspension of the license, or has failed to comply with any prerequisite for the issuance or renewal, as the case may be, of the license.

  (E) Every license issued pursuant to this section, and every renewal thereof, shall expire on December 31 of the even-numbered calendar year following the calendar year in which the license or renewal license was issued.

  (F) If the application for a renewal license has been filed with the Commissioner of Financial Regulation on or before December 31 of the year in which the existing license is to expire, the applicant named in the existing license may continue to act as insurance agent under the existing license, unless it shall be revoked or suspended, until the issuance by the Commissioner of Financial Regulation of the renewal license or until the expiration of five days after he or she has refused to renew the license and has served written notice of the refusal on the applicant. If the applicant shall, within 30 days after the notice is given, notify the Commissioner of Financial Regulation in writing of his or her request for a hearing on such refusal, the Commissioner of Financial Regulation shall, within a reasonable time after receipt of such notice, grant the hearing, and he or she may, in his or her discretion, reinstate the license.

  (G) A renewal license of an insurance agent may be issued upon the application of the society named in the existing license. The application shall be in the form or forms prescribed by the Commissioner and shall contain such information as the Commissioner may require. The application shall contain a certificate executed by the president, or by a vice president, a secretary, an assistant secretary, or corresponding officer by whatever name known, or by an employee expressly designated and authorized to execute the certificate of a domestic or foreign society or by the U.S. manager of an alien society, stating that the addresses in the application given of the agents of the society for whom renewal licenses are requested in the application have been verified in each instance immediately preceding the preparation of the application. Notwithstanding the filing of the application, the Commissioner may, after reasonable notice to the society, require that any or all agents of the society to be named as licensees in renewal licenses shall execute and file separate applications for the renewal of the licenses, as specified in this section, and the Commissioner may also require that each such application shall be accompanied by the certificate specified in subdivision (B)(ii) of this subdivision (4).

  (5) Notice of termination of appointment of insurance agent. Every society doing business in this State shall, upon the termination of the appointment of any insurance agent licensed to represent it in this State, immediately file with the Commissioner a statement, in such form as the Commissioner may prescribe, of the facts relative to the termination and the cause thereof. Every statement made pursuant to this section is privileged and shall be kept confidential to the same extent as provided under subsection 4813m(f) of this title.

  (6) Revocation or suspension of insurance agent’s license.

  (A) The Commissioner of Financial Regulation may revoke or may suspend for such period as he or she may determine, any insurance agent’s license if, after notice and hearing as specified in this section, he or she determines that the licensee has:

  (i) violated any provision of, or any obligation imposed by, this section, or has violated any law in the course of his or her dealings as agent;

  (ii) made a material misstatement in the application for the license;

  (iii) been guilty of fraudulent or dishonest practices;

  (iv) demonstrated his or her incompetency or untrustworthiness to act as an insurance agent; or

  (v) been guilty of rebating as defined by the laws of this State applicable to life insurance companies.

  (B) The revocation or suspension of any insurance agent’s license shall immediately terminate the license of the agent. An individual whose license has been revoked is not entitled to obtain any insurance agent’s license under the provisions of this section for a period of one year after the revocation or, if the revocation is judicially reviewed, for one year after the final determination affirming the action of the Commissioner in revoking the license. (Added 1959, No. 197, § 28, eff. Nov. 22, 1959; amended 1985, No. 236 (Adj. Sess.), § 1, eff. June 3, 1986; 1989, No. 225 (Adj. Sess.), § 25; 1991, No. 166 (Adj. Sess.), § 9; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2015, No. 29, § 7; 2021, No. 105 (Adj. Sess.), § 198, eff. July 1, 2022.)

• § 4489. Service of process

  (a) Every society authorized to do business in this State shall appoint in writing the Secretary of State and each successor in office to be its true and lawful attorney upon whom all lawful process in any action or proceeding against it shall be served, and shall agree in the writing that any lawful process against it which is served on the attorney shall be of the same legal force and validity as if served upon the society, and that the authority shall continue in force so long as any liability remains outstanding in this State. Copies of the appointment, certified by the Secretary of State, shall be deemed sufficient evidence thereof and shall be admitted in evidence with the same force and effect as the original thereof might be admitted.

  (b) Service may be made upon the Secretary of State or, if absent, upon the person in charge of the Secretary’s office. It shall be made in duplicate and shall constitute sufficient service upon the society. When legal process against a society is served upon the Secretary of State, the Secretary shall immediately forward one of the duplicate copies by registered mail prepaid, directed to the secretary or corresponding officer.

  (c) The service authorized in this section shall be alternative to and not exclusive of any other method of service provided by law or by rule. (Added 1959, No. 197, § 29, eff. Nov. 22, 1959; amended 1971, No. 185 (Adj. Sess.), § 20, eff. March 29, 1972; 2003, No. 70 (Adj. Sess.), § 2, eff. March 1, 2004; 2021, No. 105 (Adj. Sess.), § 199, eff. July 1, 2022.)

• § 4490. Injunction

  No action for an injunction against any domestic, foreign, or alien society, or branch thereof, shall be recognized in any court of this State unless made by the Attorney General upon request of the Commissioner of Financial Regulation. (Added 1959, No. 197, § 30, eff. Nov. 22, 1959; amended 1971, No. 185 (Adj. Sess.), § 21, eff. March 29, 1972; 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4491. Review

  All decisions and findings of the Commissioner of Financial Regulation made under the provisions of this chapter shall be subject to review by appeal to the Supreme Court. (Added 1959, No. 197, § 31, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 1997, No. 161 (Adj. Sess.), § 8, eff. Jan. 1, 1998; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4492. Funds

  (a) All assets shall be held, invested, and disbursed for the use and benefit of the society, and a member or beneficiary shall not have or acquire individual rights in such assets or become entitled to any apportionment or the surrender of any part of such assets, except as provided in the contract.

  (b) A society may create, maintain, invest, disburse, and apply any special fund or funds necessary to carry out any purpose permitted by the laws of the society.

  (c) Every society, the admitted assets of which are less than the sum of its accrued liabilities and reserves under all of its certificates when valued according to standards required for certificates issued after one year from November 22, 1959 shall, in every provision of the laws of the society for payments by members of the society, in whatever form made, distinctly state the purpose of them and the proportion of them that may be used for expenses, and no part of the money collected for mortuary or disability purposes or the net accretions of such money shall be used for expenses. (Added 1959, No. 197, § 32, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.), § 200, eff. July 1, 2022.)

• § 4493. Investments

  A society shall invest its funds only in such investments as are authorized by the laws of this State for the investment of assets of life insurance companies and subject to the limitations thereon. Any foreign or alien society permitted or seeking to do business in this State that invests its funds in accordance with the laws of the State, district, territory, country, or province in which it is incorporated, shall be held to meet the requirements of this section for the investment of funds. (Added 1959, No. 197, § 33, eff. Nov. 22, 1959.)

• § 4494. Reports and valuations

  Reports shall be filed and synopses of annual statements shall be published in accordance with the provisions of this section.

  (1) Every society transacting business in this State shall annually, on or before March 1, unless for cause shown such time has been extended by the Commissioner of Financial Regulation, file with the Commissioner of Financial Regulation a true statement of its financial condition, transactions, and affairs for the preceding calendar year and pay a fee of $20.00 for filing it. The statement shall be in general form and context as approved by the National Association of Insurance Commissioners for fraternal benefit societies and as supplemented by additional information required by the Commissioner of Financial Regulation.

  (2) A synopsis of its annual statement providing an explanation of the facts concerning the condition of the society thereby disclosed shall be printed and mailed to each benefit member of the society not later than June 1 of each year, or, in lieu thereof, the synopsis may be published in the society’s official publication.

  (3) As a part of the annual statement required in this section, each society shall, on or before March 1, file with the Commissioner a valuation of its certificates in force on December 31 last preceding; provided, however, the Commissioner may, in the Commissioner’s discretion for cause shown, extend the time for filing the valuation for not more than two calendar months. Such report of valuation shall show, as reserve liabilities, the difference between the present mid-year value of the promised benefits provided in the certificates of the society in force and the present mid-year value of the future net premiums as the same are in practice actually collected, not including any value for the right to make extra assessments and not including any amount by which the present mid-year value of future net premiums exceeds the present mid-year value of promised benefits on individual certificates. At the option of any society, in lieu of the above, the valuation may show the net tabular value. The net tabular value as to certificates issued before one year after November 22, 1959 shall be determined in accordance with the provisions of law applicable before November 22, 1959, and as to certificates issued on or after one year from November 22, 1959 shall be not less than the reserves determined according to the Commissioners’ Reserve Valuation method as defined in this section. If the premium charged is less than the tabular net premium according to the basis of valuation used, an additional reserve equal to the present value of the deficiency in the premiums shall be set up and maintained as a liability. The reserve liabilities shall be properly adjusted in the event that the mid-year or tabular values are not appropriate.

  (4)(A) Reserves according to the Commissioners’ Reserve Valuation method, for the life insurance and endowment benefits of certificates providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of the future guaranteed benefits provided for by the certificates, over the then present value of any future modified net premiums for the certificates. The modified net premiums for any such certificate shall be such percentage of the respective contract premiums for the benefits that the present value, at the date of issue of the certificate, of all such modified net premiums shall be equal to the sum of the then present value of the benefits provided for by the certificate and the excess of subdivision (i) of this subdivision (4)(A) over subdivision (ii) of this subdivision (4)(A) as follows:

  (i) a net level premium equal to the present value, at the date of issue, of the benefits provided for after the first certificate year, divided by the present value at the date of issue, of an annuity of one percent per annum payable on the first and each subsequent anniversary of the certificate on which a premium falls due; provided, however, that the net level annual premium shall not exceed the net level annual premium on the 19-year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of the certificate; and

  (ii) a net one-year term premium for the benefits provided for in the first certificate year.

  (B) Reserves according to the Commissioners’ Reserve Valuation method for (i) life insurance benefits for varying amounts of benefits or requiring the payment of varying premiums, (ii) annuity and pure endowment benefits, (iii) disability and accidental death benefits in all certificates and contracts, and (iv) all other benefits except life insurance and endowment benefits, shall be calculated by a method consistent with the principles of this subdivision.

  (5) The present value of deferred payments due under incurred claims or matured certificates shall be deemed a liability of the society and shall be computed upon mortality and interest standards prescribed in subdivision (6) of this section.

  (6)(A) Such valuation and underlying data shall be certified by a competent actuary or, at the expense of the society, verified by the actuary of the department of insurance of the state of domicile of the society.

  (B) The minimum standards of valuation for certificates issued before one year from November 22, 1959 shall be those provided by the law applicable immediately before November 22, 1959 but not lower than the standards used in the calculating of rates for the certificates.

  (C) The minimum standard of valuation for certificates issued after one year from November 22, 1959 shall be three and one-half percent interest and the following tables or such interest assumptions and tables as are authorized for use by domestic life insurers:

  (i) for certificates of life insurance—American Men Ultimate Table of Mortality, with Bowerman’s or Davis’ Extension thereof or with the consent of the Commissioner of Financial Regulation, the Commissioner’s 1941 Standard Ordinary Mortality Table or the Commissioner’s 1941 Standard Industrial Table of Mortality;

  (ii) for annuity certificates, including life annuities provided or available under optional modes of settlement in the certificates—the 1937 Standard Annuity Table;

  (iii) for disability benefits issued in connection with life benefit certificates—Hunter’s Disability Table, which, for active lives, shall be combined with a mortality table permitted for calculating the reserves on life insurance certificates, except that the table known as Class III Disability Table (1926) modified to conform to the contractual waiting period, shall be used in computing reserves for disability benefits under a contract that presumes that total disability shall be considered to be permanent after a specified period;

  (iv) for accidental death benefits issued in connection with life benefit certificates—the Inter-Company Double Indemnity Mortality Table combined with a mortality table permitted for calculating the reserves for life insurance certificates; and

  (v) for noncancellable accident and health benefits—the Class III Disability Table (1926) with conference modifications or, with the consent of the Commissioner of Financial Regulation, tables based upon the society’s own experience.

  (D) The Commissioner may, in the Commissioner’s discretion, accept other standards for valuation if the Commissioner finds that the reserves produced by such standards will be not less in the aggregate than reserves computed in accordance with the minimum valuation standard prescribed in this section. The Commissioner may, in the Commissioner’s discretion, vary the standards of mortality applicable to all certificates of insurance on substandard lives or other extra hazardous lives by any society authorized to do business in this State. Whenever the mortality experience under all certificates valued on the same mortality table is in excess of the expected mortality according to the table for a period of three consecutive years, the Commissioner may require additional reserves when deemed necessary in the Commissioner’s judgment on account of the certificates.

  (E) Any society, with the consent of the commissioner of insurance of the state of domicile of the society and under such conditions, if any, that such commissioner may impose, may establish and maintain reserves on its certificates in excess of the reserves required under such certificates, but the contractual rights of any insured member shall not be affected by such excess reserves.

  (7) A society neglecting to file the annual statement in the form and within the time provided by this section shall forfeit $500.00 for each day during which the neglect continues, and, upon notice by the Commissioner of Financial Regulation to that effect, its authority to do business in this State shall cease while such default continues.

  (8) Notwithstanding any provision of this section to the contrary, for societies whose assets exceed $250,000,000.00 as of January 1, 1991, the minimum standard of valuation for certificates issued after January 1, 1991 must be the interest assumptions and tables authorized for use by domestic life insurers. For societies whose assets are less than $250,000,000.00 on January 1, 1991, the interest assumptions and tables authorized for use by domestic life insurers must be utilized after the end of the year in which their assets first exceed $250,000,000.00. (Added 1959, No. 197, § 34, eff. Nov. 22, 1959; amended 1985, No. 111 (Adj. Sess.), §§ 4, 5, eff. April 8, 1986; 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 167 (Adj. Sess.), § 15; 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2019, No. 131 (Adj. Sess.), § 7; 2021, No. 105 (Adj. Sess.), § 201, eff. July 1, 2022.)

• § 4495. Examination of domestic societies

  The Commissioner of Financial Regulation, or any person he or she may appoint, shall have the power of visitation and examination into the affairs of any domestic society, and he or she shall make the examination at least once in every three years. He or she may employ assistants for the purpose of the examination, and he or she, or any person he or she may appoint, shall have free access to all books, papers, and documents that relate to the business of the society. The minutes of the proceedings of the supreme legislative or governing body and of the board of directors or corresponding body of a society shall be in the English language. In making an examination, the Commissioner of Financial Regulation may summon and qualify as witnesses under oath and examine its officers, agents, and employees or other persons in relation to the affairs, transactions, and condition of the society. A summary of the report of the Commissioner of Financial Regulation and such recommendations or statements of the Commissioner of Financial Regulation as may accompany the report, shall be read at the first meeting of the board of directors or corresponding body of the society following the receipt thereof and, if directed so to do by the Commissioner of Financial Regulation, shall also be read at the first meeting of the supreme legislative or governing body of the society following the receipt thereof. A copy of the report, recommendations, and statements of the Commissioner of Financial Regulation shall be furnished by the society to each member of the board of directors or other governing body. The expense of each examination and of each valuation, including compensation and actual expense of examiners, shall be paid by the society examined or whose certificates are valued, upon statements furnished by the Commissioner of Financial Regulation. (Added 1959, No. 197, § 35, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4496. Examination of foreign and alien societies

  The Commissioner of Financial Regulation, or any person whom he or she may appoint, may examine any foreign or alien society transacting or applying for admission to transact business in this State. He or she may employ assistants, and he or she, or any person he or she may appoint, shall have free access to all books, papers, and documents that relate to the business of the society. He or she may in his or her discretion accept, in lieu of the examination, the examination of the insurance department of the state, territory, district, province, or country where the society is organized. The compensation and actual expenses of the examiners making any examination or general or special valuation shall be paid by the society examined or by the society whose certificate obligations have been valued, upon statements furnished by the Commissioner of Financial Regulation. (Added 1959, No. 197, § 36, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4497. No adverse publications

  Pending, during, or after an examination or investigation of a society, either domestic, foreign, or alien, the Commissioner of Financial Regulation shall make public no financial statement, report, or finding, nor shall he or she permit to become public any financial statement, report, or finding affecting the status, standing, or rights of any society, until a copy thereof has been served upon the society at its principal office and the society has been afforded a reasonable opportunity to answer the financial statement, report, or finding and to make such showing in connection therewith as it may desire. (Added 1959, No. 197, § 37, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25; 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)

• § 4498. Misrepresentation

  (a) No person shall cause or permit to be made, issued, or circulated in any form:

  (1) any misrepresentation or false or misleading statement concerning the terms, benefits, or advantages of any fraternal insurance contract now issued or to be issued in this state, or the financial condition of any society;

  (2) any false or misleading estimate or statement concerning the dividends or shares of surplus paid or to be paid by any society on any insurance contract; or

  (3) any incomplete comparison of an insurance contract of one society with an insurance contract of another society or insurer for the purpose of inducing the lapse, forfeiture, or surrender of any insurance contract. A comparison of insurance contracts is incomplete if it does not compare in detail:

  (A) the gross rates, and the gross rates less any dividend or other reduction allowed at the date of the comparison; and

  (B) any increase in cash values, and all the benefits provided by each contract for the possible duration thereof as determined by the life expectancy of the insured;

  or if it omits from consideration:

  (C) any benefit or value provided in the contract;

  (D) any differences as to amount or period of rates; or

  (E) any differences in limitations or conditions or provisions that directly or indirectly affect the benefits.

  (b) In any determination of the incompleteness or misleading character of any comparison or statement, it shall be presumed that the insured had no knowledge of any of the contents of the contract involved.

  (c) A person who violates a provision of this section or knowingly receives any compensation or commission by or in consequence of the violation shall be punished by a fine of not less than $500.00 nor more than $2,000.00 or by imprisonment not less than 30 days nor more than one year, or both fine and imprisonment, and shall, in addition, be liable for an administrative penalty in the amount of three times the sum received by the violator as compensation or commission. (Added 1959, No. 197, § 38, eff. Nov. 22, 1959; amended 1971, No. 199 (Adj. Sess.), § 17; 1995, No. 167 (Adj. Sess.), § 16.)

• § 4499. Discrimination and rebates

  (a) No society doing business in this State shall make or permit any unfair discrimination between insured members of the same class and equal expectation of life in the premiums charged for certificates of insurance, in the dividends or other benefits payable thereon or in any other of the terms and conditions of the contracts it makes.

  (b) No society, by itself, or any other party, and no agent or solicitor, personally, or by any other party, may offer, promise, allow, give, set off, or pay, directly or indirectly, any valuable consideration or inducement to, or for insurance, on any risk authorized to be taken by the society that is not specified in the certificate. No member may receive or accept, directly or indirectly, any rebate of premium, or part thereof, or agent’s or solicitor’s commission thereon, payable on any certificate or receive or accept any favor or advantage or share in the dividends or other benefits to accrue on, or any valuable consideration or inducement not specified in the contract of insurance. (Added 1959, No. 197, § 39, eff. Nov. 22, 1959.)

• § 4500. Taxation

  Every society organized or licensed under this chapter is hereby declared to be a charitable and benevolent institution, and all of its funds shall be exempt from all and every state, county, district, municipal, and school tax other than taxes on real estate and office equipment. (Added 1959, No. 197, § 40, eff. Nov. 22, 1959.)

• § 4501. Exemptions

  (a) Except as provided in this section, societies are governed by this chapter and are exempt from all other provisions of the insurance laws of this State, not only in governmental relations with the State, but for every other purpose. No law enacted after the effective date of this chapter shall apply to them, unless societies are expressly designated in such law.

  (b) The civil marriage laws shall not be construed to affect the ability of a society to determine the admission of its members as provided in section 4464 of this title, or to determine the scope of beneficiaries in accordance with section 4477 of this title, and shall not require a society that has been established and is operating for charitable and educational purposes and that is operated, supervised, or controlled by or in connection with a religious organization to provide insurance benefits to any person if to do so would violate the society’s free exercise of religion, as guaranteed by the First Amendment to the Constitution of the United States or by Chapter I, Article 3 of the Constitution of the State of Vermont. (Added 1959, No. 197, § 41, eff. Nov. 22, 1959; amended 2009, No. 3, § 10, eff. Sept. 1, 2009; 2021, No. 105 (Adj. Sess.), § 202, eff. July 1, 2022.)

• § 4502. Exemption of certain societies

  (a) Nothing contained in this chapter shall be so construed as to affect or apply to:

  (1) grand or subordinate lodges of societies, orders, or associations now doing business in this State that provide benefits exclusively through local or subordinate lodges;

  (2) orders, societies, or associations that admit to membership only persons engaged in one or more crafts or hazardous occupations, in the same or similar lines of business, insuring only their own members, their families, and descendants of members, and the ladies’ societies, or ladies’ auxiliaries to the orders, societies, or associations;

  (3) domestic societies that limit their membership to employees of a particular city or town, designated firm, business house, or corporation that provide for a death benefit of not more than $400.00 or disability benefits of not more than $350.00 to any person in any one year, or both; or

  (4) domestic societies or associations of a purely religious, charitable, or benevolent description, which provide for a death benefit of not more than $400.00 or for disability benefits of not more than $350.00 to any one person in any one year, or both.

  (b) A society or association described in subdivision (a)(3) or (4) of this section that provides for death or disability benefits for which benefit certificates are issued, and society or association included in subdivision (a)(4) that has more than 1,000 members, is not exempted from the provisions of this chapter but shall comply with all its requirements.

  (c) No society that, by the provisions of this section, is exempt from the requirements of this chapter, except any society described in subdivision (a)(2) of this section, shall give or allow, or promise to give or allow to any person any compensation for procuring new members.

  (d) A society that provides for benefits in case of death or disability resulting solely from accident and that does not obligate itself to pay natural death or sick benefits has all of the privileges and is subject to all the applicable provisions and rules of this chapter, except that the provisions of this chapter relating to medical examination, valuations of benefit certificates, and incontestability do not apply to the society.

  (e) The Commissioner of Financial Regulation may require from any society or association, by examination or otherwise, such information as will enable him or her to determine whether the society or association is exempt from the provisions of this chapter.

  (f) Societies, exempted under the provisions of this section, shall also be exempt from all other provisions of the insurance laws of this State. (Added 1959, No. 197, § 42, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 203, eff. July 1, 2022.)

• § 4503. Penalties

  (a) Any person who willfully makes a false or fraudulent statement in or relating to an application for membership or for the purpose of obtaining money from or a benefit in a society, shall be fined not less than $500.00 nor more than $2,000.00 or imprisoned not less than 30 days nor more than 90 days, or both.

  (b) A person who willfully makes a false or fraudulent statement in any verified report or declaration under oath required or authorized by this chapter, or of any material fact or thing contained in a sworn statement concerning the death or disability of a member for the purpose of procuring payment of a benefit named in the certificate, shall be guilty of perjury and shall be subject to the penalties for perjury prescribed by law.

  (c) A person who solicits membership for, or in any manner assists in procuring membership in, any society not licensed to do business in this State shall upon conviction be fined not less than $250.00 nor more than $1,000.00.

  (d) A person guilty of a willful violation of, or neglect or refusal to comply with, the provisions of this chapter for which a penalty is not otherwise prescribed, shall upon conviction be subject to a fine of not more than $1,000.00. (1959, No. 197, § 43, eff. Nov. 22, 1959; amended 1971, No. 199 (Adj. Sess.), § 17; 1995, No. 167 (Adj. Sess.), § 17; 2021, No. 105 (Adj. Sess.), § 204, eff. July 1, 2022.)