History: L. 1970, ch. 185, § 1; March 27.
History: L. 1970, ch. 185, § 2; March 27.
(b) "Commissioner" means the commissioner of insurance of this state.
(c) "Covered claim" means an unpaid claim, including one for unearned premiums, which arises out of and is within the coverage and not in excess of the applicable limits of an insurance policy to which this act applies issued by an insurer, if such insurer becomes an insolvent insurer after the effective date of this act and:
(1) The claimant or insured is a resident of this state at the time of the insured event. For entities other than an individual, the residence of a claimant, insured or policyholder is the state in which the principal place of business of such claimant, insured or policyholder is located at the time of the insured events; or
(2) the claim is a first party claim for damage to property that is permanently located in this state.
"Covered claim" shall not include:
(1) Any amount due any reinsurer, insurer, insurance pool or underwriting association, as subrogation recoveries or otherwise;
(2) any amount awarded as punitive or exemplary damages unless such damages were covered under the policy of the insolvent insurer;
(3) any claim by an affiliate of the insolvent insurer.
(d) "Domiciliary state" means:
(1) The state in which an insurer is incorporated or organized; or
(2) in the case of an alien insurer, the state of entry of such insurer.
(e) "Insolvent insurer" means:
(1) An insurer licensed by the commissioner to transact insurance in this state either at the time the policy was issued or when the insured event occurred; and
(2) determined to be insolvent by a court of competent jurisdiction and against whom a final order of liquidation has been entered by a court of competent jurisdiction in the insurer's domiciliary state.
(f) "Member insurer" means any person who (1) is authorized to write any kind of insurance to which this act applies under K.S.A. 40-2902, and amendments thereto, including the exchange of reciprocal or inter-insurance contracts; and
(2) is licensed by the commissioner to transact insurance in this state. This act shall not apply to those persons transacting business pursuant to the provisions of K.S.A. 40-202, and amendments thereto.
(g) "Net direct written premiums" means first gross premiums written in this state on insurance policies to which this act applies, less return premiums thereon and dividends paid or credited to policyholders on such direct business. "Net direct written premiums" does not include premiums on contracts between insurers or reinsurers.
(h) "Person" means any individual, corporation, partnership, association or voluntary organization.
(i) The provisions of this section, as amended on July 1, 2006, shall apply to all claims which have not been paid prior to April 14, 2005.
History: L. 1970, ch. 185, § 3; L. 2005, ch. 92, § 1; L. 2006, ch. 122, § 2; July 1.
History: L. 1970, ch. 185, § 4; March 27.
(b) In approving selections to the board, the commissioner shall consider among other things whether all member insurers are fairly represented.
(c) Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors.
History: L. 1970, ch. 185, § 5; L. 1976, ch. 220, § 1; April 2.
(1) Be obligated to the extent of the covered claims existing prior to the determination of insolvency and arising within 30 days after the determination of insolvency, or before the policy expiration date if less than 30 days after the determination, or before the insured replaces the policy or causes its cancellation, if such insured does so within 30 days of the determination, but such obligation shall include only that amount of each covered claim which does not exceed the first $300,000 of any claim, except that the association shall pay the full amount of any covered claim arising out of a workmen's compensation policy. In no event shall the association be obligated to the policyholder or claimant in an amount in excess of the face amount of the policy from which the claim arises.
(2) Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent.
(3) Assess insurers amounts necessary to pay the obligations of the association under subsection (1) subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, and the cost of examinations under K.S.A. 40-2911, and amendments thereto, and other expenses authorized by this act. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year bears to the net direct written premiums of all member insurers for the preceding calendar year. Each member insurer shall be notified of the assessment not later than 30 days before it is due. No member insurer may be assessed in any year an amount greater than 2% of that member insurer's net direct written premiums for the preceding calendar year. If the maximum assessment, together with the other assets of the association, does not provide in any one year an amount sufficient to make all necessary payments, the funds available shall be prorated and the unpaid portion shall be paid as soon thereafter as funds become available. The association may exempt or defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance, or if the commissioner advises the association that such assessment would in such commissioner's opinion, be detrimental to the solvency of a member insurer. Each member insurer may set off against any assessment, authorized payments made on covered claims and expenses incurred in the payment of such claims by the member insurer.
(4) Investigate claims brought against the association and adjust, compromise, settle and pay covered claims to the extent of the association's obligation and deny all other claims and may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested.
(5) Notify such persons as the commissioner directs under K.S.A. 40-2908 (b)(1), and amendments thereto.
(6) Handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the commissioner, but such designation may be declined by a member insurer.
(7) Reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this act.
(b) The association may:
(1) Employ or retain such persons as are necessary to handle claims and perform other duties of the association.
(2) Borrow funds necessary to effect the purposes of this act in accordance with the plan of operation.
(3) Sue or be sued.
(4) Negotiate and become a party to such contracts as are necessary to carry out the purposes of this act.
(5) Perform such other acts as are necessary or proper to effectuate the purposes of this act.
(6) Refund to the member insurers in proportion to the contribution of each member insurer to the association that amount by which the assets of the association exceed the liabilities, if, at the end of any calendar year, the board of directors finds that the assets of the association exceed the liabilities of the association as estimated by the board of directors for the coming year.
(c) The association shall issue to each insurer paying an assessment under this act a certificate of contribution, in a form prescribed by the commissioner, for the amount so paid. All outstanding certificates shall be of equal dignity and priority without reference to amounts or dates of issue. A certificate of contribution may be shown by the insurer in its financial statement as an asset in such form and for such amount, if any, and period of time as the commissioner may approve.
(d) Notwithstanding any other provisions of this act:
(1) A covered claim shall not include a claim filed with the association after the earlier of:
(A) Eighteen months after the date of the order of liquidation; or
(B) the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer.
(2) A covered claim shall not include any claim filed with the association or a liquidator for protection afforded under the insured's policy for incurred-but-not-reported losses.
(3) Any obligation of the association to defend an insured on a covered claim shall cease upon the association's:
(A) Payment, by settlement or on a judgment, of an amount equal to the lesser of the association's covered claim obligation limit or the applicable policy limit; or
(B) tender of such amount.
History: L. 1970, ch. 185, § 6; L. 1976, ch. 220, § 2; L. 2005, ch. 92, § 2; Apr. 14.
(1) One hundred percent for the calendar year of issuance;
(2) eighty percent for the first calendar year after the year of issuance;
(3) sixty percent for the second calendar year after the year of issuance;
(4) forty percent for the third calendar year after the year of issuance; and
(5) twenty percent for the fourth calendar year after the year of issuance.
(b) The insurer may offset the amount written off by it in a calendar year under subsection (a) against its premium tax liability to this state accrued with respect to business transacted in such year.
(c) Any sums acquired by refund pursuant to subsection (b) of K.S.A. 40-2906, and amendments thereto, from the association which have theretofore been written off by contributing insurers and offset against premium taxes as provided in subsection (b) of this section, and is not then needed for purposes of this act, shall be paid by the association to the commissioner to be remitted by the commissioner to the state treasurer in accordance with the provisions of K.S.A. 75-4215, and amendments thereto. Upon receipt of each such remittance, the state treasurer shall deposit the entire amount in the state treasury to the credit of the state general fund.
(d) The provisions of K.S.A. 40-2914, and amendments thereto, shall not apply to amounts written off under subsection (a) of this section.
History: L. 1976, ch. 220, § 3; L. 2001, ch. 5, § 121; July 1.
(2) If the association fails to submit a suitable plan of operation within ninety (90) days following the effective date of this act or if at any time thereafter the association fails to submit suitable amendments to the plan, the commissioner shall, after notice and hearing, adopt and promulgate such reasonable regulations as are necessary or advisable to effectuate the provisions of this act. Such regulations shall continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner.
(b) All member insurers shall comply with the plan of operation.
(c) The plan of operation shall: (1) Establish the procedures whereby all the powers and duties of the association under K.S.A. 40-2906 will be performed.
(2) Establish procedures for handling assets of the association.
(3) Establish the amount and method of reimbursing members of the board of directors under K.S.A. 40-2905.
(4) Establish procedures by which claims may be filed with the association and establish acceptable forms of proof of covered claims. Notice of claims to the receiver or liquidator of the insolvent insurer shall be deemed notice to the association or its agent and a list of such claims shall be periodically submitted to the association or similar organization in another state by the receiver or liquidator.
(5) Establish regular places and times for meetings of the board of directors.
(6) Establish procedures for records to be kept of all financial transactions of the association, its agents and the board of directors.
(7) Provide that any member insurer aggrieved by any final action or decision of the association may appeal to the commissioner within thirty (30) days after the action or decision.
(8) Establish the procedures whereby selections for the board of directors will be submitted to the commissioner.
(9) Contain additional provisions necessary or proper for the execution of the powers and duties of the association.
(d) The plan of operation may provide that any or all powers and duties of the association, except those under K.S.A. 40-2906(a)(3) and (b)(2), are delegated to a corporation, association or other organization which performs or will perform functions similar to those of this association, or its equivalent, in two (2) or more states. Such a corporation, association or organization shall be reimbursed as a servicing facility would be reimbursed and shall be paid for its performance of any other functions of the association. A delegation under this subsection shall take effect only with the approval of both the board of directors and the commissioner, and may be made only to a corporation, association or organization which extends protection not substantially less favorable and effective than that provided by this act.
History: L. 1970, ch. 185, § 7; March 27.
(1) Notify the association of the existence of an insolvent insurer not later than three regular business days after the commissioner receives notice of the determination of the insolvency.
(2) Upon request of the board of directors, provide the association with a statement of the net direct written premiums of each member insurer.
(b) The commissioner may:
(1) Require that the association notify the insureds of the insolvent insurer and any other interested party of the determination of insolvency and of their rights under this act. Such notification shall be by mail at the insurer's or interested party's last known address, where available, but if sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation shall be sufficient.
(2) Suspend or revoke, pursuant to the provisions of K.S.A. 40-223 and amendments thereto, the certificate of authority to transact insurance in this state of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the commissioner may levy a fine on any member insurer which fails to pay an assessment when due. Such fine shall not exceed 5% of the unpaid assessment per month, except that no fine shall be less than $100 per month.
(3) Revoke the designation of any servicing facility if the commissioner finds claims are being handled unsatisfactorily.
History: L. 1970, ch. 185, § 8; L. 1986, ch. 318, § 41; July 1.
(b) The receiver, liquidator or statutory successor of an insolvent insurer shall be bound by settlements of covered claims by the association or a similar organization in another state. The court having jurisdiction shall grant such claims priority equal to that which the claimant would have been entitled in the absence of this act against the assets of the insolvent insurer. The expenses of the association or similar organization in handling claims shall be accorded the same priority as the liquidator's expenses. For purposes of this subsection, expenses for the investigation or defense of claims against insureds under policies with an insolvent insurer shall be considered expenses of the association or other similar organization in handling claims.
(c) The association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the association and estimates of anticipated claims on the association which shall preserve the rights of the association against the assets of the insolvent insurer.
(d) The association shall have the right to recover from any person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under this act.
History: L. 1970, ch. 185, § 9; L. 2005, ch. 92, § 3; Apr. 14.
(b) Any person having a claim which may be recovered under more than one insurance guaranty association or its equivalent shall seek recovery first from the association of the place of residence of the insured except that if it is a first party claim for damage to property with a permanent location, from the association of the location of the property, and if it is a workmen's compensation claim, from the association of the residence of the claimant. Any recovery under this act shall be reduced by the amount of the recovery from any other insurance guaranty association or its equivalent.
(c) The provisions of this section, as amended, shall apply to all claims which have not been paid prior to the effective date of this act.
History: L. 1970, ch. 185, § 10; L. 2005, ch. 92, § 4; Apr. 14.
(b) The board of directors may, upon majority vote, make recommendations to the commissioner for the detection and prevention of insurer insolvencies.
(c) The board of directors shall, at the conclusion of any insurer insolvency in which the association was obligated to pay covered claims, prepare a report on the history and causes of such insolvency, based on the information available to the association, and submit such report to the commissioner.
History: L. 1970, ch. 185, § 11; March 27.
History: L. 1970, ch. 185, § 12; March 27.
History: L. 1970, ch. 185, § 13; March 27.
History: L. 1970, ch. 185, § 14; March 27.
History: L. 1970, ch. 185, § 15; March 27.
History: L. 1970, ch. 185, § 16; March 27.
(2) extends, or will extend to the Kansas policyholders and residents protection and benefits with respect to insolvent insurers not substantially less favorable and effective to such policyholders and residents than the protection and benefits provided with respect to such kinds of insurance under this act.
(b) The commissioner shall by the same such order authorize discontinuance of future payments by insurers to the Kansas insurance guaranty association with respect to the same kinds of insurance: Provided, The assessments and payments shall continue, as necessary, to liquidate covered claims of insurers adjudged insolvent prior to said order and the related expenses not covered by such other plan.
(c) In the event the operation of the Kansas insurance guaranty association shall be so terminated as to all kinds of insurance otherwise within its scope, the association as soon as possible thereafter shall distribute the balance of moneys and assets remaining, after discharge of the functions of the association with respect to prior insurer insolvencies not covered by such other plan, together with related expenses, to the insurers which are then writing in this state policies of the kinds of insurance covered by this act and which had made payments to the association, pro rate upon the basis of the aggregate of such payments made by the respective insurers during the period of five (5) years next preceding the date of such order. Upon completion of such distribution with respect to all of the kinds of insurance covered by this act, this act shall be deemed to have expired.
History: L. 1970, ch. 185, § 17; March 27.
History: L. 1970, ch. 185, § 18; March 27.
History: L. 1970, ch. 185, § 19; March 27.