2014 Kentucky Revised Statutes CHAPTER 304 - INSURANCE CODE Subtitle 42 - Kentucky Life and Health Insurance Guaranty Association 42.42-140 Liquidation, rehabilitation or conservation proceedings.
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304.42-140 Liquidation, rehabilitation or conservation proceedings.
(1)
(2)
(3)
(4)
(5)
Nothing in this subtitle shall be construed to reduce the liability for unpaid
assessments of the insureds on an impaired or insolvent insurer operating
under a plan with assessment liability.
Records shall be kept of all meetings of the board of directors to discuss the
activities of the association in carrying out its powers and duties under KRS
304.42-080. The records of the association with respect to an impaired or
insolvent insurer shall not be disclosed prior to the termination of a liquidation,
rehabilitation, or conservation proceeding involving the impaired or insolvent
insurer, prior to the termination of the impairment or insolvency of the insurer,
or prior to the order of a court of competent jurisdiction. Nothing in this
subsection shall limit the duty of the association to render a report of its
activities under KRS 304.42-150.
For the purpose of carrying out its obligations under this subtitle, the
association shall be deemed to be a creditor of the impaired or insolvent
insurer to the extent of assets attributable to covered policies reduced by any
amounts to which the association is entitled as subrogee pursuant to
subsection (8) of KRS 304.42-080. Assets of the impaired or insolvent insurer
attributable to covered policies shall be used to continue all covered policies
and pay all contractual obligations of the impaired or insolvent insurer as
required by this subtitle. Assets attributable to covered policies, as used in this
subsection, is that proportion of the assets which the reserves that should have
been established for such policies bear to the reserves that should have been
established for all policies of insurance written by the impaired or insolvent
insurer.
As a creditor of the impaired or insolvent insurer as established in subsection
(3) of this section and consistent with KRS 304.33-440, the association and
other similar associations shall be entitled to receive a disbursement of assets
out of the marshaled assets, from time to time as the assets become available
to reimburse it, as a credit against contractual obligations under this subtitle. If
the liquidator has not, within one hundred twenty (120) days of a final
determination of insolvency of an insurer by the receivership court, made an
application to the court for the approval of a proposal to disburse assets out of
marshaled assets to guaranty associations having obligations because of the
insolvency, then the association shall be entitled to make application to the
receivership court for approval of its own proposal to disburse these assets.
(a) Prior to the termination of any liquidation, rehabilitation, or conservation
proceeding, the court may take into consideration the contributions of the
respective parties, including the association, the shareholders and
policyowners of the insolvent insurer, and any other party with a bona fide
interest, in making an equitable distribution of the ownership rights of
such insolvent insurer. In such a determination, consideration shall be
given to the welfare of the policy owners of the continuing or successor
insurer;
(b) No distribution to stockholders, if any, of an impaired or insolvent insurer
shall be made until and unless the total amount of valid claims of the
association for funds expended in carrying out its powers and duties
(6)
(a)
(b)
(c)
(d)
(e)
under KRS 304.42-080 with respect to such insurer have been fully
recovered by the association.
If an order for liquidation or rehabilitation of an insurer domiciled in this
state has been entered, the receiver appointed under such order shall
have a right to recover on behalf of the insurer, from any affiliate that
controlled it, the amount of distributions, other than stock dividends paid
by the insurer on its capital stock, made at any time during the five (5)
years preceding the petition for liquidation or rehabilitation subject to the
limitations of paragraphs (b) to (d) of this subsection;
No such distribution shall be recoverable if the insurer shows that when
paid the distribution was lawful and reasonable, and that the insurer did
not know and could not reasonably have known that the distribution might
adversely affect the ability of the insurer to fulfill its contractual
obligations;
Any person who was an affiliate that controlled the insurer at the time the
distributions were paid shall be liable up to the amount of distributions he
received. Any person who was an affiliate that controlled the insurer at the
time the distributions were declared, shall be liable up to the amount of
distributions which would have been received if they had been paid
immediately. If two (2) persons are liable with respect to the same
distributions, they shall be jointly and severally liable;
The maximum amount recoverable under this subsection shall be the
amount needed in excess of all other available assets of the insolvent
insurer to pay the contractual obligations of the insolvent insurer;
If any person liable under paragraph (c) of this subsection is insolvent, all
its affiliates that controlled it at the time the dividend was paid shall be
jointly and severally liable for any resulting deficiency in the amount
recovered from the insolvent affiliate.
Effective:July 15, 1998
History: Amended 1998 Ky. Acts ch. 537, sec. 9, effective July 15, 1998. -Created 1978 Ky. Acts ch. 282, sec. 14, effective June 17, 1978.
Legislative Research Commission Note (modified 10/29/96). Subsection (3) of
this statute contains the following text, which appears to be incomplete: "Assets
of the impaired or insolvent insurer as required by this subtitle." The provisions
of KRS 304.42-010 to 304.42-190 were modeled after the Model Act of the
National Association of Insurance Commissioners on Life and Health Guaranty
Associations, in which the following language appears after the word "insurer" in
the text specified above: "attributable to cover losses should be used to continue
all covered policies and pay all contractual obligations of the impaired or
insolvent insurer."
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