Help -
Help for Webmasters
« back to results for ""
Below is a cache of http://www.law.state.ak.us/pdf/opinions/883000058.pdf. It's a snapshot of the page taken as our search engine crawled the Web.
The web site itself may have changed. You can check the current page or check for previous versions at the Internet Archive. Yahoo! is not affiliated with the authors of this page or responsible for its content. Relating to the Alaska Insurance Guaranty Association TONY KNOWLES, GOVERNOR DEPARTMENT OF LAW OFFICE OF THE ATTORNEY GENERAL P.O. BOX 110300
JUNEAU, ALASKA 99811-0300
PHONE: (907) 465-3600
FAX: (907) 465-2075 May 8, 2000 The Honorable Tony Knowles
Governor
State of Alaska
P.O. Box 110001
Juneau, AK 99811-0001 Re: CSHB 310(L&C) -- Relating to the Alaska
Insurance Guaranty Association
A.G. file no: 883-00-0058 Dear Governor Knowles: At the request of your legislative director, Pat Pourchot, we have reviewed CSHB 310(L&C) relating to the Alaska Insurance Guaranty Association. This bill amends the Alaska Insurance Guaranty Association Act (the Act) in the insurance code (AS 21.80) to bring it into conformity with the model law adopted by the
National Association of Insurance Commissioners (NAIC). In general, the Act provides for a
mechanism to pay claims of policyholders or third parties in the event a property or liability
insurer becomes insolvent and to assess insurers to cover the claims and expenses paid by the
guaranty association. As stated in the sponsor statement for this bill, the Act was originally
enacted in 1970 and was based on the 1969 NAIC Post-Assessment Insurance Guaranty
Association model law. Since then the NAIC has made several substantive changes to the model
law, most recently in 1996. CSHB 310(L&C) amends Alaska's Act to conform to the 1996
NAIC model law. The bill contains 19 sections that are described below. Section 1 of the bill amends the purpose section of the Act at AS 21.80.010. Current law states that one of the purposes of the Act is to avoid financial loss to claimants or policyholders
because of an insurer insolvency. The bill changes the reference to "avoid financial loss" to "to
minimize financial loss." This change reflects the fact that the Act does not avoid all financial
loss to policyholders and claimants since from its inception the Act has contained limitations on
the amount that may be recovered from the guaranty fund. This section of the bill also deletes The Honorable Tony Knowles May 8, 2000 Governor Page 2 A.G. file no: 883-00-0058 from the purpose "to assist in the detection and prevention of insurer insolvencies" to conform
with other changes made in the bill that modifies the Association's role in that regard. The
changes in sec. 1 conform to the purpose section of the NAIC model law. Section 2 of the bill repeals and reenacts AS 21.80.020, which designates the kinds of insurance to which the Act applies. Current law states that the Act applies to all direct insurance
written by an admitted insurer except life, title, surety, health, credit, and mortgage warranty and
does not apply to a risk retention group formed under 15 U.S.C. 3901 3906. These exceptions
are preserved in the rewrite of AS 21.80.020, but the bill clarifies and expands on the types of
insurance that are not covered by the Act consistent with the NAIC model law. As stated in the
NAIC comment to the model law: The bill focuses on property and liability kinds of insurance and therefore
exempts those kinds of insurance deemed to present problems quite
distinct from those of property and liability insurance. The bill further
precludes from its scope certain types of insurance that provide protection
for investment and financial risks. NAIC Post-Assessment Property and Liability Insurance Guaranty Association Model Act
(1996), p. 2. The Alaska Life and Health Insurance Guaranty Association Act at AS 21.79
provides coverage for some of the insurance excluded by this section. One exception to the
statute has been added that is not part of the NAIC model or existing law. New paragraph (10)
excepts "insurance written on a retroactive basis to cover known losses for which a claim has
already been made and the claim is known to the insurer at the time the insurance is bound."
According to the sectional analysis accompanying the sponsor statement, this exception is based
on an Idaho statute and excludes coverage for insurance written on a retroactive basis to cover
known losses that existed when the insurance was bound. Section 3 of the bill amends AS 21.80.030, which currently provides that the chapter should be liberally construed to effect the purposes stated in AS 21.80.010. An amendment
deletes the word "liberally" from the statute. While this change conforms to changes in the
NAIC model, deletion of the word "liberally" may have an impact on how the courts construe
this chapter. Sections 4 and 5 amend AS 21.80.040, which establishes the Alaska Insurance Guaranty Association (the association) with mandatory membership of all insurers that write insurance to
which the chapter applies and that are licensed in this state. Section 4 amends AS 21.80.040 to
rename the "board of directors" to the "board of governors." This change conforms with the
terminology used in the Alaska Life and Health Insurance Guaranty Insurance Association Act
(AS 21.79) and will help avoid confusion with references in the Act to the director for the
division of insurance. The bill makes the same change to other sections of the Act where there is
a reference to "board of directors." The Honorable Tony Knowles May 8, 2000 Governor Page 3 A.G. file no: 883-00-0058 Section 5 of the bill amends AS 21.80.040 by adding a new subsection that provides for automatic termination of an insurer's membership on the next day after termination or expiration
of the member insurer's license to transact insurance business. The new subsection also clarifies
when a member insurer is no longer liable for assessments that are imposed under the Act
because of insolvencies. The subsection makes clear that a member insurer remains liable for
assessments after its license is terminated or expired if the assessments are levied or an insurer
becomes insolvent before termination or expiration of the member's license. In sec. 6 of the bill, AS 21.80.050, relating to the association's "Board of Directors," is amended to reflect the new terminology "Board of Governors" and to permit the director of the
division of insurance to appoint two public members. As provided in the amendment, the only
qualification for being a public member is that the individual not be an officer, director, or
employee of an insurer, or engaged in the business of insurance. The amendment also makes
more specific the procedure by which other members are elected by the insurer members of the
board subject to the director's approval. These changes conform to the NAIC model law. Section 7 of the bill makes several changes to AS 21.80.060, relating to the powers and duties of the association. These changes clarify the point at which the obligations of the
association are triggered. Under existing law, the association's obligation to pay is based on the
determination of insolvency by a court of competent jurisdiction. The changes substitute "order
of liquidation" for the "determination of insolvency," which is more precise terminology for
designating when the association's obligations are triggered. More specifically, sec. 7 amends
AS 21.80.060(a)(1) to delete the requirement that a claim exceed $100 to be covered, to add a
$10,000 limitation on a covered claim for return of unearned premium, and to add a new
paragraph clarifying that the association is not responsible for a claim filed after the deadline for
claims set by the court in a liquidation proceeding. This latter amendment parallels and is
consistent with the claim filing provisions in AS 21.78 governing the rehabilitation and
liquidation of insurers and with the guaranty fund laws in other states. Section 7 of the bill also amends AS 21.80.060(a)(3), which relates to the association's authority to allocate claims paid and expenses incurred through assessments to member insurers.
The reference to "the cost of examinations under AS 21.80.110" is deleted, because it is
superfluous language. The association has the authority to allocate and assess this cost by virtue
of other language in the subsection and language in AS 21.80.110. Other amendments to this
subsection clarify that the year to be used to calculate assessments paid by member insurers is
the calendar year "preceding the assessment." Subsection (a)(3) is further amended in
subparagraph (C) to clarify that the association has the authority to decide the order in which
claims will be paid, which is consistent with the NAIC model law, and in subparagraph (D) to
delete the reference to "exempt." Subparagraph (D) currently permits the association to exempt
or defer, in whole or in part, an assessment to a member insurer if it would impair that insurer's
financial position. According to the sectional analysis accompanying the sponsor statement for
this bill, the authority to exempt a member insurer from an assessment is not necessary since The Honorable Tony Knowles May 8, 2000 Governor Page 4 A.G. file no: 883-00-0058 assessments are generally passed through directly to insureds and, thus, would not impair an
insurer's financial condition in any event. Subparagraph (D) also is amended to add new
requirements for a member insurer that has had an assessment deferred and to establish a method
for member insurers to recoup excess assessments they have paid because another member's
assessment was deferred. Section 7 of the bill also amends AS 21.80.060(a)(5) by deleting the association's requirement to notify insureds of insolvent insurers and other interested parties of a
determination of insolvency, which corresponds to a change made under this bill to
AS 21.80.080(b)(1). This change should have little significance since insureds and interested
parties receive such notice under the provisions of AS 21.78, relating to the rehabilitation and
liquidation of insurers. New language also is added to AS 21.80.060(a)(5) that recognizes the
association's right to direct the defense of a covered claim including the selection of legal
counsel, subject to the requirements of AS 21.89.100, which governs the insurer's appointment of
independent counsel. The final change in sec. 7 of the bill, apart from some minor grammatical
changes, is the deletion of paragraph (7) in AS 21.80.060(b). That paragraph currently provides
that the association may appear, defend, and appeal any action on a claim brought by the
association. This language, however, is not part of the NAIC model and does not add any
additional authority beyond what the association already has in other provisions of this statute. Section 8 of the bill amends AS 21.80.070, which establishes requirements for the association's plan of operation that is submitted and approved by the director of the division of
insurance. An amendment adds two new requirements for the plan of operation in subsection
(c). The first requires that the plan of operation include procedures for handling assets received
from the estate of an insolvent insurer, which is consistent with the NAIC model law. The
second requires that the plan provide for a member insurer serving on the board of governors to
appoint an individual to represent the insurer on the board, including an appointment of an
alternate for that appointed individual. This latter change is not part of the NAIC model law, but
it seems practical given that a member insurer serving on the board of governors is represented
by individuals who may need to change from time to time. In sec. 9 of the bill, AS 21.80.080 is amended to delete one of the powers of the director of the division of insurance that are set out in that statute. This change means the director can no
longer require the association to notify insureds and other interested parties regarding the
insolvency of a particular insurer. But, as explained earlier, this change should have little
significance since AS 21.78, relating to the rehabilitation and liquidation of insurers, requires the
director of the division of insurance as statutory receiver to provide such notice to insureds and
interested parties. This change also conforms to the NAIC model law. Section 10 of the bill makes stylistic changes to AS 21.80.090(a) relating to the effect of paid claims and cross-references an exception set out in subsection (b) of this statute, which is
amended by the sec. 11 of the bill. The Honorable Tony Knowles May 8, 2000 Governor Page 5 A.G. file no: 883-00-0058 Section 11 of the bill amends AS 21.80.090(b) by clarifying the status of Alaska's association and other states' associations as claimants in an insolvent insurer's estate with respect
to the amounts paid by the associations to satisfy covered claims. Subsection (b) also is
amended to grant the association the right to receive distributions under the liquidation statutes
with a priority equal to what a claimant, who receives payment from the association, would have
been entitled. The amendments to subsection (b) also clarify that the receiver is not bound by an
association's settlement of a covered claim with respect to claim amounts that exceed the
association's statutory limit for covered claims. These changes conform to the NAIC model law. Section 12 of the bill adds a proposed new section at AS 21.80.095 related to prohibited claims. This section prohibits an insurer, reinsurer, insurance pool, or underwriting association
from asserting a claim against a person insured under a policy issued by an insolvent insurer,
except for the amount not covered by the claims limit established in AS 21.80.060. This
language is consistent with the definition of "covered claim" at AS 21.80.180(3) under existing
law and conforms to the NAIC model law. Section 13 of the bill amends AS 21.80.100(a) relating to nonduplication of recovery. The amendment clarifies that, before seeking recovery from the association, a claimant is
required to exhaust all other available insurance coverage, including insurance from an insurer
who is not a member of the association. Section 14 of the bill repeals and reenacts AS 21.80.110, relating to the prevention and detection of insolvencies, to conform with the NAIC model law. Under the rewritten version of
this statute, the association's board will no longer have a duty to notify the director of insurance
of information that a member insurer may be insolvent or in a hazardous financial condition.
The board also will no longer have the discretion to request that the director order an
examination of a member insurer that may be in a hazardous financial condition. And,
conversely, the director will no longer have a duty to report to the association's board when the
director has reasonable cause that a member insurer that has been examined may be insolvent or
in hazardous financial condition. These changes account for the deletion of the word "detection"
from the statute's lead-in line, since the remainder of this rewritten statute pertains only to
prevention. Under AS 21.80.110 as rewritten, the association's board will have the discretion to
make recommendations to the director of the division of insurance regarding matters related to
improving or enhancing regulation for insurer insolvency. And, as with existing law, the board
will be obligated to file a report with the director on the history and causes of an insolvency at
the conclusion of an insurer insolvency in which the association paid covered claims. Section 15 of the bill amends AS 21.80.120 to change the due date of the financial report the association's board is required to file with the director of the division of insurance. The due
date will be June 30 of every year instead of March 30. The new date corresponds with the
board's annual meeting. The Honorable Tony Knowles May 8, 2000 Governor Page 6 A.G. file no: 883-00-0058 Section 16 of the bill amends the immunity provision in AS 21.80 to conform with the NAIC model and to cover the alternate or substitute for a member insurer of the board of
governors. The amendment clarifies that immunity is provided not only for an action taken, but
for a failure to act as well. Section 17 of the bill amends AS 21.80.160 that provides for a stay of proceedings or the reopening of a default judgment with respect to actions where an insolvent insurer is a party or is
obligated to provide a defense. Under existing law, all court proceedings in which an insolvent
insurer is a party or is defending a party are stayed for 60 days. An amendment increases the
stay to 90 days or the additional time that may be ordered by a court, but allows the association's
board to waive the stay in specific cases involving covered claims. These changes conform to
the NAIC model law, except that the period of stay in the model law is six months. This
difference should not be significant given that the statute, in any event, allows the association to
seek court-ordered extensions of the stay. In sec. 18 of the bill, the definitions section of AS 21.80 is repealed and reenacted to conform to the definitions section of the NAIC model law. New definitions are added for
"affiliate of an insolvent insurer," "claimant," "control," and "resident." These terms are used in
provisions added or changed under this bill. The last section of the bill, sec. 19, provides a transitional provision relating to the members of the association's board. Under this provision, the terms of the existing board
members will be not affected by the amendments under the bill and the terms will expire as
provided before the bill. In closing, CSHB 310(L&C) is consistent with the state's authority to regulate insurance as delegated under the McCarran-Ferguson Act, 12 U.S.C. 1011 1015. Based on our review,
the bill does not present any legal or constitutional problems to prevent this bill from becoming
law. Sincerely, Bruce M. Botelho
Attorney General BMB:SPA:jem
The web site itself may have changed. You can check the current page or check for previous versions at the Internet Archive. Yahoo! is not affiliated with the authors of this page or responsible for its content. Relating to the Alaska Insurance Guaranty Association TONY KNOWLES, GOVERNOR DEPARTMENT OF LAW OFFICE OF THE ATTORNEY GENERAL P.O. BOX 110300
JUNEAU, ALASKA 99811-0300
PHONE: (907) 465-3600
FAX: (907) 465-2075 May 8, 2000 The Honorable Tony Knowles
Governor
State of Alaska
P.O. Box 110001
Juneau, AK 99811-0001 Re: CSHB 310(L&C) -- Relating to the Alaska
Insurance Guaranty Association
A.G. file no: 883-00-0058 Dear Governor Knowles: At the request of your legislative director, Pat Pourchot, we have reviewed CSHB 310(L&C) relating to the Alaska Insurance Guaranty Association. This bill amends the Alaska Insurance Guaranty Association Act (the Act) in the insurance code (AS 21.80) to bring it into conformity with the model law adopted by the
National Association of Insurance Commissioners (NAIC). In general, the Act provides for a
mechanism to pay claims of policyholders or third parties in the event a property or liability
insurer becomes insolvent and to assess insurers to cover the claims and expenses paid by the
guaranty association. As stated in the sponsor statement for this bill, the Act was originally
enacted in 1970 and was based on the 1969 NAIC Post-Assessment Insurance Guaranty
Association model law. Since then the NAIC has made several substantive changes to the model
law, most recently in 1996. CSHB 310(L&C) amends Alaska's Act to conform to the 1996
NAIC model law. The bill contains 19 sections that are described below. Section 1 of the bill amends the purpose section of the Act at AS 21.80.010. Current law states that one of the purposes of the Act is to avoid financial loss to claimants or policyholders
because of an insurer insolvency. The bill changes the reference to "avoid financial loss" to "to
minimize financial loss." This change reflects the fact that the Act does not avoid all financial
loss to policyholders and claimants since from its inception the Act has contained limitations on
the amount that may be recovered from the guaranty fund. This section of the bill also deletes The Honorable Tony Knowles May 8, 2000 Governor Page 2 A.G. file no: 883-00-0058 from the purpose "to assist in the detection and prevention of insurer insolvencies" to conform
with other changes made in the bill that modifies the Association's role in that regard. The
changes in sec. 1 conform to the purpose section of the NAIC model law. Section 2 of the bill repeals and reenacts AS 21.80.020, which designates the kinds of insurance to which the Act applies. Current law states that the Act applies to all direct insurance
written by an admitted insurer except life, title, surety, health, credit, and mortgage warranty and
does not apply to a risk retention group formed under 15 U.S.C. 3901 3906. These exceptions
are preserved in the rewrite of AS 21.80.020, but the bill clarifies and expands on the types of
insurance that are not covered by the Act consistent with the NAIC model law. As stated in the
NAIC comment to the model law: The bill focuses on property and liability kinds of insurance and therefore
exempts those kinds of insurance deemed to present problems quite
distinct from those of property and liability insurance. The bill further
precludes from its scope certain types of insurance that provide protection
for investment and financial risks. NAIC Post-Assessment Property and Liability Insurance Guaranty Association Model Act
(1996), p. 2. The Alaska Life and Health Insurance Guaranty Association Act at AS 21.79
provides coverage for some of the insurance excluded by this section. One exception to the
statute has been added that is not part of the NAIC model or existing law. New paragraph (10)
excepts "insurance written on a retroactive basis to cover known losses for which a claim has
already been made and the claim is known to the insurer at the time the insurance is bound."
According to the sectional analysis accompanying the sponsor statement, this exception is based
on an Idaho statute and excludes coverage for insurance written on a retroactive basis to cover
known losses that existed when the insurance was bound. Section 3 of the bill amends AS 21.80.030, which currently provides that the chapter should be liberally construed to effect the purposes stated in AS 21.80.010. An amendment
deletes the word "liberally" from the statute. While this change conforms to changes in the
NAIC model, deletion of the word "liberally" may have an impact on how the courts construe
this chapter. Sections 4 and 5 amend AS 21.80.040, which establishes the Alaska Insurance Guaranty Association (the association) with mandatory membership of all insurers that write insurance to
which the chapter applies and that are licensed in this state. Section 4 amends AS 21.80.040 to
rename the "board of directors" to the "board of governors." This change conforms with the
terminology used in the Alaska Life and Health Insurance Guaranty Insurance Association Act
(AS 21.79) and will help avoid confusion with references in the Act to the director for the
division of insurance. The bill makes the same change to other sections of the Act where there is
a reference to "board of directors." The Honorable Tony Knowles May 8, 2000 Governor Page 3 A.G. file no: 883-00-0058 Section 5 of the bill amends AS 21.80.040 by adding a new subsection that provides for automatic termination of an insurer's membership on the next day after termination or expiration
of the member insurer's license to transact insurance business. The new subsection also clarifies
when a member insurer is no longer liable for assessments that are imposed under the Act
because of insolvencies. The subsection makes clear that a member insurer remains liable for
assessments after its license is terminated or expired if the assessments are levied or an insurer
becomes insolvent before termination or expiration of the member's license. In sec. 6 of the bill, AS 21.80.050, relating to the association's "Board of Directors," is amended to reflect the new terminology "Board of Governors" and to permit the director of the
division of insurance to appoint two public members. As provided in the amendment, the only
qualification for being a public member is that the individual not be an officer, director, or
employee of an insurer, or engaged in the business of insurance. The amendment also makes
more specific the procedure by which other members are elected by the insurer members of the
board subject to the director's approval. These changes conform to the NAIC model law. Section 7 of the bill makes several changes to AS 21.80.060, relating to the powers and duties of the association. These changes clarify the point at which the obligations of the
association are triggered. Under existing law, the association's obligation to pay is based on the
determination of insolvency by a court of competent jurisdiction. The changes substitute "order
of liquidation" for the "determination of insolvency," which is more precise terminology for
designating when the association's obligations are triggered. More specifically, sec. 7 amends
AS 21.80.060(a)(1) to delete the requirement that a claim exceed $100 to be covered, to add a
$10,000 limitation on a covered claim for return of unearned premium, and to add a new
paragraph clarifying that the association is not responsible for a claim filed after the deadline for
claims set by the court in a liquidation proceeding. This latter amendment parallels and is
consistent with the claim filing provisions in AS 21.78 governing the rehabilitation and
liquidation of insurers and with the guaranty fund laws in other states. Section 7 of the bill also amends AS 21.80.060(a)(3), which relates to the association's authority to allocate claims paid and expenses incurred through assessments to member insurers.
The reference to "the cost of examinations under AS 21.80.110" is deleted, because it is
superfluous language. The association has the authority to allocate and assess this cost by virtue
of other language in the subsection and language in AS 21.80.110. Other amendments to this
subsection clarify that the year to be used to calculate assessments paid by member insurers is
the calendar year "preceding the assessment." Subsection (a)(3) is further amended in
subparagraph (C) to clarify that the association has the authority to decide the order in which
claims will be paid, which is consistent with the NAIC model law, and in subparagraph (D) to
delete the reference to "exempt." Subparagraph (D) currently permits the association to exempt
or defer, in whole or in part, an assessment to a member insurer if it would impair that insurer's
financial position. According to the sectional analysis accompanying the sponsor statement for
this bill, the authority to exempt a member insurer from an assessment is not necessary since The Honorable Tony Knowles May 8, 2000 Governor Page 4 A.G. file no: 883-00-0058 assessments are generally passed through directly to insureds and, thus, would not impair an
insurer's financial condition in any event. Subparagraph (D) also is amended to add new
requirements for a member insurer that has had an assessment deferred and to establish a method
for member insurers to recoup excess assessments they have paid because another member's
assessment was deferred. Section 7 of the bill also amends AS 21.80.060(a)(5) by deleting the association's requirement to notify insureds of insolvent insurers and other interested parties of a
determination of insolvency, which corresponds to a change made under this bill to
AS 21.80.080(b)(1). This change should have little significance since insureds and interested
parties receive such notice under the provisions of AS 21.78, relating to the rehabilitation and
liquidation of insurers. New language also is added to AS 21.80.060(a)(5) that recognizes the
association's right to direct the defense of a covered claim including the selection of legal
counsel, subject to the requirements of AS 21.89.100, which governs the insurer's appointment of
independent counsel. The final change in sec. 7 of the bill, apart from some minor grammatical
changes, is the deletion of paragraph (7) in AS 21.80.060(b). That paragraph currently provides
that the association may appear, defend, and appeal any action on a claim brought by the
association. This language, however, is not part of the NAIC model and does not add any
additional authority beyond what the association already has in other provisions of this statute. Section 8 of the bill amends AS 21.80.070, which establishes requirements for the association's plan of operation that is submitted and approved by the director of the division of
insurance. An amendment adds two new requirements for the plan of operation in subsection
(c). The first requires that the plan of operation include procedures for handling assets received
from the estate of an insolvent insurer, which is consistent with the NAIC model law. The
second requires that the plan provide for a member insurer serving on the board of governors to
appoint an individual to represent the insurer on the board, including an appointment of an
alternate for that appointed individual. This latter change is not part of the NAIC model law, but
it seems practical given that a member insurer serving on the board of governors is represented
by individuals who may need to change from time to time. In sec. 9 of the bill, AS 21.80.080 is amended to delete one of the powers of the director of the division of insurance that are set out in that statute. This change means the director can no
longer require the association to notify insureds and other interested parties regarding the
insolvency of a particular insurer. But, as explained earlier, this change should have little
significance since AS 21.78, relating to the rehabilitation and liquidation of insurers, requires the
director of the division of insurance as statutory receiver to provide such notice to insureds and
interested parties. This change also conforms to the NAIC model law. Section 10 of the bill makes stylistic changes to AS 21.80.090(a) relating to the effect of paid claims and cross-references an exception set out in subsection (b) of this statute, which is
amended by the sec. 11 of the bill. The Honorable Tony Knowles May 8, 2000 Governor Page 5 A.G. file no: 883-00-0058 Section 11 of the bill amends AS 21.80.090(b) by clarifying the status of Alaska's association and other states' associations as claimants in an insolvent insurer's estate with respect
to the amounts paid by the associations to satisfy covered claims. Subsection (b) also is
amended to grant the association the right to receive distributions under the liquidation statutes
with a priority equal to what a claimant, who receives payment from the association, would have
been entitled. The amendments to subsection (b) also clarify that the receiver is not bound by an
association's settlement of a covered claim with respect to claim amounts that exceed the
association's statutory limit for covered claims. These changes conform to the NAIC model law. Section 12 of the bill adds a proposed new section at AS 21.80.095 related to prohibited claims. This section prohibits an insurer, reinsurer, insurance pool, or underwriting association
from asserting a claim against a person insured under a policy issued by an insolvent insurer,
except for the amount not covered by the claims limit established in AS 21.80.060. This
language is consistent with the definition of "covered claim" at AS 21.80.180(3) under existing
law and conforms to the NAIC model law. Section 13 of the bill amends AS 21.80.100(a) relating to nonduplication of recovery. The amendment clarifies that, before seeking recovery from the association, a claimant is
required to exhaust all other available insurance coverage, including insurance from an insurer
who is not a member of the association. Section 14 of the bill repeals and reenacts AS 21.80.110, relating to the prevention and detection of insolvencies, to conform with the NAIC model law. Under the rewritten version of
this statute, the association's board will no longer have a duty to notify the director of insurance
of information that a member insurer may be insolvent or in a hazardous financial condition.
The board also will no longer have the discretion to request that the director order an
examination of a member insurer that may be in a hazardous financial condition. And,
conversely, the director will no longer have a duty to report to the association's board when the
director has reasonable cause that a member insurer that has been examined may be insolvent or
in hazardous financial condition. These changes account for the deletion of the word "detection"
from the statute's lead-in line, since the remainder of this rewritten statute pertains only to
prevention. Under AS 21.80.110 as rewritten, the association's board will have the discretion to
make recommendations to the director of the division of insurance regarding matters related to
improving or enhancing regulation for insurer insolvency. And, as with existing law, the board
will be obligated to file a report with the director on the history and causes of an insolvency at
the conclusion of an insurer insolvency in which the association paid covered claims. Section 15 of the bill amends AS 21.80.120 to change the due date of the financial report the association's board is required to file with the director of the division of insurance. The due
date will be June 30 of every year instead of March 30. The new date corresponds with the
board's annual meeting. The Honorable Tony Knowles May 8, 2000 Governor Page 6 A.G. file no: 883-00-0058 Section 16 of the bill amends the immunity provision in AS 21.80 to conform with the NAIC model and to cover the alternate or substitute for a member insurer of the board of
governors. The amendment clarifies that immunity is provided not only for an action taken, but
for a failure to act as well. Section 17 of the bill amends AS 21.80.160 that provides for a stay of proceedings or the reopening of a default judgment with respect to actions where an insolvent insurer is a party or is
obligated to provide a defense. Under existing law, all court proceedings in which an insolvent
insurer is a party or is defending a party are stayed for 60 days. An amendment increases the
stay to 90 days or the additional time that may be ordered by a court, but allows the association's
board to waive the stay in specific cases involving covered claims. These changes conform to
the NAIC model law, except that the period of stay in the model law is six months. This
difference should not be significant given that the statute, in any event, allows the association to
seek court-ordered extensions of the stay. In sec. 18 of the bill, the definitions section of AS 21.80 is repealed and reenacted to conform to the definitions section of the NAIC model law. New definitions are added for
"affiliate of an insolvent insurer," "claimant," "control," and "resident." These terms are used in
provisions added or changed under this bill. The last section of the bill, sec. 19, provides a transitional provision relating to the members of the association's board. Under this provision, the terms of the existing board
members will be not affected by the amendments under the bill and the terms will expire as
provided before the bill. In closing, CSHB 310(L&C) is consistent with the state's authority to regulate insurance as delegated under the McCarran-Ferguson Act, 12 U.S.C. 1011 1015. Based on our review,
the bill does not present any legal or constitutional problems to prevent this bill from becoming
law. Sincerely, Bruce M. Botelho
Attorney General BMB:SPA:jem
download Relating to the Alaska Insurance Guaranty Association
