304.36-080 Powers and duties of association.
(1) The association shall:
(a) Be obligated to the extent of the covered claims existing prior to the order of
liquidation and arising within thirty (30) days after the order of liquidation, or <br>before the policy expiration date if less than thirty (30) days after the order of <br>liquidation, or before the insured replaces the policy or on request effects <br>cancellation, if the insured does so within thirty (30) days of the order of <br>liquidation. The obligation shall be satisfied by paying to the claimant an <br>amount as follows: <br>1.
The full amount of a covered claim for benefits arising from a workers' <br>compensation insurance policy purchased to satisfy the requirements of <br>KRS 342.340;
2.
An amount not exceeding ten thousand dollars ($10,000) per policy for a <br>covered claim for the return of unearned premium; or
3.
An amount not exceeding three hundred thousand dollars ($300,000) per <br>claimant for all other covered claims;
(b) Not 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. <br>Notwithstanding any other provisions of this subtitle, a covered claim shall <br>not include a claim filed with the association after the earlier of twelve (12) <br>months after the date of the order of liquidation, or the final date set by the <br>court for the filing of claims against the liquidator or receiver of an insolvent <br>insurer and shall not include any claim filed with the association or a <br>liquidator for protection afforded under the insured's policy for incurred but <br>not reported losses. Any obligation of the association to defend an insured <br>shall cease upon the association's payment or tender of an amount equal to the <br>lesser of the association's covered claim obligation limit or the applicable <br>policy limit. Notwithstanding any other provisions of this subtitle, except in <br>the case of a claim for benefits under workers' compensation coverage, any <br>obligation of the association to any and all persons shall cease when ten <br>million dollars ($10,000,000) shall have been paid in the aggregate by the <br>association and any one (1) or more associations similar to the association of <br>any other state or states or any property/casualty security fund that obtains <br>contributions from insurers on a preinsolvency basis to or on behalf of any <br>insured and its affiliates on covered claims or allowed claims arising under the <br>policy or policies of any one (1) insolvent insurer. For purposes of this <br>section, the term "affiliate" shall mean a person who directly or indirectly, <br>through one (1) or more intermediaries, controls, is controlled by, or is under <br>common control with another person. If the claimant has a covered claim or <br>allowed claim against the association or any associations similar to the <br>association or any property and casualty insurance security fund of another <br>states, under the policy or policies of any one (1) insolvent insurer, the <br>association may establish a plan to allocate amounts payable by the <br>association in a manner as the association in its discretion deems equitable;
(c) Be deemed the insurer to the extent of its obligation on the covered claims and
to that extent shall have all rights, duties, and obligations of the insolvent <br>insurer as if the insurer had not become insolvent, including, but not limited <br>to, the right to pursue and retain salvage and subrogation recoverable on paid <br>covered claim obligations;
(d) Assess insurers amounts necessary to pay the obligations of the association
under paragraph (a) of this subsection subsequent to an insolvency, the <br>expenses of handling covered claims subsequent to an insolvency, and the cost <br>of examinations under KRS 304.36-130 and other expenses authorized by this <br>subtitle. The assessments of each member insurer shall be in the proportion <br>that the net direct written premiums of the member insurer for the calendar <br>year preceding the assessment bears to the net direct written premiums of all <br>member insurers for the calendar year preceding the assessment. Each <br>member insurer shall be notified of the assessment not later than thirty (30) <br>days before it is due. No member insurer may be assessed in any year an <br>amount greater than two percent (2%) of that member insurer's net direct <br>written premiums for the calendar year preceding the assessment. If the <br>maximum assessment, together with the other assets of the association, does <br>not provide in any one (1) year an amount sufficient to make all necessary <br>payments, the funds available shall be prorated and the unpaid portion shall be <br>paid as soon thereafter as funds become available. The association shall pay <br>claims in any order which it may deem reasonable including the payment of <br>claims as such are received from the claimants or in groups or categories of <br>claims. The association may exempt or defer, in whole or in part, the <br>assessment of any member insurer, if the assessment would cause the member <br>insurer's financial statement to reflect amounts of capital or surplus less than <br>the minimum amounts required for a certificate of authority by any <br>jurisdiction in which the member insurer is authorized to transact insurance; <br>provided, however, that during the period of deferment, no dividends shall be <br>paid to shareholders or policyholders. Deferred assessments shall be paid <br>when such payment will not reduce capital and surplus below required <br>minimums. Such payments shall be refunded to those companies receiving <br>larger assessments by virtue of such deferment, or at the election of any such <br>company, credited against future assessments. Each member insurer serving as <br>a servicing facility may set off against any assessment authorized payments <br>made on covered claims and expenses incurred in the payment of such claims <br>by such member insurer;
(e) Investigate claims brought against the association and adjust, compromise,
settle, and pay covered claims to the extent of the association's obligation and <br>deny all other claims;
(f) Notify such persons as the commissioner directs under KRS 304.36-100(2)(a); <br>(g) Handle claims through its employees or through one (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 <br>may be declined by a member insurer; and
(h) Reimburse each servicing facility for obligations of the association paid by the
facility and for expenses incurred by the facility while handling claims on <br>behalf of the association and shall pay the other expenses of the association <br>authorized by this subtitle.
(2) The association may:
(a) Appear in, defend, and appeal any action on a claim brought against the
association;
(b) Employ or retain such persons as are necessary to handle claims and perform
other duties of the association;
(c) Borrow funds necessary to effect the purposes of this subtitle in accord with
the plan of operation;
(d) Sue or be sued; <br>(e) Negotiate and become a party to such contracts as are necessary to carry out
the purpose of this subtitle;
(f) Perform such other acts as are necessary or proper to effectuate the purpose of
this subtitle; and
(g) 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 <br>association exceed the liabilities, if, at the end of any calendar year, the board <br>of directors finds that the assets of the association exceed the liabilities of the <br>association as estimated by the board of directors for the coming year.
Effective: July 15, 2010 <br>History: Amended 2010 Ky. Acts ch. 24, sec. 1466, effective July 15, 2010. --
Amended 1998 Ky. Acts ch. 99, sec. 5, effective July 15, 1998. -- Amended 1990 <br>Ky. Acts ch. 268, sec. 1, effective July 13, 1990. -- Amended 1986 Ky. Acts ch. 437, <br>sec. 24, effective July 15, 1986. -- Amended 1984 Ky. Acts ch. 322, sec. 15, effective <br>July 13, 1984. -- Created 1972 Ky. Acts ch. 137, sec. 8, effective June 16, 1972.
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