Insurance Guaranty Association Act
OHIO
INSURANCE GUARANTY ASSOCIATION ACT
Ohio Current through December 31, 2017
Section
3955.01 Definitions
3955.02 Short Title
3955.03 Purposes
3955.04 Liberal construction
3955.05 Excluded kinds of insurance
3955.06 Ohio insurance guaranty association created
3955.07 Board of directors; expenses
3955.08 Association powers and duties
3955.09 Plan of operation; requirements
3955.10 Powers and duties of superintendent of insurance
3955.11 Repealed
3955.12 Subrogation to rights of claimants; right to recover; settlements; reports
3955.13 Recovery by persons having covered claims
3955.14 Detection and prevention of insurer insolvencies
3955.15 Regulation by superintendent; annual report
3955.16 Exemption from fees and taxes
3955.17 Increased insurance premiums to recover association assessment not to be found excessive
3955.18 No liability of association or members
3955.19 Stay of proceedings or vacation of judgment to permit association defense
3955.20 Repealed
3955.21 Repealed
§ 3955.01 Definitions
As used in sections 3955.01 to 3955.19 of the Revised Code:
(A) "Account" means either of the two accounts created by division (B) of section 3955.06 of the Revised Code.
(B) "Affiliate" means a person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, an insolvent insurer on the thirty-first day of December of the year next preceding the date the insurer becomes an insolvent insurer.
(C) "Control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, 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, ten per cent or more of the voting securities of any other person. This presumption may be rebutted by a showing that control does not exist in fact.
(D) (1) "Covered claim" means an unpaid claim, including one for unearned premiums, which arises out of and is within the coverage of an insurance policy or policies to which sections 3955.01 to 3955.19 of the Revised Code apply, when issued by an insurer which becomes an insolvent insurer on or after September 4, 1970, and either of the following applies:
(a) The claimant or insured is a resident of this state at the time of the insured event provided that for the purpose of determining the place of residence of a claimant or insured that is an entity other than a natural person, the state in which its principal place of business is located at the time of the insured event shall be considered the residence of such claimant or insured.
(b) The claim is a first party claim for property damage to an insured's property that is permanently located in this state.
(2) "Covered claim" does not include any amount:
(a) In excess of ten thousand dollars on any unearned premium claim;
(b) In excess of three hundred thousand dollars on any claim. For the purposes of this division, all claims arising out of bodily injury or death to any one person shall constitute a single claim regardless of the number of insurance policies issued or the number of derivative claims made, including, but not limited to claims for loss of consortium, for injury to the relationship, for survivorship, or arising out of wrongful death.
(c) Due any reinsurer, insurer, insurance pool, or underwriting association through subrogation or otherwise; provided, that when such reinsurer, insurer, insurance pool, or underwriting association has paid a claim and thereby becomes subrogated to the amount of that claim, such subrogated claim may be asserted only against the receiver of the insolvent insurer and in no event against the insured of the insolvent insurer;
(d) Awarded as punitive or exemplary damages;
(e) Sought as a return of premium under any retrospective rating plan;
(f) Due any person that is an affiliate of the insolvent insurer;
(g) Due on any one claim that does not exceed one hundred dollars;
(h) Due under any policy of insurance issued to an insured whose net worth exceeds fifty million dollars on the last day of the insured’s fiscal year next preceding the date the insurer becomes an insolvent insurer. An insured’s net worth described in this division shall equal the aggregate of the net worth of the insured and all of the insured’s subsidiaries. The exclusion under this division shall not apply in any of the following situations:
(i) The insured has applied for or consented to the appointment of a receiver, trustee, or liquidator for all or a substantial part of the insured’s assets.
(ii) The insured has filed a voluntary petition in bankruptcy.
(iii) The insured has filed a petition or answer seeking a reorganization or arrangement with creditors or seeking to take advantage of any insolvency law.
(iv) A court of competent jurisdiction has entered an order, judgment, or decree concerning the insured’s bankruptcy, insolvency, or reorganization petition.
(E) "Insolvent insurer" means an insurer licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred, decreed by a court of competent jurisdiction of the state of such insurer's domicile to be insolvent, and ordered by or pursuant to the authority of such court to be liquidated.
(F) "Member insurer" means any person that writes any kind of insurance to which this chapter applies, as prescribed in section 3955.05 of the Revised Code, including the exchange of reciprocal or interinsurance contracts, and is licensed to transact any insurance in this state.
(G) "Net direct written premiums" means direct gross premiums written in this state on insurance policies to which sections 3955.01 to 3955.19 of the Revised Code apply, less return premiums thereon and dividends paid or credited to policyholders on such direct business, but does not include premiums on contracts between insurers or reinsurers.
(H) “Net worth” means the amount by which the value of all assets exceeds all liabilities and includes, but is not limited to, such accounting terms as owners equity, partnership equity, shareholders equity, net assets, and fund balances.
(I) "Person" has the same meaning as in section 1.59 of the Revised Code.
CREDIT(S) 133 v H 1121 (Eff 9-4-70); 136 v H 1267.Eff 5-21-76; 143 v H 105. Eff 10-26-89; 1994, H 89 (Eff. 6-29-94); (2006 S 279, eff. 3-30-07.
§ 3855.02 Short Title
Sections 3955.01 to 3955.19 of the Revised Code may be cited as the Ohio insurance guaranty association act.
CREDITS1989 H 105, eff. 10-26-89; 1970 H 1121)
§ 3955.03 Purposes
The purposes of sections 3955.01 to 3955.19 of the Revised Code are to provide a mechanism for the payment of covered claims under certain insurance policies, avoid excessive delay in payment and reduce financial loss to claimants or policyholders because of the insolvency of an insurer, assist in the detection and prevention of insurer insolvencies, and provide an association to assess the cost of such protection among insurers.
CREDIT(S)(1994 H 89, eff. 6-29-94; 1989 H 105, eff. 10-26-89; 1970 H 1121)
§ 3955.04 Liberal construction
Sections 3955.01 to 3955.19 of the Revised Code shall be liberally construed to effect the purpose stated under section 3955.03 of the Revised Code, which shall constitute an aid and guide to interpretation.
CREDIT(S) (1989 H 105, eff. 10-26-89; 1970 H 1121)
§ 3955.05 Excluded kinds of insurance
Sections 3955.01 to 3955.19 of the Revised Code apply to all kinds of direct insurance, except:
(A) Title insurance;
(B) Fidelity or surety bonds, or any other bonding obligations;
(C) Credit insurance, vendors' single interest insurance, collateral protection insurance, or any similar insurance protecting the interests of a creditor arising out of a creditor-debtor transaction;
(D) Mortgage guaranty, financial guaranty, residual value, or other forms of insurance offering protection against investment risks;
(E) Ocean marine insurance;
(F) Any insurance provided by or guaranteed by government, including, but not limited to, any department, board, office, commission, agency, institution, or other instrumentality or entity of any branch of state government, any political subdivision of this state, the United States or any agency of the United States, or any separate or joint governmental self-insurance or risk-pooling program, plan, or pool;
(G) Contracts of any corporation by which health services are to be provided to its subscribers;
(H) Life, annuity, health, or disability insurance, including sickness and accident insurance written pursuant to Chapter 3923. of the Revised Code;
(I) Fraternal benefit insurance;
(J) Mutual protective insurance of persons or property;
(K) Reciprocal or interinsurance contracts written pursuant to Chapter 3931. of the Revised Code for medical malpractice insurance if the reciprocal exchange or interinsurance exchange is not subject to the risk-based capital requirements in effect in the state of domicile of the reciprocal exchange or interinsurance exchange. As used in this division, "medical malpractice insurance" means insurance coverage against the legal liability of the insured and against loss, damage, or expense incident to a claim arising out of the death, disease, or injury of any person as the result of negligence or malpractice in rendering professional service by any licensed physician, podiatrist, or hospital, as those terms are defined in section 2305.113 of the Revised Code;
(L) Any political subdivision self-insurance program or joint political subdivision self-insurance pool established under Chapter 2744. of the Revised Code;
(M) Warranty or service contracts, or the insurance of those contracts;
(N) Any state university or college self-insurance program established under section 3345.202 of the Revised Code;
(O) Any transaction, or combination of transactions, between a person, including affiliates of such person, and an insurer, including affiliates of such insurer, that involves the transfer of investment or credit risk unaccompanied by a transfer of insurance risk;
(P) Credit union share guaranty insurance issued pursuant to Chapter 1761. of the Revised Code;
(Q) Insurance issued by risk retention groups as defined in Chapter 3960. of the Revised Code.
(R) Workers' compensation insurance, including any contract indemnifying an employer who pays compensation directly to employees.
CREDIT(S) (2006 S 279, eff. 3-30-07; 2005 S 124, eff. 6-27-05; 2004 H516, eff. 12-30-04; 1994 H 89, eff. 6-29-94; 1993 H 23, eff. 9-20-93; 1989 H 105; 1988 H 796; 1987 H 267; 1986 H 867; H428, H 875; 1976 H 1267; 1970 H 1121)
§ 3955.06 Ohio insurance guaranty association created
(A) There is hereby created an unincorporated nonprofit association to be known as the Ohio insurance guaranty association. All member insurers shall be and remain members of the association as a condition of their authority to transact insurance in this state. The association shall perform its functions under a plan of operation established and approved under section 3955.09 of the Revised Code and shall exercise its powers through a board of directors established under section 3955.07 of the Revised Code.
(B) For purposes of administration and assessment, the association shall be divided into two accounts;
(1) The automobile insurance account;
(2) The account for all other insurance to which sections 3955.01 to 3955.19 of the Revised Code apply.
CREDIT(S) (2012 H 267, eff. 5-22-12;1994 H 89, eff. 6-29-94; 1989 H 105, eff. 10-26-89; 1970 H 1121)
§ 3955.07 Board of Directors; expenses
(A) The board of directors of the Ohio insurance guaranty association shall consist of not less than five nor more than nine persons serving terms as established in the plan of operation. The members of the board shall be selected by member insurers, subject to the approval of the superintendent. Vacancies on the board shall be filled for the remaining period of the term by the unanimous vote of the remaining directors with the approval of the superintendent of insurance. A majority of the members shall be representatives of domestic insurers.
(B) In approving selections to the board, the superintendent shall consider among other things whether all member insurers are fairly represented.
(C) Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors.
CREDIT(S) (1976 H 1267, eff. 5-21-76; 1973 H 1; 1970 H 1121)
§ 3955.08 Association powers and duties
(A) The Ohio insurance guaranty association shall:
(1) Be obligated to the extent of the covered claims existing prior to the determination that an insolvent insurer exists and arising within thirty days after such determination, or before the policy expiration date if less than thirty days after the determination, or before the insured replaces the policy or on request effects cancellation, if he does so within thirty days after the determination. In no event shall the association be obligated to a policyholder or claimant in an amount in excess of the face amount of the policy from which the claim arises. Claims of assessable members or subscribers of an insolvent insurer shall not be paid until all assessable subscribers or members have been assessed in accordance with section 3903.31 of the Revised Code and such assessments have been paid. Notwithstanding any other provision of the Revised Code, the association shall not be liable to pay any claim filed with the association after the earlier of the final date set by a court for filing claims in the liquidation proceedings of the insolvent insurer or eighteen months after the order of liquidation.
(2) Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent;
(3) Allocate claims paid and expenses incurred among the accounts separately, and assess member insurers separately for each account amounts necessary to pay the obligations of the association under division (A)(1) of this section subsequent to an insolvency, the expenses of handling covered claims subsequent to insolvency, and other expenses authorized by sections 3955.01 to 3955.19 of the Revised Code. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year on the kinds of insurance in the account bears to the net direct written premiums of all member insurers for the preceding calendar year on such kinds of insurance.
Each member insurer shall be notified of the assessment not later than thirty days before it is due. Each member insurer may be assessed in any year on any account any amount not greater than one and one-half per cent of its net direct written premiums for the preceding calendar year on the kinds of insurance in that account. After an initial assessment has been made for an insolvency, any subsequent assessments for that insolvency may be calculated in the same manner as the initial assessment and may use the same calendar year's net direct written premiums as were used in determining the original assessment. If the maximum assessment, together with the other assets of the association in any account, does not provide in any one year in any account an amount sufficient to make all necessary payments from that account, the funds available shall be prorated and the unpaid portion shall be paid as soon as funds become available, or claims shall be paid in any other manner the association may consider reasonable, including the payment of claims as they are received from claimants or the payment of claims in groups or categories.
The association may exempt or defer, in whole or in part, the assessment of any member insurer, if it would cause the insurer's financial statement to reflect amounts of capital or surplus less than the minimum amount required for a certificate of authority by any jurisdiction in which such insurer is authorized to transact insurance. The association may waive an assessment of any insurer if such assessment does not exceed ten dollars. If the balance of funds in any account, established pursuant to this section and section 3955.06 of the Revised Code, is in excess of amounts needed to pay all obligations chargeable to that account, the board of directors may authorize the transfer of such excess funds to any other account established pursuant to such sections in lieu of making an additional assessment for such other account or to reduce the total amount of an additional assessment for such other account.