_________________ moved that SB 75 be amended as follows:
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Section 1. This Act applies to any kind of direct insurance, but does not apply to:
Section 4. The board of directors of the association shall consist of seven persons, each of
whom shall be appointed by the director for a term of three years and until a successor has been
appointed and qualified. The director shall consult with member insurers concerning their
recommendations for the board of directors. Any vacancy on the board shall be filled for the
remaining period of the term by a majority vote of the remaining board members subject to the
approval of the director.
Section 5. In approving selections to the board, the director shall consider, among other
things, whether all member insurers are fairly represented. No less than two members of the
board shall be domestic insurers.
Section 6. Members of the board may be reimbursed from the assets of the association for
expenses incurred by them as members of the board of directors.
Section 7. The association may:
Section 9. To aid in the detection and prevention of insurer insolvencies, it is the duty of the
board of directors, upon majority vote, to notify the director of any information indicating any
member insurer may be insolvent or in a financial condition hazardous to the policyholders or the
public.
Section 10. To aid in the detection and prevention of insurer insolvencies, the board of
directors may, upon majority vote, request that the director order an examination of any member
insurer which the board in good faith believes may be in a financial condition hazardous to the
policyholders or the public. Within thirty days of the receipt of such request, the director shall
begin the examination. The examination may be conducted as a National Association of
Insurance Commissioners' examination or may be conducted by such persons as the director
designates. The cost of the examination shall be paid by the association and the examination
report shall be treated as are other examination reports. In no event may the examination report
be released to the board of directors prior to its release to the public, but this does not preclude
the director from complying with section 11 of this Act. The director shall notify the board of
directors when the examination is completed. The request for an examination shall be kept on
file by the director but it may not be open to public inspection prior to the release of the
examination report to the public.
Section 11. The director shall report to the board of directors when the director has reasonable cause to believe that any member insurer examined or being examined at the request of the board of directors may be insolvent or in a financial condition hazardous to the policyholders or the public.
Section 13. The board of directors may, upon majority vote, make recommendations to the
director on matters generally related to improving or enhancing regulation for solvency.
Section 14. The board of directors may, at the conclusion of any domestic insurer insolvency
in which the association was obligated to pay covered claims, prepare a report on the history and
causes of such insolvency, based on the information available to the association, and submit the
report to the director.
Section 15. The association shall be obligated to pay covered claims existing prior to the
order of liquidation arising within thirty days after the order of liquidation, or before the policy
expiration date if less than thirty days after the order of liquidation, or before the insured replaces
the policy or causes its cancellation, if the insured does so within thirty days of the order of
liquidation. The obligation shall be satisfied by paying to the claimant an amount as follows:
Any obligation of the association to defend an insured shall cease upon the association's (i)
payment, by settlement releasing the insured or on a judgment, of an amount equal to the lesser
of the association's covered claim obligation limit, or the applicable policy limit, or (ii) tender of
such amount.
Notwithstanding any other provisions of this Act, except in the case of a claim for benefits under workers' compensation coverage, any obligation of the association to any person shall cease when ten million dollars has been paid in the aggregate by the association and any associations similar to the association of any other state or states or any property/casualty security fund which obtains contributions from insurers on a pre-insolvency 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 insolvent insurer. For purposes of this section, the term, affiliate, means a person who, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person. If the association determines that there may
be more than one claimant having a covered claim or allowed claim against the association or any
associations similar to the association or any property/casualty insurance security fund in other
states, under the policy or policies of any one insolvent insurer, the association may establish a
plan to allocate amounts payable by the association in such manner as the association in its
discretion deems equitable.
Section 16. The association shall be deemed the insurer to the extent of its obligation on the
covered claims and to such extent, subject to the limitations provided in this Act, shall have all
rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent,
including the right to pursue and retain salvage and subrogation recoverable on paid covered
claim obligations. The association may not be deemed the insolvent insurer for any purpose
relating to the issue of whether the association is amenable to the personal jurisdiction of the
courts of any state.
Section 17. The association shall investigate claims brought against the association and
adjust, compromise, settle, and pay covered claims to the extent of the association's obligation
and deny any other claims and may review settlements, releases, and judgments to which the
insolvent insurer or its insureds were parties to determine the extent to which such settlements,
releases, and judgments may be properly contested. The association may appoint and direct legal
counsel retained under liability insurance policies for the defense of covered claims.
Section 18. The association shall have the right to recover from the following persons the
amount of any covered claim paid on behalf of such person pursuant to this chapter:
Section 20. The association shall 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
Act.
Section 21. For purposes of administration and assessment, the association shall be divided
into three separate accounts:
Section 23. In addition to any other assessments authorized by this Act, the association may
assess each member insurer an administrative assessment not to exceed one hundred fifty dollars
per annum. The administrative assessment shall be made for the purpose of paying operating
expenses of the association and its employees not directly attributable to any particular
insolvency or insolvent insurer, and the administrative assessment may not be on a pro rata basis.
The assessments are due not less than thirty days after prior written notice to the member insurer
and shall accrue interest at ten percent per annum on and after the due date.
Section 24. 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 on the kinds of
insurance in the account bears to the net direct written premiums of all member insurers for the
preceding calendar year on the kinds of insurance in the account. The assessment is due not less
than thirty days after prior written notice to the member insurer and shall accrue interest at ten
percent per annum on and after the due date.
Section 25. No member insurer may be assessed in any year on any account an amount
greater than two percent of that member insurer's net direct written premiums for the preceding
calendar year on the kinds of insurance in the account.
Section 26. 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 if they are chargeable to the account for which the assessment is made.
Section 27. 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.
However, during the period of deferment, no dividends may be paid to shareholders or
policyholders. Deferred assessments shall be paid when such payment will not reduce capital or
surplus below required minimums. Such payments shall be refunded to those companies receiving
larger assessments by virtue of the deferment, or at the election of any such company, credited
against future assessments.
Section 28. If the maximum assessment, together with the other assets of the association in
any account, does not provide in any one year in any account an amount sufficient to make all
necessary payments from that account, the funds available shall be prorated and the unpaid
portion shall be paid as soon thereafter as funds become available.
Section 29. The association may refund to the member insurers in proportion to the contribution of each member insurer to that account that amount by which the assets of the
account exceed the liabilities, if, at the end of any calendar year, the board of directors finds that
the assets of the association in any account exceed the liabilities of that account as estimated by
the board of directors for the coming year.
Section 30. The association shall submit to the director a plan of operation and any
amendments necessary or suitable to assure the fair, reasonable, and equitable administration of
the association. The plan of operation and any amendments is effective upon approval in writing
by the director.
Section 31.
The plan of operation shall:
Section 33. The plan of operation may provide that any or all powers and duties of the association, except those under subdivision (2) of section 7 of this Act and those under sections 22 to 28, inclusive, of this Act are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this association, or its equivalent, in two or more states. Such a corporation, association, or organization shall be reimbursed as
a servicing facility would be reimbursed and shall be paid for its performance of any other
functions of the association. A delegation under this section shall take effect only with the
approval of both the board of directors and the director, and may be made only to a corporation,
association, or organization which extends protection not substantially less favorable and
effective than that provided by this Act.
Section 34. If at any time the association fails to submit suitable amendments to the plan of
operation, the director shall, after notice and hearing, promulgate such reasonable rules as are
necessary or advisable to effectuate the provisions of this Act. The rules shall continue in force
until modified by the director or superseded by a plan submitted by the association and approved
by the director.
Section 35. The director shall notify the association of the existence of an insolvent insurer
not later than three days after the director receives notice of the determination of the insolvency.
The association is entitled to a copy of any complaint seeking an order of liquidation with a
finding of insolvency against a member company at the same time that the complaint is filed with
a court of competent jurisdiction.
Section 36. The director shall, upon request of the board of directors, provide the association
with a statement of the net direct written premiums of each member insurer.
Section 37. Any proceeding in which the insolvent insurer is a party or is obligated to defend
a party in any court in this state shall, subject to waiver by the association in specific cases
involving covered claims, be stayed until the last day fixed by the court for the filing of claims
and such additional time thereafter as may be determined by the court from the date the
insolvency is determined or an ancillary proceeding is instituted in the state, whichever is later,
to permit proper defense by the association of all pending causes of action. As to any covered
claims arising from a judgment under any decision, verdict, or finding based on the default of the
insolvent insurer or its failure to defend an insured, the association, either on its own behalf or
on behalf of such insured, may apply to have the judgment, order, decision, verdict, or finding
set aside by the same court or administrator that made the judgment, order, decision, verdict, or
finding and shall be permitted to defend against the claim on the merits.
Section 38. The director may suspend or revoke, after notice and hearing, the certificate of
authority to transact insurance in this state of any member insurer that fails to pay an assessment
when due or fails to comply with the plan of operation. As an alternative, the director may levy
a fine on any member insurer which fails to pay an assessment when due. The fine may not
exceed five percent of the unpaid assessment per month, except that no fine may be less than one
hundred dollars per month.
Section 39.
The director may revoke the designation of any servicing facility if the director
finds claims are being handled unsatisfactorily.
Section 40. Any person having a claim against an insurer, whether or not the insurer is a
member insurer, under any provision in an insurance policy other than a policy of an insolvent
insurer which is also a covered claim, shall be required to first exhaust any right under the policy.
Any amount payable on a covered claim under this Act shall be reduced by the amount of any
recovery under the insurance policy.
Section 41. Any person having a claim which may be recovered under more than one
insurance guaranty association or its equivalent shall seek recovery first from the association of
the place of residence of the insured except that if it is a first-party claim for damage to property
with a permanent location, the person shall seek recovery first from the association of the
location of the property, and if it is a workers' compensation claim, the person shall seek
recovery first from the association of the residence of the claimant. Any recovery under this Act
shall be reduced by the amount of recovery from any other insurance guaranty association or its
equivalent.
Section 42. Any person recovering under this Act shall be deemed to have assigned that
person's rights under the policy to the association to the extent of any recovery from the
association. Every insured or claimant seeking the protection of this Act shall cooperate with the
association to the same extent as such person would have been required to cooperate with the
insolvent insurer.
Section 43.
The association has no cause of action against the insured of the insolvent insurer
for any sums it has paid out, except such causes of action as the insolvent insurer would have had
if the sums had been paid by the insolvent insurer and except as provided in section 18 of this
Act.
Section 44. In the case of an insolvent insurer operating on a plan with assessment liability,
payments of claims of the association may not operate to reduce the liability of insureds to the
receiver, liquidator, or statutory successor for unpaid assessments.
Section 45.
The receiver, liquidator, or statutory successor of an insolvent insurer is bound
by determinations of covered claim eligibility under this Act and by settlements of claims made
by the association or a similar organization in another state. The court having jurisdiction shall
grant such claims priority equal to that which the claimant would have been entitled in the
absence of this Act against the assets of the insolvent insurer. The expenses of the association
or similar organization in handling claims shall be accorded the same priority as the liquidator's
expenses.
Section 46. The association shall periodically file with the receiver or liquidator of the
insolvent insurer statements of the covered claims paid by the association and estimates of
anticipated claims on the association which shall preserve the rights of the association against the
assets of the insolvent insurer.
Section 47. The association is subject to examination and regulation by the director. The
board of directors shall submit, not later than March thirtieth of each year, a financial report for
the preceding calendar year in a form approved by the director.
Section 48. There is no liability on the part of and no cause of action of any nature may arise
against any member insurer, the association or its agents or employees, the board of directors,
any person serving as a representative of any director, or the director or the director's
representatives for any action taken or any failure to act by them in the performance of their
powers and duties under this Act.
Section 49. Any final action or order of the director under this Act is subject to judicial
review in a court of competent jurisdiction.
Section 50. The rates and premiums charged for insurance policies to which this Act applies
shall include amounts sufficient to recoup a sum equal to the amounts paid to the association by
the member insurer less any amounts returned to the member insurer by the association and such
rates may not be deemed excessive because they contain an amount reasonably calculated to
recoup assessments paid by the member insurer.
Section 51. It is unfair trade practice for any insurer or agent to in any manner make use of
the protection given policyholders by this Act as a reason for buying insurance from the insurer
or agent.
Section 52. The association shall pay claims in any order which it deems reasonable,
including the payment of claims as such are received from the claimants or in groups or
categories of claims.
Section 53. The association and any similar organization in another state shall be recognized
as claimants in the liquidation of an insolvent insurer for any amounts paid by them on covered
claims obligations as determined under this Act or similar laws in other states and shall receive
dividends and any other distributions at the priority set forth in
§
58-29B-124.
Section 54. The liquidator, receiver, or statutory successor of an insolvent insurer covered
by this chapter shall permit access by the board or its authorized representative to any of the
insolvent insurer's records that are necessary for the board in carrying out its functions under this
Act with regard to covered claims. In addition, the liquidator, receiver, or statutory successor
shall provide the board or its representative with copies of such records upon request by the
board and at the expense of the board.
Section 55. Except for actions by member insurers aggrieved by final actions or decisions of
the association pursuant to subdivision (7) of section 31 of this Act, any action relating to or
arising out of this Act against the association shall be brought in a court in this state. The courts
in this state have exclusive jurisdiction over all actions relating to or arising out of this Act
against the association.
Section 56. This Act shall be known as the South Dakota Insurance Guaranty Association
Act.
Section 57. That
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§
58-29A-1 to 58-29A-53, inclusive, be repealed.
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