2005 Legislation
Print Friendly

HOUSE BILL NO. 162 – Insurance guaranty assn, powers


View Bill Status

View Bill Text

View Statement of Purpose / Fiscal Impact

Text to be added within a bill has been marked with Bold and
Underline. Text to be removed has been marked with
Strikethrough and Italic. How these codes are actually displayed will
vary based on the browser software you are using.

This sentence is marked with bold and underline to show added text.

This sentence is marked with strikethrough and italic, indicating
text to be removed.

Bill Status

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.
      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

Bill Text

  ]]]]              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
  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
  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
  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 account that amount by which the assets of the
  9        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  of
 11        the association exceed the liabilities as estimated by the board of direc-
 12        tors for the coming year will 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, aAny 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 are which, in the opinion of the board  of  directors,  will
 33    not  then  be needed for the purposes of this act chapter 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 / Fiscal Impact

                       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.

Name:     Woody Richards
          Angela Richards
          Idaho Insurance Guaranty Association 
Phone:    345-8371

STATEMENT OF PURPOSE/FISCAL NOTE                            H 162