Third Amended and Restated Plan of OperationDistrict of Columbia Insurance Guaranty Association
Article 2. Board of Directors.
Article 3. Operations.
Article 4. Records and Reports.
Article 5. Membership.
Article 6. Indemnification of Officers, Directors and Others.
Article 7. Conformity to Statute.
Article 1. Plan of Operation.
This Plan of Operation (the "Plan") of the District of Columbia Insurance Guaranty Association (the "Association") is adopted under the authority of the District of Columbia Property and Liability Insurance Guaranty Association Act of 1993, as amended, Title 31, Subtitle IX, Chapter 55, Section 31-5501, et seq. of the District of Columbia Official Code (the "Act"). It shall become effective upon written approval of the Mayor as provided in Section 31-5506. All section references herein shall be to sections of the Act.
Upon approval of the Plan by the Mayor, it shall be subscribed to by all member insurers authorized to write the kinds of insurance covered by the Act as specified under Section 31-5503 of the Act.
Article 2. Board of Directors.
A. There shall be a Board of Directors (the "Board") in accordance with the provisions of Section 31-5504 of the Act.
1. The Board shall consist of seven member insurers and shall be fairly representative of those required to be members of the Association. In the event the Mayor shall determine that all member insurers are not fairly represented, the Mayor shall disapprove the membership of the Board and order another election. In the interim, between such disapproval and the subsequent election, the Mayor may appoint a temporary Board which fairly represents the member insurers.
2. The members of the initial Board shall serve until the first annual meeting or until their successors are duly elected and qualified.
3. At the first annual meeting of the Board, the member insurers by mail vote shall elect Directors to serve for three-year terms or until their successors are duly elected and qualified.
4. In the election of Directors, voting shall be weighted in accordance with the net direct premiums written by member insurers for the kinds of insurance covered by the Act in the calendar year preceding the election.
5. Beginning with the 2013 election, by mail vote, on a weighted basis, the ballots for which shall be mailed to member insurers at least thirty days prior to the annual meeting of the Board, the member insurers shall elect three Directors for a three-year term, two for a two year term, and two for a one year term. The member companies in the 2013 election receiving the top three weighted votes shall serve three year terms, the next two highest vote recipients will serve two year terms and the next two highest vote recipients will serve one year terms. Thereafter, the members shall elect Directors for a three year term to succeed the Directors whose terms will have expired at such annual meeting. In case of a vacancy on the Board, the remaining member companies serving on the Board shall elect a member company to serve out the unexpired term subject to approval by the Mayor.
6. Upon the election of Directors, the Association shall notify the Mayor and any other officers that may be deemed appropriate.
7. The members of the Board shall elect from their number a Chairman and any other officers that may be deemed appropriate.
B. At any meeting of the Board, each member shall have one vote. A majority of the Board shall constitute a quorum for the transaction of business and the acts of a majority of the Board members present at a meeting at which a quorum is present shall be the acts of the Board; except that an affirmative vote of a majority of the full Board shall be required to:
1. Approve a contract with a servicing facility,
2. Levy an assessment or provide for a refund, or
3. Borrow money.
C. An annual meeting of the Board shall be held at the office of the Superintendent of Insurance on the third Tuesday of October of each year, unless the Board, upon proper notice, shall designate some other date or place. At each meeting, the Board shall:
1. Review the Plan and submit proposed amendments, if any, to the membership for approval or rejection by a weighted majority vote of those voting. Such voting is to be on a weighted basis as in the election of Directors (see Article 2(A)(4)).
2. Review outstanding contracts with servicing facilities and, to the extent possible, make any appropriate corrections, improvements, or additions.
3. Review operating expenses and covered claims costs and determine if an assessment, or a refund of a prior assessment, and the amount of either, would be appropriate. The Board may waive the collection from a member insurer of an assessment of less than $10.00.
4. Review, consider, and act on any other matters deemed by it to be appropriate for the administration of the Association.
D. The Board shall hold an emergency meeting promptly after receiving notice from the Mayor of the insolvency of any insurer which is an insolvent insurer as provided in Section 31-5507 of the Act. At such meeting or a subsequent meeting, the Board shall:
1. Consider whether the insolvency is within the scope of the Act.
2. Consider and decide what method or methods, as permitted under Section 31-5505 of the Act shall be adopted to pay and discharge covered claims of the insolvent insurer for each of the three categories of kinds of insurance as identified in Section 31-5503 of the Act, but in no event shall an insolvent insurer be appointed a servicing facility. If the Board decides to appoint a servicing facility, every effort should be made to secure the receiver's, liquidator's, or statutory successor's participation in such contract to assist the Association in the performance of its legally imposed duties. Every effort should also be made to permit the Association to directly pursue all reinsurance recoveries permitted to the insolvent insurer.
3. Consider and decide what immediate action, if any, should be taken to assure the proper retention of the records of the insolvent insurer necessary to the prompt and economical handling by the Association of covered claims. In this effort, the Board or a designated servicing facility, shall work closely with the receiver, liquidator, or statutory successor and seek the liquidator's, receiver's, or statutory successor's approval of having the Board, or a designated servicing facility, take direct physical control of that portion of the insolvent insurer's records deemed by the Board to be necessary for the discharge of its duties imposed by law.
4. Consider and decide what persons, if any, should be hired by the Association to implement and carry out broad directives of the Board made pursuant to its statutorily imposed duties. Such persons may include a managing secretary who should be knowledgeable about insurance matters, conversant with the law as it relates to covered claims, and administratively capable of implementing the Board's directives, and who would have such authority as is properly delegated to such person by the Board. Such persons may also include attorneys at law, insurance actuaries, accountants, claims persons, and others whose advice or services are deemed by the Board to be appropriate to the discharge of its duties. The Board may agree to compensate such persons as to best serve the interest of the Association.
5. Consider and decide to what extent and in what manner the Board shall review and contest settlements and releases or judgments, orders, decisions, verdicts, and findings to which the insolvent insurer or its insureds were parties in accordance with Section 31-5505 of the Act.
6. Consider and decide what assessment, if any, should be levied or whether any refund should be made to member insurers. If such assessment or refund is determined to be necessary, the Board shall levy such assessment or make such refund in accordance with Section 31-5505 of the Act. Notices of assessments to member insurers shall be in sufficient detail as to inform member insurers of an assessment of more than $10.00.
7. Take all steps permitted by law, and deemed necessary to protect the Association's right against the estate of the insolvent insurer.
8. Consider and decide any other matters deemed appropriate for the proper administration of the Association.
E. The Board may establish a schedule of regular meetings as it may deem appropriate. Special meetings of the Board may be called by the chairman and shall be called at the request of any two Board members. Not less than five days written notice shall be given to each Board member of the time, place, and purpose of any meeting: provided that an emergency meeting may be called upon at least 48 hours oral or written notice affording each member of the Board reasonable opportunity to attend. Any Board member not present may consent in writing to any specific action taken by the Board.
Any action approved by the required number of Board members at such emergency or special meeting, including those consenting in writing, shall be as valid a Board action as though authorized at a regular meeting of the Board. At such emergency meeting, the Board may consider and decide any matter deemed by it to be necessary for the proper administration of the Association.
F. Members of the Board may participate in a meeting of the Board through the use of a conference telephone or similar communications equipment, by means of which all persons participating in the meeting are able to hear each other, and the participation by such means shall constitute presence in person at such meeting.
G. Members of the Board shall serve without compensation; but they may be reimbursed for necessary travel expenses incurred in attendance at Board meetings. Such expenses shall be submitted to the Board for approval and subsequent payment.
Article 3. Operations.
A. The official address of the Association shall be the District of Columbia Insurance Guaranty Association, c/o District of Columbia Department of Securities Regulation, 810 First St. NE - Suite 701, Washington, D.C. 20002.
B. The Board may employ such persons, firms, or corporations to perform such administrative functions as are necessary for the Board's performance of the duties imposed on the Association. The Board may use the mailing address of such a person, firm, or corporation as the official office address of the Association. Such persons, firms, or corporations shall keep such records of its activities as may be required by the Board.
C. The Board may open one or more bank accounts for use in Association business. Reasonable delegation of deposit and withdrawal authority to such accounts for Association business may be made consistent with prudent fiscal policy. The Board may borrow money from any person or organization including a member insurer, or from an appointed servicing facility, as the Board in its judgment deems advantageous for the Association and the public.
D. The Board may levy a non-pro rata assessment to cover the reasonable costs of administration of the Association, such assessment to be credited against any subsequent pro rata assessments.
F. The Board may contract with one or more persons, firms, or corporations to serve as servicing facilities, should the Board receive notice from the Mayor of an insolvency of an insurer as defined in article 2(D) of the Plan. Such contract terms shall comply with the Act and be subject to the approval of the Mayor. Such contract terms may include:
1. Terms of payment to the servicing facility.
2. Extent of authority delegated to the servicing facility.
3. Procedures for giving the receiver timely notice, sufficient to protect the Association's right of subrogation against the receiver, liquidator, or statutory successor, of each and every covered claim not otherwise reported to the receiver, liquidator, or statutory successor.
4. Procedures contemplated for the handling of covered claims as defined in the Act. These procedures shall include the right to request from or offer to any person arbitration of such person's covered claim.
5. Procedures for the printing or preparation of forms necessary for the proper handling of covered claims.
6. Requirement of a bond for faithful performance.
7. Any other provisions deemed appropriate and desirable by the Board.
Article 4. Records and Reports.
A. A written record of the proceedings of each Board meeting shall be made. The original of this record shall be retained by the Chairman with copies being furnished to each Board member and the Mayor. Copies of such written record shall be provided to each member insurer, upon request.
B. The Board shall make an annual report to the Mayor and to the member insurers. Such report shall include a review of the Association's activities and an accounting of its income and disbursements for the past year, and its assets and liabilities as of the reporting date.
C. After the appointment of a receiver, liquidator, or statutory successor and the levy of an assessment by the Association, the Board shall, once every year, appoint certain of the member insurers to serve as an Audit Committee. Such committee shall see to the proper auditing of all books and records of the Association and shall report the findings to the Board. Such report shall be available to all member insurers, upon request.
Article 5. Membership.
A. Insurers which were admitted, as of August 14, 1973, to transact the kinds of insurance covered by the Act in the District of Columbia shall be members of the Association. Each insurer admitted after August 14, 1973, to transact the kinds of insurance covered by the Act shall automatically become, effective on date of its admission, members of the Association. An insurer which ceases to be admitted after August 14, 1973, shall automatically cease to be a member effective on the day following the termination or expiration of its license to transact the kinds of insurance covered by the Act; provided such insurer shall remain liable for any assessments based on insolvencies occurring prior to the termination of its license.
B. Any member insurer aggrieved by an action or decision of the Association shall appeal to the Board before appealing to the Mayor. If such member insurer is aggrieved by a final action or decision of the Board or if the Board does not act on such complaint within 30 days, the member insurer may appeal to the Mayor within 30 days after the action or decision of the Board or the expiration of the 30 days.
Article 6. Indemnification of Officers, Directors and Others.
A. Definitions. For purposes of this Article 6:
1. "Director/officer" means each member of the Board, each individual serving as a representative of a member insurer on the Board, each employee, officer or agent of the Association, each employee, officer or agent of any association or other entity which performs services, including without limitation claims handling services, on behalf of the Association (in their capacity of performing such services on behalf of the Association only) and each person who is serving or has served at the request of the Association or such other entity as a director, officer, trustee, fiduciary, principal, partner, member of a committee, employee, consultant or agent of any other entity.
2. "Proceeding" means any action, suit or proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom, brought in or before, or threatened to be brought in or before, any court, tribunal, administrative or legislative body or agency, and any claim which could be the subject of a Proceeding.
3. "Expense" means any fine or penalty, and any liability fixed by a judgment, order, decree or award in a Proceeding, any interest payable on account of such liability, any amount reasonably paid in settlement of a Proceeding, any attorneys or other professional fees and other costs, charges and disbursements reasonably incurred in connection with the investigation, defense, appeal or settlement of a Proceeding.
B. Indemnification. Except as limited by law or as provided in Sections C and D of this Article 6, each Director/officer (and the successors, assigns, heirs and personal representatives thereof) shall be indemnified and held harmless by the Association from and against any and all Expense incurred by the Director/officer in connection with each Proceeding in which the Director/officer is involved as a result of his serving or having served as a Director/officer or as a result of any action alleged to have been taken or omitted as Director/officer, whether such service, action or omission takes place before or after the date of the effectiveness of this Article 6.
C. Indemnification Not Available. No indemnification shall be provided to a Director/officer with respect to a Proceeding as to which it shall have been adjudicated that the Director/officer is liable for gross negligence or misconduct in the performance of his or her duty as a Director/officer.
D. Settlement. In the event that a Proceeding is compromised or settled so as to impose any liability or obligation on a Director/officer or upon the Association or other related entity, no indemnification shall be provided as to said Director/officer with respect to such Proceeding if it is determined (i) by a majority of the disinterested Directors of the Association then in office (which for this purpose shall exclude member insurers whose representatives on the Board of Directors are parties to such Proceeding) or (ii) in the absence of any disinterested Directors or at the request of a majority of the disinterested Directors, by a majority of the member insurers, that with respect to the matter involved in such Proceeding said Director/officer did not act in good faith in the reasonable belief that the Director/officer's action was in the best interests of the Association or other related entity. In lieu of submitting the question to a vote of disinterested Directors or member insurers, as provided above, the Association may deny indemnification to said Director/officer with respect to such Proceeding, if there has been obtained at the request of a majority of the Directors then in office, an opinion in writing of independent legal counsel, other than counsel to the Association, to the effect that said Director/officer did not act in good faith in the reasonable belief that said Director/officer's action was in the best interest of the Association or other related entity.
E. Advances. The Association shall pay sums on account of indemnification, including, without limitation, attorneys fees and related disbursements, in advance of a final disposition of a Proceeding upon receipt of an undertaking by the Director/officer to repay such sums if it is subsequently established that the Director/officer is not entitled to indemnification pursuant to Sections C and D hereof, which undertaking may be accepted without reference to the financial ability of the Director/officer to make repayments.
F. Partial Indemnification. If a Director/officer is entitled under any provision of this Article 6 to indemnification by the Association for a portion of the Expense of any Proceeding but not, however, for the total amount thereof, the Association shall nevertheless indemnify the Director/officer for the portion of such Expense to which the Director/officer is entitled.
G. Allocation of Indemnification Expense. The expense of indemnification provided hereunder shall be assessed against and paid by the member insurers in the proportion that the net direct written premiums of each member insurer for the calendar year preceding such assessment, bears to the net direct written premiums of all member insurers for the calendar year preceding such assessment, except in the case of insurers who shall cease to be a member of the Association, as to which assessments shall be as follows: any insurer which ceases to be a member of the Association shall remain liable for assessments on account of the expense of indemnification with respect to any and all acts and omissions occurring prior to the time such insurer ceases to be a member of the Association, and in the case of such insurers the assessment for indemnification expense shall be in the proportion that the net direct written premiums of the insurer for the calendar year preceding the year in which the act or omission with respect to which indemnification is claimed bears to the net direct written premiums of all member insurers for the calendar year preceding the year in which the act or omission with respect to which indemnification is claimed.
H. Non-Exclusive. Nothing in this Article 6 shall limit any lawful rights to indemnification existing independently of this Article 6. This Article 6 is intended to operate as a supplement and additional safeguard to, and not in place of, the immunity granted by Section 31-5514 of the Act.
I. Amendment. The provisions of this Article 6 may be amended or repealed by the member insurers: provided however that no amendment or repeal of such provisions shall adversely affect the rights of a person or entity entitled to indemnification under this Article 6 with respect to acts or omissions occurring prior to such amendment or repeal.