AMEND Senate Bill 326 by inserting immediately after line 84, the following:

“59-712. Administration of Loss Reimbursement Policies.”

FURTHER AMEND Senate Bill 326 by inserting immediately after line 2109 as found on page 75, a new section 59-712 to read as follows:

“§59-712. Administration of Loss Reimbursement Policies

(a) For purposes of this section:

(1) ‘Loss reimbursement policy’ means any combination of one or more policies, endorsements, contracts or security agreements in which:

a. The insured has agreed with the insurer to:

1. Pay directly any portion of a loss or loss adjustment expense owed by the insurer under the policy up to a specified dollar amount; or

2. Reimburse the insurer for its payment of loss and loss adjustment expense under the policy up to a specified dollar amount; and

b. Under which the insurer remains liable for payment of loss and loss adjustment expense under the policy regardless of whether the insured has met its obligations.

A loss reimbursement policy may provide for a specific dollar amount of loss reimbursement applicable to each claim, an aggregate dollar amount applicable to all claims under the policy, or both.

(2) ‘Loss reimbursement’ means any payment made by the insured to or on behalf of the insurer for loss or loss adjustment expense pursuant to the terms of a loss reimbursement policy, to the extent that the insurer is responsible for payment regardless of whether the insured has met its obligations. Loss reimbursement includes any voluntary or involuntary application of loss reimbursement collateral to the loss reimbursement obligations of the insured. Loss reimbursement does not include:

a. Payments made by the insured pursuant to a deductible arrangement under which the insurer has no obligation to pay or advance the amount of the deductible on behalf of the insured or a self-insurance arrangement under which the insurer has no payment obligation for the obligation of the self-insured;

b. Retrospectively rated premium payments; or

c. Reinsurance claim payments made by a captive reinsurer or other reinsurer affiliated with or funded by the insured or affiliated with the insurer.

(3) ‘Loss reimbursement claim’ means any claim on a loss reimbursement policy that has been made against the estate or a guaranty association, or that was previously paid by the insurer, to the extent that it is subject to an insured’s loss reimbursement obligation. A loss reimbursement claim includes any loss adjustment expenses that are subject to reimbursement by the terms of the policy.

(4) ‘Loss reimbursement collateral’ means any cash, letters of credit, surety bond or any other form of security provided by the insured to secure its loss reimbursement obligations, regardless of whether the collateral is held by, for the benefit of, or assigned to the insurer, and regardless of whether the collateral also secures other obligations of the insured.

(5) ‘Uncovered loss reimbursement claim’ means a loss reimbursement claim that has been filed with the receiver, but that is not defined as a covered claim under any relevant guaranty association statute.

(6) ‘Other secured obligations’ means any other obligations, such as reinsurance or retrospective premium obligations, which are payable by the insured to the insurer and which are secured by collateral that also secures a loss reimbursement obligation.

(b) (1) Unless otherwise prohibited by law, the receiver may enter into agreements allowing the insured to fund or pay loss reimbursement claims directly or through a third party administrator.

(2) Unless otherwise prohibited by law, if the insurer allowed the insured to fund or pay loss reimbursement claims directly or through a third party administrator, the insured shall continue to fulfill its obligations, and the receiver shall enforce the funding or payment agreements.

(3) The insured’s payment of a loss reimbursement claim in whole or part, including any payment made by a third-party administrator on behalf of the insured, shall extinguish the obligation, if any, of the receiver or any guaranty association to pay that claim or that portion of the claim. Acceptance of the insured’s payment by a claimant in full or final settlement of a claim shall bar the assertion of that claim in the delinquency proceeding.

(1) The receiver shall bill an insured for reimbursement of a loss reimbursement claim when i) the insurer paid the claim prior to the commencement of delinquency proceedings; ii) the receiver is notified that a guaranty association has paid a loss reimbursement claim; iii) the receiver has paid a loss reimbursement claim; or iv) a loss reimbursement claim is allowed in liquidation proceedings.

(2) Any loss reimbursement paid to the receiver that is allocable to loss reimbursement claims paid by the insurer before the entry of a final order of liquidation is a general asset of the estate.

(3) Any loss reimbursement paid to the receiver that is allocable to a claim paid by a guaranty association shall be immediately remitted to that guaranty association.

(4) Any loss reimbursement paid to the receiver that is allocable to a claim paid by the receiver, or to a claim allowed in the liquidation proceedings that is not an obligation of a guaranty association, or to an uncovered loss reimbursement claim is a general asset of the estate.

(5) If the insured does not make payment within the time specified in the loss reimbursement policy, or within sixty days after receipt of the billing if no time is specified, the receiver is authorized to take all commercially reasonable actions necessary to collect any reimbursements owed.

(6) The insolvency of the insurer shall not be a defense to the insured’s reimbursement obligation under the loss reimbursement policy.

(d) Any collateral held under a loss reimbursement policy issued by an insurer subject to a delinquency proceeding under this Act shall be maintained and administered in accordance with the loss reimbursement policy except where the loss reimbursement policy conflicts with this section.

(e) If the loss reimbursement collateral, when combined with loss reimbursement payments that have been made by the insured, is insufficient to reimburse loss reimbursement claims already paid by the insurer, the receiver and guaranty associations, and to discharge all currently and past due loss reimbursement claims and other secured obligations, then the collateral shall be applied first to satisfy the insured’s loss reimbursement obligations on a pro rata basis and then to other secured obligations on a pro rata basis. If additional amounts are subsequently collected from the insured, they shall be applied in the same order of priority.

(f) If the receiver declines to seek or is unsuccessful in obtaining reimbursement from the insured for a loss reimbursement claim and there is no available collateral, a guaranty association may, after notice to the receiver, seek to collect reimbursement due from the insured on the same basis as the receiver, and with the same rights and remedies including without limitation the right to recover reasonable costs of collection from the insured. The guaranty association shall report any amounts so collected from each insured to the receiver. The receiver shall provide the guaranty association with available information needed to collect a reimbursement due from the insured. Whenever a guaranty association undertakes to collect reimbursements from an insured, it shall notify all other guaranty associations that have paid loss reimbursement claims on behalf of the same insured. Amounts collected by a guaranty association pursuant to this paragraph shall be treated in accordance with subparagraph (c)(3) of this section. The expenses incurred by a guaranty association in pursuing reimbursement shall not be permitted as a claim in the delinquency proceeding at any priority.

(g) To the extent that a guaranty association pays a loss reimbursement claim that is not reimbursed, the guaranty association shall have a claim for that amount in the delinquency proceeding as a Class 3 priority claim.

(h) The receiver or an affected guaranty association is entitled to deduct from loss reimbursements, deduct from the loss reimbursement collateral, or to recover through billings to the insured reasonable expenses that the receiver or the affected guaranty association incur in fulfilling their responsibilities under this Section. All such deductions or charges shall be in addition to the insured’s obligation to reimburse claims and related expenses and shall not diminish the rights of claimants.”

SPONSOR:	Sen. Blevins