Chapter 453 |
2025 -- S 0600 SUBSTITUTE A Enacted 07/02/2025 |
A N A C T |
RELATING TO INSURANCE -- VOLUNTARY RESTRUCTURING OF SOLVENT INSURERS |
Introduced By: Senators Sosnowski, Murray, and Britto |
Date Introduced: March 06, 2025 |
It is enacted by the General Assembly as follows: |
SECTION 1. Section 27-14.5-1 of the General Laws in Chapter 27-14.5 entitled |
"Voluntary Restructuring of Solvent Insurers" is hereby amended to read as follows: |
27-14.5-1. Definitions. |
As used in this chapter: |
(1) “Applicant” means a commercial run-off insurer applying under § 27-14.5-4. |
(2) “Assessment deficit” means the amount that the assessment for the previous year under |
§ 27-14.5-5 is less than, and “assessment surplus” is the amount that the assessment for the previous |
year exceeds: |
(i) The run-off insurer’s proportionate share of regulatory expenditure for the previous |
year, if the run-off insurer was domiciled in Rhode Island on March 15 of the previous year; or |
(ii) The redomestication expenditure for the previous year attributable to the run-off |
insurer, if the run-off insurer was not domiciled in Rhode Island on March 15 of the previous year. |
(3) “Assumption policyholder” means a policyholder whose policy is reinsured under an |
assumption reinsurance agreement between the applicant and a reinsurer. |
(4) “Assumption reinsurance agreement” has the meaning given in § 27-53.1-3(b), subject |
to the following: |
(i) The agreement may be conditioned upon the court’s entry of an implementation order. |
(ii) If any policy subject to the agreement is protected through a guarantee association, then |
the assuming insurer must have been and be licensed, and must have been and be a member of the |
guarantee association, in all states known to the applicant in which either: (A) Any property covered |
under the policy has a permanent situs; or (B) The policyholder resided while the policy was in |
force. |
(5) “Class of creditors” means: |
(i) All voting policyholders, including those without known claims; |
(ii) Voting creditors, other than policyholders; or |
(iii) Any separate class of creditors as the court may in its discretion determine should |
approve the commutation plan. |
(6) “Commercial run-off insurer” means: |
(i) A run-off insurer domiciled in Rhode Island, or the protected cell of the insurer, whose |
business, excluding all business subject to an assumption reinsurance agreement, includes only the |
reinsuring of any line(s) of business other than life and/or the insuring of any line(s) of business |
other than life, workers’ compensation, and personal lines insurance; or |
(ii) A Rhode Island domestic insurance company, or the protected cell of that insurer, |
meeting the requirements of subsection (i) whose liabilities consist of commercial liabilities |
transferred to said company with the approval of the commissioner and pursuant to the regulations |
issued by the department under this chapter. The amount of the commercial liabilities transferred |
must be less than or equal to the amount of assets transferred to the newly formed or re-activated |
company. |
(7) “Commissioner” means the director of the department or designee. |
(8) “Commutation plan” means a plan for extinguishing the outstanding liabilities of a |
commercial run-off insurer. |
(9) “Creditor” means: |
(i) Any person who has a claim against the applicant; or |
(ii) A policyholder other than an assumption policyholder. |
(10) “Department” means the department of business regulation. |
(11) “Guarantee association” means a guarantee association or foreign guarantee |
association, as those terms are defined in § 27-14.3-3(10), that is potentially obligated with respect |
to the applicant’s policies. |
(12) “Implementation order” means an order under § 27-14.5-4(c). |
(13) “Insurer” has the meaning given in § 27-14.3-3(12). |
(14) “Person” means an individual, corporation, partnership, association, joint stock |
company, trust, unincorporated organization, or any similar entity or any combination of the |
foregoing acting in concert. |
(15) “Personal lines insurance” means insurance issued for personal, family, or household |
purposes. |
(16) “Policy” means a contract of insurance or a contract of reinsurance. |
(17) “Policyholder” means an insured or a reinsured of the insurer. |
(18) “Proportionate share” means, for a particular run-off insurer as of December 31 of the |
previous year, the ratio of: |
(i) The gross assets of that run-off insurer; to |
(ii) The gross assets of all run-off insurers, other than those that were not domiciled in |
Rhode Island on March 15 of that calendar year. |
(19) “Redomestication expenditure” means, for any calendar year: |
(i) The amount that the department’s expenditures attributable to the regulation of run-off |
insurers increases as a result of any run-off insurer redomiciling to Rhode Island on or after March |
15 of that year; less |
(ii) Filing fees, examination costs, and any other fees in relation to insurance regulation in |
this state paid to this state by run-off insurers that redomiciled to Rhode Island on or after March |
15 of that year, but excluding any premium taxes. |
(20) “Regulatory expenditure” means, for any calendar year: |
(i) The amount of the department’s expenditures attributable to the regulation of run-off |
insurers domiciled in Rhode Island on March 15 of that year; less |
(ii) Filing fees, examination costs, and any other fees in relation to insurance regulation in |
this state paid to this state by run-off insurers domiciled in Rhode Island on March 15 of that year, |
but excluding any premium taxes. |
(21) “Run-off insurer” means an insurer that: |
(i) Is domiciled in Rhode Island; |
(ii) Has liabilities under policies for property and casualty lines of business; |
(iii) Has ceased underwriting new business; and |
(iv) Is only renewing ongoing business to the extent required by law or by contract. |
(22) “Voluntary restructuring” means the act of reorganizing the legal ownership, |
operational, governance, or other structures of a solvent insurer, for the purpose of enhancing |
organization and maximizing efficiencies, and shall include the transfer of assets and liabilities to |
or from an insurer, or the protected cell of an insurer pursuant to an insurance business transfer |
plan. A voluntary restructuring under this chapter may be approved by the commissioner only if, |
in the commissioner’s opinion, it would have no material adverse impact on the insurer’s |
policyholders, reinsureds, or claimants of policies subject to the restructuring. |
SECTION 2. Sections 27-34-3, 27-34-5, 27-34-8 and 27-34-11.5 of the General Laws in |
Chapter 27-34 entitled "Rhode Island Property and Casualty Insurance Guaranty Association" are |
hereby amended to read as follows: |
27-34-3. Scope. |
This chapter shall apply to all kinds of direct 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. For purposes of this section, “financial guaranty insurance” includes any |
insurance under which loss is payable upon proof of occurrence of any of the following events to |
the damage of an insured claimant or obligee: |
(i) Failure of any obligor or obligors on any debt instrument or other monetary obligation, |
including common or preferred stock, to pay when due the principal, interest, dividend, or purchase |
price of such instrument or obligation, whether failure is the result of a financial default or |
insolvency and whether or not the obligation is incurred directly or as a guarantor by, or on behalf |
of, another obligor which has also defaulted; |
(ii) Changes in the level of interest rates whether short-term or long-term, or in the |
difference between interest rates existing in various markets; |
(iii) Changes in the rate of exchange of currency, or from the inconvertibility of one |
currency into another for any reason; |
(iv) Changes in the value of specific assets or commodities, or price levels in general; |
(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. For purposes of this section, “credit insurance” means insurance on accounts |
receivable; |
(5) Insurance Other than coverages that may be set forth in a cybersecurity insurance |
policy, 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, except that portion of the marine protection and indemnity |
insurance covering liability of the insured for personal injury, illness, or death to employees and |
insurance covering pleasure craft; |
(8) Any transaction or combination of transactions between a person, including affiliates |
of the person, and an insurer, including affiliates of such insurer, which involves the transfer of |
investment or credit risk unaccompanied by transfer of insurance risk; |
(9) Any insurance provided by or guaranteed by government; or |
(10) Any transaction or combination of transactions between a protected cell and the |
general account or another protected cell of a protected cell company organized under the Protected |
Cell Companies Act, chapter 64 of this title, as those terms are defined in this chapter. |
27-34-5. Definitions. |
As used in this chapter: |
(1) “Account” means any one of the three (3) accounts created by § 27-34-6. |
(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 on December |
31 of the year immediately preceding the date the insurer becomes an insolvent insurer. |
(3) “Association” means the Rhode Island insurance guaranty association created under § |
27-34-6. |
(4) “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 pre-insolvency basis. |
(5) “Assumed claims transaction” means the following: |
(i) Policy obligations that have been assumed by the insolvent insurer, prior to the entry of |
a final order of liquidation, through a merger between the insolvent insurer and another entity |
obligated under the policies, and for which assumption consideration has been paid to the applicable |
guaranty associations, if the merged entity is a non-member insurer; |
(ii) Policy obligations that have been assumed by the insolvent insurer, prior to the entry |
of a final order of liquidation, pursuant to a plan, approved by the domestic commissioner of the |
assuming insurer, which: |
(A) Transfers the direct policy obligations and future policy renewals from one insurer to |
another insurer; and |
(B) For which assumption consideration has been paid to the applicable guaranty |
associations, if the assumption is from a non-member insurer. |
(C) For purposes of this section, the term non-member insurer also includes a self-insurer, |
non-admitted insurer, and risk retention group; or |
(iii) An assumption reinsurance transaction in which all of the following has occurred: |
(A) The insolvent insurer assumed, prior to the entry of a final order of liquidation, the |
claim or policy obligations of another insurer or entity obligated under the claims or policies; |
(B) The assumption of the claim or policy obligations has been approved, if such approval |
is required, by the appropriate regulatory authorities; and |
(C) As a result of the assumption, the claim or policy obligations became the direct |
obligations of the insolvent insurer through a novation of the claims or policies. |
(6) “Assumption consideration” shall mean the consideration received by a guaranty |
association to extend coverage to the policies assumed by a member insurer from a non-member |
insurer in any assumed claims transaction including liabilities that may have arisen prior to the date |
of the transaction. The assumption consideration shall be in an amount equal to the amount that |
would have been paid by the assuming insurer during the three (3) calendar years prior to the |
effective date of the transaction to the applicable guaranty associations if the business had been |
written directly by the assuming insurer. |
(i) In the event that the amount of the premiums for the three-year (3) period cannot be |
determined, the assumption consideration will be determined by multiplying one hundred thirty |
percent (130%) against the sum of the unpaid losses, loss adjustment expenses, and incurred but |
not reported losses, as of the effective date of the assumed claims transaction, and then multiplying |
such sum times the applicable guaranty association assessment percentage for the calendar year of |
the transaction. |
(ii) The funds paid to a guaranty association shall be allocated in the same manner as any |
assessments made during the three-year (3) period. The guaranty association receiving the |
assumption consideration shall not be required to recalculate or adjust any assessments levied |
during the prior three (3) calendar years as a result of receiving the assumption consideration. |
Assumption consideration paid by an insurer may be recouped in the same manner as other |
assessments made by a guaranty association. |
(7) “Claimant” means any person instituting a covered claim; provided that no person who |
is an affiliate of the insolvent insurer may be a claimant. |
(8) “Commissioner” means the director of the department of business regulation or his or |
her the commissioner’s designee. |
(9) “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 any person, directly or indirectly, owns, controls, holds |
with the power to vote, or holds proxies representing, ten percent (10%) 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. |
(10) “Covered claim” means: |
(i) An unpaid claim, including one for unearned premiums, submitted by a claimant, which |
arises out of and is within the coverage and subject to the applicable limits of an insurance policy |
to which this chapter applies, if the policy was issued by an insurer that becomes an insolvent |
insurer after the effective date of this chapter and the policy was either issued by the insurer or |
assumed by the insurer in an assumed claims transaction, and: |
(A) 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 |
(B) The claim is a first-party claim for damage to property with a permanent location in |
this state. |
(ii) Covered claim includes claim obligations that arose through the issuance of an |
insurance policy by a member insurer, which are later allocated, transferred, merged into, novated, |
assumed by, or otherwise made the sole responsibility of a member or non-member insurer if: |
(A) The original member insurer has no remaining obligations on the policy after the |
transfer; |
(B) A final order of liquidation with a finding of insolvency has been entered against the |
insurer that assumed the member’s coverage obligations by a court of competent jurisdiction in the |
insurer’s state of domicile; |
(C) The claim would have been a covered claim, as defined in this section, if the claim had |
remained the responsibility of the original member insurer and the order of liquidation had been |
entered against the original member insurer, with the same claim submission date and liquidation |
date; and |
(D) In cases where the member’s coverage obligations were assumed by a non-member |
insurer, the transaction received prior regulatory or judicial approval. |
(iii) Covered claim includes claim obligations that were originally covered by a non- |
member insurer including, but not limited to, a self-insurer, non-admitted insurer or risk retention |
group, but subsequently became the sole direct obligation of a member insurer before the entry of |
a final order of liquidation with a finding of insolvency against the member insurer by a court of |
competent jurisdiction in its state of domicile, if the claim obligations were assumed by the member |
insurer in a transaction of one of the following types: |
(A) A merger in which the surviving company was a member insurer immediately after the |
merger; |
(B) An assumption reinsurance transaction that received any required approvals from the |
appropriate regulatory authorities; or |
(C) A transaction entered into pursuant to a plan approved by the member insurer’s |
domiciliary regulator. |
(iv) Except as provided elsewhere in this section, “covered claim” shall not include: |
(A) Any amount awarded as punitive or exemplary damages; |
(B) Any amount sought as a return of premium under any retrospective rating plan; |
(C) Any amount due any reinsurer, insurer, insurance pool, or 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 claim for any amount due any reinsurer, insurer, insurance pool, underwriting |
association, health maintenance organization, hospital plan corporation, professional health service |
corporation, or self-insurer may be asserted against a person insured under a policy issued by an |
insolvent insurer other than to the extent the claim exceeds the association obligation limitations |
set forth in § 27-34-8; |
(D) Any claims excluded pursuant to § 27-34-11.5 due to the high net worth of an insured; |
(E) Any first party claims by an insured that is an affiliate of the insolvent insurer; |
(F) 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; |
(G) 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; |
(H) Any claims for interest; or |
(I) Any claim filed with the association or a liquidator for protection afforded under the |
insured’s policy for incurred-but-not-reported losses. |
(11) “Cybersecurity insurance” means for purposes of this section includes first and third- |
party coverage, in a policy or endorsement, written on a direct, admitted basis for losses and loss |
mitigation arising out of or relating to data privacy breaches, unauthorized information network |
security intrusions, computer viruses, ransomware, cyber extortion, identity theft, and similar |
exposures. |
(11)(12) “Insolvent insurer” means an insurer licensed to transact insurance in this state |
either at the time the policy was issued; when the obligation with respect to the covered claim was |
assumed under an assumed claims transaction; or when the insured event occurred, and against |
whom a final order of liquidation has been entered after the effective date of this chapter with a |
finding of insolvency by a court of competent jurisdiction in the insurer’s state of domicile. |
(12)(13) “Insured” means any named insured, any additional insured, any vendor, lessor, |
or any other party identified as an insured under the policy. |
(13)(14) “Line of credit” means an irrevocable stand-by commitment whereby the |
association or member insurer and a qualified financial institution or group of qualified financial |
institutions enter into a formal and binding contract in which the qualified financial institution or |
group of qualified financial institutions agree to lend a certain amount of money within a stated |
period of time. |
(14)(15)(i) “Member insurer” means any person who: |
(A) Writes any kind of insurance to which this chapter applies, under § 27-34-3, including |
the exchange of reciprocal or interinsurance contracts; |
(B) Is licensed to transact insurance in this state; and |
(C) Is not otherwise excepted from membership by statute or regulation. |
(ii) 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 chapter |
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 that |
became an insolvent insurer prior to the termination or expiration of the insurer’s license. |
(15)(16) “Net direct written premiums” means direct gross premiums written in this state |
on insurance policies to which this chapter applies, including policy and membership fees, less the |
following amounts: (i) Return premiums; (ii) Premiums on policies not taken; and (iii) Dividends |
paid or credited to policyholders on that direct business. “Net direct written premiums” does not |
include premiums on contracts between insurers or reinsurers. |
(16)(17) “Novation” means that the assumed claim or policy obligations became the direct |
obligations of the insolvent insurer through consent of the policyholder and that thereafter the |
ceding insurer or entity initially obligated under the claims or policies is released by the |
policyholder from performing its claim or policy obligations. Consent may be express or implied |
based upon the circumstances, notice provided, and conduct of the parties. |
(17)(18) “Ocean marine insurance” means any form of insurance, regardless of the name, |
label, or marketing designation of the insurance policy, that insures against maritime perils or risks |
and other related perils or risks, which are usually insured against by traditional marine insurance, |
such as hull and machinery, marine builders risk, and marine protection and indemnity. Perils and |
risk insured against include without limitation: loss, damage, expense, or legal liability of the |
insured for loss, damage, or expense arising out of or incident to ownership, operation, chartering, |
maintenance, use, repair, or construction of any vessel, craft, or instrumentality in use in ocean or |
inland waterways for commercial purposes, including liability of the insured for personal injury, |
injury, illness, or death or for loss or damage to the property of the insured or another person. |
(18)(19) “Person” means any individual, aggregation of individuals, corporation, |
partnership, or other entity. |
(19)(20) “Qualified financial institution” shall have the same meaning as the term in § 27- |
1.1-3. |
(20)(21) “Receiver” means liquidator, rehabilitator, conservator, or ancillary receiver, as |
the context requires. |
(21)(22) “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. |
(22)(23) “Self-insured retention” means: |
(i) Any fund or other arrangement to pay claims other than by an insurance company; or |
(ii) Any arrangement under which an insurance company has no obligation to pay claims |
on behalf of an insured if it is not reimbursed by the insured. |
27-34-8. Powers and duties of the association. |
(a) The association shall: |
(1)(i) Be obligated to pay covered claims existing prior to the order of liquidation; arising |
within sixty (60) days after the order of liquidation or before the policy expiration date if less than |
sixty (60) days after the order of liquidation or before the insured replaces the policy or causes its |
cancellation if the insured does so within sixty (60) days of the order of liquidation. The obligations |
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 coverage; |
(B) An amount not exceeding ten thousand dollars ($10,000), per policy for a covered |
claim for the return of unearned premium; |
(C) An amount not exceeding one million dollars ($1,000,000) for all first-party property |
loss claims arising from a single occurrence under a policy covering commercial or residential |
property for all other covered claims for insolvencies occurring after January 1, 2026. An amount |
not exceeding five hundred thousand dollars ($500,000), per claimant for all other covered claims |
for insolvencies occurring on or after January 1, 2008, and an amount not exceeding three hundred |
thousand dollars ($300,000) per claimant for all other covered claims for insolvencies occurring |
prior to January 1, 2008. |
(D) In no event shall the association be obligated to pay an amount in excess of five |
hundred thousand dollars ($500,000) for all first- and third-party claims under a policy or |
endorsement providing, or that is found to provide, cybersecurity insurance coverage and arising |
out of or related to a single insured event, regardless of the number of claims made or the number |
of claimants. |
(ii) 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 provision of this chapter, a covered claim shall not include a claim filed |
with the guaranty association after the final date set by the court for the filing of claims against the |
liquidator or receiver of an insolvent insurer. For the purpose of filing a claim under this subsection, |
notice of claims to the liquidator of the insolvent insurer shall be deemed notice to the association |
or its agent and a list of claims shall be periodically submitted to the association or association |
similar to the association in another state by the liquidator. |
(iii) Any obligation of the association to defend an insured shall cease upon the |
association’s payment or tender of an amount equal to the lesser of the association’s covered claim |
obligation limit or the applicable policy limit; |
(2) Be deemed the insurer to the extent of its obligation on the covered claims and to that |
extent, subject to the limitation provided in this chapter, 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 covered claim obligations to the |
extent paid by the association. The association shall not be deemed the insolvent insurer for the |
purpose of conferring jurisdiction; |
(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 association under subdivision (a)(1) 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. |
A member insurer may not 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 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, 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. 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 |
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. Deferred assessments shall |
be paid when the payment will not reduce capital or surplus below required minimums. 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 association and adjust, compromise, settle, and |
pay covered claims to the extent of the association’s obligation and deny all other claims. The |
association shall pay claims in any order that it may deem reasonable, including the payment of |
claims as they are received from the claimants or in groups or categories of claims. The association |
shall have the right to appoint and to direct legal counsel retained under liability insurance policies |
for the defense of covered claims and to appoint and direct other service providers for covered |
services; |
(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)(i) 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 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 |
order of liquidation, the association shall have the right to assert the following defenses, in addition |
to the defenses available to the insurer: |
(A) 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 into within one hundred twenty (120) days prior to the entry of an |
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. |
(B) 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)(A), 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 chapter. |
(C) The association shall have the right to assert any statutory 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. |
(ii) 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; |
(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; |
(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 chapter; |
(9)(i) The association shall obtain a line of credit for the benefit of each account, in an |
amount not to exceed the applicable maximum to ensure the immediate availability of funds for |
purposes of future claims and expenses attributable to an insurer insolvency in that account. The |
line of credit shall be obtained from qualified financial institutions. The line of credit shall provide |
for a thirty-day (30) notice of termination or nonrenewal to the commissioner and the association |
and shall provide funding to the association within three (3) business days of receipt of written |
notice from the commissioner of an insolvent insurer in that account. Each member insurer upon |
receipt of notice from the association shall make immediate payment for its proportionate share of |
the amount borrowed based on the premium for the preceding calendar year. The maximum line of |
credit or preinsolvency assessment for each account shall be subject to prior review and approval |
by the commissioner at the time of origination. |
(ii) If the association cannot obtain a line of credit, the association may 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 (a)(3) to ensure the immediate |
availability of funds for the purposes of future claims and expenses attributable to an insurer |
insolvency. |
Any amount drawn under any line of credit shall be considered a payment toward the |
member insurer’s assessment provided for in subdivision (a)(3). |
The member insurer shall provide funding to the association under the line of credit within |
three (3) business days of receipt of a written request from the association for a draw-down under |
the line of credit. |
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 association 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-day (30) notice to the association and the commissioner that the line is being terminated |
or not renewed. |
(iii) 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; |
(10) Submit, not later than ninety (90) days after the end of the association’s fiscal year, a |
financial report for the preceding fiscal year in a form approved by the commissioner. |
(b) The association may: |
(1) Employ or retain persons as are necessary to handle claims and perform other duties of |
the association; |
(2) Borrow funds necessary to effect the purposes of this chapter in accordance 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 association in any account |
exceed the liabilities of that account as estimated by the board of directors for the coming year. |
(c) Suits involving the association: |
(1) Except for actions by the receiver, all actions relating to or arising out of this chapter |
against the association shall be brought in the courts in this state. The courts shall have exclusive |
jurisdiction over all actions relating to or arising out of this chapter against the association. |
(2) The exclusive venue in any action by or against the association is in the Providence |
county superior court. The association may, at its option, waive this venue as to specific actions. |
27-34-11.5. Net worth exclusion. |
(a) For purposes of this section, “high net worth insured” shall mean any insured, excluding |
state and local governments, whose net worth exceeds fifty million dollars ($50,000,000) on |
December 31 of the year prior to the year in which the insurer becomes an insolvent insurer; |
provided that an insured’s net worth on that 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. |
(b)(1) The association shall not be obligated to pay any first-party claims by a high net |
worth insured. |
(2) The association shall have the right to recover from the high net worth insured all |
amounts paid by the association to or on behalf of such insured, whether for indemnity, defense, or |
otherwise. |
(3) The association may also, at its sole discretion and without assumption of any ongoing |
duty to do so, pay any cybersecurity insurance obligations covered by a policy or endorsement of |
an insolvent company on behalf of a high net worth insured as defined in subsection (a) of this |
section. In that case, the association shall recover from the high net worth insured under this section |
all amounts paid on its behalf, all allocated claim adjusted expenses related to such claims, the |
association’s attorneys’ fees, and all court costs in any action necessary to collect the full amount |
to the association’s reimbursement under this section. |
(c) The association shall not be obligated to pay any claim that would otherwise be a |
covered claim that 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 that state’s applicable law, and which association has denied coverage to that |
claimant on that basis. |
(d) The association shall establish reasonable procedures subject to the approval of the |
commissioner for requesting financial information from insureds on a confidential basis for |
purposes of applying this section, provided that the financial information may be shared with any |
other association similar to the association and the liquidator for the insolvent insurer on the same |
confidential basis. Any request to an insured seeking financial information must advise the insured |
of the consequences of failing to provide the financial information. If an insured refuses to provide |
the requested financial information where it is requested and available, the association may, until |
such time as the information is provided, provisionally deem the insured to be a high net worth |
insured for the purpose of denying a claim under subsection (b). |
(e) In any lawsuit contesting the applicability of this section where the insured has refused |
to provide financial information under the procedure established pursuant to subsection (d), the |
insured shall bear the burden of proof concerning its net worth at the relevant time. If the insured |
fails to prove that its net worth at the relevant time was less than the applicable amount, the court |
shall award the association its full costs, expenses, and reasonable attorney’s fees in contesting the |
claim. |
SECTION 3. This act shall take effect on January 1, 2026. |
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LC001777/SUB A |
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