2023 District of Columbia Code › Title 31 - Insurance and Securities › Chapter 54 - Life and Health Insurance Guaranty Association › § 31–5411. Miscellaneous

§ 31–5411. Miscellaneous.
(a) Nothing in this chapter shall be construed to reduce the liability for unpaid assessments of the insureds of an impaired or insolvent insurer operating under a plan with assessment liability.
(b)(1) Records shall be kept of all negotiations and meetings in which the Association or its representatives are involved in discussing the activities of the Association in carrying out its powers and duties under § 31-5405.
(2) Records of negotiations or meetings shall be made public only upon the termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired or insolvent insurer, upon the termination of the impairment or insolvency of the insurer, or upon the order of a court of competent jurisdiction.
(3) Nothing in this subsection shall limit the duty of the Association to render a report of its activities under this section.
(c)(1) For the purpose of carrying out its obligations under this chapter, the Association shall be deemed to be a creditor of the impaired or insolvent insurer to the extent of assets attributable to covered policies reduced by any amounts to which the Association is entitled as subrogee pursuant to § 31-5405(m).
(2) Assets of the impaired or insolvent insurer attributable to covered policies shall be used to continue all covered policies and pay all contractual obligations of the impaired or insolvent insurer as required by this chapter.
(3) For the purposes of this subsection, assets attributable to covered policies are that proportion of the assets which the reserves that should have been established for the policies bear to the reserves that should have been established for all policies of insurance written by the impaired or insolvent insurer.
(c-1) As a creditor of the impaired or insolvent insurer as established in subsection (c) of this section and consistent with Chapter 13 of this title [§ 31-1301 et seq.], the Association and other similar associations shall be entitled to receive a disbursement of assets out of the marshaled assets, as the assets become available to reimburse it, as a credit against contractual obligations under this chapter. If the liquidator has not, within 120 days of a final determination of insolvency of an 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 the assets.
(d)(1) Prior to the termination of any liquidation, rehabilitation, or conservation proceeding, the court may take into consideration the contribution of the respective parties, including the Association, the shareholders, and policyholders of the insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of the insolvent insurer. In such a determination, consideration shall be given to the welfare of the policyholders of the continuing or successor insurer.
(2) No distribution to stockholders, if any, of an impaired or insolvent insurer shall be made until the total amount of valid claims of the Association, with interest, for funds expended in carrying out its powers and duties under § 31-5405 with respect to the insurer have been fully recovered by the Association.
(e)(1) If an order for liquidation or rehabilitation of an insurer domiciled in the District of Columbia has been entered, the receiver appointed under the order shall have a right to recover on behalf of the insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the insurer on its capital stock, made at any time during 5 years preceding the petition for liquidation or rehabilitation subject to the limitations of paragraphs (2) through (4) of this subsection.
(2) No distribution shall be recoverable if the insurer shows that, when paid, the distribution was lawful and reasonable, and that the insurer did not know, and could not reasonably have known, that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
(3)(A) Any person who was an affiliate that controlled the insurer at the time the distributions were paid shall be liable up to the amount of distributions he or she received.
(B) Any person who was an affiliate that controlled the insurer at the time the distributions were declared shall be liable up to the amount of distributions he or she would have received if they had been paid immediately.
(C) If 2 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 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 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 recoverable from the insolvent affiliate.
(July 22, 1992, D.C. Law 9-129, § 12, 39 DCR 4036; July 23, 2014, D.C. Law 20-130, § 2(g), 61 DCR 5900.)
Prior Codifications
1981 Ed., § 35-1951.
Effect of Amendments
The 2014 amendment by D.C. Law 20-130 added (c-1).