MDL-555

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

INSURER RECEIVERSHIP MODEL ACT

Table of Contents

ARTICLE I. GENERAL PROVISIONS

Section 101. Construction and Purpose

Section 102. Conflicts of Law

Section 103. Persons Covered

Section 104. Definitions

Section 105. Jurisdiction and Venue

Section 106. Exemption from Fees

Section 107. Notice and Hearing on Matters Submitted by the Receiver for Receivership Court Approval

Section 108. Injunctions and Orders

Section 109. Statutes of Limitations

Section 110. Cooperation of Officers, Owners and Employees

Section 111. Delinquency Proceedings Commenced Prior to Enactment

Section 112. Actions By and Against the Receiver

Section 113. Unrecorded Obligations and Defenses Of Affiliates

Section 114. Executory Contracts

Section 115. Immunity and Indemnification of the Receiver and Assistants

Section 116. Approval and Payment of Expenses

Section 117. Financial Reporting

Section 118. Records

ARTICLE II. PROCEEDINGS

Section 201. Receivership Court’s Seizure Order

Section 202. Commencement of Formal Delinquency Proceeding

Section 203. Return of Summons and Summary Hearing

Section 204. Proceedings for Expedited Trial: Continuances, Discovery, Evidence

Section 205. Decision and Appeals

Section 206. Confidentiality

Section 207. Grounds for Conservation, Rehabilitation or Liquidation

Section 208. Entry of Order

Section 209. Effect of Order of Conservation, Rehabilitation or Liquidation

ARTICLE III. CONSERVATION

Section 301. Conservation Orders

Section 302. Powers and Duties of the Conservator

Section 303. Coordination With Guaranty Associations and Orderly Transition to Rehabilitation or Liquidation

ARTICLE IV. REHABILITATION

Section 401. Rehabilitation Orders

Section 402. Powers and Duties of the Rehabilitator

Section 403. Filing of Rehabilitation Plans

Section 404. Termination of Rehabilitation

Section 405. Coordination with Guaranty Associations and Orderly Transition to Liquidation

ARTICLE V. LIQUIDATION

Section 501. Liquidation Orders

Section 502. Continuance of Coverage

Section 503. Sale or Dissolution of the Insurer’s Corporate Entity

Section 504. Powers of the Liquidator

Section 505. Notice to Creditors and Others

Section 506. Duties of Agents

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ARTICLE VI. ASSET RECOVERY

Section 601. Turnover of Assets

Section 602. Recovery from Affiliates

Section 603. Unauthorized Post-Petition Transfers

Section 604. Voidable Preferences and Liens

Section 605. Fraudulent Transfers and Obligations

Section 606. Receiver as Lien Creditor

Section 607. Liability of Transferee

Section 608. Claims of Holders of Void or Voidable Rights

Section 609. Setoffs

Section 610. Assessments

Section 611. Reinsurer’s Liability

Section 612. Life and Health Reinsurance

Section 613. Recovery of Premiums Owed

Section 614. Commutation and Release Agreements

Section 615. Reinsurance Recoverable Trust Provisions

ARTICLE VII. CLAIMS

Section 701. Filing of Claims

Section 702. Proof of Claim

Section 703. Allowance of Claims

Section 704. Claims under Occurrence Policies, Surety Bonds and Surety Undertakings

Section 705. Allowance of Contingent and Unliquidated Claims

Section 706. Special Provisions for Third Party Claims

Section 707. Disputed Claims

Section 708. Liquidator’s Recommendations to the Receivership Court

Section 709. Claims of Co-debtors

Section 710. Secured Creditors’ Claims

Section 711. Qualified Financial Contracts

Section 712. Administration of Loss Reimbursement Policies

ARTICLE VIII. DISTRIBUTIONS

Section 801. Priority of Distribution

Section 802. Partial and Final Distributions of Assets

Section 803. Early Access Disbursements

Section 804. Unclaimed and Withheld Funds

ARTICLE IX. DISCHARGE

Section 901. Condition on Release from Delinquency Proceedings

Section 902. Termination of Proceedings

Section 903. Reopening Liquidation

Section 904. Disposition of Records During and After Termination of Liquidation

Section 905. External Audit of the Receiver’s Books

ARTICLE X. INTERSTATE RELATIONS

Section 1001. Ancillary Conservation of Foreign Insurers

Section 1002. Domiciliary Receivers Appointed in Other States

ARTICLE XI. SEPARABILITY AND EFFECTIVE DATE

Section 1101. Separability

Section 1102. Effective Date

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

ARTICLE I. GENERAL PROVISIONS

Section 101. Construction and Purpose

A. This Act shall be cited as the Insurer Receivership Act.

B. This Act shall not be interpreted to limit the powers granted the commissioner by other provisions of the

law.

C. This Act shall be liberally construed to support the purposes stated in Subsection E.

D. All powers and authority of a receiver under this Act are cumulative and are in addition to all powers and

authority that are available to a receiver under law other than this Act.

E. The purpose of this Act is the protection of the interests of insureds, claimants, creditors and the public

generally through:

(1) Early detection of any potentially hazardous condition in an insurer and prompt application of

appropriate corrective measures;

(2) Improved methods for conserving and rehabilitating insurers;

(3) Enhanced efficiency and economy of liquidation, through clarification of the law, to minimize

legal uncertainty and litigation;

(4) Apportionment of any unavoidable loss in accordance with the statutory priorities set out in this

Act;

(5) Lessening the problems of interstate receivership by facilitating cooperation among states in

delinquency proceedings, and by extending the scope of personal jurisdiction over debtors of the

insurer outside this state;

(6) Regulation of the business of insurance by the impact of the law relating to delinquency

procedures and related substantive rules; and

(7) Providing for a comprehensive scheme for the receivership of insurance companies and those

subject to this Act as part of the regulation of the business of insurance in this state. Proceedings in

cases of insurer insolvency and delinquency are deemed an integral aspect of the business of

insurance and are of vital public interest and concern.

Section 102. Conflicts of Law

This Act, Title [XXX], and the state insurance guaranty association acts constitute this state’s insurer receivership laws, and

these laws shall be construed together in a manner that is consistent. In the event of a conflict between the insurer

receivership laws and the provisions of any other law, the insurer receivership laws shall prevail.

Section 103. Persons Covered

The provisions of this Act shall be applied to:

A. All insurers who are doing, or have done, an insurance business in this state, and against whom claims

arising from that business may exist now or in the future, and to all persons subject to examination by the

commissioner;

B. All insurers who purport to do an insurance business in this state;

C. All insurers who have insureds resident in this state;

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D. All other persons organized or doing insurance business, or in the process of organizing with the intent to

do insurance business in this state;

E. All nonprofit service plans and all fraternal benefit societies and beneficial societies subject to [insert

statute identification if desired];

F. All title insurance companies subject to [insert statute identification if desired];

G. All prepaid health care delivery plans [insert statute identification if desired]; and

H. [Any other specialty type insurer not covered by the general law that should be subject to this Act].

Drafting Note: In considering other specialty type insurers, special attention should be given to surety companies. They are intended to be included under

this Act; but, because of the enacting state’s law, may not be included in the general provisions related to the business of insurance.

Section 104. Definitions

For the purposes of this Act:

A The terms “affiliate” of, or person “affiliated” with, a specific person, “control” and “subsidiary” shall have

the meanings ascribed to them in [insert citation equivalent to Section 1 of the NAIC Model Insurance

Holding Company System Regulatory Act].

B. “Alien insurer” means an insurer incorporated or organized under the laws of a jurisdiction that is not a

state.

C. “Commissioner” means the insurance commissioner [or the equivalent title, such as director or

superintendent, utilized by the enacting state] of this state, or his or her designee, unless the context

requires otherwise.

D. “Creditor” or “claimant” is a person having any claim against an insurer, whether the claim is matured or

not, liquidated or unliquidated, secured or unsecured, absolute, fixed or contingent.

E. “Delinquency proceeding” means any proceeding instituted against an insurer for the purpose of

liquidating, rehabilitating or conserving the insurer, and any summary proceeding under Section 201.

F. “Department” means the Insurance Department of this state unless the context requires otherwise.

G. “Doing business” (including “doing insurance business” and the “business of insurance”) includes, but is

not limited to, any of the following acts, whether effected by mail, electronic means, or otherwise:

(1) The issuance or delivery of contracts, certificates or binders of insurance, either to persons resident

in or covering a risk located in this state;

(2) The solicitation of applications for the contracts, or other negotiations preliminary to the execution

of the contracts;

(3) The collection of premiums, membership fees, assessments or other consideration for the

contracts;

(4) The transaction of matters subsequent to execution of the contracts and arising out of them;

(5) Operating as an insurer under a license or certificate of authority issued by the Insurance

Department; or

(6) The acts identified in [cite to state unauthorized insurance act].

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

H. “Domiciliary state” means the state in which an insurer is incorporated or organized; or, in the case of an

alien insurer, its state of entry. In the case of a risk retention group, the domiciliary state shall be the state in

which the risk retention group is chartered as contemplated in the Liability Risk Retention Act (15 U.S.C. §

3901, et seq).

I. “Foreign insurer” means any insurer domiciled in another state.

J. “Formal delinquency proceeding” means any conservation, rehabilitation or liquidation proceeding.

K. (1) “General assets” includes all property of the estate that is not:

(a) Subject to a properly perfected secured claim;

(b) Subject to a valid and existing express trust for the security or benefit of specified

persons or classes of persons; or

specified persons or classes of persons.

(2) “General assets” includes all property of the estate or its proceeds in excess of the amount

necessary to discharge claims described in Paragraph (1) of this subsection.

L. “Good faith” means honesty in fact and intention, and in regard to the provisions of Article VI of this Act

also requires the absence of information that would lead a reasonable person in the same position to know

that the insurer is financially impaired or insolvent, together with the absence of knowledge regarding the

imminence or pendency of any delinquency proceeding against the insurer.

M. “Guaranty association” means any mechanism mandated by [insert citation to guaranty association

enabling acts] or a similar mechanism in another state, which is created for the payment of claims or

continuation of policy obligations of financially impaired or insolvent insurers.

N. “Impaired” means that the insurer does not have admitted assets at least equal to all its liabilities together

with the minimum surplus required to be maintained by [cite states insurance statutes and regulations

regarding minimum capital and surplus requirements] or has a total adjusted capital that is less than its

Authorized Control Level Risk Based Capital (RBC) as defined in [cite to states enactments related to the

RBC Model Act, Risk RBC For Health Organizations Model Act and any related regulations].

O. “Insolvency” or “insolvent” means the insurer is unable to pay its obligations when they are due or does not

have admitted assets at least equal to all its liabilities or has a total adjusted capital that is less than its

Mandatory Control Level RBC as defined in [cite to state’s enactments related to the RBC Model Act,

RBC For Health Organizations Model Act and any related regulations]. For purposes of this Act “admitted

assets” and “liabilities” will have the meanings ascribed to them and be measured in accordance with the

NAIC Statements of Statutory Accounting Principles as incorporated in this state by [cite state’s insurance

statute incorporating the NAIC Statements of Statutory Accounting Principles].

P. “Insurer” means any person who has done, purports to do, is doing or is licensed to do the business of

insurance, or is or has been subject to the authority of, or to liquidation, rehabilitation, reorganization,

supervision or conservation by, any insurance commissioner. For purposes of this Act, any other persons

included under Section 103 shall be deemed to be insurers.

Q. “Netting agreement” means (1) a contract or agreement (including terms and conditions incorporated by

reference therein), including a master agreement (which master agreement, together with all schedules,

confirmations, definitions and addenda thereto and transactions under any thereof, shall be treated as one

netting agreement), that documents one or more transactions between the parties to the agreement for or

involving one or more qualified financial contracts and that provides for the netting, liquidation, setoff,

termination, acceleration or close out under or in connection with one or more qualified financial contracts

or present or future payment or delivery obligations or payment or delivery entitlements thereunder

(including liquidation or close-out values relating to such obligations or entitlements) among the parties to

the netting agreement; (2) any master agreement or bridge agreement for one or more master agreements

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described in Paragraph (1) of this subsection; or (3) any security agreement or arrangement or other credit

enhancement or guarantee or reimbursement obligation related to any contract or agreement described in

Paragraph (1) or (2) of this subsection; provided that any contract or agreement described in Paragraph (1)

or (2) of this subsection relating to agreements or transactions that are not qualified financial contracts shall

be deemed to be a netting agreement only with respect to those agreements or transactions that are qualified

financial contracts.

R. “New value” means money or money’s worth in goods, services or new credit, or release by a transferee of

property previously transferred to the transferee in a transaction that is neither void nor voidable by the

insurer or the receiver under any applicable law, including proceeds of the property, but does not include an

obligation substituted for an existing obligation.

S. “Party in interest” means the commissioner, any non-domiciliary commissioner in whose state the insurer

has outstanding claims liabilities, and any of the following parties that have filed a request with the

receivership court for inclusion as a party in interest and to be on the service list: an insurer that ceded to or

assumed business from the insurer, a policyholder, a third party claimant, a creditor, a ten percent (10%) or

greater equity security holder in the insolvent insurer, any affected guaranty association and any person,

including any indenture trustee, with a financial or regulatory interest in the delinquency proceeding.

T. “Person” means individual, aggregation of individuals, partnership, corporation or other entity.

U. “Policy” means a written contract of insurance or written agreement for or effecting insurance, or the

certificate thereof, by whatever name called, and includes all clauses, riders, endorsements and papers that

are a part of the policy. For purposes of this Act, the term “policy” shall not include a contract of

reinsurance.

V. “Property of the insurer” or “property of the estate” includes:

(1) All right, title and interest of the insurer in property, whether legal or equitable, tangible or

intangible, choate or inchoate, and includes choses in action, contract rights, and any other interest

recognized under the laws of this state;

(2) Entitlements that existed prior to the entry of an order of conservation, rehabilitation or

liquidation, and entitlements that may arise by operation of the provisions of this part or other

provisions of law allowing the receiver to avoid prior transfers or assert other rights; and

(3)

All records and data that are otherwise the property of the insurer, in whatever form maintained,

including, but not limited to, claims and claim files, policyholder lists, application files, litigation

files, premium records, rate books, underwriting manuals, personnel records, financial records or

similar records within the possession, custody or control of a managing general agent, third-party

administrator, management company, data processing company, accountant, attorney, affiliate or

other person.

W. “Qualified financial contract” means any commodity contract, forward contract, repurchase agreement,

securities contract, swap agreement and any similar agreement that the commissioner determines by

regulation, resolution or order to be a qualified financial contract for the purposes of this Act.

(1) “Commodity contract” means:

(a) A contract for the purchase or sale of a commodity for future delivery on, or subject to

the rules of, a board of trade or contract market under the Commodity Exchange Act (7

U.S.C. § 1, et seq.) or a board of trade outside the United States;

(b) An agreement that is subject to regulation under Section 19 of the Commodity Exchange

Act (7 U.S.C. § 1, et seq.) and that is commonly known to the commodities trade as a

margin account, margin contract, leverage account or leverage contract;

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

Commodity Exchange Act (7 U.S.C. § 1, et seq.) and that is commonly known to the

commodities trade as a commodity option;

(d) Any combination of the agreements or transactions referred to in this paragraph; or

(e) Any option to enter into an agreement or transaction referred to in this paragraph.

(2) “Forward contract,” “repurchase agreement,” “securities contract” and “swap agreement” shall

have the meanings set forth in the Federal Deposit Insurance Act, 12 U.S.C. § 1821(e)(8)(D), as

amended from time to time.

Drafting Note: This definition of “qualified financial contract” is intended to be consistent with definitions applicable under federal law in instances of

insolvency of other types of financial institutions. It is not the intention of this provision, or of Section 711, to affect the scope of permissible investments of

insurers or the valuation thereof, or to modify any other regulatory framework applicable to investments or investment practices of insurers.

X. “Receiver” means liquidator, rehabilitator, conservator or ancillary receiver, as the context requires.

Y. “Receivership” means any liquidation, rehabilitation, conservation or ancillary receivership, as the context

requires.

Z. “Receivership court” refers to the court [may insert specific court] in which a delinquency proceeding is

pending, unless the context requires otherwise.

AA. “Reinsurance” means transactions or contracts whereby an assuming insurer agrees to indemnify a ceding

insurer against all, or a part, of any loss that the ceding insurer may sustain under the policy or policies that

it has issued or will issue.

BB. “Secured claim” means a claim secured by an asset that is not a general asset, but not including special

deposit claims or a claim based on mere possession. The right to set off as provided in Section 609 shall be

a secured claim. A secured claim shall not include any claim arising from a constructive or resulting trust.

CC. “Special deposit” means a deposit established pursuant to statute for the security or benefit of a limited

class or classes of persons.

DD. “Special deposit claim” means any claim secured by a special deposit, but does not include any claim

secured by the general assets of the insurer.

EE. “State” means any state, district or territory of the United States.

FF. “Transfer” shall include the sale and every other and different mode, direct or indirect, of disposing of or of

parting with property or with an interest therein, including a setoff, or with the possession thereof or of

fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily or

involuntarily, by or without judicial proceedings. The retention of a security title in property delivered to an

insurer and foreclosure of the insurer’s equity of redemption shall be deemed a transfer suffered by the

insurer.

GG. “Unauthorized insurer” means an insurer transacting the business of insurance in this state that has not

received a Certificate of Authority from this state, or some other type of authority that allows for the

transaction of the business of insurance in this state.

Section 105. Jurisdiction and Venue

A. No delinquency proceeding under this Act shall be commenced by a person other than the commissioner of

this state and no court shall have jurisdiction to entertain, hear or determine any delinquency proceeding

commenced by any other person.

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B. No court of this state shall have jurisdiction to entertain, hear or determine any complaint praying for the

liquidation, rehabilitation, seizure, sequestration, conservation or receivership of any insurer, or praying for

a stay or injunction or restraining order or other relief preliminary to, incidental to or relating to the

proceedings other than in accordance with this Act.

C. The receivership court shall, as of the commencement of a delinquency proceeding under this Act, have

exclusive jurisdiction of all property of the insurer, wherever located, including property located outside the

territorial limits of the state. The receivership court shall have original but not exclusive jurisdiction of all

civil proceedings arising under this Act or arising in or related to delinquency proceedings under this Act.

D. In addition to other grounds for jurisdiction provided by the law of this state, a court of this state having

jurisdiction of the subject matter has jurisdiction over a person served pursuant to the [insert citation to

state rules of civil procedure] or other applicable provisions of law in an action brought by the receiver:

(1) If the person served is or has been an agent, broker or other person who has at any time written

policies of insurance for or has acted in any manner whatsoever on behalf of an insurer against

which a delinquency proceeding has been instituted, in any action resulting from or incident to

such a relationship with the insurer;

(2) If the person served is or has been an insurer or reinsurer who has at any time entered into a

contract of reinsurance with an insurer against which a delinquency proceeding has been

instituted, or is an intermediary, agent or broker of or for the reinsurer, or with respect to the

contract, in any action on or incident to the reinsurance contract;

(3) If the person served is or has been an officer, director, manager, trustee, organizer, promoter or

other person in a position of comparable authority or influence over an insurer against which a

delinquency proceeding has been instituted, in any action resulting from or incident to such a

relationship with the insurer;

(4) If the person served is or was at the time of the institution of the delinquency proceeding against

the insurer holding assets in which the receiver claims an interest on behalf of the insurer, in any

action concerning the assets; or

(5) If the person served is obligated to the insurer in any way whatsoever, in any action on or incident

to the obligation.

E. If the receivership court on motion of any party finds that any action should as a matter of substantial

justice be tried in a forum outside this state, the receivership court may enter an appropriate order to stay

further proceedings on the action in this state. Except as to claims against the estate and in regard to any

contracts rejected by the receiver under Section 114, nothing in this Act shall deprive a reinsurer of any

contractual right to pursue arbitration. A party in arbitration may bring a claim or counterclaim against the

estate, but the claim or counterclaim shall be subject to this Act.

F. Service shall be made upon the person named in the petition in accordance with the [insert state] Rules of

Civil Procedure. In lieu of such service, upon application to the receivership court, service may be made in

such a manner as the receivership court directs whenever it is satisfactorily shown by affidavit:

(1) In the case of a corporation, that the officers of the corporation cannot be served because they have

departed from the state or have otherwise concealed themselves with intent to avoid service;

(2) In the case of an insurer whose business is conducted, at least in part, by an attorney in fact,

managing general agent, or other such entity (including but not limited to, a reciprocal, Lloyd’s

association or inter-insurance exchange), that the individual attorney-in-fact, managing general

agent, or other such entity, or its officers of the corporate attorney-in-fact cannot be served

because of their departure or concealment; or

(3) In the case of a natural person, that the person cannot be served because of the person’s departure

or concealment.

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

G. All actions herein authorized shall be brought in the [identify proper court].

Drafting Note: Each state will need to consider the appropriate court and county for delinquency proceedings under this Act. In general, the venue is more

appropriate if it is in the county where the office of the insurance commissioner is located. This assures expeditious and expert handling by concentrating

these cases in the court with the most experience with regulatory affairs of all kinds, including insurance. An option could also be provided in the county

where the principal office of the insurer is located.

H. At any time after an order is entered pursuant to Section 201, 301, 401 or 501, the commissioner or receiver

may transfer the case to the county of the principal office of the person proceeded against. In the event of

transfer, the court in which the proceeding was commenced shall, upon application of the commissioner or

receiver, direct its clerk to transmit the court’s file to the clerk of the court to which the case is to be

transferred. The proceeding shall thereafter be conducted in the same manner as if it had been commenced

in the court to which the matter is transferred.

I. [Alternative 1] No person shall be allowed to intervene in any liquidation proceeding in this state for the

purpose of seeking or obtaining payment of any judgment, lien or other claim of any kind. The claims

procedure set forth in this Act constitutes the exclusive means for obtaining payment of claims from the

liquidation estate. Upon application to and approval by the receivership court, any guaranty association or

its designated representative may intervene as a party and appear and participate in any court proceeding

concerning a liquidation proceeding against an insurer if the association is or may become liable to act as a

result of the liquidation proceeding. Intervention by any guaranty association or its designated

representative conferred under this subsection shall not constitute grounds to establish general personal

jurisdiction by the courts of this state. The intervening guaranty association or its designated representative

shall be subject to the receivership court’s jurisdiction for the limited purpose for which it intervenes.

[Alternative 2] No person shall be allowed to intervene in any liquidation proceeding in this state for the

purpose of seeking or obtaining payment of any judgment, lien or other claim of any kind. The claims

procedure set forth in this Act constitutes the exclusive means for obtaining payment of claims from the

liquidation estate. Any guaranty association or its designated representative may intervene as a party as a

matter of right and otherwise appear and participate in any court proceeding concerning a liquidation

proceeding against an insurer if the association is or may become liable to act as a result of the liquidation

proceeding. Intervention by any guaranty association or its designated representative conferred under this

subsection shall not constitute grounds to establish general personal jurisdiction by the courts of this state.

The intervening guaranty association or its designated representative shall be subject to the receivership

court’s jurisdiction for the limited purpose for which it intervenes.

[Alternative 3] No person shall be allowed to intervene in any liquidation proceeding in this state for the

purpose of seeking or obtaining payment of any judgment, lien or other claim of any kind. The claims

procedure set forth in this Act constitutes the exclusive means for obtaining payment of claims from the

liquidation estate.

Drafting Note: States may choose Alternative 1, 2 or 3 for Subsection I depending on the ability of guaranty associations to intervene in liquidation

proceedings. Alternative 1 permits guaranty associations to intervene for a limited purpose upon application to and approval by the receivership court.

Alternative 2 permits intervention by guaranty associations as a matter of right, upon application to and approval by the receivership court. Alternative 3 is

silent as to guaranty associations and contains the same general prohibition on intervention in liquidation proceedings as Alternatives 1 and 2.

J. The foregoing provisions of this section notwithstanding, the provisions of this Act do not confer

jurisdiction on the receivership court to resolve coverage disputes between guaranty associations and those

asserting claims against them resulting from the initiation of a receivership proceeding under this Act

except to the extent that the guaranty association has otherwise expressly consented to the jurisdiction of

the receivership court pursuant to a plan of rehabilitation or liquidation that resolves its obligations to

covered policyholders. The determination of any dispute with respect to the statutory coverage obligations

of any guaranty association by a court or administrative agency or body with jurisdiction in the guaranty

association’s state of domicile shall be binding and conclusive as to the guaranty association’s claim in the

liquidation proceeding.

K. Upon the request of the receiver the receivership court [or a chief administrative judge] may order that one

judge hear all cases and controversies arising out of or related to the delinquency proceeding.

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L. Delinquency proceedings shall be exempt from any dormancy or similar program maintained for the early

closure of civil actions.

Section 106. Exemption from Fees

The receiver shall not be required to pay any filing, recording, transcript or authentication fee to any public officer in this

state.

Section 107. Notice and Hearing on Matters Submitted by the Receiver for Receivership Court Approval

A. Upon written request to the receiver, a person shall be placed on the service list to receive notice of matters

filed by the receiver. It shall be the responsibility of the person requesting notice to inform the receiver in

writing of any changes in his or her address, or to request that his or her name be deleted from the service

list. The receiver may require that the persons on the service list provide confirmation that they wish to

remain on the service list. Any person who fails to confirm his or her intent to remain on the service list

may be purged from the service list. Inclusion on the service list does not confer standing in the

delinquency proceeding to raise, appear or be heard on any issue.

B. Except as otherwise provided by this Act, notice and hearing of any matter submitted by the receiver to the

receivership court for approval under this Act shall be conducted as follows:

(1) The receiver shall file an application explaining the proposed action, and the basis therefore. The

receiver may include any evidence in support of the application. If the receiver determines that any

documents supporting the application are confidential, the receiver may submit them to the

receivership court under seal for in camera inspection.

(2) The receiver shall provide notice of the application to all persons on the service list and any other

parties as determined by the receiver. Notice may be provided by first class mail postage paid,

electronic mail, or facsimile transmission, at the receiver’s discretion. For purposes of this section,

notice is deemed to be given on the date that it is deposited with the U.S. Postmaster or

transmitted, as applicable, to the last known address as shown on the service list.

(3) Any party in interest objecting to the application shall file an objection specifying the grounds

therefore within [insert number] days or such longer time as the court may specify of the notice of

the filing of the application or such other time as the receivership court may set and shall serve

copies on the receiver and any other persons served with the application within the same time

period. An objecting party shall have the burden of showing why the receivership court should not

authorize the proposed action.

Drafting Note: Number of days for filing objections should be consistent with the state civil procedure or receivership practice.

(4) If no objection to the application is timely filed, the receivership court may enter an order

approving the application without a hearing, or hold a hearing to determine if the receiver’s

application should be approved. The receiver may request that the receivership court enter an

order or hold a hearing on an expedited basis.

(5) If an objection is timely filed, the receivership court may hold a hearing. If the receivership court

approves the application and, upon a motion by the receiver, determines that the objection was

frivolous or filed merely for delay or for other improper purpose, the receivership court shall order

the objecting party to pay the receiver’s reasonable costs and fees of defending the action.

Drafting Note: States may utilize the term application, petition, motion or such other term that is considered appropriate in their state. The state may also

incorporate its procedures under its civil rules for the briefing and hearing of applications. “Petition” should be reserved for the initiation of delinquency

proceedings.

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

Section 108. Injunctions and Orders

A. The receivership court may issue any order, process or judgment, including stays or injunctions or other

orders necessary or appropriate to carry out the provisions of this Act or an approved rehabilitation plan.

B. No provision of this Act shall be construed to limit the ability of the receiver to apply to a court other than

the receivership court in any jurisdiction to carry out any provision of this Act or for the purpose of

pursuing claims against any person.

C. Except as provided in Subsections E and F or as otherwise provided in this Act the commencement of a

delinquency proceeding under this Act operates as a stay, applicable to all persons, of:

(1) The commencement or continuation, including the issuance or employment of process, of a

judicial, administrative or other action or proceeding against the insurer, including an arbitration

proceeding, that was or could have been commenced before the commencement of the

delinquency proceeding under this Act, or to recover a claim against the insurer that arose before

the commencement of the delinquency proceeding under this Act;

(2) The enforcement against the insurer or against property of the insurer of a judgment obtained

before the commencement of the delinquency proceeding under this Act;

(3) Any act to obtain or retain possession of property of the insurer or of property from the insurer or

to exercise control over property or records of the insurer;

(4) Any act to create, perfect or enforce any lien against property of the insurer;

(5) Any act to collect, assess or recover a claim against the insurer that arose before the

commencement of a delinquency proceeding under this Act;

(6) The commencement or continuation of an action or proceeding against a reinsurer of the insurer,

by the holder of a claim against the insurer, seeking reinsurance recoveries that are contractually

due to the insurer;

(7) The commencement or continuation of an action or proceeding by a governmental unit to

terminate or revoke an insurance license; and

(8) Termination, failure to renew, suspension of performance, declaration of default, demand for

additional, substitute, or replacement security or performance, or other adverse action, with respect

to any contract, agreement, or lease (including but not limited to policies, insurance and

reinsurance contracts, surety bonds, or surety undertakings), whether or not the insurer is a party to

the contract, agreement, lease, policy, bond, or undertaking, if the sole basis for the termination,

failure to renew, suspension of performance, declaration of default, demand for additional,

substitute, or replacement security or performance, or other adverse action is (i) the fact that the

insurer is the subject of delinquency proceedings, and/or (ii) the fact that one or more of the

insurer’s licenses have been suspended or revoked because the insurer is the subject of

delinquency proceedings.

D. Except as provided in Subsections E and F or as otherwise provided in this Act, the commencement of a

delinquency proceeding under this Act operates as a stay, applicable to all persons, of the commencement

or continuation, including the issuance or employment of process, of a judicial, administrative or other

action or proceeding, including without limitation the enforcement of any judgment, against any insured

that was or could have been commenced before the commencement of the delinquency proceeding under

this Act, or to recover a claim against the insured that arose before or after the commencement of the

delinquency proceeding under this Act and for which the insurer is or may be liable under a policy of

insurance or is obligated to defend a party. The stay provided by this subsection shall terminate ninety (90)

days after appointment of the receiver unless extended by order of the receivership court, for good cause

shown, after notice to any affected parties and such hearing as the receivership court determines is

appropriate; provided, however, that any applicable statute of limitation with respect to any claim against

an insured shall be tolled during the period of the stay provided by this subsection and any extensions.

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E. Notwithstanding Subsection C, the commencement of a delinquency proceeding under this Act does not

operate as a stay or prohibition of:

(1) Except as provided in Subsection C(7), regulatory actions by the commissioners of non-

domiciliary states, including, but not limited to the suspension of licenses;

(2) Criminal actions;

(3) Any act to perfect, or to maintain or continue the perfection of, an interest in property to the extent

the act is accomplished within any relation back period under applicable law;

(4) Setoff as permitted by Section 609;

(5) Pursuit and enforcement of non-monetary governmental claims, judgments and proceedings;

(6) Presentment of a negotiable instrument and the giving of notice of and protesting dishonor of the

instrument;

(7) Enforcement of rights against single beneficiary trusts established pursuant to and in compliance

with [cite to the credit for reinsurance law];

(8) Any right to cause the netting, liquidation, setoff, termination, acceleration or close out of

obligations, or enforcement of any security agreement or arrangement or other credit enhancement

or guarantee or reimbursement obligation, under or in connection with any netting agreement or

qualified financial contract as provided for in Section 711;

(9) Discharge by the guaranty association of statutory responsibilities under any applicable guaranty

association act; or

(10) Any of the following actions:

(a) An audit by a governmental unit to determine tax liability;

(b) The issuance to the insurer by a governmental unit of a notice of tax deficiency;

(d) The making of an assessment for any tax and issuance of a notice and demand for

payment of the assessment.

F. Except as provided in Subsection H:

(1) The stay of an act against property of the insurer under Subsection C continues until the property

is no longer property of the receivership estate;

(2) The stay of any other act under Subsection C continues until the earlier of:

(a) The time the delinquency proceeding is closed; or

(b) The time the delinquency proceeding is dismissed.

G. Notwithstanding the provision of Subsection C, but only to the extent not inconsistent with Section 609,

claims against the insurer that arose before the commencement of the delinquency proceeding under this

Act may be asserted as a counterclaim in any judicial, administrative or other action or proceeding initiated

by or on behalf of the receiver against the holder of the claims.

H. On request of a party in interest and after notice and such hearing as the receivership court determines

appropriate, the receivership court may grant relief from the stay of Subsections C or D, such as by

terminating, annulling, modifying or conditioning the stay:

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

(1) For cause; or

(2) With respect to a stay of an act against property under Subsection C if:

(a) The insurer does not have any equity in the property; and

(b) The property is not necessary to an effective plan.

(3) For the purposes of this section, “cause” includes, but is not limited to, if (a) the receiver cancels a

policy, a surety bond, or a surety undertaking, and (b) the creditor is entitled, by contract or law, to

require the insured or the principal to have a policy, a surety bond, or a surety undertaking, and (c)

the insured or the principal fails to obtain a replacement policy, surety bond, or surety undertaking

within the later of thirty (30) days from the date of cancellation or the time permitted by contract

or law.

I. In any hearing under Subsection H, the party seeking relief from the stay shall have the burden of proof on

each issue, which shall be established by clear and convincing evidence.

J. The estate of an insurer that is injured by any willful violation of a stay provided by this section shall be

entitled to actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, the

receivership court may impose additional sanctions.

K. Notwithstanding any other provision of law, no bond shall be required of the commissioner or receiver in

relation to any stay or injunction under this section.

Section 109. Statutes of Limitation

A. If applicable law, an order, or an agreement fixes a period within which the insurer may commence an

action, and this period has not expired before the date of the filing of the initial petition in a delinquency

proceeding, the receiver shall not by reason thereof be barred from commencing such an action if the

receiver does so on or before the later of:

(1) The end of the period, including any suspension of the period occurring on or after the filing of the

initial petition in a delinquency proceeding; or

(2) Four (4) years after the entry of the most recent receivership order.

B. Except as provided in Subsection A, if applicable law, an order or an agreement fixes a period within which

the insurer may file any pleading, demand, notice, or proof of claim or loss, or cure a default in a case or

proceeding, or perform any other similar act, and the period has not expired before the date of the filing of

the petition initiating formal delinquency proceedings, the receiver shall not by reason thereof be barred

from filing, curing or performing, as the case may be, if the receiver does so on or before the later of:

(1) The end of the period, including any suspension of the period occurring on or after the filing of the

initial petition in a delinquency proceeding; or

(2) Sixty (60) days after the entry of the most recent receivership order.

C. If applicable law, an order or an agreement fixes a period for commencing or continuing a civil action in a

court other than the receivership court on a claim against the insurer, and the period has not expired before

the date of the filing of the initial petition in a delinquency proceeding, then the period does not expire until

the later of:

(1) The end of the period, including any suspension of the period occurring on or after the filing of the

initial petition in a delinquency proceeding; or

(2) Thirty (30) days after termination or expiration of the stay pursuant to this section with respect to

the claim.

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Section 110. Cooperation of Officers, Owners and Employees

A. Any present or former officer, manager, director, trustee, owner, employee or agent of an insurer, or any

other person with authority over or in charge of any segment of the insurer’s affairs, shall cooperate with

the commissioner or receiver in any proceeding under this Act or any investigation preliminary to the

proceeding. The term “person” as used in this section, shall include any person who exercises control

directly or indirectly over activities of the insurer through any holding company or other affiliate of the

insurer. “To cooperate” shall include, but shall not be limited to, the following:

(1) To reply promptly in writing to any inquiry from the commissioner or receiver requesting a reply;

and

(2) To promptly make available to the commissioner or receiver any books, accounts, documents, or

other records or information or property of or pertaining to the insurer and in his or her possession,

custody or control.

B. No person shall obstruct or interfere with the commissioner or receiver in the conduct of any delinquency

proceeding or any preliminary or incidental investigation.

C. This section shall not be construed to abridge otherwise existing legal rights, including the right to resist a

petition for liquidation or other delinquency proceedings, or other orders.

D. Any person included within Subsection A who fails to cooperate with the commissioner or receiver, or any

person who obstructs or interferes with the commissioner or receiver in the conduct of any delinquency

proceeding or any preliminary or incidental investigation, or who violates any order validly issued under

this Act, may:

(1) Be sentenced to pay a fine not exceeding $10,000 or to undergo imprisonment for a term of not

more than one year, or both; or

(2) After a hearing, be subject to the imposition by the commissioner of a civil penalty not to exceed

$10,000 and shall be subject further to the revocation or suspension of any insurance licenses

issued by the commissioner.

Section 111. Delinquency Proceedings Commenced Prior to Enactment

Drafting Note: States may draft any provision with regard to application as to existing estates as long as this Act is applicable in its entirety to new

delinquency proceedings. States may provide that this Act will apply to pending delinquency proceedings retrospectively with regard to procedural matters

and prospectively with regard to the substantive rights of persons.

[Alternative 1] The provisions of this Act shall be applicable to proceedings instituted prior to the effective date of this Act.

The provisions of this section shall not affect any final judgment or order entered by a court of competent jurisdiction prior to

the effective date of this Act.

[Alternative 2] The provisions of this Act shall be applicable to proceedings instituted prior to the effective date of this Act.

The provisions of this section shall not affect any final judgment or order entered by a court of competent jurisdiction prior to

the effective date of this Act. Provided that claims against insurers under formal delinquency proceedings prior to the

effective date of this Act shall be adjudicated under the law in effect prior to the effective date of this Act.

[Alternative 3] The provisions of this Act shall not apply to proceedings initiated prior to its effective date, unless the court,

on motion of the commissioner, and after notice and hearing and for good cause shown, directs that all or any part of this Act

shall be applicable to such proceedings.

Drafting Note: States that do not have Fabe cure legislation (proposed as a result of United States Dept. of Treasury v. Fabe, 608 U.S. 491 (1993)) enacted

prior to the proposed effective date of this Act should adopt the Fabe cure legislation prior to the proposed effective date of this Act or should otherwise take

steps to ensure that the Fabe cure is applied in open estates.

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

[Provision that may be added to Alternative 1, 2 or 3] Litigation filed in any court of competent jurisdiction under [cite to

sections of prior law applicable to asset recovery in formal delinquency proceedings] shall be concluded as though [cite to

sections of prior law applicable to asset recovery in formal delinquency proceedings] had not been repealed. Prior sections

regarding insurer receiverships will sunset and be fully repealed after all asset recovery actions under proceedings filed in any

court of competent jurisdiction prior to the effective date of this Act have been concluded.

Section 112. Actions By and Against the Receiver

A. An allegation by the receiver of improper or fraudulent conduct against any person shall not be the basis of

a defense to the enforcement of a contractual obligation owed to the insurer by a third party, but the third

party is not barred by this section from seeking to establish independently as a defense that the conduct was

materially and substantially related to the contractual obligation for which enforcement is sought.

B. No prior wrongful or negligent actions of any present or former officer, manager, director, trustee, owner,

employee or agent of the insurer may be asserted as a defense to a claim by the receiver under a theory of

estoppel, comparative fault, intervening cause, proximate cause, reliance, mitigation of damages or

otherwise; except that the affirmative defense of fraud in the inducement may be asserted against the

receiver in a claim based on a contract and a principal under a surety bond or a surety undertaking shall be

entitled to credit against any reimbursement obligation to the receiver for the value of any property pledged

to secure the reimbursement obligation to the extent that the receiver has possession or control of the

property or the insurer or its agents misappropriated (including, but not limited to, commingling) such

property. Evidence of fraud in the inducement will be admissible only if it is contained in the records of the

insurer.

C. No action or inaction by the insurance regulatory authorities may be asserted as a defense to a claim by the

receiver.

D. A judgment or order entered against an insured or the insurer in contravention of any stay or injunction

under this Act, or at any time by default or collusion, shall not be considered as evidence of liability or of

the quantum of damages in adjudicating claims filed in the estate arising out of the subject matter of the

judgment or order.

E. The provisions of Subsection D do not apply to guaranty associations’ claims for amounts paid on

settlements and judgments in pursuit of their statutory obligations.

F. The receiver shall not be deemed a governmental entity for the purposes of any state law awarding fees to a

litigant who prevails against a governmental entity.

Section 113. Unrecorded Obligations and Defenses Of Affiliates

A. In any proceeding or claim by the receiver, no affiliate, controlled or controlling person, or present or

former officer, manager, director, trustee or shareholder of the insurer may assert any defense, unless

evidence of the defense was recorded in the books and records of the insurer at or about the time the events

giving rise to the defense occurred and, if required by statutory accounting practices and procedures, was

timely reported on the insurer’s official financial statements filed with the [insert state regulatory official].

B. No affiliate, controlled or controlling person, or present or former officer, manager, director, trustee or

shareholder of the insurer may assert any claim, unless the obligations were recorded in the books and

records of the insurer at or about the time the obligations were incurred and, if required by statutory

accounting practices and procedures, were timely reported on the insurer’s official financial statements

filed with the [insert state regulatory official].

C. Claims by the receiver against any affiliate, controlled or controlling person, or present or former officer,

manager, director, trustee or shareholder of the insurer based on unrecorded or unreported transactions shall

not be barred by this section.

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Section 114. Executory Contracts

A. The receiver may assume or reject any executory contract or unexpired lease of the insurer.

B. If there has been a default in an executory contract or unexpired lease of the insurer, the receiver may not

assume the contract or lease unless, at the time of the assumption of the contract or lease, the receiver:

(1) Cures or provides adequate assurance that the receiver will promptly cure the default; and

(2) Provides adequate assurance of future performance under the contract or lease.

C. Subsection B does not apply to a default that is a breach of a provision relating to:

(1) The insolvency or financial condition of the insurer at any time before the closing of the

delinquency proceeding;

(2) The appointment of or taking possession by a receiver in a case under this Act or a custodian

before the commencement of the delinquency proceeding; or

(3) The satisfaction of any penalty rate or provision relating to a default arising from any failure of the

insurer to perform non-monetary obligations under the executory contract or unexpired lease.

D. A claim arising from the rejection, under this section or under a plan of rehabilitation or liquidation, of an

executory contract or unexpired lease of the insurer that has not been assumed shall be determined, and

shall be treated and classified as though the claim had arisen before the date of the filing of a successful

petition commencing the delinquency proceeding.

Section 115. Immunity and Indemnification of the Receiver and Assistants

[Alternative 1]

A. For the purposes of this section, the persons entitled to immunity and indemnification, and those entitled to

only immunity, as applicable, are:

(1) All present and former receivers responsible for the conduct of a delinquency proceeding under

this Act;

(2) All of the receiver’s present and former assistants. For purposes of this section, “receiver’s

assistants” shall be defined to include the following:

(a) All present and former special deputies and assistant special deputies engaged by contract

or otherwise;

(b) All persons whom the receiver, special deputies, or assistant special deputies have

employed to assist in a delinquency proceeding under this Act; and

(3) All of the receiver’s present and former contractors. For purposes of this section, “receiver’s

contractors” shall be defined to include all persons with whom the receiver, special deputies or

assistant special deputies have contracted to assist in a delinquency proceeding under this Act, e.g.

attorneys, accountants, auditors, actuaries, investment bankers, financial advisors, and any other

professionals or firms who are retained or contracted with by the receiver as independent

contractors and all employees of the contractors.

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

B. The receiver, the receiver’s assistants, and the receiver’s contractors shall have immunity under this Act, as

follows:

(1) The receiver, the receiver’s assistants, and the receiver’s contractors shall have official immunity

and shall be immune from suit and liability, both personally and in their official capacities, for any

claim for damage to or loss of property or personal injury or other civil liability caused by or

resulting from any alleged act, error or omission of the receiver or any assistant or contractor

arising out of or by reason of their duties or employment.

(2) In addition, the receiver, the receiver’s assistants, and the receiver’s contractors shall have

absolute judicial immunity and shall be immune from suit and liability, both personally and in

their official capacities, for any claim for damage to or loss of property or personal injury or other

civil liability caused by or resulting from any alleged act, error or omission of the receiver,

assistant or contractor arising out of or by reason of any matters that have been subject to review

by the receivership court after notice and opportunity to be heard, provided that the alleged act,

error or omission was not disapproved or disallowed by the receivership court.

(3) Nothing in this Act shall be construed to provide official immunity or judicial immunity or to

otherwise hold the receiver or any assistant or contractor immune from suit and liability for any

damage, loss, injury or liability caused by the intentional or willful and wanton misconduct of the

receiver, any assistant or contractor.

C. The receiver and the receiver’s assistants shall be entitled to indemnification under this Act, as follows:

(1) If any legal action is commenced against the receiver or any assistant, whether against the receiver

or assistant personally or in their official capacity, alleging property damage, property loss,

personal injury or other civil liability caused by or resulting from any alleged act, error or

omission of the receiver or any assistant arising out of or by reason of their duties or employment,

the receiver and any assistant shall be indemnified from the assets of the insurer for all expenses,

attorneys’ fees, judgments, settlements, decrees or amounts due and owing or paid in satisfaction

of or incurred in the defense of the legal action unless it is determined upon a final adjudication on

the merits that the alleged act, error or omission of the receiver or assistant giving rise to the claim

did not arise out of or by reason of their duties or employment, or was caused by intentional or

willful and wanton misconduct.

(2) Attorneys’ fees and any and all related expenses incurred in defending a legal action for which

immunity or indemnity is available under this section shall be paid from the assets of the insurer,

as they are incurred, in advance of the final disposition of the action upon receipt of an agreement

by or on behalf of the receiver or assistant to repay the attorneys’ fees and expenses if it shall

ultimately be determined upon a final adjudication on the merits that the receiver or assistant is not

entitled to immunity or indemnity under this section.

(3) Any indemnification for expense payments, judgments, settlements, decrees, attorneys’ fees,

surety bond premiums or other amounts paid or to be paid from the insurer’s assets pursuant to

this section shall be an administrative expense of the insurer.

(4) In the event of any actual or threatened litigation against a receiver or any assistant for which

immunity or indemnity may be available under this section, a reasonable amount of funds which

in the judgment of the receiver may be needed to provide immunity or indemnity shall be

segregated and reserved from the assets of the insurer as security for the payment of indemnity

until all applicable statutes of limitation shall have run and all actual or threatened actions against

the receiver or any assistant have been completely and finally resolved, and all obligations under

this section shall have been satisfied.

(5) In lieu of segregation and reserving of funds, the receiver may, in the receiver’s discretion, obtain

a surety bond or make other arrangements that will enable the receiver to fully secure the payment

of all obligations under this section.

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(6) If any legal action against an assistant for which indemnity may be available under this section is

settled prior to final adjudication on the merits, the receiver shall pay the settlement amount on

behalf of the assistant, or indemnify the assistant for the settlement amount, unless the receiver

determines:

(a) That the claim did not arise out of or by reason of the assistant’s duties or employment;

(b) That the claim was caused by the intentional or willful and wanton misconduct of the

assistant.

(7) In any legal action in which a claim is asserted against the receiver, that portion of any settlement

relating to the alleged act, error or omission of the receiver shall be subject to the approval of the

receivership court. The receivership court shall not approve that portion of the settlement if it

determines:

(a) That the claim did not arise out of or by reason of the receiver’s duties or employment; or

(b) That the claim was caused by the intentional or willful and wanton misconduct of the

receiver.

D. Nothing contained or implied in this section shall operate, or be construed or applied to deprive the

receiver, the receiver’s assistants or receiver’s contractors of any immunity, indemnity, benefits of law,

rights or any defense otherwise available.

E. The immunity and indemnification provided to the receiver’s assistants and the immunity provided to the

receiver’s contractors under this section shall not apply to any action by the receiver against such person.

F. Subsection B shall apply to any suit based in whole or in part on any alleged act, error or omission that

takes place on or after the effective date of this Act.

G. No legal action shall lie against the receiver or any assistant based in whole or in part on any alleged act,

error or omission that took place prior to the effective date of this Act, unless suit is filed and valid service

of process is obtained within twelve (12) months after the effective date of this Act.

H. Subsection C shall apply to any suit that is pending on or filed after the effective date of this Act without

regard to when the alleged act, error or omission took place.

Drafting Note: If state law provides for a self-insurance program that affords protection that is substantially similar to the provisions of Section 115, the

state may utilize the program for indemnification purposes and corresponding immunity provisions in lieu of Section 115.

[Alternative 2] There shall be no liability on the part of, and no cause of action of any nature shall arise against, the

department or its employees, the commissioner, in his or her capacity as receiver or otherwise, a special deputy, the receiver’s

assistants or the receiver’s contractors for any action taken by them in performance of their powers and duties under this Act.

Section 116. Approval and Payment of Expenses

A. The receiver may pay any expenses under contracts, leases, employment agreements or other arrangements

entered into by the insurer prior to receivership, as he or she deems necessary for the purposes of this Act.

The receiver is not required to pay any such expenses that he or she determines are not necessary and may

reject any contract pursuant to Section 114.

B. Receivership expenses other than those described in Subsection A shall be paid as follows:

(1) The receiver shall submit an application pursuant to Section 107 to the receivership court to

approve:

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

(a) The terms of compensation of each special deputy or contractor where the total amount of

the compensation is reasonably expected by the receiver for the duration of the

delinquency proceeding to exceed an amount established by the receivership court; and

(b) Any other anticipated expense in excess of an amount established by the receivership

court.

(2) The receiver may, as the receiver deems appropriate, submit an application to approve any

compensation, anticipated expenses or incurred expenses not described in Paragraph (1).

(3) The receiver may pay as incurred any expenses not requiring receivership court approval and any

expenses approved in the rehabilitation or liquidation order.

(4) The approval of expenses by the receivership court shall not prejudice the right of the receiver to

seek any recovery, recoupment, disgorgement or reimbursement of fees based on contract or

causes of action recognized in law or in equity.

C. On an annual or more frequent basis, the receiver shall submit to the receivership court a report

summarizing the expenses incurred in the prior period.

D. Receivership court approval shall not be required to pay expenses incurred by the receiver in connection

with the appeal of an order of the receivership court.

E. [Alternative 1] All expenses of receivership shall be paid from the assets of the insurer, except as provided

in this subsection. In the event that the insurer does not have sufficient cash or liquid assets to defray the

expenses incurred, the commissioner may advance funds out of any appropriation for the maintenance of

the insurance department. Any amounts advanced shall be repaid to the commissioner out of the first

available moneys of the insurer.

[Alternative 2] All expenses of receivership shall be paid from the assets of the insurer, except as provided

in this subsection. In the event that the property of the insurer does not contain sufficient cash or liquid

assets to defray the expenses incurred, the commissioner may advance funds from the account established

under Subsection 804C. Any amounts advanced shall be repaid to the account out of the first available

moneys of the insurer.

Drafting Note: States may utilize the term “application”, “motion” or such other term that is considered appropriate in their state.

Drafting Note: Alternative 2 is only appropriate if Alternative 1 to Section 804 is enacted.

Section 117. Financial Reporting

A. Within 180 days after the entry of an order of receivership by the receivership court, and at least quarterly

thereafter, the receiver shall comply with all requirements for receivership financial reporting as specified

by the National Association of Insurance Commissioners. The financial reports shall include, at a

minimum, a statement of the assets and liabilities of the insurer, the changes in those assets and liabilities

and all funds received or disbursed by the receiver during that reporting period. These reports will also be

filed with the receivership court. The receiver may qualify any financial report or provide notes to the

financial statement for further explanation. The receivership court may order the receiver to provide such

additional information as it deems appropriate.

B. Within 180 days after the entry of an order of liquidation by the receivership court, and at least quarterly

thereafter, or at such other intervals as may be agreed to between the liquidator and the guaranty

associations, but in no event less than annually, each affected guaranty association shall file reports with

the liquidator. The reports shall be in a format compatible to that specified by the National Association of

Insurance Commissioners. These reports also shall be filed with the receivership court.

C. For good cause shown, the receivership court may grant relief for an extension or modification of time to

comply with Subsection A or B above or such other relief as may be appropriate.

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Section 118. Records

A. Upon entry of an order of conservation, rehabilitation or liquidation, the receiver shall be vested with title

to all of the books, documents, papers, policy information, claim files and all other records of the insurer of

whatever nature, in whatever medium and wherever located, regardless of whether the records are in the

custody and control of third-party administrators, managing general agents, attorneys or other

representatives of the insurer. The receiver may immediately take possession and control of all of the

records of the insurer, and of the premises where the records are located. Third-party administrators,

managing general agents, attorneys and other representatives of the insurer shall release all such records to

the receiver, or to the receiver’s designee, at the request of the receiver. The guaranty associations that have

or may have obligations under policies issued by the insurer have the right, with the receiver’s approval, to

take necessary actions to obtain directly from any third-party administrator, managing general agent,

attorney or other representative of the insurer all records pertaining to the insurer’s business that are

appropriate or necessary for the guaranty associations to fulfill their statutory obligations.

B. The receiver shall have the authority to certify the records of a delinquent insurer described in Subsection A

and the records of the receiver’s office created and maintained in connection with a delinquent insurer, as

follows:

(1) Records of a delinquent insurer may be certified by the receiver in an affidavit stating that the

records are true and correct copies of records of the insurer that were received from the custody of

the insurer, or found among its effects.

(2) Records created by or filed with the receiver’s office in connection with a delinquent insurer may

be certified by the receiver’s affidavit stating that the records are true and correct copies of records

maintained by the receiver’s office.

C. Original books, documents, papers, and other records, or copies thereof certified under Subsection B, when

admitted in evidence shall be prima facie evidence of the facts disclosed and shall be admissible in

evidence in the same manner as documents certified pursuant to [insert citation to state equivalent of F.R.E.

902(1)]. Certification of records by the receiver pursuant to this section shall be deemed to satisfy the

requirements of [insert citation to state equivalent of F.R.E. 803(6)] and such records shall not be subject to

objection under the hearsay rule.

D. The records of a delinquent insurer held by the receiver shall not be considered as records of the

Department of Insurance for any purposes, and the [insert citation to public records act] shall not apply to

these records.

ARTICLE II. PROCEEDINGS

Section 201. Receivership Court’s Seizure Order

A. The commissioner may file in the [insert proper court] court of this state a petition with respect to an

insurer domiciled in this state, an unauthorized insurer or, pursuant to Section 1001, a foreign insurer:

(1) Alleging that there exist grounds that would justify a court order for a formal delinquency

proceeding against the insurer under this Act;

(2) Alleging that the interests of policyholders, creditors or the public will be endangered by delay;

and

(3) Setting forth the contents of a seizure order deemed necessary by the commissioner.

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

B. Upon a filing under Subsection A, the receivership court may issue forthwith, ex parte and without notice

or hearing, the requested seizure order, which shall direct the commissioner to take possession and control

of all or a part of the property, books, accounts, documents and other records of an insurer, and of the

premises occupied by it for transaction of its business, and until further order of the receivership court

enjoin the insurer and its officers, managers, agents and employees from disposition of its property and

from the transaction of its business except with the written consent of the commissioner. Any person

having possession or control of and refusing to deliver any of the books, records or assets of a person

against whom a seizure order has been issued shall be guilty of a misdemeanor and punishable by a fine not

exceeding $1,000 or imprisonment not exceeding one year, or both fine and imprisonment.

C. Any petition that prays for injunctive relief shall be verified by the commissioner or the commissioner’s

designee, but need not plead or prove irreparable harm or inadequate remedy at law. The commissioner

shall provide only such notice as the receivership court may require.

D. The receivership court shall specify in the seizure order what its duration shall be, which shall be the time

the receivership court deems necessary for the commissioner to ascertain the condition of the insurer. On

motion of the commissioner or the insurer or on its own motion, the receivership court may from time to

time hold such hearings as it deems desirable after the notice as it deems appropriate, and may extend,

shorten or modify the terms of the seizure order. The receivership court shall vacate the seizure order if the

commissioner fails to commence a formal proceeding under this Act after having had a reasonable

opportunity to do so. An order of the receivership court pursuant to a formal proceeding under this Act

shall vacate the seizure order.

E. Entry of a seizure order under this section shall not constitute a breach or an anticipatory breach of any

contract of the insurer.

F. An insurer subject to an ex parte seizure order under this section may petition the receivership court at any

time after the issuance of a seizure order for a hearing and review of the seizure order. The receivership

court shall hold the hearing and review not more than fifteen (15) days after the request. A hearing under

this subsection may be held privately in chambers and it shall be so held if the insurer proceeded against so

requests.

G. If, at any time after the issuance of a seizure order, it appears to the receivership court that any person

whose interest is or will be substantially affected by the seizure order did not appear at the hearing and has

not been served, the receivership court may order that notice be given to the person. An order that notice be

given shall not stay the effect of any seizure order previously issued by the receivership court.

H. Whenever the commissioner makes any seizure as provided in Subsection B, on the demand of the

commissioner, it shall be the duty of the sheriff of any county of this state, and of the police department of

any municipal corporation therein to furnish the commissioner with necessary deputies, patrolmen or

officers to assist the commissioner in making and enforcing the seizure order.

Section 202. Commencement of Formal Delinquency Proceeding

A. Any formal delinquency proceeding against a person shall be commenced by filing a petition in the name

of the commissioner or department.

B. The petition shall state the grounds upon which the proceeding is based and the relief requested, and may

include a prayer for restraining orders and injunctive relief as described in Section 108. Upon the filing of

the petition, a notice thereof shall be forwarded by first class mail or electronic communication as permitted

by the receivership court to the commissioners and guaranty associations in states in which the insurer did

business.

C. Any petition that prays for injunctive relief shall be verified by the commissioner or the commissioner’s

designee, but need not plead or prove irreparable harm or inadequate remedy at law. The commissioner

shall provide only such notice as the receivership court may require.

D. If any temporary restraining order is prayed for:

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(1) The receivership court may issue an initial order containing the relief requested;

(2) The order shall state the time and date of its issuance;

(3) The receivership court shall set a time and date for the return of summons, not more than ten (10)

days from the time and date of the issuance of the initial order, at which time the person proceeded

against may appear before the receivership court for a summary hearing; and

(4) The order shall not continue in effect beyond the time and date set for the return of summons,

unless the receivership court shall expressly enter one or more orders extending the restraining

order.

E. If no temporary restraining order is requested, the receivership court shall cause summons to be issued. The

summons shall specify a return date not more than thirty (30) days after issuance and that an answer must

be filed at or before the return date.

Section 203. Return of Summons and Summary Hearing

A. The receivership court shall hold a summary hearing at the time and date for the return of summons on a

petition to commence a formal delinquency proceeding.

B. If a person is not served with summons on a petition to commence a formal delinquency proceeding and

fails to appear for the summary hearing, the receivership court shall:

(1) Continue the summary hearing not more than ten (10) days;

(2) Provide for alternative service of summons upon the person; and

(3) Extend any restraining order.

C. Upon a showing of good faith efforts to effect personal service upon a person who has failed to appear for a

continued summary hearing, the receivership court shall order notice of the petition to commence a formal

delinquency proceeding to be published. The order and notice shall specify a return date not less than ten

(10) nor more than twenty (20) days after the publication and that the restraining order has been extended

to the continued hearing date.

D. If a person fails to appear for a summary hearing on a petition to commence a formal delinquency

proceeding after service of summons, the receivership court shall enter judgment in favor of the

commissioner against that person.

E. (1) A person who appears for the summary hearing on a petition to commence a formal delinquency

proceeding shall file its answer at the hearing and the receivership court shall:

(a) Determine whether to extend any temporary restraining orders pending final judgment;

and

(b) Set the case for trial on a date not more than ten (10) days from the summary hearing.

(2) The receivership court shall grant no continuance for filing an answer.

Section 204. Proceedings for Expedited Trial: Continuances, Discovery, Evidence

A. The receivership court shall proceed to hear the case on the petition to commence a formal delinquency

proceeding at the time and date set forth for trial without a jury and without unnecessary delays. To the

extent practicable, the receivership court shall give precedence to the matter over all other matters. To the

extent authorized by law, the receivership court may assign the matter to other judges if necessary to

comply with the need for expedited proceedings under this Act.

B. Continuances for trial shall be granted only in extreme circumstances.

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

C. The receivership court shall admit as self-authenticated any of the following when offered by the

commissioner:

(1) Certified copies of the financial statements made by the insurer or an affiliate;

(2) Certified copies of examination reports of the insurer or an affiliate made by or on behalf of the

commissioner;

(3) Certified copies of any other document filed with any insurance department by the insurer or an

affiliate.

D. The facts contained in any examination report of the insurer or an affiliate made by or on behalf of the

commissioner shall be presumed to be true as of the date of the hearing if the examination was made as of a

date not more than 270 days before the petition was filed. The presumption shall be rebuttable and shall

shift the burden of production and persuasion to the insurer.

E. Discovery shall be limited to grounds alleged in the petition, and shall be concluded on an expedited basis.

Section 205. Decision and Appeals

A. The receivership court shall enter judgment on the petition to commence formal delinquency proceeding

within fifteen (15) days after the conclusion of the evidence.

B. Any order entered pursuant to Subsection A shall be final when entered. Any appeal shall be handled on an

expedited basis and shall be taken within five (5) days of entry of the judgment.

C. Absent entry of an order staying the order pursuant to Subsection D, the order shall be of full force and

effect and the receiver shall carry out its terms and the provisions of this Act. No request for

reconsideration, review or appeal, and no posting of a bond, shall dissolve or stay the judgment.

D. A motion for a stay of the judgment, for approval of a supersede as bond or for other relief pending appeal

must be presented to the receivership court in the first instance. Subject to the power of the appropriate

appellate courts, the receivership court may suspend or otherwise modify an order entered under Subsection

A or make any other appropriate order governing the enforceability of such order during the pendency of an

appeal on such terms as will protect the rights of all parties in interest.

E. The receivership court or any appellate court to which the matter is presented may condition any relief it

grants under Subsection D on the filing of a bond or other appropriate security with the receivership court.

F. The provisions of Section 115 shall apply to all acts taken during the pendency of an appeal regardless of

its ultimate disposition.

G. The reversal or modification on appeal of an order of conservation, rehabilitation or liquidation does not

affect the validity of the acts of the receiver pursuant to the order unless the order is stayed pending appeal.

Section 206. Confidentiality

A. In all proceedings and judicial reviews under Section 201, all records of the insurer, department files, court

records and papers, and other documents, so far as they pertain to or are a part of the record of the

proceedings, shall be and remain confidential, and all papers filed with the clerk of the [insert proper court]

court shall be held by the clerk in a confidential file as permitted by law, except to the extent necessary to

obtain compliance with any order entered in connection with the proceedings, unless and until:

(1) The [insert proper court] court, after hearing argument in chambers, shall order otherwise;

(2) The insurer requests that the matter be made public; or

(3) The commissioner applies for an order under Section 207.

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B. The commissioner, conservator or rehabilitator may share documents, materials or other information in the

possession, custody or control of the department, pertaining to an insurer that is the subject of a

delinquency proceeding under this Act, with other state, federal and international regulatory agencies, with

the National Association of Insurance Commissioners and its affiliates and subsidiaries, and with state,

federal and international law enforcement authorities, with an auditor appointed by the receivership court in

accordance with Section 905, with representatives of guaranty associations that may have statutory

obligations as a result of the insolvency of the insurer provided that the recipient agrees to maintain the

confidentiality of the documents, material or other information. In the event that the domiciliary receiver

believes that certain information is sensitive, the receiver may share that information subject to a

continuation of the confidentiality obligations beyond the period allowed in Subsection D. Nothing in this

section shall limit the power of the commissioner to disclose information under other applicable law.

C. A domiciliary receiver shall permit a commissioner of another state or a guaranty association to obtain a

listing of policyholders and certificate holders residing in the requestor’s state, including current addresses

and summary policy information, provided that the commissioner of another state or the guaranty

association agrees to maintain the confidentiality of the records, and agrees that the records will be used

only for regulatory or guaranty association purposes. Access to records may be limited to normal business

hours. In the event that the domiciliary receiver believes that certain information is sensitive and disclosure

might cause a diminution in recovery, the receiver may apply for a protective order imposing additional

restrictions on access.

D. The confidentiality obligations imposed by this section shall end upon the entry of an order of liquidation

against the insurer, unless otherwise agreed to by the parties or pursuant to an order of the receivership

court. Any continuation of confidentiality as provided in Subsection B shall not apply to any insurer

records necessary for the guaranty associations to discharge their statutory responsibilities.

E. No waiver of any applicable privilege or claim of confidentiality shall occur as a result of any disclosure, or

any sharing of documents, materials or other information, made pursuant to this section.

Section 207. Grounds for Conservation, Rehabilitation or Liquidation

The commissioner may file in the [insert proper court] court of this state a petition with respect to an insurer domiciled in this

state or an unauthorized insurer for an order of conservation, rehabilitation or liquidation on any one or more of the following

grounds:

A. The insurer is impaired;

B. The insurer is insolvent;

C. The insurer is about to become insolvent. An insurer is about to become insolvent for purposes of this

section if it is reasonably anticipated that the insurer will not have liquid assets to meet its next ninety (90)

days’ current obligations;

D. The insurer has neglected or refused to comply with an order of the commissioner to make good within the

time prescribed by law any deficiency, whenever its capital and minimum required surplus, if a stock

company, or its surplus, if a company other than stock, has become impaired;

E. The insurer, its parent company, its subsidiaries or its affiliates have converted, wasted or concealed

property of the insurer, or otherwise improperly disposed of, dissipated, used, released, transferred, sold,

assigned, hypothecated or removed the property of the insurer;

F. The insurer is in such condition that it could not meet the requirements for organization and authorization

as required by law, except as to the amount of the original surplus required of a stock company under

Section [insert proper section], and except as to the amount of the surplus required of a company other than

a stock company in excess of the minimum surplus required to be maintained;

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

G. The insurer, its parent company, its subsidiaries or its affiliates have concealed, removed, altered, destroyed

or failed to establish and maintain books, records, documents, accounts, vouchers and other pertinent

material adequate for the determination of the financial condition of the insurer by examination under

Section [insert citation to examination authority statute in state’s general insurance laws], or has failed to

properly administer claims or maintain claims records that are adequate for the determination of its

outstanding claims liability;

H. At any time after the issuance of an order under Section [insert citation to corrective orders statute in state’s

general insurance laws], or at the time of instituting any proceeding under this Act, it appears to the

commissioner that upon good cause shown, it would not be in the best interest of the policyholders,

creditors or the public to proceed with the conduct of the business of the insurer;

I. The insurer is in such condition that the further transaction of business would be hazardous financially,

according to [insert citation to state’s enactment of the NAIC Model Regulation to Define Standards and

Commissioner’s Authority for Companies Deemed to be in Hazardous Financial Condition] or otherwise,

to its policyholders, creditors or the public;

J. There is reasonable cause to believe that there has been embezzlement from the insurer, wrongful

sequestration or diversion of the insurer’s property, forgery or fraud affecting the insurer, or other illegal

conduct in, by, or with respect to the insurer that if established would endanger assets in an amount

threatening the solvency of the insurer;

K. Control of the insurer is in a person who is dishonest, untrustworthy or so lacking in insurance company

managerial experience or capability as to be hazardous to policyholders, creditors or the public;

L. Any person who in fact has executive authority in the insurer, whether an officer, manager, general agent,

director or trustee, employee, shareholder, or other person, has refused to be examined under oath by the

commissioner concerning its affairs, whether in this state or elsewhere; or if examined under oath refuses to

divulge pertinent information reasonably known to the person; and after reasonable notice of the fact, the

insurer has failed promptly and effectively to terminate the employment and status of the person and all his

or her influence on management;

M. After demand by the commissioner under Section [cite examination law] or under this Act, the insurer has

failed to promptly make available for examination any of its own property, books, accounts, documents, or

other records, or those of any subsidiary or related company within the control of the insurer, or those of

any person having executive authority in the insurer so far as they pertain to the insurer;

N. Without first obtaining the written consent of the commissioner, the insurer has transferred, or attempted to

transfer, in a manner contrary to Sections [cite holding company law] or [cite bulk reinsurance law],

substantially its entire property or business, or has entered into any transaction the effect of which is to

merge, consolidate or reinsure substantially its entire property or business in or with the property or

business of any other person;

O. The insurer or its property has been or is the subject of an application for the appointment of a receiver,

trustee, custodian, conservator, sequestrator or similar fiduciary of the insurer or its property otherwise than

as authorized under the insurance laws of this state;

P. Within the previous five (5) years the insurer has willfully and continuously violated its charter or articles

of incorporation, its bylaws, any insurance law of this state, or any valid order of the commissioner;

Q. The insurer has failed to pay within sixty (60) days after the due date any obligation to any state or any

subdivision thereof or any judgment entered in any state, if the court in which the judgment was entered

had jurisdiction over the subject matter except that nonpayment shall not be a ground until sixty (60) days

after any good faith effort by the insurer to contest the obligation has been terminated, whether it is before

the commissioner or in the courts;

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R. The insurer has systematically engaged in the practice of reaching settlements with and obtaining releases

from claimants, and then unreasonably delaying payment, or failing to pay the agreed-upon settlements, or

systematically attempted to compromise with claimants or other creditors on the ground that it is financially

unable to pay its claims or obligations in full;

S. The insurer has failed to file its annual report or other financial report required by statute within the time

allowed by law;

T. The board of directors or the holders of a majority of the shares entitled to vote, or a majority of those

individuals entitled to the control of those entities specified in Section 103, request or consent to

conservation, rehabilitation or liquidation under this Act;

U. The insurer does not comply with its domiciliary state’s requirements for issuance to it of a certificate of

authority, or its certificate of authority has been revoked by its state of domicile; or

V. When authorized by [cite risk-based capital law].

Section 208. Entry of Order

If the commissioner establishes any of the grounds provided in Section 207, then the receivership court shall grant the

petition and issue the order of conservation, rehabilitation or liquidation requested in the petition. Upon the issuance of the

order, a copy shall be forwarded by first class mail or electronic communication as permitted by the receivership court to the

commissioners and guaranty associations in states in which the insurer did business.

Section 209. Effect of Order of Conservation, Rehabilitation or Liquidation

A. The filing or recording of an order of receivership with the clerk of the [insert proper court] court or

recorder of deeds of the county in which the principal business of the company is conducted, or, in the case

of real estate, with the recorder of deeds of the county where the property is located, shall impart the same

notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that recorder of deeds

would have imparted.

Drafting Note: Filing requirements should conform to existing state law.

B. Neither the filing of a petition commencing delinquency proceedings under this Act nor the entry of any

order of seizure, conservation, rehabilitation or liquidation shall constitute a breach or an anticipatory

breach of any contract or lease of the insurer.

C. The receiver may appoint one or more special deputies. A special deputy shall have all the powers and

responsibilities of the receiver granted under this section, unless specifically limited by the receiver and

shall serve at the pleasure of the receiver. The receiver may employ or contract with legal counsel,

actuaries, accountants, appraisers, consultants, clerks, assistants and such other personnel as may be

deemed necessary. Any special deputy or other person with whom the receiver contracts under this

subsection shall be considered to be an agent of the commissioner only in the commissioner’s capacity as

receiver, and shall not be considered an agent of the state. The provisions of any law governing the

procurement of goods and services by the state shall not apply to any contract entered into by the

commissioner as receiver. The compensation of any special deputies, employees and contractors and all

expenses of taking possession of the insurer and of conducting the receivership shall be determined by the

receiver, with the approval of the receivership court in accordance with Section 116, and shall be paid out

of the property of the insurer. If the receiver, in his or her sole discretion, deems it necessary to the proper

performance of the receiver’s duties under this Act, the receiver may appoint an advisory committee of

policyholders, claimants or other creditors including guaranty associations. The committee shall serve at

the pleasure of the receiver and shall serve without compensation and without reimbursement for expenses.

The receiver or the receivership court in proceedings conducted under this Act may not appoint any other

committee of any nature.

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

ARTICLE III. CONSERVATION

Section 301. Conservation Orders

A. An order to conserve the business of an insurer shall appoint the commissioner and his or her successors in

office as the conservator and shall direct the conservator to take possession [and title] of the assets of the

insurer, and to administer them under the general supervision of the court.

Drafting Note: Adding “and title” is optional.

B. Any order issued under this section shall require accountings to the receivership court by the conservator.

Accountings shall be at such intervals as the receivership court specifies in its order, but no less frequently

than semi-annually.

C. Unless otherwise directed by the receivership court, the conservator shall, within five (5) days of entry of

an order of conservation, give or cause to be given notice of the order of conservation by first class mail or

electronic communication to the guaranty associations of this state and any other guaranty association that

has or may have obligations as a result of the delinquency proceeding.

Section 302. Powers and Duties of the Conservator

A. The conservator shall conduct an analysis of the business and financial condition of the insurer to

determine if, in the best judgment of the conservator, it will be possible to correct the problems that led to

the order of conservation and restore the insurer to private management and normal operations. Within 180

days of an order of conservation, the conservator shall file a [motion or application] in the receivership

court asking that:

(1) The insurer be released from conservation, subject to Section 901;

(2) The insurer be placed into rehabilitation; or

(3) The insurer be placed into liquidation.

B. The period for filing the [motion or application] may be extended by the receivership court upon the motion

of the conservator for one additional period of 180 days.

C. With receivership court approval pursuant to Section 107, the conservator may take such action as the

conservator deems necessary or appropriate to reform and revitalize the insurer, including but not limited

to, canceling policies, insurance and reinsurance contracts (other than life or health insurance or annuities),

surety bonds or surety undertakings, or transferring policies, insurance and reinsurance contracts, surety

bonds or surety undertakings to a solvent assuming insurer. The conservator shall have all the powers of the

directors, officers and managers of the insurer, whose authority shall be suspended, except as redelegated

by the conservator. The conservator shall have full power to direct and manage, to hire and discharge

employees, and to deal with the property and business of the insurer. The conservator shall not be liable

under [cite to state version of statute imposing liability for issuing policies while insolvent] as the result of

good faith issuance or renewal of policies while in conservation.

D. If it appears to the conservator that there has been criminal or tortious conduct, or breach of any contractual

or fiduciary obligation detrimental to the insurer by any officer, manager, agent, broker, employee, affiliate

or other person, the conservator may pursue all appropriate legal remedies on behalf of the insurer.

E. The conservator may assert all defenses available to the insurer as against third persons, including statutes

of limitation, statutes of frauds, and the defense of usury. A waiver of any defense by the insurer after a

petition pursuant to Sections 201 or 207 has been filed shall not bind the conservator.

F. The enumeration, in this section, of the powers and authority of the conservator shall not be construed as a

limitation upon the conservator, nor shall it exclude in any manner the right to do other acts not specifically

enumerated or otherwise provided for, as may be necessary or appropriate for the accomplishment of or in

aid of the purpose of conservation.

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Section 303. Coordination With Guaranty Associations and Orderly Transition to Rehabilitation or Liquidation

A. Upon the entry of an order of conservation or as soon thereafter as is practical, the conservator or his or her

designated representative shall consult with the potentially obligated guaranty associations or their

designated representatives to determine the extent to which the guaranty associations will be impacted by

or may assist in the efforts to conserve the insurer, and shall also provide appropriate information to the

guaranty associations to allow them to evaluate and discharge their statutory responsibilities. The

conservator shall begin appropriate contingency planning and organizing so that an orderly transition to

liquidation occurs, if liquidation is necessary. An orderly transition to liquidation requires, among other

things, that: (i) the conservator to the fullest extent possible reserve sufficient assets to continue to meet

obligations under insurance policies of the insolvent insurer until the guaranty associations are triggered,

and (ii) the conservator shall conduct affairs in such a way and cooperate as necessary with the guaranty

associations that may become liable as a result of the insolvency of the insurer to ensure that the guaranty

associations are provided with appropriate information, along with necessary updates at reasonable

intervals, and a reasonable period of time to plan and organize so that the guaranty associations are able to

properly discharge statutory responsibilities upon being triggered.

B. Upon a determination by the commissioner or conservator that the insurer should be rehabilitated, the

commissioner or conservator or his or her designated representative shall consult with the potentially obligated

guaranty associations to advise them of the decision to seek an order of rehabilitation.

C. Upon a determination by the commissioner or a receiver that the insurer should be liquidated, the commissioner

or receiver or his or her designated representative shall participate in cooperative efforts with the potentially

obligated guaranty associations to ensure that an orderly transition to liquidation occurs. The conservator shall

make available to the guaranty associations the information necessary to discharge their responsibilities upon

becoming statutorily obligated. To the extent that information is available, or as it becomes available, the

conservator shall provide appropriate information to guaranty associations in the states where the insurer

transacted business.

D. Appropriate information as referred to in this section at a minimum includes the following for lines of business

written by the insurer (whether covered or not covered by guaranty associations): a general description of the

different types of business written or assumed by the insurer; claim counts and policy counts by state and by

line of business; claim and policy reserves; account values; cash surrender values; policy loans; interest

crediting history; premiums and mode of payment; unpaid claims and amounts; sample policies and

endorsements; listing of different locations of claim files; if third party administrators were used, copies of

executed contracts and a description of the contractual arrangements; and information concerning claims in

litigation or dispute, including a listing of claims with assigned defense counsel for those claims going to trial in

the near future after a possible liquidation date. Appropriate information also includes information concerning

states in which the insurer is or was licensed and time periods for which the insurer is or was licensed; and other

information reasonably requested by a guaranty association necessary for it to fulfill its statutory duties. In the

case of a property and casualty insurer, the conservator, in cooperation with the guaranty associations, shall

make all reasonable efforts to prepare the insurer’s electronic policy and claims data so that, upon the entry of

an order of liquidation the data will be ready for transmission using the Uniform Data Standards as promulgated

by the National Association of Insurance Commissioners.

E. The listing of information in Subsection D is not necessarily an exclusive list and other information in order to

ensure that an orderly transition to liquidation occurs may be needed and may be appropriately provided by the

receiver.

ARTICLE IV. REHABILITATION

Section 401. Rehabilitation Orders

A. An order to rehabilitate the business of an insurer shall appoint the commissioner and his or her successors

in office as the rehabilitator and shall direct the rehabilitator to take possession [and title] of the assets of

the insurer, and to administer them under the general supervision of the court.

Drafting Note: Adding “and title” is optional.

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

B. Any order issued under this section shall require accountings to the receivership court by the rehabilitator.

Accountings shall be at such intervals as the receivership court specifies in its order, but no less frequently

than semi-annually. Each accounting shall include a report concerning the rehabilitator’s opinion as to the

likelihood that a plan under Section 403 will be prepared by the rehabilitator and the timetable for doing so.

C. In recognition of the need for a prompt and final resolution for all persons affected by a plan of

rehabilitation, any appeal from an order of rehabilitation or an order approving a plan of rehabilitation shall

be heard on an expedited basis. A stay of an order of rehabilitation or an order approving a plan of

rehabilitation shall not be granted unless the appellant demonstrates that extraordinary circumstances

warrant delaying the recovery under the plan of rehabilitation of all other persons, including policyholders.

If the plan provides an appropriate mechanism for adjustment in the event of any adverse ruling from an

appeal, no stay shall be granted.

Section 402. Powers and Duties of the Rehabilitator

A. The rehabilitator may take such action as the rehabilitator deems necessary or appropriate to reform and

revitalize the insurer, including but not limited to, canceling policies, insurance and reinsurance contracts

(other than life or health insurance or annuities), surety bonds or surety undertakings, or transferring

policies, insurance and reinsurance contracts, surety bonds or surety undertakings to a solvent assuming

insurer, with court approval. The rehabilitator shall have all the powers of the directors, officers and

managers of the insurer, whose authority shall be suspended, except as redelegated by the rehabilitator. The

rehabilitator shall have full power to direct and manage, to hire and discharge employees, and to deal with

the property and business of the insurer. The rehabilitator shall not be liable under [insert citation to state

version of statute imposing liability for issuing policies while insolvent] as the result of good faith issuance

or renewal of policies while in rehabilitation.

B. If it appears to the rehabilitator that there has been criminal or tortious conduct, or breach of any

contractual or fiduciary obligation detrimental to the insurer by any officer, manager, agent, broker,

employee, affiliate, or other person, the rehabilitator may pursue all appropriate legal remedies on behalf of

the insurer.

C. The rehabilitator may assert all defenses available to the insurer as against third persons, including statutes

of limitation, statutes of frauds, and the defense of usury. A waiver of any defense by the insurer after a

petition pursuant to Sections 201 or 207 has been filed shall not bind the rehabilitator.

D. The enumeration, in this section, of the powers and authority of the rehabilitator shall not be construed as a

limitation upon the rehabilitator, nor shall it exclude in any manner the right to do other acts not

specifically enumerated or otherwise provided for, as may be necessary or appropriate for the

accomplishment of or in aid of the purpose of rehabilitation.

Section 403. Filing of Rehabilitation Plans

A. The rehabilitator shall prepare and file a plan to effect rehabilitation with the receivership court within one

year after the entry of the rehabilitation order or such further time as the receivership court may allow.

Upon application of the rehabilitator for approval of the plan, and after such notice and hearings as the

receivership court may prescribe, the receivership court may either approve or disapprove the plan

proposed, or may modify it and approve it as modified. Any plan approved under this section shall be in

compliance with applicable law and fair and equitable to all parties concerned. If the plan is approved, the

rehabilitator shall carry out the plan. In the case of a life insurer, the plan proposed may include the

imposition of liens upon the policies of the company, if all rights of shareholders are relinquished. A plan

for a life insurer may also propose imposition of a moratorium upon loan and cash surrender rights under

policies, for a period not to exceed one year from the entry of the order approving the rehabilitation plan,

unless the receivership court, for good cause shown, shall extend the moratorium.

B. Once a plan has been filed, any party in interest may object to the plan.

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C. A plan shall:

(1) Except as provided at Subsection E, provide no less favorable treatment of a claim or class of claims

than would occur in liquidation, unless the holder of a particular claim or interest agrees to a less

favorable treatment of that particular claim or interest;

(2) Provide adequate means for the plan’s implementation;

(3) Contain information concerning the financial condition of the insurer and the operation and effect of

the plan, as far as is reasonably practicable in light of the nature and history of the insurer, the

condition of the insurer’s books and records and the nature of the plan; and

(4) Provide for the disposition of the books, records, documents and other information relevant to the

duties and obligations covered by the plan.

D. A plan may include any other provisions not inconsistent with the provisions of this Act, including, but not

limited to:

(1) Payment of distributions;

(2) Assumption or reinsurance of all or a portion of the insurer’s remaining liabilities by, and transfer of

assets and related books and records to, a licensed insurer or other entity;

(3) To the extent appropriate, application of insurance company regulatory market conduct standards to

any entity administering claims on behalf of the receiver or assuming direct liabilities of the insurer;

(4) Contracting with a state guaranty association or any other qualified entity to perform the

administration of claims;

(5) Annual independent financial and performance audits of any entity administering claims on behalf of

the receiver that is not otherwise subject to examination pursuant to state insurance law; and

(6) Termination of the insurer’s liabilities other than those under policies of insurance as of a date certain.

E. A plan may designate and separately treat one or more separate sub-classes consisting only of those claims

within these classes that are for or reduced to de minimis amounts. A de minimis amount shall be any amount

equal to or less than a maximum de minimis amount approved by the receivership court as being reasonable and

necessary for administrative convenience.

Section 404. Termination of Rehabilitation

A. Whenever the rehabilitator believes further attempts to rehabilitate an insurer would substantially increase

the risk of loss to creditors, policyholders or the public, or would be futile, the rehabilitator may move for

an order of liquidation. In accordance with Section 405, the rehabilitator or the rehabilitator’s designated

representative shall coordinate with the guaranty associations that may become liable as a result of the

liquidation and any national association of guaranty associations to plan for transition to liquidation.

B. The protection of the interests of insureds, claimants and the public requires the timely performance of all

insurance policy obligations; therefore, if the payment of policy obligations is suspended in substantial part

for a period of six (6) months at any time after the appointment of the rehabilitator and the rehabilitator has

not filed an application for approval of a plan under Section 403, the rehabilitator shall petition the

receivership court for an order of liquidation or seek an order, on good cause shown, for a longer

suspension period.

C. The rehabilitator or the directors of the insurer may at any time petition the receivership court for, or the

receivership court on its own motion may enter, an order terminating rehabilitation of an insurer. Subject to

the provisions of Section 901, if the receivership court finds that rehabilitation has been accomplished and

that grounds for rehabilitation under Section 207 no longer exist, it shall order that the insurer be restored to

title and possession of its property and the control of the business.

NAIC Model Laws, Regulations, Guidelines and Other Resources—October 2007

Section 405. Coordination with Guaranty Associations and Orderly Transition to Liquidation

A. Upon the entry of an order of rehabilitation or as soon thereafter as is practical, the rehabilitator or his or her

designated representative shall consult with the potentially obligated guaranty associations or their designated

representatives to determine the extent to which the guaranty associations will be impacted by or may assist in

the efforts to rehabilitate the insurer, and shall also provide appropriate information to the guaranty associations

to allow them to evaluate and discharge their statutory responsibilities. The rehabilitator shall begin appropriate

contingency planning and organizing so that an orderly transition to liquidation occurs, if liquidation is

necessary. An orderly transition to liquidation requires, among other things, that: (i) the rehabilitator to the

fullest extent possible reserve sufficient assets to continue to meet obligations under insurance policies of the

insolvent insurer until the guaranty associations are triggered, and (ii) the rehabilitator shall conduct affairs in

such a way and cooperate as necessary with the guaranty associations that may become liable as a result of the

insolvency of the insurer to ensure that the guaranty associations are provided with appropriate information,

along with necessary updates at reasonable intervals, and a reasonable period of time to plan and organize so

that the guaranty associations are able to properly discharge statutory responsibilities upon being triggered.

B. Appropriate information as referred to in this section at a minimum includes the following for lines of business