§ 3615. Powers and duties of Association

(a) The Association shall:

(1) Be obligated to the extent of the covered claims existing prior to the order of liquidation, arising within 30 days after the order of liquidation, or before the policy expiration date if less than 30 days after the order of liquidation, or before the insured replaces the policy or causes its cancellation, if the insured does so within 30 days of the determination, but this obligation shall include only that amount of each covered claim which, unless it is a claim arising out of a workers’ compensation policy, is less than $500,000.00 and which, if it is a claim for unearned premium, is in excess of $25.00. In no event shall the Association be obligated to a policyholder or claimant in an amount in excess of the obligation of the insolvent insurer under the policy from which the claim arises, nor for any claim filed with the Association after the final date set for the filing of claims against the liquidator or receiver of the insolvent insurer, nor in any event after the expiration of three years from the date of determination of the insolvency of such insurer.

(2) Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent.

(3) Allocate claims paid and expenses incurred among the three accounts and assess member insurers separately for each account those amounts necessary to pay the obligations of the Association under subdivision (1) of this subsection subsequent to an insolvency, the expense of handling claims subsequent to an insolvency, and the cost of examinations under section 3620 of this title and other expenses authorized by this subchapter. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers and for the calendar year preceding the assessment. Each member insurer shall be notified of the assessment not later than 30 days before it is due. No member insurer may be assessed in any year on any account an amount greater than two percent of that member insurer’s net direct written premiums for the calendar year preceding the determination of insolvency on the kinds of insurance in the account. If the maximum assessment, together with the other assets of the Association, does not provide in any year in any account an amount sufficient to make all necessary payments from that account, the funds available may be pro-rated and the unpaid portion shall be paid as soon thereafter as funds become available. The Association shall pay claims in any order which it considers reasonable, including the payment of claims as they are received from the claimants or in groups or categories of claims. The Association may exempt or defer, in whole or in part, the assessment of any member insurer if the assessment would cause the member insurer’s financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. While an assessment is deferred, however, the member insurer shall not pay dividends to its shareholders or policyholders. Deferred assessments shall be paid by the insurer when payment will not reduce capital or surplus below required minimums, and the payments shall be either refunded to those members which received larger assessments because of the deferment, or, at the election of the member, credited against future assessments. Each member insurer authorized by the Association to act as a servicing facility may set off against any assessment all authorized payments made on covered claims and all expenses incurred in the payment of those claims.

(4) Investigate claims brought against the Association and adjust, compromise, settle, and pay covered claims to the extent of the Association’s obligation and deny all other claims and may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested.

(5) Notify such persons as the Commissioner directs under subdivision 3617(b)(1) of this title.

(6) Handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the Commissioner, but such designation may be declined by a member insurer.

(7) Reimburse each servicing facility for obligations of the Association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the Association and shall pay the other expenses of the Association by this subchapter.

(b) The Association may:

(1) employ or retain such persons as are necessary to handle claims and perform other duties of the Association;

(2) borrow funds necessary to effect the purposes of this subchapter in accord with the plan of operating;

(3) sue or be sued;

(4) negotiate and become a party to such contracts as are necessary to carry out the purpose of this subchapter;

(5) perform such other acts as are necessary or proper to effectuate the purpose of this subchapter;

(6) refund to the member insurers in proportion to the contribution of each member insurer to that account that amount by which the assets of the account exceed the liabilities if, at the end of any calendar year, the Board of Directors finds that the assets of the Association in any account exceed the liabilities of that account as estimated by the Board of Directors for the coming year. (Added 1969, No. 279 (Adj. Sess.), § 7; amended 1979, No. 18, §§ 10, 11; 1981, No. 165 (Adj. Sess.), § 1; 1993, No. 55, § 10, eff. June 3, 1993; 2001, No. 95 (Adj. Sess.), § 2, eff. May 1, 2002; 2009, No. 42, § 15, May 27 2009.)