FISCAL
NOTE
WEST virginia Legislature
2017 regular session
By
[
to the Committee on
A BILL to amend and reenact §33-26-2,
§33-26-3, §33-26-4, §33-26-5, §33-26-8, §33-26-9, §33-26-10, §33-26-11, §33-26-12,
§33-26-13, §33-26-14 and §33-26-18 of the Code of West Virginia, 1931, as
amended, all relating to West Virginia Insurance Guaranty Association Act; modifying scope and
construction of act; adding and amending definitions; clarifying and adding
powers, duties and rights of association; modifying provisions concerning
effect of paid claims, exhaustion of coverage, prevention of insolvencies and
stay of proceedings; changing due date of annual financial report; limiting
covered claims; expanding association’s right to recover and be reimbursed;
providing for confidentiality of financial information; and exempting certain
reports and recommendations from Freedom of Information Act.
Be it enacted by the
Legislature of West Virginia:
That
§33-26-2, §33-26-3, §33-26-4, §33-26-5, §33-26-8, §33-26-9, §33-26-10, §33-26-11,
§33-26-12, §33-26-13, §33-26-14 and §33-26-18 of the Code of West Virginia,
1931, as amended, be amended and reenacted, all to read as follows:
ARTICLE 26. WEST VIRGINIA GUARANTY ASSOCIATION ACT.
§33-26-2.
Purpose.
The purpose of this article
is to provide a mechanism for the payment of covered claims under certain
insurance policies to avoid excessive delay in payment and, to avoid the
extent provided in this article, minimize financial loss to claimants or
policyholders because of the insolvency of an insurer to assist in the
detection and prevention of insurer insolvencies and to provide permit
an association to assess the cost of such this protection among
insurers.
§33-26-3. Scope.
This article applies to all
kinds of direct insurance except life, title, surety, disability, credit,
mortgage guaranty and ocean marine insurance. but shall not be
applicable to the following:
(1) Life, annuity, health or disability insurance;
(2) Mortgage guaranty, financial guaranty or other
forms of insurance offering protection against investment risks;
(3) Fidelity or surety bonds, or any other bonding
obligations;
(4) Credit insurance, vendors’ single interest insurance or
collateral protection insurance or any similar insurance protecting the
interests of a creditor arising out of a creditor-debtor transaction;
(5) Insurance of warranties or
service contracts including insurance that provides for the repair, replacement
or service of goods or property, indemnification for repair, replacement or
service for the operational or structural failure of the goods or property due
to a defect in materials, workmanship or normal wear and tear, or provides
reimbursement for the liability incurred by the issuer of agreements or service
contracts that provide such benefits;
(6) Title insurance;
(7) Ocean marine insurance;
(8) Any transaction or
combination of transactions between a person, including affiliates of such
person, and an insurer, including affiliates of the insurer, which involves the
transfer of investment or credit risk unaccompanied by transfer of insurance
risk; or
(9) Any insurance provided by or
guaranteed by a government entity or agency.
§33-26-4. Construction.
This article shall be liberally
construed to effect the purpose under section two of this article which shall
constitute an aid and guide to interpretation.
§33-26-5. Definitions.
As used in this article:
(1) "Account"
means any one of the three accounts created by section six of this article.
(2) “Affiliate” means a person
who directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with another person on December 31 of
the year immediately preceding the date the insurer becomes an insolvent
insurer.
(3) “Affiliate of the insolvent
insurer” means a person who directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with an
insolvent insurer on December 31 of the year prior to the date the insurer
becomes an insolvent insurer.
(2) (4) “Association” means the West
Virginia Insurance Guaranty Association created under section six of this article.
(5) “Association similar to the
association” means any guaranty association, security fund or other insolvency
mechanism that affords protection similar to that of the association. The term
shall also include any property and casualty insolvency mechanism that obtains
assessments or other contributions from insurers on a preinsolvency basis.
(6) “Claimant” means any insured
making a first party claim or any person instituting a liability claim,
provided that no person who is an affiliate of the insolvent insurer may be a
claimant.
(3) (7) “Commissioner”
means the Insurance Commissioner of West Virginia.
(8) “Control” means the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person, whether through the ownership of
voting securities, by contract other than a commercial contract for goods or
nonmanagement services, or otherwise, unless the power is the result of an
official position with or corporate office held by the person. Control shall be
presumed to exist if a person, directly or indirectly, owns, controls, holds
with the power to vote, or holds proxies representing ten percent or more of
the voting securities of any other person. This presumption may be rebutted by
a showing that control does not exist in fact.
(4) “Covered claim” means an
unpaid claim, including one for unearned premiums other than retrospective
premiums or other premiums subject to adjustment after the date of liquidation,
which arises out of and is within the coverage of an insurance policy to which
this article applies and which policy is in force at the time of the occurrence
giving rise to the unpaid claims if the insurer issuing the policy becomes an
insolvent insurer after the effective date of this article and the claimant or
insured is a resident of this state at the time of the insured occurrence, or
the property from which the claim arises is permanently located in this state.
“Covered claim” does not include: (i) Any amount in excess of the applicable limits of
coverage provided by an insurance policy to which this article applies; nor
(ii) any amount due any reinsurer, insurer, insurance pool, or underwriting
association, as subrogation recoveries or otherwise from an insolvent insurer
or the insured of an insolvent insurer to the extent of coverage under the
insured’s policy.
(9) (A) “Covered claim” means an
unpaid claim, including one for unearned premiums, submitted by a claimant,
which arises out of and is within the coverage and is subject to the applicable
limits of an insurance policy to which this article applies issued by an
insurer, if such insurer becomes an insolvent insurer after the effective date
of this article and:
(i) The claimant or insured is a
resident of this state at the time of the insured event: Provided, That for entities other than an individual, the
residence of a claimant, insured or policyholder is the state in which its
principal place of business is located at the time of the insured event; or
(ii) The claim is a first party
claim for damage to property with a permanent location in this state.
(B) “Covered claim” shall not
include:
(i) Any amount awarded as
punitive or exemplary damages;
(ii) Any amount sought as a
return of premium under any retrospective rating plan;
(iii) Any amount due any
reinsurer, insurer, insurance pool, underwriting association, health
maintenance organization, hospital plan corporation, professional health
service corporation or self-insurer as subrogation recoveries, reinsurance
recoveries, contribution, indemnification or otherwise. No such claim for any
amount due any reinsurer, insurer, insurance pool, underwriting association,
health maintenance organization, hospital plan corporation or self-insurer may
be asserted against a person insured under a policy issued by an insolvent
insurer other than to the extent such claim exceeds the association obligation
limitations set forth in section eight of this article;
(iv) Any first party claim by an
insured whose net worth exceeds $25 million on December 31 of the year next
preceding the date the insurer becomes an insolvent insurer: Provided, That an insured’s net worth on
such date shall be deemed to include the aggregate net worth of the insured and
all of its subsidiaries and affiliates as calculated on a consolidated basis: Provided, however, That this exclusion shall not apply to any claim for
benefits under a workers’ compensation insurance policy required by chapter
twenty-three of this code;
(v) Any third party claim
relating to a policy of an insured whose net worth exceeds $25 million on
December 31 of the year next preceding the date the insurer becomes an
insolvent insurer: Provided, That an
insured’s net worth on such date shall be deemed to include the aggregate net
worth of the insured and all of its subsidiaries and affiliates as calculated
on a consolidated basis: Provided, however, That this exclusion shall not
apply to:
(I) Third party claims against the insured where the insured
has applied for or consented to the appointment of a receiver, trustee or
liquidator for all or a substantial part of its assets, filed a voluntary
petition in bankruptcy, filed a petition or an answer seeking a reorganization
or arrangement with creditors or to take advantage of any insolvency law, or if
an order, judgment or decree is entered by a court of competent jurisdiction,
on the application of a creditor, adjudicating the insured bankrupt or
insolvent or approving a petition seeking reorganization of the insured or of
all or substantial part of its assets; or
(II) Any claim for benefits under a workers’ compensation insurance
policy required by chapter twenty-three of this code;
(vi) Any claim that would otherwise be a covered claim but is an
obligation to, or on behalf of a, person who has a net worth greater than that
allowed by the insurance guaranty association law of the state of residence of
the claimant at the time specified by such law and which association has denied
coverage to that claimant on that basis: Provided,
That this exclusion shall not apply to any claim for benefits under a workers’
compensation insurance policy required by chapter twenty-three of this code;
(vii) Any first party claims by an
insured which is an affiliate of the insolvent insurer;
(viii) Any fee or other amount
relating to goods or services sought by, or on behalf of, any attorney or other
provider of goods or services retained by the insolvent insurer or an insured
prior to the date it was determined to be insolvent;
(ix) Any fee or other amount
sought by, or on behalf of, any attorney or other provider of goods or services
retained by any insured or claimant in connection with the assertion or
prosecution of any claim, covered or otherwise, against the association; or
(x) Any claims for interest.
(5) “Insolvent insurer” means an
insurer:
(A) Licensed to transact
insurance in this state either at the time the policy was issued or when the
insured event occurred; and
(B) Against whom an order of
liquidation with a finding of insolvency has been entered by a court of competent
jurisdiction in the insurer’s state of domicile or of this state.
(10) “Insolvent insurer” means an
insurer licensed to transact insurance in this state, either at the time the
policy was issued or when the insured event occurred, and against whom a final
order of liquidation has been entered with a finding of insolvency by a court
of competent jurisdiction in the insurer’s state of domicile.
(6)(11) "Member insurer"
means any person who: (A) Writes writes any kind of insurance to
which this article applies under section three of this article, including farmers’
mutual fire insurance companies and the exchange of reciprocal or
interinsurance contracts;, and (B) Is is licensed
to transact insurance in this state. An insurer shall cease to
be a member insurer effective on the day following the termination or
expiration of its license to transact the kinds of insurance to which this
article applies, however the insurer shall remain liable as a member insurer
for any and all obligations, including obligations for assessments levied prior
to the termination or expiration of the insurer’s license and assessments
levied after the termination or expiration, which relate to any insurer which
became an insolvent insurer prior to the termination or expiration of the
insurer’s license.
(7) (12) “Net direct written premiums” means direct gross
premiums written in this state on insurance policies to which this article
applies, less return premiums on the policies and dividends paid or credited to
policyholders on such direct business. “Net direct written premiums” does not
include premiums on contracts between insurers or reinsurers.
(8) (13) “Person” includes an individual, company,
insurer, association, organization, society, reciprocal, partnership,
syndicate, business trust, corporation or any other legal entity means
any individual or legal entity, including governmental entities.
(9) (14) “Receiver” means receiver, liquidator,
rehabilitator or conservator as the context may require.
(15) “Self-insurer” means a person that covers its liability
through a qualified individual or group self-insurance program or any other
formal program created for the specific purpose of covering liabilities
typically covered by insurance.
§33-26-8. Powers and duties of the association.
(1) (a) The association
shall:
(a) Is obligated to the extent of
the covered claims existing prior to the determination of insolvency, and for
those claims arising within thirty days after the determination of insolvency,
but the obligation only includes that amount of each covered claim which is in
excess of one hundred dollars and is less than three hundred thousand dollars:
Provided, That neither of these monetary limits applies to obligations arising
out of covered workers’ compensation claims. In no event is the association
obligated to a policyholder or claimant in an amount in excess of the
obligations of the insolvent insurer under the policy from which the claim
arises. Notwithstanding any other provision of this article, a covered claim
does not include any claim filed with the guaranty fund after the final date
set by the court for the filing of claims against the liquidator or receiver of
an insolvent insurer. A default judgment or stipulated judgment against the
insolvent insurer, or against the insured of an insolvent insurer, is not
binding against the association.
(b) Is the insurer to the extent
of its obligation on the covered claims and to such extent has all rights,
duties, defenses and obligations of the insolvent insurer as if the insurer had
not become insolvent.
(1) Be obligated to pay covered
claims existing prior to the final order of liquidation, that arise within
thirty days after the final order of liquidation or before the policy
expiration date if such expiration date is less than thirty days after the
final order of liquidation, or that arise before the insured replaces the
policy or causes its cancellation, if the insured does so within thirty days of
the final order of liquidation. This obligation shall be satisfied by paying to
the claimant an amount as follows:
(A) The full amount of a covered
claim for benefits under a workers’ compensation insurance policy: Provided, That any covered claim for deliberate
intention, including any action pursuant to section two, article four, chapter
twenty-three of this code, shall not exceed $300,000 per claim.
(B) An amount not exceeding
$10,000 per policy for a covered claim for the return of unearned premium.
(C) An amount not exceeding
$300,000 per claim for all other covered claims: Provided, That for purposes of this limitation, all claims of any
kind whatsoever arising out of, or related to, bodily injury or death to any
one person shall constitute a single claim, regardless of the number of claims
made, or the number of claimants.
In no event shall the association
be obligated to pay a claimant an amount in excess of the obligation of the
insolvent insurer under the policy or coverage from which the claim arises.
Notwithstanding any other provisions of this article, a covered claim shall not
include a claim filed with the association after the earlier of: (i)
Twenty-five months after the date of the final order of liquidation; or (ii)
the final date set by the court for the filing of claims against the liquidator
or receiver of an insolvent insurer.
Any obligation of the association
to defend an insured on a covered claim shall cease upon the association’s: (i)
Payment, either by settlement releasing the insured or on a judgment, of an
amount equal to the lesser of the association’s covered claim obligation limit
or the applicable policy limit; or (ii) tender of such amount.
(2) Be deemed the insurer only to
the extent of its obligation on the covered claims and to such extent, subject
to the limitations provided in this article, shall have all rights, duties and
obligations of the insolvent insurer as if the insurer had not become
insolvent, including, but not limited to, the right to pursue and retain salvage
and subrogation recoverable on paid covered claim obligations. The association
shall not be deemed the insolvent insurer for any purpose relating to the issue
of whether the association is amenable to the personal jurisdiction of the
courts of any state.
(c) Shall allocate (3)
Allocate claims paid and expenses incurred among the three accounts
separately, and assess member insurers separately for each account amounts
necessary to pay the obligations of the association under subdivision (a)(1)
of this subsection subsequent to an insolvency, the expenses of handling
covered claims subsequent to an insolvency, the cost of examinations under
preparing any reports specified in section thirteen of this article and
other expenses authorized by this article. The assessments of each member
insurer shall be in the proportion that the net direct written premiums of the
member insurer for the preceding calendar year prior to the
assessment on the kinds of insurance in the account bears to the net direct
written premiums of all member insurers for the preceding calendar year prior
to the assessment on the kinds of insurance in the account: Provided, That farmers mutual insurance companies
that do not issue workers’ compensation insurance policies may not be assessed
to pay for the obligations of the association payable from the workers’ compensation
insurance account. Each member insurer shall be notified of the assessment not
later than thirty days before it is due. No member insurer may be assessed in
any one year on any account an amount greater than two percent of that member
insurer’s net direct written premiums for the preceding calendar year preceding
the assessment 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 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 after that as funds become
available. The association shall pay claims in any order that it deems
reasonable, including the payment of claims as they are received from the claimant
or in groups or categories of claims. 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 the 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: Provided,
That during the period of deferment, no dividends shall be paid to shareholders
or policyholders. Deferred assessments shall be paid when the payment will not
reduce capital or surplus below required minimums. The payments shall be
refunded to those companies receiving larger assessments by virtue of such
deferment, or at the election of any such company, credited against future
assessments. Each member insurer may set off against any assessment,
authorized payments made on covered claims and expenses incurred in the payment
of such claims by the member insurer if they are chargeable to the account for
which the assessment is made.
(d) Shall investigate (4)
Investigate claims brought against the association and 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 insureds were parties to
determine the extent to which the settlements, releases and judgments may be
properly contested The association shall have the right to appoint and
to direct legal counsel retained under liability insurance policies for the
defense of covered claims.
(e) Shall notify persons as the
commissioner directs under subsection (2), section ten of this article.
(5) Notify claimants in this
state as deemed necessary by the commissioner and upon the commissioner’s
request, to the extent records are available to the association.
(6) (A) Have the right to review
and contest as set forth in this subsection settlements, releases, compromises,
waivers and judgments to which the insolvent insurer or its insureds were
parties prior to the entry of the final order of liquidation. In an action to
enforce settlements, releases and judgments to which the insolvent insurer or
its insureds were parties prior to the entry of the final order of liquidation,
the association shall have the right to assert the following defenses, in
addition to the defenses available to the insurer:
(i) The association is not bound
by a settlement, release, compromise or waiver executed by an insured or the
insurer, or any judgment entered against an insured or the insurer by consent
or through a failure to exhaust all appeals, if the settlement, release,
compromise, waiver or judgment was:
(I) Executed or entered within
one hundred twenty days prior to the entry of a final order of liquidation and
the insured or the insurer did not use reasonable care in entering into the
settlement, release, compromise, waiver or judgment, or did not pursue all
reasonable appeals of an adverse judgment; or
(II) Executed by or taken against
an insured or the insurer based on default, fraud, collusion or the insurer’s
failure to defend.
(ii) If a court of competent
jurisdiction finds that the association is not bound by a settlement, release,
compromise, waiver or judgment for the reasons described in subparagraph (i),
paragraph (A), subdivision (6) of this subsection, the settlement, release,
compromise, waiver or judgment shall be set aside and the association shall be
permitted to defend any covered claim on the merits. The settlement, release,
compromise, waiver or judgment may not be considered as evidence of liability
or damages in connection with any claim brought against the association or any
other party under this article.
(iii) The association shall have
the right to assert any statutory defenses or other defenses or rights of
offset against any settlement, release, compromise or waiver executed by an
insured or the insurer, or any judgment taken against the insured or the
insurer.
(B) As to any covered claims
arising from a judgment under any decision, verdict or finding based on the
default of the insolvent insurer or its failure to defend, the association,
either on its own behalf or on behalf of an insured may apply to have the
judgment, order, decision, verdict or finding set aside by the same court or
administrator that entered the judgment, order, decision, verdict or finding
and shall be permitted to defend the claim on the merits.
(f) Shall handle (7)
Handle claims through its employees or through one or more insurers or
other persons designated as servicing facilities. Designation of a servicing
facility is subject to the approval of the commissioner, but the designation
may be declined by a member insurer.
(g) Shall reimburse (8)
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 article.
(9) Establish procedures for
requesting financial information from insureds and claimants on a confidential
basis for purposes of applying sections of this article concerning the net
worth of first and third-party claimants, subject to such information being
shared with any other association similar to the association and the liquidator
for the insolvent company on the same confidential basis. If the insured or
claimant refuses to provide the requested financial information and an auditor’s
certification of the same where requested and available, the association may
deem the net worth of the insured or claimant to be in excess of $25 million at
the relevant time.
(2) (b) The
association may:
(a) (1) Employ or
retain persons that are necessary to handle claims and perform other duties of
the association.
(b) (2) Borrow funds
necessary to effect the purposes of this article in accord with the plan of
operation.
(c) (3) Sue or be
sued, and the power to sue includes the power and right to intervene as a
party as a matter of right before any court in this state that has jurisdiction
over an insolvent insurer as defined by this article.
(d) (4) Negotiate and
become a party to contracts that are necessary to carry out the purpose of this
article.
(e) (5) Perform other
acts that are necessary or proper to effectuate the purpose of this article.
(f) (6) Refund to the
member insurers in proportion to the contribution of each member insurer to an
account that amount by which the assets of the account exceed the liabilities,
if, at the end of any calendar year, the board of directors finds that the
assets of the association in any account exceed the liabilities of that account
as estimated by the board of directors for the coming year.
§33-26-9. Plan of operation.
(1) (a) The association
shall:
(a) (1) Submit to the
commissioner a plan of operation and any amendments thereto necessary or
suitable to assure the fair, reasonable and equitable administration of the
association. The plan of operation and any amendments thereto shall become
effective upon approval in writing by the commissioner.
(b) (2) If the
association fails to submit a suitable plan of operation within ninety days
following the effective date of this article or if at any time thereafter the
association fails to submit suitable amendments to the plan, the commissioner
shall, after notice and hearing, adopt and promulgate such reasonable rules as
are necessary or advisable to effectuate the provisions of this article. Such
rules shall continue in force until modified by the commissioner or superseded
by a plan submitted by the association and approved by the commissioner. All
such rules shall be promulgated in accordance with the provisions of chapter
twenty-nine-a of this code.
(2) (b) All member
insurers shall comply with the plan of operation.
(3) (c) The plan of
operation shall:
(a) (1) Establish the
procedures whereby all the powers and duties of the association under section
eight of this article will be performed.
(b) (2) Establish
procedures for handling assets of the association.
(c) (3) Establish the
amount and method of reimbursing members of the board of directors under
section seven of this article.
(d) (4) Establish
procedures by which claims may be filed with the association and establish
acceptable forms of proof of covered claims. Notice of claims to the
receiver of the insolvent insurer shall be deemed notice to the association or
its agent and a list of such claims shall be periodically submitted to the
association or similar organization in another state by the receiver
(e) (5) Establish
regular places and times for meetings of the board of directors.
(f) (6) Establish
procedures for records to be kept of all financial transactions of the
association, its agents and the board of directors.
(g) (7) Provide that
any member insurer aggrieved by a final action or decision of the association
may appeal to the commissioner within thirty days after the action or decision.
(h) (8) Establish the
procedures whereby selections for the board of directors will be submitted to
the commissioner.
(i) (9) Contain
additional provisions necessary or proper for the execution of the powers and
duties of the association.
(4) (d) The plan of
operation may provide that any or all powers and duties of the association,
except those under subdivision (3), subsection (a), and subdivision (2),
subsection (b), section eight of this article 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 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 article.
§33-26-10. Duties and powers of commissioner.
(1) (a) The
commissioner shall:
(a) (1) Notify the
association of the existence of an insolvent insurer not later than three business
days after he or she receives notice of the determination of the
insolvency.
(b) (2) Upon request
of the board of directors, provide the association a statement of the net
direct written premiums of each member insurer.
(2) (b) The
commissioner may:
(a) (1) Require that
the association notify the insureds of the insolvent insurer and any other
interested parties of the determination of insolvency and of their rights under
this article. Such 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 shall be
sufficient.
(b) (2) 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. Such fine shall not exceed five percent of the unpaid
assessment per month, except that no fine shall be less than $100 per month.
(c) (3) Revoke the
designation of any servicing facility if he or she finds that
claims are being handled unsatisfactorily.
(3) (c) Any final
order of the commissioner under this article shall be subject to judicial
review as provided by section fourteen, article two of this chapter.
§33-26-11. Effect of paid claims.
(1) (a) Any person
recovering under this article shall be deemed to have assigned his the
person’s rights under the policy to the association to the extent of his
the person’s recovery from the association. Every insured or claimant
seeking the protection of this article shall cooperate with the association to
the same extent as such person would have been required to cooperate with the
insolvent insurer. The association shall have no cause of action against the
insured of the insolvent insurer for any sums it has paid out except such
causes of action as the insolvent insurer would have had if such sums had been
paid by the insolvent insurer and except as provided in subsection (b) of
this section. In the case of an insolvent insurer operating on a plan
whereby insurance policies with assessment liability have been issued to
insureds, payments of claims by the association shall not operate to reduce the
liability of such insureds to the receiver, liquidator or statutory
successor for unpaid assessments.
(2) (b) The association
shall have the right to recover from the following persons all amounts paid by
the association on behalf of such person, whether for indemnity or defense or
otherwise:
(1) Any insured whose net worth
on December 31 of the year immediately preceding the date the insurer becomes
an insolvent insurer exceeds $25 million: Provided,
That an insured’s net worth on such date shall be deemed to include the
aggregate net worth of the insured and all of its subsidiaries and affiliates
as calculated on a consolidated basis: Provided,
however, That this provision shall
not apply to any claim for benefits under a workers’ compensation insurance
policy required by chapter twenty-three of this code; and
(2) Any person who is an
affiliate of the insolvent insurer.
(c) The association and any
association similar to the association in another state shall be recognized as
claimants in the liquidation of an insolvent insurer for any amounts paid by
them on covered claims obligations as determined under this article or similar
laws in other states and shall receive dividends and any other distributions at
the priority set forth in the section nineteen-a, article ten of this chapter.
The receiver, liquidator or statutory successor of an insolvent insurer
shall be bound by determinations of covered claim eligibility under this
article and by settlements of covered claims made by the
association or a similar organization in another state, subject to the
approval of the court having jurisdiction of the receivership. The court
having jurisdiction shall grant such claims priority equal to that to which the
claimant would have been entitled, in the absence of this article, against the
assets of the insolvent insurer. The expenses of the association or similar
organization in handling claims shall be accorded the same priority as the
receiver’s expenses.
(3) (d) The
association shall periodically file with the receiver or the liquidator
of the insolvent insurer statements of the covered claims paid by the
association and estimates of anticipated claims against the association which
shall preserve the rights of the association against the assets of the
insolvent insurer.
§33-26-12. Nonduplication of recovery Exhaustion
of other coverage; deductible reimbursement.
(1) Any person having a
claim against a solvent insurer under any provision in an insurance policy
other than a policy of an insolvent insurer, which is also a covered claim, is
required to exhaust first his or her right under the solvent insurer’s policy.
Any amount payable on a covered claim under this article shall be reduced by
the amount of any recovery under the solvent insurer’s policy
(a) Any person having a claim
under an insurance policy, whether or not it is a policy issued by a member
insurer, and the claim under such other policy arises from the same facts,
injury, or loss that gave rise to the covered claim against the association, shall
be required first to exhaust all coverage provided by any such policy. Any
amount payable on a covered claim under this article shall be reduced by the
full applicable limits stated in such other insurance policy and the
association shall receive a full credit for such stated limits or, where there
are no applicable stated limits, the claim shall be reduced by the total
recovery. Notwithstanding the foregoing, no person shall be required to exhaust
any right under the policy of an insolvent insurer.
(1) A claim under a policy
providing liability coverage to a person who may be jointly and severally
liable with or a joint tortfeasor with the person covered under the policy of
the insolvent insurer that gives rise to the covered claim shall be considered
to be a claim arising from the same facts, injury or loss that gave rise to the
covered claim against the association.
(2) A claim under an insurance
policy shall also include, for purposes of this section:
(A) A claim against a health
maintenance organization, a hospital plan corporation or a professional health
service corporation; and
(B) Any amount payable by or on
behalf of a self-insurer.
(3) To the extent that the
association’s obligation is reduced by the application of this section, the
liability of the person insured by the insolvent insurer’s policy for the claim
shall be reduced in the same amount.
(2) (b) Any person
having a claim which may be recovered under more than one Insurance Guaranty
Association or its equivalent shall seek recovery first from the association of
the place of residence of the insured except that if it is a first party claim
for damage to property with a permanent location, he or she shall seek recovery
first from the association of the location of the property, and if it is a
workers’ compensation claim, the person shall seek recovery first from the
association of the residence of the claimant. Any recovery under this article
shall be reduced by the amount of the recovery from any other insurance
guaranty association or its equivalent.
(c) To the extent the association pays any deductible claim
for which the insurer would have been entitled to reimbursement from the
insured, the association shall be entitled to the full amount of the
reimbursement and available collateral as provided under this subsection to the
extent necessary to reimburse the association.
Reimbursements paid to the association pursuant to this subsection shall
not be treated as distributions or as early access payments. To the extent that the association pays a
deductible claim that is not reimbursed either from collateral or by insured
payments, or incurred expenses in connection with large deductible policies
that are not reimbursed under this subsection, the association shall have an
exclusive cause of action against the insured, including the right to enforce
against the insured the rights of the insurer with respect to any obligation of
the insured to reimburse the insurer for deductibles or pay claims within a
deductible. Further, the fund is vested
with a first lien in any collateral provided by the insured to the insolvent
insurer to secure the insured’s performance, to the extent of claims paid by
the association, which lien can be perfected by notice to the liquidator.
Nothing in this subsection limits any rights of the association that may
otherwise exist under applicable law to obtain reimbursement from insureds for
claims payments made by the association under policies of the insurer or for
the association’s related expenses.
§33-26-13. Prevention of insolvencies.
To aid in the detection and
prevention of insurer insolvencies:
(1) It shall be the duty of the
board of directors, upon majority vote, to notify the commissioner of any
information indicating that any member insurer may be insolvent or in a
financial condition hazardous to the policyholders or the public
(2) The board of directors may,
upon majority vote, request that the commissioner order an examination of any
member insurer which the board in good faith believes may be in a financial
condition hazardous to the policyholders or the public. Within thirty days of
the receipt of such request, the commissioner shall begin such examination. The
examination may be conducted as a national association of Insurance
Commissioners’ examination or may be conducted by such persons as the
commissioner designates. The cost of such examination shall be paid by the
association and the examination report shall be treated as are other
examination reports. In no event shall such examination report be released to
the board of directors prior to its release to the public, but this shall not
preclude the commissioner from complying with subdivision (3) of this section.
The commissioner shall notify the board of directors when the examination is
completed. The request for an examination shall be kept on file by the
commissioner but it shall not be open to public inspection prior to the release
of the examination report to the public
(3) It shall be the duty of the
commissioner to report to the board of directors when he has reasonable cause
to believe that any member insurer examined or being examined at the request of
the board of directors may be insolvent or in a financial condition hazardous
to the policyholders or the public
(4) The board of directors may,
upon majority vote, make reports and recommendations to the commissioner upon
any matter germane to the solvency, liquidation, rehabilitation or conservation
of any member insurer. Such reports and recommendations shall not be considered
public documents
(5) The board of directors may,
upon majority vote, make recommendations to the commissioner for the detection
and prevention of insurer insolvencies
(6) The board of directors shall,
at the conclusion of any insurer insolvency in which the association was
obligated to pay covered claims, prepare a report on the history and causes of
such insolvency, based on the information available to the association, and
submit such report to the commissioner
(1) The board of directors may,
upon majority vote, make recommendations to the commissioner on matters
generally related to improving or enhancing regulation for solvency.
(2) At the conclusion of any
domestic insurer insolvency in which the association was obligated to pay covered
claims, the board of directors may, upon majority vote, prepare a report on the
history and causes of the insolvency, based on the information available to the
association and submit the report to the commissioner.
(3) Reports and recommendations provided
under this section shall not be considered public documents subject to
disclosure under chapter twenty-nine-b of this code.
§33-26-14. Examination of association; financial report.
The association shall be
subject to examination and regulation by the commissioner. The board of
directors shall submit, not later than March thirtieth April 30
of each year, a financial report for the preceding calendar year, in a form
approved by the commissioner.
§33-26-18. Stay of proceedings; reopening of default
judgments.
(a) All proceedings in which
the insolvent insurer is a party or obligated to defend a party in any court in
this state shall, subject to waiver by the association in specific cases
involving covered claims, be stayed for six months and such additional
time as may be determined by the court from the date the proof of claim
provided for in section eighteen, article ten of this chapter is filed with the
receiver the insolvency is determined to permit proper defense by
the association of all pending causes of action.
(b) The liquidator, receiver or
statutory successor of an insolvent insurer covered by this article shall
permit access by the association, or its authorized representative to such of
the insolvent insurer’s records that are necessary for the association in
carrying out its functions under this article with regard to covered claims. In
addition, the liquidator, receiver or statutory successor shall provide the
association or its representative with copies of such records upon the request
by the association and at the expense of the association.
(c) As to any covered claims
arising from a judgment under any order, decision, verdict or finding based on
the default of the insolvent insurer or its wrongful failure to defend an
insured, the association either on its own behalf or on behalf of such insured
may apply to have such judgment, order, decision, verdict or finding set aside
by the same court or administrator that made such judgment, order, decision,
verdict or finding and shall be permitted to defend against such claim on the
merits.
NOTE: The purpose of this bill is
to update the West Virginia Guaranty Association Act.
Strike-throughs indicate language
that would be stricken from a heading or the present law, and underscoring
indicates new language that would be added.