§ 4208 — Powers and duties of the Association

Delaware § 4208

• Jurisdiction: Delaware
• Title: 18
• Part: Insurance
• Ch. 42: DELAWARE INSURANCE GUARANTY ASSOCIATION ACT

Text

(a) The Association shall:

(1) Be obligated to pay valid covered claims existing prior to the order of liquidation of the insolvency and arising within 30 days after the order of liquidation or before the policy expiration date if less than 30 days after the order of liquidation, or before the insured replaces the policy or causes its cancellation, if it is done within 30 days of that order of liquidation. 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 $500,000 per claimant for all other covered claims provided that, for the purposes of this limitation, all claims of any kind arising from or relating to bodily injury or death to any person will constitute a single claim, regardless of the number of claims made, or the number of claimants. The Association is not 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 chapter, a covered claim does not include any claim filed with the Association after the earlier of: (i) 24 months after the date of the order of liquidation or (ii) 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. Notwithstanding any other provisions of this chapter, except in the case of a claim for benefits under workers’ compensation coverage, any obligation of the Association to any and all persons shall cease when $10,000,000 shall have been paid in the aggregate by the Association and any 1 or more associations similar to the Association of any other state or states or any property/casualty security fund which obtains contributions from insurers on a pre-insolvency basis, to or on behalf of any insured and its affiliates on covered claims or allowed claims arising under the policy or policies of any 1 insolvent insurer. For purposes of this section, the term “affiliate” shall mean a person who directly, or indirectly, through 1 or more intermediaries, controls, is controlled by or is under common control with another person. If the Association determines that there may be more than 1 claimant having a covered claim or allowed claim against the Association or any association similar to the Association or any property/casualty insurance security fund in other states, under the policy or policies of any 1 insolvent insurer, the Association may establish a plan to allocate amounts payable by the Association in such manner as the Association in its discretion deems equitable.

(2) Be deemed the insurer only to the extent of its obligation on the covered claims and, to such extent, subject to the limitations provided in this chapter, shall have all rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent.

(3) Be relieved of any obligation to defend an insured on a covered claim upon any of the following:

a. The Association’s payment, 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.

b. The Association’s tender of an amount equal to the lesser of the Association’s covered claim obligation limit or the applicable policy limit.

(4) 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 30 days after written notice to the member insurers.

a. There shall be 3 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 title.

2. Class B assessments shall be made annually to partially subsidize the oversight activities of the Commissioner, thereby minimizing the need for class C assessments.

3. 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 $150 annually.

2. The class B assessments shall be made annually. The Commissioner shall determine the amount and shall so notify the Association on or before July 31 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 31 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.

3. 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 1 year an amount sufficient to make all necessary payments, the funds available shall be prorated 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 exceed1/10of 1 percent 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 2 percent of the members’ premiums written in the applicable year.

(5) 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 such settlements, releases and judgments may be properly contested.

(6) Notify such persons as the Commissioner directs under § 4210(b)(1) of this title.

(7) Handle claims through its employees or through 1 or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the Commissioner, but such designation may be declined by a member insurer.

(8) Reimburse each servicing facility for obligations of the Association paid by the facility and expenses incurred by the facility while handling claims on behalf of the Association and pay the other expenses of the Association authorized by this chapter.

(9) Issue to each insurer paying an assessment under this chapter a certificate of contribution, in a form prescribed by the Commissioner, for the amount so paid. All outstanding certificates shall be of equal dignity and priority without reference to amounts or dates of issue. A certificate of contribution may be shown by the insurer in its financial statement as an asset in such form and for such amount, if any, and period of time as the Commissioner may approve.

(10) Exercise all powers and do all things authorized by this chapter with respect to a division of a bank or trust company established pursuant to § 767(a) of Title 5 and determined to be insolvent pursuant to § 4205(7) of this title with the same effect as if such department or division was a stock insurer.

(b) The Association may:

(1) Employ or retain such persons as are necessary to handle claims and perform other duties of the Association.

(2) Borrow funds necessary to effect the purposes of this chapter in accord with the plan of operation.

(3) Sue or be sued and such power to sue includes the power and right to intervene as a party before any court in this State that has jurisdiction over an insolvent insurer as defined by this chapter. All actions against the Association must be brought in this State. This State shall have exclusive jurisdiction over all actions against the Association.

(4) Negotiate and become a party to such contracts as are necessary to carry out the purpose of this chapter.

(5) [Repealed.]

(6) Refund to the member insurers in proportion to the contribution of each member insurer to the Association that amount by which the assets of the Association exceed the liabilities if at the end of any calendar year the Board of Directors finds that the assets of the Association exceed the liabilities for the coming year of the Association as estimated by the Board of Directors.

(7) Establish procedures for requesting financial information from insureds on a confidential basis for the purpose of determining net worth, subject to such information being shared with any other association similar to the Association and the liquidator or receiver of an insolvent insurer on the same confidential basis. If the insured refuses to provide the requested financial information and an auditor’s certification of the same where requested and available, the Association may deem the net worth of the insured to be in excess of the amounts specified in § 4205(6)b.4. of this title or § 4211(a)(2)a. of this title at the relevant time under the respective section under this title.

(8) Bring an action against any third-party administrator, agent, attorney, or other representative of the insolvent insurer to obtain custody and control of all files, records, and electronic data information 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 chapter. In such a suit, the Association shall have the absolute right through emergency equitable relief to obtain custody and control of all such information in the custody or control of such third-party administrator, agent, attorney, or other representative of the insolvent insurer, regardless of where such information may be physically located. In bringing such an action, the Association is not subject to any defense, lien (possessory or otherwise), or other legal or equitable ground whatsoever for refusal to surrender such information that might be asserted against the liquidator or receiver of the insolvent insurer. To the extent that litigation is required for the Association to obtain custody of the information requested and it results in the relinquishment of information to the Association after refusal to provide the same 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 such information may have against the insolvent insurers, so long as such rights and remedies do not conflict with the rights of the Association to custody and control of the files, records, and electronic data information under this title.

(9) Subject to approval by the Commissioner, provide claims-handling services to any “run-off insurer” only if the Association’s expenses related to the provision of the claims-handling services are fully reimbursed. There shall be no liability on the part of, and no cause of action of any nature shall arise against any member insurer, the Association, or its agents or employees, the board of directors, or any person serving as a representative of any director for any action taken or any failure to act by them in the performance of the services under this paragraph. For purposes of this paragraph, “run off insurer” means a property and casualty insurer that has any of the following:

a. Total adjusted capital under risk based capital requirements in an amount less than the Authorized Control Level RBC as defined in § 5801 of this title as of the date specified in § 5802 of this title for filing of the annual RBC report and has indicated that it will cease writing new insurance policies, either as part of its corrective action plan or pursuant to being placed under regulatory control.

b. Total adjusted capital under risk based capital requirements in an amount less than the Mandatory Control Level RBC as defined in § 5801 of this title as of the date specified in § 5802 of this title for the filing of the annual RBC report and that has not been placed into liquidation under § 5906 of this title.

(10) Perform such other acts as are necessary or proper to effectuate the purpose of this chapter.

Legislative History

18 Del. C. 1953, § 4208; 57 Del. Laws, c. 437 ; 63 Del. Laws, c. 395, § 2 ; 65 Del. Laws, c. 5, § 1 ; 67 Del. Laws, c. 223, § 27 ; 68 Del. Laws, c. 112, §§ 3-5 ; 71 Del. Laws, c. 463, §§ 6-11 ; 81 Del. Laws, c. 337, § 3