17B:32-41. Petition for authority to rehabilitate insurer

11. The commissioner may petition the Superior Court for an order authorizing him to rehabilitate a domestic insurer or an alien insurer domiciled in this State on any one or more of the following grounds:

a. The insurer is in such condition that the further transaction of business would be hazardous financially to its policyholders, creditors or the public.

b. There is reasonable cause to believe that there has been embezzlement from the insurer, wrongful sequestration or diversion of the insurer's assets, forgery or fraud affecting the insurer, or other illegal conduct in, by, or with respect to, the insurer that if established would endanger assets in an amount threatening the solvency of the insurer.

c. The insurer has failed to remove any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, employee or other person, if the person has been found after notice and hearing by the commissioner to be dishonest or untrustworthy in a way affecting the insurer's business.

d. Control of the insurer, whether by stock ownership or otherwise, and whether direct or indirect, is in a person or persons found after notice and hearing to be untrustworthy.

e. Any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, director or trustee, employee or other person, has refused to be examined under oath by the commissioner concerning its affairs, whether in this State or elsewhere; and after reasonable notice of that fact, the insurer has failed promptly and effectively to terminate the employment and status of the person and all his influence on management.

f. After demand by the commissioner under chapter 21 of Title 17B of the New Jersey Statutes or any other law governing the examination of insurers, or under this act, the insurer has failed to promptly make available for examination any of its own property, books, accounts, documents or other records, or those of any subsidiary or related company within the control of the insurer, or those of any person having executive authority in the insurer so far as they pertain to the insurer.

g. Without first obtaining the written consent of the commissioner, the insurer has transferred, or attempted to transfer, in a manner contrary to section 2 of P.L.1970, c.22 (C.17:27A-2) or N.J.S.17B:18-64, substantially its entire property or business, or has entered into any transaction the effect of which is to merge, consolidate or reinsure substantially its entire property or business in or with the property or business of any other person.

h. The insurer or its property has been or is the subject of an application for the appointment of a receiver, trustee, custodian, conservator or sequestrator or similar fiduciary of the insurer or its property otherwise than as authorized under the insurance laws of this State, and such appointment has been made or is imminent, and such appointment might oust the courts of this State of jurisdiction or might prejudice orderly delinquency proceedings under this act.

i. Within the previous five years the insurer has willfully violated its charter or articles of incorporation, its bylaws, any insurance law of this State, or any valid order of the commissioner.

j. The insurer has failed to pay, within 60 days after the due date, any obligation to any state or any subdivision thereof or any judgment entered in any state, if the court in which such judgment was entered had jurisdiction over such subject matter, except that such nonpayment shall not be a ground until 60 days after any good faith effort by the insurer to contest the obligation has been terminated, whether it is before the commissioner or in the courts, or the insurer has systematically attempted to compromise or renegotiate previously agreed settlements with its creditors on the ground that it is financially unable to pay its obligations in full.

k. The insurer has failed to file its annual report or other financial report required by law within the time allowed by law and, after written demand by the commissioner, has failed to give an adequate explanation immediately.

l. The board of directors or the holders of a majority of the shares entitled to vote, or a majority of those individuals entitled to the control of a mutual insurer as defined in N.J.S.17B:18-3, request or consent to rehabilitation under this act. For purposes of this subsection, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the insurer, whether through the ownership of voting securities, by contract other than 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. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10% or more of the voting securities of an insurer.

L.1992,c.65,s.11.