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PAG LIN
1 1 HOUSE FILE 2218
1 2
1 3 AN ACT
1 4 CREATING A COUNTY AND STATE MUTUAL INSURANCE GUARANTY
1 5 ASSOCIATION AND PROVIDING PENALTIES.
1 6
1 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 8
1 9 Section 1. NEW SECTION. 518C.1 TITLE.
1 10 This chapter shall be known and may be cited as the "Iowa
1 11 County and State Mutual Insurance Guaranty Association Act".
1 12 Sec. 2. NEW SECTION. 518C.2 SCOPE.
1 13 This chapter applies to direct insurance authorized to be
1 14 written by an insurer licensed to transact insurance business
1 15 in this state under chapter 518 or 518A.
1 16 Sec. 3. NEW SECTION. 518C.3 DEFINITIONS.
1 17 As used in this chapter unless the context otherwise
1 18 requires:
1 19 1. "Association" means the Iowa county and state mutual
1 20 insurance guaranty association established pursuant to section
1 21 518C.4.
1 22 2. "Claimant" means an insured making a first-party claim
1 23 or a person instituting a liability claim against an insolvent
1 24 insurer. "Claimant" does not include a person who is an
1 25 affiliate of an insolvent insurer.
1 26 3. "Commissioner" means the commissioner of insurance.
1 27 4. a. "Covered claim" means an unpaid claim, including
1 28 one for unearned premiums, which arises out of and is within
1 29 the coverage and subject to the applicable limits of an
1 30 insurance policy subject to this chapter which is issued by an
1 31 insurer, if the insurer becomes an insolvent insurer on or
1 32 after July 1, 2000, and one of the following conditions
1 33 exists:
1 34 (1) The claimant is a resident of this state at the time
1 35 of the event giving rise to the covered claim. For a claimant
2 1 other than an individual, the residence of the claimant is the
2 2 state in which its principal place of business is located.
2 3 (2) The claim is a first-party claim by the claimant for
2 4 damage to property permanently located in this state.
2 5 b. "Covered claim" does not include any of the following:
2 6 (1) An amount due a reinsurer, insurer, insurance pool,
2 7 underwriting association, or other group assuming insurance
2 8 risks, as subrogation, contribution, indemnity recoveries, or
2 9 otherwise.
2 10 (2) An amount that constitutes the portion of a claim that
2 11 is within an insured's deductible or self-insured retention.
2 12 (3) An amount due an attorney, adjuster, or witness as a
2 13 fee for services rendered to the insolvent insurer.
2 14 (4) An amount that constitutes a fine, penalty, interest,
2 15 or punitive or exemplary damages.
2 16 (5) An amount that is an obligation owed to or on behalf
2 17 of an affiliate of, as defined in section 521A.1, an insolvent
2 18 insurer.
2 19 Notwithstanding subparagraphs (1) through (5), a person is
2 20 not prevented from presenting a noncovered claim to the
2 21 insolvent insurer or its liquidator. However, the noncovered
2 22 claim shall not be asserted against any other person,
2 23 including the person to whom benefits were paid or the insured
2 24 of the insolvent insurer, except to the extent that the claim
2 25 is outside the coverage of the policy issued by the insolvent
2 26 insurer.
2 27 5. "Insolvent insurer" means an insurer against which a
2 28 final order of liquidation with a finding of insolvency has
2 29 been entered on or after July 1, 2000, by a court of competent
2 30 jurisdiction of this state.
2 31 6. "Insurer" means a person licensed to transact insurance
2 32 business in this state under either chapter 518 or chapter
2 33 518A either at the time the policy was issued or when the
2 34 insured event occurred.
2 35 7. "Net direct written premiums" means direct gross
3 1 premiums written in this state on insurance policies subject
3 2 to this chapter, less return premiums and dividends paid or
3 3 credited to policyholders on such direct business. "Net
3 4 direct written premiums" does not include premiums on a
3 5 contract between insurers or reinsurers.
3 6 8. "Person" means an individual, corporation, partnership,
3 7 association, or voluntary organization.
3 8 Sec. 4. NEW SECTION. 518C.4 ASSOCIATION ESTABLISHED.
3 9 An Iowa county and state mutual insurance guaranty
3 10 association is established as a nonprofit unincorporated legal
3 11 entity. An insurer shall be a member of the association as a
3 12 condition of the insurer's authority to transact insurance
3 13 business in this state. The association shall perform its
3 14 functions under a plan of operation established and approved
3 15 pursuant to section 518C.7 and shall exercise its powers
3 16 through a board of directors established under section 518C.5.
3 17 Except as otherwise provided in such plan of operation, an
3 18 annual or special meeting of members of the association may be
3 19 held on call as directed by the association's board of
3 20 directors or by the commissioner of insurance. Written notice
3 21 shall be given not less than ten days prior to the meeting by
3 22 ordinary mail to each member at the member's principal office
3 23 as shown by the records in the commissioner's office. The
3 24 notice shall state the time and place, and in the case of a
3 25 special meeting, the purpose of the meeting. Members may vote
3 26 in person and ten members present in person shall constitute a
3 27 quorum for the transaction of any business.
3 28 Sec. 5. NEW SECTION. 518C.5 BOARD OF DIRECTORS.
3 29 The board of directors of the association shall consist of
3 30 the officers and directors of the mutual insurance association
3 31 of Iowa or its successor association. An officer and director
3 32 of the mutual insurance association of Iowa shall serve in the
3 33 same capacity on the association board as the officer or
3 34 director serves the mutual insurance association of Iowa or
3 35 its successor association.
4 1 Sec. 6. NEW SECTION. 518C.6 DUTIES AND POWERS OF THE
4 2 ASSOCIATION.
4 3 1. The association is subject to all of the following:
4 4 a. (1) The association is obligated to pay a covered
4 5 claim as follows:
4 6 (a) A covered claim existing prior to the final order of
4 7 liquidation and arising within thirty days after the final
4 8 order of liquidation.
4 9 (b) A covered claim existing before the policy expiration
4 10 date if the expiration date is less than thirty days after the
4 11 final order of liquidation.
4 12 (c) A covered claim existing before the insured replaces
4 13 the policy or causes its cancellation, if the insured replaces
4 14 or cancels the policy within thirty days of the final order of
4 15 liquidation.
4 16 (2) An obligation under subparagraph (1) is satisfied by
4 17 paying to the claimant an amount as follows:
4 18 (a) An amount not exceeding ten thousand dollars per
4 19 policy for a covered claim for the return of unearned premium.
4 20 (b) An amount not exceeding the lesser of the policy
4 21 limits or three hundred thousand dollars per claim for all
4 22 covered claims for all damages arising out of any one or a
4 23 series of accidents, occurrences, or incidents, regardless of
4 24 the number of persons making claims or the number of
4 25 applicable policies.
4 26 b. The association is obligated to pay covered claims
4 27 subject to a limitation as established by the rights, duties,
4 28 and obligations under the policy issued by the insolvent
4 29 insurer.
4 30 c. The association shall assess member insurers amounts
4 31 necessary to pay the obligations of the association under
4 32 paragraphs "a" and "b" subsequent to an insolvency, the
4 33 expenses of handling covered claims subsequent to an
4 34 insolvency, the cost of examinations under section 518C.12,
4 35 and other expenses as authorized by this chapter. The
5 1 assessment of each member insurer shall be in the proportion
5 2 that the net direct written premiums of the member insurer for
5 3 the preceding calendar year bear to the net direct written
5 4 premiums of all member insurers for the preceding calendar
5 5 year. Each member insurer shall be notified of the assessment
5 6 not less than thirty days before it is due. A member insurer
5 7 shall not be assessed in any year an amount greater than two
5 8 percent of that member insurer's net direct written premiums
5 9 for the preceding calendar year. If the maximum assessment,
5 10 together with the other assets of the association, does not
5 11 provide in any one year an amount sufficient to make all
5 12 necessary payments, the funds available shall be prorated and
5 13 the unpaid portion shall be paid as soon as funds become
5 14 available. The association may exempt or defer, in whole or
5 15 in part, the assessment of any member insurer if the
5 16 assessment would cause the member insurer's financial
5 17 statement to reflect amounts of surplus less than the minimum
5 18 amounts required for a certificate of authority to transact
5 19 insurance business. A member insurer serving as a servicing
5 20 facility pursuant to this section may set off against any
5 21 assessment, authorized payments made on covered claims and
5 22 expenses incurred in the payment of such claims by the member
5 23 insurer. All overdue and unpaid assessments shall draw
5 24 interest at the rate of seven percent per annum.
5 25 The association may pursue and retain for its own account
5 26 salvage and subrogation recoverable on paid covered claim
5 27 obligations. An obligation of the association to defend an
5 28 insured shall cease upon the association's payment of an
5 29 amount equal to the lesser of the association's covered claim
5 30 obligation or the applicable policy limits.
5 31 d. The association shall investigate claims filed with the
5 32 association and adjust, compromise, settle, defend, and pay
5 33 covered claims to the extent of the association's obligation
5 34 and deny all other claims.
5 35 e. The association shall notify such persons as the
6 1 commissioner directs under section 518C.8, subsection 2,
6 2 paragraph "a".
6 3 f. The association shall process claims through its
6 4 employees or through one or more member insurers or other
6 5 persons designated as servicing facilities. Designation of a
6 6 servicing facility is subject to the approval of the
6 7 commissioner, but such designation may be declined by a member
6 8 insurer.
6 9 g. The association shall reimburse each servicing facility
6 10 for obligations of the association paid by the facility and
6 11 for expenses incurred by the facility while handling claims on
6 12 behalf of the association, and pay the other expenses of the
6 13 association authorized by this chapter.
6 14 2. The association may do any of the following:
6 15 a. Appear in, defend, and appeal an action on a claim
6 16 brought against the association.
6 17 b. Employ or retain persons necessary to handle claims and
6 18 perform other duties of the association.
6 19 c. Borrow funds necessary to effect the purposes of this
6 20 chapter in accord with the plan of operation.
6 21 d. Sue or be sued.
6 22 e. Negotiate and become a party to contracts necessary to
6 23 carry out the purposes of this chapter.
6 24 f. Perform such other acts necessary or proper to
6 25 effectuate the purposes of this chapter.
6 26 3. The board of directors, in its discretion, may from
6 27 time to time refund excess amounts to member insurers that are
6 28 not needed for current or projected liabilities of a
6 29 particular insolvency. The amount of each refund is equal to
6 30 the net direct written premiums of the member insurer for the
6 31 preceding calendar year divided by the net written premiums of
6 32 all member insurers for the preceding calendar year,
6 33 multiplied by the total amount to be refunded to all members.
6 34 At the discretion of the board of directors, an assessment or
6 35 refund of any member insurer in an amount not to exceed
7 1 twenty-five dollars may be waived.
7 2 Sec. 7. NEW SECTION. 518C.7 PLAN OF OPERATION.
7 3 1. The association shall submit a plan of operation to the
7 4 commissioner, together with any amendments necessary or
7 5 suitable to ensure the fair, reasonable, and equitable
7 6 administration of the association. The plan of operation and
7 7 any amendment become effective upon written approval by the
7 8 commissioner.
7 9 If the association fails to submit a suitable plan of
7 10 operation within ninety days following the effective date of
7 11 this chapter, or if at any time after submission of a suitable
7 12 plan the association fails to submit suitable amendments to
7 13 the plan, the commissioner, after notice and opportunity for
7 14 hearing, shall adopt rules necessary or advisable to
7 15 effectuate the provisions of this Act. Such rules shall
7 16 continue in force until modified by the commissioner or
7 17 superseded by a plan submitted by the association and approved
7 18 by the commissioner.
7 19 2. A member insurer shall comply with the association's
7 20 plan of operation.
7 21 3. The plan of operation shall provide for all of the
7 22 following:
7 23 a. Procedures for the performance of the duties and
7 24 execution of the powers of the association under section
7 25 518C.6.
7 26 b. Procedures for managing the assets of the association.
7 27 c. Procedures by which claims may be filed with the
7 28 association and acceptable forms of proof of covered claims.
7 29 Notice of claims to the receiver or liquidator of the
7 30 insolvent insurer constitutes notice to the association or its
7 31 agent, and a list of such claims shall be periodically
7 32 submitted to the association or similar organization in
7 33 another state by the receiver or liquidator.
7 34 d. The place and time for meetings of the board of
7 35 directors, as necessary.
8 1 e. Procedures for keeping records of all financial
8 2 transactions of the association, its agents, and the board of
8 3 directors.
8 4 f. That any member insurer aggrieved by a final action or
8 5 decision of the association may appeal the action or decision
8 6 to the commissioner within thirty days after the action or
8 7 decision.
8 8 g. Additional provisions necessary or proper for the
8 9 performance of the duties and execution of the powers of the
8 10 association.
8 11 4. The plan of operation may delegate any or all duties
8 12 and powers of the association, except those under section
8 13 518C.6, subsection 1, paragraph "c", and subsection 2,
8 14 paragraph "c", to a person with the approval of both the board
8 15 of directors and the commissioner. Such delegation shall only
8 16 be made to a person extending protection which is not
8 17 substantially less favorable and effective than that provided
8 18 by this chapter. Such person shall be reimbursed as a
8 19 servicing facility and shall be paid for the performance of
8 20 any other functions of the association.
8 21 Sec. 8. NEW SECTION. 518C.8 DUTIES AND POWERS OF THE
8 22 COMMISSIONER.
8 23 1. The commissioner shall do both of the following:
8 24 a. Notify the association of the existence of an insolvent
8 25 insurer not later than three days after the commissioner
8 26 receives notice of the determination of the insolvency.
8 27 b. Upon request of the board of directors, provide the
8 28 association with a statement of the net direct written
8 29 premiums of each member insurer.
8 30 2. The commissioner may do any of the following:
8 31 a. Require that the association notify the insureds of the
8 32 insolvent insurer and any other interested parties of the
8 33 determination of insolvency and of their rights under this
8 34 chapter. The notification shall be by regular mail at their
8 35 last known address, but if sufficient information for
9 1 notification by mail is not available, notice by publication
9 2 in a newspaper of general circulation is sufficient.
9 3 b. Suspend or revoke, after notice and opportunity for
9 4 hearing, the certificate of authority to transact insurance
9 5 business in this state of any member insurer which fails to
9 6 pay an assessment when due or fails to comply with the plan of
9 7 operation. As an alternative, the commissioner may levy a
9 8 penalty on any member insurer which fails to pay an assessment
9 9 when due. Such penalty shall not exceed five percent of the
9 10 unpaid assessment per month, except that a penalty shall not
9 11 be less than one hundred dollars per month.
9 12 c. Revoke the designation of any servicing facility if the
9 13 commissioner finds claims are being processed
9 14 unsatisfactorily.
9 15 3. Judicial review of an action of the commissioner may be
9 16 sought pursuant to chapter 17A.
9 17 Sec. 9. NEW SECTION. 518C.9 EFFECT OF PAID CLAIMS.
9 18 1. A person recovering under a claim made pursuant to this
9 19 chapter is deemed to have assigned the person's rights under
9 20 the policy to the association to the extent of the person's
9 21 recovery from the association. A claimant seeking the
9 22 protection of this chapter shall cooperate with the
9 23 association to the same extent as such claimant would have
9 24 been required to cooperate with the insolvent insurer. The
9 25 association has no cause of action against a claimant for any
9 26 sums the association has paid out.
9 27 2. The association or a similar entity in another state
9 28 shall be recognized as claimants in the liquidation of an
9 29 insolvent insurer for any amounts paid by the association or
9 30 similar entity on covered claim obligations as determined
9 31 under this chapter or under similar law in another state. The
9 32 association or similar entity shall receive dividends and any
9 33 other distributions at the priority set forth under the
9 34 applicable liquidation law. The receiver, liquidator, or
9 35 statutory successor of an insolvent insurer is bound by
10 1 determinations of covered claim eligibility under this chapter
10 2 and by settlements of covered claims made by the association
10 3 or a similar organization in another state. The court having
10 4 jurisdiction shall grant such claims priority equal to that
10 5 which the claimant would have been entitled in the absence of
10 6 this chapter against the assets of the insolvent insurer. The
10 7 expenses of the association or similar organization in
10 8 handling claims shall be accorded the same priority as the
10 9 liquidator's expenses.
10 10 3. The association shall periodically file with the
10 11 receiver, liquidator, or statutory successor of the insolvent
10 12 insurer statements of the covered claims paid by the
10 13 association and estimates of anticipated claims on the
10 14 association, which statements shall preserve the rights of the
10 15 association against the assets of the insolvent insurer.
10 16 Sec. 10. NEW SECTION. 518C.10 NONDUPLICATION OF
10 17 RECOVERY.
10 18 1. A person having a claim under another policy, which
10 19 claim arises out of the same facts which give rise to a
10 20 covered claim, is first required to exhaust the person's
10 21 rights under the other policy. An amount recovered or
10 22 recoverable by a person under another insurance policy shall
10 23 be credited against the liability of the association under
10 24 section 518C.6, subsection 1, paragraph "a". For purposes of
10 25 this section, another insurance policy means a policy issued
10 26 by an insurance company, whether a member insurer or not,
10 27 which policy insures against any of the types of risks insured
10 28 by an insurance company authorized to transact insurance
10 29 business under chapter 518 or 518A, or comparable statutes of
10 30 another state, except those types of risks set forth in
10 31 chapters 508 and 514.
10 32 2. A person having a claim which may be recovered under
10 33 more than one insurance guaranty association or an equivalent
10 34 entity shall seek recovery first from the association of the
10 35 place of residence of the insured. However, if the claim is a
11 1 first-party claim for damage to property with a permanent
11 2 location, recovery shall be first sought from the association
11 3 or equivalent entity of the state in which the property is
11 4 permanently located. An amount recovered from any other
11 5 guaranty association or equivalent entity shall be subtracted
11 6 from the maximum liability of the Iowa county and state mutual
11 7 insurance guaranty association under section 518C.6,
11 8 subsection 1, paragraph "a".
11 9 Sec. 11. NEW SECTION. 518C.11 PREVENTION OF
11 10 INSOLVENCIES.
11 11 1. a. The board of directors, upon majority vote and for
11 12 purposes of detecting and preventing insurer insolvencies, may
11 13 do either of the following:
11 14 (1) Make recommendations to the commissioner for the
11 15 detection and prevention of insurer insolvencies.
11 16 (2) Respond to a request by the commissioner to discuss
11 17 and make recommendations regarding the status of a member
11 18 insurer whose financial condition may be hazardous to
11 19 policyholders or the public.
11 20 b. The board of directors, at the conclusion of a domestic
11 21 insurer insolvency, may prepare a report based on the
11 22 information available to the association on the history and
11 23 causes of the insolvency. The report may be submitted to the
11 24 commissioner.
11 25 2. Recommendations and reports made pursuant to subsection
11 26 1, paragraph "a", subparagraph (2), are not public records
11 27 under chapter 22.
11 28 Sec. 12. NEW SECTION. 518C.12 EXAMINATION OF THE
11 29 ASSOCIATION.
11 30 The association is subject to examination and regulation by
11 31 the commissioner. The board of directors, not later than
11 32 March 30 of each year, shall submit a financial report for the
11 33 preceding calendar year in a form approved by the
11 34 commissioner.
11 35 Sec. 13. NEW SECTION. 518C.13 TAX EXEMPTION.
12 1 The association is exempt from the payment of fees and
12 2 taxes levied by this state or a subdivision of the state
12 3 except for taxes levied on property.
12 4 Sec. 14. NEW SECTION. 518C.14 RECOGNITION OF ASSESSMENTS
12 5 IN RATES.
12 6 The rates and premiums charged for insurance policies to
12 7 which this chapter applies shall include amounts sufficient to
12 8 recoup a sum equal to the amounts paid to the association by
12 9 the member insurer less any amounts returned to the member
12 10 insurer by the association. Such rates and premiums shall not
12 11 be deemed excessive as a result of including such recoupment
12 12 allowances.
12 13 Sec. 15. NEW SECTION. 518C.15 IMMUNITY.
12 14 Liability and a cause of action shall not arise against any
12 15 member insurer, the association, its agents or employees, the
12 16 board of directors, the commissioner, or the commissioner's
12 17 representatives, for any reasonable action taken in the
12 18 performance of duties and execution of powers as provided for
12 19 under this chapter.
12 20 Sec. 16. NEW SECTION. 518C.16 STAY OF PROCEEDINGS.
12 21 A proceeding to which the insolvent insurer is a party or
12 22 in which the insolvent insurer is obligated to defend a party
12 23 shall be stayed from the date of the insolvency to and
12 24 including the date set as the deadline for the filing of
12 25 claims against the insolvent insurer or its receiver.
12 26 However, upon application, the court having jurisdiction of
12 27 the receivership may lengthen or shorten the period, either as
12 28 to all claims or as to any particular claim. The association
12 29 may waive such stay as to specific cases involving covered
12 30 claims.
12 31 The association, on its own behalf or on behalf of the
12 32 insured, with respect to a covered claim based on the default
12 33 of an insurer who is or who becomes insolvent, or based on the
12 34 failure of an insurer to defend an insured, is entitled to set
12 35 the default aside and defend such claim on its merits.
13 1 Sec. 17. NEW SECTION. 518C.17 ACTIONS AGAINST THE
13 2 ASSOCIATION.
13 3 An action against the association shall be brought against
13 4 it in the association's own name and only in the Polk county
13 5 district court. Service of original notice in an action
13 6 against the association may be made on any officer of the
13 7 association or upon the commissioner of insurance on its
13 8 behalf. The commissioner shall promptly transmit any notice
13 9 served upon the commissioner to the association.
13 10 Sec. 18. NEW SECTION. 518C.18 TIMELY FILING OF CLAIMS.
13 11 Notwithstanding any other provision of this chapter, a
13 12 covered claim shall not include a claim filed with the
13 13 association after the final date set by the court for the
13 14 filing of claims against the insolvent insurer or its
13 15 receiver.
13 16 Sec. 19. NEW SECTION. 518C.19 PROHIBITED ADVERTISING.
13 17 A person, in connection with the sale of an insurance
13 18 policy, shall not advertise or publish that claims under the
13 19 insurance policy are subject to this chapter or that such
13 20 claims will be paid by the association.
13 21
13 22
13 23
13 24 BRENT SIEGRIST
13 25 Speaker of the House
13 26
13 27
13 28
13 29 MARY E. KRAMER
13 30 President of the Senate
13 31
13 32 I hereby certify that this bill originated in the House and
13 33 is known as House File 2218, Seventy-eighth General Assembly.
13 34
13 35
14 1
14 2 ELIZABETH ISAACSON
14 3 Chief Clerk of the House
14 4 Approved , 2000
14 5
14 6
14 7
14 8 THOMAS J. VILSACK
14 9 Governor
Text: HF02217 Text: HF02219 Text: HF02200 - HF02299 Text: HF Index Bills and Amendments: General Index Bill History: General Index
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