USA Statutes : nevada
Title : Title 57 - INSURANCE
Chapter : CHAPTER 687A - INSURANCE GUARANTY ASSOCIATION
This chapter shall be known and may be
cited as the Nevada Insurance Guaranty Association Act.
(Added to NRS by 1971, 1943)
Except as otherwise provided in
subsection 5 of NRS 695E.200 , this
chapter applies to all direct insurance, except:
1. Life, annuity, health or disability insurance;
2. Mortgage guaranty, financial guaranty or other forms of
insurance offering protection against investment risks;
3. Fidelity or surety bonds or any other bonding obligations;
4. Credit insurance as defined in NRS 690A.015 ;
5. Insurance of warranties or service contracts;
6. Title insurance;
7. Ocean marine insurance;
8. Any transaction or combination of transactions between a
person, including affiliates of the person, and an insurer, including
affiliates of the insurer, which involves the transfer of investment or
credit risk unaccompanied by the transfer of insurance risk; or
9. Any insurance provided by or guaranteed by a governmental
entity.
(Added to NRS by 1971, 1943; A 1973, 312; 1977, 434; 1987, 1333;
1993, 1396; 1995, 1773, 2057; 1997, 579; 1999, 1833 )
As used in this chapter, unless the
context otherwise requires, the words and terms defined in NRS 687A.031
to 687A.039 , inclusive, have the meanings ascribed to
them in those sections.
(Added to NRS by 1971, 1943; A 1977, 434; 1985, 537, 1073)
“Association” means the
Nevada Insurance Guaranty Association created pursuant to NRS 687A.040
.
(Added to NRS by 1985, 1072)
1. “Covered claim” means an unpaid claim or judgment, including a
claim for unearned premiums, which arises out of and is within the
coverage of an insurance policy to which this chapter applies issued by
an insurer which becomes an insolvent insurer, if one of the following
conditions exists:
(a) The claimant or insured, if a natural person, is a resident of
this State at the time of the insured event.
(b) The claimant or insured, if other than a natural person,
maintains its principal place of business in this State at the time of
the insured event.
(c) The property from which the first party property damage claim
arises is permanently located in this State.
(d) The claim is not a covered claim pursuant to the laws of any
other state and the premium tax imposed on the insurance policy is
payable in this State pursuant to NRS 680B.027 .
2. The term does not include:
(a) An amount that is directly or indirectly due a reinsurer,
insurer, insurance pool or underwriting association, as recovered by
subrogation, indemnity or contribution, or otherwise.
(b) That part of a loss which would not be payable because of a
provision for a deductible or a self-insured retention specified in the
policy.
(c) Except as otherwise provided in this paragraph, any claim filed
with the Association:
(1) More than 18 months after the date of the order of
liquidation; or
(2) After the final date set by the court for the filing of
claims against the liquidator or receiver of the insolvent insurer,
Ê whichever is earlier. The provisions of this paragraph do not apply to
a claim for workers’ compensation that is reopened pursuant to the
provisions of NRS 616C.390 or
616C.392 .
(d) A claim filed with the Association for a loss that is incurred
but is not reported to the Association before the expiration of the
period specified in subparagraph (1) or (2) of paragraph (c).
(e) An obligation to make a supplementary payment for adjustment or
attorney’s fees and expenses, court costs or interest and bond premiums
incurred by the insolvent insurer before the appointment of a liquidator,
unless the expenses would also be a valid claim against the insured.
(f) A first party or third party claim brought by or against an
insured, if the aggregate net worth of the insured and any affiliate of
the insured, as determined on a consolidated basis, is more than
$25,000,000 on December 31 of the year immediately preceding the date the
insurer becomes an insolvent insurer. The provisions of this paragraph do
not apply to a claim for workers’ compensation. As used in this
paragraph, “affiliate” means a person who directly or indirectly owns or
controls, is owned or controlled by, or is under common ownership or
control with, another person. For the purpose of this definition, the
terms “owns,” “is owned” and “ownership” mean ownership of an equity
interest, or the equivalent thereof, of 10 percent or more.
(Added to NRS by 1985, 1072; A 1987, 1065; 1989, 565; 1993, 1396;
1999, 2521 ; 2001, 2215 ; 2003, 3307 ; 2005, 1497 )
“Insolvent insurer”
means an insurer which has been issued a certificate of authority by the
Commissioner to transact insurance in this state, either at the time the
policy was issued or when the insured event occurred:
1. Against which a final order of liquidation with a finding of
insolvency has been entered by a court of competent jurisdiction in the
insurer’s state of domicile or in Nevada; or
2. Which is involved in judicial proceeding in its state of
domicile or in Nevada related to the determination of its solvency,
rehabilitation or liquidation, if the court conducting those proceedings
has issued an order prohibiting the insurer from paying claims for more
than 30 days.
(Added to NRS by 1985, 1072)
“Member insurer” means any
person, except a fraternal or nonprofit service corporation which:
1. Writes any kind of insurance to which this chapter applies,
including the exchange of reciprocal or interinsurance agreements of
indemnity.
2. Is licensed to transact insurance in this state.
(Added to NRS by 1985, 1073)
“Net direct
written premiums” means direct gross premiums written in this state on
insurance policies to which this chapter applies, less return premiums
and dividends paid or credited to policyholders on such direct business.
The term does not include premiums on contracts between insurers or
reinsurers.
(Added to NRS by 1985, 1073)
There
is hereby created a nonprofit unincorporated legal entity to be known as
the Nevada Insurance Guaranty Association. All member insurers must be
members of the Association as a condition of their authority to transact
insurance in this state. The Association shall perform its functions
under a plan of operation established and approved pursuant to NRS
687A.070 and shall exercise its
powers through a Board of Directors established under NRS 687A.050 .
(Added to NRS by 1971, 1944; A 1985, 1074)
1. The Board of Directors of the Association shall consist of not
fewer than five nor more than nine persons. The members of the Board
shall be appointed by the Commissioner and shall serve at his discretion.
Vacancies on the Board shall be filled in the same manner as initial
appointments.
2. A majority of the members appointed shall be the designated
representatives of member insurers. If practicable, one of the members
appointed as a designated representative of the member insurers must be
an officer of a domestic insurer. The Commissioner shall consider among
other things whether all member insurers are fairly represented.
3. 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.
(Added to NRS by 1971, 1944; A 1977, 435; 2003, 2806 )
1. The Association:
(a) Is obligated to the extent of the covered claims existing
before the determination of insolvency and arising within 30 days after
the determination of insolvency, or before the expiration date of the
policy if that date is less than 30 days after the determination, or
before the insured replaces the policy or on request cancels the policy
if he does so within 30 days after the determination. The obligation of
the Association to pay a covered claim is limited to the payment of:
(1) The entire amount of the claim, if the claim is for
workers’ compensation pursuant to the provisions of chapters 616A to 616D , inclusive,
or chapter 617 of NRS;
(2) Not more than $300,000 for each policy if the claim is
for the return of unearned premiums; or
(3) The limit specified in a policy or $300,000, whichever
is less, for each occurrence for any covered claim other than a covered
claim specified in subparagraph (1) or (2).
(b) Shall be deemed the insurer to the extent of its obligations on
the covered claims and to that extent has any rights, duties and
obligations of the insolvent insurer as if the insurer had not become
insolvent. The rights include, without limitation, the right to seek and
obtain any recoverable salvage and to subrogate a covered claim, to the
extent that the Association has paid its obligation under the claim.
(c) Shall assess member insurers amounts necessary to pay the
obligations of the Association pursuant to paragraph (a) after an
insolvency, the expenses of handling covered claims subsequent to an
insolvency, the cost of examinations pursuant to NRS 687A.110 and other expenses authorized by this
chapter. The assessment of each member insurer must be in the proportion
that the net direct written premiums of the member insurer for the
calendar year preceding the assessment bear to the net direct written
premiums of all member insurers for the same calendar year. Each member
insurer must 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 percent of the net direct written premiums of that member
insurer for the calendar year preceding the assessment. If the maximum
assessment, together with the other assets of the Association, does not
provide in any 1 year an amount sufficient to make all necessary
payments, the money available may be prorated and the unpaid portion must
be paid as soon as money becomes available. The Association may pay
claims in any order, including the order in which the claims are received
or in groups or categories. The Association may exempt or defer, in whole
or in part, the assessment of any member insurer if the assessment would
cause the financial statement of the member insurer 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. During the period of deferment, no
dividends may be paid to shareholders or policyholders. Deferred
assessments must be paid when payment will not reduce capital or surplus
below required minimums. Payments must be refunded to those companies
receiving larger assessments because of deferment, or, in the discretion
of the company, credited against future assessments. Each member insurer
must be allowed a premium tax credit for any amounts paid pursuant to the
provisions of this chapter:
(1) For assessments made before January 1, 1993, at the rate
of 10 percent per year for 10 successive years beginning March 1, 1996; or
(2) For assessments made on or after January 1, 1993, at the
rate of 20 percent per year for 5 successive years beginning with the
calendar year following the calendar year in which the assessments are
paid.
(d) Shall investigate claims brought against the fund and adjust,
compromise, settle and pay covered claims to the extent of the obligation
of the Association and deny any other claims.
(e) Shall notify such persons as the Commissioner directs pursuant
to paragraph (a) of subsection 2 of NRS 687A.080 .
(f) Shall act on claims through its employees or through one or
more member insurers or other persons designated as servicing facilities.
Designation of a servicing facility is subject to the approval of the
Commissioner, but the designation may be declined by a member insurer.
(g) Shall 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 pay the
other expenses of the Association authorized by this chapter.
2. The Association may:
(a) Appear in, defend and appeal any action on a claim brought
against the Association.
(b) Employ or retain persons necessary to handle claims and perform
other duties of the Association.
(c) Borrow money necessary to carry out the purposes of this
chapter in accordance with the plan of operation.
(d) Sue or be sued.
(e) Negotiate and become a party to contracts necessary to carry
out the purposes of this chapter.
(f) Perform other acts necessary or proper to effectuate the
purposes of this chapter.
(g) Perform any administrative acts requested by the Commissioner
in furtherance of the purposes of this title and, if the cost of the
action is not paid for by the Association or its member insurers, the
Nevada Industrial Insurance Act.
(h) If, at the end of any calendar year, the Board of Directors of
the Association finds that the assets of the Association exceed its
liabilities as estimated by the Board of Directors for the coming year,
refund to the member insurers in proportion to the contribution of each
that amount by which the assets of the Association exceed the liabilities.
(i) Assess each member insurer equally not more than $100 per year
for administrative expenses not related to the insolvency of any insurer.
(Added to NRS by 1971, 1944; A 1977, 435; 1993, 1397; 1995, 2057;
1999, 2522 ; 2003, 3308 ; 2005, 2131 )
1. The Association shall submit a plan of operation to the
Commissioner, together with any amendments necessary or suitable to
assure the fair, reasonable and equitable administration of the
Association. The plan of operation and any amendments become effective
upon approval in writing by the Commissioner. If the Association fails to
submit a suitable plan of operation within 90 days following May 5, 1971,
or if at any time thereafter the Association fails to submit suitable
amendments to the plan, the Commissioner shall adopt reasonable
regulations necessary or advisable to effectuate the provisions of this
chapter. The regulations continue in force until modified by the
Commissioner or superseded by a plan submitted by the Association and
approved by the Commissioner.
2. All member insurers shall comply with the plan of operation.
3. The plan of operation must:
(a) Establish the procedures for performance of all the duties and
powers of the Association under NRS 687A.060 .
(b) Establish procedures for managing assets of the Association.
(c) Establish the amount and method of reimbursing members of the
Board of Directors under NRS 687A.050 .
(d) 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
those claims must be periodically submitted to the Association or similar
organization in another state by the receiver or liquidator.
(e) Establish regular places and times for meetings of the Board of
Directors.
(f) Establish procedures for keeping records of all financial
transactions of the Association, its agent and the Board of Directors.
(g) Provide that any member insurer aggrieved by any final action
or decision of the Association may appeal to the Commissioner within 30
days after the action or decision.
(h) Establish procedures for submission to the Commissioner of
selections for the Board of Directors.
(i) Contain additional provisions necessary or proper for the
execution of the duties and powers of the Association.
4. The plan of operation may provide that any or all duties and
powers of the Association, except those under paragraph (c) of subsection
1 and paragraph (c) of subsection 2 of NRS 687A.060 , are delegated to a person who performs or
will perform functions similar to those of this Association in two or
more states. This person must be reimbursed as a servicing facility and
must be paid for performance of any other functions of the Association. A
delegation under this subsection takes effect only with the approval of
both the Board of Directors and the Commissioner, and may be made only to
a person who extends protection not substantially less favorable and
effective than that provided by this chapter.
(Added to NRS by 1971, 1946; A 1981, 106)
1. The Commissioner shall:
(a) Notify the Association of the existence of an insolvent insurer
not later than 3 days after he receives notice of the determination of
insolvency by a court or makes a determination of insolvency pursuant to
NRS 687A.107 , whichever is earlier.
(b) Upon request of the Board of Directors of the Association,
provide the Association with a statement of the net direct written
premiums of each member insurer.
2. The Commissioner may:
(a) Require that the Association notify the insureds of the
insolvent insurer and any other interested parties of the determination
of insolvency and of their rights under this chapter. Such notification
must be by mail at their last known address, but if sufficient
information for notification by mail is not available, notice by
publication in a newspaper of general circulation is sufficient.
(b) Suspend or revoke, after notice and opportunity for hearing,
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. The fine must not exceed 5 percent of the unpaid assessment per
month, except that no fine may be less than $100 per month.
(c) Revoke the designation of any servicing facility if he finds
claims are being acted upon unsatisfactorily.
(d) Request the Association to perform any acts specified in
paragraph (g) of subsection 2 of NRS 687A.060 .
(Added to NRS by 1971, 1947; A 1985, 1074; 2005, 2133 )
1. Any person recovering under this chapter shall be deemed to
have assigned his rights under the policy to the Association to the
extent of his recovery from the Association. Every insured or claimant
seeking the protection of this chapter shall cooperate with the
Association to the same extent as the person would have been required to
cooperate with the insolvent insurer. Except as otherwise provided in
subsection 2, the Association does not have a cause of action against the
insured of the insolvent insurer for any sums it has paid out.
2. The Association may recover the amount of money paid to or on
behalf of an insured of an insolvent insurer:
(a) If the aggregate net worth of the insured and any affiliate of
the insured, as determined on a consolidated basis, is more than
$25,000,000 on December 31 of the year immediately preceding the date the
insurer becomes an insolvent insurer; or
(b) If the Association paid the money in error.
3. The receiver, liquidator or statutory successor of an insolvent
insurer is bound by any settlements of covered claims by the Association
or a similar organization in another state. The court having jurisdiction
shall grant those claims priority equal to that to which the claimant
would have been entitled in the absence of this chapter against the
assets of the insolvent insurer. The expenses of the Association or
similar organization in handling claims must be accorded the same
priority as the liquidator’s expenses.
4. 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 statements shall preserve the rights of the
Association against the assets of the insolvent insurer.
5. As used in this section, “affiliate” means a person who
directly or indirectly owns or controls, is owned or controlled by, or is
under common ownership or control with, another person. For the purpose
of this definition, the terms “owns,” “is owned” and “ownership” mean
ownership of an equity interest, or the equivalent thereof, of 10 percent
or more.
(Added to NRS by 1971, 1947; A 2003, 3310 )
A claim asserted against a person insured by
an insurer which has become insolvent which, if it were not a claim by or
for the benefit of a reinsurer, insurer, insurance pool or underwriting
association, would be a covered claim, may be filed directly with the
receiver of the insolvent insurer. These claims may not be asserted in
any action against the insured of the insolvent insurer.
(Added to NRS by 1977, 434; A 1993, 1399)
1. Any person having a claim against his insurer, including, but
not limited to, a claim for damages caused by an uninsured motorist,
under any provision in his insurance policy, which is also a covered
claim shall first exhaust his right under the policy. Any amount payable
on a covered claim under this chapter must be reduced by the amount of
the applicable limit under the claimant’s insurance policy, regardless of
whether the claimant recovers the full amount payable under that policy
or exhausts only a lesser amount.
2. 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. However, if the claim is a first party claim for damage to
property with a permanent location, recovery must first be sought from
the association of the location of the property. If the claim is a
workman’s compensation claim, recovery must first be sought from the
association of the residence of the claimant. Any recovery under this
chapter must be reduced by the amount of the recovery from any other
insurance guaranty association or its equivalent.
(Added to NRS by 1971, 1948; A 1993, 1399)
If the Association pays any claims on behalf of an insurer which is an
insolvent insurer within the meaning of subsection 2 of NRS 687A.035
, the insurer may not accept any new
business in this state until it has reimbursed the Association for the
payment of the claims, including the administrative expenses incurred by
the Association in acting upon and paying the claims.
(Added to NRS by 1985, 1073)
1. The Commissioner may conduct a hearing to determine whether an
insurer is an insolvent insurer within the meaning of subsection 2 of NRS
687A.035 . The Commissioner shall
notify the insurer which is the subject of the hearing not less than 3
days before the hearing. The Commissioner may consider any evidence at
the hearing which he deems relevant to the determination of the solvency
of the insurer.
2. The Commissioner shall make his determination in writing within
15 days after the hearing. The Commissioner shall adopt regulations
governing hearings pursuant to this section.
(Added to NRS by 1985, 1073)
To aid in the detection and prevention of
insurer insolvencies:
1. The Board of Directors shall, upon majority vote, notify the
Commissioner of any information indicating any member insurer may be
insolvent or in a financial condition hazardous to the policyholders or
the public.
2. The Board of Directors may, upon majority vote, request that
the Commissioner order an examination of any member insurer which the
Board in good faith believes may be in a financial condition hazardous to
the policyholders or the public. Within 30 days of the receipt of such
request, the Commissioner shall begin such examination. The examination
may be conducted as a National Association of Insurance Commissioners’
examination or may be conducted by such persons as the Commissioner
designates. The cost of such examination shall be paid by the Association
and the examination report shall be treated as are other examination
reports. Except as permitted by paragraph (c) of subsection 1 of NRS
687A.115 , the Commissioner shall not
release an examination report to the Board of Directors prior to its
release to the public. The Commissioner shall notify the Board of
Directors when the examination is completed. The request for an
examination shall be kept on file by the Commissioner, but it shall not
be open to public inspection prior to the release of the examination
report to the public.
3. The Board of Directors may, upon majority vote, make reports
and recommendations to the Commissioner upon any matter germane to the
solvency, liquidation, rehabilitation or conservation of any member
insurer. Such reports and recommendations are not public documents.
4. The Board of Directors may, upon majority vote, make
recommendations to the Commissioner for the detection and prevention of
insurer insolvencies.
5. 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.
(Added to NRS by 1971, 1948; A 1977, 437)
To aid in the detection and prevention of insurer
insolvencies:
1. The Commissioner may:
(a) Notify the insurance commissioners of the other states and
territories of the United States and of the District of Columbia when he
revokes or suspends a license, or when he makes any formal order that a
company restrict its writing of insurance, obtain additional
contributions to surplus, withdraw from the state or reinsure any part of
its business or any other account for the security of policyholders or
creditors.
(b) Report to the Board of Directors any action set forth in
paragraph (a) and the receipt of a report from another insurance
commissioner indicating that the action has been taken elsewhere. The
report shall contain all significant details of the action taken or the
report received.
(c) Report to the Board of Directors when he has reasonable cause
to believe from any examination of any member insurer, whether completed
or in process, that the member insurer may be insolvent or in a financial
condition hazardous to the interests of policyholders or the public.
(d) Furnish to the Board of Directors the early warning tests
developed by the National Association of Insurance Commissioners. The
Board may use the information furnished to carry out its duties. The
report and the information contained therein is not a public record and
shall be kept confidential by the Board of Directors until it is made
public by the Commissioner or other lawful authority.
2. The Commissioner may seek the advice and recommendations of the
Board of Directors concerning any matter affecting his duties and
responsibilities relating to the financial condition of member insurers
and of insurers seeking admission to transact business in this state.
(Added to NRS by 1977, 433)
The Association is subject to examination and regulation by the
Commissioner. The Board of Directors shall submit, not later than March
30 of each year, a financial report for the preceding calendar year in a
form approved by the Commissioner.
(Added to NRS by 1971, 1949)
The Association
is exempt from payment of all fees and all taxes levied by this State or
any of its subdivisions, except taxes:
1. Levied on real or personal property; or
2. Imposed pursuant to the provisions of chapter 363A or 363B of NRS.
(Added to NRS by 1971, 1949; A 2003, 20th Special Session, 228
)
The rates and premiums charged for insurance
policies to which this chapter applies shall include amounts sufficient
to recoup a sum equal to the amounts paid to the Association by the
member insurer less any amounts returned to the member insurer by the
Association, or less any premium tax credits allowed under this chapter,
and such rates shall not be deemed excessive as a result of containing
such recoupment allowances.
(Added to NRS by 1971, 1949)
There is no liability, and
no cause of action of any nature shall arise against any member insurer,
the Association, its agents or employees, the Board of Directors, the
Commissioner or his representatives, for any reasonable action taken by
them in the performance of their duties and powers under this chapter.
(Added to NRS by 1971, 1949)
1. Upon the application of the Association or insured and upon
cause shown, all proceedings in which the insolvent insurer is a party,
or is obligated to defend a party, in any court in this state must be
stayed for 3 months and any time thereafter ordered by the court after
the date the insolvency is determined to permit proper defense by the
Association of all pending causes of action. Cause may be established by
affidavit showing the unavailability of the insolvent insurer’s files or
records which are reasonably necessary for the Association to confirm
coverage and adjust the claim.
2. If an insolvent insurer has failed to defend an insured in any
action, the Association may apply on its own behalf or on behalf of the
insured to have any judgment or order in the action set aside and the
Association may defend against the action on its merits.
(Added to NRS by 1971, 1949; A 1977, 438; 1987, 928)
