44-4809. Director's orders; supervision proceedings; hearings; violation; civil penalty; court orders.

(1) Whenever the director has reasonable cause to believe and determines, after a hearing held under subsection (5) of this section, that any domestic insurer has committed or engaged in or is about to commit or engage in any act, practice, or transaction that would subject it to delinquency proceedings under the Nebraska Insurers Supervision, Rehabilitation, and Liquidation Act, he or she may make and serve upon the insurer and any other persons involved such orders as are reasonably necessary to correct, eliminate, or remedy such conduct, condition, or ground.

(2)(a) Whenever the director has reasonable cause to believe and determines, upon examination of any domestic insurer or at any other time, that (i) the insurer's condition renders the continuance of its business hazardous to the public or to its insureds, (ii) the insurer has or appears to have exceeded its powers granted under its certificate of authority and applicable law, (iii) the insurer has failed to comply with the applicable provisions of the insurance laws of this state, (iv) the insurer's business is being conducted fraudulently, or (v) the insurer gives its consent, the director shall by order notify the insurer of his or her determination and furnish to the insurer a written list of the requirements to abate the determination.

(b) For purposes of subdivision (2)(a)(ii) of this section, an insurer has exceeded its powers if it:

(i) Has refused to permit examination of its books, papers, accounts, records, or affairs by the director or his or her deputies, employees, or examiners;

(ii) Has unlawfully removed from this state books, papers, accounts, or records necessary for an examination of the insurer;

(iii) Has failed to promptly comply with the applicable financial reporting statutes or rules and departmental requests relating thereto;

(iv) Has neglected or refused 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;

(v) Has continued doing business after its license or certificate of authority has been revoked or suspended by the director;

(vi) By contract or otherwise, has unlawfully, in violation of an order of the director, or without first having obtained written approval of the director if approval is required by law:

(A) Totally reinsured its entire outstanding business; or

(B) Merged or consolidated substantially its entire property or business with another insurer;

(vii) Has engaged in any transaction in which it is not authorized to engage under the laws of this state; or

(viii) Has refused to comply with a lawful order of the director.

(3) If the director makes a determination to supervise an insurer subject to an order under subsection (1) or (2) of this section, he or she shall notify the insurer that it is under the supervision of the director. During the period of supervision, the director may appoint a supervisor to supervise such insurer. The order appointing a supervisor shall direct the supervisor to enforce orders issued under subsection (1) or (2) of this section and may also require that the insurer not do any of the following things during the period of supervision without the prior approval of the director or the supervisor:

(a) Dispose of, convey, or encumber any of its assets or its business in force;

(b) Withdraw any funds from any of its bank accounts;

(c) Lend any of its funds;

(d) Invest any of its funds;

(e) Transfer any of its property;

(f) Incur any debt, obligation, or liability;

(g) Merge or consolidate with another company;

(h) Enter into any new reinsurance contract or treaty;

(i) Write or renew any insurance business;

(j) Terminate, surrender, forfeit, convert, or lapse any insurance policy, certificate, or contract except for nonpayment of premiums due;

(k) Release, pay, or refund premium deposits, accrued cash or loan values, unearned premiums, or other reserves on any insurance policy, certificate, or contract;

(l) Make any material change in management; or

(m) Increase salaries and benefits of officers or directors or make any preferential payment of bonuses, dividends, or other payments deemed preferential.

(4) Any insurer subject to an order under this section shall comply with the lawful requirements of the director and, if placed under supervision, shall have sixty days from the date the supervision order is served within which to comply with the requirements of the director. In the event of such insurer's failure to comply within such period, the director may institute proceedings under section 44-4812 or 44-4817 to have a rehabilitator or liquidator appointed or may extend the period of supervision.

(5) A notice of hearing under subsection (1) or (2) of this section and any order issued pursuant to either subsection shall be served upon the insurer pursuant to the Administrative Procedure Act. The notice of hearing shall state the time and place of hearing and the conduct, condition, or ground upon which the director would base his or her order. Unless mutually agreed between the director and the insurer, the hearing shall occur not less than ten days nor more than thirty days after notice is served and shall be either in the offices of the department or in some other place convenient to the parties to be designated by the director. Such hearings and any notices, orders, correspondence, records, or reports relating thereto shall be considered public unless the director deems it to be in the best interests of the insurer, its insureds or creditors, or the public that such hearings shall be held privately and such notices, orders, correspondence, records, or reports shall be considered confidential.

(6)(a) Any insurer subject to an order under subsection (2) of this section may request a hearing to review the order, but the request for a hearing shall not stay the effect of the order.

(b) If the director issues an order under subsection (2) of this section, the insurer may, at any time, waive a director's hearing and apply for immediate judicial relief by means of any remedy afforded by law without first exhausting administrative remedies. Subsequent to a hearing, any party to the proceedings whose interests are substantially affected shall be entitled to judicial review of any order issued by the director.

(c) If the director issues an order under subsection (2) of this section and subsequently determines that a rehabilitation or liquidation is appropriate, the director may at any time institute such proceedings under section 44-4812 or 44-4817.

(7) During the period of supervision, the insurer may request the director to review an action taken or proposed to be taken by the supervisor, specifying why the action complained of is believed not to be in the best interest of the insurer.

(8) If any person has violated any supervision order issued under this section which as to him or her was then still in effect, he or she shall be liable to pay a civil penalty imposed by the district court of Lancaster County not to exceed ten thousand dollars.

(9) The director may apply for and the court may grant such restraining orders, preliminary and permanent injunctions, and other orders as may be deemed necessary and proper to enforce a supervision order.

(10) In the event that any person subject to the Nebraska Insurers Supervision, Rehabilitation, and Liquidation Act, including those persons described in subsection (1) of section 44-4806, knowingly violates any valid order of the director issued under this section and, as a result of such violation, the net worth of the insurer is reduced or the insurer suffers loss it would not otherwise have suffered, such person shall become personally liable to the insurer for the amount of any such reduction or loss. The director or supervisor may bring an action on behalf of the insurer in the district court of Lancaster County to recover the amount of the reduction or loss together with any costs.

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