4. Covered claim. "Covered claim" means an unpaid claim, including one for unearned premiums but excluding one for punitive damages, arising under and within the coverage and applicable limits of a policy of a kind of insurance referred to in section 4433 to which this subchapter applies issued by an insurer that becomes an insolvent insurer after May 9, 1970, and where:

A. The claimant or insured is a resident of this State at the time of the insured event; or

B. The property from which the claim arises is permanently located in this State.

"Covered claim" does not include any amount due any insurer, reinsurer, affiliate, insurance pool or underwriting association, as subrogation recoveries or otherwise, except that any payment made to the workers' compensation residual market pool pursuant to section 4438, subsection 1, paragraph A-1 must be included as a covered claim. "Covered claim" does not include any first- party claims by an insured whose net worth exceeds $10,000,000 on December 31st of the year prior to the year in which the member insurer becomes an insolvent insurer.__An insured's net worth on that date is deemed to include the aggregate net worth of the insured and all its subsidiaries as calculated on a consolidated basis.

Sec. 6. 24-A MRSA §4435, sub-§5, as amended by PL 1995, c. 289, §13, is further amended to read:

5. Insolvent insurer. "Insolvent insurer" means an a member insurer:

A. Authorized to transact insurance in this State either at the time the policy was issued or when the insured event occurred; and

B. Determined to be insolvent Against whom a final order of liquidation has been entered with a finding of insolvency by a court of competent jurisdiction.

Effective July 1, 1995, the workers' compensation residual market pool, as created by the Bureau of Insurance Rules, Chapter 440, is deemed an insolvent insurer.

Sec. 7. 24-A MRSA §4435, sub-§9-A is enacted to read:

9-A.__Person.__"Person" means an individual or legal entity, including a governmental entity.

Sec. 8. 24-A MRSA §4438, sub-§1, ¶A, as amended by PL 1989, c. 751, §4, is further amended to read:

A. Be obligated to pay covered claims existing prior to the determination of the insolvency or arising within 30 days after the determination of insolvency, or before the policy expiration date if less than 30 days after the determination of insolvency, or before the insured replaces the policy or causes its cancellation, if within 30 days of the determination. The obligation shall must be satisfied by paying to the claimant an amount as follows:

(1) Except as provided in this paragraph, the full amount of a covered claim for benefits or unearned premium under workers' compensation insurance coverage;

(2) An amount not exceeding $100,000 $10,000 per policy for a covered claim for the return of an unearned premium; or

(3) An amount not exceeding $300,000 per claim for all other covered claims.

In no event is the association 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. The association shall pay only that amount of unearned premium in excess of $50. Notwithstanding any other provisions of this subchapter, a covered claim shall does not include any claim filed with the association after the earlier of 18 months after the date of the order of liquidation or the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer;

Sec. 9. 24-A MRSA §4438, sub-§1, ¶A-1, as enacted by PL 1995, c. 289, §14, is amended to read:

A-1. Pay to the workers' compensation residual market pool the sum of $1,538,039 on or before February 15th, May 15th, August 15th and November 15th of each year beginning August 15, 1996 and continuing for 40 consecutive calendar quarters. Each payment made under this paragraph must be treated as the payment of a covered claim except that the association may not seek reimbursement or recoupment from any source other than by assessments to member insurers. Member insurers are allowed to recognize recoup assessments made pursuant to this paragraph in rates and premiums as provided in section 4447;

Sec. 10. 24-A MRSA §4438, sub-§2, ¶C, as enacted by PL 1969, c. 561, is amended to read:

C. Sue or be sued and may intervene as a party before any court in this State that has jurisdiction over an insolvent insurer as defined by this subchapter;

Sec. 11. 24-A MRSA §4441, sub-§2, ¶A, as enacted by PL 1969, c. 561, is amended to read:

A. Require that the association notify the insureds of the insolvent insurer and any other interested parties of the determination order of liquidation with a finding of insolvency and of their rights under this subchapter. Such notifications shall must be by mail at their last known addresses, where available, but if required information for notification by mail is not available, notice by publication in a newspaper of general circulation in this State shall be is sufficient.

Sec. 12. 24-A MRSA §4447, as enacted by PL 1969, c. 561, is repealed and the following enacted in its place:

§4447.__Premium tax offset

1.__Premium tax offset permitted.__Each member insurer paying an assessment under section 4440 may offset 100% of the amount of such assessment against its premium tax liability to the State.__ This offset must be taken over a period of the 5 successive tax years following the year of payment of the assessment at the rate of 20% per year of the assessment paid to the association.__If the offset is less than 20% in any year, any unused balance may be carried over to any succeeding year until such time as the offset is fully used.__Each member insurer that has offset assessments paid to the association from its premium tax liability to the State shall pay to the State 100% of any sums that are acquired by refund from the association pursuant to section 4438, subsection 1, paragraph F.__The association shall notify the superintendent that such refunds have been made.

2.__Insurer may transfer offset to affiliate.__A member insurer may transfer any offset provided under this section to an affiliate.

Sec. 13. Application. This Act applies to the obligations of the Maine Insurance Guaranty Association, established pursuant to the Maine Revised Statutes, Title 24-A, section 4436, under policies of insolvent insurers as these obligations exist on or after the effective date of this Act.

SUMMARY

This bill makes the following changes to the Maine Insurance Guaranty Association Act.

1. It exempts additional types of insurance from being subject to the Act.

2. It excludes first-party claims by an insured whose net worth exceeds $10,000,000.

3. It amends the definition of "insolvent insurer" to clarify that it applies to that group of insurers defined as "member insurers," and amends the definition to mean a member insurer against whom a final order of liquidation has been entered.

4. It enacts a definition of "person" to mean any individual or legal entity, including a governmental entity.

5. It sets a $10,000 cap on a claim for the return of an unearned premium.

6. It provides that claims resulting from an insolvency must be filed no later than 18 months after the insolvency.

7. It provides that the Maine Insurance Guaranty Association may intervene as a party in a case involving an insolvent insurer.

8. It provides a premium tax offset for an insurer that pays an assessment pursuant to the Act.