USA Statutes : oregon
Title : TITLE 56 INSURANCE
Chapter : Chapter 734 Rehabilitation, Liquidation and Conservation of Insurers
As used in this chapter:
(1) “Delinquency proceeding” means any proceeding commenced against
an insurer pursuant to this chapter for the purpose of liquidating,
rehabilitating or conserving the insurer.
(2) “Foreign country” means territory not in any state.
(3) “General assets” means all property, real, personal or
otherwise, not specifically mortgaged, pledged, deposited or otherwise
encumbered for the security or benefit of specified persons or a limited
class 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 assets held 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.
(4) An insurer is “impaired” when its allowed assets do not exceed
its liabilities plus its required capitalization.
(5) An insurer is “insolvent” when the insurer is unable to pay its
obligations when they are due, or when its allowed assets do not exceed
its liabilities.
(6) “Insurer” includes:
(a) All persons transacting or purporting to transact insurance as
insurers in this state; and
(b) All persons in process of organization to become insurers.
(7) “Receiver” means receiver, rehabilitator, liquidator or
conservator, as the context may require.
(8) “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. “Secured claim”
also includes claims which more than four months prior to the
commencement of delinquency proceedings in the state of the insurer’s
domicile have become liens upon specific assets by reason of judicial
process.
(9) “Special deposit claim” means any claim secured by a deposit
made pursuant to statute for the security or benefit of a limited class
or classes of persons, but not including any claim secured by general
assets. [Formerly 734.020; 1993 c.447 §90]
As used in this chapter:
(1) “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.
(2) “Ancillary state” means any state other than a domiciliary
state.
(3) “Reciprocal state” means any state other than this state in
which in substance and effect the provisions of this chapter relating to
delinquency proceedings are in force, including provisions requiring that
the Director of the Department of Consumer and Business Services or
equivalent insurance supervisory official be the receiver of a delinquent
insurer and in which some provision exists for the avoidance of
fraudulent conveyances and preferential transfers. [Formerly 734.050;
1993 c.447 §91]
(1) For any reason stated in subsection (2) of this section,
the Director of the Department of Consumer and Business Services by order
may place under supervision:
(a) A domestic insurer; or
(b) A foreign or alien insurer, if the insurance regulatory
official of its state of domicile or entry has asked the director to
apply this section and ORS 734.047, 734.051 and 734.055 to the insurer.
(2) The director may place an insurer under supervision if upon
examination or at any other time the director determines that:
(a) The condition of the insurer renders the continuance of its
business hazardous to the public or to its insureds.
(b) The insurer has refused to permit examination of its books,
papers, accounts, records or affairs by the director or any deputy,
examiner or employee representing the director.
(c) A domestic insurer has unlawfully removed from this state
books, papers, accounts or records necessary for an examination of the
insurer.
(d) The insurer has failed to comply promptly with the applicable
financial reporting statutes or rules and any request of the Department
of Consumer and Business Services relating thereto.
(e) The insurer has failed to observe an order of the director to
make good, within the time prescribed by law, any prohibited deficiency
in its capital, capital stock or surplus.
(f) The insurer is continuing to transact insurance or write
business after its certificate of authority has been revoked or suspended
by the director.
(g) The insurer, by contract or otherwise, has done any of the
following unlawfully, in violation of an order of the director or without
first having obtained written approval of the director:
(A) Totally reinsured its entire outstanding business; or
(B) Merged or consolidated substantially its entire property or
business with another insurer.
(h) The insurer has engaged in any transaction in which it is not
authorized to engage under the laws of this state.
(i) The insurer has failed to comply with any other order of the
director.
(j) The insurer has failed to comply with any other applicable
provisions of the Insurance Code.
(k) The business of the insurer is being conducted fraudulently.
(L) The insurer agrees to supervision.
(3) If the director determines that one or more conditions set
forth in subsection (2) of this section exist, the director may do all of
the following:
(a) Notify the insurer of the determination of the director.
(b) Furnish to the insurer a written list of the requirements to
abate the condition or conditions determined to exist.
(c) Notify the insurer that it is under the supervision of the
director and that the director is applying this section and ORS 734.047,
734.051 and 734.055.
(4) The director may act as the supervisor to conduct the
supervision and otherwise carry out an order under subsection (1) of this
section or may appoint another person as supervisor.
(5) The director or the appointed supervisor may prohibit any
person from taking any of the following actions during the period of
supervision without the prior approval of the director or supervisor:
(a) Disposing of, conveying or encumbering any of the insurer’s
assets or its business in force.
(b) Withdrawing from any of the insurer’s bank accounts.
(c) Lending any of the insurer’s funds.
(d) Investing any of the insurer’s funds.
(e) Transferring any of the insurer’s property.
(f) Incurring any debt, obligation or liability on behalf of the
insurer.
(g) Merging or consolidating the insurer with another insurer or
other person.
(h) Entering into any new reinsurance contract or treaty.
(i) Approving new premiums or renewing any policies.
(j) Terminating, surrendering, forfeiting, converting or lapsing
any insurance policy, certificate or contract, except for nonpayment of
premiums due.
(k) Releasing, paying or refunding premium deposits, accrued cash
or loan values, unearned premiums, or other reserves on any insurance
policy, certificate or contract.
(L) Making any material change in management.
(m) Increasing salaries and benefits of officers or directors.
(n) Making or increasing preferential payment of bonuses, dividends
or other payments determined by the director to be preferential.
(o) Any other action affecting the business or condition of the
insurer.
(6) The director may apply to any circuit court for any restraining
order, preliminary and permanent injunctions and other orders necessary
to enforce a supervision order.
(7) During the period of supervision, the insurer may file a
written request for a hearing to review the supervision or any action
taken or proposed to be taken. A request under this subsection shall not
suspend the supervision. The insurer must specify in the request the
manner in which the action being complained of would not result in
improving the condition of the insurer. The hearing shall be held within
30 days after the filing of the request. The director shall complete the
review of the supervision or other action and shall take action under
subsection (8) of this section if appropriate within 30 days after the
record for the hearing is closed.
(8) The director shall release an insurer from supervision if the
director determines upon hearing that none of the conditions giving rise
to the supervision exist. [1989 c.425 §6; 1991 c.401 §6; 1993 c.447 §88](1) An insurer placed under supervision must correct,
eliminate or remedy the acts, transactions or practices that are the
basis for the order of supervision and otherwise comply with the
requirements of the Director of the Department of Consumer and Business
Services within the period of time allowed by the director, not to exceed
60 days, after the date on which the order is served on the insurer.
(2) If the director determines that the conditions giving rise to
the supervision still exist at the end of the supervision period
established in subsection (1) of this section, the director may extend
the period. [1989 c.425 §7; 1993 c.447 §89] During
the period of supervision of an insurer, the Director of the Department
of Consumer and Business Services may institute rehabilitation or
liquidation proceedings, extend the period of supervision or take any
other action under the authority of the director with respect to the
insurer. [1989 c.425 §8] The
Director of the Department of Consumer and Business Services or
supervisor on behalf of an insurer under supervision may bring an action
for damages against any person who violates any order of the director
under ORS 734.043 if the violation reduces the net worth of the insurer
or results in loss to the insurer that the insurer would not have
suffered otherwise. The director or supervisor may recover damages to the
extent of the reduction or loss. [1989 c.425 §9] (1) The Director of the Department
of Consumer and Business Services may file a petition with the circuit
court requesting an order that:
(a) Authorizes the director to seize all or part of the property,
books, accounts and other records of a domestic insurer as well as the
premises occupied by the insurer for transacting its business; and
(b) Enjoins the domestic insurer from disposing of its property and
transacting business except as allowed by written consent of the director.
(2) The director must include all of the following in the petition
under subsection (1) of this section:
(a) An allegation that one or more grounds exist that would justify
a court order for a rehabilitation or liquidation proceeding against the
insurer.
(b) An allegation that the interests of policyholders, creditors or
the public will be endangered by delay.
(c) The contents of the order that the director requests the court
to issue. [1989 c.425 §10] (1) Upon petition by the
Director of the Department of Consumer and Business Services under ORS
734.059, the court may issue the requested order immediately, ex parte
and without hearing. The court in its order shall specify the duration of
the order. The duration of an order shall be a period sufficient to
enable the director to ascertain the condition of the insurer.
(2) On motion of the director or the insurer against whom an order
under this section is issued, or on the court’s own motion, the court may
hold such hearings from time to time as the court determines are
desirable, after such notice as it determines appropriate, and may
extend, shorten or modify the terms of the order.
(3) The court may vacate an order issued under this section if the
court determines that the director has not commenced a rehabilitation or
liquidation proceeding within a reasonable time.
(4) An order of the court directing a rehabilitation or liquidation
proceeding vacates the order issued under this section.
(5) Entry of a seizure order under this section does not constitute
an anticipatory breach of any contract of the insurer.
(6) At any time after a court issues an order under this section,
the court may direct that notice of the order be given to a person if the
court determines both of the following:
(a) That the person was not notified of the hearing on the order
and did not appear at the hearing.
(b) That the interest of the person is or will be substantially
affected by the order. [1989 c.425 §11] (1) An insurer against whom an order
under ORS 734.059 is directed may petition the court for a hearing and
review of the order.
(2) Not later than the 15th day after the court receives a petition
under subsection (1) of this section, the court shall hold the hearing
and review the order. [1989 c.425 §12] (1) The
circuit court shall have original jurisdiction of delinquency proceedings
under this chapter, and any court with jurisdiction is authorized to make
all necessary or proper orders to carry out the purposes of this chapter.
(2) The venue of delinquency proceedings and proceedings under ORS
734.059 and 734.063 against a domestic insurer and the venue of
delinquency proceedings against foreign and alien insurers shall be in
the Circuit Court for Marion County.
(3) At any time after the commencement of a delinquency proceeding
or a proceeding under ORS 734.059 and 734.063 the court may issue an
order changing the venue of the proceeding on motion of the Director of
the Department of Consumer and Business Services or other interested
person if the court finds the proceedings may be more economically and
efficiently conducted thereby. [1967 c.359 §265; 1989 c.425 §13] (1) Delinquency proceedings
pursuant to this chapter shall constitute the sole and exclusive method
of rehabilitating, liquidating or conserving an insurer, and no court
shall entertain a petition for the commencement of such proceedings, or
any other similar procedure, unless the same has been filed in the name
of the state on the relation of the Director of the Department of
Consumer and Business Services.
(2) An appeal shall lie to the Court of Appeals from an order
granting or refusing rehabilitation, liquidation, or conservation, and
from every order in delinquency proceedings having the character of a
final order as to the particular portion of the proceedings embraced
therein. [1967 c.359 §266; 1979 c.562 §33] (1) The Director of
the Department of Consumer and Business Services shall commence a
delinquency proceeding by an application to the court for an order
directing the insurer to show cause why the director should not have the
relief prayed for.
(2) The application shall be by petition, verified by the director,
setting forth the ground or grounds for the proceeding and the relief
demanded.
(3) If the court is satisfied from reading the director’s petition
that the facts therein alleged, if established, would constitute grounds
for a delinquency proceeding under this chapter, the court shall issue an
order to the insurer to show cause.
(4) On the return of the order to show cause, and after a full
hearing, the court shall either deny the application or grant the
application, together with such other relief as the nature of the case
and the interests of the policyholders, creditors, stockholders, members,
subscribers or the public may require.
(5) After commencement of a delinquency proceeding by the director,
orders of the court may thereafter be made for any of the purposes
relevant upon application of any interested person. [1967 c.359 §267] (1) Upon application by the Director of the
Department of Consumer and Business Services for an order to show cause
under ORS 734.130, or at any time thereafter, the court may, without
notice, issue an injunction restraining the insurer, its officers,
directors, stockholders, members, subscribers, agents, employees and all
other persons from the transaction of its business or the waste or
disposition of its property until the further order of the court.
(2) The court may, at any time during a proceeding under this
chapter, issue such other injunctions or orders to prevent any of the
following activities:
(a) The transaction of further business.
(b) The transfer of property.
(c) Interference with the receiver or with a delinquency proceeding.
(d) Waste of the assets of an insurer.
(e) Dissipation and transfer of bank accounts.
(f) The institution or further prosecution of any actions or
proceedings.
(g) The obtaining of preferences, judgments, attachments,
garnishments or liens against the insurer, its assets or its
policyholders.
(h) The levying of execution against the insurer, its assets or its
policyholders.
(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.
(j) The withholding from the receiver of books, accounts, documents
or other records relating to the business of the insurer.
(k) Any other threatened or contemplated action that might lessen
the value of the assets of the insurer or prejudice the rights of
policyholders, creditors or shareholders, or the administration of any
delinquency proceeding.
(3) Notwithstanding any other provision of law, no bond shall be
required of the director as a prerequisite for the issuance of any
injunction or restraining order pursuant to this section. [1967 c.359
§268; 1993 c.447 §92] (1)
Each officer, manager, director, trustee, owner, employee or agent of an
insurer, and any other person with authority over or in charge of any
portion of the insurer’s affairs, including any person who exercises
control directly or indirectly over activities of the insurer through a
holding company or other affiliate of the insurer, shall cooperate with
the Director of the Department of Consumer and Business Services in any
delinquency proceeding or any investigation preliminary to the
proceeding. For purposes of this section, cooperation with the director
includes at least the following:
(a) Replying promptly in writing to any inquiry from the director
requesting such a reply; and
(b) Making available to the director any books, accounts, documents
or other records, information or property of or pertaining to the insurer
and in the possession, custody or control of the insurer.
(2) A person shall not obstruct or interfere with the director in
the conduct of any delinquency proceeding or any investigation
preliminary or incidental thereto.
(3) This section shall not be construed to abridge otherwise
existing legal rights, including the right to resist a petition for
liquidation or other delinquency proceedings, or other orders. [1993
c.447 §94]Note: 734.142 and 734.144 were added to and made a part of ORS
chapter 734 by legislative action but were not added to any smaller
series therein. See Preface to Oregon Revised Statutes for further
explanation. (1) The
following persons are entitled to protection under this section:
(a) All receivers responsible for the conduct of a delinquency
proceeding, including present and former receivers.
(b) All employees of the receiver. For purposes of this section,
such employees include all present and former special deputies and
assistant special deputies appointed by the Director of the Department of
Consumer and Business Services and all persons whom the director, special
deputies, or assistant special deputies have employed to assist in a
delinquency proceeding. Unless designated as special deputies, attorneys,
accountants, auditors and other professional persons or firms who are
retained by the receiver as independent contractors and their employees
are not entitled to protection under this section.
(2) The receiver and employees of the receiver shall have official
immunity and shall be immune from civil action and liability, both
personally and in their official capacities, for any tort claim or
demand, whether groundless or otherwise, arising out of any alleged act,
error or omission of the receiver or any employee occurring in the
performance of their duties. For purposes of this section, “tort” has the
meaning given that term in ORS 30.260.
(3) The receiver and employees of the receiver shall be indemnified
from the assets of the insurer against any tort claim arising out of any
alleged act, error or omission of the receiver or any employee occurring
in the performance of their duties, whether personally or in the official
capacity of the receiver or employee. Any indemnification made under this
subsection is an administrative expense of the insurer.
(4) The provisions of subsections (2) and (3) of this section do
not apply in case of malfeasance in office or willful or wanton neglect
of duty.
(5) In any legal action in which the receiver is a defendant, the
portion of any settlement relating to the alleged act, error or omission
of the receiver is subject to the approval of the court before which the
delinquency proceeding is pending. The court may not approve the portion
of the settlement if it determines:
(a) That the claim did not occur in the performance of the
receiver’s duties; or
(b) That the claim was caused by malfeasance in office or willful
or wanton neglect of duty by of the receiver.
(6) This section shall not be construed or applied to deprive the
receiver or any employee of any immunity, indemnity, benefits of law,
rights or any defense otherwise available. [1993 c.447 §95]Note: See note under 734.142. The
Director of the Department of Consumer and Business Services may apply
for an order directing the director to rehabilitate a domestic insurer on
one or more of the following grounds:
(1) The insurer is impaired.
(2) The insurer has failed to submit its books, papers, accounts or
affairs to the reasonable inspection and examination of the director.
(3) Without first obtaining the written consent of the director,
the insurer has by contract of reinsurance, or otherwise, transferred or
attempted to transfer substantially its entire property or business, or
has entered into any transaction the effect of which is to merge,
consolidate or reinsure substantially its entire property or business in
or with the property or business of any other person, without first
having complied with ORS 732.517 to 732.546 and 742.150 to 742.162.
(4) The insurer is in such condition that its further transaction
of business would be hazardous to its policyholders, creditors,
stockholders or the public.
(5) The insurer has violated its articles of incorporation, its
bylaws, any law of this state or any order of the director.
(6) Any person who in fact has executive authority in the insurer,
whether an officer, manager, general agent, director or trustee, employee
or other person, has refused to be examined under oath by the director
concerning its affairs, whether in this state or elsewhere, and after
reasonable notice of the fact, the insurer has not promptly and
effectively terminated the employment and status of the person and all
influence of the person on management.
(7) The insurer or its property has been or is the subject of an
application for the appointment of a receiver, trustee, custodian,
conservator or sequestrator or similar fiduciary of the insurer or of its
property other than as authorized under the Insurance Code, and the
appointment has been made or is imminent, and the appointment might
deprive the courts of this state of jurisdiction or might prejudice
orderly delinquency proceedings.
(8) The insurer has consented to such an order through a majority
of its directors, stockholders, members or subscribers.
(9) The insurer has failed to pay any obligation to any state or
any subdivision thereof or any final judgment rendered against it in any
state within 60 days after the judgment became final or within 60 days
after time for taking an appeal has expired, or within 60 days after
dismissal of an appeal before final determination, whichever date is the
later, if the court in which the judgment was entered had jurisdiction
over the subject matter.
(10) The insurer has had its certificate of authority to transact
insurance in this state revoked.
(11) There is reasonable cause to believe that there has been
embezzlement from the insurer, wrongful sequestration or diversion of the
insurer’s assets, forgery or fraud affecting the insurer or other illegal
conduct in, by or with respect to the insurer that if established would
endanger assets in an amount threatening the solvency of the insurer.
(12) The insurer has failed to remove any person who in fact has
executive authority in the insurer, whether an officer, manager, general
agent, director or trustee, employee or other person, if the person has
been found by the director to be dishonest or untrustworthy in a way
affecting the insurer’s business.
(13) Control of the insurer, whether by stock ownership or
otherwise, and whether direct or indirect, is in a person or persons
found to be untrustworthy.
(14) The insurer has failed to file its annual report or other
financial report required by statute within the time allowed by law or
within any additional time allowed by the director. [Formerly 738.450;
1993 c.447 §96; 1995 c.30 §11] (1) An order
to rehabilitate a domestic insurer shall direct the Director of the
Department of Consumer and Business Services forthwith to take possession
of the property of the insurer and to conduct the business thereof, and
to take such steps toward removal of the causes and conditions which have
made rehabilitation necessary as the court may direct.
(2) If at any time the director deems that further efforts to
rehabilitate the insurer would be useless, the director may apply to the
court for an order of liquidation under ORS 734.180.
(3) The director, or any interested person upon due notice to the
director, at any time may apply for an order terminating the
rehabilitation proceeding and permitting the insurer to resume possession
of its property and the conduct of its business, but no such order shall
be granted except after a full hearing. [1967 c.359 §270] The Director
of the Department of Consumer and Business Services may apply for an
order directing the director to liquidate the business of a domestic
insurer, regardless of whether there has been a prior order directing the
director to rehabilitate such insurer, upon any of the grounds specified
in ORS 734.150, or if the insurer:
(1) Has ceased transacting business for a period of one year;
(2) Has commenced voluntary liquidation or dissolution, or attempts
to commence or prosecute any action or proceeding to liquidate its
business or affairs, or to dissolve its corporate charter, or to procure
the appointment of a receiver, trustee, custodian, or sequestrator under
any laws except the Insurance Code;
(3) Has not organized or completed its organization and obtained a
certificate of authority as an insurer within the time authorized by law;
or
(4) Is insolvent. [1967 c.359 §271; 1993 c.447 §97] (1) An order to
liquidate the business of a domestic insurer shall direct the Director of
the Department of Consumer and Business Services forthwith to take
possession of the property of the insurer, to liquidate its business, to
deal with the insurer’s property and business in the name of the director
or in the name of the insurer as the court may direct, and to give notice
to all creditors who may have claims against the insurer to present such
claims.
(2) The director may apply under this chapter for an order
dissolving the corporate existence of a domestic insurer:
(a) Upon the application of the director for an order of
liquidation of such insurer, or at any time after such order has been
granted; or
(b) Upon the grounds specified in ORS 734.170 (3), regardless of
whether an order of liquidation is sought or has been obtained. [Formerly
738.470] The
Director of the Department of Consumer and Business Services may apply
for an order directing the director to conserve the assets within this
state of a foreign or alien insurer upon any one or more of the following
grounds:
(1) Any of the grounds specified in ORS 734.150; or
(2) That its property has been sequestrated in any jurisdiction.
[1967 c.359 §273; 1993 c.447 §98](1) An order to conserve the assets of a foreign or alien
insurer shall direct the Director of the Department of Consumer and
Business Services forthwith to take possession of the property of the
insurer within this state and to conserve it, subject to the further
direction of the court.
(2) Whenever a domiciliary receiver has been appointed for any
foreign or alien insurer in its domiciliary state, the court shall, on
application of the director, appoint the director as the ancillary
receiver in this state.
(3) An order to liquidate the assets in this state of a foreign or
alien insurer shall direct the director forthwith to take possession of
the property of the insurer within this state and to liquidate it subject
to the orders of the court and with due regard to the rights and powers
of the domiciliary receiver, as provided in this chapter. [1967 c.359
§274]
(1) Whenever under this chapter a receiver is to be appointed in
delinquency proceedings for an insurer domiciled in this state, the court
shall appoint the Director of the Department of Consumer and Business
Services as such receiver. The court shall direct the receiver forthwith
to take possession of the property of the insurer and to administer the
same under the orders of the court.
(2) Any deed or other instrument executed under this chapter shall
be valid and effectual for all purposes as though the same had been
executed by the person affected by any proceedings under this chapter or
by its officers pursuant to the direction of its governing board or
authority. The filing or recording of the order directing possession to
be taken, or a certified copy thereof, in the office where instruments
affecting title to property are required to be filed or recorded shall
impart the same notice as would be imparted by a deed, bill of sale or
other evidence of title duly filed or recorded.
(3) In cases where any real property sold by the director is
located in a county other than the county wherein the proceeding is
pending, the director shall cause a certified copy of the order of the
appointment, or order authorizing or ratifying the sale, to be filed with
the recording officer for the county in which the property is located.
(4) The director as domiciliary receiver shall be responsible on
the official bond of the director for the proper administration of all
property coming into the possession or control of the director. The court
may at any time require an additional bond from the director or the
deputies of the director if deemed desirable for the protection of the
property. [Formerly 751.020] (1) Upon taking possession
of the property and business of any person in any proceeding under this
chapter, the Director of the Department of Consumer and Business Services
shall, subject to the direction of the court, immediately proceed to
conduct the business of the insurer or to take such steps as are
authorized by the laws of this state for the purpose of rehabilitating,
liquidating or conserving the insurer.
(2) Upon taking such possession of the property and business of any
person, the director as receiver shall:
(a) Be vested with the insurer’s title and interest in and to all
assets and property of every kind, both tangible and intangible, except
that ancillary receivers in reciprocal states shall have, as to assets
located in their respective states, the rights and powers which are
prescribed in this chapter for ancillary receivers appointed in this
state as to assets located in this state;
(b) Possess, in the name of the insurer or in the name of the
director, all rights, privileges, powers and authority granted to
insurers in this state or otherwise possessed by insurers generally,
without regard to any limitations thereon prescribed in the articles or
bylaws of such insurer; and
(c) Perform and do all acts which the director may deem necessary,
advisable or expedient for the accomplishment or in aid of the purpose
for which such possession was taken. [1967 c.359 §276] In connection with delinquency
proceedings, the Director of the Department of Consumer and Business
Services may appoint one or more special deputy directors to act for the
director, and may employ such counsel, clerks, and assistants as the
director deems necessary. Unless otherwise provided by the director, no
person so appointed shall be deemed a state employee solely by reason of
such appointment. The compensation of the special deputies, counsel,
clerks or assistants and all expenses of taking possession of the
delinquent insurer and of conducting the delinquency proceedings shall be
paid out of the funds or assets of the insurer. Within the limits of the
duties imposed upon them special deputies shall possess all the powers
given to, and, in the exercise of those powers, shall be subject to all
the duties imposed upon, the receiver with respect to delinquency
proceedings. [1967 c.359 §277]
(1) Whenever under this chapter an ancillary receiver is to be appointed
in delinquency proceedings for an insurer not domiciled in this state,
the court shall appoint the Director of the Department of Consumer and
Business Services as ancillary receiver. The director shall file a
petition requesting the appointment:
(a) If the director finds that there are sufficient assets of such
insurer located in this state to justify the appointment of an ancillary
receiver; or
(b) If 10 or more persons resident in this state having claims
against such insurer file a petition with the director requesting the
appointment of such ancillary receiver.
(2) The domiciliary receiver of an insurer domiciled in a
reciprocal state, shall be vested by operation of law with the title to
all the property, contracts and rights of action, and all the books and
records of the insurer located in this state, and the domiciliary
receiver shall have the immediate right to recover balances due from
local insurance producers and to obtain possession of any books and
records of the insurer found in this state. The domiciliary receiver
shall also be entitled to recover the other assets of the insurer located
in this state except that upon the appointment of an ancillary receiver
in this state, the ancillary receiver shall during the ancillary
receivership proceedings have the sole right to recover such other
assets. The ancillary receiver shall, as soon as practicable, liquidate
from their respective securities those special deposit claims and secured
claims which are proved and allowed in the ancillary proceedings in this
state, and shall pay the necessary expenses of the proceedings. All
remaining assets the ancillary receiver shall promptly transfer to the
domiciliary receiver. Subject to the provisions of this section the
ancillary receiver and the deputies of the ancillary receiver shall have
the same powers and be subject to the same duties with respect to the
administration of such assets, as a receiver of an insurer domiciled in
this state. [Formerly 751.030; 2003 c.364 §85] The
domiciliary receiver of an insurer domiciled in a reciprocal state may
sue in this state to recover any assets of such insurer to which the
domiciliary receiver may be entitled under the laws of this state. [1967
c.359 §279] (1) In a
delinquency proceeding begun in this state against an insurer domiciled
in this state, claimants residing in reciprocal states may file claims
either with the ancillary receivers, if any, in their respective states,
or with the domiciliary receiver. All such claims must be filed on or
before the last date fixed for the filing of claims in the domiciliary
delinquency proceedings.
(2) Controverted claims belonging to claimants residing in
reciprocal states may either:
(a) Be proved in this state as provided by law; or
(b) If ancillary proceedings have been commenced in such reciprocal
states, be proved in those proceedings.
(3) In the event a claimant elects to prove a claim in ancillary
proceedings, if notice of the claim and opportunity to appear and be
heard is afforded the domiciliary receiver of this state as provided in
ORS 734.270 with respect to ancillary proceedings in this state, the
final allowance of such claim by the courts in the ancillary state shall
be accepted in this state as conclusive as to its amount, and shall also
be accepted as conclusive as to its priority, if any, against special
deposits or other security located within the ancillary state. [Formerly
751.040] (1) In a
delinquency proceeding in a reciprocal state against an insurer domiciled
in that state, claimants against such insurer who reside within this
state may file claims either with the ancillary receiver, if any,
appointed in this state, or with the domiciliary receiver. All such
claims must be filed on or before the last date fixed for the filing of
claims in the domiciliary delinquency proceedings.
(2) Controverted claims belonging to claimants residing in this
state may either:
(a) Be proved in the domiciliary state as provided by the law of
that state; or
(b) If ancillary proceedings have been commenced in this state, be
proved in those proceedings.
(3) In the event that any such claimant elects to prove a claim in
this state, the claimant shall file a claim with the ancillary receiver
in the manner provided by this chapter for the proving of claims against
insurers domiciled in this state, and the claimant shall give notice in
writing to the receiver in the domiciliary state, either by registered or
certified mail or by personal service at least 40 days prior to the date
set for hearing. The notice shall contain a concise statement of the
amount of the claim, the facts on which the claim is based, and the
priorities asserted, if any. If the domiciliary receiver, within 30 days
after the giving of such notice, shall give notice in writing to the
ancillary receiver and to the claimant, either by registered or certified
mail or by personal service, of intention to contest such claim, the
domiciliary receiver shall be entitled to appear or to be represented in
any proceeding in this state involving the adjudication of the claim. The
final allowance of the claim by the courts of this state shall be
accepted as conclusive as to its amount, and shall also be accepted as
conclusive as to its priority, if any, against special deposits or other
security located within this state. [Formerly 751.050] (1) All claims against an
insurer, against which delinquency proceedings have been begun, shall set
forth in reasonable detail the amount of the claim, or the basis upon
which such amount can be ascertained, the facts upon which the claim is
based, and the priorities asserted, if any. All such claims shall be
verified by the affidavit of the claimant, or someone authorized to act
on behalf of the claimant and having knowledge of the facts, and shall be
supported by such documents as may be material thereto.
(2) All claims filed in this state shall be filed with the
receiver, whether domiciliary or ancillary, in this state, on or before
the last date for filing as specified in this chapter.
(3) After the expiration of any period for filing of claims, the
receiver shall report the claims filed within such period to the court,
specifying in such report the recommendation of the receiver with respect
to the action to be taken thereon. Upon receipt of such report, the court
shall fix a time for hearing such claims and shall direct that the
claimants or the receiver, as the court shall specify, shall give such
notice as the court shall determine to such persons as shall appear to
the court to be interested therein. All such notices shall specify the
time and place of the hearing and shall concisely state the amount and
nature of the claim, the priorities asserted, if any, and the
recommendation of the receiver with reference thereto.
(4) At the hearing all persons interested shall be entitled to
appear and the court shall enter an order allowing, allowing in part, or
disallowing the claim. Any such order shall be deemed to be an appealable
order. [1967 c.359 §282] (1) In a delinquency
proceeding against an insurer domiciled in this state, claims owing to
residents of ancillary states shall be preferred claims if like claims
are preferred under the laws of this state. All such claims whether owing
to residents or nonresidents shall be given equal priority of payment
from general assets regardless of where such assets are located.
(2) In a delinquency proceeding against an insurer domiciled in a
reciprocal state, claims owing to residents of this state shall be
preferred if like claims are preferred by the laws of that state. [1967
c.359 §283] The owners of special
deposit claims against an insurer for which a receiver is appointed in
this or any other state shall be given priority against their several
special deposits in accordance with the provisions of the statutes
governing the creation and maintenance of such deposits. If there is a
deficiency in any such deposit so that claims secured thereby are not
fully discharged therefrom, the claimants may share in the general
assets, but such sharing shall be deferred until general creditors, and
also claimants against other special deposits who have received smaller
percentages from their respective special deposits, have been paid
percentages of their claims equal to the percentage paid from the special
deposit. [1967 c.359 §284] The owner of a secured claim
against an insurer for which a receiver has been appointed in this or any
other state may surrender the security and file a claim as a general
creditor, or the claim may be discharged by resort to the security, in
which case the deficiency, if any, shall be treated as a claim against
the general assets of the insurer on the same basis as claims of
unsecured creditors. If the amount of the deficiency has been adjudicated
in ancillary proceedings as provided in this chapter, or if it has been
adjudicated by a court of competent jurisdiction in proceedings in which
the domiciliary receiver has had notice and opportunity to be heard, such
amount shall be conclusive; otherwise the amount shall be determined in
the delinquency proceeding in the domiciliary state. [Formerly 751.080] During the pendency
of delinquency proceedings in this or any reciprocal state no action or
proceeding in the nature of an attachment, garnishment or execution shall
be commenced or maintained in the courts of this state against the
delinquent insurer or its assets. Any lien obtained by any such action or
proceeding within four months prior to the commencement of any such
delinquency proceeding or at any time thereafter shall be void as against
any rights arising in such delinquency proceeding. [1967 c.359 §286] The rights and
liabilities of the insurer and of its creditors, policyholders,
stockholders, members, subscribers, and all other persons interested in
its estate, shall, unless otherwise directed by the court, be fixed as of
the date on which the order directing the liquidation of the insurer is
filed in the office of the clerk of the court which makes the order,
subject to the provisions of ORS 734.380 with respect to the rights of
claimants holding contingent claims. [1967 c.359 §288] (1) Any transfer of, or lien upon, the
property of an insurer, other than as provided in ORS 734.320 which is
made or created within four months prior to the commencement of a
delinquency proceeding with the intent of giving to any creditor, or of
enabling the creditor to obtain, a greater percentage of the debt than
any other creditor of the same class, and which is accepted by such
creditor having reasonable cause to believe that such a preference will
occur, shall be voidable.
(2) Every director, officer, employee, stockholder, member,
subscriber, and any other person acting on behalf of such insurer who
shall be concerned in any such act or deed and every person receiving
thereby any property of such insurer or the benefit thereof, shall be
personally liable therefor and shall be bound to account to the Director
of the Department of Consumer and Business Services.
(3) The director, as receiver in any proceeding under this chapter,
may avoid any transfer of, or lien upon, the property of an insurer which
any creditor, stockholder, subscriber or member of such insurer might
have avoided, and may recover the property so transferred, unless such
person was a bona fide holder for value prior to the commencement of the
delinquency proceeding. Such property or its value may be recovered from
anyone who has received it, except a bona fide holder for value as
specified in this subsection. [1967 c.359 §289]Except as provided in ORS 734.310 for
secured claims, the claims to be paid in full in delinquency proceedings
prior to the payment of any other claims, and the order of payment, shall
be:
(1) Expenses of administration of the delinquency proceedings and
expenses of the Oregon Insurance Guaranty Association or similar
organization in another state handling claims in accordance with ORS
734.510 to 734.710;
(2) All claims under policies, including third party claims and
claims under nonassessable policies for unearned premiums, and all claims
by the Oregon Insurance Guaranty Association, the Oregon Life and Health
Insurance Guaranty Association or any similar organization in another
state for payment of covered claims or contractual obligations;
(3) Claims legally due and owing by the insurer to the United
States;
(4) If the insurer is domiciled in this state, compensation or
wages actually owing to salaried employees other than officers of the
insurer, for services rendered within three months prior to the
commencement of the delinquency proceeding, but not exceeding $2,000 for
each such employee;
(5) Claims legally due and owing by the insurer to this state; and
(6) Claims, including special deposit claims, owing to any person,
including this state, that by the laws of this state is entitled to
priority. [1967 c.359 §290; 1977 c.793 §7; 1983 c.223 §1; 2001 c.974 §3] No offsets shall be allowed in cases of mutual
debts or mutual credits between the insurer and another person in
connection with any domestic delinquency proceeding under this chapter,
except for cases of policy loans and cases of reinsurance and except for
insurance producers’ balances, excluding unearned return commissions.
[1967 c.359 §291; 1989 c.425 §14; 2003 c.364 §86] (1) A contingent claim against
an insurer or a claim based upon a cause of action or suit against an
insured of an insurer shall be filed, presented and reported in the same
manner and within the same time limitations as provided in this chapter
for a noncontingent claim. Such claims shall be allowed to share in a
distribution of assets in the same manner as noncontingent claims of the
same class and priority, provided that before any such sharing and
distribution:
(a) If the claim is a contingent claim against the insurer, it
becomes an absolute claim either as a result of proof presented or
litigation; or
(b) If the claim is based upon a cause of action or suit against an
insured of the insurer, a judgment is obtained against the insured or it
may be reasonably inferred from proof presented that the claimant would
be able to obtain such a judgment; in no case, however, shall all of the
claims so presented and allowed arising out of a single act of the
insured exceed the maximum liability of the insurer under its policy with
or affecting the insured.
(2) Nothing in subsection (1) of this section shall prevent or bar
the Director of the Department of Consumer and Business Services from
compromising a disputed claim with the claimant, whether contingent or
noncontingent, if such compromise is justified and supported by the facts
and circumstances.
(3) If full or partial distribution to noncontingent claimants is
authorized or directed by the court prior to satisfaction of the
requirements of subsection (1)(a) or (b) of this section, with respect to
particular claims the director shall retain a sum equal to the amount
which would have been paid on the contingent claim if such requirements
had then been met. The amount so withheld shall be distributed to the
person or persons found by the court to be entitled thereto at such time
as the claim is fully established as provided in subsection (1) of this
section, or the director is satisfied that the claim is without merit or
cannot be so proved or established, or the statute of limitations, if
timely asserted, would bar further consideration or recovery thereon.
(4) No judgment entered after the date of entry of a liquidation
order shall be considered in the liquidation proceedings as evidence of
liability or of the amount of damages, and no judgment entered on default
or inquest or by collusion after commencement of a delinquency proceeding
shall be considered as conclusive evidence in the liquidation proceeding,
either of liability or of the amount of damages. [1967 c.359 §292] (1) If upon the granting of an order
of liquidation under this chapter, or at any time thereafter during the
liquidation proceeding, the insurer shall not be clearly solvent, the
court shall, after such notice and hearing as it considers proper, make
an order declaring the insurer to be insolvent. Thereupon, regardless of
any prior notice which may have been given to creditors, the Director of
the Department of Consumer and Business Services shall notify all persons
who may have claims against the insurer and who have not filed proper
proofs thereof, to present the same to the director, at a place specified
in the notice, within four months from the date of the entry of such
insolvency order or within such longer time as the court shall prescribe.
The last day for filing of proofs of claims shall be specified in the
notice. The notice shall be given in a manner determined by the court.
(2) Proofs of claims may be filed subsequent to the date specified,
but no such claim shall share in the distribution of the assets until all
allowed claims, proofs of which have been filed on or before such date,
have been paid in full. [1967 c.359 §293]Within three years from the date an order of rehabilitation or
liquidation of a domestic mutual insurer or a domestic reciprocal insurer
was filed in the office of the clerk of the court by which such order was
made, the Director of the Department of Consumer and Business Services
may make a report to the court setting forth:
(1) The reasonable value of the assets of the insurer;
(2) The insurer’s probable liabilities; and
(3) The probable necessary assessment, if any, to pay all claims
and expenses in full, including expenses of administration. [1967 c.359
§294](1) Upon the basis of the report provided for in ORS 734.400,
including any amendments thereof, the court, ex parte, may levy one or
more assessments against all persons who, as shown by the records of the
insurer, were members (in the case of a mutual insurer) or subscribers
(in the case of a reciprocal insurer) at any time within one year prior
to the commencement of the delinquency proceeding.
(2) Such assessment or assessments shall cover the excess of the
probable liabilities over the reasonable value of the assets, together
with the estimated cost of collection and percentage of uncollectibility
thereof. The total of all assessments against any member or subscriber,
with respect to any policy, whether levied pursuant to this chapter or
pursuant to any other provisions of the Insurance Code, shall be no
greater than the amount specified in the policy of the member or
subscriber and as limited under the Insurance Code; except that, if the
court finds that the policy was issued at a rate of premium below the
minimum rate lawfully permitted for the risk insured, the court may
determine the upper limit of such assessment on the basis of such minimum
rate.
(3) No assessment shall be levied against any member or subscriber
with respect to any nonassessable policy issued in accordance with the
Insurance Code. [1967 c.359 §295] After levy of assessment as
provided in ORS 734.410 and upon the filing of a further detailed report
by the Director of the Department of Consumer and Business Services, the
court shall issue an order directing each member (in the case of a mutual
insurer) or each subscriber (in the case of a reciprocal insurer) if the
member or subscriber shall not pay the amount assessed against the member
or subscriber to the director on or before a day to be specified in the
order, to show cause why the member or subscriber should not be held
liable to pay such assessment together with costs as set forth in ORS
734.440, and why the director should not have judgment therefor. [1967
c.359 §296] The
Director of the Department of Consumer and Business Services shall cause
a notice of the assessment order issued under ORS 734.420, which shall
set forth a brief summary of the contents of such order, to be:
(1) Published in such manner as shall be directed by the court; and
(2) Enclosed in a sealed envelope, addressed and mailed, postage
prepaid, to each member or subscriber liable thereunder, at the
last-known address of the member or subscriber as it appears on the
records of the insurer, at least 20 days before the return day of the
order to show cause specified in the assessment order. [1967 c.359 §297] (1) On the return day of the
order to show cause specified in the assessment order issued under ORS
734.420, if the member or subscriber does not appear and serve verified
objections upon the Director of the Department of Consumer and Business
Services, the court shall make an order adjudging that such member or
subscriber is liable for the amount of the assessment against the member
or subscriber, together with $10 costs, and that the director may have
judgment against the member or subscriber therefor.
(2) If on such return day the member or subscriber shall appear and
serve verified objections upon the director, there shall be a full
hearing before the court or a referee to hear and determine the matter.
The court, after such hearing, shall make an order either negativing the
liability of the member or subscriber to pay the assessment or affirming
liability to pay the whole or some part thereof, together with $25 costs
and the necessary disbursements incurred at such hearing, and directing
that the director, in the latter case, may have judgment therefor. [1967
c.359 §298; 2003 c.576 §221]OREGON INSURANCE GUARANTY ASSOCIATION As used in ORS
734.510 to 734.710, unless the context requires otherwise:
(1) “Association” means the Oregon Insurance Guaranty Association
created by ORS 734.550.
(2) “Board” means the board of directors of the association.
(3) “Controlled insurer” means an insurer 70 percent or more of
whose stock is owned by a corporation, or by two or more corporations
that are under common ownership.
(4)(a) “Covered claim” means an unpaid claim, including a claim for
unearned premiums and a claim by the Workers’ Benefit Fund for payments
made pursuant to ORS chapter 656, that arises out of and is within the
coverage and limits of an insurance policy to which ORS 734.510 to
734.710 apply and which is in force at the time of the occurrence giving
rise to the unpaid claim, made by a person insured under such policy or
by a person suffering injury or damage for which a person insured under
such policy is legally liable, if:
(A) The insurer issuing the policy becomes an insolvent insurer
after September 9, 1971; and
(B) The claimant or insured is a resident of this state at the time
of the occurrence giving rise to the unpaid claim, or the property for
which claim arises is permanently located in this state.
(b) “Covered claim” does not include:
(A) Any amount in excess of the applicable limits of liability
provided by an insurance policy to which ORS 734.510 to 734.710 apply;
(B) Any amount due any reinsurer, insurer, insurance pool or
underwriting association as subrogated recoveries or otherwise;
(C) Except for claims arising out of workers’ compensation policies
subject to ORS chapter 656, a claim filed with the association after the
final date set by the court for the filing of claims against the
liquidator or receiver of an insolvent insurer; or
(D) Any first party claim by an insured whose net worth exceeds $25
million on December 31 of the year next preceding the date the insurer
becomes an insolvent insurer, provided that an insured’s net worth on
such date is deemed to include the aggregate net worth of the insured and
all of its subsidiaries as calculated on a consolidated basis.
(5) “Dividend” means any payment made to the stockholders of a
controlled insurer, which payment is directly related to ownership of the
stock.
(6) “Insolvent insurer” means a member insurer:
(a) Authorized to transact insurance in this state either at the
time the policy was issued or at the time of the occurrence giving rise
to the unpaid claim;
(b) 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 domicile after September 9, 1971; and
(c) With respect to which no order, judgment or finding relating to
the insolvency of the insurer, whether preliminary or temporary in nature
or otherwise, has been issued by a court of competent jurisdiction or by
any insurance commissioner, insurance department or similar official or
body prior to September 9, 1971, or which was in fact insolvent prior to
September 9, 1971, and such de facto insolvency was or should have been
known by the chief insurance regulatory official of its domicile.
(7) “Member insurer” means an insurer, including a reciprocal
insurer, authorized to transact insurance in this state that writes any
kind of insurance to which ORS 734.510 to 734.710 apply.
(8) “Net direct written premiums” means direct gross premiums
written in this state on insurance policies to which ORS 734.510 to
734.710 apply, 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.
(9) “Plan” means the plan of operation of the association
established pursuant to ORS 734.590. [1971 c.616 §5; 1977 c.793 §8; 2001
c.974 §1; 2003 c.576 §556]The purpose of ORS 734.510 to 734.710 is to
provide for the payment of covered claims under certain insurance
policies to avoid excessive delay in payment and to avoid financial loss
to claimants or policyholders because of the insolvency of an insurer, to
assist in the detection and prevention of insurer insolvencies, to
provide an association to assess the cost of such protection among
insurers and to assist in the liquidation of insurers as provided in this
chapter. [1971 c.616 §2]ORS 734.510 to 734.710 shall be liberally
construed to effect the purposes provided in ORS 734.520. [1971 c.616 §3]ORS 734.510 to 734.710 apply to all kinds of
direct insurance except life, health, title, surety, credit, mortgage
guaranty, home protection insurance, wet marine and transportation
insurance and insurance against the risk of economic loss assumed under a
less than fully insured employee health benefit plan whether issued or
delivered as health or casualty insurance. [1971 c.616 §4; 1977 c.600 §2;
1981 c.247 §14; 1993 c.649 §7]There is created the
Oregon Insurance Guaranty Association. Each insurer that is a member
insurer shall become and remain a member of the association as a
condition of its authority to transact insurance in this state. The
association shall perform its functions in accordance with a plan of
operation established under ORS 734.590, and shall exercise its powers
through its board of directors. [1971 c.616 §6]The provisions, procedures and requirements of
ORS chapter 60 relating to a registered office, registered agent and to
service of process, notice and demand shall govern the Oregon Insurance
Guaranty Association, except that the Director of the Department of
Consumer and Business Services shall be substituted for the Secretary of
State as the person with whom all filings shall be made and upon whom, in
the circumstances specified by statute, such service may be effected.
[1977 c.600 §6; 1987 c.846 §12](1) The board of directors of the
Oregon Insurance Guaranty Association shall consist of nine members
selected by the member insurers, subject to the approval of the Director
of the Department of Consumer and Business Services. The term of each
member of the board shall be as specified in the plan, but in no event
for longer than four years. A vacancy on the board shall be filled for
the remainder of the unexpired term in the same manner as for the initial
selection. If the initial selection of members is not made within 60 days
after September 9, 1971, the director may select the initial members.
(2) In making or approving selections to the board, the director
shall consider, among other things, whether member insurers are fairly
represented.
(3) A member of the board shall receive no compensation for
services as a member. However, a member shall be reimbursed by the
association for actual and necessary travel and other expenses incurred
by the member in the performance of duties.
(4) A majority of the members of the board constitutes a quorum for
the transaction of business. [1971 c.616 §7] The Oregon Insurance
Guaranty Association shall:
(1) Be obligated to pay covered claims existing at the time of
determination of insolvency of an insurer or arising within 30 days after
the determination of insolvency. Except for covered claims arising out of
workers’ compensation policies, such obligation shall include only that
amount of each covered claim that is less than $300,000. The association
shall pay the full amount of any covered claim arising out of a workers’
compensation policy, less any amount paid on a covered claim by the
Workers’ Benefit Fund pursuant to ORS chapter 656. In no event shall the
association be obligated in an amount in excess of the obligation of the
insolvent insurer under the policy from which the claim arises, or for
claims arising after the policy expiration, policy replacement by the
insured or policy cancellation caused by the insured.
(2) Be the insurer to the extent of the association’s obligation on
the covered claims and to such extent have all the rights, duties and
obligations of the insolvent insurer as if the insurer had not become
insolvent.
(3) Assess member insurers the amounts necessary to pay the
expenses incurred by the association in meeting its obligations and
exercising its duties and powers under ORS 734.510 to 734.710. 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, but shall in no event exceed in
any one year two percent of the member insurer’s net direct written
premiums for the preceding calendar year. Each member insurer shall be
notified of an assessment not later than the 30th day before the day it
is due. If the funds of the association do not provide in any one year an
amount sufficient to pay the obligations and expenses of the association,
the funds available shall be prorated among the obligations and expenses,
and the unpaid portions shall be paid as soon thereafter as funds become
available. If an assessment would cause a 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, the
association may exempt from or defer payment of the assessment, in whole
or in part, by the member insurer. However, if the member insurer is a
controlled insurer, the association, in making determinations regarding
the exemption or deferral of assessments, shall treat all dividends paid
during the three calendar years immediately preceding the year in which
the assessment is made as assets of the insurer just as if such dividends
had not been paid. Each member insurer designated as a servicing facility
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 in its capacity as a servicing facility.
(4) Investigate claims brought against the association and adjust,
compromise, settle and pay covered claims to the extent of the
association’s obligation, and 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) Reimburse servicing facilities and employees of the association
for obligations and expenses incurred and paid in the handling of claims
on behalf of the association, and pay all other expenses the association
incurs in carrying out ORS 734.510 to 734.710. [1971 c.616 §8; 1977 c.793
§9; 2001 c.974 §9] Any
sums acquired by refund from the Oregon Insurance Guaranty Association
that have previously been written off by contributing insurers and offset
against corporate excise taxes or fire insurance gross premiums taxes,
and are not then needed for purposes of ORS 734.510 to 734.710, shall be
paid by the association to the Director of the Department of Consumer and
Business Services and deposited with the State Treasurer for credit to
the General Fund of this state. [1977 c.793 §3; 1985 c.686 §1; 1995 c.786
§8; 2003 c.568 §4] (1) Each member insurer
subject to an Oregon Insurance Guaranty Association assessment pursuant
to ORS 734.570 (3) shall recoup the amount of the assessment through a
recoupment assessment imposed on net direct written premiums. The member
insurer shall fix the amount of the recoupment assessment at an amount
sufficient to reimburse the member insurer for the amount of Oregon
Insurance Guaranty Association assessments paid by the member insurer.
(2) Each member insurer shall annually certify to the Director of
the Department of Consumer and Business Services the total amount of
recoupment assessments assessed for the year and that the amount assessed
does not exceed the amount of Oregon Insurance Guaranty Association
assessments imposed and not previously recouped or offset against
corporate excise taxes or fire insurance gross premiums taxes.
(3) The director may by rule establish a minimum threshold for
which a recoupment assessment under subsection (1) of this section need
not be made.
(4) The Department of Consumer and Business Services, pursuant to
rules adopted by the director, may audit member insurer determinations of
recoupment assessments.
(5) Recoupment assessments shall be separately stated on premium
billing statements. Recoupment assessments may not be considered gross
premiums for any purpose. [2003 c.568 §2] The Oregon
Insurance Guaranty Association may:
(1) With the approval of the Director of the Department of Consumer
and Business Services, employ or retain such persons or designate such
servicing facilities as are necessary to handle claims and perform the
other duties of the association. Servicing facilities so designated may
be foreign corporations or associations.
(2) Borrow funds necessary to carry out ORS 734.510 to 734.710, in
such manner as may be specified in the plan.
(3) Sue or be sued.
(4) Negotiate and become a party to such contracts as are necessary
to carry out ORS 734.510 to 734.710.
(5) At the end of any calendar year, refund to member insurers, in
proportion to an insurer’s payments to the association, that amount by
which the board of directors find that the funds of the association
exceed its current claims and expenses plus the liabilities estimated for
the coming year.
(6) Perform such other acts as are necessary or proper to carry out
ORS 734.510 to 734.710. [1971 c.616 §9] (1) The
Oregon Insurance Guaranty Association shall submit to the Director of the
Department of Consumer and Business Services not later than 90 days after
September 9, 1971, a plan of operation, and may thereafter submit such
amendments thereto as will provide for the reasonable and equitable
exercise of the duties and powers of the association. The plan of
operation, and any amendments thereto, shall become effective upon
approval in writing by the director.
(2) If the association fails to submit a plan that receives the
approval of the director as provided in subsection (1) of this section,
or if the association thereafter fails to maintain a plan satisfactory to
the director, the director shall by rule prescribe a plan of operation
that meets the standards provided in subsection (1) of this section. A
plan prescribed by the director shall remain in effect until the director
by rule provides otherwise.
(3) No member insurer shall fail to comply with the currently
effective plan of operation. [1971 c.616 §10] A plan of operation shall:
(1) Establish procedures for the submission, processing and payment
of claims against the Oregon Insurance Guaranty Association.
(2) Establish procedures for record keeping, payment of expenses
and administration of all other financial affairs of the association.
(3) Establish times and places for meetings of the board.
(4) Establish procedures for selection of the board of directors
and for approval of that selection by the Director of the Department of
Consumer and Business Services.
(5) Establish a procedure for appeal by a member insurer to the
director of final actions or decisions of the association.
(6) Establish such other procedures as may be necessary or proper
to carry out the duties and powers of the association. [1971 c.616 §11]The Director of the
Department of Consumer and Business Services shall:
(1) Notify the Oregon Insurance Guaranty Association of the
insolvency of an insurer not later than three days after the director
receives notice of the determination of insolvency.
(2) Upon request of the board, provide the association with a
statement of the net direct written premiums of each member insurer for
the preceding calendar year. [1971 c.616 §12]The Director of the Department of
Consumer and Business Services may:
(1) Require the Oregon Insurance Guaranty Association to notify the
insureds of an insolvent insurer of the determination of insolvency and
of their rights under ORS 734.510 to 734.710. Such notification may be by:
(a) Certified or first-class mail to the address of each such
person as it last appears in the records of the director or the insurer;
(b) Publication in a newspaper of general circulation in this state
if the addresses of those persons to be notified is not available from
the records of the director or the insurer; or
(c) Any combination of the methods referred to in paragraphs (a)
and (b) of this subsection that the association considers likely to
inform the persons of their rights under ORS 734.510 to 734.710.
(2) Revoke the designation of any servicing facility that the
director finds is not processing and paying claims in the manner provided
in the plan and in ORS 734.510 to 734.710. [1971 c.616 §13](1) Any person who recovers on a
covered claim under ORS 734.510 to 734.710 thereby assigns the rights of
the person under the insurance policy to the Oregon Insurance Guaranty
Association to the extent of such recovery. Every person who seeks the
protection of ORS 734.510 to 734.710 shall cooperate with the association
to the same extent such person would have been required to cooperate with
the insolvent insurer. The association shall have no cause of action
against the insureds of an insolvent insurer for any sums paid, except
for those causes of action the insolvent insurer would have had if such
sums had been paid by the insolvent insurer. If an insolvent insurer
operates on the assessment plan, the payment of claims by the association
does not reduce the liability of the insured to the receiver for unpaid
assessments.
(2) Periodically the association shall file with the receiver
statements of the covered claims paid by the association and estimates of
anticipated claims against the association. Such filings shall preserve
the rights of the association against the assets of the insolvent insurer.
(3) The receiver 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 in accordance with
ORS 734.360. [1971 c.616 §14; 2001 c.974 §4](1) Not later than 120 days from
the date the order of liquidation of a member insurer is filed in the
office of the clerk of the court by which the order was made, that
insurer’s receiver shall make application to the court for approval of a
proposal to disburse the insurer’s marshalled assets to the Oregon
Insurance Guaranty Association from time to time as those assets become
available.
(2) A proposal made by a receiver under subsection (1) of this
section shall include, but not be limited to, provisions for:
(a) Reserving amounts for the payment of those claims described in
ORS 734.360;
(b) Disbursing the marshalled assets of the insolvent insurer to
the association in an amount estimated to be at least equal to the claim
payments to be made by the association for which the association could
assert a claim against the insolvent insurer;
(c) Disbursing the marshalled assets in the amount available when
the marshalled assets do not equal the amount of the claim payments to be
made by the association for which the association could assert a claim
against the insolvent insurer;
(d) Securing an agreement from the association to return to the
receiver any assets previously disbursed that may be required to pay the
claims of secured creditors and the claims described in ORS 734.360; and
(e) A complete report by the association to the receiver accounting
for all assets disbursed to the association under this section,
expenditures made from those assets and any interest earned by the
association on those assets.
(3) When an insurer’s receiver intends to make application to a
court for approval of a proposal to disburse the insurer’s marshalled
assets to the association under this section, the receiver shall give
notice of the application, at least 30 days prior to filing the
application with the court, to the insurance supervisory official and the
insurance guaranty agency that performs functions similar to that of the
association of each state in which the insolvent insurer was authorized.
[1977 c.793 §2; 2001 c.974 §10] (1) Any person who has a claim under an
insurance policy against an insurer other than an insolvent insurer which
would also be a covered claim against an insolvent insurer must first
exhaust the remedies under such policy.
(2) Any person who has a claim that may also be recovered from one
or more insurance guaranty agencies that perform functions similar to
that of the Oregon Insurance Guaranty Association shall first seek
recovery from whichever organization serves the place of residence of the
insured, except that:
(a) Recovery on first party claims for damage to property with a
permanent location shall first be sought from whichever organization
serves the location of the property; and
(b) Recovery on workers’ compensation claims shall first be sought
from whichever organization serves the residence of the claimant.
(3) Any recovery under ORS 734.510 to 734.710 from the association
shall be reduced by the amount of any recovery pursuant to subsections
(1) and (2) of this section. [1971 c.616 §16; 1977 c.793 §10](1) Whenever the board obtains any
information indicating that any member insurer is impaired or in a
financial condition hazardous to the policyholders or the public, the
board shall so notify the Director of the Department of Consumer and
Business Services.
(2) The board may request the director to examine any member
insurer that the board in good faith believes to be impaired or in a
financial condition hazardous to the policyholders or the public. The
director shall cause the examination to begin within 30 days after the
receipt of any such request. Except as otherwise provided in ORS 734.510
to 734.710, the examination shall be conducted as provided in ORS chapter
731.
(3) The director shall report the results of an examination to the
board and shall notify the board whenever the director has reasonable
cause to believe during an examination that the insurer is impaired or
insolvent. The results of the completed examination shall not be released
to the board before release to the public. The request for examination
shall not be available for public inspection before release of the
results of the examination to the public.
(4) The board may make such reports and recommendations to the
director regarding the insolvency, liquidation, rehabilitation or
conservation of member insurers as the board considers appropriate. Any
such reports or recommendations are not public records. [1971 c.616 §17] The Oregon Insurance
Guaranty Association is subject to regulation by the Director of the
Department of Consumer and Business Services in the same manner as an
insurer. Not later than March 30 of each year, the board shall submit to
the director, in a form approved by the director, a financial report for
the preceding year. [1971 c.616 §18]
Except for taxes levied on real or personal property, the Oregon
Insurance Guaranty Association shall be exempt from the payment of all
fees and taxes levied by this state or by any city, county, district or
other political subdivision of this state. [1971 c.616 §19] No person shall have a cause of
action against any member insurer, the Oregon Insurance Guaranty
Association or its employees or servicing facilities, any member of the
board, or the Director of the Department of Consumer and Business
Services or employees of the director for any action taken by them in
carrying out ORS 734.510 to 734.710. [1971 c.616 §21] (1) The insured
of an insolvent insurer may not be personally liable for amounts due any
reinsurer, insurer, insurance pool or underwriting association as
subrogation recoveries or otherwise up to the applicable limits of
liability provided by the insurance policy issued by the insolvent
insurer.
(2) Notwithstanding the provisions of subsection (1) of this
section, and except for claims arising out of workers’ compensation
policies subject to ORS chapter 656, the Oregon Insurance Guaranty
Association may recover from the following persons the amount of any
covered claim paid on behalf of such person under ORS 734.510 to 734.710:
(a) Any insured whose net worth exceeds $25 million on December 31
of the year next preceding the date the insurer becomes an insolvent
insurer and whose liability obligations to other persons are satisfied in
whole or in part by payments made under ORS 734.510 to 734.710; and
(b) 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 ORS 734.510 to 734.710. [1977 c.793 §4; 2001
c.974 §2] (1) Any
pending proceeding in which an insolvent insurer is a party or is
obligated to defend a party in any court of this state shall be stayed
for 60 days after the date a receiver is appointed by the court to permit
the Oregon Insurance Guaranty Association time to prepare a defense in
such proceedings.
(2) If any covered claim arises from a judgment based on the
default of the insolvent insurer or its failure to defend an insured, the
association may apply to have such judgment set aside, and, upon such
application shall be permitted to defend against the claim on the merits.
[1971 c.616 §22](1) In any delinquency proceeding involving a member insurer,
the claims and expenses of the insurer shall be administered as provided
in ORS 734.510 to 734.710.
(2) Except as otherwise provided in ORS 734.510 to 734.710, ORS
734.014, 734.026 and 734.110 to 734.440 apply to a member insurer. [1971
c.616 §23]OREGON LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATIONORS 734.750 to 734.890 may be cited as the
Oregon Life and Health Insurance Guaranty Association Act. [1975 c.251 §2] As used in ORS
734.750 to 734.890, unless the context requires otherwise:
(1) “Account” means any of the three accounts created under ORS
734.800.
(2) “Association” means the Oregon Life and Health Insurance
Guaranty Association created under ORS 734.800.
(3) “Contractual obligation” means any obligation under covered
policies.
(4) “Covered policy” means any policy or contract to which ORS
734.750 to 734.890 apply.
(5) “Impaired insurer” means a member insurer deemed by the
Director of the Department of Consumer and Business Services after
September 13, 1975, to be potentially unable to fulfill its contractual
obligations, excluding insolvent insurers.
(6) “Insolvent insurer” means an insurer:
(a) That was a member insurer either at the time the policy was
issued or when the insured event occurred, or any insurer that has
acquired direct policy obligations from a member insurer through
purchase, merger, consolidation, reinsurance or otherwise, whether or not
the acquiring insurer held a certificate of authority to transact
insurance in this state at the time the policy was issued or when the
insured event occurred; and
(b) That, after September 13, 1975, becomes insolvent and is placed
under a final order of liquidation, rehabilitation or conservation by a
court of competent jurisdiction.
(7) “Member insurer” means any insurer authorized to transact in
this state any kind of insurance to which ORS 734.750 to 734.890 apply.
(8) “Premiums” means direct gross insurance, including annuity,
premiums written on covered policies, less return premiums thereon and
dividends paid or credited to policyholders on such direct business.
“Premiums” does not include premiums on contracts between insurers and
reinsurers or any premiums on policies or contracts excluded under ORS
734.790.
(9) “Resident” means a person to whom contractual obligations are
owed by a member insurer which is determined to be an impaired or
insolvent insurer at a time when the person is a resident of this state.
[1975 c.251 §6; 1987 c.414 §180; 1991 c.811 §1]The purpose of ORS 734.750 to 734.890 is to
protect the persons specified in ORS 734.790, subject to certain
limitations, against failure in the performance of contractual
obligations, under life and health insurance policies and annuity
contracts specified in ORS 734.790, because of the impairment or
insolvency of the insurer issuing such policies or contracts. To provide
this protection:
(1) An association of insurers is created to enable the guarantee
of payment of benefits and continuation of coverages;
(2) Members of the Oregon Life and Health Insurance Guaranty
Association are subject to assessment to provide funds to carry out the
purpose of ORS 734.750 to 734.890; and
(3) The association is authorized to assist the Director of the
Department of Consumer and Business Services, in the prescribed manner,
in the detection and prevention of insurer impairments or insolvencies.
[1975 c.251 §3; 1991 c.811 §2]ORS 734.750 to 734.890 shall be liberally
construed to effect the purpose provided in ORS 734.770. [1975 c.251 §5](1) ORS 734.750 to 734.890 provide coverage to
the following persons for policies and contracts specified in subsection
(2) of this section:
(a) To a person who is a resident, if the person is an owner of or
a certificate holder under the policy or contract or, in the case of an
unallocated annuity contract, an employee participating in a governmental
retirement plan established under section 401, 403(b) or 457 of the
United States Internal Revenue Code or the beneficiaries of each such
individual if deceased.
(b) To a person who is not a resident, if the person is an owner of
or a certificate holder under the policy or contract or, in the case of
an unallocated annuity contract, an employee participating in a
governmental retirement plan established under section 401, 403(b) or 457
of the United States Internal Revenue Code or the beneficiaries of each
such individual if deceased. This paragraph applies to a person who is
not a resident only if all of the following conditions are met:
(A) The insurer that issued the policy or contract must be a
domestic insurer.
(B) The insurer must never have held a license or certificate of
authority in the state in which the person resides.
(C) The state in which the person resides must have an association
similar to the Oregon Life and Health Insurance Guaranty Association.
(D) The person must not be eligible for coverage by the association
in the state in which the person resides, as described in subparagraph
(C) of this paragraph.
(c) To a person who, regardless of where the person resides, is a
beneficiary, assignee or payee of the persons covered under paragraph (a)
or (b) of this subsection. This paragraph does not include a nonresident
certificate holder under a group policy or contract.
(2) ORS 734.750 to 734.890 provide coverage to the persons
specified in subsection (1) of this section for direct life insurance,
including annuity, policies, health insurance policies, and contracts
supplemental to life and health insurance policies, issued by authorized
insurers.
(3) ORS 734.750 to 734.890 do not provide coverage for:
(a) That portion or part of a variable life insurance or variable
annuity policy not guaranteed by an insurer.
(b) That portion or part of any policy or contract under which the
risk is borne by the policyholder.
(c) Any policy or contract or part thereof assumed by the impaired
or insolvent insurer under a contract of reinsurance, other than
reinsurance for which assumption certificates have been issued.
(d) Any policy or contract issued by a health care service
contractor complying with ORS 750.005 to 750.095.
(e) Any policy or contract issued by a fraternal benefit society.
(f) Any portion of a policy or contract to the extent that the rate
of interest on which it is based:
(A) Exceeds, when averaged over the period of four years prior to
the date on which the association becomes obligated with respect to the
policy or contract, a rate of interest determined by subtracting four
percentage points from Moody’s Corporate Bond Yield Average averaged for
that same four-year period or for a lesser period if the policy or
contract was issued less than four years before the association became
obligated; and
(B) Exceeds, on and after the date on which the association becomes
obligated with respect to the policy or contract, the rate of interest
determined by subtracting three percentage points from Moody’s Corporate
Bond Yield Average as most recently available.
(g) Any plan or program of an employer, association or similar
entity to provide life, health or annuity benefits to its employees or
members to the extent that the plan or program is self-funded or
uninsured, including benefits payable by an employer, association or
similar entity under any of the following:
(A) A multiple employer welfare arrangement as defined in section
514 of the Employee Retirement Income Security Act of 1974, as amended.
(B) A minimum premium group insurance plan.
(C) A stop-loss group insurance plan.
(D) An administrative services only contract.
(h) Any portion of a policy or contract to the extent that it
provides dividends or experience rating credits, or provides that any
fees or allowances be paid to any person, including the policy or
contract holder, in connection with the service to or administration of
the policy or contract.
(i) Any policy or contract issued in this state by a member insurer
at a time that it did not have a certificate of authority to issue the
policy or contract in this state.
(j) Any unallocated annuity contract issued to an employee benefit
plan protected under the federal Pension Benefit Guaranty Corporation.
(k) Any portion of any unallocated annuity contract that is issued
to or in connection with a specific employee, union or association of
natural persons benefit plan, other than a government retirement plan
referred to in subsection (1) of this section, or a government lottery.
(L) Any coverage issued by the Oregon Medical Insurance Pool.
(4) As used in this section, “Moody’s Corporate Bond Yield Average”
means the Monthly Average Corporates as published by Moody’s Investors
Service, Inc., or any successor thereto. [1975 c.251 §4; 1987 c.414 §181;
1991 c.811 §3](1) There is created
a nonprofit legal entity to be known as the Oregon Life and Health
Insurance Guaranty Association. All member insurers shall be and remain
members of the association as a condition of their authority to transact
insurance in this state. The association shall perform its functions
under the plan of operation established and approved under ORS 734.820,
and shall exercise its powers through a board of directors established
under ORS 734.805. For purposes of administration and assessment, the
association shall maintain three accounts:
(a) The health insurance account;
(b) The life insurance account; and
(c) The annuity account.
(2) The association shall come under the immediate supervision of
the Director of the Department of Consumer and Business Services and
shall be subject to the applicable provisions of the insurance laws of
this state. [1975 c.251 §7](1) The board of directors of the
Oregon Life and Health Insurance Guaranty Association shall consist of
not less than five nor more than nine member insurers, serving terms as
established in the plan of operation. The members of the board shall be
selected by member insurers, subject to the approval of the Director of
the Department of Consumer and Business Services. Vacancies on the board
shall be filled for the remaining period of the term by a majority vote
of the remaining board members, subject to the approval of the director.
To select the initial board of directors, and initially organize the
association, the director shall give notice to all member insurers of the
time and place of the organizational meeting. In determining voting
rights at the organizational meeting each member insurer shall be
entitled to one vote in person or by proxy. If the board of directors is
not selected within 60 days after notice of the organizational meeting,
the director may appoint the initial members.
(2) In approving selections or in appointing members to the board,
the director shall consider, among other things, whether all member
insurers are fairly represented.
(3) Members of the board of directors may be reimbursed from the
assets of the association for expenses incurred by them as members of the
board, but members of the board shall not otherwise be compensated by the
association for their services. [1975 c.251 §8] In addition to the other
powers and duties enumerated in ORS 734.750 to 734.890:
(1) If a domestic insurer is an impaired insurer, the Oregon Life
and Health Insurance Guaranty Association may, subject to any conditions
imposed by the association and approved by the impaired insurer and the
Director of the Department of Consumer and Business Services, other than
those which impair the contractual obligations of the impaired insurer:
(a) Guarantee or reinsure, or cause to be guaranteed, assumed, or
reinsured, any or all of the covered policies of the impaired insurer.
(b) Provide such money, pledges, notes, guarantees or other means
as are proper to implement paragraph (a) of this subsection and assure
payment of the contractual obligations of the impaired insurer pending
action under paragraph (a) of this subsection.
(c) Loan money to the impaired insurer.
(2) If a member insurer is an insolvent insurer, the association
shall, subject to the approval of the director:
(a) Guarantee, assume, or reinsure, or cause to be guaranteed,
assumed, or reinsured, the covered policies of the insolvent insurer;
(b) Assure payment of the contractual obligations of the insolvent
insurer; and
(c) Provide such money, pledges, notes, guarantees or other means
as are reasonably necessary to discharge such duties.
(3)(a) In carrying out its duties under subsection (2) of this
section, permanent policy liens or contract liens may be imposed in
connection with any guaranteed, assumption or reinsurance agreement, if
the court finds that the amounts which can be assessed under ORS 734.750
to 734.890 are less than the amounts needed to assure full and prompt
performance of the insolvent insurer’s contractual obligations or that
the economic or financial conditions affecting member insurers are
sufficiently adverse to render the imposition of policy or contract liens
to be in the public interest, and approves the specific policy liens or
contract liens to be used.
(b) Before being obligated under subsection (2) of this section the
association may request that there be imposed temporary moratoriums or
liens on payments of cash values and policy loans, in addition to any
contractual provisions for deferral of cash or policy loan values, and
such temporary moratoriums and liens may be imposed if they are approved
by the court.
(4) If the association fails to act as required in subsection (2)
of this section within a reasonable time, the director shall have the
powers and duties of the association under ORS 734.750 to 734.890 with
respect to insolvent insurers.
(5) The association may render assistance and advice to the
director, upon request of the director, concerning rehabilitation,
payment of claims, continuance of coverage or the performance of other
contractual obligations of any impaired or insolvent insurer.
(6) The association shall have standing to appear before any court
in this state having jurisdiction over an impaired or insolvent insurer
concerning which the association is or may become obligated under ORS
734.750 to 734.890. Such standing shall extend to all matters germane to
the powers and duties of the association including, but not limited to,
proposals for reinsuring or guaranteeing the covered policies of the
impaired or insolvent insurer and the determination of the covered
policies and contractual obligations. The association may also appear or
intervene before a court in another state with jurisdiction over an
impaired or insolvent insurer for which the association is or may become
obligated or with jurisdiction over a third party against whom the
association may have rights through subrogation of the policyholders of
the insurer.
(7)(a) Any person receiving benefits under ORS 734.750 to 734.890
shall be considered to have assigned the rights under, and any causes of
action relating to, the covered policy to the association to the extent
of the benefits received because of ORS 734.750 to 734.890, whether the
benefits are payments of or on account of contractual obligations or
continuation of coverage. The association may require an assignment to it
of such rights by any payee, policy or contract owner, beneficiary,
insured or annuitant as a condition precedent to the receipt of any
rights or benefits conferred by ORS 734.750 to 734.890 upon such person.
The association shall be subrogated to these rights against the assets of
any insolvent insurer.
(b) The subrogation rights of the association under this subsection
shall have the same priority against the assets of the insolvent insurer
as that possessed by the person entitled to receive benefits under ORS
734.750 to 734.890.
(8) The contractual obligations of the insolvent insurer for which
the association becomes or may become liable shall not exceed the lesser
of:
(a) The contractual obligations for which the insurer is liable or
would have been liable if it were not an insolvent insurer, unless such
obligations are reduced as permitted by subsection (3) of this section; or
(b) The applicable following benefits, subject to subsection (9) of
this section:
(A) $300,000 in life insurance death benefits, but not more than
$100,000 in net cash surrender and net cash withdrawal values for life
insurance, with respect to any one life, regardless of the number of
policies or contracts.
(B) $100,000 in health insurance benefits, including any net cash
surrender and net cash withdrawal values, with respect to any one life,
regardless of the number of policies or contracts.
(C) $100,000 in the present value of annuity benefits, including
net cash surrender and net cash withdrawal values, with respect to any
one life, regardless of the number of policies or contracts.
(D) $100,000 in present value annuity benefits, in the aggregate,
including net cash surrender and net cash withdrawal values, with respect
to each individual participating in a governmental retirement plan
established under section 401, 403(b) or 457 of the United States
Internal Revenue Code covered by an unallocated annuity contract or the
beneficiaries of each such individual if deceased.
(9) The association shall not be liable for more than $300,000 in
the aggregate with respect to any one individual under subsection (8)(b)
of this section.
(10) Subject to the applicable limitation with respect to any one
individual under subsections (8) and (9) of this section, the benefits
for which the association may become liable with respect to any one owner
of policies or contracts other than an unallocated annuity contract to
which subsection (8)(b)(D) of this section applies, whether the owner is
an individual, corporation or other person, shall not exceed $5 million
in benefits in the aggregate for all persons covered by such policies or
contracts, regardless of the number of the policies and contracts held by
the owner.
(11) The association may:
(a) Enter into such contracts as are necessary or proper to carry
out the provisions and purposes of ORS 734.750 to 734.890.
(b) Sue or be sued, including taking any legal actions necessary or
proper for recovery of any unpaid assessments under ORS 734.815.
(c) Borrow money to effect the purposes of ORS 734.750 to 734.890.
Any notes or other evidence of indebtedness of the association not in
default shall be legal investments for domestic insurers and may be
carried as admitted assets.
(d) Employ or retain such persons as are necessary to handle the
financial transactions of the association, and to perform such other
functions as become necessary or proper under ORS 734.750 to 734.890.
(e) Negotiate and contract with any liquidator, rehabilitator,
conservator or ancillary receiver to carry out the powers and duties of
the association.
(f) Take such legal action as may be necessary to avoid payment of
improper claims.
(g) Exercise, for the purposes of ORS 734.750 to 734.890 and to the
extent approved by the director, the powers of a domestic life or health
insurer, but in no case may the association issue policies other than
those issued to perform the contractual obligations of the impaired or
insolvent insurer. [1975 c.251 §9; 1991 c.811 §4](1) For the purpose of providing the funds necessary to carry
out the powers and duties of the Oregon Life and Health Insurance
Guaranty Association, the board of directors shall assess the member
insurers, separately for each account, at such time and for such amounts
as the board finds necessary. The board shall collect the assessments
after 30 days’ written notice to the member insurers before payment is
due.
(2) There shall be two assessments, as follows:
(a) Class A assessments shall be made for the purpose of meeting
administrative and legal costs and other general expenses whether or not
related to a particular impaired or insolvent insurer.
(b) Class B assessments shall be made to the extent necessary to
carry out the powers and duties of the association under ORS 734.810 with
regard to an impaired or insolvent insurer.
(3)(a) The amount of any class A assessment shall be determined by
the board and may be made on a pro rata or other basis. If pro rata, the
board may provide that the class A assessment be credited against future
class B assessments. An assessment on another basis shall not exceed $150
per member insurer in any one calendar year. The amount of any class B
assessment shall be allocated for assessment purposes among the accounts
in the proportion that the premiums received by the impaired or insolvent
insurer on the policies covered by each account, for the last calendar
year preceding the assessment in which the impaired or insolvent insurer
received premiums, bears to the premiums received by such insurer for
such calendar year on all covered policies.
(b) Class B assessments for each account shall be in the proportion
that the premiums received on business in this state by each assessed
member insurer on policies covered by each account for the three most
recent calendar years for which information is available preceding the
year in which the insurer became impaired or insolvent, as the case may
be, bears to such premiums received on business in this state for such
calendar years by all assessed member insurers.
(c) Assessments for funds to meet the requirements of the
association with respect to an impaired or insolvent insurer shall not be
made until necessary to implement the purposes of ORS 734.750 to 734.890.
Classification of assessments under subsection (2) of this section and
computation of assessments under this subsection shall be made with a
reasonable degree of accuracy, recognizing that exact determinations may
not always be possible.
(4) The association may abate or defer, in whole or in part, the
assessment of a member insurer if, in the opinion of the board, payment
of the assessment would endanger the ability of the member insurer to
fulfill its contractual obligations. In the event an assessment against a
member insurer is abated or deferred, in whole or in part, the amount by
which such assessment is abated or deferred shall be assessed against the
other member insurers.
(5) A member insurer shall not be required to pay assessments in
any one calendar year exceeding two percent of the insurer’s premiums in
this state on the policies covered by the account. If a member insurer’s
total assessment cannot be collected in any one year because of this
limitation, the remaining amount due shall be collected from the insurer
in future years.
(6) The board may, by an equitable method as established in the
plan of operation, refund to member insurers, in proportion to the
contribution of each insurer to that account, the amount by which the
assets of the account exceed the amount the board finds is necessary to
carry out during the coming year the obligations of the association with
regard to that account, including assets accruing from assignment,
subrogation, net realized gains and income from investments. A reasonable
amount may be retained in any account to provide funds for the continuing
expenses of the association and for future losses.
(7) It shall be proper for any member insurer, in determining its
premium rates and policyowner dividends for any kind of insurance within
the scope of ORS 734.750 to 734.890, to consider the amount reasonably
necessary to meet its assessment obligations under ORS 734.750 to 734.890.
(8) The association shall issue to each insurer paying an
assessment under ORS 734.750 to 734.890, other than a class A assessment,
a certificate of contribution in a form prescribed by the Director of the
Department of Consumer and Business Services 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 director may
approve.
(9) The association may assess and collect interest on the amount
of an assessment owed by a member insurer that fails to pay the
assessment when due. The annual rate that may be charged under this
subsection shall not exceed the rate established by the director by rule.
[1975 c.251 §10; 1991 c.811 §5](1)(a) The Oregon Life and Health Insurance
Guaranty Association shall maintain on file with the Director of the
Department of Consumer and Business Services a plan of operation and
shall submit any amendments thereto necessary or suitable to assure the
fair, reasonable and equitable administration of the association.
Amendments to the plan shall become effective upon approval in writing by
the director.
(b) If the association fails to submit suitable amendments to the
plan, the director shall, after notice and hearing, adopt and promulgate
such reasonable rules as are necessary or advisable to implement the
provisions of ORS 734.750 to 734.890. Such rules shall continue in force
until modified by the director or superseded by amendments submitted by
the association and approved by the director.
(2) All member insurers shall comply with the plan of operation.
(3) The plan of operation shall, in addition to requirements
enumerated elsewhere in ORS 734.750 to 734.890:
(a) Establish procedures for handling the assets of the association.
(b) Establish the amount and method of reimbursing members of the
board of directors.
(c) Establish regular places and times for meetings of the board of
directors.
(d) Establish procedures for records to be kept of all financial
transactions of the association, its agents, and the board of directors.
(e) Establish the procedures whereby selections for the board of
directors will be made and submitted to the director.
(f) Establish any additional procedures for assessments under ORS
734.815.
(g) Contain additional provisions necessary or proper for the
execution of the powers and duties of the association.
(4) The plan of operation may provide that any or all powers and
duties of the association, except those under of ORS 734.810 (11)(c) and
734.815, may be delegated to a corporation, association or other
organization which performs or will perform functions similar to those of
the association, or its equivalent, in two or more states. Such
corporation, association or organization shall be reimbursed for any
payments made on behalf of the association and shall be paid for its
performance of any function of the association. A delegation under this
subsection shall take effect only with the approval of both the board of
directors and the director, and may be made only to a corporation,
association or organization which extends protection not substantially
less favorable and effective than that provided by ORS 734.750 to
734.890. [1975 c.251 §11; 1991 c.811 §6] In addition to the duties
and powers enumerated elsewhere in ORS 734.750 to 734.820 and 734.830 to
734.890:
(1) The Director of the Department of Consumer and Business
Services shall:
(a) Upon request of the board of directors, provide the Oregon Life
and Health Insurance Guaranty Association with a statement of the
premiums in the appropriate states for each member insurer.
(b) When an impairment is declared and the amount of the impairment
is determined, serve a demand upon the impaired insurer to make good the
impairment within a reasonable time. Notice to the impaired insurer shall
constitute notice to its shareholders, if any. The failure of the insurer
to promptly comply with such demand shall not excuse the association from
the performance of its powers and duties under ORS 734.750 to 734.890.
(2) The director may suspend or revoke, after notice and 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 director may
levy a forfeiture on any member insurer which fails to pay an assessment
when due. Such forfeiture shall not exceed five percent of the unpaid
assessment per month, but no forfeiture shall be less than $100 per month.
(3) Any action of the board of directors or the association may be
appealed to the director by any member insurer if such appeal is taken
within 30 days of the action being appealed. Any final action or order of
the director shall be subject to judicial review in a court of competent
jurisdiction.
(4) The liquidator, rehabilitator or conservator of any impaired
insurer may notify all interested persons of the effect of ORS 734.750 to
734.890. [1975 c.251 §12]To aid in the detection and prevention of
insurer impairments and insolvencies:
(1) The board of directors shall, upon majority vote, notify the
Director of the Department of Consumer and Business Services of any
information indicating any member insurer may be an impaired insurer or
insolvent insurer.
(2) The board of directors may, upon majority vote, request that
the director order an examination of any member insurer which the board
in good faith believes to be an impaired or insolvent insurer. The
director may conduct such examination. The examination may be conducted
as a National Association of Insurance Commissioners examination or may
be conducted by such persons as the director designates. The cost of such
examination shall be paid by the Oregon Life and Health Insurance
Guaranty Association and the examination report shall be treated as are
other examination reports in this state. In no event shall the
examination report be released to the board of directors of the
association prior to its release to the public, but this shall not excuse
the director from the obligation to comply with subsection (3) of this
section. The director shall notify the board of directors when the
examination is completed. The request for an examination shall be kept on
file by the director but it shall not be open to public inspection prior
to the release of the examination report to the public and shall be
released at that time only if the examination discloses that the examined
insurer is an impaired insurer or insolvent insurer.
(3) The director shall report to the board of directors when the
director has reasonable cause to believe that any member insurer examined
at the request of the board of directors may be an impaired insurer or
insolvent insurer.
(4) The board of directors may, upon majority vote, make reports
and recommendations to the director upon any matter germane to the
solvency, liquidation, rehabilitation or conservation of any member
insurer. Such reports and recommendations shall not be considered public
records.
(5) The board of directors may, upon majority vote, make
recommendations to the director for the detection and prevention of
insurer impairments or insolvencies.
(6) The board of directors shall, at the conclusion of any insurer
impairment or insolvency in which the association carried out its duties
under ORS 734.750 to 734.890 or exercised any of its powers under ORS
734.750 to 734.890, prepare a report on the history and causes of such
impairment or insolvency, based on the information available to the
association, and submit such report to the director. [1975 c.251 §13] (1) A
member insurer may offset against its corporate excise tax liabilities to
this state an assessment described in ORS 734.815 (8), at the rate of 20
percent of the amount of such assessment for each of the five calendar
years following the year in which such assessment was paid. In the event
a member insurer should cease doing business, all uncredited assessments
may be credited against its premium or corporate excise tax liabilities
for the year it ceases doing business.
(2) Any sums acquired by refund pursuant to ORS 734.815 (6) from
the Oregon Life and Health Insurance Guaranty Association which have
theretofore been written off by contributing insurers and offset against
premium or corporate excise taxes as provided in subsection (1) of this
section, and are not then needed for purposes of ORS 734.750 to 734.890,
shall be paid by the association to the Director of the Department of
Consumer and Business Services and deposited by the director with the
State Treasurer for credit to the General Fund of this state. [1975 c.251
§14; 1995 c.786 §9](1) Nothing in ORS
734.750 to 734.890 shall be construed to reduce the liability for unpaid
assessments of the insureds on an impaired or insolvent insurer operating
under a plan with assessment liability.
(2) Records shall be kept of all negotiations and meetings in which
the Oregon Life and Health Insurance Guaranty Association or its
representatives are involved to discuss the activities of the association
in carrying out its powers and duties under ORS 734.810. Records of such
negotiations or meetings shall be made public only upon the termination
of a liquidation, rehabilitation or conservation proceeding involving the
impaired or insolvent insurer, upon the termination of the impairment or
insolvency of the insurer, or upon the order of a court of competent
jurisdiction. Nothing in this subsection shall limit the duty of the
association to render a report of its activities under ORS 734.850.
(3) For the purpose of carrying out its obligations under ORS
734.750 to 734.890, the association shall be considered to be a creditor
of the impaired or insolvent insurer to the extent of assets attributable
to covered policies reduced by any amounts to which the association is
entitled as subrogee pursuant to ORS 734.810 (7). All assets of the
impaired or insolvent insurer attributable to covered policies shall be
used to continue all covered policies and pay all contractual obligations
of the impaired or insolvent insurer as required by ORS 734.750 to
734.890. “Assets attributable to covered policies,” as used in this
subsection, is that proportion of the assets which the reserves that
should have been established for such policies bear to the reserves that
should have been established for all policies of insurance written by the
impaired or insolvent insurer.
(4)(a) Prior to the termination of any liquidation, rehabilitation
or conservation proceeding, the court may take into consideration the
contributions of the respective parties, including the association, the
shareholders and policyowners of the insolvent insurer and any other
party with a bona fide interest, in making an equitable distribution of
the ownership rights of such insolvent insurer. In such a determination,
consideration shall be given to the welfare of the policyholders of the
continuing or successor insurer.
(b) No distribution to stockholders, if any, of an impaired or
insolvent insurer shall be made until and unless the total amount of
valid claims of the association for funds expended in carrying out its
powers and duties under ORS 734.810 with respect to such insurer have
been fully recovered by the association.
(5)(a) If an order for liquidation or rehabilitation of an insurer
domiciled in this state has been entered, the receiver appointed under
such order shall have a right to recover on behalf of the insurer, from
any affiliate that controlled it, 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 or
rehabilitation, subject to the limitations of paragraphs (b), (c) and (d)
of this subsection.
(b) No such dividend shall be recoverable if the insurer 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 the ability of the insurer to fulfill
its contractual obligations.
(c) Any person who was an affiliate that controlled the insurer at
the time the distributions were paid shall be liable up to the amount of
distributions the person received. Any person who was an affiliate that
controlled the insurer at the time the distributions were declared shall
be liable up to the amount of distributions the person would have
received if they had been paid immediately. If two persons are liable
with respect to the same distributions, they shall be jointly and
severally liable.
(d) The maximum amount recoverable under this subsection shall be
the amount needed in excess of all other available assets of the
insolvent insurer to pay the contractual obligations of the insolvent
insurer.
(e) If any person liable under paragraph (c) of this subsection is
insolvent, all its affiliates that controlled it at the time the dividend
was paid shall be jointly and severally liable for any resulting
deficiency in the amount recovered from the insolvent affiliate. [1975
c.251 §15; 1991 c.811 §7]The Oregon Life and Health Insurance Guaranty
Association shall be subject to examination and regulation by the
Director of the Department of Consumer and Business Services. The board
of directors shall submit to the director, not later than May 1 of each
year, a financial report for the preceding calendar year in a form
approved by the director, and a report of its activities during the
preceding calendar year. [1975 c.251 §16]
The Oregon Life and Health Insurance Guaranty Association shall be
exempted from payment of all fees and all taxes levied by this state or
any of its political subdivisions, except taxes levied on real property.
[1975 c.251 §17] There shall be no liability on
the part of, and no cause of action of any nature shall arise against,
any member insurer or its agents or employees, the Oregon Life and Health
Insurance Guaranty Association or its agents or employees, members of the
board of directors, or the Director of the Department of Consumer and
Business Services or the representatives of the director, for any action
taken by them in the performance of their powers and duties under ORS
734.750 to 734.890. [1975 c.251 §18] All
proceedings in which an insolvent insurer is a party in any court in this
state shall be stayed 60 days from the date an order of liquidation,
rehabilitation or conservation is final to permit proper legal action by
the Oregon Life and Health Insurance Guaranty Association on any matters
germane to its powers or duties. As to judgment under any decision,
order, verdict or finding based on default the association may apply to
have such judgment set aside by the same court that made the judgment,
and shall be permitted to defend against such suit on the merits. [1975
c.251 §19] No
insurer or insurance producer shall make, publish, disseminate, circulate
or place before the public, or cause directly or indirectly, to be made,
published, disseminated, circulated or placed before the public, in any
newspaper, magazine or other publication, or in the form of a notice,
circular, pamphlet, letter or poster, or over any radio station or
television station, or in any other way, any advertisement, announcement
or statement which uses the existence of the Oregon Life and Health
Insurance Guaranty Association for the purpose of sales, solicitation or
inducement to purchase any form of insurance covered by the Oregon Life
and Health Insurance Guaranty Association Act. This section shall not
apply however to the Oregon Life and Health Insurance Guaranty
Association or any other entity which does not sell or solicit insurance
or to public service institutional advertisements by individual insurers.
[1975 c.251 §20; 2003 c.364 §87]
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