Citations Affected:
IC 27-6-8.
Synopsis: Insurance guaranty association. Amends the guaranty
association law to provide for selection of members of the board of
directors by the commissioner of the department of insurance. Adds
one member to the association's board of directors. Increases liability
limits on association covered claims. Requires the association to
determine fraud or neglect in certain settlements, releases, and
judgments.
Effective: July 1, 2003.
January 23, 2003, read first time and referred to Committee on Insurance, Corporations and
Small Business.
A BILL FOR AN ACT to amend the Indiana Code concerning
insurance.
of Mutual Insurance Companies.
(5) (E) One (1) person representing the Insurance Institute of
Indiana.
(6) (F) Three (3) persons representing the:
(A) (i) domestic stock companies;
(B) (ii) domestic mutual companies; or
(C) (iii) domestic reciprocal insurers;
with not more than two (2) persons representing any category.
(7) (G) One (1) person representing independent unaffiliated
stock, fire, and casualty companies. to be appointed by the
commissioner.
(b) Not more than one (1) member insurer in a group of insurers
under the same management or ownership shall serve as a director at
the same time.
(c) Directors shall serve such terms as shall be established in the
plan of operation.
(d) Vacancies on the board shall be filled for the remaining period
of the term in the same manner as the initial selection.
(e) If no directors are selected by March 1, 1972, the commissioner
may appoint the initial members of the board of directors.
(f) In approving selections to the board, the commissioner shall
consider among other things whether all member insurers are fairly
represented.
(g) Directors may be reimbursed from the assets of the association
for expenses incurred by them as members of the board of directors.
fifty dollars ($650) multiplied by the number of months or partial
months remaining in the policy term, not to exceed twelve (12) months.
(1) In the case of claims arising from bodily injury, sickness, or
disease, including death resulting therefrom, except claims under
IC 22-3 or similar state or federal laws providing benefits for
occupational injury or disease, the amount for which the association
shall be obligated shall not exceed the claimant's reasonable expenses
incurred for necessary medical, surgical, x-ray, and dental services,
including prosthetic devices and necessary ambulance, hospital,
professional nursing, and funeral services, and any amounts actually
lost by reason of the claimant's inability to work and earn wages or
salary or their equivalent that would otherwise have been earned in the
normal course of such injured claimant's employment, to which may be
added at the discretion of the association a sum not to exceed one
thousand dollars ($1,000) for all other costs and expenses incurred by
the claimant prior to the insolvency. In the case of a claim for wrongful
death, the foregoing obligation of the association shall, in addition to
the limits set forth above, be subject to the limitations provided by the
wrongful death statutes of the state. Such amounts which are legally
payable because of the death of a claimant shall be paid to the
claimant's estate, to the claimant's father or mother or guardian, to the
surviving spouse or children, or to the next of kin as set out in
IC 34-23-1
and
IC 34-23-2.
The amount for which the association shall be obligated may also
include payments in fact made to others, not members of claimant's
household, which were reasonably incurred to obtain from such other
persons ordinary and necessary services for the production of income
in lieu of those services the claimant would have performed for himself
had he not been injured.
In the case of claims arising from bodily injury, sickness, or disease,
including those in which death results, under IC 22-3 or similar state
or federal laws providing benefits for occupational injury or disease,
the association is obligated only to the extent provided under IC 22-3.
(2) A third party having a covered claim against any insured of an
insolvent member insurer may file such claim in the liquidation
proceeding under
IC 27-9-3
if such insolvent member insurer is a
domestic insurer and pursuant to the applicable provisions of law of the
state of domicile if such insolvent member insurer is not a domestic
insurer. The liquidator shall immediately refer said claim to the
association to process as provided in this chapter unless the claimant
shall within thirty (30) days from the date of filing said claim in the
liquidation proceeding, file with the commissioner as liquidator a
written demand that said claim be processed in liquidation proceedings
as a claim not covered by this chapter.
(ii) Be deemed the insurer to the extent of its obligation on the
covered claims as limited by this chapter and to this extent shall have
all rights, duties, and obligations of the insolvent insurer as if the
insurer had not become insolvent, including those relating to
reinsurance contracts and treaties entered into by the insolvent insurer.
However, the association's obligation to defend any insured of the
insolvent insurer or to indemnity against the costs of such defense
terminates as soon as the claimant or claimants have been paid all
benefits that they are entitled to under this chapter.
(iii) Allocate claims paid and expenses incurred among the three (3)
accounts separately, and assess member insurers separately for each
account amounts necessary to pay the obligation of the association
under paragraph (i) of this subsection subsequent to an insolvency, the
expenses of handling covered claims subsequent to an insolvency, the
cost of examination under
IC 27-6-8-12
and other expenses authorized
by this chapter. The assessments of each member insurer shall be on a
uniform percentage basis in the proportion that the net direct written
premiums in this state of the member insurer for the preceding calendar
year on the kinds of insurance in the account bears to the net direct
written premiums of all member insurers for the preceding calendar
year on the kinds of insurance in the account. However, in addition to
the pro rata assessments already described, an assessment may be made
against each member insurer in a stated amount up to fifty dollars ($50)
per year for the purpose of paying the administrative expenses of the
association. There shall be no assessment for any account so long as
assets held in such account are sufficient to cover all estimated
payments for liquidation in process under such account. Each member
insurer shall be notified of the assessment not later than thirty (30) days
before it is due. No member insurer may be assessed in any year on any
account an amount greater than one percent (1%) of that member
insurer's net direct written premiums in this state for the preceding
calendar year on the kinds of insurance in the account. If the maximum
assessment, together with the other assets of the association in any
account, does not provide in any one (1) year in any account an amount
sufficient to make all necessary payments from that account, the funds
available shall be prorated and the unpaid portion shall be paid as soon
thereafter as funds become available. The association may exempt or
defer, in whole or in part, the assessment of any member insurer, if the
assessment would cause the member insurer's financial statement to
reflect amounts of capital or surplus less than the minimum amounts
required for a certificate of authority by any jurisdiction in which the
member insurer is authorized to transact insurance. However, during
the period of deferment no dividends shall be paid to shareholders or
policyholders by a company whose assessment has been deferred. A
deferred assessment shall be paid when such payment will not reduce
capital or surplus below required minimums. Such payments shall be
refunded to those companies whose assessments were increased as the
result of such deferment, or at the option of any such company, shall be
credited to future assessments against such company.
(iv) Investigate, adjust, compromise, settle, and pay covered claims
to the extent of the association's obligation and deny all other claims
and may review settlements, releases, and judgments to which the
insolvent insurer or its insured were parties to determine the extent to
which such settlements, releases, and judgments may be properly
contested, and as appropriate were made or obtained as a result of
fraudulent or neglectful conduct of the insolvent insurer and, if so,
to contest them.
(v) Notify such persons as the commissioner directs under
IC 27-6-8-9(b)(i) section 9(b)(1) of this chapter.
(vi) Handle claims through its employees or through one (1) or more
insurers or other persons designated as servicing facilities. Designation
of a servicing facility is subject to the approval of the commissioner,
but such designation may be declined by a member insurer.
(vii) Reimburse each servicing facility for obligations of the
association paid by the facility and for expenses incurred by the facility
while handling claims on behalf of the association and shall pay the
other expenses of the association authorized by this chapter. Any
unreimbursed obligation of the association to a member insurer
designated a servicing facility shall constitute an admitted asset of such
member insurer.
(viii) Be entitled to and permitted to examine all claims, files, and
records of an insolvent insurer at such times and to such extent as
necessary or appropriate to obtain information regarding covered
claims individually and in the aggregate, and to establish such
procedures as appropriate to obtain prompt notice of all covered claims
and information pertaining thereto during the course of liquidation.
(b) The association may:
(i) Appear in, defend, and appeal any action on a covered claim but
it shall have no obligation to pay any amount in excess of the
provisions of
IC 27-6-8-7.
(ii) Employ or retain such persons as are necessary to handle claims
and perform other duties of the association.
the board of directors under section 6 of this chapter.
(iv) Establish procedures by which claims may be filed with the
association by the liquidator and establish acceptable forms of
proof of covered claims. Notice of claims to the receiver or
liquidator of the insolvent insurer shall be deemed notice to the
association or its agent and a list of these claims shall be
periodically submitted to the association or similar organization
in another state by the receiver or liquidator.
(v) Establish regular places and times for meetings of the board
of directors.
(vi) Establish procedures for records to be kept of financial
transactions of the association, its agents, and the board of
directors.
(vii) Provide that any member insurer aggrieved by any final
action or decision of the association may appeal to the
commissioner within thirty (30) days after the action or decision.
(viii) Establish the procedures whereby nominations for
selections for the board of directors by the commissioner will be
submitted to the commissioner.
(ix) Contain additional provisions necessary or proper for the
execution of the powers and duties of the association.
(d) The plan of operation may provide that any or all powers and
duties of the association, except those under section 7(a)(iii) and
7(b)(iii) of this chapter, are delegated to a corporation, association, or
other organization which performs or will perform functions similar to
those of this association, or its equivalent, in two (2) or more states.
Such a corporation, association, or organization shall be reimbursed as
a servicing facility would be reimbursed and shall be paid for its
performance of any other functions of the association. A delegation
under this subsection shall take effect only with the approval of both
the board of directors and the commissioner, and may be made only to
a corporation, association, or organization which extends protection not
substantially less favorable and effective than that provided by this
chapter.
each member insurer.
(3) Select the members of the board of directors under section
6 of this chapter.
(b) The commissioner may:
(i) (1) Require that the association notify the insureds of the
insolvent insurer and any other interested parties of the order of
liquidation and of their rights under this chapter. This notification
shall be by mail at their last known address, where available, but
if sufficient information for notification by mail is not available,
notice by publication in a newspaper of general circulation in all
counties in which the insolvent insurer transacted insurance
business shall be sufficient.
(ii) (2) Require each agent of the insolvent insurer to give prompt
written notice by first class mail of such insolvency and the rights
of the insured under this chapter, to each insured of the insolvent
insurer for whom he is agent of record, at such insured's last
known address.
(iii) (3) Suspend or revoke, after notice and hearing, the certificate
of authority to transact insurance in this state of any member
insurer which fails to pay an assessment when due or fails to
comply with the plan of operation. As an alternative, the
commissioner may levy a fine on any member insurer which fails
to pay an assessment when due. The fine shall not exceed five
percent (5%) of the unpaid assessment per month, except that no
fine shall be less than one hundred dollars ($100) per month.
(iv) (4) Revoke the designation of any servicing facility if he finds
claims are being handled unsatisfactorily.
(v) (5) Any final action or order of the commissioner under this
chapter shall be subject to judicial review in a court of competent
jurisdiction.