2023 Connecticut General Statutes › Title 38a - Insurance › Chapter 704a - Insurance Guaranty Funds › Section 38a-871. (Formerly Sec. 38-314). - Liability for unpaid assessments. Records. Use of assets of impaired insurer. Distributions.

(a) Nothing in sections 38a-858 to 38a-875, inclusive, shall be construed to reduce the liability for unpaid assessments of the insureds of an impaired insurer operating under a plan with assessment liability.
(b) Records shall be kept of all negotiations and meetings in which the association or its representatives are involved to discuss the activities of the association in carrying out its powers and duties under section 38a-865. Records of such negotiations or meetings shall be made public only upon the termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired insurer, upon the termination of the impairment of the insurer, or upon the order of a court of competent jurisdiction. Nothing in this subsection shall limit the duty of the association to render a report of its activities under section 38a-872.
(c) For the purpose of carrying out its obligations under sections 38a-858 to 38a-875, inclusive, the association shall be deemed to be a creditor of the impaired insurer to the extent of assets attributable to covered policies reduced by any amounts to which the association is entitled as subrogee pursuant to subdivision (i) of section 38a-865. All assets of the impaired insurer attributable to covered policies shall be used to continue all covered policies and pay all contractual obligations of the impaired insurer as required by sections 38a-858 to 38a-875, inclusive. Assets attributable to covered policies or contracts, as used in this subsection, is that proportion of the assets which the reserves that should have been established for such policies or contracts bear to the reserve that should have been established for all policies or contracts of insurance or health care center subscriber contracts and certificates written by the impaired or insolvent insurer.
(d) (1) Prior to the termination of any liquidation, rehabilitation or conservation proceeding, the court may take into consideration the contributions of the respective parties, including the association, the shareholders, contract owners, certificate holders, enrollees and policy owners of the insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of such insolvent insurer. In such a determination, consideration shall be given to the welfare of the policy holders, contract owners, certificate holders and enrollees of the continuing or successor member insurer.
(2) No distribution to stockholders, if any, of an impaired or insolvent insurer shall be made until and unless the total amount of valid claims of the association with interest thereon for funds expended in carrying out its powers under section 38a-865 with respect to the member insurer have been fully recovered by the association.
(e) It shall be a prohibited unfair trade practice and a violation of section 38a-815 for any person to make use in any manner of the protection afforded by sections 38a-858 to 38a-875, inclusive, in the solicitation, negotiation, procurement or effectuation of insurance provided, this subsection shall not apply to the distribution of any publication approved by the commissioner and describing the general purposes and current limitations of sections 38a-858 to 38a-874, inclusive. Violations of this section shall be subject to the provisions of section 38a-817.
(f) (1) If an order for liquidation or rehabilitation of a member insurer domiciled in this state has been entered, the receiver appointed under such order shall have a right to recover on behalf of the member insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the member insurer on its capital stock, made at any time during the five years preceding the petition for liquidation or rehabilitation subject to the limitations of subdivisions (2) to (4), inclusive, of this subsection.
(2) No such dividend shall be recoverable if the member insurer shows that the distribution was lawful and reasonable when paid, and that the member insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the member insurer to fulfill its contractual obligations.
(3) Any person who was an affiliate that controlled the member insurer at the time the distributions were paid shall be liable up to the amount of distributions such person received. Any person who was an affiliate that controlled the member insurer at the time the distributions were declared shall be liable up to the amount of distributions which such person would have received if such person had been paid immediately. If two persons are liable with respect to the same distributions, they shall be jointly and severally liable.
(4) The maximum amount recoverable under this subsection shall be the amount needed in excess of all other available assets of the insolvent insurer to pay the contractual obligations of the insolvent insurer.
(5) If any person liable under subdivision (3) of this subsection is insolvent, all its affiliates that controlled it at the time the dividend was paid shall be jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.
(1972, P.A. 280, S. 14; P.A. 85-105, S. 2; P.A. 92-60, S. 23; P.A. 18-13, S. 8.)
History: P.A. 85-105 amended Subsec. (e) to expand the prohibition to any “solicitation, negotiation, procurement or effectuation” of insurance, rather than the “sale” of insurance; Sec. 38-314 transferred to Sec. 38a-871 in 1991; P.A. 92-60 amended Subsec. (e) making the provisions of this section a violation of Sec. 38a-815 and excluding its effect from the distribution of publications approved by the insurance commissioner describing the general purposes or current limitations of the Connecticut Insurance Guaranty Association Act; P.A. 18-13 amended Subsec. (c) by adding references to contracts, adding “or health care center subscriber contracts and certificates”, and adding reference to insolvent insurer, amended Subsec. (d) by adding references to contract owners, certificate holders and enrollees, replacing “impaired insurer” with “insolvent insurer”, and replacing “successor insurer” with “successor member insurer” in Subdiv. (1), adding reference to insolvent insurer, and replacing “assessments levied by the association with respect to such insurer has been fully recovered by the commission” with “valid claims of the association with interest thereon for funds expended in carrying out its powers under section 38a-865 with respect to the member insurer have been fully recovered by the association” in Subdiv. (2), amended Subsec. (f) by replacing “insurer” with “member insurer”, and replacing “impaired insurer” with “insolvent insurer” in Subdiv. (4), and made technical and conforming changes, effective July 1, 2018, and applicable to impairments and insolvencies occurring on or after said date.