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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 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
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