304.33-140 Grounds for rehabilitation.
(1)
The commissioner may apply by verified petition to the court for an order directing
the commissioner to rehabilitate a domestic insurer or an alien insurer domiciled in
this state on any one (1) or more of the following grounds:
(a) Any ground on which the commissioner may apply for an order of liquidation
under KRS 304.33-190, whenever the commissioner believes that the insurer
may be successfully rehabilitated without substantial increase in the risk of
loss to creditors of the insurer or to the public;
(b) That the commissioner has reasonable cause to believe that there has been
embezzlement from the insurer, wrongful sequestration or diversion of the
insurer's assets, forgery or fraud affecting the insurer, or other illegal conduct
in, by, or with respect to the insurer, that if established would endanger assets
in an amount threatening the solvency of the insurer;
(c) That any one (1) of the following circumstances has occurred and the
commissioner has reasonable cause to believe that the insurer is insolvent or
that assets are endangered in an amount threatening the solvency of the
insurer:
1.
That information coming into the commissioner's possession has
disclosed substantial and not adequately explained discrepancies
between the insurer's records and the most recent annual report or other
official company reports;
2.
That the insurer has failed to remove any person who in fact has
executive authority in the insurer, whether an officer, manager, general
agent, employee, or other person, if the person has been found by the
commissioner after notice and hearing to be dishonest or untrustworthy
in a way affecting the insurer's business;
3.
That control of the insurer, whether by stock ownership or otherwise,
and whether direct or indirect, is in one (1) or more persons found by the
commissioner after notice and hearing to be dishonest or untrustworthy;
4.
That any person who in fact has executive authority in the insurer,
whether an officer, manager, general agent, employee, or other person,
has refused to be examined under oath by the commissioner concerning
its affairs, whether in this state or elsewhere, and after reasonable notice
of the fact the insurer has failed promptly and effectively to terminate
the employment and status of the person and all his or her influence on
management;
5.
That the insurer has refused to submit its books, accounts, documents, or
other records to the reasonable examination or inspection of the
commissioner or the commissioner's authorized representative;
(d) That the insurer is or is about to become insolvent;
(e) That the insurer is engaging in a systematic practice of reaching settlements
with and obtaining releases from policyholders or third-party claimants and
(2)
then unreasonably delaying payment of or failing to pay the agreed upon
settlements;
(f) That the insurer is in such condition that the further transaction of business
would be hazardous, financially or otherwise, to its policyholders, its
creditors, or the public;
(g) That within the previous twelve (12) months the insurer has systematically
attempted to compromise with its creditors on the ground that it is financially
unable to pay its claims in full;
(h) That without first obtaining the written consent of the commissioner, the
insurer has transferred, or attempted to transfer, substantially its entire
property or business, or has entered into any transaction the effect of which is
to merge, consolidate, or reinsure substantially its entire property or business
in or with the property or business of any other person;
(i) That the insurer or its property has been or is the subject of an application for
the appointment of a receiver, trustee, custodian, conservator, or sequestrator
or similar fiduciary of the insurer or its property otherwise than as authorized
under this subtitle, and that such appointment has been made or is imminent,
and that such appointment might oust the courts of this state of jurisdiction or
prejudice orderly delinquency proceedings under this subtitle;
(j) That within the previous year the insurer has willfully violated its charter or
articles of incorporation or any insurance law or regulation of this state, or
having become aware within the previous year of an unintentional violation
has failed to take all reasonable steps to remedy the situation resulting from
the violation and to prevent future violations;
(k) That the directors of the insurer are deadlocked in the management of the
insurer's affairs and that the members or shareholders are unable to break the
deadlock and that irreparable injury to the insurer, its creditors or its
policyholders is threatened by reason thereof;
(l) That the insurer has failed to file its annual report or other report within the
time allowed by law, and after written demand by the commissioner has failed
to give an adequate explanation immediately; and
(m) That two-thirds (2/3) of the board of directors, or the holders of a majority of
the shares entitled to vote, or a majority of members or policyholders of an
insurer subject to control by its members or policyholders, consent to
rehabilitation under this subtitle.
Upon the issuance of an order directing the commissioner to rehabilitate a domestic
insurer, the court shall have exclusive jurisdiction over all matters relating to the
rehabilitation, including, but not limited to, the proper scope and application of the
provisions of this subtitle to the rehabilitation as well as all interpretation and
enforceability of all contracts of insurance to which the insurer is a party.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1439, effective July 15, 2010. -Amended 1990 Ky. Acts ch. 422, sec. 9, effective July 13, 1990. -- Created 1970 Ky.
Acts ch. 301, subtit. 33, sec. 14, effective June 18, 1970.
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