Legal Notice:The following statutory enactment is presented on this website for informational purposes only. Neither GFMS® nor the fund/association makes any representation as to the accuracy or correctness of the enactment as presented, and neither shall be responsible for or bound by any inaccuracy or lack of correctness thereof. Any interested party should consult with an attorney if he/she has any questions with respect to the foregoing. This disclaimer is not in lieu of, but in addition to, the "Legal Disclaimer" contained at the bottom of this enactment, which is incorporated by reference herein.
Rhode Island Property & Casualty Insurance Guaranty Association Act
27-34-2. - Purpose
27-34-3. - Scope
27-34-4. - Construction
27-34-5. - Definitions
27-34-6. - Creation of the association
27-34-7. - Board of directors
27-34-8. - Powers and duties of the association
27-34-9. - Plan of operation
27-34-10. - Duties and powers of the commissioner
27-34-10.5. - Coordination among guaranty associations
27-34-11. - Effect of paid claims
27-34-11.5. - Net worth exclusion
27-34-12. - Exhaustion of other coverage
27-34-12.5. - Prevention of insolvencies
27-34-14. - Tax exemption
27-34-15. - Recoupment of assessments
27-34-16. - Immunity
27-34-17. - Stay of proceedings
27-34-19. - Prohibition against advertising of membership in fund
1) Life, annuity, health, or disability insurance;
2) Mortgage guaranty, financial guaranty or other forms of insurance offering protection against investment risks. For purposes of this section "financial guaranty insurance" include any insurance under which loss is payable upon proof of occurrence of any of the following events to the damage of an insured claimant or obligee:
(i) Failure of any obligor or obligors on any debt instrument or other monetary obligation, including common or preferred stock, to pay when due the principal, interest, dividend or purchase price of such instrument or obligation, whether failure is the result of a financial default or insolvency and whether or not the obligation is incurred directly or as a guarantor by, or on behalf of, another obligor which has also defaulted;
(ii) Changes in the level of interest rates whether short-term or long-term, or in the difference between interest rates existing in various markets;
(iii) Changes in the rate of exchange of currency, or from the inconvertibility of one currency into another for any reason;
(iv) Changes in the value of specific assets or commodities, or price levels in general;
3) Fidelity or surety bonds, or any other bonding obligations;
4) Credit insurance, vendors' single interest insurance, or collateral protection insurance or any similar insurance protecting the interests of a creditor arising out of a creditor-debtor transaction. For purposes of this section "credit insurance" means insurance on accounts receivable;
5) Insurance of warranties or service contracts including insurance that provides for the repair, replacement or service of goods or property, indemnification for repair, replacement or service for the operational or structural failure of the goods or property due to a defect in materials, workmanship or normal wear and tear, or provides reimbursement for the liability incurred by the issuer of agreements or service contracts that provide such benefits;
6) Title insurance;
7) Ocean marine insurance, except that portion of the marine protection and indemnity insurance covering liability of the insured for personal injury, illness, or death to employees and insurance covering pleasure craft;
8) Any transaction or combination of transactions between a person, including affiliates of the person, and an insurer, including affiliates of such insurer, which involves the transfer of investment or credit risk unaccompanied by transfer of insurance risk;
9) Any insurance provided by or guaranteed by government; or
10) Any transaction or combination of transactions between a protected cell and the general account or another protected cell of a protected cell company organized under the Protected Cell Companies Act, chapter 64 of this title, as those terms are defined in this chapter.
As used in this chapter:
1) "Account" means any one of the three (3) accounts created by § 27-34-6;
2) "Affiliate" means a person, who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another on December 31 of the year immediately preceding the date the insurer becomes an insolvent insurer;
3) "Association" means the Rhode Island insurance guaranty association created under § 27-34-6.
4) "Association similar to the association" means any guaranty association, security fund or other insolvency mechanism that affords protection similar to that of the association. The term shall also include any property and casualty insolvency mechanism that obtains assessments or other contributions from insurers on a pre-insolvency basis.
5) "Assumed claims transaction" means the following:
(i) Policy obligations that have been assumed by the insolvent insurer, prior to the entry of a final order of liquidation, through a merger between the insolvent insurer and another entity obligated under the policies, and for which assumption consideration has been paid to the applicable guaranty associations, if the merged entity is a non-member insurer;
(ii) Policy obligations that have been assumed by the insolvent insurer, prior to the entry of a final order of liquidation, pursuant to a plan, approved by the domestic commissioner of the assuming insurer, which:
A) Transfers the direct policy obligations and future policy renewals from one insurer to another insurer; and
B) For which assumption consideration has been paid to the applicable guaranty associations, if the assumption is from a non-member insurer.
C) For purposes of this section the term non-member insurer also includes a self-insurer, non-admitted insurer and risk retention group; or
(iii) An assumption reinsurance transaction in which all of the following has occurred:
A) The insolvent insurer assumed, prior to the entry of a final order of liquidation, the claim or policy obligations of another insurer or entity obligated under the claims or policies;
B) The assumption of the claim or policy obligations has been approved, if such approval is required, by the appropriate regulatory authorities; and
C) As a result of the assumption, the claim or policy obligations became the direct obligations of the insolvent insurer through a novation of the claims or policies.
6) "Assumption Consideration" shall mean the consideration received by a guaranty association to extend coverage to the policies assumed by a member insurer from a non-member insurer in any assumed claims transaction including liabilities that may have arisen prior to the date of the transaction. The assumption consideration shall be in an amount equal to the amount that would have been paid by the assuming insurer during the three (3) calendar years prior to the effective date of the transaction to the applicable guaranty associations if the business had been written directly by the assuming insurer.
(i) In the event that the amount of the premiums for the three (3) year period cannot be determined, the assumption consideration will be determined by multiplying one hundred thirty percent (130%) against the sum of the unpaid losses, loss adjustment expenses, and incurred but not reported losses, as of the effective date of the assumed claims transaction, and then multiplying such sum times the applicable guaranty association assessment percentage for the calendar year of the transaction.
(ii) The funds paid to a guaranty association shall be allocated in the same manner as any assessments made during the three (3) year period. The guaranty association receiving the assumption consideration shall not be required to recalculate or adjust any assessments levied during the prior three (3) calendar years as a result of receiving the assumption consideration. Assumption consideration paid by an insurer may be recouped in the same manner as other assessments made by a guaranty association.
7) "Claimant" means any person instituting a covered claim; provided that no person who is an affiliate of the insolvent insurer may be a claimant;
8) "Commissioner" means the director of the department of business regulation or his or her designee;
9) "Control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with, or corporate office held by, the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, ten percent (10%) or more of the voting securities of any other person. This presumption may be rebutted by a showing that control does not exist in fact;
10) "Covered claim" means:
(i) An unpaid claim, including one for unearned premiums, submitted by a claimant, which arises out of and is within the coverage and subject to the applicable limits of an insurance policy to which this chapter applies if the insurer becomes an insolvent insurer after the effective date of this chapter and the policy was either issued by the insurer or assumed by the insurer in an assumed claims transaction, and:
A) The claimant or insured is a resident of this state at the time of the insured event; provided, that for entities other than an individual, the residence of a claimant, insured or policyholder is the state in which its principal place of business is located at the time of the insured event; or
B) The claim is a first-party claim for damage to property with a permanent location in this state.
(ii) Except as provided elsewhere in this section, "covered claim" shall not include:
A) Any amount awarded as punitive or exemplary damages;
B) Any amount sought as a return of premium under any retrospective rating plan; or
C) Any amount due any reinsurer, insurer, insurance pool, or underwriting association, health maintenance organization, hospital plan corporation, professional health service corporation or self-insurer as subrogation recoveries, reinsurance recoveries, contribution, indemnification or otherwise. No claim for any amount due any reinsurer, insurer, insurance pool, underwriting association, health maintenance organization, hospital plan corporation, professional health service corporation or self-insurer may be asserted against a person insured under a policy issued by an insolvent insurer other than to the extent the claim exceeds the association obligation limitations set forth in § 27-34-8 of this chapter;
D) Any claims excluded pursuant to § 27-34-11.5 due to the high net worth of an insured;
E) Any first party claims by an insured that is an affiliate of the insolvent insurer;
F) Any fee or other amount relating to goods or services sought by or on behalf of any attorney or other provider of goods or services retained by the insolvent insurer or an insured prior to the date it was determined to be insolvent;
G) Any fee or other amount sought by or on behalf of any attorney or other provider of goods or services retained by any insured or claimant in connection with the assertion or prosecution of any claim, covered or otherwise, against the association;
H) Any claims for interest; or
I) Any claim filed with the association or a liquidator for protection afforded under the insured's policy for incurred-but-not-reported losses.
11) "Insolvent insurer" means an insurer licensed to transact insurance in this state either at the time the policy was issued; when the obligation with respect to the covered claim was assumed under an assumed claims transaction; or when the insured event occurred, and against whom a final order of liquidation has been entered after the effective date of this chapter with a finding of insolvency by a court of competent jurisdiction in the insurer's state of domicile;
12) "Insured" means any named insured, any additional insured, any vendor, lessor or any other party identified as an insured under the policy.
13) "Line of credit" means an irrevocable stand-by commitment whereby the association or member insurer and a qualified financial institution or group of qualified financial institutions enter into a formal and binding contract in which the qualified financial institution or group of qualified financial institutions agree to lend a certain amount of money within a stated period of time.
14) a) "Member insurer" means any person who:
(i) Writes any kind of insurance to which this chapter applies, under § 27-34-3, including the exchange of reciprocal or interinsurance contracts;
(ii) Is licensed to transact insurance in this state; and
b) An insurer shall cease to be a member insurer effective on the day following the termination or expiration of its license to transact the kinds of insurance to which this chapter applies, however, the insurer shall remain liable as a member insurer for any and all obligations, including obligations for assessments levied prior to the termination or expiration of the insurer's license and assessment levied after the termination or expiration, which relate to any insurer that became an insolvent insurer prior to the termination or expiration of the insurer's license.
(iii) Is not otherwise excepted from membership by statute or regulation.
15) "Net direct written premiums" means direct gross premiums written in this state on insurance policies to which this chapter applies, including policy and membership fees, less the following amounts: (i) Return premiums, (ii) Premiums on policies not taken and (iii) Dividends paid or credited to policyholders on that direct business. "Net direct written premiums" does not include premiums on contracts between insurers or reinsurers;
16) "Novation" means that the assumed claim or policy obligations became the direct obligations of the insolvent insurer through consent of the policyholder and that thereafter the ceding insurer or entity initially obligated under the claims or policies is released by the policyholder from performing its claim or policy obligations. Consent may be express or implied based upon the circumstances, notice provided and conduct of the parties.
17) "Ocean Marine insurance" means any form of insurance, regardless of the name, label or marketing designation of the insurance policy, which insures against maritime perils or risks and other related perils or risks, which are usually insured against by traditional marine insurance, such as hull and machinery, marine builders risk, and marine protection and indemnity. Perils and risk insured against include without limitation loss, damage, expense or legal liability of the insured for loss, damage or expense arising out of or incident to ownership, operation, chartering, maintenance, use, repair or construction of any vessel, craft or instrumentality in use in ocean or inland waterways for commercial purposes, including liability of the insured for personal injury, injury, illness or death or for loss or damage to the property of the insured or another person.
18) "Person" means any individual, aggregation of individuals, corporation, partnership, or other entity;
19) "Qualified financial institution" shall have the same meaning as the term in § 27-1.1-3.
20) "Receiver" means liquidator, rehabilitator, conservator or ancillary receiver, as the context requires.
21) "Self-insurer" means a person that covers its liability through a qualified individual or group self-insurance program or any other formal program created for the specific purpose of covering liabilities typically covered by insurance.
22) "Self-insured retention" means:
(i) Any fund or other arrangement to pay claims other than by an insurance company; or
(ii) Any arrangement under which an insurance company has no obligation to pay claims on behalf of an insured if it is not reimbursed by the insured.
b) In approving selections to the board, the commissioner shall consider among other things whether all member insurers are fairly represented.
c) Members of the board of directors may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors.
d) Any board member who is an insurer in receivership shall be terminated as a board member, effective as of the date of the entry of the order of receivership. Any resulting vacancies on the board shall be filled for the remaining period of the term in accordance with the provisions of subsection (a).
e) In the event that a director shall, because of illness, nonattendance at meetings or any other reason, be deemed unable to satisfactorily perform the designated functions as a director by missing three (3) consecutive board meetings, the board of directors may declare the office vacant and the member or director shall be replaced in accordance with the provisions of subsection (a).
f) If the commissioner has reasonable cause to believe that a director failed to disclose a known conflict of interest with his or her duties on the board, failed to take appropriate action based on a known conflict or interest with his or her duties on the board, or has been indicted or charged with a felony, or misdemeanor involving moral turpitude, the commissioner may suspend that director pending the outcome of an investigation or hearing by the commissioner or the conclusion of any criminal proceedings. A company elected to the board may replace a suspended director prior to the completion of an investigation, hearing or criminal proceeding. In the event that the allegations are substantiated at the conclusion of an investigation, hearing or criminal proceeding, the office shall be declared vacant and the member or director shall be replaced in accordance with the provisions of subsection (a).
a) The association shall:
1) (i) Be obligated to pay covered claims existing prior to the order of liquidation; arising within sixty (60) days after the order of liquidation or before the policy expiration date if less than sixty (60) days after the order of liquidation or before the insured replaces the policy or causes its cancellation if the insured does so within sixty (60) days of the order of liquidation. The obligations shall be satisfied by paying to the claimant an amount as follows:
A) The full amount of a covered claim for benefits under a workers' compensation insurance coverage;
B) An amount not exceeding ten thousand dollars ($10,000), per policy for a covered claim for the return of unearned premium;
C) An amount not exceeding five hundred thousand dollars ($500,000), per claimant for all other covered claims for insolvencies occurring on or after January 1, 2008 and an amount not exceeding three hundred thousand dollars ($300,000) per claimant for all other covered claims for insolvencies occurring prior to January 1, 2008.
(ii) In no event shall the association be obligated to pay a claimant an amount in excess of the obligation of the insolvent insurer under the policy or coverage from which the claim arises. Notwithstanding any other provision of this chapter, a covered claim shall not include a claim filed with the guaranty association after the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer. For the purpose of filing a claim under this subsection, notice of claims to the liquidator of the insolvent insurer shall be deemed notice to the association or its agent and a list of claims shall be periodically submitted to the association or association similar to the association in another state by the liquidator;
(iii) Any obligation of the association to defend an insured shall cease upon the association's payment or tender of an amount equal to the lesser of the association's covered claim obligation limit or the applicable policy limit.
2) Be deemed the insurer to the extent of its obligation on the covered claims and to that extent, subject to the limitation provided in this chapter, shall have all rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent, including, but not limited to, the right to pursue and retain salvage and subrogation recoverable on covered claim obligations to the extent paid by the association. The association shall not be deemed the insolvent insurer for the purpose of conferring jurisdiction;
3) Allocate claims paid and expenses incurred among the three (3) accounts separately, and assess member insurers separately for each account amounts necessary to pay the obligations of the association under subdivision (a)(1) of this subsection subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency and other expenses authorized by this chapter. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment on the kinds of insurance in the account bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment on the kinds of insurance in the account. Each member insurer shall be notified of the assessment not later than thirty (30) days before it is due.
A member insurer may not be assessed in any one year on any account an amount greater than two percent (2%) of that member insurer's net direct written premiums for the calendar year preceding the assessment on the kinds of insurance in the account. If the maximum assessment, together with the other assets of the association in any account, does not provide in any one year in any account an amount sufficient to make all necessary payments from that account, each member insurer shall be assessed the additional amount that must be obtained to make all necessary payments of the underfunded account from the other two accounts, subject to the same limitation of two percent (2%) of that member insurer's net direct written premiums for the calendar year preceding the assessment on the kinds of insurance in the account. The additional assessments shall be considered loans by and between the separate accounts. Amounts borrowed under this subsection shall be paid back to the separate accounts from which they were borrowed, out of assets, including, but not limited to, existing and future assessments in the account receiving the loan. An interest charge shall be levied on all amounts borrowed under this subsection based on the average prime rate of interest for each year the money remains unpaid. If the amounts borrowed remain unpaid on the seventh yearly anniversary as a result of the inability of the borrowing account to make repayment, then the amount borrowed and interest which is not repaid, starting with the principal and interest of the first year, shall be considered uncollectible. The funds available shall be prorated and the unpaid portion shall be paid as soon after this as funds become available. The association may exempt or defer, in whole or in part, the assessment of any member insurer if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. However, during the period of deferment, no dividends shall be paid to shareholders or policyholders. Deferred assessments shall be paid when the payment will not reduce capital or surplus below required minimums. Payments shall be refunded to those companies receiving larger assessments by virtue of the deferment, or, at the election of any company, credited against future assessments.
4) Investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims. The association shall pay claims in any order that it may deem reasonable, including the payment of claims as they are received from the claimants or in groups or categories of claims. The association shall have the right to appoint and to direct legal counsel retained under liability insurance policies for the defense of covered claims;
5) Notify claimants in this state as deemed necessary by the commissioner and upon the commissioner's request, to the extent records are available to the association;
6) (i) Have the right to review and contest as set forth in this subsection settlements, releases, compromises, waivers and judgments to which the insolvent insurer or its insureds were parties prior to the entry of the order of liquidation. In an action to enforce settlements, releases and judgments to which the insolvent insurer or its insureds were parties prior to the entry of the order of liquidation, the association shall have the right to assert the following defenses, in addition to the defenses available to the insurer:
A) The association is not bound by a settlement, release, compromise or waiver executed by an insured or the insurer, or any judgment entered against an insured or the insurer by consent or through a failure to exhaust all appeals, if the settlement, release, compromise, waiver or judgment was:
(I) Executed or entered into within one hundred twenty (120) days prior to the entry of an order of liquidation, and the insured or the insurer did not use reasonable care in entering into the settlement, release, compromise, waiver or judgment, or did not pursue all reasonable appeals of an adverse judgment; or
(II) Executed by or taken against an insured or the insurer based on default, fraud, collusion or the insurer's failure to defend.
B) If a court of competent jurisdiction finds that the association is not bound by a settlement, release, compromise, waiver or judgment for the reasons described in subparagraph (i)(A), the settlement, release, compromise, waiver or judgment shall be set aside, and the association shall be permitted to defend any covered claim on the merits. The settlement, release, compromise, waiver or judgment may not be considered as evidence of liability or damages in connection with any claim brought against the association or any other party under this chapter.
C) The association shall have the right to assert any statutory defenses or rights of offset against any settlement, release, compromise or waiver executed by an insured or the insurer, or any judgment taken against the insured or the insurer.
(ii) As to any covered claims arising from a judgment under any decision, verdict or finding based on the default of the insolvent insurer or its failure to defend, the association, either on its own behalf or on behalf of an insured may apply to have the judgment, order, decision, verdict or finding set aside by the same court or administrator that entered the judgment, order, decision, verdict or finding and shall be permitted to defend the claim on the merits.
7) Handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the commissioner, but the designation may be declined by a member insurer;
8) Reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this chapter;
9) (i) The association shall obtain a line of credit for the benefit of each account, in an amount not to exceed the applicable maximum to ensure the immediate availability of funds for purposes of future claims and expenses attributable to an insurer insolvency in that account. The line of credit shall be obtained from qualified financial institutions. The line of credit shall provide for a thirty (30) day notice of termination or nonrenewal to the commissioner and the association and shall provide funding to the association within three (3) business days of receipt of written notice from the commissioner of an insolvent insurer in that account. Each member insurer upon receipt of notice from the association shall make immediate payment for its proportionate share of the amount borrowed based on the premium for the preceding calendar year. The maximum line of credit or preinsolvency assessment for each account shall be subject to prior review and approval by the commissioner at the time of origination.
(ii) If the association cannot obtain a line of credit, the association may obtain an irrevocable line of credit agreement from each member insurer in an amount not to exceed the member insurer's maximum assessment pursuant to subdivision (3) of this subsection to ensure the immediate availability of funds for the purposes of future claims and expenses attributable to an insurer insolvency;
Any amount drawn under any line of credit shall be considered a payment toward the member insurer's assessment provided for in subdivision (3) of this subsection;
The member insurer shall provide funding to the association under the line of credit within three (3) business days of receipt of a written request from the association for a draw-down under the line of credit;
The line of credit agreement shall be subject to prior review and approval by the commissioner at the time of origination and any subsequent renewal. It shall include any commercially reasonable provisions the association or the commissioner may deem advisable, including a provision that the line of credit is irrevocable or for a stated period of time and provides for thirty (30) day notice to the association and the commissioner that the line is being terminated or not renewed;
(iii) If a line of credit is not given as provided for in this section, the member insurer shall be responsible for the payment of an assessment of up to the member's proportionate share of the applicable maximum as set forth in this subsection which shall be paid into a pre-insolvency assessment fund in each account.
10) Submit, not later than ninety (90) days after the end of the association's fiscal year, a financial report for the preceding fiscal year in a form approved by the commissioner.
b) The association may:
1) Employ or retain persons as are necessary to handle claims and perform other duties of the association;
2) Borrow funds necessary to effect the purposes of this chapter in accordance with the plan of operation;
3) Sue or be sued;
4) Negotiate and become a party to any contracts necessary to carry out the purpose of this chapter;
5) Perform any other acts necessary or proper to effectuate the purpose of this chapter; and
6) Refund to the member insurers in proportion to the contribution of each member insurer to that account that amount by which the assets of the account exceed the liabilities, if, at the end of any calendar year, the board of directors finds that the assets of the association in any account exceed the liabilities of that account as estimated by the board of directors for the coming year.
c) Suits involving the association:
1) Except for actions by the receiver, all actions relating to or arising out of this chapter against the association shall be brought in the courts in this state. The courts shall have exclusive jurisdiction over all actions relating to or arising out of this chapter against the association.
2) The exclusive venue in any action by or against the association is in the Providence county superior court. The association may, at its option, waive this venue as to specific actions.
a) The association shall submit to the commissioner a plan of operation and any amendments to the plan of operation necessary or suitable to assure the fair, reasonable, and equitable administration of the association. The plan of operation and amendments shall become effective upon approval in writing by the commissioner.
b) If the association fails to submit a suitable plan of operation or suitable amendments to the plan, the commissioner shall, after notice and hearing, adopt and promulgate any reasonable rules necessary or advisable to effectuate the provisions of this chapter. The rules shall continue in force until modified by the commissioner or superseded by a plan or amendments to it submitted by the association and approved by the commissioner.
c) All member insurers shall comply with the plan of operation.
d) The plan of operation shall:
1) Establish the procedures where all of the powers and duties of the fund under § 27-34-8 will be performed;
2) Establish the procedures for handling the assets of the association;
3) Require that written procedures be established for the disposition of liquidating dividends or other monies received from the estate of the insolvent insurer;
4) Require that written procedures be established to designate the amount and method of reimbursing members of the board of directors under § 27-34-7;
5) Establish procedures by which claims may be filed with the association and establish acceptable forms of proof of covered claims.
6) Establish regular places and times for meetings of the board of directors;
7) Require that written procedures be established for records to be kept of all financial transactions of the association, its agents and the board of directors;
8) Provide that any member insurer aggrieved by any final action or decision of the association may appeal to the commissioner within thirty (30) days after the action or decision;
9) Establish the procedures under which selections for the board of directors will be submitted to the commissioner;
10) Contain additional provisions necessary or proper for the execution of the powers and duties of the association.
e) The plan of operation may provide that any or all powers and duties of the association, except those under §§ 27-34-8(a)(3) and 27-34-8(b)(2), are delegated to a corporation, association, similar to the association or other organization which performs or will perform functions similar to those of the association, or its equivalent, in two or more states. The corporation, association, similar to the association or organization shall be reimbursed as a servicing facility would be reimbursed and shall be paid for its performance of any other functions of the association. A delegation under this subsection shall take effect only with the approval of both the board of directors and the commissioner, and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this chapter.
a) The commissioner shall:
1) Notify the association of the existence of an insolvent insurer not later than three (3) days after he or she receives notice of the determination of the insolvency. The association shall be entitled to a copy of a complaint seeking an order of liquidation with a finding of insolvency against a member company at the same time that the complaint is filed with a court of competent jurisdiction; and
2) Provide the association with a statement of the net direct written premiums of each member insurer upon request of the board of directors.
b) The commissioner may:
1) Suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer that fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the commissioner may levy a fine on a member insurer that fails to pay an assessment when due. The fine shall not exceed five percent (5%) of the unpaid assessment per month, except that a fine not be less than one hundred dollars ($100) per month;
2) Revoke the designation of any servicing facility if he or she finds claims are being handled unsatisfactorily; and
3) Examine, audit, or otherwise regulate the association.
c) A final action or order of the commissioner under this chapter shall be subject to judicial review in a court of competent jurisdiction.
a) The association may join one or more organizations of other state associations of similar purposes, to further the purposes and administer the powers and duties of the association. The association may designate one or more of these organizations to act as a liaison for the association and, to the extent the association authorizes, to bind the association in agreements or settlements with receivers of insolvent insurance companies or their designated representatives.
b) The association, in cooperation with other obligated or potentially obligated guaranty associations, or their designated representatives, shall make all reasonable efforts to coordinate and cooperate with receivers, or their designated representatives, in the most efficient and uniform manner, including the use of uniform data standards as promulgated or approved by the national association of insurance commissioners.
a) Any person recovering under this chapter shall be deemed to have assigned any rights under the policy to the association to the extent of his or her recovery from the association. Every insured or claimant seeking the protection of this chapter shall cooperate with the association to the same extent as the person would have been required to cooperate with the insolvent insurer. The association shall have no cause of action against the insured of the insolvent insurer for sums it has paid out except any causes of action as the insolvent insurer would have had if the sums had been paid by the insolvent insurer and except as provided in subsection (b) of this section and § 27-34-11.5. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the association shall not operate to reduce the liability of the insureds to the receiver, liquidator or statutory successor for unpaid assessments.
b) The association shall have the right to recover from a person who is an affiliate of the insolvent insurer all amounts paid by the association on behalf of that person pursuant to the chapter, whether for indemnity, defense or otherwise.
c) The receiver, liquidator, or statutory successor of an insolvent insurer shall be granted the utmost deference with regard to settlements of covered claims by the fund or a similar organization in another state.
d) The association and any association similar to the association in another state shall be entitled to file a claim in the liquidation of an insolvent insurer for any amounts paid by them on covered claim obligations as determined under this chapter or similar laws in other states and shall receive dividends and other distributions at the priority set forth in § 27-14.3-46.
e) The association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the association and estimates of anticipated claims on the association which shall preserve the rights of the association against the assets of the insolvent insurer.
a) For purposes of this section "high net worth insured" shall mean any insured, excluding state and local governments, whose net worth exceeds fifty million dollars ($50,000,000) on December 31 of the year prior to the year in which the insurer becomes an insolvent insurer; provided that an insured's net worth on that date shall be deemed to include the aggregate net worth of the insured and all of its subsidiaries and affiliates as calculated on a consolidated basis.
b) 1) The association shall not be obligated to pay any first-party claims by a high net worth insured.
2) The association shall have the right to recover from the high net worth insured all amounts paid by the association to or on behalf of such insured, whether for indemnity, defense or otherwise.
c) The association shall not be obligated to pay any claim that would otherwise be a covered claim that is an obligation to or on behalf of a person who has a net worth greater than that allowed by the insurance guaranty association law of the state of residence of the claimant at the time specified by that state's applicable law, and which association has denied coverage to that claimant on that basis.
d) The association shall establish reasonable procedures subject to the approval of the commissioner for requesting financial information from insureds on a confidential basis for purposes of applying this section, provided that the financial information may be shared with any other association similar to the association and the liquidator for the insolvent insurer on the same confidential basis. Any request to an insured seeking financial information must advise the insured of the consequences of failing to provide the financial information. If an insured refuses to provide the requested financial information where it is requested and available, the association may, until such time as the information is provided, provisionally deem the insured to be a high net worth insured for the purpose of denying a claim under subsection (b) of this section.
(e) In any lawsuit contesting the applicability of this section where the insured has refused to provide financial information under the procedure established pursuant to subsection (d) of this section, the insured shall bear the burden of proof concerning its net worth at the relevant time. If the insured fails to prove that its net worth at the relevant time was less than the applicable amount, the court shall award the association its full costs, expenses and reasonable attorney's fees in contesting the claim.
a) 1) Any person having a claim against an insurer, shall be required first to exhaust all coverage provided by any other policy, including the right to a defense under the other policy, if the claim under the other policy arises from the same facts, injury or loss that gave rise to the covered claim against the association. The requirement to exhaust shall apply without regard to whether the other insurance policy is a policy written by a member insurer. However, no person shall be required to exhaust any right under the policy of an insolvent insurer or any right under a life insurance policy.
2) Any amount payable on a covered claim under this chapter shall be reduced by the full applicable limits stated in the other insurance policy, or by the amount of the recovery under the other insurance policy as provided herein. The association shall receive a full credit for the stated limits, unless the claimant demonstrates that the claimant used reasonable efforts to exhaust all coverage and limits applicable under the other insurance policy. If the claimant demonstrates that the claimant used reasonable efforts to exhaust all coverage and limits applicable under the other insurance policy, or if there are no applicable stated limits under the policy, the association shall receive a full credit for the total recovery.
(i) The credit shall be deducted from the lesser of:
A) The association's covered claim limit;
B) The amount of the judgment or settlement of the claim; or
C) The policy limits of the policy of the insolvent insurer.
(ii) In no case, however, shall the obligation of the association exceed the covered claim limit embodied in § 27-34-8.
3) Except to the extent that the claimant has a contractual right to claim defense under an insurance policy issued by another insurer, nothing in this section shall relieve the association of the duty to defend under the policy issued by the insolvent insurer. This duty shall, however, be limited by any other limitation on the duty to defend embodied in this chapter.
4) A claim under a policy providing liability coverage to a person who may be jointly and severally liable as a joint tortfeasor with the person covered under the policy of the insolvent insurer that gives rise to the covered claim shall be considered to be a claim arising from the same facts, injury or loss that gave rise to the covered claim against the association.
5) For purposes of this section, a claim under an insurance policy other than a life insurance policy shall include, but is not limited to:
(i) A claim against a health maintenance organization, a hospital plan corporation, a nonprofit hospital, medical or dental service corporation or disability insurance policy; and
(ii) Any amount payable by or on behalf of a self-insurer.
6) The person insured by the insolvent insurer's policy may not be pursued by a third-party claimant for any amount paid to the third-party by which the association's obligation is reduced by the application of this section.
b) Any person having a claim which may be recovered from more than one insurance guaranty association or its equivalent shall seek recovery first from the association or its equivalent of the place of residence of the insured, except that if it is a first party claim for damage to property with a permanent location the person shall seek recovery first from the association of the location of the property. If it is a workers' compensation claim, the person shall seek recovery first from the association of the residence of the claimant. Any recovery under this chapter shall be reduced by the amount of recovery from another insurance guaranty association or its equivalent.
To aid in the detection and prevention of insurer insolvencies:
1) The board of directors may, upon a majority vote, make recommendations to the commissioner on matters generally related to improving or enhancing regulation for solvency.
2) At the conclusion of any domestic insurer insolvency in which the association was obligated to pay covered claims, the board of directors may, upon a majority vote, prepare a report on the history and causes of the insolvency, based on the information available to the association and submit the report to the commissioner.
3) Reports and recommendations provided under this section shall not be considered public documents.
The rates and premiums charged for insurance policies to which this section applies shall include amounts sufficient to recoup a sum equal to the amounts paid to the association by the member insurer less any amounts returned to the member insurer by the association. Rates shall not be deemed excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer.
There shall be no liability on the part of, and no cause of action of any nature shall arise against, any member insurer, the association, or its agents or employees, the board of directors, or any persons serving as an alternate or substitute representative of any director, or the commissioner or his or her representatives for any action taken or any failure to act by them in the performance of their powers and duties under this chapter.
All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in this state shall, subject to waiver by the association in specific cases involving covered claims, be stayed for six (6) months and such additional time as may be determined by the court from the date the insolvency is determined or an ancillary proceeding is instituted in this state, whichever is later, to permit proper defense by the association of all pending causes of action. The liquidator, receiver, or statutory successor of an insolvent insurer covered by this chapter shall permit access by the board or its authorized representative to such of the insolvent insurer's records that are necessary for the board in carrying out its functions under this chapter with regard to covered claims. In addition, the liquidator, receiver, or statutory successor shall provide the board or its representative with copies of the records upon the request by the board and at the expense of the board.
No person shall make, publish, or circulate, or cause to be made, published, or circulated, any statement that uses the existence of the association for the purposes of sale, solicitation, or inducement to purchase any form of insurance within the scope of this chapter.