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H0162...........................................................by BUSINESS INSURANCE GUARANTY ASSOCIATIONS - Amends existing law relating to insurance guaranty associations to revise the powers of associations; and to revise provisions applicable to credits for assessments paid. 02/10 House intro - 1st rdg - to printing 02/11 Rpt prt - to Bus 03/02 Rpt out - rec d/p - to 2nd rdg 03/03 2nd rdg - to 3rd rdg 03/08 3rd rdg - PASSED - 67-0-3 AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer, Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Cannon, Chadderdon, Clark, Collins, Crow, Deal, Denney, Edmunson, Ellsworth, Eskridge, Field(23), Garrett, Hart, Harwood, Henbest, Henderson, Jaquet, Jones, Kemp, Lake, LeFavour, Loertscher, Martinez, Mathews, McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen, Nonini, Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche, Rydalch, Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley, Skippen, Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Trail, Wills, Wood, Mr. Speaker NAYS -- None Absent and excused -- Bradford, Field(18), Sali Floor Sponsor - Rusche Title apvd - to Senate 03/09 Senate intro - 1st rdg - to Com/HuRes 03/18 Rpt out - rec d/p - to 2nd rdg 03/21 2nd rdg - to 3rd rdg 03/23 3rd rdg - PASSED - 34-0-0, 1 vacancy AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett, Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough, Langhorst, Little, Lodge, Malepeai, Marley, McGee, McKenzie, Pearce, Richardson, Schroeder, Stegner, Stennett, Sweet, Werk, Williams NAYS -- None Absent and excused -- (District 21 seat vacant) Floor Sponsor - Cameron Title apvd - to House 03/24 To enrol 03/28 Rpt enrol - Sp signed 03/29 Pres signed 03/30 To Governor 04/05 Governor signed Session Law Chapter 268 Effective: 07/01/05
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-eighth Legislature First Regular Session - 2005 IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 162 BY BUSINESS COMMITTEE 1 AN ACT 2 RELATING TO INSURANCE GUARANTY ASSOCIATIONS; AMENDING SECTION 41-3608, IDAHO 3 CODE, TO REVISE THE POWERS OF ASSOCIATIONS; AND AMENDING SECTION 41-3616, 4 IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO CREDITS FOR ASSESSMENTS 5 PAID. 6 Be It Enacted by the Legislature of the State of Idaho: 7 SECTION 1. That Section 41-3608, Idaho Code, be, and the same is hereby 8 amended to read as follows: 9 41-3608. OBLIGATIONS AND POWERS OF ASSOCIATION. (1) The association 10 shall: 11 (a) Be obligated to pay covered claims existing prior to the order of 12 liquidation arising within thirty (30) days after the order of liquida- 13 tion, or before the policy expiration date if less than thirty (30) days 14 after the order of liquidation, or before the insured replaces the policy 15 or causes its cancellation, if he does so within thirty (30) days of the 16 order of liquidation. Such obligation shall be satisfied by paying to the 17 claimant an amount as follows: 18 (i) The full amount of a covered claim for benefits under a wor- 19 ker's compensation insurance coverage; 20 (ii) An amount not exceeding ten thousand dollars ($10,000) per pol- 21 icy for covered claim for the return of unearned premium; 22 (iii) An amount not exceeding three hundred thousand dollars 23 ($300,000) per claim for all other covered claims. 24 (b) In no event shall the association be obligated to pay a claimant an 25 amount in excess of the obligation of the insolvent insurer under the pol- 26 icy or coverage from which the claim arises. 27 Notwithstanding any other provision of this chapter, a covered claim 28 shall not include any claim filed with the association after the earlier 29 of: (i) eighteen (18) months after the date of the order of liquidation, 30 or (ii) the final date set by the court for the filing of claims against 31 the liquidator or receiver of an insolvent insurer and shall not include 32 any claim filed with the association or a liquidator for protection 33 afforded under the insured policy for incurred-but-not-reported losses. 34 Any obligation of the association to defend an insured shall cease upon 35 the association's payment by settlement releasing the insured or on a 36 judgment of an amount equal to the lesser of the association's covered 37 claim obligation limit or the applicable policy limit. 38 (c) Be deemed the insurer to the extent of its obligation on the covered 39 claims and to such extent shall have all rights, duties, and obligations 40 of the insolvent insurer as if the insurer had not become insolvent 41 including, but not limited to, the right to pursue and retain salvage and 42 subrogation recoverable on paid covered claim obligations. 43 (d) Assess member insurers separately for amounts necessary to pay the 2 1 obligations of the association under paragraph (a) of this subsection sub- 2 sequent to an insolvency, the expenses of handling covered claims subse- 3 quent to an insolvency and other expenses authorized by this chapter. The 4 assessments of each member insurer shall be in the proportion that the net 5 direct written premiums of the member insurer for the calendar year pre- 6 ceding the assessment on the kinds of insurance covered by the account 7 bears to the net direct written premiums of all member insurers for the 8 calendar year preceding the assessment on the kinds of insurance covered 9 by the account. Each member insurer shall be notified of the assessment 10 not later than thirty (30) days before it is due. No member insurer may be 11 assessed in any one (1) year an amount greater than one percent (1%) of 12 that member insurer's net direct written premiums for the calendar year 13 preceding the assessment. If the maximum assessment, together with the 14 other assets of the association in the account, does not provide in any 15 one (1) year an amount sufficient to make all necessary payments, the 16 funds available shall be prorated and the unpaid portion shall be paid as 17 soon thereafter as funds become available. The association shall pay 18 claims in any order which it deems reasonable, including the payment of 19 claims as such are received from the claimants or in groups or categories 20 of claims. The association may exempt or defer, in whole or in part, the 21 assessment of any member insurer, if the assessment would cause the member 22 insurer's financial statement to reflect amounts of capital or surplus 23 less than the minimum amounts required for a certificate of authority by 24 any jurisdiction in which the member insurer is authorized to transact 25 insurance; provided, however, that during the period of deferment, no div- 26 idends shall be paid to shareholders or policyholders. Deferred assess- 27 ments shall be paid when such payment will not reduce capital or surplus 28 below required minimums. Such payments shall be refunded to those compa- 29 nies receiving larger assessments by virtue of such deferment, or at the 30 election of any such company, credited against future assessments. Each 31 member insurer may set off against any assessment, authorized payments 32 made on covered claims and expenses incurred in the payment of such claims 33 by the member insurer if they are chargeable to the account. 34 (e) Investigate claims brought against the association and adjust, com- 35 promise, settle, and pay covered claims to the extent of the association's 36 obligation and deny all other claims and may review settlements, releases 37 and judgments to which the insolvent insurer or its insureds were parties 38 to determine the extent to which such settlements, releases and judgments 39 may be properly contested. The association shall have the right to appoint 40 or substitute and to direct legal counsel retained under liability insur- 41 ance policies for the defense of covered claims. 42 (f) Handle claims through its employees or through one (1) or more insur- 43 ers or other persons designated as servicing facilities. Designation of a 44 servicing facility is subject to the approval of the director, but such 45 designation may be declined by a member insurer. 46 (g) Reimburse each servicing facility for obligations of the association 47 paid by the facility and for expenses incurred by the facility while 48 handling claims on behalf of the association and shall pay the other 49 expenses of the association authorized by this chapter. 50 (2) The association may: 51 (a) Employ or retain such persons as are necessary to handle claims and 52 perform other duties of the association. 53 (b) Borrow funds necessary to effect the purposes of this chapter in 54 accord with the plan of operation. 55 (c) Sue or be sued, and such power to sue includes the power and right to 3 1 intervene as a party before any court that has jurisdiction over the 2 insolvent insurer as defined by this chapter. 3 (d) Negotiate and become a party to such contracts as are necessary to 4 carry out the purpose of this chapter. 5 (e) Perform such other acts as are necessary or proper to effectuate the 6 purpose of this chapter. 7 (f) Refund to the member insurers in proportion to the contribution of 8 each member insurer to that accountthat amount by which the assets of the9 account exceed the liabilities, if, at the end of any calendar year,10 which, in the opinion of the board of directors, finds that the assets of11 the association exceed the liabilities as estimated by the board of direc-12 tors for the coming yearwill not be needed for the purposes of this chap- 13 ter within two (2) years from the date the association receives the refund 14 from the receivership. 15 SECTION 2. That Section 41-3616, Idaho Code, be, and the same is hereby 16 amended to read as follows: 17 41-3616. CREDITS FOR ASSESSMENTS PAID. (1) A member insurer may offset 18 against its premium tax liability to this state under section 41-402, Idaho 19 Code, an assessment described in subsection (1)(d) of section 41-3608, Idaho 20 Code. An insurer that is exempt from the premium tax imposed by section 21 41-402, Idaho Code, may offset its premium tax liability to the industrial 22 administration fund. An offset is allowable to the extent of twenty percent 23 (20%) of the amount of such assessment for each of the five (5) calendar years 24 following the year in which such assessment was paid. An allowable offset, or 25 portion thereof, not used in any calendar year cannot be carried over or back 26 to any other year. 27 (2) Notwithstanding any provision to the contrary in section 28 41-3608(2)(f), Idaho Code, a Any sums acquired by refund , pursuant to subsec-29 tion (2)(f) of section 41-3608, Idaho Code,from insurance company receiver- 30 ships by the association which have heretofore been written off by contribut- 31 ing insurers and offset against premium taxes as provided in subsection (1) of 32 this section, and arewhich, in the opinion of the board of directors, will 33 not thenbe needed for the purposes of this actchapter within two (2) years 34 from the date the association receives the refund from the receivership, shall 35 be paid by the association to the director and by him deposited with the state 36 treasurer for credit to the state general fund.
STATEMENT OF PURPOSE RS 14596 The purpose of this legislation is to clarify the refund obligations and options of the Idaho Insurance Guaranty Association. Existing Idaho Code Sections 41-3608 (2)(f) and 41- 3616(2) are currently inconsistent and need to be harmonized. The Guaranty Association will be allowed to hold and reuse refunds rather than immediately paying over refunds and assessing more money from insurance companies. FISCAL IMPACT Retention of funds to pay ongoing expenses instead of making refunds and then making further assessments later may have a very minor effect on the General Fund in the short run in an amount that is difficult to estimate. However, over the long run, there should be no impact as a result of this legislation. Contact Name: Woody Richards Angela Richards Idaho Insurance Guaranty Association Phone: 345-8371 STATEMENT OF PURPOSE/FISCAL NOTE H 162