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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 before the policy expiration date if less than thirty (30) days
after the order of liquidation, or before the insured replaces the policy or
on request effects cancellation, if the insured does so within thirty (30)
days of the order of liquidation. The obligation shall be satisfied by paying
to the claimant an amount as follows:
1.
The full amount of a covered claim for benefits arising from a
workers' compensation insurance policy purchased to satisfy the
requirements of KRS 342.340;
2.
An amount not exceeding ten thousand dollars ($10,000) per policy
for a covered claim for the return of unearned premium; or
3.
An amount not exceeding three hundred thousand dollars
($300,000) per 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. Notwithstanding any other provisions of this subtitle, a covered
claim shall not include a claim filed with the association after the earlier of
twelve (12) 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 shall 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 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.
Notwithstanding any other provisions of this subtitle, 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 ten
million dollars ($10,000,000) shall have been paid in the aggregate by the
association and any one (1) or more associations similar to the
association of any other state or states or any property/casualty security
fund that obtains contributions from insurers on a preinsolvency 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 one (1) insolvent insurer.
For purposes of this section, the term "affiliate" shall mean a person who
directly or indirectly, through one (1) or more intermediaries, controls, is
controlled by, or is under common control with another person. If the
claimant has a covered claim or allowed claim against the association or
any associations similar to the association or any property and casualty
insurance security fund of another states, under the policy or policies of
any one (1) insolvent insurer, the association may establish a plan to
allocate amounts payable by the 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
(d)
(e)
(f)
(g)
claims and to that extent 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 paid covered claim obligations;
Assess insurers amounts necessary to pay the obligations of the
association under paragraph (a) of this subsection subsequent to an
insolvency, the expenses of handling covered claims subsequent to an
insolvency, and the cost of examinations under KRS 304.36-130 and
other expenses authorized by this subtitle. 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 bears to the net direct written premiums of all member
insurers for the calendar year preceding the assessment. Each member
insurer shall be notified of the assessment not later than thirty (30) days
before it is due. No member insurer may be assessed in any year an
amount greater than two percent (2%) 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 (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 shall pay claims in any order which it may deem reasonable
including the payment of claims as such 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, no dividends shall be paid to
shareholders or policyholders. Deferred assessments shall be paid when
such payment will not reduce capital and surplus below required
minimums. Such payments shall be refunded to those companies
receiving larger assessments by virtue of such deferment, or at the
election of any such company, credited against future assessments. Each
member insurer serving as a servicing facility may set off against any
assessment authorized payments made on covered claims and expenses
incurred in the payment of such claims by such member insurer;
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;
Notify such persons as the commissioner directs under KRS
304.36-100(2)(a);
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 may be declined by a member insurer; and
(h)
(2)
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 subtitle.
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;
(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
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 of the association as estimated by the board of directors for the
coming year.
Effective:July 15, 2010
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 Ky. Acts ch. 268, sec. 1, effective July 13, 1990. -- Amended 1986 Ky.
Acts ch. 437, sec. 24, effective July 15, 1986. -- Amended 1984 Ky. Acts
ch. 322, sec. 15, effective July 13, 1984. -- Created 1972 Ky. Acts ch. 137,
sec. 8, effective June 16, 1972.
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