CHAPTER 112
FORMERLY
HOUSE SUBSTITUTE NO. 1
TO
HOUSE BILL NO. 140 AS AMENDED BY HOUSE AMENDMENT NO. 3
AN ACT TO AMEND CHAPTER 42, TITLE 18, DELAWARE CODE, RELATING TO VARIOUS ASPECTS OF THE INSURANCE GUARANTY ACT.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend §4203, Chapter 42, Title 18, Delaware Code, by deleting this Section in its entirety and substituting in lieu thereof the following:
14203. Scope.
This Chapter shall apply to all kinds of direct insurance but shall not be applicable to the following:
(1) Life, annuity, health, and disability insurance;
(2) Mortgage guaranty, financial guaranty, and other forms of financial guarantees;
(3) Fidelity and surety bonds, or other bonding obligations;
(1) 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;
(2) Insurance of warranties or service contracts;
(3) Title insurance;
(1) Ocean marine insurance;
(2) Any transaction or combinations of transactions between a person (including affiliates of such person) and an insurer (including affiliates of such insurer) which involves the transfer of an investment or credit risk unaccompanied by the transfer of insurance risk.
(1) Any insurance provided by or guaranteed by government."
Section 2. Amend §4205, Chapter 42, Title 18, Delaware Code, by deleting this Section in its entirety and substituting the following in lieu thereof:
14205. Definitions.
As used in this Chapter:
(1) "Affiliate" 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 next preceding the date the insurer becomes an insolvent insurer.
(1) "Association" means the Delaware Insurance Guaranty
Association created under §4206 of this title.
(1) "Claimant" means any insured making a first party claim, any person instituting a liability claim; provided that no person who is an affiliate of an insolvent insurer may be a claimant.
(1) "Commissioner" means the Commissioner of Insurance of this State.
(5) "Control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position With or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds the power to vote, or holds proxies representing ten percent (101) or more of the voting securities of any other person. This presumption may be rebutted by showing the control does not in fact exist.
(6) "Covered claim" means an unpaid claim, including one for
unearned premiums, submitted by a claimant, which arises out of and is with the coverage, and subject to the applicable limits, of an insurance policy to which this Act applies, issued by an insurer, if such insurer becomes an insolvent insurer after the effective date of this Act, and:
(a) the property from which the claim arises is permanently located in this State; or (b) the claimant or insured is a resident of this state at the time of the insured event. For entities other than individuals, for purposes of this Chapter, the State of residence of a claimant or insured shall be the state in which that entity has a principal place of business most closely related to the claim. "Covered claim" shall in no event include any amount awarded as punitive, bad faith or exemplary damages regardless of the language of the insurance policy involved; or any amount sought as a return of premium under any retrospective rating plan; or due any reinsurer, insurer, insurance pool, or underwriting association as subrogation monies or otherwise.
(7) "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 an Order of Liquidation with a finding of insolvency has been entered after the effective date of this Act by a court of competent jurisdiction in the State of domicile or in this State under the provisions of Chapter 59 and which Order of Liquidation has not been stayed or been the subject of a writ of supersedes or other comparable order.
(8) Net direct written premiums" means direct gross premiums
written in this State on insurance policies to which this Chapter applies, less return premiums thereon 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.
(1) "Member insurer" means any person who: (a) writes any kind
of insurance to which this Act applies under §3, including the exchange of reciprocal or inter-insurance contracts; and (b) is licensed to transact insurance in this State.
(2) "Person" means any individual, corporation, partnership,
association or voluntary organization."
Section 3. Amend §4208(a)(1), Chapter 42, Title 18, Delaware Code by
striking subsection (1) in its entirety and inserting the following in lieu thereof:
"(1) Be obligated to pay valid covered claims existing prior to the determination of the insolvency and arising within thirty (30) days after the determination of the insolvency or before the policy expiration date if less than thirty (30) days after the determination of an insolvency, or before the insured replaces the policy or causes its cancellation, if it is done within (30) days of that determination. Such obligation shall be
satisfied by paying to the claimant an amount as follows: (i) the full
amount of a covered claim for benefits under a workers' compensation insurance policy; (ii) an amount not exceeding $10,000 per policy for a covered claim for the return of an unearned premium; (iii) an amount not exceeding $300,000 per claimant for all other covered claims. In no event shall the Association be obligated to pay a claimant an amount in excess of the obligation of the insolvent insurer under the policy or coverage from which the claim arises. Notwithstanding any other provisions of this Act, a covered claim shall not include any claim filed with the Association after the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer, provided, however, that a "covered claim" shall include any covered claim of which notice was given to the Association on or prior to June 30, 1991. The Association shall pay only that amount of each unearned premium which is in excess of $100.00."
Section 4. Amend Section 4208(a)(3), Chapter 42, Title 18, Delaware Code, by striking said section in its entirety and inserting the following in lieu thereof:
"(3) For the purpose of providing the funds necessary to carry out the powers and duties of the Association, the Board of Directors shall assess the member insurers, separately for each class, at such times and in such amounts as the Board finds necessary. Assessments shall be due not less than thirty (30) days after written notice to the member insurers.
a. There shall be three classes of assessments as follows:
1. Class A assessments shall be made for the purpose of
meeting administrative costs and other expenses and examinations conducted under the authority of §4213 of this Chapter.
2. Class 8 assessments shall be made annually to partially
subsidize the oversight activities of the Commissioner, thereby minimizing the need for Class C assessments.
1. Class C assessments shall be made to the extent necessary to carry out the powers and duties of the Association under this Chapter with regard to an insolvent member insurer.
b. The assessments shall be determined as follows:
1. The Class A assessments will be equal in amount as to each member and may be assessed not more often than once each year. Such assessment shall not exceed one hundred and fifty dollars ($150.00) annually.
1. The Class B assessments shall be made annually. The
Commissioner shall determine the amount and shall so notify the Association on or before July 31st of each calendar year in which the assessment is to be made. Class B assessments will also be
equal in amount as to each member. The said assessments shall be paid to the Insurance Commissioner's regulatory revolving fund. Not later than October 31st of each said calendar year, the Commissioner shall issue a report to the Association detailing the expenditure of those funds. Amounts not expended will remain in the revolving fund to be used in the succeeding year.
2. Class C 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 bears to the net direct written premiums of all member insurers for the preceding calendar year. If the maximum assessment, together with the other assets of the Association, does not provide in any one year, an amount sufficient to make all necessary payments, the funds available shall be pro-rated and the unpaid portion shall be paid as soon thereafter as funds become available. The Association may exempt or defer, in whole or in part, the assessment of any member insurer if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a Certificate of Authority by any jurisdiction in which a member insurer is authorized to transact insurance.
c. The amounts assessed for Class B assessments shall in no event exceed one-tenth (1/10th) of one percent (1%) of the members' premiums for the year on which the assessment is based. The amounts assessed for Class B and Class C assessments combined shall not result in members being assessed a total B and C assessment amount which exceeds 21. of the members' premiums written in the applicable year.
Section 5. Amend §4208(a)(9), Chapter 42, Title 18, Delaware Code, by striking it in its entirety.
Section 6. Amend Section 4211, Chapter 42, Title 18, Delaware Code, by striking subsection (a) in its entirety and substituting the following in lieu thereof:
"(a)(1). Any person recovering under this Act shall be deemed to have assigned his rights under the policy to the Association to the extent of his recovery from the Association. Every insured or claimant seeking the protection of this Act shall cooperate with the Association to the same extent as such person would have been required to cooperate with the insolvent insurer. The Association shall have no cause of action against the insured or the insolvent insurer for any sums it has paid out except such causes of action as the insolvent insurer would have had if such sums had been paid by the insolvent insurer and except as provided in subsection (a)(2) of this Section. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the Association shall not operate to reduce the liability of the insureds to the receiver, liquidator, or statutory successor for unpaid assessments.
(2). The Association shall have the right to recover from the following persons the amount of any covered claim paid on behalf of such person pursuant to the Act:
a. any insured whose average annual net worth for the three-year period ending on December 31 of the year next preceding the date the insurer becomes an insolvent insurer exceeds $50,000,000 and whose liability obligations to other persons are satisfied in whole or in part by payments made under this Act; and
b. any person who is an affiliate of the insolvent insurer and whose liability obligations to any other person are satisfied in whole or in part by payment under this Act. This subsection (a)(2) shall
not apply retroactively and/or retrospectively and shall apply only as to insurer insolvencies which occur on or after June 30, 1991."
Section 7. Amend §4212, Chapter 42, Title 18, Delaware Code, by deleting the current section (a) in its entirety and inserting the following section in lieu thereof.
"(a) Any person having a claim covered under any provision in an insurance policy other than a policy of an insolvent insurer, which is also a covered claim, shall be required to first exhaust his rights such policy. Any amount payable on a covered claim under this chapter shall be reduced by the amount of any recovery under such insurance policy."
Section 8. Amend §4212, Chapter 42, Title 18, Delaware Code, by deleting the current section (c) in its entirety and inserting the following section in lieu thereof:
"(c) Any person having a claim or legal right of recovery under any governmental insurance or guaranty program which is also a covered claim shall be required to exhaust his rights under such program prior to recovery under this Act.- Any amount payable on a covered claim under this Act shall be reduced by the amount of any recovery under such program."
Section 9. Amend §4213, Chapter 42, Title 18, Delaware Code by striking subsections (1) and (2) and inserting the following in lieu thereof:
"(1) The Board of Directors may, upon majority vote:
a. make recommendations to the Commissioner for the detection and prevention of insurer insolvencies; and
b. respond to requests by the Commissioner to discuss and make recommendations regarding the status of any member insurer whose financial condition may be hazardous to policyholders or the public. Such recommendations shall not be considered public documents.
(2) The Board of Directors may, at the conclusion of any domestic insurer insolvency in which the Association was obligated to pay covered claims, prepare a report on the history and causes of such insolvency, based upon the information available to the Association and submit such report to the Commissioner."
Section 10. Amend §4214, Chapter 42, Title 18, Delaware Code, by deleting the words "March 30" and inserting in lieu thereof the words "June 30".
Section 11. Amend §4217, Chapter 42, Title 18, Delaware Code by inserting the phrase or any failure to act" between the words "action" and "taken" as they appear in said Section, and adding at the end of this section the following sentence: "Neither shall the association, its officers, agents and employees be subject to any claim for damages for bad faith."
Section 12. Amend §4218, Chapter 42, Title 18, Delaware Code by striking that section in its entirety and inserting the following in lieu thereof:
"§4218. Stay of proceedings; reopening of default judgments.
All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in this State, shall be stayed for one hundred and twenty (120) days from the date the insolvency is determined, and for such time thereafter as may be determined by the court, to permit a proper defense by the Association of all pending causes of actions. 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 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. (18 Del. C. 1953, §4218; 57 Del. Laws, c.437.)."
Section 13. Amend §4221, Chapter 42, Title 18, by deleting that Section in its entirety.
Section 14. Amend Chapter 42, Title 18, by adding a new §4223 as follows:
"Unless otherwise provided by this Act, this amendment shall apply retroactively and/or retrospectively to all incomplete matters having arisen or arising under the Delaware Insurance Guaranty Act (18 Del. C. §4201, et seq.)."
Approved July 5, 1991.