1. The association is subject to all of the following:

 a. (1) The association is obligated to pay a covered claim as follows:

 (a) A covered claim existing prior to the final order of liquidation and arising within thirty days after the final order of liquidation.
 (b) A covered claim existing before the policy expiration date if the expiration date is less than thirty days after the final order of liquidation.
 (c) A covered claim existing before the insured replaces the policy or causes its cancellation, if the insured replaces or cancels the policy within thirty days of the final order of liquidation.
 (2) An obligation under subparagraph (1) is satisfied by paying to the claimant an amount as follows:

 (a) An amount not exceeding ten thousand dollars per policy for a covered claim for the return of unearned premium.
 (b) An amount not exceeding the lesser of the policy limits or five hundred thousand dollars per claim for all covered claims for all damages arising out of any one or a series of accidents, occurrences, or incidents, regardless of the number of persons making claims or the number of applicable policies.
 b. The association is obligated to pay covered claims subject to a limitation as established by the rights, duties, and obligations under the policy issued by the insolvent insurer.
 c. (1) The association shall assess member insurers amounts necessary to pay the obligations of the association under paragraphs “a” and “b” subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, the cost of examinations under section 518C.12, and other expenses as authorized by this chapter. The assessment of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year bear to the net direct written premiums of all member insurers for the preceding calendar year. Each member insurer shall be notified of the assessment not less than thirty days before it is due. A member insurer shall not be assessed in any year an amount greater than two percent of that member insurer’s net direct written premiums for the preceding calendar year. If the maximum assessment, together with the other assets of the association, do not provide in any one year an amount sufficient to make all necessary payments, the funds available shall be prorated and the unpaid portion shall be paid as soon as funds become available. 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 surplus less than the minimum amounts required for a certificate of authority to transact insurance business. A member insurer serving as a servicing facility pursuant to this section may set off against any assessment authorized payments made on covered claims and expenses incurred in the payment of such claims by the member insurer. All overdue and unpaid assessments shall draw interest at the rate of seven percent per annum.

 (2) The association may pursue and retain for its own account salvage and subrogation recoverable on paid covered claim obligations. An obligation of the association to defend an insured shall cease upon the association’s payment of an amount equal to the lesser of the association’s covered claim obligation or the applicable policy limits.
 d. The association shall investigate claims filed with the association and adjust, compromise, settle, defend, and pay covered claims to the extent of the association’s obligation and deny all other claims.
 e. The association shall notify such persons as the commissioner directs under section 518C.8, subsection 2, paragraph “a”.
 f. The association shall process claims through its employees or through one or more member 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.
 g. The association shall reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association, and pay the other expenses of the association authorized by this chapter.

Terms Used In Iowa Code 518C.6

  • Account: means the same as defined in section 554. See Iowa Code 554E.1
  • Appeal: A request made after a trial, asking another court (usually the court of appeals) to decide whether the trial was conducted properly. To make such a request is "to appeal" or "to take an appeal." One who appeals is called the appellant.
  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Association: means the Iowa county and state mutual insurance guaranty association established pursuant to section 518C. See Iowa Code 518C.3
  • Board: means the engineering and land surveying examining board provided by this chapter. See Iowa Code 542B.2
  • Claimant: means an insured making a first-party claim or a person instituting a liability claim against an insolvent insurer. See Iowa Code 518C.3
  • Commissioner: means the commissioner of insurance. See Iowa Code 518C.3
  • Covered claim: means an unpaid claim, including one for unearned premiums, which arises out of and is within the coverage and subject to the applicable limits of an insurance policy subject to this chapter which is issued by an insurer, if the insurer becomes an insolvent insurer on or after July 1, 2000, and one of the following conditions exists:
     (1) The claimant is a resident of this state at the time of the event giving rise to the covered claim. See Iowa Code 518C.3
  • Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
  • following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
  • Insolvent insurer: means an insurer against which a final order of liquidation with a finding of insolvency has been entered on or after July 1, 2000, by a court of competent jurisdiction of this state. See Iowa Code 518C.3
  • Insurer: means a person licensed to transact insurance business in this state under either chapter 518 or chapter 518A either at the time the policy was issued or when the insured event occurred. See Iowa Code 518C.3
  • Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
  • Net direct written premiums: means direct gross premiums written in this state on insurance policies subject to this chapter, less return premiums and dividends paid or credited to policyholders on such direct business. See Iowa Code 518C.3
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • year: means twelve consecutive months. See Iowa Code 4.1
 2. The association may do any of the following:

 a. Appear in, defend, and appeal an action on a claim brought against the association.
 b. Employ or retain persons necessary to handle claims and perform other duties of the association.
 c. Borrow funds necessary to effect the purposes of this chapter in accord with the plan of operation.
 d. Sue or be sued.
 e. Negotiate and become a party to contracts necessary to carry out the purposes of this chapter.
 f. Perform such other acts necessary or proper to effectuate the purposes of this chapter.
 3. The board of directors, in its discretion, may from time to time refund excess amounts to member insurers that are not needed for current or projected liabilities of a particular insolvency. The amount of each refund is equal to the net direct written premiums of the member insurer for the preceding calendar year divided by the net written premiums of all member insurers for the preceding calendar year, multiplied by the total amount to be refunded to all members. At the discretion of the board of directors, an assessment or refund of any member insurer in an amount not to exceed twenty-five dollars may be waived.
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