17B:32A-12. Liabilities of impaired, insolvent insurers

12. a. Nothing in this act shall be construed to reduce the liability for unpaid assessments of the insureds of an impaired or insolvent insurer operating under a plan with assessment liability.

b. Records shall be kept of all negotiations and meetings in which the association or its representatives are involved to discuss the activities of the association in carrying out its powers and duties under section 7 of this act. Records of those negotiations or meetings shall be made public only upon the termination of a liquidation, rehabilitation, conservation or receivership proceeding involving an impaired or insolvent insurer, upon the termination of the impairment or insolvency of the insurer, or upon the order of a court of competent jurisdiction.

c. For the purpose of carrying out its obligations under this act, the association shall be deemed to be a creditor of an impaired or insolvent insurer to the extent of assets attributable to covered policies or contracts reduced by any amounts to which the association is entitled as subrogee pursuant to subsection m. of section 7 of this act. Assets of an impaired or insolvent insurer attributable to covered policies or contracts shall be used to continue all covered policies or contracts and pay all contractual obligations of the impaired or insolvent insurer as required by this act. For purposes of this subsection, assets attributable to covered policies or contracts are that proportion of the assets which the reserves that should have been established for such policies or contracts bears to the reserves that should have been established for all policies or contracts of insurance written by the impaired or insolvent insurer.

d. (1) Prior to the termination of any receivership, liquidation, rehabilitation or conservation proceeding, the court may take into consideration the contributions of the respective parties, including the association, the shareholders, and policyowners of an insolvent insurer, and any other party with a bona fide interest in making an equitable distribution of the ownership rights of that insolvent insurer. In making such a determination, consideration shall be given to the welfare of the policyholders and to the reasonable requirements of a continuing or successor insurer.

(2) No dividend or other distribution to stockholders or policyholders of an impaired or insolvent insurer shall be made until and unless the total amount of valid claims of the association for funds expended in carrying out its powers and duties under section 7 of this act with respect to that insurer have been recovered by the association.

e. (1) If an order for liquidation or rehabilitation of an insurer domiciled in this State has been entered, the receiver appointed under that order shall have a right to recover on behalf of the insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the insurer on its capital stock, made at any time during the five years preceding the petition for liquidation or rehabilitation subject to the limitations of paragraphs (2) through (4) of this subsection.

(2) No such distribution shall be recoverable if the insurer shows that the distribution was lawful and reasonable when paid, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.

(3) Any person who was an affiliate that controlled the insurer at the time the distributions were paid shall be liable up to the amount of distributions he received. Any person who was an affiliate that controlled the insurer at the time the distributions were declared, shall be liable up to the amount of distributions he would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they shall be jointly and severally liable.

(4) The maximum amount recoverable under this subsection shall be the amount in excess of all other available assets of the insolvent insurer needed to pay the contractual obligations of the insolvent insurer.

(5) If any person liable under paragraph (3) of this subsection is insolvent, all its affiliates that controlled it at the time the distribution was paid shall be jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.

L.1991,c.208,s.12.