2001 Legislation
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HOUSE BILL NO. 161 – Insurance guaranty assn, accounts


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Daily Data Tracking History

H0161...........................................................by BUSINESS
INSURANCE GUARANTY ASSOCIATION - Amends existing law to delete the
requirement that the insurance guaranty association maintain three separate
accounts; to provide for one account; and to delete the requirement to
allocate claims and assessments by the Idaho Insurance Guaranty Association
among three accounts.
02/07    House intro - 1st rdg - to printing
02/08    Rpt prt - to Bus
03/02    Rpt out - rec d/p - to 2nd rdg
03/05    2nd rdg - to 3rd rdg
03/07    3rd rdg - PASSED - 62-0-8
      AYES -- Barraclough, Barrett, Bedke, Bell, Bieter, Black, Boe, Bolz,
      Bradford, Bruneel, Callister, Campbell, Chase, Clark, Collins, Crow,
      Cuddy, Deal, Denney, Ellis, Ellsworth, Eskridge, Field(13), Gagner,
      Gould, Hadley, Hammond, Harwood, Henbest, Higgins, Hornbeck, Jaquet,
      Jones, Kellogg, Kendell, Kunz, Lake, Langford, Loertscher, Mader,
      Marley, Meyer, Mortensen, Pearce, Pischner, Pomeroy, Raybould,
      Ridinger, Roberts, Robison, Schaefer, Sellman, Shepherd, Smith,
      Smylie, Stevenson, Stone, Tilman, Trail, Wheeler, Wood, Young
      NAYS -- None
      Absent and excused -- Field(20), McKague, Montgomery, Moss, Moyle,
      Sali, Swan(Hansen), Mr. Speaker
    Floor Sponsor -- Chase
    Title apvd - to Senate
03/08    Senate intro - 1st rdg - to Com/HuRes
03/16    Rpt out - w/o rec - to 2nd rdg
03/19    2nd rdg - to 3rd rdg
03/20    3rd rdg - PASSED - 35-0-0
      AYES -- Andreason, Boatright, Branch, Brandt, Bunderson, Burtenshaw,
      Cameron, Danielson, Darrington, Davis, Deide, Dunklin, Frasure,
      Geddes, Goedde, Hawkins, Ingram, Ipsen, Keough, King-Barrutia, Lee,
      Lodge, Noh, Richardson, Risch, Sandy, Schroeder, Sims, Sorensen,
      Stegner, Stennett, Thorne, Wheeler, Whitworth, Williams,
      NAYS -- None
      Absent and excused -- None
    Floor Sponsor -- Andreason
    Title apvd - to House
03/21    To enrol
03/22    Rpt enrol - Sp signed - Pres signed - to Gov
03/23    Governor signed
         Session Law Chapter 155
         Effective: 07/01/01

Bill Text

  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-sixth Legislature                  First Regular Session - 2001
                              IN THE HOUSE OF REPRESENTATIVES
                                     HOUSE BILL NO. 161
                                   BY BUSINESS COMMITTEE
  1                                        AN ACT
 10    Be It Enacted by the Legislature of the State of Idaho:
 11        SECTION  1.  That  Section 41-3605, Idaho Code, be, and the same is hereby
 12    amended to read as follows:
 13        41-3605.  DEFINITIONS. As used in this act:
 14        (1)  "Account" means any one (1) of the three (3) accounts created by sec-
 15    tion 41-3606, Idaho Code.
 16        (2)  "Affiliate" means a person who directly, or indirectly,  through  one
 17    (1) or more intermediaries controls, is controlled by, or is under common con-
 18    trol  with  an insolvent insurer on December 31 of the year next preceding the
 19    date the insurer becomes an insolvent insurer.
 20        (3)  "Association" means the Idaho insurance guaranty association  created
 21    under section 41-3606, Idaho Code.
 22        (4)  "Claimant" means any insured making a first party claim or any person
 23    instituting  a liability claim, provided that no person who is an affiliate of
 24    the insolvent insurer may be a claimant.
 25        (5)  "Director" means the director of the department of insurance of  this
 26    state.
 27        (6)  "Control"  means  the possession, direct or indirect, of the power to
 28    direct or cause the direction of the management  and  policies  of  a  person,
 29    whether  through  the ownership of voting securities, by contract other than a
 30    commercial contract for goods or nonmanagement services, or otherwise,  unless
 31    the  power is the result of an official position with or corporate office held
 32    by the person. Control shall be presumed to exist if any person,  directly  or
 33    indirectly,  owns,  controls,  holds  with the power to vote, or holds proxies
 34    representing, ten percent (10%) or more of the voting securities of any  other
 35    person.  This  presumption  may be rebutted by a showing that control does not
 36    exist in fact.
 37        (7)  "Covered claim" means an unpaid claim,  including  one  for  unearned
 38    premiums submitted by a claimant, which arises out of and is within the cover-
 39    age  and  is  subject to the applicable limits of an insurance policy to which
 40    this act applies issued by an insurer, if such insurer  becomes  an  insolvent
 41    insurer after the effective date of this act and:
 42        (a)  tThe  claimant  or insured is a resident of this state at the time of
 43        the insured event, provided that for entities other  than  an  individual,
  1        the  residence  of  a  claimant,  insured, or policyholder is the state in
  2        which its principal place of business  is  located  at  the  time  of  the
  3        insured event; or
  4        (b)  tThe  claim is a first party claim for damage to property with a per-
  5        manent location in this state.
  6        "Covered claim" shall not include any amount awarded as punitive or  exem-
  7    plary  damages;  any amount sought as a return of premium under any retrospec-
  8    tive rating plan; any first party claims by an insured which is  an  affiliate
  9    of  the insolvent insurer; or any amount due any reinsurer, insurer, insurance
 10    pool, or underwriting  association,  as  subrogation  recoveries,  reinsurance
 11    recoveries,  contribution,  indemnification  or  otherwise.  No  claim for any
 12    amount due any reinsurer, insurer, insurance pool or underwriting  association
 13    may be asserted against a person insured under a policy issued by an insolvent
 14    insurer other that than to the extent such claim exceeds the association obli-
 15    gation limitations set forth in section 41-3608, Idaho Code.
 16        (8)  "Insolvent insurer" means an insurer holding a certificate of author-
 17    ity  issued  by the director to transact insurance in this state either at the
 18    time the policy was issued or when the insured event occurred and against whom
 19    a final order of liquidation has been entered after the effective date of this
 20    act with a finding of insolvency by a court of competent jurisdiction  in  the
 21    insurer's state of domicile.
 22        (9)  "Member insurer" means any person who:
 23        (a)  wWrites any kind of insurance to which this act applies under section
 24        41-3603,  Idaho  Code, including the exchange of reciprocal or interinsur-
 25        ance contracts; and
 26        (b)  iIs licensed to transact insurance in this state,  except  assessable
 27        mutual  companies. An insurer shall cease to be a member insurer effective
 28        on the day following the termination  or  expiration  of  its  license  to
 29        transact  the  kinds  of insurance to which this act applies, however, the
 30        insurer shall remain liable as a member insurer for any  and  all  obliga-
 31        tions,  including obligations for assessments levied prior to the termina-
 32        tion or expiration of the insurer's license and assessments  levied  after
 33        the  termination  or expiration, which relate to any insurer which becomes
 34        an insolvent insurer  prior  to  the  termination  or  expiration  of  the
 35        insurer's license.
 36        (10) "Net  direct written premiums" means direct gross premiums written in
 37    this state on insurance policies to which this act applies, less  return  pre-
 38    miums  thereon  and dividends paid or credited to policyholders on such direct
 39    business. "Net direct written premiums" does not include premiums on contracts
 40    between insurers or reinsurers.
 41        (11) "Ocean marine insurance" includes any form of  insurance,  regardless
 42    of  the  name,  label  or marketing designation of the insurance policy, which
 43    insures against maritime perils or risks and other related  perils  or  risks,
 44    which  are  usually  insured  against by traditional marine insurance, such as
 45    hull and machinery, marine builders risk, and marine protection and indemnity.
 46    Such perils and risks insured against include, without limitation, loss,  dam-
 47    age,  expense  or  legal  liability of the insured for loss, damage or expense
 48    arising out of or incident to ownership, operation,  chartering,  maintenance,
 49    use,  repair or construction of any vessel, craft or instrumentality in use in
 50    ocean or inland waterways for commercial purposes, including liability of  the
 51    insured  for  personal  injury,  illness or death or for loss or damage to the
 52    property of the insured or another person.
 53        (12) "Person" means any individual, corporation, partnership,  association
 54    or voluntary organization.
 55        (13) "Warranty  insurance"  includes  a contract under which one (1) other
  1    than a manufacturer, builder, seller or lessor of the subject property  under-
  2    takes  to  perform  or  provide, for a fixed term and consideration, repair or
  3    replacement service or indemnification therefor for the operational or  struc-
  4    tural  failure  of specified real or personal property or property components.
  5    Warranty insurance includes, but is not limited to, automobile guaranty insur-
  6    ance.
  7        SECTION 2.  That Section 41-3606, Idaho Code, be, and the same  is  hereby
  8    amended to read as follows:
 10    BERS -- PURPOSES. There is created a nonprofit unincorporated legal entity  to
 11    be  known as the Idaho Iinsurance Gguaranty Aassociation. All insurers defined
 12    as member insurers shall be and remain members of the association as a  condi-
 13    tion  of  their authority to transact insurance in this state. The association
 14    shall perform its functions under a plan of operation established and approved
 15    under section 41-3609, Idaho Code, and shall exercise  its  powers  through  a
 16    board of directors established under section 41-3607, Idaho Code. For purposes
 17    of  administration and assessment, the association shall be divided into three
 18    (3) separate accounts: (a) the workmen's compensation insurance  account;  (b)
 19    the  automobile insurance account; and (c) the account for all other insurance
 20    to which this act applies maintain one (1) account. Any accounts in  existence
 21    on June 30, 2001, shall be consolidated into one (1) account.
 22        SECTION  3.  That  Section 41-3608, Idaho Code, be, and the same is hereby
 23    amended to read as follows:
 24        41-3608.  OBLIGATIONS AND  POWERS  OF  ASSOCIATION.  (1)  The  association
 25    shall:
 26        (a)  Be  obligated  to  pay  covered claims existing prior to the order of
 27        liquidation arising within thirty (30) days after the  order  of  liquida-
 28        tion,  or  before the policy expiration date if less than thirty (30) days
 29        after the order of liquidation, or before the insured replaces the  policy
 30        or  causes  its cancellation, if he does so within thirty (30) days of the
 31        order of liquidation. Such obligation shall be satisfied by paying to  the
 32        claimant an amount as follows:
 33             (i)   The  full  amount  of  a  covered  claim  for  benefits under a
 34             worker's compensation insurance coverage;
 35             (ii)  An amount not exceeding ten thousand dollars ($10,000) per pol-
 36             icy for covered claim for the return of unearned premium;
 37             (iii) An  amount  not  exceeding  three  hundred   thousand   dollars
 38             ($300,000) per claim for all other covered claims.
 39        (b)  In  no  event shall the association be obligated to pay a claimant an
 40        amount in excess of the obligation of the insolvent insurer under the pol-
 41        icy or coverage from which the claim arises.
 42             Notwithstanding any other provision of this chapter, a covered  claim
 43        shall  not  include any claim filed with the association after the earlier
 44        of: (i) eighteen (18) months after the date of the order  of  liquidation,
 45        or  (ii)  the final date set by the court for the filing of claims against
 46        the liquidator or receiver of an insolvent insurer and shall  not  include
 47        any  claim  filed  with  the  association  or  a liquidator for protection
 48        afforded under the insured policy  for  incurred-but-not-reported  losses.
 49        Any  obligation  of  the association to defend an insured shall cease upon
 50        the association's payment by settlement releasing  the  insured  or  on  a
 51        judgment  of  an  amount  equal to the lesser of the association's covered
  1        claim obligation limit or the applicable policy limit.
  2        (c)  Be deemed the insurer to the extent of its obligation on the  covered
  3        claims  and  to such extent shall have all rights, duties, and obligations
  4        of the insolvent insurer as  if  the  insurer  had  not  become  insolvent
  5        including, but not limited to, the right to  pursue and retain salvage and
  6        subrogation recoverable on paid covered claim obligations.
  7        (d)  Allocate  claims  paid  and  expenses  incurred  among  the three (3)
  8        accounts separately, and  aAssess  member  insurers  separately  for  each
  9        account  amounts necessary to pay the obligations of the association under
 10        paragraph (a) of this subsection subsequent to an insolvency, the expenses
 11        of handling covered claims subsequent to an insolvency and other  expenses
 12        authorized  by  this  act  chapter. The assessments of each member insurer
 13        shall be in the proportion that the net direct  written  premiums  of  the
 14        member insurer for the calendar year preceding the assessment on the kinds
 15        of  insurance  in  covered  by the account bears to the net direct written
 16        premiums of all member  insurers  for  the  calendar  year  preceding  the
 17        assessment  on the kinds of insurance in covered by the account. Each mem-
 18        ber insurer shall be notified of the assessment not later than thirty (30)
 19        days before it is due. No member insurer may be assessed in  any  one  (1)
 20        year  on  any  account an amount greater than one per cent percent (1%) of
 21        that member insurer's net direct written premiums for  the  calendar  year
 22        preceding the assessment. on the kinds of insurance in the account. If the
 23        maximum  assessment,  together with the other assets of the association in
 24        any the account, does not provide in any one (1) year in  any  account  an
 25        amount  sufficient  to make all necessary payments, from that account, the
 26        funds available shall be prorated and the unpaid portion shall be paid  as
 27        soon  thereafter  as  funds  become  available.  The association shall pay
 28        claims in any order which it deems reasonable, including  the  payment  of
 29        claims  as such are received from the claimants or in groups or categories
 30        of claims. The association may exempt or defer, in whole or in  part,  the
 31        assessment of any member insurer, if the assessment would cause the member
 32        insurer's  financial  statement  to  reflect amounts of capital or surplus
 33        less than the minimum amounts required for a certificate of  authority  by
 34        any  jurisdiction  in  which  the member insurer is authorized to transact
 35        insurance; provided, however, that during the period of deferment, no div-
 36        idends shall be paid to shareholders or  policyholders.  Deferred  assess-
 37        ments  shall  be paid when such payment will not reduce capital or surplus
 38        below required minimums. Such payments shall be refunded to  those  compa-
 39        nies  receiving  larger assessments by virtue of such deferment, or at the
 40        election of any such company, credited against  future  assessments.  Each
 41        member  insurer  may  set  off against any assessment, authorized payments
 42        made on covered claims and expenses incurred in the payment of such claims
 43        by the member insurer if they are chargeable to the account. for which the
 44        assessment is made.
 45        (e)  Investigate claims brought against the association and  adjust,  com-
 46        promise, settle, and pay covered claims to the extent of the association's
 47        obligation  and deny all other claims and may review settlements, releases
 48        and judgments to which the insolvent insurer or its insureds were  parties
 49        to  determine the extent to which such settlements, releases and judgments
 50        may be properly contested. The association shall have the right to appoint
 51        or substitute and to direct legal counsel retained under liability  insur-
 52        ance policies for the defense of covered claims.
 53        (f)  Handle claims through its employees or through one (1) or more insur-
 54        ers  or other persons designated as servicing facilities. Designation of a
 55        servicing facility is subject to the approval of the  director,  but  such
  1        designation may be declined by a member insurer.
  2        (g)  Reimburse  each servicing facility for obligations of the association
  3        paid by the facility and for  expenses  incurred  by  the  facility  while
  4        handling  claims  on  behalf  of  the  association and shall pay the other
  5        expenses of the association authorized by this act chapter.
  6        (2)  The association may:
  7        (a)  Employ or retain such persons as are necessary to handle  claims  and
  8        perform other duties of the association.
  9        (b)  Borrow  funds necessary to effect the purposes of this act chapter in
 10        accord with the plan of operation.
 11        (c)  Sue or be sued, and such power to sue includes the power and right to
 12        intervene as a party before any  court  that  has  jurisdiction  over  the
 13        insolvent insurer as defined by this act chapter.
 14        (d)  Negotiate  and  become  a party to such contracts as are necessary to
 15        carry out the purpose of this act chapter.
 16        (e)  Perform such other acts as are necessary or proper to effectuate  the
 17        purpose of this act chapter.
 18        (f)  Refund  to  the  member insurers in proportion to the contribution of
 19        each member insurer to that account that amount by which the assets of the
 20        account exceed the liabilities, if, at the end of any calendar  year,  the
 21        board of directors finds that the assets of the association in any account
 22        exceed the liabilities of that account as estimated by the board of direc-
 23        tors for the coming year.

Statement of Purpose / Fiscal Impact

                      STATEMENT OF PURPOSE
                           RS 10782C1
Currently the Idaho Insurance Guaranty Association maintains three
separate administration and assessment accounts, one for each of
the following: workmen's compensation insurance, automobile
insurance, and all other insurance types.  The proposed legislation
would consolidate the three accounts into one account and place all
existing funds which are in the current accounts into one account. 
This will reduce Association costs and potential confusion
associated with maintaining three separate accounts.  Consolidating
the accounts will also increase the base against which future
assessments to pay claims can be made.

                         FISCAL IMPACT
There should be no fiscal impact resulting from this proposed


Contact:  Woody Richards
          Idaho Insurance Guaranty Association
STATEMENT OF PURPOSE/FISCAL NOTE                       H 16