CHAPTER 704a
INSURANCE GUARANTY FUNDS

Table of Contents

Sec. 38a-838. (Formerly Sec. 38-275). Definitions.
Sec. 38a-844. (Formerly Sec. 38-281). *(See end of section for amended version of subsection (4) and effective date.) Assignment of rights under policy. Receiver or liquidator bound by settlements. Preservation of rights of association. Right of recovery.
Sec. 38a-845. (Formerly Sec. 38-282). Exhaustion of rights under policy prior to claim against association. Claims recoverable from more than one association. Persons required to exhaust rights under governmental insurance or guaranty program.

PART I
CONNECTICUT INSURANCE GUARANTY ASSOCIATION ACT

      Sec. 38a-838. (Formerly Sec. 38-275). Definitions. The following terms as used in sections 38a-836 to 38a-853, inclusive, unless the context otherwise requires or a different meaning is specifically prescribed, shall have the following meanings:

      (1) "Account" means any one of the three accounts created by section 38a-839;

      (2) "Affiliate" means any affiliate, as defined in section 38a-1, of an insolvent insurer;

      (3) "Association" means the Connecticut Insurance Guaranty Association created under section 38a-839;

      (4) "Commissioner" means the Insurance Commissioner;

      (5) "Covered claim" means an unpaid claim, including, but not limited to, one for unearned premiums, which arises out of and is within the coverage and subject to the applicable limits of an insurance policy to which sections 38a-836 to 38a-853, inclusive, apply issued by an insurer, if such insurer becomes an insolvent insurer after October 1, 1971, and (A) the claimant or insured is a resident of this state at the time of the insured event; or (B) the claim is a first party claim for damage to property with a permanent location in this state, provided the term "covered claim" shall not include (i) any claim by or for the benefit of any reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise; provided that a claim for any such amount, asserted against a person insured under a policy issued by an insurer which has become an insolvent insurer, which, if it were not a claim by or for the benefit of a reinsurer, insurer, insurance pool or underwriting association, would be a "covered claim" may be filed directly with the receiver of the insolvent insurer but in no event shall any such claim be asserted against the insured of such insolvent insurer, (ii) any claim by or on behalf of an individual who is neither a citizen of the United States nor an alien legally resident in the United States at the time of the insured event, or an entity other than an individual whose principal place of business is not in the United States at the time of the insured event, and it arises out of an accident, occurrence, offense, act, error or omission that takes place outside of the United States, or a loss to property normally located outside of the United States or, if a workers' compensation claim, it arises out of employment outside of the United States, (iii) any claim by or on behalf of a person who is not a resident of this state, other than a claim for compensation or any other benefit which arises out of and is within the coverage of a workers' compensation policy, against an insured whose net worth at the time the policy was issued or at any time thereafter exceeded twenty-five million dollars, provided that an insured's net worth for purposes of this section and section 38a-844 shall be deemed to include the aggregate net worth of the insured and all of its subsidiaries as calculated on a consolidated basis, (iv) any claim by or on behalf of an affiliate of the insolvent insurer at the time the policy was issued or at the time of the insured event, or (v) any claim arising out of a policy issued by an insurer which was not licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred;

      (6) "Insolvent insurer" means an insurer (A) (i) licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred, and (ii) determined to be insolvent by a court of competent jurisdiction; (B) which is (i) the legal successor of an insurer that was licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred, by reason of a merger, provided such merger is approved by an insurance regulator having jurisdiction over such merger, and (ii) determined to be insolvent by a court of competent jurisdiction; or (C) which (i) succeeds to the policy obligations of an insurer that was licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred, by reason of a division whereby policies issued by such licensed insurer are transferred to an insurer, and (ii) is determined to be insolvent by a court of competent jurisdiction, provided such division is approved (I) in a jurisdiction that allows such division, and (II) by an insurance regulator having jurisdiction over such division. "Insolvent insurer" shall not be construed to mean any insurer with respect to which an order, decree, judgment or finding of insolvency, whether permanent or temporary in nature, or order of rehabilitation or conservation has been issued by a court of competent jurisdiction prior to October 1, 1971;

      (7) "Member insurer" means any person who (A) writes any kind of insurance to which sections 38a-836 to 38a-853, inclusive, apply under section 38a-837, including, but not limited to, the exchange of reciprocal or interinsurance contracts, and (B) is licensed to transact insurance in this state. An insurer shall cease to be a member insurer effective on the day following the termination or expiration of its license to transact the kinds of insurance to which said sections 38a-836 to 38a-853, inclusive, apply, however such insurer shall remain liable as a member insurer for any obligations, including obligations for assessments levied prior to the termination or expiration of the insurer's license and for assessments levied after the termination or expiration which relate to any insurer which became an insolvent insurer prior to the termination or expiration of such insurer's license. In the case of such insurer, the average of its net direct written premium for the five calendar years prior to expiration or termination of its license, whether or not the insurer has net direct written premium in the year preceding such expiration or termination, shall be used as its assessment base for any year following such expiration or termination in which the insurer has no direct written premium;

      (8) "Net direct written premiums" means direct gross premiums written in this state on insurance policies to which sections 38a-836 to 38a-853, inclusive, apply, less return premiums thereon and dividends paid or credited to policyholders on such direct business, provided the term "net direct written premiums" shall not include premiums on any contract between insurers or reinsurers;

      (9) "Person" means an individual, corporation, partnership, association, joint stock company, business trust, limited liability company, unincorporated organization, voluntary organization, governmental entity or other legal entity;

      (10) "Residence" means, when used in reference to a corporation, its principal place of business;

      (11) "United States" has the meaning assigned to it by section 38a-1.

      (1971, P.A. 466, S. 3; P.A. 77-614, S. 163, 610; P.A. 80-482, S. 321, 345, 348; P.A. 81-83, S. 1; P.A. 87-290, S. 1, 8; P.A. 88-76, S. 2, 10; P.A. 90-243, S. 151; P.A. 97-125, S. 2, 9; P.A. 03-49, S. 1; P.A. 04-174, S. 5; P.A. 05-140, S. 2.)

      History: P.A. 77-614 placed insurance commissioner within the department of business regulation and made insurance department a division within that department, effective January 1, 1979; P.A. 80-482 restored insurance commissioner and division to prior independent status and abolished the department of business regulation; P.A. 81-83 added Subdiv. (9) defining "residence" and replaced "authorized" with "licensed" in Subdiv. (5); P.A. 87-290 added definitions of "affiliate", "claimant", and "United States", and amended the definition of "covered claim" to limit its application to nonresidents of this state, renumbering previous Subdivs. as necessary; P.A. 88-76 clarified the definition of "covered claim"; P.A. 90-243 amended the definitions for "affiliate", "affiliated", "person" and "United States"; Sec. 38-275 transferred to Sec. 38a-838 in 1991; P.A. 97-125 amended Subdiv. (4) re time when a claimant files a claim, amended Subdiv. (6)(c) to require the claim to be a first party claim for damage to property with a permanent location and to exclude any claim by or for the benefit of any reinsurer, insurance pool or underwriting association, amended Subdiv. (8) re when an insurer ceases to be a member and such member's liability for obligations and amended Subdiv. (10) to redefine "person", effective July 1, 1997; P.A. 03-49 redefined "affiliate" and "covered claim", deleted former Subdiv. (4) re definition of "claimant", redesignated existing Subdivs. (5) to (12) as Subdivs. (4) to (11) and made technical changes, effective May 23, 2003, and applicable to claims filed on or after that date; P.A. 04-174 amended Subdiv. (6)(B) to insert clause (i) designator and add new clause (ii) to include the legal successor of the insolvent insurer in the event of merger; P.A. 05-140 redefined "covered claim" in Subdiv. (5) and "insolvent insurer" in Subdiv. (6), effective June 24, 2005, and applicable to insolvencies occurring on or after that date.

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      Sec. 38a-844. (Formerly Sec. 38-281). *(See end of section for amended version of subsection (4) and effective date.) Assignment of rights under policy. Receiver or liquidator bound by settlements. Preservation of rights of association. Right of recovery. (1) Any person recovering any moneys under sections 38a-836 to 38a-853, inclusive, shall be deemed to have assigned his rights under the policy to said association to the extent of his recovery from said association. Every insured or claimant seeking the protection of said sections shall cooperate with said association to the same extent as such person would have been required to cooperate with the insolvent insurer. Said association shall have no cause of action against any insured of the insolvent insurer for any sums it has paid out to such insured except such causes of action as the insolvent insurer would have had if such sums had been paid by the insolvent insurer. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of said association shall not operate to reduce the liability of insureds to the receiver, liquidator, or statutory successor for unpaid assessments.

      (2) The receiver, liquidator, or statutory successor of an insolvent insurer shall be bound by determinations of covered claim eligibility under sections 38a-836 to 38a-853, inclusive, and by settlements of claims made by said association or any similar organization having a like function to that of said association in another state. The court having jurisdiction shall grant such claims priority equal to that to which the claimant would have been entitled in the absence of said sections 38a-836 to 38a-853, inclusive, against the assets of the insolvent insurer. The expenses of said association or any similar organization having a like function to that of said association in handling claims shall be accorded the same priority as the receiver's or liquidator's expenses.

      (3) Said association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by said association, the expenses paid for the processing of covered claims paid or contested and estimates of anticipated claims on said association, and expenses of processing such claims which shall preserve the rights of said association against the assets of the insolvent insurer.

      *(4) The association shall have the right to recover from the following persons the amount of any covered claim paid on behalf of such person pursuant to sections 38a-836 to 38a-853, inclusive: (A) Any person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under this chapter; and (B) any insured whose net worth on December thirty-first of the year next preceding the date the insurer becomes an insolvent insurer exceeds fifty million dollars and whose liability obligations to other persons are satisfied in whole or in part by payments made under said sections. For purposes of this subdivision, "insured" does not include a municipality, as defined in section 7-148.

      (1971, P.A. 466, S. 9; P.A. 81-83, S. 4; P.A. 87-290, S. 4, 8; P.A. 97-125, S. 4, 9; P.A. 03-182, S. 1; P.A. 04-10, S. 9.)

      *Note: On and after July 1, 2006, subsection (4) of this section, as amended by section 12 of public act 05-199, is to read as follows:

      "(4) The association shall have the right to recover from the following persons the amount of any covered claim paid on behalf of such person pursuant to sections 38a-836 to 38a-853, inclusive: (A) Any person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under this chapter; and (B) any insured whose net worth on December thirty-first of the year next preceding the date the insurer becomes an insolvent insurer exceeds fifty million dollars and whose liability obligations to other persons are satisfied in whole or in part by payments made under said sections. For purposes of this subdivision, "insured" does not include a municipality, as defined in section 7-148, or the Second Injury Fund, established in section 31-354."

      (1971, P.A. 466, S. 9; P.A. 81-83, S. 4; P.A. 87-290, S. 4, 8; P.A. 97-125, S. 4, 9; P.A. 03-182, S. 1; P.A. 04-10, S. 9; P.A. 05-199, S. 12.)

      History: P.A. 81-83 required that association file statements of expenses paid for processing paid or contested claims in Subsec. (3); P.A. 87-290 added Subsec. (4) describing the persons from whom the association has the right to recover; Sec. 38-281 transferred to Sec. 38a-844 in 1991; P.A. 97-125 made a technical change in Subsec. (1) and amended Subsec. (2) re determinations of covered claim eligibility and settlements of claims made by the association, effective July 1, 1997; P.A. 03-182 amended Subdiv. (4) to make technical changes and provide that "insured" does not include a municipality, as defined in Sec. 7-148, effective June 26, 2003; P.A. 04-10 made technical changes in Subdiv. (4) (Revisor's note: In 2005, a provision in Subdiv. (4) defining "insured", added by P.A. 03-182 and inadvertently omitted from P.A. 04-10, was reinstated editorially by the Revisors); P.A. 05-199 amended Subsec. (4) to exclude the Second Injury Fund from the definition of "insured", effective July 1, 2006.

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      Sec. 38a-845. (Formerly Sec. 38-282). Exhaustion of rights under policy prior to claim against association. Claims recoverable from more than one association. Persons required to exhaust rights under governmental insurance or guaranty program.

      Subsec. (1):

      Claimant satisfies the exhaustion requirement of subsec. by pursuing coverage under her own uninsured motorist policy prior to attempting to collect; claimant's failure to obtain the full policy limits from her own coverage does not preclude claimant from collecting from guaranty fund or tortfeasor personally, but any recovery is reduced by full amount of those policy limits. 275 C. 290.

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