# N.D. Cent. Code § 26.1-38.1-01: 26.1-38.1-01. Coverage and limitations

> North Dakota · Statutes · In force

URL: https://www.frixlaw.com/law-library/statutes/STATE_ND_T26.1_C26.1-38.1_S26.1-38.1-01

## Section

- **Citation:** N.D. Cent. Code § 26.1-38.1-01
- **Heading:** 26.1-38.1-01. Coverage and limitations
- **Jurisdiction:** North Dakota
- **Kind:** Statutes
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** ND Code / Title 26.1 / Chapter 26.1-38.1 / Section 26.1-38.1-01

## Text

26.1-38.1-01. Coverage and limitations

1. This section provides coverage for the policies and contracts specified in subsection 2:

a. To persons, except for nonresident certificate holders under group policies or

contracts, who, regardless of where they reside, are the beneficiaries, assignees,

or payees, including health care providers rendering services covered under

health insurance policies or certificates, of the persons covered under

subdivision b.

b. To persons who are owners of or certificate holders or enrollees under such

policies or contracts other than unallocated annuity contracts and structured

settlement annuities, and in each case who:

(1) Are residents; or

(2) Are not residents, but only under all of the following conditions:

(a) The member insurer that issued such policies or contracts is domiciled

in this state;

(b) The states in which the persons reside have associations similar to

the association created under this chapter; and

(c) The persons are not eligible for coverage by an association in any

other state because the insurer or the health maintenance

organization was not licensed in the state at the time specified in the

state's guaranty association law.

c. For any unallocated annuity contract specified in subsection 2, subdivisions a and

b do not apply, and this chapter, except as provided in subdivisions e and f,

provides coverage to:

(1) Persons who are the owners of the unallocated annuity contracts if the

contracts are issued to or in connection with a specific benefit plan, the

sponsor of which has its principal place of business in this state; and

(2) Persons who are owners of unallocated annuity contracts issued to or in

connection with government lotteries if the owners are residents.

d. For structured settlement annuities specified in subsection 2, subdivisions a and

b do not apply, and this chapter, except as provided in subdivisions e and f,

provides coverage to a person who is a payee under a structured settlement

annuity or beneficiary of a payee if the payee is deceased, if the payee:

(1) Is a resident, regardless of where the contract owner resides; or

(2) Is not a resident, and:

(a) The contract owner of the structured settlement annuity is a resident,

or the contract owner of the structured settlement annuity is not a

resident but the insurer that issued the structured settlement annuity is

domiciled in this state and the state in which the contract owner

resides has an association similar to the association created under

this chapter; and

(b) Neither the payee or beneficiary nor the contract owner is eligible for

coverage by the association of the state in which the payee or contract

owner resides.

e. This chapter does not provide coverage to:

(1) A person who is a payee or beneficiary of a contract owner resident of this

state, if the payee or beneficiary is afforded any coverage by the association

of another state;

(2) A person covered under subdivision c, if any coverage is provided by the

association of another state to the person; or
in which the payee or contract

owner resides.

e. This chapter does not provide coverage to:

(1) A person who is a payee or beneficiary of a contract owner resident of this

state, if the payee or beneficiary is afforded any coverage by the association

of another state;

(2) A person covered under subdivision c, if any coverage is provided by the

association of another state to the person; or

(3) A person who acquires rights to receive payments through a structured

settlement factoring transaction as defined in section 5891(c)(3)(A) of title

26 of the United States Code, regardless of whether the transaction

occurred before or after this federal law became effective.

f. This chapter provides coverage to a person who is a resident of this state and, in

special circumstances, to a nonresident. In order to avoid duplicate coverage, if a

person who would otherwise receive coverage under this chapter is provided

coverage under the laws of any other state, the person may not be provided

coverage under this chapter. In determining the application of the provisions of

this subdivision in situations in which a person could be covered by the

association of more than one state, whether as an owner, payee, enrollee,

beneficiary, or assignee, this chapter must be construed in conjunction with other

state laws to result in coverage by only one association.

2. This chapter provides coverage to the persons specified in subsection 1 for policies or

contracts of direct, nongroup life insurance, health insurance, which for the purposes

of this chapter includes health maintenance organization subscriber contracts and

certificates, or annuities, and supplemental contracts to any of these, for certificates

under direct group policies and contracts, and supplemental contracts to any of these

and for unallocated annuity contracts issued by member insurers, except as limited by

this chapter. Annuity contracts and certificates under group annuity contracts include

guaranteed investment contracts, deposit administration contracts, unallocated funding

agreements, allocated funding agreements, structured settlement annuities, annuities

issued to or in connection with government lotteries, and any immediate or deferred

annuity contracts.

3. Except for the portion of a policy or contract, including a rider, which provides

long-term care or any other health insurance benefits, this chapter does not provide

coverage for:

a. Any portion of a policy or contract not guaranteed by the member insurer, or

under which the risk is borne by the policy owner or contract owner;

b. Any policy or contract of reinsurance, unless assumption certificates have been

issued pursuant to the reinsurance policy or contract;

c. Any portion of a policy or contract to the extent that the rate of interest on which

the portion of the policy or contract is based or to the extent that the rate of

interest, crediting of a rate of interest, or similar factor determined by using an

index or other external reference stated in the policy or contract which is

employed in calculating returns or changes in value:

(1) Averaged over the period of four years prior to the date on which the

member insurer becomes an impaired or insolvent insurer under this

chapter, whichever is earlier, exceeds a rate of interest determined by

subtracting two percentage points from Moody's corporate bond yield

average averaged for that same four-year period or for such lesser period if

the policy or contract was issued less than four years prior to the date on

which the member insurer becomes an impaired or insolvent insurer under

this chapter, whichever is earlier; and
whichever is earlier, exceeds a rate of interest determined by

subtracting two percentage points from Moody's corporate bond yield

average averaged for that same four-year period or for such lesser period if

the policy or contract was issued less than four years prior to the date on

which the member insurer becomes an impaired or insolvent insurer under

this chapter, whichever is earlier; and

(2) On and after the date on which the member insurer becomes an impaired or

insolvent insurer under this chapter, whichever is earlier, exceeds the rate of

interest determined by subtracting three percentage points from Moody's

corporate bond yield average as most recently available;

d. A portion of a policy or contract issued to a plan or program of an employer,

association, or other person to provide life, health, or annuity benefits to its

employees, members, or others, to the extent that such plan or program is

self-funded or uninsured, including benefits payable by an employer, association,

or other person under:

(1) A multiple employer welfare arrangement as defined in section 1144 of

title 29 of the United States Code;

(2) A minimum premium group insurance plan;

(3) A stop-loss group insurance plan; or

(4) An administrative services only contract;

e. Any portion of a policy or contract to the extent that it provides for dividends or

experience rating credits, voting rights, or payment of any fees or allowances to

any person, including the policy owner or contract owner, in connection with the

service to or administration of the policy or contract;

f. Any policy or contract issued in this state by a member insurer at a time when it

was not licensed or did not have a certificate of authority to issue the policy or

contract in this state;

g. Any unallocated annuity contract issued to or in connection with a benefit plan

protected under the federal pension benefit guaranty corporation regardless of

whether the federal pension benefit guaranty corporation has yet become liable to

make any payments with respect to the benefit plan;

h. Any portion of any unallocated annuity contract which is not issued to, or in

connection with, a specific employee, union, or association of natural persons

benefit plan or a government lottery;

i. A portion of a policy or contract to the extent that the assessments required by

section 26.1-38.1-06 with respect to the policy or contract are preempted or

otherwise not permitted by federal or state law;

j. An obligation that does not arise under the express written terms of the policy or

contract issued by the member insurer to the enrollee, certificate holder, contract

owner or policy owner, including:

(1) Claims based on marketing materials;

(2) Claims based on side letters, riders, or other documents that were issued by

the member insurer without meeting applicable policy or contract form filing

or approval requirements;

(3) Misrepresentations of or regarding policy or contract benefits;

(4) Extracontractual claims; or
llee, certificate holder, contract

owner or policy owner, including:

(1) Claims based on marketing materials;

(2) Claims based on side letters, riders, or other documents that were issued by

the member insurer without meeting applicable policy or contract form filing

or approval requirements;

(3) Misrepresentations of or regarding policy or contract benefits;

(4) Extracontractual claims; or

(5) A claim for penalties or consequential or incidental damages;

k. A contractual agreement that establishes the member insurer's obligations to

provide a book value accounting guaranty for defined contribution benefit plan

participants by reference to a portfolio of assets that is owned by the benefit plan

or its trustee, which in each case is not an affiliate of the member insurer;

l. A portion of a policy or contract to the extent it provides for interest or other

changes in value to be determined by the use of an index or other external

reference stated in the policy or contract, but which has not been credited to the

policy or contract, or as to which the policy owner's or contract owner's rights are

subject to forfeiture, as of the date the member insurer becomes an impaired or

insolvent insurer under this chapter, whichever is earlier. If a policy's or contract's

interest or changes in value are credited less frequently than annually, then for

purposes of determining the values that have been credited and are not subject

to forfeiture under this subdivision, the interest or changes in value determined by

using the procedures defined in the policy or contract will be credited as if the

contractual date of crediting interest or changing values was the date of

impairment or insolvency, whichever is earlier, and is not subject to forfeiture;

m. A policy or contract providing any hospital, medical, prescription drug, or other

health care benefits pursuant to part C or part D of subchapter XVIII of chapter 7

of title 42 of the United States Code, commonly known as Medicare part C and

part D, or subchapter XIX of chapter 7 of title 42 of the United States Code;

commonly known as Medicaid, or any regulations issued pursuant thereto; and

n. Structured settlement annuity benefits to which a payee or beneficiary has

transferred the payee's or beneficiary's rights in a structured settlement factoring

transactions, as defined in section 5891(c)(3)(A) of title 26 of the United States

Code, regardless of whether the transaction occurred before or after this federal

law became effective.

4. The benefits that the association may become obligated to cover may in no event

exceed the lesser of:

a. The contractual obligations for which the member insurer is liable or would have

been liable if it were not an impaired or insolvent insurer; or

b. (1) With any respect to one life, regardless of the number of policies, or

contracts:

(a) Three hundred thousand dollars in life insurance death benefits, but

not more than one hundred thousand dollars in net cash surrender

and net cash withdrawal values for life insurance;

(b) For health insurance benefits:

[1] One hundred thousand dollars for coverages not defined as

disability income insurance or health benefit plans or long-term

care insurance, including any net cash surrender and net cash

withdrawal values.

[2] Three hundred thousand dollars for disability income insurance,

and three hundred thousand dollars for long-term care insurance.

[3] Five hundred thousand dollars for health benefit plans.
e hundred thousand dollars for coverages not defined as

disability income insurance or health benefit plans or long-term

care insurance, including any net cash surrender and net cash

withdrawal values.

[2] Three hundred thousand dollars for disability income insurance,

and three hundred thousand dollars for long-term care insurance.

[3] Five hundred thousand dollars for health benefit plans.

(c) Two hundred fifty thousand dollars in the present value of annuity

benefits, including net cash surrender and net cash withdrawal values.

(2) With respect to each individual participating in a government retirement

benefit plan established under section 401(k), 403(b), or 457 of the United

States Internal Revenue Code covered by an unallocated annuity contract

or the beneficiaries of each such individual if deceased, in the aggregate,

two hundred fifty thousand dollars in present value annuity benefits,

including net cash surrender and net cash withdrawal values.

(3) With respect to each payee of a structured settlement annuity or beneficiary,

or beneficiaries of the payee if deceased, two hundred fifty thousand dollars

in present value annuity benefits, in the aggregate, including net cash

surrender and net cash withdrawal values, if any.

(4) However, in no event shall the association be obligated to cover more than:

(a) An aggregate of three hundred thousand dollars in benefits with

respect to any one life under paragraphs 1, 2, and 3 of subdivision b

except with respect to the benefits for health benefit plans under

subparagraph b of paragraph 1 of subdivision b, in which case the

aggregate liability of the association shall not exceed five hundred

thousand dollars with respect to any one individual; or

(b) With respect to one owner of multiple nongroup policies of life

insurance, whether the persons insured are officers, managers,

employees, or other persons, more than five million dollars in benefits,

regardless of the number of policies and contracts held by the owner.

(5) With respect to either one contract owner provided coverage under

paragraph 2 of subdivision c of subsection 1; or one plan sponsor whose

plans own directly or in trust one or more unallocated annuity contracts not

included in paragraph 2 of subdivision b, five million dollars in benefits,

irrespective of the number of contracts with respect to the contract owner or

plan sponsor. However, in the case in which one or more unallocated

annuity contracts are covered contracts under this chapter and are owned

by a trust or other entity for the benefit of two or more plan sponsors,

coverage must be afforded by the association if the largest interest in the

trust or entity owning the contract or contracts is held by a plan sponsor

whose principal place of business is in this state and in no event is the

association obligated to cover more than five million dollars in benefits with

respect to all these unallocated contracts.
y for the benefit of two or more plan sponsors,

coverage must be afforded by the association if the largest interest in the

trust or entity owning the contract or contracts is held by a plan sponsor

whose principal place of business is in this state and in no event is the

association obligated to cover more than five million dollars in benefits with

respect to all these unallocated contracts.

(6) The limitations set forth in this subsection are limitations on the benefits for

which the association is obligated before taking into account either its

subrogation and assignment rights or the extent to which those benefits

could be provided out of the assets of the impaired or insolvent insurer

attributable to covered policies. The costs of the association's obligations

under this chapter may be met by the use of assets attributable to covered

policies or reimbursed to the association pursuant to its subrogation and

assignment rights.

5. In performing its obligations to provide coverage under this chapter, the association is

not required to guarantee, assume, reinsure, reissue, or perform, or cause to be

guaranteed, assumed, reinsured, reissued, or performed, the contractual obligations of

the insolvent or impaired insurer under a covered policy or contract that do not

materially affect the economic values or economic benefits of the covered policy or

contract.

6. For purposes of this chapter, benefits provided by a long-term care rider to a life

insurance policy or annuity contract must be considered the same type of benefits as

the related base life insurance policy or annuity contract.

## Nearby sections

- [N.D. Cent. Code § 26.1-38.1-01 26.1-38.1-01. Coverage and limitations](https://www.frixlaw.com/law-library/statutes/STATE_ND_T26.1_C26.1-38.1_S26.1-38.1-01.md)
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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/STATE_ND_T26.1_C26.1-38.1_S26.1-38.1-01. Check the current official text before relying on it. Not legal advice.