GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	1 

HOUSE BILL 1193*

Short Title:  Continuing Care Facility Supervision.	(Public)

─────────────────────────────────────── 
Sponsors: Representatives Cocklereece and Dockham.

─────────────────────────────────────── 
Referred to:  Insurance.

─────────────────────────────────────── 

May 16, 1996

A BILL TO BE ENTITLED
AN ACT TO PROVIDE FOR MORE EFFECTIVE FINANCIAL SUPERVISION, REHABILITATION, AND LIQUIDATION PROCEDURES FOR CONTINUING CARE RETIREMENT CENTERS AND TO PROVIDE THAT CONTINUING CARE AGREEMENTS ARE SUBORDINATE TO THE COST OF ADMINISTRATION IN LIQUIDATION AS RECOMMENDED BY THE LEGISLATIVE RESEARCH COMMISSION'S COMMITTEE ON INSURANCE AND INSURANCE-RELATED ISSUES.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 58-30-5(5) reads as rewritten:
"(5)	All persons subject to Articles 64, 65 and 66, or 67 of this Chapter; except to the extent there is a conflict between the provisions of this Article and the provisions of those Articles, in which case those Articles will govern."
Sec. 2.  G.S. 58-30-10(14) reads as rewritten:
"(14) 'Insurer' means any entity licensed under Articles 7, 16, 26, 49, 65, or 67 of this Chapter and any employer that has furnished to the Commissioner satisfactory proof of its financial responsibility under G.S. 97-93(a)(2).  For purposes of this Article, 'insurer' also includes continuing care retirement centers licensed under Article 64 of this Chapter."
Sec. 3.  G.S. 58-64-45 reads as rewritten:
"§ 58-64-45.  Supervision, rehabilitation, and liquidation.
(a)	If, at any time, the Commissioner determines, after notice and an opportunity for the provider to be heard, that:
(1)	A portion of an entrance fee escrow account required to be maintained under this Article has been or is proposed to be released in violation of this Article;
(2)	A provider has been or will be unable, in such a manner as may endanger the ability of the provider, to fully perform its obligations pursuant to contracts for continuing care, to meet the projected financial data previously filed by the provider;
(3)	A provider has failed to maintain the escrow account required under this Article; or
(4)	A facility is bankrupt or insolvent, or in imminent danger of becoming bankrupt or insolvent;
the Commissioner may commence a supervision proceeding pursuant to Article 30 of this Chapter or may apply to the Superior Court of Wake County or to the federal bankruptcy court that may have previously taken jurisdiction over the provider or facility for an order directing the Commissioner or authorizing the Commissioner to rehabilitate or to liquidate a facility in accordance with Article 30 of this Chapter.
(b)	The definition of 'insolvency' or 'insolvent' in G.S. 58-30-10(13) shall not apply to facilities under this Article.  Rules adopted by the Commissioner shall define and describe 'insolvency' or 'hazardous financial condition' for facilities under this Article.  G.S. 58-30-12 shall not apply to facilities under this Article.
(c)	If, at any time, the Court finds, upon petition of the Commissioner or provider, or on its own motion, that the objectives of an order to rehabilitate a facility have been accomplished and that the facility can be returned to the provider's management without further jeopardy to the residents of the facility, the Court may, upon a full report and accounting of the conduct of the facility's affairs during the rehabilitation and of the facility's current financial condition, terminate the rehabilitation and, by order, return the facility and its assets and affairs to the provider's management.
					(f)	In applying for an order to rehabilitate or liquidate a facility, the Commissioner shall give due consideration in the application to the manner in which the welfare of persons who have previously contracted with the provider for continuing care may be best served.
(g)	An order for rehabilitation shall be refused or vacated if the provider posts a bond, by a recognized surety authorized to do business in this State and executed in favor of the Commissioner on behalf of persons who may be found entitled to a refund of entrance fees from the provider or other damages in the event the provider is unable to fulfill its contracts to provide continuing care at the facility, in an amount determined by the Court to be equal to the reserve funding that would otherwise need to be available to fulfill such obligations."
Sec. 4.  G.S. 58-64-60 reads as rewritten:
"§ 58-64-60.  Agreements as preferred claims on liquidation.
In the event of liquidation of a provider, all continuing care agreements executed by the provider shall be deemed preferred claims against all assets owned by the provider; provided, however, such claims shall be subordinate to the liquidator's cost of administration or any secured claim."
Sec. 5.  This act becomes effective October 1, 1996, and applies to continuing care retirement centers that are determined by the Commissioner of Insurance to be financially impaired on or after that date.