404-B:1. - Title
This chapter shall be known and may be cited as the New Hampshire Insurance Guaranty Association Act.
404-B:2. - Purpose
The purpose of this chapter is to provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies, and to provide an association to assess the cost of such protection among insurers.
404-B:3. - Scope
This chapter shall apply to all kinds of direct insurance, except life, title, surety, credit, mortgage guaranty, ocean marine, and health insurance as defined in RSA 404-D:3, I.
404-B:4. - Construction
This chapter shall be liberally construed to effect the purpose under RSA 404-B:2 which shall constitute an aid and guide to interpretation.
404-B:5. - Definitions
As used in this chapter:

I. "Account" means any one of the 3 accounts created by RSA 404-B:6.

II. "Association" means the New Hampshire Insurance Guaranty Association created under RSA 404-B:6.

III. "Commissioner" means the commissioner of insurance of this state.

IV. "Covered claim" means a net unpaid claim, in excess of $50 (after application of all deductions or commissions as provided for by any contract of insurance) including one for unearned premiums, which arises out of and is within coverage and not in excess of the applicable limits of an insurance policy to which this chapter applies issued by an insurer, if such insurer after the effective date of this chapter is declared insolvent by the superior court, and (a) the claimant or insured is a resident of this state at the time of the insured event; or (b) the property from which the claim arises is permanently located in this state. Claims may not be cumulated by assignment to avoid the application of the $50 deductible provision. "Covered claim" shall not include any amount due any reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise. Any such claim asserted against an insured or an insurer which has become insolvent shall have as its exclusive remedy a direct claim against the assets of the insolvent insurer filed with the liquidator as provided for in RSA 402-C in a maximum amount not to exceed the policy limits of the insured.  For an order of liquidation with a finding of insolvency issued on or after August 23, 2003 "covered claim" shall also not include an unpaid claim of an insured or third party claimant whose net worth as of December 31 of the year preceding the date the insurer becomes an insolvent insurer exceeds $25,000,000; provided, that an insured's or third party liability claimant's net worth on such date shall be deemed to include the aggregate net worth of the insured or third party liability claimant and all of its affiliates as calculated on a consolidated basis.

V. "Insolvent insurer" means (a) an authorized insurer licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred and (b) declared insolvent by a court of competent jurisdiction after the effective date of this chapter.

VI. "Member insurer" means any person who (a) writes any kind of insurance to which this chapter applies under RSA 404-B:3, including the exchange of reciprocal or inter-insurance contracts, and (b) is licensed to transact insurance in this state, except mutual insurance companies that operate on an assessment plan and require as a condition for granting insurance the signing of a premium deposit note by the insured, which note is given for the purpose of establishing a limit of liability to assessment, while their total receipts from policyholders is less than $10,000 per year.

VII. "Net direct written premiums" means direct gross premiums written in this state on insurance policies to which this chapter applies, less return premiums thereon and dividends paid or credited to policyholders on such direct business. "Net direct written premiums" does not include premiums on contracts between insurers or reinsurers.

VIII. "Person" means any individual, corporation, partnership, association or voluntary organization.
404-B:6. - Creation of the Association
There is created a nonprofit unincorporated legal entity to be known as the New Hampshire Insurance Guaranty Association. All insurers defined as member insurers in RSA 404-B:5, VI shall be and remain members of the association as a condition of their authority to transact insurance in this state. The association shall perform its functions under a plan of operation established and approved under RSA 404-B:9 and shall exercise its powers through a board of directors established under RSA 404-B:7. For purposes of administration and assessment, the association shall be divided into 3 separate accounts: (a) the workmen's compensation insurance account; (b) the automobile insurance account; and (c) the account for all other insurance to which this chapter applies.
404-B:7. - Board of directors
I. The board of directors of the association shall consist of not less than 5 nor more than 9 persons serving terms as established in the plan of operation. The members of the board shall be selected by member insurers subject to the approval of the commissioner. Vacancies on the board shall be filled for the remaining period of the term in the same manner as initial appointments. If no members are selected within 60 days after the effective date of this chapter, the commissioner may appoint the initial members of the board of directors.

II. In approving selections to the board, the commissioner shall consider among other things whether all member insurers are fairly represented.

III. Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors.
404-B:8. - Powers and Duties of the Association

I. The association shall:

(a) Be obligated to the extent of the covered claims existing prior to the determination of insolvency and arising within 30 days after the determination of insolvency, or before the policy expiration date if less than 30 days after the determination, or before the insured replaces the policy or causes its cancellation, if he does so within 30 days of the determination, but such obligation shall include only that amount of each covered claim which is less than $300,000 except that the association shall pay the full amount of any covered claim arising out of a workmen's compensation policy, provided however RSA 281-A:37 shall not apply to payments or settlements made pursuant to this chapter. In no event shall the association be obligated to a policyholder or claimant in an amount in excess of the obligation of the insolvent insurer under the policy from which the claim arises.

(b) Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent.

(c) Allocate claims paid and expenses incurred among the 3 accounts separately, and assess member insurers separately for each account amounts necessary to pay the obligations of the association under paragraph I(a) subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, the cost of examinations under RSA 404-B:13 and other expenses authorized by this chapter. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the preceding calendar year on the kinds of insurance in the account bears to the net direct written premiums of all member insurers for the preceding calendar year on the kinds of insurance in the account. Each member insurer shall be notified of the assessment not later than 30 days before it is due. No member insurer may be assessed in any year an amount greater than 2 percent of that member insurer's net direct written premiums for the preceding calendar year on all kinds of insurance written by the insolvent insurer which are covered by the scope of this chapter. If the maximum assessment, together with the other assets of the association in any account, does not provide in any one year in any account an amount sufficient to make all necessary payments from that account, the funds available shall be pro rated and the unpaid portion shall be paid as soon thereafter as funds become available. The association may exempt or defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. Each member insurer may set off against any assessment, authorized payments made on covered claims and expenses incurred in the payment of such claims by the member insurer if they are chargeable to the account for which the assessment is made.

(d) Investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims and may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested.

(e) Notify such persons as the commissioner directs under RSA 404-B:10, II (a).

(f) Handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the commissioner, but such designation may be declined by a member insurer.

(g) Reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this chapter.

(h) Notwithstanding any of the powers of the commissioner or liquidator as provided for in RSA 402-C, the association shall have the final authority with respect to the processing and settlement of covered claims for which it becomes responsible pursuant to this chapter, including authority for the use of records of the insolvent insurer directly related to covered claims. At the conclusion of the association's responsibility with respect to any insolvent insurer, any original records of said insolvent insurer then in the possession of the association shall be turned over to the liquidator for ultimate disposal in accordance with RSA 402-C. The association shall cooperate with any agent to the extent possible in identifying policyholders of the agent and the insolvent insurer.

II. The association may:

(a) Employ or retain such persons as are necessary to handle claims and perform other duties of the association.

(b) Borrow funds necessary to effect the purposes of this chapter in accord with the plan of operation.

(c) Sue or be sued.

(d) Negotiate and become a party to such contracts as are necessary to carry out the purposes of this chapter.

(e) Perform such other acts as are necessary or proper to effectuate the purposes of this chapter.

(f) Refund to the member insurers in proportion to the contribution of each member insurer to that account that amount by which the assets of the account exceed the liabilities, if, at the end of any calendar year, the board of directors finds that the assets of the association in any account exceed the liabilities of that account as estimated by the board of directors for the coming year.

404-B:9. - Plan of operation
I. The association shall submit to the commissioner a plan of operation and any amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration of the association. The plan of operation and any amendments thereto shall become effective upon approval in writing by the commissioner.

II. If the association fails to submit a suitable plan of operation within 90 days following the effective date of this chapter or if at any time thereafter the association fails to submit suitable amendments to the plan, the commissioner shall, after notice and hearing, adopt and promulgate such reasonable rules as are necessary or advisable to effectuate the provisions of this chapter. Such rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner.

III. All member insurers shall comply with the plan of operation.

IV. The plan of operation shall:

(a) Establish the procedures whereby all the powers and duties of the association under RSA 404-B:8 will be performed.

(b) Establish procedures for handling assets of the association.

(c) Establish the amount and method of reimbursing members of the board of directors under RSA 404-B:7.

(d) Establish procedures by which claims may be filed with the association and establish acceptable forms of proof of covered claims.  Notice of claims to the receiver or liquidator of the insolvent insurer shall be deemed notice to the association or its agent and a list of such claims shall be periodically submitted to the association or similar organization in another state by the receiver or liquidator.

(e) Establish regular places and times for meetings of the board of directors.

(f) Establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors.

(g) Provide that any member insurer aggrieved by any final action or decision of the association may appeal to the commissioner within 30 days after the action or decision.

(h) Establish the procedures whereby selections for the board of directors will be submitted to the  commissioner.

(i) Contain additional provisions necessary or proper for the execution of the powers and duties of the association.

V. The plan of operation may provide that any or all powers and duties of the association, except those under RSA 404-B:8, I (c) and II (b), are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this association, or its equivalent, in 2 or more states. Such a corporation, association or organization shall be reimbursed as a servicing facility would be reimbursed and shall be paid for its performance of any other functions of the association. A delegation under this paragraph shall take effect only with the approval of both the board of directors and the commissioner, and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this chapter.
404-B:10. - Duties and Powers of the Commissioner
I. The commissioner shall:

(a) Forward to the association a copy of any complaint seeking an order of liquidation with a finding of insolvency against a member company at the same time such complaint is filed with a court of competent jurisdiction.

(b) Notify the association of the existence of an insolvent insurer not later than 3 days after he receives notice of the determination of the insolvency.

(c) Upon request of the board of directors, provide the association with a statement of the net direct written premiums of each member insurer.

(d) Make available to the association as soon as practicable after receipt, but only after court approval, that fraction of any reinsurance treaty proceeds which are directly related to covered claims so that said funds may be used by the association for the prompt payment of said covered claims.

II. The commissioner may:

(a) Require that the association notify the insureds of the insolvent insurer and any other interested parties of the determination of insolvency and of their rights under this chapter. Such notification shall be by mail at their last known address, where available, but if sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation shall be sufficient.

(b) Suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the commissioner may levy a fine on any member insurer which fails to pay an assessment when due. Such fine shall be paid to the association and shall not exceed 5 percent of the unpaid assessment per month, except that no fine shall be less than $100 per month.

(c) Revoke the designation of any servicing facility if he finds claims are being handled unsatisfactorily.

(d) Upon request of the association, hold hearings, subpoena witnesses and compel their attendance, administer oaths, examine any person under oath and compel any person to subscribe to his testimony after it has been correctly reduced to writing, and in connection with such hearings require the production of any books, papers, records, or other documents which he deems relevant to the inquiry conducted by said association with respect to covered claims.

III. Any final action or order of the commissioner under this chapter shall be subject to judicial review in a court of competent jurisdiction.
404-B:11. - Effect of Paid Claims
I. Any person recovering under this chapter shall be deemed to have assigned his rights under the policy to the association to the extent of his recovery from the association. Every insured or claimant seeking the protection of this chapter shall cooperate with the association to the same extent as such person would have been required to cooperate with the insolvent insurer. The association shall have no cause of action against the insured of the insolvent insurer for any sums it has paid out except such causes of action as the insolvent insurer would have had if such sums had been paid by the insolvent insurer. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the association shall not operate to reduce the liability of insureds to the receiver, liquidator, or statutory successor for unpaid assessments.

II. The receiver, liquidator, or statutory successor of an insolvent insurer shall be bound by settlements of covered claims by the association or a similar organization in another state.  The court having jurisdiction shall grant such claims priority equal to that which the claimant would have been entitled in the absence of this chapter against the assets of the insolvent insurer. The expenses of the association or similar organization in handling claims shall be accorded the same priority as the liquidator's expenses.

III. The association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the association and estimates of anticipated claims on the association which shall preserve the rights of the association against the assets of the insolvent insurer. 
404-B:12. - Nonduplication of Recovery
I. Any person having a claim against an insurer under any provision in an insurance policy other than a policy of an insolvent insurer which is also a covered claim, including but not limited to the provisions of uninsured motorist coverage of any policy, shall be required to exhaust first his right under such policy. Any amount payable on a covered claim under this chapter shall be reduced by the amount of any recovery under such insurance policy.

II. Any person having a claim which may be recovered under more than one insurance guaranty association or its equivalent shall seek recovery first from the association of the place of residence of the insured except that if it is a first party claim for damage to property with a permanent location, he shall seek recovery first from the association of the location of the property, and if it is a workmen's compensation claim, he shall seek recovery first from the association of the residence of the claimant. Any recovery under this chapter shall be reduced by the amount of recovery from any other insurance guaranty association or its equivalent.
404-B:13. - Prevention of Insolvencies
To aid in the detection and prevention of insurer insolvencies:

I. It shall be the duty of the board of directors, upon majority vote, to notify the commissioner of any information indicating any member insurer may be insolvent or in a financial condition hazardous to the policyholders or the public.

II. The board of directors may, upon majority vote, request that the commissioner order an examination of any member insurer which the board in good faith believes may be in a financial condition hazardous to the policyholders or the public. Within 30 days of the receipt of such request, the commissioner shall begin such examination. The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by such persons as the commissioner designates. The cost of such examination shall be paid by the association and the examination report shall be treated as are other examination reports. In no event shall such examination report be released to the board of directors prior to its release to the public, but this shall not preclude the commissioner from complying with paragraph III.  The commissioner shall notify the board of directors when the examination is completed. The request for an examination shall be kept on file by the commissioner but it shall not be open to public inspection prior to the release of the examination report to the public.

III. It shall be the duty of the commissioner to report to the board of directors when he has reasonable cause to believe that any member insurer examined or being examined at the request of the board of directors may be insolvent or in a financial condition hazardous to the policyholders or the public.

IV. The board of directors may, upon majority vote, make reports and recommendations to the commissioner upon any matter germane to the solvency, liquidation, rehabilitation or conservation of any member insurer. Such reports and recommendations shall not be considered public documents.

V. The board of directors may, upon majority vote, make recommendations to the commissioner for the detection and prevention of insurer insolvencies.

VI. The board of directors shall, at the conclusion of any insurer insolvency in which the association was obligated to pay covered claims, prepare a report on the history and causes of such insolvency, based on the information available to the association, and submit such report to the commissioner.
404-B:14. - Examination of the Association
The association shall be subject to examination and regulation by the commissioner. The board of directors shall submit, not later than March 30 of each year, a financial report for the preceding calendar year in a form approved by the commissioner.
404-B:15. - Tax Exemption

The association shall be exempt from payment of all fees and all taxes levied by this state or any of its subdivisions except taxes levied on real or personal property.

404-B:16. - Recognition of Assessments in Rates
The rates and premiums charged for insurance policies to which this chapter applies shall include amounts sufficient to recoup a sum equal to the amounts paid to the association by the member insurer less any amounts returned to the member insurer by the association and such rates shall not be deemed excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer.
404-B:17. - Immunity

There shall be no liability on the part of and no cause of action of any nature shall arise against any member insurer, the association or its agents or employees, the board of directors, or the commissioner or his representatives for any action taken by them in the performance of their powers and duties under this chapter.

404-B:18. - Stay of Proceedings; Reopening of Default Judgments
All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in this state shall be stayed for 6 months and any additional time thereafter as may be determined by the court from the date the insolvency is determined or an ancillary proceeding is instituted in this state, whichever is later, to permit proper defense by the association of all pending causes of action. As to any covered claims arising from a judgment under any decision, verdict or finding based on the default of the insolvent insurer or its failure to defend an insured, the association either on its own behalf or on behalf of such insured may apply to have such judgment, order, decision, verdict, or finding set aside by the same court or administrator that made such judgment, order, decision, verdict or finding and shall be permitted to defend against such claim on the merits.