2007 Legislation
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SENATE BILL NO. 1029 – Insurance guaranty assn, claims


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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

Bill Text

  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-ninth Legislature                   First Regular Session - 2007
                                       IN THE SENATE
                                    SENATE BILL NO. 1029
  1                                        AN ACT
  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
  9    shall:
 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
 15        receivership.

Statement of Purpose / Fiscal Impact

                         STATEMENT OF PURPOSE

                               RS 16588
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.

                             FISCAL IMPACT
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
Phone:   208-345-8371
STATEMENT OF PURPOSE/FISCAL NOTE                               S 1029