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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
|||| 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 2 RELATING TO THE INSURANCE GUARANTY ASSOCIATION; AMENDING SECTION 41-3605, 3 IDAHO CODE, TO REVISE THE DEFINITION OF ACCOUNT AND TO MAKE TECHNICAL COR- 4 RECTIONS; AMENDING SECTION 41-3606, IDAHO CODE, TO DELETE THE REQUIREMENT 5 THAT THE INSURANCE GUARANTY ASSOCIATION MAINTAIN THREE SEPARATE ACCOUNTS, 6 TO PROVIDE FOR ONE ACCOUNT AND TO MAKE TECHNICAL CORRECTIONS; AND AMENDING 7 SECTION 41-3608, IDAHO CODE, TO DELETE THE REQUIREMENT TO ALLOCATE CLAIMS 8 AND ASSESSMENTS BY THE IDAHO INSURANCE GUARANTY ASSOCIATION AMONG THREE 9 ACCOUNTS AND TO MAKE TECHNICAL CORRECTIONS. 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) ofthe three (3)account screated 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, 2 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 thatthan 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 3 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: 9 41-3606. INSURANCE GUARANTY ASSOCIATION -- INSURERS REQUIRED TO BE MEM- 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 three18 (3) separate accounts: (a) the workmen's compensation insurance account; (b)19 the automobile insurance account; and (c) the account for all other insurance20 to which this act appliesmaintain 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 4 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 each9 accountamounts 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 actchapter. 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 incovered 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 incovered 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 accountan amount greater than one per centpercent (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 anythe account, does not provide in any one (1) year in any accountan 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 the44 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 5 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 actchapter. 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 actchapter 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 actchapter. 14 (d) Negotiate and become a party to such contracts as are necessary to 15 carry out the purpose of this actchapter. 16 (e) Perform such other acts as are necessary or proper to effectuate the 17 purpose of this actchapter. 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 account22 exceed the liabilities of that accountas estimated by the board of direc- 23 tors for the coming year.
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 legislation. Contact: Woody Richards Idaho Insurance Guaranty Association 385-5451 STATEMENT OF PURPOSE/FISCAL NOTE H 16