71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
 
NOTE:  Matter within  { +  braces and plus signs + } in an
amended section is new. Matter within  { -  braces and minus
signs - } is existing law to be omitted. New sections are within
 { +  braces and plus signs + } .
 
LC 2517
 
                         Senate Bill 608
 
Sponsored by COMMITTEE ON BUSINESS, LABOR, AND ECONOMIC
  DEVELOPMENT (at the request of Oregon Insurance Guaranty
  Association)
 
 
                             SUMMARY
 
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
 
  Modifies provisions for payment of claims under certain
insurance policies due to insolvency of insurer.
 
                        A BILL FOR AN ACT
Relating to insurers; amending ORS 734.360, 734.510, 734.630 and
  734.695.
Be It Enacted by the People of the State of Oregon:
  SECTION 1. ORS 734.510 is amended to read:
  734.510. As used in ORS 734.510 to 734.710, unless the context
requires otherwise:
  (1) 'Association' means the Oregon Insurance Guaranty
Association created by ORS 734.550.
  (2) 'Board' means the board of directors of the association.
  (3) 'Controlled insurer' means an insurer 70 percent or more of
whose stock is owned by a corporation, or by two or more
corporations that are under common ownership.
  (4)(a) 'Covered claim' means an unpaid claim, including a claim
for unearned premiums, that arises out of and is within the
coverage and limits of an insurance policy to which ORS 734.510
to 734.710 apply and which is in force at the time of the
occurrence giving rise to the unpaid claim, made by a person
insured under such policy or by a person suffering injury or
damage for which a person insured under such policy is legally
liable, if:
  (A) The insurer issuing the policy becomes an insolvent insurer
after September 9, 1971; and
  (B) The claimant or insured is a resident of this state at the
time of the occurrence giving rise to the unpaid claim, or the
property for which claim arises is permanently located in this
state.
  (b) 'Covered claim' does not include:
  (A) Any amount in excess of the applicable limits of liability
provided by an insurance policy to which ORS 734.510 to 734.710
apply;   { - nor - }
  (B) Any amount due any reinsurer, insurer, insurance pool or
underwriting association as subrogated recoveries or otherwise
 { - . - }  { + ; + }
 
 
   { +  (C) A claim filed with the guaranty fund after the final
date set by the court for the filing of claims against the
liquidator or receiver of an insolvent insurer; or
  (D) Any first party claim by an insured whose net worth exceeds
$10 million on December 31 of the year next preceding the date
the insurer becomes an insolvent insurer, provided that an
insured's net worth on such date is deemed to include the
aggregate net worth of the insured and all of its subsidiaries as
calculated on a consolidated basis. + }
  (5) 'Dividend' means any payment made to the stockholders of a
controlled insurer, which payment is directly related to
ownership of the stock.
  (6) 'Insolvent insurer' means a member insurer:
  (a) Authorized to transact insurance in this state either at
the time the policy was issued or at the time of the occurrence
giving rise to the unpaid claim;   { - and - }
  (b) Against which a final order of liquidation, with a finding
of insolvency, has been entered by a court of competent
jurisdiction in the insurer's domicile after September 9, 1971;
and
  (c) With respect to which no order, decree, or finding relating
to the insolvency of the insurer, whether preliminary or
temporary in nature or otherwise, has been issued by a court of
competent jurisdiction or by any insurance commissioner,
insurance department or similar official or body prior to
September 9, 1971, or which was in fact insolvent prior to
September 9, 1971, and such de facto insolvency was or should
have been known by the chief insurance regulatory official of its
domicile.
  (7) 'Member insurer' means an insurer, including a reciprocal
insurer, authorized to transact insurance in this state that
writes any kind of insurance to which ORS 734.510 to 734.710
apply.
  (8) 'Net direct written premiums' means direct gross premiums
written in this state on insurance policies to which ORS 734.510
to 734.710 apply, less return premiums thereon and dividends paid
or credited to policyholders on such direct business. 'Net direct
written premiums' does not include premiums on contracts between
insurers or reinsurers.
  (9) 'Plan' means the plan of operation of the association
established pursuant to ORS 734.590.
  SECTION 2. ORS 734.695 is amended to read:
  734.695.  { + (1) + } The insured of an insolvent insurer
 { - shall - }   { + may + } not be personally liable for amounts
due any reinsurer, insurer, insurance pool or underwriting
association as subrogation recoveries or otherwise up to the
applicable limits of liability provided by the insurance policy
issued by the insolvent insurer.
   { +  (2) The Oregon Insurance Guaranty Association may recover
from the following persons the amount of any covered claim paid
on behalf of such person under ORS 734.510 to 734.710:
  (a) Any insured whose net worth exceeds $10 million on December
31 of the year next preceding the date the insurer becomes an
insolvent insurer and whose liability obligations to other
persons are satisfied in whole or in part by payments made under
ORS 734.510 to 734.710; and
  (b) Any person who is an affiliate of the insolvent insurer and
whose liability obligations to other persons are satisfied in
whole or in part by payments made under ORS 734.510 to
734.710. + }
  SECTION 3. ORS 734.360 is amended to read:
  734.360. Except as provided in ORS 734.310 for secured claims,
the debts and claims to be paid in full in delinquency
proceedings prior to the payment of any other debts or claims,
and the order of payment, shall be:
 
  (1) Expenses of administration of the delinquency proceedings
 { +  and expenses of the Oregon Insurance Guaranty Association
or similar organization in another state handling claims in
accordance with ORS 734.510 to 734.710 + };
    { - (2) If the insurer is domiciled in this state,
compensation or wages actually owing to salaried employees other
than officers of the insurer, for services rendered within three
months prior to the commencement of the delinquency proceeding,
but not exceeding $2,000 for each such employee; - }  { +
  (2) Covered claims as defined in ORS 734.510 (4)(a) and (b) and
as provided in ORS 734.570; + }
  (3) Taxes legally due and owing by the insurer   { - to this
state or - }  to the United States;   { - and - }
    { - (4) Debts or claims, including special deposit claims,
owing to any person, including this state, who by the laws of
this state is entitled to priority. - }  { +
  (4) If the insurer is domiciled in this state, compensation or
wages actually owing to salaried employees other than officers of
the insurer, for services rendered within three months prior to
the commencement of the delinquency proceeding, but not exceeding
$2,000 for each such employee;
  (5) Taxes and other debts legally due and owing by the insurer
to this state; and
  (6) Debts or claims, including special deposit claims, owing to
any person, including this state, that by the laws of this state
is entitled to priority. + }
  SECTION 4. ORS 734.630 is amended to read:
  734.630. (1) Any person who recovers on a covered claim under
ORS 734.510 to 734.710 thereby assigns the rights of the person
under the insurance policy to the Oregon Insurance Guaranty
Association to the extent of such recovery. Every person who
seeks the protection of ORS 734.510 to 734.710 shall cooperate
with the association to the same extent such person would have
been required to cooperate with the insolvent insurer. The
association shall have no cause of action against the insureds of
an insolvent insurer for any sums paid, except for those causes
of action the insolvent insurer would have had if such sums had
been paid by the insolvent insurer. If an insolvent insurer
operates on the assessment plan, the payment of claims by the
association does not reduce the liability of the insured to the
receiver for unpaid assessments.
  (2) Periodically the association shall file with the receiver
statements of the covered claims paid by the association and
estimates of anticipated claims against the association. Such
filings shall preserve the rights of the association against the
assets of the insolvent insurer.
  (3) The receiver shall be bound by settlements of covered
claims by the association or a similar organization in another
state. The court having jurisdiction shall grant such claims
priority  { + in accordance with ORS 734.360. + }   { - equal to
that to which the claimant would have been entitled in the
absence of ORS 734.510 to 734.710 against the assets of the
insolvent insurer.  The expenses of the association or similar
organization in another state in handling claims shall be
accorded the same priority as the expenses of administration of
the delinquency proceedings. - }
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