2006 Louisiana Laws - RS 22:1382 — Powers and duties of the association

§1382.  Powers and duties of the association

A.  The association shall:

(1)(a)  Be obliged to the extent of the covered claims existing prior to the determination of the insurer's insolvency, or upon order of the court as provided in R.S. 22:735, or arising after such determination but prior to the first to occur of the following events:

(i)  Expiration of thirty days after the date of such determination of insolvency,

(ii)  Expiration of the policy, or

(iii)  Replacement or cancellation of the policy at the instance of the insured if he does so within thirty days of the determination, but such obligation shall include only that amount of each covered claim, except return premiums, which is in excess of one hundred dollars and is less than one hundred fifty thousand dollars, per claim, subject to a maximum limit of three hundred thousand dollars per accident or occurrence, nor shall a claim for the portion of unearned premiums in excess of ten thousand dollars be allowed.

(b)  The applicable limit per claim and per accident or occurrence shall be exhaustive of the entire liability of the association under this Part, however arising, without regard to the nature of or basis for that liability, except court costs incurred subsequent to the date of insolvency.

(c)  Excepting claims for unearned premiums, which shall be subject to the ten thousand dollar limitation provided herein, the association shall pay the full amount of any covered claim arising out of a worker's compensation policy.

(d)  In no event shall the association be obligated to a policyholder or claimant in an amount in excess of the obligation of the insolvent insurer under the policy from which the claim arises.

(e)  "Accident or occurrence" in this Section means one proximate, uninterrupted, or continuing cause which results in all of the injuries or damages even though several discrete items of damage result, and even though multiple claims and claimants may arise as a result of one such accident or occurrence.  A series of claims arising from the same accident or occurrence shall be treated as due to that one accident or occurrence and thus shall be subject to the aggregate liability limit established herein.

(2)  Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent; however, when the liability of the association under this Part has been exhausted by payment, the obligation of the association to provide a defense to the insured of an insolvent insurer shall cease.

(3)(a)(i)  Assess insurers amounts necessary to pay the obligations of the association under Paragraph A(1) subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, and the cost of examinations under R.S. 22:1388, to fund loans or provide guarantees to member insurers under rehabilitation or liquidation and other expenses authorized by this Part.  The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year, whether or not a company withdraws subsequent to the preceding calendar year, bears to the net direct written premiums of all member insurers for the preceding calendar year.  Each member insurer shall be notified of the assessment not later than thirty days before it is due.

(ii)(aa)  Beginning January 1, 1990, and ending December 31, 2002, no member insurer may be assessed in any year an amount greater than two percent of that member insurer's net direct written premiums for the preceding calendar year.  Beginning January 1, 2003, and thereafter, no member insurer may be assessed in any year an amount greater than one percent of that member insurer's net direct written premiums for the preceding calendar year.  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 shall be prorated and the unpaid portion shall be paid as soon thereafter as funds become available.  However, as to any assessment or portion thereof payable after May 1, 1992, payors doing business in Louisiana under a valid certificate of authority as of January 1, 1992, and who as of August 21, 1992 have at least one-half of their total admitted assets invested in qualifying Louisiana investments as defined in R.S. 22:1068(C), shall receive an earned credit for the amount of such assessment payable as follows: the association shall establish on its books an assessment credit fund and shall set aside and escrow in such fund ninety-five percent of the amount actually received by the association from each payor qualifying for such earned credit; not later than sixty days after receipt of such payments, the association shall certify to each payor the amount in such fund attributable to each qualifying payor; amounts credited to the assessment credit fund shall be expended by the association, only to the extent funds are not otherwise available, to meet its obligations under any cooperative endeavor agreement dated as of October 1, 1990, (together with all amendments and supplements thereto entered into by the association) and upon satisfaction of all of the association's obligations under such cooperative endeavor agreement and the termination thereof in accordance with its terms, the balances in the assessment credit fund shall be promptly paid over by the association to each payor qualifying for the earned credit in the amounts certified by the association; to the extent amounts then on deposit in the fund are insufficient to make such payments to such payors, such amounts shall be paid over by the association pro rata.  However, the payors shall continue to have a claim of first priority against funds thereafter received by the association until the earned credits are paid in full by the association.  Notwithstanding the foregoing, no amounts shall be paid by the association to any payor that has received an earned credit until the association has satisfied all of its obligations under any cooperative endeavor agreement, dated as of October 1, 1990, (together with all amendments and supplements thereto entered into by the association) and such agreement has been terminated in accordance with its terms.  In the event any indebtedness secured or permitted to be secured under the cooperative endeavor agreement dated as of October 1, 1990, (together with all amendments and supplements thereto) is refunded or otherwise refinanced by the extension of such existing cooperative endeavor agreement and the incurrence by the association thereunder of indebtedness not contemplated by such agreement as of August 21, 1992, upon the payment and satisfaction by the association of all of its obligations and commitments thereunder, such agreement shall be deemed to be terminated for purposes of this Item.

(bb)  As to any assessment made on or after the termination of any such cooperative endeavor agreement in accordance with its terms or deemed terminated under the provisions of this Item, payors doing business in Louisiana under a valid certificate of authority as of January 1, 1992, and who, on August 21, 1992, have at least one-half of their admitted assets invested in qualifying Louisiana investments as defined in R.S. 22:1068(C), shall have such assessment reduced by eighty percent of the amount otherwise assessed.

(iii)  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.  Each member insurer may set off against any assessment, authorized payments made on covered claims and expenses incurred in the payment of such claims by the member insurer.

(iv)  Beginning January 1, 1990, the amount of the assessment shall be offset, in the same manner that an offset is provided against the premium tax liability in Paragraph (A)(3)(c) of this Section, against the assessment levied by R.S. 22:1419, provided that such offset shall not be applied against any portion of the assessments to be deposited to the credit of the Municipal Police Employees' Retirement System, the Sheriffs' Pension and Relief Fund, and the Firefighters' Retirement System.  To qualify for this offset, the payer shall file a sworn statement with the annual report required by Part XXIII of Chapter 1 of Title 22 of the Louisiana Revised Statutes of 1950 showing as of December thirty-first of the reporting period that at least the following amounts of the total admitted assets of the payer, less assets in an amount equal to the reserves on its policies issued in foreign countries in which it is authorized to do business and which countries require an investment therein as a condition of doing business, are invested and maintained in qualifying Louisiana investments as defined in R.S. 22:1068(C).  If one-sixth of the total admitted assets of the payer are in qualifying Louisiana investments, then the offset shall be sixty-six and two-thirds percent of the amount otherwise assessed; if at least one-fifth of the total admitted assets of the payer are in qualifying Louisiana investments, then the offset shall be seventy-five percent of the amount otherwise assessed; if at least one-fourth of the total admitted assets of the payer are in qualifying Louisiana investments, the offset shall be eighty-five percent of the amount otherwise assessed; and if at least one-third of the total admitted assets of the payer are in qualifying Louisiana investments, then the offset shall be ninety-five percent of the amount otherwise assessed.  If the total of the net premium tax liability and the assessment for the expenses of the Louisiana Insurance Rating Commission paid for the previous year was less than the offset allowed under R.S. 22:1382(A)(3)(c) for the previous year, the member company may reduce its assessment payment to the Louisiana Insurance Guaranty Association for the current year by that difference.

(v)  An insurer may transfer up to twenty percent annually of any offset as described in this Section with the prior approval of the commissioner to an affiliated insurer.  For the purposes of this Section:

(aa)  "Affiliated insurer" means an insurance company licensed or holding a certificate of authority to do business in this state which controls, is controlled by, or is under common control with, another insurer.

(bb)  "Control" means holding, directly or indirectly, the ownership of or power to vote, at least eighty percent of the voting stock of another member insurer.

(b)  The association shall issue to each insurer paying an assessment under this Act a certificate of contribution, in a form prescribed by the commissioner, for the amount so paid.  All outstanding certificates shall be of equal dignity and priority without reference to amounts or dates of issue.

(c)  A certificate of contribution issued to a member company shall be offset against its premium tax liability in an amount not to exceed ten percent of the assessment for the year of assessment and not to exceed ten percent of the assessment per year for each succeeding year, not to exceed a total offset of one hundred percent for each assessment. During the calendar year of issuance of a certificate of contribution, and yearly thereafter, a member shall at its option have the right to show a certificate of contribution as an asset in the form approved by the commissioner at percentages of the original face amount approved by the commissioner, equal to the unused offset as of each such calendar year.

(d)  Repealed by Acts 2004, No. 140, §1.

(e)  To the extent amounts have been written off under R.S. 22:1382(A)(3)(c) above, the provisions of R.S. 22:1390 shall not apply.

(f)  Not subject the premium dollars paid to an insurer by any insured whose net worth exceeds twenty-five million dollars on December thirty-first to the assessment provided for in this Section for the next calendar year.  An insured's net worth shall include the aggregate net worth of the insured and all of its subsidiaries and affiliates calculated on a consolidated basis.  An "affiliate" of the insured includes any person or entity who directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the insured.  "Control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the controlled person or entity, whether through the ownership of voting securities, by contract, or otherwise.  The consolidated net worth of the insured and all of its subsidiaries and affiliates shall be calculated on the basis of their fair market values.  Any insurer deducting the premium dollars from its assessment shall provide a net worth affidavit to the association from each insured whose premium dollars are being deducted together with a statement of the amount of premium dollars paid by such insured in accordance with procedures established by the association.

(4)  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.  On contradictory motion of the association, a court of proper jurisdiction and venue over the claim shall enter a formal order annulling any unsatisfied preinsolvency settlement, release, or consent judgment entered into by the insolvent insurer in its name or the name of the insured, upon a showing of fraud, ill practice, or where the settlement is clearly excessive, considering all relevant factors, including but not limited to coverage, liability, and quantum issues.

(5)  Notify such persons as the commissioner directs under R.S. 22:1384(B)(1).

(6)  Handle claims through its 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 such designation may be declined by a member insurer.

(7)  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 Part.

(8)  Annually submit the plan of operation to the commissioner of insurance in accordance with the provisions of R.S. 22:1383 and of this Part.  Approval by the commissioner shall not be unreasonably withheld.  If the plan of operation is disapproved in whole or in part, the commissioner shall provide written reasons as to each disapproved part, and the association shall resubmit the part of the plan which has been disapproved by the commissioner within thirty days thereafter.  The preceding plan of operation shall remain in effect until such time as the revised plan is effective.  Amendments to the plan of operation shall be submitted to the commissioner for approval within ten days of adoption by the association, and approval of amendments shall be in accordance with R.S. 22:1383 and with this Part except as otherwise provided in this Section.

(9)  Annually promulgate policies and procedures which shall be incorporated into the plan of operation, which policies and procedures are designed to increase participation for minorities and women in contractual legal services entered into by such association.

(10)  Annually promulgate policies and procedures relative to the appointment of all legal counsel which shall be incorporated into the plan of operation.

(11)  Annually promulgate policies and procedures relative to a system of alternative dispute resolution of lawsuits and claims which shall be incorporated into the plan of operation, and implement such a system of alternative dispute resolution.

(12)  Coordinate and work in conjunction with a special deputy commissioner designated and appointed by the commissioner of insurance, said deputy commissioner being charged with oversight and implementation of the provisions of this Part.

B.  The association may:

(1)  Employ or retain such persons as are necessary to handle claims and perform other duties of the association.

(2)  Borrow funds necessary to effect the purposes of this Part.  In connection therewith the association may agree to such terms and conditions as it deems necessary and proper, and the association may assign to the state or any agency or authority thereof, or to any private entity, the right to the receipt of assessments to the extent necessary to provide for the payment of bonds issued by the state or such agency or authority, or such private agency, for the purpose of providing for the repayment of such borrowings.

(3)  Sue or be sued. The power to sue includes the power and right to intervene as a party before any court in this state that has jurisdiction over an insolvent insurer.

(4)  Negotiate and become a party to such contracts as are necessary to carry out the purpose of this Part.

(5)  Perform such other acts as are necessary or proper to effectuate the purpose of this Part.

(6)  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.

(7)  As to any member insurer under rehabilitation or liquidation, and pursuant to a written plan of full or partial rehabilitation or liquidation jointly submitted by the commissioner through his counsel of record, which counsel is approved by the attorney general pursuant to the provisions of this Code, and the Louisiana Insurance Guaranty Association through its counsel of record, and subject to approval of the court in which such rehabilitation or liquidation proceeding is pending, which court must be satisfied that such plan is the most cost-effective method of dealing with the conditions creating the member insurer's impairment or insolvency, and improving the condition and is in the best interest of the member insurer's policyholders; and is in the best interests of the association, then the association may:

(a)  Guarantee or assume, or cause to be guaranteed or assumed, any or all of the policies, contracts, or other obligations of such member insurer.

(b)  Provide such monies, pledges, notes, guarantees, or other means as are proper to effectuate R.S. 22:1382(B)(7)(a), and to assume payment of the obligations of such member insurer pending action under R.S. 22:1382(B)(7)(a).

(c)  Loan money to such member insurer.

C.(1)  Notwithstanding any other provision to the contrary and unless such other law is specifically excepted from this Section, the provisions of this Section shall supersede and prevail over any other law to the contrary.

(2)  This Section shall not apply to R.S. 24:38(C) and 654.

D.  In the event that the association pays a claim on behalf of an insured whose net worth exceeds twenty-five million dollars on December thirty-first of the year immediately preceding the date of the determination of the insolvency of the insurer, the association shall have the right to recover from the insured all costs incurred in the defense of said claim, including attorney fees, administrative costs, court costs, indemnity, settlement, or other defense costs.  An insured's net worth on such date shall be deemed to include the aggregate net worth of the insured and all of its subsidiaries and affiliates as calculated on a consolidated basis, as provided in R.S. 22:1379(3)(f).  An insured for the purposes of this provision shall not include any state or local governmental agency or subdivision thereof.

Added by Acts 1970, No. 81, §1.  Amended by Acts 1975, No. 234, §1; Acts 1985, No. 780, §1, eff. Sept. 1, 1985; Acts 1987, No. 172, §1, eff. June 19, 1987; Acts 1989, No. 685, §1; Acts 1990, No. 1, §1; eff. May 1, 1990; Acts 1990, No. 253, §1; Acts 1991, No. 941, §1, eff. July 24, 1991; Acts 1992, No. 237, §1, eff. June 10, 1992; Acts 1992, No. 500, §1; Acts 1992, No. 517, §1, eff. June 25, 1992; Acts 1993, No. 397, §2, eff. June 2, 1993; Acts 1993, No. 955, §1; Acts 1999, No. 77, §1, eff. June 9, 1999; Acts 1999, No. 475, §1, eff. June 18, 1999; Acts 1999, No. 1327, §1; Acts 2004, No. 109, §1; Acts 2004, No. 140, §1.