Mutual Benefit Associations

Del. Code tit. 18, ch. 55
in effect

Del. Code tit. 18, § 5501 Scope of chapter; provisions exclusive.

(a) This chapter applies only to domestic mutual benefit associations as defined in § 5502 of this title. (b) This title shall not apply to such associations unless contained or referred to in this chapter.

Del. Code tit. 18, § 5502 “Mutual benefit association” defined.

As used in this chapter: (1) “Association” means a mutual benefit association as defined in this section. (2) “Mutual benefit association” means a corporation, society, order or association which has no capital stock, which issues certificates of membership providing for payment of benefits in case of sickness, disability or death of its members and which accumulates funds by the collection of fees or dues from its members, at either stated or irregular intervals, with which to discharge its liabilities on its membership certificates and with which to pay the administrative expenses, but fraternal benefit societies as defined in Chapter 62 of this title shall not be deemed to be mutual benefit associations.

Del. Code tit. 18, § 5503 Exempt associations.

A mutual benefit association whose membership is confined to employees or former employees of common carriers engaged in interstate commerce or any association which administers 2 or more such associations is not subject to the provisions of this chapter.

Del. Code tit. 18, § 5504 Incorporation; prerequisites.

The Secretary of State shall not file a certificate of incorporation for any mutual benefit association unless accompanied by a certificate duly signed by the Commissioner setting forth that a deposit of $25,000 has been made with the Commissioner in cash or approved securities, that conformity has been made with all of the requirements of this chapter and that the certificate of incorporation so presented for filing is in substantial compliance with the provisions of the insurance laws of this State. The deposit shall constitute a guaranty fund hereinafter mentioned.

Del. Code tit. 18, § 5505 Certificate of authority required; foreign operations.

(a) No association shall directly or indirectly issue any certificate of membership without being so authorized by a valid and subsisting certificate of authority issued to it by the Commissioner. (b) No association shall issue any certificate of membership in any other state or foreign country unless it holds a valid and subsisting certificate of authority issued to it by the Commissioner.

Del. Code tit. 18, § 5506 Certificate of authority — Application.

(a) No certificate of authority shall be issued to any association unless it files with the Commissioner: (1) A certified copy of its certificate of incorporation or charter; (2) A copy of its constitution and bylaws; (3) A copy of all forms of certificates of membership which it proposes to issue; (4) A certified statement that it has a membership of at least 500 persons or that it has at least 500 bona fide applications for membership accompanied by the initial payments; (5) Such other information respecting its business or affairs as may be required by the Commissioner. (b) At the time of application for certificate of authority the association shall deposit with the Commissioner a guaranty fund as required under § 5509 of this title.

Del. Code tit. 18, § 5507 Certificate of authority — Issuance; renewal.

(a) The Commissioner shall issue a certificate of authority to every mutual benefit association complying with this chapter upon payment of the fee therefor in the amount specified in § 5520 of this title. (b) The certificate of authority shall be valid until the March 1 next following its issuance. So long as the association is qualified therefor the Commissioner shall, upon payment of the fee for renewal specified in § 5520 of this title, annually on March 1 renew the certificate of authority for the ensuing year.

Del. Code tit. 18, § 5508 Certificate of authority — Revocation.

The Commissioner shall forthwith revoke the certificate of authority of an association if, from an examination of the affairs of the association or for other cause and after notice to the association and a hearing before the Commissioner, the Commissioner finds that as to the association any 1 or more of the following grounds exist: (1) It is insolvent, or its assets are not sufficient for carrying on its business; (2) Its condition is such as to render its further proceeding hazardous to its certificate holders or to the public, notwithstanding any special provision granted in its charter or certificate of incorporation; (3) It is fraudulently conducted; or (4) It has violated or failed to comply with this chapter.

Del. Code tit. 18, § 5509 Guaranty fund.

(a) Each mutual benefit association before receiving a certificate of authority shall deposit with the Commissioner $25,000 in cash and/or securities approved by the Commissioner. (b) The deposit shall constitute a guaranty fund and shall remain in trust with the Commissioner to answer any default of the association. (c) While not in default the association may collect the interest, dividends and profits upon the deposited securities and from time to time substitute therefor other securities of equally good character and value, subject to the approval of the Commissioner. (d) The deposit shall not be withdrawn by the association except as hereinafter provided. The Commissioner may make withdrawals from the fund upon the order of any court of record of this State issued upon a final judgment to pay any claim reduced to final judgment by such court in an action by any member or beneficiary based upon a certificate of membership. In the event of such withdrawal the association shall replace the amount withdrawn within 6 months thereafter. (e) If the association determines to discontinue its business, it shall make written application to the Commissioner for withdrawal of its guaranty fund. Within 3 months after receipt of the application, the Commissioner shall determine the financial affairs and condition of the association; and if the Commissioner finds that its books and records are in proper order and that it has no liabilities outstanding, the Commissioner shall cancel the association’s certificate of authority and deliver to the association or its assigns all moneys and/or securities then held in the deposited guaranty fund to the association’s credit.

Del. Code tit. 18, § 5510 Benefit fund.

(a) Every association shall deposit in a bank or trust company approved by the Commissioner a sum not less than 50% of all dues collected by the association or by any agent thereof on all certificates of membership. This shall constitute a benefit fund for the sole purpose of payment of claims arising under certificates of membership, for the payments to the guaranty fund maintained with the Commissioner and for the payment of legal expenses incurred in adjusting and defending claims. (b) If after an examination of the financial affairs of the association the Commissioner determines that 50% of all dues collected is insufficient to properly maintain the benefit fund, the Commissioner may require the association to deposit a larger percentage of its dues to the credit of the benefit fund.

Del. Code tit. 18, § 5511 Investments.

An association may invest its funds in such investments as are eligible for investment of the funds of domestic life insurers under Chapter 13 (Investments) of this title.

Del. Code tit. 18, § 5512 Annual statement.

(a) Each association shall annually on or before March 1 file with the Commissioner its financial statement on forms furnished by the Commissioner and subscribed and sworn to by its president and secretary or in their absence by 2 of its principal officers. The statement shall show the association’s financial condition and total membership at the close of business on the December 31 next preceding. (b) The Commissioner shall annually, in December, furnish to each association then holding a certificate of authority, 2 or more blanks in the form adopted for such annual statements.

Del. Code tit. 18, § 5513 Examination of association — Timing; responsibility.

(a) The Commissioner shall examine the affairs of each association as to its financial condition at least once in 3 years. The commissioner shall also make an examination of any such association whenever the commissioner deems it prudent or advisable to do so. (b) The examination shall be made by the Commissioner personally or by a deputy or other accredited representative of the Commissioner, and all proper charges incurred in making such examination, inclusive of expert assistance, shall be paid by the association examined except that the expenses of such examination shall not exceed $25 per day plus traveling expenses incurred.

Del. Code tit. 18, § 5514 Examination of association — Access to books and records; witnesses.

For the purpose of the examination under § 5513 of this title, the person making the examination shall have free access to all the books and papers of the association relating to its business and to the books and papers of any of its agents and may summon and qualify as witnesses under oath and examine the directors, officers, agents and employees of the association and any other persons in relation to its affairs, transactions and conditions.

Del. Code tit. 18, § 5515 Examination of association — Refusal to permit; revocation of certificate of authority.

The refusal of any association to submit to and provide for the examination under § 5513 of this title or to exhibit its books and records for inspection shall be presumptive evidence that it has violated this chapter, and its certificate of authority shall forthwith be revoked by the Commissioner, and it shall be subject to the penalties prescribed and imposed by this chapter.

Del. Code tit. 18, § 5516 Domestic associations; situs of business; reports and fees.

Any mutual benefit association organized under the general corporation law of this State with its principal office situated in this State shall be regarded as doing business in this State regardless of whether or not its membership is acquired from residents of this State, other states, District of Columbia or territories of the United States and shall make the reports required to the Commissioner and pay all of the fees prescribed in this chapter.

Del. Code tit. 18, § 5517 Certificate of membership — Approval; terms.

(a) No certificate of membership providing for sick, accident and/or death benefits to members or their beneficiaries, as hereinafter provided, shall be issued by any association unless the form of the same shall first be filed with and approved by the Commissioner. (b) A certificate of membership, among other conditions not contrary to the provisions of this chapter, may specify the diseases for which limited benefits may be paid in sickness or death and may also specify the causes of personal injuries, or death therefrom, for which no benefits will be paid. (c) A certificate of membership may also restrict the payment of any benefit for sickness, accident and/or death that occurs within a specified time after the issuance of such certificate to the refund of all dues paid by the members or their beneficiaries less the expense of carrying the same on the books of the association, and the payment of such refund shall fully liquidate all claims of a member against the association by reason of such certificate of membership. (d) A certificate of membership may also limit the time which shall elapse before any benefits are payable and may be paid within reasonable limitations approved by the Commissioner.

Del. Code tit. 18, § 5518 Certificate of membership — Limitations on benefits.

No certificate of membership issued by any association shall provide for death benefits in excess of $100,000 or sickness or accident disability benefits in excess of $1,000 per week. No association shall issue more than 1 of each of the above types of certificates of membership to any 1 person.

Del. Code tit. 18, § 5519 Agreement between association and members; binding effect.

The certificate of membership, the certificate of incorporation and any amendments thereto, the bylaws of the association and the provisions of this chapter shall constitute an agreement between the association as a whole or the membership thereof and the members and shall be binding on their respective beneficiaries.

Del. Code tit. 18, § 5520 Fees; costs; in lieu of provision.

(a) Each association shall pay to the Commissioner fees and costs as follows: (1) For issuance of original certificate of authority $25 (2) For each annual renewal thereof 25 (3) For filing of annual statement 25 (4) For filing, reviewing and approval of the form of certificates of membership, the actual expenses incurred by the Department in connection therewith, as determined by the Commissioner. (b) The fees and costs hereinabove provided shall be for the use of the State and shall be in lieu of all other taxes, levies, assessments or contributions, except taxes on real property.

Del. Code tit. 18, § 5521 Merger; reinsurance; transfers with other associations.

Every association may merge, insure, reinsure or accept the transfer of membership or funds with any other like association under such reasonable rules and regulations for the protection of members as the Commissioner prescribes.

Del. Code tit. 18, § 5522 Dissolution.

Upon the withdrawal of its guaranty fund deposit as provided in § 5509(e) of this title, the directors or governing body of the association shall forthwith cause the association to be dissolved in accordance with the applicable laws of this State and shall file proper evidence of such dissolution with the Commissioner.

Del. Code tit. 18, § 5523 Penalties.

(a) Any corporation, society, order or association which shall organize and/or transact the business of a mutual benefit association in this State contrary to the provisions of this chapter or any mutual benefit association which shall directly or indirectly transact such business in this State without having a valid and unrevoked certificate of authority therefor, agreeable to the provisions of this chapter, shall be fined not more than $1,000. Any officer, manager or agent of such corporation, society, order or association or mutual benefit association wilfully violating or failing to observe or comply with the provisions of this chapter shall be punishable under this section. (b) Any mutual benefit association or any officer, manager or agent thereof neglecting or refusing to comply with or violating this chapter, the penalty for which neglect, refusal or violation is not otherwise specified, shall be fined not more than $200.

Del. Code tit. 18, § 5524 Other provisions applicable.

The following additional chapters of this title shall also apply as to mutual benefit associations to the extent so applicable and not inconsistent with the express provisions of this chapter and the reasonable implications of such express provisions: (1) Chapter 1 (General Definitions and Provisions); (2) Chapter 3 (The Insurance Commissioner); (3) Chapter 13 (Investments); (4) Chapter 15 (Administration of Deposits); (5) Chapter 23 (Unfair Practices in the Insurance Business); (6) Chapter 59 (Rehabilitation and Liquidation).
Source: DE Code (Official Site)URL: https://delcode.delaware.gov/title18/c055/index.htmlFetched: 10/4/2026

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