Chapter
161
2005 -- S 0040 SUBSTITUTE A
Enacted 07/06/05
A N A C T
RELATING TO INSURANCE
Introduced By: Senators Walaska, and Alves
Date Introduced: January 12, 2005
It is
enacted by the General Assembly as follows:
SECTION
1. Section 27-34-8 of the General Laws in Chapter 27-34 entitled "Rhode
Island
Insurers' Insolvency Fund" is hereby amended to read as follows:
27-34-8.
Powers and duties of the fund. -- (a) The fund shall:
(1) Be obligated to pay covered claims existing prior to the determination of
the
insolvency
of a member insurer or arising within sixty (60) days after the determination
of the
insolvency
or before the policy expiration date if less than sixty (60) days after the
determination
of
insolvency or before the insured replaces the policy or causes its cancellation
if he or she does
so
within sixty (60) days of the determination. The obligations shall be satisfied
by paying to the
claimant
an amount as follows:
(i) The full amount of a covered claim for benefits under a workers'
compensation
insurance
coverage;
(ii) An amount not exceeding ten thousand dollars ($10,000), per policy for a
covered
claim
for the return of unearned premium;
(iii) An amount not exceeding three hundred thousand dollars ($300,000), per
claimant
for all
other covered claims. In no event shall the fund 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 provision of this chapter, a covered claim
shall not
include
any claim filed with the fund after the final date set by the court for the
filing of claims
against
the liquidator or receiver of an insolvent insurer. The fund shall pay only
that amount of
each
unearned premium, which is in excess of one hundred dollars ($100);
(2) Be deemed the insurer to the extent of its obligation on the covered claims
and to that
extent
shall have all of the rights, duties and obligations of the insolvent insurer
as if the insurer
had not
become insolvent;
(3) 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
obligations
of the
fund under subdivision (1) of this subsection subsequent to an insolvency, the
expenses of
handling
covered claims subsequent to an insolvency and other expenses authorized by
this
chapter.
The assessments of each member insurer shall be in the proportion that the net
direct
written
premiums of the member insurer for the calendar year preceding the assessment
on the
kinds of
insurance in the account bears to the net direct written premiums of all member
insurers
for the
calendar year preceding the assessment on the kinds of insurance in the
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 one year on any account an amount greater
than two
percent
(2%) of that member insurer's net direct written premiums for the calendar year
preceding
the
assessment on the kinds of insurance in the account. If the maximum assessment,
together
with the
other assets of the fund in any account, does not provide in any one year in
any account
an
amount sufficient to make all necessary payments from that account, each member
insurer
shall be
assessed the additional amount that must be obtained to make all necessary
payments of
the
underfunded account from the other two accounts, subject to the same limitation
of two
percent
(2%) of that member insurer's net direct written premiums for the calendar year
preceding
the
assessment on the kinds of insurance in the account, subject to the limitation
that the ability to
assess
from different accounts to make all necessary payments from any underfunded
account
shall
lapse on December 31, 1998 2006. The additional assessments shall
be considered loans by
and
between the separate accounts. Amounts borrowed under this subsection shall be
paid back to
the
separate accounts from which they were borrowed, out of assets, including, but
not limited to,
existing
and future assessments in the account receiving the loan. An interest charge
shall be
levied
on all amounts borrowed under this subsection based on the average prime rate
of interest
for each
year the money remains unpaid. If the amounts borrowed remain unpaid on the
seventh
yearly
anniversary as a result of the inability of the borrowing account to make
repayment, then
the
amount borrowed and interest which is not repaid, starting with the principal
and interest of
the
first year, shall be considered uncollectible. The funds available shall be
prorated and the
unpaid
portion shall be paid as soon after this as funds become available. The fund
shall pay
claims
in any order which it deems reasonable, including the payment of claims as they
are
received
from the claimants or in groups or categories of claims. The fund 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. 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 the deferment, or,
at the
election
of any company, credited against future assessments.
(4) Investigate claims brought against the fund and adjust, compromise, settle,
and pay
covered
claims to the extent of the fund'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 the settlements, releases, and judgments may be properly
contested;
(5) Notify the insured as the commissioner directs under section
27-34-10(b)(1);
(6) 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;
(7) Reimburse each servicing facility for obligations of the fund paid by the
facility and
for
expenses incurred by the facility while handling claims on behalf of the fund
and shall pay the
other
expenses of the fund authorized by this chapter; and
(8) (i) Obtain an irrevocable line of credit agreement from each member insurer
in an
amount
not to exceed the member insurer's maximum assessment pursuant to subdivision
(3) of
this
subsection to ensure the immediate availability of funds for the purposes of
future claims and
expenses
attributable to an insurer insolvency;
(ii) Any amount drawn from the fund under any line of credit shall be
considered a
payment
toward the member insurer's assessment provided for in subdivision (3) of this
subsection;
(iii) The member insurer shall provide funding to the fund under the line of
credit within
three
(3) business days of receipt of a written request from the fund for a draw-down
under the
line of
credit;
(iv) The line of credit agreement shall be subject to prior review and approval
by the
commissioner
at the time of origination and any subsequent renewal. It shall include any
commercially
reasonable provisions the fund or the commissioner may deem advisable,
including
a
provision that the line of credit is irrevocable or for a stated period of time
and provides for
thirty
(30) day notice to the fund and the commissioner that the line is being
terminated or not
renewed;
(v) If a line of credit is not given as provided for in this section, the
member insurer shall
be
responsible for the payment of an assessment of up to the member's
proportionate share of the
applicable
maximum as set forth in this subsection which shall be paid into a
pre-insolvency
assessment
fund in each account.
(b) The fund may:
(1) Employ or retain those persons necessary to handle claims and perform other
duties
of the
fund;
(2) Borrow funds necessary to effect the purposes of this chapter in accord
with the plan
of
operation;
(3) Sue or be sued;
(4) Negotiate and become a party to any contracts necessary to carry out the
purpose of
this
chapter;
(5) Perform any other acts necessary or proper to effectuate the purpose of
this chapter;
and
(6) Refund to the member insurers in proportion to the contribution of each
member
insurer
to that 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 fund
in any account
exceed
the liabilities of that account as estimated by the board of directors for the
coming year.
SECTION 2. This act
shall take effect upon passage.
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LC00487/SUB A
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