WEST virginia legislature
2017 regular session
for
By Delegates
Westfall, White, Hamrick, Hartman and Frich
[
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
and to provide 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 is not 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
constitutes 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 the 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” does
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 that date shall be considered 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 does 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
that date shall be considered 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 does 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 that law and which
association has denied coverage to that claimant on that basis: Provided, That this exclusion does 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 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 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 the 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, may 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 constitutes a single
claim, regardless of the number of claims made, or the number of claimants.
In no event may 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 may 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 considered the insurer only to the extent of its obligation on the covered
claims and to that extent, subject to the limitations provided in this article,
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 may not be considered 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 may be paid to shareholders or policyholders. Deferred assessments
shall be paid when the payment does 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 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 may
appoint and 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 determined 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 may 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 may 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 may 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 may 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 that 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 consider 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
promulgate such reasonable rules for legislative approval as are
necessary or advisable to effectuate the provisions of this article. Such
The 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 proposed 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 (c)(3), subsection (1)(a),
and subdivision (b)(2), subsection (2)(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 may
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 the 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 The
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 is
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 The
fine shall may not exceed five percent of the unpaid assessment
per month, except that no fine shall may 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 is 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 is considered 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 that person would have been required to cooperate
with the insolvent insurer. The association shall have has 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 the 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 may not operate to reduce the liability of such
the insureds to the receiver, liquidator or statutory successor
for unpaid assessments.
(2) (b) The association may recover from the following
persons all amounts paid by the association on behalf of the 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 considered 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 may 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 first 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 may
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 is 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 is 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 may 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 has 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 may 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. The bill modifies the
scope and construction of the act. It adds and amends definitions; clarifies
and adds powers, duties and rights of association. The bill modifies provisions
concerning effect of paid claims, exhaustion of coverage, prevention of
insolvencies and stay of proceedings. It changes due date of annual financial
report and limits covered claims. The bill expands association’s right to
recover and be reimbursed. The bill provides for confidentiality of financial
information and exempts certain reports and recommendations from Freedom of
Information 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.