2023 New Jersey Revised Statutes › Title 17B - Insurance › Section 17B:32A-12 - Liabilities of impaired, insolvent insurers

17B:32A-12. Liabilities of impaired, insolvent insurers
12. a. Nothing in P.L.1991, c.208 (C.17B:32A-1 et seq.) or P.L.2022, c.98 (C.17B:32A-2 et al.) shall be construed to reduce the liability for unpaid assessments of the insureds or enrollees of an impaired or insolvent 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 7 of P.L.1991, c.208 (C.17B:32A-7). Records of those negotiations or meetings shall be made public only upon the termination of a liquidation, rehabilitation, or conservation proceeding involving an impaired or insolvent insurer, upon the termination of the impairment or insolvency of the member insurer, or upon the order of a court of competent jurisdiction.
c. For the purpose of carrying out its obligations under P.L.1991, c.208 (C.17B:32A-1 et seq.), the association shall be deemed to be a creditor of an impaired or insolvent insurer to the extent of assets attributable to covered policies or contracts reduced by any amounts to which the association is entitled as subrogee pursuant to subsection m. of section 7 of P.L.1991, c.208 (C.17B:32A-7). Assets of an impaired or insolvent insurer attributable to covered policies or contracts shall be used to continue all covered policies or contracts and pay all contractual obligations of the impaired or insolvent insurer as required by P.L.1991, c.208 (C.17B:32A-1 et seq.). For purposes of this subsection, assets attributable to covered policies or contracts are that proportion of the assets which the reserves that should have been established for such policies or contracts bears to the reserves that should have been established for all policies or contracts of insurance or health benefit plans written by the impaired or insolvent insurer.
d. As a creditor of the impaired or insolvent insurer as established in subsection c. of this section and consistent with section 33 of P.L.1992, c.65 (C.17B:32-63), the association and other similar associations shall be entitled to receive a disbursement of assets out of the marshaled assets, from time to time as the assets become available to reimburse it, as a credit against contractual obligations under P.L.1991, c.208 (C.17B:32A-1 et seq.). If the liquidator has not, within 120 days of a final determination of insolvency of a member insurer by the receivership court, made an application to the court for the approval of a proposal to disburse assets out of marshaled assets to guaranty associations having obligations because of the insolvency, then the association shall be entitled to make application to the receivership court for approval of its own proposal to disburse these assets.
(1) Prior to the termination of any receivership, liquidation, rehabilitation or conservation proceeding, the court may take into consideration the contributions of the respective parties, including the association, the shareholders, enrollees, certificate holders, and policy or contract owners of an insolvent insurer, and any other party with a bona fide interest in making an equitable distribution of the ownership rights of that insolvent insurer. In making such a determination, consideration shall be given to the welfare of the policy or contract owners, enrollees, and certificate holders, and to the reasonable requirements of a continuing or successor member insurer.
(2) No dividend or other distribution to stockholders or policyholders 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 and duties under section 7 of P.L.1991, c.208 (C.17B:32A-7) with respect to that member insurer have been recovered by the association.
e. (1) If an order for liquidation or rehabilitation of a member insurer domiciled in this State has been entered, the receiver appointed under that 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 paragraphs (2) through (4) of this subsection.
(2) No such distribution 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 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 would have been received if they had been paid immediately. If two or more 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 in excess of all other available assets of the insolvent insurer needed to pay the contractual obligations of the insolvent insurer.
(5) If any person liable under paragraph (3) of this subsection is insolvent, all its affiliates that controlled it at the time the distribution was paid shall be jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.
L.1991,c.208,s.12; amended 2022, c.98, s.11.