HB 1451CS

CHAMBER ACTION



1The Insurance Committee recommends the following:
2
3     Council/Committee Substitute
4     Remove the entire bill and insert:
5
A bill to be entitled
6An act relating to insurer insolvency; amending s.
7627.727, F.S.; correcting a cross reference; amending s.
8631.181, F.S.; providing an exception to certain
9requirements for a signed statement for certain claims;
10providing requirements; amending s. 631.54, F.S.; revising
11and providing definitions; amending s. 631.55, F.S.;
12correcting a cross reference; amending s. 631.57, F.S.;
13revising requirements and limitations for obligations of
14the Florida Insurance Guaranty Association, Inc., for
15covered claims; providing requirements and limitations for
16the association relating to emergency assessments for
17covered claims payable from revenue bonds issued by
18counties or municipalities; authorizing the association to
19contract with counties and municipalities to issue revenue
20bonds for certain purposes; requiring the Office of
21Insurance Regulation to levy emergency assessments on
22certain insurers for bond repayment purposes; providing
23requirements for the office in levying and administering
24such assessments; providing requirements for use of bond
25proceeds; requiring the association to issue an annual
26report relating to use of bond proceeds and payment of
27claims; providing insurer rate filing requirements
28relating to emergency assessments; providing requirements
29for terms and liability of assessments; specifying
30assessments as not premium and not subject to tax, fees,
31or commissions; providing for insurer liability for
32emergency assessments; creating s. 631.695, F.S.;
33providing legislative findings and purposes; providing for
34issuance of revenue bonds through counties and
35municipalities to fund assistance programs for paying
36covered claims for hurricane damage; providing procedures,
37requirements, and limitations for counties,
38municipalities, and the Florida Insurance Guaranty
39Association, Inc., relating to issuance and validation of
40such bonds; providing for payments on and retirement of
41such bonds from certain emergency assessments; prohibiting
42pledging the funds, credit, property, and taxing power of
43the state, counties, and municipalities for payment of
44bonds; specifying authorized uses of bond proceeds;
45limiting the term of bonds; specifying a state covenant to
46protect bondholders from adverse actions relating to such
47bonds; specifying exemptions for bonds, notes, and other
48obligations of counties and municipalities from certain
49taxes or assessments on property and revenues; authorizing
50counties and municipalities to create a legal entity to
51exercise certain powers; prohibiting repeal of certain
52provisions relating to certain bonds under certain
53circumstances; creating s. 631.1915, F.S.; providing
54requirements for policyholder collateral, deductible
55reimbursements, and other policyholder obligations;
56specifying that certain collateral held by an insurer or a
57receiver to secure policyholder obligations under a
58deductible agreement are not an estate asset; requiring
59use of such collateral to secure policyholder obligations
60under such agreement; requiring a receiver to use such
61collateral to pay noncovered claims under certain
62circumstances; providing for certain claims to be claims
63against an insurer's estate under certain circumstances;
64requiring a receiver to allocate collateral among certain
65obligations and administer such collateral; authorizing a
66receiver to continue and enforce certain alternative
67policyholder claim funding contractual agreements;
68specifying certain actions as a bar to certain claims and
69an extinguishment of certain obligations; requiring a
70guaranty association to bill a policyholder for certain
71reimbursement amounts for certain claims; specifying
72policyholder obligation for certain amounts; prohibiting
73certain defenses; requiring a receiver to use certain
74collateral for certain purposes; requiring a receiver to
75prorate certain funds of an estate under certain
76circumstances; authorizing a guaranty association to
77deduct certain expenses; requiring a guaranty association
78to provide a complete accounting of certain billing and
79collection activities; authorizing a guaranty association
80to contract for certain collections; providing for claims
81against an insolvent insurer's estate for certain
82unreimbursed claims payments; requiring a receiver to
83annually adjust collateral held pursuant to a deductible
84agreement; specifying jurisdiction of a state court to
85resolve disputes; preserving rights of a guaranty
86association to reimbursement for certain claims; providing
87application to certain orders of liquidation; providing
88definitions; providing for nonapplication to certain
89claims; providing severability; providing an effective
90date.
91
92Be It Enacted by the Legislature of the State of Florida:
93
94     Section 1.  Subsection (5) of section 627.727, Florida
95Statutes, is amended to read:
96     627.727  Motor vehicle insurance; uninsured and
97underinsured vehicle coverage; insolvent insurer protection.--
98     (5)  Any person having a claim against an insolvent insurer
99as defined in s. 631.54(6)(5) under the provisions of this
100section shall present such claim for payment to the Florida
101Insurance Guaranty Association only. In the event of a payment
102to any person in settlement of a claim arising under the
103provisions of this section, the association is not subrogated or
104entitled to any recovery against the claimant's insurer. The
105association, however, has the rights of recovery as set forth in
106chapter 631 in the proceeds recoverable from the assets of the
107insolvent insurer.
108     Section 2.  Paragraph (f) is added to subsection (2) of
109section 631.181, Florida Statutes, to read:
110     631.181  Filing and proof of claim.--
111     (2)
112     (f)  The signed statement required by this section shall
113not be required, at the option of a guaranty fund, on claims for
114which adequate claims file documentation exists within the
115records of the insolvent insurer. Claims for payment of unearned
116premium shall not be required to use the signed statement
117required by this section if the receiver certifies to the
118guaranty fund that the records of the insolvent insurer are
119sufficient to determine the amount of unearned premium owed to
120each policyholder of the insured and such information is
121remitted to the guaranty fund by the receiver in electronic or
122other mutually agreed upon format.
123     Section 3.  Subsection (3) of section 631.54, Florida
124Statutes, is amended, subsections (5) through (8) of said
125section are renumbered as subsections (6) through (9),
126respectively, and a new subsection (5) is added to said section,
127to read:
128     631.54  Definitions.--As used in this part:
129     (3)  "Covered claim" means an unpaid claim, including one
130of unearned premiums, which arises out of, and is within the
131coverage, and not in excess of, the applicable limits of an
132insurance policy to which this part applies, issued by an
133insurer, if such insurer becomes an insolvent insurer and the
134claimant or insured is a resident of this state at the time of
135the insured event or the property from which the claim arises is
136permanently located in this state. For an entity other than an
137individual, the state of residence of a claimant, insured, or
138policyholder is the state in which the entity's principal place
139of business is located at the time of the insured event.
140"Covered claim" shall not include:
141     (a)  Any amount due any reinsurer, insurer, insurance pool,
142or underwriting association, sought directly or indirectly
143through a third party, as subrogation, contribution,
144indemnification, or otherwise; or
145     (b)  Any claim that would otherwise be a covered claim
146under this part that has been rejected by any other state
147guaranty fund on the grounds that an insured's net worth is
148greater than that allowed under that state's guaranty law.
149Member insurers shall have no right of subrogation,
150contribution, indemnification, or otherwise, sought directly or
151indirectly through a third party, against the insured of any
152insolvent member.
153     (5)  "Homeowner's insurance" means personal lines
154residential property insurance coverage, which consists of the
155type of coverage provided under homeowner's, dwelling, and
156similar policies, for repair or replacement of the insured
157structure and contents, which are written directly to the
158individual homeowner. Residential coverage for personal lines as
159set forth in this section includes policies that provide
160coverage for particular perils such as windstorm and hurricane
161coverage but excludes all coverage for mobile homes, renter's
162insurance, or tenant's coverage. Homeowner's insurance excludes
163commercial residential policies covering condominium
164associations or homeowners' associations, which associations
165have a responsibility to provide insurance coverage on
166residential units within the association, and also excludes
167coverage for the common elements of a homeowners' association.
168     Section 4.  Subsection (1) of section 631.55, Florida
169Statutes, is amended to read:
170     631.55  Creation of the association.--
171     (1)  There is created a nonprofit corporation to be known
172as the "Florida Insurance Guaranty Association, Incorporated."
173All insurers defined as member insurers in s. 631.54(7)(6) shall
174be members of the association as a condition of their authority
175to transact insurance in this state, and, further, as a
176condition of such authority, an insurer shall agree to reimburse
177the association for all claim payments the association makes on
178said insurer's behalf if such insurer is subsequently
179rehabilitated. The association shall perform its functions under
180a plan of operation established and approved under s. 631.58 and
181shall exercise its powers through a board of directors
182established under s. 631.56. The corporation shall have all
183those powers granted or permitted nonprofit corporations, as
184provided in chapter 617.
185     Section 5.  Paragraph (a) of subsection (1) and paragraph
186(d) of subsection (2) of section 631.57, Florida Statutes, are
187amended, and paragraph (e) is added to subsection (3) of said
188section, to read:
189     631.57  Powers and duties of the association.--
190     (1)  The association shall:
191     (a)1.  Be obligated to the extent of the covered claims
192existing:
193     a.  Prior to adjudication of insolvency and arising within
19430 days after the determination of insolvency;
195     b.  Before the policy expiration date if less than 30 days
196after the determination; or
197     c.  Before the insured replaces the policy or causes its
198cancellation, if she or he does so within 30 days of the
199determination.
200     2.  The obligation under subparagraph 1. shall include only
201that amount of each covered claim which is in excess of $100 and
202is less than $300,000, except policies providing coverage for
203homeowner's insurance shall provide for an additional $200,000
204for that portion of a covered claim that relates to the damage
205to the structure and contents only.
206     3.2.  Notwithstanding subparagraph 2., the obligation under
207subparagraph 1. for shall include only that amount of each
208covered claim which is in excess of $100 and is less than
209$300,000, except with respect to policies covering condominium
210associations or homeowners' associations, which associations
211have a responsibility to provide insurance coverage on
212residential units within the association, the obligation shall
213include that amount of each covered property insurance claim
214which is less than $100,000 multiplied by the number of
215condominium units or other residential units; however, as to
216homeowners' associations, this subparagraph applies only to
217claims for damage or loss to residential units and structures
218attached to residential units.
219     4.  Notwithstanding subparagraph 2., the association has no
220obligation to pay covered claims that are to be paid from the
221proceeds of bonds issued under s. 631.695. However, the
222association shall cause emergency assessments to be made under
223paragraph (3)(e) for such covered claims, and such emergency
224assessments shall be assigned and pledged under paragraph (3)(e)
225to or on behalf of the issuer of such bonds for the benefit of
226the holders of such bonds. The association shall administer any
227such covered claims and present valid covered claims for payment
228in accordance with the provisions of the assistance program in
229connection with which such bonds have been issued.
230     5.3.  In no event shall the association be obligated to a
231policyholder or claimant in an amount in excess of the
232obligation of the insolvent insurer under the policy from which
233the claim arises.
234     (2)  The association may:
235     (d)  Negotiate and become a party to such contracts as are
236necessary to carry out the purpose of this part. Additionally,
237the association may enter into such contracts with a
238municipality or county or such legal entity created pursuant to
239s. 163.01(7)(g) as are necessary in order for the municipality
240or county or such legal entity to issue bonds under s. 631.695.
241In connection with the issuance of any such bonds and the
242entering into of any such necessary contracts, the association
243may agree to such terms and conditions as the association deems
244necessary and proper.
245     (3)
246     (e)1.a.  In addition to assessments otherwise authorized in
247paragraph (a) and to the extent necessary to secure the funds
248for the account specified in s. 631.55(2)(c), or to retire
249indebtedness, including, without limitation, the principal,
250redemption premium, if any, and interest on, and related costs
251of issuance of, bonds issued under s. 631.695, and the funding
252of any reserves and other payments required under the bond
253resolution or trust indenture pursuant to which such bonds have
254been issued, the Office of Insurance Regulation, upon
255certification of the board of directors, shall levy emergency
256assessments upon insurers holding a certificate of authority as
257set forth in this paragraph. The emergency assessments payable
258under this paragraph by any insurer shall not exceed in any
259single year more than 2 percent of that insurer's direct written
260premiums, net of refunds, in this state during the preceding
261calendar year for the kinds of insurance within the account
262specified in s. 631.55(2)(c).
263     b.  Any emergency assessments authorized under this
264paragraph shall be levied by the Office of Insurance Regulation
265upon insurers referred to in sub-subparagraph a., upon
266certification as to the need for such assessments by the board
267of directors, in each year that bonds issued under s. 631.695
268are outstanding, in such amounts up to such 2-percent limit as
269required in order to provide for the full and timely payment of
270the principal, redemption premium, if any, and interest on, and
271related costs of issuance of bonds issued under s. 631.695. The
272emergency assessments provided for in this paragraph are
273assigned and pledged to the municipality, county, or legal
274entity issuing bonds under s. 631.695 for the benefit of the
275holders of such bonds in order to enable such municipality,
276county, or legal entity to provide for the payment of the
277principal, redemption premium, if any, and interest on such
278bonds, the cost of issuance of such bonds, and the funding of
279any reserves and other payments required under the bond
280resolution or trust indenture pursuant to which such bonds have
281been issued, without the necessity of any further action by the
282association, the Office of Insurance Regulation, or any other
283party. To the extent bonds are issued under s. 631.695, the
284proceeds of emergency assessments levied under this paragraph
285shall be remitted directly to and administered by the trustee or
286custodian appointed for such bonds.
287     c.  Emergency assessments under this paragraph may be
288payable in a single payment or, at the option of the
289association, payable in 12 monthly installments with the first
290installment due and payable at the end of the month after an
291emergency assessment is levied and subsequent installments being
292due not later than the end of each succeeding month.
293     d.  The association shall issue an annual report on the
294status of the use of the bond proceeds as related to
295insolvencies caused by hurricanes. The report must contain the
296number and amount of claims paid. The association shall also
297include an analysis of the revenue generated from the additional
298assessment levied under this paragraph. The association shall
299submit a copy of the report to the President of the Senate, the
300Speaker of the House of Representatives, and the Chief Financial
301Officer within 90 days after the end of each calendar year in
302which bonds were outstanding.
303     2.  In order to ensure that insurers paying emergency
304assessments levied under this paragraph continue to charge rates
305that are not inadequate or excessive, within 90 days after being
306notified of such assessments, each insurer that is to be
307assessed pursuant to this paragraph shall make a rate filing for
308coverage included within the account specified in s.
309631.55(2)(c) and for which rates are required to be filed under
310s. 627.062. If the filing reflects a rate change that, as a
311percentage, is equal to the difference between the rate of such
312assessment and the rate of the previous year's assessment under
313this paragraph, the filing shall consist of a certification so
314stating and shall be deemed approved when made. Any rate change
315of a different percentage shall be subject to the standards and
316procedures of s. 627.062.
317     3.  An annual assessment under this paragraph shall
318continue until the bonds issued with respect to which the
319assessment was imposed are outstanding, including any bonds the
320proceeds of which were used to refund bonds issued pursuant to
321s. 631.695, unless adequate provision has been made for the
322payment of the bonds under the documents authorizing the
323issuance of such bonds.
324     4.  Emergency assessments under this paragraph are not
325premium and are not subject to the premium tax, any fees, or any
326commissions. An insurer is liable for all emergency assessments
327that the insurer collects and must treat the failure of an
328insured to pay an emergency assessment as a failure to pay the
329premium. An insurer is not liable for uncollectible emergency
330assessments.
331     Section 6.  Section 631.695, Florida Statutes, is created
332to read:
333     631.695  Revenue bond issuance through counties or
334municipalities.--
335     (1)  The Legislature finds:
336     (a)  The potential for widespread and massive damage to
337persons and property caused by hurricanes making landfall in
338this state can generate insurance claims of such a number as to
339render numerous insurers operating within this state insolvent
340and therefore unable to satisfy covered claims.
341     (b)  The inability of insureds within this state to receive
342payment of covered claims or to receive such payment on a timely
343basis creates financial and other hardships for such insureds
344and places undue burdens on the state, the affected units of
345local government, and the community at large.
346     (c)  In addition, the failure of insurers to pay covered
347claims or to pay such claims on a timely basis due to the
348insolvency of such insurers can undermine the public's
349confidence in insurers operating within this state, thereby
350adversely affecting the stability of the insurance industry in
351this state.
352     (d)  The state has previously taken action to address these
353problems by adopting the Florida Insurance Guaranty Association
354Act, which, among other things, provides a mechanism for the
355payment of covered claims under certain insurance policies to
356avoid excessive delay in payment and to avoid financial loss to
357claimants or policyholders because of the insolvency of an
358insurer.
359     (e)  In the wake of the unprecedented destruction caused by
360various hurricanes that have made landfall in this state, the
361resultant covered claims, and the number of insurers rendered
362insolvent thereby, it is evident that alternative programs must
363be developed to allow the Florida Insurance Guaranty
364Association, Inc., to more expeditiously and effectively provide
365for the payment of covered claims.
366     (f)  It is therefore determined to be in the best interests
367of, and necessary for, the protection of the public health,
368safety, and general welfare of the residents of this state, and
369for the protection and preservation of the economic stability of
370insurers operating in this state, and it is declared to be an
371essential public purpose, to permit certain municipalities and
372counties to take such actions as will provide relief to
373claimants and policyholders having covered claims against
374insolvent insurers operating in this state by expediting the
375handling and payment of covered claims.
376     (g)  To achieve the foregoing purposes, it is proper to
377authorize municipalities and counties of this state
378substantially affected by the landfall of a category 1 or
379greater hurricane to issue bonds to assist the Florida Insurance
380Guaranty Association, Inc., in expediting the handling and
381payment of covered claims of insolvent insurers.
382     (h)  In order to avoid the needless and indiscriminate
383proliferation, duplication, and fragmentation of such assistance
384programs, it is in the best interests of the residents of this
385state to authorize municipalities and counties severely affected
386by a category 1 or greater hurricane to provide for the payment
387of covered claims beyond their territorial limits in the
388implementation of such programs.
389     (i)  It is a paramount public purpose for municipalities
390and counties substantially affected by the landfall of a
391category 1 or greater hurricane to be able to issue bonds for
392the purposes described in this section. Such issuance shall
393provide assistance to citizens located within said
394municipalities and counties, as well as to other residents of
395this state.
396     (2)  The governing body of any municipality or county the
397residents of which have been substantially affected by a
398category 1 or greater hurricane may issue bonds to fund an
399assistance program in conjunction with, and with the consent of,
400the Florida Insurance Guaranty Association, Inc., for the
401purpose of paying claimants' or policyholders' covered claims as
402defined in s. 631.54 arising through the insolvency of an
403insurer, which insolvency is determined by the Florida Insurance
404Guaranty Association, Inc., to have been a result of a category
4051 or greater hurricane, regardless of whether such claimants or
406policyholders are residents of such municipality or county or
407the property to which such claim relates is located within or
408outside the territorial jurisdiction of such municipality or
409county. The power of a municipality or county to issue bonds as
410described in this section is in addition to any powers granted
411by law and may not be abrogated or restricted by any provisions
412in such municipality's or county's charter. A municipality or
413county issuing bonds for this purpose shall enter into such
414contracts with the Florida Insurance Guaranty Association, Inc.,
415or any entity acting on behalf of the Florida Insurance Guaranty
416Association, Inc., as are necessary to implement the assistance
417program. Any bonds issued by a municipality or county or
418combination thereof under this subsection shall be payable from
419and secured by moneys received by or on behalf of the
420municipality or county from emergency assessments levied under
421s. 631.57(3)(e) and assigned and pledged to or on behalf of the
422municipality or county for the benefit of the holders of such
423bonds in connection with such assistance program. The funds,
424credit, property, and taxing power of the state or any
425municipality or county shall not be pledged for the payment of
426such bonds.
427     (3)  Bonds may be validated by such municipality or county
428pursuant to chapter 75. The proceeds of such bonds may be used
429to pay covered claims of insolvent insurers; to refinance or
430replace previously existing borrowings or financial
431arrangements; to pay interest on bonds; to fund reserves for the
432bonds; to pay expenses incident to the issuance or sale of any
433bond issued under this section, including costs of validating,
434printing, and delivering the bonds, costs of printing the
435official statement, costs of publishing notices of sale of the
436bonds, costs of obtaining credit enhancement or liquidity
437support, and related administrative expenses; or for such other
438purposes related to the financial obligations of the fund as the
439association may determine. The term of the bonds may not exceed
44030 years.
441     (4)  The state covenants with holders of bonds of the
442assistance program that the state will not take any action which
443will have a material adverse affect on such holders and will not
444repeal or abrogate the power of the board of directors of the
445association to direct the Office of Insurance Regulation to levy
446the assessments and to collect the proceeds of the revenues
447pledged to the payment of such bonds as long as any such bonds
448remain outstanding unless adequate provision has been made for
449the payment of such bonds pursuant to the documents authorizing
450the issuance of such bonds.
451     (5)  The accomplishment of the authorized purposes of such
452municipality or county under this section is in all respects for
453the benefit of the people of the state, for the increase of
454their commerce and prosperity, and for the improvement of their
455health and living conditions. Such municipality or county, in
456performing essential governmental functions in accomplishing its
457purposes, is not required to pay any taxes or assessments of any
458kind whatsoever upon any property acquired or used by the county
459or municipality for such purposes or upon any revenues at any
460time received by the county or municipality. The bonds, notes,
461and other obligations of such municipality or county, and the
462transfer of and income from such bonds, notes, and other
463obligations, including any profits made on the sale of such
464bonds, notes, and other obligations, are exempt from taxation of
465any kind by the state or by any political subdivision or other
466agency or instrumentality of the state. The exemption granted in
467this subsection is not applicable to any tax imposed by chapter
468220 on interest, income, or profits on debt obligations owned by
469corporations.
470     (6)  Two or more municipalities or counties the residents
471of which have been substantially affected by a category 1 or
472greater hurricane may create a legal entity pursuant to s.
473163.01(7)(g) to exercise the powers described in this section as
474well as those powers granted in s. 163.01(7)(g). Reference in
475this section to a municipality or county includes such legal
476entity.
477     Section 7.  No provision of s. 631.57 or s. 166.111,
478Florida Statutes, shall be repealed until such time as the
479principal, redemption premium, if any, and interest on all bonds
480issued under s. 166.111, Florida Statutes, payable and secured
481from assessments levied under s. 631.57(3)(e), Florida Statutes,
482have been paid in full or adequate provision for such payment
483has been made in accordance with the bond resolution or trust
484indenture pursuant to which such bonds were issued.
485     Section 8.  Section 631.1915, Florida Statutes, is created
486to read:
487     631.1915  Policyholder collateral; deductible
488reimbursements; other policyholder obligations.--
489     (1)  Any collateral held by or for the benefit of, or
490assigned to, the insurer or subsequently the receiver in order
491to secure the obligations of a policyholder under a deductible
492agreement shall not be considered an asset of the estate and
493shall be maintained and administered by the receiver as provided
494in this section, notwithstanding any other provision of law or
495contract to the contrary.
496     (2)  If the collateral is being held by or for the benefit
497of, or assigned to, the insurer or subsequently the receiver to
498secure obligations under a deductible agreement with a
499policyholder subject to the provisions of this section, the
500collateral shall be used to secure the policyholder's obligation
501to fund or reimburse claims payments within the agreed
502deductible amount.
503     (3)  If a claim is subject to a deductible agreement and
504secured by collateral and is not covered by any guaranty
505association, the receiver shall adjust and pay the noncovered
506claim using the collateral, but only to the extent of the
507available collateral. A claim against the collateral by a third-
508party claimant is not a claim against the insolvent insurer's
509estate for purposes of s. 631.193. If the collateral is
510exhausted and the insured is not able to provide funds to pay
511the remaining claims within the deductible, the remaining claims
512shall be claims against the insurer's estate subject to
513complying with other provisions in this part for the filing and
514allowance of such claims.
515     (4)  To the extent the receiver is holding collateral
516provided by a policyholder that was obtained to secure a
517deductible agreement and to secure other obligations of the
518policyholder, the receiver shall equitably allocate the
519collateral among such obligations and administer the collateral
520allocated to the deductible agreement pursuant to this section.
521The receiver shall inform the guaranty associations of the
522method and details of all the foregoing allocations.
523     (5)  Regardless of whether there is collateral, if the
524insurer has contractually agreed to allow the policyholder to
525fund its own claims within the deductible amount pursuant to a
526deductible agreement, through the policyholder's own
527administration of its claims or through the policyholder
528providing funds directly to a third-party administrator who
529administers the claims, the receiver may allow such funding
530arrangement to continue and, where applicable, shall enforce
531such arrangements. The funding of such claims by the
532policyholder within the deductible amount acts as a bar to any
533claim for such amount in the liquidation proceeding, including,
534but not limited to, any such claim by the policyholder or the
535third-party claimant. The funding extinguishes both the
536obligation, if any, of any guaranty association to pay such
537claims within the deductible amount and the obligations, if any,
538of the policyholder or third-party administrator to reimburse
539the guaranty association. No charge of any kind shall be made
540against any guaranty association on the basis of the
541policyholder's funding of claims payment made pursuant to the
542mechanism set forth in this subsection.
543     (6)  If the insurer has not contractually agreed to allow
544the policyholder to fund the policyholder's own claims within
545the deductible amount, to the extent a guaranty association is
546required by applicable state law to pay any claims for which the
547insurer would have been entitled to reimbursement from the
548policyholder under the terms of the deductible agreement and to
549the extent the claims have not been paid by a policyholder or
550third party, the guaranty association shall bill the
551policyholder for such reimbursement and the policyholder is
552obligated to pay such amount to the guaranty association for the
553benefit of the guaranty associations who paid such claims.
554Neither the insolvency of the insurer nor its inability to
555perform any of its obligations under the deductible agreement
556shall be a defense to the policyholder's reimbursement
557obligation under the deductible agreement. If the policyholder
558fails to pay the amounts due within 60 days after the bill for
559such reimbursements is due, the receiver shall use the
560collateral to the extent necessary to reimburse the guaranty
561association and, at the same time, the guaranty association may
562pursue other collection efforts against the policyholder. If
563more than one guaranty association has a claim against the same
564collateral and the available collateral, after allocation under
565subsection (4), together with billing and collection efforts,
566are together insufficient to pay each guaranty association in
567full, the receiver shall prorate payments to each guaranty
568association based upon the relationship the amount of claims
569each guaranty association has paid bears to the total of all
570claims paid by such guaranty associations.
571     (7)(a)  The guaranty association is entitled to deduct from
572reimbursements owed to guaranty associations or collateral to be
573returned to a policyholder reasonable actual expenses incurred
574in fulfilling the responsibilities under this provision, not to
575exceed 3 percent of the collateral or the total deductible
576reimbursements actually collected by the guaranty association.
577     (b)  With respect to claims payments made by any guaranty
578association, the guaranty association shall provide the guaranty
579associations and the receiver with a complete accounting of the
580guaranty association's deductible billing and collection
581activities, including copies of the policyholder billings when
582rendered, the reimbursements collected, the available amounts
583and use of collateral for each account, and any proration of
584payments when such proration occurs. The cost of reports
585required pursuant to this subsection shall be considered part of
586the expenses of the guaranty association.
587     (c)  The guaranty association may contract with the
588receiver for the direct collection from the policyholders on the
589same basis as the guaranty association and with the same rights
590and remedies. If so assigned, the receiver shall report any
591amounts so collected from each policyholder to the guaranty
592association.
593     (d)  To the extent that guaranty associations pay claims
594within the deductible amount but are not reimbursed by the
595receiver under this section or by policyholder payments from the
596guaranty associations' own collection efforts, the guaranty
597association shall have a claim on the insolvent insurer's estate
598for such unreimbursed claims payments. The priority of such
599claim shall depend upon the nature of the payment that should
600have been reimbursed.
601     (e)  At least annually, the receiver shall adjust the
602collateral being held pursuant to the deductible agreement. The
603receiver shall maintain adequate collateral to secure 110
604percent of the entire estimated obligation of the policyholder.
605The receiver shall provide a copy of its collateral review to
606any obligated guaranty association. Once all claims covered by
607the collateral have been paid and the receiver is satisfied that
608no new claims can be presented, the receiver may release any
609remaining collateral.
610     (8)  The state court that has jurisdiction over the
611liquidation proceedings shall have jurisdiction to resolve
612disputes arising under this section.
613     (9)  Nothing in this section limits or adversely affects
614any right the guaranty associations may have under applicable
615state law to obtain reimbursement from certain classes of
616policyholders for claims payments made by such guaranty
617associations under policies of the insolvent insurer or for
618related expenses the guaranty associations incur.
619     (10)  This section applies to all liquidations for which an
620order is entered after October 1, 2005.
621     (11)  For purposes of this section, the term:
622     (a)  "Deductible agreement" means any combination of one or
623more policies, endorsements, contracts, or security agreements
624that provide for the policyholder to bear the risk of loss
625within a specified amount per claim or occurrence covered under
626a policy of insurance, and that may be subject to aggregate
627limit of policyholder reimbursement obligations.
628     (b)  "Noncovered claim" means a claim that is subject to a
629deductible agreement, may be secured by collateral, and is not
630covered by a guaranty association.
631     (12)  This section does not apply to first-party claims.
632     Section 9.  If any provision of this act or the application
633thereof to any person or circumstance is held invalid, the
634invalidity shall not affect other provisions or applications of
635the act which can be given effect without the invalid provision
636or application, and to this end the provisions of this act are
637declared severable.
638     Section 10.  This act shall take effect upon becoming a
639law.


CODING: Words stricken are deletions; words underlined are additions.