OHIO INSURANCE GUARANTY
ASSOCIATION ACT
3955.01 Property and casualty insurance guaranty
association definitions.
3955.04 Liberal construction of chapter.
3955.05 Nonapplicability to certain kinds of insurance.
3955.06 Ohio insurance guaranty association.
3955.08 Association powers and duties.
3955.09 Plan of operation and amendments.
3955.10 Superintendent of insurance - powers and duties.
3955.12 Subrogation of association - recovery against
insolvent insurers.
3955.13 Exhausting rights under other policy.
3955.14 Aiding detection and prevention of insurer
insolvencies.
3955.15 Examination and regulation by superintendent -
annual financial report.
3955.16 Exemption from fees and taxation.
3955.17 Rates - factors and calculation.
3955.19 Staying pending proceedings involving insolvent
insurers.
3955.01
Property and casualty insurance guaranty association 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
(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 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.
Effective Date:
Sections 3955.01
to 3955.19 of the Revised Code may be cited as the Ohio insurance guaranty
association act.
Effective Date:
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.
Effective Date:
3955.04 Liberal construction of chapter.
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.
Effective Date:
3955.05 Nonapplicability to certain 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.
Effective Date:
3955.06 Ohio insurance guaranty
association.
(A) There is
hereby created a nonprofit unincorporated 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.
Effective Date:
(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.
Effective Date:
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 eighteeen
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 amounts 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.
(4) Investigate
claims brought against the association and adjust, compromise, settle, or pay
covered claims to the extent of the association’s obligation and deny all other
claims;
(5) Notify such
persons as the superintendent directs under section 3955.10 of the Revised
Code;
(6) Handle
claims through its employees or through one or more insurers or other persons
designated as servicing facilities. Designation of a servicing facility is
subject to the approval of the superintendent, but may be declined by a member
insurer.
(7) Reimburse
each servicing facility for obligations of the association paid by the facility
and for expenses incurred by the facility while handling claims on behalf of
the association, and pay all other expenses of the association authorized by
sections 3955.01 to 3955.19 of the Revised Code.
(B) The
association may:
(1) Appear in,
defend, and appeal any action on a claim brought against the association;
(2) Employ or
retain such persons as are necessary to handle claims and perform other duties
of the association;
(3) Borrow funds
necessary to effect the purposes of sections 3955.01 to 3955.19 of the Revised
Code, in accord with the plan of operation;
(4) Sue or be
sued;
(5) Negotiate
and become a party to such contracts as are necessary to carry out the purposes
of sections 3955.01 to 3955.20 of the Revised Code;
(6) Perform such
other acts as are necessary or proper to effectuate the purposes of sections
3955.01 to 3955.19 of the Revised Code;
(7) Refund to
the member insurers in proportion to the contribution of each member insurer to
that account that amount by which the assets of the account exceed the
liabilities, if, at the end of any calendar year, the board of directors finds
that the assets of the association in any account exceed the liabilities of
that account as estimated by the board of directors for the coming year,
provided that the association shall not be required to make a refund to any
member insurer where the amount does not exceed ten dollars;
(8) Act, with
the approval of the superintendent, as a servicing facility for other insurance
guaranty associations.
Effective Date:
3955.09 Plan of operation and
amendments.
(A) The Ohio
insurance guaranty association shall submit to the superintendent of insurance
a plan of operation and any amendments to the plan necessary or suitable to
assure the fair, reasonable, and equitable administration of the association.
If the association fails to submit a suitable plan of operation by
(B) All member
insurers shall comply with the plan of operation.
(C) The plan of
operation shall:
(1) Establish
the procedures whereby all the powers and duties of the association shall be
performed;
(2) Establish
procedures for handling assets of the association;
(3) Establish
the amount and method of reimbursing members of the board of directors under
section 3955.07 of the Revised Code;
(4) Establish
procedures whereby claims may be filed with the association, hearings and
appeals may be had, and acceptable forms of proof of claims may be prescribed.
Notice of claims to the receiver or liquidator appointed in this state of an
insolvent insurer shall be deemed notice to the association or its agent. A
list of such claims shall be periodically submitted to an association or
similar organization in another state by any receiver or liquidator appointed
in this state. Any notice of claim filed with a receiver or liquidator
appointed in another state, if such receiver or liquidator forwards a certified
copy of the notice of claim to the association within such time as is
designated for filing claims with the association, shall be deemed notice to
the association.
(5) Establish
regular places and times for meetings of the board of directors;
(6) Establish
procedures for records to be kept of all financial transactions of the
association, its agents, and the board of directors;
(7) Provide that
any member insurer aggrieved by any final action or decision of the association
may appeal to the superintendent within thirty days after the action or
decision;
(8) Establish
the procedures whereby selections for the board of directors shall be submitted
to the superintendent;
(9) Contain
additional provisions necessary or proper for the execution of the powers and
duties of the association.
(D) The plan of
operation may provide that any or all powers and duties of the association,
except those under divisions (A)(3) and (B)(3) of section 3955.08 of the
Revised Code, may be delegated to a corporation, association, or other
organization which performs or will perform functions similar to those of this
association, or its equivalent, in two or more states. Such a corporation,
association, or organization shall be reimbursed as a servicing facility and
paid for its performance of any other functions of the association. A delegation
under this division shall take effect only with the approval of both the board
of directors and the superintendent, and may be made only to a corporation,
association, or organization which extends protection not substantially less
favorable and effective than those provided by sections 3955.01 to 3955.19 of
the Revised Code.
Effective Date:
3955.10 Superintendent of insurance
- powers and duties.
(A) The
superintendent of insurance shall:
(1) Immediately
furnish to the association a copy of any complaint filed by the superintendent
in any court which seeks an order to rehabilitate or liquidate the company;
(2) Notify the
Ohio insurance guaranty association of the existence of an insolvent insurer
not later than three days after he receives notice of its existence;
(3) Upon request
of the board of directors, provide the association with a statement of the net
direct written premiums of each member insurer related to either account.
(B) The
superintendent may:
(1) Require that
the association notify any or all of the insureds of an insolvent insurer and
any other interested parties of the determination of insolvency and of their
rights under sections 3955.01 to 3955.19 of the Revised Code. Such notification
shall be by mail at their last known address, but if sufficient information for
notification by mail is not available, notice by publication in a newspaper of
general circulation in an area reasonably selected to assure that interested
parties will become acquainted with the facts shall be sufficient.
(2) Suspend or
revoke, after notice and hearing under Chapter 119. of the Revised Code, the
certificate of authority to transact insurance in this state of any member
insurer which fails to pay an assessment when due or to comply with the plan of
operation. The superintendent, in lieu of such suspension or revocation, may
levy a penalty on any member insurer which fails to pay an assessment when due.
Such penalty shall not exceed five per cent of the unpaid assessment per month,
except that no penalty shall be less than one hundred dollars per month.
(3) Revoke the
designation of any servicing facility when he finds claims are being handled
unsatisfactorily.
(C) Any final
action or order of the superintendent under sections 3955.01 to 3955.19 of the
Revised Code is subject to judicial review under Chapter 119. of the Revised
Code.
Effective Date:
Effective Date:
3955.12 Subrogation of association -
recovery against insolvent insurers.
(A) The Ohio
insurance guaranty association shall be subrogated to the rights of any person
recovering under sections 3955.01 to 3955.19 of the Revised Code to the extent
of the person’s recovery from the association. Every insured or claimant
seeking the protection of sections 3955.01 to 3955.19 of the Revised Code shall
cooperate with the association to the same extent as such person would have
been required to cooperate with the insolvent insurer. Except as provided in
division (B) of this section, the association shall have no cause of action
against the insured of the insolvent insurer for any sums the association has
paid out.
(B)(1) The
association has the right to recover from the following insureds or persons the
amount of any covered claim paid to or on behalf of those insureds or persons:
(a) Any insured
who is not a resident of this state at the time of the insured event, except
for first-party claims for property damage to an insured’s property that is
permanently located in this state;
(b) Any person
that is an affiliate of the insolvent insurer.
(2) The
association has the right to recover from any insured of an insolvent insurer
for any sums the association has paid out as the result of an error.
(C) The
receiver, liquidator, or statutory successor of an insolvent insurer 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
claim priority equal to that which the claimant would have been entitled in the
absence of sections 3955.01 to 3955.19 of the Revised Code against the assets
of the insolvent insurer. The expenses of the association or similar
organization in handling claims shall be accorded the same priority as the
liquidator’s expenses.
(D) The
association periodically shall file with the receiver or liquidator of an
insolvent insurer reports of the covered claims paid by the association and
estimates of anticipated claims on the association, which shall preserve the
right to the association against the assets of the insolvent insurer.
Effective Date:
3955.13 Exhausting rights under
other policy.
(A) Any person
having a covered claim upon which recovery is also presently possible under an
insurance policy written by another insurer shall be required first to exhaust
his rights under such other policy. Any amount payable on a covered claim under
sections 3955.01 to 3955.19 of the Revised Code shall be reduced by the amount
of such recovery.
(B) Any person
having a claim which may be recovered against more than one insurance guaranty
association or its equivalent shall first seek recovery from the association of
the place of residence of the insured, except that a first-party claim for
damage to the insured’s property with a permanent location shall first be
presented to the association of the state of the location of the property. Any
recovery under sections 3955.01 to 3955.19 of the Revised Code shall be reduced
by the amount of recovery from any other insurance guaranty association or its
equivalent.
Effective Date:
3955.14 Aiding detection and
prevention of insurer insolvencies.
To aid in the
detection and prevention of insurer insolvencies:
(A) The board of
directors of the Ohio insurance guaranty association, upon a majority vote, may
do the following:
(1) Make
recommendations to the superintendent of insurance for the detection and
prevention of insurer insolvencies;
(2) Respond to
requests by the superintendent to discuss and make recommendations regarding
the status of any member insurer whose financial condition may be hazardous to
policyholders or the public. These recommendations are not public records.
(B) At the
conclusion of any domestic insurer insolvency in which the association was
obligated to pay covered claims, the board may prepare a report, based on the
information available to the association, on the history and causes of the
insolvency. The board shall submit to the superintendent any report prepared
pursuant to this division.
Effective Date:
3955.15 Examination and regulation
by superintendent - annual financial report.
The Ohio
insurance guaranty association is subject to examination and regulation by the
superintendent of insurance. The association shall submit in a form approved by
the superintendent, not later than the thirtieth day of March of each year, a
financial report for the preceding calendar year.
Effective Date:
3955.16 Exemption from fees and
taxation.
The Ohio
insurance guaranty association is exempt from payment of all fees and taxes
levied by this state or any of its subdivisions.
Effective Date:
3955.17 Rates - factors and
calculation.
(A) A rate shall
not be found excessive under section 3935.03 or 3937.02 of the Revised Code
solely because it contains a factor designed to recover any amounts paid to the
Ohio insurance guaranty association by a member insurer as an assessment under
division (A)(3) of section 3955.08 of the Revised Code from sources other than
such fund.
(B) The rates
subject to section 3935.03 or 3937.02 of the Revised Code may include an amount
necessary to recoup assessments paid or payable to the Ohio insurance guaranty
association made pursuant to division (A)(3) of section 3955.08 of the Revised
Code and reasonable expenses and costs attributable to payment and recoupment
of the assessment. The association may establish a plan whereby assessments or
projected assessments due from member insurers may be payable periodically.
Such plan may also provide for the calculation and use of rates or rating factors
necessary to recoup such assessments, subject to the approval of the
superintendent. Member insurers of the association implementing a change in
rates pursuant to the plan shall file such changes with the superintendent,
provided such changes shall not increase rates more than the amount authorized
by the association and approved by the superintendent pursuant to the plan. The
association may consult with member insurers or licensed rating bureaus in
connection with the establishment and operation of any such plan.
Effective Date:
There shall be
no liability on the part of and no cause of action of any nature shall arise
against any member insurer, the Ohio insurance guaranty association or its
agents or employees, the board of directors, or the superintendent of insurance
or his representatives, including the office of the deputy liquidator and its
employees, for any act or omission in the performance of their powers and
duties under sections 3955.01 to 3955.19 of the Revised Code.
Effective Date:
3955.19 Staying pending proceedings
involving insolvent insurers.
To permit a
proper defense by the Ohio insurance guaranty association of all pending causes
of action, all proceedings in which an insolvent insurer is a party or is
obligated to defend a party in any court in this state shall be stayed for six
months, and such additional time thereafter as may be determined by the court
in which the proceedings are pending or with jurisdiction over the proceedings,
from the date the insolvency is determined or an ancillary proceeding is
instituted in this state, whichever is later.
As to any
covered claims arising from any judgment, order, decision, verdict, or finding
based on a default or stipulation of the insolvent insurer or its insured, the
association, either on its own behalf or on behalf of the insured, may apply to
the court to have its judgment, order, decision, verdict, or finding vacated.
The court shall grant the application, and the association shall be permitted
to defend the claim on the merits.
Effective Date:
Effective Date:
Effective Date: