2006 Regular Session

To: Insurance

By: Senator(s) Kirby

Senate Bill 2921



     SECTION 1.  Section 83-23-109, Mississippi Code of 1972, is amended as follows:

     83-23-109.  As used in this article:

          (a)  "Affiliate" means an entity or person who directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with another person or entity.

          (b)  "Affiliate of an insolvent insurer" means a person or entity who directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with an insolvent insurer on December 31 of the year next preceding the date the insurer becomes an insolvent insurer.

          (c)  "Association" means the Mississippi Insurance Guaranty Association created under Section 83-23-111.

          (d)  "Claimant" means any insured making a first-party claim or any person instituting a liability claim, provided that no person who is an affiliate of the insolvent insurer may be a claimant.

          (e)  "Commissioner" means the Commissioner of Insurance.

          (f)  "Control" means the possession, direct or indirect, of the power to direct or cause direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person.  Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing ten percent (10%) or more of the voting securities of any other person.  This presumption may be rebutted by a showing that control does not exist in fact.

          (g)  (i)  "Covered claim" means an unpaid claim, including one of unearned premiums, which arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this article applies issued by an insurer, if such insurer becomes an insolvent insurer and 1. the claimant or insured is a resident of this state at the time of the insured event, provided that for entities other than an individual, the residence of a claimant or insured is the state in which its principal place of business is located at the time of the insured event; or 2. the property from which the claim arises is permanently located in this state.

              (ii)  "Covered claim" shall not include:

                   1.  Any amount awarded as punitive or exemplary damages;

                   2.  Prejudgment interest;

                   3.  Post-judgment interest;

                   4.  Awards of penalties of any type;

                   5.  Any extra-contractual damages;

                   6.  Amounts * * * sought as a return of premium under any retrospective rating plan;

                   7.  Any amount * * * due any reinsurer, insurer, insurance pool or underwriting association, as subrogation recoveries or otherwise and shall preclude recovery thereof from the insured of any insolvent carrier to the extent of the policy limits.

                   8.  Any first-party claim by an insured or third-party liability claim against any insured where either the third-party liability claimant's net worth or the insured's net worth exceeds Twenty-five Million Dollars ($25,000,000.00) on December 31 of the year preceding the date of the determination of the insolvency of the insurer.  An insured's net worth or third-party liability claimant's net worth on such date shall be deemed to include the aggregate net worth of the insured or third party liability claimant and all of its affiliates as calculated on a consolidated basis;

                   9.  Any claim that would otherwise be a covered claim, but is an obligation to or on behalf of a claimant or insured who has a net worth greater than that allowed by the insurance guaranty association law of the state of residence of the claimant or insured at the time specified by such law, and which association has or can deny coverage to that claimant or insured on the basis of that state guaranty association's net worth provision;

                   10.  A claim filed with the association after the earlier of:

                        a.  Eighteen (18) months after the date of the order of liquidation;

                        b.  The final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer; or

                        c.  The earliest date set by any other insurance guaranty association or similar law in any other state which is applicable to the same claim.

     The requirement of filing within eighteen (18) months after the date of the order of liquidation shall not apply to claims by injured employees for workers' compensation benefits where the basis for the claim is a latent occupational illness or disease that does not manifest itself within the eighteen-month period.

          (h)  "Insolvent insurer" means an insurer licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred and against whom an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction, in the insurer's state of domicile or of this state and the order of liquidation has not been stayed or been the subject of a writ of supersedeas or other comparable order.

          (i)  "Member insurer" means any person who (i) writes any kind of insurance to which this article applies under Section 83-23-105, including the exchange of reciprocal or interinsurance contracts, and (ii) is licensed to transact insurance in this state.

          (j)  "Net direct written premiums" means direct gross premiums written in this state on insurance policies to which this article applies, less return premiums thereon and dividends paid or credited to policyholders on such direct business.  "Net direct written premiums" does not include premiums on contracts between insurers or reinsurers.

          (k)  "Person" means any individual, corporation, partnership, association or voluntary organization.

     SECTION 2.  Section 83-23-115, Mississippi Code of 1972, is amended as follows:

     83-23-115.  (1)  The association shall:

          (a)  Be obligated to insured and claimants for covered claims existing prior to the determination of insolvency and arising within thirty (30) days after the determination of insolvency, or before the policy expiration date if less than thirty (30) days after the determination, or before the insured replaces the policy or causes its cancellation if he does so within thirty (30) days of the determination.  Such obligations to an insured or claimant are limited to the following:

              (i)  The full amount of a covered claim for benefits under a workers' compensation insurance coverage;

              (ii)  An amount in excess of Fifty Dollars ($50.00) but not exceeding Ten Thousand Dollars ($10,000.00) per policy for a covered claim for the return of unearned premium;

              (iii)  An amount in excess of Fifty Dollars ($50.00) but not exceeding Three Hundred Thousand Dollars ($300,000.00) per claim for all other covered claims.

     For purposes of this limitation, all claims of any kind including, but not limited to, claims arising out of, or related to, bodily injury or death to any one (1) person shall constitute a single claim, regardless of the number of insurance policies issued, the number of claims made or the number of claimants.

              (iv)  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.

              (v)  In the event the claim arises under the Mississippi Tort Claims Act, Section 11-46-1 et seq., the association's liability shall not exceed the amount set forth in subparagraph (iii) of this paragraph (a), or the applicable limit of the Mississippi Tort Claims Act, whichever is less.

          (b)  (i)  Have the duty and obligations of the insolvent insurer from the policy for contractual benefits to the extent the benefits are "covered claims" as provided herein.

              (ii)  Have all rights of the insolvent insurer as if the insurer had not become insolvent.

          (c)  Assess insurers amounts necessary to pay the obligations of the association under paragraph (a) subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, and the cost of examinations under Section 83-23-125 and other expenses authorized by this article.  The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year bears 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 later than thirty (30) days before it is due.  No member insurer may be assessed in any year an amount greater than one percent (1%) 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, does not provide in any one (1) year an amount sufficient to make all necessary payments, the funds available shall be prorated and the unpaid portion shall be paid as soon thereafter 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 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.  Each member insurer may set off, against any assessment, authorized payments made on covered claims and expenses incurred in the payment of such claims by the member insurer.

          (d)  Investigate claims brought against the association; adjust, compromise, settle and pay covered claims to the extent of the association's obligation; 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.

          (e)  Notify such persons as the commissioner directs under Section 83-23-119(2)(a).

          (f)  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.

          (g)  Reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association, and shall pay the other expenses of the association authorized by this article.

     (2)  The association may:

          (a)  Employ or retain such persons as are necessary to handle claims and perform other duties of the association.

          (b)  Borrow funds necessary to effect the purposes of this article in accord with the plan of operation.

          (c)  Sue or be sued.

          (d)  Negotiate and become a party to such contracts as are necessary to carry out the purpose of this article.

          (e)  Perform such other acts as are necessary or proper to effectuate the purpose of this article.

          (f)  Refund to the member insurers in proportion to the contribution of each member insurer to the association that amount by which the assets of the association exceed the liabilities if, at the end of any calendar year, the board of directors finds that the assets of the association exceed the liabilities of the association as estimated by the board of directors for the coming year.

     SECTION 3.  Section 83-23-135, Mississippi Code of 1972, is amended as follows:

     83-23-135.  All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in this state shall be stayed for six (6) months and for such additional time thereafter as may be determined by the court from the date the insolvency is determined or an ancillary proceeding is instituted in the state, whichever is later, to permit proper defense by the association of all pending causes of action as to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the insolvent insurer or its failure to defend an insured.  The association, either on its own behalf or on behalf of such insured, may apply to have such judgment, order, decision, verdict, or finding set aside by the same court or administrator that made such judgment, order, decision, verdict, or finding, and shall be permitted to defend against such claim on the merits.

     The liquidator, receiver, or statutory successor of an insolvent insurer covered by this article shall permit access by the board or its authorized representative to the insolvent insurer's records which are necessary for the board in carrying out its functions under this article with regard to covered claims.  In addition, the liquidator, receiver or statutory successor shall provide the board or its representative with copies of such records upon the request by the board and at the expense of the board.

     The association shall be entitled to an automatic stay of execution of a money judgment and shall not be required to post a supersedeas bond pending appeal of any legal proceeding in which the association is a party or any legal proceeding the association is defending on behalf of an insured.

     SECTION 4.  This act shall take effect and be in force from and after its passage.