518C.6 Duties and powers of the association.
1. The association is subject to all of the following:
a. (1) The association is obligated to pay a covered claim as follows:
(a) A covered claim existing prior to the final order of liquidation and arising within thirty days after the final order of liquidation.
(b) A covered claim existing before the policy expiration date if the expiration date is less than thirty days after the final order of liquidation.
(c) A covered claim existing before the insured replaces the policy or causes its cancellation, if the insured replaces or cancels the policy within thirty days of the final order of liquidation.
(2) An obligation under subparagraph (1) is satisfied by paying to the claimant an amount as follows:
(a) An amount not exceeding ten thousand dollars per policy for a covered claim for the return of unearned premium.
(b) An amount not exceeding the lesser of the policy limits or five hundred thousand dollars per claim for all covered claims for all damages arising out of any one or a series of accidents, occurrences, or incidents, regardless of the number of persons making claims or the number of applicable policies.
b. The association is obligated to pay covered claims subject to a limitation as established by the rights, duties, and obligations under the policy issued by the insolvent insurer.
c. (1) The association shall assess member insurers amounts necessary to pay the obligations of the association under paragraphs “”a”” and “”b”” subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, the cost of examinations under § 518C.12, and other expenses as authorized by this chapter. The assessment of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year bear to the net direct written premiums of all member insurers for the preceding calendar year. Each member insurer shall be notified of the assessment not less than thirty days before it is due. A member insurer shall not be assessed in any year an amount greater than two percent of that member insurer’s net direct written premiums for the preceding calendar year. If the maximum assessment, together with the other assets of the association, do not provide in any one year an amount sufficient to make all necessary payments, the funds available shall be prorated and the unpaid portion shall be paid as soon as funds become available. The association may exempt or defer, in whole or in part, the assessment of any member insurer if the assessment would cause the member insurer’s financial statement to reflect amounts of surplus less than the minimum amounts required for a certificate of authority to transact insurance business. A member insurer serving as a servicing facility pursuant to this section 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. All overdue and unpaid assessments shall draw interest at the rate of seven percent per annum.
(2) The association may pursue and retain for its own account salvage and subrogation recoverable on paid covered claim obligations. An obligation of the association to defend an insured shall cease upon the association’s payment of an amount equal to the lesser of the association’s covered claim obligation or the applicable policy limits.
d. The association shall investigate claims filed with the association and adjust, compromise, settle, defend, and pay covered claims to the extent of the association’s obligation and deny all other claims.
e. The association shall notify such persons as the commissioner directs under section
518C.8, subsection 2, paragraph “”a””.
f. The association shall process claims through its employees or through one or more member insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the commissioner, but such designation may be declined by a member insurer.
g. The association shall reimburse each servicing facility for obligations of the association

§518C.6, COUNTY AND STATE MUTUAL INSURANCE GUARANTY ASSOCIATION 2

paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association, and pay the other expenses of the association authorized by this chapter.
2. The association may do any of the following:
a. Appear in, defend, and appeal an action on a claim brought against the association.
b. Employ or retain persons necessary to handle claims and perform other duties of the association.
c. Borrow funds necessary to effect the purposes of this chapter in accord with the plan of operation.
d. Sue or be sued.
e. Negotiate and become a party to contracts necessary to carry out the purposes of this chapter.
f. Perform such other acts necessary or proper to effectuate the purposes of this chapter.
3. The board of directors, in its discretion, may from time to time refund excess amounts to member insurers that are not needed for current or projected liabilities of a particular insolvency. The amount of each refund is equal to the net direct written premiums of the member insurer for the preceding calendar year divided by the net written premiums of all member insurers for the preceding calendar year, multiplied by the total amount to be refunded to all members. At the discretion of the board of directors, an assessment or refund of any member insurer in an amount not to exceed twenty-five dollars may be waived.
2000 Acts, ch 1035, §6; 2011 Acts, ch 70, §37; 2012 Acts, ch 1023, §157
Referred to in §518C.7, 518C.10