CHAPTER 58-29B
INSURERS SUPERVISION, REHABILITATION AND LIQUIDATION
58-29B-1 Citation of chapter.
58-29B-2 Scope.
58-29B-3 Definition of terms.
58-29B-4 Delinquency proceedings sole and exclusive remedy--Commencement of proceedings by director.
58-29B-5 Commencement of proceedings despite lack of notice to insurer.
58-29B-6 Grounds for personal jurisdiction.
58-29B-7 Venue of proceedings.
58-29B-8 Receiver authorized to grant certain orders.
58-29B-9 Persons to cooperate in proceedings and preliminary investigations.
58-29B-10 Obstruction or interference in conduct of proceedings.
58-29B-11 Failure to cooperate--Obstruction or interference--Penalty.
58-29B-12 Directors and deputies responsible for official bonds--Source of payment.
58-29B-13 Proceedings commenced prior to enactment of chapter.
58-29B-13.1 Service of appropriate orders by director.
58-29B-14 Director's determination of continuation of business hazardous--Notification of insurer.
58-29B-15 Supervision of insurer--Appointment of supervisor--Certain acts by insurer prohibited--Costs.
58-29B-16 Insurer to comply with director's requirements--Time period--Failure to comply.
58-29B-17 Hearings--Notice and procedure.
58-29B-18 Request for hearing--Request not to stay order.
58-29B-19 Waiver of hearing--Application for judicial relief--Judicial review of order after hearing.
58-29B-20 Requests for review of supervisor's actions.
58-29B-21 Violation of supervision order--Penalty.
58-29B-22 Application for necessary orders to enforce supervision order.
58-29B-23 Violation of valid orders--Personal liability for losses suffered by insurer--Commencement of action.
58-29B-24 Authority to file petition for seizure order--Grounds.
58-29B-25 Ex parte issuance of seizure order--Costs.
58-29B-26 Duration of order--Hearing to extend, shorten or modify--Vacation of order.
58-29B-27 Entry of order not anticipatory breach of insurer's contracts.
58-29B-28 Petition for review of order--Procedure.
58-29B-29 Notice to persons not present at hearing--Effect on previously issued order.
58-29B-30 Records to remain confidential--Exceptions.
58-29B-31 Application by director for rehabilitation of insurer--Grounds.
58-29B-32 Order of rehabilitation--Contents--Effect of filing or recording--Vesting of title--Accounting required.
58-29B-32.1 Appointment of deputies--Powers and responsibilities--Employment of counsel, clerks and assistants--Compensation--Advisory committee.
58-29B-32.2 Promulgation of rules for appointing committees.
58-29B-33 Authority of rehabilitator to reform and revitalize issuer.
58-29B-34 Authority to pursue legal remedies on insurer's behalf.
58-29B-35 Rehabilitator's plan for transformation--Application and grounds for approval--Procedure upon approval.
58-29B-36 Disposition of actions in which insurer a party pending when rehabilitation order entered.
58-29B-37 Petition for appointment of rehabilitator--Suspension of statute of limitations, laches--Time period for commencement of actions ripe when petition is filed.
58-29B-38 Guaranty associations--Standing to appear in rehabilitation proceedings.
58-29B-39 Rehabilitation futile--Petition for liquidation--Effect--Court to permit directors or insurers to defend.
58-29B-40 Termination of rehabilitation--Procedure--Payment of costs.
58-29B-41 Petition for liquidation--Grounds.
58-29B-42 Order of liquidation--Contents--Title vested in liquidator--Effect of filing or recording.
58-29B-42.1 Plan for continued performance of policy claim obligations during appeal of liquidation order.
58-29B-43 Rights and liabilities fixed upon issuance of order.
58-29B-44 Order to liquidate alien insurer domiciled in state--Effect.
58-29B-45 Declaration of insurer's insolvency--Procedure.
58-29B-46 Order of liquidation--Financial reports required--Annual filing.
58-29B-47 Effect of order upon policies in effect at time of issuance.
58-29B-48 Order to dissolve corporate existence--Procedure.
58-29B-49 Powers of liquidator.
58-29B-50 Enumeration in § 58-29B-49 not exclusive.
58-29B-50.1 Obligations of liquidator subsequent to entry of liquidation order.
58-29B-51 Notice of liquidation order.
58-29B-52 Duties of claimant upon notice of liquidation.
58-29B-53 Duties of insurance producer upon notice of liquidation.
58-29B-54 Failure of insurance producer to comply with § 58-29B-53--Penalty--Liquidator's waiver of duties.
58-29B-55 Appointment of liquidator--Effect upon actions and injunctions pending against insurer or liquidator--Liquidator's right to intervene.
58-29B-56 Time periods in which liquidator may act for or institute action on behalf of insurer.
58-29B-57 Petition for liquidation--Suspension of statute of limitations, laches--Time period for commencement of actions ripe when petition filed.
58-29B-58 Guaranty associations--Standing to appear in liquidation proceedings.
58-29B-59 Liquidator to prepare list of insurer's assets--Filing requirements.
58-29B-60 Reduction of assets to appropriate degree.
58-29B-61 Fraudulent transfers defined--Avoidance by receiver--Acceptance or preservation of transfer.
58-29B-61.1 Liability of beneficiary of fraudulent transfer.
58-29B-62 Fraudulent transfers between insurer and reinsurer--Grounds for avoidance by receiver.
58-29B-63 Transfers of insurer's real property after petition filed--Recording of copy of petition as constructive notice.
58-29B-64 Validity of transfers after petitions filed and before receiver takes possession or order granted.
58-29B-65 No impairment of negotiability.
58-29B-66 Preference defined.
58-29B-67 Preference--Avoidance by liquidator.
58-29B-68 Preference voidable--Consequences.
58-29B-69 When transfer of property other than real property deemed made or suffered.
58-29B-70 When transfer of real property deemed made or suffered.
58-29B-71 Transfer creating equitable lien--Conditions prohibiting perfection.
58-29B-72 Transfer not perfected prior to filing of petition deemed made before filing of successful petition.
58-29B-73 Sections 58-29B-69 to 58-29B-72 applicable despite certain creditors or potential bona fide purchasers.
58-29B-74 Lien by legal or equitable proceedings upon simple contract defined.
58-29B-75 Lien by legal or equitable proceedings--Superiority to rights of transferee.
58-29B-76 Transfer for or on account of new and contemporaneous consideration--Transfer to secure future loan--Effects.
58-29B-77 Voidable lien dissolved--Indemnifying transfer or lien deemed voidable.
58-29B-78 Property affected by voidable lien discharge--That and indemnifying property pass to liquidator--Exception.
58-29B-79 Summary jurisdiction of Hughes county circuit court--Notice--Valuation of certain property or liens--Election of transferee or lienholder.
58-29B-80 Extent of surety discharge under releasing bond or similar obligation.
58-29B-81 Preferred creditor--Setoff for new credit issued in good faith.
58-29B-82 Transfers by insurer to attorney for services within four months of filing petition--Examination by court.
58-29B-83 Conditions creating personal liability to liquidator for amount of preference.
58-29B-84 Claims of creditor who has received or acquired a voidable preference, lien, conveyance, transfer, assignment, or encumbrance.
58-29B-85 Filing of claims under § 58-29B-84.
58-29B-86 Mutual debts or credits between insurer and another set off.
58-29B-87 Setoff or counterclaim not allowed.
58-29B-88 Liquidator's report to court--Time limit--Content.
58-29B-89 Court to levy assessments--Amount.
58-29B-90 Issuance of show cause order upon failure to pay assessment.
58-29B-91 Notice of show cause order.
58-29B-92 Failure to appear and serve objections on or before return day of order--Procedure on timely appearance.
58-29B-93 Enforcement of order or judgment under § 58-29B-92.
58-29B-94 No reductions in amounts recoverable from reinsurers--Exception--Payments.
58-29B-94.1 Association election to succeed to rights and obligations of insolvent insurer under reinsurance contract--Reinsurer's liability to pay claims.
58-29B-95 No liability for unearned premiums or uncollected earned premiums before declaration of insolvency--Recovery of unearned premium representing commission--Credits or setoffs--Obligations of uninsured.
58-29B-96 Course of action upon violation of § 58-29B-95--Director's options.
58-29B-97 Notice and hearings required before impositions of penalties.
58-29B-98 Application for approval of proposal to disburse assets.
58-29B-99 Proposal to disburse assets--Contents.
58-29B-100 Amounts for disbursements to associations.
58-29B-101 Insolvent insurer writing life or health insurance or annuities--Liquidator to include disbursements to guaranty in proposal.
58-29B-102 Notice of application for approval of proposal.
58-29B-103 Filing proof of claims--Exceptions.
58-29B-104 Circumstances under which claimant making late filing may share in distributions.
58-29B-105 Certain late filing claims of guaranty association--Right to share in distributions.
58-29B-106 Treatment of late claims not covered by § 58-29B-104.
58-29B-107 Proof of claim--Contents.
58-29B-108 Failure to provide necessary information--Liquidator may require prescribed forms and additional information.
58-29B-109 Liquidator may request or otherwise obtain additional information or evidence.
58-29B-110 Judgment or order not evidence of liability or quantum of damages.
58-29B-111 Claims of guaranty associations--Form and content.
58-29B-112 Third party's claim contingent on judgment against insured--Consideration.
58-29B-113 Contingent claims allowed.
58-29B-114 Treatment of claims due except for passage of time.
58-29B-115 Claims made under employment contracts by directors or similar personnel--Limit on payment.
58-29B-116 Third party claim against insured of insurer in liquidation filed with liquidator--Insured's filing--Late filing.
58-29B-117 Allowance of insured's claim--Liquidator's recommendations to court--Sums withheld--Procedures upon allowance.
58-29B-118 Several claims founded upon one policy--Disposition--Prohibited claims.
58-29B-119 Liquidator to give written notice of denial of claim--Objections.
58-29B-120 Hearing upon objections--Notice--Referee may conduct.
58-29B-121 Creditor's claim secured by "other person"--Subrogation--Right to distribution.
58-29B-122 Valuation of security held by secured creditor.
58-29B-123 Valuation made under supervision of court--Treatment of deficiency and surrender of security.
58-29B-124 Priority and order of distribution of claims from insurer's estate.
58-29B-125 Review, investigation and negotiation of claims by liquidator--Exception--Report to court.
58-29B-126 Court approval, disapproval, or modification of report.
58-29B-127 Distributions by liquidator under court direction--Manner of payment.
58-29B-128 Disposition of unclaimed funds subject to distribution.
58-29B-129 Disposition of funds not distributed.
58-29B-130 Application for discharge.
58-29B-131 Petition to reopen proceedings for good cause.
58-29B-132 Recommendation and direction for retention or disposal of insurer's records.
58-29B-133 Audits of receivership books.
58-29B-134 Director's application to act as conservator--Grounds.
58-29B-135 Issuance of order allowing director to act as conservator--Filing--Notice imparted.
58-29B-136 Petition to liquidate assets of foreign or alien insurer.
58-29B-137 Termination of conservation of insurer.
58-29B-138 Director's application to liquidate assets of foreign or alien insurer--Grounds.
58-29B-139 Notice of orders sought under § 58-29B-134 or 58-29B-138.
58-29B-140 Order to liquidate in whatever terms court deems appropriate--Filing--Notice imparted.
58-29B-141 Domiciliary receiver, conservator, or liquidator appointed while liquidation proceeding--Duty to act as ancillary receiver.
58-29B-142 Director's application to act as receiver--Grounds.
58-29B-143 Payment of resident's claims against foreign or alien insurer.
58-29B-144 Domiciliary receiver, conservator, or liquidator of insurer domiciled in reciprocal state--Title vested--Date of vesting.
58-29B-145 Domiciliary liquidator for insurer not domiciled in reciprocal state--Title vested--Timing--Petition for conservation or liquidation.
58-29B-146 Resident claimants--With whom and when to file.
58-29B-147 Domiciliary receiver, conservator, or liquidator appointed for alien insurer--Appointment as ancillary receiver.
58-29B-148 Court may appoint ancillary receiver on terms deemed appropriate--Filing--Notice imparted.
58-29B-149 Duties and powers of ancillary receiver when domiciliary receiver, conservator, or liquidator appointed in reciprocal state.
58-29B-150 Duties and powers of ancillary receivers, conservators, or liquidators when domiciliary liquidator appointed in this state.
58-29B-151 Director may institute proceedings under §§ 58-29B-13 to 58-29B-30.
58-29B-152 Liquidation proceeding against insurer domiciled in state--Claimants residing in foreign countries or states not reciprocal--Filing.
58-29B-153 Proof of claims of residents in reciprocal states.
58-29B-154 Proceeding in reciprocal state against domiciled insurer--Filing.
58-29B-155 Proof of claims of South Dakota residents--Elections--Procedure.
58-29B-156 Final allowance by state courts conclusive as to amount and priority.
58-29B-157 Attachment, garnishment, levy of execution prohibited during receivership, conservatorship, or liquidation proceedings.
58-29B-158 Domiciliary state's order of distribution controls claims of residents of this and reciprocal states.
58-29B-159 Owners of special deposit claims--Priority--Deficiencies in deposit.
58-29B-160 Owner of secured claim--Elections.
58-29B-161 Ancillary receiver's failure to transfer certain assets.
58-29B-1. Citation of chapter.
This chapter may be cited as the Insurers Supervision, Rehabilitation, and Liquidation Act.
Source: SL 1989, ch 436, § 1.
58-29B-2. Scope.
The provisions of this chapter apply to:
(1) All insurers who are doing, or have done, an insurance business in this state, and against whom claims arising from that business may exist now or in the future;
(2) All insurers who purport to do an insurance business in this state;
(3) All insurers who have insureds resident in this state;
(4) All other persons organized or in the process of organizing with the intent to do an insurance business in this state;
(5) All nonprofit service plans and all fraternal benefit societies, health maintenance organizations, benefit societies and any other entity subject to Title 58;
(6) All title insurance companies, subject to chapter 58-25;
(7) Any entity whose administrative actions represent the administrative actions of an insurance company.
Source: SL 1989, ch 436, § 2.
58-29B-3. Definition of terms.
Terms used in this chapter mean:
(1) "Ancillary state," any state other than a domiciliary state;
(2) "Creditor," a person having any claim, whether matured or unmatured, liquidated or unliquidated, secured or unsecured, absolute, fixed, or contingent;
(3) "Delinquency proceeding," any proceeding instituted against an insurer for the purpose of liquidating, rehabilitating, reorganizing, or conserving such insurer, and any summary proceeding under § 58-29B-9 or 58-29B-10. A "formal delinquency proceeding" is any liquidation or rehabilitation proceeding;
(4) "Director," the director of the Division of Insurance;
(5) "Doing business," includes, but is not limited to, any of the following acts, whether effected by mail or otherwise:
(a) The issuance or delivery of contracts of insurance to persons resident in this state;
(b) The solicitation of applications;
(c) The collection of premiums, membership fees, assessments, or other consideration of such contracts, or the transaction of matters subsequent to execution of such contracts and matters arising out of the contracts;
(d) Operating under a license or certificate of authority, as an insurer, issued by the Division of Insurance.
(6) "Domiciliary state," the state in which an insurer is incorporated or organized, or, in the case of an alien insurer, its state of entry;
(7) "Fair consideration," is given for property or obligation:
(a) When in exchange for such property or obligation, as a fair equivalent therefor, and in good faith, property or services are rendered or an obligation is incurred or an antecedent debt is satisfied; or
(b) When property or obligation is received in good faith to secure a present advance or antecedent debt in an amount not disproportionate when compared to the value of the property or obligation obtained;
(8) "Foreign country," any other jurisdiction not in any state of the United States;
(9) "General assets," all property, real, personal, or otherwise, not specifically mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or classes of persons. As to specifically encumbered property, the term "general assets" includes all such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and on deposit for the security or benefit of all policyholders in more than a single state shall be treated as general assets;
(10) "Guaranty association," the South Dakota Insurance Guaranty Association created by chapter 58-29A for the payment of claims of insolvent insurers. A foreign guaranty association is any similar entity of any other state;
(11) "Insolvency" or "insolvent," for an insurer issuing only assessable fire insurance policies:
(a) The inability to pay any obligation within thirty days after it becomes payable, or
(b) If an assessment be made within thirty days after such date, the inability to pay such obligation thirty days following the date specified in the first assessment notice issued after the date of loss.
For any other insurer, "insolvency" or "insolvent" means that it is unable to pay its obligations when they are due, or when its admitted assets do not exceed its liabilities plus the greater of any capital and surplus required by law for its organization or the total par or stated value of its authorized and issued capital stock.
For purposes of this section the term "liabilities" includes, but is not limited to, reserves required by statute or by insurance division general regulations or specific requirements imposed by the director upon a subject company at the time of admission or subsequent thereto.
(12) "Insurer," any person who has done, purports to do, is doing or is licensed to do an insurance business, and is or has been subject to the authority of, or to liquidation, rehabilitation, reorganization, supervision, or conservation by any insurance director. For purposes of this chapter, any other person included under § 58-29B-2 is an insurer;
(13) "Preferred claim," any claim with respect to which the terms of this chapter accord priority of payment from the general assets of the insurer;
(14) "Receiver," receiver, liquidator, rehabilitator, or conservator as the context requires;
(15) "Reciprocal state," any state other than this state which has laws similar in substance to §§ 58-29B-42, 58-29B-144 to 58-29B-150, inclusive, and 58-29B-152 to 58-29B-157, inclusive, and in which provisions are in force requiring that the director or equivalent official be the receiver of a delinquent insurer, and in which some provision exists for the avoidance of fraudulent conveyances and preferential transfers;
(16) "Secured claim," any claim secured by mortgage, trust deed, pledge, deposit as security, escrow, or otherwise, but not including special deposit claims or claims against general assets. The term also includes claims which have become liens upon specific assets by reason of judicial process;
(17) "Special deposit claim," any claim secured by a deposit made pursuant to statute for the security or benefit of a limited class or classes of persons, but not including any claim secured by general assets;
(18) "State," any state, district or territory of the United States and the Panama Canal Zone;
(19) "Transfer," includes the sale and every other and different mode, direct or indirect, of disposing of or of parting with property or with an interest therein, or with the possession thereof or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily, by or without judicial proceedings. The retention of a security title to property delivered to a debtor shall be deemed a transfer suffered by the debtor.
Source: SL 1989, ch 436, § 3.
58-29B-4. Delinquency proceedings sole and exclusive remedy--Commencement of proceedings by director.
Delinquency proceedings pursuant to this chapter shall constitute the sole and exclusive method of liquidating, rehabilitating, reorganizing, or conserving an insurer, and no court may entertain a petition for the commencement of such proceedings, or any other similar procedure, unless it has been filed in the name of the state on the relation of the director.
Source: SL 1989, ch 436, § 4.
58-29B-5. Commencement of proceedings despite lack of notice to insurer.
Delinquency proceedings pursuant to this chapter may be commenced by the director at any time, regardless of whether notice to an insurer has been given concerning impairment of capital or assets as provided in § 58-5-114.
Source: SL 1989, ch 436, § 5.
58-29B-6. Grounds for personal jurisdiction.
In addition to other grounds for jurisdiction provided by the law of this state, a court of this state having jurisdiction of the subject matter has jurisdiction over a person served pursuant to chapter 15-6 or other applicable provisions of law in an action brought by the receiver of a domestic insurer or an alien insurer domiciled in this state:
(1) If the person served is obligated to the insurer in any way as an incident to any agency or brokerage or other arrangement that may exist or has existed between the insurer and the insurance producer or representative of the insurer, in any action on or incident to the obligation;
(2) If the person served is a reinsurer who has at any time written a policy of reinsurance for an insurer against which a rehabilitation or liquidation order is in effect when the action is commenced, or is an insurance producer or representative of or for the reinsurer, in any action on or incident to the reinsurance contract;
(3) If the person served is or has been an officer, manager, trustee, organizer, promoter, or person in a position of comparable authority or influence in an insurer against which a rehabilitation or liquidation order is in effect when the action is commenced, in any action resulting from such a relationship with the insurer;
(4) If the person served is an insurance producer or representative of the insurer or other person who has at any time written policies of insurance for or has acted in any manner on behalf of an insurer against which a delinquency proceeding has been instituted, in any action resulting from or incident to such a relationship with the insurer;
(5) If the person served is or was at the time of the institution of the delinquency proceeding against the insurer holding assets in which the receiver claims an interest on behalf of the insurer, in any action concerning the assets; or
(6) If the person served is obligated to the insurer in any way whatsoever, in any action or incident to the obligation.
Source: SL 1989, ch 436, § 6; SL 1992, ch 351, § 1; SL 2001, ch 286, § 139.
58-29B-7. Venue of proceedings.
Any action authorized in this chapter shall be brought in the circuit court of Hughes County.
Source: SL 1989, ch 436, § 7.
58-29B-8. Receiver authorized to grant certain orders.
Any receiver appointed in a proceeding under this chapter, may at any time apply for and the court may grant, such restraining orders, preliminary and permanent injunctions, and other orders as may be deemed necessary and proper to prevent:
(1) The transaction of further business;
(2) The transfer of property;
(3) Interference with the receiver or with a proceeding under this chapter;
(4) Waste of the insurer's assets;
(5) Dissipation and transfer of bank accounts;
(6) The institution or further prosecution of any actions or proceedings;
(7) The obtaining of preferences, judgments, attachments, garnishments, or liens against the insurer, its assets or its policyholders;
(8) The levying of execution against the insurer, its assets or its policyholders;
(9) The making of any sale or deed for nonpayment of taxes or assessments that would lessen the value of the assets of the insurer;
(10) The withholding from the receiver of books, accounts, documents, or other records relating to the business of the insurer; or
(11) Any other threatened or contemplated action that might lessen the value of the insurer's assets or prejudice the rights of policyholders, creditors, or shareholders, or the administration of any proceeding under this chapter.
The receiver may apply to any court outside of the state for the relief described in this section.
Source: SL 1989, ch 436, § 8.
58-29B-9. Persons to cooperate in proceedings and preliminary investigations.
Any officer, manager, director, trustee, owner, employee, representative, or insurance producer of any insurer, or any other persons with authority over or in charge of any segment of the insurer's affairs, shall cooperate with the director in any proceeding under this chapter or any investigation preliminary to the proceeding. The term, person, as used in this section, includes any person who exercises control directly or indirectly over activities of insurer through any holding company or other affiliate of the insurer. The term, to cooperate, includes the following:
(1) To reply promptly in writing to any inquiry from the director requesting such a reply; and
(2) To make available to the director any books, accounts, documents, or other records or information or property of or pertaining to the insurer and in the insurer's possession, custody, or control.
Source: SL 1989, ch 436, § 9; SL 2001, ch 286, § 140.
58-29B-10. Obstruction or interference in conduct of proceedings.
No person may obstruct or interfere with the director in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto. This section may not be construed to abridge otherwise existing legal rights, including the right to good faith resistance to a petition for liquidation or other delinquency proceedings, or other orders.
Source: SL 1989, ch 436, § 10.
58-29B-11. Failure to cooperate--Obstruction or interference--Penalty.
Any person included within § 58-29B-9 who fails to cooperate with the director, or any person who obstructs or interferes with the director in the conduct of any delinquency proceeding or any investigation preliminary or incidental thereto, or who violates any order the director issued validly under this chapter may be ordered by the court to pay a fine not exceeding ten thousand dollars or sentenced to state imprisonment for a term of not more than one year, or both, or after a hearing, the director may impose and order the person to pay an administrative penalty not to exceed ten thousand dollars and may order the revocation or suspension of any insurance licenses issued by the director.
Source: SL 1989, ch 436, § 11.
58-29B-12. Directors and deputies responsible for official bonds--Source of payment.
In any proceeding under this chapter, the director and his deputies shall be responsible on their official bonds for the faithful performance of their duties. If the court deems it desirable for the protection of the assets, it may at any time require an additional bond from the director or his deputies, and such bonds shall be paid for out of the assets of the insurer as a cost of administration.
Source: SL 1989, ch 436, § 12.
58-29B-13. Proceedings commenced prior to enactment of chapter.
Every proceeding heretofore commenced under the laws in effect before the enactment of this chapter shall be deemed to have commenced under this chapter for the purpose of conducting the proceeding henceforth, except that in the discretion of the director the proceeding may be continued, in whole or in part, as it would have been continued had this chapter not been enacted.
Source: SL 1989, ch 436, § 13.
58-29B-13.1. Service of appropriate orders by director.
If the director has reasonable cause to believe, and determines, after a hearing held pursuant to the provisions of § 58-29B-17, that any domestic insurer has committed or engaged in, or is about to commit or engage in, any act, practice, or transaction that would subject it to delinquency proceedings under this chapter, he may make and serve upon the insurer and any other persons involved, such orders as are reasonably necessary to correct, eliminate, or remedy such conduct, condition, or ground.
Source: SL 1989, ch 436, § 13A.
58-29B-14. Director's determination of continuation of business hazardous--Notification of insurer.
If upon examination or at any other time the director has reasonable cause to believe or determines that any domestic insurer is in such condition as to render the continuance of its business hazardous to the public or to holders of its policies or certificates of insurance, or if such domestic insurer gives its consent, then the director shall upon his determination:
(1) Notify the insurer of his determination; and
(2) Furnish to the insurer a written list of the director's requirements to abate his determination.
Source: SL 1989, ch 436, § 14.
58-29B-15. Supervision of insurer--Appointment of supervisor--Certain acts by insurer prohibited--Costs.
If the director makes a determination to supervise an insurer subject to an order under § 58-29B-13.1 or 58-29B-14, he shall notify the insurer. During the period of supervision, the director may appoint a supervisor to supervise such insurer. The order appointing a supervisor shall direct the supervisor to enforce orders issued under this chapter and may also require that the insurer not do any of the following things, during the period of supervision, without the prior approval of the director or the supervisor:
(1) Dispose of, convey, or encumber any of its assets or its business in force;
(2) Withdraw from any of its bank accounts;
(3) Lend any of its funds;
(4) Invest any of its funds;
(5) Transfer any of its property;
(6) Incur any debt, obligation, or liability;
(7) Merge or consolidate with another company;
(8) Enter into any new reinsurance contract or treaty; or
(9) Write any new insurance contract or renew any insurance contract.
All costs and expenses, including attorney fees, associated with administering the supervision order are the responsibility of the insurer and shall be paid from insurer's funds or assets.
Source: SL 1989, ch 436, § 15; SL 1991, ch 404, § 1.
58-29B-16. Insurer to comply with director's requirements--Time period--Failure to comply.
Any insurer subject to an order under §§ 58-29B-13.1 and 58-29B-14 shall comply with the lawful requirements of the director and, if placed under supervision, shall have sixty days from the date the supervision order is served within which to comply with the requirements of the director. In the event of such insurer's failure to comply within the proper time, the director may institute proceedings under § 58-29B-31 or 58-29B-41 to have a rehabilitator or liquidator appointed, or extend the period of supervision.
Source: SL 1989, ch 436, § 16.
58-29B-17. Hearings--Notice and procedure.
The notice of hearing under § 58-29B-13.1 and any order issued pursuant to that section shall be served upon the insurer pursuant to the applicable rules of civil or administrative procedure. The notice of hearing shall state the time and place of hearing, and the conduct, condition, or ground upon which the director would base his order. Unless mutually agreed between the director and the insurer, the hearing shall occur no less than ten days nor more than thirty days after notice is served and shall be in Hughes County or such other location as may be designated by the director. All hearings shall be private, unless the insurer requests a public hearing.
Source: SL 1989, ch 436, § 17.
58-29B-18. Request for hearing--Request not to stay order.
Any insurer subject to an order under § 58-29B-14 may request a hearing to review that order. Such a hearing shall be held as provided in § 58-29B-17, but the request for a hearing may not stay the effect of the order.
Source: SL 1989, ch 436, § 18.
58-29B-19. Waiver of hearing--Application for judicial relief--Judicial review of order after hearing.
If the director issues an order under § 58-29B-14, the insurer may, at any time, waive a director's hearing and apply for immediate judicial relief by means of any remedy afforded by law without first exhausting administrative remedies. If a hearing is held subsequent to the hearing, any party to the proceedings whose interests are substantially affected shall be entitled to judicial review of any order issued by the director.
Source: SL 1989, ch 436, § 19.
58-29B-20. Requests for review of supervisor's actions.
During the period of supervision the insurer may request the director to review an action taken or proposed to be taken by the supervisor, specifying wherein the action complained of is believed not to be in the best interest of the insurer.
Source: SL 1989, ch 436, § 20.
58-29B-21. Violation of supervision order--Penalty.
If any person has violated any supervision order issued under this chapter, he is liable to pay a civil penalty imposed by the circuit court of Hughes County not to exceed ten thousand dollars.
Source: SL 1989, ch 436, § 21.
58-29B-22. Application for necessary orders to enforce supervision order.
The director may apply for and any court of general jurisdiction may grant, such restraining orders, preliminary and permanent injunctions, and other orders as may be deemed necessary and proper to enforce a supervision order.
Source: SL 1989, ch 436, § 22.
58-29B-23. Violation of valid orders--Personal liability for losses suffered by insurer--Commencement of action.
In the event that any person, subject to the provisions of this chapter, including those persons described in § 58-29B-9 shall knowingly violate any valid order of the director issued under §§ 58-29B-13.1 to 58-29B-23, inclusive, and, as a result of such violation, the net worth of the insurer shall be reduced or the insurer shall suffer loss it would not otherwise have suffered, that person shall be personally liable to the insurer for the amount of any such reduction or loss. The director or supervisor may bring an action on behalf of the insurer in the circuit court of Hughes County to recover the amount of the reduction or loss together with any costs.
Source: SL 1989, ch 436, § 23.
58-29B-24. Authority to file petition for seizure order--Grounds.
For domestic insurers the director may file in the circuit court of Hughes County a petition for a seizure order:
(1) That there exist any grounds that would justify a court order for a formal delinquency proceeding against an insurer under this chapter;
(2) That the interest of policyholders, creditors, or the public will be endangered by delay; and
(3) The contents of an order deemed necessary by the director.
Source: SL 1989, ch 436, § 24.
58-29B-25. Ex parte issuance of seizure order--Costs.
Upon a filing under § 58-29B-24, the court may issue forthwith, ex parte and without a hearing, the requested order which shall direct the director to take possession and control of all or a part of the property, books, accounts, documents, and other records of an insurer, and of the premises occupied by it for transaction of its business, and until further order of the court enjoin the insurer and its officers, managers, representatives, insurance producers, and employees from disposition of its property and from transaction of its business except with the written consent of the director. All costs and expenses incurred by the Division of Insurance, including attorney fees, associated with taking possession of the property, books, accounts, documents, and other records of the insurer and the business premises are the responsibility of the insurer and shall be paid from the insurer's funds and assets. The court may require an accounting of the costs and expenses.
Source: SL 1989, ch 436, § 25; SL 1991, ch 404, § 2; SL 2001, ch 286, § 141.
58-29B-26. Duration of order--Hearing to extend, shorten or modify--Vacation of order.
The court shall specify in the order under § 58-29B-25 its duration which shall be such time as the court deems necessary for the director to ascertain the condition of the insurer. On motion of either party or on its own motion, the court may from time to time hold such hearings as it considers desirable after such notice as it deems appropriate, and may extend, shorten, or modify the terms of the seizure order. The court may vacate the seizure order if the director fails to commence rehabilitation or liquidation proceedings under this chapter after having had a reasonable opportunity to do so. An order of the court pursuant to a formal proceeding under this chapter shall vacate the seizure order.
Source: SL 1989, ch 436, § 26.
58-29B-27. Entry of order not anticipatory breach of insurer's contracts.
Entry of a seizure order under §§ 58-29B-24 to 58-29B-26, inclusive, does not constitute an anticipatory breach of any contract of the insurer.
Source: SL 1989, ch 436, § 27.
58-29B-28. Petition for review of order--Procedure.
An insurer subject to an ex parte order under § 58-29B-25 may petition the court at any time after the issuance of such order for a hearing and review of the order. The court shall hold the hearing and review the order within fifteen days of the date of the request. A hearing under this section may be held privately in chambers and it shall be so held if the insurer proceeded against so requests.
Source: SL 1989, ch 436, § 28.
58-29B-29. Notice to persons not present at hearing--Effect on previously issued order.
If, at any time after the issuance of an order under § 58-29B-25, it appears to the court that any person whose interest is or will be substantially affected by the order did not appear at the hearing and has not been served, the court may order that notice be given. An order that notice be given does not stay the effect of any order previously issued by the court.
Source: SL 1989, ch 436, § 29.
58-29B-30. Records to remain confidential--Exceptions.
In any proceeding and judicial review thereof under the provisions of §§ 58-29B-13.1 to 58-29B-29, inclusive, all records of the insurer, other documents, and all Division of Insurance files and court records and papers, so far as they pertain to or are a part of the record of the proceedings, shall be and remain confidential except as is necessary to obtain compliance therewith, unless the circuit court of Hughes County, after hearing arguments from the parties in chambers, shall order otherwise, or unless the insurer requests that the matter be made public. Until such court order, all papers filed with the clerk of the circuit court of Hughes County shall be held by him in a confidential file.
Source: SL 1989, ch 436, § 30.
58-29B-31. Application by director for rehabilitation of insurer--Grounds.
The director may apply by petition to the circuit court of Hughes County for an order authorizing him to rehabilitate a domestic insurer or an alien insurer domiciled in this state on any one or more of the following grounds:
(1) The insurer is in such condition that the further transaction of business would be hazardous, financially, to its policyholders, creditors, or the public;
(2) There is reasonable cause to believe that there has been embezzlement from the insurer, wrongful sequestration or diversion of the insurer's assets, forgery or fraud affecting the insurer, or other illegal conduct in, by, or with respect to the insurer that if established would endanger assets in an amount threatening the solvency of the insurer;
(3) The insurer has failed to remove any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, employee, or other person, if the person has been found after notice and hearing by the director to be dishonest or untrustworthy in a way affecting the insurer's business;
(4) Control of the insurer, whether by stock ownership or otherwise, and whether direct or indirect, is in any person found after notice and hearing to be untrustworthy;
(5) Any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, director or trustee, employee, or other person, has refused to be examined under oath by the director concerning its affairs, whether in this state or elsewhere, and after reasonable notice of the fact the insurer has failed promptly and effectively to terminate the employment and status of the person and all his influence on management;
(6) After demand by the director under this title, the insurer has failed to promptly make available for examination any of its own property, books, accounts, documents, or other records, or those of any subsidiary or related company within the control of the insurer, or those of any person having executive authority in the insurer so far as they pertain to the insurer;
(7) Without first obtaining the written consent of the director, the insurer has transferred, or attempted to transfer, in a manner contrary to chapter 58-5 or chapter 58-5A, substantially its entire property or business, or has entered into any transaction the effect of which is to merge, consolidate, or reinsure substantially its entire property or business in or with the property or business of any other person;
(8) The insurer or its property has been or is the subject of an application for the appointment of a receiver or trustee, custodian, conservator or sequestrator or similar fiduciary of the insurer or its property otherwise than as authorized under the insurance laws of this state, and such appointment has been made or is imminent, and such appointment might oust the courts of this state of jurisdiction or might prejudice orderly delinquency proceedings under this chapter;
(9) Within the previous four years the insurer has willfully violated its charter or articles of incorporation, its bylaws, any insurance law of this state, or any valid order of the director under the provisions of this chapter;
(10) The insurer has failed to pay within sixty days after due date any obligation to any state or any subdivision thereof or any judgment entered in any state, if the court in which such judgment was entered had jurisdiction over such subject matter except that such nonpayment is not a ground until sixty days after any good faith effort by the insurer to contest the obligation has been terminated, whether it is before the director or in the courts, or the insurer has systematically attempted to compromise or renegotiate previously agreed settlements with its creditors on the ground that it is financially unable to pay its obligation in full;
(11) The insurer has failed to file its annual report or other financial report required by statute within the time allowed by law and, after written demand by the director, has failed to give an adequate explanation immediately;
(12) The board of directors of the holders of a majority of the shares entitled to vote, or a majority of those individuals entitled to the control of the entities request, or consent to rehabilitation under this chapter.
Source: SL 1989, ch 436, § 31; SL 1991, ch 404, § 3.
58-29B-32. Order of rehabilitation--Contents--Effect of filing or recording--Vesting of title--Accounting required.
Except for good cause shown, an order to rehabilitate the business of a domestic insurer, or an alien insurer domiciled in this state, shall be issued within ten days of the hearing on the order to show cause and shall contain an appointment of the director and his successors in office as the rehabilitator, and shall direct the rehabilitator forthwith to take possession of the assets of the insurer, and to administer them under the general supervision of the court. The filing or recording of the order with the clerk of the circuit court of Hughes County or register of deeds of the county in which the principal business of the company is conducted, or the county in which its principal office or place of business is located, shall impart the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that register of deeds would have imparted. The order to rehabilitate the insurer shall by operation of law vest title to all assets of the insurer in the rehabilitator. Any order issued under this section shall require an accounting to the court by the rehabilitator. Accountings shall be at such intervals as the court specifies in its order, but no less than semiannually. Entry of an order of rehabilitation does not constitute an anticipatory breach of any contracts of the insurer nor may it be grounds for retroactive revocation or cancellation of any contracts of the insurer, unless revocation or cancellation is done by the rehabilitator pursuant to §§ 58-29B-32.1 to 58-29B-35, inclusive. Each accounting shall include a report from the rehabilitator on whether a plan pursuant to § 58-29B-35 is being prepared and, if so, the timetable for the preparation.
Source: SL 1989, ch 436, § 32; SL 1992, ch 351, § 2.
58-29B-32.1. Appointment of deputies--Powers and responsibilities--Employment of counsel, clerks and assistants--Compensation--Advisory committee.
The director as rehabilitator may appoint one or more special deputies, who shall have all the powers and responsibilities of the rehabilitator granted under this section, and the director may employ such counsel, clerks, and assistants as he considers necessary. The compensation of the special deputy, counsel, or clerks and assistants and all expenses of taking possession of the insurer and of conducting the proceedings shall be fixed by the director, with the approval of the court and shall be paid out of the funds or assets of the insurer. Any persons appointed under this section shall serve at the pleasure of the director. In the event that the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the director, with the approval of the secretary of the Department of Labor and Regulation, may advance the costs so incurred out of any appropriation for the maintenance of the Division of Insurance. Any amounts so advanced for expenses of administration shall be repaid to the director for the use of the Division of Insurance out of the first available money of the insurer. The director may, with the approval of the court, appoint an advisory committee of policyholders, claimants or other creditors including guaranty associations. The committee shall serve at the pleasure of the director and shall serve without compensation other than reimbursement for reasonable travel and per diem expenses. No other committee of any nature may be appointed by the director or the court in rehabilitation.
Source: SL 1989, ch 436, § 32A; SL 1992, ch 351, § 3; SL 2003, ch 272 (Ex. Ord. 03-1), § 20; SL 2011, ch 1 (Ex. Ord. 11-1), § 162, eff. Apr. 12, 2011.
58-29B-32.2. Promulgation of rules for appointing committees.
The director may promulgate rules pursuant to chapter 1-26 for appointing committees pursuant to §§ 58-29B-32.1 and 58-29B-46 and establishing the duties to be performed by such committees.
Source: SL 1992, ch 351, § 14.
58-29B-33. Authority of rehabilitator to reform and revitalize issuer.
The rehabilitator may take any action he considers appropriate to reform and revitalize the insurer. He shall have all the powers of the directors, officers, and managers, whose authority shall be suspended, except as they are redelegated by the rehabilitator. He may direct and manage, hire and discharge employees subject to any contract rights they may have, and deal with the property and business of the insurer.
Source: SL 1989, ch 436, § 33.
58-29B-34. Authority to pursue legal remedies on insurer's behalf.
If it appears to the rehabilitator that there has been criminal or tortious conduct, or breach of any contractual or fiduciary obligation detrimental to the insurer by any officer, manager, representative, insurance producer, employee, or other person, the rehabilitator may pursue all appropriate legal remedies on behalf of the insurer.
Source: SL 1989, ch 436, § 34; SL 2001, ch 286, § 142.
58-29B-35. Rehabilitator's plan for transformation--Application and grounds for approval--Procedure upon approval.
If the rehabilitator determines that reorganization, consolidation, conversion, reinsurance, merger, sale, or other transformation of the insurer is appropriate, he shall prepare a plan to effect such changes. Upon application of the rehabilitator for approval of the plan, and after such notice and hearings as the court may prescribe, the court may either approve or disapprove the plan proposed, or may modify it and approve it as modified. Any plan approved under this section shall be, in the judgment of the court, fair and equitable to all parties concerned. If the plan is approved, the rehabilitator shall carry out the plan. In the case of a life insurer, the plan proposed may include the imposition of liens upon the policies of the company, if all rights of shareholders are first relinquished. A plan for a life insurer may also propose imposition of a moratorium upon loan and cash surrender rights under policies, for such period and to such an extent as may be necessary. The rehabilitator may under §§ 58-29B-61 to 58-29B-65, inclusive, avoid fraudulent transfers.
Source: SL 1989, ch 436, § 35; SL 1991, ch 404, § 4.
58-29B-36. Disposition of actions in which insurer a party pending when rehabilitation order entered.
Any court in this state before which any action or proceeding in which the insurer is a party or is obligated to defend a party is pending when a rehabilitation order against the insurer is entered shall stay the action or proceeding for ninety days and such additional time as is necessary for the rehabilitator to obtain proper representation and prepare for further proceedings. The rehabilitator shall take such action respecting the pending litigation as he deems necessary in the interests of justice and for the protection of creditors, policyholders, and the public. The rehabilitator shall immediately consider all litigation pending outside this state and shall petition the courts having jurisdiction over that litigation for stays if necessary to protect the estate of the insurer.
Source: SL 1989, ch 436, § 36.
58-29B-37. Petition for appointment of rehabilitator--Suspension of statute of limitations, laches--Time period for commencement of actions ripe when petition is filed.
No statute of limitations or defense of laches may run with respect to any action by or against an insurer between the filing of a petition for appointment of a rehabilitator for that insurer and the order granting or denying that petition. Any action by or against the insurer that might have been commenced when the petition was filed may be commenced for at least sixty days after the order of rehabilitation is entered or the petition is denied.
Source: SL 1989, ch 436, § 37.
58-29B-38. Guaranty associations--Standing to appear in rehabilitation proceedings.
Any guaranty association or foreign guaranty association covering life or health insurance or annuities shall have standing to appear in any court proceeding concerning the rehabilitation of a life or health insurer if such association is or may become liable to act as a result of the rehabilitation.
Source: SL 1989, ch 436, § 38.
58-29B-39. Rehabilitation futile--Petition for liquidation--Effect--Court to permit directors or insurers to defend.
If the director believes further attempts to rehabilitate an insurer would substantially increase the risk of loss to creditors, policyholders, or the public, or would be futile, the director may petition the circuit court of Hughes County for an order of liquidation. A petition under this section has the same effect as a petition under § 58-29B-41. The circuit court of Hughes County shall permit the directors of the insurer to take such actions as are reasonably necessary to defend against the petition and may order payment from the estate of the insurer of such costs and other expenses of defense as justice may require. If the insurer is insolvent, the court shall issue an order for liquidation and shall set a hearing to determine the issues being asserted by the directors.
Source: SL 1989, ch 436, § 39; SL 1992, ch 351, § 15.
58-29B-40. Termination of rehabilitation--Procedure--Payment of costs.
The rehabilitator or directors may at any time petition the circuit court of Hughes County for an order terminating rehabilitation of an insurer. The court may order payment from the estate of the insurer of such costs and other expenses of such petition as justice may require. If the court finds that rehabilitation has been accomplished and that grounds for rehabilitation under § 58-29B-31 no longer exist, it shall order that the insurer be restored to possession of its property and the control of its business. The court may also on its own motion make that finding and issue an order terminating rehabilitation.
Source: SL 1989, ch 436, § 40.
58-29B-41. Petition for liquidation--Grounds.
The director may petition the court for an order directing him to liquidate a domestic insurer or an alien insurer domiciled in this state based on the following:
(1) Any ground for an order of rehabilitation as specified in § 58-29B-31, whether or not there has been a prior order directing the rehabilitation of the insurer;
(2) The insurer is insolvent; or
(3) The insurer is in such condition that the further transaction of business would be hazardous, financially or otherwise, to its policyholders, its creditors or the public.
Source: SL 1989, ch 436, § 41.
58-29B-42. Order of liquidation--Contents--Title vested in liquidator--Effect of filing or recording.
An order to liquidate the business of a domestic insurer shall contain appointment of the director and his successors in office as liquidator and shall direct the liquidator forthwith to take possession of the assets of the insurer and to administer them under the general supervision of the court. The liquidator shall be vested by operation of law with the title to all property, contracts, and rights of action and all of the books and records of the insurer ordered liquidated, wherever located, as of the entry of the final order of liquidation. The filing or recording of the order with the clerk of the circuit court of Hughes County and the register of deeds of the county in which its principal office or place of business is located, or, in the case of real estate with the register of deeds of the county where the property is located, shall impart the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that register of deeds would have imparted.
Source: SL 1989, ch 436, § 42.
58-29B-42.1. Plan for continued performance of policy claim obligations during appeal of liquidation order.
If an insurer is in liquidation, within five days of July 1, 1992, or, if later, within five days after the initiation of an appeal of an order of liquidation, which order has not been stayed, the director shall present for the court's approval a plan for the continued performance of the company's policy claims obligations, including the duty to defend insureds under liability insurance policies, during the pendency of an appeal. The plan shall provide for the continued performance and payment of policy claims obligations in the normal course of events, notwithstanding the grounds alleged in support of the order of liquidation includes the ground of insolvency. If the company's financial condition does not, in the judgment of the director, support the full performance of all policy claims obligations during the appeal period, the plan may prefer the claims of certain policyholders and claimants over creditors and interested parties as well as other policyholders and claimants, as the director finds to be fair and equitable considering the relative circumstances of the policyholders and claimants. The court shall examine the plan submitted by the director and if it finds the plan to be in the best interests of the parties, the court shall approve the plan. No action may lie against the director or any of his deputies, agents, clerks, assistants, or attorneys by any party based on preference in a plan during the pendency of appeal approved by the court.
The plan may not supersede or affect the obligations of any insurance guaranty association.
If the liquidator pays claims from assets of the estate, which would otherwise be the obligations of any particular guaranty association but for the appeal of the order of liquidation, the plans, during the appeal period, shall provide for equitable adjustments to be made by the liquidator to any distributions of assets to guaranty associations, so that all guaranty associations equally benefit on a pro rata basis from the assets of the estate. Further, if an order of liquidation is set aside upon any appeal, the company may not be released from delinquency proceedings until all funds advanced by any guaranty association, including reasonable administrative expenses relating to obligations of the company, are repaid in full, together with interest at the judgment rate of interest or unless an arrangement for repayment has been made with the consent of all applicable guaranty associations.
Source: SL 1992, ch 351, § 5.
58-29B-43. Rights and liabilities fixed upon issuance of order.
Upon issuance of the order to liquidate, the rights and liabilities of any such insurer and of its creditors, policyholders, shareholders, members, and all other persons interested in its estate shall become fixed as of the date of entry of the order of liquidation, except as provided in §§ 58-29B-47 and 58-29B-112 to 58-29B-114, inclusive.
Source: SL 1989, ch 436, § 43.
58-29B-44. Order to liquidate alien insurer domiciled in state--Effect.
An order to liquidate the business of an alien insurer domiciled in this state shall be in the same terms and have the same legal effect as an order to liquidate a domestic insurer, except that the assets and the business in the United States shall be the only assets and business included therein.
Source: SL 1989, ch 436, § 44.
58-29B-45. Declaration of insurer's insolvency--Procedure.
At the time of the petition for an order of liquidation, or at any time thereafter, the director, after making appropriate findings of an insurer's insolvency, may petition the court for a judicial declaration of such insolvency. After providing such notice and hearing as it deems proper the court may make the declaration.
Source: SL 1989, ch 436, § 45.
58-29B-46. Order of liquidation--Financial reports required--Annual filing.
Any order issued under §§ 58-29B-41 to 58-29B-45, inclusive, shall require financial reports to the court by the liquidator.
Financial reports shall include, at a minimum, the assets and liabilities of the insurer and all funds received or disbursed by the liquidator during the current period. Financial reports shall be filed within one year of the liquidation order and at least annually thereafter.
Source: SL 1989, ch 436, § 46; SL 1992, ch 351, § 4.
58-29B-47. Effect of order upon policies in effect at time of issuance.
All policies, including bonds and other noncancellable business, other than life or health insurance or annuities, in effect at the time of issuance of an order of liquidation shall continue in force for the lesser of:
(1) A period of thirty days from the date of entry of the liquidation orders;
(2) The expiration of the policy coverage;
(3) The date when the insured has replaced the insurance coverage with equivalent insurance coverage in another insurer or otherwise terminated the policy; or
(4) The liquidator has effected a transfer of the policy obligation pursuant to § 58-29B-49.
An order of liquidation under §§ 58-29B-41 to 58-29B-45, inclusive, shall terminate coverages at the time specified in this section for purposes of any other statute.
Policies of life or health insurance or annuities shall continue in force for such period and under such terms as is provided for by any applicable guaranty association or foreign guaranty association.
Policies of life or health insurance or annuities or any period or coverage of such policies not covered by a guaranty association or foreign guaranty association shall terminate according to this section.
Source: SL 1989, ch 436, § 47; SL 1992, ch 351, § 6.
58-29B-48. Order to dissolve corporate existence--Procedure.
The director may petition for an order dissolving the corporate existence of a domestic insurer or the United States branch of an alien insurer domiciled in this state at the time he applies for a liquidation order. The court shall order dissolution of the corporation upon petition by the director upon or after the granting of a liquidation order. Dissolution may also be effected by operation of law upon the discharge of the liquidator, if the insurer is insolvent and may be ordered by the court upon the discharge of the liquidator if the insurer is under a liquidation order for some other reason.
Source: SL 1989, ch 436, § 48.
58-29B-49. Powers of liquidator.
The liquidator may:
(1) Appoint a special deputy to act for the liquidator under this chapter and determine his reasonable compensation. The special deputy shall have all powers of the liquidator granted by this section. The special deputy shall serve at the pleasure of the liquidator;
(2) Employ employees, representatives, insurance producers, legal counsel, actuaries, accountants, appraisers, consultants, and such other personnel as the liquidator may consider necessary to assist in the liquidation;
(3) Fix the reasonable compensation of employees, representatives, insurance producers, legal counsel, actuaries, accountants, appraisers, and consultants with the approval of the court;
(4) Pay reasonable compensation to persons appointed and defray from the funds or assets of the insurer all expenses of taking possession of, conserving, conducting, liquidating, disposing of, or otherwise dealing with the business and property of the insurer. If the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the director may advance the costs so incurred out of any appropriation for the maintenance of the Division of Insurance. Any amounts so advanced for expenses of administration shall be repaid to the director for the use of the Division of Insurance out of the first available money of the insurer;
(5) Hold hearings, subpoena witnesses to compel their attendance, administer oaths, examine any person under oath, and compel any person to subscribe to the person's testimony after it has been correctly reduced to writing, and, in connection therewith, require the production of any books, papers, records, or other documents which the liquidator considers relevant to the inquiry;
(6) Collect all debts and money due and claims belonging to the insurer, wherever located, and, for this purpose:
(a) To institute timely action in other jurisdictions, in order to forestall garnishment and attachment proceedings against such debts;
(b) To do such other acts as are necessary or expedient to collect, conserve, or protect its assets or property, including the power to sell, compound, compromise, or assign debts for purposes of collection upon such terms and condition as the liquidator deems best; and
(c) To pursue any creditor's remedies available to enforce the creditor's claims;
(7) Conduct public and private sales of the property of the insurer;
(8) Use assets of the estate of an insurer under a liquidation order to transfer policy obligations to a solvent assuming insurer, if the transfer can be arranged without prejudice to applicable priorities under § 58-29B-124;
(9) Acquire, hypothecate, encumber, lease, improve, sell, transfer, abandon, or otherwise dispose of or deal with, any property of the insurer at its market value or upon such terms and conditions as are fair and reasonable. The liquidator may also execute, acknowledge, and deliver any and all deeds, assignments, releases, and other instruments necessary or proper to effectuate any sale of property or other transaction in connection with liquidation;
(10) Borrow money on the security of the insurer's assets or without security and to execute and deliver all documents necessary to that transaction for the purpose of facilitating the liquidation;
(11) Enter into such contracts as are necessary to carry out the order to liquidate, and affirm or disavow any contracts to which the insurer is a party;
(12) Continue to prosecute and institute in the name of the insurer or in the liquidator's name any and all suits and other legal proceedings, in this state or elsewhere, and abandon the prosecution of claims the liquidator considers unprofitable to pursue further. If the insurer is dissolved under § 58-29B-48, the liquidator may apply to any court in this state or elsewhere for leave to proceed on behalf of the insurer as plaintiff;
(13) Prosecute any action which may exist on behalf of the creditors, members, policyholders, or shareholders of the insurer against any officer of the insurer, or any other person;
(14) Remove any or all records and property of the insurer to the offices of the director or to such other place as may be convenient for the purposes of efficient and orderly execution of the liquidation. Guaranty associations and foreign guaranty associations shall have such reasonable access to the records of the insurer as is necessary for them to carry out their statutory obligations;
(15) Deposit in one or more banks in this state such sums as are required for meeting current administration expenses and dividend distributions;
(16) Invest all sums not currently needed, unless the court orders otherwise;
(17) File any necessary documents for record in the office of any register of deeds or record office in this state or elsewhere where property of the insurer is located;
(18) Assert all defenses available to the insurer as against third persons, including statutes of limitation, statutes of frauds, and the defense of usury. A waiver of any defense by the insurer after a petition in liquidation has been filed does not bind the liquidator. If a guaranty association or foreign guaranty association has an obligation to defend any suit, the liquidator shall give precedence to such obligation and may defend only in the absence of a defense by such guaranty associations;
(19) Exercise and enforce all the rights, remedies, and powers of any creditor, shareholder, policyholder, or member, including any power to avoid any transfer or lien that may be given by the general law and that is not included with §§ 58-29B-61 to 58-29B-83, inclusive;
(20) Intervene in any proceeding wherever instituted that might lead to the appointment of a receiver or trustee, and act as the receiver or trustee if the appointment is offered;
(21) Enter into agreements with any receiver or director of any other state relating to the rehabilitation, liquidation, conservation, or dissolution of an insurer doing business in both states;
(22) Exercise all powers conferred upon receivers by the laws of this state not inconsistent with the provisions of this chapter;
(23) To appoint, with the approval of the court, an advisory committee of policyholders, claimants, or other creditors including guaranty associations. The committee shall serve at the pleasure of the director and shall serve without compensation other than reimbursement for reasonable travel and per diem living expenses. No other committee of any nature may be appointed by the director or the court in liquidation proceedings;
(24) To audit the books and records of all representatives and insurance producers of the insurer insofar as those records relate to the business activities of the insurer.
Source: SL 1989, ch 436, § 49; SL 1992, ch 351, § 7; SL 2001, ch 286, § 143.
58-29B-50. Enumeration in § 58-29B-49 not exclusive.
The enumeration, in § 58-29B-49, of the powers and authority of the liquidator may not be construed as a limitation upon him, nor may it exclude in any manner his right to do such other acts not herein specifically enumerated, or otherwise provided for, as may be necessary or appropriate for the accomplishment of or in aid of the purpose of liquidation.
Source: SL 1989, ch 436, § 50.
58-29B-50.1. Obligations of liquidator subsequent to entry of liquidation order.
Notwithstanding the powers of the liquidator as stated in §§ 58-29B-47 and 58-29B-50, the liquidator has no obligation to defend claims or to continue to defend claims subsequent to the entry of a liquidation order.
Source: SL 1992, ch 351, § 8.
58-29B-51. Notice of liquidation order.
Unless the court otherwise directs, the liquidator shall give notice of the liquidation order as soon as possible but in no event more than ten days from the date of entry of the order to liquidate:
(1) By first class mail or by telegram or telephone to the insurance director of each jurisdiction in which the insurer is doing business;
(2) By first class mail to any guaranty association or foreign guaranty association which is or may become obligated as a result of the liquidation;
(3) By first class mail to any insurance producer of the insurer;
(4) By first class mail to any person known or reasonably expected to have claims against the insurer including any policyholder, at the person's last known address as indicated by the records of the insurer; and
(5) By publication in a newspaper of general circulation in the county in which the insurer has its principal place of business and in such other locations as the liquidator considers appropriate.
Source: SL 1989, ch 436, § 51; SL 2001, ch 286, § 144.
58-29B-52. Duties of claimant upon notice of liquidation.
Notice to any potential claimant under § 58-29B-51 requires such claimant to file with the liquidator his claims together with proper proofs thereof under §§ 58-29B-106 to 58-29B-110, inclusive, on or before a date the liquidator shall specify in the notice. The liquidator need not require any person claiming cash surrender values or other investment values in life insurance and annuities to file a claim. All claimants shall keep the liquidator informed of any changes of address. If notice is given in accordance with § 58-29B-51, the distribution of assets of the insurer under this chapter shall be conclusive with respect to all claimants, whether or not they received notice.
Source: SL 1989, ch 436, § 52.
58-29B-53. Duties of insurance producer upon notice of liquidation.
Every person who receives notice in the form prescribed in § 58-29B-51 that an insurer which the person represents is the subject of a liquidation order shall, within five days of the notice, give written notice of the liquidation order by first class mail to the last known address contained in the insurance producer's records to each policyholder or other person named in any policy issued through the insurance producer by the insurer. A policy is deemed issued through an insurance producer if the insurance producer has a property interest in the expiration of the policy at any time during the life of the policy, unless the ownership of the expiration of the policy has been transferred to another. The written notice shall include the name and address of the insurer, the name and address of the insurance producer, identification of the policy impaired, and the nature of the impairment including termination of coverage, as described in § 58-29B-47. Each insurance producer obligated to give notice under this section shall file a report of compliance with the liquidator within five days of the receipt of the notice from the liquidator.
Source: SL 1989, ch 436, § 53; SL 2001, ch 286, § 145.
58-29B-54. Failure of insurance producer to comply with § 58-29B-53--Penalty--Liquidator's waiver of duties.
Any insurance producer failing to give notice or file a report of compliance as required in § 58-29B-53 may be subject to payment of a penalty of not more than one thousand dollars and may have the insurance producer's license suspended, which may only be imposed after a hearing held by the director. The liquidator may waive the duties imposed by § 58-29B-53 if he determines that other notice to the policyholders of the insurer under liquidation is adequate.
Source: SL 1989, ch 436, § 54; SL 2001, ch 286, § 146.
58-29B-55. Appointment of liquidator--Effect upon actions and injunctions pending against insurer or liquidator--Liquidator's right to intervene.
Upon issuance of an order appointing a liquidator of a domestic insurer or of an alien insurer domiciled in this state, no action at law or equity may be brought against the insurer or liquidator, whether in this state or elsewhere, nor may any such existing action be maintained or further presented after issuance of such order. The courts of this state shall give full faith and credit to injunctions against the liquidator or the company or the continuation of existing actions against the liquidator or the company, if such injunctions are included in an order to liquidate an insurer issued pursuant to corresponding provisions in other states. If in the liquidator's judgment, protection of the estate of the insurer requires intervention in an action against the insurer that is pending outside this state, he may intervene in this action. The liquidator may defend any action in which he intervenes under this section at the expense of the estate of the insurer.
Source: SL 1989, ch 436, § 55.
58-29B-56. Time periods in which liquidator may act for or institute action on behalf of insurer.
The liquidator may, upon or after an order for liquidation, within two years or such time in addition to two years as applicable law may permit, institute an action or proceeding on behalf of the estate of the insurer upon any cause of action against which the statute of limitations has not expired at the time of the filing of the petition upon which such order is entered. If, by any agreement, a period of limitation is fixed for instituting a suit or proceeding upon any claim, or for filing any claim, proof of claim, proof of loss, demand, notice, or the like, or where in any proceeding, judicial or otherwise, a period of limitation is fixed, either in the proceeding or by applicable law, for taking any action, filing any claim or pleading, or doing any act, and where in any such case the period had not expired at the date of the filing of the petition, the liquidator may, for the benefit of the estate, take any such action or do any such act, required of or permitted to the insurer, within a period of one hundred eighty days subsequent to the entry of an order for liquidation, or within such further period as is shown to the satisfaction of the court not to be unfairly prejudicial to the other party.
Source: SL 1989, ch 436, § 56.
58-29B-57. Petition for liquidation--Suspension of statute of limitations, laches--Time period for commencement of actions ripe when petition filed.
No statute of limitations or defense of laches may run with respect to any action against an insurer between the filing of a petition for liquidation against an insurer and the denial of the petition. Any action against the insurer that might have been commenced when the petition was filed may be commenced for at least sixty days after the petition is denied.
Source: SL 1989, ch 436, § 57.
58-29B-58. Guaranty associations--Standing to appear in liquidation proceedings.
Any guaranty association or foreign guaranty association may appear in any court proceeding concerning the liquidation of an insurer if such association is or may become liable to act as a result of the liquidation of an insurer if such association is or may become liable to act as a result of the liquidation of an insurer.
Source: SL 1989, ch 436, § 58.
58-29B-59. Liquidator to prepare list of insurer's assets--Filing requirements.
As soon as practicable after the liquidation order, but not later than one hundred twenty days thereafter, the liquidator shall prepare in duplicate a list of the insurer's assets. The list shall be amended or supplemented from time to time as the liquidator may determine. One copy shall be filed in the office of the clerk of the circuit court of Hughes County and one copy shall be retained for the liquidator's files. All amendments and supplements shall be similarly filed. A submission to the court for disbursement of assets in accordance with §§ 58-29B-98 to 58-29B-100, inclusive, fulfills the requirements of this section.
Source: SL 1989, ch 436, § 59.
58-29B-60. Reduction of assets to appropriate degree.
The liquidator shall reduce the assets to a degree of liquidity that is consistent with the execution of the liquidation.
Source: SL 1989, ch 436, § 60.
58-29B-61. Fraudulent transfers--Avoidance by receiver--Acceptance or preservation of transfer.
Every transfer made or suffered and every obligation incurred by an insurer within one year prior to the filing of a successful petition for rehabilitation or liquidation under this chapter is fraudulent as to then existing and future creditors if made or incurred without fair consideration, or with actual intent to hinder, delay, or defraud either existing or future creditors. A transfer made, or an obligation incurred, by an insurer ordered to be rehabilitated or liquidated under this chapter, which is fraudulent under this section, may be avoided by the receiver. However, a person who in good faith is a purchaser, lienor, or obligee who in good faith has given a consideration less than fair for such transfer, lien, or obligation may retain the property, lien, or obligation as security for repayment. The court may, on due notice, order any such transfer or obligation to be preserved for the benefit of the estate, and in that event, the receiver shall succeed to and may enforce the rights of the purchaser, lienor, or obligee.
Source: SL 1989, ch 436, § 61.
58-29B-61.1. Liability of beneficiary of fraudulent transfer.
Any person receiving any property or benefit from the insurer which is a fraudulent transfer under § 58-29B-61 is personally liable and shall account to the liquidator concerning it.
Source: SL 1992, ch 351, § 9.
58-29B-62. Fraudulent transfers between insurer and reinsurer--Grounds for avoidance by receiver.
Any transaction of the insurer with a reinsurer shall be deemed fraudulent and may be avoided by the receiver under § 58-29B-61 if:
(1) The transaction consists of the termination, adjustment, or settlement of a reinsurance contract in which the reinsurer is released from any part of its duty to pay the originally specified share of losses that had occurred prior to the time of the transaction, unless the reinsurer gives a present fair equivalent value for the release; and
(2) Any part of the transaction took place within one year prior to the date of filing of the petition through which the receivership was commenced.
Source: SL 1989, ch 436, § 62.
58-29B-63. Transfers of insurer's real property after petition filed--Recording of copy of petition as constructive notice.
After a petition for rehabilitation or liquidation has been filed a transfer of any of the real property of the insurer made to a person acting in good faith shall be valid against the receiver if made for a present fair equivalent value, or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred. The commencement of a proceeding in rehabilitation or liquidation shall be constructive notice upon the recording of a copy of the petition for or order of rehabilitation or liquidation with the register of deeds in the county where any real property in question is located. The exercise by a court of the United States or any state or jurisdiction to authorize or effect a judicial sale of real property of the insurer within any county in any state may not be impaired by the pendency of such a proceeding unless the copy is recorded in the county prior to the consummation of the judicial sale.
Source: SL 1989, ch 436, § 63.
58-29B-64. Validity of transfers after petitions filed and before receiver takes possession or order granted.
After a petition for rehabilitation or liquidation has been filed and before either the receiver takes possession of the property of the insurer or an order of rehabilitation or liquidation is granted:
(1) A transfer of any of the property of the insurer, other than real property, made to a person acting in good faith shall be valid against the receiver if made for a present fair equivalent value, or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred;
(2) A person indebted to the insurer or holding property of the insurer may, if acting in good faith, pay the indebtedness or deliver the property, or any part thereof, to the insurer or upon his order, with the same effect as if the petition were not pending;
(3) A person having actual knowledge of the pending rehabilitation or liquidation is deemed not to act in good faith;
(4) A person asserting the validity of a transfer under this section has the burden of proof. Except as elsewhere provided in this section, no transfer by or on behalf of the insurer after the date of the petition for liquidation by any person other than the liquidator may be valid against the liquidator.
Source: SL 1989, ch 436, § 64.
58-29B-65. No impairment of negotiability.
Nothing in this chapter may impair the negotiability of currency or negotiable instruments.
Source: SL 1989, ch 436, § 65.
58-29B-66. Preference defined.
A preference is a transfer of any of the property of an insurer to or for the benefit of a creditor, for or on account of an antecedent debt, made or suffered by the insurer within one year before the filing of a successful petition for liquidation under this chapter, the effect of which transfer may be to enable the creditor to obtain a greater percentage of this debt than another creditor of the same class would receive. If a liquidation order is entered while the insurer is already subject to a rehabilitation order, then such transfers shall be deemed preferences if made or suffered within one year before the filing of the successful petition for rehabilitation, or within two years before the filing of the successful petition for liquidation, whichever time is shorter.
Source: SL 1989, ch 436, § 66.
58-29B-67. Preference--Avoidance by liquidator.
Any preference may be avoided by the liquidator if:
(1) The insurer was insolvent at the time of the transfer;
(2) The transfer was made within four months before the filing of the petition;
(3) The creditor receiving it or to be benefited thereby or his agent acting with reference thereto had, at the time when the transfer was made, reasonable cause to believe that the insurer was insolvent or was about to become insolvent; or
(4) The creditor receiving it was an officer, any employee, attorney, or other person who was in a position of comparable influence in the insurer to an officer whether or not he held such position, any shareholder holding directly or indirectly more than five percent of any class of any equity security issued by the insurer, or any other person, firm, corporation, association, or aggregation of persons with whom the insurer did not deal at arm's length.
Source: SL 1989, ch 436, § 67.
58-29B-68. Preference voidable--Consequences.
If the preference is voidable, the liquidator may recover the property or, if it has been converted, its value from any person who has received or converted the property, except where a bona fide purchaser or lienor has given less than fair equivalent value, he shall have a lien upon the property to the extent of the consideration actually given by him. If a preference by way of lien or security title is voidable, the court may on due notice order the lien or title to be preserved for the benefit of the estate, in which event the lien or title shall pass to the liquidator.
Source: SL 1989, ch 436, § 68.
58-29B-69. When transfer of property other than real property deemed made or suffered.
For purposes of §§ 58-29B-61 and 58-29B-66, transfer of property other than real property shall be deemed to be made or suffered when it becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee.
Source: SL 1989, ch 436, § 69.
58-29B-70. When transfer of real property deemed made or suffered.
A transfer of real property shall be deemed to be made or suffered when it becomes so far perfected that no subsequent bona fide purchaser from the insurer could obtain rights superior to the rights of the transferee.
Source: SL 1989, ch 436, § 70.
58-29B-71. Transfer creating equitable lien--Conditions prohibiting perfection.
No transfer which creates an equitable lien may be deemed to be perfected if there are available means by which a legal lien could be created.
Source: SL 1989, ch 436, § 71.
58-29B-72. Transfer not perfected prior to filing of petition deemed made before filing of successful petition.
A transfer not perfected prior to the filing of a petition for liquidation shall be deemed to be made immediately before the filing of the successful petition.
Source: SL 1989, ch 436, § 72.
58-29B-73. Sections 58-29B-69 to 58-29B-72 applicable despite certain creditors or potential bona fide purchasers.
The provisions of §§ 58-29B-69 to 58-29B-72, inclusive, apply whether or not there are or were creditors who might have obtained liens or persons who might have become bona fide purchasers.
Source: SL 1989, ch 436, § 73.
58-29B-74. Lien obtainable by legal or equitable proceedings--Simple contract--Exclusions.
A lien obtainable by legal or equitable proceedings upon a simple contract is one arising in the ordinary course of such proceedings upon the entry or docketing of a judgment or decree, or upon attachment, garnishment, execution, or like process, whether before, upon, or after judgment or decree and whether before or upon levy. It does not include liens which under applicable law are given a special priority over other liens which are prior in time.
Source: SL 1989, ch 436, § 74.
58-29B-75. Lien by legal or equitable proceedings--Superiority to rights of transferee.
A lien obtainable by legal or equitable proceedings could become superior to the rights of a transferee, or a purchaser could obtain rights superior to the rights of a transferee within the meaning of §§ 58-29B-69 to 58-29B-72, inclusive, if such consequences would follow only from the lien or purchase itself, or from the lien or purchaser, with or without the aid of ministerial action by public officials. Such a lien could not, however, become superior and such a purchase could not create superior rights for the purpose of §§ 58-29B-69 to 58-29B-72, inclusive, through any acts subsequent to the obtaining of such a lien or subsequent to such a purchase which require the agreement or concurrence of any third party or which require any further judicial action or ruling.
Source: SL 1989, ch 436, § 75.
58-29B-76. Transfer for or on account of new and contemporaneous consideration--Transfer to secure future loan--Effects.
A transfer of property for or on account of a new and contemporaneous consideration which is deemed under §§ 58-29B-69 to 58-29B-72, inclusive, to be made or suffered after the transfer because of delay in perfecting it does not thereby become a transfer for or on account of an antecedent debt if any acts required by the applicable law to be performed in order to perfect the transfer as against liens or bona fide purchasers' rights are performed within twenty-one days or any period expressly allowed by the law, whichever is less. A transfer to secure a future loan, if such a loan is actually made, or a transfer which becomes security for a future loan, shall have the same effect as a transfer for or on account of a new and contemporaneous consideration.
Source: SL 1989, ch 436, § 76.
58-29B-77. Voidable lien dissolved--Indemnifying transfer or lien deemed voidable.
If any lien deemed voidable under § 58-29B-67 has been dissolved by the furnishing of a bond or other obligation, the surety on which has been indemnified directly or indirectly by the transfer of or the creation of a lien upon any property of an insurer before the filing of a petition under this chapter which results in a liquidation order, the indemnifying transfer or lien shall also be deemed voidable.
Source: SL 1989, ch 436, § 77.
58-29B-78. Property affected by voidable lien discharge--That and indemnifying property pass to liquidator--Exception.
The property affected by any lien deemed voidable under §§ 58-29B-66 to 58-29B-68, inclusive, and 58-29B-77, shall be discharged from such lien, and that property and any of the indemnifying property transferred to or for the benefit of a surety shall pass to the liquidator, except that the court may on due notice order any such lien to be preserved for the benefit of the estate and the court may direct that such conveyance be executed as may be proper or adequate to evidence the title of the liquidator.
Source: SL 1989, ch 436, § 78.
58-29B-79. Summary jurisdiction of Hughes county circuit court--Notice--Valuation of certain property or liens--Election of transferee or lienholder.
The circuit court of Hughes County shall have summary jurisdiction of any proceeding by the liquidator to hear and determine the rights of any parties under §§ 58-29B-71 to 58-29B-88, inclusive. Reasonable notice of any hearing in the proceeding shall be given to all parties in interest, including the obligee of a releasing bond or other like obligation. If an order is entered for the recovery of indemnifying property in kind or for the avoidance of an indemnifying lien, the court, upon application of any party in interest, shall in the same proceeding ascertain the value of the property or lien, and if the value is less than the amount for which the property is indemnified or than the amount of the lien, the transferee or lienholder may elect to retain the property or lien upon payment of its value, as ascertained by the court, to the liquidator, within such reasonable times as the court shall fix.
Source: SL 1989, ch 436, § 79.
58-29B-80. Extent of surety discharge under releasing bond or similar obligation.
The liability of a surety under a releasing bond or other like obligation shall be discharged to the extent of the value of the indemnifying property recovered or the indemnifying lien nullified and avoided by the liquidator or, if the property is retained under § 58-29B-79, to the extent of the amount paid to the liquidator.
Source: SL 1989, ch 436, § 80.
58-29B-81. Preferred creditor--Setoff for new credit issued in good faith.
If a creditor has been preferred, and afterward in good faith gives the insurer further credit without security of any kind, for property which becomes a part of the insurer's estate, the amount of the new credit remaining unpaid at the time of the petition may be set off against the preference which would otherwise be recoverable from him.
Source: SL 1989, ch 436, § 81.
58-29B-82. Transfers by insurer to attorney for services within four months of filing petition--Examination by court.
If an insurer shall, directly or indirectly, within four months before the filing of a successful petition for liquidation under this chapter, or at any time in contemplation of a proceeding to liquidate it, pay money or transfer property to an attorney-at-law for services rendered or to be rendered, the transaction may be examined by the court on its own motion or shall be examined by the court on petition of the liquidator and shall be held valid only to the extent of a reasonable amount to be determined by the court, and the excess may be recovered by the liquidator for the benefit of the estate. However, if the attorney is in a position of influence in the insurer or an affiliate thereof, payment of any money or the transfer of any property to the attorney-at-law for services rendered or to be rendered shall be governed by the provision of subdivision 58-29B-67(4).
Source: SL 1989, ch 436, § 82.
58-29B-83. Conditions creating personal liability to liquidator for amount of preference.
Every officer, manager, employee, shareholder, member, subscriber, attorney, or any other person acting on behalf of the insurer who knowingly participates in giving any preference when he has reasonable cause to believe the insurer is or is about to become insolvent at the time of the preference shall be personally liable to the liquidator for the amount of the preference. Reasonable cause may be inferred if the transfer was made within four months before the date of filing of the successful petition for liquidation. Every person receiving any property from the insurer or the benefit thereof as a preference voidable under this section is personally liable therefore and shall be bound to account to the liquidator. Nothing in this section may prejudice any other claim by the liquidator.
Source: SL 1989, ch 436, § 83.
58-29B-84. Claims of creditor who has received or acquired a voidable preference, lien, conveyance, transfer, assignment, or encumbrance.
No claims of a creditor who has received or acquired a preference, lien, conveyance, transfer, assignment, or encumbrance, voidable under this chapter, may be allowed unless he surrenders the preference, lien, conveyance, transfer, assignment, or encumbrance. If the avoidance is effected by a proceeding in which a final judgment has been entered, the claim may not be allowed unless the money is paid or the property is delivered to the liquidator within thirty days from the date of the entering of the final judgment. However, the court having jurisdiction over the liquidation may allow further time if there is an appeal or other continuation of the proceeding.
Source: SL 1989, ch 436, § 84.
58-29B-85. Filing of claims under § 58-29B-84.
A claim allowable under § 58-29B-84 by reason of avoidance, whether voluntary or involuntary, or a preference, lien, conveyance, transfer, assignment, or encumbrance, may be filed as an excused late filing under §§ 58-29B-102 to 58-29B-105, inclusive, if filed within thirty days from the date of the avoidance, or within the further time allowed by the court under § 58-29B-84.
Source: SL 1989, ch 436, § 85.
58-29B-86. Mutual debts or credits between insurer and another set off.
Mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under this chapter shall be set off and the balance only shall be allowed or paid, except as provided in § 58-29B-87, and §§ 58-29B-95 to 58-29B-97, inclusive.
Source: SL 1989, ch 436, § 86.
58-29B-87. Setoff or counterclaim not allowed.
No setoff or counterclaim may be allowed in favor of any person if:
(1) The obligation of the insurer to the person would not at the date of the filing of a petition for liquidation entitle the person to share as a claimant in the assets of the insurer; or
(2) The obligation of the insurer to the person was purchased by or transferred to the person with a view to its being used as a setoff; or
(3) The obligation of the person is to pay an assessment levied against the members or subscribers of the insurer, or is to pay a balance upon a subscription to the capital stock of the insurer, or is in any other way in the nature of a capital contribution.
Source: SL 1989, ch 436, § 87; SL 1995, ch 288, § 1.
58-29B-88. Liquidator's report to court--Time limit--Content.
As soon as practicable, but not more than two years from the date of an order of liquidation under §§ 58-29B-41 to 58-29B-45, inclusive, of an insurer issuing assessable policies, the liquidator shall make a report to the court setting forth:
(1) The reasonable value of the assets of the insurer;
(2) The insurer's probable total liabilities;
(3) The probable aggregate amount of the assessment necessary to pay all claims of creditors and expenses in full, including expenses of administration and costs of collecting the assessment; and
(4) A recommendation as to whether or not an assessment should be made and in what amount.
Source: SL 1989, ch 436, § 88.
58-29B-89. Court to levy assessments--Amount.
Upon the basis of the report provided in § 58-29B-88, including any supplements and amendments thereto, the court may levy one or more assessments against all members of the insurer who are subject to assessment. Subject to any applicable legal limits on assessability, the aggregate assessment shall be for the amount that the sum of the probable liabilities, the expenses of administration, and the estimated cost of collection of the assessment, exceeds the value of existing assets, with due regard being given to assessments that cannot be collected economically.
Source: SL 1989, ch 436, § 89.
58-29B-90. Issuance of show cause order upon failure to pay assessment.
After levy of assessment under § 58-29B-89, the liquidator shall issue an order directing each member who has not paid the assessment pursuant to the order to show cause why the liquidator should not pursue a judgment therefor.
Source: SL 1989, ch 436, § 90.
58-29B-91. Notice of show cause order.
The liquidator shall give notice of the order to show cause by legal publication in the county of the principal place of business of the insurer and by first class mail to each member liable thereunder mailed to his last known address as it appears on the insurer's records, at least twenty days before the return day of the order to show cause.
Source: SL 1989, ch 436, § 91.
58-29B-92. Failure to appear and serve objections on or before return day of order--Procedure on timely appearance.
If a member does not appear and serve duly verified objections upon the liquidator on or before the return day of the order to show cause under § 58-29B-90, the court shall make an order adjudging the member liable for the amount of the assessment against him, pursuant to § 58-29B-89, together with costs, and the liquidator shall have a judgment against the member therefor. If on or before such return day, the member appears and serves duly verified objections upon the liquidator, the director may hear and determine the matter or may appoint a referee to hear it and make such order as the facts warrant. In the event that the director determines that such objections do not warrant relief from assessment, the member may request the court to review the matter and vacate the order to show cause.
Source: SL 1989, ch 436, § 92.
58-29B-93. Enforcement of order or judgment under § 58-29B-92.
The liquidator may enforce any order or collect any judgment under § 58-29B-92, by any lawful means.
Source: SL 1989, ch 436, § 93.
58-29B-94. No reductions in amounts recoverable from reinsurers--Exception--Payments.
The amount recoverable by the liquidator from reinsurers may not be reduced as a result of delinquency proceedings, unless the reinsurance contract provides, in substance, that in the event of the insolvency of the ceding insurer, the reinsurance is payable under a contract reinsured by the reinsurer on the basis of reported claims allowed in the liquidation proceeding or proof of payment of the claim by a guaranty association, without diminution because of the insolvency of the ceding insurer. Such payments shall be made directly to the ceding insurer or to its domiciliary liquidator unless:
(1) The contract or other written agreement specifically provides another payee of such reinsurance in the event of the insolvency of the ceding insurer; or
(2) The reinsurer, with the consent of the direct insured, has assumed such policy obligations of the ceding insurer as direct obligations of the reinsurer to the payees under such policies and in substitution for the obligations of the ceding insurer to such payees. The consent of the liquidator is required for any such assumption of policy obligations effected after an order of liquidation.
Source: SL 1989, ch 436, § 94; SL 2005, ch 274, § 1.
58-29B-94.1. Association election to succeed to rights and obligations of insolvent insurer under reinsurance contract--Reinsurer's liability to pay claims.
Notwithstanding § 58-29B-94, if a life and health insurance guaranty association has made the election to succeed to the rights and obligations of the insolvent insurer under the contract of reinsurance, the reinsurer's liability to pay covered reinsured claims continues under the contract of reinsurance, subject to the payment to the reinsurer of the reinsurance premiums for such coverage. Payment for such reinsured claims may only be made by the reinsurer pursuant to the direction of the guaranty association or its designated successor. Any payment made at the direction of the guaranty association or its designated successor by the reinsurer discharges the reinsurer of any further liability to any other party for the claim payment.
Source: SL 2005, ch 274, § 2.
58-29B-95. No liability for unearned premiums or uncollected earned premiums before declaration of insolvency--Recovery of unearned premium representing commission--Credits or setoffs--Obligations of uninsured.
No insurance producer, premium finance company, or any other person, responsible for the payment of a premium at the time of the declaration of insolvency, may be held liable for payment of collected or uncollected unearned premiums or for uncollected earned premiums as shown on the records of the insurer. The liquidator has the right to recover from the person any part of an unearned premium that represents commission of the person. Credits or setoffs or both may not be allowed to an insurance producer, or premium finance company for any amounts advanced to the insurer by the insurance producer or premium finance company on behalf of, but in the absence of a payment by, the insured. An insured is obligated to pay any unpaid earned premium due the insurer at the time of the declaration of insolvency, as shown on the records of the insurer.
Source: SL 1989, ch 436, § 95; SL 1990, ch 403; SL 1995, ch 288, § 2; SL 2001, ch 286, § 147.
58-29B-96. Course of action upon violation of § 58-29B-95--Director's options.
Upon satisfactory evidence of a violation of § 58-29B-95, the director may pursue either one or both of the following courses of action; suspend, revoke, or refuse to renew the licenses of such offending party or parties or impose a penalty of not more than one thousand dollars for each and every act in violation of § 58-29B-95, by the party or parties.
Source: SL 1989, ch 436, § 96.
58-29B-97. Notice and hearings required before impositions of penalties.
Before the director shall take any action as set forth in § 58-29B-96, he shall give written notice to the person, company, association, or exchange accused of violating the law, stating specifically the nature of the alleged violation, and fixing a time and place, at least ten days thereafter, when a hearing on the matter shall be held. After such hearing, or upon failure of the accused to appear at such hearing, the director, if he shall find such violation, shall impose such of the penalties under § 58-29B-96, as he deems advisable. If the director shall take action in any or all of the ways set out in § 58-29B-96, the party aggrieved may appeal as provided by chapter 1-26.
Source: SL 1989, ch 436, § 97.
58-29B-98. Application for approval of proposal to disburse assets.
Within one hundred twenty days of a final determination of insolvency of an insurer by the court, the liquidator shall make application to the court for approval of a proposal to disburse assets out of marshaled assets, from time to time as such assets become available, to a guaranty association or foreign guaranty association having obligations because of such insolvency. If the liquidator determines that there are insufficient assets to disburse, the application required by this section shall be considered satisfied by a filing by the liquidator stating the reasons for this determination.
Source: SL 1989, ch 436, § 98.
58-29B-99. Proposal to disburse assets--Contents.
The proposal under § 58-29B-98 shall include, but is not limited to, provisions for:
(1) Reserving amounts for the payment of expenses of administration and the payment of claims of secured creditors to the extent of the value of the security held, and claims falling within the priorities established in subdivisions 58-29B-124(1) and (2);
(2) Disbursement of the assets marshaled to date and subsequent disbursement of assets as they become available;
(3) Equitable allocation of disbursements to each of the guaranty associations and foreign guaranty associations entitled thereto;
(4) The securing by the liquidator from each of the associations entitled to disbursements pursuant to this section of an agreement to return to the liquidator such assets, together with income earned on assets previously disbursed, as may be required to pay claims of secured creditors and claims falling within the priorities established in § 58-29B-124, in accordance with such priorities. No bond is required of any such association; and
(5) A full report to be made by each association to the liquidator accounting for all assets so disbursed to the association, all disbursements made therefrom, any interest earned by the association on such assets and any other matter as the court may direct.
Source: SL 1989, ch 436, § 99.
58-29B-100. Amounts for disbursements to associations.
The liquidator's proposal shall provide for disbursements to the associations in amounts estimated at least equal to the claim payments made or to be made thereby for which such associations could assert a claim against the liquidator, and shall further provide that if the assets available for disbursement from time to time do not equal or exceed the amount of such claim payments made, or to be made, by the association then disbursements shall be in the amount of available assets.
Source: SL 1989, ch 436, § 100.
58-29B-101. Insolvent insurer writing life or health insurance or annuities--Liquidator to include disbursements to guaranty in proposal.
The liquidator's proposal shall, with respect to an insolvent insurer writing life or health insurance or annuities, provide for disbursements of assets to any guaranty association or any foreign guaranty association covering life or health insurance or annuities or to any other entity or organization reinsuring, assuming, or guaranteeing policies or contracts of insurance under the acts creating such associations.
Source: SL 1989, ch 436, § 101.
58-29B-102. Notice of application for approval of proposal.
Notice of the application under § 58-29B-98 shall be given to the association and to the directors of insurance of each of the states. Any such notice shall be deemed to have been given when deposited in the United States' mail, with first class postage prepaid thereon, at least thirty days prior to submission of such application to the court. Action on the application may be taken by the court provided the required notice has been given and the liquidator's proposal complies with subdivisions 58-29B-99(1) and (2).
Source: SL 1989, ch 436, § 102.
58-29B-103. Filing proof of claims--Exceptions.
Proof of all claims shall be filed with the liquidator in the form required by §§ 58-29B-106 to 58-29B-110, inclusive, on or before the last day for filing specified in the notice required under §§ 58-29B-51 and 58-29B-52, except that proof of claims for cash surrender values or other investment values in life insurance and annuities need not be filed unless the liquidator expressly so requires.
Source: SL 1989, ch 436, § 103.
58-29B-104. Circumstances under which claimant making late filing may share in distributions.
The liquidator may permit a claimant making a late filing to share in distributions, whether past or future, as if he were not late, to the extent that any such payment will not prejudice the orderly administration of the liquidation, under the following circumstances:
(1) The existence of the claim was not known to the claimant and that he filed his claim as promptly thereafter as reasonably possible after learning of it;
(2) A transfer to a creditor was avoided under §§ 58-29B-61 to 58-29B-83, inclusive, or was voluntarily surrendered under §§ 58-29B-84 and 58-29B-85, and that the filing satisfies the conditions of §§ 58-29B-84 and 58-29B-85; or
(3) The valuation under §§ 58-29B-121 and 58-29B-122, of security held by a secured creditor shows a deficiency, which is filed within thirty days after the valuation.
Source: SL 1989, ch 436, § 104; SL 2021, ch 210, § 18.
58-29B-105. Certain late filing claims of guaranty association--Right to share in distributions.
The liquidator shall permit late filing claims to share in distributions, whether past or future, as if they were not late, if such claims are claims of a guaranty association or foreign guaranty association for reimbursement of covered claims paid or expenses incurred, or both, subsequent to the last day for filing where such payments were made and expenses incurred as provided by law.
Source: SL 1989, ch 436, § 105.
58-29B-106. Treatment of late claims not covered by § 58-29B-104.
The liquidator may consider any claim filed late which is not covered by § 58-29B-104, and permit it to receive distributions which are subsequently declared on any claims of the same or lower priority if the payment does not prejudice the orderly administration of the liquidation. The late filing claimant shall receive, at each distribution, the same percentage of the amount allowed on his claim as is then being paid to claimants of any lower priority. This shall continue until his claim has been paid in full.
Source: SL 1989, ch 436, § 106.
58-29B-107. Proof of claim--Contents.
Proof of claim shall consist of a verified statement signed by the claimant that includes all of the following that are applicable:
(1) The particulars of the claim including the consideration given for it;
(2) The identity and amount of the security on the claim;
(3) The payments made on the debt, if any;
(4) That the sum claimed is justly owing and that there is no setoff, counterclaim, or defense to the claim;
(5) Any right of priority of payment or other specific right asserted by the claimants;
(6) A copy of the written instrument which is the foundation of the claim;
(7) The name and address of the claimant and the attorney who represents him, if any.
Source: SL 1989, ch 436, § 107.
58-29B-108. Failure to provide necessary information--Liquidator may require prescribed forms and additional information.
The liquidator need not consider or allow a claim if it does not contain all the information in § 58-29B-107, which may be applicable. The liquidator may require that a prescribed form be used and may require that other information and documents be included.
Source: SL 1989, ch 436, § 108.
58-29B-109. Liquidator may request or otherwise obtain additional information or evidence.
At any time the liquidator may request the claimant to present information or evidence supplementary to that required under § 58-29B-107, and may take testimony under oath, require production of affidavits or depositions, or otherwise obtain additional information or evidence.
Source: SL 1989, ch 436, § 109.
58-29B-110. Judgment or order not evidence of liability or quantum of damages.
No judgment or order against an insured or the insurer entered after the date of filing of a successful petition for liquidation and no judgment or order against an insured or the insurer entered at any time by default or by collusion need be considered as evidence of liability or of quantum of damages. No judgment or order against an insured or the insurer entered within four months before the filing of the petition need be considered as evidence of liability or of the quantum of damages.
Source: SL 1989, ch 436, § 110.
58-29B-111. Claims of guaranty associations--Form and content.
All claims of a guaranty association or foreign guaranty association shall be in such form and contain such substantiation as may be agreed to by the association and the liquidator.
Source: SL 1989, ch 436, § 111.
58-29B-112. Third party's claim contingent on judgment against insured--Consideration.
The claim of a third party which is contingent only on his first obtaining a judgment against the insured shall be considered and allowed as if there were no such contingency.
Source: SL 1989, ch 436, § 112.
58-29B-113. Contingent claims allowed.
A claim may be allowed even if contingent, if it is filed in accordance with §§ 58-29B-103 to 58-29B-106, inclusive. It may be allowed and may participate in all distributions declared after it is filed to the extent that it does not prejudice the orderly administration of the liquidation.
Source: SL 1989, ch 436, § 113.
58-29B-114. Treatment of claims due except for passage of time.
Claims that are due except for the passage of time shall be treated as settled claims are treated. However, such claims may be discounted at the rate specified in § 58-15-15.8 minus two percent.
Source: SL 1989, ch 436, § 114.
58-29B-115. Claims made under employment contracts by directors or similar personnel--Limit on payment.
Claims made under employment contracts by directors, principal officers, or persons in fact performing similar functions or having similar powers are limited to payment for services rendered prior to the issuance of any order of rehabilitation or liquidation under § 58-29B-32 or 58-29B-42.
Source: SL 1989, ch 436, § 115.
58-29B-116. Third party claim against insured of insurer in liquidation filed with liquidator--Insured's filing--Late filing.
If any third party asserts a cause of action against an insured of an insurer in liquidation, the third party may file a claim with the liquidator. Whether or not the third party files a claim, the insured may file a claim on his own behalf in the liquidation. If the insured fails to file a claim by the date for filing claims specified in the order of liquidation or within sixty days after mailing of the notice required by §§ 58-29B-51 and 58-29B-52, whichever is later, he is an unexcused late filer.
Source: SL 1989, ch 436, § 116.
58-29B-117. Allowance of insured's claim--Liquidator's recommendations to court--Sums withheld--Procedures upon allowance.
The liquidator shall make his recommendations to the court under § 58-29B-125, for the allowance of an insured's claim under § 58-29B-116, 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 by the court, the liquidator shall withhold any dividends payable on the claim, pending the outcome of litigation and negotiation with the insured. Upon request by the claimant the liquidator may reconsider the claim on the basis of additional information and amend his recommendations to the court. The court may amend its allowance as it considers appropriate. As claims against the insured are settled or barred, the insured shall be paid from the amount withheld the same percentage dividend as was paid on other claims of like property, based on the lesser of the amount actually recovered from the insured by action or paid by agreement plus the reasonable costs and expenses of defense or 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 section shall not be a reason for unreasonable delay of final distribution and discharge of the liquidator.
Source: SL 1989, ch 436, § 117.
58-29B-118. Several claims founded upon one policy--Disposition--Prohibited claims.
If several claims founded upon one policy are filed, whether by third parties or as claims by the insured under § 58-29B-116 or 58-29B-128, 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 shall be evaluated as in § 58-29B-117. If any insured's claim is subsequently reduced under § 58-29B-117, the amount thus freed shall be apportioned ratably among the claims which have been reduced under this section. No claim may be presented under § 58-29B-116 or this section, if it is or may be covered by any guaranty association or foreign guaranty association.
Source: SL 1989, ch 436, § 118.
58-29B-119. Liquidator to give written notice of denial of claim--Objections.
If a claim is denied in whole or in part by the liquidator, written notice of the determination shall be given to the claimant or his attorney by first class mail at the address shown in the proof of claim. Within sixty days from the mailing of the notice, the claimant may file his objections with the liquidator. If no such filing is made, the claimant may not further object to the determination.
Source: SL 1989, ch 436, § 119.
58-29B-120. Hearing upon objections--Notice--Referee may conduct.
If objections are filed with the liquidator and the liquidator does not alter his denial of the claim as a result of the objections, the liquidator shall ask the court for a hearing as soon as practicable and give notice of the hearing by first class mail to the claimant or his attorney and to any other persons directly affected, not less than ten nor more than thirty days before the date of the hearing. The matter may be heard by the court or by a court-appointed referee who shall submit findings of fact along with his recommendation.
Source: SL 1989, ch 436, § 120.
58-29B-121. Creditor's claim secured by "other person"--Subrogation--Right to distribution.
If a creditor whose claim against an insurer is secured, in whole or in part, by the undertaking of another person, fails to prove and file that claim, the other person may do so in the creditor's name, and shall be subrogated to the rights of the creditor, whether the claim has been filed by the creditor or by the other person in the creditor's name, to the extent that he discharges the undertaking. In the absence of an agreement with the creditor to the contrary, the other person is not entitled to any distribution paid on the claim from the insurer's estate to the creditor if the claim of the other person equals the amount of the entire claim of the creditor. Any excess received by the creditor shall be held by him in trust for such other person. The term "other person," as used in this section is not intended to apply to a guaranty association or foreign guaranty association.
Source: SL 1989, ch 436, § 121.
58-29B-122. Valuation of security held by secured creditor.
The value of any security held by a secured creditor shall be determined in one of the following ways, as the court may direct:
(1) By converting the same into money according to the terms of the agreement pursuant to which the security was delivered to such creditors; or
(2) By agreement, arbitration, compromise, or litigation between the creditor and the liquidator.
Source: SL 1989, ch 436, § 122.
58-29B-123. Valuation made under supervision of court--Treatment of deficiency and surrender of security.
The determination made pursuant to § 58-29B-122 shall be under the supervision and control of the court with due regard for the recommendation of the liquidator. The amount so determined shall be credited upon the secured claim, and any deficiency shall be treated as an unsecured claim. If the claimant shall surrender his security to the liquidator, the entire claim shall be allowed as if unsecured.
Source: SL 1989, ch 436, § 123.
58-29B-124. Priority and order of distribution of claims from insurer's estate.
The priority of distribution of claims from the insurer's estate shall be in accordance with the order in which each class of claims is herein set forth. Every claim in each class shall be paid in full or adequate funds retained for such payment before the members of the next class receive any payment. No subclasses may be established within any class. The order of distribution of claims shall be:
(1) Class 1. The costs and expenses of administration, including but not limited to the following:
(a) The actual and necessary costs of preserving or recovering the assets of the insurer;
(b) Compensation for all services rendered in the liquidation;
(c) Any necessary filing fees;
(d) The fees and mileage payable to witnesses;
(e) Reasonable attorney's fees;
(f) The reasonable expenses of a guaranty association or foreign guaranty association in handling claims;
(2) Class 2. Debts due to employees for services performed to the extent that they do not exceed one thousand dollars and represent payment for services performed within one year before the filing of the petition for liquidation. Officers and directors are not entitled to the benefit of this priority. Such priority shall be in lieu of any other similar priority which may be authorized by law as to wages or compensation of employees;
(3) Class 3. All claims under policies for losses incurred, including third party claims, all claims against the insurer for liability for bodily injury or for injury to or destruction of tangible property which are not under policies, and all claims of a guaranty association or foreign guaranty association. All claims under life insurance and annuity policies, whether for death proceeds, annuity proceeds, or investment values shall be treated as loss claims. That portion of any loss, indemnification for which is provided by other benefits or advantages recovered or recoverable in discharge of familial obligations of support or by way of succession at death or as proceeds of life insurance, or as gratuities. No payment by an employer to this employee may be treated as a gratuity;
(4) Class 4. Claims under nonassessable policies for unearned premium or other premium refunds and claims of general creditors;
(5) Class 5. Claims of the federal or any state or local government. Claims, including those of any governmental body for a penalty or forfeiture, shall be allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual cost occasioned thereby. The remainder of such claims shall be postponed to the class of claims under subdivision (8) of this section;
(6) Class 6. Claims filed late or any other claims other than claims under subdivisions (7) and (8) of this section;
(7) Class 7. Surplus or contribution notes, or similar obligations, and premium refunds on assessable policies. Payments to members of domestic mutual insurance companies shall be limited in accordance with law;
(8) Class 8. The claims of shareholders or other owners.
Source: SL 1989, ch 436, § 124.
58-29B-125. Review, investigation and negotiation of claims by liquidator--Exception--Report to court.
The liquidator shall review all claims duly filed in the liquidation and shall make such further investigation as he shall deem necessary. He may compound, compromise, or in any other manner negotiate the amount for which claims will be recommended to the court except where the liquidator is required by law to accept claims as settled by any person or organization, including any guaranty association or foreign guaranty association. Unresolved disputes shall be determined under § 58-29B-119 or 58-29B-120. As soon as practicable, he shall present to the court a report of the claims against the insurer with his recommendations. The report shall include the name and address of each claimant and the amount of the claim finally recommended, if any. If the insurer has issued annuities or life insurance policies, the liquidator shall report the persons to whom, according to the records of the insurer, amounts are owed as cash surrender values or other investment value and the amounts owed.
Source: SL 1989, ch 436, § 125.
58-29B-126. Court approval, disapproval, or modification of report.
The court may approve, disapprove, or modify, the report on claims by the liquidator. Such reports as are not modified by the court within a period of sixty days following submission by the liquidator shall be treated by the liquidator as allowed claims, subject thereafter to later modification or to rulings made by the court pursuant to §§ 58-29B-119 and 58-29B-120. No claim under a policy of insurance may be allowed for an amount in excess of the applicable policy limits.
Source: SL 1989, ch 436, § 126.
58-29B-127. Distributions by liquidator under court direction--Manner of payment.
Under the direction of the court, the liquidator shall pay distributions in a manner that will assure the proper recognition of priorities and a reasonable balance between the expeditious completion of the liquidation and the protection of unliquidated and undetermined claims, including third party claims. Distribution of assets in kind may be made at valuations set by agreement between the liquidator and creditor and approved by the court.
Source: SL 1989, ch 436, § 127.
58-29B-128. Disposition of unclaimed funds subject to distribution.
All unclaimed funds subject to distribution remaining in the liquidator's hands when he is ready to apply to the court for discharge, including the amount distributable to any creditor, shareholder, member, or other person who is unknown or cannot be found, shall be deposited with the state treasurer, and shall be paid without interest except in accordance with § 58-29B-123 to the person entitled thereto or his legal representative upon proof satisfactory to the state treasurer of his right thereto. Any amount on deposit not claimed within six years from the discharge of the liquidator shall be deemed to have been abandoned and shall be escheated without formal escheat proceedings and be deposited into the general fund.
Source: SL 1989, ch 436, § 128.
58-29B-129. Disposition of funds not distributed.
All funds withheld under §§ 58-29B-112 to 58-29B-114, inclusive, and not distributed shall upon discharge of the liquidator be deposited with the state treasurer and paid by him in accordance with § 58-29B-123. Any sums remaining which under § 58-29B-123 would revert to the undistributed assets of the insurer shall be transferred to the state treasurer and become the property of the state under § 58-29B-128, unless the director in his discretion petitions the court to reopen the liquidation under § 58-29B-131.
Source: SL 1989, ch 436, § 129.
58-29B-130. Application for discharge.
If all assets justifying the expense of collection and distribution have been collected and distributed under this chapter, the liquidator shall apply to the court for discharge. The court may grant the discharge and make any other orders, including an order to transfer to the state treasurer any remaining funds that are uneconomic to distribute, as may be deemed appropriate. Any other person may apply to the court at any time for an order under this section. If the application is denied, the applicant shall pay the costs and expenses of the liquidator in resisting the application, including a reasonable attorney's fee.
Source: SL 1989, ch 436, § 130.
58-29B-131. Petition to reopen proceedings for good cause.
After the liquidation proceeding has been terminated and liquidator discharged, the director or other interested party may at any time petition the court to reopen the proceedings for good cause, including the discovery of additional assets. If the court is satisfied that there is justification for reopening, it shall so order.
Source: SL 1989, ch 436, § 131.
58-29B-132. Recommendation and direction for retention or disposal of insurer's records.
If it appears to the director that the records of any insurer in process of liquidation or completely liquidated are no longer useful, he may recommend to the court and the court shall direct what records should be retained for future reference and what should be destroyed.
Source: SL 1989, ch 436, § 132.
58-29B-133. Audits of receivership books.
The court may, as it considers desirable, cause audits to be made of the books of the director relating to any receivership established under this chapter, and a report of each audit shall be filed with the director and with the court. The books, records, and other documents of the receivership shall be made available to the auditor at any time without notice. The expense of each audit shall be considered a cost of administration of the receivership.
Source: SL 1989, ch 436, § 133.
58-29B-134. Director's application to act as conservator--Grounds.
If a domiciliary liquidator has not been appointed, the director may apply to the court by verified petition for an order directing him to act as conservator to conserve the property of an alien insurer not domiciled in this state or a foreign or alien insurer on any one or more of the following grounds:
(1) Any of the grounds in § 58-29B-31;
(2) That any of its property has been sequestered by official action in its domiciliary state, or in any other state;
(3) That enough of its property has been sequestered in a foreign country to give reasonable cause to fear that the insurer is or may become insolvent;
(4) That its certificate of authority to do business in this state has been revoked or that none was ever issued and that there are residents of this state with outstanding claims or outstanding policies.
Source: SL 1989, ch 436, § 134.
58-29B-135. Issuance of order allowing director to act as conservator--Filing--Notice imparted.
The court may issue the order in whatever terms it deems appropriate. The filing or recording of the order with the clerk of the circuit court of Hughes County or the register of deeds of the county in which the principal business of the company is located or the county in which its principal office or place of business is located, shall impart the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that register of deeds would have imparted.
Source: SL 1989, ch 436, § 135.
58-29B-136. Petition to liquidate assets of foreign or alien insurer.
The conservator may at any time petition the court for an order under §§ 58-29B-138 to 58-29B-143, inclusive, to liquidate assets of a foreign or alien insurer under conservation, or, if appropriate, for an order under §§ 58-29B-145 to 58-29B-150, inclusive, to be appointed ancillary receiver.
Source: SL 1989, ch 436, § 136.
58-29B-137. Termination of conservation of insurer.
The conservator may at any time petition the court for an order terminating conservation of an insurer. If the court finds that the conservation is no longer necessary, it shall order that the insurer be restored to possession of its property and the control of its business. The court may also make such finding and issue such order at any time upon motion of any interested party, but if such motion is denied all costs shall be assessed against such party.
Source: SL 1989, ch 436, § 137.
58-29B-138. Director's application to liquidate assets of foreign or alien insurer--Grounds.
If a domiciliary receiver has not been appointed, the director may apply to the circuit court of Hughes County by verified petition for an order directing him to liquidate the assets found in this state of a foreign insurer or an alien insurer or an alien insurer not domiciled in this state, on any of the following grounds:
(1) Any of the grounds in § 58-29B-31 or 58-29B-41; or
(2) Any of the grounds specified in subdivisions 58-29B-134(2) to (4), inclusive.
Source: SL 1989, ch 436, § 138.
58-29B-139. Notice of orders sought under § 58-29B-134 or 58-29B-138.
If an order is sought under § 58-29B-134 or 58-29B-138, the court shall cause the insurer to be given such notice and time to respond thereto as is reasonable under the circumstances.
Source: SL 1989, ch 436, § 139.
58-29B-140. Order to liquidate in whatever terms court deems appropriate--Filing--Notice imparted.
If it appears to the court that the best interests of creditors, policyholders, and the public require, the court may issue an order to liquidate in whatever terms it deems appropriate. The filing or recording of the order with the clerk of the circuit court of Hughes County or the register of deeds of the county in which the principal business of the company is located or the county in which its principal office or place of business is located, shall impart the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that register of deeds would have imparted.
Source: SL 1989, ch 436, § 140.
58-29B-141. Domiciliary receiver, conservator, or liquidator appointed while liquidation proceeding--Duty to act as ancillary receiver.
If a domiciliary receiver, conservator, or liquidator is appointed in a reciprocal state while a liquidation is proceeding under this section the liquidator under this section shall thereafter act as ancillary receiver under §§ 58-29B-145 to 58-29B-148, inclusive. If a domiciliary liquidator is appointed in a nonreciprocal state while a liquidation is proceeding under this section the liquidator may petition the court for permission to act as ancillary receiver under §§ 58-29B-145 to 58-29B-150, inclusive.
Source: SL 1989, ch 436, § 141; SL 2008, ch 271, § 1.
58-29B-142. Director's application to act as receiver--Grounds.
On the same grounds as are specified in § 58-29B-138, the director may petition any appropriate federal district court to be appointed receiver to liquidate that portion of the insurer's assets and business over which that court will exercise jurisdiction, or any lesser part thereof that the director deems desirable for the protection of the policyholders and creditors in this state.
Source: SL 1989, ch 436, § 142.
58-29B-143. Payment of resident's claims against foreign or alien insurer.
The court may order the director, if he has liquidated the assets of a foreign or alien insurer under this chapter, to pay claims of residents of this state against the insurer under such rules as to the liquidation of insurers under this chapter as are otherwise compatible with the provisions of this chapter.
Source: SL 1989, ch 436, § 143.
58-29B-144. Domiciliary receiver, conservator, or liquidator of insurer domiciled in reciprocal state--Title vested--Date of vesting.
The domiciliary receiver, conservator, or liquidator of an insurer domiciled in a reciprocal state shall, except as to special deposits and security on secured claims under § 58-29B-149, be vested by operation of law with the title to all of the assets, property, contracts, and rights of action, insurance producers' balances, and all of the books, accounts, and other records of the insurer located in this state. The date of vesting shall be the date of the filing of the petition for receivership, conservatorship, or liquidation, as the case may be, if that date is specified by the domiciliary law for the vesting of property in the domiciliary state. Otherwise, the date of vesting shall be the date of entry of the order directing possession to be taken. The domiciliary receiver, conservator, or liquidator may immediately recover balances due from insurance producers and obtain possession of the books, accounts, and other records of the insurer located in this state. The domiciliary receiver, conservator, or liquidator also may recover all other assets of the insurer located in this state, subject to §§ 58-29B-145 to 58-29B-150, inclusive.
Source: SL 1989, ch 436, § 144; SL 2001, ch 286, § 148; SL 2008, ch 271, § 2.
58-29B-145. Domiciliary liquidator for insurer not domiciled in reciprocal state--Title vested--Timing--Petition for conservation or liquidation.
If a domiciliary liquidator is appointed for an insurer not domiciled in a reciprocal state, the director of this state shall be vested by operation of law with the title to all of the property, contracts, and rights of action, and all of the books, accounts, and other records of the insurer located in this state, at the same time that the domiciliary liquidator is vested with title in the domicile. The director of this state may petition for a conservation or liquidation order under §§ 58-29B-134 to 58-29B-144, inclusive, or for an ancillary receivership under §§ 58-29B-145 to 58-29B-148, inclusive, or after approval by the circuit court of Hughes County may transfer title to the domiciliary liquidator, as the interests of justice and the equitable distribution of the assets require.
Source: SL 1989, ch 436, § 145.
58-29B-146. Resident claimants--With whom and when to file.
Claimants residing in this state may file claims with the liquidator or ancillary receiver, if any, in this state or with the domiciliary receiver, conservator, or liquidator, if the domiciliary law permits. The claims shall be filed on or before the last date fixed for the filing of claims in the domiciliary receivership, conservator, or liquidation proceedings.
Source: SL 1989, ch 436, § 146; SL 2008, ch 271, § 3.
58-29B-147. Domiciliary receiver, conservator, or liquidator appointed for alien insurer--Appointment as ancillary receiver.
If a domiciliary receiver, conservator, or liquidator has been appointed for an insurer not domiciled in this state, the director may file a petition with the circuit court of Hughes County requesting appointment as ancillary receiver in this state:
(1) If the director finds that there are sufficient assets of the insurer located in this state to justify the appointment of an ancillary receiver; or
(2) If the protection of creditors or policyholders in this state so requires.
Source: SL 1989, ch 436, § 147; SL 2008, ch 271, § 4.
58-29B-148. Court may appoint ancillary receiver on terms deemed appropriate--Filing--Notice imparted.
The court may issue an order appointing an ancillary receiver in whatever terms it deems appropriate. The filing or recording of the order with the register of deeds in this state imparts the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that register of deeds.
Source: SL 1989, ch 436, § 148.
58-29B-149. Duties and powers of ancillary receiver when domiciliary receiver, conservator, or liquidator appointed in reciprocal state.
If a domiciliary receiver, conservator, or liquidator has been appointed in a reciprocal state, then the ancillary receiver appointed in this state may, whenever necessary, aid and assist the domiciliary receiver, conservator, or liquidator in recovering assets of the insurer located in this state. The ancillary receiver shall, as soon as practicable, liquidate from their respective securities those special deposit claims and secured claims which are proved and allowed in the ancillary proceedings in this state, and shall pay the necessary expenses of the proceedings. The ancillary receiver shall promptly transfer all remaining assets, books, accounts, and records to the domiciliary receiver, conservator, or liquidator. The ancillary receiver and the receiver's deputies have the same powers and duties with respect to the administration of assets as a liquidator of an insurer domiciled in this state.
Source: SL 1989, ch 436, § 149; SL 2008, ch 271, § 5.
58-29B-150. Duties and powers of ancillary receivers, conservators, or liquidators when domiciliary liquidator appointed in this state.
When a domiciliary liquidator has been appointed in this state, ancillary receivers, conservators, or liquidators appointed in reciprocal states shall have, as to assets and books, accounts, and other records in their respective states, corresponding rights, duties, and powers to those provided in this chapter for ancillary receivers appointed in this state.
Source: SL 1989, ch 436, § 150; SL 2008, ch 271, § 6.
58-29B-151. Director may institute proceedings under §§ 58-29B-13 to 58-29B-30.
The director in his sole discretion may institute proceedings under §§ 58-29B-13 to 58-29B-30, inclusive, at the request of the director or other appropriate insurance official of the domiciliary state of any foreign or alien insurer having property located in this state.
Source: SL 1989, ch 436, § 151.
58-29B-152. Liquidation proceeding against insurer domiciled in state--Claimants residing in foreign countries or states not reciprocal--Filing.
In a liquidation proceeding begun in this state against an insurer domiciled in this state, claimants residing in foreign countries or in states not reciprocal states shall file claims in this state, and claimants residing in reciprocal states may file claims either with the ancillary receivers, if any, in their respective states, or with the domiciliary liquidator. Claims shall be filed on or before the last date fixed for the filing of claims in the domiciliary liquidation proceeding.
Source: SL 1989, ch 436, § 152.
58-29B-153. Proof of claims of residents in reciprocal states.
Claims belonging to claimants residing in reciprocal states may be proved either in the liquidation proceeding in this state as provided in this chapter, or in ancillary proceedings, if any, in the reciprocal states. If notice of the claims and opportunity to appear and be heard is afforded the domiciliary liquidator of this state as provided in § 58-29B-155, with respect to ancillary proceedings, the final allowance of claims by the court in ancillary proceedings in reciprocal states shall be conclusive as to amount and as to priority against special deposits or other security located in such ancillary state, but are not conclusive with respect to priorities against general assets under § 58-29B-124.
Source: SL 1989, ch 436, § 153.
58-29B-154. Proceeding in reciprocal state against domiciled insurer--Filing.
In a liquidation proceeding in a reciprocal state against an insurer domiciled in that state, claimants against the insurer who reside within this state may file claims either with the ancillary receiver, if any, in this state, or with the domiciliary receiver, conservator, or liquidator. Claims shall be filed on or before the last dates fixed for the filing of claims in the domiciliary receivership, conservatorship, or liquidation proceeding.
Source: SL 1989, ch 436, § 154; SL 2008, ch 271, § 7.
58-29B-155. Proof of claims of South Dakota residents--Elections--Procedure.
Claims belonging to claimants residing in this state may be proved either in the domiciliary state under the law of that state, or in ancillary proceedings, if any, in this state. If a claimant elects to prove a claim in this state, the claimant shall file the claim with the liquidator in the manner provided in §§ 58-29B-103 to 58-29B-111, inclusive. The ancillary receiver shall make a recommendation to the court as under §§ 58-29B-125 and 58-29B-126. The ancillary receiver shall also arrange a date for hearing if necessary under §§ 58-29B-124 and 58-29B-125 and shall give notice to the receiver, conservator, or liquidator in the domiciliary state, either by registered or certified mail or by personal service at least forty days prior to the date set for hearing. If the domiciliary receiver, conservator, or liquidator, within thirty days after the giving of such notice, gives notice in writing to the ancillary receiver and to the claimant, either by registered or certified mail or by personal service, of the receiver's intention to contest the claim, the receiver is entitled to appear or to be represented in any proceeding in this state involving the adjudication of the claim.
Source: SL 1982, ch 28, § 18; SL 1989, ch 436, § 155; SL 2008, ch 271, § 8.
58-29B-156. Final allowance by state courts conclusive as to amount and priority.
The final allowance of the claim by the courts of this state shall be accepted as conclusive as to amount and as to priority against special deposits or other security located in this state.
Source: SL 1989, ch 436, § 156.
58-29B-157. Attachment, garnishment, levy of execution prohibited during receivership, conservatorship, or liquidation proceedings.
During the pendency in this or any other state of a receivership, conservatorship, or liquidation proceeding, whether called by those names or not, no action or proceeding in the nature of an attachment, garnishment, or levy of execution may be commenced or maintained in this state against the delinquent insurer or its assets.
Source: SL 1989, ch 436, § 157; SL 2008, ch 271, § 9.
58-29B-158. Domiciliary state's order of distribution controls claims of residents of this and reciprocal states.
In a liquidation proceeding in this state involving one or more reciprocal states, the order of distribution of the domiciliary state shall control as to all claims of residents of this and reciprocal states. All claims of residents of reciprocal states shall be given equal priority of payment from general assets regardless of where such assets are located.
Source: SL 1989, ch 436, § 158.
58-29B-159. Owners of special deposit claims--Priority--Deficiencies in deposit.
The owners of special deposit claims against an insurer for which a liquidator is appointed in this or any other state has priority against the special deposits in accordance with the statutes governing the creation and maintenance of the deposits. If there is a deficiency in any deposit, so that the claims secured by it are not fully discharged from it, the claimants may share in the general assets, but the sharing shall be deferred until general creditors, and also claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from the special deposit.
Source: SL 1989, ch 436, § 159.
58-29B-160. Owner of secured claim--Elections.
The owner of a secured claim against an insurer for which a liquidator has been appointed in this or any other state may surrender his security and file his claim as a general creditor, or the claim may be discharged by resort to the security in accordance with §§ 58-29B-122 and 58-29B-123, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors.
Source: SL 1989, ch 436, § 160.
58-29B-161. Ancillary receiver's failure to transfer certain assets.
If an ancillary receiver in another state or foreign country, whether called by that name or not, fails to transfer to the domiciliary liquidator in this state any assets within his control other than special deposits, diminished only by the expenses of the ancillary receivership, if any, the claims filed in the ancillary receivership, other than special deposit claims or secured claims, shall be placed in the class of claims under subdivision 58-29B-124(7).
Source: SL 1989, ch 436, § 161.
