Print Friendly HOUSE BILL NO. 161 – Insurance guaranty assn, accounts
HOUSE BILL NO. 161
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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
|||| 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) of the three (3) account s 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
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-
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 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
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
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.
There should be no fiscal impact resulting from this proposed
Contact: Woody Richards
Idaho Insurance Guaranty Association
STATEMENT OF PURPOSE/FISCAL NOTE H 16