HOUSE BILL NO. 335
AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE RELATING TO THE TWO DELAWARE INSURANCE GUARANTY ASSOCIATIONS AND THE PROVISIONS FOR REHABILITATION AND LIQUIDATION OF A DELAWARE INSURANCE COMPANY.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend §5918, Chapter 59, Title 18, Delaware Code, by adding thereto a new subsection
(e) which shall read as follows:
"(e) Claims by policyholders, beneficiaries, and insureds arising from and within the coverage of and not in excess of the applicable limits of insurance policies and insurance contracts issued by the company, and liability claims against insureds which claims are within the coverage of and not In excess of the applicable limits of insurance policies and insurance contracts issued by the company, and claims of the Delaware Insurance Guaranty Association, the Delaware Life and Health Insurance Guaranty Association, as the case may be, and any similar organization in another state shall have priority in a liquidation proceeding over all other claims except those for expenses of administration, wages covered by §5926 of this title and taxes."
Section 2. Amend Chapter 44, Title 18, Delaware Code, by adding thereto a new Section 4420 which shag read as follows:
"§4420. Access to Assets of Insurer in Liquidation; Application for Court Approval of Plan to Disburse Assets.
(a) Within 120 days of the issuance of a final order of liquidation of an insurance company by a court of competent Jurisdiction the receiver shall make application to the said court for approval of a proposal to disburse assets out of such company's marshalled assets, from time to time as such assets become available, to the Delaware Life and Health Insurance Guaranty Association, and to any entity or person performing a similar function in another state. (The Delaware Life and Health Insurance Guaranty Association, and any entity or person performing a similar function in other states shall hereinafter be referred to collectively as "The Associations').
(b) Such proposal shall at a minimum include provision for:
(1) Reserving amounts for the payment of expenses of administration and claims falling within the priorities established in the Delaware Uniform Insurers Liquidation Act but only with respect to such priorities higher than that of the Associations;
(2) Disbursement of the assets marshalled to date and subsequent disbursement of assets as they become available;
(3) Equitable allocation of disbursement to each of the Associations entitled thereto;
(4) The securing by the receiver from each of the Associations entitled to disbursements pursuant to this section of an agreement to return to the receiver such assets previously disbursed as may be required to pay claims of secured creditors and claims with a higher priority than those of the Associations. No bond shall be required of any such Association.
(c) The receiver's proposal shall provide for the disbursements to the Associations in amounts at least equal to the payments made or to be made thereby for which such Associations could assert claims against the receiver, and shall further provide that if the assets available for disbursement from time to time do not equal or exceed the amount of such payments made or to be made by the Associations then disbursements shall be in the amount of available assets.
(d) Notice of such application shall be given to the Associations in and to the commissioners of insurance of each of the states. Any such notice shall be deemed to have been given when deposited in the United States certified mails, first-class postage prepaid, at least 30 days prior to submission of such application to the said court. Action on the application may be taken by the said court provided the above required notice has been given and provided further that the receiver's proposal complies with paragraphs (1) and (4) of sub-section (b) of this section."
Section 3. Amend Section 4220, Title 18, Delaware Code, by deleting such section in its entirety.
Section 4. This Act shall be effective upon its enactment into law with respect to both Delaware insurance Companies that are now in rehabilitation or liquidation under Title 18, Delaware Code, and those that will become so in the future.
Section 5. If any section, part, phrase or provision of this Act or the application of such provision to any person or circumstances shall be held invalid, the remainder of this Act and the application of such provision of this Act to persons or circumstances, other than those to which it is held invalid, shall not be affected hereby.
Approved July 19, 1983.