HB-6223, As Passed House, June 29, 2006
June 20, 2006, Introduced by Rep. Mortimer and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending section 8134 (MCL 500.8134), as amended by 1998 PA 279.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 8134. (1) Within 120 days of a final determination of
insolvency of an insurer by a court of competent jurisdiction of
this state, the liquidator shall make application to the court for
approval
of a proposal to disburse assets out of marshalled
assets,
from time to time as those assets become available, to a
guaranty
association or foreign guaranty association having
obligations
because of the insolvency. If the liquidator determines
that
there are insufficient assets to disburse, the application
required
by this section shall be considered satisfied by a filing
by
the liquidator stating the reasons for this determination. to
make early access disbursements out of marshaled assets, to any
guaranty association or foreign guaranty association having
obligations because of the insolvency. If the liquidator determines
that the estate will not have sufficient assets to make any early
access disbursements to a guaranty association or foreign guaranty
association under this section, the liquidator shall file a report
with the court supporting this determination. Notice to the state
insurance commissioners, guaranty associations, and foreign
guaranty associations and court review of the report shall be
provided under subsection (5). This report may be given instead of
an application for a proposal to make early access disbursements.
However, if at any time the estate obtains sufficient assets to
support an early access disbursement under this section, the
liquidator shall file an application for a proposal to make early
access disbursements within 60 days of the estate obtaining those
assets. If, within 120 days of a final determination of insolvency,
the liquidator fails to file an application with the court for
approval of a proposal to make early access disbursements or,
alternatively, fails to file a report with the court supporting the
determination that the estate will not have sufficient assets to
make early access disbursements, any guaranty association or
foreign guaranty association that may become obligated to pay
claims as a result of the insolvency may file this application. An
application filed by an association shall be reviewed by the court
and, if the proposal submitted by the association meets the
requirements set out in this section, the application shall be
approved by the court. Upon court approval of the guaranty
association or foreign guaranty association proposal, the
liquidator shall begin making early access disbursements in
accordance with the proposal.
(2) A proposal under subsection (1) shall at least include
provisions for all of the following:
(a) Reserving amounts for the payment of expenses of
administration and the payment of claims of secured creditors, to
the extent of the value of the security held, and claims falling
within the priorities established in section 8142(1)(a) and (b) and
(2). When a reserve for uncovered claims under section 8142(2) is
appropriate, the amount of estate assets to be reserved for those
claims shall be a percentage of the uncovered claims under section
8142(2), equal in proportion to the percentage of assets
distributed, or proposed for distribution, to the guaranty
association or foreign guaranty association with respect to covered
obligations at the time the reserve for uncovered claims is
calculated. Reserves shall be established based on the best
available information at the time the distribution is calculated
and modified from time to time as more refined information becomes
available.
(b)
Disbursement of the assets marshalled marshaled to date
and subsequent disbursement of assets as they become available.
(c) Equitable allocation of disbursements to each of the
guaranty associations and foreign guaranty associations entitled to
disbursements.
(d) The securing by the liquidator from each of the
associations entitled to disbursements pursuant to this section of
an agreement to return to the liquidator such assets, together with
income earned on assets previously disbursed, as may be required to
pay claims of secured creditors and claims falling within the
priorities established in section 8142 in accordance with those
priorities. A bond shall not be required of any such association.
(e) A full report to be made by each association to the
liquidator accounting for assets disbursed to the association, all
disbursements made from the assets, interest earned by the
association on the assets, and any other matter as the court
directs.
(3) The liquidator's proposal shall provide for disbursements
to the associations in amounts estimated at least equal to the
claim payments made or to be made thereby for which the
associations could assert a claim against the liquidator, and shall
further provide that if the assets available for disbursement from
time to time do not equal or exceed the amount of claim payments
made or to be made by the association, then disbursements shall be
in the amount of available assets.
(4) The liquidator's proposal shall, with respect to an
insolvent insurer writing life or health insurance or annuities,
provide for disbursements of assets to any guaranty association or
any foreign guaranty association covering life or health insurance
or annuities or to any other entity or organization reinsuring,
assuming, or guaranteeing policies or contracts of insurance under
the acts creating the associations.
(5) Notice of application shall be given to the association in
each state and to the commissioners of insurance of each state.
Notice shall be considered to have been given when deposited in the
United States certified mails, first-class postage prepaid, at
least 30 days before submission of the application to the court.
Action on the application may be taken by the court if the notice
under this subsection has been given and if the liquidator's
proposal complies with subsection (2)(a) and (b).
(6) The liquidator shall not offset the amount to be disbursed
to any guaranty association or foreign guaranty association by any
special or statutory deposit or any other asset of the insolvent
insurer except to the extent the deposit or asset has been paid to
the association for the purpose of satisfying the association's
claims. If a guaranty association or foreign guaranty association
has received an early access distribution and thereafter also
receives a special or statutory deposit or any other asset of the
insolvent insurer, the liquidator may request the return of the
early access funds up to the amount of the special or statutory
deposit or other asset of the insolvent insurer.
Enacting section 1. This amendatory act does not take effect
unless all of the following bills of the 93rd Legislature are
enacted into law:
(a) Senate Bill No.____ or House Bill No. 6235(request no.
07127'06).
(b) Senate Bill No.____ or House Bill No. 6234(request no.
07128'06).
(c) Senate Bill No.____ or House Bill No. 6233(request no.
07129'06).
(d) Senate Bill No.____ or House Bill No. 6232(request no.
07130'06).
(e) Senate Bill No.____ or House Bill No. 6231(request no.
07131'06).
(f) Senate Bill No.____ or House Bill No. 6230(request no.
07132'06).
(g) Senate Bill No.____ or House Bill No. 6229(request no.
07133'06).
(h) Senate Bill No.____ or House Bill No. 6228(request no.
07134'06).
(i) Senate Bill No.____ or House Bill No. 6227(request no.
07135'06).
(j) Senate Bill No.____ or House Bill No. 6226(request no.
07136'06).
(k) Senate Bill No.____ or House Bill No. 6225(request no.
07137'06).
(l) Senate Bill No.____ or House Bill No. 6224(request no.
07138'06).