A. Whenever it appears to the superintendent that any person has committed a violation of Chapter 59A, Article 37 NMSA 1978 which so impairs the financial condition of a domestic insurer as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders or the public, then the superintendent may proceed as provided in Chapter 59A, Article 41 NMSA 1978, to take possession of the property of such domestic insurer and to conduct the business thereof.

B. If an order for liquidation or rehabilitation of a domestic insurer has been entered for any reason, the receiver appointed under such order shall have a right to recover on behalf of the insurer:

(1) from any parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions, other than distributions of shares of the same class of stock, paid by the insurer on its capital stock;

(2) any payment in the form of a bonus, termination settlement or extraordinary lump-sum salary adjustment made by the insurer or its subsidiary to a director, officer or employee; or

(3) any payment on a surplus note entered into pursuant to Section 59A-34-23 NMSA 1978, where the distribution or payment pursuant to Paragraph (1), (2) or (3) of this subsection is made at any time during the two years preceding the petition for liquidation, conservation or rehabilitation, as the case may be, subject to the limitations of Subsections C, D, and E of this section.

C. No such distribution shall be recoverable if the parent or affiliate shows that when paid, the distribution was lawful and reasonable, 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.

D. Any person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate at the time such distributions were paid shall be liable up to the amount of distributions or payments under Subsection B of this section which the person received. Any person who otherwise 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.

E. The maximum amount recoverable under this section shall be the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty associations.

F. To the extent that any person liable under Subsection D of this section is insolvent or otherwise fails to pay claims due from it pursuant to this section, its parent corporation or holding company or person who otherwise controlled it at the time the distribution was paid shall be liable for any resulting deficiency in the amount recovered from its subsidiary.

History: Laws 1984, ch. 127, § 642; 1993, ch. 320, § 88.

The 1993 amendment, effective June 18, 1993, added the subsection "A" designation; in Subsection A, substituted "Chapter 59A, Article 37 NMSA 1978" for "this article" and substituted "Chapter 59A, Article 41 NMSA" for "Article 41 of the Insurance Code"; and added Subsections B through F.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 43 Am. Jur. 2d Insurance § 128.

44 C.J.S. Insurance § 200 et seq.