§ 3368. Transacting business without certificate of authority prohibited

(a) It shall be unlawful for any insurer to enter into a contract of insurance as an insurer or to transact insurance business in this State as set forth in subsection (b) of this section, without a certificate of authority from the Commissioner of Financial Regulation; provided that this subsection shall not apply to:

(1) The lawful transaction of surplus lines insurance.

(2) The lawful transaction of reinsurance by insurers.

(3) Transactions in this State involving a policy lawfully solicited, written, and delivered outside this State covering only subjects of insurance not resident, located, or expressly to be performed in this State at the time of issuance and which transactions are subsequent to the issuance of such policy.

(4) Transactions in Vermont involving group or blanket insurance and group annuities if:

(A) the master policy was lawfully issued and delivered in a state in which the insurer was authorized to do an insurance business;

(B)(i) no more than 25 of the certificate holders are Vermont residents; or

(ii) the master policy covers one or more certificate holders who reside in Vermont, are employed at a workplace located outside Vermont and have obtained insurance coverage through the workplace;

(C) the person or entity holding the master policy exists primarily for purposes other than to procure insurance, is not a Vermont corporation or resident, and does not have its principal office in Vermont; and

(D) the policy is not offered for sale by an agent or broker licensed in Vermont, offered by mail to a Vermont resident, directly advertised to a Vermont resident, or marketed in Vermont in a similar manner.

An insurer exempted from the requirements of this subsection by the provisions of this subdivision shall not issue or deliver a policy or certificate to a resident of Vermont without including a notice approved by the Commissioner that the policy or certificate is not subject to regulation by Vermont.

(5) Transactions involving contracts issued by a life insurance or annuity company, organized and operated without profit, to any private shareholder or individual exclusively for the purpose of aiding and strengthening educational institutions by issuing insurance and annuity contracts only to or for the benefit of such institutions and individuals engaged in the service of such institution.

(6) Transactions involving any insurance company or underwriter issuing contracts of insurance to industrial insured, or to industrial insureds, or to contracts of insurance issued to an industrial insured. For purposes of this section, an “industrial insured” is:

(A) an insured who procures the insurance of any risk or risks by use of the services of a full-time employee acting as an insurance manager or buyer; and

(B) whose aggregate annual premiums for insurance on all risks total at least $25,000.00; and

(C) has at least 25 full-time employees.

(7) Transactions involving wet marine and transportation insurance covering property in the course of transportation by land, air, or water, to, from, or through this State and including any preparation or storage incidental thereto.

(8) Transactions in this State involving insurance on the property or operations of aircraft or railroads engaged in interstate or foreign commerce.

(9) Transactions in this State involving a policy of insurance or annuity contract issued prior to July 1, 1968, with regard to subdivisions (1) through (7) of this subsection (a) and prior to July 1, 1980, with regard to subdivision (8) of this subsection (a) of this section.

(b) Any of the following acts in this State, effected by mail or otherwise by an unauthorized insurer, shall be included among those deemed to constitute transacting insurance business in this State:

(1) the issuance or delivery of contracts of insurance to residents of this State;

(2) the solicitation of applications for such contracts;

(3) the collection of premium, membership fees, assessments, or other considerations for such contracts; or

(4) the transaction of matters subsequent to the execution of such contracts and arising out of them.

(c) Any insurer that violates subsection (a) of this section shall be required to pay an administrative penalty of not less than $500.00 nor more than $5,000.00 for each violation.

(d) The failure of an insurer to obtain a certificate of authority shall not impair the validity of any act or contract of such insurer and shall not prevent such insurer from defending any action in any court of this State, but no insurer transacting insurance business in this State without a certificate of authority shall be permitted to maintain an action in any court of this State to enforce any right, claim, or demand arising out of the transaction of such business until such insurer shall have obtained a certificate of authority, and with respect to contracts solicited, issued, or delivered after passage of this act an insurer shall not maintain an action in this State upon such contract if, at the time of soliciting, issuing, or delivering such contract, it was doing business in this State without lawful authority. Nor shall an action be maintained in any court of this State by any successor or assignee of such insurer on any such right, claim, or demand originally held by such insurer until a certificate of authority shall have been obtained by such insurer or by an insurer which has acquired all or substantially all of its assets, and with respect to contracts solicited, issued, or delivered after passage of this act, a successor or assignee of such contract shall not maintain an action in this State upon such contract if, at the time of soliciting, issuing, or delivering such contract, the insurer was doing business in this State without lawful authority. (Added 1967, No. 353 (Adj. Sess.), § 1; amended 1979, No. 197 (Adj. Sess.), § 13; 1989, No. 106, § 1, eff. Sept. 1, 1989; 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 167 (Adj. Sess.), § 1; 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)