TITLE 20. COMMERCE, FINANCIAL INSTITUTIONS, AND INSURANCE

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-101 recodified from R4-14-101 (Supp. 95-1). Amended by final rulemaking at 5 A.A.R. 618, effective February 4, 1999 (Supp. 99-1).

R20-6-102. Appearance and Practice before the Director

A. Any person may appear in his own behalf or through counsel. An insurer may appear through legal counsel or through a duly authorized officer of the corporation.

B. When an attorney other than the Attorney General appears or intends to appear before the Director, he shall promptly advise the Director of his name, address and telephone number and the name and address of the person on whose behalf he intends to appear.

C. Conduct at any hearing which, in the discretion of the Director, is deemed contemptuous shall be grounds for exclusion from the hearing. Contemptuous conduct shall include willful noncompliance with an order of the Director or hearing officer, willful disruption or obstruction of any hearing, or any other willful conduct during any hearing which lessens the dignity or authority of the Director or hearing officer.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-102 recodified from R4-14-102 (Supp. 95-1).

R20-6-103. Filing; Service

A. No paper shall be deemed filed until received by the Director.

B. Unless otherwise provided by these rules, copies of all papers filed shall, at or before the time of filing, be served on the hearing officer, the Attorney General, and all parties to the proceeding.

C. Whenever under these rules service is required or permitted to be made upon a party represented by an attorney, the service shall be made upon the attorney.

D. Service upon the attorney, or upon a party, shall be made personally in accordance with Rule 5(c) of the Arizona Rules of Civil Procedure, or by mail by enclosing a copy thereof in a sealed envelope and depositing same, postage prepaid, in the United States mail, addressed to the party to be served or his attorney at the address as shown by the records of the Director. Service by mail is complete upon deposit in the United States Mail.

E. All notices of hearing and final decisions issued by the Director shall be served by mail.

F. Proof of service shall be made by filing with the Director a written statement that service was made.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-103 recodified from R4-14-103 (Supp. 95-1).

R20-6-104. Form of All Filings; Signature

A. All papers filed with the Director shall be typewritten on 8 1/2 x 11 inch paper.

B. Every paper filed with the Director under these rules shall be signed by the party filing it or by at least one attorney, in his individual name, who represents the party. The signature constitutes a certificate by the signer that he has read the paper, that to the best of his knowledge, information and belief, it is well grounded in fact and is warranted by law, and that it is not interposed for delay.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-104 recodified from R4-14-104 (Supp. 95-1).

R20-6-105. Amendments

Except where otherwise provided by law or these rules, the Director may amend any notice of hearing or prior order issued by the Director or permit the amendment of any answer in the interest of justice.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-105 recodified from R4-14-105 (Supp. 95-1).

R20-6-106. Answer to Notice of Hearing

A. In any notice of hearing, the Director may require that one or more parties shall file a written answer to the allegations contained in the notice of hearing. Even if not directed to do so, any party may file such an answer.

B. Except where a different period is provided by the notice of hearing, a party directed to file a written answer shall do so within 20 days after issuance of the notice of hearing. Where amendments to the assertions contained in the notice of hearing are made subsequent to service of the notice of hearing, one or more of the parties may be required to answer within a reasonable time the amended assertions.

C. Unless otherwise directed by the Director, an answer filed under this rule shall briefly state the party's position or defense to the proceeding and shall specifically admit or deny each of the assertions contained in the notice of hearing. If the answering party is without or is unable to reasonably obtain knowledge or information sufficient to form a belief as to the truth of an assertion, he shall so state, which shall have the effect of a denial. Any assertion not denied shall be deemed to be admitted. When answering party intends in good faith to deny only a part of an assertion, he shall specify so much of it as is true and shall deny only the remainder.

D. If a party fails to file an answer required by the Director within the time provided, such person shall be deemed in default and the proceeding may be determined against him by the Director and one or more of the assertions contained in the notice of hearing may be deemed to be admitted.

E. Any defenses not raised in the answer shall be deemed to be waived.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-106 recodified from R4-14-106 (Supp. 95-1).

R20-6-107. Prehearing Disclosure of Documents and Statements

A. The Director, upon written request, shall allow any party to have a reasonable opportunity to inspect and copy, at the party's expense, admissible documentary evidence or documents reasonably calculated to lead to admissible evidence prior to a hearing in a contested case, so long as such evidence is not privileged. The inspection shall be at the Department or at a place designated by the Director.

B. The Director may order a party to allow the Attorney General or the Department's investigator to have an opportunity, prior to a hearing, to inspect and copy at the state's expense, admissible documentary evidence or documents reasonably calculated to lead to admissible evidence. The inspection shall be at the premises of the party, if located in the state of Arizona. Otherwise, the Director may order the party to produce documents at a place designated by the Director.

C. The Director, upon request by the Attorney General or any party, may require, prior to a hearing, the disclosure of documentary evidence intended to be used at the hearing, so long as such evidence is not privileged. Disclosure may include inspection and copying.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-107 recodified from R4-14-107 (Supp. 95-1).

R20-6-108. Subpoenas

A. Any party desiring the issuance of a subpoena to compel the appearance of a witness or the production of documents at any hearing shall file a written ex part application therefore setting forth the name and address of the witness, time and place of appearance, and any documents or tangible things sought to be produced. Upon receipt, the Director shall issue the subpoena.

B. The party requesting the subpoena shall arrange for service of the subpoena as in civil actions. Subpoenas issued at the request of the Director may be served by an employee of the Department or any attorney or agent of the Attorney General's Office.

C. A party may request issuance of an amended subpoena, which shall be served as provided in subsection (B).

D. The person to whom the subpoena is directed may, within 10 days after the service thereof or on or before the return date if the return date is less than 10 days after service, serve upon the Director, the hearing officer and the attorney or party designated in the subpoena, written objection to the appearance or to the inspection or copying of any or all of the designated material. If objection is made, the party serving the subpoena shall not be entitled to inspect and copy the materials except pursuant to an order of the Director. The party serving the subpoena shall have five days within which to file a written response to the objection. The Director's order on the objection shall be based upon the written objection and response. No oral argument shall be heard on the objection unless the Director or hearing officer directs.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-108 recodified from R4-14-108 (Supp. 95-1).

R20-6-109. Depositions

A. Except as provided by this Section and otherwise provided by law, depositions may not be taken of any witness.

B. Depositions for use as evidence may be taken of witnesses who cannot be subpoenaed or are otherwise unable to attend the hearing. In order to take a deposition, a party shall file with the Department a written motion with copies to all parties and the Attorney General setting forth the name and address of the witness, the subject matter of the deposition, the documents, if any, sought to be produced, the time and place proposed for the deposition, and the justification for the deposition.

C. If a deposition is permitted, a subpoena and a written order shall be issued. The subpoena and order shall identify the person to be deposed, the scope of testimony to be taken, the documents, if any, to be produced, and the time and place of the deposition. The party requesting the deposition shall arrange for service of the subpoena and order. The subpoena and order shall be served on all parties and the Attorney General five business days before the time fixed for taking the deposition unless, for good cause shown, such time is shortened by the Director or a hearing officer.

D. If the parties agree in writing, a deposition may be taken of a witness for any purpose, in the manner and upon the terms designated by them, subject to approval by the Director or the hearing officer.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-109 recodified from R4-14-109 (Supp. 95-1).

R20-6-110. Prehearing Conference

The Director, upon written request of a party or the Attorney General, or on his own motion, and upon written notice to all parties, may direct that a prehearing conference be held for the purpose of clarifying or limiting the procedural, legal or factual issues involved in a contested case.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-110 recodified from R4-14-110 (Supp. 95-1).

R20-6-111. Hearings

A. Hearings may be presided over by a hearing officer designated by the Director. All such hearings shall be open to the public, except as provided in A.R.S. § 20-164. A hearing officer appointed by the Director may make all determinations and enter all orders and process which the Director is authorized to make or issue under these rules or any other order necessary for the orderly conduct of the hearing.

B. Any challenge of the hearing officer shall be made in the form of a written motion specifying the grounds for disqualification of the hearing officer and shall be served as soon as practicable under the circumstances, but no later than 15 days after the person discovers that such grounds exist or should have discovered with reasonable diligence. The Director shall rule upon the challenge prior to the commencement or continuation of the hearing.

C. The hearing officer shall regulate the course of the hearing in an impartial manner and shall rule upon procedural and evidentiary matters incidental thereto. The hearing officer may question witnesses. Upon motion of any party, a witness may be excluded from the hearing by the hearing officer prior to his or her testimony, except that this rule shall not be used to exclude a party to the proceeding.

D. All motions and objections made during the course of a hearing shall be made to the hearing officer who shall rule thereon or take them under advisement for later determination. Objections to the admission or exclusion of evidence shall be made on the record and shall state the grounds of objections relied upon.

E. The hearing proceedings shall be stenographically reported by a certified court reporter or mechanically recorded under the direction of a hearing officer who shall retain control of the used reel or tape following conclusion of the hearing.

F. By order of the Director or the hearing officer, proceedings involving a common question of fact or a common respondent may be consolidated for hearing of any or all of the matters at issue where such consolidation may tend to facilitate a just and efficient resolution.

G. At the discretion of the Director, the hearing record may be held open for a reasonable period of time at the conclusion of the hearing to permit the presentation of additional written arguments, memoranda, evidence or responsive pleadings. At the close of such period, the hearing record shall close.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-111 recodified from R4-14-111 (Supp. 95-1).

R20-6-112. Order of Presentation

All witnesses at a hearing shall testify under oath or affirmation. The parties may make an opening and closing statement. In matters brought at the request of the Director, evidence in support of the Director's action shall be presented first, then the respondent may present evidence in support of his or her position, and then there may be rebuttal and surrebuttal evidence presented. In matters brought at the request of a person other than the Director, including requests for hearing on the denial of a license and other hearings brought pursuant to A.R.S. § 20-161(B), the person seeking the hearing shall present his or her evidence first. The parties may present evidence and conduct cross-examination. The hearing officer shall rule upon the admissibility of evidence sua sponte or upon objection of any party.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-112 recodified from R4-14-112 (Supp. 95-1).

R20-6-113. Computation of Time; Continuances and Extensions of Time

A. In computing any period of time prescribed or allowed by these rules, by order of the Director or by any applicable statute, the day of the act or event from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included unless it is a Saturday or Sunday or a legal holiday in which event the period runs until the end of the next day which is not a Saturday, Sunday or legal holiday. When the period of time prescribed or allowed is less than 11 days, intermediate Saturdays, Sundays and legal holidays shall be excluded in the computation.

B. Except as otherwise provided by law, the Director or hearing officer, for good cause, may extend time limits prescribed by these rules except those time limits imposed by R20-6-114.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-113 recodified from R4-14-113 (Supp. 95-1).

R20-6-114. Request for Rehearing or Review

A. Within 30 days after service of the Director's order on the hearing, any aggrieved party may request a rehearing or review of the order. The request shall be in writing and shall be served upon the Director as provided by R20-6-103, and a copy shall be served upon all other parties to the hearing, including the Attorney General if the Attorney General is not the party filing the request.

B. A request for rehearing or review shall be based upon one or more of the following grounds which have materially affected the rights of a party:

1. Irregularity in the hearing proceedings, or any order or abuse of discretion whereby the party seeking rehearing or review was deprived of a fair hearing;

2. Misconduct by the Director, the hearing officer or any party to the hearing;

3. Accident or surprise which could not have been prevented by ordinary prudence;

4. Newly discovered material evidence which could not have been discovered with reasonable diligence and produced at the hearing;

5. Excessive or insufficient sanctions or penalties imposed;

6. Error in the admission or rejection of evidence, or errors of law occurring at the hearing or during the course of the hearing;

7. Bias or prejudice of the Director or hearing officer;

8. That the order, decision, or findings of fact are not justified by the evidence or are contrary to law.

C. A request for rehearing or review shall specify which of the grounds listed in subsection (B) it is based upon and shall set forth specific facts and laws in support of the request. A request may cite relevant portions of testimony from the hearing by referring to the pages or lines of the reporter's transcript of the hearing and may cite hearing exhibits by reference to the exhibit number.

D. A request for rehearing shall specify the relief sought by the request, such as a different finding of fact, conclusion of law or order. A request for rehearing or review may seek multiple forms of relief in the alternative.

E. When a request for rehearing is based upon affidavits, they shall be attached to and filed with the request unless leave for later filing of affidavits is granted by the Director or hearing officer. Leave may be granted ex parte.

F. A request for rehearing or review of the Director's order on the hearing which is not timely made is deemed waived for the purpose of judicial review. A party who fails to request rehearing or review of the Director's order on the hearing shall be barred from raising a claim in any proceeding in which the Director, the hearing officer or the Department of Insurance is a party, except as otherwise required by law.

G. A party may file a written request for a stay of the Director's decision. An order entered by the Director shall not be stayed by the filing of a stay request or a request for rehearing or review. The Director may stay an order pending the resolution of a request for rehearing or review or when justice requires.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-114 recodified from R4-14-114 (Supp. 95-1). Amended effective June 15, 1998 (Supp. 98-2).

R20-6-115. Response to Request for Rehearing

A. Each party served with a request for rehearing pursuant to R20-6-114 shall be permitted to file a response within 15 days after the request for rehearing has been filed. This response shall be designated as a "response to request for rehearing or review" and shall be in writing. Affidavits may be attached to and filed with the response. If not filed in this manner, an affidavit shall be filed only if leave for later filing of affidavits is granted by the hearing officer or Director. Leave may be granted ex parte. The original response shall be filed with the Department as provided in R20-6-103, and one copy shall be served upon all other parties to the hearing, including the Attorney General if the Attorney General is not the party filing the response.

B. The hearing officer or Director has the discretion to convene a hearing or hear oral argument to consider a request for rehearing.

Historical Note

Adopted effective January 23, 1992 (Supp. 92-1). R20-6-115 recodified from R4-14-115 (Supp. 95-1). Amended effective June 15, 1998 (Supp. 98-2).

R20-6-116. Reserved

through

R20-6-158. Reserved

R20-6-159. Repealed

Historical Note

Adopted effective February 17, 1977 (Supp. 77-1). R20-6-159 recodified from R4-14-159 (Supp. 95-1). Repealed effective June 15, 1998 (Supp. 98-2).

R20-6-160. Rulemaking Petition

A. The following definitions apply in this Section.

1. "Department" means the Arizona Department of Insurance.

2. "Director" means the Director of the Department of Insurance.

3. "Petitioner" means a person who petitions the Department for rulemaking action.

4. "Rulemaking action" means the process for formulation and finalization of a new rule, or amendment or repeal of an existing rule.

B. Any person may petition the Department under A.R.S. § 41-1033 for rulemaking action.

C. A person who seeks rulemaking action shall file, with the Director, a petition with the following information:

1. The petitioner's name, address, and telephone number;

2. The name and address of any organization the petitioner represents;

3. A statement of the rulemaking action the petitioner seeks, including:

a. A citation to any existing rule, substantive policy statement, or Department practice to be amended or repealed; and

b. The specific language of a proposed new rule or rule amendment;

4. The reasons for the rulemaking action, including an explanation of why an existing rule, substantive policy statement, or Department practice is inadequate, unreasonable, unduly burdensome, or unlawful; and

5. The petitioner's dated signature.

D. The petitioner may submit additional supporting information, including:

1. Statistical data; and

2. A list of other persons and entities likely to be affected by the proposed rulemaking action, with an explanation of the likely effects.

E. Within 60 days of the date the Department receives the petition, the Department shall send the petitioner a written decision indicating whether the Department is denying the petition or will initiate the requested rulemaking action, with the reasons for the decision.

Historical Note

New Section adopted by final rulemaking at 5 A.A.R. 618, effective February 4, 1999 (Supp. 99-1).

ARTICLE 2. TRANSACTION OF INSURANCE

R20-6-201. Advertisements of Health Insurance

A. Definitions. The following definitions apply to this Section and to R20-6-201.01, R20-6-201.02, and R20-6-203:

1. "Advertisement" means materials and information used by an insurer to generate insurance business.

a. Advertisement includes the following information:

i. Printed and published material, audio visual material, or other forms of electronic communication that an insurer uses or displays in direct mail, newspapers, magazines, radio, television, billboards, Internet web sites, and similar media to inform the public about the insurer or its products;

ii. Descriptive literature and sales aids an insurer issues or releases for presentation to members of the public, including circulars, leaflets, booklets, depictions, illustrations, and form letters;

iii. Prepared sales talks and presentations and material for use by an insurer or prepared by an insurer for use by authorized producers; and

iv. Material included with a policy when the policy is delivered and material used in the solicitation of renewals and reinstatements;

b. "Advertisement" does not include the following:

i. Material used solely for training and educating an insurer's employees or producers;

ii. Material used in-house by insurers;

iii. Communications within an insurer's own organization not intended for dissemination to the public;

iv. Individual communications with current policy holders regarding a member's personal information other than material urging the policyholders to increase or expand coverages;

v. Correspondence between a prospective group or blanket policyholder and an insurer in the course of negotiating a group or blanket contract;

vi. Court-approved material ordered by a court to be disseminated to policyholders;

vii. Material in connection with promotion or sponsorship of a charitable event in which only the name of the insurer is displayed;

viii. A general announcement from a group or blanket policyholder to eligible individuals on an employment or membership list that a contract or program has been written or arranged. The announcement shall clearly indicate that it is preliminary to the issuance of a booklet and that does not describe the specific benefits under the contract or program nor the advantages as to the purchase of the contract or program;

ix. A general announcement by the sponsor that endorses the program;

x. Health and wellness material with general health and wellness information; or

xi. Press releases and news releases not intended to generate business.

2. "Disability insurance" has the same meaning prescribed in A.R.S. § 20-253.

3. "Elimination period" means the time between the date a loss occurs and the date that benefits begin to accrue for that loss.

4. "Exclusion" means a policy term stating a risk that an insurer has not assumed.

5. "Health insurance" means:

a. Disability insurance;

b. Insurance provided by a service corporation regulated under A.R.S. § 20-821 et seq.;

c. Insurance provided by a prepaid dental plan organization regulated under A.R.S. § 20-1001 et seq.; and

d. Insurance provided by a health care services organization regulated under A.R.S. § 20-1051 et seq.

6. "Insurance administrator" or "administrator" has the meaning prescribed in A.R.S. § 20-485(A)(1).

7. "Insurer" has the same meaning prescribed in A.R.S. § 20-104.

8. "Limitation" means a policy term, other than an exclusion or reduction, that decreases the risk assumed by the insurer or the insurer's obligation to provide benefits.

9. "Person" has the meaning in A.R.S. § 20-105.

10. "Policy" means any plan, certificate, contract, agreement, statement of coverage, evidence of coverage, subscription contract, membership coverage, rider, or endorsement that provides disability benefits, health insurance, medical, surgical or hospital expense benefits, long-term care benefits, or Medicare supplement benefits in the form of a cash indemnity, reimbursement, or service.

11. "Reduction" means a policy term that reduces the amount of an insured's benefits. A reduction means that the insurer has assumed the risk of a particular loss, but the amount or period of the insurer's coverage is less than what the insurer would have paid for the loss without the reduction.

12. "Spokesperson" means a person making a testimonial about or an endorsement of an insurer's product who:

a. Has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee, or independent contractor;

b. Has been formed by the insurer, is owned or controlled by the insurer or its employees, or is a person who owns or controls an insurer;

c. Is in a policy-making position and affiliated with the insurer in any capacity described in subsections (a) or (b); or

d. Is directly or indirectly compensated for making the testimonial or endorsement.

B. Scope.

1. This Section applies to all advertisements for health insurance.

2. This Section applies to the conduct of insurers, producers, and third-party administrators.

C. General requirements. Insurers, producers, and third-party administrators shall ensure that health insurance advertisements meet the requirements of this Section.

1. Advertisements shall be truthful and not misleading. The insurer shall not use words or phrases, the meaning of which is clear only by implication or by familiarity with insurance terminology.

2. An advertisement shall not omit information or use words, phrases, statements, references, or illustrations if the omission of information or use of words, phrases, statements, references, or illustrations may mislead or deceive purchasers or prospective purchasers.

3. The words and phrases used to describe a policy shall accurately describe the benefits of the policy and not exaggerate any benefit through the use of phrases such as "all," "full," "complete," "comprehensive," "unlimited," "up to," "as high as," "this policy will pay your hospital and surgical bills" or "this policy will replace your income," or similar words and phrases.

4. If a policy covers only one disease or a list of specified diseases, any advertisement for the policy shall not imply coverage beyond the specified diseases.

5. If a policy pays varying amounts for the same loss occurring under different conditions or pays benefits only when a loss occurs under certain conditions, any advertisement for the policy shall disclose the limited conditions.

6. If an advertisement specifies payment of a particular dollar amount for hospital room and board expenses, the advertisement shall also include the maximum daily benefit and the maximum time limit for which those expenses are covered.

7. An advertisement that refers to any dollar amount, period of time for which a benefit is payable, cost of policy, or specific policy benefit or the loss for which a benefit is payable shall also disclose any related exclusions, reductions, and limitations without which the advertisement would have the capacity and tendency to mislead or deceive.

8. An advertisement covered by subsection (C)(7) shall disclose the existence of a waiting period if a policy contains a period between the effective date of the policy and the effective date of coverage under the policy. The advertisement shall disclose the existence of an elimination period.

9. An advertisement shall disclose any exclusion, reduction, or limitation applicable to a pre-existing condition; however, an insurer is not required to make disclosure in an advertisement that does not reference specific product information, benefit level, or dollar amounts.

10. If a policy has an exclusion, reduction, or limitation applicable to a preexisting condition, an advertisement shall not state or imply that the applicant's physical condition or medical history will not affect the issuance of the policy or payment of a claim and shall not use the phrase "no medical examination required" or other similar phrase.

11. If an advertisement refers to renewability, cancellation, or termination of a policy, or states or illustrates time or age in connection with eligibility of applicants or continuation of the policy, the advertisement shall disclose the provisions relating to renewability, cancellation, and termination and any modification of benefits, losses covered, or premiums because of age or for other reasons, in a manner that does not minimize or obscure the qualifying conditions.

12. An advertisement shall not make any offer prohibited under A.R.S. § 20-452(4).

13. An advertisement shall not advertise any health insurance policy or form that has not been approved by the Department, unless the policy or form being advertised is exempt from approval or not subject to approval by order or statute.

14. An advertisement shall not state or imply that a product being offered is an introductory, special, or initial offer that will entitle the applicant to receive advantages not described in the policy by accepting the offer.

15. An advertisement designed to produce leads either by use of a coupon, a request to write or call the company, or subsequent advertisement before contact, shall disclose that a producer may contact the potential applicant.

D. Method of disclosure of required information. If an insurer is required by law to disclose particular information, the information shall be conspicuous and in close proximity to the statements to which the information relates, or under a prominent caption so that the required disclosure is not minimized, obscured, presented in an ambiguous fashion, or intermingled with the content of the advertisement.

E. Testimonials.

1. Testimonials used in advertisements shall be genuine, represent the current opinion of the author, be applicable to the policy advertised, and be accurately reproduced. The insurer shall provide the Department with the full name of the author and a copy of the full testimonial if the advertisement is filed with the Department or requested by the Department. If an insurer uses a testimonial, the insurer adopts the statements in the testimonial as the insurer's own statements. If a testimonial or endorsement is used more than one year after it is given, the insurer shall obtain a written confirmation from the author that the testimonial represents the current opinion of the author.

2. The insurer shall disclose that a spokesperson has a financial interest or the proprietary or representative capacity of a spokesperson in an advertisement in the introductory portion of a testimonial or endorsement in the same form and with equal prominence as the endorsement. If a spokesperson is directly or indirectly compensated for making a testimonial or endorsement, the insurer shall disclose that fact in the advertisement by language that states, "Paid Endorsement," or words of similar import in type, style, and size at least equal to that used for the spokesperson's name or the body of the testimonial or endorsement, whichever is larger. For television or radio advertising, the insurer shall place the required disclosure prominently in the introductory portion of the advertisement.

F. Statistics. An advertisement with information on the dollar amounts of claims paid, the number of persons insured, or similar statistical information relating to any insurer or policy shall not use facts that are irrelevant to the sale of insurance and shall accurately reflect all of the relevant facts specific to the advertised policy or insurer. An advertisement shall not state or imply that statistics are derived from the policy being advertised unless that is true. The insurer shall identify in the advertisement the source of any statistics used.

G. Inspection of policy. An offer in an advertisement of free inspection of a policy or offer of a premium refund does not cure misleading or deceptive statements in the advertisement.

H. Identification of plan or number of policies.

1. If an advertisement offers a choice in the amount of benefits the advertisement shall disclose that the amount of benefits depends on the policy selected and that the premium will vary with the amount of the benefits.

2. If an advertisement refers to benefits contained in more than one policy, other than a group master policy, the advertisement shall disclose that the benefits are provided only if multiple policies are purchased.

I. Disparaging comparisons and statements. An advertisement shall not make unfair, incomplete, or unsubstantiated comparisons of other insurers' policies or benefits or falsely disparage other insurers' policies, services, or business methods. A comparison is unsubstantiated if the insurer has no empirical study, analysis, or documentation supporting the comparative statement or comparison of policies or benefits.

J. Jurisdictional limits. If an insurer has an advertisement that is meant to be seen or heard beyond the limits of the jurisdiction in which the insurer is licensed, the advertisement shall indicate that the insurer is licensed in a specified state or states only, or is not licensed in a specified state or states, by use of language such as "This Company is licensed only in State A" or "This Company is not licensed in State B."

K. Identity of insurer. The insurer shall state the name of the actual insurer in all of its advertisements. An advertisement shall clearly identify the insurer and shall not use a trade name, an insurance group designation, name of the parent company of the insurer, name of a particular division of the insurer, service mark, slogan, symbol, or other device that may mislead or deceive the public as to the insurer's identity.

L. Group insurance. An advertisement shall not state or imply that prospective policyholders become group or quasi-group members and enjoy special rates or underwriting privileges, unless it is true. An advertisement to join an association, trust, or group that is also an invitation to contract for insurance coverage shall disclose that the applicant will be purchasing both membership in the association, trust, or group and insurance coverage.

M. Government approval. An advertisement shall not state or imply any of the following:

1. That a governmental agency or regulator is connected with or has provided or endorsed a policy or endorsed an insurer;

2. That a governmental agency or regulator has examined an insurer's financial condition and found it satisfactory. This subsection does not apply if an insurer is responding to a specific documented, public, false allegation about its financial condition.

N. Endorsements. An advertisement may state that an individual, group, society, association, or other organization has approved or endorsed the insurer or its policy if the organization or group has done so in writing and if any proprietary relationship between the organization and the insurer is disclosed.

O. Claims handling. An advertisement shall not contain false statements about the time within which claims are paid or statements that imply that claim settlements will be liberal or generous beyond the terms of the policy.

P. Statements about the insurer. An advertisement shall not contain false or misleading statements about an insurer's assets, corporate structure, financial standing, length of time in business, or relative position in the insurance business.

Historical Note

Former General Rule Number 2. R20-6-201 recodified from R4-14-201 (Supp. 95-1). Amended by final rulemaking at 13 A.A.R 2061, effective August 4, 2007 (Supp. 07-2).

R20-6-201.01. Insurer Advertising Responsibility and Records

A. An insurer shall establish, and at all times maintain, a system of control over the content, form, and method of dissemination of all advertisements. The insurer whose policies are advertised is responsible for the advertisements, regardless of who writes, creates, designs, or presents the advertisement, except the insurer is not responsible for any advertisement placed by a person to whom the insurer gave no actual or apparent authority. Before using an advertisement about an insurer or its products, a producer shall get written approval from the insurer for use of advertisements that were not supplied by the insurer.

B. An insurer shall maintain, at its home or principal office, the following:

1. Advertisements disseminated by the insurer in Arizona or any other state, including:

a. Each printed, published, recorded, or prepared advertisement of individual policies; and

b. Typical printed, published, recorded, or prepared advertisements of blanket, franchise, and group policies.

2. A notation attached to each advertisement specifying the manner and extent of distribution and the form number of any policy advertised; and

3. Documentation supporting any testimonials, statistical claims, or comparisons shown in the advertising.

C. An insurer shall maintain the advertisements, notations, and supporting documentation for at least three years from the date of first dissemination.

Historical Note

New Section made by final rulemaking at 13 A.A.R 2061, effective August 4, 2007 (Supp. 07-2).

R20-6-201.02. Procedures for Filing Advertising Materials; Transmittal Form

A. An insurer that is required to file a health insurance advertisement with the Department as specified in A.R.S. §§ 20-826(T), 20-1018, 20-1057(X), 20-1110(E), or 20-1662 shall file the advertisement with a transmittal form prescribed by the Department.

B. The transmittal form shall include the following information:

1. Identifying information of the insurer, including name, address, National Association of Insurance Commissioners' identification number, and type of insurer;

2. A contact person at the insurer with whom the Department can communicate about the advertisement;

3. Description of the type of advertisement being filed;

4. Planned use and dissemination of the advertisement, including date of first use, or a statement that the advertisement will not be used any earlier than a specified date;

5. Description of product being advertised;

6. Form number and name for the advertised product;

7. A certification from an officer of the insurer that the advertisement complies with applicable laws; and

8. The dated signature of the insurer's officer.

Historical Note

New Section made by final rulemaking at 13 A.A.R 2061, effective August 4, 2007 (Supp. 07-2).

R20-6-202. Advertising, Solicitation, and Transaction of Life Insurance

A. The definitions in R20-6-201(A) and the following definition apply in this Section:

"Life insurance" means a life insurance contract, including all benefits payable under the policy.

B. Applicability

1. This Section applies to:

a. All persons subject to regulation under A.R.S. Title 20; and

b. Advertising, promotion, solicitation, negotiation, and sale of life insurance policies, regardless of the form of dissemination.

2. This Section does not apply to group insurance, franchise insurance, or to annuities without life contingencies.

C. General provisions. A life insurance advertisement shall not mislead the public by:

1. Omitting information that fairly describes the subject matter as a life insurance policy and the benefits available under the policy;

2. Placing undue emphasis on facts that, even if true, are not relevant to the sale of life insurance; or

3. Placing undue emphasis on features of incidental or secondary importance to the life insurance aspects of the policy.

D. The Department deems the following acts misleading and deceptive:

1. Using any statement, including phrases such as "investment," "investment plan," "founders plan," "charter plan," "expansion plan," "profit," "profits," or "profit sharing," in a context or under circumstances or conditions that may mislead a purchaser or prospective purchaser to believe that the insurer is selling something other than a life insurance policy or will provide some benefit not included in the policy, or not available to other persons of the same class and equal expectation of life;

2. Using any phrase as the name or title of a life insurance policy if the phrase does not include the words "life insurance," unless other language in the same document expressly provides that the contract is a life insurance policy;

3. Making any statement relating to the growth or earnings of the life insurance industry or to the tax status of life insurance companies in a context that would reasonably be understood as attempting to interest a prospective applicant in the purchase of shares of stock in the insurance company rather than in the purchase of a life insurance policy;

4. Making any statement that reasonably tends to imply that the insured will enjoy a status common to a stockholder or will acquire a stock ownership interest in the insurance company by purchasing the policy, unless the statement is made with reference to policies of domestic life insurers engaged in a program allowed under A.R.S. § 20-453;

5. Providing a policyholder with a premium receipt book, policy jacket, return envelope, or other printed or electronic material referring to the insurer's "investment department," "insured investment department," or similar terminology in a manner implying that the policy is sold, issued, or serviced by the insurer's investment department;

6. Making any statement that reasonably tends to imply that, by purchasing a policy, the purchaser or prospective purchaser will become a member of a limited group of persons who may receive the payment of dividends, special advantages, benefits, or favored treatment unless the insurance contract specifically provides for the described payment of dividend, special advantages, benefits, or favored treatment;

7. Stating or implying that only a limited number of persons or limited class of persons may buy a particular kind of policy, unless the limitation is related to recognized underwriting practices or specifically stated in the policy or rider;

8. Describing premium payments in language that states the payment is a "deposit," unless:

a. The payment establishes a debtor-creditor relationship between the insurance company and the policyholder; or

b. The term is used with the word "premium" in a manner as to clearly indicate the true character of the payment;

9. Providing any illustration or projection of future dividends that:

a. Is not based on the company's actual scale for payment of current dividends, and

b. Does not clearly indicate that the dividends are not guarantees;

10. Using the words "dividends," "cash dividends," "surplus," or similar phrases in a manner that states or implies that the payment of dividends is guaranteed or certain to occur;

11. Stating, without qualification, that a purchaser of a policy will share in a stated percentage or portion of the insurer's earnings;

12. Making any statement that projected dividends under a participating policy will be or can be sufficient at any future time to assure the receipt of benefits such as a paid-up policy without further payment of premiums unless the statement also explains:

a. The benefits or coverage that would be provided at the future time, and

b. The conditions under which the receipt of benefits without further payment of premiums would occur;

13. Describing a life insurance policy or premium payments in terms of "units of participation," unless accompanied by other language clearly indicating that the references are to a life insurance policy or to premium payments, as applicable.

14. Advising producers to avoid disclosing that life insurance is the subject of the solicitation or sale;

15. Stating that an insured is guaranteed certain benefits if the policy is allowed to lapse, without explaining the non-forfeiture benefits;

16. Using a dollar amount in printed material to be shown to a prospective policyholder, unless the amount is accompanied by language that:

a. States the nature of the dollar amount,

b. Prohibits including the use of dollar amounts not related to guaranteed values and properly projected dividend figures, and

c. Prohibits the use of figures showing growth of stock values, or other values not a part of the life insurance contract.

17. Stating that a policy provides features not found in any other insurance policy, unless the insurer can demonstrate that other policies do not have the same feature;

18. Making any statement or implication about an insurance policy that cannot be verified by reference to the policy contract, a sample of the policy being described, or the company's officially published rate book and dividend illustrations;

19. Stating that life insurance is "loss proof" or "depression proof," except that an insurer may make statements that life insurance benefits, other than dividends, are guaranteed by the company regardless of economic conditions;

20. Making any statement that a company makes a profit as a result of policy lapses or surrenders;

21. Making comparisons to the past experience of other life insurance companies as a means of projecting possible experience for the company issuing the advertising; and

22. Conduct or statements designed to mislead a prospective applicant or purchaser.

Historical Note

Former General Rule Number 68-14. R20-6-202 recodified from R4-14-202 (Supp. 95-1). Amended by final rulemaking at 13 A.A.R 2061, effective August 4, 2007 (Supp. 07-2).

R20-6-203. Form Filings; Translations

A. An insurer, rate service organization, or rating organization shall provide to the Department, at the time of filing, an English language translation of each form, advertisement, or other document or material that the insurer is required by statute or rule to file with the Department, if the filed document or material contains communication in a language other than English.

B. The translation filed under subsection (A) shall compare the foreign language version in a side-by-side format with the English language translation. An insurer, rate service organization, or rating organization shall ensure that the translation is performed by a person with formal college-level or specialized training in the foreign language, including training in grammar and sentence syntax.

C. With each translation, an insurer, rate service organization, or rating organization shall also provide to the Department a sworn statement signed by the translator who translated the document that includes the qualifications of the translator under subsection (B) and attests that the translation is identical in substance to the English document or material.

D. If an insurer, rate service organization, or rating organization files a foreign language version of a document or material that the insurer has previously filed in English, the insurer is not required to refile the English version, but shall identify the English version, provide the side-by-side comparison under subsection (B), and file the sworn statement required under subsection (C).

Historical Note

Former General Rule Number 71-23; Repealed effective January 1, 1981 (Supp. 80-6). R20-6-203 recodified from R4-14-203 (Supp. 95-1). New Section made by final rulemaking at 13 A.A.R 2061, effective August 4, 2007 (Supp. 07-2).

R20-6-204. Surplus Lines Brokers' Filing Requirements; List of Unauthorized Insurers

A. Definitions.

1. "Alien insurer" has the meaning prescribed in A.R.S. § 20-201.

2. "Foreign insurer" has the meaning prescribed in A.R.S. § 20-204.

3. "Listed insurer" means an unauthorized insurer who is on the list created by the Director under subsection (C)(1) and A.R.S. § 20-413.

4. "Surplus lines broker" means a person licensed under A.R.S. § 20-411.

5. "Surplus lines insurance" means the type of insurance described in A.R.S. § 20-407.

6. "Unauthorized insurer" means an insurer that does not have a certificate of authority to transact insurance in Arizona.

B. Filing requirements. An unauthorized insurer writing surplus lines insurance in Arizona and each surplus line broker shall comply with the filing requirements of this Section.

C. List of unauthorized insurers.

1. The Director shall create and maintain a list of unauthorized insurers that may write surplus lines insurance in this state under A.R.S. § 20-413. The list shall contain the names of unauthorized insurers for which a surplus lines broker has made the filings required by this Section.

2. The Director shall retain a listed insurer on the list until:

a. The Director removes the insurer from the list under A.R.S. § 20-413 or subsection (H) or (I) below, or

b. The insurer requests the Director to remove its name from the list.

D. Placing surplus lines insurance. A surplus lines broker shall place all surplus lines business with insurers listed under subsection (C). An insurer's removal from the list does not affect the validity of any contract existing at the time of removal.

E. Requirements for foreign unauthorized insurers and insurance exchanges. A surplus lines broker shall file the following documents for a foreign unauthorized insurer:

1. An original or a certified copy of the insurer's certificate of compliance from the supervisory official of the insurer's state of domicile;

2. A current Certificate of Deposit, Capital, and Surplus for Foreign Insurers from the public officials or other persons who have supervision over the insurer in any other state;

3. A certification from the surplus lines broker of the insurer's compliance with the financial requirements of A.R.S. § 20-413;

4. The insurer's most recent report of financial examination, certified by the insurance supervisory official of its state of domicile; and

5. A certified copy of a full-size National Association of Insurance Commissioners (N.A.I.C.) annual statement for the insurer as of December 31 of the preceding year.

F. Requirements for initial listing of alien unauthorized insurers. A surplus lines broker shall file a certification of the insurer's compliance with the financial requirements of A.R.S. § 20-413. For all alien insurers other than title insurers, the surplus lines broker may rely on the information contained in the most recent N.A.I.C. Financial Review of Alien Insurers as prima facie evidence of the insurer's compliance.

G. Filing requirements to maintain listing. To ensure that a foreign or alien unauthorized insurer remains on the Director's list, a surplus lines broker shall file, before June 1 of each year:

1. A copy of a full-size National Association of Insurance Commissioners (N.A.I.C.) convention blank annual statement (Form 2) for the insurer, as of December 31 of the preceding year; and

2. An affidavit, on a form approved by the Director, that meets the following requirements:

a. The surplus lines broker and a duly authorized officer of the unauthorized insurer shall sign the affidavit.

b. The insurer's officer shall state whether there have been any changes in the insurer's name, address, state of domicile, statutory producer, and any material changes in its operations since the insurer's initial qualification for listing or the last annual filing under this subsection. If there have been material changes in operations, the officer shall describe the changes. Material changes under this subsection include a change in any one or more of the following:

i. A director, officer, or controlling person;

ii. The insurer's holding company or affiliates;

iii. The insurer's charter documents, including its articles of incorporation, articles of agreement, or by-laws governing its conduct of business;

iv. The insurer's marketing or administration plans, operations, or agreements with third parties;

v. Any other matter material to the insurer meeting its obligations to its policyholders; and

vi. Any other matter that relates to any of the grounds for removal from the list as prescribed in A.R.S. § 20-413.

c. The insurer's officer shall state whether the insurer is in good standing in all jurisdictions where it conducts insurance business and whether the insurer has been, since the date of initial listing or the last annual filing under this subsection, or currently is, the subject of any action or order by any regulatory official in any jurisdiction. If the insurer has been or is the subject of a disciplinary action or order, the insurer's officer shall describe the matter in the affidavit and shall attach a copy of any applicable official document regarding the disciplinary action or order. Regulatory action or order under this subsection includes any one or a combination of the following:

i. Denial, suspension, or revocation of a license, permit, or certificate of authority;

ii. A corrective action or operation plan, consent order, memorandum of understanding, or cease and desist order;

iii. Action against the insurer's bond or securities held in trust by a regulatory official; and

iv. Supervision, conservatorship, receivership, or any other form of possession or control by a regulatory official in any jurisdiction.

d. The insurer's officer shall state whether the report of examination, if any, previously filed with the Director under subsection (E)(4) or with a previous annual filing, remains the most current, filed report. If a more recent report of examination exists, the surplus lines broker shall file a copy of the report with the affidavit.

H. Supplemental information; removal. A surplus lines broker and an unauthorized insurer shall provide any additional information the Director requests to determine whether the insurer meets the requirements of A.R.S. § 20-413, or to clarify information in documents filed under this Section. The Director may remove an insurer from the list if the surplus lines broker or insurer does not submit the requested information within 30 days after the date of a written request for information.

I. Removal for failure to make annual filing. The Director shall remove an unauthorized insurer from the list if a surplus lines broker fails to timely file the documents required by subsection (G). The Director shall not restore the insurer to the list until a surplus lines broker files all applicable documents required under subsections (E) or (F) and the insurer requalifies under A.R.S. § 20-413.

J. Organizations of surplus lines brokers; unauthorized insurer.

1. A surplus lines broker may file records or reports that are subject to examination by the director under A.R.S. § 20-408 with any voluntary organization of surplus lines brokers. The Director may examine the records or reports filed with an organization of surplus lines brokers to ascertain compliance with A.R.S. Title 20, Chapter 2, Article 5. An examination performed under this authority shall not preclude examination of records of a surplus lines broker.

2. Nothing in this subsection requires that a surplus lines broker become a member of any surplus lines organization to file or preserve or maintain any affidavit or statement.

Historical Note

Former General Rule Number 71-24; Former Section R4-14-204 repealed, new Section R4-14-204 adopted effective January 1, 1981 (Supp. 80-6). R20-6-204 recodified from R4-14-204 (Supp. 95-1). Amended effective July 14, 1998 (Supp. 98-3). Amended by final rulemaking at 6 A.A.R. 475, effective January 5, 2000 (Supp. 00-1). Amended by final rulemaking at 13 A.A.R 2061, effective August 4, 2007 (Supp. 07-2).

R20-6-205. Local or Regional Retaliatory Tax Information

A. Definitions.

1. "Addition to the rate of tax" means the tax rate determined under subsection (D) to be applied under A.R.S. 20-230(A) and this Section to foreign or alien insurers domiciled in a foreign country or other state that impose local or regional taxes.

2. "Alien insurer" has the meaning prescribed in A.R.S. § 20-201.

3. "Arizona life insurer" means a domestic insurer authorized to issue life insurance policies in this state within the meaning of A.R.S. § 20-254 or annuities within the meaning of A.R.S. § 20-254.01, regardless of whether the insurer is authorized to transact disability insurance in this state.

4. "Department" means the Arizona Department of Insurance.

5. "Director" has the meaning prescribed in A.R.S. § 20-102.

6. "Domestic insurer" has the meaning prescribed in A.R.S. § 20-203.

7. "Foreign insurer" has the meaning prescribed in A.R.S. § 20-204.

8. "Foreign or alien life insurer" means a foreign or alien insurer authorized to issue life insurance policies in this state within the meaning of A.R.S. § 20-254 or annuities within the meaning of A.R.S. § 20-254.01, regardless of whether the insurer is authorized to transact disability insurance in this state.

9. "Local or regional taxes" means any tax, license, or other obligation imposed upon domestic insurers or their producers by any:

a. City, county, or other political subdivision of a foreign country or other state; or

b. Combination of cities, counties, or other political subdivisions of a foreign country or other state.

10. "Other Arizona insurer" means a domestic insurer authorized to transact one or more lines of insurance in this state but not authorized to transact life insurance or annuities in this state.

11. "Other foreign or alien insurer" means a foreign or alien insurer authorized to transact one or more lines of insurance in this state but not authorized to transact life insurance or annuities in this state.

12. "Other state" means any state in the United States, the District of Columbia, and territories or possessions of the United States, excluding Arizona.

13. "Premium Tax and Fees Report," includes the "Survey of Arizona Domestic Insurers" and the "Retaliatory Taxes and Fees Worksheet," and means the form prescribed by the Director and filed annually by insurers under A.R.S. § 20-224.

B. Scope. This Section applies to all foreign, alien, and domestic insurers and to Premium Tax and Fees Reports filed by all insurers.

C. Data to be reported by domestic insurers. As a part of its Premium Tax and Fees Report, each domestic insurer shall file a Survey of Arizona Domestic Insurers that reports the following data for the calendar year covered by the insurer's Premium Tax and Fees Report with respect to each foreign country or other state in which the insurer was required to pay any local or regional taxes:

1. Total local or regional taxes paid; and

2. Total premiums taxed under the premium taxing statute of the foreign country or other state, as reported by the insurer in any premium tax report filed under the laws of the foreign country or other state.

D. Computation of statewide and foreign countrywide additions to the rate of tax. For each foreign country or other state having one or more local or regional taxes on domestic insurers, the Department shall compute on a statewide or foreign countrywide basis an addition to the rate of tax. The Department shall compute the addition to the rate of tax payable by Arizona life insurers separately from the addition to the rate of tax payable by other Arizona insurers. The addition to the rate of tax payable by each category of Arizona domestic insurers shall be the quotient of:

1. The aggregate local or regional taxes reported as paid to the foreign country or other state by domestic insurers in each category for the calendar year covered by the Premium Tax and Fees Report divided by,

2. The aggregate statewide or foreign countrywide premiums taxed under the premium taxing statute of the other state or foreign country reported by domestic insurers in each category for the calendar year covered by the Premium Tax and Fees Report.

E. Publication of additions to the rate of tax. The Department shall publish additions to the rate of tax determined under A.R.S. § 20-230(A) and this Section, based upon the survey information gathered from domestic insurers for the preceding calendar year under subsection (C). The Department shall publish the information annually on the Department web site, on or before November 1, and in the Retaliatory Taxes and Fees Worksheet for the next year's Premium Tax and Fees Report.

F. Foreign and Alien Insurers' Report of the Effect of Local or Regional Taxes. Each foreign or alien insurer domiciled in a foreign country or other state for which the Department publishes an addition to the rate of tax shall include in the "State or Country of Incorporation" column of its Retaliatory Taxes And Fees Worksheet for the calendar year covered by its Premium Tax and Fees Report an amount equal to:

1. The total premiums received in Arizona that would be taxed under the laws of the domiciliary jurisdiction, as reported in the "State or Country of Incorporation" column of its premium tax and fees report multiplied by,

2. The applicable addition to the rate of tax published by the Dep