§ 27-34-8. Powers and duties of the association. [Effective until January 1, 2026.]
(a) The association shall:
(1)(i) Be obligated to pay covered claims existing prior to the order of liquidation; arising
within sixty (60) days after the order of liquidation or before the policy expiration
date if less than sixty (60) days after the order of liquidation or before the insured
replaces the policy or causes its cancellation if the insured does so within sixty
(60) days of the order of liquidation. The obligations shall be satisfied by paying
to the claimant an amount as follows:
(A) The full amount of a covered claim for benefits under a workers' compensation insurance
coverage;
(B) An amount not exceeding ten thousand dollars ($10,000), per policy for a covered claim
for the return of unearned premium;
(C) An amount not exceeding five hundred thousand dollars ($500,000), per claimant for
all other covered claims for insolvencies occurring on or after January 1, 2008, and
an amount not exceeding three hundred thousand dollars ($300,000) per claimant for
all other covered claims for insolvencies occurring prior to January 1, 2008.
(ii) 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 provision of this chapter, a covered claim
shall not include a claim filed with the guaranty association after the final date
set by the court for the filing of claims against the liquidator or receiver of an
insolvent insurer. For the purpose of filing a claim under this subsection, notice
of claims to the liquidator of the insolvent insurer shall be deemed notice to the
association or its agent and a list of claims shall be periodically submitted to the
association or association similar to the association in another state by the liquidator.
(iii) Any obligation of the association to defend an insured shall cease upon the association's
payment or tender of an amount equal to the lesser of the association's covered claim
obligation limit or the applicable policy limit;
(2) Be deemed the insurer to the extent of its obligation on the covered claims and to
that extent, subject to the limitation provided in this chapter, shall have all rights,
duties, and obligations of the insolvent insurer as if the insurer had not become
insolvent, including, but not limited to, the right to pursue and retain salvage and
subrogation recoverable on covered claim obligations to the extent paid by the association.
The association shall not be deemed the insolvent insurer for the purpose of conferring
jurisdiction;
(3) Allocate claims paid and expenses incurred among the three (3) accounts separately,
and assess member insurers separately for each account amounts necessary to pay the
obligations of the association under subdivision (a)(1) subsequent to an insolvency,
the expenses of handling covered claims subsequent to an insolvency, and other expenses
authorized by this chapter. The assessments of each member insurer shall be in the
proportion that the net direct written premiums of the member insurer for the calendar
year preceding the assessment on the kinds of insurance in the account bears to the
net direct written premiums of all member insurers for the calendar year preceding
the assessment on the kinds of insurance in the account. Each member insurer shall
be notified of the assessment not later than thirty (30) days before it is due.
A member insurer may not be assessed in any one year on any account an amount greater
than two percent (2%) of that member insurer's net direct written premiums for the
calendar year preceding the assessment on the kinds of insurance in the account. If
the maximum assessment, together with the other assets of the association in any account,
does not provide in any one year in any account an amount sufficient to make all necessary
payments from that account, each member insurer shall be assessed the additional amount
that must be obtained to make all necessary payments of the underfunded account from
the other two accounts, subject to the same limitation of two percent (2%) of that
member insurer's net direct written premiums for the calendar year preceding the assessment
on the kinds of insurance in the account. The additional assessments shall be considered
loans by and between the separate accounts. Amounts borrowed under this subsection
shall be paid back to the separate accounts from which they were borrowed, out of
assets, including, but not limited to, existing and future assessments in the account
receiving the loan. An interest charge shall be levied on all amounts borrowed under
this subsection based on the average prime rate of interest for each year the money
remains unpaid. If the amounts borrowed remain unpaid on the seventh yearly anniversary
as a result of the inability of the borrowing account to make repayment, then the
amount borrowed and interest which is not repaid, starting with the principal and
interest of the first year, shall be considered uncollectible. The funds available
shall be prorated and the unpaid portion shall be paid as soon after this 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 the member insurer is
authorized to transact insurance. However, during the period of deferment, no dividends
shall be paid to shareholders or policyholders. Deferred assessments shall be paid
when the payment will not reduce capital or surplus below required minimums. Payments
shall be refunded to those companies receiving larger assessments by virtue of the
deferment, or, at the election of any company, credited against future assessments;
(4) 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. The association shall pay claims in any order that it may deem reasonable,
including the payment of claims as they are received from the claimants or in groups
or categories of claims. The association shall have the right to appoint and to direct
legal counsel retained under liability insurance policies for the defense of covered
claims;
(5) Notify claimants in this state as deemed necessary by the commissioner and upon the
commissioner's request, to the extent records are available to the association;
(6)(i) Have the right to review and contest as set forth in this subsection settlements,
releases, compromises, waivers, and judgments to which the insolvent insurer or its
insureds were parties prior to the entry of the order of liquidation. In an action
to enforce settlements, releases, and judgments to which the insolvent insurer or
its insureds were parties prior to the entry of the order of liquidation, the association
shall have the right to assert the following defenses, in addition to the defenses
available to the insurer:
(A) The association is not bound by a settlement, release, compromise, or waiver executed
by an insured or the insurer, or any judgment entered against an insured or the insurer
by consent or through a failure to exhaust all appeals, if the settlement, release,
compromise, waiver, or judgment was:
(I) Executed or entered into within one hundred twenty (120) days prior to the entry of
an order of liquidation, and the insured or the insurer did not use reasonable care
in entering into the settlement, release, compromise, waiver, or judgment, or did
not pursue all reasonable appeals of an adverse judgment; or
(II) Executed by or taken against an insured or the insurer based on default, fraud, collusion,
or the insurer's failure to defend.
(B) If a court of competent jurisdiction finds that the association is not bound by a
settlement, release, compromise, waiver, or judgment for the reasons described in
subparagraph (i)(A), the settlement, release, compromise, waiver, or judgment shall
be set aside, and the association shall be permitted to defend any covered claim on
the merits. The settlement, release, compromise, waiver, or judgment may not be considered
as evidence of liability or damages in connection with any claim brought against the
association or any other party under this chapter.
(C) The association shall have the right to assert any statutory defenses or rights of
offset against any settlement, release, compromise, or waiver executed by an insured
or the insurer, or any judgment taken against the insured or the insurer.
(ii) 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, the association,
either on its own behalf or on behalf of an insured, may apply to have the judgment,
order, decision, verdict, or finding set aside by the same court or administrator
that entered the judgment, order, decision, verdict, or finding and shall be permitted
to defend the claim on the merits;
(7) Handle claims through its employees or through one or more insurers or other persons
designated as servicing facilities. Designation of a servicing facility is subject
to the approval of the commissioner, but the designation may be declined by a member
insurer;
(8) Reimburse each servicing facility for obligations of the association paid by the facility
and for expenses incurred by the facility while handling claims on behalf of the association
and shall pay the other expenses of the association authorized by this chapter;
(9)(i) The association shall obtain a line of credit for the benefit of each account, in
an amount not to exceed the applicable maximum to ensure the immediate availability
of funds for purposes of future claims and expenses attributable to an insurer insolvency
in that account. The line of credit shall be obtained from qualified financial institutions.
The line of credit shall provide for a thirty-day (30) notice of termination or nonrenewal
to the commissioner and the association and shall provide funding to the association
within three (3) business days of receipt of written notice from the commissioner
of an insolvent insurer in that account. Each member insurer upon receipt of notice
from the association shall make immediate payment for its proportionate share of the
amount borrowed based on the premium for the preceding calendar year. The maximum
line of credit or preinsolvency assessment for each account shall be subject to prior
review and approval by the commissioner at the time of origination.
(ii) If the association cannot obtain a line of credit, the association may obtain an irrevocable
line of credit agreement from each member insurer in an amount not to exceed the member
insurer's maximum assessment pursuant to subdivision (a)(3) to ensure the immediate
availability of funds for the purposes of future claims and expenses attributable
to an insurer insolvency.
Any amount drawn under any line of credit shall be considered a payment toward the
member insurer's assessment provided for in subdivision (a)(3).
The member insurer shall provide funding to the association under the line of credit
within three (3) business days of receipt of a written request from the association
for a draw-down under the line of credit.
The line of credit agreement shall be subject to prior review and approval by the
commissioner at the time of origination and any subsequent renewal. It shall include
any commercially reasonable provisions the association or the commissioner may deem
advisable, including a provision that the line of credit is irrevocable or for a stated
period of time and provides for thirty-day (30) notice to the association and the
commissioner that the line is being terminated or not renewed.
(iii) If a line of credit is not given as provided for in this section, the member insurer
shall be responsible for the payment of an assessment of up to the member's proportionate
share of the applicable maximum as set forth in this subsection which shall be paid
into a pre-insolvency assessment fund in each account;
(10) Submit, not later than ninety (90) days after the end of the association's fiscal
year, a financial report for the preceding fiscal year in a form approved by the commissioner.
(b) The association may:
(1) Employ or retain 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 accordance with the
plan of operation;
(3) Sue or be sued;
(4) Negotiate and become a party to any contracts necessary to carry out the purpose of
this chapter;
(5) Perform any other acts necessary or proper to effectuate the purpose of this chapter;
and
(6) Refund to the member insurers in proportion to the contribution of each member insurer
to that account that amount by which the assets of the account exceed the liabilities,
if, at the end of any calendar year, the board of directors finds that the assets
of the association in any account exceed the liabilities of that account as estimated
by the board of directors for the coming year.
(c) Suits involving the association:
(1) Except for actions by the receiver, all actions relating to or arising out of this
chapter against the association shall be brought in the courts in this state. The
courts shall have exclusive jurisdiction over all actions relating to or arising out
of this chapter against the association.
(2) The exclusive venue in any action by or against the association is in the Providence
county superior court. The association may, at its option, waive this venue as to
specific actions.