Print Friendly SENATE BILL NO. 1029 – Insurance guaranty assn, claims
SENATE BILL NO. 1029
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S1029.......................................by COMMERCE AND HUMAN RESOURCES
INSURANCE GUARANTY ASSOCIATION - Amends existing law relating to the Idaho
Insurance Guaranty Association Act to clarify the obligation of an
association to pay certain claims.
01/18 Senate intro - 1st rdg - to printing
01/19 Rpt prt - to Com/HuRes
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-ninth Legislature First Regular Session - 2007
IN THE SENATE
SENATE BILL NO. 1029
BY COMMERCE AND HUMAN RESOURCES COMMITTEE
1 AN ACT
2 RELATING TO THE IDAHO INSURANCE GUARANTY ASSOCIATION ACT; AMENDING SECTION
3 41-3608, IDAHO CODE, TO CLARIFY THE OBLIGATION OF AN ASSOCIATION TO PAY
4 CERTAIN CLAIMS AND TO MAKE A TECHNICAL CORRECTION.
5 Be It Enacted by the Legislature of the State of Idaho:
6 SECTION 1. That Section 41-3608, Idaho Code, be, and the same is hereby
7 amended to read as follows:
8 41-3608. OBLIGATIONS AND POWERS OF ASSOCIATION. (1) The association
10 (a) Be obligated to pay covered claims existing prior to the order of
11 liquidation arising within thirty (30) days after the order of liquida-
12 tion, or before the policy expiration date if less than thirty (30) days
13 after the order of liquidation, or before the insured replaces the policy
14 or causes its cancellation, if he does so within thirty (30) days of the
15 order of liquidation. Such obligation shall be satisfied by paying to the
16 claimant an amount as follows:
17 (i) The full amount of a covered claim for benefits under a wor-
18 ker's compensation insurance coverage;
19 (ii) An amount not exceeding ten thousand dollars ($10,000) per pol-
20 icy for covered claim for the return of unearned premium;
21 (iii) An amount not exceeding three hundred thousand dollars
22 ($300,000) per claim for all other covered claims; provided however,
23 that for the purposes of this limitation, all claims of any kind
24 arising out of, or related to, bodily injury or death to any one (1)
25 person shall constitute a single claim, regardless of the number of
26 insurance policies issued by the insolvent insurer, the number of
27 claims made or the number of claimants.
28 (b) In no event shall the association be obligated to pay a claimant an
29 amount in excess of the obligation of the insolvent insurer under the pol-
30 icy or coverage from which the claim arises.
31 Notwithstanding any other provision of this chapter, a covered claim
32 shall not include any claim filed with the association after the earlier
33 of: (i) eighteen (18) months after the date of the order of liquidation,
34 or (ii) the final date set by the court for the filing of claims against
35 the liquidator or receiver of an insolvent insurer and shall not include
36 any claim filed with the association or a liquidator for protection
37 afforded under the insured policy for incurred-but-not-reported losses.
38 Any obligation of the association to defend an insured shall cease upon
39 the association's payment by settlement releasing the insured or on a
40 judgment of an amount equal to the lesser of the association's covered
41 claim obligation limit or the applicable policy limit.
42 (c) Be deemed the insurer to the extent of its obligation on the covered
43 claims and to such extent shall have all rights, duties, and obligations
1 of the insolvent insurer as if the insurer had not become insolvent
2 including, but not limited to, the right to pursue and retain salvage and
3 subrogation recoverable on paid covered claim obligations.
4 (d) Assess member insurers separately for amounts necessary to pay the
5 obligations of the association under paragraph (a) of this subsection sub-
6 sequent to an insolvency, the expenses of handling covered claims subse-
7 quent to an insolvency and other expenses authorized by this chapter. The
8 assessments of each member insurer shall be in the proportion that the
9 net direct written premiums of the member insurer for the calendar year
10 preceding the assessment on the kinds of insurance covered by the account
11 bears to the net direct written premiums of all member insurers for the
12 calendar year preceding the assessment on the kinds of insurance covered
13 by the account. Each member insurer shall be notified of the assessment
14 not later than thirty (30) days before it is due. No member insurer may be
15 assessed in any one (1) year an amount greater than one percent (1%) of
16 that member insurer's net direct written premiums for the calendar year
17 preceding the assessment. If the maximum assessment, together with the
18 other assets of the association in the account, does not provide in any
19 one (1) year an amount sufficient to make all necessary payments, the
20 funds available shall be prorated and the unpaid portion shall be paid as
21 soon thereafter as funds become available. The association shall pay
22 claims in any order which it deems reasonable, including the payment of
23 claims as such are received from the claimants or in groups or categories
24 of claims. The association may exempt or defer, in whole or in part, the
25 assessment of any member insurer, if the assessment would cause the member
26 insurer's financial statement to reflect amounts of capital or surplus
27 less than the minimum amounts required for a certificate of authority by
28 any jurisdiction in which the member insurer is authorized to transact
29 insurance; provided, however, that during the period of deferment, no div-
30 idends shall be paid to shareholders or policyholders. Deferred assess-
31 ments shall be paid when such payment will not reduce capital or surplus
32 below required minimums. Such payments shall be refunded to those compa-
33 nies receiving larger assessments by virtue of such deferment, or at the
34 election of any such company, credited against future assessments. Each
35 member insurer may set off against any assessment, authorized payments
36 made on covered claims and expenses incurred in the payment of such claims
37 by the member insurer if they are chargeable to the account.
38 (e) Investigate claims brought against the association and adjust, com-
39 promise, settle, and pay covered claims to the extent of the association's
40 obligation and deny all other claims and may review settlements, releases
41 and judgments to which the insolvent insurer or its insureds were parties
42 to determine the extent to which such settlements, releases and judgments
43 may be properly contested. The association shall have the right to appoint
44 or substitute and to direct legal counsel retained under liability insur-
45 ance policies for the defense of covered claims.
46 (f) Handle claims through its employees or through one (1) or more insur-
47 ers or other persons designated as servicing facilities. Designation of a
48 servicing facility is subject to the approval of the director, but such
49 designation may be declined by a member insurer.
50 (g) Reimburse each servicing facility for obligations of the association
51 paid by the facility and for expenses incurred by the facility while
52 handling claims on behalf of the association and shall pay the other
53 expenses of the association authorized by this chapter.
54 (2) The association may:
55 (a) Employ or retain such persons as are necessary to handle claims and
1 perform other duties of the association.
2 (b) Borrow funds necessary to effect the purposes of this chapter in
3 accord with the plan of operation.
4 (c) Sue or be sued, and such power to sue includes the power and right to
5 intervene as a party before any court that has jurisdiction over the
6 insolvent insurer as defined by this chapter.
7 (d) Negotiate and become a party to such contracts as are necessary to
8 carry out the purposes of this chapter.
9 (e) Perform such other acts as are necessary or proper to effectuate the
10 purposes of this chapter.
11 (f) Refund to the member insurers in proportion to the contribution of
12 each member insurer that amount which, in the opinion of the board of
13 directors, will not be needed for the purposes of this chapter within two
14 (2) years from the date the association receives the refund from the
STATEMENT OF PURPOSE
The purpose of this legislation is to clarify that for purposes of lawsuits
against the Idaho Insurance Guaranty Association with regard to Idaho
Code Section 41-3608 (1) (a) (iii), all claims of any kind arising out of, or
related to, bodily injury or death to any one (1) person shall constitute a
single claim, regardless of the number of insurance policies issued by the
insolvent insurer, the number of claims made or the number of claimants.
There is no negative impact on the general fund, other state funds or on
local government. To the extent that multiple claims may have been made
contrary to this amendment in the future and to the extent that they were
allowed by the courts, there may be a savings to the general fund in the
future in an amount which cannot be quantified relating to a premium tax
offset allowed to guaranty association member companies for
assessments to pay claims.
Name: Woody Richards
Idaho Insurance Guaranty Association
STATEMENT OF PURPOSE/FISCAL NOTE S 1029