October 12, 2005, Introduced by Reps. Mortimer, Gaffney and Hune and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 7911, 7918, 7921, 7925, 7931, 7941, 7945,
8111, 8124, and 8134 (MCL 500.7911, 500.7918, 500.7921, 500.7925,
500.7931, 500.7941, 500.7945, 500.8111, 500.8124, and 500.8134),
sections 7911 and 7921 as amended by 1993 PA 200, section 7918 as
amended by 2001 PA 182, sections 7925, 7931, and 7945 as amended by
1980 PA 41, section 7941 as amended by 1990 PA 137, section 8111 as
amended by 1992 PA 182, section 8124 as added by 1989 PA 302, and
section 8134 as amended by 1998 PA 279, and by adding sections
8124a, 8125a, and 8133a.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 7911. (1) To implement this chapter, there shall be
maintained within this state, by all insurers authorized to
transact in this state insurance other than life or disability
insurance, except the Michigan basic property insurance association
created pursuant to section 2920, an association of those insurers
to be known as the property and casualty guaranty association,
hereafter referred to as the "association". Each insurer shall be a
member of the association as a condition of its authority to
continue to transact insurance in this state.
(2) An insurer from which insurance has been or may be
procured
in this state solely by virtue of
sections 1901 to 1955
chapter 19 shall not be considered to be an insurer authorized to
transact insurance in this state for the purposes of this chapter.
(3)
The association shall be is subject to the
requirements
of
this chapter , and
chapter 81 ,
and section 3172a, but
shall
is not be subject to the other chapters of this act. The
association shall be subject to other laws of this state to the
extent that it would be subject to those laws if it were an insurer
organized and operating under chapter 50, to the extent that those
other laws are consistent with this chapter.
Sec. 7918. (1) The association may borrow funds when necessary
to implement this act.
(2) The association, either in its own name or through a
servicing facility, may sue or be sued, and may use the courts to
assert or defend any rights the association may have under this
chapter, to the extent necessary to fully exercise its rights and
perform its duties under, and to implement, this chapter.
(3) The association may retain and employ legal counsel in its
discretion to represent the association in all respects.
(4) The association may bring an action against any third
party administrator, agent, attorney, or other representative of
the insolvent insurer to obtain custody and control of all claims
information, including all files, records, and electronic data
related to an insolvent company that are appropriate or necessary
for the association, or a similar association in other states, to
carry out its duties under this act. The association shall have the
absolute right through emergency equitable relief to obtain custody
and control of all claims information in the custody or control of
the third party administrator, agent, attorney, or other
representative of the insolvent insurer, regardless of where the
information may be physically located. In bringing the action, the
association is not subject to any defense, lien, possessory or
otherwise, or other legal or equitable ground for refusal to
surrender claims information that might be asserted against the
liquidator of the insolvent insurers. If litigation is necessary
for the association to obtain custody of the claims information
requested and it results in the relinquishment of claims
information to the association after refusal to provide the
information in response to a written demand, the court shall award
the association its costs, expenses, and reasonable attorney fees
incurred in bringing the action. This section does not affect the
rights and remedies that the custodian of the claims information
may have against the insolvent insurers, so long as those rights
and remedies do not conflict with the rights of the association to
custody and control of the claims information under this act.
(5) (4)
Upon request of the commissioner, consent of the
association, and appointment by the court, the association may act
as deputy receiver in delinquency proceedings under chapter 81.
Sec. 7921. As used in this chapter:
(a)
"Insolvent insurer" means an insurer for which a
domiciliary
receiver has been appointed by a final order in this
state
or in a reciprocal state, as defined in section 8103 for the
liquidation
of the insurer and which has been a member insurer 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. The date on which the order becomes
final
shall be the date on which the receiver is appointed for
purposes
of this chapter all appeals
of the finding of insolvency
are exhausted. If the finding of insolvency in the order of
liquidation is not appealed, the order of liquidation shall be
considered final on the date the order was issued.
(b) "Member insurer" means an insurer required to be a member
of the association pursuant to section 7911.
Sec. 7925. (1) "Covered claims" means obligations of an
insolvent
insurer which that
meet all of the following
requirements:
(a) Arise out of the insurance policy contracts of the
insolvent insurer issued to residents of this state or are payable
to residents of this state on behalf of insureds of the insolvent
insurer.
(b) Were unpaid by the insolvent insurer.
(c) Are presented as a claim to the receiver in this state or
the asssociation
association on or before the last date fixed for
the filing of claims in the domiciliary delinquency proceedings.
(d) Were incurred or existed before, at the time of, or within
30 days after the date the receiver was appointed.
(e) Arise out of policy contracts of the insolvent insurer
issued for all kinds of insurance except life and disability
insurance.
(f) Arise out of insurance policy contracts issued on or
before the last date on which the insolvent insurer was a member
insurer.
(2) Covered claims shall not include any of the following:
(a) Obligations to refund unearned premiums above the first
$500.00 of unearned premiums from each person from any 1 insolvent
insurer. The maximum amount of unearned premiums which shall
constitute a covered claim shall be adjusted annually to reflect
changes in the cost of living under rules prescribed by the
commissioner. A refund in an amount less than $50.00 shall not be
made for unearned premiums.
(b) Obligations incurred after the expiration date of the
insurance policy, after the insurance policy has been replaced by
the insured, or after the insurance policy has been canceled by the
association as provided in this chapter.
(c)
Obligations which arise arising out of sections
2001 to
2050, or similar provisions of law in another jurisdiction.
(3)
Covered claims shall not include obligations to an
insurer,
insurance pool, underwriting association, or to a person
who
has a net worth greater than 1/10 of 1% of the aggregate
premiums
written by member insurers in this state in the preceding
calendar
year. any amount due any
reinsurer, insurer, insurance
pool, underwriting association, health maintenance organization,
health care corporation, or self-insurer as subrogation recoveries,
contribution, indemnification, or other obligation. A claim for any
amount due any reinsurer, insurer, insurance pool, underwriting
association, health maintenance organization, health care
corporation, or self-insurer shall not be brought against a person
insured under a policy issued by the insolvent insurer unless the
claim exceeds the association's obligation limitations under
subsection (6).
(4) Covered claims shall not include obligations for any first
party or third party claim by or against an insured whose net worth
exceeds $25,000,000.00 on December 31, or on the last date of the
insured's fiscal period if that is other than December 31, of the
year immediately preceding the date the insurer becomes an
insolvent insurer. In determining net worth on this date, an
insured's net worth shall include the aggregate net worth of the
insured and all of its subsidiaries and affiliates as calculated on
a consolidated basis. The $25,000,000.00 net worth limit shall be
adjusted annually to reflect the aggregate annual percentage change
in the consumer price index since the previous adjustment, rounded
to the nearest $10,000.00. The effective date of the adjustment
shall be January 1 of each year.
(5) (4)
Covered claims shall not include any portion of a
claim which
that is in excess of an applicable limit provided in
the insurance policy.
(6) (5)
Covered claims shall not include that portion of a
claim,
other than a worker's compensation claim , which is in
excess
of 1/20 of 1% of the aggregate premiums written by member
insurers
in this state in the preceding calendar year. or a claim
for personal protection insurance benefits under section 3107 that
is in excess of $5,000,000.00. The $5,000,000.00 claim cap shall be
adjusted annually to reflect the aggregate annual percentage change
in the consumer price index since the previous adjustment, rounded
to the nearest $10,000.00. The effective date of the adjustment
shall be January 1 of each year and shall apply to claims made on
or after that date.
(7) (6)
Covered claims shall not include adjustment fees and
expenses, attorneys' fees and expenses, court costs, interest, or
bond premiums if the fees, expenses, costs, interest, or premiums
were incurred by the insolvent insurer before the receiver was
appointed.
(8) As used in this section:
(a) "Consumer price index" means the consumer price index for
all urban consumers in the US city average, as most recently
reported by the United States department of labor, bureau of labor
statistics, and as certified by the commissioner.
(b) "Control" means that term as defined in section 115(b)(i).
(c) "Health care corporation" means that term as defined in
section 105 of the nonprofit health care corporation reform act,
1980 PA 350, MCL 550.1105.
(d) "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.
Sec.
7931. (1) The association shall pay and discharge
covered
claims for the amount by which each covered claim exceeds
$10.00.
The association may pay or discharge the
covered claims
directly, through a servicing facility, or through a contract for
reinsurance or transfer of liabilities with a member insurer, in
accordance with the plan of operation.
(2) The association shall be a party in interest in all
proceedings involving a covered claim and shall have the same
rights as the insolvent insurer would have had if not in
receivership, including the right to appear, defend, and appeal a
claim in a court of competent jurisdiction; to receive notice of,
investigate, adjust, compromise, settle, and pay a covered claim;
and to investigate, handle, and deny a noncovered claim. The
association shall not have a cause of action against the insureds
of the insolvent insurer for any sums it has paid out, except those
causes
of action which that
the insolvent insurer would have had
if the sums had been paid by the insolvent insurer, or except as
otherwise provided by this chapter.
(3) If damages or benefits are recoverable by a claimant or
insured under an insurance policy other than a policy of the
insolvent
insurer, or from the motor vehicle accident claims fund,
or
a similar fund under a
worker's compensation self-insured
program of a self-insured entity, the damages or benefits
recoverable shall be a credit against a covered claim payable under
this chapter. The claimant, insured, or self-insured entity shall
first exhaust all coverage provided by any policy or self-insured
program. If damages against an insured who is not a resident of
this state are recoverable by a claimant who is a resident of this
state,
in whole or in part, from any insolvency insurance
guaranty association or fund or its equivalent in the state where
the insured is a resident, the damages recoverable shall be a
credit against a covered claim payable under this chapter. To the
extent that the association's obligation is reduced by this
section, the liability of the person insured by the insolvent
insurer's
policy shall be reduced in the same amount. An insurer,
or
a fund may self-insured
entity, or any other person shall not
maintain an action against an insured of the insolvent insurer to
recover
an amount which that
constitutes a credit against a
covered claim under this section. An amount paid to a claimant in
excess of the amount authorized by this section may be recovered by
an action brought by the association.
(4) The association shall continue coverage for covered claims
under each insurance policy of the insolvent insurer that was in
force on the date the receiver was appointed until the insurance
policy has expired in accordance with its terms, has been replaced
by the insured, or has been canceled by the association as provided
in this chapter, but in no event for more than 30 days after the
date the receiver was appointed.
(5) The association may cancel insurance policies of the
insolvent insurer by mailing or delivering to the insured at the
last known address within this state a 10 days' written notice of
cancellation, notwithstanding a statute or policy provision to the
contrary.
Sec. 7941. (1) To the extent necessary to secure funds for the
association for payment of covered claims and for payment of
reasonable costs of administering the association, including the
cost of indemnifying members of the board of governors, other
member insurers, officers, employees, and other persons acting on
behalf of the association to the extent permitted by law and the
plan
of the operation, the association shall levy assessments
upon all member insurers. The association shall allocate its claim
payments and costs to the following 5 categories:
(a) Worker's compensation insurance.
(b) Automobile insurance.
(c) Title insurance.
(d) Fire, allied lines, farm owner's multiple peril,
homeowner's multiple peril, inland marine, earthquake, and credit
insurance.
(e) All other kinds of insurance except life and disability
insurance.
(2) Separate assessments shall be made for each category
prescribed in subsection (1). The assessment for each category
shall be used to pay the claim payments and costs allocated to that
category. The assessment for each category shall be in proportion
to the net direct premiums written, after deducting dividends paid
or credited to policyholders, by each member insurer in this state
for kinds of insurance included within each category, as reported
in the most recent annual statement available at the time of
assessment. The rate of assessment shall be a uniform percentage of
the premiums for all member insurers. The assessments shall be
remitted to and administered by the association in accordance with
the plan of operation. Each member insurer assessed shall have not
less than 30 days' advance written notice of the date the
assessment is due and payable.
(3) A member insurer shall not be assessed during a calendar
year for more than 1% of its net direct premiums written in this
state during the previous calendar year. The commissioner may
exempt a member insurer from all or part of an assessment or may
defer, in whole or in part, the assessment of a 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 exemption or deferment, dividends
shall not be declared or paid to shareholders or policyholders. If
a member insurer is exempted from all or part of an assessment, or
if an assessment against a member insurer is deferred in whole or
in part, the amount of the exemption or deferred assessment may be
assessed against the other member insurers in a manner consistent
with the basis for assessments prescribed in this section. The
commissioner may impose conditions on an exemption or deferral
which he or she considers reasonable and necessary. The state
accident
fund shall not be is not liable for any
assessment based
on
premiums written after the effective date of this 1990
amendatory
act June 29, 1990 including any assessment for an
insolvency occurring before the date of termination of its
membership in the association.
(4) The assessments shall be recognized in the rate-making
procedures for insurance rates in the same manner that expenses and
premium taxes are recognized. Unused assessments and reimbursements
from the receiver remaining in a category in excess of covered
claims and expenses allocated to that category shall be refunded by
the association to each member insurer who paid the assessments for
that category in proportion to its assessments paid. An insurer
which
that ceases to be a member of the association shall not
have
a right to a refund of an assessment previously remitted to the
association. The commissioner may revoke the certificate of
authority to transact business in this state of a member insurer
which
that fails to pay an assessment when due as provided in
this
act and after a demand has been made.
Sec.
7945. All proceedings in any court of law of this state
or administrative tribunal, including worker's compensation
proceedings, to which the insolvent insurer is a party, or in which
the insolvent insurer is obligated to defend or has assumed the
defense of a party, shall be stayed for 6 months after the date a
receiver is appointed, and for any additional time as determined by
the
court which or
administrative tribunal that has
jurisdiction
over those proceedings, to permit proper defense of all pending
causes of action.
Sec. 8111. (1) Except as provided in subsection (2), in all
proceedings and judicial review of these proceedings under sections
8109 and 8110, all records of the insurer, other documents,
insurance
bureau office of financial
and insurance services files,
and court records and papers, so far as they pertain to or are a
part of the record of the proceedings, are confidential and shall
be held by the clerk of the court in a confidential file except as
is necessary to obtain compliance therewith, unless the court,
after hearing arguments from the parties in chambers, orders
otherwise or the insurer requests that the matter be made public.
(2) Without compromising the confidentiality of the records of
the
commissioner, insurance bureau office of financial and
insurance services, or supervisor, the commissioner or his or her
supervisor may advise third parties of the existence of a
supervision order and of the supervisor's authority if considered
by either of them necessary to further the insurer's compliance
with the supervision order. The commissioner may advise third
parties of the existence of a supervision order and of facts
pertaining to the supervision order if considered necessary by the
commissioner with regard to other regulatory matters affecting the
insurer or a person or entity related to the insurer. Third parties
advised under this subsection are required to keep the existence of
a supervision confidential. As used in this subsection, "third
parties" means the following persons:
(a) Debtors and creditors of the insurer and its affiliates.
(b) Persons who hold or control assets of the insurer and its
affiliates.
(c) Reinsurers of the insurer and its affiliates.
(d) Insurance regulatory officials.
(e) Law enforcement agencies.
(f) Representatives of a guaranty association or foreign
guaranty association that may become obligated as a result of the
insolvency of the insurer. Confidentiality obligations of a
guaranty association or foreign guaranty association to the
receiver end upon the entry of an order of liquidation with a
finding of insolvency against the insurer.
Sec. 8124. (1) Upon issuance of an order appointing a
liquidator of a domestic insurer or of an alien insurer domiciled
in this state, an action at law or equity shall not be brought
against the insurer or liquidator, whether in this state or
elsewhere, and any such existing action shall not be maintained or
further presented after issuance of such order. The courts of this
state shall give full faith and credit to injunctions against the
liquidator or the company or the continuation of existing actions
against the liquidator or the company, if such injunctions are
included in an order to liquidate an insurer issued pursuant to
corresponding provisions in other states. If, in the liquidator's
judgment, protection of the estate of the insurer necessitates
intervention in an action against the insurer that is pending
outside this state, he or she may intervene in the action. The
liquidator may defend an action in which he or she intervenes under
this section at the expense of the estate of the insurer.
(2) The liquidator may, upon or after an order for
liquidation, within 2 years or such time in addition to 2 years as
applicable law may permit, institute an action or proceeding on
behalf of the estate of the insurer upon any cause of action
against which the period of limitation fixed by applicable law has
not expired at the time of the filing of the petition upon which
the order is entered. If, by agreement, a period of limitation is
fixed for instituting a suit or proceeding upon a claim, or for
filing a claim, proof of claim, proof of loss, demand, notice, or
the like, or if in a proceeding, judicial or otherwise, a period of
limitation is fixed, either in the proceeding or by applicable law,
for taking action, filing a claim or pleading, or doing any act,
and the period had not expired at the date of the filing of the
petition, the liquidator may, for the benefit of the estate, take
action or do an act required of or permitted to the insurer within
a period of 180 days subsequent to the entry of an order for
liquidation, or within such further period as is shown to the
satisfaction of the court not to be unfairly prejudicial to the
other party.
(3) A statute of limitation or defense of laches shall not run
with respect to an action against an insurer between the filing of
a petition for liquidation against an insurer and the denial of the
petition. An action against the insurer that might have been
commenced when the petition was filed may be commenced at least
within 60 days after the petition is denied.
(4)
A guaranty association or foreign guaranty association
shall
have standing to appear in a court proceeding concerning the
liquidation
of an insurer if the association is or may become
liable
to act as a result of the liquidation.
Sec. 8124a. (1) Any guaranty association or foreign guaranty
association or its designated representative has standing to appear
and may intervene as a party as a matter of right or otherwise
appear and participate in any court proceeding concerning the
rehabilitation or liquidation of an insurer if the association is
or may become liable to act as a result of the liquidation. Any
national association of guaranty associations may also intervene as
a party as a matter of right or otherwise appear and participate in
any court proceeding concerning the liquidation of an insurer if 1
or more of its member guaranty associations is or may become liable
to act as a result of the liquidation. Exercise by any guaranty
association, or its designated representative or national
association of guaranty associations, of the right to intervene
conferred under this subsection does not constitute grounds to
establish general personal jurisdiction by the courts of this
state. The intervening guaranty association, or its designated
representative or national association of guaranty associations, is
subject to the court's jurisdiction only for the limited purpose
for which it intervenes.
(2) Any guaranty association or foreign guaranty association
or its designated representative, otherwise qualified to intervene
or participate under subsection (1), may also, with or without
intervention, request in writing that the court convene a case
management conference with the liquidator and all interested
guaranty associations and foreign guaranty associations or their
designated representatives. The request shall specify the topics
that the requesting association seeks to have addressed during the
conference, and those the court will address shall be identified in
a written notice scheduling the conference. Appropriate topics for
a conference under this subsection include, but are not limited to,
the following:
(a) Transfer and administration of claims payment
responsibilities.
(b) Reimbursement of guaranty association administrative
expenses, pursuant to section 8142.
(c) The filing and administration of a plan for early access
distributions of assets pursuant to section 8134.
(d) The collection and distribution of large deductible
reimbursements and administration of collateral and related matters
under section 8133a.
(e) The reporting of data to the liquidator by guaranty
associations.
(f) The timing and amount of any interim distributions.
(g) Reinsurance collections on claims paid by guaranty
associations.
(h) Causes of action against persons responsible for the
insolvency of the insurer.
(3) Following a case management conference under subsection
(2), the court may issue orders on the subject matter of the
conference as it sees fit. The request for and participation in any
case management conference under this section does not constitute
grounds to establish general personal jurisdiction over the
participating guaranty associations or their designated
representatives in the liquidation proceedings or in the courts of
this state.
Sec. 8125a. If an insurer, prior to the initiation of
proceedings under this chapter, was required to report unit
statistical card or equivalent claim-based loss and related
worker's compensation data to any licensed statistical, rating, or
advisory organization, the receiver shall continue or resume as
soon as possible this reporting and continue to comply with the
insurer's data reporting requirements during the pendency of
proceedings under this chapter.
Sec. 8133a. (1) Notwithstanding any other law or contract to
the contrary, any collateral held by or for the benefit of or
assigned to the insurer or subsequently the receiver in order to
secure the obligations of a policyholder under a deductible
agreement shall not be considered an asset of the estate and shall
be maintained and administered by the receiver as provided in this
section.
(2) If collateral is being held by or for the benefit of or
assigned to the insurer or subsequently the receiver to secure
obligations under a deductible agreement with a policyholder, the
collateral shall be used to secure the policyholder's obligation to
fund or reimburse claims payment within the agreed deductible
amount as provided in this section.
(3) If a claim that is subject to a deductible agreement and
secured by collateral is not covered by any guaranty association or
foreign guaranty association and the policyholder is unwilling or
unable to take over the handling and payment of the noncovered
claims, the receiver shall adjust and pay the noncovered claims
using the collateral but only to the extent the available
collateral after allocation under subsection (4) is sufficient to
pay all outstanding and anticipated claims. If the collateral is
exhausted and the insured is not able to provide funds to pay the
remaining claims within the deductible after all reasonable means
of collection against the insured have been exhausted, the
receiver's obligation to pay the claims from the collateral
terminates and the remaining claims shall be claims against the
insurer's estate subject to complying with other provisions in this
chapter for the filing and allowance of those claims. If the
liquidator determines that the collateral is insufficient to pay
all additional and anticipated claims, the liquidator may file a
plan, subject to court approval, for equitably allocating the
collateral among claimants.
(4) To the extent that the receiver is holding collateral
provided by a policyholder that was obtained to secure a deductible
agreement and to secure other obligations of the policyholder to
pay the insurer directly or indirectly amounts that become assets
of the estate, such as reinsurance obligations under a captive
reinsurance program or adjustable premium obligations under a
retrospectively rated insurance policy where the premium due is
subject to adjustment based upon actual loss experience, the
receiver shall equitably allocate the collateral among those
obligations and administer the collateral allocated to the
deductible agreement as provided in this section. For collateral
allocated to obligations under the deductible agreement, if the
collateral secured reimbursement obligation under more than 1 line
of insurance, then the collateral shall be equitably allocated
among the various lines based upon the estimated ultimate exposure
within the deductible amount for each line. The receiver shall
inform the guaranty associations and foreign guaranty associations
of the method and details of all the foregoing allocations.
(5) Regardless of whether there is collateral, if the insurer
has contractually agreed to allow the policyholder to fund its own
claims within the deductible amount pursuant to a deductible
agreement, either through the policyholder's own administration of
its claims or through the policyholder providing funds directly to
a third party administrator who administers the claims, the
receiver shall allow this funding arrangement to continue and,
where applicable, will enforce the arrangement to the fullest
extent possible. The funding of these claims by the policyholder
within the deductible amount will act as a bar to any claim for
such amount in the liquidation proceeding, including, but not
limited to, any claim by the policyholder or the third party
claimant. This funding arrangement extinguishes both the
obligation, if any, of any guaranty association to pay those claims
within the deductible amount, as well as the obligations, if any,
of the policyholder or third party administrator to reimburse the
guaranty association. No charge of any kind shall be made against
any guaranty association on the basis of the policyholder funding
of claim payments made pursuant to an arrangement described in this
subsection.
(6) If the insurer has not contractually agreed to allow the
policyholder to fund its own claims within the deductible amount,
to the extent a guaranty association or foreign guaranty
association is required by applicable state law to pay any claims
for which the insurer would have been entitled to reimbursement
from the policyholder under the terms of the deductible agreement
and to the extent the claims have not been paid by a policyholder
or third party, the receiver shall promptly bill the policyholder
for reimbursement and the policyholder is obligated to pay the
reimbursement amount to the receiver for the benefit of the
guaranty association or foreign guaranty associations who paid the
claims. Neither the insolvency of the insurer, nor its inability to
perform any of its obligations under the deductible agreement, is a
defense to the policyholder's reimbursement obligation under the
deductible agreement. The receiver shall promptly reimburse the
guaranty association or foreign guaranty association for claims
paid that were subject to the deductible when the policyholder
reimbursements are collected. If the policyholder fails to pay the
amounts due within 60 days after the bill for the reimbursement is
due, the receiver shall use the collateral to the extent necessary
to reimburse the guaranty association or foreign guaranty
associations, and, at the same time, may pursue other collections
efforts against the policyholder. If more than 1 guaranty
association or foreign guaranty association has a claim against the
same collateral and the available collateral, after allocation
under subsection (4), along with billing and collection efforts,
are together insufficient to pay each guaranty association and
foreign guaranty association in full, then the receiver will
prorate payments to each guaranty association and foreign guaranty
association based upon the relationship the amount of claims each
guaranty association and foreign guaranty association has paid
bears to the total of all claims paid by the guaranty association
and foreign guaranty associations.
(7) The receiver is entitled to deduct from reimbursements
owed to a guaranty association or foreign guaranty association or
collateral to be returned to a policyholder reasonable actual
expenses incurred in fulfilling the responsibilities under this
section, not to exceed 3% of the collateral or the total deductible
reimbursements actually collected by the receiver. For claim
payments made by a guaranty association or foreign guaranty
association, the receiver shall promptly provide the guaranty
association or foreign guaranty association with a complete
accounting of the receiver's deductible billing and collection
activities, including copies of the policyholder billings when
rendered, the reimbursements collected, the available amounts and
use of collateral for each account, and any proration of payments
when it occurs. If the receiver fails to make a good faith effort
within 120 days of receipt of claims payment reports to collect
reimbursements due from a policyholder under a deductible agreement
based on claim payments made by the guaranty association or foreign
guaranty association, the guaranty association or foreign guaranty
association may pursue collection from the policyholders directly
on the same basis as the receiver, and with the same rights and
remedies, and shall report any amounts collected from each
policyholder to the receiver. To the extent that a guaranty
association or foreign guaranty association pays claims within the
deductible amount, but is not reimbursed by either the receiver
under this section or by policyholder payments from the guaranty
association's or foreign guaranty association's own collection
efforts, the guaranty association or foreign guaranty association
shall have a claim in the insolvent insurer's estate for
unreimbursed claims payments.
(8) The receiver shall adjust the collateral being held as the
claims subject to the deductible agreement are run off, so long as
adequate collateral is maintained to secure the entire estimated
ultimate obligation of the policyholder plus a reasonable safety
factor. The receiver shall make these adjustments periodically, but
is not required to adjust the collateral more than once a year. The
guaranty association and any foreign guaranty association shall be
informed of all such collateral reviews, including, but not limited
to, the basis for the adjustment. Once all claims covered by the
collateral have been paid and the receiver is satisfied that no new
claims can be presented, the receiver will release any remaining
collateral to the policyholder.
(9) The Ingham county circuit court having jurisdiction over
the liquidation proceedings shall have jurisdiction to resolve
disputes arising under this section.
(10) This section does not limit or adversely affect any right
a guaranty association or foreign guaranty association may have
under applicable state law to obtain reimbursement from certain
classes of policyholders for claims payments made by the guaranty
association or foreign guaranty association under policies of the
insolvent insurer or for related expenses the guaranty association
or foreign guaranty association incurs.
(11) This section applies to all delinquency proceedings that
are open and pending on the effective date of this section.
(12) This section does not apply to first party claims or to
claims funded by a guaranty association or foreign guaranty
association net of the deductible unless subsection (5) applies.
(13) As used in this section:
(a) "Deductible agreement" means any combination of 1 or more
policies, endorsements, contracts, or security agreements that
provide for the policyholder to bear the risk of loss within a
specified amount per claim or occurrence covered under a policy of
insurance and may be subject to aggregate limit of policyholder
reimbursement obligations.
(b) "Noncovered claim" means a claim that is subject to a
deductible agreement, may be secured by collateral, and is not
covered by a guaranty association or foreign guaranty association.
Sec. 8134. (1) Within 120 days of a final determination of
insolvency of an insurer by a court of competent jurisdiction of
this state, the liquidator shall make application to the court for
approval
of a proposal to disburse assets out of marshalled
assets,
from time to time as those assets become available, to a
guaranty
association or foreign guaranty association having
obligations
because of the insolvency. If the liquidator determines
that
there are insufficient assets to disburse, the application
required
by this section shall be considered satisfied by a filing
by
the liquidator stating the reasons for this determination. to
make early access disbursements out of marshaled assets, to any
guaranty association or foreign guaranty association having
obligations because of the insolvency. If the liquidator determines
that the estate will not have sufficient assets to make any early
access disbursements to a guaranty association or foreign guaranty
association under this section, the liquidator shall file a report
with the court supporting this determination. Notice to the state
insurance commissioners, guaranty associations, and foreign
guaranty associations and court review of the report shall be
provided under subsection (5). This report may be given instead of
an application for a proposal to make early access disbursements.
However, if at any time the estate obtains sufficient assets to
support an early access disbursement under this section, the
liquidator shall file an application for a proposal to make early
access disbursements within 60 days of the estate obtaining those
assets. If, within 120 days of a final determination of insolvency,
the liquidator fails to file an application with the court for
approval of a proposal to make early access disbursements or,
alternatively, fails to file a report with the court supporting the
determination that the estate will not have sufficient assets to
make early access disbursements, any guaranty association or
foreign guaranty association that may become obligated to pay
claims as a result of the insolvency may file this application. An
application filed by an association shall be reviewed by the court
and, if the proposal submitted by the association meets the
requirements set out in this section, the application shall be
approved by the court. Upon court approval of the guaranty
association or foreign guaranty association proposal, the
liquidator shall begin making early access disbursements in
accordance with the proposal.
(2) A proposal under subsection (1) shall at least include
provisions for all of the following:
(a) Reserving amounts for the payment of expenses of
administration and the payment of claims of secured creditors, to
the extent of the value of the security held, and claims falling
within the priorities established in section 8142(1)(a) and (b) and
(2). When a reserve for uncovered claims under section 8142(2) is
appropriate, the amount of estate assets to be reserved for those
claims shall be a percentage of the uncovered claims under section
8142(2), equal in proportion to the percentage of assets
distributed, or proposed for distribution, to the guaranty
association or foreign guaranty association with respect to covered
obligations at the time the reserve for uncovered claims is
calculated. Reserves shall be established based on the best
available information at the time the distribution is calculated
and modified from time to time as more refined information becomes
available.
(b)
Disbursement of the assets marshalled marshaled to date
and subsequent disbursement of assets as they become available.
(c) Equitable allocation of disbursements to each of the
guaranty associations and foreign guaranty associations entitled to
disbursements.
(d) The securing by the liquidator from each of the
associations entitled to disbursements pursuant to this section of
an agreement to return to the liquidator such assets, together with
income earned on assets previously disbursed, as may be required to
pay claims of secured creditors and claims falling within the
priorities established in section 8142 in accordance with those
priorities. A bond shall not be required of any such association.
(e) A full report to be made by each association to the
liquidator accounting for assets disbursed to the association, all
disbursements made from the assets, interest earned by the
association on the assets, and any other matter as the court
directs.
(3) The liquidator's proposal shall provide for disbursements
to the associations in amounts estimated at least equal to the
claim payments made or to be made thereby for which the
associations could assert a claim against the liquidator, and shall
further provide that if the assets available for disbursement from
time to time do not equal or exceed the amount of claim payments
made or to be made by the association, then disbursements shall be
in the amount of available assets.
(4) The liquidator's proposal shall, with respect to an
insolvent insurer writing life or health insurance or annuities,
provide for disbursements of assets to any guaranty association or
any foreign guaranty association covering life or health insurance
or annuities or to any other entity or organization reinsuring,
assuming, or guaranteeing policies or contracts of insurance under
the acts creating the associations.
(5) Notice of application shall be given to the association in
each state and to the commissioners of insurance of each state.
Notice shall be considered to have been given when deposited in the
United States certified mails, first-class postage prepaid, at
least 30 days before submission of the application to the court.
Action on the application may be taken by the court if the notice
under this subsection has been given and if the liquidator's
proposal complies with subsection (2)(a) and (b).
(6) The liquidator shall not offset the amount to be disbursed
to any guaranty association or foreign guaranty association by any
special or statutory deposit or any other asset of the insolvent
insurer except to the extent the deposit or asset has been paid to
the association for the purpose of satisfying the association's
claims.