Kentucky Statutes 304.36-080 – Powers and duties of association
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(1) The association shall:
(a) 1. Be obligated to the extent of the covered claims existing:
a. Prior to the order of liquidation and arising within thirty (30) days after the order of liquidation;
b. Before the policy expiration date if less than thirty (30) days after the order of liquidation; or
c. Before the insured replaces the policy or on request, effects cancellation, if the insured does so within thirty (30) days of the order of liquidation.
2. The obligation shall be satisfied by paying to the claimant an amount as follows:
a. The full amount of a covered claim for benefits arising from a workers’ compensation insurance policy purchased to satisfy the requirements of KRS § 342.340;
b. An amount not exceeding ten thousand dollars ($10,000) per policy for a covered claim for the return of unearned premium;
c. An amount not exceeding five hundred thousand dollars ($500,000) per insured event for all covered claims resulting from that event for benefits arising from a cybersecurity insurance policy; or
d. An amount not exceeding three hundred thousand dollars
($300,000) per claimant for all other covered claims;
(b) 1. Not be obligated to pay a claimant an amount in excess of the obligation of the insolvent insurer under the policy or coverage from which the claim arises.
2. Notwithstanding any other provisions of this subtitle, a covered claim shall not include:
a. A claim filed with the association after the earlier of:
i. Twelve (12) months after the date of the order of liquidation;
or
ii. The final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer; or
b. Any claim filed with the association or a liquidator for protection afforded under the insured’s policy for incurred but not reported losses.
3. Any obligation of the association to defend an insured shall cease upon the association’s payment or tender of an amount equal to the lesser of the association’s covered claim obligation limit or the applicable policy limit.
4. Notwithstanding any other provisions of this subtitle, except in the case of a claim for benefits under workers’ compensation coverage, any
obligation of the association to any and all persons shall cease when ten million dollars ($10,000,000) shall have been paid in the aggregate by the association and any one (1) or more associations similar to the association of any other state or states or any property and casualty security fund that obtains contributions from insurers on a preinsolvency basis to or on behalf of any insured and its affiliates on covered claims or allowed claims arising under the policy or policies of any one (1) insolvent insurer.
5. For purposes of this paragraph, the term “affiliates” means any person who directly or indirectly, through one (1) or more intermediaries, controls, is controlled by, or is under common control with another person.
6. If the claimant has a covered claim or allowed claim against the association or any associations similar to the association or any property and casualty insurance security fund of another state, under the policy or policies of any one (1) insolvent insurer, the association may establish a plan to allocate amounts payable by the association in a manner as the association in its discretion deems equitable;
(c) 1. Be deemed the insurer to the extent of its obligation on the covered claims and to that extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent, including, but not limited to, the right to pursue and retain salvage and subrogation recoverable on paid covered claim obligations.
2. In the case of a covered claim involving obligations assumed by an assuming insurer from a ceding insurer, the association shall:
a. Have the right to recover a deposit, bond, or other assets that may have been required to be posted by the ceding insurer to the extent of covered claim payments; and
b. Be subrogated to any rights the ceding insurer’s policyholders may have against the ceding insurer;
(d) 1. Assess insurers amounts necessary to pay the obligations of the association under paragraph (a) of this subsection subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, the cost of examinations under KRS § 304.36-130, and other expenses authorized by this subtitle.
2. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment.
3. Each member insurer shall be notified of the assessment not later than thirty (30) days before it is due.
4. No member insurer may be assessed in any year an amount greater than two percent (2%) of that member insurer’s net direct written premiums for the calendar year preceding the assessment.
5. If the maximum assessment, together with the other assets of the association, does not provide in any one (1) year an amount sufficient to make all necessary payments, the funds available shall be prorated and the unpaid portion shall be paid as soon thereafter as funds become available.
6. The association shall pay claims in any order which it may deem reasonable including the payment of claims as such are received from the claimants or in groups or categories of claims.
7. The association may exempt or defer, in whole or in part, the assessment of any member insurer, if:
a. The assessment would cause the member insurer’s financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance; and
b. During the period of deferment, no dividends are paid by the member insurer to shareholders or policyholders.
8. Deferred assessments shall be paid when the payments will not reduce capital and surplus below required minimums, and the payments shall be refunded to those companies receiving larger assessments by virtue of the deferment or at the election of any such company, credited against future assessments.
9. Each member insurer serving 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 such member insurer;
(e) Investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association’s obligation and deny all other claims;
(f) Notify such persons as the commissioner directs under KRS § 304.36-100(2)(a); (g) 1. Handle claims through its employees or through one (1) or more
insurers or other persons designated as servicing facilities.
2. Designation of a servicing facility is subject to the approval of the commissioner, but the designation may be declined by a member insurer;
(h) Reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association; and
(i) Pay the other expenses of the association authorized by this subtitle. (2) The association may:
(a) Appear in, defend, and appeal any action on a claim brought against the association;
(b) Employ or retain such persons as are necessary to handle claims and perform
other duties of the association;
(c) Borrow funds necessary to effect the purposes of this subtitle in accord with the plan of operation;
(d) Sue or be sued;
(e) Negotiate and become a party to such contracts as are necessary to carry out the purpose of this subtitle;
(f) Perform such other acts as are necessary or proper to effectuate the purpose of this subtitle; and
(g) Refund to the member insurers in proportion to the contribution of each member insurer to the association that amount by which the assets of the association exceed the liabilities, if, at the end of any calendar year, the board of directors finds that the assets of the association exceed the liabilities of the association as estimated by the board of directors for the coming year.
Effective: June 29, 2023
History: Amended 2023 Ky. Acts ch. 19, sec. 3, effective June 29, 2023. — Amended
2010 Ky. Acts ch. 24, sec. 1466, effective July 15, 2010. — Amended 1998 Ky. Acts ch. 99, sec. 5, effective July 15, 1998. — Amended 1990 Ky. Acts ch. 268, sec. 1, effective July 13, 1990. — Amended 1986 Ky. Acts ch. 437, sec. 24, effective July
15, 1986. — Amended 1984 Ky. Acts ch. 322, sec. 15, effective July 13, 1984. — Created 1972 Ky. Acts ch. 137, sec. 8, effective June 16, 1972.
(a) 1. Be obligated to the extent of the covered claims existing:
Terms Used In Kentucky Statutes 304.36-080
- Action: includes all proceedings in any court of this state. See Kentucky Statutes 446.010
- any other state: includes any state, territory, outlying possession, the District of Columbia, and any foreign government or country. See Kentucky Statutes 446.010
- Appeal: A request made after a trial, asking another court (usually the court of appeals) to decide whether the trial was conducted properly. To make such a request is "to appeal" or "to take an appeal." One who appeals is called the appellant.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Association: means the Kentucky Insurance Guaranty Association created under
KRS §. See Kentucky Statutes 304.36-050 - Claimant: means any insured making a first-party claim or any person instituting a liability claim, except that no person who is an affiliate of the insolvent insurer may be a claimant. See Kentucky Statutes 304.36-050
- Company: may extend and be applied to any corporation, company, person, partnership, joint stock company, or association. See Kentucky Statutes 446.010
- Control: means the possession, direct or indirect, of power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a loan contract or a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. See Kentucky Statutes 304.36-050
- Directors: when applied to corporations, includes managers or trustees. See Kentucky Statutes 446.010
- Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
- Insolvent insurer: means an insurer:
(a) That was a member insurer at the time the policy was issued. See Kentucky Statutes 304.36-050 - Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Member insurer: means any person who:
1. See Kentucky Statutes 304.36-050 - Net direct written premiums: means direct gross premiums written, or in the case of an insurer organized under KRS Chapter 299, assessments, membership fees, and policy fees levied and collected, in this state, less returns thereon and dividends paid or credited to policyholders on such direct business. See Kentucky Statutes 304.36-050
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- State: when applied to a part of the United States, includes territories, outlying possessions, and the District of Columbia. See Kentucky Statutes 446.010
- Year: means calendar year. See Kentucky Statutes 446.010
a. Prior to the order of liquidation and arising within thirty (30) days after the order of liquidation;
b. Before the policy expiration date if less than thirty (30) days after the order of liquidation; or
c. Before the insured replaces the policy or on request, effects cancellation, if the insured does so within thirty (30) days of the order of liquidation.
2. The obligation shall be satisfied by paying to the claimant an amount as follows:
a. The full amount of a covered claim for benefits arising from a workers’ compensation insurance policy purchased to satisfy the requirements of KRS § 342.340;
b. An amount not exceeding ten thousand dollars ($10,000) per policy for a covered claim for the return of unearned premium;
c. An amount not exceeding five hundred thousand dollars ($500,000) per insured event for all covered claims resulting from that event for benefits arising from a cybersecurity insurance policy; or
d. An amount not exceeding three hundred thousand dollars
($300,000) per claimant for all other covered claims;
(b) 1. Not be obligated to pay a claimant an amount in excess of the obligation of the insolvent insurer under the policy or coverage from which the claim arises.
2. Notwithstanding any other provisions of this subtitle, a covered claim shall not include:
a. A claim filed with the association after the earlier of:
i. Twelve (12) months after the date of the order of liquidation;
or
ii. The final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer; or
b. Any claim filed with the association or a liquidator for protection afforded under the insured’s policy for incurred but not reported losses.
3. Any obligation of the association to defend an insured shall cease upon the association’s payment or tender of an amount equal to the lesser of the association’s covered claim obligation limit or the applicable policy limit.
4. Notwithstanding any other provisions of this subtitle, except in the case of a claim for benefits under workers’ compensation coverage, any
obligation of the association to any and all persons shall cease when ten million dollars ($10,000,000) shall have been paid in the aggregate by the association and any one (1) or more associations similar to the association of any other state or states or any property and casualty security fund that obtains contributions from insurers on a preinsolvency basis to or on behalf of any insured and its affiliates on covered claims or allowed claims arising under the policy or policies of any one (1) insolvent insurer.
5. For purposes of this paragraph, the term “affiliates” means any person who directly or indirectly, through one (1) or more intermediaries, controls, is controlled by, or is under common control with another person.
6. If the claimant has a covered claim or allowed claim against the association or any associations similar to the association or any property and casualty insurance security fund of another state, under the policy or policies of any one (1) insolvent insurer, the association may establish a plan to allocate amounts payable by the association in a manner as the association in its discretion deems equitable;
(c) 1. Be deemed the insurer to the extent of its obligation on the covered claims and to that extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent, including, but not limited to, the right to pursue and retain salvage and subrogation recoverable on paid covered claim obligations.
2. In the case of a covered claim involving obligations assumed by an assuming insurer from a ceding insurer, the association shall:
a. Have the right to recover a deposit, bond, or other assets that may have been required to be posted by the ceding insurer to the extent of covered claim payments; and
b. Be subrogated to any rights the ceding insurer’s policyholders may have against the ceding insurer;
(d) 1. Assess insurers amounts necessary to pay the obligations of the association under paragraph (a) of this subsection subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, the cost of examinations under KRS § 304.36-130, and other expenses authorized by this subtitle.
2. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment.
3. Each member insurer shall be notified of the assessment not later than thirty (30) days before it is due.
4. No member insurer may be assessed in any year an amount greater than two percent (2%) of that member insurer’s net direct written premiums for the calendar year preceding the assessment.
5. If the maximum assessment, together with the other assets of the association, does not provide in any one (1) year an amount sufficient to make all necessary payments, the funds available shall be prorated and the unpaid portion shall be paid as soon thereafter as funds become available.
6. The association shall pay claims in any order which it may deem reasonable including the payment of claims as such are received from the claimants or in groups or categories of claims.
7. The association may exempt or defer, in whole or in part, the assessment of any member insurer, if:
a. The assessment would cause the member insurer’s financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance; and
b. During the period of deferment, no dividends are paid by the member insurer to shareholders or policyholders.
8. Deferred assessments shall be paid when the payments will not reduce capital and surplus below required minimums, and the payments shall be refunded to those companies receiving larger assessments by virtue of the deferment or at the election of any such company, credited against future assessments.
9. Each member insurer serving 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 such member insurer;
(e) Investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association’s obligation and deny all other claims;
(f) Notify such persons as the commissioner directs under KRS § 304.36-100(2)(a); (g) 1. Handle claims through its employees or through one (1) or more
insurers or other persons designated as servicing facilities.
2. Designation of a servicing facility is subject to the approval of the commissioner, but the designation may be declined by a member insurer;
(h) Reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association; and
(i) Pay the other expenses of the association authorized by this subtitle. (2) The association may:
(a) Appear in, defend, and appeal any action on a claim brought against the association;
(b) Employ or retain such persons as are necessary to handle claims and perform
other duties of the association;
(c) Borrow funds necessary to effect the purposes of this subtitle in accord with the plan of operation;
(d) Sue or be sued;
(e) Negotiate and become a party to such contracts as are necessary to carry out the purpose of this subtitle;
(f) Perform such other acts as are necessary or proper to effectuate the purpose of this subtitle; and
(g) Refund to the member insurers in proportion to the contribution of each member insurer to the association that amount by which the assets of the association exceed the liabilities, if, at the end of any calendar year, the board of directors finds that the assets of the association exceed the liabilities of the association as estimated by the board of directors for the coming year.
Effective: June 29, 2023
History: Amended 2023 Ky. Acts ch. 19, sec. 3, effective June 29, 2023. — Amended
2010 Ky. Acts ch. 24, sec. 1466, effective July 15, 2010. — Amended 1998 Ky. Acts ch. 99, sec. 5, effective July 15, 1998. — Amended 1990 Ky. Acts ch. 268, sec. 1, effective July 13, 1990. — Amended 1986 Ky. Acts ch. 437, sec. 24, effective July
15, 1986. — Amended 1984 Ky. Acts ch. 322, sec. 15, effective July 13, 1984. — Created 1972 Ky. Acts ch. 137, sec. 8, effective June 16, 1972.