2023 Louisiana Laws › Revised Statutes › Title 22 - Insurance › §22:2058. Powers and duties of the association

RS 22:2058 - Powers and duties of the association
A. The association shall do all of the following:
(1)(a) Be obliged to pay covered claims pursuant to an order as provided in R.S. 22:2008(C), existing prior to the determination of the insurer's insolvency, or arising after such determination but prior to the first to occur of the following events:
(i) Expiration of thirty days after the date of such determination of insolvency.
(ii) Expiration of the policy.
(iii) Replacement or cancellation of the policy at the instance of the insured if the insured does so within thirty days of such determination.
(b) Satisfy the obligation by paying to the claimant an amount as follows:
(i) The full amount of a covered claim for benefits payable directly to or on behalf of the injured employee or his health care providers, vocational rehabilitation counselors, and similar providers under a workers' compensation insurance coverage.
(ii) An amount not exceeding ten thousand dollars per policy for a covered claim for the return of unearned premium.
(iii) An amount which is less than five hundred thousand dollars per claim, subject to a minimum limit of one hundred one dollars and a maximum limit of five hundred thousand dollars per accident or occurrence for all other covered claims.
(c)(i) In no event be obligated to pay a claimant an amount in excess of the obligation of the insolvent insurer under the policy or coverage from which the claim arises. Notwithstanding any other provision of this Part, a "covered claim" shall not include a claim filed with the association after the earlier of five years after the date of the order of liquidation of the insolvent insurer or the final date set by the domiciliary court for the filing of claims against the liquidator or receiver of an insolvent insurer.
(ii) For the purpose of filing a claim under this Subsection, notice of claims to the liquidator of the insolvent insurer shall be deemed notice to the association or its agent and a list of claims shall be periodically submitted to the association or association similar to the association in another state by the liquidator.
(d) Have no obligation to defend an insured upon the association's payment or tender of an amount equal to the lesser of the association's covered claim obligation limit or the applicable policy limit or written notice of extinguishment of the obligation due to application of a credit. The association is entitled to conduct confidential discovery to determine whether credits exist to extinguish its defense obligation during the pendency of litigation, subject to maintaining the confidentiality of any information.
(e)(i) Have an applicable limit per claim and per accident or occurrence which shall be exhaustive of the entire liability of the association under this Part, however arising, without regard to the nature of or basis for that liability, except court costs incurred subsequent to the date of insolvency.
(ii) "Accident or occurrence" in this Section means one proximate, uninterrupted, or continuing cause which results in all of the injuries or damages even though several discrete items of damage result, and even though multiple claims and claimants may arise as a result of one such accident or occurrence. A series of claims arising from the same accident or occurrence shall be treated as due to that one accident or occurrence and thus shall be subject to the aggregate liability limit established herein.
(2) To the extent of its obligation on the covered claims, have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent, including but not limited to, the right to pursue and retain salvage and subrogation recoverable on covered claim obligations to the extent paid by the association. The association shall not be deemed the insolvent insurer for the purpose of conferring jurisdiction.
(3)(a)(i) Assess insurers amounts necessary to pay the obligations of the association under Paragraph (1) of this Subsection subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, and the cost of examinations of the association, to fund loans or provide guarantees to member insurers under rehabilitation or liquidation and other expenses authorized by this Part. 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, whether or not a company withdraws subsequent to 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 days before it is due.
NOTE: Item (3)(a)(ii) eff. until January 1, 2024. See Acts 2023, No. 444.
(ii) No member insurer may be assessed in any year an amount greater than one 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, does 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 thereafter as funds become available.
NOTE: Item (3)(a)(ii) eff. January 1, 2024. See Acts 2023, No. 444.
(ii) No member insurer may 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, does 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 thereafter as funds become available.
(iii) 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.
(iv) Up to one-half of the amount of the maximum assessment shall be offset in the same manner that an offset is provided against the premium tax liability in Item (b)(ii) of this Paragraph, against the assessment levied by R.S. 22:1476, if the offset shall not be applied against any portion of the assessments to be deposited to the credit of the Municipal Police Employees' Retirement System, the Sheriffs' Pension and Relief Fund, and the Firefighters' Retirement System. To qualify for this offset, the payer shall file a sworn statement with the annual report required by R.S. 22:791 et seq., 821 et seq., and 831 et seq., showing as of December thirty-first of the reporting period that at least the following amounts of the total admitted assets of the payer, less assets in an amount equal to the reserves on its policies issued in foreign countries in which it is authorized to do business and which countries require an investment therein as a condition of doing business, are invested and maintained in qualifying Louisiana investments as defined in R.S. 22:832(C). If one-sixth of the total admitted assets of the payer are in qualifying Louisiana investments, then the offset shall be sixty-six and two-thirds percent of the amount otherwise assessed; if at least one-fifth of the total admitted assets of the payer are in qualifying Louisiana investments, then the offset shall be seventy-five percent of the amount otherwise assessed; if at least one-fourth of the total admitted assets of the payer are in qualifying Louisiana investments, the offset shall be eighty-five percent of the amount otherwise assessed; and if at least one-third of the total admitted assets of the payer are in qualifying Louisiana investments, then the offset shall be ninety-five percent of the amount otherwise assessed.
(v) An insurer may transfer up to twenty percent annually of any offset as described in this Section with the prior approval of the commissioner to an affiliated insurer. For the purposes of this Section:
(aa) "Affiliated insurer" means an insurance company licensed or holding a certificate of authority to do business in this state which controls, is controlled by, or is under common control with, another insurer.
(bb) "Control" means holding, directly or indirectly, the ownership of or power to vote, at least eighty percent of the voting stock of another member insurer.
(b)(i) Issue to each insurer paying an assessment under this Part a certificate of contribution, in a form prescribed by the commissioner, for the amount so paid up to but not exceeding one-half of the maximum assessment. All outstanding certificates shall be of equal dignity and priority without reference to amounts or dates of issue.
(ii) A certificate of contribution issued to a member company may be offset against its premium tax liability in an amount not to exceed ten percent of the assessment for the year in which the assessment was paid in full and not to exceed ten percent of the assessment per year for each of the nine calendar years following the year in which the assessment was paid in full, not to exceed a total offset of one hundred percent for each assessment. During the calendar year of issuance of a certificate of contribution, and yearly thereafter, a member shall at its option have the right to show a certificate of contribution as an asset in the form approved by the commissioner at percentages of the original face amount approved by the commissioner, equal to the unused offset as of each such calendar year.
(iii) To the extent amounts have not been offset under Item (ii) of this Subparagraph, the provisions of R.S. 22:2066 shall apply. The commissioner may promulgate a separate form in accordance with the Administrative Procedure Act to facilitate submission of a filing to recover the amounts not offset pursuant to Item (ii) of this Subparagraph, subject to oversight by the House Committee on Ways and Means and the Senate Committee on Revenue and Fiscal Affairs.
(c) Any insurer may deduct the premium dollars from its assessment by providing a net worth affidavit to the association from each insured whose premium dollars are being deducted together with a statement of the amount of premium dollars paid by the insured in accordance with procedures established by the association.
(4) Investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims. The association may pay claims in any order that it may deem reasonable, including the payment of claims as they are received from the claimants or in groups or categories of claims. The association shall have the right to appoint and to direct legal counsel retained under liability insurance policies for the defense of covered claims.
(5) Notify claimants, insureds and other interested parties of the determination of insolvency and of their rights under this Part as deemed necessary by the commissioner and upon the commissioner's request, to the extent records are available to the association. The association may discharge this duty by notice mailed to the last known address or notice by publication in a newspaper of general circulation when a mailing address is unavailable or insufficient.
(6)(a) Have the right to review and contest as set forth in this Subsection settlements, releases, compromises, waivers and judgments to which the insolvent insurer or its insureds were parties prior to the entry of the order of liquidation. In an action to annul, vacate, or enforce settlements, releases and judgments to which the insolvent insurer or its insureds were parties prior to the entry of the order of liquidation, the association shall have the right to assert the following defenses, in addition to the defenses available to the insurer:
(i) The association is not bound by an unsatisfied settlement, release, compromise or waiver executed by an insured or the insurer, or any unsatisfied judgment entered against an insured or the insurer by consent or through a failure to exhaust all appeals, if the settlement, release, compromise, waiver or judgment was executed or entered within one hundred twenty days prior to the entry of an order of liquidation, and the insured or the insurer did not use reasonable care in entering into the settlement, release, compromise, waiver or judgment, or did not pursue all reasonable appeals of an adverse judgment; or executed by or taken against an insured or the insurer based on default, fraud, ill practice
,
collusion, the insurer's failure to defend, or the clearly excessive amount of any settlement, release, compromise, waiver or judgment considering all relevant issues including but not limited to coverage, liability, and quantum.
(ii) If a court of competent jurisdiction finds that the association is not bound by a settlement, release, compromise, waiver or judgment for the reasons described in Item (i) of this Subparagraph, the settlement, release, compromise, waiver or judgment shall be set aside, and the association shall be permitted to defend any covered claim on the merits. The settlement, release, compromise, waiver or judgment may not be considered as evidence of liability or damages in connection with any claim brought against the association or any other party under this Part.
(iii) The association shall have the right to assert any statutory defenses or rights of offset against any settlement, release, compromise or waiver executed by an insured or the insurer, or any judgment taken against the insured or the insurer.
(b) 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, either on its own behalf or on behalf of an insured, have the right to apply to have the judgment, order, decision, verdict or finding set aside by the same court or administrator that entered the judgment, order, decision, verdict or finding and be permitted to defend the claim on the merits.
(7) 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.
(8) 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 Part.
(9) Implement a system of alternative dispute resolution of lawsuits and claims.
(10) Coordinate and work in conjunction with the commissioner of insurance, or his designee charged with oversight and implementation of the provisions of this Part.
B. The association may do any of the following:
(1) Employ or retain such persons as are necessary to handle claims and perform other duties of the association.
(2) Borrow funds necessary to effect the purposes of this Part. In connection therewith the association may agree to such terms and conditions as it deems necessary and proper, and the association may assign to the state or any agency or authority thereof, or to any private entity, the right to the receipt of assessments to the extent necessary to provide for the payment of bonds issued by the state or such agency or authority, or such private agency, for the purpose of providing for the repayment of such borrowings.
(3) Sue or be sued. The power to sue includes the power and right to intervene as a party before any court in this state that has jurisdiction over an insolvent insurer.
(4) Negotiate and become a party to such contracts as are necessary to carry out the purpose of this Part.
(5) Perform such other acts as are necessary or proper to effectuate the purpose of this Part.
(6)(a) 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.
(b) With respect to state fiscal year 2014-2015, the association is hereby authorized to make a one-time transfer to the state general fund of the amount of such excess as determined by the board of directors. This one-time authorization is not intended to create any right or interest of the state in and to the association's funds, and the legislature hereby affirms its intent that association monies may not be considered part of the general fund of the state other than monies subject to the one-time transfer hereby authorized.
(7) Submit with the commissioner to the court having jurisdiction over an impaired or insolvent insurer a joint written plan of full or partial rehabilitation or liquidation that satisfies the court that such plan is the most cost-effective method of addressing the member insurer's impairment or insolvency, is in the best interest of the member insurer's policyholders and claimants and is in the best interests of the association, and may, upon approval of the court:
(a) Guarantee, assume, or cause to be guaranteed or assumed, including the financial undertakings necessary and proper to effect such guarantees or assumptions, any or all of the policies, contracts, or other obligations of such member insurer.
(b) Lend money to such member insurer.
C. Suits involving the association:
(1) Except for actions by the receiver, all actions relating to or arising out of this Part against the association shall be brought in the courts in this state. The courts shall have exclusive jurisdiction over all actions relating to or arising out of this Part against the association.
(2) The domicile of the association for purposes of venue is East Baton Rouge Parish. The association may, at its option, waive exceptions to venue for specific actions.
(3) Any person, and any attorney who represents a person, who files a petition against the association alleging as a basis for the claim the insolvency of an insurer, where said insurer is not an insolvent insurer within the meaning of this Part, shall pay the reasonable expenses incurred because of the filing of the petition, including a reasonable attorney fee, subject to the following conditions:
(a) The association shall furnish to either the person or his attorney, by ordinary service of process, hand delivery, or certified mail, return receipt requested, written notification that the insurer is not an insolvent insurer within the meaning of this Part.
(b) If, within sixty days of the receipt of such notification, the person or his attorney has not dismissed the petition, with prejudice and at plaintiff's cost.
D.(1) Notwithstanding any other provision to the contrary and unless such other law is specifically excepted from this Section, the provisions of this Section shall supersede and prevail over any other law to the contrary.
(2) This Section shall not apply to R.S. 24:38(C) and 654.
Acts 1970, No. 81, §1; Acts 1975, No. 234, §1; Acts 1985, No. 780, §1, eff. Sept. 1, 1985; Acts 1987, No. 172, §1, eff. June 19, 1987; Acts 1989, No. 685, §1; Acts 1990, No. 1, §1; eff. May 1, 1990; Acts 1990, No. 253, §1; Acts 1991, No. 941, §1, eff. July 24, 1991; Acts 1992, No. 237, §1, eff. June 10, 1992; Acts 1992, No. 500, §1; Acts 1992, No. 517, §1, eff. June 25, 1992; Acts 1993, No. 397, §2, eff. June 2, 1993; Acts 1993, No. 955, §1; Acts 1999, No. 77, §1, eff. June 9, 1999; Acts 1999, No. 475, §1, eff. June 18, 1999; Acts 1999, No. 1327, §1; Acts 2004, No. 109, §1; Acts 2004, No. 140, §1; Acts 2007, No. 459, §1, eff. Jan. 1, 2008; Redesignated from R.S. 22:1382 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009; Acts 2008, No. 687, §1; Acts 2010, No. 959, §1, eff. July 6, 2010; Acts 2012, No. 271, §1; Acts 2015, No. 274, §1, eff. June 29, 2015; Acts 2023, No. 444, §1, eff. June 28, 2023, §3, eff. January 1, 2024.
NOTE: Former R.S. 22:2058 redesignated as R.S. 22:418 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009.