CHAPTER 3. FORMAL PROCEEDINGS
IC 27-9-3
Chapter 3. Formal Proceedings
IC 27-9-3-1
Petition to rehabilitate insurer
Sec. 1. The commissioner may apply by petition to the Marion
County circuit court for an order authorizing him to rehabilitate a
domestic insurer or an alien insurer domiciled in Indiana on any one
(1) of the following grounds:
(1) The insurer is in a 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 commissioner under
IC 4-21.5-3 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 a person found
after notice and hearing under IC 4-21.5-3 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 commissioner concerning its affairs, whether
in Indiana 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 commissioner under this article or
IC 27-1-3, 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 concern the insurer.
(7) Without first obtaining the written consent of the
commissioner, the insurer has transferred, or attempted to
transfer, in a manner contrary to IC 27-1-23 or IC 27-6,
substantially all of 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, trustee, custodian,
conservator, or sequestrator or similar fiduciary of the insurer
or its property otherwise than as authorized under this title, and
the appointment has been made or is imminent, and the
appointment might:
(A) remove the insurer from the jurisdiction of the Indiana
courts; or
(B) prejudice orderly delinquency proceedings under this
article.
(9) Within the previous four (4) years the insurer has willfully
violated its charter or articles of incorporation, its bylaws, this
title, or any valid order of the commissioner under IC 27-9-2-1.
(10) The insurer has failed to pay within sixty (60) days after
the due date any obligation to any state or any political
subdivision of any state or any judgment entered in any state, if
the court in which the judgment was entered had jurisdiction
over the subject matter. However, nonpayment shall not be a
ground until sixty (60) days after any good faith effort by the
insurer to contest the obligation has been terminated, whether
it is before the commissioner 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 obligations in full.
(11) The insurer has failed to file its annual report or other
financial report required by law and, after written demand by
the commissioner, has failed to immediately give an adequate
explanation.
(12) The board of directors or the holders of a majority of the
shares entitled to vote, or a majority of those individuals
entitled to the control of those entities, request or consent to
rehabilitation under this article.
(13) The insurer is a mutual insurance holding company under
IC 27-14 and a reorganized insurance company that is affiliated
with the mutual insurance holding company and is or has been
the subject of a petition for an order authorizing the
commissioner to rehabilitate the reorganized insurance
company under this section or to liquidate the reorganized
insurance company under section 6 of this chapter, regardless
of whether another basis exists for petitioning for rehabilitation
of the mutual insurance holding company.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.7-1987,
SEC.156; P.L.5-2000, SEC.3.
IC 27-9-3-2
Order to rehabilitate insurer
Sec. 2. (a) An order to rehabilitate the business of a domestic
insurer, or an alien insurer domiciled in Indiana, must:
(1) Appoint the commissioner and his successors in office as
the rehabilitator.
(2) Direct the rehabilitator to take possession of the assets of the
insurer as soon as possible, and to administer them under the
general supervision of the Marion County circuit court.
(b) The filing or recording of the order with the clerk of the
Marion County circuit court or recorder 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 recorder 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.
(c) An order issued under this section must require accounting by
the rehabilitator to the Marion County circuit court. Accountings
shall be at intervals as the Marion County circuit court specifies in
its order.
(d) Entry of an order of rehabilitation does not constitute an
anticipatory breach of any contracts of the insurer.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-3
Rehabilitator; personnel; term; compensation; powers; plan
Sec. 3. (a) The commissioner, as rehabilitator, may appoint one
(1) or more special deputies, who shall have all the powers and
responsibilities of the rehabilitator granted under this section. Also,
the commissioner may employ such counsel, clerks, and assistants as
he considers necessary.
(b) With the approval of the court, the compensation of the special
deputy, counsel, clerks, and assistants and all expenses of taking
possession of the insurer and of conducting the proceedings shall be:
(1) fixed by the commissioner; and
(2) paid out of the funds or assets of the insurer.
(c) The persons appointed under this section shall serve at the
pleasure of the commissioner.
(d) In the event that the property of the insurer does not contain
sufficient cash or liquid assets to defray the costs incurred, the
commissioner may advance the costs so incurred out of any
appropriation for the maintenance of the insurance department. Any
amounts so advanced for expenses of administration shall be repaid
to the commissioner for the use of the insurance department out of
the first available money of the insurer.
(e) The rehabilitator may take such action as he considers
necessary or appropriate to reform and revitalize the insurer. The
commissioner:
(1) has all the powers of the directors, officers, and managers,
whose authority shall be suspended, except as they are
redelegated by the rehabilitator;
(2) may direct, manage, hire, and discharge employees subject
to any contract rights they may have; and
(3) may deal with the property and business of the insurer.
(f) The rehabilitator may prosecute any action that exists in behalf
of the creditors, members, policyholders, or shareholders of the
insurer against any director or officer of the insurer or any other
person or entity.
(g) If the rehabilitator determines that reorganization,
consolidation, conversion, reinsurance, merger, or other
transformation of the insurer is appropriate, he shall prepare a plan
to effect those changes.
(h) Upon application of the rehabilitator for approval of the plan,
and after such notice and hearings as the Marion County circuit 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 must 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.
(i) In the case of the life insurer, the plan proposed may include
the imposition of liens upon the policies of 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.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.167-1986,
SEC.3.
IC 27-9-3-4
Pending actions; protection of insurer after rehabilitation order
Sec. 4. (a) Any court in Indiana 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 (90) days and
for any additional time as is necessary for the rehabilitator to obtain
proper representation and prepare for further proceedings. The
rehabilitator shall take action respecting the pending litigation as he
considers 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 Indiana and shall
petition the courts having jurisdiction over that litigation for stays
whenever necessary to protect the estate of the insurer.
(b) The statute of limitations or the defense of laches shall not 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 (60) days after the order of
rehabilitation is entered or the petition is denied.
(c) Any guaranty association or foreign guaranty association
covering life or health insurance or annuities has standing to appear
in any court proceeding concerning the rehabilitation of a life or
health insurer if that association is or may become liable to act as a
result of the rehabilitation.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-5
Petition for liquidation; termination of rehabilitation
Sec. 5. (a) Whenever the commissioner 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
commissioner may petition the Marion County circuit court for an
order of liquidation. A petition under this subsection has the same
effect as a petition under section 6 of this chapter. The Marion
County circuit court shall permit the directors of the insurer to take
actions that 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.
(b) The rehabilitator may at any time petition the Marion County
circuit court for an order terminating rehabilitation of an insurer. The
Marion County circuit court shall also permit the directors of the
insurer to petition the court for an order terminating rehabilitation of
the insurer and may order payment from the estate of the insurer of
such costs and other expenses of the petition as justice may require.
If the Marion County circuit court finds that rehabilitation has been
accomplished and that grounds for rehabilitation under section 1 of
this chapter no longer exist, the court shall order that the insurer be
restored to possession of its property and the control of its business.
The Marion County circuit court may also make that finding and
issue that order at any time upon its own motion.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-6
Basis for liquidation
Sec. 6. The commissioner may petition the Marion County circuit
court for an order directing him to liquidate a domestic insurer or an
alien insurer domiciled in Indiana on the basis:
(1) of any ground for an order of rehabilitation as specified in
section 1 of this chapter, whether or not there has been a prior
order directing the rehabilitation of the insurer;
(2) that the insurer is insolvent; or
(3) that the insurer is in such a condition that the further
transaction of business would be hazardous, financially or
otherwise, to its policyholders, its creditors, or the public.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-7
Order to liquidate; content; effect; declaration of insolvency;
accounting
Sec. 7. (a) An order to liquidate the business of a domestic insurer
must:
(1) Appoint the commissioner and his successors in office
liquidator.
(2) Direct the liquidator as soon as possible to take possession
of the assets of the insurer and to administer them under the
general supervision of the Marion County circuit court.
(b) The liquidator 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 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 and the
recorder of deeds of the county in which its principal office or place
or business is located, or in the case of real estate with the recorder
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 recorder of deeds would have imparted.
(c) Upon issuance of the order, the rights and liabilities of any
insurer and of its creditors, policyholders, shareholders, members
and all other persons interested in its estate become fixed as of the
date of entry of the order of liquidation, except as provided in
sections 8 and 35 of this chapter.
(d) An order to liquidate the business of an alien insurer
domiciled in Indiana must 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 in the liquidation.
(e) At the time of petitioning for an order of liquidation, or at any
time after petitioning for an order of liquidation, the commissioner,
after making appropriate findings of an insurer's insolvency, may
petition the Marion County circuit court for a judicial declaration of
that insolvency. After providing for a notice and hearing as the
Marion County circuit court considers proper, the court may make
the declaration.
(f) An order issued under this section shall require accounting by
the liquidator to the Marion County circuit court. Accountings shall
be at intervals as the court specifies in its order.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-8
Termination of insurance coverage
Sec. 8. (a) All policies, other than life or health insurance or
annuities, in effect at the time of issuance of an order of liquidation
shall continue in force only for the lesser of:
(1) a period of thirty (30) days from the date of entry of the
liquidation order;
(2) the expiration of the policy coverage;
(3) the date when the insured has replaced the insurance
coverage with equivalent insurance in another insurer or
otherwise terminated the policy; or
(4) the date when the liquidator has effected a transfer of the
policy obligation under section 9(b)(8) of this chapter.
(b) An order of liquidation under section 7 of this chapter shall
terminate coverages at the time specified in subsection (a) for
purposes of any other law.
(c) Policies of life or health insurance or annuities shall continue
in force for periods and under terms as is provided for by any
applicable guaranty association or foreign guaranty association.
(d) Policies of life or health insurance or annuities or any period
or coverage of those policies not covered by a guaranty association
or foreign guaranty association terminate under subsections (a) and
(b).
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-9
Dissolution of corporate existence; authorized acts of liquidator
Sec. 9. (a) The commissioner may petition for an order dissolving
the corporate existence of a domestic insurer, or the United States
branch of an alien insurer domiciled in Indiana, at the time the
commissioner applies for a liquidation order. The Marion County
circuit court shall order dissolution of the corporation upon petition
by the commissioner upon or after the granting of a liquidation order.
If the dissolution has not previously been ordered, the dissolution
shall be effected by operation of law upon the discharge of the
liquidator if the insurer is insolvent but may be ordered by the court
upon the discharge of the liquidator if the insurer is under a
liquidation order for some other reason.
(b) The liquidator may do all acts necessary or appropriate for the
accomplishment of the liquidation, including the following:
(1) Appoint a special deputy to act for the liquidator under this
article, and determine a reasonable compensation for that
special deputy.
(2) Employ employees and insurance producers, legal counsel,
actuaries, accountants, appraisers, consultants, and other
personnel as the liquidator considers necessary to assist in the
liquidation.
(3) Fix the reasonable compensation of employees and
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.
(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
with hearings and the examination of witnesses require the
production of any books, papers, records, or other documents
which the liquidator deems relevant to the inquiry.
(6) Collect all debts and moneys due and claims belonging to
the insurer, wherever located, and for this purpose:
(A) institute timely action in other jurisdictions, in order to
forestall garnishment and attachment proceedings against
those debts;
(B) do other acts 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 terms and conditions as the liquidator
considers best; and
(C) pursue any creditor's remedies available to enforce the
liquidator'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 section 40 of this chapter.
(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.
(10) Borrow money on the security of the insurer's assets or
without security and execute and deliver all documents
necessary to that transaction for the purpose of facilitating the
liquidation.
(11) Enter into contracts that 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 to institute in the name of the
insurer, or in the liquidator's own name, all suits and other legal
proceedings, in Indiana or elsewhere, and abandon the
prosecution of claims the liquidator considers unprofitable to
pursue further.
(13) Prosecute any action that may exist in behalf of the
creditors, members, policyholders, or shareholders of the
insurer against any director or officer of the insurer, or any
other person.
(14) Remove all records and property of the insurer to the
offices of the commissioner or to some other place as may be
convenient for the purposes of efficient and orderly execution
of the liquidation.
(15) Deposit in one (1) or more banks in Indiana sums 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 recorder of deeds or record office in Indiana 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.
(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 in sections 14 through 16
of this chapter.
(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 whenever the appointment is offered.
(21) Enter into agreements with any receiver or commissioner
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 Indiana not inconsistent with this article.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.167-1986,
SEC.4; P.L.178-2003, SEC.75.
IC 27-9-3-10
Notice of liquidation by liquidator
Sec. 10. (a) Unless the Marion County circuit court otherwise
directs, the liquidator shall give notice of the liquidation order as
soon as possible by:
(1) first-class mail and either by telegram or telephone to the
insurance commissioner of each jurisdiction in which the
insurer is doing business;
(2) first-class mail to any guaranty association or foreign
guaranty association that is or may become obligated as a result
of the liquidation;
(3) first-class mail to all insurance producers of the insurer;
(4) first-class mail to all persons known or reasonably expected
to have claims against the insurer, including all policyholders,
at their last known address as indicated by the records of the
insurer;
(5) first-class mail to the secretary of state's office; and
(6) publication in a newspaper of general circulation in the
county in which the insurer has its principal place of business
and in all other locations the liquidator considers appropriate.
(b) Notice to potential claimants under subsection (a) must require
claimants to file with the liquidator their claims, together with proper
proof of those claims under section 34 of this chapter, before a date
the liquidator specifies in the notice. The liquidator need not require
persons claiming cash surrender values or other investment values in
life insurance and annuities to file a claim. All claimants must keep
the liquidator informed of any changes of address.
(c) If notice is given in accordance with this section, the
distribution of assets of the insurer under this chapter shall be
conclusive with respect to all claimants, whether or not they received
notice.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.178-2003,
SEC.76.
IC 27-9-3-11
Notice of liquidation by insurance producers to policyholders
Sec. 11. (a) Every person who receives notice in the form
prescribed in section 10 of this chapter that an insurer whom the
person represents as an insurance producer is the subject of a
liquidation order must, within fifteen (15) days of that notice, give
notice of the liquidation order to each policyholder as provided by
subsection (b).
(b) The notice must be sent by first class mail to the last address
contained in the insurance producer's records to each policyholder or
other person named in any policy issued through that insurance
producer by the insurer, if the insurance producer has a record of the
address of the policyholder or other person.
(c) A policy shall be treated as though it were issued through an
insurance producer if the insurance producer has a property interest
in the expiration of the policy, or if the insurance producer has had
in the insurance producer's possession a copy of the declarations of
the policy at any time during the life of the policy, except where the
ownership of the expiration of the policy has been transferred to
another.
(d) The written notice must include:
(1) the name and address of the insurer;
(2) the name and address of the insurance producer; and
(3) identification of the policy impaired and the nature of the
impairment, including termination of coverage as described in
section 8 of this chapter.
(e) Notice by a general agent satisfies the notice requirement for
any insurance producers under contract to the general agent. Each
insurance producer obligated to give notice under this section shall
file a report of compliance with the liquidator.
(f) After a hearing under IC 4-21.5-3, an insurance producer
failing to give notice or file a report of compliance as required by
subsection (e) may be subject to payment of a penalty of not more
than one thousand dollars ($1,000) and may have the insurance
producer's license suspended.
(g) The liquidator may waive the duties imposed by this section
if the liquidator determines that other notice to the policyholders of
the insurer under liquidation is adequate.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.7-1987,
SEC.157; P.L.178-2003, SEC.77.
IC 27-9-3-12
Actions after liquidation orders
Sec. 12. (a) Upon issuance of an order appointing a liquidator of
a domestic insurer or of an alien insurer domiciled in Indiana, an
action at law or equity may not be brought against the insurer or
liquidator, whether in Indiana or elsewhere, nor shall any existing
actions be maintained or further presented after issuance of an order.
(b) The courts of Indiana 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, when those
injunctions are included in an order to liquidate an insurer issued
under similar provisions in other states.
(c) Whenever in the liquidator's judgment, protection of the estate
of the insurer necessitates intervention in an action against the
insurer that is pending outside Indiana, the liquidator may intervene
in the action. The liquidator may defend any action in which he
intervenes under this section at the expense of the estate of the
insurer.
(d) Within two (2) years after an order for liquidation (or a time
in addition to two (2) years as applicable law may permit) the
liquidator may institute an action or proceeding on behalf of the
estate of the insurer upon any cause of action against which the
period of limitation fixed by applicable law has not expired at the
time of the filing of the petition upon which the order is entered.
(e) Where, 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 (180) days after the
entry of an order for liquidation, or within such further period as is
shown to the satisfaction of the Marion County circuit court not to be
unfairly prejudicial to the other party.
(f) A statute of limitations or defense of laches shall not 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 not be commenced for
at least sixty (60) days after the petition is denied.
(g) Any guaranty association or foreign guaranty association has
standing to appear in any court proceeding concerning the liquidation
of an insurer if that association is or may become liable to act as a
result of the liquidation.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-13
Listing of assets
Sec. 13. (a) As soon as practicable after the liquidation order, but
not later than one hundred twenty (120) days after that order, the
liquidator shall prepare in duplicate a list of the insurer's assets. The
list shall be amended or supplemented as the liquidator determines
necessary. One (1) copy shall be filed in the office of the clerk of the
Marion County circuit court and one (1) copy shall be retained for
the liquidator's files. All amendments and supplements shall be
similarly filed.
(b) The liquidator shall reduce the assets to a degree of liquidity
that is consistent with the effective execution of the liquidation.
(c) A submission to the Marion County circuit court for
disbursement of assets in accordance with section 32 of this chapter
fulfills the requirements of subsection (a).
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-14
Transfers made or obligations incurred as fraudulent
Sec. 14. (a) Every transfer made, or suffered, and every obligation
incurred by an insurer within one (1) year before the filing of a
successful petition for rehabilitation or liquidation under IC 27-9 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.
(b) A transfer made or an obligation incurred by an insurer
ordered to be rehabilitated or liquidated under IC 27-9, which is
fraudulent under this section, may be avoided by the receiver, except:
(1) as to a person who in good faith is a purchaser, lienor, or
obligee for a present fair equivalent value; and
(2) that any 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 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.
(c) A transfer of property, other than real property, is 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 under section 18
of this chapter.
(d) A transfer of real property is 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.
(e) A transfer that creates an equitable lien is not perfected if there
are available means by which a legal lien could be created.
(f) Any transfer not perfected before the filing of a petition for
liquidation shall be treated as if it were made immediately before the
filing of the successful petition.
(g) The provisions of subsections (b) through (f) apply whether or
not there are or were creditors who might have obtained any liens or
persons who might have become bona fide purchasers.
(h) Any transaction of the insurer with a reinsurer is fraudulent
and may be avoided by the receiver under section 13 of this chapter
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 before 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 (1) year
before the date of filing of the petition through which the
receivership was commenced.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-15
Transfers after petition; validity
Sec. 15. (a) 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 for that real property, 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 recorder 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 with jurisdiction to authorize
or effect a judicial sale of real property of the insurer within any
county in any state shall not be impaired by the pendency of a
proceeding, unless the copy is recorded in the county before the
consummation of the judicial sale.
(b) 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 for that real
property, 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 of the property, 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 shall be considered not to act in
good faith; and
(4) a person asserting the validity of a transfer under this
section has the burden of proof.
Except as elsewhere provided in this section, a transfer by or on
behalf of the insurer after the date of the petition for liquidation by
any person other than the liquidator is not valid against the
liquidator.
(c) Nothing in IC 27-9 shall be considered to impair the
negotiability of currency or negotiable instruments.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-16
Preferences
Sec. 16. (a) 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 (1) year
before the filing of a successful petition for liquidation under
IC 27-9, 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 that transfer
shall be considered a preference if made or suffered within one (1)
year before the filing of the successful petition for rehabilitation, or
within two (2) years before the filing of the successful petition for
liquidation, whichever time is shorter.
(b) A 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 (4) months before the
filing of the petition;
(3) the creditor receiving it or to be benefited by it or his agent
acting with reference to it 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, or any employee or
attorney or other person who was in fact in a position of
comparable influence in the insurer to an officer whether or not
he held such a position, or any shareholder holding directly or
indirectly more than five percent (5%) of any class of any
equity security issued by the insurer, or any other person, firm,
limited liability company, corporation, association, or
aggregation of persons with whom the insurer did not deal at
arm's length.
(c) Where 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. Where 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.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.8-1993,
SEC.433.
IC 27-9-3-17
Transfers; time perfected
Sec. 17. (a) A transfer of property other than real property shall
be considered 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.
(b) A transfer of real property shall be considered 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.
(c) A transfer that creates an equitable lien shall not be considered
to be perfected if there are available means by which a legal lien
could be created.
(d) A transfer not perfected before the filing of a petition for
liquidation shall be considered to be made immediately before the
filing of the successful petition.
(e) This section applies whether or not there are or were creditors
who might have obtained liens or persons who might have become
bona fide purchasers.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-18
Liens
Sec. 18. (a) A lien obtainable by legal or equitable proceedings
upon a simple contract is one arising in the ordinary course of those
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 that under applicable law are given a
special priority over other liens that are prior in time.
(b) 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 section 17 of this chapter, if those consequences would follow
only from the lien or purchase itself, or from the lien or purchase
followed by any step wholly within the control of the respective
lienholder or purchaser, with or without the aid of ministerial action
by public officials. A lien could not, however, become superior and
a purchase could not create superior rights for the purpose of section
17 of this chapter through any acts after obtaining a lien or after a
purchase that requires the agreement or concurrence of any third
party or which requires any further judicial action or ruling.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-19
Transfers on account of new and contemporaneous consideration
Sec. 19. A transfer of property for or on account of a new and
contemporaneous consideration that is considered under section 17
of this chapter to be made or suffered after the transfer because of
delay in perfecting it does not 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 (21) days or any
period expressly allowed by the law, whichever is less. A transfer to
secure a future loan or a transfer that becomes security for a future
loan, has the same effect as a transfer for or on account of a new and
contemporaneous consideration.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-20
Liens dissolved by furnishing bond; effect of voidable lien
Sec. 20. If any lien that is voidable under section 16(b) of this
chapter 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 IC 27-9
that results in a liquidation order, the indemnifying transfer or lien
shall also be considered voidable.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-21
Discharge from voidable lien
Sec. 21. The property affected by any lien considered voidable
under sections 16 and 20 of this chapter shall be discharged from that
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 lien to
be preserved for the benefit of the estate and the court may direct that
the conveyance be executed as may be proper or adequate to
evidence the title of the liquidator.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-22
Jurisdiction of Marion County circuit court under this chapter
Sec. 22. The Marion County circuit court has summary
jurisdiction of any proceeding by the liquidator to hear and determine
the rights of any parties under this chapter. 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.
Where 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 indemnity 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 reasonable times as the court shall fix.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-23
Discharge of surety under releasing bond
Sec. 23. 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 where the property is retained under
section 22 of this chapter to the extent of the amount paid to the
liquidator.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-24
Extension of unsecured credit by preferred creditor
Sec. 24. If a creditor has been preferred, and afterward in good
faith gives the insurer further credit without security of any kind for
property that 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 that would otherwise be recoverable from him.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-25
Payment to attorney for services
Sec. 25. If an insurer shall, directly or indirectly:
(1) within four (4) months before the filing of a successful
petition for liquidation under IC 27-9; or
(2) at any time in contemplation of a proceeding to liquidate it;
pay money or transfer property to an attorney for services, 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. The excess may be recovered by the liquidator for the
benefit of the estate. However, where the attorney is in a position of
influence in the insurer or an affiliate of the insurer payment of any
money or the transfer of any property to the attorney for services is
governed by section 16(b)(4) of this chapter.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-26
Personal liability relating to improper preferences
Sec. 26. (a) 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 is personally liable to
the liquidator for the amount of the preference. If the transfer was
made within four (4) months before the date of filing a successful
petition for liquidation it may be presumed that the person knew of
the pending insolvency.
(b) Every person receiving any property from the insurer (or the
benefit of any property) as a preference voidable under section 16(a)
of this chapter is personally liable for that property and is bound to
account to the liquidator.
(c) Nothing in this section shall prejudice any other claim by the
liquidator against any person.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.1-1991,
SEC.168.
IC 27-9-3-27
Claims by creditors holding voidable preferences
Sec. 27. (a) Claims of a creditor who has received or acquired a
preference, lien, conveyance, transfer, assignment, or encumbrance,
voidable under IC 27-9, shall not 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 shall not be allowed unless the
money is paid or the property is delivered to the liquidator within
thirty (30) days from the date of entering of the final judgment,
except that the Marion County circuit court may allow further time
if there is an appeal or other continuation of the proceeding.
(b) A claim allowable under subsection (a) by reason of the
avoidance, whether voluntary or involuntary, or a preference, lien,
conveyance, transfer, assignment, or encumbrance, may be filed as
an excused late filing under section 33 of this chapter if filed within
thirty (30) days from the date of the avoidance (or within the further
time allowed by the court under subsection (a)).
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-28
Setoff of mutual debts or credits
Sec. 28. (a) Mutual debts or mutual credits between the insurer
and another person in connection with any action or proceeding
under this article shall be set off and only the balance shall be
allowed or paid, except as provided in section 31(a) of this chapter.
(b) A setoff or counterclaim shall not be allowed in favor of any
person where:
(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;
(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.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.29-1987,
SEC.3; P.L.255-1995, SEC.10.
IC 27-9-3-29
Liquidator's report; assessment of members
Sec. 29. (a) As soon as practicable but not more than two (2) years
from the date of an order of liquidation under section 7 of this
chapter of an insurer issuing assessable policies, the liquidator shall
make a report to the Marion County circuit court stating:
(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.
(4) A recommendation as to whether or not an assessment
should be made and in what amount.
(b) Upon the basis of the report required by subsection (a),
including any supplements and amendments to that report, the
Marion County circuit court may levy one (1) or more assessments
against all members of the insurer who are subject to assessment.
(c) Subject to any applicable legal limits on assessability, the
aggregate assessment must be the amount that:
(1) the sum of the probable liabilities;
(2) the expenses of administration; and
(3) the estimated cost of collection of the assessment;
exceed the value of existing assets, with due regard being given to
assessments that cannot be collected economically.
(d) After the levy of assessment under subsections (b) and (c), the
liquidator shall issue an order directing each member who has not
paid the assessment under the order to show cause why the liquidator
should not pursue a judgment for that amount.
(e) The liquidator shall give notice of the order to show cause by
publication and by first-class mail to each member liable under the
order mailed to his last known address as it appears on the insurer's
records, at least twenty (20) days before the return day of the order
to show cause.
(f) 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 subsection (d), the Marion County circuit court shall
issue an order adjudging the member liable for the amount of the
assessment against him, under subsection (d) together with costs. The
liquidator shall have a judgment against the member for that amount.
(g) If on or before the return day, the member appears and serves
duly verified objections upon the liquidator, the commissioner may
hear and determine the matter or may appoint a referee to hear it and
make an order as the facts warrant. In the event that the
commissioner determines that the objections do not warrant relief
from assessment, the member may request the Marion County circuit
court to review the matter and vacate the order to show cause.
(h) The liquidator may enforce any order or collect any judgment
under subsection (f) by any lawful means.
As added by Acts 1979, P.L.255, SEC.1.
IC 27-9-3-30
Repealed
(Repealed by P.L.233-1999, SEC.16.)
IC 27-9-3-30.1
Reinsurance; method of payment upon liquidation
Sec. 30.1. (a) Reinsurance must be payable under a contract
reinsured by an assuming insurer on the basis of reported claims
allowed in the liquidation proceedings, subject to court approval,
without diminution because of the insolvency of the ceding insurer.
Payments must be made directly to the ceding insurer or to the
ceding insurer's domiciliary liquidator except when:
(1) the contract or other written agreement specifically provides
another payee of the reinsurance in the event of the insolvency
of the ceding insurer; or
(2) before the initiation of the insolvency proceedings, the
assuming insurer, with the consent of the direct insured, has
assumed the policy obligations of the ceding insurer as direct
obligations of the assuming insurer to policy payees and in
substitution for the obligations of the ceding insurer to the
payees.
(b) During the pendency of a receivership proceeding, an
assuming insurer, with the consent of the direct insured and the
receiver, subject to court approval, may assume policy obligations of
the ceding insurer as direct obligations of the assuming insurer to the
policy payees and in substitution for the obligations of the ceding
insurer to the payees.
As added by P.L.233-1999, SEC.12.
IC 27-9-3-31
Liability for payment of premiums by insured and person other
than insured; penalties
Sec. 31. (a) An insurance producer, a broker, an agency, a
premium finance company, an insured, or any other person
responsible for the payment of a premium shall be obligated to pay
any earned but unpaid premium for any policy that is due the insurer
for coverage provided before the declaration of insolvency. However,
an insurance producer, a broker, an agency, a premium finance
company, an insured, or any other person responsible for the
payment of a premium shall not be responsible for any unpaid
premium unearned as of the time of the declaration of insolvency.
(b) In addition to the obligation owed under subsection (a), an
insurance producer, broker, agency, premium finance company, or
any other person, other than the insured, responsible for the payment
of a premium to the insurance company or any holding company
shall pay any unearned premium collected from the insured before
the declaration of insolvency. The commissioner may also recover
from that person any part of an unearned premium that represents a
commission of that person.
(c) Credits or setoffs or both may not be allowed to an insurance
producer, broker, or premium finance company for any amounts
advanced to the insurer by the insurance producer, broker, or
premium finance company on behalf of, but in the absence of a
payment by, the insured.
(d) Upon satisfactory evidence of a violation of this section, the
commissioner may pursue the following courses of action against
those parties licensed by the department of insurance:
(1) Suspend, revoke, or refuse to renew the licenses of the
offending party.
(2) Impose a penalty of not more than one thousand dollars
($1,000) for each and every act in violation of this article by the
party.
These penalties are in addition to and not in lieu of the obligations
owed under subsections (a) and (b).
(e) Before the commissioner may take any action as provided in
subsection (d), the commissioner shall give written notice to the
person accused of violating the law, stating specifically the nature of
the alleged violation, and fixing a time (at least ten (10) days after
the notice is sent) and place when a hearing on the matter is to be
held. After the hearing, if the commissioner finds a violation, or upon
failure of the accused to appear at the hearing, the commissioner
shall impose whatever penalties allowed under subsection (d) as the
commissioner considers advisable.
(f) Subsection (a) does not relieve an insured of any obligation
that may exist to reimburse any agency, insurance producer, broker,
premium finance company, or other person for amounts advanced to
the insurer on behalf of the insured.
As added by Acts 1979, P.L.255, SEC.1. Amended by P.L.29-1987,
SEC.4; P.L.255-1995, SEC.11; P.L.178-2003, SEC.78.
IC 27-9-3-32
Proposal to disburse assets
Sec. 32. (a) Within one hundred twenty (120) days of a final
determination of insolvency of an insurer by the Marion County
circuit court, the liquidator shall make application to that court for
approval of