2006 Utah Code - 31A-27-331 — Special provisions for third party claims.

     31A-27-331.   Special provisions for third party claims.
     (1) This section does not apply to a claim that is or may be covered by one of the Utah insurance guaranty associations or a corresponding association or fund of another state.
     (2) Whenever any third party asserts a cause of action against an insured of an insurer which is in liquidation for which the insurance might indemnify the insured, the third party may file a claim with the liquidator.
     (3) Whether or not the third party files a claim, the insured may file a claim on his own behalf in the liquidation. An insured who fails to file a claim by the date for filing claims specified in the order of liquidation or within 60 days after mailing of the notice required by Subsection 31A-27-315 (1) (b), whichever is later, is an unexcused late filer.
     (4) The liquidator shall make recommendations to the court under Section 31A-27-336 for the allowance of an insured's claim under Subsection (3) after consideration of the probable outcome of any pending action against the insured on which the claim is based, the probable damages recoverable in the action, and the probable costs and expenses of defense. After allowance of the claim by the court, the liquidator shall withhold any distributions payable on the claim, pending the outcome of the litigation and negotiation with the insured. Whenever it seems appropriate, the liquidator may reconsider the claim on the basis of additional information and amend the recommendations to the court. The insured shall be afforded the same notice and opportunity to be heard on all changes in the recommendation as in its initial determination. The court may amend its allowance as it determines is appropriate. As claims against the insured are settled or barred, the insured shall be paid from the amount withheld the same percentage distribution as was paid on other claims of like priority, based on the lesser of:
     (a) the amount actually recovered from the insured by the action or paid by the agreement, plus the reasonable costs and expenses of defense; and
     (b) the amount allowed on the claims by the court.
     After all claims are settled or barred, any sum remaining from the amount withheld shall revert to the undistributed assets of the insurer. Delay in final payment under this subsection is not a reason for unreasonable delay of final distribution and discharge of the liquidator.
     (5) If several claims founded upon one policy are filed, whether by third parties or as claims by the insured under this section, and the aggregate allowed amount of the claims to which the same limit of liability in the policy is applicable exceeds that limit, each claim as allowed shall be reduced in the same proportion so that the total equals the policy limit. Claims by the insured are evaluated as in Subsection (4). If any insured's claim is subsequently reduced under Subsection (4), the amount thus freed shall be apportioned ratably among the claims which have been reduced under this subsection.

Enacted by Chapter 242, 1985 General Session