Substitute House Bill No. 5614
Substitute House Bill No. 5614
PUBLIC ACT NO. 98-214
AN ACT CONCERNING THE INSURERS REHABILITATION AND
LIQUIDATION ACT.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. Section 38a-903 of the general
statutes is repealed and the following is
substituted in lieu thereof:
Sections 38a-903 to 38a-961, inclusive, AS
AMENDED, may be cited as the "Insurers
Rehabilitation and Liquidation Act". Said sections
shall not be interpreted to limit the powers
granted the commissioner by other provisions of
the law. Sections 38a-903 to 38a-961, inclusive,
AS AMENDED, shall be construed to effect their
purpose which is the protection of the interests
of insureds, claimants, creditors and the public
generally, with minimum interference with the
normal prerogatives of the owners and managers of
insurers, through:
(1) Early detection of any potentially
dangerous condition in an insurer and prompt
application of appropriate corrective measures;
(2) Improved methods for rehabilitating
insurers, involving the cooperation and management
expertise of the insurance industry;
(3) Enhanced efficiency and economy of
liquidation, through clarification of the law, to
minimize legal uncertainty and litigation;
(4) Equitable apportionment of any unavoidable
loss;
(5) Reducing the problems of interstate
rehabilitation and liquidation by facilitating
cooperation between states in [the liquidation
process] DELINQUENCY PROCEEDINGS and by extending
the scope of personal jurisdiction over debtors of
the insurer outside this state;
(6) Regulation of the BUSINESS OF insurance
[business] by the impact of the law relating to
delinquency procedures and RELATED substantive
rules; [on the entire insurance business;] and
(7) Providing for a comprehensive scheme for
the rehabilitation and liquidation of insurance
companies and those subject to sections 38a-903 to
38a-961, inclusive, AS AMENDED, as part of the
regulation of the business of insurance [,
insurance industry and insurers] in the state.
Proceedings in cases of insurer insolvency and
delinquency are deemed an integral aspect of the
business of insurance and are of vital public
interest and concern.
Sec. 2. Section 38a-904 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[The proceedings authorized by sections]
SECTIONS 38a-903 to 38a-961, inclusive, AS
AMENDED, shall apply to: (1) All insurers who are
doing, or have done, an insurance business in this
state and against whom claims arising from that
business may exist now or in the future, AND ALL
PERSONS SUBJECT TO EXAMINATION BY THE
COMMISSIONER; (2) all insurers who purport to do
an insurance business in this state; (3) all
insurers who have insureds resident in this state;
(4) all other persons organized OR DOING INSURANCE
BUSINESS, or in the process of organizing with the
intent to do an insurance business in this state;
(5) all nonprofit service plans and all fraternal
benefit societies; (6) all title insurance
companies; and (7) all health care centers.
Sec. 3. Section 38a-905 of the general
statutes is repealed and the following is
substituted in lieu thereof:
For the purposes of sections 38a-903 to
38a-961, inclusive, AS AMENDED:
[(a)] (1) "Ancillary state" means any state
other than a domiciliary state.
[(b)] (2) "Commissioner" means the Insurance
Commissioner.
(3) "COMMODITY CONTRACT" MEANS: (A) A CONTRACT
FOR THE PURCHASE OR SALE OF A COMMODITY FOR FUTURE
DELIVERY ON, OR SUBJECT TO THE RULES OF, A BOARD
OF TRADE DESIGNATED AS A CONTRACT MARKET BY THE
COMMODITY FUTURES TRADING COMMISSION UNDER THE
COMMODITY EXCHANGE ACT (7 USC 1, ET SEQ.) OR BOARD
OF TRADE OUTSIDE THE UNITED STATES; (B) AN
AGREEMENT THAT IS SUBJECT TO REGULATION UNDER
SECTION 19 OF THE COMMODITY EXCHANGE ACT (7 USC 1,
ET SEQ.) AND THAT IS COMMONLY KNOWN TO THE
COMMODITIES TRADE AS A MARGIN ACCOUNT, MARGIN
CONTRACT, LEVERAGE ACCOUNT OR LEVERAGE CONTRACT;
OR (C) AN AGREEMENT OR TRANSACTION THAT IS SUBJECT
TO REGULATION UNDER SECTION 4c(b) OF THE COMMODITY
EXCHANGE ACT (7 USC 1 ET SEQ.) AND THAT IS
COMMONLY KNOWN TO THE COMMODITIES TRADE AS A
COMMODITY OPTION.
[(c)] (4) "Creditor" is a person having any
claim, whether matured or unmatured, liquidated or
unliquidated, secured or unsecured, absolute,
fixed or contingent.
[(d)] (5) "Delinquency proceeding" means any
proceeding instituted against an insurer for the
purpose of liquidating, rehabilitating,
reorganizing or conserving such insurer, and any
summary proceeding under section 38a-912. "Formal
delinquency proceeding" means any liquidation or
rehabilitation proceeding.
[(e)] (6) "Doing business", "DOING INSURANCE
BUSINESS" AND THE "BUSINESS OF INSURANCE",
includes any of the following acts, whether
effected by mail or otherwise: [(1)] (A) The
issuance or delivery of contracts of insurance,
EITHER to persons resident IN OR COVERING A RISK
LOCATED in this state; [(2)] (B) the solicitation
of applications for such contracts or other
negotiations preliminary to the execution of such
contracts; [(3)] (C) the collection of premiums,
membership fees, assessments or other
consideration for such contracts; [(4)] (D) the
transaction of matters subsequent to execution of
such contracts and arising out of them; or [(5)]
(E) operating under a license or certificate of
authority, as an insurer, issued by the Insurance
Department.
[(f)] (7) "Domiciliary state" means the state
in which an insurer is incorporated or organized,
or, in the case of an alien insurer, its state of
entry.
[(g)] (8) "Fair consideration" is given for
property or obligation: [(1)] (A) When in exchange
for such property or obligation, as a fair
equivalent therefor, and in good faith, property
is conveyed or services are rendered or an
obligation is incurred or an antecedent debt is
satisfied; or [(2)] (B) when such property or
obligation is received in good faith to secure a
present advance or antecedent debt in an amount
not disproportionately small as compared to the
value of the property or obligation obtained.
[(h)] (9) "Foreign country" has the meaning
assigned to it in section 38a-1.
(10) "FORWARD CONTRACT" MEANS A CONTRACT,
OTHER THAN A COMMODITY CONTRACT, FOR THE PURCHASE,
SALE OR TRANSFER OF A COMMODITY, AS DEFINED IN
SECTION 1 OF THE COMMODITY EXCHANGE ACT (7 USC 1
ET SEQ.), OR ANY SIMILAR GOOD, ARTICLE, SERVICE,
RIGHT OR INTEREST THAT IS PRESENTLY OR IN THE
FUTURE BECOMES THE SUBJECT OF DEALING IN THE
FORWARD CONTRACT TRADE, OR PRODUCT OR BY-PRODUCT
THEREOF, WITH A MATURITY DATE MORE THAN TWO DAYS
AFTER THE DATE THE CONTRACT IS ENTERED INTO,
INCLUDING, BUT NOT LIMITED TO, A REPURCHASE
TRANSACTION, REVERSE REPURCHASE TRANSACTION,
UNALLOCATED HEDGE TRANSACTION, DEPOSIT, LOAN,
OPTION, ALLOCATED TRANSACTION OR A COMBINATION OF
THESE OR OPTION ON ANY OF THEM.
[(i)] (11) "General assets" [means] INCLUDES
all property, real, personal or otherwise, not
specifically mortgaged, pledged, deposited or
otherwise encumbered for the security or benefit
of specified persons or classes of persons. As to
specifically encumbered property, "general assets"
includes all such property or its proceeds in
excess of the amount necessary to discharge the
sum or sums secured thereby. Assets held in trust
and on deposit for the security or benefit of all
policyholders or all policyholders and creditors,
in more than a single state, shall be treated as
general assets.
[(j)] (12) "Guaranty association" means the
Connecticut Insurance Guaranty Association
established pursuant to sections 38a-836 to
38a-853, inclusive, the Connecticut Life and
Health Insurance Guaranty Association established
pursuant to sections 38a-858 to 38a-875,
inclusive, and any other similar entity [now or
hereafter] created by the [legislature of this
state] GENERAL ASSEMBLY for the payment of claims
of insolvent insurers. "Foreign guaranty
association" means any similar entities [now in
existence in or hereafter] created by the
legislature of any other state.
[(k)] (13) "Insolvency" and "insolvent" have
the meanings assigned to them in section 38a-1, AS
AMENDED BY THIS ACT.
[(l)] (14) "Insurer" means any person who has
done, purports to do, is doing or is licensed to
do an insurance business, and is or has been
subject to the authority of, or to liquidation,
rehabilitation, reorganization, supervision or
conservation by, any insurance commissioner. For
purposes of sections 38a-903 to 38a-961,
inclusive, AS AMENDED, any other persons included
under section 38a-904, AS AMENDED BY THIS ACT,
shall be deemed to be insurers.
(15) "NETTING AGREEMENT" MEANS A CONTRACT OR
AGREEMENT, INCLUDING TERMS AND CONDITIONS
INCORPORATED BY REFERENCE THEREIN, INCLUDING A
MASTER AGREEMENT, WHICH MASTER AGREEMENT, TOGETHER
WITH ALL SCHEDULES, CONFIRMATIONS, DEFINITIONS AND
ADDENDA THERETO AND TRANSACTIONS UNDER ANY
THEREOF, SHALL BE TREATED AS ONE NETTING
AGREEMENT, THAT (A) DOCUMENTS ONE OR MORE
TRANSACTIONS BETWEEN THE PARTIES TO THE AGREEMENT
FOR OR INVOLVING ONE OR MORE QUALIFIED FINANCIAL
CONTRACTS AND (B) PROVIDES FOR THE NETTING OR
LIQUIDATION OF QUALIFIED FINANCIAL CONTRACTS OR
PRESENT OR FUTURE PAYMENT OBLIGATIONS OR PAYMENT
ENTITLEMENTS THEREUNDER, INCLUDING LIQUIDATION OR
CLOSE-OUT VALUES RELATING TO SUCH OBLIGATIONS OR
ENTITLEMENTS, AMONG THE PARTIES TO THE NETTING
AGREEMENT.
[(m)] (16) "Preferred claim" means any claim
with respect to which the terms of sections
38a-903 to 38a-961, inclusive, AS AMENDED, accord
priority of payment from the general assets of the
insurer.
(17) "QUALIFIED FINANCIAL CONTRACT" MEANS A
COMMODITY CONTRACT, FORWARD CONTRACT, REPURCHASE
AGREEMENT, SECURITIES CONTRACT, SWAP AGREEMENT AND
ANY SIMILAR AGREEMENT THAT THE COMMISSIONER
DETERMINES TO BE A QUALIFIED FINANCIAL CONTRACT
FOR THE PURPOSES OF THIS CHAPTER, AND SECTIONS 7,
15 AND 22 OF THIS ACT.
[(n)] (18) "Receiver" means receiver,
liquidator, rehabilitator or conservator as the
context requires.
[(o)] (19) "Reciprocal state" means any state
other than this state in which in substance and
effect sections 38a-920, AS AMENDED BY THIS ACT,
38a-954, 38a-955 and 38a-957 to 38a-959,
inclusive, are in force and in which provisions
are in force, requiring that the commissioner or
equivalent official be the receiver of a
delinquent insurer and in which some provision
exists for the avoidance of fraudulent conveyances
and preferential transfers.
(20) "REPURCHASE AGREEMENT" AND "REVERSE
REPURCHASE AGREEMENT" MEAN AN AGREEMENT, INCLUDING
RELATED TERMS, THAT PROVIDES FOR THE TRANSFER OF
CERTIFICATES OF DEPOSIT, ELIGIBLE BANKERS'
ACCEPTANCES, OR SECURITIES THAT ARE DIRECT
OBLIGATIONS OF, OR THAT ARE FULLY GUARANTEED AS TO
PRINCIPAL AND INTEREST BY, THE UNITED STATES OR AN
AGENCY OF THE UNITED STATES AGAINST THE TRANSFER
OF FUNDS BY THE TRANSFEREE OF THE CERTIFICATES OF
DEPOSIT, ELIGIBLE BANKERS' ACCEPTANCES OR
SECURITIES WITH A SIMULTANEOUS AGREEMENT BY THE
TRANSFEREE TO TRANSFER TO THE TRANSFEROR
CERTIFICATES OF DEPOSIT, ELIGIBLE BANKERS'
ACCEPTANCES OR SECURITIES AS DESCRIBED IN THIS
SUBDIVISION, AT A DATE CERTAIN NOT LATER THAN ONE
YEAR AFTER THE TRANSFERS OR ON DEMAND, AGAINST THE
TRANSFER OF FUNDS. FOR THE PURPOSES OF THIS
SUBDIVISION, THE ITEMS THAT MAY BE SUBJECT TO AN
AGREEMENT INCLUDE MORTGAGE-RELATED SECURITIES, A
MORTGAGE LOAN, AND AN INTEREST IN A MORTGAGE LOAN,
AND SHALL NOT INCLUDE ANY PARTICIPATION IN A
COMMERCIAL MORTGAGE LOAN, UNLESS THE COMMISSIONER
DETERMINES TO INCLUDE THE PARTICIPATION WITHIN THE
MEANING OF THE TERM.
[(p)] (21) "Secured claim" means any claim
secured by [mortgage, trust deed, pledge, deposit
as security, escrow, or otherwise, but not
including special deposit claims or claims against
general assets. The term also includes claims
which have become liens upon specific assets by
reason of judicial process] AN ASSET THAT IS NOT A
GENERAL ASSET. "SECURED CLAIM" ALSO INCLUDES
CLAIMS WHICH HAVE BECOME LIENS UPON SPECIFIC
ASSETS BY REASON OF JUDICIAL PROCESS PRIOR TO FOUR
MONTHS BEFORE THE COMMENCEMENT OF DELINQUENCY
PROCEEDINGS. "SECURED CLAIM" DOES NOT INCLUDE A
SPECIAL DEPOSIT CLAIM OR A CLAIM ARISING FROM A
CONSTRUCTIVE OR RESULTING TRUST.
(22) "SECURITIES CONTRACT" MEANS A CONTRACT
FOR THE PURCHASE, SALE OR LOAN OF A SECURITY,
INCLUDING AN OPTION FOR THE REPURCHASE OR SALE OF
A SECURITY, CERTIFICATE OF DEPOSIT, OR GROUP OR
INDEX OF SECURITIES, INCLUDING AN INTEREST THEREIN
OR BASED ON THE VALUE THEREOF, OR AN OPTION
ENTERED INTO ON A NATIONAL SECURITIES EXCHANGE
RELATING TO FOREIGN CURRENCIES, OR THE GUARANTEE
OF A SETTLEMENT OF CASH OR SECURITIES BY OR TO A
SECURITIES CLEARING AGENCY. FOR THE PURPOSES OF
THIS SUBDIVISION, "SECURITY" INCLUDES A MORTGAGE
LOAN, MORTGAGE-RELATED SECURITIES, AND AN INTEREST
IN ANY MORTGAGE LOAN OR MORTGAGE-RELATED SECURITY.
[(q)] (23) "Special deposit claim" means any
claim secured by a deposit made pursuant to A
STATE statute for the security or benefit of a
limited class or classes of persons, but DOES not
[including] INCLUDE any claim secured by general
assets.
[(r)] (24) "State" means any state, district
or territory of the United States.
(25) "SWAP AGREEMENT" MEANS AN AGREEMENT,
INCLUDING THE TERMS AND CONDITIONS INCORPORATED BY
REFERENCE IN AN AGREEMENT, THAT IS A RATE SWAP
AGREEMENT, BASIS SWAP, COMMODITY SWAP, FORWARD
RATE AGREEMENT, INTEREST RATE FUTURE, INTEREST
RATE OPTION, FORWARD FOREIGN EXCHANGE AGREEMENT,
SPOT FOREIGN EXCHANGE AGREEMENT, CURRENCY SWAP
AGREEMENT, CROSS-CURRENCY RATE SWAP AGREEMENT,
CURRENCY FUTURE, OR CURRENCY OPTION OR ANY OTHER
SIMILAR AGREEMENT, AND INCLUDES ANY COMBINATION OF
AGREEMENTS AND AN OPTION TO ENTER INTO AN
AGREEMENT.
[(s)] (26) "Transfer" [shall include] INCLUDES
the sale and every other and different mode,
direct or indirect, of disposing of or of parting
with property or with an interest therein, or with
the possession thereof or of fixing a lien upon
property or upon an interest therein, absolutely
or conditionally, voluntarily, by or without
judicial proceedings. The retention of a security
title to property delivered to a debtor shall be
deemed a transfer suffered by the debtor.
Sec. 4. Section 38a-907 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) [Any receiver appointed in a proceeding
under sections 38a-903 to 38a-961, inclusive, may
at any time apply for and any court of general
jurisdiction may grant, such restraining orders,
preliminary and permanent injunctions and other
orders as may be deemed necessary and proper to
prevent: (1)] THE CONSERVATION, REHABILITATION AND
LIQUIDATION OF INSURANCE COMPANIES AND OTHER
PERSONS SUBJECT TO THE PROVISIONS OF SECTIONS
38a-903 TO 38a-961, INCLUSIVE, AS AMENDED, ARE A
MATTER OF VITAL PUBLIC INTEREST AND AFFECT THE
RELATIONSHIPS BETWEEN INSUREDS AND THEIR INSURERS.
(1) AN APPLICATION OR PETITION UNDER SECTIONS
38a-912, 38a-914, 38a-915, 38a-918, 38a-919 AND
38a-920, AS AMENDED BY THIS ACT, SHALL OPERATE AS
AN AUTOMATIC STAY APPLICABLE TO ALL PERSONS, OTHER
THAN THE RECEIVER, WHICH SHALL BE PERMANENT AND
SURVIVE THE ENTRY OF AN ORDER OF CONSERVATION,
REHABILITATION OR LIQUIDATION, AND WHICH SHALL
PROHIBIT: (A) The transaction of further business;
[(2)] (B) the transfer of property; [(3)] (C)
interference with the receiver or with a
proceeding under said sections; [(4)] (D) waste of
the insurer's assets; [(5)] (E) dissipation and
transfer of bank accounts; [(6)] (F) the
institution or further prosecution of any actions
or proceedings IN WHICH THE INSURER IS A PARTY;
[(7)] (G) the obtaining of preferences, judgments,
attachments, garnishments, or liens against the
insurer, its assets or its policyholders; [(8)]
(H) the levying of execution against the insurer,
its assets, or its policyholders; [(9)] (I) the
making of any sale or deed for nonpayment of taxes
or assessments that would lessen the value of the
assets of the insurer; [or (10)] (J) the
withholding from the receiver of books, accounts,
documents, or other records relating to the
business of the insurer; or [(11)] (K) any other
threatened or contemplated action that might
lessen the value of the insurer's assets or
prejudice the rights of policyholders, creditors,
or shareholders, or the administration of any
proceeding under said sections.
(2) NOTWITHSTANDING ANY OTHER PROVISION OF
LAW, NO BOND SHALL BE REQUIRED OF THE COMMISSIONER
AS A PREREQUISITE FOR THE ISSUANCE OF ANY
INJUNCTION OR RESTRAINING ORDER PURSUANT TO THIS
SECTION.
(3) UPON MOTION OF A PERSON SUBJECT TO THE
STAY, THE COURT, AFTER NOTICE TO THE RECEIVER AND
A HEARING, MAY MODIFY OR GRANT RELIEF FROM THE
STAY, PROVIDED SAID PERSON SHALL HAVE THE BURDEN
OF PROOF AND SHALL ESTABLISH BY CLEAR AND
CONVINCING EVIDENCE THAT SUCH RELIEF SHOULD BE
GRANTED.
(4) ALL MATTERS THAT MAY BE STAYED, ENJOINED
OR BARRED UNDER THIS SECTION AND ALL MATTERS
INVOLVING ITS INTERPRETATION OR OPERATION SHALL
REMAIN WITHIN THE EXCLUSIVE JURISDICTION OF THE
DOMICILIARY RECEIVERSHIP COURT.
(b) The receiver may apply to any court
outside of the state for the relief described in
subsection (a) of this section.
Sec. 5. Section 38a-934 of the general
statutes is repealed and the following is
substituted in lieu thereof:
The amount recoverable by the liquidator from
reinsurers shall not be reduced as a result of the
delinquency proceedings, regardless of any
provision in the reinsurance contract or other
agreement. Payment made directly to an insured or
other creditor shall not diminish the reinsurer's
obligation to the insurer's estate except when (1)
the reinsurance contract [provided for direct
coverage of a named insured and the payment was
made in discharge of that obligation] PROVIDES FOR
PAYMENT OF THE REINSURANCE PROCEEDS TO ANOTHER
PAYEE, (2) THE UNDERLYING INSURANCE POLICY,
INCLUDING ANY AMENDMENTS OR ENDORSEMENTS, PROVIDES
FOR THE ASSUMPTION OF THE POLICY OBLIGATIONS BY
THE REINSURER, OR (3) THERE HAS BEEN A NOVATION OF
THE UNDERLYING POLICY OBLIGATIONS AND AN
ASSUMPTION OF THOSE OBLIGATIONS BY THE REINSURER
AND THE PROCEEDS ARE PAYABLE TO ANOTHER PAYEE.
Sec. 6. Section 38a-911 of the general
statutes is repealed and the following is
substituted in lieu thereof:
No insurer that is subject to any delinquency
proceedings, whether formal, informal,
administrative or judicial, shall:
[(1) Be released from such proceedings, unless
such proceeding is converted into a judicial
rehabilitation or liquidation proceeding;]
[(2)] (1) Be permitted to solicit or accept
new business or request or accept the restoration
of any suspended or revoked license or certificate
of authority;
[(3)] (2) Be returned to the control of its
shareholders or private management; or
[(4)] (3) Have any of its assets returned to
the control of its shareholders or private
management until all payments of or on account of
the insurer's contractual obligations by all
guaranty associations, along with all expenses
thereof and interest on all such payments and
expenses, shall have been repaid to the guaranty
associations or a plan of repayment by the insurer
shall have been approved by the guaranty
association.
Sec. 7. (NEW) (a) All records or certified
copies thereof of any delinquent insurer which
come into the possession of the receiver and are
held by the receiver in the course of the
delinquency proceedings shall be received in
evidence in all cases without proof of the
correctness of such records and without other
proof, except the certificate of the receiver that
such records were received from the custody of the
delinquent insurer or found among its property.
For the purposes of this section, "record" means
books, records, documents and papers.
(b) The receiver shall have the authority to
certify to the correctness of any record of his
office and to make certificates of the receiver
certifying to any fact contained in such records.
Such records shall be received in evidence in all
cases in which the original would be evidence.
(c) Original records, or certified copies
thereof, when offered by the receiver and received
in evidence shall be prima facie evidence of the
facts disclosed.
(d) The appointment of the Insurance
Commissioner as receiver shall not make records of
a delinquent insurer subject to disclosure under
the Freedom of Information Act, as defined in
section 1-18a of the general statutes, as amended.
In the event a third party successfully pursues a
records request in the receivership court, the
receiver shall be reimbursed for the reasonable
cost of producing such records.
Sec. 8. Section 38a-913 of the general
statutes is repealed and the following is
substituted in lieu thereof:
In all proceedings and judicial reviews
thereof pursuant to section 38a-912, all records
of the insurer, other documents and all Insurance
Department files and court records and papers, so
far as they pertain to or are a part of the record
of the proceedings, shall be and remain
confidential, AND ALL PAPERS FILED WITH THE CLERK
OF THE SUPERIOR COURT SHALL BE HELD BY THE CLERK
IN A CONFIDENTIAL FILE, except as is necessary to
obtain compliance [therewith] WITH ANY ORDER
ENTERED IN CONNECTION WITH SUCH PROCEEDINGS,
unless: [and until the] (1) THE Superior Court,
after hearing arguments [from the parties] in
chambers, [shall order] ORDERS otherwise; [, or
unless] (2) the insurer requests that the matter
be made public; [. Until such court order, all
papers filed with the clerk of the Superior Court
shall be held by him in a confidential file] OR
(3) THE COMMISSIONER APPLIES FOR AN ORDER UNDER
SECTION 38a-914 OR SECTION 38a-919.
Sec. 9. Section 38a-915 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) An order to rehabilitate the business of a
domestic insurer, or an alien insurer domiciled in
this state, shall appoint the commissioner and his
successors in office the rehabilitator and shall
direct the rehabilitator forthwith to take
possession of the assets of the insurer and to
administer them under the general supervision of
the court. THE COMMISSIONER SHALL BE ENTITLED TO
REQUEST THE ADMINISTRATIVE JUDGE OF THE SUPERIOR
COURT FOR THE JUDICIAL DISTRICT OF HARTFORD-NEW
BRITAIN TO APPOINT A SINGLE JUDGE TO SUPERVISE THE
REHABILITATION AND HEAR ANY CASES OR CONTROVERSIES
ARISING OUT OF OR RELATED TO THE REHABILITATION.
REHABILITATION PROCEEDINGS SHALL BE EXEMPT FROM
ANY DORMANCY OR SIMILAR PROGRAM MAINTAINED BY THE
COURT FOR THE EARLY CLOSURE OF CIVIL ACTIONS. The
filing or recording of the order with the clerk of
the Superior Court or recorder of deeds of the
judicial district in which the principal business
of the company is conducted, or the judicial
district in which its principal office or place of
business is located, shall impart the same notice
as a deed, bill of sale or other evidence of title
duly filed or recorded with that recorder of deeds
would have imparted. The order to rehabilitate the
insurer shall by operation of law vest title to
all assets of the insurer in the rehabilitator.
(b) Any order issued under this section shall
require accounting to the court by the
rehabilitator. Accountings shall be at such
intervals as the court specified in its order, but
no less frequently than semiannually. Each
accounting shall include a report concerning the
rehabilitator's opinion as to the likelihood that
a plan under subsection (e) of section 38a-916, AS
AMENDED BY THIS ACT, will be prepared by the
rehabilitator and the timetable for doing so.
(c) Entry of an order of rehabilitation shall
not constitute an anticipatory breach of any
contracts of the insurer nor shall it be grounds
for retroactive revocation or retroactive
cancellation of any contracts of the insurer
unless such revocation or cancellation is done by
the rehabilitator pursuant to section 38a-916, AS
AMENDED BY THIS ACT.
(d) IN ORDER TO FACILITATE THE PROMPT AND
FINAL RESOLUTION FOR ALL AFFECTED BY A PLAN OF
REHABILITATION, ANY APPEAL FROM AN ORDER OF
REHABILITATION OR AN ORDER APPROVING A PLAN OF
REHABILITATION SHALL BE HEARD ON AN EXPEDITED
BASIS. A STAY OF AN ORDER OF REHABILITATION OR AN
ORDER APPROVING A PLAN OF REHABILITATION SHALL NOT
BE GRANTED UNLESS THE APPELLANT DEMONSTRATES THAT
EXTRAORDINARY CIRCUMSTANCES WARRANT DELAYING THE
RECOVERY UNDER THE PLAN OF REHABILITATION OF ALL
OTHER PERSONS, INCLUDING POLICYHOLDERS. IF THE
PLAN PROVIDES AN APPROPRIATE MECHANISM FOR
ADJUSTMENT IN THE EVENT OF ANY ADVERSE RULING FROM
AN APPEAL, NO STAY SHALL BE GRANTED.
Sec. 10. Section 38a-916 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) The commissioner as rehabilitator may
appoint one or more special deputies, who shall
have all the powers and responsibilities of the
rehabilitator granted under this section, and
NOTWITHSTANDING ANY CONTRARY PROVISION OF LAW,
INCLUDING CHAPTERS 55a AND 67, the commissioner
may employ such counsel, clerks and assistants as
deemed necessary. The compensation of the special
deputy, counsel, clerks and assistants and all
expenses of taking possession of the insurer and
of conducting the proceedings shall be fixed by
the commissioner, with the approval of the court
and shall be paid out of the funds or assets of
the insurer. The persons appointed under this
section shall serve at the pleasure of the
commissioner. The commissioner, as rehabilitator,
may, with the approval of the court, appoint an
advisory committee of policyholders, claimants or
other creditors including guaranty associations
should such a committee be deemed necessary, [.
Such] EXCEPT THAT THE DECISION TO APPOINT AN
ADVISORY COMMITTEE SHALL BE AT THE SOLE DISCRETION
OF THE COMMISSIONER, AND THE committee shall serve
at the pleasure of the commissioner and shall
serve without compensation [other than] AND
WITHOUT reimbursement for [reasonable travel and
per diem living] expenses. No other committee of
any nature shall be appointed by the commissioner
or the court in rehabilitation proceedings
conducted under sections 38a-903 to 38a-961,
inclusive, AS AMENDED.
(b) In the event that the property of the
insurer does not contain sufficient cash or liquid
assets to defray the costs incurred, the
commissioner may advance the costs so incurred out
of any appropriation for the maintenance of the
Insurance Department. Any amounts so advanced for
expenses of administration shall be repaid to the
commissioner for the use of [said] THE Insurance
Department out of the first available money of the
insurer.
(c) The rehabilitator may take such action as
he deems necessary or appropriate to reform and
revitalize the insurer. He shall have all the
powers of the directors, officers and managers,
whose authority shall be suspended, except as they
are redelegated by the rehabilitator. He shall
have full power to direct and manage, to hire and
discharge employees subject to any contract rights
they may have and to deal with the property and
business of the insurer.
(d) If it appears to the rehabilitator that
there has been criminal or tortious conduct, or
breach of any contractual or fiduciary obligation
detrimental to the insurer by any officer,
manager, producer, employee or other person, he
may pursue all appropriate legal remedies on
behalf of the insurer.
(e) If the rehabilitator determines that
reorganization, consolidation, conversion,
reinsurance, merger or other transformation of the
insurer is appropriate, he shall prepare a plan to
effect such changes. Upon application of the
rehabilitator for approval of the plan, and after
such notice and hearing as the court may
prescribe, the court may either approve or
disapprove the plan proposed, or may modify it and
approve it as modified. Any plan approved under
this section shall be, in the judgment of the
court, fair and equitable to all parties
concerned. If the plan is approved, the
rehabilitator shall carry out the plan. In the
case of a life insurer, the plan proposed may
include the imposition of liens upon the policies
of the company, if all rights of shareholders are
first relinquished. A plan for a life insurer may
also propose imposition of a moratorium upon loan
and cash surrender rights under policies, for such
period and to such an extent as may be necessary.
(f) The rehabilitator shall have the power
pursuant to sections 38a-928 and 38a-929 to avoid
fraudulent transfers, AND MAY EXERCISE ANY OF THE
POWERS UNDER SECTION 38a-923, AS AMENDED BY THIS
ACT, AS NECESSARY OR APPROPRIATE, EXCEPT THAT IN
THE CASE OF A LIFE INSURER, THE REHABILITATOR OF
SUCH AN INSURER MAY, AS PART OF A COURT APPROVED
PLAN OF REHABILITATION, MODIFY OR RESTRUCTURE THE
POLICIES OR CONTRACTS OF INSURANCE. IN THE EVENT
THE REHABILITATOR PROPOSES TO MODIFY OR
RESTRUCTURE THE POLICIES OR CONTRACTS OF
INSURANCE, THE REHABILITATOR MAY, WITH THE
CONCURRENCE OF THE COURT, APPROVE PAYMENT OF
CERTAIN EXPENSES INCURRED BY AN ADVISORY COMMITTEE
APPOINTED PURSUANT TO SUBSECTION (a) OF THIS
SECTION, THE EXPENSES TO BE LIMITED TO THE
REASONABLE AND NECESSARY EXPENSES INCURRED IN
OBTAINING AN EXPERT EVALUATION OF THE EFFECT UPON
POLICYHOLDERS OF ANY PROPOSED MODIFICATION OR
RESTRUCTURING OF POLICIES OR CONTRACTS OF
INSURANCE.
(g) THE ENUMERATION, IN THIS SECTION, OF THE
POWERS AND AUTHORITY OF THE REHABILITATOR SHALL
NOT BE CONSTRUED AS A LIMITATION UPON THE
REHABILITATOR, NOR SHALL IT EXCLUDE IN ANY MANNER
THE RIGHT TO DO OTHER ACTS NOT SPECIFICALLY
ENUMERATED OR OTHERWISE PROVIDED FOR, AS MAY BE
NECESSARY OR APPROPRIATE FOR THE ACCOMPLISHMENT OF
OR IN THE AID OF THE PURPOSE OF REHABILITATION.
Sec. 11. Section 38a-920 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) An order to liquidate the business of a
domestic insurer shall appoint the commissioner
and his successors in office AS liquidator and
shall direct the liquidator [forthwith] to take
possession of the assets of the insurer and to
administer them under the general supervision of
the court. THE COMMISSIONER SHALL BE ENTITLED TO
REQUEST THE ADMINISTRATIVE JUDGE OF THE SUPERIOR
COURT FOR THE JUDICIAL DISTRICT OF HARTFORD-NEW
BRITAIN TO APPOINT A SINGLE JUDGE TO SUPERVISE THE
LIQUIDATION AND HEAR ANY CASES OR CONTROVERSIES
ARISING OUT OF OR RELATED TO THE LIQUIDATION.
LIQUIDATION PROCEEDINGS SHALL BE EXEMPT FROM ANY
DORMANCY OR SIMILAR PROGRAM MAINTAINED BY THE
COURT FOR THE EARLY CLOSURE OF CIVIL ACTIONS. The
liquidator shall be vested by operation of law
with the title to all of the property, contracts,
and rights of action and all of the books and
records of the insurer ordered liquidated,
wherever located, as of the entry of the final
order of liquidation. The filing or recording of
the order with the clerk of the Superior Court and
with the recorder of deeds of the town in which
its principal office or place of business is
located, or, in the case of real estate with the
recorder of deeds of the town where the property
is located, shall impart the same notice as a
deed, bill of sale, or other evidence of title
duly filed or recorded with that recorder of deeds
would have imparted.
(b) Upon issuance of the order, the rights and
liabilities of any such insurer and of its
creditors, policyholders, shareholders, members
and all other persons interested in its estate
shall become fixed as of the date of entry of the
order of liquidation, except as provided in
sections 38a-921, AS AMENDED BY THIS ACT, and
38a-939, AS AMENDED BY THIS ACT, UNLESS OTHERWISE
FIXED BY THE SUPERIOR COURT.
(c) An order to liquidate the business of an
alien insurer domiciled in this state shall be in
the same terms and have the same legal effect as
an order to liquidate a domestic insurer, except
that the assets and the business in the United
States shall be the only assets and business
included therein.
(d) At the time of petitioning for an order of
liquidation, or at any time thereafter, the
commissioner, after making appropriate findings of
an insurer's insolvency, may petition the court
for a judicial declaration of such insolvency.
After providing such notice and hearing as it
deems proper the court may make the declaration.
(e) Any order issued under this section shall
require THE LIQUIDATOR TO SUBMIT financial reports
to the court. [by the liquidator.] Financial
reports shall include, [as] AT a minimum, A
STATEMENT OF the assets and liabilities of the
insurer and all funds received or disbursed by the
liquidator during the current period. Financial
reports shall be filed within one year of the
liquidation order and at least annually
thereafter.
(f) (1) [Within] NOT LATER THAN five days
after the initiation of an appeal of an order of
liquidation, which order has not been stayed, the
commissioner shall present for the court's
approval a plan for the continued performance of
the defendant company's policy claim obligations,
including the duty to defend the insured under
liability insurance policies, during the pendency
of an appeal. Such plan shall provide for the
continued performance and payment of policy claim
obligations in the normal course of events,
notwithstanding the grounds alleged in support of
the order of liquidation including the ground of
insolvency. In the event the defendant company's
financial condition will not, in the judgment of
the commissioner, support the full performance of
all policy claim obligations during the appeal
pendency period, the plan may prefer the claims of
certain policyholders and claimants over creditors
and interested parties as well as other
policyholders and claimants, as the commissioner
finds to be fair and equitable considering the
relative circumstances of such policyholders and
claimants. The court shall examine the plan
submitted by the commissioner and if it finds the
plan to be in the best interests of the parties,
the court shall approve the plan. No action shall
lie against the commissioner or any of his
deputies, agents, clerks, assistants or attorneys
by any party based on preference in an appeal
pendency plan approved by the court.
(2) The appeal pendency plan shall not
supersede or affect the obligations of any
insurance guaranty association.
(3) Any such plans shall provide for equitable
adjustments to be made by the liquidator to any
distributions of assets to guaranty associations,
in the event that the liquidator pays claims from
assets of the estate, which would otherwise be the
obligations of any particular guaranty association
but for the appeal of the order of liquidation,
such that all guaranty associations equally
benefit on a pro rata basis from the assets of the
estate. In the event [,] an order of liquidation
is set aside upon any appeal, the company shall
not be released from delinquency proceedings
unless and until funds advanced by any guaranty
association, including reasonable administrative
expenses in connection therewith relating to
obligations of the company, shall be repaid in
full, together with interest at the judgment rate
of interest or unless an arrangement for repayment
thereof has been made with the consent of all
applicable guaranty associations.
Sec. 12. Section 38a-921 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) [All policies, other than life or health
insurance or annuities, in effect at the time of
issuance of an order of liquidation shall continue
in force only for the lesser of] NOTWITHSTANDING
ANY POLICY OR CONTRACT LANGUAGE OR ANY OTHER
PROVISION OF LAW, ALL POLICIES, INSURANCE
CONTRACTS, OTHER THAN REINSURANCE, SURETY BONDS OR
SURETY UNDERTAKINGS, OTHER THAN LIFE OR HEALTH
INSURANCE OR ANNUITIES, IN EFFECT AT THE TIME OF
ISSUANCE OF AN ORDER OF LIQUIDATION SHALL CONTINUE
IN FORCE ONLY FOR THE LESSER OF: (1) A period of
thirty days from the date of entry of the
liquidation orders; (2) the expiration of the
policy coverage; (3) the date when the insured has
replaced the insurance coverage with equivalent
insurance in another insurer or otherwise
terminated the policy; (4) the liquidator has
effected a transfer of the policy obligation
pursuant to subdivision (8) of subsection (a) of
section 38a-923, AS AMENDED BY THIS ACT; or (5)
the date proposed by the liquidator and approved
by the court to cancel coverage.
(b) An order of liquidation pursuant to
section 38a-920, AS AMENDED, shall terminate
coverages at the time specified in subsection (a)
of this section for purposes of any other statute.
(c) Policies of life or health insurance or
annuities shall continue in force for such period
and under such terms as is provided for by any
applicable guaranty association. [or foreign
guaranty association.]
(d) Policies of life or health insurance or
annuities or any period of coverage of such
policies not covered by a guaranty association [or
foreign guaranty association] shall terminate
under subsections (a) and (b) of this section.
(e) THE CANCELLATION OF ANY BOND OR SURETY
UNDERTAKING SHALL NOT RELEASE ANY COSURETY OR
GUARANTOR.
(f) A CANCELLATION UNDER THIS SECTION SHALL
NOT AFFECT THE OBLIGATIONS OF THE INSOLVENT
INSURER'S REINSURERS WITH RESPECT TO LOSSES
ARISING OUT OF ACTS OR OCCURRENCES PRIOR TO SUCH
CANCELLATION.
Sec. 13. Section 38a-923 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) The liquidator shall have the power: (1)
To appoint a special deputy to act for him under
sections 38a-903 to 38a-961, inclusive, AS
AMENDED, and to determine his reasonable
compensation. The special deputy shall have all
powers of the liquidator granted by this section.
The special deputy shall serve at the pleasure of
the liquidator; (2) to employ employees and
agents, legal counsel, actuaries, accountants,
appraisers, consultants and such other personnel
as he may deem necessary to assist in the
liquidation, NOTWITHSTANDING ANY CONTRARY
PROVISION OF LAW, INCLUDING CHAPTERS 55a AND 67;
(3) to fix the reasonable compensation of
employees and agents, legal counsel, actuaries,
accountants, appraisers and consultants with the
approval of the court; (4) to pay reasonable
compensation to persons appointed and to defray
from the funds or assets of the insurer all
expenses of taking possession of, conserving,
conducting, liquidating, disposing of, or
otherwise dealing with the business and property
of the insurer. THE LIQUIDATOR SHALL HAVE THE
POWER TO PAY REASONABLE COMPENSATION TO SUCH
PERSONS ON AN INTERIM BASIS. ALL SUCH INTERIM
PAYMENTS SHALL BE SUBJECT TO THE APPROVAL OF THE
COURT UPON SUBMISSION BY THE LIQUIDATOR. In the
event that the property of the insurer does not
contain sufficient cash or liquid assets to defray
the costs incurred, the commissioner may advance
the costs so incurred out of any appropriation for
the maintenance of the Insurance Department. Any
amounts so advanced for expenses of administration
shall be repaid to the commissioner for the use of
the Insurance Department out of the first
available moneys of the insurer; (5) to hold
hearings, to subpoena witnesses, to compel their
attendance, to administer oaths, to examine any
person under oath and to compel any person to
subscribe to his testimony after it has been
correctly reduced to writing, and in connection
therewith to require the production of any books,
papers, records or other documents which he deems
relevant to the inquiry; (6) to collect all debts
and moneys due and claims belonging to the
insurer, wherever located, and for this purpose
(A) to institute timely action in other
jurisdictions in order to forestall garnishment
and attachment proceedings against such debts; (B)
to do such other acts as are necessary or
expedient to collect, conserve or protect its
assets or property, including the power to sell,
compound, compromise or assign debts for purposes
of collection upon such terms and conditions as he
deems best; and (C) to pursue any creditor's
remedies available to enforce [his] THE CREDITOR'S
claims; (7) to conduct public and private sales of
the property of the insurer; (8) to use assets of
the estate of an insurer under a liquidation order
to transfer policy obligations to a solvent
assuming insurer, if the transfer can be arranged
without prejudice to applicable priorities under
section 38a-944, AS AMENDED; (9) to acquire,
hypothecate, encumber, lease, improve, sell,
transfer, abandon or otherwise dispose of or deal
with, any property of the insurer at its market
value or upon such terms and conditions as are
fair and reasonable. [He] THE LIQUIDATOR shall
also have power to execute, acknowledge and
deliver any and all deeds, assignments, releases
and other instruments necessary or proper to
effectuate any sale of property or other
transaction in connection with the liquidation;
(10) to borrow money on the security of the assets
in the insurer's estate or without security and to
execute and deliver all documents necessary to
that transaction for the purpose of facilitating
the liquidation. Any such funds borrowed may be
repaid as an administrative expense and have
priority over any other claims in class 1 under
the priority of distributions; (11) to enter into
such contracts as are necessary to carry out the
order to liquidate and to affirm or disavow any
contracts to which the insurer is a party; (12) to
continue to prosecute and to institute in the name
of the insurer or in [his] THE LIQUIDATOR'S own
name any and all suits and other legal
proceedings, in this state or elsewhere, and to
abandon the prosecution of claims he deems
unprofitable to pursue further. If the insurer is
dissolved pursuant to section 38a-922, [he] THE
LIQUIDATOR shall have the power to apply to any
court in this state or elsewhere for leave to
substitute [himself] THE LIQUIDATOR for the
insurer as plaintiff; (13) to prosecute any action
which may exist [in] ON behalf of the creditors,
members, policyholders or shareholders of the
insurer against any officer of the insurer or any
other person; (14) to remove any or all records
and property of the insurer to the offices of the
commissioner or to such other place as may be
convenient for the purposes of efficient and
orderly execution of the liquidation. Guaranty
associations [and foreign guaranty associations]
shall have such reasonable access to the records
of the insurer as is necessary for them to carry
out their statutory obligations; (15) to deposit
in one or more banks in this state such sums as
are required for meeting current administration
expenses and dividend distributions; (16) to
invest all sums not currently needed, unless the
court orders otherwise; (17) to file any necessary
documents for record in the office of any recorder
of deeds or record office in this state or
elsewhere where property of the insurer is
located; (18) to assert all defenses available to
the insurer as against third persons, including
statutes of limitation, statutes of frauds and the
defense of usury. A waiver of any defense by the
insurer after a petition in liquidation has been
filed shall not bind the liquidator. Whenever a
guaranty association or foreign guaranty
association has an obligation to defend any suit,
the liquidator shall give precedence to such
obligation and may defend only in the absence of a
defense by such guaranty associations; (19) to
exercise and enforce all the rights, remedies, and
powers of any creditor, shareholder, policyholder,
or member, including any power to avoid any
transfer or lien that may be given by the general
law and that is not included with sections 38a-928
to 38a-930, inclusive; (20) to intervene in any
proceeding wherever instituted that might lead to
the appointment of a receiver or trustee and to
act as the receiver or trustee whenever the
appointment is offered; (21) to enter into
agreements with any receiver or commissioner of
any other state relating to the rehabilitation,
liquidation, conservation or dissolution of an
insurer doing business in both states; (22) to
exercise all powers [now held or hereafter]
conferred upon receivers by the laws of this state
not inconsistent with the provisions of sections
38a-903 to 38a-961, inclusive, AS AMENDED; (23) to
appoint, with the approval of the court, an
advisory committee of policyholders, claimants or
other creditors including guaranty associations
should such a committee be deemed necessary.
[Such] THE committee shall serve at the pleasure
of the commissioner and THE DECISION TO APPOINT AN
ADVISORY COMMITTEE SHALL BE AT THE SOLE DISCRETION
OF THE COMMISSIONER. THE COMMITTEE shall serve
without compensation [other than reimbursement for
reasonable travel and per diem living expenses]
AND WITHOUT REIMBURSEMENT FOR EXPENSES. No other
committee shall be appointed by the commissioner
or the court in liquidation proceedings conducted
under sections 38a-903 to 38a-961, inclusive, AS
AMENDED; (24) to audit the books and records of
all agents of the insurer insofar as those records
relate to the business activities of the insurer.
(b) The enumeration, in this section, of the
powers and authority of the liquidator shall not
be construed as a limitation upon him, nor shall
it exclude in any manner his right to do [such]
other acts not [herein] specifically enumerated,
or otherwise provided for, as may be necessary or
appropriate for the accomplishment of or in aid of
the purpose of liquidation.
(c) [Notwithstanding the powers of the
liquidator as stated in subsections (a) and (b) to
the contrary, the liquidator shall have no
obligation to defend claims or to continue to
defend claims subsequent to the entry of a
liquidation order.] THE LIQUIDATOR SHALL NOT BE
OBLIGATED TO DEFEND ANY ACTION AGAINST THE INSURER
OR INSURED AND MAY ENFORCE INJUNCTIONS, STAYS AND
THE CLAIMS PROCEDURE SET FORTH IN SECTIONS 38a-903
TO 38a-961, INCLUSIVE, AS AMENDED. THE LIQUIDATOR
MAY ELECT TO DEFEND ANY ACTIONS AGAINST THE
INSURER OR INSUREDS IF IT IS IN THE BEST INTEREST
OF THE ESTATE. ANY INSUREDS NOT DEFENDED BY A
GUARANTY ASSOCIATION SHALL PROVIDE THEIR OWN
DEFENSE, AND INCLUDE THE COST OF THE DEFENSE AS
PART OF THEIR CLAIMS, IF THE DEFENSE WAS AN
OBLIGATION OF THE INSURER. THE RIGHTS OF THE
LIQUIDATOR TO CONTEST COVERAGE ON A PARTICULAR
CLAIM SHALL BE DEEMED PRESERVED WITHOUT THE
NECESSITY FOR AN EXPRESS RESERVATION OF RIGHTS.
Sec. 14. Section 38a-924 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) Unless the court otherwise directs, the
liquidator shall give or cause to be given notice
of the liquidation order as soon as possible: (1)
By first class mail and [either by telegram or
telephone] ELECTRONIC COMMUNICATION to the
Insurance Commissioner of each jurisdiction in
which the insurer is doing business; (2) by first
class mail to any guaranty association [or foreign
guaranty association] which is or may become
obligated as a result of the liquidation; (3) by
first class mail to all [insurance agents of the
insurer] THE INSURER'S AGENTS, BROKERS OR
PRODUCERS OF RECORD, WITH CURRENT APPOINTMENTS OR
CURRENT LICENSES TO REPRESENT THE INSURER, AND TO
ALL OTHER AGENTS, BROKERS OR PRODUCERS AS THE
LIQUIDATOR DEEMS APPROPRIATE AT THEIR LAST KNOWN
ADDRESS; (4) by first class mail to all persons
known or reasonably expected to have claims
against the insurer, including all policyholders
AND REINSURERS, at their last known addresses as
indicated by the records of the insurer; and (5)
by publication in a newspaper of general
circulation in the town in which the insurer has
its principal place of business and in such other
locations as the liquidator deems appropriate.
(b) WHENEVER THE INSURANCE COMMISSIONER OF
THIS STATE IS APPOINTED RECEIVER FOR AN INSURER
DOMICILED IN ANOTHER STATE, THE NOTICE OF THE
LIQUIDATION ORDER GIVEN BY THE DOMICILIARY
LIQUIDATOR IN COMPLIANCE WITH THE LAWS OF THAT
STATE SHALL BE SUFFICIENT NOTICE, AND THE
ANCILLARY RECEIVER SHALL NOT BE REQUIRED TO GIVE
ANY NOTICE UNLESS THE DOMICILIARY LIQUIDATOR FAILS
TO GIVE NOTICE. THE ANCILLARY RECEIVER MAY REQUEST
THAT THE DOMICILIARY LIQUIDATOR'S NOTICE MENTION
THE EXISTENCE OF ANY APPLICABLE GUARANTY
ASSOCIATION LAWS IN THIS STATE, AND INFORM
CLAIMANTS THAT ANY CLAIMS WHICH THE GUARANTY
ASSOCIATION OF THIS STATE MAY COVER MAY BE FILED
WITH THE DOMICILIARY LIQUIDATOR AND WILL BE
FORWARDED TO THE APPLICABLE GUARANTY ASSOCIATION.
IF NOTICE BY THE DOMICILIARY LIQUIDATOR IN ANOTHER
STATE DOES NOT MENTION THE POSSIBILITY OF GUARANTY
ASSOCIATION COVERAGE IN THIS STATE, THEN THE
ANCILLARY RECEIVER SHALL ARRANGE TO GIVE NOTICE TO
THOSE WHO MAY HAVE RIGHTS UNDER APPLICABLE
GUARANTY ASSOCIATION LAWS IN THIS STATE, TOGETHER
WITH A CITATION TO THE GUARANTY ASSOCIATION
STATUTE IN THIS STATE. THE NOTICE MAY INCLUDE A
BRIEF SUMMARY OF CLAIMANT'S RIGHTS UNDER THE
GUARANTY ASSOCIATION LAWS IN THIS STATE AND ANY
OTHER INFORMATION DEEMED APPROPRIATE.
[(b) Notice] (c) EXCEPT AS OTHERWISE
ESTABLISHED BY THE LIQUIDATOR WITH THE APPROVAL OF
THE COURT, NOTICE to potential claimants under
subsection (a) of this section shall require
claimants to file with the liquidator their claims
together with proper proofs [thereof pursuant to]
SPECIFIED IN section 38a-938, AS AMENDED BY THIS
ACT, on or before a date the liquidator shall
specify in the notice. The liquidator need not
require persons claiming cash surrender values or
other investment values in life insurance and
annuities to file a claim. All claimants shall
have a duty to keep the liquidator informed of any
changes of address.
[(c)] (d) (1) Notice under subsection (a) to
agents of the insurer and to potential claimants
who are policyholders shall include, where
applicable, notice that coverage by state guaranty
associations may be available for all or part of
policy benefits in accordance with applicable
state guaranty laws.
(2) The liquidator shall promptly provide to
the guaranty associations such information
concerning the identities and addresses of such
policyholders and their policy coverages as may be
within the liquidator's possession or control, and
otherwise cooperate with guaranty associations to
assist them in providing to such policyholders
timely notice of the guaranty associations'
coverage of policy benefits, including, as
applicable, coverage of claims and continuation or
termination of coverages.
[(d)] (e) If notice is given in accordance
with this section, the distribution of assets of
the insurer under sections 38a-903 to 38a-961,
inclusive, AS AMENDED, shall be conclusive with
respect to all claimants, whether or not they
received notice.
(f) NOTWITHSTANDING THE PROVISIONS OF
SUBSECTIONS (a) TO (e), INCLUSIVE, OF THIS
SECTION, THE LIQUIDATOR SHALL HAVE NO DUTY TO
LOCATE ANY PERSON IF NO ADDRESS IS FOUND IN THE
RECORDS OF THE INSURER, OR IF MAILINGS ARE
RETURNED TO THE LIQUIDATOR BECAUSE OF AN INABILITY
TO DELIVER AT THE ADDRESS SHOWN IN THE COMPANY'S
BOOKS AND RECORDS. IN SUCH CIRCUMSTANCES THE
NOTICE BY PUBLICATION AS REQUIRED BY THIS CHAPTER
AND SECTIONS 7, 15 AND 22 OF THIS ACT, OR ACTUAL
NOTICE RECEIVED SHALL BE SUFFICIENT NOTICE.
WRITTEN CERTIFICATION BY THE LIQUIDATOR OR OTHER
KNOWLEDGEABLE PERSON ACTING FOR THE LIQUIDATOR,
THAT THE NOTICES WERE DEPOSITED IN THE UNITED
STATES MAIL, POSTAGE PREPAID, SHALL BE PRIMA FACIE
EVIDENCE OF MAILING AND RECEIPT.
(g) UPON APPLICATION OF THE LIQUIDATOR AND FOR
GOOD CAUSE SHOWN, THE COURT MAY FIND THAT NOTICE
BY PUBLICATION AS REQUIRED IN THIS SECTION IS
SUFFICIENT NOTICE TO THOSE PERSONS HOLDING AN
OCCURRENCE POLICY WHICH EXPIRED MORE THAN FOUR
YEARS PRIOR TO THE ENTRY OF THE ORDER OF
LIQUIDATION, AND UNDER WHICH THERE ARE NO PENDING
CLAIMS; OR THE COURT MAY ORDER SUCH NOTICE TO
THOSE PERSONS AS IT DEEMS APPROPRIATE.
Sec. 15. (NEW) (a) If an order instituting a
delinquency proceeding against an insurer
authorized to do business in this state is entered
under chapter 704c of the general statutes or
sections 7, 15 and 22 of this act, the receiver
appointed under the order has a right to recover
on behalf of the insurer from any affiliate that
controlled the insurer the amount of
distributions, other than stock dividends paid by
the insurer on its capital stock, made at any time
during the five years preceding the petition for
liquidation, rehabilitation or conservation. This
recovery is subject to the limitations of
subsections (b) to (g), inclusive, of this
section. For purposes of this section,
"distribution" includes any dividend, or any loan,
advance, payment or other transfer for which the
insurer did not receive fair consideration prior
to the commencement of delinquency proceedings.
(b) No distribution is recoverable if the
recipient 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 its
solvency.
(c) The maximum amount recoverable under this
section is the amount needed, in excess of all
other available assets, to pay all claims under
the receivership, reduced for each recipient by
any amount the recipient has already paid to
receivers under similar laws of other states.
(d) Any person who was an affiliate that
controlled the insurer at the time the
distributions were paid is liable up to the amount
of distributions received. Any person who was an
affiliate that controlled the insurer at the time
the distributions were declared is liable up to
the amount of distributions he would have received
if he had been paid immediately. If two or more
persons are liable regarding the same
distributions, they shall be jointly and severally
liable.
(e) If any person liable under subsection (d)
of this section is insolvent, all affiliates that
controlled that person at the time the dividend
was declared or paid shall be jointly and
severally liable for any resulting deficiency in
the amount recovered from the insolvent affiliate.
(f) An action or proceeding under this section
may not be commenced after the earlier of: (1) Two
years after the appointment of a rehabilitator
under section 38a-915 of the general statutes, as
amended by this act, or a liquidator under section
38a-920 of the general statutes, as amended by
this act; or (2) the date the rehabilitation is
terminated under subsection (b) of section 38a-918
of this general statutes or the liquidation is
terminated under section 38a-948 of the general
statutes.
Sec. 16. Section 38a-935 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) (1) A producer, premium finance company or
any other person, other than the insured,
responsible for the payment of a premium shall [be
obligated to] pay any unpaid collected premium
INCLUDING ANY AMOUNT REPRESENTING COMMISSIONS held
by such person at the time of the [declaration of
insolvency] ENTRY OF THE LIQUIDATION ORDER,
whether earned or unearned BASED ON THE
TERMINATION OF COVERAGE UNDER SECTION 38a-921, AS
AMENDED BY THIS ACT, and any unpaid earned
premium, all as shown on the records of the
insurer. A producer, premium finance company or
any other person shall have no obligation to pay
an uncollected unpaid unearned premium to the
liquidator. [The insured shall have the right to
recover from such person any part of an unearned
premium that represents] (2) THE LIQUIDATOR SHALL
ALSO HAVE THE RIGHT TO RECOVER FROM ANY PERSON
OTHER THAN THE INSURED, RESPONSIBLE FOR THE
PAYMENT OF A PREMIUM, ANY UNEARNED commission
actually paid or credited to such person BASED ON
THE TERMINATION OF COVERAGE UNDER SECTION 38a-921,
AS AMENDED BY THIS ACT. Credits or set-offs or
both shall not be allowed to a producer or premium
finance company, OR ANY OTHER PERSON AGAINST
UNPAID PREMIUM DUE THE INSURER for any amounts
advanced to the insurer by [the producer or
premium finance company] SUCH PERSON on behalf of,
but in the absence of a payment by, the insured,
OR FOR ANY OTHER AMOUNT PAID BY SUCH PERSON TO ANY
OTHER PERSON AFTER THE ENTRY OF THE ORDER OF
LIQUIDATION. (3) An insured shall [be obligated
to] pay, EITHER DIRECTLY TO THE LIQUIDATOR OR TO
ANY AGENT WHO HAS PAID OR IS OBLIGATED TO PAY THE
LIQUIDATOR ON BEHALF OF THE INSURED, any unpaid
earned premium OR RETROSPECTIVELY RATED PREMIUM
due the insurer [at the time of the declaration of
insolvency, as shown on the records of the
insurer] BASED ON THE TERMINATION OF COVERAGE
UNDER SECTION 38a-921, AS AMENDED BY THIS ACT.
PREMIUM ON SURETY BUSINESS SHALL BE DEEMED EARNED
AT INCEPTION IF NO POLICY TERM CAN BE DETERMINED.
ALL OTHER PREMIUM SHALL BE DEEMED EARNED AND SHALL
BE PRORATED OVER THE DETERMINED POLICY TERM,
REGARDLESS OF ANY PROVISION IN THE BOND, GUARANTY,
CONTRACT OR OTHER AGREEMENT. IF A CLAIM FOR LOSSES
INCURRED UNDER A POLICY IS APPROVED BY THE COURT
UNDER SUBSECTION (b) OF SECTION 38a-945, AS
AMENDED BY THIS ACT, THEN ALL PREMIUM FOR THE FULL
POLICY TERM SHALL BE DEEMED EARNED. (4) ANY PERSON
WHO COLLECTED PREMIUM, OR FINANCED PREMIUM UNDER A
PREMIUM FINANCE CONTRACT, THAT IS DUE THE INSURER
IN LIQUIDATION SHALL BE DEEMED TO HOLD THAT
PREMIUM IN TRUST AS A FIDUCIARY FOR THE BENEFIT OF
THE INSURER AND TO HAVE AVAILED HIMSELF OF THE
LAWS OF THIS STATE, REGARDLESS OF ANY PROVISION IN
ANY AGENCY CONTRACT OR OTHER AGREEMENT. (5) ANY
PREMIUM FINANCE COMPANY SHALL BE OBLIGATED TO PAY
ANY AMOUNTS DUE THE INSURER FROM PREMIUM FINANCE
CONTRACTS, WHETHER THE PREMIUM IS EARNED OR
UNEARNED. THE LIQUIDATOR HAS THE RIGHT TO COLLECT
ANY UNPAID FINANCED PREMIUM DIRECTLY FROM THE
PREMIUM FINANCE COMPANY, BY TAKING AN ASSIGNMENT
OF THE UNDERLYING PREMIUM FINANCE CONTRACTS, OR
DIRECTLY FROM THE INSURED WHO IS A PARTY TO THE
PREMIUM FINANCE CONTRACT.
(b) Upon satisfactory evidence of a violation
of this section, BY A PERSON OTHER THAN AN
INSURED, the commissioner may pursue either one or
both of the following courses of action: (1)
Suspend or revoke or refuse to renew the licenses
of such offending party or parties; (2) impose a
penalty of not more than one thousand dollars for
each and every act in violation of this section by
said party or parties.
(c) Before the commissioner [shall take] TAKES
any action as set forth in subsection (b) of this
section, he shall give written notice to the
person, company, association, or exchange accused
of violating the law, stating specifically the
nature of the alleged violation, and fixing a time
and place, at least ten days thereafter, when a
hearing on the matter shall be held. After such
hearing, or upon failure of the accused to appear
at such hearing, the commissioner, if he shall
find such violation, shall impose such of the
penalties under subsection (b) of this section as
he deems advisable.
(d) [When the commissioner shall take action
in any or all of the ways set out in subsection
(b) of this section, the party aggrieved may
appeal from said action to the Superior Court.]
ANY PERSON AGGRIEVED BY THE ACTION OF THE
COMMISSIONER IN REVOKING, SUSPENDING OR REFUSING
TO GRANT A LICENSE OR IN IMPOSING A FINE MAY
APPEAL THEREFROM IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 4-183, EXCEPT VENUE FOR SUCH APPEAL
SHALL BE IN THE JUDICIAL DISTRICT OF HARTFORD-NEW
BRITAIN.
Sec. 17. Section 38a-938 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) Proof of claim shall consist of a
statement signed by the claimant that includes all
of the following that are applicable: (1) The
particulars of the claim including the
consideration given for it; (2) the identity and
amount of the security on the claim; (3) the
payments made on the debt, if any; (4) that the
sum claimed is justly owing and that there is no
set-off, counterclaim, or defense to the claim;
(5) any right of priority of payment or other
specific right asserted by the claimants; (6) a
copy of ANY written instrument which is the
foundation of the claim; [and] (7) the name and
address of the claimant and the attorney who
represents him, if any; AND (8) THE SOCIAL
SECURITY OR FEDERAL EMPLOYER IDENTIFICATION NUMBER
OF THE CLAIMANT.
(b) No claim need be considered or allowed if
it does not contain all the information in
subsection (a) of this section which may be
applicable. The liquidator may require that a
prescribed form be used and may require that other
information and documents be included.
(c) At any time the liquidator may request the
claimant to present information or evidence
supplementary to that required under subsection
(a) of this section and may take testimony under
oath, require production of affidavits or
depositions or otherwise obtain additional
information or evidence.
(d) No judgment or order against an insured or
the insurer entered after the date of filing of a
successful petition for liquidation, and no
judgment or order against an insured or the
insurer entered at any time by default or by
collusion, need be considered as evidence of
liability or of quantum of damages. No judgment or
order against an insured or the insurer entered
within four months before the filing of the
petition need be considered as evidence of
liability or of the quantum of damages.
(e) [All claims of a guaranty association or
foreign guaranty association shall be in such form
and contain such substantiation as may be agreed
to by the association and the liquidator.] A
GUARANTY ASSOCIATION SHALL BE PERMITTED TO FILE A
SINGLE OMNIBUS PROOF OF CLAIM FOR ALL CLAIMS OF
THE ASSOCIATION IN CONNECTION WITH PAYMENT OF
CLAIMS OF THE INSOLVENT INSURER. THE OMNIBUS PROOF
OF CLAIM SHALL BE PERIODICALLY UPDATED BY THE
ASSOCIATION, AND THE LIQUIDATOR MAY REQUIRE THE
ASSOCIATION TO SUBMIT A REASONABLE AMOUNT OF
SUPPORTING DOCUMENTATION.
Sec. 18. Section 38a-939 of the general
statutes is repealed and the following is
substituted in lieu thereof:
[(a) The claim of a third party which is
contingent only on his first obtaining a judgment
against the insured shall be considered and
allowed as if there were no such contingency.
(b) A claim may be allowed even if contingent,
if it is filed in accordance with section 38a-937.
It may be allowed and may participate in all
distributions declared after it is filed to the
extent that it does not prejudice the orderly
administration of the liquidation.
(c) Claims that are due except for the passage
of time shall be treated as absolute claims are
treated, except that such claims may be discounted
at the legal rate of interest.]
[(d)] (a) Claims made under employment
contracts by directors, principal officers, or
persons in fact performing similar functions or
having similar powers are limited to payment for
services rendered prior to the issuance of any
order of rehabilitation or liquidation pursuant to
section 38a-915 or 38a-920, AS AMENDED.
(b) WHEN A LIQUIDATION ORDER HAS BEEN ENTERED
IN A PROCEEDING AGAINST AN INSURER, ANY INSURED,
REINSURED, THIRD PARTY PERSON WHO HAS A CAUSE OF
ACTION AGAINST AN INSURED OF THE INSURER, OR ANY
OTHER PERSON OR ENTITY THAT HAS A CLAIM OR CAUSE
OF ACTION AGAINST THE INSURER, SHALL HAVE THE
RIGHT TO FILE A CLAIM IN THE PROCEEDING,
REGARDLESS OF THE FACT THAT THE CLAIM MAY BE
CONTINGENT, UNLIQUIDATED OR IMMATURE. FOR PURPOSES
OF THIS SECTION: (1) A CLAIM IS CONTINGENT IF THE
ACCIDENT, CASUALTY, DISASTER OR LOSS INSURED OR
REINSURED AGAINST OCCURRED ON OR BEFORE THE DATE
FIXED UNDER SECTION 38a-920, AS AMENDED BY THIS
ACT, BUT THE ACT OR EVENT TRIGGERING THE INSURER'S
OBLIGATION TO PAY HAS NOT OCCURRED AS OF THAT
DATE; (2) A CLAIM IS UNLIQUIDATED IF THE AMOUNT OF
THE CLAIM HAS NOT BEEN DETERMINED; AND (3) A CLAIM
IS IMMATURE IF PAYMENT ON THE CLAIM IS NOT YET
DUE.
(c) EXCEPT AS PROVIDED IN THIS SECTION, A
CLAIM MAY NOT SHARE IN A DISTRIBUTION OF ASSETS
PURSUANT TO THIS CHAPTER OR SECTIONS 7, 15 AND 22
OF THIS ACT, UNLESS IT HAS BEEN DEFINITELY
DETERMINED, PROVED AND ALLOWED. A CONTINGENT,
UNLIQUIDATED OR IMMATURE CLAIM MAY SHARE IN A
DISTRIBUTION OF ASSETS PROVIDED THAT, AS OF THE
TIME OF THE ALLOWANCE OR DISALLOWANCE OF THE CLAIM
BY THE COURT: (1) IF THE CLAIM WAS A CONTINGENT
CLAIM AGAINST THE INSURER AS OF THE DATE
ESTABLISHED UNDER SECTION 38a-920, AS AMENDED, THE
CLAIMANT HAS PRESENTED PROOF OF THE INSURER'S
OBLIGATION TO PAY REASONABLY SATISFACTORY TO THE
RECEIVER; (2) IF THE CLAIM WAS A CONTINGENT CLAIM
AS OF THE DATE ESTABLISHED UNDER SECTION 38a-920,
AS AMENDED BY THIS ACT, AND WAS BASED UPON A CAUSE
OF ACTION AGAINST AN INSURED OF THE INSURER, (A)
IT MAY BE REASONABLY INFERRED FROM PROOF PRESENTED
UPON THE CLAIM THAT THE CLAIMANT WOULD BE ABLE TO
OBTAIN A JUDGMENT, (B) THE PERSON HAS FURNISHED
SUITABLE PROOF, UNLESS THE COURT FOR GOOD CAUSE
SHOWN SHALL OTHERWISE DIRECT, THAT NO FURTHER
VALID CLAIMS CAN BE MADE AGAINST THE INSURER
ARISING OUT OF THE CAUSE OF ACTION OTHER THAN
THOSE ALREADY PRESENTED, AND (C) THE TOTAL
LIABILITY OF THE INSURER TO ALL CLAIMANTS ARISING
OUT OF THE SAME ACT SHALL BE NO GREATER THAN ITS
TOTAL LIABILITY WOULD BE WERE IT NOT IN
LIQUIDATION. IN THOSE CASES UNDER SUBPARAGRAPH (C)
OF THIS SUBDIVISION, INSUREDS MAY INCLUDE IN
CONTINGENT CLAIMS REASONABLE ATTORNEY'S FEES FOR
SERVICES RENDERED AFTER THE DATE OF LIQUIDATION,
IN DEFENSE OF CLAIMS OR SUITS COVERED BY THE
INSURED'S POLICY, PROVIDED THE ATTORNEY'S FEES
HAVE BEEN PAID BY THE INSURED AND EVIDENCE OF
PAYMENT IS PRESENTED TO THE RECEIVER; (3) IF THE
CLAIM WAS UNLIQUIDATED AS OF THE DATE ESTABLISHED
UNDER SECTION 38a-920, AS AMENDED BY THIS ACT, ITS
AMOUNT HAS BEEN DETERMINED, PROVIDED SUCH
DETERMINATION DOES NOT PREJUDICE THE ORDERLY
ADMINISTRATION OF THE LIQUIDATION PROCEEDING; OR
(4) IF THE CLAIM WAS IMMATURE AS OF THE DATE
ESTABLISHED UNDER SECTION 38a-920, AS AMENDED BY
THIS ACT, IT SHALL BE DISCOUNTED AT THE HIGHER OF
THE LEGAL RATE OF INTEREST ACCRUING ON JUDGMENTS
OR THE RATE OF INTEREST AVAILABLE ON UNITED STATES
TREASURY SECURITIES OF APPROXIMATELY THE SAME
MATURITY.
(d) NOTWITHSTANDING THE PROVISIONS OF
SUBSECTIONS (a) TO (c), INCLUSIVE, OF THIS
SECTION, ANY INSURED SHALL HAVE THE RIGHT TO FILE
A CLAIM FOR THE PROTECTION AFFORDED UNDER THE
INSURED'S POLICY, IRRESPECTIVE OF WHETHER A CLAIM
IS THEN KNOWN, IF THE POLICY IS AN OCCURRENCE
POLICY. THEREAFTER, AT SUCH TIME THAT A SPECIFIC
CLAIM IS MADE BY OR AGAINST THE INSURER, THE
INSURED SHALL SUPPLEMENT HIS CLAIM AND THE
RECEIVER SHALL TREAT THE SAME AS A CONTINGENT,
UNLIQUIDATED OR IMMATURE CLAIM. ANY SUCH CLAIMS OF
POLICYHOLDERS FOR THE PROTECTION UNDER AN
OCCURRENCE POLICY REMAINING AT OR NEAR THE CLOSING
OF THE ESTATE SHALL BE DISPOSED OF IN ACCORDANCE
WITH SECTION 38a-945, AS AMENDED BY THIS ACT.
(e) THE ESTIMATION AND ALLOWANCE OF A
CONTINGENT CLAIM UNDER THIS SECTION SHALL NOT
PROVIDE A BASIS TO COMPEL PAYMENT FROM A REINSURER
OF ESTIMATED INCURRED BUT NOT REPORTED LOSSES AND,
EXCEPT WITH RESPECT TO CLAIMS MADE UNDER
SUBSECTION (c) OF SECTION 38a-939, AS AMENDED,
OUTSTANDING RESERVES, UNLESS THE REINSURANCE
CONTRACT SPECIFICALLY PROVIDES FOR THE PAYMENT OF
SUCH LOSSES OR RESERVES.
Sec. 19. Section 38a-940 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) Whenever any third party asserts a cause
of action against an insured of an insurer in
liquidation, the third party may file a claim with
the liquidator ON OR BEFORE THE LAST DAY FOR
FILING CLAIMS.
(b) Whether or not the third party files a
claim, the insured may file a claim on [his] THE
INSURED'S own behalf in the liquidation. TO THE
EXTENT THE INSURED FILES A CLAIM, IT SHALL BE
DEEMED SUFFICIENT TO COVER ALL RELATED THIRD PARTY
CLAIMS. If the insured fails to file a claim by
the date for filing claims specified in the order
of liquidation or within sixty days after mailing
of the notice required by section 38a-924, AS
AMENDED BY THIS ACT, whichever is later, [he is]
THE INSURER SHALL BE DEEMED an unexcused late
filer.
(c) The liquidator shall make [his]
recommendations to the court pursuant to section
38a-944, AS AMENDED BY THIS ACT, for the allowance
of an insured's claim pursuant to subsection (b)
of this section after consideration of the
probable outcome of any pending action against the
insured on which the claim is based, the probable
damages recoverable in the action and the probable
costs and expenses of defense. After allowance by
the court, the liquidator shall withhold any
dividends payable on the claim, pending the
outcome of litigation and negotiation with the
insured. Whenever it seems appropriate, [he] THE
LIQUIDATOR shall reconsider the claim on the basis
of additional information and amend his
recommendations to the court. The insured shall be
afforded the same notice and opportunity to be
heard on all changes in the recommendation as in
its initial determination. The court may amend its
allowance as it [thinks] FINDS appropriate. As
claims against the insured are settled or barred,
the insured shall be paid from the amount withheld
the same percentage dividend as was paid on other
claims of like priority, based on the lesser of
(1) the amount actually recovered from the insured
by action or paid by agreement plus the reasonable
costs and expenses of defense, or (2) the amount
allowed on the claims by the court. After all
claims are settled or barred, any sum remaining
from the amount withheld shall revert to the
undistributed assets of the insurer. Delay in
final payment under this subsection shall not be a
reason for unreasonable delay of final
distribution and discharge of the liquidator.
(d) If several claims founded upon one policy
are filed, whether by third parties or as claims
by the insured under this section, and the
aggregate allowed amount of the claims to which
the same limit of liability in the policy is
applicable exceeds that limit, each claim as
allowed shall be reduced in the same proportion so
that the total equals the policy limit. Claims by
the insured shall be evaluated as in subsection
(c) of this section. If any insured's claim is
subsequently reduced under subsection (c) of this
section, the amount thus freed shall be
apportioned ratably among the claims which have
been reduced under this subsection.
(e) No claim may be presented under this
section if it is or may be covered by any guaranty
association. [or foreign guaranty association.]
Sec. 20. Section 38a-941 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) When a claim is denied in whole or in part
by the liquidator, written notice of the
determination shall be given to the claimant or
[his] THE CLAIMANT'S attorney by first class mail
at the address shown in the proof of claim.
[Within sixty] NOT LATER THAN THIRTY days [from]
AFTER the mailing of the notice, the claimant may
file [his] objections with the liquidator. ANY
FILED OBJECTIONS SHALL CLEARLY SET FORTH ALL FACTS
AND THE LEGAL BASIS FOR THE OBJECTIONS AND THE
REASONS WHY THE CLAIM SHOULD BE ALLOWED. If no
such filing is made, [the claimant may not further
object to] the determination SHALL BE FINAL.
(b) Whenever objections are filed with the
liquidator and the liquidator does not alter [his
denial] THE DETERMINATION of the claim as a result
of the objections, the liquidator shall ask the
court for a hearing as soon as practicable and
give notice of the hearing by first class mail to
the claimant or [his] THE CLAIMANT'S attorney and
to any other persons directly affected, not less
than ten nor more than thirty days before the date
of the hearing. The matter may be heard by the
court or by a court-appointed referee. [who shall
submit findings of fact along with his
recommendation.] THE HEARING SHALL BE CONDUCTED ON
THE RECORD IN AN INFORMAL MANNER AND THE FORMAL
RULES OF EVIDENCE AND CIVIL PROCEDURE NEED NOT BE
STRICTLY APPLIED. HEARINGS SHALL BE HELD WITHOUT A
JURY. PREHEARING DISCOVERY SHALL BE LIMITED TO
SUCH PRETRIAL DISCOVERY AS EXPRESSLY PERMITTED IN
ARBITRATION PROCEEDINGS UNDER CHAPTER 909.
(c) WHEN A DISPUTED CLAIM IS HEARD BY A
REFEREE, THE REFEREE SHALL SUBMIT WRITTEN FINDINGS
OF FACT AND CONCLUSIONS OF LAW ALONG WITH THE
RECOMMENDATION FOR DISPOSITION TO THE COURT. THE
REFEREE'S RECOMMENDATION SHALL BECOME THE FINAL
JUDGMENT OF THE COURT, UNLESS OBJECTIONS TO THE
REFEREE'S RECOMMENDATIONS ARE FILED BY THE
LIQUIDATOR OR CLAIMANT WITH THE COURT NOT LATER
THAN FIFTEEN DAYS AFTER THE RECOMMENDATION IS
MAILED TO THE LIQUIDATOR AND CLAIMANT.
(d) THE FINAL DISPOSITION BY THE COURT OF A
DISPUTED CLAIM, WHETHER AFTER A HEARING BY THE
COURT OR AFTER A RECOMMENDATION BY A REFEREE,
SHALL BE DEEMED A FINAL JUDGMENT FOR PURPOSES OF
APPEAL.
(e) THE COURTS OF THIS STATE MAY MAKE SPECIAL
RULES OF CIVIL PROCEDURE FOR DISPUTED CLAIMS,
PROVIDED THAT THE RULES ARE NOT INCONSISTENT WITH
THIS CHAPTER AND SECTIONS 7, 15 AND 22 OF THIS
ACT.
Sec. 21. Section 38a-942 of the general
statutes is repealed and the following is
substituted in lieu thereof:
Whenever [a creditor] AN OBLIGEE whose claim
against an insurer is secured, in whole or in
part, by the undertaking of another person, fails
to prove and file that claim, the other person may
do so in the [creditor's] OBLIGEE'S name, and
shall be subrogated to the rights of the
[creditor] OBLIGEE, whether the claim has been
filed by the [creditor] OBLIGEE or by the other
person in the [creditor's] OBLIGEE'S name, to the
extent that [he] THE OBLIGEE discharges the
undertaking. In the absence of an agreement with
the [creditor] OBLIGEE to the contrary, the other
person shall not be entitled to any distribution
[, however,] until the amount paid to the
[creditor] OBLIGEE on the undertaking plus the
distributions paid on the claim from the insurer's
estate to the [creditor] OBLIGEE equals the amount
of the entire claim of the [creditor] OBLIGEE. Any
excess received by the [creditor] OBLIGEE shall be
held by him in trust for such other person. The
term "other person", as used in this section is
not intended to apply to a guaranty association.
[or foreign guaranty association.]
Sec. 22. (NEW) (a) Notwithstanding any
provision of sections 38a-903 to 38a-961,
inclusive, of the general statutes, as amended,
including any provision permitting the
modification of contracts, or other law of a
state, no person shall be stayed or prohibited
from exercising: (1) A contractual right to
terminate, liquidate or close out any netting
agreement or qualified financial contract with an
insurer because of: (A) The insolvency, financial
condition or default of the insurer at any time,
provided that the right is enforceable under
applicable law other than sections 38a-903 to
38a-961, inclusive, of the general statutes, as
amended, or (B) the commencement of a formal
delinquency proceeding under sections 38a-903 to
38a-961, inclusive, of the general statutes, as
amended. (2) Any right under a pledge, security,
collateral or guarantee agreement or any other
similar security arrangement or credit support
document relating to a netting agreement or
qualified financial contract. (3) Subject to any
provision of subsection (b) of section 38a-932 of
the general statutes, any right to set off or net
out any termination value, payment amount, or
other transfer obligation arising under or in
connection with a netting agreement or qualified
financial contract where the counterparty or its
guarantor is organized under the laws of the
United States or a state or foreign jurisdiction
approved by the Securities Valuation Office of the
National Association of Insurance Commissioners as
eligible for netting.
(b) Upon termination of a netting agreement,
the net or settlement amount, if any, owed by a
nondefaulting party to an insurer against which an
application or petition has been filed under
sections 38a-903 to 38a-961, inclusive, of the
general statutes, as amended, shall be transferred
to or on the order of the receiver for the
insurer, even if the insurer is the defaulting
party, notwithstanding any provision in the
netting agreement that may provide that the
nondefaulting party is not required to pay any net
or settlement amount due to the defaulting party
upon termination. Any limited two-way payment
provision in a netting agreement with an insurer
that has defaulted shall be deemed to be a full
two-way payment provision as against the
defaulting insurer. Any such property or amount
shall, except to the extent it is subject to one
or more secondary liens or encumbrances, be a
general asset of the insurer.
(c) In making any transfer of a netting
agreement or qualified financial contract of an
insurer subject to a delinquency proceeding, the
receiver shall either: (1) Transfer to one party,
other than an insurer subject to a delinquency
proceeding, all netting agreements and qualified
financial contracts between a counterparty or any
affiliate of the counterparty and the insurer that
is the subject of the proceeding, including: (A)
All rights and obligations of each party under
each such netting agreement and qualified
financial contract; and (B) all property,
including any guarantees or credit support
documents, securing any claims of each party under
such netting agreement and qualified financial
contract; or (2) transfer none of the netting
agreements, qualified financial contracts, rights,
obligations or property referred to in subdivision
(1) of this subsection, with respect to such
counterparty and any affiliate of such
counterparty.
(d) If a receiver for an insurer makes a
transfer of one or more netting agreements or
qualified financial contracts, then the receiver
shall use its best efforts to notify any person
who is a party to the netting agreements or
qualified financial contracts of the transfer by
twelve o'clock noon, the receiver's local time, on
the business day following the transfer. For
purposes of this subsection, "business day" means
a day other than a Saturday, Sunday or any day on
which either the New York Stock Exchange or the
Federal Reserve Bank of New York is closed.
(e) Notwithstanding any other provision of
sections 38a-903 to 38a-961, inclusive, of the
general statutes, as amended, a receiver may not
avoid a transfer of money or other property
arising under or in connection with a netting
agreement or qualified financial contract, or any
pledge, security, collateral or guarantee
agreement or any other similar security
arrangement or credit support document relating to
a netting agreement or qualified financial
contract, that is made before the commencement of
a formal delinquency proceeding under sections
38a-903 to 38a-961, inclusive, of the general
statutes, as amended, except that a transfer may
be avoided under subsection (a) of section 38a-928
of the general statutes, as amended, if the
transfer was made with actual intent to hinder,
delay or defraud the insurer, a receiver appointed
for the insurer or existing or future creditors.
(f) Notwithstanding any other provision of
sections 38a-903 to 38a-961, inclusive, of the
general statutes, as amended, any claim of a
counterparty against the estate arising from the
receiver's disaffirmance or repudiation of a
netting agreement or qualified financial contract
that has not been previously affirmed in the
liquidation or immediately preceding
rehabilitation case shall be determined and shall
be allowed or disallowed as if the claim has
arisen before the date of the filing of the
petition for liquidation or, if a rehabilitation
proceeding is converted to a liquidation
proceeding, as if the claim had arisen before the
date of the filing of the petition for
rehabilitation. The amount of the claim shall be
the actual direct compensatory damages determined
as of the date of the disaffirmance or repudiation
of the netting agreement or qualified financial
contract. "Actual direct compensatory damages"
does not include punitive or exemplary damages,
damages for lost profit or lost opportunity or
damages for pain and suffering, but does include
normal and reasonable costs of cover or other
reasonable measures of damages utilized in the
derivatives market for the contract and agreement
claims.
(g) As used in this section, "contractual
right" includes any right, whether or not
evidenced in writing, arising under statutory or
common law, a rule or bylaw of a national
securities exchange, national securities clearing
organization or securities clearing agency, a rule
or bylaw, or a resolution of the governing body,
of a contract market or its clearing organization,
or under law merchant.
(h) The provisions of this section shall not
apply to persons who are affiliates of the insurer
that is the subject of the proceeding.
(i) All rights of counterparties under
sections 38a-903 to 38a-961, inclusive, of the
general statutes, as amended, shall apply to
netting agreements entered into on behalf of the
general account or separate accounts if the assets
of each separate account are available only to
counterparties to netting agreements entered into
on behalf of that separate account.
Sec. 23. Section 38a-944 of the general
statutes, as amended by section 1 of public act
97-113, is repealed and the following is
substituted in lieu thereof:
(a) The priority of distribution of claims
from the insurer's estate shall be in accordance
with the order in which each class of claims is
set forth in this section. Every claim in each
class shall be paid in full or adequate funds
retained for such payment before the members of
the next class receive any payment. ONCE SUCH
FUNDS ARE RETAINED BY THE LIQUIDATOR AND APPROVED
BY THE COURT, THE INSURER'S ESTATE SHALL HAVE NO
FURTHER LIABILITY TO MEMBERS OF THAT CLASS EXCEPT
TO THE EXTENT OF THE RETAINED FUNDS AND ANY OTHER
UNDISTRIBUTED FUNDS. No subclasses shall be
established within any class, EXCEPT AS PROVIDED
IN SUBDIVISION (1) OF SUBSECTION (a) OF SECTION
38a-923, AS AMENDED. No claim by a shareholder,
policyholder or other creditor shall be permitted
to circumvent the priority classes through the use
of equitable remedies. The order of distribution
of claims shall be:
(1) Class 1. The costs and expenses of
administration EXPRESSLY APPROVED BY THE RECEIVER,
including but not limited to the following: (A)
The actual and necessary costs of preserving or
recovering the assets of the insurer; (B)
compensation for all services rendered in the
CONSERVATION, REHABILITATION OR liquidation; (C)
any necessary filing fees; (D) the fees and
mileage payable to witnesses; AND (E) authorized
reasonable attorney's fees and other professional
services rendered in the CONSERVATION,
rehabilitation [and] OR liquidation. [; (F) the
reasonable expenses of a guaranty association or
foreign guaranty association in handling claims.]
(2) CLASS 2. THE ADMINISTRATIVE EXPENSES OF
GUARANTY ASSOCIATIONS. FOR PURPOSES OF THIS
SECTION SUCH EXPENSES SHALL BE THOSE REASONABLE
EXPENSES INCURRED BY GUARANTY ASSOCIATIONS WHERE
THE EXPENSES ARE NOT PAYMENTS OR EXPENSES WHICH
ARE REQUIRED TO BE INCURRED AS DIRECT POLICY
BENEFITS IN FULFILLMENT OF THE TERMS OF THE
INSURANCE CONTRACT OR POLICY, AND THAT ARE OF THE
TYPE AND NATURE THAT, BUT FOR THE ACTIVITIES OF
THE GUARANTY ASSOCIATION OTHERWISE WOULD HAVE BEEN
INCURRED BY THE RECEIVER, INCLUDING, BUT NOT
LIMITED TO, EVALUATIONS OF POLICY COVERAGE,
ACTIVITIES INVOLVED IN THE ADJUSTMENT AND
SETTLEMENT OF CLAIMS UNDER POLICIES, INCLUDING
THOSE OF IN-HOUSE OR OUTSIDE ADJUSTERS, AND THE
REASONABLE EXPENSES INCURRED IN CONNECTION WITH
THE ARRANGEMENTS FOR ONGOING COVERAGE THROUGH
TRANSFER TO OTHER INSURERS, POLICY EXCHANGES OR
MAINTAINING POLICIES IN FORCE. THE RECEIVER MAY IN
HIS OR HER SOLE DISCRETION APPROVE AS AN
ADMINISTRATIVE EXPENSE UNDER THIS SECTION ANY
OTHER REASONABLE EXPENSES OF THE GUARANTY
ASSOCIATION IF THE RECEIVER FINDS: (A) THE
EXPENSES ARE NOT EXPENSES REQUIRED TO BE PAID OR
INCURRED AS DIRECT POLICY BENEFITS BY THE TERMS OF
THE POLICY, AND (B) THE EXPENSES WERE INCURRED IN
FURTHERANCE OF ACTIVITIES THAT PROVIDED A MATERIAL
ECONOMIC BENEFIT TO THE ESTATE AS A WHOLE,
IRRESPECTIVE OF WHETHER THE ACTIVITIES RESULTED IN
ADDITIONAL BENEFITS TO COVERED CLAIMANTS. THE
COURT SHALL APPROVE SUCH EXPENSES UNLESS IT FINDS
THE RECEIVER ABUSED HIS OR HER DISCRETION IN
APPROVING THE EXPENSES. IF THE RECEIVER DETERMINES
THAT THE ASSETS OF THE ESTATE WILL BE SUFFICIENT
TO PAY ALL CLASS 1 CLAIMS IN FULL, CLASS 2 CLAIMS
SHALL BE PAID CURRENTLY, PROVIDED THAT THE
LIQUIDATOR SHALL SECURE FROM EACH OF THE
ASSOCIATIONS RECEIVING DISBURSEMENTS PURSUANT TO
THIS SECTION AN AGREEMENT TO RETURN TO THE
LIQUIDATOR SUCH DISBURSEMENT, TOGETHER WITH
INVESTMENT INCOME ACTUALLY EARNED ON SUCH
DISBURSEMENTS, AS MAY BE REQUIRED TO PAY CLASS 1
CLAIMS. NO BOND SHALL BE REQUIRED OF ANY SUCH
ASSOCIATION.
[(2) Class 2] (3) CLASS 3. All claims under
policies including such claims of the federal or
any state or local government for losses incurred,
including third party claims, CLAIMS FOR UNEARNED
PREMIUMS, and all claims of a guaranty association
[or foreign guaranty association] FOR PAYMENT OF
COVERED CLAIMS OR COVERED OBLIGATIONS OF THE
INSURER. ALL CLAIMS OF A GUARANTY ASSOCIATION FOR
REASONABLE EXPENSES other than those included in
class [1] 2. All claims under life AND HEALTH
insurance policies, annuity contracts and funding
agreements, whether for death proceeds, HEALTH
BENEFITS, annuity proceeds, or investment values
shall be treated as loss claims. That portion of
any loss, indemnification for which is provided by
other benefits or advantages recovered by the
claimant, shall not be included in this class,
other than benefits or advantages recovered or
recoverable in discharge of familial obligations
of support or by way of succession at death or as
proceeds of life insurance, or as gratuities. No
payment by an employer to his employee shall be
treated as a gratuity. NOTWITHSTANDING THE
PROVISIONS OF THIS SUBDIVISION, THE FOLLOWING
CLAIMS SHALL BE EXCLUDED FROM CLASS 3 PRIORITY:
(A) OBLIGATIONS OF THE INSOLVENT INSURER ARISING
OUT OF REINSURANCE CONTRACTS; (B) OBLIGATIONS
INCURRED AFTER THE EXPIRATION DATE OF THE
INSURANCE POLICY OR AFTER THE POLICY HAS BEEN
REPLACED BY THE INSURED OR CANCELED AT THE
INSURED'S REQUEST OR AFTER THE POLICY HAS BEEN
CANCELED AS PROVIDED IN THIS CHAPTER, AND SECTIONS
7, 15 AND 22 OF THIS ACT. NOTWITHSTANDING THE
PROVISIONS OF THIS SUBDIVISION, EARNED PREMIUM
CLAIMS ON POLICIES, OTHER THAN REINSURANCE
AGREEMENTS, SHALL NOT BE EXCLUDED; (C) OBLIGATIONS
TO INSURERS, INSURANCE POOLS OR UNDERWRITING
ASSOCIATIONS AND THEIR CLAIMS FOR CONTRIBUTION,
INDEMNITY OR SUBROGATION, EQUITABLE OR OTHERWISE;
AND (D) ANY CLAIM WHICH IS IN EXCESS OF ANY
APPLICABLE LIMITS PROVIDED IN THE INSURANCE POLICY
ISSUED BY THE INSOLVENT INSURER.
[(3) Class 3] (4) CLASS 4. Claims of the
federal government except those under class [2] 3.
[(4) Class 4, Reasonable] (5) CLASS 5. DEBTS
DUE EMPLOYEES FOR SERVICES, BENEFITS, CONTRACTUAL
OR OTHERWISE DUE ARISING OUT OF SUCH REASONABLE
compensation to employees for services performed
to the extent that they do not exceed two months
of monetary compensation and represent payment for
services performed within [one year] SIX MONTHS
before the filing of the petition for liquidation
or, if rehabilitation preceded liquidation, within
one year before the filing of the petition for
rehabilitation. Officers and directors shall not
be entitled to the benefit of this priority,
except as otherwise approved by the liquidator and
the court. Such priority shall be in lieu of any
other similar priority which may be authorized by
law as to wages or compensation of employees.
[(5) Class 5] (6) CLASS 6. Claims [under
nonassessable policies for unearned premium or
other premium refunds and claims] of general
creditors, including claims of ceding and assuming
companies in their capacity as such, and claims
against the insurer for liability for bodily
injury or for injury to or destruction of tangible
property which are not under policies.
[(6) Class 6] (7) CLASS 7. Claims of any state
or local government, except those under class [2]
4. Claims [, including those] of any such
governmental body for a penalty or forfeiture,
[shall be allowed in this class] BUT only to the
extent of the pecuniary loss sustained from the
act, transaction or proceeding out of which the
penalty or forfeiture arose, with reasonable and
actual costs occasioned thereby. The remainder of
such claims shall be postponed to the class of
claims under subdivision (8) of this subsection.
[(7) Class 7. Claims filed late or any other
claims other than claims under subdivisions (8)
and (9) of this subsection.]
(8) Class 8. Surplus or contribution notes, or
similar obligations, and premium refunds on
assessable policies, INTEREST ON CLAIMS OF CLASSES
1 TO 7, INCLUSIVE, AND ANY OTHER CLAIMS
SPECIFICALLY SUBORDINATED TO THIS CLASS. [Payments
to members of domestic mutual insurance companies
shall be limited in accordance with law.]
(9) Class 9. [The claims of shareholders or
other owners in their capacity as shareholders.]
CLAIMS OF SHAREHOLDERS OR OTHER OWNERS ARISING OUT
OF THEIR CAPACITY AS SHAREHOLDERS OR OWNERS, OR
ARISING IN ANY OTHER CAPACITY OR FACTS EXCEPT AS
THEY MAY BE QUALIFIED IN CLASS 3 OR 4.
(b) UPON THE DECLARATION OF A DIVIDEND, THE
RECEIVER SHALL APPLY THE AMOUNT OF THE DIVIDEND
AGAINST ANY INDEBTEDNESS OWED TO THE INSURER BY
THE PERSON ENTITLED TO THE DIVIDEND. THERE SHALL
BE NO CLAIM ALLOWED FOR ANY DEDUCTIBLE CHARGED BY
A GUARANTY ASSOCIATION OR ENTITY PERFORMING A
SIMILAR FUNCTION.
[(b)] (c) Every claim under a separate account
agreement providing, in effect, that the assets in
the separate account shall not be chargeable with
liabilities arising out of any other business of
the insurer shall be satisfied out of the assets
in the separate account equal to the reserves
maintained in such account for such agreement and,
to the extent, if any, not fully discharged
thereby, shall be treated as a class [2] 3 claim
against the estate. For the purposes of this
section, the "insurer's estate" shall mean the
general assets of such company less any assets
held in separate accounts that, pursuant to
section 38a-433 or 38a-459, AS AMENDED, are not
chargeable with liabilities arising out of any
other business of the insurer.
Sec. 24. Section 38a-945 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) The liquidator shall review all claims
duly filed in the liquidation and shall make such
further investigation as [he shall deem] DEEMED
necessary. [He] THE LIQUIDATOR may compound,
compromise or in any other manner negotiate the
amount for which claims will be recommended to the
court except where the liquidator is required by
law to accept claims as settled by any person or
organization, including any guaranty association.
[or foreign guaranty association.] Unresolved
disputes shall be determined pursuant to section
38a-941, AS AMENDED BY THIS ACT. As soon as
practicable, he shall present to the court a
report of the claims against the insurer with his
recommendations. The report shall include the name
and address of each claimant and the amount of the
claim finally recommended, if any. If the insurer
has issued annuities or life insurance policies,
the liquidator shall report the persons to whom,
according to the records of the insurer, amounts
are owed as cash surrender values or other
investment value and the amounts owed.
(b) The court may approve, disapprove, or
modify, the report on claims by the liquidator.
Such reports as are not modified by the court
within a period of sixty days following submission
by the liquidator shall be treated by the
liquidator as allowed claims, subject thereafter
to later modification or to rulings made by the
court pursuant to section 38a-941, AS AMENDED. No
claim under a policy of insurance shall be allowed
for an amount in excess of the applicable policy
limits.
(c) AFTER GIVING DUE CONSIDERATION TO THE
NATURE OF THE POLICIES THAT WERE SOLD BY THE
INSURER, AND THE NUMBER OF CLAIMS BY POLICYHOLDERS
FOR PROTECTION UNDER THEIR POLICIES, AND AFTER
CONSIDERING ACTUARIAL ESTIMATES THAT SUBSTANTIAL
AMOUNTS OF INCURRED BUT NOT REPORTED LOSSES EXIST,
THE LIQUIDATOR MAY, BUT NEED NOT, FORMULATE A
PROPOSAL, SUBJECT TO THE APPROVAL OF THE COURT TO
ALLOW SUCH CLAIMS. THE PROPOSAL MAY ALLOCATE OR
ATTRIBUTE ALL OR A PORTION OF THE INCURRED BUT NOT
REPORTED LOSSES TO INDIVIDUAL POLICYHOLDER
CLAIMANTS ON A BASIS OF REASONABLE EXPERT OPINION.
THE COURT SHALL APPROVE THE PROPOSAL AND THE
ALLOWANCE OF THE CLAIMS UNLESS IT FINDS THAT THE
BASIS OF ALLOCATION IS ARBITRARY OR CAPRICIOUS.
(d) THE LIQUIDATOR IS NOT REQUIRED TO PROCESS
CLAIMS FOR ANY CLASS UNTIL IT APPEARS REASONABLY
LIKELY THAT ASSETS WILL BE AVAILABLE FOR A
DISTRIBUTION TO THAT CLASS. IF THERE ARE
INSUFFICIENT ASSETS TO JUSTIFY PROCESSING ALL
CLAIMS FOR ANY CLASS LISTED IN SECTION 38a-944, AS
AMENDED, THE LIQUIDATOR SHALL REPORT THE FACTS TO
THE COURT AND MAKE SUCH RECOMMENDATIONS AS MAY BE
APPROPRIATE FOR HANDLING THE REMAINDER OF THE
CLAIMS.
Sec. 25. Section 38a-947 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) All unclaimed funds subject to
distribution remaining in the liquidator's hands
when [he] THE LIQUIDATOR is ready to apply to the
court for discharge, including the amount
distributable to any creditor, shareholder,
member, or other person who is unknown or cannot
be found, shall be deposited with the State
Treasurer, and shall be paid without interest
except in accordance with section 38a-944, AS
AMENDED, to the person entitled thereto or [his]
THAT PERSON'S legal representative upon proof
satisfactory to the State Treasurer of his right
thereto. Any amount on deposit not claimed within
six years from the discharge of the liquidator
shall be deemed to have been abandoned and shall
be escheated without formal escheat proceedings
and be deposited in the General Fund. THE
LIQUIDATOR MAY ELECT TO APPLY TO THE COURT FOR
AUTHORITY TO HOLD THE UNCLAIMED FUNDS SUBJECT TO
DISTRIBUTION FOR A PERIOD OF TWO YEARS.
THEREAFTER, ANY UNCLAIMED FUNDS MAY BE DISTRIBUTED
TO APPROVED CLAIMANTS WHO HAVE PREVIOUSLY RECEIVED
A DISTRIBUTION, IF IT IS ECONOMICALLY FEASIBLE FOR
THE LIQUIDATOR TO MAKE THE DISTRIBUTION, OR THE
LIQUIDATOR MAY APPLY TO THE COURT FOR PERMISSION
FOR THE FUNDS TO BE HELD BY THE STATE TREASURER IN
AN ACCOUNT ON BEHALF OF THE COMMISSIONER IN HIS
CAPACITY AS RECEIVER FOR THE PURPOSE AND USE OF
DEFRAYING THE COSTS AND EXPENSES OF ADMINISTRATION
OF OTHER INSOLVENT INSURERS FOR WHICH THERE ARE
INSUFFICIENT ASSETS TO FUND THE COSTS AND EXPENSES
OF ADMINISTRATION.
(b) All funds withheld pursuant to section
38a-939, AS AMENDED BY THIS ACT, and not
distributed shall upon discharge of the liquidator
be deposited with the State Treasurer and paid by
him in accordance with section 38a-944, AS AMENDED
BY THIS ACT. Any sums remaining which pursuant to
section 38a-944, AS AMENDED BY THIS ACT, would
revert to the undistributed assets of the insurer
shall be transferred to the State Treasurer and
become the property of the state under subsection
(a), unless the commissioner in his discretion
petitions the court to reopen the liquidation
pursuant to section 38a-949.
Sec. 26. Section 38a-952 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) If a domiciliary liquidator has not been
appointed, the commissioner may apply to the
Superior Court by verified petition for an order
directing [him] THE COMMISSIONER to act as
conservator to conserve the property FOUND IN THIS
STATE of an alien insurer not domiciled in this
state or PROPERTY FOUND IN THIS STATE OF a foreign
insurer on any one or more of the following
grounds: (1) Any of the grounds pursuant to
section 38a-914; (2) that any of its property has
been sequestered by official action in its
domiciliary state or in any other state; (3) that
enough of its property has been sequestered in a
foreign country to give reasonable cause to fear
that the insurer is or may become insolvent; (4)
that its certificate of authority to do business
in this state has been revoked or that none was
ever issued; and (5) that there are residents of
this state with outstanding claims or outstanding
policies.
(b) When an order is sought pursuant to
subsection (a) of this section, the court shall
cause the insurer to be given such notice and time
to respond [thereto] as is reasonable under the
circumstances.
(c) The court may issue the order in whatever
terms it shall deem appropriate. The filing or
recording of the order with the clerk of the
superior court of the judicial district or the
recorder of deeds of the town in which the
principal business of the company is located or
the country in which its principal office or place
of business is located shall impart the same
notice as a deed, bill of sale or other evidence
of title duly filed or recorded with that recorder
of deeds would have imparted.
(d) The conservator may at any time petition
for and the court may grant an order pursuant to
section 38a-953 to liquidate assets of a foreign
or alien insurer under conservation, or, if
appropriate, for an order pursuant to section
38a-955, to be appointed ancillary receiver. THE
COMMISSIONER SHALL BE ENTITLED TO REQUEST THE
ADMINISTRATIVE JUDGE OF THE SUPERIOR COURT FOR THE
JUDICIAL DISTRICT OF HARTFORD-NEW BRITAIN TO
APPOINT A SINGLE JUDGE TO SUPERVISE THE ANCILLARY
PROCEEDING AND HEAR ANY CASES OR CONTROVERSIES
ARISING OUT OF OR RELATED TO THE ANCILLARY
PROCEEDING. ANCILLARY PROCEEDINGS SHALL BE EXEMPT
FROM ANY DORMANCY OR SIMILAR PROGRAM MAINTAINED BY
THE COURT FOR THE EARLY CLOSURE OF CIVIL ACTIONS.
(e) The conservator may at any time petition
the court for an order terminating conservation of
THE PROPERTY OF an insurer. If the court finds
that the conservation is no longer necessary, it
shall order that the insurer be restored to
possession of its property and the control of its
business. The court may also make [such] A finding
and issue [such] AN order at any time upon motion
of any interested party, but if [such] THE motion
is denied all costs shall be assessed against such
party.
Sec. 27. Section 38a-961 of the general
statutes is repealed and the following is
substituted in lieu thereof:
If an ancillary receiver in another state or
foreign country, whether called by that name or
not, fails to transfer to the domiciliary
liquidator in this state any assets within his
control other than special deposits, diminished
only by the expenses of the ancillary
receivership, if any, the claims filed in the
ancillary receivership, other than special deposit
claims or secured claims, shall be placed in the
class of claims pursuant to [subsection (g)]
SUBDIVISION (8) OF SUBSECTION (a) of section
38a-944, AS AMENDED BY THIS ACT.
Sec. 28. Subdivision (9) of section 38a-1 of
the general statutes is repealed and the following
is substituted in lieu thereof:
(9) "Insolvency" or "insolvent" means, for any
insurer, that it is unable to pay its obligations
when they are due, or when its admitted assets do
not exceed its liabilities plus the greater of:
(A) [Any capital] CAPITAL and surplus required by
law for its organization AND CONTINUED OPERATION;
or (B) the total par or stated value of its
authorized and issued capital stock. For purposes
of this subdivision "liabilities" shall include
but not be limited to reserves required by statute
or by regulations adopted by the commissioner or
specific requirements imposed by the commissioner
upon a subject company at the time of admission or
subsequent thereto.
Sec. 29. Section 38a-69 of the general
statutes is repealed and the following is
substituted in lieu thereof:
Except as otherwise provided in title 38a,
sections 38a-11, AS AMENDED, 38a-50, 38a-52,
[38a-65,] 38a-70 to 38a-76, inclusive, 38a-81 to
38a-83, inclusive, and 38a-153, and the
regulations adopted to implement said sections
apply to all insurers, including reinsurers,
licensed to do business in this state.
Sec. 30. Subdivision (15) of section 38a-816
of the general statutes, as amended by public act
97-95, section 3 of public act 97-126 and section
13 of public act 97-202, is repealed and the
following is substituted in lieu thereof:
(15) Failure to pay accident and health claims
within forty-five days of receipt by an insurer of
the claimant's proof of loss form unless the
Insurance Commissioner determines that a
legitimate dispute exists as to coverage,
liability or damages or that the claimant has
fraudulently caused or contributed to the loss.
Any insurer who fails to pay such a claim within
the forty-five-day period shall pay the claimant
the amount of such claim plus interest at the rate
of fifteen per cent per annum, in addition to any
other penalties which may be imposed pursuant to
sections 38a-11, AS AMENDED, 38a-25, AS AMENDED,
38a-41 to 38a-53, inclusive, 38a-57 to 38a-60,
inclusive, 38a-62 to [38a-65] 38a-64, inclusive,
38a-76, 38a-83, 38a-84, 38a-117 to 38a-124,
inclusive, 38a-129 to 38a-140, inclusive, 38a-146
to 38a-155, inclusive, 38a-283, 38a-288 to
38a-290, inclusive, 38a-319, 38a-320, AS AMENDED,
38a-459, AS AMENDED, 38a-464, 38a-815 to 38a-819,
inclusive, AS AMENDED, 38a-824 to 38a-826,
inclusive, and 38a-828 to 38a-831, inclusive.
Whenever the interest due a claimant pursuant to
this section is less than one dollar, the insurer
shall deposit such amount in a separate
interest-bearing account in which all such amounts
shall be deposited. At the end of each calendar
year each such insurer shall donate one-half of
such amount to The University of Connecticut
Health Center and one-half of such amount to
Uncas-on-Thames Hospital.
Sec. 31. Subsection (f) of section 38a-88a of
the general statutes, as amended by section 1 of
public act 97-292, is repealed and the following
is substituted in lieu thereof:
(f) The credit allowed by this section may be
claimed only with respect to an income year for
which a certification of continued eligibility
required under subsection (g) of this section has
been issued. If, with respect to any year for
which a tax credit is claimed, any subject
insurance business ceases at any time to employ at
least twenty-five per cent of its total work force
in new jobs, then, except as provided in
subsection (g) of this section, the entitlement to
the credit allowed by this section shall not be
allowed for the taxable year in which such
employment ceases, and there shall not be a pro
rata application of the credit to such taxable
year; provided, if the reason for such cessation
is the dissolution of such insurance business in
bankruptcy or delinquency proceeding, as defined
in [subsection (d) of] section 38a-905, AS AMENDED
BY THIS ACT, the credit shall be allowed.
Sec. 32. Sections 38a-65 and 38a-316 of the
general statutes are repealed.
Approved June 8, 1998