40-3013. Liability for unpaid assessments of insureds of impaired or insolvent insurers under plan; records of negotiations made public, when; association deemed creditor, when; use of assets of impai
40-3013
40-3013. Liability for unpaid assessments of insureds of impairedor insolvent insurers under plan; records of negotiations made public, when; associationdeemed creditor, when; use of assets of impaired or insolvent insurer; equitabledistribution of rights; recovery of distributions.(a) Nothing in this act shall be construed to reduce the liability forunpaid assessments of the insureds of an impaired or insolvent insurer operatingunder a plan with assessment liability.
(b) Records shall be kept of all negotiations and meetings in whichthe association or its representatives are involved to discuss theactivities of the association in carrying out its powers and dutiesunder K.S.A. 40-3008 and amendments thereto. Records of such negotiations or meetingsshall be made public only upon the termination of a liquidation,rehabilitation or conservation proceeding involving the impairedor insolvent insurer, upon the termination of the impairment orinsolvency of the insurer, or uponthe order of a court of competent jurisdiction. Nothing in thissubsection shall limit the duty of the association to render a report ofits activities under K.S.A. 40-3014 and amendments thereto.
(c) For the purpose of carrying out its obligations under this act,the association shall be deemed to be a creditor of the impaired or insolvent insurerto the extent of assets attributable to covered policies reduced by anyamounts to which the association is entitled as subrogee pursuant tosubsection (l) of K.S.A. 40-3008 and amendmentsthereto. Assets of the impaired or insolvent insurerattributable to covered policies shall be used to continue all coveredpolicies and pay all contractual obligations of the impaired or insolvent insurer asrequired by this act. Assets attributable to covered policies, as usedin this subsection, are that proportion of the assets which the reservesthat should have been established for such policies bear to the reservethat should have been established for all policies of insurance writtenby the impaired or insolvent insurer.
(d) (1) Prior to the termination of any liquidation,rehabilitation, or conservation proceeding, the court may take intoconsideration the contributions of the respective parties, including theassociation, the shareholders and policyowners of the insolvent insurer,and any other party with a bona fide interest, in making an equitabledistribution of the ownership rights of such insolvent insurer. In such adetermination, consideration shall be given to the welfare of thepolicyholders of the continuing or successor insurer.
(2) No distribution to stockholders, if any, of an impaired or insolvent insurershall be made until and unless the total amount of valid claims of theassociation with interest thereonfor funds expended in carrying out its powers and duties under K.S.A.40-3008 and amendments thereto with respect to such insurer have been fully recoveredby the association.
(e) (1) If an order for liquidation or rehabilitation of an insurerdomiciled in this state has been entered, the receiver appointed undersuch order shall have a right to recover on behalf of the insurer, fromany affiliate that controlled it, the amount of distributions, otherthan stock dividends paid by the insurer on its capital stock, made atany time during the five years preceding the petition for liquidation orrehabilitation subject to the limitations of subsections (2) to (4), inclusive.
(2) No such distribution shall be recoverable if the insurer shows thatwhen paid the distribution was lawful and reasonable, and that theinsurer did not know and could not reasonably have known that thedistribution might adversely affect the ability of the insurer tofulfill its contractual obligations.
(3) Any person who was an affiliate that controlled the insurer atthe time the distributions were paid shall be liable up to the amount ofdistributions such person received. Any person who was an affiliate thatcontrolled the insurer at the time the distributions were declared,shall be liable up to the amount of distributions such personwould have receivedif such person had been paid immediately. If two or morepersons are liable withrespect to the same distributions, such person shall be jointly and severallyliable.
(4) The maximum amount recoverable under this subsection shall bethe amount needed in excess of all other available assets of the insolventinsurer to pay the contractual obligations ofthe insolventinsurer.
(5) If any person liable under subsection (3) is insolvent, all itsaffiliates that controlled it at the time the distributionwas paid, shallbe jointly and severally liable for any resulting deficiency in theamount recovered from the insolvent affiliate.
History: L. 1972, ch. 190, § 13;L. 1986, ch. 180, § 11; July 1.