26.1-42.1-05. Powers and duties of the association
1. The association:
a. Shall pay covered claims existing before the order of liquidation and arising within
thirty days after the order of liquidation or before the policy expiration date if less
than thirty days after the order of liquidation, or before the insured replaces the
policy or causes the policy's cancellation, if the insured does so within thirty days
of the order of liquidation. The obligation must be satisfied by paying to the
claimant an amount as follows:
(1) An amount not exceeding ten thousand dollars per policy for a covered
claim for the return of unearned premium.
(2) An amount not exceeding three hundred thousand dollars per claim for all
other covered claims.
b. 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 provision of this chapter, a covered claim does not
include a claim filed with the association after the earlier of eighteen months after
the date of the order of liquidation or the final date set by the court for the filing of
claims against the liquidator or receiver of an insolvent insurer and a claim does
not include any claim filed with the association or a liquidator for protection
afforded under the insured's policy for incurred, but not reported, losses.
Any obligation of the association to defend an insured on a covered claim
ceases upon 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 or upon the association's tender of
that amount.
Notwithstanding any other provision of this chapter, an obligation of the
association to any person ceases when ten million dollars is paid in the aggregate
by the association and any one or more associations similar to the association of
any other state or states or any property and casualty security fund that obtains
contributions from insurers on a preinsolvency basis, to or on behalf of any
insured and the insured's affiliates on covered claims or allowed claims arising
under the policy or policies of any one insolvent insurer. For purposes of this
section, the term "affiliate" means a person who, directly or indirectly, through one
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 one
claimant having a covered claim or allowed claim against the association or any
associations similar to the association or any property and casualty insurance
security fund in other states, under the policy or policies of any one insolvent
insurer, the association may establish a plan to allocate amounts payable by the
association in any manner the association deems equitable.
c. Is deemed the insurer only to the extent of the association's obligation on the
covered claims and to that extent, subject to the limitations provided in this
chapter, has all rights, duties, and obligations of the insolvent insurer as if the
insurer had not become insolvent, including the right to pursue and retain salvage
and subrogation recoverable on paid covered claim obligations. The association
may not be deemed the insolvent insurer for any purpose relating to the issue of
whether the association is amenable to the personal jurisdiction of the courts of
any state.
d. Shall assess member insurer's amounts necessary to pay the obligations of the
association under subdivision a following an insolvency, the expenses of handling
covered claims following an insolvency and other expenses authorized by this
chapter. The assessments of each member insurer must be in the proportion that
the net direct written premiums of the member insurer for the calendar year
preceding the assessment bears to the net direct written premiums of all member
insurers for the calendar year preceding the assessment. Each member insurer
must be notified of the assessment at least thirty days before the assessment is
due. A member insurer may not be assessed in any one year an amount greater
than two percent of that member insurer's net direct written premiums for the
calendar year preceding the assessment. 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 must be
prorated and the unpaid portion must be paid as soon as funds become available.
The association shall pay claims in any order the association determines
reasonable, including the payment of claims as the claims are received from the
claimants or in groups or categories of claims. 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; provided, however, that during the period of
deferment, dividends may not be paid to shareholders or policyholders. Deferred
assessments must be paid when payment will not reduce capital or surplus below
required minimums. Deferred assessment payments must be refunded to those
companies receiving larger assessments by virtue of this deferment, or at the
election of any such company, credited against future assessments. Each
member insurer may set off against any assessment authorized payments made
on covered claims and expenses incurred in the payment of these claims by the
member insurer.
e. Shall 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 may review settlements, releases, and
judgments to which the insolvent insurer or the insolvent insurer's insureds were
parties to determine the extent to which these settlements, releases, and
judgments may be properly contested. The association may appoint and direct
legal counsel retained under liability insurance policies for the defense of covered
claims.
f. Shall handle claims through the association's 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 this
designation may be declined by a member insurer.
g. Shall 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.
2. The association may:
a. Employ or retain persons necessary to handle claims and perform other duties of
the association;
b. Borrow funds necessary to effect the purposes of this chapter in accordance with
the plan of operation;
c. Sue or be sued, and this power to sue includes the power and right to intervene
as a party before any court in this state which has jurisdiction over an insolvent
insurer;
d. Negotiate and become a party to contracts that are necessary to carry out the
purposes of this chapter;
e. Perform acts that are necessary or proper to effectuate the purposes of this
chapter; and
f. Refund to the member insurers in proportion to the contribution of each member
insurer 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 as estimated by the board.
3. Except for actions by member insurers aggrieved by final actions or decisions by the
association pursuant to subdivision h of subsection 3 of section 26.1-42.1-06, all
claims for relief relating to this chapter against the association must be brought in the
courts of this state. These courts have exclusive jurisdiction over all actions relating to
this chapter against the association. Exclusive venue in any action by or against the
association is in the district courts of this state. The association, at its option, may
waive this exclusive venue as to specific actions.
